ML19327A997
| ML19327A997 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1988 |
| From: | Duffett J PUBLIC SERVICE CO. OF NEW HAMPSHIRE |
| To: | |
| Shared Package | |
| ML19327A998 | List: |
| References | |
| NUDOCS 8910240167 | |
| Download: ML19327A997 (40) | |
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ANNUAL REPORT ,
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1988
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' - Contents
. l' Highlights of 1988 and Description of Business 2 Letter to Shareowners s 6 Seabrook Station Licensing Update 8 Management's Discussion and Analysis
. 13 Financial Ststements I 33 Independent Auditors' Report l' . ,
. 34 Selected Data and Statistics 35 Directors and Officers 36 Shareownerinformation
. . 37 Service Territory Map e
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i W,e Highlights of 1988 -
' Change
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" Since 4 !
1988 1987 1987' Operating Revenues - $ 603,485,000 $ 549,108,000 9.9% i Operating Empenses $ 498,942,000. $ 450,960,000 10.6% Weighted Average Common Shares .t8,133,735 37.194.226- - Eamings (Loss) Per Common Share (Average) $ 1.14 $ (14.16) Gross Investment in Utility Plant $2,783,867,000 $2,754,461,000 1.1%
, Construction Expenditures $ 143,674,000 $ 295,874,000 (51.4)%
Prime Megawatt Hours Sold 6,811,549' 6,444,036 5.7% Number of Customers (Average) 373.158 358,619 4.0% Description of Business Public Service of New Hampshire
- is the largest electric utility in New Hampshire, supplying electricity to approximately three quarters of the state's one million residents.
The Company distributes and sells
. electricity at retail in approximately 200 cities and towns in the state and also sells electricity at w holesale to other utilities. On January 28,1988, the Company filed a voluntary petition for protection under Chapter 1) of the United States Bankruptcy Code, The Company is now operating its business as a debtor in possession.
I
y , E i.( March 27,1969 ..,
l 1 g Public Service of New H ampshire ("PSNH ") attention. On March 16,1989. U.S. Banknipicy , j- has been ' operating in bankruptcy for close to Court Judge -James E. Yacos issued orders 4 L founeen months now. Since filing for protection allowing panies other than PSNH to file plans of under Chapter 11 of the Bankruptcy Code, we reorganization. It is now probable that a number have focused on two main objectives: of competing plans wul be fUed by other parties. { including but not limited to the Equity Conunittee l l' e To fonnulate and implement a reorganization and Unsecured Creditors Committee. However, I l plan that best serves the interests of investors thejudge has prohibited active solicitation toward [ and customers for the long term; and [ the confirmation of any filed plan until at least l e To continue to provide outstanding service to ,
- customers,thereby protecting the value of the in a second ruling on March 16, Judge Yacos ;
enterprise which is a healthy electric business. authorized the appointment of an examiner by the . . U.S. Trustee on or before March 31. The exam- ! Meeting these objectives is not easy. But we iner's role wul primarily be to advise the judge on have bui!: a conunon base of knowledge among all technical issues and to assess the status of ongoing t parties a prerequisite to a confirmable plan of negotiations. i reorganization and we continue to provide L excellent service to our customers. The next two months could be critical in the ! reorganization process. We are already working At a special meeting of the Board of Directors i
' held in September, Robert J. llarrison voluntarily toward achieving a compromise that best satisfies (
the diverse interests of all the parties in the bank- ! stepped down from his position as president and ruptcy, and we will redouble our efforts. I am enief executive officer of PSNH, after over 30 hopeful that we can work out a solution that years of distinguished service to the Company. balances the interests and rights of PSNil's inves- ; Bob's premature relinquistunent of duties was ors and customers. I believe that the solution will . health related. I was elected to succeed Bob aF involve one of three financial reorganization ! PSNH's president and chief executive officer. attematives noted below on which we are now ! The Board also elected William J. focusing. I Scharffenberger as chainnan. In October,I announced a restructuring of top of New Hampshire, whereby the State and PSNil i management. completing the managemerit transi- would agree on appropriate and necessary rate i tion which was necessary after Bob's departure, increases. This attemative has the potential to be ! At that time I named four senior vice presidents: the quicke>t path out of bankruptcy. It restores the ; Charles E. Bayless, D. Pierre G. Cameron, Jr., regulatory balance between investors and i John P. Edwards, and Ralph S. Johnson. I am customers. and could be the basis for a consensual ! confident that, with this team in place. we can lead plan of reorganization that could be completed ' PSNil successfully through its bankruptcy reor- within the next year. . ganization in an efficient and effective way, and > position the Company as a strong competitor in 2. Reconfiguring PSNH as a holding company and the post bankruptcy period. moving regulation of the generation and transmis-sion functions from the New Hampshire Public The unusually rapid pace of events in the Utuities commission ("NHPUC") to the Federal Company's bankruptcy process means that there Energy Regulatory Comrnission ("FERC"). i are very recent developments to bring to your 2
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;" 3. A sale, merger or other combination of all or a We are actively discussing various compo-ponion of the Company's assets with one or more nents of a potential compromise with represen-c 3 panies. JWhether done in conjunction with a tatives of the State. I am hopeful that we can reach p switch to FERC regulation or not, this allemative a compromise agreement that will maximire the ;. j might produce value equal to or greater than a plan value of the business and be in the best interests of 1 where PSNH remains an independent entity, both investors and customers. We have publicly l stated that we would be amenable to a package l Near year end we filed with the bankruptcy which included three ten percent annual rate in- I coun a reorganization plan that proposed the creases. Under traditional ratemaking, increases I second attemative: a holding company primarily at this level ate substantially less than what PSNH regulated by the FERC. Of the three allematives, would be legally entitled to when Seabrook this was the only one that did not require agree.
Station begins to provide service to customers, ment by third panies before the coun's December However, extensive analyses by Company people 27 deadlme. A primary strength of the plan is that ' and by independent expens have convinced us federallaw more equitably balances the interests that rate increases in excess of this range would of investors and customers than does current New not maximize the value of the Company because I Hampshirelaw. AFERC basedplancouldenable the resulting loss of sales wculd more than offset I PSNH to obtam, appropnate and necessary rate l higher prices. increases even if a negotiated settlement is not achieved. In an increasingly competitive environ- The level of future rates must be detennined ment, there are also signilleant operating benefits in order to establish the reorganization value of the such as opponunities for more flexible power Company. In this connection, it is imponant to . supply planning and sales - to be gained i: a understand that the electric power business is . holding company configuration, steadily becoming less of a natural monopoly. [ Our customers have some very real energy i The FERC based plan has been vigorously ! options,includingcogeneration municipalization opposed by the State of New Hampshire, which and altemative fuels for space heating. In this en-does not want to lose any regulatory authority over vironment, there are economic limits on rates. ' PSNH. 'Ihe State has taken this position even Unrealistically high rate increases would impair though the generation costs incurred by all other the business and ultimately the value of the electrie utilities in New Hampshire are recovered Company. ! through rates regulated by the FERC Since the
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State is a full pany in the bankruptcy case, it can Earlier this month we released the results of a t use legal appeals in that process to greatly delay repon, "Affordability of Rates", prepared by l the completion of reorganization. Our holding Bower Rohr & Associates. a New Hampshire-based l company plan is based t.pon the presumption that economic consulting finn. The repon included a ;
; regulatory approvals are not required for most review of all analyses prepared by or for the ;
actions taken pursuant to a Chapter i1 plan. I Company relating to rate matters, as well as an believe that our presumption is valid. If it is independent review and evaluation by Bower Rohr. necessary for us to pursue the FERC-based option, The finn defined feasible rate increases as those however, the issue of w hether regulatory approv. which "are collectible, maximize the value of the als are required would undoubtedly be decided Company to its financial claimants, and do not ' only after lengthy coun appeals because the par- cause the Company to shrink in size as an enerFy l ticular issue is unprecedented. Given this poten. provider." Their conclusion was that increases in tial for protracted delays,it may well be that this the range of 30 percent were not only affordable plan does not maximize investor value. For this for customers, but also feasible for the business. reason, we coatinue to pursue the other two finan. Bower Rohr also shared our conclusion that sig-l cial reorganization allematives. nificantly higher rate increases would not maxi-l mire the value of the Company. 3
t Once the level of future rates has been deter- plant will receive the Nuclear ReFulatory l mined, w e can establish whether the Company is Commission's go ahead to begin the ascent to full l' worth more on its own, as pan of another com- power operation before the end of 1989. As the pany or with the assets sold individually. To date, in.senice operation of Seabrook Station looks there has been substantial interest from potential more promisinF, so does the beginning of recov-acquirers. Twenty fiveentitieshaveexpressedan cry of investment associated with the project. interest in acquiring some or all of PSNH's assets. However, it is important to remember that the ! Founeen of those firms have signed confidential- high rate increases which might be theoretically f ity agreements, thus Faining access to restricted justifiable once the plant is in service do not , information which will help them detennine if and necessarily translate into value maximization. Our how much they would be willing to pay. The goalis to raise rates to a level where shareowners interest of several of these finns is public: New and other investors get the greatest possible retum i England Electric System; Noaheast Utilities; New on their investment in PSNH. That goal will not Hampshire Electric Cooperative,Inc. (for one of be attained by raising prices to the point where PSNH's four operating divisions along with a large numbers of customers are driven off the small share of the Company's generation and system. ' transmission facilities); and the combined interest of Central Maine Power Company and Central In 1988,the Company addedjust under l 2,000 Vennont Public Service Corporation in a possible new customers to its systern. This addition is three way merger. To date, Nonheast Utilities is equivalent to the number of customers PSNH the only company which has made a formal offer serves in the city of Deny or in the city of Dover. i for a significant part of the Company's assets 1 Mostly es a result of this growth, prime megawatt-believe that once the rate issue is settled, the hour sales were up 5.7 percent and operating bidding process will begin in camest, enabling us income was up 6.5 percent, to determine if this alternative is going io produce the greatest value for investors. This customer growth is primarily due to the vitality of our service area economy. Although in January, the U. S. Supreme Court deter- the New Hampshire economy remains healthy, mined,on procedural grounds.not to hear PSNil's there is evidenec of a slowdown in state cconomic appeal of its 1987 Emergency Rate Case which growth. The most obvious indication is in job challenfed the New Hampshire Anti CWIP creation. For the first year since 1985, figures (Construction Work in Progress) law. A favor- show that fewer than 20,000 newjobs were created able ruling from the Coun could have resulted in in the state in 1988. In the residential sector, the availability of appropriate and necessary rate houses were on the market 20 percent longer and relief under existing New Hampshire regulation. housing starts were 25 percent lower in 1988 than We are disappointed with the Supreme Court's two years earlier. Finally,while PSNH eustomer action, but do not believe that it will have a major growth continued, it slowed to four percent in effect on the bankruptcy reorganization. The 1988, compared to five to six percent growth in Coun's action does not foreclose the Company's the prior two years, ability to challenge the Anti CWIP law in the future. I anticipate that PSNH's sales growth will continue, albeit at a somewhat slower pace than la On yet another front, in recent months consid- recent years. We are now forecasting that the crable progress has been made toward completing Company's average annual rate of sales growth the full powerlicensing of Seabrook Station. This over the next five years will be about four pere-progress is outlined in a separate section of this ent. With severe cash constraints, effectively year's annual report, it is new possible that the managing a growing business like this is a major
