ML19309F887
| ML19309F887 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 02/26/1980 |
| From: | BANGOR HYDRO-ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML19309F878 | List: |
| References | |
| NUDOCS 8005010551 | |
| Download: ML19309F887 (180) | |
Text
l 10 i BANGOR HYDRO-ELECTR C COMPANY ANNUAL i
REPORT 1979
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I 10 THE STOCKHOLDERS OF BANGoliHYDRO-ELECTRIC COMPANY Eamings in 1979 were disappoiriting - $1.63 per common share,8% less than 1978 earnings of $1.77 per common share. In addition, the 1979 earnings contain two noteworthy income items. Tne first resu!!ed from the recording of unbiled revenue, as explained in Note 1 to the financial statements, which added $.58 per share. The second item arcze from the Maine Public Utilities Commission approval of a new fuel adjustment clause allowing the recovery of previously iricurred fuel costs, as explained in Note I to the financial statements, which resulted in an increase in 1979 eamings of $1.06 per share. However, $.36 of this $1.06 per share is attnbutable to the amount of fuel that would tave been deferred at December 31,1978 had the new fuel clause been in effect at that time. These two items contribute $94 of the $1.63 per share camed in 1979. It is clear that our basic rate schedule, established in 1976 and based on 1975 operating results, can no longer support the realities of higher operating and maintenance costs and the higher costs of capital fonds in the 1980's. Consequently, on February 25,1980 the Company filed for a general rate increase with the Maine Pubiic Utilities Commission seeking increased revenue of $5,372,000, or 10.4% over 1979 revenues. In addition, in order to support ! the efforts of secunng at reasonable costs the long-term financing that must be accomplished in carrying out the capital construction program, some of which must be undertaken before any new permanent rates will be in effect, ) , the Company asked for interim rate relief of approximately one half the permanent request. 1 The year 1979 has been one of turmoil in the electric utility industry. Conflicts between growth and no-growth continue to plague the decisions that must be made in planning for future energy requirements. During the year j there were demonstrations at Seabrook in an effort to halt construction of that much needed facility; the Maine Public , Utilities Commission denied Central Maine Power Company permission to ouild a 600 megawatt coal-fired l generating station on Sears Island; and New England Power Compar;y cancelled the proposed nuclear generating i station in Rhode Island in which your Company was a joint owner. The year also saw the accident at Three Mile i Island and the cautious but positive response by the Kemeny Commission. Further, a referendum petition calling for the prohibition of the generation of electricity by nuclear fiscion within the state, including the shutdown of Maine Yankee, has been circulated by anti-nuclear advocates. Although we cannot be certain at this writing,it would appear that the petition drive has been successful, and that the question will go to public referendum later in 1980. The electric utility industry has yet to see a clea9 cut energy policy developed by the Federal govemment and the industry continues to be exposed to confusing signals from all branches of government. The most disturbing aspect of this confusion is the resultant uncertainty about the sources of the electric energy necessary to serve customers in the years ahead. Little, if any, progress has been made in forcing regulators and policy makers to take a realistic approach to available solutions, and the regulatory and political processes continue to be bogged down in
- peripheral matters.
l Evidently the only remedy is for the general public to exert its ini;uence directly upon the pol:ticians and regulatory bodies to make the difficult decisions on the issues which those pot,ticians and regulators have, over the years appropriated to themselves to consider. Accordingly we again ask you to become involved in the energy issues arJ make your views known to your national and state legislators and to the various agencies involved in regulating tae electnc utility business. The directors and officers of the Company gratefully acknowledge and appreciate the continued support of you the stockholders. Respectfully subrmtted, ! - icv & M P k j R N. Haskell ' Chairman of the Board -
/ t.fte W T. A. Green at Earnings Presi dent and olvidende per Share i D E Earnings per Share February 26, 1980 E Dividends per Share 1975 1976 1977 1978 1979 1
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ME kM l((' _. b '
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Salsa and Revenues C : Revenues in 1979 increased by
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$9.121,532 to a total of $51,748,328.
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Of this increase, only $1,087,918 is I
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Fuel for generation and pur-chased power totaled $33,054,914 (exclusive of $5,484,688 deferred - oi!-fired generating sources from which the Company purchases energy. Kilowatt Hours Sold ,I O Other O commercial B Residential M industrial see Note 1 to financial statements) in 1979 compared to $26,762,748 in 1978. Of this $6.292,166 increase, Other E::penses The William F. Wyman Unit #4 Total sales in 1979 were $5.796,771 is directly attributable generating station in Yarmouth, 1,331,750,431 kilowatt-hours, an to increased fuel expense. In Jan- Maine, in which the Company owns I increase kilowatt-hours of over 8 2%. or 101.219.36S last year. Ex-cary of 1979 the Company was pay-ing $11.d8 for a barrel of oil. In an 8 33% interest, oegaa com-mercict operation on December 1, ciuding interruptible sales total firrn December the price had increased 1978. Operation, maintenar'ce, de-97% to $23.40 per barrel. In preciation and property tax ex- ! I sales Residential increased sales increased 5.9% in 4.5%. this period. January 1980 the price of oil was penses associated with the Corr-commercial sales 3.4% and indus- further increased to $24.40 per pany's ownership in that plant are trial sales, again excluding inter- barrel. This type of increase was also experienced at the various l included payrollincosts 1979as expenses. well as signif- Higher 1 I ruptible industrial sales. sales increase were upis 12.3%. due to The icaritly higher prices for purchased substantially higher sales to Great - materials, cupplies and outside Northern Paper Company and - services have also contributed to ' l Lincoln Pulp and Paper Company. _ increased operation and mcinten-W Interruptible sales increased 16.4% ance expenses. due to a major plant expansion by - Interest costs reflect heavier IMC Chemical Group, Inc. borrowing for the Company's con-structico program as well as the Fuel for Generation - - - abnormal increase in short-term and Purchased Power ~ interest rates experienced during in 1979, the Company's generation - - the year. I mix produced 17% from its hydco- l electric stations. 23% from Maine ggg Yankee Atomic Po,ver Company, in _ _ _ which the Company owns a 7% - - A major concern of the Company is interest, and the remaining 60% 18op, 5 l,*$g i xi[en E e ($ N!! ions) the ability to meet its customers' from oil-fired sources owned by the O Taxes 3 Depreciation demands for electric energy in mid Company or purchased from other E Operations and Maintenance to late 1980's. Current forecasts utilities. Fj Fuel and Purchased Power indicate a 3.3% load growth during I - - _ _ _ _ - _ _ . . - . - - . . - _ - - - - - - . - 3
i l the next decade, down from the this investment will be requested in 4.4% forecast of a year ago. the Company's 1980 rate pro-The Company has a .37% interest, ceeding. or 8 6 megawatts, in the Seabrook As a result of the cancellation of nuclear units being built by Public the New England Power Company Service Company of New Hsmp- units we are currently examining shire, ("PSNH") and scheduled for alternative sources of generating completion in 1983 and 1985, and capacity. The Company is re-has contracted to purchase an evaluating the economic feasibility additional 1.8% interest, or 41.4 . of adding hydro-electric generation megawatts, for a total of 50 mega- within the system. Despite the high watts. The Company's commitment construction costs, the develop-l to purchase the additional interest . ment of additional hydro-electric in the Seabrook nuclear units, along capacity is becoming a competitive with the commitments of other pur- alternative to the use of oil for chasers, is being delayed by regu- generation. Among other alterna-latory proceedings. Those proceed- tives being considered are pur-ings may not be completed until chases of capacity from other January 1981 or even later. utilities, including the New Bruns-The Company had planned to 1975 1976 1977 1978 1979 wick Electric Power Commission Fuel Sources of Power n Canada, and joint ownership in provide the greater part of the iemainder of its capacity require. O oil a Nuclear E Hydr one cr more of the generating mentu in the late 1980's from its 100 stations being planned in New megawatt interest in the New Eng- New England Power Company can- England. Other factors being con-land Power Company nuclear units celled its plans to construct these sidered in our load projections to have been built in Charlestown, units. The Company's investmer.t in include the impact of conserva-Rhode Island. However, when efforts this project at December 31, 1979 tion and load management tech-to obtain the site were unsuccessful, was $2,015,307. The recovery of niques.
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I BANG 0R HYDR 0fLECTRIC ,l l COMPANY l FINANCIAL I STATEMENTS & HOTESTO FINANCIAL i I STATEMENTS ! l 1979 'I I 'I 'I I I I , I I I
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I AUDITORS' REPORT To the Stockholders and Board of Directors of Bangor Hydro-Electric Company: g 1 g We have examined the balance sheet of Bangor Hydro-Electric Company (a Maine corporation) and the statement of capitalization as of December 31,1979 and 1978, and the related statements of income, retained earnings and g sources of funds for plant additions for the years then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion the accompanying financial statements present fairly the financial position of Bangor Hydro-Electric Company as of December 31,1979 and 1978, and the results of its operations and its sources of funds for plant additions for the years then ended, in conformity with generally accepted accounting principles, which, except 3 for the change (with which we concur) in the method of recording Electric Operating Revenues as indicated in g Note I to the financial statements, have been applied on a consistent basis. Arthur Andersen & Co. Boston. Massachusetts, o l January 25,1980 l9 7W g NT TT f a 6 66' ' "
I BANGORHYORO-ELECTRICCOMPANY Statement of Income for the Years Ended December 31,1979 and 1978 Electric Operating Revenues (Note 1) 1979 1978 General rate revenue $27,340,857 $26.252.939 Fuel charge revenue 24,407,471 16.373.857
$51,748,328 $42.626.796
~ Operating Expenses: Fuel for generation and purchased power (Notes 1, 8 and 9) $33,054,914 $26.762,748 I Other operation Maintenance Depreciation (Note 1) 6,260,570 2,077,141 2,814,541 5,156.183 1.456.350 2.200.513 T axes-
- I Local property and other 1,822,225 1,514,646 Income (Note 2) 722.874 1.128.430
- $46,758,265 $38.218.870 Operating income $ 4,990,063 $ 4.407.926 Other income and (Deductions):
Allowance for other funds used during construction (Note 1) - 531.293 Other. net of applicable income taxes (5,886) (14.117) Jg income Before Interest Expense $ 4.984,177 $ 4.925.102 Interest Expense: i g First mortgage bonds (Note 5) $ 2,088,957 $ 1.872,034 )
'g Other (Note 6)
Allowance for borrowed funds used during construction (Note 1) 1,243,365 (792,693) 304,734 (643.149)
$ 2,539,629 $ 1.533.619 Income Before Cumulative Effect of a Change in Accounting Principle $ 2,444,548 $ 3.391.483
, Cumulative effect on poor periods (to December 31,1978) of changing to a differer,t method of recording revenue net of related income taxes of $1,034.000 (Note 1) 1,043,000 -
'I Nst income Dividends on Preferred Stock
$ 3,487,548 $ 3.391.483 546,420 450.570 Ecrnings Appilcable to Common Stock $ 2,941,128 $ 2.940.913 I Ecrnings Per Common Share, based on weighted average number of shares outstanding of 1.801,906 in 1979 and 1.658.985 in 1978 (Note 1)
Before cumulative effect of a change in accounting principle $ 1.05 $ 1.77 Cumulative effect on prior periods (to December 31,1978) of l changing to a different method of recording revenue $ .58 $ - 1 Net $ 1.63 $ 1.77 I Pro forma earnings assuming the new method of recording revenue is applied retroactively Applicable to common stock $ 1,898,128 $ 3.045.475 l Per share $ 1.05 $ 1.83 I I !I o m w MN at AM yk .
- g The accompanyssg notes are an integral part of these financtal statements
- 7 i
l BANGOR HYORO-ELECTRIC COMPANY
, Balance Sheet - December 31,1979 and 1978 I
Assets I 1979 1978 investment in Utility Plant: Electric plant in service, at original cost (Notes 8 and 9) $95,017,710 $87.396.867 Less-Accumulated depreciation (Notes 8 and 9) 32,459,170 30.065.676
$62,558,540 $57.331.191 Construction in progress including $3.697.502 in 1979 and $3.835.595 in 1978 for construction of jointly-owned generating units (Notes 9 and 10) 3,824,265 5.453.208 g
$66,382,805 $62.784.399 51 investments in corporate joint ventures (Notes 1 and 8)
Maine Yankee Atomic Power Company 4,683,022 4.678.772 Maine Electnc Power Company. Inc. 178,898 188.002 ,
$71,244,725 $67.651.173 Other Investments, principally at cost $ 520,395 $ 529.659 Current Assets:
Cash (Note 6) $ 1,122,801 $ 1.917.124 Accounts receivable - Customers, net of reserve 5,098,511 4,280.689 income tax refund 563,287 772,265 Unbilled revenue receivable (Note 1) 2,549,199 - Inventories, at average cost - , Material and supplies 1,840,857 1.529.516 Fuel oil 1,286,905 515.611 Prepaid expenses 359,103 357,590 Deferred fuel costs (Note 1) 5,484,688 -
$18.305,351 $ 9.372.795 Deferred Charges:
Cost of cancelled NEPCO nuclear units, net of related income taxes
- of $785265 (Note 10) $ 1,230,041 $ -
Other 424.054 380.418
$ 1,654,095 $ 380.418
$91,724,566 $77.934.045 l qp M31h I I
I I I Ihe aCCOmfanysng notes af 0 an integral part Of these financial statements 8
l I ' i Stockholders' investment and Liabilities 1979 1978 Capitalization (see accompanying statement): Common stock investment (Note 3) $25,694,645 $25.217,605 i Preferred stock (Note 4) 4,734,000 4,734,000 Redeemable preferred stock (Note 4) 5,000,000 2.000,000 First mortgage bonds, exclusive of a current maturity and I g sinking fund requirements (Note 5) 32,345,000 27.515.000 l g Total capitalization $67,773,645 $59.466.605 ; Current Liabilites: Current maturity of long-term debt (Note 5) $ 2,000,000 $ - Notes payable to banks (Note 6) 7,550,000 7.050.000
$ 9,550,000 $ 7.050.000
- Other current habilities -
Current sinking fund requirements $ 170,000 $ 170,000 Accounts payable 5,116,931 4,134,670 Dividends payable 856,598 792,813 Accrued interest 664,954 384,635 Accrued taxes (Note 2) Current 207,764 227,742 Short-term deferred (55,417) - 3 Customers' deposits 73,859 79,448
;g Accrued pension plan contribution (Note 7) 410,000 363.600
$ 7,444,689 $ 6.152.908
$16,994,689 $13.202.908
)I Ccmmitments and Contingencies (Notes 8,9 and 10)
Dsferred Credits and Reserves (Note 2): Accumulated deferred income taxes $ 3,441,848 $ 2,746,181
.lW Unamortized investment tax credits Other 3,418,326 96,058 2,437,848 80.503
$ 6,956,232 $ 5.264.532
$91,724,566 $77.934.045 I
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_ 2o lo xUL I IN5 aCCompanyog notes are an anlegraf part of these feancial $fatements 9 ,I
BANGOR HYDR 0fLECTRIC COMPANY I Statement of Retained Earnings for the Years Ended December 31,1979 and 1978 1979 1978 Balance at Beginning of Year $ 8,599,913 $ 8,026,517 Add: Net income 3,487,548 3,391,483 Equity reserve for licensed hydro projects - 136,262
$12,087,461 $11.554,262 Deduct: g Cash dividends declared on-Preferred stock 546,420 $ 450,570 g
Common stock - $1.52 per share in 1979 and $1.46 per share in 1978 2,742,338 2.503,779
$ 3,288,758 $ 2,954,349 Calance at End of Year $ 8,798,703 $ 8,599,913 Statement of Capitalization - December 31,1979 and 1978 1979 1978 Common Stock Investment:
Common stock, par value $5 per share-Authorized--2,500,000 shares Outstanding--1,812.023 shares in 1979 and 1,789,827 shares in 1978 $ 9,060,115 $ 8,949,135 Amounts paid in excess of par value 7,835,827 7,668,557 l 5 Retained earnings 8,798,703 8.599.913
$25,694,645 $25,217,605 Preferred Stock, non-participating, cumulative, par value $100 per share. l authorized 100.000 shares (Note 4): W Subject to mandatory redemption requirements-9-1/2%, Callable at $109.50, 30,000 shares authorized and outstanding $ 3,000,000 $ -
g 2,000.000 9-1/4%, Callable at $106.77, 20,000 shares authorized and outstanding 2,000,000 g
$ 5,000,000 $ 2.000,000 Not redeemable or redeemable solely at the option of the issuer-7%, Noncallable, 25,000 shares authorized and outstanding $ 2,500,000 $ 2,500,000 4-1/4%, Callable at $100, 4,840 shares authorized and outstanding 484,000 484,000 4%, Series A, Callable at $110,17,500 shares authonzed and outstanding 1,750,000 1,750.000
$ 4,734,000 $ 4,734,000 First Mortgage Bonds (Note 5):
2-3/4% Series due 1980 $ 2,000,000 $ 2,000,000 3-1/4% Series due 1982 1,000,000 1,000,000 3-1/8% Series due 1984 1,000,000 1,000,000 3-1/4% Series due 1985 1,500,000 1,500,000 4% Series due 1988 2,500,000 2,500,000 4% Series due 1993 3,500,000 3,500,000 g 6-3/4% Senes due 1998 2,500,000 2,500,000 3,500,000 g 8-1/4% Series due 1999 3,500,000 10-1/2% Series due 2000 4,800,000 4,850,000 9-1/4% Series due 2001 2,865,000 2,910,000 8-3/5% Senes due 2003 2,350,000 2.425,000 10-1/4% Series due 2004 7,000,000 -
$34,515,000 $27,685,000 Less - Sinking fund requirements and a current maturity 2,170,000 170.000
$32,345,000 $27.515.000 Total capitalization $67,773,645 $59.466.605 in. accompanvog notes are an ,ntegrai part or these f,nanoai statements
,0
l I BANG 0RHYDRO-ELECTRICCOMPANY Statement of Sources of Funds for Flant Additions for the Years Ended Decem'ber 31,1979 and 1978 l 1979 1978 l Sources of Funds: l l Internal sources- ' Operations - I Net income before cumulative change in accounting principle $ 2,444,548 $ 3,391,483 Items not currently requiring or (providing) funds-Depreciation i I Deferred income taxes investment tax credit, not Allowance for other funds used during construction 2,814,541 695,667 980,478 2200,513 470,488 923,637 (531,293)
>l
.W Funds provided from operations Cumulative effect on prior years (to December 31, 1978) of a change
$ 6,935,234 $ 6,454.828 to a different method of recording revenue 1,043,000 -
I Other sources (uses) of funds - Sinking fund requirements
$ 7,978,234 $ 6.454.828
$ (170,000) $ (170.000)
Dividends declared (3,288,758) (2,954,349) Other, net 874,952 74.206
$(2,583,806) $(3.050,143)
Change in net current assets, exclusive of interim financing - Cash, receivables and unbilled revenue $(2,363,720) $(3,122,661) Deferred fuel costs (5,484,688) - Other current assets (1,084,148) (83.265) Accounts payable 982,261 1.807,113 Other current liabilities 309,522 _ 54,944
$(7,640,773) $(1.343.869) -
Funds available from internal sources $(2,246,345) $ 2.060.816 External sources-Notes payable to banks $ 500,000 $ 2,750,000 Proceeds from sale of-I First mortgage bonds Preferred stock (30.000 shares in 1979) Common stock-7,000,000 3,000,000 2,500,000 Public offering - 4,288,010
.l Dividend reinvestment purchase plan (14,145 shares in 1979) 194,626 -
E Employee stock ownership plan (8,051 shares in 1979 and 3.800 in 1978) 110,547 56.696 Funds from external sources $10,805,173 $ 9.594,706 I Funds Available for Plant Additions Funds Used For: Wyman Unit #4
$ 8,558,828 $11.655.522
$ 1,313,818 $ 3.620.186 I NEPCO Units #1 and #2 (Note 10)
Seabrook Other plant additions 379,991 1,504,070 5,360,949 1271,168 2200,279 5.095.182
$ 8,558,828 $12,186,815
; Less: Allowance for other funds used during construction -
'(531.293)
Funds Used for Plant Additions $ 8,558,828 $11.655.522
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BANGOR HYDRO-ELECTRIC COMPANY Notes to Financial Statements December 31,1979 and 1978 I (1) Summary of Significant Accounting Policies Electric OperatirN Revenues Prior to 1979. EleGic Operating Revenues were recorded when billings, based on cycle meter readings for either a one- or two-month period of consumption, were rendered to customers. Due to the cycle billing process, a portion of the electricity used by the Company's customers during a fiscal period remains unbilled at the end of thF period. In general, this "unbilled" amount of revenue was not recorded as revenue prior to 1979. g in the first quarter of 1979, the method of recording Electric Operating Revenues was changed to recognize g revenues as electricity is used by the Company's customers, including electricity delivered but not yet billed at the end of the accounting period. This accounting change was made in order to better match the recognition of electric revenues with the recognition of the costs of providing the electric service. Ee The cumulative effect of this accounting change on prior years (to December 31,1978) amounts to $1,043.000 E (after reduction for income taxes of $1,034.000) and was included in income for the first quarter of 1979. The pro forma amounts shown in the Statement of income reflect the effect of retroactive application of the new method of recording revenue as if the new method had been followed throughout the periods. Deferred Fuel Accounting Under the fuel adjustment clause in operation in 1979, Fuel Charge Revenue was generally recorded when the cost of g fuel was billed to customers. Operating Expenses were charged for the cost of fuel as incurred, which preceded the g billing of fuel adjustment revenues by an average of three months. Consequently, in periods of rising fuel costs the Company's earnings were adversely affected by the amount of fuel codts incurred in excess of fuel billings. On December 28,1979 the Maine Public Utilities Commission ("MPUC") promulgated new fuel adjustment g regulations to be effective January 1,1980. As part of its order implementing the new fuel regulations, the MPUC W authonzed the Company to collect, over a three-year period beginning January 1980, the fuel costs incurred which were unrecovered at December 31,1979, due to the operation of the previous fuel clause. Accordingly,in December g the Company deferred $3.806 901 of fuel expenses, which amount represents the balance of unrecovered fuel costs g which will be collected over the next three years. The af ter-tax effect of this deferral is to increase eamings by $1.06 per common share. Poor to December, the Company had received separate orders providing for deferral of incremental fuel costs E incurred as a result of the two 1979 shutdowns of the Maine Yankee Atomic Power Company nuclear plant (" Maine 5 Yankee"). Deferred fuel costs at December 31, 1979 include the $230.380 remaining balance of unrecovered incremental fuel costs incurred during the normal maintenance shutdown in September 1979 and the $1,447,407 g remaining balance of unrecovered incremental costs incurred during the unscheduled shutdown discussed below. g Dunng the March 15 to June 5,1979 Maine Yankee plant shutdown ordered by the Nuclear Regulatory Commission ("NRC") for safety checks, the Company purchased replacement energy at costs in excess of the cost of the energy that Maine Yankee would have generated. During the shutdown period the MPUC held hearings to g consider the applicability of the Maine utihties' normal fuel adjustment clauses to the incremental costs of replace- 3 ment energy. On May 5,1979 the MPUC issued an order altering the utilities' fuel clauses so as to provide for recovery of this incremental cost of energy over a 12-month penod. On December 28 and 31,1979 the MPUC issued orders which further extended this collection period through the end of 1980. The utilities involved in these hearings, including the Company, have appealed the December 28 and 31 orders. The MPUC is conducting hearings to consider the justness and reasonableness of the incremental fuel costs incurred by the Maine utilities during the Maine Yankee shutdown and the amounts which the utilities will ultimately g be allowed to collect from customers. Management believes that all of the replacement energy costs incurred by 3 the Company were just and reasonable and therefore should be recoverabb from its customers. Equity Method of Accounting l The Company accounts for its investments in the conimon stock of Maine Yankee and Maine Electric Power E Company, Inc (" Maine Electnc"). an electric transmission company, on the equity method of accounting and records its proportionate share of the net earnings of these companies (substantially all of these earnings are paid out in g dividends) as a reduction of purchased power costs. See Note 8 for additional information with respect to these g investments. Depreciation of Electric Plant and Maintenance Policy g Depreciation of electric plant is provided using the straight-line method at rates designed to amortize the original g cost of the properties over their estimated service lives. The composite depreciation rate, expressed as a percentage of average depreciable plant in service, was approximately 3.2% in both 1979 and 1978. The Company follows the practice of charging to maintenance the cost of repairs, replacements and renewsts l of minor items considered to be less than units of property. Costs of additions, replacements and renewals of W 12 D**D *D'T];F oc o AN
I items considered to be units of property are charged to the utility plant accounts and any items removed are retired from such accounts. The original costs of units of property retired and removal costs, less salvage, are charged to the reserve for depreciation. Allowance for Funds Used During Construction The Company reflects as an element of the cost of construction of major units of depreciable property an allowance I for funds (including common equity funds) employed during the construction period ("AFDC"). While not currently providing funds, under the rate-making process of applicable regulatory agencies,the Company is permitted to recover these amounts over the usefullife of the constructed property. Further, the unrecovered cost of constructed property, including the allowance, is an element of rate base on which the Company is permitted to earn a return. I The amount of the allowance recorded is determined by multiplying the portion of the average monthly dollar balance of construction in progress financed by short-term borrowings by the weigh'ed average interest rate apphcable to short-term borrowings for the month and multiplying any remainder of the monthly dollar balance of construction in progress by the weighted average cost of debt and equity as of the beginning of the year. In 1979, the average monthly short-term borrowings exceeded the average monthly balance of construction in progress and, as a result, the 1979 allowance rate is the average interest rate of 1979 short-term borrowings. The average rate produced by the Company's computations was 13.2% in 1979 and 8.4% in 1978. I (2) Income Taxes The individual components of Federal and state income taxes reflected in the statement of income for the years ended December 31, 1979 and December 31, 1978 are as follows: 1979 1978 Federal State Federal State Current $ (491.027) $ (238,106) $ (453.080) $102,120 Deferred short-term 326.040 403.808 - - Deferred-other 695.667 - 467,928 2,560 investment tax credit, net 980.478 923,637 Employee stock ownership plan investment tax credit 106,165 95.964 - Total provision for income taxes $1.617,323 $ 165,702 $1.034,449 $104,680 Charged to other income (22,515) (3.683) (9,215) (1,484) Allocated to cumulative change in accounting principle (Note 1) (888.553) (145.400) - - Charged to operating expenses S 706.255 $ 16.619 $1.025.234 $103.196 In 1979, the Company expenenced a net loss for tax purposes resulting principally from three significant transactions which increased income for accounting purposes but not for tax purposes. The loss for tax purposes resulted in net operating loss and investment tax credit carryovers which, subject to review by the Internal Revenue I Service will be used to reduce income taxes otherwise payable in future years. The provisions and accruals related to these items, which have been classified (principally as short-term deferred taxes) to correspond to the accounting for the related assets, are as follows-Federal State Costs of cancelled NEP units $ 681,548 $ 103,717 Deferred fuel costs 2,346.349 383,928 Unbilled revenues 1.090.547 178.444 Net operating loss carry forward (1,603.732) (262,281) Investment tax credit carry forwards-I Through 1985 Through 1986 (1,187.814) (1,000.858)
$ 326.040 $ 403.808 The rate-making practice followed by the MPUC in the Company's most recent (November,1976) rate order permitted the Company to recover as a part of the cost of service only the deferred Federalincome tax arising from the use, for income tax purposes, of accelerated depreciation of property added subsequent to 1969. Except as I described above, the income tax effects of other timing differences between pretax accounting income and taxable income generally are, in effect, flowed through to the Company's customers. Although this accounting differs from generally accepted accounting principles followed by nonrate-regulated companies, which are required to record I deferred faxes related to all timing differences, the Company expects that deferred taxes not recorded will be collected through customer rates in the future when such taxes become payable.
