ML19246A560
| ML19246A560 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 06/26/1979 |
| From: | Ritsher J ROPES & GRAY |
| To: | Vassallo D Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 7907030355 | |
| Download: ML19246A560 (54) | |
Text
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ROPES & GRAY 225 FRANKLIN STR EET BOSTON O2ilO casto4coarss koponatcW
,,,, c c c, g,.,,yg, g g i t L C m *e v u s t m 940549 June 26, 1979 U.S. Nuclear Regulatory Commission Washington, D.
C.
20555 Attention:
D.
B. Vassallo, Assistant Director for Light Water Reactors, Division of Proj ect Management Re:
Sesbrook Station, Units 1 and 2, Docket Nos.
50-:43 and 50-444; Staff Letter Dated May 23, 197?; Request for Additional Financial Informa-tien
Dear Mr. Vassallo:
I enclose twenty-five copies of the Public Service Company of New Hampshire preliminary prospectus dated June 21, 1979 relating to 2,000,000 shares of its Common Stock.
This prospec-tus should be added to the material which was furnished with my letter of June 22, 1979 in the above dockets.
Very truly yours,
'1 Q
k vt Joh Ritsher JAR:vml Enclosures
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Copies to:
Alan S.
Rosenthal, Chairman E. Tupper Kinder, Esquire Atc=ic. Safety and Licensing As'sistant Attorney General Appeal Board Environmental Protection Division U.S. Nuclear Regulatory Cc= mission Office of the Attorney General Washington, D.C.
20555 208 State House Annex Concord, Ne w "anpshire 03301 Dr. John H. Buck Atemic Safety and Licensing Karin F. Sheldon, Esquire Sheldon Roistan & Weiss Suite 56o,Harmon, Ac.ceal Board U.S. Nuclear Regulatory Commission Washington, D.C.
20555 1725 I Street, N.W.
Washington, D.C.
20006 Michael C.
Farrar, Esquire Arc =ic Safety and Licensing Dr. Ernest O.
Salo Appeal Board Professor of Fisheries Research U.S.
Nuclear Regulatory Commission Institute Washington, D.C.
20555 College of F'.sheries University cf Washington Ivan W.
Smith, Escuire Seattle, Washington 98195 Atcric Safety and Licensing Board Panel Dr. Kenneth A. McCellum U.S. Nuclear Regulatory Commission 1107 West Knapp Street Washington, D.C.
20555 Stillwater, oklahoma 74074 Joseph F.
Tubridy, Esquire Robert A.
Backus, Esquire 410.0 Cathedrcl Avenue, N.W.
O'Neill Sackus Spieln.an Washington, D.C.
20016 116 Lowell Street Manchester, New Hampshire 03105 Dr. Marvin M.
Mann Atomic Safety and Licensing Laurie 3urt, Esquire Scard Panel Assistant Attorney General U.S. Nuclear Rt
'.tcry Cctmission One Ashburton Place Washington,. D.C.
20555 Essten, Massachusetts 02105 Lawrence Brenner, Esquire Office of the Executive Legal Director U.S. Nuclear Regulatory Cc= mission Washingten, D.C.
20555
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PI!El DlINAltY PItOSPECTUS I>ATED JUNE 21, 1979 e c ~ a H i!M 2,000,000 Shares
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c a S2te Outstanding shares of the Conunon Stock are, and the shares offered hereby will be, listed on the y li d j New York Stock Exchange. The ht.st reported sale price of the Common Stock on such Exchange on 5 0 g E. lune 20,1979 was $19.25 per share.
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9yhy TIIESE SECUltlTIES IIAVE NOT llEEN APPItOVED Olt DISAPPitOVED BY THE Z r
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SECUltITIES AND EXCilANGE CO31311SSION NOlt ilAS Tile CO31311SSION e oa PASSED UPON TIIE ACCURACY Olt ADEQUACY OF TIIIS PHOSPECTUS.
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.B ANY HEPItESENTATION TO Tile CONTHAltY IS A CRITIINAL OFFENSE.
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(1) The Company has agreed to indemnify the several Underwriters against certain civil liabilities,
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' ~ O en!! El The sharts of Conunon Stock are offered by the several Underwriters when, as and if issued by
- ae 9 the ('ompany and accepted by the Underwriters and subject to their right to reject orders in whole or E9$S in part. It is expected that certificates for such shares will be ready for delivery at the office of Kidder,
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c-Y M 4j ", Peabody & Co. Incorporated,10 llanover Square, New York, New York, on or about July 1979.
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Blyth Eastman Dillon & Co.
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u 0 C3 II The date of this Prospectus is July
,1979.
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IN CONNECTION WITil TIIIS OFFEltING, TIIE UNDEllWitITEIts 3IAY OVElt-ALLOT 0I1 EFFECT TItANSACTIONS WIIICII STABILIZE Olt 31AINTAIN TIIE 31AltKET PIIICE5 OF TIIE CO31PANY'S CO3DION STOCK AT LEVELS ABOVE TIIOSE WIIICII 311 Gilt OTIIElt.
WISE PIIEVAIL IN TIIE OPEN 31AltKET. SUCil STABILIZING, IF CO3DIENCED,31AY llE DISCONTINUED AT ANY TDIE.
AVAILABLE INFOIDIATION Public Service Company of New IIampshire (the " Company") is ruhjeet to the informa-tional requirements of the Securities Exchange Act of 1931 and in accordance therewith files reports and other information with the Securities and Exchange Conunission. Information for the year 1978 and prior years concerning directors and officers of the Company, renmneration and any material interests of such persons in transactions with the Company, is disclo ed in proxy statements distributed to shareholders of the Company and filed with the Commission.
Such reports, proxy statements and other information can be inspected at the oflice of the Commission at lloom 6101 at 1100 L Street, N.W., Washington, D. C.; Boom 1100, Federal Building, 26 Federal Plaza, New York, N.Y.; Suite 1710, Tishmrsn lluilding,10950 Wilshire Boulevard, Los Angeles, California; and Itoom 1228, Everett 31cKinley Dirksen Building,219 South
Dearborn Street,
Chicago, Illinois. Copies of such snaterial may also be obtained at prescribed rates from the Public Iteference Section of the Commission at 500 North Capitol Street, N.W., Washington, D. C. 20549. Certain of the Company's recurities are listed on the New York Stock Exchange where reports, proxy material aml other information concerning the Company may also be in pected.
TIIE CO31PANY The Company was incorporated in New Hampshire in 1926. The mailing address of the Com-pany is 1000 Elm Street, Post Office Box 330,3Ianchester, New Hampshire 0310.i and the Company's telephone number is (603) 669-4000.
The Company is the largest electric utility in New IIampshire. It operates a single integrated system furnishing electric service in 3Ianchester, Nashua, Portsmouth, Berlin, Dover, Kicne, Laconia, Franklin, llochester, Somersworth and IS7 other New llampshire municipalities, including about 839 of the total population of the State. It also sells electricity to other utilities and distributes and sells electricity in 6 towns in Vermont and 13 towns in 3Iaine. The area served at retail has a popula-tion of about 74G,000.
The Company is pnsently experiencing serious difficulties in financing its construction program and has taken steps to redur e that program. See " Problems Facing the Pompany' for information concerning the proi,osed reduction and a description of the substantial 1979 external financing reiluired in order to enable the Company to maintain its construction program and continue its busi-ness operations, per dmg rtecipt of regulatory approvals for the propoml reduction in its construction
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No dealer, salesman or any other person has been authorized to give any information or to make a " representations other iba those con-tained in this Prospectus and, if given or made, o
% LJ PUBLIC SERVICE such information or representatious must not be Company of New Hampshire relied upon as hasing been authorized by the Company or the Underwriters. This Prospectus does not constitute an offer to sell, or a solicita-tion of an otter to buy, any of these securities by any Underwriter in any jurisdiction to any per.
2,000,000 Sliares son to whom it is unlawful to make such offer or solicitation in such jurisdiction. He deliserv of
- Q this Prospectus does not imply that the informa-tion herem is correct as of any time subsequent public Service Cornpany g:::
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g; of New IIainpshire g
unu or coxreyrs Page The Company CO3DION STOCK a
The Issue in'Drief 3
-m Problams Pacing the Company 4
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Industry Problems
^
t; Use of Proceeds 6
'la Construction Prog *a u 6
M Financing to Common Stock Dividends nn.1 Price llange 11 h,y] w Capitalization 13 j
PROSPECTUS I < nt it su ta f i rations Management's Discussion and analyse of the phN r
Statement of Earnings n
Operating Statistics 19
- EM..
Business go
- 4 New Engiand Power Poei
- o iWWJ5 Kidder, Peabody & Co.
Power Supply and Properties ao Joint Projects al Seabrook Nuclear Project h2 Incorporated llegulation 4
Rates-New IIaupahire Retail e3 Rates - Other
'0 2
["aslETergy Ponc, S
Blyth Eastman Dillon & Co.
Environmental Matters 29 incorporated Employees, Salaries and Wages.
31 Voluntary Wage and Price Gui.lelines 31 Municipalities and Cooperatives 31 Accountants' Reyrt 33 Financial Statements 31 July
,1979 Description of Common Stv. k 46 i q ";
4, "rQ Legal Opinions 4s J u,,
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Experts 49 Underwriting 50
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Numlwr of 5harc uf
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Total
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Tho 1 nderwriting.\\greernent provides that the several Underwriters are required to take aral pay for all of the shares of the aihlitional Common Stock offered hereby if any are take i. The obliga-tions of the Underwriterm aret subject to certain conditions precedent.
The Company has hetu advised by Kidder, Peabody & Co. Incortu> rated tinil Illyt!r Ist. tinan 1)illon & Co. Incorporated, as llepresentatives of the several Underwriters, that the I:ndi ru riters propose to offer the additional Conanon Stock to the public initia!!y at the offering ; rice set forth on the cover page of this Pruspectus and to certain deah rs at such price less a concession of not in ( xcess of
( a share, and that the Underwriters and such dealers may reallow a discount of not in excess of
( a share to other dealers. The public offering price and the concersions and disecants to dealers may be changed by the Itepresentatives.
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TIIE ISSUE IN BILIEF The.following material is qualified in its entirety by the detailed infonnation and the finan-cial statements and notes appearing elsetchere in this Prospectus. See especially " Problems Facing the Company",
TIIE OFFERING Company Public Service Company of New IIampshire Common Stock Offered 2,000,000 Shares Expected Offering Date July 11,1979 Common Stock Listed New York Stock Exchange (Symbol: PNII).
1979 Price Range (through June 20,1979) 21% 171 k Book Value of Common Stock at March 31,1979
$23.09 per share Current Dividend Rate 53( per share quarterly ($2.12 annualized rate)
<t quarterly din'dend of 53$ pcr share has been dcclarcd by the Board of Dircctors payalde slugust 15, 1979 to ludders of r card of Comnum Stock on July 31, 1979. The sharcs of the additiomd Comnum Stock ofer d hircby teill be entitled to this divid<nd.
TIIE COMPANY Business Electric utility Estimated Service Area Population 746,000 Energy Sources (12 months ended December 31,1978)
Oil - 537c, Coal - 277c, Nuclear-157c and IIydro - 57c Estimated 1979-1955 Construction Expenditures
$600,600,000*
- Amuming expected reduction of ownership interests in nuclear plants under construction. See " Problems Facing the Company" FINANCIAL INFORMATION (Thousanda exceps l'er 5 hare Amounts)
Tu nthe Year ended December 31, April 30,1979 1978 1977 Operating Revenues
$272,132
$260,751
$214,787 Net Income 37,662 36,507 21,722 Earnings Available for Common Stock 31,288 30,116 16,602 Average Shares of Common Stock Outstanding 10,261 9,275 7,6SO Per Share of Common Stock:
Earnings
$3.05
$3.25
$2.16 Dividends
$2.06
$1.94
$1.88 Ccpitalization and short-term debt as of March 31,1979, and as adjusted for the proceeds from the sale of 1,200,000 shares of $25 par value Preferred Stock on May 22, 1979 and of the - ddi-tional Common Stock (asumed to aggregate $65,800,000) (see " Capitalization"):
l'<reent of Adju.ted Actual As Adjunted Capitalization Long-Term Debt (Thousands)
(including current maturities)
$292,390
$292.390 41.07c Preferred Etock S3,153 113,153 15.9 Common Stock Equity 273,082 307,466 43.1
$648,625
$713,009 100.0 %
Short '(erm Debt
$ 95,100
$ 3,300
=
PROBLE31S FACING TIIE CO31PANY The Company is pnsently experiencing serious difficulties in financing its construction program which, prior to the Company's decision to reduce its interests in nuclear plants as described below, had an estimated cost of $1,109,600,000 over the period 1979-1983 The major portion of this program has been the Company's 50% ownership interest in the 2300 31W nuclear plant at Seabrook, New llampshire; the estimated cost of this interest and related nuclear fuel over the same period is approxi-mately $752,600,000 (see " Construction Program" and " Financing").
The Company's financing program had been based upon the inclusion in the Company's rate base of a portion (approximately 509 on average over the period) of the expenditures for construction work in prognws ("CWIP") associated with major generating facilities, and, in the Company's most recent retail rate order in 1978, the Company's request for such inclusion was granted by the New llampshire Public Utilities Commission ("NIIPI'C"). On 3 fay 7,1979, a New IIampshire statute prohibiting the inclusion of CWIP in the Company's rate base became law, and on June 5,1979 a hearing was hehl before the NIIPUC on its order to the Company to show cause why it should not, as of 5f ay 7,1979, eliminate fn>m its existing rates that portion based on CWIP, At the June 5 hearing, the NilPUC ruled that the Company could not present evidence as to its general revenue requi reme n t s, and that the only question before the NHPITC was whether the statute mandated immediate elimination of CWIP from rate base. Briefs have been filed and the decision of the NIIPI'C is pending. See "Itates - New llampshire Retail" Mduc tion of Construction Program. In view of the anticipated cash stringency renulting from the elimination of CWIP (see Note (D) to the Statement of Earnings) and the resultant diffleulty of financing the 509 interest in Seahn>ok, the Company decided on 3Iarch 3,1979 to reduce its owner-ship interest in the Seabrook plant to 289 by offering ownership interests aggregating 22% to other utilities. It has also offenst to other utilities its ownership intensts in the Pilgrim #2 and 31illstone
= 3 pn>ji cts. If completed, these reductions would result in an estimated 1979-1985 construction pn gram for the Pompany of $600,000,000.
Ily amendment to the Joint Ownemhip Agn-ement relating to the Seahnnk plant, nine other New England utilities have agned, subject to necessary regulatory and other approvals, to increase gradually over an Adjustment Period of about two years their ownership interests in the Seabrook plant by pro ntto sharing of costs otherwise attributable to the Company's ownemhip interest until their aggregate investment in Seahn>ok will be increased by 229, and the Company's investment reduced to 289, of the total investment of all participants. See " Construction Program" The amend-ment to the Joint Ownership Agn ement will become effective, and the Adjustment Period will begin, only after receipt by all of the utilities involved of any required approvals by the NIIPUC, the Nuclear Hegulatory Commission, the 3fassachusetts Department of Public Utilities and the Vennont Public Service Board and of approval by stockhohlers of two 3fassachusetts eh.etric companies and the Company as to the change in the ownership interests of such 3f assachusetts utilities. Although opposition from intervenor groups is anticipated, decisions on the requested approvals are expected to be made by the end of 1979. The Company believes that if such approvals are received with respect to substantially all of the propel reduction in the Company's ownership interest, the Com-pany and the participants involval would pnsbably agree to start the Adjustment Period with respect to the changes so approved.
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' Until the Adjustment Period begins, the Campany must continue to finance its construction program at its present 509 ownership interest in the Seabniok project.
Immediate Financing Program. The Company has a revolving credit agreement with certain commercial banks which prior to April,1979 pennittexl the company, subject to periodic review by t he banks, to borrow up to $95,000,000 until April 30, 1979. On April 24,1979, the b2mks extended the nmturity date to.iuly 2,1979 and increased the amount to $115,000,000 and they have since advised the ('ompany that they are willing to extend the maturity date to October 15, 1979. The Com-pany htlb ves that the availability of such cred:t to October 15, 1979 and any extension of the October 15 maturity date will depend principally upon the success of the Company's financing pm gram described below and the status of the regulatory approvals nquired for the emamencement of the Adjustment Period; there can be no assurance that such extension will be granted. The Company has additional lines of credit of $1,330,000 with New Hampshire banks. At June 15, 1979, an aggre-gate of $1N,350,000 was outstanding under such agreement and lines of credit.
The company estimates that, in onler to finance its construction program if the Adjustment Period begins in January,1980, it must raise up to $b0,000,000 by external financing during 1979 in a<hlition to the funds raised from the s:de of the 2,000,000 shan s of additional Common Stock offri ed he rel,, (the " additional Conunon Stock") assuming the continued availability of such Cl"u,O,ono of short.tenn bank credit. If the neemary ipprovals for the commencement of the Adjustment Period re obtained earlier than the end of the year, the Company's 1979 financing requirements would be reduced. After the sale of the additional Common Stock, the Company expects that it will have again fully utilized its presently available bank credit, and will require additional external financing, during September,1979, assuming that the present constnietion schedule for the Seabrook plant is maintained.
As part of its plan to obtain the nee h d funds, the Company expects to receive in July,1979 advance payments aggregating $10,600,000 from the other Seahniok participants against their pn sent ownership interests in the pn, ject. These advances will be secured by the Company's inten st in nuch ar fuel for the Seabniok project. The Company will seek the necessary additional funds thnmgh a sale of general and refunding mortgage bonds and nuclear fuel financing. Advance payments from the other Seahn>ok participants will be repaid fnim the pnieceds of any nuclear fuel financing obtained by the Company.