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? undenaking. The challenge is magnified by the e PSNH customer satisfaction has also been . importance of continued excellent customer measured by surveys conducted by highly re- l t service in an increasingly competitive business. garded survey research organizations. Their results have consistently shown a high I am extremely proud of how well we are favorability rating toward PSNH among its I meeting this challenge, as evidenced by the customers, significantly higher than general i examples cited below. public attitudes toward business as a whole. l e Continuing surveys of customers who have e Since the early 1980's, PSNH has made recently had transactions with PSNH confirm i tremendous advancements in power plant that we are providing the service that : availability. These improvements rank PSNil i customers want. For example,265 customers among the fastest improving power genera-were surveyed near the end of 1988, immedi- i tors in New England as measured by this ately follow ng contact with our Customer i imponant statistic. gen. ices Division. Ninery-one percent of these e Since 19.84, PSNH's oil costs have been among cust mers evaluated the service they received the very lowest in the nation due to our inno- as " excellent" or " good, vative use oflow gravity oil. The resulting I believe that we are doing a very effective job ! fuel savings - which are estimated at 516 of managing both the bankruptcy and the ; million over the past five years - are passed ' business. I would imagine that it seems to many of directly on to our customers, you that PSNH's bankruptcy reorganization has e PSNH is continually looking at ways to cut already taken too long. I share your fmstration costs. A key measure of our success in this with the length of time the bankruptcy process has ; already taken and with the lack of a consensual re- ! effort is seen in our staffing levels: at year end, PSNH had 206 customers for each employee. ISanizati n Pl an at this time. The truth of the
, l This is 35 percent better than the most recent rnatter is that with so many panies invo3ved - ;
national average, which was 153 customers including political interests represented by the ; per employee in 1987. State fNewHampshire-thebankruptcyprocess has proved to be extremely complex. And we are ; e Despite PSNH's bankruptcy, we have contin- advised that the process is moving far more quickly ued to innovate and invest on behalf of cus- than many expens would have predicted. How- , tomers. For example,in 1988 PSNH com- ever, with necessary and reasonable concessions pleted the centralization of its Customer fr m all panies, I believe it is now possible to . Services Division. This means that in addition complete a consensual plan of reorganization and to emergency service,non emergency service emerge from Chapter 11 protection within the is now available 24 hours a day. Only one D'XI F'af " befere my next annual report letter to other utility in New England offers this array you. of sen* ices around the clock. Sincerely, o One measure of customer satisfaction is the number of complaints received. In PSNH's *K - case, the number is remarkably low. In 1988 PSNH received only 386 complaints from the John C. Duffett Consumer Assistance Division of the NHPUC. President and This translates into one complaint for every Chief Executive Officer 978 customers. 5
7 .. Seabrook Station Licensing Llpdate PSNH is the principal owner of Seabrook Station, with a 35.6 percent share of the project. The plant was completed in 1986 but is not yet operatinF. In October 1986, the Nuclear Regulatory Commission ("NRC") granted the Joint Owners a 40 year operating license for Seabrook Station, and fuel was loaded into the plant. Soon afterwards,zero power testing was successfully completed. Under the terms r of the license, however, full power operation was subject to cenain conditions, including successfullow power testing and approval of emergency response plans by the NRC. The Company's New llampshire Yankee Division ("NilY"), the management organization for Seabrook Station, has made significant progress towards meeting these conditions in recent months. 1:
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Low Power _ In December 1988, the NRC voted unani- On htarch 9, New ilampshire Govemor G regg mously that a low power license for Seabrook announced that he intended to seek, in the bank. could be issued after the resolution of two issues: ruptcy coun, an injunction prohibiting the 1.) a motion by the biassachusetts Attomey Gen. Company from commencing low power testinF. eral to reopen the record for hearings on the No papers have yet been fded with the coun. response of Seabrook Station personnel to the PSNH cannot predict what effect these actions June 1988 graded exercise of emergency response might have upon the timing oflow power testing. plans; and 2.) a plan to satisfy the NRC's request that funds be available to decommission Seabrook . in the hypothetical case that full power authoriza-tion is not g ranted after low power testing has been Full Pow er perfomied. Approved emergency response plans are re-In January 1989, the motion from the hiassa. quired for both New Hampshire and for hiassa-chusetts Attomey General was rejected, leaving chusetts. On December 31,1988, an NRC hearing the aforementioned decommissioning fund matter board announced its approval of New as the sole outstanding issue. In mid Febru ary, the Hampshire's emergency response pian as ade. Joint Owners reached agreement on a funding quate to protect the public health and safety. This plan which involves the purchase of a $72.1 mij. decision followed 55 days of hearings over an lion surety bond; NHY is confident that this plan eight month period and more than 15,000 pages of will satisfy the NRC's final outstanding require. testimony. The ruling was a major step towards ment forlow power. Information with respect to full power authorization for the plant, this funding plan has been filed with the NRC staff i for its review. It is anticipated that a decision on A similar consideration process must now be the adequacy of these financial arrangements could completed regarding the adequacy of the be promptly rendered. it is then expected that utility sponsored emergency response plan for NHY will receive the go-ahead to proceed with biassachusetts and the June 1988 graded exercise low power testing. Any such authorization would of emergency response plans for both New be followed by a 10 day automatic stay to give Hampshire and biassachusetts. The staffs of both intervenors an opportunity to comment As a the NRC and the Federal Emergency hianage-result, low power testing is not expected to begin ment Agency have already published positive ' any earlier than April. reviews of the blassachusetts plan and the 6
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. I i exercise, reponing that both meet the require- would have been required to purchase some of ments to ensure that public health and safety MMWEC's Seabrook capacity for a perind of ten 1
would be protected in the unlikely event of an years after operation at a price well above market emergency at Seabrook Station. NHY is value, confident that it will be able to successfully ' complete this final step in the licensing process. At a total expenditure by PSNH of just over
$50 million,the estbnated value of this settlement Hearings have been scheduled by an NRC to PSNH is in excess of $400 million. In order to hearing board to begin on March 21. In a follow up fin +nce its agreement to fund MMWEC's memorandum, the NRC conunissioners said they pre operational Seabrook expenditures, PSNH has ,
expect the hearing board to complete hearings and secured a commitment for a $37.5 million issue a ruling on these two final matters by debtor in possession financing from Chemical September 30,1989. Following a decision on Bank. Both the settlement agreement and the these matters and after a final review and vote by financing arrangements are subject to approval by the NRC commissioners, it is anticipated that the bankruptcy coun. Pending its decision an the NHY would then receive the go ahead to begin the two matters, the bankruptcy court has authorized ascent to full power operation. The earliest pos. the Company to fund MMWEC's share of sible date for such authorization is probably to- pre-operational Seabrook expenditures until wards the end of this year. PSNH continues to use mid April. It is believed that this settlement will an anticipated in settice date of January 1,1990 enhance the potential for receipt of full power solely for financial planning purposes. Given the authorization by funher reducing the uncenainty ; political nature of the delays in the licensing associated with the project, , process, the Company cannot project with assur-ance when or if the plant will operate. Comprehensh e Seabrook Settlement On June 1,1988,the Massachusetts Municipal Wholesale Electric Company ("MMWEC"), which owns 11.59 percent of the Seabrook project, announced that it would no longer pay its share of the project's monthly funding require-ments. After protracted negotiations, a compre-hensive settlement has been reached under the terms of which PSNH will assume MMWEC's monthly pre-operational costs up to a maximum of $30 million, and a majority of the current and past Joint Owners will covenant not to sue PSNH for any claims associated with the management of the engineering, design and construction of the plant. The resolution of these claims reduces an element of uneenainty for PSNH in the bank-ruptcy reorganization. Under additional tenns of l the settlement, MMWEC has also agreed to a tennination of an agreement under which PSNH 1 7
~ MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION I AND RESULTS OF OPERATIONS , [ The Company's Bankruptcy l On January 28,1988 the Company filed a voluntary petition for protection under Chapter il of the Uruted States Bankruptcy Code, and has since operated its business as a debtor in possession under the protection of the Bankruptcy Court. Two official committees have been formed to represent the interests of unsecured credators and equity secunty holders, respectively. in the bankruptcy proceedings. The State of New Hampshire has been recognized as a full party in ; interest in the proceedings. The financial difficulties u hich led to the Company's bankruptcy are attributable io a combination of several factors, j each of which remains s key factor in the Chapter 11 case: the magnitude of the Company's $1.8 billion investment in j the Seabrook Nuclear Generating Station ("Seabrook"), which represents approximately 67% of the Company's assets, the prohibition under New Hampsture law of the realization by the Company of any cash income from or retum on that investment until Seabrook provides service to customers (the so called anti CWIP statutch and the delay in obtaining the l approval of Seabrook operation from the Nuclear Regulatory Commission (the "NRC"). In January 1988 the New , Harnpshire Supreme Court upheld the anti CWIP statute and prevented the New Hampshire Public Utilities Commission i (the "NHPUC") from considering the Company's request for emergency rates u hich were an essential element of the ' Company's e fforts to achieve a financial restructuring outside of Chapter i I, Substantial rate increases remain an essential , element of the Company's efforts to achieve a successful consensual reorganitation plan in the Chapter iI case. Cash Flow Concerns. ' During the Chapter iI case to date, the Company has ceased paying interest on all of its unsecured indebtedness and on its Tidrd blortgage Bonds and indebtedness secured by those Bonds, but is paying interest on its First biortgage Bonds and its General and Refunding hiertgage Bonds and indebtedness secured by such Bonds. See Note 5 of Notes to Financial Statements. By not paying such interest, or any principal on any of its outstanding indebtedness, the Company has generated su fficient funds intemally to satisfy its cash requirements. Assuming continued non payment of such debt service, continued moderate growth (about t% annually)in the Company's lesel of sales, the continuance of the Company's present rate structure, and that there are no material additions to the Company's projected operating and capital expenditures, the Company estimates that it can satisfy its cash requirements through the end of 1991 without extemal financing, other than the proposed financing for the hih!WEC settlement agreement (see Note 2 of Notes to Financial Statements), even if Seabrook does not become operational until as late as January 1991 and is not re nected in rates during the period. Nevertheless, the Company could encounter cash flow problems during the Chapter 11 case. The Company's construction expenditures for 1989 1993 are estimated at approximately S 169 million, but could be significantly increased if the Company is required by environmentallaws to make additional expenditures, particularly in response to legislation regarding acid rain. Although the Bankruptcy Court denied the motion of the holders of the Company's Third blortgage Bonds seeking to receive interest payTnents during the pendency of the Chapter 1 I case, the Third biortgage Bondholders can be expected to again seek such payments. Any such additional expenditures will be difficult to accommodate without affecting the quality of utility service provided by the Company. The financial constraints under w hich the Company has been operating for the last several years have reduced operating budgets and restrained capital expenditures to the point that, should any substantial additional cash flow savings be required in the future, the Company might be required to cease paying interest on First hfort age Bonds and General and Refundmg htortgage Bonds and such circumstances could erode support by the Company's secured creditors for continued funding of Seabrook's pre operational expenditures. Plan of Reorganization To enable the Company to successfully resolve its financial difficulties and emerge from Chapter i 1, it is necessary that there be a plan of reorganization for the Company. The Company has been negotiating with the State of New Hampshire, the official committees representing unsecured creditors and equity security holders and others to atternpt to achieve a consensual plan, that is a plan of reorganization agreed to by the parties. Such a consensual plan would avoid the extensive delays and the uncertainty which will result from htigation over a plan. Except to the e xtent all parties u ould prefer the more expeditious result which could be achieved by a consensual plan, the positions of the State and the official committees representing unsecured creditors and equity security holders are diametncally opposed. The State seeks to keep to a minimum the rate increases w hich are essential to create value for the interests represented by the committees 8
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i On March 16,1989 the Bankruptcy Court issued several orders designed to encourage the parties to re ach a consensual plan. Under the Bankruptcy Code the Company was given the exclusive right for a certain period to attempt to regotiate ;
] and develop a reorganization plan. In one of its March 16 orders the Court denied the Company's motion for a further estension of the exclusivity period and dMeted the Company Io file, by March 31,1989, a disclosure document tegarding its teorganization plan. Consequently, any party in interest is now allowed Io file with the Court and circulate among other j parties a proposed reorganization plan, but for a period of 60 days, ending May 15,1989, there can be no solicitation of acceptances of plans. The Court stated that it took this step in order to induce "hard bargaining" on plans, w hlch it stated l had not been occurring in the period preceding its order. Terminating the debtor's exclusive right to propose a l' reorganization plan in a case of this size and complexity is unprecedented, and there is now greater uneenainty as to the course which the Chapter I! case will take.
