ML20036A391
| ML20036A391 | |
| Person / Time | |
|---|---|
| Site: | Haddam Neck, Seabrook File:Connecticut Yankee Atomic Power Co icon.png |
| Issue date: | 12/31/1992 |
| From: | Ellis W, Locke F PUBLIC SERVICE CO. OF NEW HAMPSHIRE |
| To: | |
| Shared Package | |
| ML20035G106 | List: |
| References | |
| NUDOCS 9305110163 | |
| Download: ML20036A391 (46) | |
Text
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O Public Service Company of Ne3v Hampshire PSNH a subsidiary of Northeast Utilitics oV 1
1992 nnuaMleport 1
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Directors Roben E. Busch Gerald Letendre yG Executive Vice President and Chief President-Diamond Casting 6: Machine Co.,Inc.
Financial Officer-Northeast Unlities Frank R. Locke John C. Collins President and Chief Operating Officer Chief Executive Officer-Jane E. Newman The Hitchcock Clinic President-Coastal Broadcasting Corporation William B. Ellis Dale E Nitzschke Chairman of the Board and Chief President-University of New Hampshire Executive Officer-Northeast Utihties Robert E Wax Bernard M. Fox Vice President, Secretary and General President and Chief Operating Officer-Counsel-Northeast Utilities Northeast Unlities Executive Committee of the Board of Directors William B. Ellis Chairman Roben E. Busch Bernard M. Fox Frank R. Locke leben E Wax 0
Officers
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JohnJ. Roman William B. Ellis John B. Keane Chairman and Chief Vice President and General Assistant Controller Executive Officer Counsel-Corporate Theresa H. Allsop Bernard M. Fox Earl G. Legacy Assistant Secretary Vice Chairman Vice President O. Kay Comendul Frank R. Locke John W. Noyes Assistant Secretary President and Chief Vice President and Controller Mark A.Joyse Operating Officer C. Frederick Sears Assistant Secretary Roben E. Busch Vice President Roben C. Aronson Executive Vice President and Chief Financial Officer Roben E Wax Assistant Treasurer Vice President Assistant Bruce E Garelick William T. Frain,Jr.
Secretary and General Counsel Assistant Treasurer Senior Vice President Pierre O. Caron C.Thayer Browne2 Sectetary Vice President and Treasurer Paul E. Ramsey Dwid H. Boguslawski Assistant Controller j
Vice President and Assistant Treasurer j
n 1.Mr. Browne has regned as %ce Prmdent and Treasurer eficcuve Msy 1.1993.
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2 Mr. Keane has regned as %ce President and Gueral Courncl Corporate eficcuve May 1,1993.at wheh urne he will serve as
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%ce Prmdent and Treasurer.
1 Febrwy 28,1993 T
1992 Annual Report 7"N Public Service Company of Nww Hampshire l
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Index Contents Pace r
1 Letter to Preferred Stockholders Balance Sheets............
2 Statements of income.........................................
4 Statements of Cash Flows...
5 i
6 Statements of Common Equity 7
Notes to Financial Statements Reports of independent Public Accountants / independent Auditors...........
28 Management's Discussion and Analysis of Financ'el Condition and Resutts of Operations.................................
30 Selected Financial Data..........................................
40
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Statistics.............................
42 Statements of Quarterly Financial Data.............................
42 Preferred Stockholder and Bondholder Information......................
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PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE x--
March, 1993 TO OUR PREFERRED STOCKHOLDERS:
On June 5, 1992, Northeast Utilities (NU) completed its acquisition of Public Service Company of New Hampshire (PSNH or the Company) and PSNH became a wholly owned subsidiary of NU.
In a related transaction, PSNH transferred its 35.6-percent ownership interest in the Seabrook nuclear power plant to North Atlantic Energy Corporation, another wholly owned subsidiary of NU.
The acquisition of PSNH by NU resolved PSNH's bankruptcy and provided much greater rate stability for current and future customers of PSNH.
The financial statements and statistical data contained in this report reflect the financial position, results of operations and statements of cash flows of PSNH for 1992, including the effect of the acquisition.
The 1992 Annual Report of NU, which provides information regarding the entire NU system, including PSNH, from June 5 through the end of the year, also has been
,s mailed to all PSNH preferred stockholders.
PSNH's rates are determined by a comprehensive rate agreement which provides for seven annual base rate increases of 5.5 percent.
The first of these increases was put into effect on January 1, 1990.
The second and third rate increases took place on May 16, 1991 and June 1, 1992, respectively, and the remaining four increases will take effect annually on each June 1 beginning in 1993.
For the period June 5, 1992 to December 31, 1992, operating revenues for PSNH amounted to $492.6 million.
Net income before preferred dividends for the same period amounted to $29.4 million.
Earnings for this period include the one-time impact of
$15.8 million of revenues previously held in escrow that were released to the Company on the acquisition date.
A more comprehensive discussion for each of these items is contained within this report.
Sincerely, Frank R. Locke William B. Ellis President and Chief Chairman and Chief operating Officer Executive Officer m ~i
Public Servic] Comp:1y of Nm Hirnpshira BALANCE SHEETS
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At December 31, 1992 1991 (Thousands of Dollars)
ASSETS Utility Plant, at original cost:
E le etric....... -..................
$ 1,887,659 51,769.514 Less: Accumulated provision for depreciation........
410.026 398.334 1,477,633 1,371,180 Construction work in progress.,
4,363 7,697 2.337 5.683 Nucle ar fuel. net............................
1,484.333 1.384.560 Totat net utility plant........
Other Property and investments:
Nuclear decommissioning trusts, at cost....
1,147 3.462 investments in regional nuclear genersing companies and subsidiary company, at equity..
19,917 19.986 422 150 Other, at cost.............
21.486 23.598 Current Assets:
Cash and special deposits...........................
2.328 9,112 Receivables, less accumulated provision for uncollectible accounts of $2,780.000 in 1992 and of $2,834,000 in 1991.................................
75,094 97.361 Receivables from affiliated companies....... -......... -..... -
2,827 Accrued utility revenues...................................
32,213 28,891 Fuel, materials, and supplies...,....................
45,123 43,710 17,413 Rate incre ase e serow..................................
Prepayments and other.
9.261 16.263 166.846 212.750 Deferred Charges:
Regulsory asset (Note 1)..........................
868.716 864,972 29.466 Deferred costs - Seabrook (Note 3).....
Unrecovered contract obligation - YAEC (Note 2)..
28,160 Energy adpstment clause (Note 1)......................
82,175 41,125 Unamortized debt expense....................
24,679 35,367 Deferred taxes, net (Note 1)...............................
66,670 5,324 Deferred receivable from affiliated company (Note 10)...
32.909 0:her...................................................
17,794 39.363, i
1,121.103_
1,015.617 Tot al As sets.....................................................
$ 2,793,768
$ 2,636,525 PSNH was reorganized on May 16,1991 and became a wholly owned subsidiary of Northeast Utilitias on June 5,1992.
p The accompanying notes are an lategraf part of these financial statements.
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Public Service Company of New Hampshiro
.e BALANCE SHEETS
['y At December 31, 1992 1991 (Thousands of Dollars)
CAPITALIZATION AND LIABILITIES Capitalization:
Common stock at December 31,1992,51 par value.
Authorized and outstanding 1,000 shares 5
1 5
37,494 Capital surplus, paid in........
420,762 646.298 Retained eamings......................
21,853 632 Total common eQJlty............
442.616 684,424 Cumulative preferred stock subject to mandatory redemption.
$25 par value - authorized 25,000,000 shares; outstanding 5,000,000 shares in 1992 (Note 6) 125,000 125.000 Long-temi debt (Note 7).......
1.093.985 1.436.221 Total capita!!zation 1.661.601 2.245.645 Obligation Under Seabrook Power Contract (Note 3)..
752.866 Current Uabilities:
Notes payable to banks-...............
35,000 108.000 Notes payable to a' filiated company.. --
8,500 Long-term debt - current ponion...._.....
94,000 79,764 Obtigation under Seabrook Power Contract -
b current portion (Note 3)...........
34,960
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Accounts payable.....
23,406 48,589 Accounts payable to a' filiated compalies..
19,183 Accrued taxes............
1,725 7,057 Accrued interest..........
11.281 29,362 A::crued pensions......................
31,643 31,911 Other
=
22.767 54,704 287,465 359.387 Deferred Credits:
Accumulated deferred investment tax credits...._.......
6,740 15,199 Deferred contra::t obligation - YAEC (Note 2)........._..
28,160 Other......................................
56.936 16.294 91,836 31,493 Commitments and Contingencies (Note 10)
Total Capitalization and Liabilities...............
5 2,793,768
$ 2,636,525 PSNH was reorganized on May 16,1991 and became a wholly owned subsidiary of Northeast Utihties on June 5,1992.
The accompanying notes are an integral pan of these financial statements.
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Pebc tendoo Cornpany of New Hampshire.
- i STATEMENTS OF INCOME t
.nane 5.1992 May 16.1991 g
to January 1)S92 to January 1;199 I, YearEnoed I
December 31 to December 31; to December 31.