Adequate and timely rate relief, particularly if CWIP is eliminated as described above, is essential to the Pompany's financing plan ( Adverse developments in rate proceedings couhl reduce the avail-ability of external financing, including the availability of short-term bank credit. See "Husine-Itates - New Ilampshire lletail" Conscquince of Failure to Ol>tain Regulatonj.1pyrovals or, =nancing. There can be no assur-ance that the regulatory approvals for the proposed nsluction in the Company's interest in the Sea-brook pn> ject will be obtained or that the Company can obtam financing in the necessary amounts or in a timely numner. Timely approvals and financing are essential to enable the Company to maintain its constnletion program and continue its business operations.
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INDUSTItY PItOHLE31S The Company has experienced and may in the future experience in varying degrees a number of problems generally common to the electric utility industry. These pniblems include obtaining ade-quate and timely rate increases, uncertainties caused by inercasing political involve'nent in utility n gulation, financing large construction programs during an inflationary period, obtaining sufficient capital on reasonable terms, compliance with environmental regulations, high costs of fossi! forl, delays in licensing and constructing new facilities, and effects of energy conservation.
Recent events at the Three 3 file Island Nuclear Unit No. 2 in Pennsylvania ("T311") resulted in damage to the plant and release of radioactivity into the surmun<iing environment and caused widespread concern about the safety of nuclear generating plants. The Pompany has interests not only in the Seabrook project but also in six other nuclear generating plants which are either operat-ing or planned or under construction in New Engiand (see " Business-.Ioint Projects"); its interests in the four such operating plants represent approximately 89 of the Company's present generating capacity. The Pompany cannot predict what effect, if any, the recent events at T3fI ty have upon the completion or the cost of completion of the Seahnsok project or such other planned nuclear units or upon the continued operation of the existing nuclear generating plants in New England. Neither the Seabrook Units nor any of these six other New England plants utilize a nuclear steam supp',"
system furnished by tho vendar which supplied T311. United Engineers & Con-tructers Inc., the engineer-constructor for the Seabn>ok project, was constructor of T311 but was not involved in its design. The T3II incident has pn,mpted a rigorous reexamination of safety and operating procedures in all nuclear facihties. The plants in which the Company has an interest are being reviewed by their owner-operators, and those plants and all other nuclear facilities are being re-examined by the United States Nuclear Regulatory Commission. The T3II incident has also generated a multiplicity of legis!ative pn>posals in Congress and various state legislatuns. The ultimate effect of taese reexaminations and pr posals cannot be prediet. d.
USE OF PROCEEDS The proemds to the Company from the sale of the additional Common Stock, estimated to amount to about $35,P)0,W)0 will be used for the Company's continumg construction program, including the reduction of shor' tenn bank borrowings incurred in connection therewith. On the date of issue of the c.dditional Common Stock, short-term bank borrowings are expected to be appn>ximately $115,000,000.
CONSTRUCTION PltOGItA31 The area served by the Company has experienced relatively rapid population and economic growth in the last several years. Acconling to statistics compiled by the United States Department of Com-merce, Hureau of the Census, the averago annual rate of population growth in the State of New Ilamp-shire was approximately 29 during the period 1970-78, the second highest rate of growth for any state east of Colorado. Figures released by the New Hampshire Department of Employment Security show that New Ilampshire is experiencing om of the lowest unemplovment rates in the nation, and the lowest in New England 3.29 (not seasonally adjusted) for the month of Afarch,1979.
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As a result, the electric needs of the Company's customers have increased (an average annual increase of 7.5') in the Company's annual peak load during the ten-year period ending December 31, 1978). Furthermore, such needs have been projected by the Company to increase at an average annual rate of appniximately G.5') at least through 19A7, which would be the highest anticipated increase of any major electrie utility in New England based upon estimates furnished to the New England Power Pool. The Company's fo-ecasts indicate that its net purchases of capacity will have increa. sed to 45131W at the time of scheduled completion in 1983 of the first unit of the Seabrook plant described below, of which the Company's expected reduced share will be 322 31W. Certain of the utilities whose shares in the Seabrook plant are being inenased may sell all or part of their increased Seabrook entitlen:ents to the Company for varying periods. If the Company's h>ad growth projections are cor-rect, the Company woubl be required to purchase capacity from other electric utilities during most of ti.e 1980's. If the Seabrook plant is not completed on schedule, such purchases will increase, and there can br no as.surance that the Company would be able to purcha.se sufTicient power to render mhyu te service to its cu.stumen.
The Company pn> poses to meet the projected needs of its customem primarily thn, ugh its share of the 2,300 31W Seahn>ok nuclear plant, with two units each having a capacity of 1,150 31W currently planned for completion in 1983 and 1955, respectively. Unit c1 of the Seabrook plant is the only major base load generating station in New England nov, scheduled to begin service before 1955. In the viev of the Company, both units of the plant are essential to meet not only the Company's needs but the New England load as well. As described under " Problems Facing the Company", the Con.pany and nine other New England utilities
- have agrtel to adjust their ownership interests in the Sea! rook project, subject to receipt of t!.e necessary regulatorv approvals. The following table shows the pro-posed changes in ownership interests:
Increase Adjusted Present (Decrease)
Adjusted MW Utility Interest in Intercat Interest Capacity The Company 5400000 %
(2100000) %
25.00000q 641.00 MMWEC 5.59219
13.57416 19.46695 447.71 NU 4.37370 "
117390 6.58760 150.59 lbngor 0.37219 130142
.'.17391 50.00 Montaup 193531 "
1.00000 3.93531 90.51 CMP 151175
1.00000 3.5417%
81.46 CVP8 1.59096**
1.00n M 159096 59.59 GMP o.00000 1.00000 1.00000 23.00 Taunton 0.10031 0.13065 0.23099 5.31 IluLon 0.05730 "
0.01957 0.07737 1.78
'3f r ssachuset ts 31unicipal Wholesale Electric Company ("3131WEC"), New Bedfon! Gas and Edison Light Company ("NB"), Bangor IIydro-Electric Company ("Bangor"), Afontaup Electric Company ("3fontaup"), Central 3f aine Power Company ("C3fP"), Centrid Vermont Public Ser-vice Corporation ("CVPS' ), Green 5 fountain Power Corporation ("G3f P"), Town of Hudson, 3fa.ssachusetts, Light and Power Department ("Huds4m") and Taunton 31unicipal Lighting Plant Commission ("Taunton").
"Heth ets enances which will result from transfers by participants, other than the Company,. pre.v ously agreed to but not yet completed.
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After such adjustments, the Company's share of the cost of Seabrook, including the initid! nuclear fuel, is estimated at $5G1,500,000, excluding any allowance for funds used during construction which allowance is estimated to be $301,000,000. If the Company's ownership intenst shoubl remain at 509, these amounts would be $1,002,722,000 and $429,000,000, respectively. See " Prob! cms Facing the Com-pany" and " Financing" for a discussion of the factors affecting the financing of the Seabn ok plant, and see " Business - Seabnok Nuclear Project' for a discus., ion of administrative proceedings and litigation relating to the Seahniok plant.
Tho Company's aggregate construction program for the seven-year period 1979 through 1985, which is subject to continuing review and adjustment, is currently estimated to be about $600,600,000 (excludMg any allowance for funds used during construction) if its ownership interest in Seabrook is reduced to 289 as described above and under " Problems Facing the Company" and its ownership interests in Pilgrim #2 and Millstone =3 are sobl. Such construction expenditures wouhl total
$1,109,600,000 if such interests remain at their present amounts. The following table sets forth the Company's estimated construction expenditures for 1979 (assuming no effect in this year of its reduced construction program) and the unadjusted and adjusted construction programs as thseribed above based n current construction schedubs and cost pn>jections (including an inflation factor, which in the case of Seabrook is 89 per annum):
Estimated Construction Espenditure.
(Million, of Dollars) l'nadju ted Adj u.ted Generating Facilities 1979 1979-1985 1979-1985 Company's Share of Seabnyok Nuclear Project Plant
$140.7
$ 673.0
$271.9 Nuclear F':el 21.2 79.6 3!L9 Total 161.9 752.6 311.8 Participation in Other Plants
- Nuclear Plants 6.6 67.7 6.6 Nue! ear Fuel 0.4 7.5 0.4 Total 7.0 75.2 7.0 Other Generation 2.5 12.4 12.4 Total Generating Facilities 171.4 840.2 331.2 Transmission Facilities 11.0 128.0 128.0 Distribution and General Facilities 18.2 141.4 141.4 Tott 1
$200.6"
$1,109.6 2600.6
- See " Business - Joint Projects."
- Of this amount, approximately $66,100,000 had been expended through April 30,1979.
The following table shows the aggregate amount for each of the years 1979 throu rh 1985 of the Company's estimated construction program before and after adjustment to refleet the reduction of 8
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the Company's ownership interest in Seabrook to 28% commencing in January,1980 and the sale of its interests in l'ilgrim #2 and 31illstone #3 by that date:
l'nadjusted Adjusted Construction Construction Program Program 1979
$ 200,600,000
$200,G00,000 1980 220,100,000 30,200,000 1981 210,600,000 4G,800,000 1982 169,400,000 105,200,000 1983 120,200,000 81,500,000 1984 120,300,000 82,800,000 1985 62,400,000 53,500,000 Total
$1,109,600,000
$600,600,000 Actual construction expenditures could vary from these estimates because of changes in the Company's plans and load forecasts, cost fluctuations, licensing delays, and other factors. The Company is continuing to experience increases in construction costs for the Seabrook nuclear plant as a result of escalating labor, material and equipment costs caused by delays in the regulatory proceedings relating to the plant. The Company estimates that the ultimate cost of its share of Seabrook would iner ase between $5,770,000 and $7,900,000 for a 289 ownership interest (c.nd between $10,300,000 and
$14,100,000 for a 50% ownership interest) for each month's delay in completion. Delays of more than one month may result in a higher per month cost; the increase in cost in each case depends upon the cause and length of tho delay. It is also possible that additional expenditures may be required to meet regulatory and environmental requin ments at the Seabrook nuclear plant and at the Company's other generating facilities. See " Industry Problems" and " Business - Environmental 31atters."
The complexity of present-day electric utility technology and the time required for the construc-tion of generating facilities and for the completion of the necessary licensing and regulatory proceed-ings, which have become increasingly extensive, have compelled the Company, as well as other electric utilities, to make substantial investments in the construction of such facilities befcre the licensing and regulatory proceedings are final. At April 30, 1979, the Company had invested approximately
$348,800,000 (including allowance for funds ussl during construction of approximately $38,500,000) in the Seabrook nuclear plant. While it is possible that future developments could lead to cancellation of the project, the Company considers such a possibility unlikely not only because the necessary construction permits and approvals have been received (although certain of them are subject to further court appeal and administrative proceedings, see " Business-Seabrook Nuclear Project") and con-struction is proceeding but also because of the pn>jected need for the plant's power in the Company's service area and in New England generally. However, if the Seabrook project were cancelbd, the Company estimates that at the present time its share of the total costs would be substantially more than its investment; the precise amount would depend upon a number of factors, including the amount of termination charges and salvage and the results of negotiations in connection with contract terminations. The Company would apply to regulatory authorities for ap al to amortize its sharc W'
302 i~h
~ '.
of total costs over an appropriate future period and to recover such costs thniugh the ' Company'a retail and wholesale rates. While the Company cannot predict whether and to what extent regulatory authorities wouhl permit such recovery, construction of the plant was authorized by the New IIamp-shire Public Utilities Commission based upon its finding that the plant was nquired to meet the demand for electric power. See " Business - Seabnmk Nuclear Project - NIIPUC" FINANC2NG Financing of the Company's 1979-1985 construction program estimated at $600,600,000 (amuming its construction program is reduced as described above), and the refinancing at maturity of certain long-term debt and required sinking fund payments together aggregating $114,942,000 during this period (sm Notes 4 and 6 of Notes to Financial Statements), represent a major undertaking for the Company. Approximately $169,000,000 is expected to be generated from internal funds (principally after 1982) assuming CWIP is not included in rate base after Jtme 30,1979. The balance is expectcd to be financed imm external sources.
1)uring 1978, the Company raised approximately $83,900,000 from permanent financing, consist-ing of approximately $23,900,000 from the sale of 1,300,000 shares of Common Stock in 31ay and
$60,000,000 from the sale of General and llefunding 3Iortgage Bonds in September. The Company raised $39,610,000 from the s:de of 2,0m),000 shares of Common Stock in January,1979, and $30,000,000 from the sde of Preferred Stock in 3 fay,1979. The Company's financing plans for the 1979-1985 period include the issuance of conunon stod., preferred stock and long-term debt, nuclear fuel financing and intermediate-term debt financing.
The success of the Company's fmancing plan is dependent upon a number of factors, including the Company's ability to obtain adequate and timely rate increases, conditions in the securities mar-kets, economic conditions and the Company's level of sales and particularly resolution of the matters discussed under " Problems Facing the Company" JIortgage Ihmds. Due to certain restrictions in the Company's First 3Iortgage Indenture, no significant amount of First 3Iortgage Bonds may be issued thereunder until an operating license is obtained for Seabrook Unit 21, now anticipated in late 1932. The Company is considering seek-ing the consent of the holders of its First 3Iortgage Bonds (757c in principal amount required) to amend that Indenture by modifying or eliminating these restrictions. but no assurance can be given that such consent will be sought or obtained. If these amendments are made, the Company is required to redeem all outstanding Gener:d and Refunding 3fortgage Bonds described below by exchange for First 3fortgage Bonds; until such time, such First 31ortgage Bonds as may be issued will be pledged as additional security for the General and Refunding 3fortgage Bonds.
Because of the restrictions in the Company's First 3tortgage Indenture, the Company has emered into the General and Refunding 3Iortgage Indenture dated as of August 15, 1978, constituting a see-und mortgage on the Company's properties to secure General and Refunding 3fortgage Bonds. The Com-pany sold $60,000,000 of such Bonds to institutionalinvestom in September,1978. The terms of the Gen-eral and Refunding 3fortgage Indenture are generally similar to those of the First 3fortgage Indenture except for elimination of the above-mentioned restrictions on issuance of bonds and the inclusion of a
~
40
- 9 4
3
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limitation on the amount of other income (including AFUDC) includible in earnings coverage under the General and Itefunding 3fortgage Indenture. For the twelve months ended 3farch 31,1979, the earnings coverage of intenst on bonds was approximately 3.46, as compared with the requirements for the issuance of additional bonds contained in the General and llefunding 3fortgage Indenture of 2.0.
At 3f arch 31,1979 the earnings cove ~ age test woubl have limited the pr~ncipal amount of General and Itefunding 3fortgage llonds (11%fe annual interest rate assumed) which could have been issued to
$142,G00 000 I'pon the exclusion of CWIP from rate base, the earnings coverage will be adversely affected and the amount of Honds issuable under the General and Itefunding 5fortgage Indenture will be significantly reduced.
Bank Financing. The Company has a revolving credit agreement with a group of seven commer-cial banks under which the Company may born >w up to $115,0WJ,000 thn> ugh June 29,1979. A mounts outstanding under the credit are due and payable ou July 2,1979 but the banks have advised the Company that they are willing to extend the maturity date to October 15, 1979; there can he na assurance that the maturity will be extended beyond that date. The same group of commercial banks have extended to the company a $25.000,000 term credit due.Tanuary 3,19w0. The Company has agreed to use its best efforts to make arrangements mutually satisfactory to the Conipany and the banks to issue General and liefunding 3f ort gage Hands to secure all revolving credit advances exceeding $95,000,000 and the term credit. The Company has mhlitional lim s of credit aggregating
$5,350.(HMJ with New Hampshire banks. The Pompany is exploring the possibility of obtaining addi-tional loans from other commercial banks.
As of 3f arch 31,1979, the Company couhl have incurred approximately $123,000,000 of short-term unsecured indebtedness under its Artic!cs of Agreement without obtaining the approval of holders of the Preferred Stock. The NIIPUC has approved up to $121,700,000 of short-term borrowings.
Prefe rrM N/ock. Under the Company's Articles of Agreement additional Preferred Stock may be issued without the affirmative vote of the holders of a raajority of either class of the Preferred Stock provided that the ratio of earnings to fixed charges and preferred dividends, including dividends on Preferred Stock to be issaed, is at least 1.50.
For the twelve months ended Alarch 31,1979, the ratio of earnings to fixed charges and preferred dividends computed under the method prescribed by the Company's Articles of Agreement was 2.10; as of that date, after giving effect to the issuance of 1,200,000 shares of the Sinking Fund Preferred Stock 11.244 Dividend Series, $25 par value, on ratio woubl have been 1.89, and the Company coubl have issued, without such 3f ay 22.1979, sueb vote of the holders of the Preferred Stock, approximately $71,000,000 of additional Preferred Stock (llW; annual dividend rate assurned).
CO3DION STOCK DIVIDENDS AND PIIICE IIANGE The Company has paid regular quarterly dividends on its Common Stock since 1946 when its Common Stock tirst became publicly hehl. The Company's annual dividend increased from $1.64 to
$1.72 in 1975, to $1.86 in 1976 and to $1.88 in 1977. The quarterly dividend paid November 15,1978 was inen ased to $0.53 ($2.12 annual rate). A quarterly dividend of 53( per share was declared by the Hoanl of Dirktors at its June 21, 1979 meeting payable August 15, 1979 to holders of recon 1 of 11 m
,i 8
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Common Stock on July 31, 1979. The shares of the additional Common Stock o!Tered hereby will be entitled to this dividend. It is the intention < ' the Board of Directors to continue to pay dividends quarterly on the Common Stock, but such dividends will be dependent on the future earnings and financial condition of tho Company and other factors. See " Statement of Earnings" as to dividends paid on Common Stock.
The following table indicates the high and low sale prices of the Common Stock as reported in The Wall Strat Journal as New York Stock Exchange transactiona through January 23,1976,and as composite transactions thereafter:
liigh low Ifigh low 1974 19?k 10 1978 1975 19 %
11 %
Second Quarter 20 %
18?L 1976 213j 18 %
Third Quarter 2214 19 %
Fourth Quarter 2216 191,5 1977 Firs
- Quarter 2131 19?k Fint Quarter 21 %
19 %
Second Quarter 22 1931 Sec nd Quarter Third Quarter 2215 2031
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(ti :ough Fourth Quarter 213i 19 %
June 20,1979) 19 %
17 %
The last reported sale price on t.2e New York Stock Exeb :nge on. lune 20,1979 was $19.25. The book value of the Common Stock at Starch 31,1979 was $23.09 oer share.