I In view ef the conflicting positions of the State and the official committees, the Companydoes not believe it is possible ; to achieve a consensual plan except upon the assumption that Seabrook achieves operation. It is likely that any consensual ! plan with the State and security holders would require the concurrence of the Govemor and the Legislature of the State as ; w ell as the NHPUC. It is doubtful that the politicalleaders of the State will agree to any material rate increases if Seabrook does not become operational. Rate increases,if any,in that event would have to come from a shift in a portion of rate regulation of the Company from the NHPUC to the Federal Regulatory Commission ("FERC") as contemplated in the , Company's holding company plan described below or a success ful court challenge of the anti.CWIP statute. Consequently, the Company does not believe that a consensual plan can be achieved until the parties are satis 0ed that Seabrook will become operational. Nevertheless, the Company is continuing to pursue aggressively negotiations on a consensual plan. Such negotiations are by their nature difficult, coroplex and time. consuming. They are influenced not only by the legal ; and economic factors indicated above but by the political process as well. A consensual plan would avoid lengthy and i expensive litigation and would likely improve the political and regulatory enviroment in which the Company must operate in the future. The Company's Holding Company Plan. The Company filed with the Bankruptcy Court on December 27,1988 a proposed plan of reorganization (the " Company's holding company plan") which would place the Company's assets used for retail distribution of electricity in a separate company, to be supplied power by the Cornpany on a w holesale basis at rates which would be snbject to the jurisdiction of FERC. In addition, certain servicing assets and operations would be ; placed in a separate corpolation and all three corporations would be wholly owned by a holding company. Under FERC policy it is anticipated that a substantial portion of the Company's Seabrook investment could be reflected in these wholesale rates uhether or not Seabrook becomes operational, w hich would result in significantly higher rates at the wholesale and retail levels. In the event Seabrook never becomes operational the Company believes that, if it can be implemented, the Cornpany's holding company plan would maximize the recovery of the Company's creditors and security holders. Nevertheless, the Company's holding company plan would still entail a substantial reallocation of the equity of > the Company and would also result in reductions in the book amounts of its unsecured debt. The Company's holding company plan has been criticized by virtually every political leader in New Hampshire, , primarily because it would likely reduce the NHPUC's control over the Company's retail rates. Political opposition has included the introduction in the New Hampshire I.egislature oflegislation allowing the State to take by eminent domain the Company's operations and assets. See Note 1 of Notes to Financial Statements. i Acquisition of Company, Twenty five entities have expressed interest in acquiring some or all of the Company's I assets. Preliminary offers have been received for cenain specific assets and one offer has been received, which is from Nonheast Utilities, for all of the Company's assets except Seabrook. This offer, which is now formalized in a plan of l reorganization filed on March 22,1989, would entail substantial rate increases and a shift to FERC regulation of all new power supply for the Company,11 also allocates the risk of Seabrook becoming operational to the Company's security holders and the benefit if Seabrook operates to the ratepayers. The official committees for unsecured creditors and equity security holders have publicly indicated that this offer is unacceptably low. Until there is su fficient assurance that Seabrook p will achieve operation and the extent of future rate increases is known, the Company believes it is not possible to evaluate offers to purchase some or all of the Company's assets or operations, or to evaluate reorganization plans on a comparative basis, w hether such plans include a plan based on such an offer, a consensual plan w hich might be agreed upon with the State, the Company's holding company plan or a plan submitted by any of the other parties in the Chapter 11 case. Confirmation and Approval of Plan. Any reorFanization plan will require confirmation by the Bankruptcy Coun i and approval of any other regulatory bodies whose junsdiction is not preempted by the Bankruptcy Code, as well as acceptance by cenain of the Company's creditors and security holders. Confirmation of any reorganiza(ion plan is hkely 9
m ! to require a substantial period of time during which the Company will remain under the jurisd etion of the Bankruptcy Court. The Company is unable to pre &ct the amount of recovery w hich will ultimately be achieved by the Com(+any's debt _ and equity holders, the hkelihood that any plan which might result from an agreement with the State, or the Company's i holding company plan, or any plan proposed by a bidder seeking to acquire the Company, will te accepted by the Company's creditors and security holders ot will te confirmed by the Bankruptcy Court or approved by any other regulatory bo&es having jurisdiction, or the length of time it will take to receive such confirmation and approvals and to implement the plan. Need for Seabrook Pow er. The Company currently does not have sufficient generating capacity to meet its demand and must purchase substantial amounts of power. If Seabrook is not placed in service tefore the early 1990's, the availability of additional capacity at any price is unpredictable and the Company may be unable to meet the increasing - demand for electric energy in its service area. The Company continues to believe that Seabrook is needed as a source of , reliable energy for New Hampshire and the New England region. The Company also telieves that reflection of a portion ofits Seabrook investment in rates is a necessary element to matimite recovery for the Company's security holders. The Company intends to continue to fund its share of Seabrook expenitures as long as resources are available utdess ordered by the Bankruptcy Court to reduce or cease such funding. Construction Program The Company has very substantial capital requirements to satisfy ifit is to provide adequate service to its fast growing service area. The Company's construction program for the five year period 19891993, exclusive of expenditures for Seabrook, is currently estimated to te approaimately $327.300,000. The Company's share of the pre operational testing and other capital expenditures relating to Seabrook are estimated to asgregate $ 142,000,000, based on Seabrook's assumed operational date for financial forecast purposes of January 1,1990. As indicated in Note 2 of Notes to Financial Statements, the actual operational c' ate may be later,in w hich case the Company will need to accrue the aggregate amount of ad&tional * ! pre operational expen&tures involved in any delay as described in Note 3 of Notes to Financial Statements. In addition, ; as descrited in Note 2 of Notes to Financial Statements, the Company has agreed to pay MM%IC's share of pre-operational expenditures for Seabrook as u eli as certain other amounts if a proposed settlement agreement with MMWTC is appruved by the Bankruptcy Court; the Company will obtain the funds for most of these payments from a $37.5 million short term credit uhlch is also subject to Bankruptcy Court approval. Set forth below are the Company's estimated expenditures in these categories for each of the years in the 1989,1993 period, assuming for these purposes a Seabrook operational date of January 1,1990: MhMTC Non Seabrook Pig Seabrook M g Company Total Settlement 1989 $ 49,400,000 $ 61.400,000 $110,800,000 $31,500,000 : 1990 64,800,000 14,100,000 78.900,000 2,000,000 '
!991 79,200,000 19,400,000 98,600,000 2,000,000 1992 65,200,000 25,600,000 90,800,000 2,000,000 1993 68,700.000 21,500,000 90,200,000 2,000,000 Total $327.300,000 $142,000.000 S469,300,000 $ 39.500.000 A delay in the operational date of Seabrook would int rease the estimated capital expenditures for Seabrook by approx.imately $$ rnillion per month (not including capitalized interest of $3 million per month). The matimum amount by which the Company's obligation under the MM%TC settlement can be increased due to a Seabrook delay of any duration is S4 million, it is possible that very substantial additional expenditures may be required to meet regulatory and envi;onmental requirements at Seabrook and the Company's other generating facihties.
10
! l y ... ,.i -
i
.ftesults of Operations i I
1'
. Operaung tevenues mereased 9.9% for the year ended December 31,1988,8.7 % for 1987 and decreased 2.8 % in 1986. '
%e' increase for 1988 was due to the growth in megawatt hour ("MWH") sales of 7.14 and a small increase in the !
Company's energy cost recovery tevenues resulting from higher fuel costs. The grow th in M%H sales was primanly due ! to a 4.1 % increase in the number of customers served with an average increase in consumption per customer of apptod. < mately 2.2% , due somew hat 1o weather related conditions. The increase for 1987 was due to a 4.87% base rate increase
- i. effective January,1987 and a substantialincrease in the Company's energy cost recovery revenues commencing on July 1,1987 offset by a 2.8% decrease in prime M%H sales. The decrease in sevenues for 1986 was principally due to lower energy cost recovery revenues, as prime M%H sales increased 2.6% in 1986. -
Effective October 1,1986 Iwo wholesale customers of the Company, wHch previously accounted for approalmately t .12% of the Company's total prime sales and approximately 8% of total revenues from prime s. des, tenninated their caisting ; power purchase contracts with the Company. Cunently, the powe r previously sold these customers offsets some of the need for purchased capacity and energy to meet cunent demand. Due to speculation as to the possibility of significant Seabrook rate increases, a number of the Company's large industrial customers and several cities and towns within its service area have begun investigating other possible sources t of power, w hich might include self generation, cogeneration, or purchases from small power producers or other sources L of supply. I L Fuel and purchased power expense increased 21.1 % for 1988,1.6% for 1987 and decreased 12.2% for 1986. The large
. increase for 1988 was due to an in-rease in purchased power, which is more costly than internally generated power, and i the increase in MWH sales. The decrease for 1986 w as principally due to lower energy costs.
Operating expenses, other than fuel and purchased power and taxes on income, decreased slightly for 1988, and i increased 21.0% for 1987 and 11.0% for 1986. The 1987 and 1986 increases resulted mainly from increases in the costs needed to suppon the grow th in the num ber of eustomers se rved as w ell as increases in maintenance, depreciation. property ;
. Iaxes and insurance.
The Company had overall provisions for income tax expense of $37.6 million for 1988 and recoveries of $72.9 tnillion. ;
$30.2 million for 1987 and 1986, respectively, Effective tax rates varied significantly from year to year. See Note 6 of l
Notes to Financial Statements. All of the amounts for 1987 and 1986 represent non cash reductions in accumulated E deferred income tues associated with financial statement provisions for losses on generating projects. r The Financial Accounting Standards Board has promulgated new income tax accounting rules u hich will require the , Company 1o change from the defened method Io the liability mett od of accounting for income tues. The liability method l accounts for defened income ta es by applying enacted statutory rates in effect at each balance sheet date to differences ; between the book basis and the tu basis of assets and liabilities. The Companyplans to adopt the new rules in 1990 without f restating prior years' fmancial statements. It is estimated that adoption of the new rules in 1990 will result in an increase in accumulated defened taxes on income of approxirnately 5110 million of w hich approximately $70 million will result i in a regulatory asset representing amounts to te recovered from customers through future rates and approximately $70 [ million will be reponed as the cumulative effect of the change in the method of accounting for income tues in the statement of earnings. Interest on Long Term Debt and Other Interest for 1988 decreased markedly As of January 28,1988 the date of the i filing of the Company's Chapter 1 I petition, the Company ceased accruing interest on its unsecured debt. As a result, for the year ended December 31,1988 interest onlong term debt and capitalized interest are approximately $ 130 millionlower , than they otherw ise would have been. Interest on Long Term Debt and Other Interest increased 7.1% for 1987 and 16.5% for 1980. These increases reficct the issuance ofdebt totniing $100 million in May 1987 and $325 million in February 1986. i During 1987 the Company capitalized additions to Seabrook,includmg related interest costs. In 1987 the Company l made the assumption for financial forecast purposes that Seabrook would commence operation on January 1,1990. i , Etfective Decernber 31,1987 the Company ceased capitalization of Seabrook costs and recognized the liability for future l pre operational expenditures by t.ccruing the $212 rmilion estirnated Seabrook costs to be incurred during the period l January 1,1988 to December 31,1989. For the year ended December 31,1988, $109.5 million w as charged to the accrual, 1 including the $47.5 million of capitalized interest recorded in that period. The Company has not changed Seabrook's
!I
.pv _ - _ yy,
'. m' assumed operational date for nnancial forecast purposea of1anuary 1.1990. If there are delays in that date,Seabtook costs.
' I
' approsimating $$ million for each month of delay, will hase to be accrued by the Company when the delay becomes probable.
The preferred dividend requirements were reduced in 1989 by $37.9 rnillion, since the Company cear,ed accruing
<, preferred dividends upon the Bling of the Chapter 1i petition in January 1988. Had the Company not discontinued ac. .
.- cruing preferred dividend requirements, enmings available for common stock and eartungs per cornmori and common equivalent share would have been $14.298.000 and 50.35 respectively, for 1986.
inf1stion continues to affect Company operations, since under existing regulatory practice the investment in utility plant has teen recovered at historical cost but replaced, as necessary, at current cost. In the case of the Seabrook plam and other plants constructed over many years, the rates necessary to recover accumulated inflation and carrying costs will te '[ in excess of m hat the customers for that pow et can pay. Thus something less than histo teal cost will be recovered. The effects of inflation on other expenses are generally recovered through energy cost recoves y mechanisms or rate filings, as tweessary. . The results of operations discussed above are not necessarily indicative of future camings. Continued growth in megau att hout sales will depend upon de the rate of economic grow th in New Hampshire, w cather, the competition from , other energy sources and suppliers, and the price of electricity. The reorganiration of the Company will have a significant ( ' impact on future interest expense and earnings levels and could result in substantial decreases in the carrying v alue of assets. I j i
'f L .,
i 7 l l. I t f L I m I t I r 12 ,
yw ~ - - - - 0 l- { . '- PUBLIC SERVICE COMPANY OF NEW ll AMPSillRE i" STATEMENTS OF EARNINGS
) ).