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((j For the Penode 1992
.kene 4.1292 1991 Way 15 1991 1990 l
(Thousands of Dohara) s f-Operating Revenues 492.559 381.769 $
539.827 8
2462B1 $
660 122 Operating Espenses:
Operabon -
Fuel. purchased and net interchange power -
105.346 123.734 139.166 d5261 280 936 Other -
176.679 103,250 119.296 80.231 174.769' Waarnanance -
20A35 22.520 42.335 19.936 53 459 Depreciate 21426 25.183 36390 28289 55.221 f
l Amortzaboriof regulatory assets,not 51.143 36328 53.554 Federal and utste income saaes (Note 8) 39.197 18.449 36.316 (12.709) 525 I
Taxes other than income taxes, 16.927 19.835 27.815 13.737 32.153 '
l Tota! operating expenses -
431.353 347.519 457.072 224.e65 597 23 l
Operating income 61236 34250 82.755 21.616 63.059 Other Incoma:
Ahowance for other funds used 5
(11) 184 45 230 dunng construcDon I
12.101 15.578 Delerred Seabrook retum - othof funds Equky in carrungs el regsnal rear pmeratinD compenses and subsidary company 1 S 31 869 1.426 681 1.101 (Sh84)
QJ74)
(9.314)
Q4.000) j Sankruptc y rolated esponsen Gaan poss) on generabng pro,ects.
6.498 12.446 (6.464)
Other. net.
2.514 74 6422 3.314 6230 income tases - creda 14254 12.814 20 665 (12 495) 1.137 Other tncome. net -
17204 27281 43.501
- (5.323)
(21.774) l Income before irnerest charges.__
79.010
$1.511 126.556 16283 44285 Interest Charpes:
Interest on tong-term deb:
47.62b 54.125 87.620 32.423 65.677 42.101 198.g68 Post-petnaan interest..
Other irnerest.
2,11$
4 342 321 3.453 1.230 (13.648).
Captattred meer==*
Apowance kr tsorrowed funds used 41unng constructon (128)
(629)
(191) 915)
(650)
Deterred Seabrook returri - borrowed Gurubs. net of hcome sames (E.305)
(13Ase)
Irasteet chergas.e de A12 48.733 73Aer 77.7s7 251297 Iricome (tmas) belore estraordinary loos 29.398 12,778
&2 Ate (111.409)
Rt0,012)
(39.322)
Esteordmary loss troen reorgantramon r
Not income (Lose)-
29 398 12.778 $
$2 894 (100.791) $
- 10 012) i PSNH eres voorgentred on May 16.1991 and became a whoDy owned adstadiary of Northeast Uthines on Juno S.1932 The accompanying naams are an entspre! part of these fr.sncnsi statemeras.
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STATamptTs OF CASH R.0W8 u no.. test m.,10.,51 i:
to January 1,1W2 13 -
Jursuary 1.1W1 Wer Ended l
For sie Perbde December 31 mi December 31 to De ember 31 l-1982 Amo4.1982 test May 15, test
- eso (lhousanosof Domare) t l
Ceeh MouAs Pfom Opere5ons:
f Net hcome (beeb s
So,30s s
12.77e s 83.004 s
(100.7et) s (210.012)'
n erru 31.716 35.163 as.600 5,3ee 06J21.
Deferred hoomo enums and hwesonant tax aedess. net _
32,543
- 3.141 17, set (2e4)
(are) 1 (21,40s)
(3o.400)
Delurred ressn - Seabrook Deserved energr costs, not of encreamoort (42.520) 1,480 (38.000)
Amorenstari of reguinbry asset tiote 1).
m St.s3e 3e.52s 53,564 Not eienge h deierted ch.ges and other j
nonomah esma.
(439) 11.012 (43.210)
(e.002)
(ges) l Chanpas M woning capast; t
neceimbine and socrued utmy reserums (30.41e)
M.432 44,e7e 7.982 p.s15) l Fust. metanal, and supptse ese (4.845)
(23.1o7) 4,482 (34.4e3)
Acame,m payable 5.313 (0.10e)
(23.7es)
Se.aoe (10.035) kuorved ness.
F.te0) 30.40s (22.0e3) 36,232' 2,see Liebefuse sub) set t> estemment won teorgantecke 163.482 Oher workhg cephal (asAndes cash) '
12.e64 (36 Ose)
(56,114) 2'1 Jet 10617e Net cash sours tom (used br) operasans.
e2.750 ed.eSe (30 e61) 32 610 K 3eo 6
Cash Roure From Financing Acentsee:
Common eheres 426,000 Me 1,331.7e5 Long-term debt.
75.000 1a5,000 preemrred enock.
(46) p.734)
(21.132) i Thencbg eipmees i
hcrosos h ob6gutbre urider Sentrook power Contract 37,400 Net morense (domesse) h short-tem debt (es.s00) e7,200 (ae2) as2 -
namewissaans and reeremens of long-trm debt (171,000)
(27.000) nopermare of Seabrook Power Cenomet (10.154) l Cash evidends on presurred stock (Note 14 (e,83e)
(3.31 3 (eje2)
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Aceinsson essement pooto 1.i (441,4e8)
(14.412)
(1.006.373)
Sesamentof turikrwtoycialmL Not cash towe tom (used kw) enmche actMens Seeese)
(30.367) 57.01e (70.012) 3e2 Irweetment Acevtties:
hweetment h plant (hetsdhg Seabrook Power Consect:
Eiscotc utmy pier *
(s2.e47)
(as. ass)
(at.as7)
(ie,to7)
(73.eae) i Nucimer tast.
(SEC (o.se0)
(3.125) 3.3es (3.Se3)
Lees: Atomence broeier hands used datng ennaeucoce (5) 11 (1M)
(45)
(330) '
(53.3e4)
(35,280)
(35.00s)
(10,40s)
(77,2se)
Not cash sours used br huestnants h phr*
Seis of Sentrook emmen to NAEC (%w 1) 004,3e6 30 (3) 7.e21 Oher hometnant ac9dises (100)
Not cash towe tom (used tw)Imesonant 400 est (35.250)
(05778)
(10.40s) fee 038)
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seat beseemme (Deeresse) in cash ter the Period.--
(as,t27) so.M3 eso (es.nes) se,014 Cash and special depossm-IngHnha at poed se oss e,112 0,a23 71,70s deJr2 Cunh and specw depoelm-ed of perbd s
a.3as s
so. ass s e.112 s
eJ23 s t17ee l
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= -- Ceeh near beermanson Ceuh peld estng he partods tor.
hesroot. net of amount W durbo sonstrucion s
as 40s s
s3 427 s 71 see s
ade. ass s 47.227 hoome mens a
410 s
aos t e0 s
ao a es pse#4 was rearpantsed on May to.1991 and become a whoey owned subsidery of Nortismet Uteless on.hane 8,1982.
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Pubre Service Company of Nert Hampshira 1
STATEMENTS OF COMMON EQUITY i
Capital Common
- Surplus, Retained qj Stock Paid in Eamings (a)
Total (Thousands of Dollars)
Balance at January 1,1990................
5 210,773
$ 435,420
$(532.195)
S 113.998 Net loss...............................
(210.012)
(210.012)
Balance at December 31, 199 0...........
210,773 435,420 (742.207)
(96,014)
Nel loss...............
(61,469)
(61.469)
Balance at May 15, 19 91...................
$ 210,773
$ 435.420
$(803.676) 5 (157,483) 4 Balance at May 16, 19 91...................
$ 31,982 5 607,366 S 639,348 Net income.....
52.694 52,694 Cash dividends on preferred stock......
(8.282)
(8,282)
Stock dividends on common stock...
5.470 38,310 (43,780)
Issuance of 42,313 shares of common stock...................
42 622 664 Balance at December 31, 1991...........
37.494 646.298 632 684,424 Net income.....................................
12,778 12,778 Cash dividends on preferred p
stock (Note 12)=
(5.704)
(5,704)
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Stock dividends on common stock.....
1,962 16.456 (18.418) y Capital stock expenses, net......
(2)
(2)
Balance at June 4,1992...................
$ 39,456 5 662,752 5 (10,712)
$ 691A96_
5 Balance at June 5,1992.....................
5 N e t income.............................
29.398 29.398 Cash dividends on preferred stock (Note 12)
(7.545)
(7.545) issuance of 1,000 shares of common stock, $1 par value..................
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Premium on common stock............
424,999 424,999 Capital stock expenses, net..........
(4.237)
(4.237)
Balance at December 31, 1992...........
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5 420,762 5 21,853 5 442 616 1
(a) The Company has dividend restrictions imposed by its first mortgage bond indenture and bank credit agreements effectively prohibiting the distribution of any common stock dividends though May1993.
PSNH was reorganized on May 16,1991 and became a wholly owned subsidiary of Northeast Utilities on June 5,1992.
The accompanying notes are an integral part of these financial statements.
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J Public Service Company of New Hampshire C
NOTES TO FINANCIAL STATEMENTS
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SUMMARY
OF SIGNIFICANT ACCOUNTING POlJCIES Emergence From Bankruptcy and Merger with Northeast Utilities On January 28,1988, Public Service Company of New Hampshire (PSNH or the Company) filed a pethion for reorganization under Chapter 11 of the Bankruptcy Code.
On January 2,1990, Northeast Utilities Service Company (NUSCO) filed a plan of reorganization (the Plan) on behalf of Northeast Utilities (NU), the Crednors Committee, the Equity Committee, and various PSNH bondholders, with the support of the state of New Hampshire. On April 20,1990, following a vote by all classes of creditors and equity security holders of PSNH and hearings in the Bankruptcy Court, the Plan was confirmed by the Bankruptcy Court. From April 30,1990 until the June 5,1992 acquisition date, NUSCO managed PSNH in accordance with a management services agreement approved by the Bankruptcy Court.