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The table below reconciles a provision calculated by multiplying income before Federal income tanes by the statutory Federal income tax rate to the above provision for Federal income tanes: 1979 1978 Amount % Amount % (Dollars in Thousands) Federal income tax provision at statutory rate $2.348 46% $2,110 48% Permanent reductions in tax expense resulting from statutory exclusions from taxable income: Dividend received deduction related to earnings of associated companies 207 4 208 5 Equity component of AFDC - - 255 6 g Preferred dividends paid deduction - - 34 1 g Amortization of investment tax credit 80 1 36 1 Other 34 1 - - Federal income tax provision before effect of flow-through $2.027 40% $1.577 35% Timing differences that are flowed through for rate-making and accounting purposes: Interest component of AFDC 365 7 309 7 g Deduction of certain costs (primarily pension costs and payroll taxes) for g tax purposes that are included in the cost of electric property 29 1 27 1 One-half year depreciation convention - - 216 5 Other 16 - (9) (1) Federal income tax provision $1.617 32% $1.034 23% Under the Federal income tax laws, the Company receives investment tax credits at a rate of 10% on qualified property additions. Investment credits received are deferred and amortized over the life of the related property. Due to the adoption of a Tax Reduction Act Stock Ownership Plan (see Note 3). the Company receives an additional 1% investment tax credit which is used to fund the Plan (3) Capital Stock The Company has an employee stock ownership plan which qualifies as a Tax Reduction Act Stock Ownership Plan g ("TRASOP"). Annual contributions to the Plan by the Company will be in the form of common stock of the Company having a market value equal to an additional 1% investment credit allowed by Federal tax law. less some adminis-g trative expenses The Company also has adopted a Dividend Reinvestment and Common Stock Purchase Plan through which shareholders may purchase common stock without payment of brokerage commissions or service g charges in connection with these plans. the Company has reserved 130.000 shares of common stock. 3 (4) Preferred Stock General Authorized preferred stock consists of 100,000 shares, par value $100 per share, of which there are outstanding 97.340 shares. The remaining 2,660 authorized but unissued shares (plus additional shares equal in number to such presently outstanding shares as may be retired) may be issued with such preferences, restrictions or qualifica-tions as the Board of Directors may determine. The callable preferred stock may be called in whole or in part upon l m any dividend date by appropnate resolution of the Board of Directors. With the exception of the 20.000 shares of 9%% Preferred Stock and the 30.000 shares of 9%% Preferred Stock (issued en August 31, 1979), the outstanding preferred stock has general voting rights of one vote per share. Redeemable Preferred Shares The 9%% Preferred Stock and the 9%% Preferred Stock are subject to mandatory redemption through the operation g of sinking funds at the redemption price of $100 per share plus dividends accrued. The Company will set aside in 3 cash annually (1) on December 1 in each year commencing with December 1,1982, an amount sufficient to redeem 1000 shares of the 9%% Preferred Stock; and (2) on August 1 in each year commencing with August 1,1985, an amount sufficient to redeem 2000 shares of the 9%% Preferred Stock. The aggregate amounts of preferred stock redemption requirements for each of the five years following 1979 are as follows: 1980 - F D]c
'L D
Ob~ 9 b $ 1983 sioojoo
$100.000 1984 $100,000 14
(5) Fir;t M:rtgrge Bonds Under the provisions of the indenture, substantially all of the Company's plant and property has been mortgaged to secure the First Mortgage Bonds. Additional bc.,ds may be issued under the First Mortgage Bond indenture, subject to certain restnctions and provisions specified in the indenture and supplements thereto. Sinking fund requirements and current matunties of long-term debt for the five years subsequent to December 31 1979 aggregate $4,850.000 as follows: I Sinking Fund Current Requirement Maturities
$170,000 $2,000,000 Total 1980 $2,170,000 I 1981 1982 1983 170.000 170,000 170,000 1,000.000 170.000 1,170,000 170,000 1984 170,000 1,000.000 1.170.000
$4.850.000 (6) Notes payable to Banks The Company uses short-term borrowings under lines of credit to initially finance construction and for other corporate purposes. The Company intends to refinance such borrowings with the proceeds from sales of long-term debt and equity secunties.
At December 31,1979 the Company had lines of credit with three banks totaling $15.300,000 as follows: Amount Available Under Interest Commitment Fee or Line of Credit Rate Compensating Balance Terms I $7.000.000 4.300.000 Prime Rate Prime Rate
$100.000 compensating balance plus a fee of pnme rate applied to 7%% of $3,300,000 of the line plus a fee of the pnme rate I 4.000,000 108% of the Prime Rate applied to 7K% of borrowings
$100,000 compensating balance plus a fee of prime rate applied to 8% of. $3,000.000 of the line Certain information related to these borrowings for the years 1979 and 1978 is as follows:
1979 1978 l I Total lines of credit Unused line of credit at end of period Borrowings outstanding at end of period
$15,300,000
$ 8,050,000
$ 7,250,000
$9.000.000
$2250.000
$6,750,000
)
i 1 Effective interest rate (exclusive of fees for the lines) I on borrowings outstanding at end of period Average daily outstanding borrowings for the period Weighted daily average annual interest rate 15.5%
$ 9,291,000 13.2%
11.75 %
$2,490,000 9.8%
3 Highest level of borrowings outstanding at any g month end during the period $14,250,000 $6,750.000 (7) Supplementary Income Statement Information l l The Company has a noncontnbutory pension plan covering substantially all of its employees. The Company funds pension costs accrued Pension expense was $410.000 in 1979 and $408.600 in 1978, including amortization of unfunded poor service costs (approximately $928,000 as of January 1,1979) over a twenty-year period. As of January 1,1979, the date of the latest actuarial review, the pension fund assets exceeded the actuarially computed value of vested benefits. -I Maintenance expense, depreciation, and local property and other taxes not based on income which were charged to operating expenses are stated separately in the income statement. Rents and advertising costs are not significant. No royalty or research and development expenses were incurred. (8) Capacity The Com I company,panyand 14 2% owns of the 7% of the common common stock stock Power of Maine Electnc of Maine YankeeanAtomic Company,Inc. Power Company. electric transmission Under purchased power arrangements, the Company is entitled to purchase 7.3071% of the output of Maine Yankee, company. and is obligated to pay a like percentage of Maine Yankee's costs, including a return on invested capital regardless of a nucle the level of efectrical output. The Company is also entitled to 2.4% of a purchased power contract between Maine Electnc and the New Brunswick Electnc Power Commission. To the extent that Maine Electric's revenues from trans-mission services are insufficient to meet its expenses. the Company and the other participants pay Maine Electric's D**]D *D 3' is o sa o AA
costs based on their relative system peaks. Information relating to the above purchased power arrangements and the operations of Maine Yankee and Maine Electric is as follows: l Maine Yankee Maine Electric Power Sales Contract Term 1973 - 2003 1976 - 1986 Capacity Entitlement in megawatts (MW) 60MW 9.6MW CPerations: 1979 1978 1979 1978 As reported by investee. (Do:lars in Thousands) Operating revenues S 68.867 $ 70.373 $ 98,122 $ 59.860 Depreciation $ 8279 $ 8.173 $ 735 $ 736 Interest and preferred dividends 14,458 12.550 1,238 1,201 Other, net 39.480 42.948 95.994 57,760
$ 62.217 $ 63.671 $ 97.967 $ 59.697 Earnings applicable to common stock $ 6.650 $ 6.702 $ 155 $ 163 Amounts reported by Company-Purchased power costs $ 4,199 $ 4,217 $ 587 $ 551 g Equity in net income (468) (479) (24) (39) g
$ 3.731 $ 3.738 $ 563 $ 512 Financial Position:
As reported by investee-Plant in service $240,061 $237,884 $ 18,617 $ 18,617 Accumulated depreciation (54,105) (46,449) (6,482) (5,746) Other 101.149 74.520 10.669 7.941 Total assets $287,105 $265,955 $ 22,804 $ 20,812 Less- Preferred stock 13.070 13,696 - - First mortgage bonds and long-term notes 139,373 128.818 10,560 11.220 Other liabilities and deferred credits 67.805 56.657 10.997 8.267 Net assets S 66.857 $ 66.784 $ 1.247 $ 1.325 Company's reported equity-Equity in net assets $ 4,680 $ 4.675 $ 177 $ 188 Add (deduct) - Effect of adjusting Company's estimate to actual 3 4 2 - Amounts reported by Company $ 4,683 $ 4.679 $ 179 $ 188 Financial statements of Maine Yankee and Maine Electric are included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission. The Company owns 8 3% (50 megawatts) of the 600 megawatt Wyman #4 plant which is operated by another utility. Included in plant in service and accumulated depreciation is the Company's interest in this plant of $16,207,360 and $485,174 respectively. The Company's proportionate share of the direct expenses of this unit is included in the corresponding operating expenses in the income Statement. (9) Construction The Company is engaged in an ongoing construction program including an investment in the Seabrook Nuclear Units ("Seabrook"), a jointly-owned electric generating facility being built by the Public Service Company of New Hampshire ("PSNH"). The Company now owns .37% (8.6 megawatts) of Seabrook and has contracted to purchase another 1.8% (41.4 megawatts) of that plant. The Company's participation in the .37% interest and its potential participation in the 1.8% interest are summarized below' Existing Under Contract Total Company's Ownership Percentage .37% 1.8% 2.17% Utility plant under construction (000's): Construction and nuclear f uel costs S 3.319 $16.145 $19,464 Allowance for funds 379 - 379 Estimated for completion: Construction and nuclear fuel costs 5,210 25,345 30,555 Allowance for funds 2,110 11.992 14,102 Total D**D D y Sn .018 $53.482 $64,500 l ow ]) SLb h
- c. . .- -
[
The above estimat:s for completion are based on the lat:st cstimates of the project's cost fumished by PSNH. See also Note 10. " Contingencies - Seabrook" for a further discussion of this project. The Company also had a 4.35% interest ($2,015,000 at December 31, 1979) in the New England Power I Company nuclear units which have been cancelled. See Note 10, " Contingencies - NEP Nuclear Units" for a discussion of this matter. (10) Contingencies NEP Nuclear Units One of the projects in which the Company had an ownership interest is the New England Power Company nuclear units originally planned for Charlestown, Rhode Island, at the site of an abandoned naval base. The Company's investment in that project at December 31,1979 was $2,015,000, including AFDC of $359,700. Efforts to obtain the site were unsuccessful, and the lead owner's parent company has determined that the capacity from the units will nc' be required to meet its system's fifteen year corporate plan. Accordingly, on I December 17, 1979, the lead owner announced the cancellation of the project. The recoverability of the Company's investment in the project will depend upon regulatory approval, which is being sought as a part of the Company's general rate increase request filed in February 1980. The Company's investment may be reduced somewhat by its proportionate share in the salvage value of certain contracts relating I to nuclear fuel While the Company believes that these costs should be recovered, no prediction can be made as to the amount of any recovery through rates or otherwise or the time period over which recovery will take place. If any of this amount is determined not to be recoverable, that amount would be charged, net of related income taxes, against earnings in the period such a determination is made. Seabrook As discussed in Note 9 above, one of the jointly-owned generating stations in which the Company is participating is the nuclear generating plant being constructed in Seabrook, New Hampshire in which PSNH has a 50% ownership interest and acts as the principal or lead participant. In response to the passage of a statute in New Hampshire prohibiting the inclusion of expenditures for con-struction work in prugress in rate base, PSNH determined that it could not continue to finance a 50% interest in the Seabrook units, and in March 1979 it began efforts to reduce its ownership interest to 28%. PSNH's efforts have resulted in commitments only sufficient to reduce PSNH's interest to approximately 35%, which transactions can be consummated only after regulatory approvals of all purchases are obtained. The Company anticipates having no I difficulty in receiving the necessary regulatory approvals for its additional 1.8% interest. However, regulatory proceedings with respect to some of the other purchasers' interests have been delayed, ano PSNH has indicated tnat the required approvals may not be obtained before January 1981, or later. In the meantime, PSNH is attempting to continue to finance its 50% ownership interest in the Seabrook project. PSNH has indicated that absent adequate I rate relief, it may be unable to continue to finance its 50% interest in the Seabrook project pending approval of the above described reduction of its interest. No assurance can be given that such approvals will be forthcoming. However, PSNH has applied for a rate increase, which is currently pending before the New Hampshire Public Utilities Commission ("NHPUC"), and in December 1979 the NHPUC granted PSNH's request for emergency rate relief while i the rate request is being considered. Construction of the Seabrook units has required numerous approvals and permits from various state and Federal regulatory agencies. The process of obtaining these approvals and permits has been long and complex I and has been opposed consistently by a number of intervening groups. Opposition to the project has included demonstrations at the Seabrook site. The project also has been plagued by lengthy delays which have resulted in greatly increased costs. One court appeal from Federal regulatory approvals is pending and further appeals are possible. I The Company cannot predict whether PSNH's financing problems will be resolved, nor can it predict what effect those financing probtems or further administrative or court decisions or regulatory actions may have upon PSNH's ability in complete the project or upon the cost of the project. l Malne Yankee investigation W During the March to June,1979 shutdown of Maine Yankee ordered by the NRC, the Company's costs of fuel and purchased energy were increased by an estimated $3.350,000 in order to replace the energy which Maine Yankee I would have supplied. Upon complaint of citizens' groups, the MPUC has been conducting an investigation of these replacement energy costs with respect to the Company and the other two major electric utilities in Maine. On May 5, 1979 the MPUC issued an order altering the fuel clauses of these utilities to provide that the replacement energy costs would be collected over a 12 month period instead of the shorter period that otherwise would have pertained. The uncollected balance of such costs was $1,447,407 at December 31,1979. On December 28 and 31,1979, the MPUC issued orders further extending the recovery period through the end of 1980. The Company and the other utilities have appealed to the Maine Supreme Judicial Court from this action. The MPUC investigation is continuing, I and includes such issues as whether the utilities were responsible for the shutdown and therefore should not recover the costs; whether, absent such responsibility, the costs should nevertheless be amortized over an even longer period of time; and whether the costs themselves are just and reasonable. It is the opinion of management that the D"*D "D W YQ' 7 od w 1 kth
r:placem:nt energy costs incurred by the Company were just and reasonable End therefore ought to b3 recover;d. The Company is unable to predict what order, if any, the MPUC will issue with regard to a more lengthy amortization of such costs. Indian Cases The Company is the defendant in a class action brought by the Penobscot Nation of Indians seeking $5 million in compensatory damages and a like amount in punitive damages for loss of lands taken by flowage resulting from the damming of the Penobscot River by the Company's predecessors in title, allegedly in violation of the Indian Trade and Intercourse Act of 1790. The Company is also the defendant in an action based upon the same 1790 law brought by an individual alleging that he is a Penobscot Indian seeking $200,000 in damages for trespassing and requesting removal of existing transmission lines. g Proceedings in both of the above matters have been stayed pending the outcome of two suits brought by the g United States against the State of Maine, one on behalf of the Passamaquoddy Tribe of Indians and one on behalf of the Penobscot Nation of Indians, seeking a total of $300 million in damages for divesting them of their aboriginal lands more than a century ago, allegedly in violation of the above mentioned 1790 law. The suits could be amended to seek the return of that land. The area involved includes much of northeastem Maine and substantially all of the Company's service territory. The United States has refrained from proceeding with the claims in Court while various extra-judicial settlement proposals have been explored by the parties. The United States and the other parties have been actively engaged in negotiations during 1979. The Company believes that any settlement package ultimately agreed upon is likely to provide, among other things, for Federal funds and services and other considerations to be extended to the Indians in return for extinguishment of some or all of the Indians' claims against private landowners, including the Company. Until the disposition of the Indian cases against the State of Maine, the likelihood of an unfavorable outcome in the cases against the Company cannot be specifically determined, but in the opinion of management, based on the cpinion of legal counsel, the outcome of the above mentioned cases against the Company will not have a materially adverse effect on the financial condition of the Company. IMC IMC Chemical Group, Inc. ("lMC"), the Company's largest customer, accounting for apprcximately 8.1% of the Company's general rate revenue, instituted proceedings in August 1975 before the MPUC requesting that it be served by another utility. If the MPUC were to grant the request, the Company would apply for rate relief to make up for the loss of revenue from the basic rates applicable to this customer. However, the loss of this customer would reduce the Company's cost of fuel and purchased energy which is passed on to all customers including IMC. In the g opinion of management, the magnitude of this reduction in fuel and purchased energy costs would offset substantially g all of any basic rate increase to other customers. (11) Unaudited Quarterly Financial Information See " Management's Analysis of Summary of Operations" for unaudited quarterly financial information. = I I D**D *]D 3'YM g oo o Ju 5) .\ lb I I I 18
CIX YE'AR CTATl3TICAL CUM"ARY FRC] 1C74 THEOUCH 1070 1979 1978 1977 1976 1975 1974 I (Electric 000) Plant Total Electric Plant $ 103,704 $ 97,717 $ 86,026 $ 79,018 $ 72,490 $ 68,928 Depreciation Reserve 32,459 30.066 28239 26.588 24.993 24,239 Net Electric Plant $ 71,245 $ 67,651 $ 57,787 $ 52.430 $ 47,497 $ 44.689 Capital Structure (000) Bonds $ 34,515 $ 27,685 $ 25,355 $ 27.950 $ 25,000 $ 25,000 Redeemable Preferred Stock 5,000 2.000 2,000 2,000 - - Preferred Stock 4,734 4,734 4,734 4,734 4,734 4.734 Common Stock 9,060 8,949 7,430 6,169 6,168 5,544 Premium on Common Stock 7,836 7.668 4.843 2.388 2,405 1,763 Retained Earnings 8,799 8.600 8,027 7.637 8,250 7,900 Total Capitalization $ 69,944 $ 59.636 $ 52,389 $ 50.878 5 46,557 $ 44.941 Capital Structure Ratios Bonds 49.4 464 48.4 54.9 53.7 55.6 Preferred Stock 13.9 11.3 12.8 13.2 10.2 10.5 Common Stock Equity 36.7 42.3 38 8 31.9 36.1 33.9 Summary of Operations I (000) Operating Revenue $ 51,748 $ 42,627 $ 38294 $ 31,336 $ 32,314 $ 30,546 Fuel & Purchased Power Operation & Maintenance 33,055 8,344 26.763 6,612 22,548 6,687 18,143 6,334 17.974 6,067 18,178 5,472 I Depreciation Other income (expenses) Taxes 2,814 2,545 (456) 2201 2.643 855 2,095 2.894 407 2,029 1.819 167 1,962 2,952 (140) 1,897 2270 (212) Bond Interest 2,089 1.872 1,718 1.633 1,132 1,090 Net income $ 3,488* $ 3,391 $ 2,759 $ 1.545 $ 2.087 $ 1,427 Common Stock Number of Stockholders-End of Year 7,535 7,479 6.841 6,184 6,136 5,870 I Shares Outstanding-End of Year 1,812,023 1,789.827 1,486,027 1,233,710 1,233,710 1,108.710 Shares Outstanding-Average 1,801,906 1.658,985 1,317,816 1.233,710 1,139,960 1,103,710 Earnings per Common Share-Average $ 1.63* $ 1.77 $ 1.75 $ .95 $ 1.60 $ 1.05 I Dividends Declared per Common Share $ Production Sources in KWH (000) Hydro Generation 1.52 $ 246,052 1.46 $ 213,195 1.41 $ 245.821 1.34 $ 254.813 1.29 $ 232,341 1.28 233.655 I Fuel Generation 77,209 Purchased Power 1,112,676 1,108,416 15,910 11,498 977,400 113.119 818,361 Total Generated & Purchased 1,435,937 1,337,521 1234,719 1,186,293 1,067,889 1,104,576 118,386 717,162 182,624 688.297 I (S:les 000) in KWH Residential Commercial 386,623 221,071 369,989 213,777 349,869 198.384 335,692 186,271 308253 170291 301.069 162,118 l Other 724,056 646,765 580.679 557,167 501,045 562,045 ! Total 1,331,750 1 230.531 1,128,932 1.079,130 979,589 1,025.232 I Revenue from Electric Energy Sales (000) Residential $ 18,627 $ 16,171 $ 14.994 $ 12.306 $ 12.618 $ 11,303 l I Commercial Other 10,384 22,307 9,013 17,152 8.207 14,764 6,649 12,222 Total $ 51,318 $ 42.336 $ 37,965 $ 31,177 $ 32,153 $ 30,370 6,705 12.830 5,970 13.097 1 Residential Customer Use
!I Average Number of Customers Kilowatt Hours per Customer 64,958 5,952 64,666 5,721 62,371 5.609 60,975 5,505 59,131 5.213 55,075 5,467 Revenue per Customer $ 286,75 $ 250.07 $ 240.40 $ 201.82 $ 213.40 $ 205.33 I Revenue per Kilowatt-hour 4,82c 4.37C 4.29C 3 67C 4.09C 3.75C 'locludes cumu'ative effect of change in accounting principle of $1.043,000 ($ 56 per share) and $658,729 ($ 36 per share) attributable to the amount of fuel that would have been deferred at December 31,1978 had the new fuel regulations been effectwe at that date See Note 1 to the l financial statements. '
! See page 23 for Management's Analyses of Summary of Operations , D
*
- lD o M J l0 T3k al h is
1 I TWO YEAR STOCK PRICES AND DM0 ENDS BY OUARTERS The Common and Preferred Stocks shown below are not listed on any Exchange but are traded in the Over the Counter Market. The 9%% and the 9%% Preferrea Stock series were not quoted during this period: 1979 First Quarter Second Quarter Third Quarter Fourth Quarter High Low High Low High Low High Low l Common Stock 14h 13h 14% 13% 14% 12% 12% 11 % Preferred Stock - 7% Series 65 64 67 63 64 63 57 53 Preferred Stock - 4%% Series 38 36 39 37 37 37 34 32 l Preferred Stock - 4% Senes 36 35 36 36 36 35 32% 30 1978 First Quarter Second Quarter Third Quarter Fourth Quarter High Low High Low High Low High Low Common Stock 15% 14h 15% 14% 15% 14% 14% 13% Preferred Stock - 7% Series 73 70 -- -- 72 72 66 66 Preferred Stock - 4%% Series 43 43 -- -- 42 42 39 39 Preferred Stock - 4% Series 42 42 -- -- 41 41 38 38 Cash Dividends were declared as follows:* First Quarter Second Quarter Third Quarter Fourth Quarter 1979 1978 1979 1978 1979 1978 1979 1978 Common Stock $ .38 $ .36 $ .38 $.36 $ .38 S .36 $ .38 $ .38 Preferred Stock - 9%% Series -- -- -- --
.79 --
2.375 -- Preferred Stock - 9%% Series 2.3125 2.3125 2.3125 2.3125 2.3125 2.3125 2.3125 2.3125 Preferred Stock - 7% Series 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 Preferred Stock - 4%% Series 1.06 1.06 1.06 1.06 1.06 1.06 1.07 1.07 Preferred Stock - 4% Series 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
*See page 22 for a discussion of ti.e tax status of 1979 dwidends.