The Company has a Dividend Reinvestment and Common s.ock Purchnve F!an under which holden of its Common Stock may automatically reinvest their dividends, make optional eash invest-ments of an aggregate of from $25 to $'i,000 per quarter, or both, in additional shares of Common Stock without payment of any brokerage commission or service charge. Participation in the Plan is offeral only by means of a separate prospectus available upon request from the Company. The Plan was suspended before the May,1979 dividend 4ayment date pending revision of the offering prospectus 1
to reflect the matters describal under " Problems Facing the Company" It is expected that the Plan will be reinstituted before the August dividend date.
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CAPITALIZNTION The capitalization and short-term debt of the Company as of 31 arch 31,1979 was, and adjusted as of that date to reth et (a) the issuance of 1,200,000 shares of Sinking Fund Preferred Stock, $25 par value, on 3f ay 22,1979, and (b) the issuance of 2,000,000 shares of Common Stock, $5 par value, offered hereby am! the application of the combined proceeds thereof (a.ssumed to aggregate
$65,800,0u)) wouhl have be en, as folh>ws:
Amount Outstanding March 31,1979 Adjuated Amount Percent Amount Pc NAt Long-Term Debt (including current maturities)
(Thousan :; of Dollars)
First Rrtgage llauds (a)
$200,190
$200,190 General and itefunding 3f ortgage Bonds (b) 60,000 60,000 Promissory Lte 25,000 25,000 Pollution Coutrol Itesenue Bonds 7,200 7,200 Total leng-Term Debt 192.390 45.1 %
292.390 41.9 %
Preferred Stock -Cumulative
$100 Par Value, Authorized, 1,35(,000 sha res Out st a nding, 631,527 shares (ci 64,153 6 %153
$25 Par Value, Ac'L 91e,1,2,000, bo shares Outstanding, 60t,000,, hares; adjustrd, 1,500,000 shares (c) 15,000 45,N 9 Total Preferred Stock sa,153 10.s 113 153 15.9 Couunun Stock 1:quity Common Stock - $5 Par Value Authorized,1x,MO,000 shares Outstan2ing,11,s22,056 shares; adj ust ol, 13,s21,056 shares (d) 59,110 69,116 Other Paid T 1 Capital 134,460 162,Hs'e)
Hetained Earnings 75,512 75,51s Total Common Stock Equity 273,o s e 42.1 307,466 43.1 Total Capitalization (f)
$64 %,65 100.0 %
$ 713.009 IUU'UM Short Term Debt 795,17iii
~
$ 29,300(g)
(a) Because of certain restrictions in the First Ertgage Indenture na significant amount of bonds rnay now be issued thereunder. See " Financing" For a description of the outstanding series, set Note 6 of Notes to l'inancial Statements.
(b) The amount of bonds issuable under the General and Refunding 31artgage Indenture is subject to certain restrictions. See " Financing' For a description of the outstanding series, see Note 6 of Notes to Financial Statements.
(c) For a dueription of the outstanding series, see Note 4 of Notes to Financial Statements.
(d) In addLion as of March 31,1979 there were reserml for issuance upon conversion of the 54,527 shares ot Convertible Preferred Stock, 5.50g I)ividend Series, 234,928 shares of Common Stock based upon the mversion price of $23.21 per share (the Convcrtible Preferred Stock being taken at its par value of $19) per share). The issuance of the 2,000,000 shares of additional Common Stock will result in adjustment of the conversion price to $
per share and an aggregate of shares of Comnum Stock will be reserved for issuance upon such conversion.
(e) The expemes of issuing the Common Stock offered hereby (estimated at $115,000) will be paid out of the eeneral funds of the Company and, like the underwriting commissions and thc expenses of issuing the Preferred Stock in May,1979, charged to Other Paid.In Capital.
(f) See Note 7 of Notes to Financial Statements with respect to Commi+m?nts and Contingencies.
(g) On the date of the issue of the additional Common Stock, short-term bank borrowings are c_.
pected to be approximately $115,000,0ty). See "Use of Proceeds" and Note 3 of Notes to Financial Statements.
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STATEMENT OF EARNINGS The following Statement of Earnings, so fac a.s it relates to the five years in the period ended December 31,1978, luts been examined by Peat, Marwick, Mitchell & Co., independent certified public accountants, whose report thereon appears elsewhere in this l'rospectus. The information for the twelve inonths ended Lrch 31, 1979 is unaudited and, in the opinion of management, includm all adjustinents (consisting only of normal recurring accruals) neci ssary to a fair statement of results of operations for such periml. This statement should be rtad in conjunction with the other financial statements and the related notes appearing el.sewhere in this Prospectus.
Twebe Loth.
Ended Year Ended Decenilwr 31, March 31, 1979 1978 1977 1976 19 7 ~,
1974 (l'naudited)
(Thousand, of Dollars)
Operating Reunua ( A)(ll)
$26*,%43
$200,751
$214,787
$196,671
$ 1 s6,393
$ 155,930 Operating 1:xpenses O ieration i
Fuel (B) s i,s3 7 71,996 70,500 5-1,w l 5*,511 43,161 l'urchased and Interchangni l'ow er 39,61s 43,422 37,s lo 36,46s 27,153 32,505 Other 32,s98 31,190 27,611 25,05s 22,04s 19,2s3 Alaintenance ( A) 17,565 17,502 14,550 12,930 10,72i s,575 Depreciation (A) 18,921 14,75;.'
11,117 13,791 13,52; 11,621 Federal and State Taws on incomr (A)(C) 19,286 19,666 N399 9,733 9,916 3,702 Other Taxes, Principally Property Taxes 13,s5%
13,5s3 12,506 11,wc0 10,01s 9,756 Total Operating Exproses 219,912 212,413 1 5,613 161,721 151,*95 12*,606 Operating incon e 4*,901 1 %,:I5
.:9,174 31,953 34,495 27,324 Other Income nn,I Drductions Allowance for Epity Funds Used During Construction (D)
- 930 7,*2s 6,093 3,205 1,573 1,7 s3 Equity in Earnings of Athliatnl Cone panies (A) 574 s70 s02 1,007 s21 570 Other - Net 1,016 983 491 391 49s 2,611 Total G hcr Income and Deductions 10,*50 9,6
- 1 7'6 4,ema 2,*92 5,299 Income llefore Interest Charges 59,751 5 =,019 36,560 36,556 37 190 32,623 Interest Charges Interest on Long Term Debt 22,so2 21,073 1 s,9 so 17,932 16,6 so 13,547 Other Interrat 9,33s 8,201 2,029 290 1/209 4.672 Allowance for Borrour<1 Fund 4 Used During Construction (D)
(10,029)
(7,762)
(6,171)
(2,661)
(1 307)
( 1,*96 )
Net Interest Charges
.;2,111 21,512 14,*3s 15,561 16,5*2 16.3 3 Net income 3 7,td o 36,5 u 7 21,722 20,995 to, wow 16,300 Preferred Dividend IWuirements 6,377 6 391 5,120 4,s 4 s 3,601 3,37s Earnings Asai!al.le for Common Stock
$ 31,263
'.' 30,116
$ 16.602
$ 16,14 7
$ 17,2"1
$ 12,922 Average Shares of Conunon Stock Out tan 1 ing (Thousands) 9,9 *3 9,275 7,6
- 0 6,372 6,121 5,138 Earnings Per Share of Common Stock (E)
$3.13
$ 3.2,2
$ 2.16
$ 2.53
$2 *1
$ 2.52 Dividen b Per Share of Common Stock
$ 2.06 *
$ 1.9 4
$ 1.s s
$ 1.s6
$ 1.72
$ 1.61
- Includes a dividend of 53( per eharr declared by the Board of Directors on April 2c,1979, paid on my 15, 1979.
(See " Management's Discussion and Analysis of the Statement of Earnines".)
( A) See tiie applicable portion of Note 1 of Notes to Financial Statements.
(B) Since December 3,1977, the Company's New Hampshire retail ratra have been based in part upon the inclusion in the Company's rate base of a portion of the costs of construction work in progress (CWIP) associatsl-with major generating projects. The inclusion of CWIP n mte ba3e increases (F%. ]
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revenues from customers to cover the costs of financing such CWIP. See "Busim ss - Rates -
New IIempshire lhtail" for information concerning the elimination of CWIP from the Com-pany's rate base.
See " Rates - Other" for a discus.sion of increased rates to whohsale customers put into effect by the Company on July 29,1978.
During 1977, the Federal Power Commission (FPC) aflirmed an Administrative Law Judge's decision which resulted in the Company refunding in October,1977 approximately $1,622,000 of 1975 wholesale fuel adjustment clause revenues. This decision was affirmed by the United States Court of Appeals for the District of Columbia Circuit on 31ay 3,1979. Pending a deci-sion by the Company regarding a further court appeal of this matter, the Company has charged the refund with intertst to deferral debits.
In August,1976, the Company and a fuel supplier reached agreement on the amount of a fuel inventory adjustment. As a rtwult of this settlement, operating revenues and fuel (xpense for 1976 are each approximately $4,595,000 hss than they otherwise would have beer.
(C) See Note 2 of Notes to Financial Statements for information regarding income taxes.
(D) AFUDC is the estimated cost, during the period of construction, of funds invested in the con-struction pn. gram which are not being recovered from customers through current revenues. Such allowance is not realized in cash currently but under the rate-making process the amount of the allowance will be recovered in cash over the sersice life of the plant in the form of increased revenue collected as a result of higher plant costs. The NHPUC, commencing on December 3, 1977, permitted the Company to include in rate base a portion of the costs of construction work in progress (CWIP) associated with major generating projects. Therefore, AFUDC for the year 1978 and the twelve months ended 3farch 31,1979 does not include the cost of funds invested in the construction program which are being currently provided for by revenues of the Company.
To the extent CWIP is not included m the Company's rate base, the cost of funds invested in CWIP (interest on debt and return on quity, iecluding dividends) will not be provided by r ' venues and larger amounts of AFUDC will be added to the cost of the plant being constructed with offsetting credits in the Statement of Earnings. Since the credits are not cash items, cash for interest and dividends may med to be provided in whole or in part by additional financing during the construction period.
AFUDC net of applicable deferred income tax provisions equa led 32.5SF and 37.87F of net income for 1978 and the twelve months ended 3farch 31,1979, respectively. Th ' Company capitalized AFUDC at a net-of-tax rate of 71GSF for 1974. Effective January 1,1975, the Com-pany began using a pre-tax rate of 9%CF (increased to 10$F effective January 1,1979) and began rn ognizing deferred income tax expense applicable to the current tax reduction resulting frma interest expense associated with construction, but the.se changes had no significant effect on net income.
The Company began compounding AFUDC on February 1,1977 resulting in an increase in the grtss amount of AFUDC capitaFzed during 1977 and subsequent periods. This change increased 1977 net incon.e and earnings per share of common stock by approximately $810,000 and $0.11, respectively.
10
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(E) Earnings per share are based on the average number of common shares outstanding, after recog.
nition of preferred dividend reluirements.
(F) The following quarterly information is unaudited, and, in the opinion of management, is a fair summary of results of operations for such periods. Variations between quarterm refleet the sea-sonal nature of the Company's businesa, and beginning with the fourth quarter of 1977, addi-tionally includes the effect of rate increases. See
" Management's Discussion and Analysis of the Statement of Earnings." The fourth quarter of 1977 also includes an adjustment which de-creased maintenance expenses recorded in the first three quarters of 1977 by approximately
$1,000,000.
Quarter Ended Year 1979 Year 1978 Year 1977
- r. h Dec.
5ept.
June
% rch 13 Sept.
June March (Thousand esrept Per Share Amounta)
Operating Revenues
$ 50,072 $69,316 $62,357 $57,033 $71,9 0 $57,091 $52,678 $47,491 $57.507 Operating Income 14,755 12,324 11,700 10,119 14,195 9,109 6,611 5,252 8,202 Net incomo 12.217 9,359 8,872 7,192 11,034 7,390 5,098 3,244 5,990 Preferred Dividend Requirement s 1,5 *6 1,594 1,59s 1,599 1,600 1,516 1,199 1,197 1,208 Earnings Available for Common Stock 10,631 7,765 7,274 5,592 9,484 5A74 3,899 2,047 4,732 Average Shares of Commen 8tod Outstanding 11,319 9,770 9,755 9,109 8,447 S,144 7A03 7,230 7,209 Earnings Per Share of Common Stock
$R94
$0J9
$035
$0.61
$1.12
$0.70
$0.50
$0.28
$0.66 Itecent Re ults of Operations Information with respect to the results of operations for the twelve months and four months ended April 30,1979 and 1978 is as follows:
Twelve Monthe Ended Four Monthe Ended April 30, April 30, 1979 1978 1979 1978 (Thousande except Per Share Amounts)
Operating Revenues
$2 72,132
$232,785
$103,334
$91,953 Operating Income 48,752 36,833 18,226 17,812 Net Income 37,00
')8,192 14,893 13,738 Preferred Dividend Requirementa 6,374 5,648 2,116 2.133 Earnings Available for Common Stock 31,258 22,544 12,777 11,605 Average Sharea of Common Stock Outstanding 10,261 8,086 11,445 8,448 Earnings Per Share of Common Stock
$3.05
$2.79
$1.12
$1.37 The foregoing information is unaudited and, in the opinion of management, includes all adjust-ments (consisting only of normal recurring accruals) newssary to a fair statement of resulta of operations for such periods. Information for the tweive and four months ended April 30,1979 may not be indicative of.results for the full year ending December 31, 1979.
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31anagement% Discus ion and Analpi of the Four 31onth Ended April 30,1979 a, Compared with the Four Slonths Ended April 30,1978 Operating Ilevenues inended $11.391,000 principally due to (1) the operation of the fuel adjust-ment clause ($4,823,0W), (2) an inen ase in unit powi r sales ($1,797,000), (3) an increase in rates te New llampshire retail customers of appn>ximately $3,000,000 on an annual basis efreetive. lune 1, 1978, (4) an inen ase in rat 4 s to wholesale eu.stomers of approximately $2,400,000 on an annual basis e frective.luly 29,1978 aml (5) an increase in prime energy sales.
l'arnings per share declined principally duo to the larger number of shares ot tstandine and because operating margins have declined due to higher operating expenses. The Company anticipates that margins will remain under pressure unless and until higher rates become effective.
31ANAGE31ENT'S DISCUSSION AND ANALYSIS OF Tile STATE 31ENT OF EAltNINGS Twebe 31onth Ended 31 arch 31,1979 u-Compared with Criendar 1978:
" Ope ratinu Re re nro s" increased $8,092,000 principally due to (1) the operation of the fuel adjustment clause ( $2,83G,000), (2) an increase i unit power sales ($1,520,000), (3) an increase in rates to New Ilampshire retail customers of approximately $3.000,000 on an annual basis offettive
. lune 1, 1978, (4) an increase in rates to wholesale customers of approximateiy $2,400,000 on an annual basis effective luly 29,1978 and (5) an increase in prime energy sales.
" Fro l Expe nse" increased $9,841,000 because a larger percentage J total power supply was generated by ('ompany-ow ned fossil fuel plants.
"Purchau d aml In.te n hamp d Pouv r" decreased $3,804,000 due to the increased generation by t'ompany-own d fossil fm l plants.
" 111nwano for Equity Funds Use d During Construc tion" and " Allowance for Borrowcd Funds rud During Con 3truction" increaml due to an increase in the Company's construction program, primarily the Seahnmk nuch ar plant.
"Othe r Inte n st" increawd $1,137,000 due to an increase in the rates and level of short-term borniwings from banks as an interim method of financing construction of new facilities.
1978 a Compared with 1977:
" Operating Re t e n urs" increased $45,96L000 principatly dt e to a rate increase to New Ifampshire retail customers on 1)ecember 3,1977 ($27,FM,000 on an annual basis), increased to $30,000,000 on an annual basis on. lune 1,197A; a rate increase to wholesale customers on.hily 29,1978 (approxi-mately $2,400,000 on an annual basis); increaud revenue associated with the operation of a fuel mljustment clause ($10,000,000), and an increav in prime encrpy sales.
" Purchased and Inte rchange d Forcr" increaml $5,612,000 principally due to increases in capa-city and energy purchase s necessary to mes t the Company's increased KWH sahs and replacement liower as required during the shutdown of 3ferrimack Station.
"Othe r Op4 rating Erpe tws" increased principally because of tl.a effect of inflation on wages, supplies atol services and employee benefits, the exact amount of which cannot be determined indi-vidually.
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" Maintenance Expenus"inertased principally due to increased cost of maintenance at Merrimack Station (appniximately 607; of the total increase) and because of the eff.vt of intiation on waees and materials (approximately 315; ) and on costs of annual maintenance at other generatine stations (approximately G7;-).
" Federal and State Tare s on Incmnt" increased $11,267,000 principally due to an increase in current taxable income due to increased operating revenues, and an increase in deferred taxable income.
"Other Tarts, Principally Prop < rty Tarrs" increased due primarily to higner real estate property assessments and tax rates.
".ll!meance for Equity Funds l'ud During Construction" and ".tllmvancr for Horrmerd Funds Usrd During Construction" increased due to an increas in the Company's construction program, e
primarily the Seabrook nuclear plant.
"Other Income and Drduction.s - Other-L t" increastd $5G0,000 primarily as a result of in-creased interest income from short-term investments.
"Infe r(st Charge s" increased principally due to (1) additional long-te rm debt outstanding (ap-proximately 25(I of the total increase) and (2) an increase in the rates and level of short-term borrowings from banks as an interita method of financine construction of new facilities (approxi-mately 75(1 ).