On May 16,1991 (Reorganization Date) the Company emerged from bankruptcy pursuant to the Plan as a stand-alone company, subject to a merger agreement (Merger Agreement) with NUSCO ard NU Acquisition Corp. (NUAC). On the ReorDanization Date, the Company's then-existing security holders and creditors were entitled to receive distributions of cash and new PSNH securities.
Under the Plan, a distribution totaling approximately $2.3 bElion in cash and securities was made as of May 16.1991 to former creditors and equity security holders of the Company. Former holders of secured claims received cash in the full amount of their claims for principal and unpaid interest. Former holders of unsecured claims received a distribution in the amount of their claims for principal plus pre-petition eb)
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interest, less any applicable original issue discount unamort! zed at the petition date, and a total of
$110.6 million of post-petition Interest. Approximately $593 million of such distribution was rnede in cash and the balance in shares of new common stock. Former holders of shares of preferred and common stock of the Company received $205 m!!! ion principal amount of 15.23 percent Notes, shares of new common stock and certificates entitling the holder to receive warrants to purchase NU common shares.
Former holders of the Company's outstanding warrants recetved a total of $1.3 million in cash.
The Company accounted for the reorganization using fresh start accounting. Accordingly, all assets and liabilities were restated to their reorDanization value, which approximated fair value at the Reorganization Date.
On June 5,1992 (Acquisition Date), NU completed its acquisition of PSNH when NUAC was merged into PSNH pursuant to the Merger Agreement ard the Company became a wholly owned operating subsidlary of NU. In a related transaction, PSNH's 35.6 percent share of the Seabrook 1 nuclear power plant (Seabrook 1) and other Seabrook-related assets were transferred to North Atlantic Energy Corporation (NAEC), another new NU subsidiary, for approximately $504 mElion in cash ard the assumption of the Company's obilgations urder the $205 million,15.23 percent Notes.
The total cash required to effect the acquisition of PSNH was approximately $941 mElion. The sources of the $941 m!!Iion were a $425 million equity investment by NU into PSNH, a $161 million equiry investment by NU into NAEC, and NAEC's issuance and sale of $355 mlition principal amount of First Mortgage Bords.
The proceeds were used (a) to make a distribution of $20 per share, or approximately $789 million in the aggregate, to the holders of the approximately 39.5 mlition outstarding shares of the Company's new common stock, (b) to reimburse $45 million of NU acquisition expenses under the Pirn, (c) to provide
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Public Service Company of New Hampshire NOTES TO FINANCIAL STATEMENTS
$49 million to reduce PSNH's Term Loan, (d) to provide $7 ml!! ion to meet the tax on the transfer of Seabrook to NAEC, and (e) to reduce PSNH's short term borrowings with the balance of funds. The Plan also called upon NU to issue to former PSNH equity security holders warrants ent!*ing the holders to J
purchase approximately 8.4 m!!! ion NU common shares over the next fNe years at an exercise price of $24 per share.
In accordance with generally accepted accounting principles, the acquisition of PSNH has been accounted for as a purchase.
On June 29,1992, PSNH's New Hampshire Yankee Division (NHY) was dissolved and North Atlantic Energy Service Corporation (NAESCO), a wholly owned subsidiary of NU, with the approval of the Securttles and Exchange Commission (SEC) and the Nudear Regulatory Commission (NRC), began management of the Seabrook 1 power plant as agent for the Seabrook joint owners. On June 29,1992, all NHY employees became employees of NAESCO.
See Note 13 for additional information about these transactions.
General PSNH, The Connecticut Light and Power Company, Westem Massachusetts Electric Company, and Holyoke Water Power Company are the operating subsidiaries comprising the Northeast UtDlties system (the system) and are wholly owned by NU.
Other wholly owned subsidiaries of NU provide substantial support services to the system. NUSCO
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supplies centralized accounting, administrative, data procesdng, engineering, financial, legal, operational,
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planning, purchasing, and other services to the system companies. Northeast Nudear Energy Company b
acts as agent for system companies in constructing and operating the Millstone nudear Denerating facDities.
All transactions among affiliated companies are on a recovery of cost basis which may indude amounts representing a retum on equ!!y, and are subject to approval by various federal ard state regulatory agencies.
Accounting Reclassifications For perieds prior to December 31,1992, certain amounts in the accompanying financia! statements of PSNH have been reclassified to conform with the December 31,1992 preserfation.
Public Utility Regu!stion NU is registered with the SEC as a holding company under the Public Utility Holding Company Act of 1935 (1935 Act), and it and its subsidiaries, induding PSNH, are subject to the provisions of the 1935 Act.
Arrangements among the system companies, outside agencies, ard other utElties covering inter-coanections, interchange of electric power, and sales of utEtty property are subject to regulation by the Federal Energy Regulatory Commission (FERC) and/or the SEC. The Company is subject to further regulation for rates and other matters by the FERC and the New Hampshire Public Utitties Commission (NHPUC), and follows the accounting policies prescribed by tre comm!ssions.
Public Service Company of New Hampshire NOTES TO FINANCIAt. STATEMENTS Revenues UtHtty revenues are based on authorized rates applied to each customer's use of electricity. Rates can be increased only through a formal proceeding before the appropriate regulatory commission. At the end of each accounting period, PSNH accrues an estimate for the amount of energy delNered but unbilled.
For additional information see Note to, Commitments and Contingencies - PSNH Rate Agreement.
Accounting Release 14 On November 25,1991, the FERC issued Accounting Release 14 (AR-14) limtting the application of the purchased power account to the cost of energy and capacity purchases and net settlements on barter transactions. PSNH adopted AR-14. on a prospective basis. January 1,1992.
Regutatory Asset The Regulatory Asset represents the aggregate value placed by the rate agreement with the state of New Hampshire (Rate Agreement) on PSNH's assets in excess of the net book value of PSNH's non-Seabrook assets and the $700 million value assigned to Seabrook by the Rate Agreement. The Regulatory Asset was 1
valued at approxirnately $920.6 m!!! ion on the Acquisition Date. The Rate Agreement provides for the recovery, through rates, of the amortization of the Regulatory Asset with a retum each year on the unamortized portion of the asset. The Rate Agreement provides that $425 ml!! ion of the Regulatory Asset be amortized over the first seven years after the Reorganization Date, with the remaining amount to be amortized over the 20-year period after the Reorganization Date.
Investments and Jointly Owned Electric Utility Plant Recional Nuclear Generafino Comoanies: PSNH owns common stock of four regional nuclear generating
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companies (Yankee companies). The Yankee companies, with PSNH's ownership interests. are:
Connecticut Yankee Atomic Power Company (CY)....................
5.0%
Yankee Atomic Electric Company (YAEC)...........................
7.0 Maine Yankee Atomic Power Company (MY)........................
5.0 Vermont Yankee Nuclear Power Corporation (W).
4.0 PSNH's investments in the Yankee companies are accounted for on the equity basis. The electricity produced by these faci!!!ies !s commt:ted to the participants substantia!!y on the basis of their ownership interests and is billed pursuant to conuactual agreements.
The 173-megawatt (MW) YAEC nuclear power plant was shut down permanently on February 26.1992.
For more information on the Yankee companies, see Note 2. Nuclear Decommissioning.
Millstone 3: The Company has a 2.85 percent joint ownership interest in Mi!! stone 3. a 1,149-megawatt (MW) nuclear generating unit. As of December 31,1992, plant-in-service and the accumulated provision for depreciation included approximately $117.3 million and $18.8 million. respecitve!y, for PSNH's proportionate share of MHistone 3. PSNH's share of MHistone 3 expenses is included in the corresponding operating expenses on the accompanying Statements of income.
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Pub!!c Service Company of New Hampshire
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NOTES TO FIN ANCIAL STATEMENTS k
Wyman Unit 4: PSNH has a 3.14 percent ownership Interest in Wyman Unit 4 (Wyman), a 620-MW oil-fired generating unit. At December 31,1992, plant-in-service and the accumulated prwision for depreciation included approximately $6.0 million and $2.9 million, respectively, for PSNH's share of Wyman. PSNH's share of Wyman expenses are included in the corresponding operating expenses on the accompanying Statements of Income.
Depreciation The provkion for depreciation is calculated using the straight line method based on estimated remaining lives of depreciable utility plant-in-service, adjusted for salvage value and removal costs as approved by the NHPUC. Except for major facEPJes, depreciation factors are applied to the average plant-in-service during the period. Major factitles are depreciated from the time they are placed in service. When plant is retired from service, the original cost of plant, including costs of removal, less safvage, is charged to the accumulated provision for depreciation. For Millstone 3, the costs of removal, less salvage, that have been furded through an extemal decommissioning trust will be charged to the trust. See Note 2. Nuclear Decommissioning, for additional information.
The depreciation rates for the several classes of electric plant-in-service are equivalent to a composite rate of 3.5 percent for the six-month and twenty-six day period ending December 31,1932,3.4 percent for the five-month and four-day period ending June 4,1992,3.4 percent for the seven and one-half months ended December 31,1991,3.1 percent for the four and one-half months ended May 15,1991, and 3.2 percent l
for the year ended December 31,1990.
income Taxes The tax effect of timing differences (differences between the periods in which transactions affect income in the financial statements and the periods in which they affect the determination of income subject to tax) is accounted for in accordance with the ratemaking treatment of the NHPUC. See Note 8 for the components of income tax expense.