For the YeaL E nded Dttt.m.Lqh
- 13) L937 L916 (Thouundo of Dollars Eiseri Per Shore Amconm Operating Revenues (Note 4)
Residential $237,385 $ 214,227 $ 188,873 Industrial 16$,171 150,437 131.303 Other 200,929 ._184,444 185,012 Totaj Operating Revenues 603,485 $49,108 505,190 Operating Expenses l Operation
; Fuel 137,122 123,$71 122,457 Purchased and Interchanged Power 130,647 97,$71 95.187 ! Other Operating Expenses 96,567 97,180 66,915 Maintenance 39,147 37,236 39,704 Depreciation 32,690 31,396 29,795 Taxes on Income (Note 6) 33,492 35,601 43,108 Other Taxes, Principally Propeny Taxes 29,277 28,405 24,136 Total Operating Expenses I98,942 450,960 421.M Operating income [6.i.,Q3 98,348 ~)),)Ri Other income and Deductions Allowance for Equity Funds Used Dunng Construction (Nctes 3 and 4) $98 1,183 124.697 Taxes on income (Note 6) (4,113) 108.478 73,320 x Equity in Earnints of Affiliated Companies 1,308 1,423 2,722 i Interest and Dividends 7,$75 5,666 11,649 Losses on Generating Projects (Note 3) . (241,452) (348,$21)
Other Net 607 (5.299) (5,207) Total Other Income and Deductions 5,975 (130,001) (141,340) L Income (l.oss) Before Interest Charges 110,518 (31,853) (57.452) Interest Charges Interest on Long. Term Debt (Note 5) 100,52$ 210,409 206,400 Other Interest 4.341 14,950 4,091 Capitalized Interest (Notes 3 and 4) (47,479) (169,068) . Allowance for Borrowed Funds Used During Construction (Notes 3 and 4) (f,142) (1,108) (69.578) Net Interest Charges 55,245 55,183 140,913
~
i Income (Loss) Before Cumulative Effect of Change in Seabrook Plant Accounting $$,273 (87,036) (198,365) Cumulative Effect of Change In Seabrook Plant Accounting (Note 3) - (398,651) . Net Income (Loss) 55,273 (485.687) (198,365) Preferred Dividend Requirements (Note (b), Statements of Capitalization) 3,0R4 40,980 40.981 Earnings (L >ss) Available for Common Stock (Note 4) $ $2.189 $(526.667) $(239,346) Weighted Average Common and Common Equivalent Shares (000's) 48,134 37,194 37,194 Earnings (Loss) Per Common and Comrnon Equivalent Share (Note 4) Before Cumulative Effect $1.14 $ (3.44) $(6.44) Cumulative Effect of Change in Seabrook Plant Accounting (Note 3) . (10 72) . I Net income (Loss) $1.14 $(14.16) $(6.44 ) l See accompanying Notes to Financial Statements 13
- ,ugw 4 ,
PUBLIC SERYlCE CO.\lPANY OF NEW li AMPSillRE II ALANCE SilEETS ASSETS-De rmter31, 1988 1987 (Thousands of Dollars) Utility Plant at Cost Electric Plant S 977,173 $ 941,092 Less: Accumulated Provision for Depreciation 318.345 291,201 658,828 649,891 Unfinished Comtniction: Seabrook (Note 3) 1,794,823 1,794.82) Other 11,871 18,546 Total Unfinished Construction 1,806,694 1,813.369 Net Utility Plant 2f65,522 2,463,260 investments Nuclear Generating Companies 12,131 11,590 Real Estate Subsidiary 9,099 8,340 Other, at Cost 155 182 Total lnvestments 21,385 20.112 Current Assets Cash and Temporary Investments 94,830 19,378 Accounts Receivable (Net of Allowance of $1,536 in 1988 and $935 in 1987)(Note 5) 57,122 46,674 Unbilled Revenue 16,740 15,750 Fuel, Materials and Supplies, at Cost 26,448 20,643 , Prepaid Real Estate Taxes 4,849 4,916 Prepaid Fuel Costs 34 7,711 Other 3.211 8.358 Total Current Assets 203,234 123,430 Other Assets Deferred Charges 12,682 15,728
' Other 965 1,075 Total Other Assets 13,647 16,803
$D63,788 $2.623,605 l
l l See accompanying Notes to Financial Statements 14
ci y - fr 4 PUllLIC SERVICE COMPANY OF NEW ll AMPSillRE s' BALANCE SHEETS CAPITALIZATION AND LIABILITIES recember 31, 1988 1987 (Thousands of Dollars 1 Capitalitation (See separate statemen'.s) Common Stock Equity $ 293,335 $ 240,777 Prefened Stock
, With Mandatory Reden ption Requirements 420,613 384,248 !
Without Mandatory Redemption Requirements 48,596 48,696 Long Tem) Debt . 540,888 Liabilities Subject to Settlement Upon Reorganization (Note $) 1,675,250 . Total Capitaliration 2,437,794 1,214,609 . Current Liabilities Debt and AccrueJ interest in Default (Note $) . 1,028,638 Long Tenn Debt to te Retired Within One Year . 6,599 Prefened Stock Redemption Due Cunently -- 33,5$0 Estimated Future Seabrook Expenditures (Note 3) 102,519 212,000 :
.s Accounts Payable 30,776 l$,038 '
Accrued Pension Costs 6,935 16,633 Accrved Interest 7,869 23,634 Estimated Cancellation Costs for Seabroc.k Unit 2 (Note 3) 12,795 13,329 Other 18,421 11.168 Total Cunent Liabilities 179..IIS 1,360,589 Defened Credits Accumulated Defened Investment Tax Credits (Note 6) 17,243 17,817 Accumulated Deferred Taxes on income (Note 6) 66,333 28,454 L Other 3.103 - 2.136 Total Defened Credits 86,679 48,407 Commitments and Contingencies (Notes I and 2) . . [
$2.703,788 $2,623.605 I
t See accompanying Notes to Financial Statements 15
4 PUllLIC SER\' ICE COMPANY OF NEW fl AMPSillRE STATDil:NTS OF CAPITAllIATION December 31, 1213 1212 (Thousands of Dollars) Common Stock Equity Co'nmon Stock . $$ Par Valae (a) Authorired . 60,000,000 $ hares Outstanding . 37,201.127 Shares in 1988 and 37,194,226 Shares in 1987 $186,006 $185,97 i Other Paid.In Capital 436,287 436.221 Accumulated De0 cit (328,958) (381,415) Total Common Stock Equity 293.335 240,777 Cumulative Preferred Stock Par Value $100 Per Share . Authorired 1,350,000 Shares
. Outstanding 614,360 Shares Par Value $25 Per Share . Authorized 14,000,000 Shares
. Outstanding 10,400,000 Shares Shares Dividend far Value Outstandine . Call Price With Mandatory Redemption Rsquirements (b)(c) 7.64'7c $100 120,000 $103.83 15,622 15,553 9.00 100 158,400 104.50 21,472 21,364 11.24 25 1,2(0,000 27.I I 43,320 43,067 17.00 25 1,200.000 28.19 50,146 49,762
!$.00 25 1,200,000 27.81 47,776 47.438 15.44 25 2,400,000 27.90 96,595 95.898 13.00 25 1,400,000 27.17 52,974 52.631 13.80 25 2,400,000 27.30 _ 92,708 _92,085 420,613 417,798 Less: Preferred Stock Redemption Due Currently . _( 33,550) 420,6i3 384.248 Without Mandatory Redemption Requirements (b) 3.35 % $100 102.000 $100.00 10.200 10.200 4.50 100 75.000 102.00 7,500 7,500 5.50tConvertible) 100 8,960 100.00 896 996 7.92 100 150,000 101.98 15,000 15,000 11.00 25 600,000 26.25 15,000 15,000 48,596 48.696 Total Cumulative Preferred Stock . Net $469.209 $432.944 l
l See accompanying Notes to Financial Statements and to Statements of Capitahration l 16 [
PUBLIC SERVICE CO,\tPANY OF NEW H AMPSillRE STATEMENTS OF CAPITALIZATION l December 31,
?
y g n Long Term Debt (Thousands of Dollars) l First Mortgage Bonds Series Rate Maturity M 4 $/8% 1992 5 20,805 $ 20,805 N 6t/8 1996 14,957 15,069
, O 61/4 1997 13,381 13,381 P 71/8 1998 13.491 13.491 i
Q 9 2000 18.262 18,262 R 75/8 2002 18,381 18,381 l S 9 2004 18,719 18,719 V 91/8 2006 14,296 14.296 W 10 1/3 1993 9,658' 9.658' i X 12 1999 9,126' 9,126' b Y 18 1989 24,135* 24,135' < Z Variable 1991 10 080' 10 080' Tl3,.9T% ~Il3303 Less: First Mon; age Bonds (*) Pledged as Security for General and Refunding Mortgage Bonds (52 999) Total First Mongage Bonds 73dV2 T($2,099) 32 303 General and Refunding Mortgage Bonds A 101/8% 1993 32,700 32,700 ; B 12 1999 60,000 60,000 C 14 1/2 2000 30,000 30,000 D 17 1990 23,000 23,000 E 18 1989 50,000 50,0(0 ; H Variable 1991 112,500 " 112,500 " ' Less: General and Refunding Montage Bonds (") Pledged as Security for Nuclear Fuel Obligation, Eurodollar Term Loan and Promissory Note Due 1991 (112,500) (112,500) Third Mortgage Bonds ! A I33/4% 1996 225,000 225,000 , B 10 1/2 2016 100,000 "
- 100,000 "
- Less: 'Ihird Mongage Bonds ("') Pledged as Security for ,
Pollution Control Revenue Bonds (100,000) (100,000) Nuclear Fuel Obliga' ion, due 1991 45,000 45,000 Eurodol:ar Term Loan, due 1991 45,000 45,000 Promissory Note, due 199i 22,500 22,500 Pollution Control Revenue Bonds 12 1/4 13 3/4 % 1988,2003 20,000 20,(00 e 10 1/2 2016 100.000 100,0C0 Debentures 15 3/4 % 1988 75,000 75,000 143/8 199I I00,000 100,0(0 15 2003 100,000 100,0($ 17 1/2 2004 425,000 425,000 Promissory Note. Due 1988 t 8,437 18,437 Total Long Term Debt UDX729 UU3331 Less: Unamortized Pretnium and Discount (104,171) (105,617) D99~7,9 D98'J23 , Less: Amount to be Retired Within One Yeat - (6,599) ' Amount in Default - (850,937) Amount Reclassified to Liabilities Subject to Settlement i Upon Reorganization 1,399,758 - Long Term Debt Net - 33EEEB Liabilities Subject to Settlement Upon Reorganization (Note 5) 1,675,250 - Total Capitalization 52~J3U9] 5DT3309 See accompanying Notes to Financial Statements and to Staternents of Capitalization 17
\
{ PUllLIC SERVICE COMPANY OF NEW ll AMPSillRE i - NOTES TO STATEMENTS OF CAPITAllZATION I (a)In 1984 the Company issued 18,375,000 wanants allowing the holders to purchase a share of Common Stock at an e ne reise price of $5.00 per share, of w hich 18.372,999 are outstaning. The Wana its expire in 1991. Although the exercise of u anants was suspended in June of 1986, limited exercise of the warrants,through the exchange of the Company's 17.5% Debentures due 2004, for common stock will be allow ed for a 120 day period in 1989,if a tentative settlement is approved by the Bankruptcy Court. (b) The Company ceased paying dividends on shares of its Common and Preferred Stock in 1984. Until the dividend anearages w ith respect to shares of the Preferred Stock are cured, the holders thereof will continue to have the nght to elect a majority of the Company's Board of Directors, a right which they have exercised since 1985. The Company ceased accruing dividends on all series of Preferred Stock on January 28,1988, the date of the filing of the voluntary petition for , protection under Chapter iI of the United States Bankruptcy Code, resulting in a reduction of $37.9 million in preferred dividend requirements for 1988. Any reorganization plan filed and conarmed in the bankruptcy case is expected to result in substantial alteration or elimination of some or all of the current rights of the holders of shares of Common and Preferred Stock. The table below indicates the amounts of dividends in arrears as of January 28,1988 when the Company ceased accruing prefened dividends: Disidend Eals .Sharza Per Share Ig,ta[ With Mandatory Redemption Requirements: (Classified in Prefened Stxk) 7,64 % 120,000 $30.180 $ 3,621,606 9.00 158,400 35.552 5,631,503 11.24 1,200,000 11.100 13.320,306 17.00 1,200,000 16.789 20,146,371 15.00 1,200,000 14.813 17,776,210 15.44 2,400,000 15.248 36,595,290 13.00 1,400,000 12.838 17,973,723 13.80 2,400.000 13.628 32,708,227
$147,773,236 Without Mandatory Redemption Requirements:
(Classified in Retained Earnings) 3.35 % 102,000 $13.233 $ 1,349,806 4.50 75,000 17,776 1,333,216 5.50 (Convertible) 8,960 21.727 194,670 7,92 150,000 31.286 4,692,919 11.00 500,000 10.863 6,517,944 5 14.088,5.9 (c)The Company ceased making sinking N:( pyments on preferred stock with mandatory redemption requirements in 1984. At December 31,1987 the preferre: smk redemption due currently (includmg arrearages) of $33.550,000 was classified as a current liability. During ' 9H ubsequent to the Company filing a voluntary petition for protection under Chapter i! of the United States Bankruptcy C c<e, the current liability was reclassified io preferred stock. Any amounts payable to holders of preferred stock are sta,e: to settlement upon the confirmation of a teorganization plan. See a:::n,$anying Notes to Financial Statements 18 L
C,
; PUBLIC SERVICE COMPANY OF NEW ll AMPSillRE r
STATEMENTS OF CASH FLOWS For the Year Ended December 31, ! i 12.6.6 12.El 1EE.6 i (Thousands of Dollars) Income (Loss) Before Cumulative Effect of Change in Seabrook Plant Accounting 5 55,273 $ (87,036) $(198,365) Non Cash items included in income Depreciation 32,690 31,396 29,795 Allowance for Equity Funds Used During Construction (598) (1,183) (124,697) Amortization of Debt Premium, Discount and Expense 1,758 7,666 27,827 Defened Taxes and Investment Credit Adjustments 37,305 (69,591) (30,212) Losses on Generating Projects . 241,452 348,521 Gains on Sale of Properties (1,124) . . Changes in Operating Assets and Liabilities Cunent Assets Other Than Cash and Temporary Investments (4,352) (23,939) 15,108 Accounts Payable 35,667 (I1,985) (8,336) Accrued Pension Costs 783 11,485 (188) Accrued Interest 27,780 15,188 1,501 Other Current Liabilities 6,719 (1,940) 16,047 Deferred Charges 3,046 (17.051) (16,627) Other . net (I,937) 13,002 (13,380) Net Cash Flows From Operating Activities 193,010 107,464 46,994 Cash Rows From Investing Activities Capital Expenditures (Net of Allowance for Equity Funds Used During Construction) (143,076)* (294,691) (242,991) Change in Accrued Interest . Investing Activities 24,450 46,836 741 Disposals of Propeny, Plant and Equipment 1,180 2,947 1,928 Net Cash Flows From Investing Activities (I17.446) (244,908) (240,322) Cash Flows Frsm Financing Activities Proceeds of long Term Debt . - 281,065 , Redemptions of Long Term Debt (112) (5,719) (42,969) Proceeds of Short Term Debt . 100,000 70,000 Redemptions of Short Term Debt - . . (70,000) Net Cash Flows From Financing Activities (112) 94,281 238,096 Net increase (Decrease)in Cash and Temporary Investments 75,452 (43,163) 44,768 Cash and Temporary Irnestments at Beginning of Year 19,378 62,541 17,773 Cash and Temporary Investments at End of Year $ 94,830 $ 19,378 $ 62,541 Supplemental Cash Flow Information: Cash paid for Total Interest $ 48,148 $ 154,020 $ 180,985 24,171 123,340 68,837 Capitalired Interest Irverest (Net of Amount Capitalized) $ 23,977 $ 30,680 $ 112,148 Income Taxes $ 107 $ 581 5 -
~