1977 as Compared with 1976:
" Operating Re ctrurs" increased $18,113,000 in 1977 principally due to increased revenne associ-ated with the operation of a fuel adjustment clause ($7,685,000), an increase in unit power sales
( $3,268,000), a rate increase to New Hampshire n tail customers on December 3,1977 ($27,000,000 on an annual basis) and an increase in prime energy sales.
" Fuel Expense" increased $15,619,000 in 1977 because a larger percentage of total power supply was generated in Company-owned fossil fuel plants (approximately 4951 of the total amount) and due to increases in the mit em's cf coal ur.d oil (approxunateiy.np ), and also hi cause of the inven-tory adjustnient referred to in Note (R) to Statement of Earnines (approximately 30r; ).
"Othe r Ope rating Erprnees" increased in 1977 principally because of the effect of intlatim on wages, supplies and services, employee benefits, and additional cost for transmicion services associate d with additional power purchased.
" Maintenance Expenses" increased in 1977 principally due to increased costs of maintenance at Merrimack Station (approximately 129 of the total increase) and because of the effect of inflation on waecs and materials (approximately 4sr; ) and on costs of annual maintenance at all generating stations (approximately 409 ).
" Federal and Ntate Tarcs on inco:ne" decreased $1,334,000 in 1977 primarily due to a decrease in taxablo income.
"Other Tazes, Principally Prope rty Tares" increased in 1977 due primarily to higher real estate property tr rates.
"ztll<ncance for Equity Funds Used During Construction" and "illimcance for Horrmerd Funds Used During Construction" increasel substantially in 1977 due to (1) an increase in the Company's construction program, primarily the Seabrook nuclear plant and (2) the iffect of compoundine of AFUDC semi-annually, effective February 1,1977 as permitted by Federal Power Commission Order No. 561. See Note (D) to Statement of Earnings.
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OPEllATING STATISTICS Twelve Months Ended Year Ended December 31, March 31, 1979 1978 1977 1976 1975 1974 hlW11 Generateil and Purchased -- Net
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Generatel by \\ Vater Power 270,055 291,972 332,523 328,701 335,521 347,129 Generated by Fuel J.+04,072 3,849,s53 4,033,701 3,596,002 3,669,x00 3,3*5,094 Total Generateil 4,674.127 4,141,*25 4,366,2_7 3,921,703 4,uu5,321 3,732,227 Power Purchased - Nuclear Affiliates 635.174 674,337 629,116 670,994 618,737 530,129 Other Power Purchased and Interchs' l.016,053 1,374.245 999,052 1,092,414 819,437 1,133,423 Total Genrrated and Purcha.
6.353,3,.4 6,199,4u 7 5,994,425 5,638,111 5,443,545 5,4u0,7 79 Disposition of 31Wil Out[ot sol i 5,910,t>62 5:752,734 5,5s6,37%
5,2x6,507 5,055,673 5,054,271 Used by the Company 26,215 22,734 15,217 13,476 13,047 23,521 Ab<orlel in Delivery 416,477 414,% 9 392,%30 3*4,124 374,525 32J,647
~,4 43,545 5,400,779 Total Output 6.353,3s4 6,190,407 5,u94.425 5,6 v,111 5
11Wil Sold Her.idential 1,771.026 1,765,553 1,709,52s 1,676,950 1,552,212 1,552.714 Ind ust rial 1,759,161 1,743,131 1,56*,063 1,539,459 1,396,957 1,470,307 Unit Power 1 +4,s03 36%,735 545,755 372,321 524,s31 502,715 Wholesale, Comnwrcial and Othe r 1,905.672 1,*75,315 1,763.007 1,697,717 1,581,673 1,528,535 Total 11Wil Sold 5,910,662 5,752,7 x4 5,5 s 6,3 7 s 5,2%6,507 5,055,673 5,054,271 Sources of Electric Revenue (Thou. sands of Dollars) llesidential Hales
$ 99,735 $ 94,331 $ 81,551 $ 77,153 $ 72,167 8 57,566 Ind=timl Saks 66,% 3 63,565 45,578 45,361 42,049 38,807 Unit Power Hales 10,625 9,104 10,297 7,029 9,130 6,746 Wholesale, Commercial an 1 Other 55,452 52,519 69,278 63,392 55,992 44,742 31iscellaneous Operating Revenue 6.918 7,202 4,733 3,739 7,055 11,769 Total Electric Revenues
$ 263,343 $ 260,751 $ 214,7*7 $ 196,674 $ 156.393 $ 155,930 Electric Customers (End of Period)
Residential 244,222 214,003 238,s30 232,354 226,215 221,737 Indust rial 1,081 1,090 1,046 1,018 947 992 Unit Power 1
1 1
1 1
1 Whle* ale. Comm-eist n i Other 31,766 31,766 30,571 30,115 29,268 28,853 Total Ehytric Customers 277,070 2 76,w55 270,743 ' 263,492 256,471 251,573 Diversity of Industrial Resenues Textile Product s 3.6 N 3.7 c1 3.9%
4.1%
4.5%
5.6%
Paper Products 17.5 17.2 16.5 16.8 15.7 17.9 Leuther Products 2.9 3.0 3.2 3.4 3.6 3.5 Chemicals 9.4 9.3 9.0 S.3 7.9 8.1 Other Non Durabl,' Products 7.2 7.4 7.9 7.6 7.7 7.5 Total Non-Durable Products 40.6 40.6 40.5 40.2 39.4 42.6 5fachinery 16.7 16.8 16.3 15.2 14.8 14.7 Othe r Durable Products 13.2 13.2 13.0 12.4 12.1 12.0 Total Durable Products 29.9 30.0 29.3 27.6 26.9 2$ 7 Tot al linnufacturing 70.5 70.6 69.5 ti7.8 66.3 T9T Commercial and Service 29.5 29.4 30.2 32.2 33.7 30.7 Total 100.0g 100.0 %
100.0 %
100.u%
100.0 %
100.0 %
Customer 8tatistics ( Annual)
Average Cu-t orners - Residential 243,759 242,416 236,453 230,390 224, % 6 220,937 Average KWil Per Customer - Residential 7,265 7,2 %3 7,230 7,279 6,902 7,029 Average Rate-Cents Per KWII-Resilential 5.63 5.57 4.74 4.60 4.65 3.73 Average Rate-Cents Per KWii-Industrial 3.69 3.65 3.12 2.95 3.01 2.37 Average Rate-Cents Per KWil-Other Utilities 3.30 3.20 3.07 2.45 2.44 2.12 Aserage Annual Bill-Residential
$ 109.15
$405.63
$344.90
$331M
$320.90
$261.91 AveragoNuclear Fuel Cost per KWII Generated u.3702(
0.363*v 0.3181t 0.2550f 0.3506f 0.2249f Average Fossil Puel Cxat per KW11 Genersted
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l.7575f 1.6540(
1.5944f 1.2902(
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IlUSINESS Poncer Supj>ly and Properties.
The electric properties of the Company form a single integrated system including transmi% ion facilities which are part of the New England. wide transmission grid. The maximum one-hour prinn-peak loan experienced to date by the Company's system was 1,173 net 31W on l'ebruary 14, 1979. At that time the Company had available to meet such load 1,154 31W of its own generating capacity, 97 31W from its participations in the four Yankee nuclear generating companies do,cribed behar under "Ioint Projects" and 217 31W of purchased capacity. Because the generation aml transmission systems of the nr jor New England utilities, including the company, are operatot as if they were a single system, the ability of the Company to meet its load is dependent on the ability of the New England utilities to meet the New England load. See "New England Power Pool" below.
The Company has one coal-fired 456 31W electric generating station Oferrimack Station), from which the Company has agreed to sell to another utility 100 31W on a single unit basis from Unit #2 through April,1998, and four oil-fired electric generating stations with an agen gate (frective capability of 641 31W, consisting of t he Newington piant (420 31W), the Schiller plant (180 31W) and two smaller plants. See " Environmental 3f atters" below The availability of the two units at 31errimack Station, the Company's largest fossil fuel station, has been less than desin,1 due to forced outages caused by both the boilers and the turbines. llowever, the availability record of the Station is roughly comparable to that of oth, r coal. fired generating plants of similar age and design.
The Company also has other generating facilides with an negregnte emetive capability of 162 31%
as follows: hydnwh etric (48 31WL combustion turbine (111 31W ) and diesel (3 31W). The Company has participations with otin r New England utilities in five generating units recendy com-pleted, under construction or in C:agn 3 tares, including the two Seabrmk units. See "Consti dion Program", ami see ",loint Projects" and "S, abrook Nuclear Project" below.
The Company purchases capacity and energy from other utilities as necessary, together with its own generatine capacity, to meet its load growth and its reserve obligations under NEPOOL dis-cussed be!ow. These purchases are expected to increase from 217 31W to approximately 45131W by April,1983 when Seabn ok Unit
=1, in wn."h the Company's reduced interest will be 322 31W, is currently scheduled to be completed and to reduce substantially the need for most of such purchases.
See " Problems Pacing the C~npany" Nese England Poscer Pool.
A New England Power Pool Agreement ("NEPOOL") to w hich the major investor-owned utilities in New England, including the Company, and certain municipal and cooperative utilities are parties, has been in effect since 1971. This Agreement provides for joint planning and operation of generating and transmission facilities and also incorporates generating capacity nwerve obligations and provisions regarding the use of major transmission lines and payment for such use.
Substantially all planning, operation and dispatching of electric generating capacity for New England is done on a regional basis under NEPOOL. At the time of the 1978-1979 NEPOOL winter peak, the New England utilities had about 21,5fo 31W of installed capacity to nm t the New England peak load of about 14,950 31W.
The Company's capability responsibility under NEPOOL involves carrying an allocated share of a New England capacity requirement which is determinn! for caeh periml based on certain regional 20
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reliability criteria. It is expected that the Company's capacity will be suf!1cient through its own generating facilities, its participations and through purchases to meet its NEPOOL obligations in the foreseeable future.
Joins Projects.
The Company is a part owner with other New England electric utilities of four nuchar generating companies. The Company owns a 7% interest in Yankee Atomic Electric Company, a 59 interest in Connecticut Yankee Atomic Power Company, a 59 interat in Maine Yankee Atomic Power Company and a 4% interest in Vermont Yankee Nuclear Power Corporation, each of which owns an operating nuclear generating plant with present net capabilities of 175 MW,575 31W,7813fW and 528 MW, respectively. The stockholders of each of the four nuclear generating companies are entitled to the entire output of the plant in proportion to their respective ownerships, and are obligated to pay their proportionate shares of the generating company's operating expenses and return on invested capital.
The Company is participating on a tenancy-in-common basis with other New England utilities in the ownership of five generating units. One of these, Wyman Unit c4, a 600 MW oil-fired generating unit in 31aine in v hich the Company has a 3.14337c interest, commenced operation at full capacity in February,1979; the other units are phumed or under construction as follows:
Company Share Estimated Construction Cost (3)
Comp!etfoa Capacity Capacity Total Per Type Date (1)
(MW)
Percent (2) (MW)(2)
(Millions)(2)
KW Seabrook #1 & c2 Nuclear 1983 & 1985 2,300 28.0000 644.0
$ 863.1
$1,340 (New IIampshire)
Pilgrim #2 Nuclear 1955 1,150 3.4700 39.9 67.0 1,679 (Massachusetts)
Millstone #3 Nuclear 19S6 1,150 3.8910 44.7 102.2 2356 (Connecticut)
(1) The completion dates of th, four nuclear units have been deferred from time to time and addi-tional deferrals may occur due to licensing delays, economic conditions and other factors.
Dae to the time required for the construction of generating facilities and the completion of licensing and regulatory proceedings relating thereto, substantial investments in the above units will be required prior to the completion of licensing and regulatory proceedings. There is no assurance that all necessary approvals, permits or licenses will be obtained, or if obtained, will not be mmlifini or revoked. See " Industry Problems
(2) See " Problems Facing the Company" for information concerning the proposed rnluction of the Company's interest in Seabrook to 2S4 and s de of the Company's interests in Pilgrim =2 and Millstone #3. In connection with such reduction, the Company may acquire up to a 5.29 interest in a 568 MW coal-fired unit plaimed for construction by Central Maine Power Company at Sears Island, Maine. If the Company's ownership interest in Seabrook should remain at 509, the capacity would be 1,150 MW and the total cost, $1,431,722,000.
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(3) Including the cost of the initial nuclear fuel an AFUDC on the estimated costs of unfinished construction not included in the Company's rate base. AFUDC was discontinued on Dreember 3, 1977 on the portion of unfinished construction included in rate base. F. purposes of this table such portion of unfinished construction has been excluded from rate base effective.luly 1,1979 and it has hwn a.ssunawl that AFliDC will be capitaliznl thereafter on all unfinished construction.
See Note (D) to the Statement of Earnings for a discussion of AFUDC.
Estimated construction expenditures for the jointly owned units used in calculating the estimated cost per KW are based upon information furnished by the utility responsible for the construe-tion of such unit. The Company has been advised by each of the sponsoring utilities that con-struction budgets are continuously under review in light of increased costs due to deferrals, delays and other factors. The estimated expenditures and completion dates of the nuclear unita may also be affected by the licensing and regulatory proceedings relating to each unit and to nuclear power generally and may also be affected by events and conditions which cannot now he predicted.
Seebrook Nuclear Project.
The Company is the lead owner of the Seabrook project now under construction ir. Seabrook, New IIampshire and has enten d into contracts covering the purchase of equipment and services in connection with the project. The project is planned to consist of two Westinghouse pressurized water nuclear reactors utilizing ocean water for condenser cooling purpows. Other owners of the project presently include The United Illuminating Company ("Ul") (209), New England Power Company (109 ) and a number of otNr utilities with smaller participations. UI nas made available for sale to other utilities one-half of its 209 ownership interest in accordance with a recommendation of the Connecticut Department of Business Ikgulation - Division of Public Utility Control contained in a recent rate decision. See " Problems Facing the Company" for information concerning the proposed reduction of the Company's ownership interest in the project.
The project has required numerous approvals and permits from varioue aate
.,1 federal regu-latory bodies consisting principally of a certificate authorizing construct e. of the plant (which incor-
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porates related state permits) from the New Ilampshire Public Utilities Commission ("NHPUC")
under New Hampshire's power plant siting law; approval of the once-through cooling system for the p roject by the Environmental Protection Agency (" EPA"); and construction permits from the Nuclear Hegulatory Conunission ("NRC"). All of these appnwuis and permits have been obtained and, except as describnl belaw, there are no appeals or proceedings relating thereto. Construction of the project is in prvgress.
The process of obtaining these approvals and permits has het n long and complex, has been ce>n.
sistently opposed by a number of intervening groups, has included demonstrations at the Seabrook site, and has been plaened by lengthy delays which have resulted i'. greatly increasnl costs for the project. Court appeals from these federal regidatory approvals have been decided in the Company's favor, but one appeal described below is still pending and further appeals are possible. The Company is unable to predict what effect adverse legis!ative action, financing problems, work stoppagiw or further administrative or court decisions relating to NIIPUC, NRC or EPA actions may have on the completion of the project, on the cost of the project or on the Company.,See " Problems Pacing the Companv" and " Construction Program"
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XIII'I'U. The state siting pn,ceedings began in 1972, involved lengthy hearings during 1972 and 1973 and culminated in issuance of the n quisite certificate on January 29,1974. A subsoluent appeal to the New llampshire Supreme Court roulted in a remaml for further fimlings but without in any
'vay invalidating the certitirate. T!w supph mental findings were issued on lheemh( r 30, 1977; no tuctlar appeals were taken. Proceedings before the NilPl:C and the New IIampshire Site Evaluation (i umittee an pending on the Company's petition seeking modification of the certificate to refleet the extension of fle cooling water intake tunnel onlered by the EPA, transmission line rvlocations onlered by tlm NltC, and eermio other transmission line relocations.
X/C The N1:0 pr me" dings. :annwneed with the dock" ting of the application for construction permits on July 9,1973.
.ne he armgs before mi Atomic Safety and 1 in nsing Iloard (the " Licensing Iloan!"), in which even iw vt nors in opposition participated consmned over sixty days durine 1975 and 1976 and cubainated on. lune 29,1976 in the issuance by the Licensing Ikanl of its Initial Ikei-sion (one memb. r dieentine), approving the issumme m west ruction pamits for the Seabrook project.
The NItC issued the permit.s on July 7,1976, and construction conuneneul shortly thereafter but was subsequently suspended in 1977 and 1978 for periods of seven months and tFree wt ky, resputive!y, as a result of administrative pnceedings and com appt als.
The Initial 1)ceision was affirmed by an N1:C Atomic Saf,ty m.d Licensing Appeal Isoard (the
" Appeal lloard") (with one member dissenting) and by the NRC. The NIsr has postponed a final decision on the seismic issue pendmg receipt of the opinion of the di+cnting member of the Appeal lloani on t hat issue.
On June 30,197s, the NI P ordned the Appi al lloanl to conduct further he arings on whether cooling tow ers (rather than the once-through cooling system presently approved) would be environ-mentally acceptable at the Seabnok site and whether Seabn)ok with cooling towers is acceptable over alternate sites; t hose hearings were concluded in January,1979, and the matter is pending dreision before the Appeal Board. The Appeal Board has indicated that it will take no action on this matte r unless the May 2,1979 decision e,f the United States Court of Appeals for the First Circuit referred to helow umler " EPA" is reviewed by the United States Supn me Court. One aspect of the June 30, 1978 onler was appealed by certain intervenom to the United States Court of Appeals for the First Circuit u hich dismissed the appeal on May 30,1979.