PSNH has not provided deferred income taxes for certain timing differences during periods when the NHPUC dd not permit the recovery of such income taxes through rates charged to customers. The cumutatNe net amount of income tax timing differences for which deferred taxes have not been provided was approximately $32 million at December 31,1992. As allowed under current regulatory practices, deferred taxes not previously provided are being collected in customers' rates as such taxes become payable.
On the Acquisition Date, a deferred tax asset of approximately $90.7 mH! ion was recorded. This amount represents the tax effect of previously unrecorded PSNH net operating loss (NOL) carryforwards that are assured of rea!!zation beyond a reasonable doubt. The Rate Agreement includes an equity collar mechanism, which provides the abElty to increase PSNH's revenues if its retum on equity (ROE) fa!!s below specified levels, thereby assuring future taxable income to realize the deferred tax asset during the fixed rate period, which continues through May 1997. As of December 31,1992, the remaining balar ce of the deferred tax asset was $81.3 mHlion.
At December 31,1992, PSNH had a NOL carryforward of approximately $800 milion, ard an Attematke Minimum Tax (AMT) NOL carryforward of $690 mElion, both to be used against PSNH's federal taxable income and expiring between the years 1998 and 2006. PSNH also had Irwestment Tax Credri (iTC) carryforwards of $66 m!!! ion, which expire between the years 1993 and 2004. Approximately $395 milion \\s
Public Service Company of New Hampshire
/]
NOTES TO FINANCIAL STATEMENTS of the NOL, $364 million of the AMT NOL, and $35 million of the ITC carryforwards are avaltable for use subject to applicable limits of the Intemal Revenue Code. The reorganization of PSNH under Chapter 11 of the Un!!ed States Bankruptcy Code limits its ability to use !!s remaining NOL and ITC carryforwards so that some portion may expire unused.
In February 1992, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No.109 Accounting for income Taxes (SFAS 109). SFAS 109 supersedes previously issued income tu accounting standards and is effective beginning January 1.1993. When SFAS 109 is adopted, it will not have a material effect on PSNH's financial position or results of operations.
Allowance for Funds Used During Construction (AFUDC)
AFUDC, a noncash cost calculated in accordance with FERC guidelines, represents the estimated cost of capt al funds used to finance PSNH's construction program. These costs, which are one component of the total capitalized cost of construction, are not recognized as part of the rate base for ratemaking purposes untB facilities are placed in service. The effective AFUDC rates under the gross-of-income tax method for the sk-month and twenty-sk day period ending December 31,1992, the five-month and four-day period ending June 4,1992, the seven and one-half month period ending December 31,1991, the four and one-half month period ended May 15,1991, and the year erJing December 31,1990 were 5.7 percent, 7.3 percent,9.3 percent,15.1 percent, and 15.1 percent, respectively.
Energy Adjustment Clause The Rate Agreement includes a comprehensive fuel and purchased power adjustment clause (FPPAC) permitting PSNH to pass through to retaH customers, for a ten year period, the retaH portion of differences between the fuel and purchased power costs assumed in the Rate Agreement and PSNH's actual costs, which include the costs under the Seabrook Power Contract. The cost components of the FPPAC are Q
subject to a prudence review by the NHPUC.
The costs associated with purchases from certain small-power producers (SPPs) over the level assumed in the Rate Agreement are deferred and recovered over ten-year periods through the FPPAC. At December 31,1992, SPP deferrals are $71.1 million. A majority of these purchases are under long-term arrangements (20-30 years) at prices significantly higher than the company's current or projected avoided costs.
For additional information, see Note 3, Seabrook Power Contract and Management's Discussion and Analysis.
1 2.
NUCLEAR DECOMMISSIONING A 1992 decommissioning study concluded that complete and immediate dismantlement at retirement continues to be the most viable and economic method of decommissioning MHistone 3. A 1991 Seabrook decommissioning study also confirmed that complete and immediate dismantlement at retirement is the most viable and economic method of decommissioning Seabrook 1.
Decommissioning studies are reviewed and updated periodically to reflect changes in decommissioning requirements, technology, and inflatiort The estimated cost of decommissioning PSNH's ownership share of MHistone 3 and NAEC's share of Seabrook 1. In year-end 1992 dollars, is $11.3 mH! ion and $124.9 mHlion, respectively.
-11
(
l
Public Service Company of New Hampshire
/7 NOTES TO FINANCIAL STATEMENTS
\\
]
U PSNH's Millstone 3 decommissioning costs are included in depreciation expense on its Statement of income. Nuclear decommissioning costs, as a cost of removal, are included in the accumulated provision for depreciation on the PSNH's Balance Sheet.
Under the terms of the Rate Agreement, PSNH is obligated to pay NAEC's share of Seabrook decommissioning costs, even if the unit is shut down prior to the expiration of ks operating license.
According!y, NAEC bt!!s PSNH directly for hs share of the cost of decommissioning Seabrook. PSNH records its Seabrook decommissioning costs as a component of purchased power expense on its Statement of income. Under the Rate Agreement, PSNH's Seabrook decommissioning costs are recovered through base rates.
PSNH makes payments to an independent decommissioning trust for its portion of the costs of decommissioning Millstone 3. As of December 31,1992 PSNH has collected,through rates,approximately
$935,000 toward the future decommissioning costs of its share of Mi!! stone 3, which has been transferred to the extemal decommissioning trust. As of December 31,1992, NAEC (including pre-Acquisition Date payments made by PSNH) has paid approximately $4.7 million, into Seabrook 1's decommissioning financing fund. The decommissioning trusts of Mi!! stone 3 and Seabrook 1 are reported on the PSNH and NAEC Balance Sheets, respectNely, at cost, which approximates market.
PSNH, along with other New Engf and utilities, has equity investments in the four Yankee companies. Each Yankee company owns a singte nuclear generating unit. The estimated costs, in year-end 1992 dollars, of decommissioning PSNH's ownership share of CY, MY, and VY, are $16.0 million, $11.6 mDllon, and
$9.6 million, respectively. As discussed in the following paragraph, YAEC's owners voted to permanently shut down the YAEC unit on February 26,1992. The decommissioning costs of the Yankee companies g
[
are recorded on their respective financial statements. Under the terms of their contracts with the Yankee
(
companies, the shareholders-sponsors are responsible for their proportionate share of the operating costs of each un!!, including decommissioning. The nuclear decommissioning costs of the Yankee companies are included as part of the cost of power.
YAEC has begun preparations for an order 1y decommissioning of its nuclear facR!ry. On June 1,1992, YAEC filed a rate filing to obtain FERC authorization to collect the closing and decommissioning costs and to reewer the remaining investment in the YAEC nuclear power plant, over the remaining period of the plant's NRC operating license. YAEC, the FERC staff, and intervenors to the FERC proceeding have approved a settlement a greement for approximatety $402.3 mH! ion that would resolve all outstanding issues.
The settlement agreement is awaiting FERC approval. At December 31,1992, PSNH's share of these estimated costs was approximately $28.2 mDlion. Management expects that PSNH will continue to be allowed to recover such FERC-approved costs from hs customers. Accordingly, PSNH has recognized these costs as a regu!atory asset, with a corresponding obligation, on its Balance Sheets. PSNH has a 7.0 percent equity irrvestment, approximating $1.7 mRiion, in YAEC. PSNH had relied on YAEC for less than one percent of ks system capacity.
3.
SEABROOK POWER CONTRACT On June 5,1992, NAEC and PSNH entered into the Seabrook Power Contract (Contract), under which PSNH is obilgated to buy from NAEC, and NAEC is obilgated to sell to PSNH, a!! of NAEC's 35.6 percent ownership share of the capacity and output of Seabrook 1 for a period equal to the length of the NRC's full power operating license for Seabrook 1. Accordingly, PSNH has included its right to buy power from NAEC on its Balance Sheets as part of utility plant with a corresponding obligation. At December 31,1992. a
Public Service Company of New Hampshire NOTES TO FINANCIAL STATEMENTS this right was valued at approxirnately $787.8 million. Under the Contract, PSNH is unconditionally obligated to pay NAEC's cost of service during this period whether or not Seabrook 1 is operating.
I NAEC's cost of service includes all of hs Seabrook-related costs, including operation and maintenance expense, fuel expense, property tax expense, depreciation expense, and certain overhead and other costs.
The Contract establishes the value of the initial investment in Seabrook (Initia! Investment) at $700 million and the initial investment in nuclear fuel at $0. NAEC is depreciating its in!!ial investment on a straight line basis over the remaining term of Seabrook's full power operating license. Any subsequent additions to Seabrook 1 will be depreciated on a straight-line basis over the remaining term of the Contract at the time the additions are brought into service. The Contract provides that NAEC's retum on hs allowed investment in Seabrook 1 (its investment in working caphal, fuel, caphal additions after the date of commercial operation of Seabrook 1 and a portion of the initial investment) is calculated based on NAEC's actual caphafization from time to time over the term of the Contract, which includes its actual debt and preferred equ!ty costs, and a common equity cost of 12.53 percent for the first ten years of the Contract, and thereafter at an equity rate of retum to be fixed in a fiting with FERC. The portion of the initial Investment which is included in the a!! owed investment was 40 percent at the Acquisition Date and will increase by 15 percent in each of the following four years beginning May 15,1993. Between the Reorganization Date and the Acquisition Date, PSNH, recorded $50.9 million of deferred retum on its investment in Seabrook 1.