- Includes $109.5 million charged to Estimated Future Seabrook Expenditures liability, See accompanying Notes to Financial Statements 19
n __ PUBLIC SERVICE COMPANY OF NEW ll AMPSillRE y STATEMENTS OF CH ANGES IN COMMON STOCK EQUITY f for The Three Years Ended December 31.1988 i Other Retained Ameunt at Paid in Emmings ' shares Par Value Capital (Deficit) Igla! (Thousands of Dollars) Balance . December 31,1985 37,191,896 $185,959 $436,219 $ 447,594 $1,069,772
. Add (Deduct)
Net Loss (198,365) (198,365) Reclassification to Preferred Stxk of cumulative dividends in arrears for Preferred Stock with mandatory redemption requirements (107,549) (107,549) Issuance of Common Stock 2,000 10 (1) . 9 Balance . December 31,1986 37,193.896 $185,969 $436,218 $ 141,680 $ 763,867 Add (Deduct) Net Loss (485,687) (485,687) Issuance of Common Stock 330 2 3 5 Dividend requirements for Preferred Stock with mandatory redemption requirements (37,408) (37,408) Balance . December 31,1937 37,194,226 $185,971 $436,221 $(381,415) $ 240,777 Add (Deduct) Net income 55,273 55,273 issuance of Common Stock 6,901 35 66 101 Dividend requirements for Preferred Stock w!th mandatory redemption requirements (Note (b), Statements of Capitalization) (2.816) (2,816) Balance . December 31,1988 37,201.127 $186,006 $436,287 $(328,958) $ 293.335 i See accompanying Notes to Financial Statements 20
.n
y _ _. __ . __ PUBLIC SERVICE COMPANY OF NEW ll AMPSHIRE , NOTES TO th'ANCIAl. STATUtthis t (
- 1. Proceedings Under Chapter 11 i
On January 28,1988 the Company filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code, and has since operated its business as a debtor.in possession under the protection of the Bankruptcy Coun. Twu official committees have been fonned to represent the interests of unsecured creditors and equity security holders, respectively,in the bankruptcy proceedings. The State of New llampshire has been recognized as a full pany in interest in the proceedings. Plan of Reorganiration To enable the Company to successfully resolve its financial difficulties and emerge from Chapter iI,it is necessary that there be a plan of reorganization for the Company. The Company has been negotiating with the State of New Hampshire, the official committees representing unsecured creditors and equity security holders and others to attempt to achieve a consensual plan, that is a plan of reorganization agreed to by the panies. Such a consensual plan would avoid the extensive delays and the uneenainty w hich will tesult from litig ation over a plan. Except to the extent all parties w culd prefer the more espeditious result which could be achieved by a consensual plan,the positions of the State and the official comminees representing unsecured creditors and equity security holders are diametrically opposed. The State seeks to keep to a minimurn the rate increases u hich are essential to create value for the interests represented by the committees, , On hiarch 16,1989 the Bankruptcy Court issued several orde rs designed to encourage the parties to re ach a consensual plan. Under the Bankruptcy Code the Company was given the exclusive right for a certain period to attempt to negotiate and i develop a reorganization plan. In one ofits hiarch 16 orders the Coun denied the Company's motion for a funhet extension of the exclusivity period. Consequently, any party in interest is now allowed to file with the Court and circulate among other panies a proposed reorganitation plan, but for a period of 60 days, ending hiay 15,1989, there can te no solicitation of acceptances of plans. The Coun stated that it took this step in order to induce "hard bargaining" on plans, w hich it stated had not been occurring in the period preceding its order. Terminating the debtor's exclusive right to propose a reorganization plan in a case of this size and complexity is unprecedented, and there is now greater uncertainty as to the course which the Chapter 11 case will take. In view of the conflicting positions of the State and the of ficial committees, the Company does not believe it is possible to achieve a consensual plan except upon the assumption that Seabrook achieves operation. It is likely that any consensual plan with the State and security holders would require the concurrence of the Governor and the Legislature of the State as i well as the NHPUC. It is doubtful that the politicalleaders of the State will agree to any material rate increases if Seabrook does not become operational. Rate increases,if any,in that event would have to come from a shift in a portion of rate ' regulation of the Company from the NHPUC to the FERC as contemplated in the Company's holding company plan described below or a successful court challenge of the anti-CWIP statute. Consequently,the Company does not beliese that a consensual plan can be achieved until the parties are satisfied that Seabrook will become operational. Nevertheless, the Company is continuing to pursue a g gressively negotiations on a consensual plan. Such negotiations are by their nature - difficult, complex and time consuming. They are influenced not only by the legal and economic factors indicated above but by the political process as well. A consensual plan would avoid lengthy and expensive litigation and would likely improve the political arxi regulatory envirornent in which the Company must operate in the future. The Company's Holding Company Plan. The Company filed with the Bankruptcy Coun on Decemter 27,1988 a r proposed plan of reorganizat on(the " Company's holding company plan") w hich would place the Company's assets used for retail distribution of electricity in a separate company, to te supplied power by the Company on a w holesale basis at , rates which w ould te subject to the jurisdiction of FERC. In addition. certain servicing assets and functions w ould te placed in a separate corporation and all three corporations w ould be w holly owned by a holdmg company. Under FERC policy it is anticipated that a substantial portion of the Company's Seabrook investment could te reflected in these wnolesale raies w hether or not Seabrook becomes operational, which would result in significantly higher rates at the w holesale and retaillevels. The Company believes that,if it can te implemented, the Company's holdmg company plan would maximite the recovery of the Company's creditors and security holders in the event Seabrook never tecomes 21
P . L [' PUHLIC SERVICE COMPANY OF NEW li ASIPSiliRE NOT!'S TO FINANCLAL. STATEMENTS (ContinueJ a f i l operational Nevertheless, the Company's hol&ng company plan u ould siill entail a substantial reallocation of the equity
! of the Company and would also result in reductions in the book amounts of its unsecured debt.
The Company's holang company plan has teen criticized by virtually every pohtical leader in New Hampshire. primanly because it would hkely reduce the NHPUC's control over the Company's retail rates. New Hampshire's United States Senators and Representatives have introduced federal leFislation which would amend the Bankruptcy Code retroactively to explicitly require NHPUC approval of key aspects of the Company's holJing company plan. effectively permitting the NHPUC to seto the holdmg company plan notwithstanding its appruval by the Company's creditors and confirmation by the Bankruptcy Court. Legislation was also introducedin the New Hampshire Legislature which,if , enacted, w ould allow the State to take by eminent domain the operations and assets of the Company at an anificiallylow pnce. In an advisory opinion issued on March 10,19!t9, the New Hampshire Supreme Court has advised the Legislature that in addition to other problems the proposed legislation is constitutionally defective in providing for less than just compensation for any operations or assets so taken. Further, in January of this year the NHPUC ordered the Company to demonstrate why a decrease in rates would not be appropriate and scheduled hearings on the establishment of temporary i rates to bef n in March. At the request of the Company, the Bankruptcy Court issued a preliminaryinjunction on February 10,1989 against the co;nmencement of that rate case. Finally, the Governor of New Hampshire recently stated publicly i his opposition to permitting low power testing of Seabrook until the Company has reached agreement with the State as to any rate increases. if negotiations with the State do not appent to te productive within a reaso. table period, the Company will actively press its holding cornpany plan in the Bankruptcy Court. The Company has filed suit in the Bankruptcy Court against the
- State and the NHPUC seeking a declaratory judgment that NHPUC approval is not required for the various transactions ;
contemplated by the Company's holding company plan, including the transfer of distribution assets to a new subsid ary Lwhich would shift regulation of the generation and transmission components of rates from the NifPUC to FERCt, the formation of a holding company, and the issuance of new securities, all of which wsuld require prior NHPUC approval catside of Chapter 11. In the event Seabrook never tecomes operational, the Company believes that, if it can te implemented.the Company's holdmg company plan would maximize the recovery of the Company's creditors and security holders. Nevertheless, the Company's holdmg company plan would still entail a substantial reallocation of the equity of the Cornpany and would alsu result in reductions in the book amounts of its unsecured debt. Acquisition of Company. Twenty five entities have expressed interest in acquiring some or all of the Company's assets. Preliminary offers have teen received for certain specific assets and one offer has teen received, w hich is from Northeast Utilities, for all of the Company's assets except Seabrook. This offer, w hich is now formalized in a plan of reorganization filed on March 22,1989, would entail substantial rate increases and a shift to FERC regulation of all new power supply for the Company. It also allocates the risk of Seabrook becoming operational to the Company's security holders and the benefit if Seabrook operates eo the ratepayers. The official committees for unsecured creditors and equity security holders have publicly indicated that this offe r is unacceptably low. Until there is sufficient assurance that Seabrook will achieve operation and the extent of future rate increases is known, the Company believes it is not possible to evaluate offers to purchase some or all of the Company's assets or operations, or to evaluate reorganization plans on a compnative basis, w hether such plans include a plan based on such an offer, a consensual plan w hich might te agreed upon with the ! State, the Company's holding company plan or a plan submitted by any of the other parties in the Chapter ii case. Confirmation and Appros al of Plan. Any reorganization plan will require confirmation by the Bankruptcy Court and approval of any other regulatory bodies whose jurisdiction is not preempted by the Bankruptcy Code, as well as acceptance by certain of the Company's creditors and security holders. Confirmation of any reorganization plan is likely to require a substantial period of time during w hich the Company will remain under the jurisdiction of the Bankruptcy Coun. The Company is unable to predict the amount of recovery w hich will ultimately be achieved by the Company's debt and equity holders, the likelihood that ariy plan which might result from an agreement with the State, or the Company's l holding company plan, or any plan propond by a bidder seeking to acquire the Company, will be accepted by the Company's credators and equity holders or will be approved by the Bankruptcy Coun or any other regulatory bodies having jurisdiction, or the length of time it will take to receive such approvals and to implement the plan. l 22 i
PUllLIC SERVICE COMPANY OF NEW li AMPSillRE NOTES TO FINANCIAL STATEMENTS (Contuuti . in view of the very great uncenainty regarding the nature of any reorganization plan w hich may te confirmed in the ,
! Chapter 1i case. die valuation of the Company's secunties is extremely speculative. Any reorganization plan filed and confinned in die Chapter 1i case will result in substantial alteration or climination of some or all of the cunent rights of the holders of shares of Common and prefened Stock. If Seabrook does not become operational (and assuming no agreement is made with the State, die anti CWIP statute is not ovenumed and the Company's holding company plan is not ! confirmed and implementedh die value of the Company for its security holders would be very substantially reduced. ,
Need for Seabrook Pow er. The Company cunently does not have sufficient generating capacity to meet its demand and must purchase substantial amounts of power. If Seabrook is not placed in service t efore the early 1990's, the availability of additional capacity at any price is unpredictable and the Company may te unable to meet the increasing demand for electric energy in its service area. The Company continues to believe that Seabrook is needed as a source of reliable energy for New Hampshire and the New England region. The Company intends to continue to fund its share of , Seabrook expenditures as long as resources are avadable utdess ordered by the Bankruptcy Court to reduce or cease such l funding.