I I,
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I-20
1 l l PURPA contains requirements in the ! ment and numerous standards will MANCMG areas of customer class load data be reviewed in public hearings on a I On August 31 issued and sold at private sale 1979 the Company
$ 7 000 000 of First Mortgage Bonds and cost of service information A program involving magnetic de-mand recorders c 1 at least two penodic basis NECPA includes a residential conservation service program which will involve the l
and 30.000 shares of Preferred hundred customers will be init:ated Company in comprehensive energy I i Stock $100 par value The bonds and administered marginal and audits of homes. as well as arrange-hear interest at 10 25%. are subject embedded cost data will be col- ments for installation financing and i to redemption at f ace value pur- lected and a comprehensive eval- l billing of customer conservation l suant to a sinking fund at the rate uation of rate design load manage- investments I ut 4% per year beginning in 1985 and are due on August 1. 2004 The pre'ened stock pays dividends at l I the annual rate of 9 % and is sutyect to redemption at par pur-want to a sinong fund of 2.000 . . .
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'ai:Jt d a nd the "npact on the ,g,y . 7, s , g .m .r" a ug s S% o Save socerrra'ket o ftingor uses hear C m pany could be signit cant 'n +ai e' w'an 's,s'em u smc e "eenc and net wa'e' needs ct Ine Duou'ng 1I 21 l
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p I The Company was the first Maine . g a
- utility to implement the newly ..
authorized, forward looking fuel
- clause. Operation of this clause will eliminate the delay between the recording of fuel expense and fuel revenue which, in these days of rapidly accelerating fuel prices, had, ! ,
" 59 '
poor to 1979, adversely impacted -
)
I h Q.y the Company's eamings. In addition to allowing the Company to better J. eg ,,
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ng; match revenues and expenses, the u-% ___a R+
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new clause will result in a more .
& l stable mechanism for billing fuel costs to our customers. In conjunc-7 3-( ,
g tion with the implementation of the ~ k i- r - - := - new clause, the Maine Public ' Utilities Commission ("MPUC") has authorized the Company to Generating units at the Company's 6.400 KW Milford hydro station on the Penobscot Rwer. l collect over a three year period I fuel costs unrecovered at year-end MPUC matters will occupy much to base wages were made in the 1979 under the previous fuel clause. more of the Company's time in 1980 non-union pay scale effective The Nuclear Regulatory Commis- with the processing of the rate January 1,1980. sion ("NRC") ordered the shutdown increase request and the contin- Despite technological advance- 3' of Maine Yankee on March 13,1979 uation of the Maine Yankee investi- ment in the distribution of electricity g pending investigation of certain gation, the IMC case and the and processing of information for safety related piping systems. The Hampden-Orrington transmission billing and customer inquiries, the investigation was completed and the line proceeding. Company continues to rely on the NRC terminated the shutdown order dedication and skill of its employees l W l on May 24,1979, and the plant MANAGEMENTCHANGE in oreer to assure tne continuation resumed rormal operations on June of reliable electric service and to 5,1979. In April, complaints were filed with the MPUC against the On July 1,1979 Robert S. Briggs meet other customer needs. The 5 E joined the Company as Vice Presi- officers and directors of the Com-Company and other Maine electric dent and General Counsel. Mr. pany wish to extend their apprecia-utilities seeking to prevent col- Briggs had been in the private tion to these employees for their a lection of the replacement energy costs or any other costs related to practice of law in Bangor since 1973, and has been clerk and legl contribution to the Company's operations. g; 1 the shutdown. As reported in Note counsel to the Company since 1975. 10 to the financial statements, the He is a graduate of the University E INCOMETAX MPUC altered the fuel clauses of of New Hampshire and the Univer- 3, the utilities involved to provide for sity of Maine School of Law. STATUS 0FDMDENDS the recovery of the Maine Yankee replacement energy costs over a EMPLOYEES The Company estimates inat a E 12 month period instead of the portion of the dividends paid in 1979 5, shorter period which otherwise The Company had 330 full-time and will be considered nootaxable for would have pertained. In Decemoer 14 part-time employees at Decem. Federal income tax purposes. The g 1979 the MPUC stretched that primary reason that this has period to the end of 1980. Mean-ber 31,1979 for a total of 344, a reduct.on of 2 from the prior year. occurred is the difference between E' . while, the underlying investigation in accordance with the contract the tax return and financial state-begun by the complaints continues. Other activities before the MPUC between the Company and Local 1837 of the Intemational Brother-ment treatment accorded certain 1979 transactions. 3l included further pre-hearing confer- hood of Electrical Workers, which Based on our estimates, the E ences in the investigation instituted represents 184 employees of the Common Stock and Preferred Stock upon the August 1975 complaint of Sobin Chemicals, Inc. (now IMC Company, a 6.75% base wage in- 1979 dividend distributions of January 20 and April 20 are fully E) crease became effective on Jan- 5 Chemical Group, Inc.) which is uary 1,1980, the beginning of the taxable as dividend income. The desenbed in more detail in Note 10 second year of the two year con- dividend distributions of July 20 to the notes to financial statements. tract. Commensurate adjustments and October 19 are fully nontaxable 22
I . . as dividend income. The dividend wages 8%% on March 9,1979; and operations for 1979 are shown distributions excludable from divi- 3) other inflationary pressures. below-dend income should be applied to Depreciation increased by r.,n.no. I reduce the tax cost basis of the shares upon which the dividends were paid.
$614,028 or 27.9% mainly as a result of the Wyman #4 plant depreciation which amounted to N me 71 ene Emetnc
,C ,
<oow. e n,owano.3 Net (loss) Per 5*;*[' 1"* D .
$485,174. 3/31 $12.436 $ 395 $ 873* $ .42' Loc I Property and Other Taxes MANAGEMMT'S increased $307,579 or 20.3% due 6/30 11.845 1,439 817 39 9/30 12.509 543 (95) (.13)
ANALYSIS 0F largely to the $177,705 tax at 12/31 14.958 2.613 1.893 .95 I SUM M 0F M M M 1979ASCOMPARED
*Y * " " 4 "d'"'*S*d'*~
able property and property tax rates. incrucing the cumutative errect $1.043.000, or fgg8';,;'g';=gg,',=,134 income Taxes decreased M1 ,, venue more 17 I Elsctric Operating Revenues in-
$405,556 or 35.9% because of a reduction in taxable income before the cumulative effect of the change "sno m oua: quarters recomputed based on
*9"# 8"89' ' C ** " 8^8 "'S'8"d"9
** #'^
creased $9,121,532 or 21.4% in accounting principle as well as principally because of an $8,033,614 the lower Federal tax rate. or 49.1% increase in fuel adjust. Allowance for Other Funds MMM'S ment rate revenue. This increase is Used During Construction de- ANALYSISOF a directly attributable to the fuel creased $531,293 as the average 'g portion of the increase in "Pur- balance of short-term notes payable exceeded the average balance of
SUMMARY
0F0PERATIONS chased Power and Fuel for Genera-tion" expense discussed next. Construction work in progress and 1978ASCOMPARE0 M ]$77 I Fuel for Generation and Pur. chased Power Expense increased
$6,292,166 or 23.5% primarily as a accordingly the allowance for funds was limited to the borrowed com-ponent. Electric Operating Revenues in-result of: 1) substantial increases in First Mortgage Bond Interest creased approximately $4,333,000 I the price of oil; 2) the amortization of $2,472.000 of incremental fuel costs as a result of the two Ma:ne Expense increased $216,923 or 11.6% because of the August 31, 1979 issuance of $7,000,000 of or 11.3% as a result of a 3.5% and 5% increase in the number of resi-dential and commercial customers Yankee shutdowns in 1979; and 3) 10%% bonds. respectively. Residential customers an 8.2% increase in kilowatt-hour Allowance for Borrowed Funds also experienced a 2% increase in sales billed during the period. Used During Construction in- average electrical usage. Further-Other Operation Expense in- creased $149,544 or 23.3% partially more, several of the Company's creased $1.110,387 or 21.5% sub. because the entire amount of large industrial customers under-stantially due to: 1) $251,516 in allowance for funds is allocable to went significant expansion pro-expenses attributable to the 8.3% interest as explained above. In grams.
participation in the William F. addition, the rate of accrual is Purchased Power and Fuel for I Wyman #4 generating plant which was certified ready for operation on December 1, 1978; 2) an Inter-higher this year because of the increased borrowing rates. Off-setting this increase, however, was Generation increased $4.214,000 or 18.7% because of the purchase of additional capacity under a l l nal Revenue Service adjustment a reduction in the Company's con- capacity contract and increased ' attributable to a prior period re- struction work in progress due to the fuel costs. Fuel costs were higher , sulting in the 1978 expense being completion of Wyman #4. due to lower than normal water l some $300.000 lower than it would Other interest Expense in- conditions, a refueling shutdown be otherwise; 3) the union wage creased $938,631 or 308% as the of the Maine Yankee nuclear plant, t contract which increased wages average short-term borrowings a reduction in the operation of the l 8%% on March 9,1979; and 4) other increased from L2,490,000 to Company's Graham Station due to l inflationary pressures. $9,291,000 and the average interest cooling water intake problems and Maintenance Expense increased rate increased from 9.8% to 132%. increased kilowatt-hour sales
$620,791 or 42.6% principally The Cumulative Effect on explained above.
because of: 1) $222,509 in ex- Prior Years (to December 31, income Taxes decreased ap-penses attributable to the 8.3% 1978) of Changing to a Different proximately $200,000 or 16.3% I participation in the William F. Wyman #4 generating plant which was certified ready for operation Method of Recording Revenue is explained in Note 1 to the financial statements. due to a reduction in pretax accounting income. See Note 2 to the financial statements for further on December 1, 1978; 2) the union Unaudited quarterly financial information. wage contract which increased data pertaining to the results of Interest on First Mortgage
- 23 I
I Bonds .rt rem-er: approomatolv
, matelv $198 00n or 44 50 0 as a m tions for 1978 are shown below
$154 000 or 9% primarily as a re- sQt M tho increased e penditures ,o, ,n. 14 r,
'*"C" sult of the refunding in January 1978 for c onstruc:ta,n o ;,r ua ross pri [",, ,, m, of $2 500 000 of First Mortgage rna r o y tne Wy" an NFPCO and Ended a 4 Bonds at a higher interest rate Seabrocm un:ts 3/31 $10 '15 $1425 $1 133 $ 61 Iho Allowance for Other Funds Earnings per Common Share 6/30 9 518 1 134 853 45 Used During Construction in- are affected by the issuance of an 9/30 9 547 563 447 20 n .,e,. .o a p pr o x im a t ely $;"48 onD 12/31 12 797 1 285 958 51 add >tional 300 000 shares in June Mai $4 627 $4 40 7 $3 341 01 /7 r 1 '+ and tN Allowance for 1978 Borrowed Funds Used During Unaudited quarterly financial data * [" "((,(.[l((,$
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I i j BANGOR HYDRO-ELECTRIC COMPANY BULK RATE j 33 STATE STAEET US POSTAGE l BANGOR MAINE / 04401 PAID Bangor, Maine j Permit No 651 i l I I i l I i l 1 Il I-I I l l i I I
~ 4 i SECURITIES AND EXCHANGE COMMISSION va-t= D. c. 2589 I -- 1 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the ascal year andesDee emb e r 31. 1979r w - aleammha, 0-505 BANCOR HTDRO-E ICTRIC COMPANY g .e.._._...._ Maine 01-0024370
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7% Preferred Stock, i Par value 3100. Nones 11able None 4-1/4s Preferred Stock, f Par Value $100. Callable None 45 Preferred Stock, I Par Yelue $100. Callable None Common Stock, Par Value 33, 1,912,023 Shares Outstanding gene i
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, PART I ' ITEM 1 - BUSINESS Bangor Hydro-Electric Company (the " Company") was incorporated under the general laws of Maine in 1924. Its principal office is at 33 State Street, Bangor, Maine 04401,
- and its telephone number is (207)945-5621. The Company is a public utility engaged in the generation, purchase, transmission, distribution and sale of electric energy, with a service area of 4,850 square miles having a population of approximately 190,000 persons and covering portions of the counties of Penobscot, Hancock, Washington, Waldo, Piscataquis and Aroostook in Eastern Maine. With t minor exceptions which are not material, no other electric l ut L11ty operates in competition with the Company in any city ot town in which it operates. Its customers are residential, commercial, industrial and governmental. The Company also I sells energy to other utilities for resale. The Company serves approximately 73,800 eustomers, excluding summer seasonal customers. Some of the more important industries l served are those engaged in the manufacture of pulp and paper products, chemicals, lumber and woodworking, and footwear. In 1979 29.09% of the Company's KWH sales were to residential customers, 16.6% were to commercial customers, 45.8% were to industrial customers (of which approximately one-half was to IMC Chemical Group, Inc. ("IMC")] and 8.6% were to municipal and other customers. In 1979 IMC, the Company's largest single customer (which is served on an interruptible basis), accounted for 7.9% of the Company's i general rate revenues,15.2% of its electric operating i' revenues and 23.44 of its KWH sales. IMC has instituted proceedings before the Maine Public Utilities Commission
, ("MPUC") requesting that it be served by another utility.
(See Item 5, "Pending Legal Proceedings".) If the MPUC l should grant the request, the Company would apply for appropriate rate relief (an increase in base rates) as a condition of the order, and in the absence of rate relief, the loss of this customer would Pave an adverse effect on the Company's earnings until the revenues could be replaced
,i by expected growth in the Company's business.
The Company's electric operating revenues, including fuel revenues, have increased over the last five years from j $33.3 million in 1975 to $51.7 million in 1979. KWH sold were 980 million in 1975 and 1,332 million in 1979. The
. m:_ximum one-hour prime peak load experienced to date by the
{ Company's system was 222.0 MN on December 18, 1979. At that time the Company had available to meet such load 122.4 MW of its own generating capacity, 51.3 MN from its joint ownership entitlements, and 100.9 MW of purchased capacity, a total of 274.6 MW. During the years 1975 through 1979 winter demand has exceeded summer demand by approximately 20%. As of December 31, 1979 the Company had 330 full-time employees.
. Other information pertinent to the business of the
.l Company is contained in the Company's 1979 annual report to stockholders which is incorporated by reference and attached to this Annual Report on Form 10-K.
t,
Preblems Facing the Company and the Industry General
' There are a number of problems being experienced in varying degrees by the Company and by the electric utility industry in general. These problems include obtaining adequate and timely rate increases, uncertainties caused by inersasing political involvement in utility regulation,
; financing large construction programs during an inflationary period, obtaining sufficient capital un reasonable terms, compliance with environmental regulations, high costs of fossil fuel, delays in licensing and constructing new facilities, and effects of energy conservation.
Over the next decade, Company load growth and replacement of existing sources will require new and additional generating capacity. The unit cost of this new capacity will be significantly more than the historical cost of existing capacity. It is anticipated that approximately eighty i percent of the new capital required by the Company over the next three years will come from external sources through a combination of debt and equity securities offerings. The ability to obtain this financing and carry out the construction program depends upon, among other factors, the approval of adequate and timely increases in rates and other regulatory approvals. ! The Company, like other electric utilities, is subject
! to present and developing standards administered by Federal, state and local authorities with respect to the siting, construction and operation of facilities, including air and l water quality and other environmental factors. These standards i 8 may require modifications of and restrictions upon the operations and in some instances delay construction of new facilities, any and all of which could increase capital and operating costs.
Seabrook Nuclear Units The Company has a .37% interest in the Seabrook nuclear
, units, and has contracted to purchase an additional 1.8%
interest in those units. See Item 3, " Properties.- Joint Construction Projects" herein. I The necessary approvals and permits for the construction
' of the Seabrook plant have been consistently opposed by a number of groups. This has resulted in significant project I delays (including the suspension of construction in both
'I 1977 and 1978 fSr periods of seven months and three weeks, respectively) and greatly increased costs. Although all of l these approvals and permits for construction of the Seabrook i units have been obtained and construction is currently in progress, regulatory proceedings and one court appeal therefrom are still pending and further proceedings and appeals are possible. In addition, further proceedings before the Nuclear Regulatory Connaission ("NRC") relating to the licensing of the units will be required for operation, and other proceedings and appeals are possible. Currently pending before the United States Court of Appeals for the First Circuit is an appeal by intervenors from a decision of the NRC challenging the NRC's refusal in 1976 to suspend the 1 Seabrook construction permits. Following the announcement in March 1979 by Public Service Company of New Hampshire
("PSNH"), the lead participant in the project, of a proposed I reduction in its ownership interest in the project as described I i e
below, an intervenor filed a request with the NRC staff for issuance of a show cause order as to why the construction permits should not be suspended or revoked because of PSNH's alleged lack of financial qualifications and the NRC's lack of review of financial qualifications of the other participants whose ownership interests are proposed to be increased. The same intervenor has also filed a request with the NRC staff . for issuance of a show cause order as to why the construction permits should not be suspended or revoked due to the NRC's failure to consider evacuation plans for certain areas surrounding the plant and the consequences of certain types of accidents, including the possibility of such evacuation. These requests for show cause orders have been denied by the NRC staff. The Company is unable to predict the outcome of any of the above proceedings or what effect these proceedings and further administrative or court decisions relating to
; licenses and approvals for the project may have on the completion of the project, the cost of the project, or the , Company.
1 A New Hampshire statute prohibiting the inclusion of construction work ir progress ("CWIP") in rate base resulted l in the exclusion of CWIP from PSNH's rate base in May, 1979. l At that at time PSNH tock the position that without the l inclusion in rate base of CWIP or an equivalent effect on ! revenues it would be unable to continue to finance its construction program, including its 50% share of the Seabrook prcject. Therefore, in March 1979, PSNH offered to sell a portion of its share under an arrangement whereby the purchasing utilities in the aggregate pay all of PSNH's construction costs relating to the Seabrook project until their ownership interests are increased and PSNH's interest is decreased to the appropriate levels. This transaction was initially anticipated to involve 22% of the total plant ownership interests but subsequent changes resulting from the inability of Massachusetts Municipal Wholesale Electric Company to ; obtain commitments from its constituent utilities for all of ) the share that it originally agreed to assume, the decision ' of t*:o Vermont utilities not to participate, and the increase by other utilities have resulted in a final proposed adjustment of about 15%, or a reduction in PSNH's share from 50% to 35%. The additional 1.8% that the Company has agreed to purchase is part of this 154 adjustment. Various regulatory and stockholder approvals are still required before the 15% adjustment can be accomplished and the commitments of two participating utilities aggregating approximately 8.2% of ownership interests are contingent upon obtaining satisfactory financing. On the present schedule, proceedings now pending
; before the Massachusetts Department of Public Utilities t concerning certain of these approvals, which will include consideration of the financial viability of the project Emong other matters, may not be concluded until January l 1981, or later. The ccumitments of two participating utilities i
aggregating approximately 2.6% of owner: hip interests may be i terminated by either the utility or PSNH if the adjustment l of ownership interests has not commenced by January 1, 1981. In September, 1979 PSNH filed a permanent retail rate request of 8.4% or $18,500,000 per === with the New Hampshire
! Public Utilities Connaission (*NEPUC") . Subsequently, as a
' result of delays in the proposed reduction of its 50% ownership
', interest and serious difficulties in obtaining the external j financing required by that interest, PSNH has sought and obtained, under bond, emergency rate relief of 5.5% or
$11,970,000 per annum from the NEPUC.
PSNH has taken the position that adequate permanent rates as well as timely approvals for the reduction of its t ownership interest in the Seabrook plant by not significantly l
less than 15% and continued availability of external financing are all essential to enable PSNH to finance its chare of the plant and avoid suspension of construction or other measures which might adversely affset the completion and cost of the two units under construction. In that regard, on March 20, 1980 PSNH announced that, in view of the unsettled state of the capital markets and the very high cost of exterral i funds, the overall level of construction of the Seabrook 4 project would be reduced substantially in order to lessen PSNH's external ~ financing requirements for 1980, such reduction to continue until tne necessary regulatory approvals for the i' above described reduction in PSNH's interest in the project have been obtained and the capital markets have stabilized. Construction will continue on those ite:as considered essential over the next few months to maintain the earliest possible completion dates (1983 for Unit il and 1985 for Unit 92), I l but if the zoduction in the level of construction were to
- I continue for more than a few menths, the scheduled completion dates would be deferred. Such actions as the above described
. reduction in the level of con nruction do operate to reduce
! the cash needs of the participants, including the Company, but they e.lso can result in substantially greater construction costs, especially if the scheduled completion dates are deferred. The Company cannoc predict at this time the effect on its cash needs or the amount of its share of any greater construction costs as a result of the reduction in the level of construction of the project.