In accordance with the Rate Agreement, PSNH transferred the $50.9 million of deferred retum balance to NAEC along with the other Seabrook assets. NAEC has recorded the $50.9 million as part of utiltty plant.
From the Acquisition Date through December 31,1992, NAEC recorded an additional $22.8 million of deferred retum. The deferred retum on the excluded portion of the initial Investment, including the
$50.9 mi!! ion, will be recovered with carrying charges beginning six months after the end of PSNH's Fixed Rate Period and will be fully recovered by May 15,2001.
If Seabrook 1 is shut down prior to the expiration of the NRC operating license term, PSNH will be unconditionally required to pay NAEC termination costs for 39 years, less the period during which Seabrook 1 has operated. These costs are designed to reimburse NAEC for its share of Seabrook 1 shut-down and decommissioning costs and to pay NAEC a retum of and on any undepreciated balance of its initial investment in the plant over the then-remaining term of the Contract, and the retum of and on any capital additions to the plant made after the Acquisition Date over a period of f've years after shut down r
(net of any tax benefits to NAEC attributable to such cancellation).
Contract payments charged to operating expense were $26,474,000, including $16,320,000 of interest, for the period June 5,1992 through December 31,1992.
13-N
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Pubile Service Company of New Hampshire n
[
}
NOTES TO FINANCIAL STATEMENTS
'%s' Future minimum payments, excluding executory costs, such as property taxes, state use taxes, insurance.
and maintenance, under the terms of the Contract. as of December 31.1992, are approximately:
Heabrook Power Contract (Thousands of Dollars) 1993
$ 54,000 1994.
63.200 1995 72,300 1996..
81,200 1997.....
99,800 After 1997......................
1.851.800 Future minimum payments............
2,222.300 Less amount representing interest and retum on equky............................
1 A34.500 Present value of Seabrook Power Contract
$ 787.800 payments....
4.
LEASES PSNH has entered into lease agreements, for the use of substation equ!pment. data processing and office equipment, vehicles, and office space. The provisions of these lease agreements generally provide for s
renewal options. Operating lease rental payments charged to operating expense were $8,511,000 in 1992, A-
$6,875,000 in 1991, and $6.452,000 in 1990.
Future minimum rental payments, excluding executory costs. such as property taxes, state use taxes, insurance. and maintenance. under long-term noncancelable leases, as of December 31,1992, are approximately:
Ooeratino teases (Thousands of Dollars) 1993......................................
$ 5.800 1994......................................
5,500 1995.....................................
4,500 1996......................................
3,500 1997......................................
2,300 Aft er 1997..................................
10.900 Future minimum payments......................
EZ,222 l
l i
- ]d i
i
Public Service Company of New Hampshire NOTES TO FINANCIAL STATEMENTS 5.
SHORT-TERM DEBT PSNH has credit lines totaling $125 million aval!able through a revolving-credit agreement wttn a group of 22 banks. PSNH may borrow funds on a short-term revoMng basis using either fixed-rate or standby-loans. Flxed rates are set using competitive bidding. Standby 4oan rates are based upon several attematrve variable rates. PSNH is obligated to pay a facluty fee of.25 percent per annum on the total commttment. At December 31,1992, there were $35 million in borrowings under the agreement.
Certain subsidiaries of NU, including PSNH, are members of the Northeast Utinties System Money Pod (Pod). The Pod provides a more efficient use of the cash resources of the system, and reduces outside short-term borrowings. NUSCO administers the Pool as agent for the member companies. Short-term borrowing needs of the member companies are first met with aval!able funds of other member companies, including funds borrowed by NU parent. NU parent may lend to the Pod but may not borrow. Investing and borrowing subsidiaries receh'e or pay interest based on the average dally Federal Funds rate. Funds may be withdrawn from or repaid to the Pool at any time without prior notice. However, borrowings based on loans from NU parent bear interest at NU's parent cost and must be repaid based upon the terms of NU parent's original borrowing.
The amount of short-term borrowings that may be incurred by PSNH is subject to periodic approval by the SEC under the 1935 Act. Under the SEC restrictions. PSNH was authorized, as of January 1,1993, to incur short-term borrowings up to a maximum of $125 mi!! ion.
6.
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION Detalis of preferred stock subject to mandatory redemption are:
,L December 31, Shares 1992 Outstanding Redemption December 31, December 31 Descriotion Price 1992 1992 1991 (Thousands of Dollars) 10.60% Series A of 1991 25.00 5.000,000
$125 000
$125 000 in case of defautt on dMdends or sinking-fund payments, no payments rnay be made on any junior stock by way of dMdends or otherwise (other than in shares of junior stock) so long as the default continues.
If PSNH is in arrears in the payment of dMdends on any outstanding shares of preferred stock, PSNH would be prohibited from redemption or purchase of less than all of the preferred stock outstanding. The Series A Preferred Stock is not subject to optional redemption by PSNH. It is subject to a sinking fund beginning on June 30,1997, sufficient to retire annually 1,000,000 shares at $25 per share.
d s s
l Pubtle Service Company of New Hampshire NOTES TO FINANCIAL STATEMENTS k
7.
LONG-TERM DEBT Details of long-term debt outstanding are:
December 31 1992
'991 (Thousands of Dollars)
First Mortgage Bonds:
87/8% Series A, due 1996....
$ 172,500
$ 172,500 9.17%
Series B.
due 1998..................
170.000 170.000 Total First Mortgage Bonds..............
342,500 342,500 Term Loan / Notes:
Variab!e Rate due 1996 329,000 452,000 15.23% Notes due 2000...
205,000*
Pollution Control Revenue Bonds:
7.65 %
Series A.
due 2021 66,000 66,000 7.50 %
Series B, due 2021 108,985 108,985 7.65 %
Series C, due 2021.
112,500 112,500 Adjustable Rate Series D, due 2021......
39.500 114,500 Adjustable Rate Series E, due 2021...
114,500 114,500 Adjustable Rate Tax-Exempt, Series D, due 2021.........
75.000 h
Less: Amounts due whhin one year..................
94.000 79.764 Q
Long-term debt, net.................
$1093.985 51 436 221
'As discussed in Note 1, NAEC assumed the 15.23% Notes as part of the Seabrook 1 asset transfer.
Long-term debt maturities and cash sinking-fund requirements on debt outstarding at December 31,1992 for the years 1993 through 1997 are $94,000,000 in 1993,1994, and 1995, $219,500,000 in 1996, and $0 in 1997. Also, there are annual renewal and replacement fund requirements equal to 2.25 percent of the average of net depreciable property owned by PSNH at the Reorganization Date, plus cumulative gross property additions thereafter. PSNH expects to meet its future fund requirements by certifying property additions. Any deficiency would need to be satisfied by the deposit of cash or bonds.
PSNH has entered into interest rate cap agreements to reduce the potential impact of upward changes in interest rates on a portion of its adjustable rate long term debt. At December 31,1992, $198 m!!! ion of PSNH's $329 mlltion Terrn 1.can was capped at 8.0 percent and $75 m!!! ion of its taxable Po!!ution Control Revenus Bonds was capped at 8.5 percent.
The Series A and B First Mortgage Bonds are not redeemable prior to their maturity axcept in limited circumstances. The Pollution Control Revenue Bonds, except for Series D and E, are redeemable on or after May 1,2001, at the option of the Company with accrued interest and at specified premiums. Under current interest rate elections by PSNH, the Series D and E Pollution Control Revenue Bonds are redeemable, at par plus accrued interest at the end of each interest rate period Future interest rate elections by PSNH could significantly defer or eliminate the availab111ty of optional redemptions by PSNH and could affect costs as well.
. km
1 l
Public Service Company of New Hampshire NOTES TO FINANCIAL. STATEMENTS i
b Concurrent with the issuance of PSNH's Series A and B First Mortgage Bonds, PSNH entered into j
financing arrangements w!!h the industrial Development Authorty of the state of New Hampshire (IDA).
)
Pursuant to these arrangements, the IDA issued five series of Pollution Control Revenue Bonds (PCRBs) i and loaned the proceeds of $516.5 million to PSNH. PSNH's obligation to repay each series of PCRBs i
is secured by a series of First Mortgage Bonds that were issued under its indenture. Each such series of First Mortgage Bonds contains terms and provisions whh respect to maturity, principal payment, interest rate and redemption that correspond to those of the applicable series of PCRBs; for financial reporting purposes, these bonds would not be considered outstanding unless PSNH falls to rneet hs obligation under the PCRBs.
l PSNH's two bank fackies, the Term 1.oan and the Revolving Credit FacElty have a second tien, junior to i
the lien of its first mortgage bond indenture, on all PSNH property located in New Hampshire. At December 31,1992, the principal amounts outstanding under the Term Loan and RevoMng Credh Faclity were $329,000,000 and $35,000,000, respectively.
8.
INCOME TAX EXPENSE i
The components of federal and state income tax provisions are:
.hne 5,1992 Jan.1.1992 Msy 16,1991 Jan.1.1991
.lan.1,1990 to to to to to For the Penods Dec 31.1992 June 4.1992 Dec 31.1991 Msv 15.1991 Dec 31,1990 1
(Thousands of Dollars) l wrrent income taxes:
j%deral....
s 2.400 s 415 s-s s-79 9Q 22
_M stste.
p;9 44 gQ 20
_g Totat eurrent....