There is presently pending before the United States Corrt of Appeals for the Firm U.rcuit an appeal by inti rvenors fren a eismn of the NHC chal!cnging the NI!U s refus d in 1976 to suspend the Seahn>ok construction permits despite a court decision in litigation not involving the Company which set asidr the NitU s rule with respect to the environmental effects of repn> cessing spe nt fuel and disposing of nuclear waste. (Xatural /le ymn, s Ih fe n.o rou ncil, Inc. v. XIlr, D. (', ('ir. Nos. 7413*5 and 74-15%, which was reversed and n mandal by the United States Supn me Court on April 3,1978 in Ve rmont Yankie Xm le ar Pov i r Corporation Natural ll< sourn s D<ft nsi roumil, Inc., No.70-419). In March,1977, the Nlte pn.muleati d a new interim rule emering the i nvironmental impact of reprocessine. spent fuel and disposing of nuclear waste, which is applicable to Si ahna, ropiiring that such impact he considered in the licensing process, and the Appeal Boani found that, under the interim rule, the fuel cycle impacts were too small to affect the environmental cost-benefit evaluation of the project. Ilowever, the interim rule is also being challenged on appeal in the District of Columbia
('ircuit ( Natural ll<sonnis Difu na rouncil, Inc. v. NIlr, No. 77-1444).
In March,1979, after the Company announced its decision to reduce its ownership inten st in the Seabrook project, an intervenor filed a request with the NItC staff for issuance of a show cauw m
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order as to why the construction permits shonhl not be suspended or revoked lwanse of tlm Company's allegen lack of financial qualifications anil lack of review of financial qualifications of tlm partici.
pants wlurso ownership inten sts are proposed to be increas d. The staff on April 6,1979, gave publir notice that it would take action on that n quest within a reasonable time. The staff luul previously asked the Company to furnish further details of its financial plans, which were filed on April 23, 1979. On May ",1979 the same inti rvenor filed a further request with the NHC staff for issuance of a.du,w cause onler a to why the const ruction permits shouhl not lm suspemb d or n voked because of t!m Nlrs faihire to reipiin development of evacuation plans beyomi the low population zone aml tel evaluate the consetjuences saf ci riain ty[ms tif accidentN InchDling the piisdhility of sllch evacuatil)fl.
The ('ompany camiot pn dict win n tim staff will act on either request or what actions it wi.I take.
- 21. Under the Federal Water Pollution Control Act, as amended, the EPA has jurisdiction over dischargi s from the cooling system of the Seabrook plant. In August,1974, the Company applied to EPA for approval of the om -thnmgh cooling system utilizing ocean water and, in June and October.1975, the regional administrator of Region I of EPA approved the concept subject to estending the intake tunnel fu: ' er offshore. After a further hearing resulting from a court remand, the EPA Administrator on Aug : 4,1978 rca'lirmed his previous appn> val of the once-thn'uch cooling system and that decision was afiirmed ly the Uniteu Nates Court or ippeals fm ih Rim tircuit on May 2,1979.
Olla r.
The Pompany la als involved in proceedings or disputes concerning title to a portion of the Seahn>ok site, th undergrounding of the Seahnnk transmis,sion lirms and the use of the Por.
pany's water wells on the Seabrook site. The Company believes that none of these matters will hat e a material advense etTect upon the Seahn,ok project.
Ina u nin ce.
The Federal Price-Anderson Act provides, among other things, that the maximum liability for damages resulting from a nuclear incident woubl be 960 million. to be provided by private insurance and governmental souren. As required by NHC regulations, prior to operation of the Seahrook project, the owi-rs of toe Si abrook projiet will insure against this exposure by pur-chasing the maxinnun available private insurance ( presently $100 million), the remainder to be cov-ered by the recently implemented retrosptetive premium insurance and by an indenmity agreement with the NHi'
, mter recent amendments to that Act, owners of operating nuclear facilities may be assessed a retrospective premium of up to N million for < ach reactor owned in the event of any one nuclear incident occurring at any reactor in the United States, with a maximum a+cssment of $10 mil-lion per year per reactor owned. As a part owner of other operatine New England facilities (see
".foint Projrets ' above), the Company woubl be obligated to pay its proportionate share of any such assessments, which pre.sently amounts to a maxinuun of $1,050,000 per incident. While it is not yet possible to evaluate the claims being a.sserted as a result of the TMI incident, the Company does not anticipate any assessments being levied umler these provisions as a result of that incident.
Regulation.
The Company, as to retail rates, security issues, and various otla r matters, is subject to the regulatory amhority of the NHPUC. A management audit report prepared by an independent management consulting firm at the direction of the NIIPU(' was released on October 11,1978, and identifh s both management sin ngths and opportunities for improvement and makes certain n com-mendations for action. AmoDR the significant strenuths identified arr the following: tight contnd of "1
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staff levels and employte compensation, souml financial planning, soutul manaRi ment of the Seahnmk pn. ject, atul a stnmg transmission am] distribution system planning and i ngineering function. Ac-cording to the n port, the mon significant opportunitie-for impniven.ent an in the follmving an as:
the overhunh ning of top management. ornelion of operating pn>hhuns at Merrimack Station, fuel procurement and storage, and pahlie relat; ens.
In addition to recomna nding expansion of the top marugement vroup by the en ation of several new exceutive posit ion s. the n port ri conunends reor-ga.n..ation aml :,trengthening of the f uel management function, strengthening d the public affairs Nnetion, and a comprehensive n view of 3ferritnack Station operations. The NIIPUU requested the l'ompany to comment on flie audit n port am! to st a t e how it proposes to implement the report's recommemlations, ami the Pompany has filed a de tailed nsponw with the NIIPUP As to properties and busimv in 31ain" a::d Vermont thi Pm w m,;uhr t io ib-re m tatory e
authority of the Public Utilities Commission of 3f aine ("31 PI T") aml the Vermont Public Ser-vice lloanl, respectively. Aiblitionally, both the Connecticut Department of Business Regulation -
Division of Public Utility Pontnd arni the Massachusetts Department of Public l'tilities have limited jurisdiction over the Company bawd on the Company's ownership as a fi nant-in-common of portions of the Millstone 23 and Pilgrim c2 nuclear units. See ".foint Projects" above. The Company is also subject, as to some phases of its business, including accounts, certain rates, and licensing of its hydnu lectric generating plants, to the jurisdiction of the Federal Energy Regulatory Commission
("FEld "') under the Federal Power Act. The various nue! ear generating units in which the Com-pany has an ownership inten st an subject in their construction and operation to the broa 1 ntmlatory jurisdiction of the NRP under thr Atomic Energy Act of 1954, particularly in regard to public health, safety, environmental and antitrust matters. Se e a!.so " Environmental Mat ters ' below.
Rates - New flampshire ifetail.
On May 25,1978, the NIIPUC granted the Company an increase in its New Hampshire ntail rates of $30,131,232 on an annual basis based on a test year ending in April,1977. The order allowed the Company a return on common equity of 149, an overall rate of retunt of 10.199, and included in rate base CWIP a.ssociated with major generating facilitiu, which was substantially all of the rate relief to which Company witnesses testified it was entith41. The onler of the NH PPC was affirmed by the New Hampshire Supreme Court on May 17, 1979. The rates filed with the NHPFC in April, 1977 were placed in effect on December 3,1977 subject to refund; under the NHPIT's May 25,1978 onler, no refunds were necessary. On May 17,1979 the New Hampshin Supn me Court decided that the Pompan.v had unlawfully applied the new higher rates to hills rendered after December 3,1977 for service renden d beforr that date, and the Company has been onkred by the NHPI'C to make refunds to its New Hampshire retail customers, estimated at approximately $1,000,000 If, in the current NHPFC proceeding resulting fnim the New Hampshire statute effective May 7,1^79 uich pnihibits inclusion of CWIP in the Company's rate base, the NHPFC onlers the Com-pany to eliminate from its rates that portion based on CWIP, the Company's ex;stine retail rates would be reduced approximately $17,500,000 to $18,000,000 on an annual basis. N e " Problems Facing the Company" Although the elimination of CWIP would be largely offset by an inerraso in AFUDC, the Company's net income would be reduced approximately $3,000,000 on an annual basis. Apart from its effect on net income, the reduction in rates would also intensify the Company's cash strin-gency because AFUDC is a non-cash credit to income. See Note D to the Statement of Earnings. If M -)
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the NIIPCC orders such elinunation, the Pompany wouhl take immediate action o preserve its present revenues, including an appeal of any such order to the New Ilampshire Supre ne C<mrt or e rupiest to t he NIIPIT for imnnsliately effective new rates, or both. In addition, t'ie Pompany intends to fih by the end of the third <pmrter of 1979 a new tariff se"kinc increased retail cates which will be hasnl on esidence denumstratine, tlm company believes, that increases in expen. m due to inflation and inercases in rate base exclusive of PWIP justify revenues in excess of tlu pre,ent level of revenues which are based in part on the inclusion of existing UWIP in cate base. I'nder New thimpshire hnv, ropmstol new ratis could be pla"ed in effect umler bond six numths after the pro-posed effective date of sueb rates or sooner with the consent of the NilPIP The Company cannot predict the outcome of any su' h request for rate relief or any app < al by the rompany of an NIIPIT dreision to eliminate PWIP now in rate base.
The Company has a fuel adjustment clause which 4 designed to n,
t r, a f tt r :. t u mont h4' lag, all fuel custs above base, including the energy portion of the cost of purchased power. A hearing and prior apprmal by the NHPFC is required with respect to each month's fuel adjustment rate.
The NHPIT, in September,1976, ordered an investiention into the Company's fuel adjustment charges, and hearines connaenced in Erch,1977. A!! aspects of the Company's fuel adjustment charges are expected to be a viewed, including the Pompany's fuel procurement policies.
In.lanuary,1975, the NHPIT ordered an investication into the rate structures of the e1cetric utilities umler its jurisdiction. Ifearings be gan in,Iuly,1975 and continued from time to time through 1978. While the investigation has not been conchuled, the proceeding has int ilved only the proper distribution of rates among the various custmaers and custmner classes aml not overall revenue re-quirements. Pursuant to an interiin order of the NHPIT issued in Marel,1977, the Company has implemented peakdoad pricing rate experiments involving certain of its custemers. Irgislation was i nacted in 197S re<pliring the ('ompany to offer time of day aml seasonal rates on an optional basis, and su rates have been nuule available to its residential customers atal have been filed for its other custoine rs.
Rain - Other.
Rates to the Co npany's wholesale-for-resale customers increasing revenues from these customers by approximately $3,865,000 or an annual basis became effective as of April 11,1976 On April 29 1978, the Company filed new rates with FERC prososed by the Pompany to be efi :ive on May 29,1978 that woubl increase revenm from the Company's wholesale for-resale custome approxi-mately $2,4u0,000 or 7.74 on an annua' basis based on a 197S test year: the new rates m at mto eTeet subject to refund on July 29,1978. The Company has also filed with FERC a petition rnpiesting the inclusion of CWIP in ra'e base. Af ter trial of the CWIP issue, the Administrative Law.ludge issued an initial decision on January 25,1979 which authorized the Company to inchule in rate base CWIP associated with major generating facilities aml which allowed the Company a return on common equi *y of 139. The.luder's decision has been appealed to FERP The Company cannot place wholesale rates based on CWIP into effect unless mu! until FERP issues a final favorable decision on the CWIP issue.
In another procee< ling before FERU, the Pompany's richt to collect through a surcharge approxi-mately i,1,%0,000 of accruni but unhilled fuel "lause revenue was contested by certain whohdale-for-
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operatine at full load. The tv o sinall plants have limited storage capacity. Si e "Environniental Matters" below.
Poni. Coal for the Company's only coabburning unit, the 456 31W Merrimack plant, is presently being f trnished from West Virginia soun es under a contract which expires in A >ril, !!63. The 1
contract generally provides that a 45-day supply of coal is to be maintained for the Company, that the base price of the coal may be changed by Ae seller annually hut the Company's disagreement with the change will re.sult in termination of the cot 'ract at the eral of the year, and that the price of the coal is subject to certain adjustments for changes in the seller's costs. The Company's policy is to rnaintain a Go-day supply of coal on barol for the 31errimack plant; at June 16,1979, a G1 day supply was on I and. The plant, with 119 MW and J37 MW units, pnsently requires a total of approximately 1.000,000 tons of coal per year. Fut u re a nm.. ' tonnage requirenn nts of the t 'ompany may h, more or lew *.o. that lieure depending upon a number of variables omluding particularly the relative cos and ai uitability of coal and other fuels and possibh. conversion of units pn.sently burnime oil. See "Envir,mnental 31atti rs" below.
The Cornpany's appn>ximate averare costs of oil anil coal for 1973 through April 30,1979 were as follows:
Coal Oil Per Oil Per Coal Per Coal Per Spot Price llarrel 5fillion Irl1:
Ton 3Iillion !!'I U Per Ton 1973
$ 175 to 61
$ 13.78
$0.51 1974 11.32 1.33 21.97 052
$ 40.67 1975 11.49 1.SS 32.55 1.24 37.50 197G 10.95 1.77 34.33 1.25 35.27 1977 12.97 2.09 35.54 1.31 1978 12.13 1.95 39.09 1.47 3~.54 1979 (thn> ugh April 30i 12.31 1.98 40.62 1.50
- No spot purcha.ses by the Company during the period.
Xucle a r.
The cycle of production of nuelcar fuel consists of ;l) the inining and milling of uranium ore, (2) the conversion of uranima concentrate to uranium hexatluoride, (3) the enrichment of tlle uranium hexaflutiride, (4) the [ahrication of [ gel ILeemillies arol (3) the rejirocessine,5tiirage, or disposal of sp(nt fuel.
With respiet to the Seahrook units, the C,unpany has long. term contracts for enrichment. The Company also has contracts for consersion services and for the fabrication of the initial cores and six reload regions (each region con.sn. ting of one-third of a comph te core). These contracts are expected to meet the Company's reijuirements for fuel cycle sers iers as follows-enrichment t hrough 260',
conversion through 1937, and fahrication through 1986.
The Company has contracted for all of the uranium concentrates n quired to cononence operation of the Seabrook units and is actively set king additional sourcis thereof, whi. h it expects will he avail-2s 25'
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nsate customers, aml FEltC ruled against the surcharce and onlen d the Pompany to refund approxi.
mately S1,622,000 with interest, the balance not having been billed. FEHC's decision has been affirmed by the United Statis Court of Appeals for the District of Columbia Circuit. See Note (H) to Statement of Earnings. In another phase of the smne proceeding, FERC has unlen d a refund of the higher cost of spot-market purchases of coal by tiw Pompany; the Company has applit d for a rehearing on the onler.
Hates essentially identical to those in < ffect in New Ihunpshire prior to December 3,1977 were placed in effect in Vermont on May 1,1975, and in Maine on March 2.1976. On an annual basis, a'iout iG5,000 of additional revenues results from the Vermont increase ami approximately 0 92,000 results from the Maine increa.se.
In its decision allowing the increase to become effective in 3faine, the MPUC conunented no the disparity between the allowed rates of the Company and those of Central Maine Power Com;.hy (CM P), which ser es adjacent territory ai iowei ratms. The decision requested the managements of the two companies to discuss the possibility of a transfer of the Company's Maine business to CMP and stated that in the future the MPUC might use UMP's rates as a yanistick to determine the reasonableness of the Company's rates. While preliminary discussions have been held between the two managements, no conclusions have been reached concerning the desirability of such a transfer. In 1978 the Company obtained fnim its Maine customers appniximately 1.47c of its operating n venues. The Company has recently solicited offers for the pun hase fnun it of its business and pn.perties in Vermont, its revenues from which in 1978 amounted to approximately $672,000, or about.259 of its operating revenues.
A complaint was fiks! with the MPUC in April,1976, by two Maine municipalities and a number of their residents who are customers of the Company allegine that the Company's rates are unreason-able uol dweriminatory and requesting that the rates be reduced to a level no higher than the rates of CMP, IIrarings began in December,1976, and the proceeding is still pending.
Fuel Supply.
For 1978, the Pompany's firm net output was derived 53fc from oil, 279 fnun coal,15fc from nuclear, and 59 from hydro. As indicated above un.h r " Power Supply and Pn>perties" and "New England Power Pool", substantially all of New EnglamPs generation and transmission systems, in-cludine tloise of the Company, are operated as if they were a single system.
Oil. The New England electric utilities, including the Company, make greater use of fuel oil for grneration of power than those in any other region of the country. While fuel oil supplies of the New England utilities now appear to be adequate to meet their requirements, most of these supplies are derived from foreign suurers aml are subject to interference by foreign governments aml price increases. A contingency pnicedure for action durir.g, or in anticipation of, energy shortages in New England, adopted by the participants in NEPHOL in late 1973, remains available in the event of presently unforeseen energy shortages. This pneedure provides for various energy conservation steps which can be implemented by the utilities if and to the extent required.
The Company has a contract expiring on December 31, 1979 with a supplier for fuel oil for the Company's oil. fired plants. The storage capacity for the Company's two large oil burning plants is approximately 30 days operating at full load, and inventory varies substantially depending upon oil shipments. During 1979, the average inventory through June 9 was approximately 17 days 27 cq
)k,
able wht n needed. The Cornpany has no contractual arrangernents for reprocessing of spent fuel and there a re no reprocessing facilities curre ntly operating in tim United States; Pn sident Carter has stated the position of his Adtninistration to be that tim l'nited States should defer indefinitely corn-tuercial reprocessing atal the recycline of spent Iniclear fuel. If such serviers are not available whe n respured for the S, abniok units, the spent fuel can he ston21 [mnding reprocessine or disposal.
.\\lthouch the cost of such storage i3 not known at the present tirne, it is anticipated that such cost would he substantial. The ('ornpany cannot predict at this tinm what difficulties will be encountered regarding disposal of nuclear wastes. The NRC, along with other fuleral acencies, is in the process of developing regulations atol guidelira s in this erra. The ('ompany expects to develop plans for the ilispmal of its nuclear wast (s after prontulgation of these regulations and such plans will be subject to treulatory approvak The ('ompany has been advis.d by the companies operatine-plannine or constructing the othe r m:ck m:. 'u*ina stabos, io whi:O the t oropany nas an interest that they have contracted for errtain scernents of the nucIcar fuel production cycle through various datts. The ('ompany has further i ei n advised by the sponsors of the four operating nuelcar generatine stations that they have or will have storage capacity to rueet the spent fuel storace needs of the units throagh various dates ranging frorn 19<> to the late 1990's. Contracts for other segments of the fuel cycle will be required in the future, and their availability, prices and terms cannot now he predicted.