- 2. Commitments and Contingencies The Company is the principal owner of Seabrook, a nuclear fueled steam clectric generating plant located in Seabrook,New Hampshire. At Decemter 31,1988 the Company's investment in Seabrook was approximately $ t.8 bdlion representing 67% of die Company's total assets. Because of the New Hampshire anti CW!P statute, no part of the Company's investment in Seabrook has been redected in the Company's rates to date. The commenecment of Seabrook operation may be essential to obtaining substantial rate increases and a successful reorganization plan. While the Company '
is cautiously optimistic that an appropriate NRC authorization for operation will ultimately be granted, the Company is concvmed that the process may te so prolonged as to jeopardize pre operational fundmg of Seabrook by the Joint Owners, including the w illingness of the Company's secured creditors and the Bankruptcy Court to permit the Company to continue funding its shares of such expenditures. On June 3,1988 Massachusetts Municipal Electric Wholesale Company ("MMWEC"), w hich has an approximately i1.6% ownership interest in Seabrook, notified the other Joint On ners that, as part of an overall plan to withdraw from Seabrook and to restructure its Seabrook related indebtedness, MMWEC would no longer fund its share of Seabrook pre-operational expenditures. Since the cessation of hB1WEC's payments, other Joint Ow nets have been funding hB1WEC's share. On Novemter 4,1988 the Company and MMWEC entered into an agreement providing for payments by the Company to or on behalf of MMWEC of up to $50 million, the major portion of uhich is MMWEC's pre operationa; funding commitment for Seabrook from December 1,195:8. If Seabrook does not become operational, the Company will pay MMWEC's share of the costs of cancellation and decommissioning in excess of $10 million, payments cunently estimated not to exceed $38 million. In order to proside funds to make certain of these payments, the Company has ananged a $37.5 million shon term credit with a major financialinstitution. The bonowing under this credit,if approved by the Bankruptcy Court, will be entided to a ruperpriority administratis e claim in the Chapter ii case. I Under the settlement agreement, MMWEC covenants not to sue the Company for any alleged claims against 'he Company associated with managernent of the engineering, design and construction of Seabrook and with MMWEC's acquisition of a ponion ofits Seabrook ownership interest. MMWEC has also agreed to a temdnation of an agreement tthe "MMWEC Buy back") under w hich the Company might be required to purchase a share of MMWEC's Seabrook capacity for a period of ten years at a cost substantially in excess of market pnce. Cenain other Joint Owners, representing all but I about 2.5% of the ownership interests in Seabrook, have also agreed to g rant the Company covenants not to sue on any suc h claims. in e xchange for cash payments or of fsets totalling $2 rmllion and assurnption by the Company of their pro r ata shares l l cf up to $10 million of cancellation and decemmissiontng costs if Seabrook is abandoned and another Joint Owner does not pay its full share of such costs. The Company has requested Bankruptcy Court approval of these agreements wnh MMWEC and the other Jomt Owners. The Company has been authorized by the Bataruptcy Coun to meet MMWEC's funding obligauons fot the period i l 23 l ..
4 PUlilIIC SElWICE COMPANY OF NEW H AMlWHIRE NOTES TO FINANCIAL STATEhlENTS (Ccminued) from mid blarch through April 14,1989, the date of the Court hearing on approval of the h!h!WEC sentement. If the h!htWEC settlement is not approved promptly, the Company believes that continued funding of Seabrook's pre-operational expenses might cease, and ihe prospects for Seabrook's ultimate operation could be seriouslyjeopardited. T
- 3. hih1WEC settlement is being challenged by the ofGeW committee for equity security holders.. The Company can predict whether the Bankruptcy Court will approve the bih!WEC settlement agreement or whether any approval and resolution of any appeals therefrom will be timely, Notwithstanding these agreements and covenants not to sue by hih!WEC, certain of the htMWEC cities and towns have filed claims against the Company in the Bankruptcy Court asserting they are third party beneficiaries of the MM WEC Buyback and of MMWEC's ownership interest in Seabrook, and that Mh!WEC's agreements and covenants not to sue are a
not binding upon their claims. The ' mounts claimed by them are very substantial. On March 16,1989 the Bankrup Court ruled that the cities and towns are not third party beneficiaries as claimed and may not assert these claims ag the Company, The Company cannot predict whether this ruling will be appealed and, if so, whether it will be upheld o appeal, The MMWEC settlement agreement is important to the Company's successful reorganization and achieving maximum recovery for securi'y holders. The MMWEC settlement not only limits the claims that could potentially be brought against the Company, but it enhances the likelihood of receipt oflow power authorization and eventual Seabrook operation. Should the MMWEC settlement agreement not become effective, continued pre operational funding of ; Seabrook could be jeopardized. Operating License. The process of obtaining approvals and pennits for Seabrook has been long, complex, consistently opposed by a number ofintenening groups and plagued by lengthy delays. These factors have resulted in greatly increased costs for Seat took. Continued opposition by intervenor groups at the regulatory level and through cou appeals is virtually certain. Seabrook was originally designed as a two unit facility, Construction of Unit I was complete in the fall of 1986; Urdt 2 has been cancelled. A 40 year operating license for Unit I has teen granted by the NRC sub - to certain conditions. Among those conditions are completion of fuel loading and zero power testing (both now donel, 1 successful low power testing, and NRC approval of radiological emergency response plans for certain New Hampshire and Massachusetts towns and cities within a ten mile radius of the Seabrook Plant. ; I Low Ponert in December 1988 the NRC voted unardmously to authorize low power testing for Seabrook pending j satisfaction of the NRC's requirement that funds be available to decommission Seabrook if full power authorization is not e granted. On March 20,1989 the Joint Owners filed with the NRC staff a funding plan which they believe will satisfy the f NRC's requirement. It is anticipated that shortly after reviews and determination by the NRC Staff that this funding plan ! meets the NRC's requirements, authorization to proceed with low power testing will be issued. Any such authorization would likely be subject to a 10 day automatic stay to give intervenors an opporturdty to appeal. As a result, low power i testing is not expected to begin earlier than mid April. On March 9,1989 the Governor of New Hampshire announced that he intended to seek,in the Bankruptcy Court, an l. Injunction prohibiting the Company from commencing low power testing unless the State and the Company reach a rate agreement. The Company cannot predict what effect this action might have upon the timing oflow power testing. Full Power: Emergency response plans have been Sled with the NRC for both New Hampshire and for Massachusetts l and in June 1988 a graded eurcise of emergency response plans was held for New Hampshire and Massachusetts. On December 31,1988 an NRC hearing board announced its approval of New Hampshire's emergency response plan. The staffs of both the NRC and the Federal Emergency Management Agency have pubhshed positive reviews of the Massachusetts plan and the June exercise, concluding that both meet the requirements to ensure that public health and safety would be protected in the unlikely event of an emergency at Seabrook. Hearings by an NRC hearing board on these matters began on March 21. The NRC has stated that it expects the hearing board Io complete hearings and issue its ruling by September 30,1989. A final review and vote by the NRC commissioners is then required. The earliest possible date for the issuance of authorization to commence operation beyond low power is towards the end of 1989. Continued 24 j
y - ,
-PUBLIC SERVICE CON 1PANY OF NEW H A51PSHIRE NOTES TO FINANCIAL STATEMEt(IS (Continued) oppositionio the operation of Seabrook by intervenors at the regulatory level and ihrough coun appeals is vinually cenain.
. Due to the uncertainties arising out of the politicizing of the NRC approval process for Seabrook and the overall negatise political climate in New H ampshire in which the Company must operate,it is not possible to be certain when or if operation will in fact occur.
Seabrook Oper.stion, ' theoretically when Seabrook becomes operational the Company would be entitled under traditional ratemaking principles to very large rate increases: in practice, competition in the Company's service area from other sources of power supply effectively limits such rate increases. In the absence of an agreement with the State on rate increases which are an essential element of a conse'.sual reorganization plan, obtaining significant rate increases even in the event Seabrook operates could be a lengthy and uncertain process. See Note i for a discussion of the uncenainties affecting efforts to achieve a consensual plan of reorganization in the
> Chapter Ii case.
The Company has very substantial capital requirements to satisfy ifit is to provide adequate service Io its fast growing service area. The Company's construction program for the five year period 19891993, exclusive of expenditures for Seabrook, is currently estimated to be approximately $327.300,000. The Company's share of the pre operational testing and other capital expenditures relating to Seabrook are estimated to aggregate $ 142.000,000, based on Seabrook's assumed operational date for financial forecast purposes of January 1,1990. In addition, as described above, the Company has agreed to pay MMWEC's share of pre operational expenditures for Seabrook as well as certain other amounts if a proposed settlement agreement with MMWEC is approved by the Bankruptcy Coun. The Joint Owners have received a judgement in their favor for excessive property taxes paid to the Town of Seabrook. The award has been appealed by the Town of Seabrook and payment terms are uncertain. The Company's share of the refund,in excess of $10 million, will be used when it is received to offset other future Seabrook expenditures.
- 3. Change in Seabrook Piant Accounting and Losses on Generating Projects The Company's financial difficulties are directly related to the magnitude of its investment in the Seabrook Plant and
' to the Company's inability to base its rates upon the cost of this project prior to its operation (currently assumed to be January 1,1990 for financial planning purposes). The Company determined that, should the Seabrook Plant be permitted
, to become operational, political and competitive pressures would not permit the Company to recover the recorded cost of its investment in accordance with traditional utility ratemaking practices. Accordingly,in 1987 the Company changed its i l method of accounting for its investment in the Seabrook Plant to eliminate AFUDC from capitalized costs andIo recognize l capitalized interest and associated income tax effects, This change in method of accounting effectively restated the cost basis of the Seabrook Plant to elirninate the previously assumed effecu of regulation. The 1987 financial statements reflect this change as if it had occurred at January 1,1987. In 1988 the Financial Accounting Standards Board issued definitive guidance to be followed in situations where the recorded cost ofinvestments would not be recovered through traditional ratemaking practices. While the new accounting standard would provide for treatment of the event as an extraordinary item, rather than as a change in accounting principle, the overall result of the application of the new standard would not produce a result materially different than the accounting followed by the Company in 1987, and accordingly, no restatement of that accounting has been made. The new standard would not require the elimination of the previously assumed effects of regulation and restatement of assets, unless, as was the case for the cost basis of the Seabrook Plant, there was impairment. Management has determined that further cost capitalization in connection with the Seabrook Plant would not be prudent and therefore ceased capitalizing such costs effective December 31,1987. Accordingly, a loss of $212.0 million was recognized in 1987 associated with estimated remaining costs to be incurred prior to an assumed operating date of January 1,1990. The loss provision of $212.0 million included interest of $70 million relating principally to interest on 25
w a PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE ' NOTES TO FINANCIAL STATEMENTS (Continuedi _ s secured debt. it did not include a provision for interest on unsecured debt after January 28,1988. During 1988 $l09.5 million was charged to the accrual, including the $47.5 million of capitalized interest associated with the Seabrook investment. The Company has not changed Seabrook's assumed operational date for financial forecast purposes ofJ I,1990, if there are delays in that date, Seabrook costs, approximating $8 million for each month of delay, will have to ' be accrued by the Company when the delay becomes probable, A summary of losses on generating projects recorded in 1987 and 1986 is as follows: 12.81 12M (Thousands of Dollars) Seabrook Plant Unit 2
^
Plant costs 5 - $318,513 Estimated cancellation costs (468) 15,000 Pilgrim Plant Unit 2 - 15,008 Seabrook Plant Unit i Estimated future expenditures 212,000 - hiillstone Unit 3 3,557 - Regulatory assets 26,363 - Total $241,452 $348,521 In 1987 the Company also expensed $3.6 million ofitsinvestment in hiillstone Unit 3 as a result of an order from the NHPUC based on prudency audits completed for another regulator in the State of Connecticut. The Company also expensed regulatory assets of $26.4 million primarily related to previously deferred rate case expenses and the cost of converting a generating facility to bum oil or coal. In addition, the Company expensed $6.1 million of accumulated costs for an unconsummated exchange offer.