Deferred hcome taxes. not Federal 23.086 8.703 25,342 111 335 i
state................
r3.oes g.zga 25.342 111
- i;is Totai o.ierred...............
investment tax credres. net..
r32a) r345)
(49e) c2941 tna2) l M
U.f.3 M
L uD LED Totaiincome tax expense.
The components of totalincome tax expense are cistsl5ed as follows:
I heome taxes charged to operating axpenses........
s39.197 sis.449 s38.316 s(12.769) s 525 hcome taxes assocasted with the deferred 4,793 7.1s5 retum on Seabrook............
i booms taxes associated with AFUDC and the deferred retum on NHEC deterred costs.........
217 428 98 111 335
- 1. 3.18)
(21665) 12.495 IL12D 1
Other income taxes - credit (14254)
Totaf income tax expense......................
M 1.6 B.56 M
W)
+
17 1
Pubile Service Company of New Hampshire
,N NOTES TO FINANCIAL STATEMENTS
\\
D Deferred income taxes are comprised of the tax effects of timing differences as follows:
June 5.1992 Jan.1,1992 May 16,1991 Jan.1,1991 Jan.1.1990 to to to to to For the Periods Dec 31.1992 June 4.1992 Dee 31.1991 Ma y 15.1991 Dec 31.1990 Uhousands of Donars)
Depreciation.
$ 1,629
$12.333 121.450
$17.289
$26.164 Energy adjustment clauses....
14.520 (1.359) 14.476 4.628 (9.341)
DMerted tax asset associated with NOL 9.335 (2.317)
(17.149)
(81,002) 116.359 Aftsmatwo minimum tax.
(2,441)
(394)
Provision for future Seabrook expenditures.
6.236 Losses on generating projects (1,991)
Se brook unsecured interest 52.058 (145.508)
Seabrook comprehensive settlement 8.107 Deterred retam on Seabrook 4,793 7,155 AFuDC and return on defened NHEC costs, net.
217 428 98 111 335 Psnsion accrual (699)
(1.803) i Severance benefits..
254 (1.020)
Omer...
271 fi.95e)
.,,,,,,,.3af.)
7.027 (as)
$23 046 s25 ~442
$ 111 Q
The effective income tax rate is computed by dividing total income tax expense by the sum of such taxes and net income. The differences between the effective rate and the federal statutory income tax rate are:
- }
June 5,1992 Jan.1.1992 May 16,1991 Jan.1,1991 Jan.1.1990
/
to to to to to
( Jr the Penods Dec 31.1992 June d 1992 Dec 31.1991 Mov 15.1991 Dee 31.1990 Unousands of Dohars)
Federal statutory income tax rate...............
34.00%
34.00 %
34.00 %
34.00%
34.00 %
Tax effect of differences:
Depreciation differonces.
1.89 (50.66)
(17.71)
(1.51)
(1.24)
Amortzstion of Regulatory Asset.
32.34 76.01 26.01 Seabrook intercompany loss..
9 1.84) bvestment tax credit amortization..
(.60) p.08)
{.71) 48
.32 Asorpanization expenses..
.oo 10.53 1.13 (5.13)
(3.54)
Deferred investment retum......
(44.34)
(14.24) unused book NOL............
(21.85)
(28.15)
Or.or. net.,.
.,,.,22 i! 2.1.)
D.22)
E.15) 11.1 0.)
Effectue income tax rate......
A5 05%
g%
LO9%
J%
E 9.
POSTRETIREMENT BENEFITS PSNH has a un! form noncontributory defined benefit retirement plan covering all of ks regular emoloyees.
Benefas are based on years of service and employees' highest compensation during five consecutive years of employment. Effective January 1,1993. PSNH's plan war merged into the NU system's uniform noncontributory defined benefit plan. PSNH's pension cost, approximated $4,422,000 for the period January 1,1992 to June 4,1992 and $3,467,000 for the period June 5,1992 to December 31,1992,
~.
18-O kx e.
Public Service Company of New Hampshire
(
NOTES TO FIN ANCIAt. STATEMENTS l
$13,220,000 in 1991, and $11,621,000 in 1990. The pension cost for June 5,1992 to December 31,1992 excludes employees of NHY, who are now employees of NAESCO.
l Currently, PSNH funds annually an amount at least equal to that which will satisfy the requirements of the Employee Retirement income Securtty Act and the Intemal Revenue Code. Pension costs are determined using market.related values of pension assets. Pension assets are invested primar9y in equ!!y securtties and bonds.
l The components of net pension cost for PSNH are:
Jan.1,1922 June 5.1992 Jan.1,1991 Jan.1,1990
{
e e
e e
i For the Pe6ods June 4 1992 Dec 31.1992 Dec 31.1991 Dec.31.1990 (Thousands of Dollars)
Service cost.
$ 3,850
$ 2,889
$ 8,382
$ 7,689 l
Interest cost..
6,200 6,810 12.771 11,547 Retum on plan assets.........
(4,561)
(5,026)
(45,157)
(3.293)
Net amortization...........
(1.067)
(1.206) 37.224 (4.322) l Net pension cost
$ 4.422 M
M M
For calculating pension cost, the following assumptions were used:
Jan.1,1992 June 5,1992 Jan.1,1991 Jan.1.1990 s
2 2
2 2
j For the Penods June 4.1992 Dec 31.1992 Dec 31.1991 Dec 31.1900 j
l i
Discount rate.
8.0%
8.0%
8.0%
8.0%
Expected long. term rate of retum...................
9.0 9.0 8.5 8.5 i
Compensation / progression rate..
6.0 6.0 6.0 6.0 The following table represents the plan's funded status:
At December 31.
1992 1991 (Thousands of Dollars)
Accumulated benefit obligation, including $112,507,000 of vested benefits at December 31,1992 and
$117,695,000 of vested benefits at December 31,1991....................
$113 465
$119431 Projected benefit obligation (PBO)..........
$175.891
$184,833 Lass: Market value of plan assets..........
166.456 154.160 PBO in excess of plan assets.............
(9,435)
(30,673)
Unrecognized transition amount...........
6,741 7.139 Unrecognized prior service costs..........
4,870 4.609 Unrecogn! zed net gain.................
(32 859)
(11.819)
Accrued pension (liabl!Ity)...............
$ (30 f63)
[Q2J,f,4,,,)
-19
(
_m________.
Pubile Service Company of New Hampshire r~
NOTES TO FINANCIAL STATEMENTS k
The following actuarial assumptions were used in calculating the plan's year.end funded status:
At December 31.
1992 1991 Discount rate 8.0%
8.0%
Compensation / progression rate....
5.0 6.0 in addition to pension benefits. PSNH currently has a practice of providing certain health care and life insurance benefits to retired employees. The cost of providing those benefits was approximately
$3.290,000 in 1992, $2,783,000 in 1991, and $2,050,000 in 1990. PSNH currently recogntzes health care benefits primarily as paid and provides for life insurance benefits through premiums paid to an insurance company.
In December 1990, the FASB issued Statement of Financla! Accounting Standards No.106, Employers' Accounting for Postretirement Benefits Other Than Pensions (SFAS 106). This new standard requires that the expected cost of postretirement benefits, primarDy health and life insurance benefits, must be charged to expense during the years that employees render service. This is a significant chanDe from the Company's current policy of recognizing these costs as paid. Effective January 1,1993, PSNH wul adopt SFAS 106 on a prospective basis. PSNH anticipates that h wl!! amortize hs SFAS 106 prior service obligation of approximately $63 million over a 20-year period. The adoption of SFAS 106 willincrease the cost of postretirement benefits by approximately $6 million in 1993. The accrual of the net SFAS 106 obligation is not expected to have a material impact on the financial position or on resutts of operations.
Under the Rate Agreement, PSNH is entitled to the same general treatment accorded other utilities by the NHPUC as if any new accounting standards are promulgated during the Fixed Rate Period. PSNH has
(
petitioned its regulators for recovery of these costs, including those related to prior service.
10.
COMMITMENTS AND CONTINGENCIES Construction Program The construction program is subject to periodic review and revision. Actual construction expenditures may vary from estimates due to factors such as revised lead estimates, inflation, revised nuclear safety regulations, delays, difficuttles in the licensing process, the availabi!!ty and cost of capital, and the granting of timely and adequate rate relief by regulatory commissions, as well as actions by other regulatory bodies.
PSNH currently forecasts construction expenditures (including AFUDC) of $237.0 mDlion for the years 1993 1997, including $43.0 malion for 1993. In addition, PSNH estimates hat nuclear fuel requirements, for hs share of Mi!! stone 3, wEl be $4.6 mD!lon for the years 19931997, including $688,000 for 1993.