Nationni Energy l'olicy.
.\\ national energy act was riwntly enacted di aline with coal conversion, gas deregulation, energy conwrvation, enrrgy taxes alul utility rate regulation; the ( ffect of this act on the Company, including its rates and fu( 1 supply, cannot he predicted at t his time.
Environinental Mallers.
The Company is subject to regulation with n gard to air and water quality, and may be subject to regulation with recard to other environmental considerations, by various federal, state and local authorities The Wmpany cannot forecast the effect of a!! such rien1ations upon its generating, trans-roi.ssion and other facilitics, or its operations.
The application of federal, state and local standards to protect the environment, including but not limited to those hereinafter described, involus or may involve review, certification or issuance of permits by various federal, state and local authorities. Such standards, particularly in regani to emis.stons into the air and water, thermal Inixing zones and u nter temperature variations, ruay halt, limit or preverit operations, or prevent or substantially increase the cost of construction and operation of installations and may rt quire substantial investim nts in riew equipnu nt at existing installations.
They ruay ab,o requiro substantial investan nts above the figures stated umler " Construction Program" for pt oposed new pnijects.
.tir Qmiluy control. Pursuant to the federal Clean.\\ir.\\et of 1970, as amended, the State of New Ilampshire acting through the New Ilampshire.\\ir Pollution Cont rol Commission (".\\PCC")
has adopted regulations containine stainlan!s liniitine emissions of partica'ates, sulphur oxides and nitrogen oxiqles, w hich att gt nerally ilesiermd to achieve arD1 rnailltain federal primary ambient air 09 r
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quality starolants. The Company's fossi' fuel gero rating units are biing operated in cornpliance with APCC's regulations.
Pursuant to the lo77 amendments to the Ulcan Air Act, the APUU has proposal lists showing those areas of New Ilampshin which have attainnl or failni to attain national ambient air quality standants, has reviewed the State implementation plan, aml has tih d a resisal State implenn ntation plan with the EPA. It dois not appear that any of the revisions in the State implementation plan will require the ('omimny either to modify operations at any of its fossil fuel generating plants or expeml fumis for additional air pollution cont rol e quipment.
While coal now available and expected to be available in the future for the Company's Merrimack Station presently meets all applicable requirements, if more stringent ruluirements bi come i ff etive which coubl not be met by sd of. the fimpanv might have to install mlphur remural npiipment at substantial capital cost or take such other actions as may be required by regulatory autimrities. The installation of such equipment wouhl increase operating costs aml reduce the net capability of the units.
In August, 1976, a hearine by the Federal Energy Administration (now the Department of Energy ) was behl on the draft Environnn ntal Impact Statement relative to a pn.hibition onk r issued by the FEA under the E nergy Supply aml Enviroranental coordination Act of 1974 prohibiting two 50 MW units at the Company's Schiller Station from burning oil as their primary fuel On May 7,1979, the Department of Energy notified the ('ompany that it was rescimling the prohibition order, w hich had neser become i ficethe; however, furt her action to rnpiire conversion to coal might be taken by the Department under the Fuel Use Act of 1978. A capital invi stment of about 4G,nuo."UO wouhl be required to convert the two units from the burning of oil to the burning of coal, which con-version wouhl n sult in a loss of from $ to 109 (8 MW to 10 MW) in the combined capability of the two units.
Wate r Quality ('ontrol. The Company has received from EPA. or from the Maine Ikpartme nt of Envir mmental Protection in the case of one generating station hicatn! in the State of Maine, all permits requin d under the Federal Water Pollution ('ont rol Act, as amended, for discharges of thermai ar.d other ei!Inents from its generating stations. Such permits have varj mg expiration dates ami the t'ompany has made and expcets to inake timely applications for renew a!.
The EPA issued effluent limitations guidelines for ste am e!cetrir power phmts bas d on application of the best practicable cont rol technoloey ( to be met by.luly 1,1977, and of the best available te chnology eco-nomically achievable ( to b. no t by.luly 1,19s4 ), atol alternate emuent standards with respect to thermal discharees from steam electric pow er plants. The guidelim s ami starulan!s im pose rigorous limitations upon the indust ry.
An indust ry group filed an appeal in a Fnleral Court of Appeals challenuine the cuidelines and standards and the ('ourt of Appeals n maruh d the guidelines ami starniants to the EPA for reconsideration of ecrtain of them. The Company is in compliance with the July 1,1977 guidelines.
The discharge permit for the Company's Newington plant contains canditions requiring installa-tion of some type of closed.cye:c comb nser cooline system if an exi mption is not obtained. The Com-pany has been studying the effects of the plant's operation on the aquatie environment of the Pisca-Illqua Nlver arol will apply to El'A for an exemlition to pe rmit continuati in of the pris nt <>nce-30 g,
aw-w,--.
through cooling. While it cannot be known what action EPA will take on such application when filed, the Company believes that the results of its studies will support the granting of such exemption. If the Company should be unable to ebtain such requested exemption, it wunbl have to make substantial capital expenditures to install the closed-rycle condenser cooling system.
Punuant to a requirement in its discharge permit for ita 31errinwek phnt locatol on the 3Ierri-mack Itiver, the Company is studying the (ffectx of the plant's operation on the aquatic tuvironment of the 31errimack Iliver and expects to be able to show, as required by tb permit, that discharges from the present once-through cooling system either are in compliance with the thermal limitations in the permit or will not interfere with the resiuent and migratory fish in the affected 1,ortion of the 5ferrimack Iliver.
The Corrpany's construction and operation of the Seabrook plant, including environmental con:
sideratmns, is subject to regulation by the NItC and the EPA. See "Seabrook Nuclear Praject" above.
Othcr Eneironmental Expcnditurcs. The Company's capital expenditurm for environmental protection facilities amounted to approximately $12,613,000 for 1978, the major portion of which was for facilities to reduce the thermal effect of the discharge of the Seabrook phuit condenser cooling systems, with $250,000 for the control of water pollution at other Company facilities.
For the years 1979 and 1950 and for the years 1981-1982, there will be approximately $8,500,000,
$7,500,000 and $7,500,000, respectively, of further expenditures for these pollution control facilitim.
The foregoing amounts are included in the construction expenditures set forth under the caption "Cnadjusted 1979-1985" in the table under " Construction Program.' Any expeaditures assoelated with the conversion at the Schiller Station referred to above would be in addition to these amounts.
Employees, Salaries and Wages.
The Company has approximately 1,600 employees, of whom 359 are represented by unions with which the Company has contracts which expired on June 1,1979 and have bwn extended to June 25 and June 27,1979. Negotiations on new contracts are in progress.
Voluntary Wage and Price Guidelines.
The Company is subject to the voluntary Wage and Price Standards of the Federal Council on Wage and Price Stability, which provide basically that annual increases of wages and benefit pay-ments shouhl not exceed 79 and that prices shoubl not be iner ased during 1979 more than.5 of ICF below the average annual rate of increase during 1976-1977. The regulatory acencies are asked to assure compliance to the fullest extent possible. The Company is unable to predict what effect these standards will have upon its operations in the future.
Municipalities and Cooperatives.
New IIampshire law permits municipalities to engage in the production and sale of electricity, including the power to condemn the plant and property of any existing public utility which is located in the municipalityg Under legislation, enacted in 1975, intended primarily tr
.,le all electric sys-e-
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31 i
te.n, (including municipalities) to participate in regional bulk power supply projects, New IIamp-s'r mur.icipalities rmw have broader powers with respect to contracting and atra-territorial activity, as well L.s the pour to tinance through th" issuance of revenue bonds tH ownership of neve enerating units of at h ast T) TlW Ln i new transmission facilities of at least Gs KY. The City of It ilin took preliminary etion in 1969 and I!GO authorizing the City to enrage in the prode > tion, distribution and sab ot ele < tricity, but the matter has ie;t run Enally determined. Tha Compan,'s resenuen from sahw i. the l'ity of lleriin in 1978 were aboct.ic,2Jo,on ineb. ding revenuts of about $3,"29.000 frou a sinch large industrial custoraer. If the (;ity of lier;;o were to acquire ownership of the rompant's property, the Company would he i ntith d to e.unpensation to-the f air value of its preperty an<l any severance ibimages. No other municipality urvnl at retail by the Company is, so far as is knawn to the ('ompany, taking steps to engage in such business.
V > llamy-hiit I'!ceti-ie Ceepci atit e, I!m, a, up ratit e n-miation finu.. ml 1.y thr !!urel l'lec-trification Administration, as well as five smil municipal electrie uti'ities, opi rate in areas adjacent to areas served by the Company. The Cooperative purchcscs most of its electricity from the Company
~
and is subject to regulation by the NIIPCC as a public utility.
afmi E T M D,
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32 w'*
1;EPollT OF I.NDEl'ENDENT CEltTIFIED PUllLIC ACCOUNTANTS The 'toard of liirectors PUlu.'c SERvlCE Coill'ANY OF N1:W ll A 511'Slinu:
We have examine d the balance sht et of Public Si rvict Company of New llampshire as of I)ecem-ber 31,1975 and the related statenients of earnings, retained earnines, other paid-in capital arn!
changes in financial position for each of the live years iri the period then ernled. Our exaniinations were made in accordance with generally acceptt d auditine stanilarda, and accordingly included such tests of the accountirig records and such othtr auditing procedures as wt con.sidered nt eessary in the cireurustances.
In our opinion, the aforenientiom d financial stat.ments prese nt f:mirly the financial po.dtion of Public Service Company of New IIampshire at December 31,1978 and the results of its operations arol the changes in its financial position for each of the five years in the period then ended, in con-formity with ger.erally accepted accounting principh s applied on a consisterit ba. sis.
Pi:AT, 3IARWICK, 3flTCl!EIL & CO, lloston, 3f amachusetts February 16,1979, except u.s to Nota 7, which is as of 31 arch 5,1979
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l'UllLIC SEltVICE CO311*ANY OF NEW llA311'SilillE IIAIANCE SilEET ASSETS
%rch 31, Deren.hcr 31, 1979 1973 (l'nuudited)
(Thousands of Dollare)
Utility l'lant, at Original Cost (Note 1):
Electric l'lant
$510,001
$307,711 lass Accumulated l'rovlsion for l)clireciation idi,923 134,373 372,078 373,338 Unfinished Construction (l'rincipally Ni elcar Generating l'rojects)
(Note 7) 377,441 310,382 Net Utility I'lant 749,519 719,720 Investinents (Note 1):
Nuclear Generating Companies 9,664 9,529 1(eal Estate Subsidiary 3,95G 4,472 Giher, at Cmt 184 184 Total Investments 13,801 14,165 Current Amets:
Cash (Note 3) 1,617 1,bi9 Temporary Ca.,h investments 3,500 Accounts lleceivable 25,678 27,5S8 Unbilled lievenue, Estimated (Note 1) 19,925 18,057 Fuel, afaterials and Supplies, at Cost 17,914 20,743 l' repayments 330 3,330 Total Current Assets 68,970 71,597 Other Assets:
31iscellaneous l'roperties 501 314 I)eferred I)ebita 5,922 5,359 Unamortized I)cht Expense 906 926 Total Other Assets 7,329 0,599 9 39,622
$S12,101 See accompanying Notes to Financial Statements.
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PUllLIC SEltVICE CO31PANY OF NEW II.OIPSillitE STATE 31ENT OF ItETAINEI) EAltNINGS Three Months Ended Year Ended December 31, March 31, 1979 1978 1977 1976 1975 1974
("naudited)
(Thousands of Dollars) llalance at lleginning of I'eriail
$ 71,140
$5 *,725
$ 36,i a l
$51,936
$ 15,0 70
$ 40,613 N et i n co nie 12,217 36,507 21,722 20,995 20,* H 16,300
.3,357 95,232 77,W6 72,931 65,w 7 s 56,913 pro uet :
Invitlen.ls I)erlart 1:
l'referreil Stock, at R.,luirt*l Annual Rates 1,5
- 9 6.398 4,925 4,w34 3,416 3,379 Cotunion Stock 6,256 17,69%
18,156 11,993 10,526 8,464 Total lh'. i len.ls 7,s l3 24,092 19,0 s l 16,517 13,912 11,%3 Italance at Enit of I'eriml (Note 5;
$ 75,512
$ 71,110 95s,725 656,iW I
$51,936
$ 15,070 STNIT31ENT OF OTliEll Pall)-IN CAPITAL Three Months Ended Year Ended December 31, March 31, 1979 1978 1977 1976 1975 1974 (Unaudited)
(Thousands of Dollars) llalauce at lleginning of l'erioil
$ 10 *,232
$ 90,109
$70,v21
$51,111
$53,102
$3 4,3 4 8 Exece of l'rociwls mer the l'ar Value on the luuance of Conauon stock:
8011 - 1,650,000 shares in 1974, 1,000.hio shares in 1976, 1,200,000 Shares in 1977,1,321,2*l Shares in 197w nrul 2,017,471 Shares in 1979 J9,996 17,461 1*,961 15,7 x 1 (24)
I I,665 Conversions - 5.50';E Convertil,le l're.
ferrnl Stock, 3,632 Shar
- in 1974, F7,545 Shares in 1975, 35,000 Mhares in 1976, 37,092 Sha res in 1977, 21,171 Shares in.1975 anel 17,613 Shares in 1979 3.'2 407 751 739 2,061 59 l'referrisl stock issuance E x pensrs (45)
(121)
(110)
(72*)
Italanc' at En.! of I'erio,1
$ 13 *,4 60
$ 10 *,232
$90,409
$ 70,521
$51,111
$53,102 See accompanying Notes to Financia; Statements.
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l'Ullt.IC SEltVICE CO.Til'ANY OF NEW IIA 311'SillltE IIAldNCI; SilEET cal' ITAL.lZATION AND LI AllILITIES Wrch 31, Dcrcrober 31, 197')
1973
( t *na udital)
('I hou.and, of Dollars)
Capitalization:
Conunon Stock Equity:
Conimon Sioek - $, l'ar Value (Noic 4)
Aut horizul: 1S,000,000 Shares Outstatuling,11,K22,036 Shares (!!)TS - !6,786,116!I)
$ 5!),110
$ 48,!)35 Other l'aiil-In Capital 138,4G0 108,232 lletainnl 1:arnings (Note 5) 75,512 71,140 Total Conunon Stock Equity 273,0x2 228,307 l'referreil Stock (Note 4) 83, l a,1 83,562 1 ong-Term Ih ht - Net (Note G) 262,211 237,252 Total Capitalization 618,476 afl!),121 Current I.iabilities:
Notes l'ayable -Ilanks (Note 3)
!)3,100 85,325 Long-Term 1)cht to l>e lietirn! Within one Year (Note 6) 30,14!)
5,231 Accounts l'ayable (Note 3) 33,333 G 8,035 Accrue <l Taxes 14, sis 12,34!)
Aceruul Interest 8,470 6,215 Other 1,227 1,145 Total Current I.iabilities 183,177 178,300 I)eferrnl Crnlits:
Accumulatul Deferrn! Investment Tax Urnlits (Note 1) 13,026 12,458 Accumulate.1 Deferrn! Taxes on !ncome ( Note 1) 21,467 21,716 Other 476 474 Total 1)eferrn! Crnlits 37,!)6!)
31,6S0 Commitments aml Contingencies (Note 7)
$53!),622
$912,101
- G:
1/I See necompanying Notes to Financial Statement.s.
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NOTES TO FINANCIAI STATE 31ENTS (Information related to period-sub-equent to Decemlwr 31,19711 is unaudited) 1.
Sest swcv or Accou.vrtso l'oucna lagulations and Op, rations: The Company is subject, as to rates, accounting and other matters, to the regulatory authority of the New Ilampshire Public Utili ies Conunission (NIIPI'C), the Federal Energy llegulatory Conunission (FEl(U) and, to a lesser extent, the public utilities commissmns in other New England states where the Company does busiocas.
IncoIna n ts: The Company follows the equity method of accounting for its inve.stments in nuclear generating companies and in its wholly.owrud real estate subsidiary. The Company's invest-nu nt in this Mul+idiary is principally in the forin of advanes s The Pompany's investments in nuclear gent rating companies are:
O ncr. hip mrch 31.
Ikrember 31, G mipany l'erre n t 1979 1973 (Thousand. of Dollars)
Yankee Atornie Electrie Company 7[F
$ 1,4 85
$1,413 Connecticut Yankte Atomie Power Company 55F 2,371 2,335 Slaine Yankee Atomie Power Company 55F 3,426 3,427 Vermont Yankee Nuebar Power l'orporation 4[F 2,3 s2 2,324
$9,664
$9,529 In tio caw of e ach of the nuelcar generating companics, pursuant to provisions of purcha. sed po 5er contracts w hich are regulat(d by the FEllC, the Uc.mpany is entitled to it.s ownership percent of otal plant output and i, obligated to pay a similar share of each company's operating expenses and return on invested (apital. Approximately 10.99 and 10.59 of the Company's total energy require-ments w ere furnished by tlase companies in 1978 and 1977, respectively.
Utility I'lant: 1% vision for depreciation of utility plant is computed on a straight line method at rates based on estimated service lives and salvace values of the several classes of property. The depreciation provisions were equivalent to overall effective rates ranging fnim 3.117F to 3.199 of depreciable property for the live years ended December 31,1978. The rate for 1978 was 3.19;F.
31aintenance and repairs of property are charged to maintenance expense. Iteplacements and betterno nts are charged to utility plant. At the time properties are retired, the cost of property retired plus costs of removal less salvace are charged to the accumulated provision for depreciation.
Ope rating In r, n ue s: lievenues are based on billine rates authorized by applicable federal a :d state regulatory conunissions which are applied to eu.stomers' consumption of electricity. The Com-pany records stimated unbill d rewnue, including amounts to be hilled uruler a retail fuel adjust-ment clause, at t he end of acelluntir.;.*, Periods.