Three Mile Island
, Events at the Three Mile Island Nuclear Unit No. 2 in Pennsylvanin ("TMI") resulted in damage to the plant and
. release of radioactivity into the surrounding environment
' l and caused widespread concern about the safety of nuclear generating plants. The Company has an interest not only in
, the Seabrook project but also ir. Maine Yankee Atomic Power l
Company's nuclear generating unit (" Maine Yankee") which has been in operation since 1973, and the Company may have interests in other nuclear generating plants in the future. The Company cannot predict what effect the events at TMI which have precipitated increased opposition to nuclear power may ultimately have upon the completion or the cost of completion of the Seabrook project er other nuclear units or j upon the continued operation of existing nuclear generating plants. Neither the Seabrook units nor Maine Yankee utilize a nuclear steam supply system furnished by the vendor which 4 ! 4 supplied TMI. United Engineers & Constructars Inc., the engineer-constructor for the Seabrock project. was constructor of TMI but was not involved in its design. The TMI incident has prompted a rigorous re' examination of safety related equipment and operating procedures in all 4
,l nuclear facilities. On October 30, 1979, President Carter's Commission or. IMI issued its final report, which, among i other things, contained extensive recommendations on aspects l of nuclear powers on December 7, 1979, the President, while
< l reaffirming his support for continued inclusion of nuclear power in his national energy policy, announced his agreement with the spirit and intent of those recommendations and his I initiation of steps toward their implementation. On January 13, 1980, the NRC's Special Inquiry Group publicly released i its report on TMI which contained recommendations similar to j these of the Presidential Commission. The NRC and its staff are currently reviewing this latter report. Meanwhile, the l NRC has promulgated numerous requirements in response to i l I i l
\
l
l l l 1 l l i TMI, including both near-term modifications to upgrade
; certain safety systems and instrumentation and longer-term I ! design changes which affect about 25 items, ranging from equipment changes to operational support. The NRC and owners and operators of nuclear generating plants, including Seabrook and Maine Yankee, are reviewing the plants to determine the scope of modifications necessary to comply
- with these new requirements. The Company is advised that, for the plants in which it has interests, the near-term ,
I modifications required by the NAC have been or are being 1 made, and that the process of evaluating the impact of long-term improvements suggested by the NRC staff is still being conducted. However, the scope of these long-term improvements is not yet fully defined, and the cost of modifications and i their effect on operations cannot, presently be quantified. I l The TMI incident has also generated a multiplicity of legislative i proposals in Congress and various state legislatures. While the ultimate effect of these reexaminations, studies and
! proposals cannot be specifically predicted, they could cause delays in construction and costly modifications of nuclear plants in which the Company has, or may in the future have, an interest.
NEP Nuclear Units The Company had a 4.35% interest, or 100 megawatts, in the New England Power Company nuclear units which were to have been built in Charlestown, Rhode Island, at the site of an abandoned naval base. However, efforts to obtain the site were unsuccessful, and in December 1979 the lead owner advised that the project was being cancelled. The Company's
!j investment in the units at year end was $2,015,307, including h an allowance for funds used during construction ("AFDC") of
$359,769. In the Company's pending rate proceeding before 4 the MPUC, the Company has requested permission to recover its investment through customer rates over five years.
Anti-Nuclear Petition . A petition calling for termination of the production of electricity by nuclear fission due to alleged safety and i economic reasons, and the consequent shutdown of Maine Yankee, was circulated by certain groups in Maine. The petition was signed by more than the required number of voters and was presented to the Maine Legislature in February, i 1980. Under Maine law, the Legislature must enact the proposed legislation at its 1980 session or refer it to a t vote of the electorate. The Company is unable to predict I the ultimate resolution of the petition drive, including the result or validity of any referendum vote, which would be
; i held in the late susmaer or fall of 1980. The Company believes
-j that Maine Yankee is both a safe and economical source of base lead electric power, and intends to assist in taking all reasonable steps necessary to provide for the continued operation of the plant.
l ITEM 2 -
SUMMARY
OF OPERATIONS I A summary of operations of t 1 Company for the last six I fiscal years along with management s analysis of the sunnnary l 4 of operations is contained in the Capany's 1979 annual l 1 report to stockholders which is incoc) orated by reference j and attached to this Annual Report on ?orm 10-K. Reference i 1 ? _. . - _
is specifically made to Summary of Operations and Common , Stock on page 19 and Management's Analysis on page 23 of said annual report to stockholders. 1 ITEM 3 - PROPERTIES The following is a brief description of the location i and general character of the Company's principal plants and i physical properties. All of the Company's properties and 1 interests in properties are subject to the lien of the indenture securing the Company's first mortgage bonds. ]
* \
Company owned ) The Company owns eight hydro-electric generating stations ) located at Milford, veazie, Ellsworth, Stanford, Stillwater,
}
Howland, Medway and Orono, Mainer six internal combustion generating stations located at Veazie, Milford, East Machias, Eastport, Medway and Bar Harbor, Maine; one steam generating unit at yeazie, Maine: and offices, garage and warehouse facilities at its principal offices in Bangor, Maine and in other locations throughout its service territory. The Company has in excess of 560 miles of transmission lines and in excess of 2500 miles of distribution lines to serve its customers. Seven of the hydro-electric generating stations are licensed under the Federal Power Act, and the remaining station is in the process of being licensed. Three of the existing licenses will expire in 1987, one will expire in 1990, two in 1993, and one in 1999. The United States government has the right upon or after expiration of each of the above licenses to take over and thereafter mainthin and 1 operate a project upon payment to the licensee of its " net investment" (not to exceed the fair value of the property taken) and any severance damages. If the United States does not exercise its statutory right, the Federal Energy Regulatory Commission ("FERC") is authorized to issue a new license to the original licensee, or to a new licensee upon payment to the original licensee of the amount the United States would have been obligated to pay had it taken over the project. Jointiv Owned The Company owns a 7% equity interest in Maine Yankee Atomic Power Company which owns and operates the Maine Yankee nuclear generating facility located at Wiseasset, Maine. Because of its ownership interest the Company is entitled to purchase approximately 6.9% of the output of the
, facility, and an arrangement with another participant entitles j it to purchase an additional 0.4% of such output, for a total entitlement of approximately 60 megevatts. The Company is obligated to pay approximately 7.3% of Maine Yankee's operating expenses and capital costs.
l The Company owns a 14.2% equity interest in Maine l Electric Power Company, Inc., ("MEPCO") , which owns a 345 KV
.I transmission line running from Wiscasset, Maine to the border of New Brunswick, Canada where it connects with lines i of the New Brunswick Electric Power Commission. The Company l
! connects with the NEPCO lines at Orrington, Maine. l 1
The Company is a tenant in common (owning an 8.333% l interest) with other utilities in Wyman Unit No. 4, a 600 l megawatt oil-fired generating station in Yarmouth, Maine. , The Company is entitled to 8.333% of the energy produced, I
' and is responsible for a like share of the operating expenses 1
- and capital costs.
i l I l t l
NEPOOL The Company, together with other electric utility I companies in the New England area, is a member of the New England Power Pool ("NEPOOL"), which was formed for the purposes of undertaking and integrating planning for the 1 power needs of the New England region and providing for i centralized dispatching of electric energy throughout the region. The generation and transmission systems of the New England utilities, including the Company, are operated as if
!' they were a single system. Coordination of power supply through NEPOOL enables the establishment of reserves in i i generating capacity on a region-wide rather than an individual )
company basis, making possible economies in the electric i utilities' capital programs. Under the agreement creating NEPOOL (the "NEPOOL Agreement"), l energy is dispatched by a central facility. NEPOOL seeks at any given moment to operate the most efficient generating units of member companies, consistent with reliability of { service, in order to fulfill the demands for energy throughout the region. An optimum combination of reliability and efficiency is made possible by constantly monitoring the system. Because of the interdependence of activities of the 1 various companies participating in the NEPOOL arrangement, ! the company's operating revenues and costs are affected by i the operations of other participants. i
! .he NEPOOL Agreement requires that a participating l utility have available, either through its own generating I
facilities or through purchased power contra:ts, sufficient capacity to meet its share of the total NEPOOL capability
,l 1 requirements, which include appropriate reserves.
, Joint Construction Projects l 1 Seabrook Nuclear Units The Company has a .37% interest, or about 8.6 megawatts, in the Seabrook nuclear units being constructed by PSNH and scheduled for commercial operation in 1983 and 1985. The company is responsible for a similar percentage of the construction and operating costs. The Company has also agreed to purchase an additional 1.8% interest, or about 41.4 megawatts, from PSNE. Reference is made to Item 1, i " Business Problems Facing the Company and the Industry" above, <
and to Notes 9 and 10 to the financial statements contained ) in the Company's annual report to stockholders which is incorporated herein by reference, for a more complete l discussion of this project. ITZM 4 - PARENTS AND SUBSIDIARIES This item has not changed since the Company's previous filing on Form 10-K, and Item 4 of the Company's Form 10-1 l dated March 28, 1977 is incorporated herein by reference. ITEM 5 - PENDING LEGAL iROCEEDINGS Maine Yankee Investication i I During the March to June, 1979 shutdown of Maine Yankee 8 ordered by the NRC, the Company's costs of fuel and purchased energy were incre.ased by an estimated 53,350,000 in order to replace the energy which Maine Yanket wocid have supplied. l I l
In April 1979 a citizens' group instituted proceedings before the MPUC against the company and other Maine utilities alleging that the utilities were responsible for tha shutdown and that ratepayers should not bear any costs associated
' therewith, including the cost of replacement energy. The MPUC instituted its own investigation into the matter and consolidated the complaints into that investigation.
- On May 5,1979 the MPUC issued an order altering the fuel clauses of these utilities to provide that the replacement i
energy costs would be collected over a twelve month period instead of the shorter period that otherwise would have pertained. The Company's uncollected balance of such costs was $1,447,407 at December 31, 1979. On December 28 and 31, 1979, the MPUC issued orders further extending the recovery period through the end of 1980. The Company and the other utilities have appealed to the Maine Supreme Judicial Court j from these December orders. The MPUC investigation is continuing and includes such issues as whether the utilities were responsible for the whether shutdown and therefore should not recover the costs: absent such responsibility, the costs should nevertheless be amortized over an even longer period of timer and whether the costs themselves are just and reasonable. It is the opinion of management that the Company was not responsible
' for the shutdown, and that the replacement energy costs I incurred by the Company were just and reasonable and therefore ought to be recovered. The Company is unable to predict what order, if any, the MPUC will issue with regard to a l
e more lengthy amortization of such costs. Rate Proceedings On February 25, 1980 the Company filed for an increase in basic rates with the MPUC, seeking increaset. basic rate revenue of $5.4 million, or 10.4% over total 1979 revenues and 19.8% over 1979 basic rate revenue. The Company anticipates that the MPOC will investigate the rate increase request and conduct hearings with respect thereto. Under the pertinent statutory procedure, the MPUC must issue its order with respect to the rates the Company has filed within nine months of the filing date. Accordingly, the Company may not l
- have increased rates in effect until late November, 1980.
l On February 28, 1980 the compan' filed a petition for l i interim rate relief with the MPUC p6ading the outcome of the basic rate increase request, seeking a temporary increase in rates, effective May 1,1980, sufficient to produce $2.7 [ million annually. This request has since been increased The to l seek rates sufficient to produce 53.5 million annually. Company anticipates that the MPDC will also investigate and hold hearings with regard to this petition. Unlike the basic rate increase proceeding, there is no time limit within which the MPUC must act on this request.
' On March 24, 1980 the Company filed with the MPUC for an increase in the Company's fuel cost adjustment, pursuant to the MPUC's fuel clause regulations. The revised fuel I cost adjustment if approved by the MPUC would increase the fuel cost adjustment factor currently being charged to customers from S.01191 per kilowatt-hour to S.02064 per kilowatt-hour. The fuel cost adjustment is in addition to a charge of 5.01225 per kilowatt-hour included in basic rates.
l
~ _ _ _ _
Indian Cases i The Company is the defendant in a class action brought i on July 17, 1972, in the United States District Court, District of Maine, Northern Division, by the Penobscot Nation of Indians seeking $5 million in compensatory damages
, and a like amount in punitive damages for loss of lands j taken by flowage resulting from the damming of the Penobscot River by the Company's predecessors in title, allegedly in violation of the Indian Trade and Intercourse Act of 1790.
j The Company is also the defendant in an action brought simultaneously in that court based upon the same 1790 law by an individual alleging that he is a Penobscot Indian seeking
$200,000 in damages for trespassing and requesting removal I of existing transmission lines.
I Proceedings in both of the above matters have been j stayed pending the outcome of two suits brought by the United States against the State of Maine, one on behalf of i the Passamaquoddy Tribe of Indians and one on behalf of the i Penobscot Nation of Indians, seeking a total of $300 million in damages for divesting them of their aboriginal lands more than a century ago, allegedly in violation of the above mentioned 1790 law. The suits could be amended to seek the return of that land. The area involved includes much of northeastern Maine and substantially all of the Company's service territory. The United States has refrained from proceeding with i the claims in court while various extra-judicial settlement
! proposals have been explored by the parties. The United States and the other parties have been actively engaged in negotiations during 1979. The Company believes that any l, settlement package ultimately agreed upon is likely to provide, among other things, for Fedr .a* fends and services and other considerations to be extended to the Indians in return for extinguishment of some or all of the Indians' claims against private landowners, including i.he Company.
Until the disposition of the Indian cases against the State of Maine, the likelihood of an unfavorable outcome in l
. the cases against the Company cannot be specifically determa p ined, but in the opinion of management the outcome of the I above mentioned cases against the Company will not have a materially adverse effect on the financial condition of the Company.
Wyman Unit No. 4 l On April 11, 1979 the Maine Department of Environmental Protection ("DEP") issued an order restricting the hours of operation of Wyman Unit No. 4 to weekdays only, and from 6 l j A.M. to 11 P.M. only, as a result of alleged excessive noise emanating from the unit. Sound attenuating mufflers were t fabricated to reduce the noise, and the installation of those mufflers was completed in late 1979. No action has l
-l been taken as yet to revise or terminate the DEP order.
[ On September 4, 1979, the DEP instituted a lawsuit in
- 1. Kennebec County Superior Court against the lead owner of the unit, seeking payment of civil penalties for each day of an i alleged violation of the siting permit as a result of alleged
[ excessive noise during operation. The lead owner has advised that it does not believe that substantial penalties will be imposed. 1
i. IMC On August 11, 1975, IMC (formerly Sobin Chemicals, Inc.) brought a complaint before the MPUC requesting that
> the MPUC order Central Maine Power Company (" CMP") to provide electric service to IMC at the border of the Company's service territory in Bucksport for ultimate use at IMC's l
i plant at Orrington or, in the alternative, to determine that the Company's rates to IMC are unreasonable, that the Company
- is unable to provide IMC with adequate service nd that, accordingly, public convenience and necessity require that ,
. CMP provide service to IMC in the town of Orrington. After
' court resolution of certain preliminary issues, the matter is now in order for further proceedings at the MPUC. ( ITEM 6 - INCREASES AND DECREASES IN OUTSTANDING SECURITIES AND INDEBTEDNESS { On August 31, 1979 the Company issued and sold at
; private sale $7,000,000 of First Mortgage Bonds, 10.25%
Series due 2004, and 30,000 shares of 9 1/24 Preferred 7 Stock, $100 par value. For a description of these transactions, reference is made to Item 5 of the Company's Form 10-Q for the period ended September 30, 1979, which is incorporated herein by reference. During 1979, the Company issued additional shares of common stock, $5 par value, to the Trustee for the Employee
, Stock Ownership Plan ("ESOP") and the agent for Dividend I
Reinvestment and* Common Stock Purchase Plan ("DRP") as follows: Cesanon Stock, $5 par value l No. of shares outstanding 12/31/78 1,789,827 1/19/79 - Issuance to DRP 2,689 4/20/79 - Issuance to DRP 3,645 6/29/79 - Issuance to ESOP 8,051 7/20/79 - Issuance to DRP 3,718 10/20/79 - Issuance to DRP 4,093 No. of shares outstanding at 12/31/79 1,812,023 ITEM 7 - CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED SECURITIES None. ITEM 8 - DEFAULTS UPON SENIOR SECURITIES f None. ITEM 9 - APPROXIMATE NUMBER OF EQUITY SECUkITY HOLDERS The following is the approximate number of holders of _I record of each class of equity securities as of December 31, 1979:
] (1) (2)
Title of Class Number of Record Holders J Common Stock SS Par Value 7535 1 9 1/24 Preferred Stock $100 Par Value 1 l 9 1/44 Preferred Stock S100 Par value 3 i J 7% Preferred Stock 5100 Par value 750 4 1/44 Preferred Stock $100 Par Value 163
' 44 Preferred Stock S100 Par value 567 a
_ - , ~ , _ ~ . _ . , . . . . _ . _ _ .
~. _
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! I ITEM 10 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- Not applicable.
j ITEM 11 - INDEMNIFICATION OF DIRECTORS AND OFFICERS This item has not changed since the Company's previous < i filing on Form 10-K, and Item 9 of Bangor Hydro-Electric Company
- I Form 10-K dated March 28, 1977 is incorporated herein by reference. l ITEM llA - EXECUTIVE OFFICERS OF THE REGISTRANT (a) The following are the present executive officers
. of the Company with all positions and offices held. There are no family relationships: ;
Name Age Offices Term Robert N. Haskell 76 Chairman of the Board 1 Year i 9
; since 1976 President from 1958 to 1976:
Director since 1938 l Thomas A. Greenquist 51 President since 1976; 1 Year
. Vice President from l 1972 to 1976; I Treasurer from 1963 to 1976; Director since 1972 Gerald F. Hart 63' Vice President- 1 Year
.i Engineering since
!! 1976: Chief Engineer 1 from 1971 to 1976 ,
John P. O'Sullivan 38 il! Vice President & Treasurer since 1 Year January 8, 1979 i Paul A. LeBlanc 32 Vice President- 1 Year Administration since January 1, 1978 Robert S. Briggs 36 Vice President and 1 Year General Counsel since July 1, 1979
; (b) Business Experience of Officers for the cast 5 Years i Robert N. Haskell has been the chief executive officer of the Company during the past five years, charged with
,l l
overall supervision of the Company in accordance with the policies established by the Directors. Until February 1978 he was Chairman of the Board of Directors of Merchants National Bank of Bangor, a local commercial bank, and from I 1971 to 1976 was a director and member of the Executive Committee of Diamond International Corporation, a large l concern in'.alved with pulp and paper products, building j supplies and other interests. l 4 Thomas A. Greenquist, President of the Company, was l
~
previously Vice President & Treasurer of the Company for the j
; period including the last five years, during which time he i
, was primarily responsible for the financial and accounting aspects of the business. Ha was a director of The Savings and Loan Association of Bangor from 1965 to 1976, and has been a director of the Merchants National-Bank of Bangor i since 1971. J
Gerald F. Hart has been Vice President-Engineering since 1976, and was Chief Engineer for more than the past five years. John P. O'Sullivan joined the Company on January 8, 1979. He was the Commicsioner of Finance and Administration for the State of Maine from 1975 to 1979, and served with a major accounting firm for eight y7ars prior to his position with the State. Paul A. LeBlanc joined the Company in 1973. He was Millinecket Division Manager from 1974 to 1976, Banger Division Manager from 1976 to 1977, and Manager-Administration from 1977 to 1978. Robert S. Briggs joined the Company on July 1, 1979. f He was in the private practice of law starting in 1973, and i in 1975 he became Clerk of the Compe y and his firm became general counsel. He is a director of The Savings and Loan Association of Bangor. ITEM 12 - FINANCIAL STATEMENTS, EXHIBITS FILED, AND REPORTS ON FORM 8-K Financial Statements Report of independent public accountants
- Bangor Hydro-Electric Company -
Balance sheets - December 31, 1979 and 1978
- Statements for the years ended December 31, 1979 and 1978* -
I Capitalization . l Income Retained earnings Sources of funds for plant additions I Notes to financial statements *
, Report of independent public accountants
; on schedules Consent of independent public accountants
- Incorporated by reference to the company's 1979 annual report to stockholders which is attached to this Annual Report on Form 10-K.
Schedules V - Property, Plant and Equipment for years Ended December 31, 1979 and 1978 VI - Reserves for Depreciation and Amortization of Property, Plant and Equipment for l Years Ended December 31, 1979 and 1978 XII - Valuation and Qualifying Accounts and Reserves for Years Ended December 31, i 1979 and 1978 l The information required to be submitted in Schedules 1 IX, XIII and XVI has been included in the financial statements and related notes. Schedules I to XIX not referred to above are omitted as not applicable or not required. I 1 O
Exhibits A. Maine Yankee Atomic Power Company financial statements f for the years ended December 31, 1979 and 1978 (included
- 3 in the enclosed Form 10-K for Maine Yankee).
; B. Maine Electric Power Company, Inc. financial statements for the years ended December 31, 1979 and 1978.
, C. Amendment filed August 23, 1979 to the Company's Articles i of Incorporation in connection with the establishment of the 9 1/24 Preferred Stock series.
I D. Copies of Tenth and Eleventh Amendments, dated October I 11, 1979 and December 15, 1979 respectively, to the Agreement for Joint Ownership, Construction and Operation of New Hampshire Nuclear Units. { ' E. Bond Purchase Agreement dated August 1, 1979, including i form of Supplemental Indenture dated August 1, 1979 in connection with the Company's First Mortgage Bonds, 10.25% Series due 2004, incorporated by reference to Exhibit A to the Company's Form 10-Q for the period ended September 30, 1979.
- q F. Preferred Stock Purchase Agreement dated August 15, i; 1979, in connection with the Company's 9 1/24 Preferred Stock, $100 par value, including By-I,aw amendments with respect thereto, incorporated by reference to Exhibit 4 1 B to the Company's Form 10-Q for the period ended i September 30, 1979.
t
! G. Copies of forms of documents related to the Company's proposed purchase of an additional 1.80142% interest in the Seabrook Nuclear Units, consisting of PSNH's offer to sell ownership shares dated March 8, 1979, the Company's letter response thereto dated March 19, 1979, and the Sixth, Seventh, Eighth and Ninth Amendments to
! the Agreement for Joint Ownership, Construction and i( Operation of New Hampshire Nuclear Units dated April 18, 1979, April 18, 1979, April 25, 1979, and June 8, 1979 respectively, incorporated by reference to Exhibit
;f A to the Company's Form 10-Q for the period ended June 30, 1979.
Reports on Form 8-K Under date of December 31, 1979 the company filed a l[ report on Form 8-K for the month of December, 1979, with I respect to the cancellation of the NEP nuclear units in which the Company had an interest. (See Item 1, " Business - Problems Facing the Company and the Industry".) PART II Not filed per General Instruction H since the Company l has filed a proxy statement not later than 120 days after close of the fiscal year. SIGNATURE [ Pursuant to the requirements of the Securities Exchange
.I Act of 1934, the Company has duly caused this Annual Report l
l t a
to be signed on its behalf by the uadersigned thereunto duly
; authorized.
BANC3R HYDRO-ELECTRIC COMPANY l 1 by /s/ John P. O'3ullivan l Vice President & Treasurer Dated: March 27, 1980 4 I i
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O l- . l' I I
, 4 I
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- 4 BANGCR HYDRO-ELECTRIC COMPANY k
. INDEX TO FINANCIAL STATEMENTS j Reference Report of independent public accountants Page 6
- Bangor Hydro-Electric Company -
Balance sheet - December 31, 1979 and 1978 Pages 8,9
- Statements for the years ended -
l, December 31, 1979 and 1978 - - Capitalization Page 10
- Income Page 7*
I Retained earnings Page 10
- Sources of funds for plant additions Page 11
- 1 Notes to financial statements Pages 12-18 ' l
\ \
Report of independent public accountants l on schedules Attached Consent of independent public accountants Attached SCHIDCLES V - Property, Plant and Equipment for Years l Ended December 31, 1979 and 1978 Attached i, VI - Accumulated Depreciation of Property, Plant and Equipment for Years Ended l December 31, 1979 and 1978 Attached i III - valuation and Qualifying Accounts and Reserves for Years Ended December 31, 1979 and 1978 Attached The information required to be submitted in Schedules IX, XIII and 27I has been included in the financial statements and related notes. Schedules I to III not referred to above are omitted as not applicable or not required.
- The financial statements and related notes as indicated above are incorporated by reference to Bangor Hydro-l Electric Company's 1979 annual report to stockholders which is attached to this Annual Report on Form 10-K.
The page number refers to the page of the annual report. I I 1 i i
I f i r
! REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES l To Bangor Hydro-Electric Company: -
1 In connection'with our examinations of the financial statements included in Ban:,or Hydro-Electric Company's Annual Report to stockholders and incorporated by reference in this Form 10-K, we have also examined the supporting schedules listed in the accompanying index. In our opinion, these schedules present fairly, when read in conjunction with the related financial statements, the financial information required to be set forth therein, in conformity with generally accepted-accounting principles applied on a consistent basis. Q- k *- r $ . ARTHUR ANDERSEN & CO. t
- Boston, Massachusetts, 1 January 25, 1980.