PSNH Rate Agreement PSNH's Rate Agreement provided the financial basis for the Plart The Rate Agreement calls for seven successNe 5.5 percent annual increases in PSNH's base rates for its charges to retal customers (the Fixed-Rate Period). The first three increases were put into effect on January 1,1990, May 16,1991, and June 1,1992, respectively. The remaining four increases are scheduled to be put into effect annually beginning on June 1,1993. PSNH's base rates, as adjusted to reflect the 5.5 percent annual increases, are intended to recover assumed increases in PSNH's costs and to prwide PSNH whh a reasonable cumulative retum on investment wer the Fixed-Rate Period. As discussed in Note 1, Summary of Signflicant Accounting Policies-Energy Adjustment Clause, the FPPAC protects PSNH from changes in tuel and purchased power costs. Although the Rate Agreement provides an unusually high degree of certainty Q V
Public Service Company of New Hampshire NOTES TO FINANCIAL STATEMENTS
\\
as to PSNH's future retall rates, it also entails a risk wtien sales are lower than anticipated or if PSNH should experience unexpected increases in its costs other than those for fuel and purchased power, since PSNH has agreed that it will not seek additional rate relief during the Rxed-Rate Period, except in limbed circumstances. However, in order to provide protection from signtficant variations from the costs assumed in base rates over the Fixed-Rate Period, the Rate Agreement establishes a ROE cortar to prevent PSNH from eaming a ROE in excess of an upper limh or below a lower limit.
Environmental Matters The system companies, including PSNH, are subject to regulation by federal, state, and local authorities with respect to air and water quality, handling and the disposal of toxic substances and hazardous and solid wastes, and the handling and use of chemical products. The cumulative long-term economic cost impact of increasingly stringent environmental requirements cannot be estimated. However, PSNH has an active environmental auditing program to detect and remedy noncompliance wth environmental laws or regulations, PSNH may locur significant additional costs, greater than amounts induded in cost of removal and other reserves, in connection with the generation, transmission, and distribution of electricity and the storage, transportation, and disposal of by-products and waste. PSNH may also encounter significantly increased costs to remedy the environmental effects of prior waste handling and disposal practices.
In most cases, the extent of additional future environmental cleanup costs is not estimable due to factors such as the unknown magnitude of possible contamination, the possible effects of future legislation and regulation, the possible effects of technological changes related to future deanup, and the difficulty of determining future liability,11 any, for the cleanup of sites at which PSNH has been informed that it may be determined to be legally liable by the United States Environmental Protection Agency, the New (Qj Hampshire Department of Environmental Services, or the Connecticut Department of Environmental d
Protection. In addition, PSNH cannot estimate the potentialliability for future claims that may be brought against it by private parties. However, considering known facts and existing laws and regulatory practices, management does not believe that such matters will have a material adverse effect on PSNH's financial position or future resutts of operations.
Changing environmental requirements could hirder the construction of new generating untts, transmission and distribution lines, substations, and other fachtties. Changing environmental requirements could also require extensive and costly modifications to PSNH's existing hydro, nudear, and fossil-fuel generating units, and transmission and distribution systems, and could raise operating costs signif'cantly. PSNH may also face sign!ficantly increased caphal and operating costs for work centers, substations, and other i
faci!!!ies as a result of environmental regu!ations. However, PSNH believes that it is in substantial compliance with current environmental laws and regulations.
Nuclear insurance Contingencies The Price-Anderson Act currently limits public liabl!ity from a single incident at a nudsar power plant to
$7.9 bDlion. The first $200 mimon of liabHity would be provided by purchasing the maximum amount of commerciatly evalable insurance. Additional coverage of up to a total of $7.3 bi!! ion would be provided by an assessment of $63 mD! ion per incident, levied on each of the 116 nuclear unhs that are currently subject to the Secordary Financial Protection Program in the United States, subject to a maximum assessment of $10 m! mon per incident per nuclear unk in any year. In addition, E the sum of a!! public liabRity dalms and legal costs arising from any nudear incident exceeds the maximum amount of financial protection, each reactor operator can be assessed an additional 5 percent, up to $3.2 mlition, or
$365.4 ml!! ion in total, for all 116 nudear untts. The maximum assessment is to be adjusted at least every
/ kv f
Public Service Company of New Hampshire NOTES TO FINANCIAL STATEMENTS ftve years to reflect inflationary changes. Under the terms of the Contract with NAEC, PSNH would be obligated to pay for any assessment charged to NAEC as a
- cost of service." Based on PSNH's ownership interests in Millstone 3; and NAEC's ownership interests in Seabrook 1; PSNH's metum liability would be $25.4 murion per incident. In addhion, through PSNH's power purchase contracts with the four Yankee i
regional nuclear generating companies PSNH would be responsible for up to an additional $13.9 million per incident. These payments for PSNH's ownership interest in nuclear generating facRities and costs resutting from the Contract whh N AEC would be limhed to a maximum of $5.9 million per incident per year.
Insurance has been purchased from Nuclear Electric insurance Limited (NEIL) to cover (1) certain extra costs incurred in obtaining replacement power during prolonged accidental outages with respect to PSNH's Contract with NAEC: and (2) the cost of repair, replacement, or decontamination or premature decommissioning of utility property resulting from occurrences with respect to PSNH's ownership interests in Millstone 3, CY, MY, and VY; and NAEC's ownership interest in Seabrook 1. A!! companies insured whh NEIL are subject to retroactive assessments if losses exceed the accumulated funds available to NEIL The maximum potential assessments against PSNH (including costs resutting from the PSNH's Contract with NAEC) with respect to losses arising during current policy years are approximately $1.8 million under the replacement power policies and $6.6 mi!! ion under the property damage, decontamination, and decommissioning policies. Although PSNH has purchased the lim!!s of coverage currently available from the conventional nuclear insurance pools, the cost of a nuclear incident could exceed available insurance proceeds.
Insurance has been purchased from American Nuclear insurers / Mutual Atomic Energy Liability Underwriters, aggregating $200 mi!! ion on an industry basis for coverage of worker claims. All companies insured under this coverage are subject to retrospective assessments of $3.2 m!!! ion per reactor. The maximum potential assessments against PSNH (including costs resutting from PSNH's Contract with s
NAEC) whh respect to losses arising during the current policy period are approximately $1.9 million.
Financing Arrangements for the Regional Nuclear Generating Companies PSNH believes that the regional nuclear generating companies will require additional extemal financing in the next several years for construction expenditures, nuclear fuel, and other purposes. Although the ways in which each regional nuclear generating company will attempt to finance these expenditures have not been determined, PSNH expects that it may be asked to provide direct or indirect financial support for one or more of these companies.
Hydro-Quebec Along wth other New England utilities, PSNH entered into agreements to support transmission ard terminal facDrties to import efectricity from the Hydro-Quebec system in Canada. PSNH is obligated to pay, over a 30-year period, its proportionate share of the annual operation, maintenance, and cap!!al costs of these facElties. PSNH's share of Hydro-Ouebec costs are currently forecast to be S57.1 mBlion for the years 1993-1997, including $12.1 mHlion for 1993.
New Hampshire Electric Cooperative, Inc. (NHEC)
NHEC is PSNH's largest customer, representing 4.4 percent of PSNH's revenues for the 12-month period ending December 31,1992. On May 6,1991, NHEC filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The plan of reorganization for NHEC was corJirmed by the Bankruptcy Court on March 20,1992, and related rate fHings were apprcued by the FERC on July 22,1992 and by the NHPUC on October 5,1992. Under the ptan of reorgan!zation, NHEC remains a customer of PSNH. The Plan also contemplates that PSNH will purchase the capacity and energy of NHEC's 22-(
Pub!!c Service Company of New Hampshire n
NOTES TO FINANCIAL STATEMENTS 2.2 percent interest in Seabrook 1 and pay all of NHEC's Seabrook costs for a ten-year period, which began July 1,1990. Intervenors have filed an appeal of the NHPUC approval wth the New Hampshire Supreme Court.
EUA Power Corporation (EUAP)
PSNH and NAEC could be affected by the abiltty of other Seabrook joint owners to fund their share of Seabrook costs. On February 28,1991 EUAP filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code. EUAP's principal asset is hs 12.13 percent joint cwnership interest in Seabrook 1. On February 5,1993, with SEC approval. EUAP redeemed all of its preferred and common stock from its parent company, terminating EUAP's status as a subsidiary of a public utRity holding company and SEC jurisdiction under the 1935 Act. In addition, EUAP also formally changed hs name to Great Bay Power Corporation. A confirmation hearing on an amended plan of reorDanization has been scheduled for March 5,1993. If the Bankruptcy Court confirms the plan, R will still need to be approved by the NRC, NHPUC, and FERC.
Deferred Receivable from Affiliated Company At the time PSNH emerged from bankruptcy on May 16,1991, in accordance with the phase-in under the Rate Agreement, it began accruing a deferred retum on a portion of hs Seabrook irrvestment. From May 16,1991 to the Acquisition Date, PSNH accrued a deferred retum of $50.9 million. On the Acquis! tion Date. PSNH sold the $50.9 million deferred retum to NAEC as part of the Seabrook-related assets.
At the time PSNH transferred the deferred retum to NAEC, R realized, for income tax purposes, a gain that is deferred under the consolidated income tax rules. This gain will be restored ;or income tax purposes
(
when the deferred retum of $50.9 million, and the associated income taxes of $32.9 million, are collected
(
by NAEC through the Contract. When NAEC recovers the $32.9 million in years eight through ten of the Rate Agreement, h is obligated to make corresponding payments to PSNH.
On the Acquisition Date. PSNH recorded the $32.9 million of income taxes associated with the defctred retum as a deferred receivable from NAEC, with a corresponding entry to deferred revenue, on hs Balance Sheet.
11.