Income TaJu: The tax effect of diff(rences between pretax income in the financial statements and income subject to tax, which are tae result of timing differences, are accounted for as prescribed by and in accordance with the ratemaking policies of the NIIPCC Accordingly, provisions for de-ferred income taxes are recognized only for specified timing differences. Tax reductions attributable aem
PUILLIC SEltVICE CO31PANY OF NEW llA31PSillitE STATE 31ENT OF CliANGES IN 7INANCIAL POSITION Twelve Months Ended Year Er.ded December 31, March 31, 1979 _
1978 1977 1976 1975 1974 (Unauo r')
(Thousands of Dollars)
Bource of Fun <ls:
am Operrtions:
- Net income
$ 37,610
$ 36,507
$ 21,72.1
$ 20,995 s 20, sos
$ 16,300 Q9' Princips! Non-Cash Charges
%"2 (Crelits) to Income:
k.69 Depreriation 16,924 14,752 14,117 13,791 13,522 11,621 25 Allowance for 1:quity Funds UIC'C Ust4 During Construction
( *,93 0)
(7,523)
(0,093, (3,005)
(1,573)
( 1,7 *5 )
f P Deferrni Taxes and Investment D'Y Credit Adjustmenta 7304 7,021 5,610 2,517 6,400 4,130 ETTim Totai from Operations 51,535 50,155 35,356
- tray 33,157 a0,.75 p yrom Outside Sources
%g Sale of long-Term Dond and
,qry Not en
'Jpoo 60,000 25,000 15,000 22,300 45,000
,w Hale of I'referreil Stock 14,000 15,000 Sale of Common Stock 64,303 21,3P9 25,092 20,*
- 0 23,022 Change in S ho rt-Te rm Dorrowing 13,9%7 30,212 55,113 (25,400;
( 20,s w0 )
b Total from Oatsido soure.m 143,230 114,5 1 123,2u5 35,570 x,9uo 67,142 Neeremm in Working Capit il 33,510 41.939 5,100 Y
i Total
-$ 191,523
$195,1*6
$ 15 *,561
$ 114,907
$ 53.157
$ 77,417 g-4 plication of Funds:
'roperty Additions
$173,614
$173,539
$114.310
$ 70,252
$ 46,926 b
Allow ance for Equity Fund 4 Cud
(
During Construction (8,930)
(7,525)
(6,093)
(3,205)
(1,T> 73 )
( 1,7 *5 )
?
Jis idends 20,795 24,092 19,051 16,*47 13,942 11,%43 R duction of Is>ng-Term lh4.t 5.767 5.917 9,271 29,517 947 92 Increnu in Working Ca}> ital 792 20,374 19,528 Other Applicistions - Net 2,790 2,736 1,614 1,496 1,50s 23 Total
$ 19 4, r s
$ 19 *,4 s0
$ 153,561
$ 114So7
$ 53,157
$ 77,417 Increwe (Dirrense) in Working Capi-tal Other Than Nhort-Term D.4;t :
Cash and Cash investments
$ 2,471
$ (3,050)
$ (142)
$ (2,467)
$ 1,370
$ 1,625 Rwelvat>Ies 2,555 5,596 2,195 (1,157)
(3,811) 10,4*1 Ins ent o ri. n 7,412 3,707 (3,020) 2,564 3,696 6,914 Long-Term Debt to tio Ret ire =1 Within One Ymr 76s 3,337 20,332 (24,911) 95 25 Accounts Payalle (10,028)
(33,125)
(1,520)
(13,334)
(3,314)
(5,653)
Dividends I'ayable 5,571 Acerum! Taxes (x,629)
(11,470) 3,000 (1,051)
(2,220)
(270; Other 668 1.435 (257) e576) 1,71,
.;,906 Total incream ( Dwrease) In Working Capit al Other Than short-Term Debt 792
$ (33,510)
$ 20,3M
$ (4 8,939)
$ (5,100)
$ 19,52i See accompanyin;; N]1_p% -- ~ l Statements.
o es to Fina.
JC
,i n,.
,J.
l l
NOTES TO FINANCI AL STATE 31ENTS - Continue <l (Information relateil to perioil muli-e<1uent to Deceruleer 31,1978 i, unauditeil) 2, Iscosu: TAXIM - Continued in accordance with the reiplironoit,s of the NillT(? prosision.s for defern d inconic taxes are recognized only for the following tiniing difft rences:
Twetve Months Ended Year Ended December 31, March 31,
_1979 1978 1977 1976 1975 1974 (Thouunds of Dollars)
A i ortion of fiel.n ciation an.1 Anwrtizat mn of I'la n t l'acilit ies*
? $29
$ '5s
$ s95
$ 515
? Dis
$ 901 Acerurl an 1 If nl db 1 l'url A.!just ment i' harp s 992 1,019
- hi (117;
" '9 3,125 The Interest
( bu},onent of AHowance fm Fun la 1.'se.1 1)uro.g Const ructiou (See.Lt e (1)) to Stat ement of Earning 3y 4,721 3,713
.L954 1,271 020 Other 1
(wi 6
2 79 16,5 83 4 3,'il2 13,' 5 41,675 42,21')
$ 4,111
'Curr*:nt inconle tax reductions attributable to (1) the tax depreciation perinitted unih r the Class Life Adit Sy. stem of the 1971 lleunne.\\ct in excess of the tan depreciation permittid under the
(;uideline 1.ives provisions of the IDt;9 Iteunue Act and (2) the arnurtization of certain pollution control fa:ilities over lite year periods.
Tho principal casons for the difference betwein the total tax expense and the amount calculated by applying the Federal income tax rate to income la fore tax are u.s follows:
Teelve Months Ended Year Ended December 31, March 31, 1979 1978 1977 1976 1975 1974 (Thouunds of Ddars)
Incomo liefore i n como Tax
$56,m 156,119
$ 3 0,4 m
$ 30,63 %
$ 30,= s5
$ 17,713 IMral stat utory Ihtte (1979 A [trox.)
17.33 Si 4 v, 48 %
1s%
4%9 4*%
Exiwte.1 Tax 1:x1+ns.
26,9' e '
"6,937 14,404 14,700 14,s25
- 519 I n ci ras. a ( 1:eiluetian3; in Taxes 1:c3ultmg from:
Interest an.1 Owrhen.1 Charg ~l t o Con-st ruction anil Ex1.enu 1 for Tux l'ur-1-3 (5,e92:
(4,511)
(3,377)
(1,s59)
(979; 12.109, 1:xcess of Tax Os er llook 1)epreciat on
( 2,15 %
(2,265,
<2,31s>
(2,773; (3.019:
(3,924)
State Ta m Lt of l'eleral Ineurae Tax lienefit s 1,391 1,?.'
717 712 N n) 65%
l'ololl. ! Ilevenurs (536)
(6293 (209)
(1 sip (457)
(5ul)
Other l le.l uc t m n s, each 1.% than 551 of Ex[wte<! Tax 1:x 1>. n -.
( 1,L 59 it.219; (1,no0)
(962)
( 1,e93 >
(1,195 Total Iv au;r Taxes
$ 13.19 %
119.612 i *,a6 t 9,643
$ 10 n 7 7
$ 1,Ilw The ( ompany is considering making an election under certain provisions of the Inte rnal I(evenue Code w hich would result in a significant irenase in the amount of the investment tax credit available
~ Q' b
NOTES TO FINA. SCI AL STAT 1311Nr5 - Continued (Inforruation related to period, sub eiguent to Deceniber 31,19711 is unaudited) 1.
Srst31 Any or Accorvrisu Poucnx - Continu(d to other timing differtnets are !!oned through to la t inconte as riductions of invoine tax expense. Sm Note 2.
Insestinent tax credits carrad are deferred and amortized to income over the lives of the related properties.
.tllou a na for Furuls l'u d 1) urin!) Construction: Allowance fur lund.s used during construe-tion is the estinuitid cost, during the period of construction, of (quity funds and horroun d funds 'Ised for const ruction purposes w hich are not in ing ri cot ert.d from customers through rev( nut s.
See Note (1)) to Stateinent of Earnings.
Pe n# ion I'lon: The Company has a non-contributory ptnsion pla. covering all fulbtim. ua-ployees who have met a ruin; mum x rvice ruluirena nt.
TLe Company's policy is to fund current peasion costs at erned. Pension plan costs w< re as follow s: 1971 - $ 1,320,lni,1975 - sl,6.w.onn,1976
- $1,s50,400,1977 - $2,112,000,12 - 42,100,(MJ and the tw elve rnont hs ended Erch 31,1979 -
$2,521,000. At December 31,197s, u 3ti d In nefits under the plan exceeded the mark (t value of the plan's a.s3 cts ' y approxiraately 9,296,W). At that date, the tota, unfunded pa.st service liability was apprmimately H,943,000 Earnings P r Nhare : Earnings per 3 hare are based on the average number of conunon sharts outstanding, atter recognition of preferred tiividend n quirenants.
Pr.' s /,*_'%,Q m
..q f, 5},y (?s,. t.'. O, ' - --
=
2.
} NCo311; TAXIM
.f)
.i J ' ' p '. L' $.' d N,
,,, e t e
- n. w,.
.s
~1
,/. i N Jh gg T he colup rnents of intoine ( AX expt Im are ia fJ!
/s :
Twelve Months Ended Year Erded December 31, March 31, 1979 1978 1977 1976 1975 1974 (Thousands of Dollars)
Fnleral:
Op.ratag I re ina i w.7'M t io,166
$ 1,297
$ 5,* 15 f 2,05
$ ( 1,312 7 Otfr-r Ir/orm :ai l l>nluction s (17)
<10
- ill3, i t,y 159 (2,333) s.749 10,120 1,1
- 1 5,719 2,197 (3,675; F t a t e, includi,1 in Oj rrating Inn 2.515 2.163 1, l a _
1,107 1,4 *o 9*7 Total Current t nrou.. Tur i 11.294 12fe 2,676 7,126 3,677 i 2,6
- H lieferrol Fnleral:
Operat ug liw.,me 0,150 5,527 3,w - 2 1,7e9 2,1 w 3
.,751 Otlwr luce
- not lieductions (1,
tw>
6 2
79 i.
I)cferred Stat e:
O + rating Jr.co:nr 96 93 3
(37)
Co 27s l
Total lieferred Inco:ne Ne-c,513
,,;12 3,w 3 5 1,67%
u,215 4,111 Inomtinent Tax Crnlit A ljustinent 1.361 1,112 1,725 39 1,155 25 Total Inco:ue Tmes
$ 19,19 s f l 9,612
$ %.2 6
$ 9.643
$ 10.0 7 -
$ 1,lis m
p M hv9 h "- % *.
r
~
(
,q
.)'
4' h
WA
NOTES TO l'INANCI AI. STAT 131ENTS - Continued (Information related to period-,uli-celuent to Decemlier 31,19711 i, unaudited )
3.
CO31rl:Ns cr1NG lbMNCr.s AN9 SHORr-Trint P,ounowrNos The Cornpany uses horrowings fnim banks a.s an interim method of financing construction of n w far ilit ies. At t h eembt r 31,19i8, the Company had a resolvmg credit agn t nwnt w hich permitted the t 'ompany to born >w up to 593M op)0 throt.eh April 30,1979 and also had line of credit aen ements w hich aggn gati d $5,330,0h0, S. e " Problems Facing the t ompany - Imnu diate Financing Program"
~
for infonnation concerning an exte nsion of and increase in the revelving credit agreement. The t'ompany pays commitment fu s on the revolvitig credit a gn-eme n t and maintains entu pen sat ing bala nc. s for n rtain line of credit agreements. Compensating balaners amounteil to $303pF) at t h eember 31,197s and March 31,1979.
The au raer inti n st rate on short-ti rm borrowings at Ih ce mber 31,1978 and March 31,1979 was 12.61'; and 12.63';, n<.pectivt ly. l >uring 1978, nr. unum short. term borrowings were $ss,ll2,300; the aterr re amor:.t outstanding (ba-d on month end balances) was $66,911,138; and the weighte 1 average inten st rate w as Il.365, computt d with columi'Inent it(s included in inte n st expense. 1)uring the t u rive months i nded.Y re' 11, 1979, Inaximum short term borrowines w e re @3,100,000; the average atuount outstandine w as.thoM43,750; atal the urightt d averaire intt rist race was 12.135;.
At Ihccmber 31, 1976 the Company had defern.1 the payment to vondors of approximate ly
$7,500,000 of construction costs. Such deferrals, with interest, were paid fn m the pn eceds of the sale of additional Common Stock in Januarj,1979.
1.
l'hl.I'l:Hiu.n Sit WL mption
%rch 31 Derern!wr 31 Ouistanding i,re.~errnl Stock is,a follows:
I t ed e,7 ;y,,
g g g-a png (lhow h of Dollar *)
Cumulatis e, Par Value fliMl, T ut horize d 1,330,iH o shan s,
()utstandine:
3.W i im iiienii beries, 16 M,,.a s t ho u)
$ 10.200 ilo2W) 4.30'; l>ividend Sern s, i o,000. 'an s 102.00 7,59)
".300 5.30' '- I)is iden i Seris s, M 'onvert J Ir), 31,327 shares
( 19 e - e,V2 shan s) 100 00 5,433 5,'62 7.92' ; f)ividend writ s, 150,000 -ha re.
103.91 159 0 15 P "
7.615; l)ividend Series, t Sinl,ine : m..I, 120,000 s ha res lun 37*
12M }0 12# M 9.00',,1)ivid end Se ries t Sinking Fund 1s0.000 shan.s lWoo*
ls # >0 1*Mo 63,133 6,362
('umulative, Par Vr.lue 525 Aut hori/cd !# Hi# d P shares, O u t s'a n d in e.
11'; l)ividt hd Si rics, Goop o shan, 27.73' 15,NHi 13hoy p3,133 9 3,362
' Subject to n rtain refunding limitations.
rrhe 7.64'; and 99 1)ividend Series contain sinking fund pn> visions roluiring the Company to rnleem all shan s at par on the L sis of 1. on siian s.ua.ually b ginning in 1984 for the 7.614 series and 10.'00 shares annually la cinnir.e in 19 2 fo t he 9'; series.
r At March 31, 1979 there were 231,928 shan s of Common Stock reserved ir conversions of the 5 30;; lhvidend Series Convertible Preferrni Stock I ased unn a conversim. i ~ce of $23, 21 pc.r share.
11 i
g6 '
NOTES TO FINANCIAL STATE 31ENTS - Continued (Information related to periods subsequent to December 31,1978 is unaudited)
On Alay 22,1979, the Company sold 1,200,000 shares of Sinking Fund Preferred Stock 11.249 Dividend Series, $25 par value. Proceeds to the Company of $30,000,000 were used for the Company's construction program, including the reduction of short-term bank borrowings.
5.
Divronxo RixrnicTION Pursuant to terms of the General and Refunding Mortgage Indenture, dividends may not be paid on the Common Stock in excess of Net Income accumulated after January 1,1978 less the aggregate amount of all dividends paid or declared an the Preferred Stock of the Company during such period plus $32,000,000. At December 31,1978, and at 3Iarch 31,1979, Retained Earnings of N4,415,000 and $48,787,000, rtspectively, were not subject to dividend restriction.
6.
Loso-TEH51 DUrr j' y '
"" #",)'h ' '
7 g
(Tliousands of Dollars)
First Mortgage Bonds:
Series E - 3 Sb, Due 1979
$ 3,356
$ 3,35G Series II-3%9, Due 1984 10,483 10,483 Series I-3?qSc, Due 1980 7,G17 7,M7 Series 31-4%r', Due 1992 22,039 22,149 Series N-7d Sb, Due 1996 15,910 15,910 Series 0 - 6% 9, Due 1997 14,173 14,173 Series P-7%Sc, Due 199S 14.272 14,277 Series Q - 9 $6, Due 2000 19,206 19,206 Series R - 7%SB, Due 2002 19,455 19,455 Series S-9 9, Due 2041 19,778 19,778 Series T - 12%SE, Due 1981 25,000 25,tM)
Series U - 10%9, Due 19S5 15,000 15,000 Series V - 9%g, Due 2006 15,000 15,000 Series W - 10%9. Due 1993 10,000' 10,000*
2 I o,719 210,834 Less-Deposited with Trustee of the General and Refunding 31 ort-gage Indenture as additional security for General and He-funding Bonds 10,000' 10,000*
Total First Mortgage Bonds 200,7!9 200,534 General and Refunding Mortgage Bonds:
Series A - 10%9, Due 1993 G0,000 60,000 Promissory Note, Due January 3,1950 with interest at 1169 of lending bank's prime rate plus 0,259 25.000 25,000 Pollution C >ntrol Revenue Bonds:
8%Q, Due December 1979 1,500 1,500 9 9, Due December 1984 5,800 5.M *0 Total Long-Term D(bt 293,019 293.134 Less: Long-Term Dt bt To Be Retired Within One Yetr
" 30,149 5,231 Unamortized Premium and Discount G29 651 30,778 5.42 Long-Term L)ebt - Net
+262.211
$287,252 4,>
' N'$
Q s
NOTES TO FINANCI AL STATE 31ENTS - Continued (Inf 6 ation related to period-subsequent to December 31,1978 is unaudited) 6.
LoNo-Tuot Durr - Continued The annuct Sinking Fund requirements with respect to First 31ortgage Bonds, which may be met by the payment of cash or honds or, up to one-half of their amounts, by the certification of additional property, are as follows: 1979 - $2,213,241,19S0 - $2,463,241,1981 - $2,636,318,1982 - $2,052,984, 1983 - $2,052,984 and 1984 - $2,052,984. Annual Sinking Fund requirements with respect to the General and Ilefunding Mortgage Bonds are $5,400,000 payable in cash beginning in 1983.
Ismg term debt maturities, excluding the aforementionni Sinking Fund requirements, are as follows: 1979 - $4,850,000, 1980 - $25,000,000, 1981 - $25,000,000, 1982 - None, 1983 - None and 1984 - $1 G,283,000.
Under the terms of the First Mortgage Indenture and the General and Ilefunding Mortgage Indenture, substantially all utility property of the Company is subject to the liens thereof.
7.