- 4. Summary of Accounting Policies Regulation. During the pendency of bankruptcy proceedings the Company and its properties are subject to the jurisdiction of the Bankruptcy Court. Subject to the foregoing, the Company is subject, as to rates, accounting and other matters, to the regulatory authority of the NHPUC, the Federal Energy Regulatory Commission and, to a lesser extent the public utilities comraissions in other New England states where the Company does business. ;
Cash and Temporary Investments, For purposes of the Statement of Cash Flows, the Company considers all highly I liquid investments purchased with a maturity of three months or less to be temporary investments. I l Investments. The Company follows the equity method of accounting for its investments in nuclear generating i companies and a wholly-owned real estate subsidiary. The Company owns four to seven percent of each of four New England nuclear generating companies and, pursuant to purchased power contracts, is entitled to its ownership percent of , l ' total plant output and is obligated to pay a similar share of operating expenses and retums on invested capital. ! Approximately 7.7%,6.9%, and 7.5% of the Company's total energy requirements were furnished by these companies in 1988,1987, and 1986, respectively. Utility Plant. Provision for depreciation of utility plant is computed on a straight.line method at rates based on estimated service lives and salvage valacs of the several classes of property. The depreciation provisions were equivalent to overall effective rates of 3.55%,3.56%, and 3.90% of depreciable property for 1988,1987, and 1956, respectively. hiaintenance and repairs of property are charged to maintenance expense. Replacements and betterments are charged to utility plant. At the time properties are retired, the cost of property retired plus costs of removalless salvage are charged to the accumulated provision for depreciation. 26 J
p - L: t: PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE ! NOTES TO FINANCIAL. STATEh1ENTS (Cominued) o i Operating Revenues. Revenues are based on billing rates, authorized by applicable regulatory commissions, which are applied to customers' consumption of electricity These rates include estimates of the cost of energy incurred by the Company in the generation or purchase of electricity. To the extent that energy cost estimates differ from actual costs incurred, the differences are deferred and refunded or charged to customers through periodic rate adjustments. The Company records an estimate of revenue for service rendered but not billed. Allow ance for Funds Used During Construction (AFUDC). AFUDC is the estimated cost, during the period of construction, of funds invested in the construction program which is not recovered from customers through current revenues. Such allowance is not realized in cash currently but under the ratemaking process the amount of the allowance is expected to be recovered in cash over the service life of the plant in the form ofincreased revenue collected as a result j of lugher plant costs. The Company capitalized AFUDC at a net of tax annual rate of 11.7% for 1986. In 1987 the Company changed its method of accounting for its investment in the Seabrook Plant to eliminate AFUDC from the l Seabrook Plant's capitalized costs and to recognize capitalized interest and associated income tax effects. (See Note 3.) Capitalized Interest. As described in Nc,te 3,in 1987 the Company adjusted the cost basis of its investment in the Seabrook Plant to eliminate AFUDC and to substitute capitalized interest, w hich is the accounting treatment used by non-regulated enterprises. For 1987 totalinterest expense,less the estimated amount applicable to regulated operations, was allocated to the Seabrook Plant in the proportion that it represented of total costs of construction work in progress. For 198R the portion of interest associated with the Seabrook Plant was charged to the accrual of estimated future Seabrook expenditures. Earnings Per Common and Common Equivalent Share. Eamings per common and common equivalent t. hare was calculated for 1988 by adjusting earnings available for common stock for the assumed interest income, that would result from the investment of the proceeds from the assumed exercise of 18.372.999 common stock purchase warrants, at an exerc;se price of $$ per share,in excess of those proceeds used to repurchase 20% of the Company's outstanding shares of common stock, in treasury bills. The resulting earnings available for common stock was then divided by the weighted average number of shares of common stock outstanding and common stock assumed to be outstanding upon the exercise j of warrants and assumed repurchases of common stock. For the years ended 1967 and 1986 the loss per common share was l calculated by dividing earnings available for common stock by the weighted average number of shares of common stock ; outstanding. l j Had the Company not discontinued accruing preferred dividend requirements, earnings available for common stock and earnings per common and common equivalent share would have been $14,298.000 and $0.35 respectively, for 1988.
- 5. Liabilities Subject to Settlement Upon Reorganization i The Company ceased paying interest onits unsecured debt in October 1987. On January 28,1988,the date of the iiling of the petition in bankruptcy, the Company ceased accruing interest on its unsecured debt and ceased paying interest on the remainder ofits debt . The Bankruptcy Court has since granted a mntion of the Company to permit,during the pendency of the bankruptcy case. payment ofinterest on the First biortgage Bonds, the General and Refundmg biortgage Bonds and debt secured by any such boncis. Payment of interest enThird h1ortgage Bonds har been denied by the Bankruptcy Court.
Any reorganization plan for the Company will have to address the extent to w hich payrnent will be made on the Company's debentures, other unsecured debt, prepetition trade payables and certain prepetition accrued pension costs. Additional liabilities resulting from the rejection ofleases and executory contracts may be recognized when claims are fixed by the Coun. The Bankruptcy Court established October 31,1988 as a bar date by which date claims against the Company had , to be filed with the Bankruptcy Court or be forever barred. The bar date was extended to a future date based upon further order of the Court for certain Seabrook related claims and to December 9,1988 for certain underwriters' indemnification claims relating tc, Sridel v.Public Sen ice Company ofNewHampshire. Additional claims in excess of the amounts listed below have been filed. Substantial claims could also be filed if the hih1WEC agreement is not approved. (See Note 2.) 27
)
b PUI3LIC SERVICE COhlPANY OF NEW H AMPSHIRE : NOTES TO FINANCIAL STATEMENTS (Continued) Included in the Company's Accounts Receivable are $2.2 million in receivables from vendors and custc.mers who are claiming their right to offset the receivable against prepetition liabilities of the Company. The Company expects that these amounts will also be settled upon reorganization. At December 31,1987 the Company was in default on S850.9 million of long temi debt and $100 million of short-L temt floating rate notes. The total of such obligations, as shown in the table below, was classified in current liabilities as ' l
- l. debt and accrued interest in default at December 31,1987. After filing for protection under the United States Bankruptcy l
Code in January of 1988, all prepetition obligations of the Company are subject to settlement upon the adoption of a plan [. of reorganization. Accordingly, at December 31,1988 the amounts of debt and accrued interest in default at Decemtwr , 31,1987 together with all other long term debt, interest accrued to the date of filing and other known prepetition liabilities, , l have been classified in noncurrent liabilities as liabilities subject to settlement upon reorganization as shown in the table below, j M M IThousands of Dollars) Long Term Debt $1,503.929 $ 850,037 Unamortized Premium and Discount (104,171) - Floating Rate Notes 100,000 100,000 Accrued Interest 145,696 77,701 Accounts Payable 19,315 - Accrued Pension 10,481 - 5,1,675,250 $ 1,028,638 Interest on unsecured debt of $130,193.000 has not been recognized in the 1988 financial statements. o 6, Income Tases The components of Income Tax Expense (Benefit) are as follows: ! M M M ' (Thousands of Dollars) included in OperatinFExpenses Current Federal S 34,889 $ 25,342 S 32,064 l
- State 3,052 (1,314) 1,602 37,941 24.028 33,666 Deferred Federal (3,875) 10,839 9,953 Investment Tax Credit Adjustments (574) 734 . (511)
$ 33,492 $ 35,601 S 43,108 i
included in Other income and Deductions ' Current Federas S(34,726) $ (26.706) $(32,064) Current State (2,915) (608) (1,603) Defened Federal 41,754 (81,164) (39,653)
$ 4.113 $( 108,478) S(73,320) ,
Total Income Tax Expense (Benefit) -Federal S 37,468 $ (70,955) $(30,211)
-State 137 (1,922) (1)
$ 37,605 $ (72,877) S(30,212) ]
At December 31,1988 the Company had, for regular tax rurposes, a net operating loss (NOL) carryforward of approximately $565 million expiring between the years 2000 and 2003, and an Alternative hiinimum Tax NOL carryforward of $480 million expiring between the years 2000 and 2002. Investment tax credits utilized are deferred and
~
amortized to income over the lives of the related properties. At December 31,1988 the Company had investment tax credit carryforwards of $38.0 million w hich expire between the years 1994 and 2001 As described in Note 1, the Company has 28
7 b , PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE NOTES TO FINANCIAL STATEMENTS (Continued) filed for protection under Chapter 11 of the United States Bankruptcy Code, A reorganization of the Company under L Chapter 11 may limit the usage of net operating loss and investment tax credit carryforwards so that some may expire ! unused. The tax e ffect of stifferences between pretax income in the financial statements and income st?bject to tax, which are i the result of timing differences, are accounted for as presenbed by and in accordance with the ratemaking policies of l the NHPUC except for the Company's investment in Seabrook, Accordingly, provisions for deferred income taxes are recognized for all timing differences specified by the NHPUC and, as a result of the change in method of Seabrook Plant accounting discussed in Note 3, for all timing differences associated with Seabrook, Taxes attributable to other timing differences are flowed through to net income as adjustments toincome iax expense. As of December 31.1988 the Company had not provided cumulative deferred taxes of approximately $25,000,000 relating to various tax deductions which
- had been flowed through. The principal timing difference which has been flowed through is the excess of tax over book depreciation for assets placed in service before 1971, Provisions for deferred income taxes are summarized as follows:
M M M (Thousands of Dollars) Provision for Future Seabrook Expenditures $16,143 $(84,800) $ . Capitalized Interest (78) 66,709 - Nonnalized Timing Differences Relating to Plant 6,472 13,310 13,742 Deferred Fuel Costs (3,807) 2,332 (1,530) Excess of Tax over Book Unused Net Operating Loss Carryforward (26,424) (51,201) (45,245) Rate Differential on Book Net Operating Loss Used . (9,131) - Seabrook Unsecured Interest 44,266 . . ; Other 1,307 (7.544) 3,333
$37,879 $(70,325) $(29,700)
The principal reasons for the differences between total income tax expense and the amount calculated by applying the federal ir.come tax rate (34% for 1988,40% for 1987 and 46% for 1986) to income before income tax and the cumulative effect of change in Seabrook Plant accounting are as follows: 8 M M (Thousands of Dollars) ! Income (Loss) Before Income Tax and the Cumulative Effect of Change in ; Seabrook Plant Accounting $92,8 /8 $(159,913) $(228,577) ; Expected Tax Expense $31,578 $ (63,965) $(105,145) i increase (Reductions)in Taxes Resulting From j AFUDC Equity (203) (473) (57,361) Net of Tax Method of Recording AFUDC - (443) (32,006) Reversal of AFUDC on Cancelled Nuclear Projects - - 49,395 , Difference Between Book and Tax Depreciation. : Not Normalized 2,496 2,882 3,018 l Other Deductions and Adjustments 3,734 (1,747) (1,660) Unused Book Net Operating Loss . . I13,547 1 Additional Book Net Operating Loss Carryback Benefit . (9,131) . Total Income Tax Expense (Benefit) $37,605 $ (72,R77) $ (30,212) 29
1 PUERIC SERVICE COMPANY OF NEW li AMPSHIRE NOTES TO FINANCIAL STATUtENTS (Continued) r , The Financial Accounting Standards Board has prnmulgated new income tu accounting rules which will require the
! Company Io change from the deferred method to the liability method of accounting for income taxes. The liability method -
t accounts for deferred income tues by applying enacted statutory rates in effect at each balance sheet date to differences between the book basis and the tax basis of assets and liabihties. The Company plans to adopt the new rules in 1990 without restating prior years' imancial statements, it is estimated that adoption of the new rules in 1990 uill result in an increase in accumulated deferred taxes on income of approximately $140 million of which approximately $70 million will result in e regulatory asset representing amounts to be recovered from customers through future rates and approximately $70 million will be reported as the cumulative e ffect of the change in the method of accounting forincome taxes in the statement ofcandngs. ; 7.Short Term Borrowings Short term debt outstanding at December 31,1987, other than those amounts classified as current through default, consisted of $100,000,000 principal amount of unsecured floating rate promissory notes due blay 1,1988. The Company reclassified these notes in 1988 as liabilities subject to settlement upon reorganization and ceased accruing interest thereon effective January 28,1988. There was no short term debt outstanding at December 31,1988 and 1986. Infomtation regarding short term borrowings is as follows: , M M 1916 (Thousands of Dollars) blaximum Short Term Borrowings - $100,000 $ 70,000 Average Amount Outstanding . $ 61,096 $ 6,137 Averap Interest Rate (Including Fees) At Year End . 21.85 % - During the Year . 21.85 % 18.31 %
- 8. Postemployment Benents Pension Plan.The Company has a dermed non contributory pension benefit plan covering substantially all of its employees. The benefits are based on years of service and the employee's compensation during the highest consecutive i
five years of eamings of the last ten years of employment. The Company's policy is to fund the minimum amount required. Costs were $7,500,000,56,368,000(excluding the cost of the early retirement program described below) and
$5,148,000 in 1988,1987 and 1986, respectively. Contributions are intended to provide for benefits attributed to service to date and for benefits expected to be camed in future years. The assets of the plan primarily include United States Govemment Bonds, other bonds which are ofinvestment grade, and stocks of publicly traded compardes.
There were two changes to the pension plan in 1967. Effective August 1,1987 the vesting requirement was reduced from ten to five years of employment. Also in 1987 an early retiremet.t incentive program was offered as part of the Company's cost cutting efforts. Employees who had attained age 55 and had completed twenty years of service by August 1,1987 were eligible to elect to retire as of September 16,1987. Employees electing to retire pursuant to the plan received an addition of five years to both age and length of service in determining pension bene fits, and a temporary monthly supplement of $550. The cost of this program, $5,116,000, was recognized in 1987. Net pension cost includes the following components: M M (Thousands of Dollars) Service Cost for Benefits Eamed During the Year $5,614 $5,244 Interest Cost on Projected Benefit Obligation 9,075 8,142 Actual Retum on Plan Assets (0,463) (4,630) Net Amortization and Deferral 2,274 (2,388) ' Net Periodic Pension Cost $7,500 $6,368 30
( - r: t - PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO FINANCIAL STA1BtENTS (Continued) G The following table sets fonh the plan's funded status : I. December 31. December 31, , 126.8 1912 (Thousands of Dollars) Actuarial Present Value of Benefit Obligations: Accumulated Benefit Obligation, including Vested Benefits of $80,518 at December 31,1988 and
$74,422 at December 31.1987 $ 83,585 S 79,817 Additional Benefits Related to Future Compensation Levels 41,341 39,566 Projected Benefit Obligation for Service Rendered to Date 124,926 119,383 Assets Available for Benefits 99.840 90,249 Projected Benefit Obligation in Excess of Plan Assets 25,086 29,134 '
Unrecognized Net Transition Obligation (8,411) (8,812) Unrecognized Net Gain or (Loss) from Past Experience Different From that Assumed and Effects of Changes in Assumptions 741 (3,689) Accrued Pension Costs $_17,416 $ 16,633 , The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligation were 8 percent and 6 percent, respectively, for 1988 and 1987, i The assumed investment rate of return was 8,5 percent for 1988 and 1987.