J
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I I. 1 l l l
l t. I CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS i As independent public accountants, we hereby consent to the incorporation of our reports appearing, or incorporated by reference, in the Annual Report on Form 10-K for the year ended December 31, 1979, of Bangor Hydro-Electric Company in its Registration Statement on Form S-16 (File No. 2-62910).
; A W4 ARTHUR ANDERSEN & CO.
f I 1 l Boston, Massachusetts 1 March 28, 1980. I l I, ! I
l . l I t sac:=z e neuem eno-c.ac sc e:siruf ricr w ?, narfus wararr I i mestrumanes. h W SS
- - - , aa.itlans ama ,o ser antans.
' _ag. Inst. tas of Tear u:1 ** cose 'O Estrzem traserert i n. ant 2s sEsnce.
1staaelalaa--erve=Asa1 n esp.ma. 8 3e.s7e : - : = s = s 30.370 Freesssias plass= staan 22.433.899 = 932
- 2,243.907 24.709,850 syero-elmetria 18.648.414 = 12.476 3 M.349 11.018.287 *'*
Zammanal ni- 4.494.141 = 3.214 14.654 4.441.307 2 = % property 12.826.773 - 13.813 2.344.447 13.164.571 21striastaan preparty 32.413.218 = 214.914 2.449.123 34.647.432 Gematal property 4.543.742 = 2s4.023 707.983 4.975.491 Total plass is servise SS7.3M.447 8 - 8851.822 5 8.172.445 895.817.718 as E c=*.cn 3 Pues M BS 5.453.200 8.354.824 = (18.187.771) 3.824.285 892.850.073 8 8.338.824 8531.422 9 (2.015.30 tit 31898.841.975 rX D SEEM3
*stamgaalas==orvenazatism empamme 8 30.579 8 - 8 = 8 = 8 30.570 Freemeuan slaat.
,6 Sumer 7,730.373 = 1.000 14.704.234 22.433.809
{ ayeza.-elararse 14.527.370 = la.392 139,434 18.644.414 2aternal l- 4.447.521 - 1.90s 44.395 4.490,141 "r=== m = propert? 12.292.004 = 16.070 950,037 12.828.773 31 stria'ntian property 30.081.546 = 191.855 2.523.30? 22.413.218 Gameral property 4.212.064 = 281.509 623.167 4.133.742 Total plast la servise 849.212.742 8 = S$10.811 8 18.584.976 s87,394.847
- . - - '- 2 PEDERESS 11.881.369 12.134.815 = (13.564.978) 5.453.20s 881.174.871 812.186.811 8318,411 s = 892.350.075
- ..= ~ ._ am r r 1., ___ ., m .2,3 ,. ,,,..
l . - r - - ... . .... . . - . . - . . - 1. . - . as riamustal sene mmmes. I l I i I yg Og 'B@$b 1 l
4 SCHEDCLE VI 1 i BANGOR HYDRO-ELEC T C COMPANY ACCUMULATED DEPRECIATICN CF PROPERTY, I PLANT AND EQUIMENT , l t
' December 31, 1978 1979 l
BALANCE BEGINNING OF PERIOD $28,239,075 $30,065,676 ADDITIONS:
- P cvisiens charged to income 2,200,513 2,814,541 Salvage 134,873 161,586 Other 59,919 ~35,088 530,634,380 $33,076,891 DEDUCTICNS:
Property retirements 510,811 551,162
; Removal costs 57,893 66,559 BALANCE END CF PEIC:00 $30,065,676 532,459,170 l
i 1 l I 1 , I I
c. 1 SCHEDC"E XH 4 I I t tapeOB TTDWPCLECTRIC C:BWAff f J P* ~ W nas e m nun assssets k a.u stans _r _ I _ tusemece 4steunts . Sedut".Long of w iad M I 218 23EED N 31. 1378a l 8 u .000 8149.491 S.4.730 8101.221 8 83.000 Bemesse for dem.stal 8 74.273 8 6. 800 0 = 8 77.770 8 80.842 ammeswo for a.saremme L34.262 = = 128.262 = Squty reensva ter tiW kyese proteses
$115.833 8 84.000 $ = 3314.831 8 44.843 2&R E5053 - 31. 1379 c.n.n. ...... n... 1. .u.
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I'mIBIT A i JC 3ITIES AND EICIANGE N T99 ION Washington, DC 20549 f j TCRM 10-E Annual Report under Section 13 or 15(d) of The
' -Securities Exchange Act of 1934 ' Tor the fiscal year ended Commission file number . December 31, 1979 1-6554 g ,
MAINE TANIEE ATOMIC POWER COMPANY (Exact name of registrant as specified in its charter) i I Maine 01-0278125 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) l Idison Drive. Augusta, Maine 04336 l (Address of principal executive (Zip Code) offices) Registrant's telephone number including area code 207-623-3521 Securities registered pursuant to Section 12(b) of the Act': Name of each exchange Title of each class on which registered First Mortasse Bonds, Series A (Sinh an Fund) 9.10*. Due 2002 New York Stock Exchanne First Mortasse Bonds, Series B (Sinham Fund) 8 1/2*. Due 2002 New York Stock Exchante First Mortasse Bonds, Series C (Sinkina Fund) 7 5/8*. Due 2002 New York Stock Exchanne Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
, Exchange Commission Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such I reports), and (2) has been subject to such filing requirements for the
[ past 90 days. Yes v No Indicate the number of shares outstanding of each of the issuer's
! classes of Common Stock, as of the close of the period covered by this report.
Shares outstanding Class as of December 31, 1979 { Common Stock 500,000
} EXHIBIT A i
e a
Maine Yankee Atomic Power Company Tom 10-K-1979 e PM I 1"Ti 1 - ErmTun 1 l l (a) General. The Company, incorporated under the laws of Maine on
. January 3,1966, owns and operates a pressurized water nuclear powered electric generating plant at Viscasset, Maine, with a current net capa-bility of approriantely 830 megawatts electric (the " Plant"). The Coe-pany sella its capacity and output to its eleven sponsoring utilities.
The Cosqpany's principal office is located on Edison Drive, Augusta,
' Haine 04336, and its telephone number is (207) 623-3521.
The Company is sponsored by eleven investor-owned New England stilities (the " Sponsors"), each of which committed itself under a Power Contract l with the Company to purchase a specified percentage of the capacity and ontput of the Plant and pay therefor, beginning on January 1,1973, a 1
, like percentage of amounts sufficient to pay its fuel costs, operating ;
expenses (including a depreciation accrual at a zate sufficient to fully l amortize the investment in the Plant over a period ending Hay 1, 2002), interest on its debt and a composite return of 9.8% on its capital stock l equity. However, due to limitations imposed by the Federal Power Coe-
! aission (now the Federal Energy Regulatory Commission ["TERC"]) on the return on the Company's common equity, the actual composite return is somewhat less. Each sponsor has also agreed under a Capital Funds
, Agreement with the Company to provide a like percentage of the Coe- j pany's capital requirements not obtained from other sources, subject '
! to obtaining necessary authorizations of regulatory bodies in each I instance. All such obligations are subject to the continuing jurisdic-l tion of various Federal and state regulatory bodies. (b) Problems Affecting the Industry and the Cocoany. Events at the Three 511e Island Nuclear Unit No. 2 in Pennsylvania ("TMI") caused increased concern about the safety of naclear generating plants. The company cannot predict what effect the events at IMI, which have pre-cipitated renewed opposition to nuclear power, may ultimately have upon the continued operation of the Company's nuclear generating facility. I The TMI incident has prompted a rigorous re-w==4n= tion of safety related equipment and operating procedures in all nuclear facilities. On Octo-ber 30, 1979, President Carter's Cosumission on TMI issued its final report which, among other things, contained extensive rec-dations on l aspects of nuclear power; on December 7, 1979, the President, while reaffiming his support for continued inclusion of nuclear power in his national energy policy, announced his agreement with the spirit and in-I tant of those rec-dations and his initiation of steps toward their implementation. On January 13 , 1980, the Nuclear Regulatory Commis-l sion's ("IRC") Special Inquiry Group publicly released its Report on TM1 I which contained recommendations similar to those of the Presidential Commission. The IRC and its staff are currently reviewing this latter i report. Measuhile, the NBC has preenigated numerous requirements in re-l sponse to THI, including both near-tars modifications to upgrade cartain safety systems and instrumentations and longer-term design chanets which affect about 25 items, ranging from equipment changes to operational support. The Company's nuclear facility and all other nuclear facili-ties are being re**==4nad by the IRC to determine the scope of sodifica-tions necessary to comply with these new requirements. The Company has made the near-term modifications required by the NRC during the period I from January 11, 1980 to March 15, 1980 when its nuclear plant was shut down for a scheduled reloading of its nuclear fuel. The Company is still in the process of evaluating the impact of the long-term improve-ments suggested by the IRC staff. However, until the scope of those t l 2
Maine Yankee Atomic Power Company Form 10=K-1979 f - I latter improvements, as they apply to particular reactors, has beer. de-I fined by the IRC, the cost of any modifications and their effect, i.f any, on the operations of the Company cannot be quantified. While the e altimate effect of these es====4aations, studies and proposals cannot be specifically predicted, they could result in costly modifications of the Company's nuclear plant. A petition calling for termination of the production of electricity by nuclear fission due to alleged safety and economic reasons, and the con-sequent shutdown of the Company's nuclear plant, was circulated by car-tain groups in Maine. The petition was signed by more than the required number of voters and was presented to the Maine legislature in Tebruary, 1980. Under Maine law, tb legislature must enact the proposed legisla-tion at its 1980 session or refer it to a vote of the electorate. The
. Company is presently unable to predict the ultimate resolution of the petition drive, fa
- diaa the result or validity of any legislative action er referendum vote, which would be held in the late summer or .
fall of 1980 pursuant to a gubernatorial proclamation after adjournment of the legislature. The Company believes that the Maine Yankee plant is both a safe and the most economical source of base load electric I power, and intends to take all reasonable steps necessary to provide for the continued operation of the plant. (c) Reaulation and Environmental Matters. The nuclear generating facil-ity of Haint- Yankee is subject to extensive regulatics by the NRC. The NRC is empowered to authorize the siting, construction and operation of anclear reactors after consideration of public health, safety, environ-mental and antitrust matters. The United States Environmental Protection Agency (" EPA") administers programs established under the federal Water Pollution Control Act and the Clean Air Act which affect the Plant. The former Act establishes a national objective of complete elimination of discharges of pollutants
! into the nation's water and creates a rigorous permit program designed to achieve this objective. The latter Act empowers EPA to establish clean air standards which are implemented and enforced by state agen-
' c1es. The EPA has broad authority in ad=4nistering these programs, including the ability to require installation of pollution control and mitigation devices. The Company is also subject to regulation with regard to environmental matters and land use by various state authori-ties.
Under their cone 4nning jurisdiction, the NRC and one or more of the EPA and the state authorities having jurisdiction over the Company's facili-ties may modify permits or licenses which have already been issued, or impose new conditions os such permits or licenses, and may require additional capital expenditures or require that the level of the opera- { tion of a unit be temporarily or pee ==amatly reduced or ceased. See
" Problems Affecting the Industry and the Company. However, since the eleven Sponsors of the Cogany have agreed to provide the required I cad etyl not otherwise available, to take the total output of the Plant, and to pay all costa including capital costs, statutory requirements t with respect to environmental quality, although they could necessitate l significant cash outlays, will not materially affect the earniss power of the Company or causa material changt s in the registrant's business or intended business.
(d) Nuclear Tual. The Company has contracted for the purchase of all of its uranium concentrate requirements through 1983. In addition, the Company has contracted with a supplier for the purchase of up to 3 s
Maine Yankee Atomic Power Company Form 10-I-1979 t j 1,300,000 pounds of uranium concentrates, deliveries of which, although contingent upon the commeretal operation of a processing facility cur-reatly under construction, are scheduled for 1981 to 1992 and would 9 fulfill anclear fuel requirements through 1986. h Company has a con-version contract through 1983 and has a contract with DCE for enrichment services through 2002; its fabrication requirements are covered through I 1983, with a contract option for too additional years. As is the case throughout the nnelaar industry, the Company has no contractual arrange-ments for the final disposition of spent fuel. In September 1979, the Company filed with the IGtC a proposed change to its operating license relating to increasing its existing spent fuel storage capacity by providing more compact fuel storage. Da October 24, . 1979, the NRC published notice of the proposed issuance of a license amendmast implementing the change and providing. an opportunity for interested persons to petition for leave to intezvene and request ,a hearing. A timely petition and request was filed by Sensible Haine Power, a non profit corporation, and the Attorney General of Maine filed a notice of his intent to perticipate in ary hearing. The IRC i has established an Atomic Safety and Licensing Board to preside over the proceeding. h Company anticipates that a prehearing conference to designate issues will be scheduled in May 1980 and that the adjudi-catory hearing will follow within shaut 90 days thereafter. N Company cannot predict the scope of the paceeding, its duration or its outcome. l h present capacity of the spent fuel pool at the Company's plant will be filled in 1987 and after 1983 would not accommodate a full core re-moval. h modification of this capacity proposed by the Company differs from designs heretofore implemented at other nuclear facilities but is essentially the same basic concept of more compact storage in the existing spent fuel pool. If the proposed modification is not approved, the Company will have to develop alternative plans which would involve further approval by the NRC. Maine Tankee does not enrrently nH1he a ont salvage value for spent fuel in its mu lear fuel cost calculations. Maine Yankee's nuclear i fuel in the reactor is amortised on the basis of original cost plus the estiasted cost of cisposition of that fuel. l (e) Emplovees. At December 31, 1979, the Company had 130 employees. ITEM 2 - SI:MMARY 07 OPERATIONS la accordance with the Power Contracts with the Sponsors, the Company bills out an amount, each month, equal to the total costs for that month, [ including a return on invested capital, regardless of the level of I operation of the plant. The Plant was placed in commercial operation for billing purposes on Jaanary 1,1973. l 1 l I 4 l l
Maine Yankae Atomic Power Company Form 10-1-1979
' tfaina Yanhae Atomic Power Company I Stamrirr CT INC3R I (Dollars in thousands Except Pc; Share Amounts)
. I 1977 1976 1975 1979 1978
$68,267 $70,373 $65,659 $58,860 $61,731 Electric Operating Revenues Operating Expenses 15,319 17,411 14,863 11,686 14,538 I Tuel I
Operation 14,193 10,684 8,394 6,884 7.230 Maine == mars 2,544 4,496 3,556 1,433 1,917 I Depreciation and Amortization 8,279 8,173 8,087 8,029 7,736 I Tasse Federal and State Income 7,864 8,703 9,058 8,578 8,192 4,222 3,800 --- 2,839 Local Property 3,7'A 4,094 Total Operating Expenses 51,949 53,561 48,180 40,410 42.452 Operating Income 16,918 16,812 17,479 18,450 19,179
, other. Income (Expenses)
, Allowance for Othar Tunds Used:
During Construction 76 50 50 31 114 For Nuclear Tual 1,547 1,341 1,047 1,136 64 Cther (168) (63) (31) (15) (3.') Iacome Before Interest Charges 18,373 18,140 18,545 19,602 20,204 Interest Charges Iang-Tern Debt 13,307 11,534 11,502 11,616 12,527 Otbar 150 (8) 23 781 441 Allowance for Borrowed Tunda Used: During Construction (133) (90) (90) (59) (193) for Nuclear Tuel (2,602) (1,023) (674) (561) (378) Total Intarost Charges 10,722 10,413 10,761 11,777 12,397 7,651 7,727 7,784 7,825 7,807 i Net Income 1,122 i Dividends on Preferred Stock 1,001 1,025 1,083 1,122 Earnings Applicable to Common Stock $ 6,650 $ 6,702 $ 6,701 3 6,703 $ 6,685 Shares of Common Stock outscanding 500,000 500,000 500,000 500,000 500,000 Earnings per Share of Common Stock $13.300 $13.404 $1).402 $13.406 $13.370 Dividends Declared per Share of f '* - Stock $13.250 $13.400 $13.404 $13.405 $13.380 l l 5 1 ! I i s
Maine Yankaa Atomic Power Company Tars 10-E-1979 I namrwrvT'S DISCUSSION AMD AIAI:T3IS OF THE I 5tnetARY OF OPERATIONS i For a period of thirty years, cosmancing on January 1,1973 in accord-ence with the Power contracts, each participant receives its entitlement percentage of plant output and is obligated to pay its entitlement per-cantage of the Company's total costs, including a return on hvasted capital, regardless of the level of operation of the plant. h following is management's discussion and analysis of certain sig-nificant factors which have affected the Company's costs during the comparative periods 1979 versus 1978, and 1978 versus 1977. ! A summary of the significant period to period changes in the principal J , cost items is shown below-l comparison of I j 1979 1978 1 i Versus 1978 _ Versus 1977 l IL 1 1 [ Thousands of Dollars][ Increase or (Decrease}}
, Tual Expense (2,092) (12.0) 2,548 17.1 Operation Expense 3,509 32.8 2,290 27.3 Maintenance Espense (1,952) (43.4) 940 26.4 Long-Tern Debt Interest Expense 1,773 15.4 - -
)
Allowance for Tunds Used for the Purchase of Nuclear Tual 1,785 75.5 643 37.4 ) l Tuel Espense ) The decrease in fuel espense was primarily the result of (1) the plant
! being ordered to shut down by the NRC from March 13 through May 24, 1979 and (2) an outage during the month of September 1979. The plant operat-ed during most of the 1978 period except for a major maintansace and refueling outage which occurred from July 14 through August 24, 1978.
Tual expense increased in 1978 due to (1) a higher amortization rate, which was caused by (A) 72 new assemblies being inserted in August 1978 at a higher cost in comparison to the assemblies inserted in June 1977 (3) a full year's effect of the change in the assumptions regarding the cost of spent fuel disposal made in July 1977 and (2) an increase in generation of 209 million IWE. 1 Operation and Maintenance Expense l Significant increases in Operation Expenses in 1979 were primarily the result of expenses associated with the shut down ordered by the NRC and to a lesser degree due to costs of renting a transformer, outside ser-I vices employed and increases in insurance premiums. h increase in Operations Expenses in 1978 reflect tas increased cost j of outside services, rental of a transformer and general labor increases. The Company did not have a refueling shutdown in 1979. The level of maintenance activity performed in 1979 when the plant was not operating { were below those experienced in 1978 during the refueling. l The increase in Heintenance Expenses in 1978 reflects expenditures I which included work on the Reactor Coolant System, Turbo generator unit and the Condenser Systems. 6 1
Maine Yankee Atomic Power Comp:nv Fers 10-E 1979 W_s-Tem Debt Interest Expense and Allowance for Funds Used to Purchase i Duclear Tual (AFN) j h increase in Interest Izpense and AIT in 1979 and the increase of AFN in 1978 vere the result of higher levels of investment in nuclear fuel to meet current and future refueling requirements and to higher interest f rates incurred on corporate borrowings. \ i ITZM 3 - PROPERTIES I h Plant is located on tidewater on Bailey Point in Wiscasset, Maine, on a 740-acre site which is owned in fee by the Company and is adequate
' for the Plant and for the associated switchyard facilities (which are owned in part and operated by Central Maine Power Company). It is a anclear-powered electric separating plant, utilizing a pressurized l
- l. wats reactor, fueled with slightly enriched uranium dioxide. h nuclear staans supply system and certain other equipa snt were designed 1
and fabricated by Combustion Engineering, Inc. The turbine generator
, was supplied by Westinghouse Electric Corporation. Stone & Webster Engineering Corporation, es engineer and constructor, designed and I i constructed tha Plant. h nuclear design and construction of the l j Plant was supervised by the Nuclear Services Division of Yankee Atnaic Electric Company, which supervised and is supervising the desi;n and l construction of several nuclear generating plants in New England. Cen-i structics of the Plant, which began in 1967, was completed in 1972 except for certain discharge temperature control far.ilit.ies designed to meet the requirements of the Maine Board of Environmental Protection, which were completed in 1975.
ITEM 4 - PARENTS AND SUESIDIARIES h names of the Sponsors and the percentage of voting securities owned by each are as follows: Name of Sponsor Percentate Central Maine Power Company 38". New England Power Company 20 h Connecticut Light & Power Cospany 8 3angor Hydro-Electric Company 7 Maine Public Service Company 5 Public Service Company of New Hampshire 5 Cambridge Electric Light Caspany 4 Hontaup Electric Company 4 h Hartford Electric Light Company 4 Westarn Massachasetts Electric Compar.y 3 Central Vermont f ablic Service Corporation j
]
19.4 h Ccg any has no rubsidiaries. ITIM $ - LIGAL PMOCZEDIN_GS l
. h operation of existing nuclear units and the construction of nuclear units presently planned in the United States continue to be a subject of I public controversy. Various groups have filed law suits and participat-I ed in ad=4nistrative procee< tings claining that the present state of nuclear tecnnelogy presents risks to public health and safety and to the environment. In addition, certain of these groups have proposed I restrictive legislation relating to nuclear power. Some of the claims ande by such groups, if they should preveil, or che existence of the l
t l 7 L t 2
l Maine Yankee Atomic Power Company Tcza 10-E-1979
' controversy itself, could cause substantial modifications to or extended :
shntdowns of plants presently in operation. See Item 1. "Proolemn ' I Affecting the Indnatry and the Company". 1 h Price-Anderson Act is a Federal statute providing, among other things, that the ==W == liability for damages resulting fro:4 a nuclear ) I incident would be $560 million, to be provided by private insurance and governmental rescurces. As required by the HC regulations, prior to operativa of a nuclear reactor, the licensee of the reactor is required I to insure against this esposure by purchasing the mar 4== available private insurance (presently $160 million), the remainder to be covered by the recently implemented retrospective premium insurance and by an indemnity agreement with the RC. Under ==M=nts to that Act, owners of operating nuclear facilities any be assessed a retrospective premium of up to $5 million for each rese*,or owned in the event of any one 9 j nuclear incident occurring at any reactor in the United States, with a
==H - = assessment of $10 -4111)n per year per reactor owned. It is
- -~not yet possible to evaluate the claims being asserted as a result of the M incident or whether any assessments may be levied under these provisions as a result of the incident. See Item 1. " Problems Affecting the Ir.dustry and the Conspany".
h Maine Yankee slant was declared commercial December 28,1972, with regular operation at approximately 570 megawatts electric (net) starting on January 1,1973, in accordance with the Powcr Contract. Hearings on the Company's application for a forty-year license at full operation weae completed in 1972 and the license for full operation at approzi-mately 790 angewatta electric (net) was granted by the Atomic Energy . Comrission ("AEC'), the predecessor of the EC, on June 29, 1973. Dur- ! ing 1978 the BC authorized an incrasse in the output rating of the Plant to approximately 850 megawatts electric (net). h CcapanJ'a nuclear generating plant, which had been teuporarily shut down along with four other nuclear units pursuant to a March 13, 1979 order of the BC staff, was restored to power pr> duction on June 5,1979 after the order esa 12.fted er Usy 24 The orde- was based on the dis-covery by the RC of an allegedly improper analysis technique in a com-puter code used by the arr.hitect-enginscriac fizn which designed thz plant in predicting the stress loads which would be placed on some safety-related piping syntams cf the plant in ti.e event of a major earthquake. During the shutdova the Co,pe.ny performed reanalyses of the piping syntams in accordance with the order, and the plant was returned to commercial operation without modification cf the systesis. h Company's phnt war shnt down on Janaary 11, 1980 for a scheduled l r-loading of its nuclear fuel and was restored to power production on
; March 15,1980. During tua shutdown the Company also made certain modi-I fications required by the MC as a retult of the THI incident. See Itasi 1. "Peeblems Affecting the Industry and the Company".
l h Power Centracts between Maine Yankee and its sponsors require the sponsors to continue to make monthly payments thereender throuri 2002 whether or not the plant is in operatina except under cirrumstances not l aov applicshle which wculd entitle the sponsors to cancel the Power Contrae:.. h Sponsors are .lso obligated under the Capital Funds Agreseacts .rith Maine Yankee to pay their respective shares of the capi-
! tal requirements of Maine Yankee, not othe: wire obtainable, which would j l
include the cost of any modifications to the Plant that may be required pursuant to an B C Order. i 8
a Maxna Yankee Atomic Power Company Fers 10-E-1979 ITEM 6 - DCREASES AND DECREASES U OUFSTANDING SECCRITIES AND nmnTEDNESS I ITZH 7 - CHANGES IN SECURITIES AND CHANGES IN SECURITT FOR REGISTERED l SEcuR m zS l l Not Applicable t
- ITEM 8 - DETAULTS UPON SENIOR SECURITIES Not Applicable.
i ITEM 9 - APPRCIIMATE NUMBER OF EQUITY SECURITT HOLDERS 1 i (1) (2) i Number of Record Holders j
.- Tjtle of Class I
e-a Stock 11 (Spcasors) l Cumniative Preferred Stock, ! l 7.487, Series (Siniring Fund) 77 l ITEM 10 - SUBMISSION OF MATIERS TO A VOTE OF SECURITT HOLUERS i
' Previously reported in form 10-Q for quarter ended June 30, 1979.