ConurrMENTS AND CONTINGENCIM The Company (both as sole and as joint mvner of facilities) and the nuclear generating companies in which the Company has investments, in common with of her electric utilities, are subject to present and developing regulations with rtgard to air and water quality, nuclear plant licensing and safety, land use and other environmental matters by various Federal, state and local authorities. It is Im-sible that compliance with such regulations may require additional capital exponditures and increased operating costs not now determinable in amount.
Prior to the decision described in the next paragraph, the Company was forecasting construction program expenditures of $200,600,000 for 1979 and $909,tKH),000 for 1980 throuch 1985 (exclud-ing allowance for funds used during construction). These estiniates included $1Gl.000,so0 and
$390,700,fK)0, respectively, for the Company's interest in a nuclear generating station under construe-tion in Seabrook, New Ilampshire, and $7,000,000 and $68,200,000, respectively, for the Company's interests in other nuclear generating units owned on a tenancy-in-common basis with other New England utilities. The Company's ownership interests and its share of total expenditures included in Unfinished Construction for the jointly-owned nuclear facilities in which it is participating are as follows:
O w ner* hip Lrch 31, Decernher 31, l'errent 1979 1973 (Thou and.of Dollars)
Seai> rook #1 and #2 50M)00%
$336,300
$307,800 Pilgrim #2 3.4700 10,100 9,0(H) 31illstone #3 3.8910 22,000 21,200
$368,400
$339,G00 On March 3,1979, the Company's Board of Directors directed management to proceed to sell all of the Comi:any's Pilgrim =2 and Millstone #3 ownership interests and to reduce its ownership inter-43 Q
-) h -
)
V
.g ;%wM w
NOTES TO FINANCIAL STATEMENTS - Continued (Information related to periods subsequent to December 31,1978 is unaudited) 7.
COM1HT11ENTS AND CONTINGENCU;S - Continued est in the Seabrook nuclear plant by offering 22% to other Seabrook participants. See " Problems Facing the Company" for a description of the proposed arrangements for the reduction of the Com-pany's interest and the effect of such agreements on the Company's financing plans for 1979 and subsequent years.
Construction of the Seabrook project has required numerous approvals and permits from various state and Federal regmator agencies. The process of otataining these approvals and permits hts been f
long and complex, has been consistently opposed by a number of intervening groups, has included demonstrations at the Seabrook site and has been plagued by lengthy delays which have resulted in greatly increased costs for the project. Court appeals fmm Federal regulatory approvals are pending.
The Company is unable to predict what effect financing problems or further administrative or court decisions relating to Nuclear Regulatory Commission or Environmental Protection Agency actions may have on the Company's ability to complete the project or on the cost of the project.
8.
UNAUDrrED REPLACEMENT COST INFORMATION The replacement cost data described in this note has been compiled in response to regulations promulgated by the Securities and Exchange Commission and represents, in the opinian of manage-ment, reasonable estimates of replacement costs given the guidelines of the regulations. IIowever, imprecisions exist and subjective judgments have been made in the estimating process. Also, certain incomo effects which might result trom the replacement of pmductive capacity are not required to be described by the regulations and have not been evaluated, including the impact of replacement on capital costs and taxes. Furthermore, the regulations do not call for a description of all factors which may result from inflation, including the impact of long-term debt outstanding in a time of inflation and these have not been evaluated or included in the replacement cost data presented.
Consequently, in the opinion of management this note is of limited usefulness in the evaluation of the impact of inflation on the financial position or results of operations of the Compay. Furthermore, the disclosure of this replacement cost data should not be construed as a plan to replace existing productive capacity, and the actual replacement of productive capacity may not take the form implied by the techniques used to develop the estimates. Finally, the replacement cost data presented in this note should not be taken to be management's estimate of the current value of existing prop-erty, plant and equipment.
The Company's operating costs and the recovery of its investment in utility property are signifi-cantly affected by inflation and the current and expected more stringent environmental regulations.
Replacing existing utility property with equivalent productive capacity will require substantially greater dollars of capital investment than was required to construct or acquire the property originally; but replacement cost is not nor:mdly considered in the rate making process, since only the historical cost of utility property is normally included in the rate base upon which the Company is allowed to earn a fair rate of return. Ilowever, the cost of replacement property, when existing productive capacity is actually replaced, is expected to be included in the rate base.
44
,n^
]
i a~-
w 4:M4Qin -
.Qi??KR%
e
NOTES TO FIN ANCIAL STATEMENTS - Continued (Information related to period, sub-equent to December 31,1978 is unaudited) 8.
UNAUDrrED }D:PIACEAUNr COST INFOR51NrION - Continued The computed replacen.rnt cost of the Company's productive capacity, depr(einted replacement cost and related depreciation expense and corresponding historical cost data are presented below for December 31,1978 and 1977:
December 31,1978 Deceml,cr 31, '977 litimated I.atima t eti Iteplace-Iteplace.
Iliaturical ment 16*torical ment Cost Coa t Cont Coat Utility Plant:
(Thounam!. of Dollars)
Plant in Service Subject to Repincement Cost Disclosure
$ 493,0s0
$1,452,671
$472,510
$1,345,446 Construction Work in Progr ss 346,3s2 346,382 196,825 196,825 Other Property, at llistorical Crets 14,631 11,631 14,558 14,558 Totai 854,093 1,513,6N US3,893 1,556,629 Accumulated Provimon for Depreciation 134,373 435,985 121,364 381.292 Net Utility Plant
$719,720
$ 1,377,t,99
$361,529
$ 1,175,537 Depreciation Expense e 15.117
$ 43,479
$ 14,731 S 42,163 U< ntrating Plants: Fuel generation replacement costs were estimated on the basis of current construction cost per megawatt at December 31,1978 and 1977 developed by engineering studies and applied to essentially the generation mix at the end of each year. Ilydro generation replacement costs were calculated using the Handy-Whitman Index.
Transmission an<l Distribution Plant: High voltage transmission line replacement costs were computed based on engineering studies which determined the cost per mile of line at the end of each year. The rep!acement costs of certain transmission substations were computed based on costs and technology at the end of each year. The replacement costs of the remainder of tra.,smission facilities along with the replacement costs of all di.<tribution plant were calculated using the Handy-Whitnu.n Index.
Urneral Plant: Estimated replacement costs of buihlings were developed by applying the estimated cost per s<1uare foot at the end of each year to the then present facilities. Estim ted re-placement costs for all other general plant were developed by applying unit prices or the appropriate Wholesale Price Inhx at the end of each year. Other property consists primarily of land and land rights.
Ilese ree For Depreciation: Related necumulated depreciation based on replacement costs was developed by applying the same percentage relationship that existed between depreciable plant and accumulated depreciation by functional groups on an historical cost basis at December 31,1977 and 1978 to the current replacement costs of the same groups.
Drprrciation Expense: Depreciation expense for the replacement costs of utility plant was developed by applying the actual average rates and methods by functional groups in use to the average of beginning ami year end ba!ances of depreciable replacen.ent costs.
_)
Ii 45
)'
I T
fi, a
g3lh.t
~~
es ea,pfD'**"
DESCltlPTION OF COMMON STOCK The authorized capital stock of the Company consists of 18,000,000 shan s of Common Stock, $5 1,ar value (the "Conunon Stock"), and two classes of Preferred Stock consisting of 1,330,000 shares of Preferred Stock, $100 par value, and 2,000,0m shan s of Preferred Stuck, 525 par value. The com-pany is seeking stockholder approval of an increase of the number of authorized shans of Pn ft rred Stock, $25 par value, to 5,000,000 sha res. The two classes of Preferred Stock rank on a parity wit b each other and are hereinafter referred to colhetively as the " Preferred Stock" The Company's Articles of Agreement are included as an exhibit to the llegistration Stat (ment. The following statements are subject to and are qualified by the provisions of the Articles of Agn,nu nt, par ticularly the parts thenof specifically referred to. The applicable sections of the Articles of Agreement follow the sum-mary of the provisions of the Common Stock. Where no sperine section reference is made, this description reflects applicable New IIampshire law.
Dividend Rights.
Subject to the prior rights of the Prefernst Stock and to the limitations described below, the Common Stock is entitled to dividends when and as declared by the Board of Din etors out of any remaining funds legilly available therefor.
The Prefern d Stock of each class may be issued in one or more series. Each series of the Pre-ferred Stock is entitled, w hen and as declared by the Boanl of Directom, out of funds leeally available therefor to quarti rly dividends, cumulative fnun the date of issue, payable as to all series on the fif-teenth day of February, 31ay August and November, at the annual rate per share designated in its title in preference to the Common Stock and any other junior stock. S;nking fund re<ptiromints on each of the thnv outstanding Series of the Sinking Fund Preferred Stock are on a parity with dividend requirements on the Preferred Stock. No dividends shall be declared en any series of the Preferred Stock unless like proportionate dividends, ratably, in proportion to the respective dividend rates, are declared on all shares of all series. ( Art. V, Subdiv. 2; Art. V, Subdiv.12B.)
The Articles of Aereement contain certain limitations, applicable so long as any shares of the Preferred Stock are outstanding, on the company's richt to declare dividends on the Common Stock out of net income (similar limitations are contained in certain indentures supplemental to the First Mortgage, applicable so long a.s any bonds of Series 11 through V are outstanding), or in the event Ponunon %ck Equity tas de fined) is less than 259 of Total Capitalization (as defined). ( Art. V, Subdiv. 9; Art. V, Subdiv.12I.) Pursuant to terms of the General and Itefunding Mortgage Inden-ture under which the Company issued the first series of bonds in September,1978, dividends may not be paid on the Common Stock in excess of the Company's Net Income accumulated after lanuary 1, 1978 hss the aggregate amount of all di,;denJs paid o-declared on the Preferred Stock of t! e Com-pany during such period plus $32,000,000. L 3! arch 31,1979 $48,787,(40 of Hetained Earnings was not subject to dividend restriction. At March 31, 1979 the Conunon Stock Equity was 42.1% of Total Capitvliration and pro forma after giving effect to the issue of 1,"00,000 shares of Sinking Fund Preferred Stock 11.249 Dividend Series on May 22,1979 and the additional Common Stock would have been approximately fc.
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Voting Rights.
Each share of Common Stock is entitled to one vote ( Art. V, Sec. 6) and this cla.ss of capital stock has general voting rights. Under New Ilampshire law and the Com;>any's Articles of Agreement, the amendment to the Artichs of Agreement containing the terms of any new series of the Preferred Stock must be approved by tho favorable vote of the holders of at least two-thirds (?s) of the shares of Common Stock voting at the meeting called for the purpose of considering such an amendment.
If and when dividends payable on any class of the Preferred Stock are in arreais in an amount equal to four or more quarterly dividends on all series of the class, the hohlers of the Preferred Stock of all series of such chtss voting as a single class or voting with hohlers of one or more other classes of the Preferred Stock, as a single class. if such holders have the right to participate in such election, have the right to elect a majority of th. I; iard of 1)irectors. If both the $100 Preferred Stock and the $25 Preferred Stock are entit!cd to participate in such election, the $100 Preferred Stock shall have one vote per share and the $25 Preferred Stock shall have one-quarter vote per share. ( Art. V, Subdiv. 6; Art. V, Subdiv.12F.)
So long as any shares of Preferred St. k are outstanding, the Company shall not, except upon the affirmative vote of two-thirds (ys) of each class of the Preferred Stock then outstanding, (1) authorize any prior or parity preferred stock in addition to the currently authorized Preferred Stock, or securities convertible into such stock, except to refund all of the Preferred Stock or (2) issue stock having a preference as to dividends or assets over the Preferred Stock, or securities convertible into such stock, except to refund fumled indebtedness; and the Company shall not, except upon the affirma-tive vote of two-thirds (ys) of the class of the Preferred Stock affected, change the provisions of such class in a manner substantially prejudh lal to the hohlers. ( Art. V, Subdiv. 7; Art. V, Subdiv.120.)
So long as any shares of Preferred Stock are outstanding, the Company shall not, except upon tho affirmative vote of a nmjority of each class of the Preferred Stock then outstanding, (1) issue any shares of Preferred Stock, or other preferred stocks ranking on a parity as to dividends or assets with the Preferred Stock, o securities convertible into shares of such preferred stocks, unless (a) for the purpose of refunding preferred stocks or funded indebtedness or (b) the amount of Con-mon Stock and other stock junior to the Preferred Stock, plus premiums on Common Stock and earned and capital surplus, after deducting the amount, if any, by which Electrie Plant Adjustments exceed reserves therefor, shall be equal to the par value of preferred steeks to be outstanding, and net income before fixed charges (as defined) but af ter federal taxes, for 12 consecutive months within the 15 immediately preceding months, is 11,s times an amount equal to such fixed charges and the annual dividend requirements on the prefi ried stocks to be outstanding; (2) issue or assume any unsecured obligat:ons in excess of 20% of the aggrecate of secured indebtedness, capital stock and surplus, after the deduction referred to in (b) above; provided, however, that without such affirmative vote and in addition to securities otherwise permitted by this clause (2), term indebted-ness (defined as unsecured indebtedness having original maturities of more than one year issued under this proviso) may be issued or assumed after. lune 30.1972, if the sum of any term indebtedness and any secured indebtedness issued after that date (other than for refunding) does not exceed 60'lb of the sum of $20,000,000 plus the amount by which gross utility plant at a date not more than 30 days prior to such issuance or assumption exceeds gross utility plant at June 30, 1972, and any such indebtedness issued may be refunded with other term indebtedness; or (3) merge or consolidate the Company with or into another corporation unless such merger or conmlidation, or the issuance 47 f!
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or assumption of all securities to be issued ar asstuned in connection therewith, is ordered, approved or perniitted by any federal regulatory authority having jurisdiction. ( Art. V, Subdiv. S; Art. V, Subdiv.121L)
Liquidation Rights.
Upon any liquidation, dissolution or winding up,"fter payment of the Company's obligations and after payment in full to hohlers of the Preferred Stock, the remaining net assets of the Company shall be distributed ratably to the holders of the Comnmn Stock. In case of involuntary liquidation the $25 Preferred Stock is entitled to $25 pt r share and the $1N Preferred Stock to $100 per share, in each case plus accrued dividends, or in ca3e of voluntary liquidation, to the redemption price applicable to the particular series, and no more, in preference to the Conunon Stock. ( Art. V, Subdiv. 5; Art. V, Subdiv.12E). See Note 4 of Notes to Financial Statements for redemption prices of Preferred Stock.
Other Rights.
Hohlers of the Conunon Stock have preemptive rights to purchase each future issue of Common Stock, warrants carrying rights to Conunon Stock or securities convertible into Conunon Stock which is offered for sale for cash other than (i) by a public otTering or (ii) in or through underwriters or investnant bankers who shall have aereed promptly to nnke a public offering thereof (as in the case of this offering of the additional Common Stock) or (iii) to employees of the Company or (iv) to hold-ers of the Conanon Stock under a dividend reinvestment amt conunon stock purchase plan. ( Art. V, S u bdiv.10. )
The Comnmn Stock is not liable for further calls or to assessment.
Each share of the Convertible Pr(ferred Stock, 5.50',; Dividend Series, is convertible into fully W.id and non-assessable shares of Couunon Stock subject to termination of the conversion privilege at the ehtse of business on the second full business day prior to any redemption date. In certain events the conversion price is subject to adjustment designed in general to preserve and protect the value of the conversion privilege ( Art. V, Subdiv.11). See Note (d) under the caption " Capitalization" for the conversion price.
Except for the sha'es of the Convertible Preferred Stock,5.50',; Dividend Series, no outstandin,r stock of the Company '.ias any conversion rights.
Transfer Agents cad Registrars.
The transfer agents for the Company's Conunon Stock are The First National Bank of Boston and Manufacturm Hanover Trust Company, New York, New York, and the registrars are The First National Bank if Boston and Morgan Guaranty Trust Company of New York.
LEGAL OPINIONS Tne validity of the Jditional Common Stock will be passed upon for the Company by Ralph IL Wood, Esquire, Vice President and General Counsel of the Company, and by Messrs. Hopes & Gray, Boston, Massachuse tts, and for the Underwriters by E ssm. Choate, Hall & Stewart, Boston, Marsa-chusetts, both of which firms, as to the organization and existence of the Company, approvals of state 4s
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UNDEllWIIITING The names of the several Undmvriters and the respective numbers of shares of the additional Common Stock which they have severally agreed to purchaw from the Company, subject to the terms anil condith,ns specified in the Unilerwriting Agreemem filed as an exhibit to the Itegistration State-ment, are as follows:
Numtwr of Shareaof Name Stod Kidder, Peabody & Co. Incorporated Blyth Ea.stman Dillon & Co. Incorporated n-
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epmmissions and legal conclusions affected by the laws of New IIampshire, Vermont, 3faine and Connecticut, may rely upon Ralph II. Wood. Ralph H. Wood owns, jointly with his wife,300 shares of the Company's Common Stock.
EXPERTS The financial statements incluikd herein so far as they pertain to each of the five years in the period ended December 31,1978 have been so included in reliance upon the report of Peat, 3f arwick, 3fitchell & Co., independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing.
Ralph II. Wo<ul, Esquire, Vice President and General Counsel of the Company, has reviewed the statements made herein as to matters of law and legal conclusions under the subcaptions " Joint Projects", "Seabrook Nuclear Project", " Regulation", " Rates - New Ilampshire Retail", " Rates -
Other "," Fuel Supply"," Environmental 3Iatters","Employe(s, Salaries and Wages" and "31unicipali-ties and Cooperatives" under the caption " Business", and under the caption " Description of Common Stock" 3fessrs. Hopes & Gray have reviewed the statements made herein as to mattem of law and legal conclusions ander the subcaptions "3fortgage Bonds" and " Preferred Stock" under the caption
" Financing", under the subcaptions "New England Power 1%1" and "Seabrook Nuclear Project" under the caption " Business", under the caption " Description of Common Stock" and concerning the jurisdiction of FERC, the NRC and the 3fassachusetts Department of Public Utilities under the caption " Business - Regulation." Such statements are included on the authority of such person and firm as experts.
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