- Health and Life Insurance, The Company provides certain health and life insurance benefits for employees, Substantially all of the Company's employees may become eligible to continue those benefits if they reach retirement age while working for the Company. Those benefits are provided or administered through insurance companies whose ,
premiums or charges are based on the benefits paid during the year, "Ihe Company recognizes the cost of providing those benefits by expensing the annual insurance premiums, which were approximately $1,765,000, $1,260,000 and
$1,200,000 for retired employees in 1988,1987 and 1986, respectively.
- 9. Leases The Company has a leasing agreement for a ponion of the nuclear fuel for the Seabrook Plant. This agreement has been capitalized for financial reponing purposes. Additionally, the Company leases cenain propeny from a w holly.
owned real estate subsidiary, Rentals charged to expense in 1988,1987 and 1986 were $4,826,000, $4,814,000 and $4,772,000, respectively, including rentals to the wholly owned real estate subsidiary of $1,230,000 in 1988. At December 31,1988 estimated future minimum lease payments for non-cancellable operating leases were as follows: 1989 $ 6,397,000 1990 5,584,000 1991 4,820,000 1992 4,049,000 1993 3,101,000 ~ Thereafter 22,090,000
$46,041,000 31
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? ; '. ; PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE
[ NOTES TO FINANCIAL STATEMEtGS tContinued) - I-
- 10. Unaudited Quarterly information The following quarterly information is unaudited, and,in the opinion of management,is a fair summary of results of
!! operations for such periods. Vailttions in Operating Revenues and Operating income betw een quarters tellect the seasonal
(' nature of the Company's business. Three Months Ended December 3t, September .40 June 30, klarch 31. M M M M M M M M [ qThousands eteept Per Share amounts) l , Orerating Revenuet $152.900 $146,M7 3148,078 $135.442 $135,185 Stl4.099 $167,322 3153,220 Operating income 25,612 25.7M 20.540 24,655 21.880 16.109 .u sli 31.650 Louet on 0enerating Projects . (237.895) . MI . (3.898) . Income (Loul Before Cumelsthe Effect of I Change in SeabrmL Plant Accounting 13.199 (121,175) 10.726 8.808 9,749 545 21,599 2J?86 Cumulaine Effect of Ch.mge in Seabrook Plant Accounting . . . . . .
. (308.A51 Net income (Lois) 13,199 (121.175) 10.726 8.808 9,749 545 21,599 0 73,8651 L Preferred Dividend Requirements . 10,245 . 10.245 . 10.243 3.084 10.2J5 Earningt (Lou) Assilable for Common $tock 1.1,199 (131,400) 10,726 (1,437) 9.749 (9,700) 18,515 (384.t!01 Weighted Aserage Common and Common Equivaleni $ hares 48,l M 37,194 48,l M 37,t 9J 48,l M 37,1 W 48,l M 48,125 E2mings (Lou) Per Share $ 0.29 $ (3.53) $ 0.24 3 (0.04) $ 0.22 $ (0.26) $ 0.40 $ (7.96)
]
I See Note 3 for a discussion of the 1987 change in Seabrook Plant accounting and losses on generating projects. ' t s i i
]
f7
- j: .
INDEPENDENT AUDITORS' REPORT The Board of Directors Public Service Company of New Hampshire: We have audited the accompanying balance sheets and statements of capitalization of Public Service Company of New Hampshire as of December 31.1988 and 1987, and the related statements of earnings, cash flows and changes in common f stock equity for each of the years in the three year period ended December 31,1988. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements re fened to above present fairly, in all material respects, the financial position of Public Service Company of New Hampshire at December 31,1988 and 1987, and the results of its operations and its cash flows for each of the years in the three year period ended December 31.1988 in conformity with generally accepted , accounting principles. As discussed in Note I to the financial statements, on January 28,1988 the Company filed a voluntary petition for
'. t. protection under Chapter 11 of the United States Bankruptcy Code. The Company is now operating its business as a debtor.
in-possession and is seeking 1o put in place a plan of reorganization. Approval of any plan is dependent upon many factors, including acceptance by certain of the Company's creditors and equity security holders, confirmation by the Bankruptcy Court and, possibly, approvals by governmental authorities of the State of New Hampshire. The accompanying financial statements do not include any adjustments relating io the recoverability and classification of reported asset amounts or the amounts and classification ofliabilitics that might result from the resolution of the foregoing matters. As discussed in Note 3 to the financial statements, the Company changed its method of accounting for its investment in the Seabrook Plant in 1987. l u+ Na N 4. l l Boston, Massachusetts February 24.1989 l 33
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}y u . Selected Financial Data m . g e 'g s l O (Thousands of Dollars Escept Per share Amounts and Ratins) - i Operating kesenues $ 603483. $ $49,108 $ $03,190
; $ 319,740 ' $ 323,343 fuel ami lNechawd lwer Esreme 267,789 221,142 217,644 247,809 - 238,316 Operating income 104,343 94,148 83,888 81,173 87,244 Total AR'DC 1,7J0 '2,291 194,273 173,799. 144,033 Capitatired Interest 47,479 169,068 . . .
Loues on Ocaerating Projects . (241,432) (348,321) , , income (Lnn) Before Cumulathe Effect of Change in Seabenck Plant Accounting $3,273 < (87,036) '(198.363) 134,742 135J00 Per Share: Earnings (Lou) Befnee Cumulative Effect of Change in 5eabrwk Plant Accountmg 1,14 (3.44) (6.44 ) 2.30 3 07 Dnidendi $ . $ . $ $
$ 0.33 Ratio of Earnings to Fised Charges 1.84 ,30 ,20 2,34 2.03 Shwes of Common and Cnmmon Sto:k Equivalents Outstandmg ( Aserage) 48,134 37,194 37,194 48,128 37.920 Unfinished Construction $ 1,806,694 $1,813.369 $1,874,289 $1,989,164 31,691,433 E Total Auets 2.703,788 2,623,603 2,707,844 2 662,384 ' 2,365,283 8 ons. Term Debt - 340,888 - 1,372,383 1,089,922 999,601 Debt and Accrued Interest in Default . 1,028,638 . . .
1,labihuet Subject to Setdement Upon Reorganisation 1,673,250 . . . - Preferred Stack with Mandatory Redemption Requirements . 420.613 417,798 380,389 272,84u 272,840
' Total Capitaliasi!nn 2,417,794 1,214,609 2,342,802 2,467,333 2.228,661 short Term Debt 3 . $ . $ . $ . $ I43,433 Operating Statistics E 1211 E E 12M Customer Data ( Aserage)
Total Customers 373,138 338,619 342.414 322,636 309,263 KW"II Per Residential Customer 7,338 7,181 7,119 6.989 7,067 Cenal'er KWil Reshkntial 9.48 9.31 8.83 9.24 9.78 Prime Sales (housands of Mw11) ResiJertial 2.389 2,233 2.133 1,978 1,917 Industrial 2,326 2,224 2,099 2,046 1,9 20 Commercial and other 2.097 1.967 2.399 2,4 23 2,322 local Prime Sales 6 812 6.444 ,,6.g 6,449 TT54 ~j Generating Capabihry . MW - Coal 738 64 7 622 622 463 Oil 479 364 393 393 749 Hydro 68 69 69 69 63 Nuckar 131 131 131 93 94 Peak Load . Net MW I,446 1,343 1,3 73 L,347 1,202 l 3 k W Common Stock Market Prices
- 1211 Lu2 Esh b Esh b First Quarter 33/4 31/8 93/8 81/8 -
Second Quarter.., 4 t/2 3 83/8 4 $/8 Third Quarter... 43/4 37/8 6 t/4 33/8 , Fourth Quarter :- 6 41/4 41/8 2 t /4 34 s _. _ .)
_ =- , -
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.; Directors Harvey F. Brash
- Fred B. Roedel William M. Scranton Senior Executis e Consultant, President & Founder hianagement Consultant s L Bechtel Group. inc. Chalet Sucse international. inc. Keene, NH San Francisco CA \Vilton. NH
- p. Edward M. Shapiro
- y. . Hilary P. Cleveland . Philip B. Ryan Education Consultant Lecturer \* ice President .bfanchester, NH Colby Sanyer College . The Bigelow CompanyInc.
New London. NH Afanchester. NH William C. Tallman Fonner Chairman of the j George A. Dorr, Jr. William J. Scharffenberger Company President Chairman of the Company bianchester. NH Dorr Fabrics. Inc. Afanchester. NH and . Neuport, NH President and Chief Executive Hugh C Tuttle- , Officer of \\' heeling.Pittsburgh Treasurer John C, Duffett Steel Corporation Tutrie Afarket Gardens.Inc. Wheeling, tVV Dover, NH President and Chief Executive
, Officer of the Company Afanchester, NH John T. Schiffman b
Partner Philip S. Dunlap Smith Batchelder & Rugg President. Treasurer Lebanon. NH NJf. Automatic Equipment Corporation Concord, NH Omcers John C. Duffett,61 (35) Ted C. Feigenbaum,38 (3) Frederick R. Plett,42 (21) President and Chief Vice President. Assistant Vice President Executive Officer NewHampshire Yankee Division Bruce W. Wiggett,42 (14) Charles E. Bayless,46 (8) William T. Frain, Jr.,47 (24) ComptroIIer Senior Vice President and Vice President Russell A. Winslow,54 (27) Chief FinancialOfficer Earl G. Legacy,56 (29) Secretary D. Pierre G. Cameron, Jr., Vice President 54 (8) Kathlyne M. Davis. 34 (12) Senior Vice President and 1ames L Nevins. 54 (20) Assistant Treasurer General Counsel Vice President O. Kay Jones,33 (10) , John P. Edwards,46 (3) Robert A. Parks,43 (20) Assistant Secretary Senior Vice President. Vice President Kevem R. Joyce,42 (6) Customer Affairs George S. Thomas,46 (8) Assistant Comptroller Ralph S. Johnson,45 (20) Vice President. Nuclear Senior Vice President Production Dennis D. Race. 40 (1) Assistant Treasurer George Branscombe,41 (9) John J. Lampton,44 (17) Vice President and Treasurer Assistant Vice President Paul E. Ramsey,35 (l 3) Assistant Comptroller Divisional Edw ard A. Brown,59 (4) Omcer President and Chief Executive Officer . New Hampshire Yankee Division l Elected ":/17/89 __( ) Denotes age and years of service 35
i\ 4 l
'\_
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', Shareowner Information ,
- Annual bleeting of Shareowners Common Stock Ow nership
- All shareowners are invited to attend ' As of December 31,1988, there were '
the Annual hiceting to be held on' 42,953 record owners of shares of the Monday, blay 15,1989, at 9:30 a.m. Company's Common Stock, at the Sheraton.Tara Hotel Baliroom. Nashua, NH (Route 3.Everett Tum. Shareowner Inquiries pike, Exit I to Tara Blvd.). During the meeting there will be an opportunity to Shareowner inquiries regarding change discuss matters ofinterest penaining to of address, stock transfer requirements, the Company. lost or stolen certificates, or other account infonnation should be directed Annual Report on Form 10 K to the Transfer Agent as follows: For those who wish, the Company will The First National Bank of Boston furnish, without charge, to each Shareholder Services Division shareowner who makes a request, a P.O. Box 644 copy of the Company's 1988 Annual Boston, MA 02102 Report on Form 10.K as filed with the Securities and Exchange Commission. Transfer Agent and Registrar Requests should be directed to George Branscombe, Vice President and The First National Bank of Boston Treasurer, Public Service of New 100 Federal Street Hampshire, P.O. Box 330. Manchester, Boston, h! A 02110 NH 03105 Stock Exchange Listing Annual Report - Shares of the $$ par value Common The 1988 Annual Report has been Stock and $25 par value Preferred approved by the Board of Directors. Stock are listed on the New York Shareowners who have questions con- Stock Exchange. Shares of the $5 par cerning the Annual Report or the value Common Stock and wanants to Company should direct their requests purchase shares of the Company's
. In writing to Russell A. Winslow, Sec. Common Stock are listed on the retary, Public Service of New Hamp- l'acific Stock Exchange. The shire, P.O. Box 330, Manchester, NH Company's symbol on both exchanges 03105 is PNH.
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