ITEM 11 - INDEMNIFICATION OF DIRECTORS AND OTTICERS Section 9 of the Company's By-laws provides as follows: Section 9. Indemnification of Officers, Directors, Employees ahd Agents
. la) Any person who was or is a party or is threatened, to be made a party to any threatened, pending or coupleted action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the Company, by reason of the fact that he is or was a Director, officer, employee or agent of the Company, or is or was serving at the ra p st of the Company as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall be ind==nified by the Company assinst expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, r.uit cr proceeding if he acted in good faith and in a man-ner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termi-nation of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not of itself, create a presumption that the person did not act in good fai*h and in a manner which he reasonably believed to be in or not l opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in l ' the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a Director, officer, employee or agent of l f- the Company or is or was serving at the request of the Company as a , i I 9 i l l l 1 1
i IIaine yankee Atomic Power Company Fern 10-E-1979 I 4 I Director, officer, employee or agent of another corporation, partner- [ ship, joint ventare, trust or other enterprise shall be indamnified by i the Company against expenses, ineindia- attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement
; af such action or suit if he acted in good faith and in a manner he j reasonably believed to be in or not opposed to the best interests of the Company ascept that no inAm==4 fication shan be made in respect of any , claim, issue or matter as to which such person shan have been adjudged j to be liable for negligence or misconduct in the performance of his dury to the Company unless and only to the extent that the Superior Court or the court in which such action or suit was brought shall determine upon - application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Superior Court or such ! other court shall deem proper.
d (c) To the extent that a Director. . officer, employee or agent of the Company has been successful on the serits or otherwise in defense of any action, suit or proceeding referred to in subparagraphs (a) and (b) l above, or in defense of any claim, issue- or matter therein, he shall J be indemnified against expenses including attorneys' fees ac+uany and ) reasonably incurred by him in connection therewith. Any such person i may enforce the right of ind*=nification granted by this subparagraph (c) by a separate action against the Co.mpany, if an order for ind==ni-fication is not entered by a court in the action, suit or proceeding in ! which he was successful on the merits. l l (d) Any inde=nification under subparagraphs (a) and (b) unless ordered l by a court shan be made by the Company only as authorized in the i specific case upon a determination that ind==nification of the Director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subparagraphs ] (a) and (b). Such determination shan be made by the Board of Direc-tors who were not parties to such action, suit or proceeding, or if such quorum is not obtainable, or even if obtainable, or even if obtainable if a quorum of disinterested Directors so directs, by independent legal counsel in a written opinica, or by the stockholders. 4 (e) Expenses incurred in defending a civil or criminal action, suit or l proceeding any be paid by the Company in advance of the final disposi-i tion of such action, suit or proceeding as authorized by the Board of Directors in the manner provided in subparagraph (d) upon receipt of an undertaking by or on behalf of the Director, officer, nyloyee or apt to repay such amount unless it shan ultimately be determined that he is entitle.1 to be indemnified by the Company as authorized in this Sec-i tion 9. 1 (f) The indammification provided by this Section 9 for any person shall not be deemed esclusive of any other rights to which such person may be entitled under any Ry-Law, agreement, vote of stockholders or disinter-f ested Directors or otherwise, both as to action in his official capacity and as to action in another capacity, while holding any office, and shall continue as to any such person who has ceased to be a Director, officer, employee or agent and shall innre to the benefit of the heirs, executors and ad=4aietrators of such person. (g) The Company shall have power to purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or l agent of the Company, or is or was serving at the request of the Company I as a Director, officer, employee or agent of another corporation, part-norship, joint venture, trust or other enterprise against any liability I i i 10
Maine Yankee Atomic Power Company Foza 10-E-1979
' asserted against his incarred by him in any such capacity, or arising ont of his status as such, whether or not the Company would have the I pows to i="4 +y him against such liability under the provisions of I this Section 9.
I The Company's Board of Directors has takaa action to implement the pro-I visions of ths By-laws.
.t Insofar as indesnification for liabilities arising under the Securities l Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or
, otherwise, the registrant has been advised that in the opinion of the j Securities and Exchange Commission such inh 4 fi cation is against i
public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities l (other than the payment by the re ,istrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defe'ss a of any action, suit or proceeding) is asserted by i such director, officer . or controlling person in connection with the
' securities being registered, the registrant will, unless in the opinion of its counsel the metter has been settled by controlling precedent.
submit to a court of appropriate jarisdiction the question whether such l indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. ITEM 12 - FINANCIAI, STAT M NTS AND EIKI3ITS FIIED, AND REPORTS ON FORM 8,-E (A) Fisancial statements and exhibits filed as a part of this report:
- 1. Financial Statements: .
Fmport of Independent Public Accountants. Statement of Income for the five years ended December 31, 1979. I Rat ==ce Sheet at December 31, 1979 and 1978. Statement of Capit=14vation at December 31, 1979 and 1978. Statement of Changes in Common Stock Investment for the five years ended December 31, 1979. . Statment of Sources of Funds for Acquisition of Nuclear Fuel and Construction of Electric Property for the five years ended December 31, 1979. Schedules: Y Electric Property and Nuclear Fuel. VI Acc-1= tad Provision for Depreciation and Amortization of Electric Plant and Nuclear Fuel. All other schedules are omitted as the required information l is inapplicable or the information is presented in the i Financial Statements or related notes.
- 2. Exhibits - None (3) No reports on Forme 8-E were filed during the last quarter of 1979.
1 1 I 1 i 11 l
1
!!aine Yankee Atomic Power Company !
Form 10-K-1979 l i IIPORT OP DEPEEUT PUBLIC ACCOGfTANTS To !!aine Yankee Atomic Power Company: l We have own=4ned the balance sheet and statement of capitalization of
!!aine Yankee Atomic Power Company (a !!aine corporation) as of Decem-ber 31,1979, and 1978, and the related stataments of income, changes in f
common stock investment and sources of funds for acquisition of nuclear fuel and construction of electric property for the years than ended, and l ~ the supporting schedules as listed on the accompanying index. Our exam-i inations were made in accordance with generally accepted auditing stan-dards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circiumstances. In our opinion, the financial stataments referred to' above present i fairly the financial position of liaine Yankee _ Atomic Power Company as I of December 31, 1979, and 1978, and the results of its operations and its sources of funds for acquisition of anclear fuel and construction of electric property for the years then ended, and the supporting schedules present fairly the information required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistant basis. AltMUR AMNRm & CD. l Boston, !!assachusetts, I February 6, 1980. I , l l l l l ! l 12 l l
Maine Tankee Atomic Power Company Icts 10-E-1979 Maine Yankee Atomic Power h STAT MENT OF INCatE i For the Tive Years Ended December 31,1979 (Dollars in husands except Per Share Amounts) Year Ended December 31, j 1979 1978 1977 1976 1975 i Electric Operating
, 2evenues $68,867 $70,373 $65,659 $38,860 $61,731 ; Operating Expenses Fuel (Notes 1 and 11) 15,319 17,411 14,863 11,686 14.538 Operation 14,193 10,684 8,394 6,884 7,230 ; Maintenanae (Note 1) 2,544 4,496 3,556 1,433 1,917 Depreefation and Amortization (Notes 1 l and 11) 8,279 8,173 8,087 8,029 7,736 Taxes Federal and State Income (Note 2) 7,864 8,703 9,058 8,578 8,192 ,
I Local Property 3,750 4,094 4,222 3,800 2,839 l Total Operating i Expenses 51,949 53,561 48,180 40,410 42,452 Operating Incces 16,918 16,812 17,479 18,450 19,279 , Other Income (Expenses) ; Allowance for Other Innds Usad-Tor Nuclear Fuel (Note 1) , 1,547 1,341 1,047 1,136 844 During Construction (Note 1) 76 '50 50 31 114 other (168) (63) (31) (15) (33) j Income Before Interest i Charges 18,373 18,140 18,545 19,602 20,204 Interest Charges Iang-Tt.ru Debt , l 13,307 11,534 '11,502 11,616 12,527 (Notes 4 and 5) Other 150 (8) 23 781 441 I Allowance for Borrowed Tunds Used - Tor Nuclear'Tual l (Note 1) (2,602) (1,023) (674) (561) (378) I During Construction (Note 1) (133) (90) (90) (59) (193) [ 10,722 10,413 &76J 11,777 12,397 I Net Income 7,65 1 7,727 7,784 7,825 7,807 Dividends on Preferred [ 5tock 1,001 1,025 1,083 1,122 1,122 l Earnings Applicable to Comon Stock $ 6,650 $ 6,702 3 6,701 $ 6,703 $ 6,685 l Shares of Common Stock outstanding 500,000 500,000 500,000 500,000 500,000 l Earnings per Share of I Comon Stock $13.300 $13.404 $13.402 $13.406 $13.370 Dividends Declared per l Share of Com on Stock $13.250 $13.400 $13.404, $13.405 $13.380 l l The accompanying notes are an integral part of these financial statements
; 13 l
. Maine Tankee Atomic Power Company Fata 10-K-1979 Maine Yankee Atomic Power Company I
BAIANCE SIEET I Decnaber 31, 1979 and 1978 (Dollars in Thousands) December 31, f 1979 1978 I Ilectric Property, at original Cost (Notas 4 & 11) (Sch. V) $240,061 $237,884 l I,ess: Acc - tated Depreciation (Notas 1 & 11) (Sch. VI) 54,105 46,448
; 185,956 191,436
; Construction Work in Progress 8.951 3.275 Net Electric Property 194,907 194,711 Nuclear Fuel, at Original Cost (Notes 1 & 11) f (Sch. V)
Nuclear Fuel in Reactor 52,564 52,564
! Nuclear Fuel-Spent 41,557 42,557 8
Nuclear Fuel-Stock 35,679 4,924 130,800 100,045 Lass: Accumulated Amortization (Note 1) (Sch. VI) 91,844 76,525_ 38,956 23,520 Nuclear Fuel in Process 40,394 35,905
. Net Nuclear Fuel 79,350 59,425 Not Electric Property and Nuclear Fuel 274,257 254,136 Current Assets Cash (Note 3) 139 250 Accounts Receivable
- 6,474 6,788 Materials and Supplies, at Average Cost 3,503 2,859 Prepaymenta 949 1,127 Total Current Assets 11,065 11,024 Deferred Charges and Other Assets 1,783 795
$287,105 $265.955 The accompanying notes are an integral part of these financial statements, I
l t t . I 14 l
Maine Tankee Atomic Power Company Form 10-E-1979
' Maine Tankee Atomic Power Company I BAIANCE SIEET December 31, 1979 and 1978 j (Dollars in Thousands) 1 l
I 1 l
= i l STomm'unM' INVESTMENT AND LIABILITIES l f
December 31, 1979 1978 Capitalization (See Separate Statement) l Common Stock Investment $ 66,857 $ 66,754 j Redeseable Preferred Stock 13,070 13,696 , Long-Ters Debt 105,923 111,168 ) Notes Payable to MIA Fuel Company 33,450 17,650 ' Total Capitalization 219,300 209,298 Current Liabilities ;
, Notes Payable to Banks (Note 3) 3,925 - 1 j Carrent Sinking Fund Requirements (Note 4) 1,822 1,414 l Accounta Payable 3,412 3,758 )
Dividends Payable 1,919 1,956
. Accrued Interest and Tazes 2,739 2,893 i I
Other Current Liabilities 47 43 I Total Current Liabilities 13,864 10,064 ! Deferred Credits Accumulated Deferred Income Tazes and Unamortized Investment Tax Credits, Net (Note 2) 52,570 45,652 Unamortized Gains on Reacquired Debt (Note 1) 1,371 941 Total Deferred Credits 53,941 46,593 Commitments and Contingencies (Note 8)
$287,105 $265,955
{ The accompanying notes are an integral part of these financial statements. l I I I I i
Maine Tankee Atomic Power Company Tom 10-E-1979 i Maine Tankee Atomic Power Cosqpany STA2EME2rf 0F CAPITALIZATICN December 31, 1979 and 1978 (Dollars in Thousands) l> December 31, 1979 1978 I Common Stock Investment Common Stock, $100 Par Value, Anthorized and Outstanding 500,000 Shares $ 50,000 $ 50,000 i Other Paid-in Capital 16,805 16,805 Capital Stock Expense (281) (303) Gain on Cancellation of Preferred Stock 110 75 Premiums on Preferred Stock 196 205 Retained Earnings 27 2 66,857 66,784 i Redeemable Preferred Stock - 7.48% Series,
$100 Par Value, Anthorized 170,000 Shares, Outstanding. 130,700 at December 31, 1979 and 136,960 at December 31, 1978 (Note 6) 13,070 13,696 Long-Tem Debt (Note 4)
First and General Mortgage Bonds Series A - 9.10 % due May 1, 2002 58,161 60,575 Series R - 8 1/2% due May 1, 2002 38,911 40,075' Series C - 7 5/8% due May 1, 2002 10,842 12,114 Less: Carrant Sunring Fund Requirements (1,822) (1,414) Unamortized Debt Discount, Net of
' Premium (169) (182) 105,923 111.168 Notes Payeble to MTA Fuel Company (Note 5) 33,450 17,650 e Total Capitalization $219,300 $209,298 The accompanying notes are an integral part of these financial statements.
l l l I i
! 16
Ifaine Tankee Atomic Power Company Torm 10-E-1979 t liaine Yankee Atomic Power Company I i STA? MENT OF CNARES IN ff1Peew STOCK INVEST!ENT Tor the Tive Years Xaded December 31, 1979 [ (Dollars in Thousands) I h
' Amount at Other Paid Retained Shares Par Value in Caoital Zarninas Total
- lalance December 31, 1974 560.000 $50,000 $16,653 $ 5 $66,658 1
Add (Deduct) Net Income - - - 7,808 7,808 i Cash Dividends l Declared on - Common Stock - - - (6,690) (6,690)
, Preferred Stock - - - (1,122) (1,122)
Capital Stock Expense - - 14 - 14 Ralance December 31, 1975 500,000 50,000 T3 337 1 33 T&T Add (Deduct) Net Income - - - 7,825 7,825 l Cash Dividends Declared on - Common Stock - - - (6,703) (6,703) Preferred Stock - - - (1,122) (1,122) , Capital Stock Expense - - 14 - 14 talance December 31, 1976 500,000 50,000 16,68' 1 33"T5I Add (Deduct) Net Income - - - 7,784 7,784 , Cash Dividends 1 Declared on - f - Stock - - - (6,702) (6,702) Preferred Etock - - - (1,083) (1,083)
- Redemption of Preferred Stock - -
75 - 75 Capital Stock Izpense - - 13 - 13 3alance December 31, 1977 500,000 50,000 16,769 - 66,769 Add (Deduct) Net Income - - - 7,727 7,727 Cash Dividends t Declared on = l Common Stock - - - (6,700) (6,700) Preferred Stock - - - (1,025) (1,025) Capital Stock Expense - - 13 - 13 31, 1978 500,000 50,000 16,782 66,784 l3alanceDecember Add (Deduct) 2 Net Income - - - 7,651 7,651 l Cash Dividends I Declared on - F - Stock - - - (6,625) (6,625) [ Preferred Stock - - - (1,001) (1,001) [ Redegtion of Preferred Stock - - 35 - 35 Capital Stock Izpanse - - 13 - 13 Salance December 31, 1979 500,000 $50,000 $16,830 $ 27 $6o,857 The accompanying notes are an integral part of these financial stae - ts. l
?
I
.i 17
Ziaine Tankee Atomic Power Company
, Fern 10-1-1979 Maine Yankee Atomic Power Company STAmaxT OF SOHCES OF FUNDS FCR ACQUISITION 1
0F NUCLEAR FUEL AND CONSTRUCTION OF ELECTRIC PROPERTT (Dollars in Thousands) 1979 1978 1977 1976 1975 Funds Provided t Internal Sources l From operations Net Income 3 7,651 $ 7,727 $ 7,784 $ 7,825 $ 7,807 Amortization of Nuclear Fuel 15,319 17,411 14,863 13,240 15,029 Fuel Settlement Credit - - - (1,554) (491) Depreciation and l Amortization 8,279 8,173 8,087 8,029 7,736 Deferred Income Taz l and Investment Taz Credits, Net 6,918 7,583 8,868 8,413 8,192 { Allowance for Other Funds Used for Nuclear j Fuel and During I Construction (1,623) (1,391) (1,097) (1,167) (958) 36,544 39,503 38,505 34,786 37,315 l Less: I Sinking Fund Requirements:
- Long-Tern Debt 4,850 5,555 5,626 4,483 4,172 Preferred Stock 626 -
1,304 - - Dividends on Preferred Stock 1,001 1,025 1,083 1,122 1,122 Dividends on Co m a Stock 6,625 6,700 6,702 6,703 6,690 Other, Net 505 46 (139) (1,208) (463) 22,937 26,177 23,929 23,686 25,794 (Increase) Decrease in Working Capital, Exclusive of Notas Payable to Banks
- and Sinking Fund Require-i ments cash and Receivables 425 (616) (1,054) 1,519 994 Other Current Assets (466) (66) (587) (598) (618)
! Other Current Liabilities (533) (7,776) 12,075 (4,354) (6,178) * ' (574) (8,458) 10,434 (3,433) (5,802)
Net Available free Internal Sources 22,363 17,719 34,363 20,253 19,992 External Sources Increase (Decrease) in Notes Payable to tfEA Fuel company 15,800 8,750 (11,950) 20,850 - Increase (Decrease) in
' Notes Payable to Banks 3,925 -
(200) (5,700) (3,100) Series A Debentares - - - (15,000) - Net Available from External Sources 19,725 8,75,0, (12,150) 150 (3,100,)
$42,088 $26,469 $ 22,213 $20,403 $16,892 I Funds Used for Acquisition of I
Nuclear Fuel and Construction of Electric Property Acquisition of Nuclear l fuel $35,244 $25,732 $20,968 $19,543 $12,786 Allowance for Other Funds Used for Nuclear Fuel (1,547) (1,341) (1,047) (1,136) (844) Construction of Electric Property 8,467 2,128 2,342 2,027 5,064 Allowance for other Funds Used During Construction (76) (50) (50) (31) (114)
, $42,088 $26,469 $22,213 $20,403 $16,892 ! The accompanying actes are an integral part of these financial statements.
18 1
n Maine Tankee Atomic Power Company yara 10-1-1979 I Maine yankee Atomic Power gggg l BlYIIS TO FINANCIAL STATDENTS f
. 1. STD98ARY OF SIGNIyICANT ACCOWTING POLICIES i l
I h Company: The Company owns and operatas a pressurized-water
' nuclear powered electric generating plant with a current net capac- 1 icy of approxiastaly 830 megawatts electric. h plant commenced j commercial operation on January 1,1973. h following New Englana 1
.' electric atilities own all of the Company's common stock:
I .
' ownership i Sponsor / Participant Interest Central Maine Power Company ,38%
1 - New England Power Company 20 h Connecticut Light and Power Company 8
, Bangor Hydro-Electric Company 7 ;
j Maine Public Service Company , 5 i Public Service Company of New Hampshire 5 : Cambridge Electric Light Company 4 Montaup Electric Company 4 h Hartford Electric Light Company 4 I Western Massachusetts Electric Company 3 l Central Vermont Public Service j Corporation j Total L00% 7 l yor a period of thirty years, commencing on January 1, 1973, in 1 accordance with the Power Contracts, each participant shall receive its enti-lanent percentage of plant output and is obligated to pay its entitlement percentage of the Company's total costs, including i a return on invested capital regardless of the level of operation of the plant. Re,,tulation: h Company is subject to the regulatory authority of the federal Energy Begulatory Commission (TERC), the Nuclear Regu-latory Commsission (NRC) and the Public Utilities Commission of the Stata of Maine (PUC) as to accounting, operations and other matters.
. Depreciation and Maintenance: Depreciation is provided using a re- ; meining life method designed to fully depreciate electric plant on a straight-line basia over the period ending May 1, 2002.
Because of economic and regulatory uncertainties, the Company does I not presently provide for nuclear plant decommissioning costs. The Cogany is currently studying ha many alternative methods of decom-l missioning and the various ' anding options but cannot now predict
; what method of decommissioning will be adopted or its cost, which could be significant using present technology.
l l Minor renewals and better:nents are charged to maine-nee expense unless the itam constitutes a retirement unit, in which case the new unit is charged to electric plant. At the time depreciable proper-ties are retired, the original cost, plus cost of removal, less sal-vage, of such property is charged to the accumulated provision for depreciation. I 19
Maine Tankee Atomic Power Company
! Isra 10-K-1979 I Maine Tankee Atomic Power Company NDIE3 TO FINANCIAL Sta? M NTS I
i 1. SMaEY OF SIGNIFICAlff ACCOUNTING POLICIES (continued) i Amortization of Nuclear Tual: h cost of nuclear fuel in the l reactor, plus the estimated cost of disposition of that nuclear fuel, is amortized to fuel expense based on the ratio of energy produced during the period to the estimated total core capability with a corresponding credit to Ac p lated Amortization. f Prior to June 10, 1977, the Company's estimated cost of disposition { of nuclear fuel was based on estimates of the cost of reprocessing, less salvage. Through May 1976, nuclear fuel salvage values and reprocessing costs were based on the estimated market values and I costs of reprocessing at the time that the fuel was expected to be I removed from the reactor. From June 1,1976 through June 9,1977, nuclear fuel salvage values and reprocessing costs were based on l the estimated market values and reprocessing costs at the time of I reprocessing. This modification for estimating the cost of re-processing, not of salvage, had no material effect on the cost of
! power because the increases in each component were approximately of equal magnitude.
l As a result of federal energy proposals and other indications of a l developing national policy with respect to the disposition of I nuclear f 2el, the Cosgany changed its estimate of the cost of dis-position of nuclear fuel. C- -M_ng June 10, 1977, the Company began providing for pemanent storage rather than reprocessing of spent fuel. h Company's estimate of the cost of pemanent stor-age is based on a study by the IRC. This estimate of cost is sub-ject to a number of uncertainties including the timing of available storage capacity, the extent of future inflation, regulatory require-ments and the cost of future services, all of which may require periodic revisions in future nuclear fuel soortizatiion ratas. { N original cost of Nuclear Fuel-Spent has been fully amortized. Amounts for the final disposition of fuel have been collected total-ling $15,401,000 at December 31, 1979 and $11,365,000 at December 31, 1978. h se amounts are reported under the caption "Acc=nl ated i l Amortization" in the attached financial stata==nts. Spent fuel l .I discharged prior to June 10, 1977 has not been revalued to reflect perman nt sto ra ge. Management will revalue its spent fuel inven-y tories beginning in 1980 to reflect an estimate of the cost of l permanent disposal. Costs of revaluation will not affect net income of the Compacy as such costs are recoverable under the terms of the power contracts. I. Allowance for Funds Used Durine Ccustruction and Allowance for Funds
,I Used for Nuclear Tual (AFC): h Company records the net cost of borrowed funds and a reasonable return on other funds used to fin-
, ance construction and nuclear fuel acquisition programs. h amount of the allowance recorded is detemined by multiplying the average monthly dollar balance of Construction Work In Progress (C' NIP) and J Nuclear Fuel In Process and Stock (NTIPS) by rates related to the cost of the capital used to finance the respective additions. h following table contains the weighted average rates used during the most recent five annual periods:
, 20 1
L m_ __m
Maine Yankee Atomic P'ower Company Fare 10-E-1975
)
, Maine Yankee Atomic Power Campany !
EDT13 TO FINANCIAL STAT 3 MEETS l i f 1. SN MARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) AFC AFC on CWIP on NFIPS l 1979 7.68% 7.40% 1978 7.60 7.00 1 1977 7.87 6.98 1976 - 8.07 7.21 l 1975 8.46 7.35 I Unamortized Gain or T.oss on Reacquired Debt: Gains and losses on bonds reacquired to satisfy sinHng fand requirementa of First Mortgage Bonds have been deferred and are being amortized to income over the remaining original teres of the applicable series as pre-a scribed by the Unifore Systee of Accounts of the FERC. l
- 2. INC0tE TAI EIPENSE l h components of Federal and state income taxes reflected in the star ===ats of income are as follows:
Year Ended December 31, 1979 1978 1977 1976 1975 (Dollars in h usands) Federal: Current 3 602 $ 625 $ 134 $ - { Deferred and Investment Tax Credits, Net 6,076 6,831 7,594 7,410 7,042 l 6,678 7.456 7,728 7,410 7,042 State: i Current 344 495 56 165 - Deferred 842 752 1,274 1,003 1,150 1,186 1,247 1,330 1,168 1,150 Total Federal and State Income Taxes $7,864 $8,703 $9,058 $8,578 $8,192 f h Company provides deferred taxes for the tax effects of timing differences between pre-tax accounting income and taxable income. Prior to 1975 the Company did not provide fully for the tax effect I of timing differences and beginning in 1976 is providing additional l deferred taxes tn recognize the tax effect of these differences. ! hoe additional deferred taxes are recoverable under the teres of ( the power contracts described in Note 1. [ h table below reconciles a provision calculated by multiplying i income before Federal income taxes by the scatutory Tederal income tax rate to the above provision for Federal income taxes: 1 f
, 21 0 6 l
Maine yankee Atomic Power Company Form 10-E-1979
' !!aine yankee Atomic Power Company NOTES TO FDIANCIAL STATE!!DTS
- 2. INC0tS TAI EIPUSE (continued)
(Dollars in Thousands) 1979 1978 1977 1976 1975 i Amount 1 Amount 1 Amount 1 Amount 1 Amount J 6 Federal income tax provision at statutory rate $6,591 46.0% $7,2F8 48.0% $7,446 48.0% $7,313 48.0% $7,128 48
, (Increase) i neductions in taxes resulting l from: .
Deferred taxes not provided on certain
- timing dif-farences 411 2.9 429 2.8 429 2.7 143 .9 - -
Amortization of invest-ment taz credit (678) (4.7) (573) (3.8) (456) (2.9) (331) (2.2) (293) (2 l' Other 354 2.4 312 2.1 309 2.0 285 1.9 207 - 1. Tederal income tax provisions $6,678 46.6% $7,456 49.1% $7,728 49.8% $7,410 48.6% $7,042 47 l I Investment tax credits are ' deferred and amortized over the life of the assets giving rise to the credits. At December 31, 1979, the Company had available approximately $5,800,000 of investment tax credits which any be used to reduce Federal income taxes which would otherwise be payable. Available net operating loss and investment tax credit carryforwards have been utilized to the extent possible to e14=4nate current taxes payable in each period. , The Company has provided for, and deducted for tax purposes, certain l costs associated with anclear fuel reprocessing and storage. In the i awa=4 nation of the Company's Federal income tax returns for years 1973 through 1977, the Internal Revenue Service ("Dts") has disallow-ed the current deduction of these costs. If the ins prevails, the I Company will be required to fully utilize the $5,800,000 of invest-ment tax credit available as of December 31, 1979 and to pay Federal and state income taxes of approximately $1,375,000 to meet the cueu-
! lative income tax assesseests through 1979. However, these assess-menta vill have no effect on income tax expense because the Company provides ineone taxes for the effects of all timing differences.
- 3. NOTES PAIAEE TO BAIES The Company had lines of credit at the perioda ended December 31, I 1979 and 1978 totaling $14,000,000. With respect to $13,000,000 of l
4 f 22 O
Maine Yankee Atomic Power Company Form 10-E-1979 , 1 I I Maine Yankee Atomic Power Company l I EDTES TO FINANCIAL STA m ourT3 i f l J. NOTES PAYARTl TO BAMIS (continued) the line, the enspensating balance requirement is 15% of average {
- outstanding borrowings. The compensating balance requirement for l the remaining $1,000,000 is 10% of the line or 20% of outstanding ,
i borrowings, whichever is greater. Certain information related to l these lines is as fonows for the years ended December 31: 1979 1978 ! j (Dollars in h usanda) Total lines of credit $14,000 $14,000 Borrowings outsenad4ng 3,925 - Average daily outseendine borrowings 1,148 97 i Highest level of borrowings 9.300 3,900 l j Anan=1 interest rate at year and , 15.25% - 1 Average anor.al interest rate 15.40% 7.79% j l
- 4. FIRST HoltIGAGE BONDS The annual sinking fund requirements of the First Mortgage Bonds currently outse =ading amount to $4,775,000 for each of the years 1980 through 1984. Bonds repurchased amounted to $3,436,000 at December 31, 1979 and $3,361,000 at December 31, 1978.
Under the terms of the Taden':nre securing tLe First Mortgage Bonds, substantially all electric plant of the Company is subject to a first mortssge lien.
- 5. MIA FCII. COMPANY On August 26, 1976, the Company entered into a Loan Agreement cov-ering the issuance of up to $35,000,000 principal amount of promis-sory notes to MIA Fuel Company, a subsidiary of BSC Holdings, Inc.
ESC is owned by a partnership composed of partners of Goldman, Sachs & Co. Certain information related to this loan arrangement is as follows for the years ended December 31,: i 1979 1978 (Dollars in husands) Promissory notes outse=ading $33,450 $17,650 Average daily outse=ading borrowings 28,252 16,002 Highest level of borrowings 34,250 25,100 Annual interest rate at year and 14.18% 10.61% I Effective average annum 1 interest rate 13.33% 10.11%
! The Loan Agreement provides that, in the absence of an Event of Default (as defined) or occurrence of a Terminating Event (as defined) the arrangement will extend to May 1, 2002, unless terminated by either party upon proper notice. The Company I
meet provide 90 days written notics while MTA Tual Company mast give at least three years written notice. In order for the arrangement to extend beyond August 26, 1981, the PUC I must extend its present approval of the arrangement. 1
, 23
!!aine Yankee Ato ic Power Coinpany Farm 10-E-1979
?
i lig Tankee Atomic Power Company I l EDIES TO FINANCIAL STA N 1rIS
- 6. N7"aAH PRETZERED STCCE I
The Company may redeem, in whole or in part, any of the 7.48% Series Preferred Stock upon not 1ssa than thirty nor more than fifty days' notice at $107.11 per share on or before December 31, 1982, and at j amounts decreasing to $100.00 thereafter; in each case plus accrued dividends. I Beginning in 1978, 6,000 shares must be redecuned and cancened i I ==pn=117, at par, and at the election of the Company ac sdditional 6,000 shares may be redeemed and cancelled, at p.r, on each redeep- j i tion date. The optional provision is not .umulative. l f Preferred Stock repurchased and act cancelled amounted to 7,300 shares at Decembar 31,1979 and 7,040 shares at December 31, 1978. l
- 7. RETIRE!!ENT INCatfE PIAN f
l The Company has a nonecatributory retirement income plan which covers substantially all full-time employees. h Cospany's policy is to fund pension costs accrued, including amovs s sufficient to amortize unfunded prior service costs of $155,598 as of December 1, 1978 over 30 years. The Plan expense approximated $182,000 'for the year 1979, $130,000 for the year 1978, $121,000 for the year 1977, $86,000 for the year 1976 and $72,000 for the year 1975. As of December 1, 1978, the data cf the 1:.st actuarial review, the market value of the assets i exceed =4 t!e actuaris~ly computed value of vested benefits by
$532,091.
! 8. CottiIT!!ENTS AND CONTI3GENCIIS f Nuclear Tual l The Company anticipatas nuclear fuel expenditures of $26,749,000 for 192') (exclusive of AFC) and $85,144,000 for the period 1981 through M84 (exclusive of AFC).
The Company has contracted for the purchase 6f all of its uranium i concentrate requirements through 1983. In addition the Company has a contract with a uranium supplier for the purchase of up to l 1.3 million pounds of uranium concentrates. Deliveries of these concentrates are scheduled to begin in 1981 and and in 1992, but delivery is contingent upon the comercial operation of a processing f facility which is enrrently under construction. The Company, has not included fuel expenditures or deliveries for this contract in I the irformation presented above. The impact on expenditures for the 1981 through 1984 period could amount to $25,422,000 and the uranium concentrate requirements would be fulfilled through 1986 if contracted deliveries are fulfilled. l l l l t The Company has conversion contracts through 1983 and has a contract I l with the Department of Energy for enrichment services through 2002. l Its fabrication requirements are covered through 1983, with a cur-rent contract option for two additional years. It has no contrac-taal arrangements for - reprocessing or per==nat storage of spent I 24 1
Maine Tankea Atomic Power Comp:ny Farm 10-E-1979 Naine Yankae Atomic Power gepany l BOTES 70 yDANCIAI. S*1m8DrTS I I'
. 8. CuttiITMENTS AND CONTINGENCIES (continued) fuel. The Company is expanding its on-site spent fuel storage
{ facility to provide capacity to store such fuel through 1983 while maintaining a full cora discharge capability. In addition, in l September 1979 the Company filed with the NRC a proposed change in i its operating license relating to increasing its existing spent fuel storage capacity by providing more compact fuel storage. An inter-venor has requested a hearing, which the Congpany expects will be l held after tha first quarter of 1980. h Cogany cannot predict the scope of that proceeding, its daration or its outcome. If the proposed change is not approved, the Company will have to develop alternative plans which would involve further approval by the NRC.
, Construction h Company anticipates construction expenditures to amount to l $13,000,000 for 1980 including $3,000,000 towarda a $6,300,000 con-tract comunitment for the purchase of a spaz. turbine rotor.
I Price-Anderson h 1975 -A==ats to the Price-Anderson Act changed the public liability insurance requirementa for the nuclear industry. Since ( Angnat 1, 1977, each reactor licensee is required to carry $160 mil-l lion of primary public liability insurance, supplemented by a mandatory industry-wide program of self insurance. Under the pro-gram, in the event of a nuclear incident at any operating reactor in the United States, unch licensee could be assessed up to $5 mil-lion with a limit of two assessments per resctor owned per calendar year in the event of more than one incident. Three Mile Island h events dunna the spring of 1979 at the Three Mile Island Naclear Unit No. 2 in Pennsylvania ("THI") resulted in damage
, to the THI plant and release of radioactivity into the environ-aant and caused widespread concern about the safety of nuclear
[ generating plants. N incident also prompted a rigorous reewn=4n= tion of safety-related equipment and operating procedures l in all nuclear facilities by their owners and the MRC. h commission formed by. President Cartar to investigate and report on the causes of the TMI incident issued its report on October 30, 1979, rec- int a number of changes in NRC 1 organization and practices , lict.asing of anclear plants, plant operating practices, operator training and other safety-related setters and on January 13 , 1980, an IRC-commissioned report I containing similar ree - d=tions was released. As a re-sult, the NRC has promulgated numerous requirements, including both e near-teza modifications and longer-term design changes. h Company has made the modifications required to date by the NRC, but cannot predict what further modifications will be required, their cost, or their effect on the operation of the Maine Tankee plant.
- 9. ARTI-NUCLEAR PETITION MIVE t
A petition calling for tar =4n= tion of the production of electricity [ l by nuclear fission due to alleged safety and econceic reasons, and i
! 25
l Maine Yankes Atomic Tower Company Form 10-K-1979 4 Maine Yankee Atomic Power C g j EDIES TO FINANCIAL STAT M M TS i
- 9. ANTI-NUCIZAR PETITION DRIVE (continued) ;
f the consegr.ent shutdown of the Company's nuclear plant, was circu-I lated by certain groups in Maine. h petition was signed by more
. than the required number of voters and was presented to the Maine
. Legislature in February, 1980. Under Maine law, the Eegislature mast enact the proposed legislation at its 1980 session or refer it to a vote of the electorate. h Company is presently unable to predict the ultfaste resolation of the petition drive, including i 6
the result or validity of any legislative action or referendum vote, , which would be held in the late summer or fall of 1980 pursuant to a l gubernatorial proclamation after adjournment of the Legislature.
& Company believes that the Maine Yankee plant is both a safe and )
the most economical source of base load electric power, and intends i to take all reasonable steps necessary to provide for its continued operation of the plant. I 3 10. UNAUDITED QUARIERLY TINANCIAL DATA 1 1 i' Unaudited quarterly financial data pertaining to the results of l l operations is shown below: ) 1 1979 Quarter Ended i Mar. 31 June 30 Sept. 30 Dec. 31 (Dollars in husands Except Per Share amounts) Electric Operating Revennes $16,592 515,324 $17,686 $19,265 Operating Income 4,334 a,234 4,145 4,204 Net Income 1,9'3 '.,929 1,876 1,912 Earnings Per Share of Comenon Stock 3.35 3.35 3.26 3.34 i l 1978 Quarter Ended 1 Mar. 31 June 30 Sepc. 30 Dec. 31 (Dollars in h usands Except Per Share Amounts) ) Electric Operating Revenues $17,082 $17,179 $17,160 $18,952 1 Operatlag Income 4,219 4,052 4,148 4.393 Net Income 1,932 1,930 1,931 1,934 Earnings Per Share of Common Stock 3.35 3.35 3.35 3.35
- 11. SUPPT_nnTART INFORMATION TO DISCIASE THE EFFECTS OF CHANGING FUCES (UNAUDITED) h following supplementary information is supplied in accordance l with the requirements of the Statament of Financial Accounting Stan-dards No. 33 for the purpose of providing certain information about l
the effect of changing prices. It should be viewed as an estimate of the approximate effect of inflation, rather than 'as a precise measure. l l ] Constant dollar-amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumer j 26
11aine Yankee Atomic Power Company Fern 10-E-1979 i
' Maine Yankee 'tomic Power Company BITIES TU yTwaur Tar STAtrMerTS f . 11. SUPPIZMENTARY IIF0Eti& TION TO DISCl0SE THE EFIECTS OF CHANGING PRICES (UgAUDITED) (continued)
Price Indez for All Urban Consumers (CPI-U). Current cost amounts reflect the changes in specific prices of plant from the date the
! plant was acquired to the present, and differ from constant dollar
' amounts to the extent that specific prices have increased more or less rapidly th n the general rate of inflation. The current cost i of enclear generating plant is estimated based on an engineering study of tne current cost (per negawatt) of replacing the present generating plant.
Nuclear fuel used in generation has been restated from historical cost asing current market prices of uranium, conversion, enrich-
~
aast and fabrication. Notletr fuel expense was developed by divid-ing the estimated currn'. cost of the in-reactor fuel by the l expected generation of the core times the actual generation produced during the year 1979. Depreciation expense for the current cost of productive capacity was developed by applying the depreciable rate to the cvfrent cost value adjusted by the ratio of average historical cost f.o year-end l historical cost.
. Since. only historical costs are deductible for income tax purposes, ;
the income tax expense in the historical cost fh-a-4=1 statements ' is not adjusted. Under the rate-making practices prescribed by the regulatory com-missions to which the Company is subject, only the depreciation of i historical cost of utility property is included in the cost of ser-
^
vice used to establish the Company's rates. Therefore, the cosc of plant and rmetame fuel stated in r=== of constant dollars or cur-rent cost that exceeds the historical cost of plant is not presently g recoverable in ratas, and is reflected as a reduction to not recov-
' erable costs. While the rate-making process gives no recognition to the current cost of replacing property, plant and equipment, based en past practices the Company believes it will be allowed to earn on l and recover the increased cost of its not investment when replace-ment of facilities actually ocents.
To properly reflect the economics of rate regulation in the State-sent of Income from Operations Adjusted for ^=a-ine Prices, the l reduction of utility plant and nuclear fuel to net recoverable cost J should be offset by the gain from the decline in purchasing power of net amounts owed as shown below. During a period of .aflation, t holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attributable to the substantial amount of debt which has been used to finance property, plant, equipment and nuclear fuel. l Since the depreciation on utility plant and amortization of nuclear i fuel is limited to amounts based on historical costs, the Company l 1
! 17 i
i
!!aine Yankee 4tomic Power Company Form 10-K-1979 i
. Maine Yankee Atomic Power Company 1
N17IES TO FINANCIAL STATE!!ENTS 4
- 11. SUPPLE!!ENTARY INFORMATION TO DISCIDSE THE ETIT. CTS OF CHANGING PRICES l (UNAUDITED) (continued) does not have the opportunity to realize a holding gain on debt and
' is limited to recovery only of the embedded cost of debt capital.
i Statement of Income and Operations Adjusted
; for Changing Prices for the Year Ended
; December 31,1979 (Dollars in Thousands)
Constant Current Dollar Dollar Conventional Average Average Historical 1979 1979 Cost Dollars Dollars Operating Revenues $68,867 $68,867 $ 68,867 Operation & Maintenance 16,737 16,737 16,737 Fuel Expense 15.319 18,147 28,518
, Depreciation & Amortization 8,279 13,692 26,299
, Taxes 11,614 11,614 11,614
;; Interest Charges 10,722 10,722 10,722
- i. Other, Net (1,455) -(1,455) (1,455)
Income (Loss) from Operations (excluding reduction to net recoverable amount) $_7,651 $ (590) $(23,568) l Increase in specific prices (current cost) of plant I and Nuclear Fuel held dur-ing the year * $ $ 92,831 Reduction to net recov-l erable amount (24,833) (11,875) Effect of increase in general price level (82,811) Net (1,855) Gain from decline in pur-chasing power of net amounts owed 24,666 24,666 i
$ (167) $ 22,811
*At December 31, 1979 current cost of Plant and Nuclear Fuel, net of
! accumulated depreciation and amortization was $704,512, while histori-
- i cal costs or net cost recoverable through rates was $274,257.
i r l l
} 28 )
l l
t!aine Yank 4.a Atomic Power Compray Form 10-K-1979 Maine Yankee Atomic Power Company NOIES TO FINANCIAL STATE!!ENTS
- 11. SUPPtDfENTARY INTORMATION TO DISCl0SE THE EFFECTS OF CHANGING PRICES (UNAUDIIED) (continued) l Five Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices (Dollars in Thousands, Average 1979 I
Dollars) Years Ended December 31, 1979 1978 1977 1976 1975 Operating Revenues $68,867 $78,296 $73,646 $75,051 $83,253 I I Historical Cost Information Adjusted for General Inflation Loss from operations excluding reduction to net recoverable amount $ (590) Loss from operations per common share
, (after preferred dividend requirement) $ (3.18)
Current Cost Information I Loss from operations excluding reduction to l net recoverable amount $(23,568) i Loss from operation's per common share (after preferred l
; dividend requirement) $(49.14)
Excess of increase in
, general price level over increase in
}
specific prices after reduction to net re-coverable amount $(1,855) l General Information Net assets at year end I at recoverable amount $ 63,222 Gain from decline in parchasing power of I net amounts owed $24,666 Cash dividends per r- common share $13.250 $14.909 $16.055 $17.092 $18.045 l
.l Average Consumer l
Price Iadex 217.4 195.4 181.5 170.5 161.2
.I
! I 29 I i l
Maine Tankee Atomic Power Company Iocs 10-E-1979 Schedule V Maine Tankee Atomic Power Company EIzC nIC PROPEFTT AND NUCI.ZAR TUE. For The Year Ended December 31, 1979
, l (Dollars in. Thousands)
Balance at Balance { Beginning Additions Retirements Transfers and at End of Period at Cost or Sales Other Charaes of Period Electric Properev { Organization $ 7 $ -
$ 7 HisCal1 anm3us Intangible Plant - 601 - - 601 l Land and land rights $22 - - - 522 Structures and improvements 56,025 1,505 3 - 57,527 Reactor plant
; equipment 101,189 280 1 - 101,468 i, Turbogenerator units 57,605 - 608 - 56,997 Accessory electric equipeant 14,498 - - - 14,498 f
Hiscellaneou power plant equi; . 4,725 405 2 - 5,128 Substation eq Q . 3,239 - - - 3,239 Hiscellawoes electric property 74 - - - 74 Unfinished construction 3,275 5,676 - - 8,951 Total Electric Property $241,159 $ 8,447 $g 3 - $249,012 i Nuclear Tual Nuclear fuel in i reactor S 52,564 $
$- 3 - 3 52,564 l Nuclear fuel in process 35,905 35,167 - (30,678) 40,394 i
Euclear fuel -
,; spent 42,557 - - - 42,557 Nuclear fuel -
stock 4,924 77 -
- 30,678 35,679 I- $135,950 $35,244 S- $
- $171,194 1
t i l l l ! 30 I I I I l
1 Maine Yankee Atomic Tower Company Tars 10-E-1979 Schedula 7 (continued) j 1 6 Haine Yankee Atomic Power Company l EIECTRIC PROPERIT AMD NUC ZAR IML l Tor The Year Ended December 31, 1978 (Dollars in Thousands) l I Balance at Balance Beginning Additicas Retirements Transfers and at End I of Period at Cost or Sales Other Chartes of Period Electric Property 1 organization $ 7 $ -
$ 7
; Land and land rights 522 - - - 522 Structures and improvements 55,861 166 2 - 56,025 Eeactor plant equipment 101,084 126 21 - 101,189 y
. Turbogenerator units 56,658 947 - - 57,605
, Accessory electric
; equipment 14,477 21 - - 14,498 Hiscellaneous power plant equip. 4,607 130 12 - 4,725 Substation equip. 3,239 - - - 3,239 Hiscellaneous electric property 74 - - - 74 Unfinished construction 2,537 736 - - 3,275 Total Electric -
FM $239,066 $ 2,128 $2
$ - $241,159 Nuclear Tual f*.laar fuel in teactor $ 39,812 $ -
$- $ 12,752 $ 52,564 Nuclear fuel in process 33,140 25,665 - (22,900) 35,905 Nuclear fuel -
spent 33,202 - - 9,355 42,557 I Nuclear fuel - stock 4,065 66 - 793 4,924
$110.219 $25,731 $- $ - $135,950 t
I i i 31
Maine Yankee Atomic Power Company Form 10-K-1979 Schedule VI Maina Yankee Atomic Power Company ACCmm2Trn PROVISION FOR EFRECIATION AMD AMORTIZATION
- l OF ELECTRIC PLANT AMD NUCLEAR FEL For The Years Ended December 31, (Dollars in Thousands) l t
I Additions Balance at Charged Balance t Beginning to Costs Other at End l 1978 of Period and Expenses Retirements Changes of Period
$38,313 $ 8,173 $ (4) $46,448 Electric Property $g Nuclear Fuel $59.114 $17,411 $- $
- $76,525 1979
' $54,105 Electric Property $46,448 $ 8,279 $g $ (8)
Nucisar Fuel $76,525 $15,319 $- $ - $91,844 See Note 1 of " Notes to Fia ae4=1 Statements" for the Company's depreciation and amortization policies. 1 I I I l I f I l . 32 l
l
!!aine Yankee Atomic Power Company Fern 10-E-1979 I i
PART II . l Itas 13 - SECURITT OWlERENT18 Oy CERTAIF BENETICIAL OWNERS AND MANAGCfEfT l
- The following table shows the ownership, of the Company's 500,000 shares of $100 par value Common Stock, all of which is issued and outsunMng and all of which is held of record and beneficially. None is held by management.
Amount Percenta ge Name and Class owned of Class 1 Central Maine Power Company 190,000 shares 38% i Edison Drive . Augusta, Maine 04336 i New England Power Company 100,000 20 20 Turnpike Road (Route 9) Westboro, Massachusetts 05181 The Connecticut Light and Power Company 40,000 8 PO Box 2010 l Hartford, Connectient 06101 Bangor Hydro-Electric Company 35,000 7 33 State Street Bangor, Maine 04401 . Maine Public Service Company 25,000 5 209 State Street
- Presque Isle, Maine 04769 Public Se dee Company of New Hampshire 25,000 5 PO Box 330 Manchester, New Hampshire 03105 ,
i Cambridge Electric Light Company 20,000 4
; 675 Massachusetts Avenne Cambridge, Massachusetts 02139 Montaup Electric Company 20,000 4 PO Box 2333 l Boston, Massachusetts 02107 Ihe Hartford Electric Light Company 20,000 4 l
PO Box 2370 Hartford, Connecticut 06101 Western Massachusetts Electrii Company 15,000 3 174 Brush Hill Avenne l West Springfield, Massachusetts 01089 l Central Vermont Public Service Corporation 10,000 2 77 Grove Street
'l Rutland, Vermont 05701 _
500,000 shares 100% j = 1
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Maine Tankeo Atomic Power Company Form 10-E-1979 ITEM 14 - DIRECTORS AND EXECDTIVE OFFICERS OF TE REGISTRANT A. Directors The directors of the Company and their principal occupations and all positions and offices with the Company are as follows: Name, Age and Year First Elected Director Principal Occupation F.1 win W. Thurlow, 56, 1973 President and Chief Executive President and Director officer, Central hina Power Company i Tha=== C. Webb, 45, 1977 Senior Vice President, Finance Vice President and Director Central Maine Power Cogany Charles E. Monty, 53, 1971 Senior Vice President, Engineering Vice President and Director and Production, Central Maine Power Company John B. *=ad= = =, 51, 1975 Vice Prasident, Central Maine
' Power Company Vice President and Director Joan T. Bok, 50, 1977 Vice Chairman, New England Electric Director System William F. Burt, 54, 1978 Assistant to the President, New Director England Gas and Electric Association Ralph A. Brown, 62, 1968 President and Chief Executive officer, Director Maine Public Service Company John F. G.* Eichorn, Jr., so, President, Eastern Utilities 1971, Director Associates William B. Ellis, 39, 1976 President, Bortheast Utilities Director Thomas A. Greenquist, 51, 1973 Pasident, Bangor Hydro-Electric Director Company James E. Griffin, 52, 1973 President and Chief Executive Director officer, Central Vemont Public Service Corporation Carrol R. Lee, 30, 1979 Assistant to the President, Director Bangor Hydro-Electric Company l
Guy W. Nichols, 54, 1978 Chairman, P esident and Chief Director Executive Officer, New England Electric System Robert F. Scott, 50, 1976 Senior Vice President, Customer Director Services and Ratss, Central Maine Power Company Donald C. Switzer, 63, 1971 Vice Chairman, Northeast Utilities Director j William C. Ta11===, 59,1966 President (Chief Executive), Public I Director Service Company of New Hampshire l l
' 34 i
Maine Yankes Atomic Power Company Farm 10-E-1979 i { Each of the Directors, other than Mr. Webb, has for the past five years been and is now an officer or employee of one of the Sponsors J or an associate company thereof. Mr. Webb joined Central Maine i Power Company as Vice President, financial and Treasurer in 1977 after having served as Treasurer (from 1974) and Assistant Treasurer (1972-1974) of Wisconsin Power and Light Company. Each of the
, I Sponsors is represented on the Company's Board of Directors, but there is no formal underse=nding with respect to such representa-tion. The Directors are elected at the annual meeting of stock-j
, holders and hold office until their successors are elected and qualified.
B. Executive Officers f The following are the executive officers of the Company with all positions and offices held: { ~ Name Am Office and Year first Elected i Elvin W. Thurlow 56 President and Director - 4975 Charles E. Monty 53 Vice President and Dissector - 1971 John B. 7=adan= 51 Vice President and Director - 1975 Thomas C. Webb 45 Vice President and Director - 1977 Donald G. Vandenburgh 56 Vice President - 1974 Wendell P. Johnson 57 Vice President - 1972 Richard A. Crabtree 33 Treasurer - 1977 Seward B. Brewster 52 Secretary and Clerk - 1968 i Each of the executive officers other than tir. Webb, whose business experience is given under paragraph A above, has for the past five I years been and is now an officer or employee of one of the sponsors I or an associated company thereof. The executive officers are elect-ed annually by the Boars of Directors and hold office until their l successors are elected and qualified. There are no family relationships between any director or executive officer not any arrangements pursuant to which any were selected as a officers or directors. ITEM 15 - MANAGEMEFT RENUMERATION AND TRANSACTIONS The Company has paid no ra=== ration to its officers or directors, but, complying with regulatory requirements, has reimbursed Central Maine Power Company for services rendered by its employees. f During the construction period, no return was paid to Sponsors on the
' money paid by them for Common Stock, but a return (at the rate of 7% per
==== through November 30, 1970 and at the rate of 10% per anm= there-after) was charged to plant in a manner similar to that followed by
, utility companies in recording plant construction costs. The amounts
- i. so charged were recorded as paid-in capital. This practice terminated as of December 31, 1972, the last day of the last month of the con-l struction period. These amounts are to be paid to the Sponzars on the i redemption of Common Stock. The Company's First Mortgage Indenture and l
!faine Tanke2 Atomic Power Company Form 10-I-1979 I
the provisions of its Articles of Incorporation relating to its capital stock contain various limitations on redemption. l I During 1979 and 1978, the Company paid $3,1,23,255 and $2,462,917, respectively, to Yankee Atomic Electric Company, an associata of sev-eral of the Sponsors, for services at cost of its engineering and nuclear services department. Prior to the execution of the Capital Funds Agreements and Poe c Contracts, Central !!aine Power Company, one of the Sponsors, advanced necessary construction funds to the Company l at cost. Subsequent to that time, Central !!aine has furnished the Company certain engineeria.g. administrative and legal services, and I furnished certain facilities, at cost and electric service at its filed i rates. During 1979 and 1978 Central !!aise was reimbursed in the amount of $3,090,256 and $1,689,901, respectively, for such services. It is expected that Yankee and Central !!aine will continne to perform { such services for the Cogany in the future, for which they will be reimbursed by the Company. -
?. s i
SIGNATURES l I Pursuant to the requirements of Section 13 of the Securities Exchange r Act of 1934, the registrant has duly caused this report to be signed I on its behalf by the undersigned, thereunto duly authorized. IfAINE YANIEE ATotfIC PCER CCtfPANY
!! arch 25,1980 By /S/ R. A. Crabtree Treasurer By /S/ R. S. Howe Chief Accounting Officer u
ll Il. d b
EXHIBIT B l 1- l i
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NAINE EZCTRIC POWER COMPAMT, DfC. Indes to Financial Statements and Schedules . \ Financial Statements: I i Report of Independent Public Accountants. Statement of Income for the five years eoded December 31, 1979. Balance Sheet at December 31, 1979 and 1978. i [ Statement of Changes in Common Stock Investment for the five years ended December 31, 1979. Statement of Changes in Financial Position for the five years ended December 31, 1979. I Schedules: Y Electric Property for the years ended December 31, 1979 and 1978. VI Accumulated Provision for Depreciation of Electric Property
, for the years ended December 31, 1979 and 1978.
l All other schedules are omitted as the required information is inapplic-able or the information is presented in the financial stat-ents or , related notes. . , 1 t. f l 6 I i J EXHIBIT B a
i IEPORT OF DEEPMENT PUBUC ACCOGrIANTS { To Maine n ectric Power Company, Inc.: We have own=4aad the balance sheet of Maine nectric Power Company, Inc. (a Maine corporation) as of December 31, 1979 and 1978, and the i related statements of income, changes in common stock investment and
; changes in f4n==Hal position for the years then ended, and the support-1 ing schedules as listed on the accompanying indez. Our ====4"=tions were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circum-stances.
In our opinion, the financial stataments referred to above present fairly the f4a=aM21 position of Mains n ectric Power Company. Inc., as of December 31, 1979, and 1978, and the results of its operations and its changes in financial position for the years then ended, and the
, supporting schedules present fairly the information required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistent basis.
AirT1rtIII AFNDM & CO. Boston, Massachusetts, yebruary 6, 1980. l . I ( l I L
saine Electric Power Company, Inc. 1979 Maine Electric Power Company, Inc. I BAIB CE SIEET (Dollars in Thousands) ASSETS December 31, 1979 1978 l ELECTRIC.PROPERTT, at Original Cost (Notas 1 and 3) 1 (Sch. Y) $18,617 $18,617 Less: Acc - lated Depreciation (Nota 1) (Sch. VI) 6,482 5,747 r 12,135 12,870
' CURRENT ASSETS Cash (Note 4) 129 144
, Temporary-Investments, at Cost which approximates j market value 275 1,600 Accounts Receivable
- Associated Companies 1,165 802 Other 8,852 ; - 5,145 Other Current Assets 15 4 ' 147 Total Current Assets 10,575 7,838
.{ DEFERIED CPARGES 94 104
$22,'804 $20,812 I
STOCIHOIDERS' INVESTMENT AND LIABILITIES CAPITALIZATION Common Stock Investment Common Stock, $100 Par Value, Authorized 20,000 Shares, Outar=nM ag 12,467 in 1979 and 13,248 in 1978 $ 1,247 $ 1,325 Retained Earnings - - Total Common Stock Investment 1,247 1,325 Series A 9k1 First Mortgage Bonds due in Annnal Install ==nts through August 1,1996-Iass Sinking Fund Requirements (Note 3) 10,560 11,220 Total Capitalization 11,807 12,545 CURRENT LIABILITIES Current SinHng Fund Requirements (Note 3) 660 660 Accounts Payable Associated Companies 90 25 Other 468 4 Dividends Payable 37 40 Accrued Purchased Power 7,547 5,494 Accrued Interest and Taxes 466 468 i Total Carrent Liabilities 9,268 6,691 l DEDERRED CREDITS Accumulated Deferred Income Taxes (Note 2) 1,696 1,556 Unamortized Investment Tax Credits (Note 2) 10 10 Unamortized Gain on Reacquired Debt (Nota 1) 23 10 , Total Deferred Credits 1,729 1,576 CatniITMENTS AMD CONTINGENCIES (Nota 5) l $22,804 $::0,812 The accompanying notes are an integral part of these financial stacaments. i i. l
Maine Electric Power Company, Inc. 1979 l Maine Electric Power Company, Inc. 1 StaTitMrirf GF INCGE For the Five Years Ended December 31, 1979 (Dollars in Thousands Except per Shars Amounts) . I Year Ended December 31, l 1979 1978 1977 1976 1975 Electric Operating Revenues $98,122 $59,860 $72,758 $35,144 $16,242 f Operating Expenses Purchased Power (Note 1) 95,364 57,181 69,936 32,134 13,327 i Operation 206 182 195 192 159 Maintenance (Note 1) 153 44 45 203 103 Depreciation (Note 1) 735 736 735 735 730 Taxes Federal and State Income (Note 2) 162 197 221 214 212 l Local Property and Other 217 229 239 258 J Total Operating Expenses 96,841 58,569 71,371 33,736 14,776 Operating Income 1,281 1,291 1,387 1,408 1,466 Other Income and Deductions,
. Net 112 74 51 23 37 i' Income Before Interest Charges 1,393 1,365 1,438 1.431 1,503 Interest Charges Long-Tern Debt (Nota 3) 1,056 1,127 1,192 1,224 1,298 Other 182 74 73 25 14 Total Interest Charges 'M '1,201 1,265 1,249 1,312 Net Income $ 155 $ 164 $ 173 $ 182 $ 191 l Weighted Average Number of I Shares of Common Stock Outstanding 12,923 13,677 14,413 15,149 15,885 I
Earnings per Share of Common Stock $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 12.00 Dividends Declared per Share of Common Stock $ 12.00 $ 12.00 $ 12.00 $ 12.00 $ 15.10 l l The accompanying notes are an integral part of these financial stataments. l l i i t
Maine Eloctric Power Company, Enc.
! 1979 Maine Electric Power Company, Inc.
STAMENT OF CHANGF.1 IN CatedON STOCK INVESTMENT For the Five Years Ended December 31, 1979 l (Dollars in Thousands) l Amount Capital at Par Stock Retained Shares value Expense Earninas Total Balance December 31, 1974 16,192 $1,619 $(3) $ 49 $1,665
. Add (Deduct) .
Net Income 191 191 { Dividends Declared (240) (240) Redemption of Stock . (736) (74) (74) M
' Balance December 31, 1975 15,456 1,545 1,542 Add (Deduct) v Net Income 182 182 l
Dividends Declared (112) (182) Redemption of Stock (736) (73) (73) Balance December 31, 1976 14,720 - 1,472 W - 1,469 Add (Deduct)
- i Net Income 173 173 Dividenis Declared (173) (173)
Rederption of Stock (736) (74) (74) Capital Stock Expense 3 3 Balance December 31, 1977 13,984 1,398 1,398 Add (Deduct) Net Income 164 164 Dividends Declared (164) (164) Redemption of Stock (736) (73) _ _ (73)
. Balance December 31, 1978 13,248 1,325 1,325 Add (Deduct)
Net Income 155 155 l Dividends Declared (155) (155) i Redemption of Stock (781) (78) _ _ (78) Balance December 31, 1979 12,467 $1,247 $_ $_ $1,247 l - - The accompanying notes are an integral part of these f4a=aamt stae==ents.
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maine sicctric rower company, Inc. l 1979 J
\
t l Mains Electric Power Co w any, Inc. ) l I StaTFMENT OF CIANGES IN FINANCIAL POSITION I For the Five Years Inded Decesher 31, 1979 Oo11ars in Thousands)
. \
Tear Ended December 31, l [ 1979 1978 1977 1976 1975 Funds Provided From Operations Net Income $ 'ti5 $ 164 $ 173 $ 182 $ 191
- Depreciation
- 735 736 735 735 730 j I Deferred Income Tazes and i I
Investment Tax Credit, 3et 140 186 213 132 159
- $1,030 $1,086 $1,121 $1,049 $1,080 Funds Used 7 Plant Construction and Replacement - - 9 23 87 l
- SinHng Fund Requirements of Long-Tern Debt 660 660 600 720 660 Dividends on Common Stock 155 164 173 182 240 Redemption of Common Stock 78 73 74 73 74 Other (23) (5) (11) (12) (29) 870 892 845 986 1,032 Increase (Decrease) in Working Capital, exclusive of sinking I fund requirements $ 160 $ 194 $ 276 $ 63 $ 48 l
Increase (Decrease) in Working i Capital, exclusive of sinHng fund requirements-Cash, Receivables and .
,* Tagorary Investments $2,730 $ (421) $1,058 $4,982 $(1,076)
, Other Current Assets 7 4 (4) 44 13 ]
' Notes Payable - - 65 (65) -
Other Current Liabilities (2,577) 611 (843) (4,898) 1,111
$ 160 $ 194 $ 276 $ 63 $ 48 4 The accompanying notes are an integral part of these financial stata==nts.
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Maine Electric Power Company, Inc. 1979 Maine Electric Power Coogany, Inc. l EDTIS 70 yINANCIAL STArmrNTS I December 31, 1979 and 1978
, 1. Summary of Significant Accounting Policies The Campany; h Company owns and operates a 345,000 volt transmis- 1 sion interconnection, i I
Mains to the Cansdian border atcompleted in 1971, ez+=ading from Wiscasset, with a line Orient, Maine, where it connects j f of The New Brunswick Electric Power commission (New Brunswick) under a 25-year Interconnection Agreement. Under a Par-ticipation Agreement which terminates in 1996, all costs of th& Coe-pany (4= etna 4ng a reta M on invested capital), to the extent not met { by transmission revennae, are paid by the participating utilities (Participants), which include most of the larger companies in New
! ,-- rngtand and a group of publicly-owned systems. Under a Power Pur- ,
{ i chase Agreasent, New Brunswick is providing to the Participants over the interconnection up to 400,000 kilowatts of base load power , for a ten-year period ending October 31, 1986. The following is a list of those companies that are taking power
- ' under the Power Purchase Agreement and their respective entitlements:
1 Participant Percent of Entitlement Banger Nydro-Electric Company Boston Edison Company 2.395% Boylston Municipal Light Departamat 16.250 ! Central Maine Power Company .030 i Danvers Municipal Light Departamat 10.274 1
.371 !
Eastern Maine Electric Co-operative, Inc. 2.583
- yitchbara Gas and Electric Cosgany .770
)
Maine Psalic Service Company 1 Marblehead Municipal Light Depart:ssat .844 i .170 } i Middleborough Manicipal Light Department Middleton Municipal Light Department .769 Montaup Electric Coupesy .056 j 5.792 New England Power Company Newport Electric Corporation 22.500 Peabody Mumietpal Light Department 2.260
.j .546 Public Service company of New Isopshire i Shrewsbury Municipal Light Department 26.250
' Union River Co-op .275 Vermont Electric Power Company, Inc. .005 Wakefield Municipal Light Department 7.509
.168 West Boylston thsaicipal Lighting Department .083 f Total 100.000%
l I The following Maine electric utilities own all of the Company's Cosmos Stock: i Sponsor Ownership Interest l Central Maine Power Company i 78.15% Bangor Hydro-Electric Company 14.19 Maine Public Service Company 7.49 Woodland Water and Electric Company .17 Total
' 100.00%
l
't:mina Eisetric rower company, Inc.
1979
- 1. Susenry of Significant Accounting Policies (continued)
Emanlation: The Company is subject to the regulatory authority of the Federal Inargy Eagulatory Commission and the Public Utilities Commission of the State of Mains as to operations, accounting and l I other matters. Depreciation and Maintenance: Depreciatiin is provided using the
- l. straight-line method at rates designed to fully depreciata all prop-arties over the period anM ng July 1, 1996.
Minor renewals and betterments are charged to maintenance expense, i unless the item constitutas a retirement unit, in which case the new unit is charged to electric plant. At the time depreciable , properties are re'. ired, the original cost, plus cost of removal, I less salvage, of such proporcy is charged to the accuenlated provis-
- ion for depreciation.
I Unamortized Gains and Losses: Gains and losses on bonds reacquired to satisfy sinking fund requirements are deferred and amortized over
' the m iaia= original term of the Ser$~* A Bonds.
~
- 2. Ynea== Tax Impense l The components of Federal and Stata iscoes taxes reflected in the I statement of income are as follows:
t
' Tear Ended December 31, 1979 1978 1977 1976 1975 (Dollars in Thousands) yederal:
Current $ 21 $ 10 $ 8 $ 71 $ 45 - Deferred 121 162 183 112 131 Investment Tax Credit, Net _ 142 3) 171 192 1 185 2 184 8 ' l Stata: Current 1 1 11 8 ! Deferred 19 25 29 18 20 ' 20 26 29 29 2S < 1 Total Income Taxes $@ $E
$m
$214
$212 l
I i The Company provides deferred Federal and state income taxes for the tax effects of timing differences between pre-tax accounting income
; and income subject to tax. The deferred provision represents prin- '
I cipally the tax effects arising from the use of accelerated degree- ) istion for income tax purposes which currently exceeds the amounts i provided in the accounts. Investment tax credits are deferred and amortized over the lives of the related properties. l l The table below reconciles a provision calenlated by multiplying income before Federal taxes by the statutory Federal income tax rata [ to the above pesvision for Federal income taxes: l
\
l i f l I t t i 1 i
1 .. l Maine Elsetric PeJer Company, Inc.
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l 1979 l
, 2. Incces Tax Expense (continued)
I~ 1979 1978 1977 1976 1975 Amount } Amount } Amount } Amount } Amount } f (Dollars in husands) lFederalincometaxprovis-ion at statutory rate $137 46.0% $161 48.0% $175 48.0% $176 48.0% $180 48.0% _ Difference in, tax expense: Depreciation and Amor-tization for accounting purposes not allowed for tax purposes 22 7.6 22 6.7 23 6.2 22 5.9 22 5.8 Other iFederalincometax Q7,)(5.8) H2) (3.6) J ) 0.6) H }) (3.5) Q8,)(4.7) 9rovision $142, 2 47.8% $17J1, 51.1% $Q2 2 52.6% $ M 50.4% $ g 49.1%
- 3. First Hortgage Bonds ,
; Under the terms of the indenture securing the First Mortgage Bonds substantially all electric property of the Company is subject to a first mortgage lien.
h annual sinking fund rsquirement for First Mortgage Bonds is
$660,000.
- 4. Compensating Balances h Company had lines of credit at year-end 1979 tor =1fng $8,400,000.
With respect to $1,400,000, the average compensating balance is 15% of outstanding borrowings. h average compensating balance require-ment for $2,500,000 is 10% of the line or 20% of outstanding borrow-ings, whichever is greater. With respect to $1,500,000 the compen-sating balanca requirement is 2% of the line pins 13% of outse=nding borrowings. T M r===4=4a* $3,000,000 has no compensating balance t requirement but ha; an annual fee of 5/8 of 1% of the line with interest at 115% of prise. t h Company had lines of credit at year-end 1978 totaling $8,400,000. With respect to $4,400,000, the average compensating balance require-
' ment is 15% of outstanding borrowings. h average compensating balance requir==ent for $2,500,000 is 10% of the line or 20% of out-s**ad4ag borrowings, whichever is greater. With respect to the rum mining $1,500,000 the compensating balance requirement is 2% of q the *ica plus 13% of outs *=ading borrowings.
l'arta:n information related to these lines is as follows: 1979 1978 (Dollars in h usands) Total linas of credit at and of periods $8,400 $8,400 l Borrowin g outseending at end of the periods - - Average daily outs *=ading borrowings for the twelve months ended 1,179 765 Average annual interest rata for the twelve months ended 13.65% 9. 02*. Highest level of borrowing at any time f
] daring the twelve months periods 8,150 5,300 l =
Maine Elcctric Power Company, Inc. 1979 e 5. Commitments and Contingencies 1. Two actions have been brought in the United States District Court for the District of Maine, Northern Division, by the United States of America against the State of Maine, one on behalf of the Passa-maquoddy Tribe and die other on behalf of the Penobscot Nation of Tad 4=na. Each seeks damages of $150 million for alleged wrongs by the State in respect of Tad 4== lands. It is possible that the com-
, l plaints may be amended to assert claims with respect to the land itself or to seek damages, including damages from the present owners of the land, or both. Approximately 69*. of the Company's ,
electric properties are located in the territory which may be in- ,
~
volved in the claims. i
.l The Attorney General of the United States has obtained a stay of the proceedings to permit development of a comprehensive legislative proposal for resolving the problems underlying the litigation and i various extra-judicial settlement proposals are being explored by the parties. -.
; At least until legislation is introduced or the United States has decided whether to proceed with the Indian claims, it is not possible 1
; to assess the validity of such e1=4== as any be advanced by or on !
' behalf of the Tad 4=== or to detem4ne the extent to which the Coe-pany and its properties any be invol,ved.
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Maina Eloctric Power Company, Inc. 1979 l Schedule V Maine Electric Power Company, Inc. Electric Property For the Years Ended December 31, 1979 and 1978 (Dollars in Thousands) Balance
- at End i Classification of Periods Intansible plant I organization $ 4 Franchises and consents 4 Miscellaneous intangible plant 25 i Total intangible plant 33 Transmission plant I' Land and land rights 914 Structures and improvements 180 i Station equipment 3,040 ,1 Towers and fixtures 6 15 Poles and fixtures 9,029 , Overhead conductors and devices 4,563 ! Total transmission plant 18,341 General plant Land and land rights 4 Structures and improvements 9 Tools, shop and gara8e equipment 14 t'-=4 cation equipment 216 Total general plant 263 Total electric property $18,617 i
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u 4am mam.uaw ev a w .my. aus. 1979
; Schedulo VI
(, Maine Electric Power Cas unv. Inc. Accumlated Provision for Depreciation of Electric Property , For the Years Ended December 31, 1979 and 1978
-I' (Dollars in Thousands)
I Balance at Charged Balance l I Beginning to Costa Retire- Other at End I of Period and Expenses sents Channes of Period Electric property $5,0;1 $736 $ -
$ - $5,747 1979 -
Electric property $5,747 $735 $
$ - $6,482 See Note 1 of " Notes to Financial Statementa" for the Company's depreciation policy.
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