FAIR VALUE OF FINANCIAL INSTRUMENTS in December 1991, the FASB issued Statement of Financial Accounting Standards No.107. Disclosures About Fair Values of FinancialInstruments (SFAS 107). SFAS 107 requires companies to disclose the estimated fair value of their financial instruments for which it is practicable to estimate fair value.
The following methods and assumptions were used to estimate the fair value of each d the following financial instruments:
Cash and special depos/ts: The carrying amount approximates fair value.
Nuclear decommissioning trusts: The carrying amount approximates fair value.
Preferred stock: The fair value of PSNH's preferred stock is based upon the quoted market price for those issues or simHar issues. m 6
Public Service Company of New Hampshire
(
NOTES TO FINANCIAL STATEMENTS Long-term debt: The fair value of PSNH's fixed. rate long-term debt is based upon the quoted market price for those issues, or similar issues. Adjustable rate securities are assumed to have a falt value equal to their carrying value.
The carrying amount of PSNH's financial instruments, and the estimated fair value at December 31,1992, is as follows:
Carryino Amount Fair Value (Thousands of ool:ars)
Preferred stock subject to mandatory redemption.
$125 000
$140 625 Long-term debt - First Mortgage Bonds.
$342 500
$385.747 Other long-term debt
$845 485
$861 ?97 The fair values shown above have been reported to meet the disclosure requirements of SFAS 107 and do not purport to represent the amounts that those obligations would be settled at.
12.
PSNH PREFERRED STOCK DIVIDENDS g
As of the Acquisition Date, PSNH had accruad, but not paid, $2.4 million of its second quarter preferred
(
stock dividend. The entire second quarter dividend of $3.3 mDilon was paid, as scheduled, after the Acquisition Date.
13.
PSNH CONDENSED PRO FORMA STATEIGNT OF INCOME (UNAUDITED)
The following condensed pro forma statement of income gives effect to the acquisition of PSNH by NU.
The condensed pro forma PSNH statement of income for the year ended December 31,1992 has been presented as if the acquisition of PSNH had occurred as of the beginning of the period presented. The condensed pro forma PSNH statement of income combines PSNH's audited post. acquisition income statement for the period June 5,1992 to December 31,1992 with PSNH's audited pre acquisition income statement for the period January 1,1992 to June 4,1992.
The adjustments necessary to derfve the pro forma data are based on avatable information and certain assumptions, including the following:
(1)
The Rate Agreement sets out a comprehenshre plan of retaD rates for PSNH. For purposes of derMng pro forma data, it is assumed that the third rate increase, which went into effect on June 1, 1992, has been reflected in the December 31,1992 income statement to the extent that it has been reflected in the historical resutts.
(2)
The regulatory asset is adjusted to reflect: (i) PSNH's $45 mB! ion relmbursement to NU for NU's out-of-pocket expenses associated with the Plan, (ii) common dMdonds accrued from July 1,1990 24-((
1 Public Service Company of New Hampshire a
O NOTES TO FINANCIAL STATEMENTS to the assumed acquisition date of January 1,1992, (iii) the recognition of additional NOL j
carryforwards, and (iv) other PSNH expenses associated with the Plan.
j (3)
The equity collar under the Rate Agreement provides upper and lower limits on the level of the cumulative present value ROE that may be achieved during the Fixed-Rate Period. The pro forma income statement does not include any effects on revenues or expenses that may result in the future if the equity co!!ar goes into effect.
(4)
The pro forma income statement does not give effect to the synergies arising from the acquisition, which are expected to occur after the acquisition, other than the synergies reflected in the historical financial statements.
O
~.
Public Service Company of New Hampshire
./m NOTES TO FINANCIAL STATEMENTS Condensed Pro Forma Statement of income (Uneudited) i Hstorical' Pro Forma l
Giving Etteet June 5,1992 January 1.1992 Pro Forma
. To to to Adjuttrnents
. Acquisit on For the 12 Months Ended December 31.1992 December 31.1992 June 4.1992 (Unaudited) '
(thaudeod)
Uhousands of Dollars) e Operetng Revenues.
5492.559
$381J69 Sf17.079)(a) gE242 Op3rshng Expenses:
Other operabon 319.487 269.359 (26.581)(b) 504.914 42.236 (c)
(9,587)(d)
Depreciation..........
21.$26 25.183 (8.486)(b) 38.223 Arnortzabon of regulatory asset...
51.143 36.528 87.671 39.197 16a49 fr.415)(e) 48.231 Federal and state inmme taxes..
Total operatnD expenses..
431.353 347.519 (9.833)
,Zgt.Q32 Operating income 61.206 34.250 9.246) 88.210 t
i Other boome..
17.804 27.261 (12.101)(b) 18.751 i
(12J99)(e)
(1.414)(d) 7 rest Char 9es............
49.612 48J33 (48,733)(f) 86.753 4
36.016 (f) 1M5 (f)
Not hmme.........................
L,gg L.g27.3 gitag) m i
- Derived from audited data.
Tbs pro forma financial data are presented to comply wtth the SEO's reputations, which permM only limhed adjustments to historical data.
l The pro forma firsancial data are neither a forecast or projection for any future date or period, nor are they a representation of what the Company's resuhs of cperatons would actually have been if such transactions in fact had occurred during the period presented.
See accompanying Notes to Condensed Pro Forma Statement of hoome b
4,
t i
Public Service Company of New Hampshire
[^
NOTES TO FINANCIAL STATEMENTS
\\
Notes to Condensed Pro Forma Statement of income (a)
Reflects PSNH's Operating Revenues and Fuel and Purchased and Net interchange Power effects of the Rate Agreement.
(b)
Eliminates historical Seabrook expenses to reflect the transfer of the Seabrook Interest to NAEC.
(c)
Records purchased power costs urxler the Seabrook Power Contract.
(d)
Eliminates nonrecurring expenses associated vdth the acquisition of PSNH.
(e)
Reflects the income tax effects on the pro forma adjustments.
(f)
Eliminates PSNH's historical pre-acquisition interest and reflects the pro forma interest adjustments as follows:
Principal Pro Forma Outstandino Interest (Thousands of Dollars)
Long-Term Debt:
First Mortgage Bonds:
,e Series A Bonds 8 7/8% (1)...........
$ 172.500
$ 6,564
(
Series B Bonds, 9.17% (1).............
170,000 6.684
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Securing Taxable and Tax-Exempt Pollution Control Revenue Bonds, Variable Rate (assume 5.0%) (1)(2)...............
229,000 4,909 Securing Tax-Exempt Pollution Control Revenue Bonds, 7.59% (1)..................
287,485 9,356 Term Loan, Variable Rate (assume 5.0%) (1)...
329,000 7,053 Amortization of debt issuance costs.........
N/A 1 A5Q
$1.187 9o5g,0j1) Other Debt: Revolving Credit Agreement (assume 5.0%).. $35,000 $ 750 Other........................ N/A 375 121222 $ 1,125 (1) Issued on May 16,1991 in connection with the emergence of PSNH from bankruptcy. (2) Interest rate includes letter of credit fees. ~
I Public Service C:mpany cf New Hampshire j A REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS i To the Board of Directors of Public Service Company of New Hampshire: We have audited the balance sheet of Public Service Company of New Hampshire (a New Hampshire corporation and a who!!y owned subsidiary of Northeast UtHities) as of December 31,1992, and the related statements of income, changes in common equity and cash flows for the periods from January 1,1992 to June 4, 1992 and June 5,1992 to December 31,1992. These financial statements are the responsibility of the Company's management. Our responsibi!!ry is to express en opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairiy, in all material respects, the financial position of Public Service Company of New Hampshire as of December 31,1992, and the results of its operations and cash flows for the periods from January 1,1992 to June 4,1992 and June 5,1992 to December 31,1992, in conformity with generally accepted accounting principles. g ARTHUR ANDERSEN & CO. Hartford, Connecticut t February 19,1993 . a I am j
' Public Service Company cf N;w Hampshire fNDEPENDENT AUDITORS
- REPORT l
l s The Board of Directors Public Service Company of New Hampshire We have audited the accompanying balance sheet and statement of capitalization of Public Service Company of New Hampshire as of December 31,1991, and the related statements of eamings, cash flows and changes in common stock equity for the year onded December 31, 1990 and for the periods January 1,1991 to May.
- 15. 1991, and May 16, 1991 to December 31, 1991. These financial statements are the responsibility of management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generstly accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedutos are free of material misstatement. An audit 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 referred to above present f airly, in all material respects, the financial position of Public Service Company of New Hampsh;te at December 31,1991 and the resutts of its f ' operations and its cash flows for the year ended December 31,1993 and the periods January 1,1991 to May 15.1991 and May 16,1991 to December 31, 1991. J KPMG Post Marwick Boston, Massachusetts February 7,1992 I 1 1 -
Public Service Company of New Hampshire n f MANAGEMENT'S DISCUSSION AND ANALYSIS OF L FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section contains management's assessment of Public Service Company of New Hampshire's (the company or PSNH) financial condition and the principal factors having an impact on the results of operations. The company is a wholly-owned subsidiary of Northeast Utilities (NU). This section should be read in conjunction with the company's financial statements and footnotes. FINANCIAL CONDITION Overview On June 5,1992 (the Acquisition Date), NU and PSNH completed an affiliation, which represented the second step of a two-step bankruptcy court approved plan (the Plan) that was devised in 1989 to retum the then-bankrupt company to financial health. The first step took place on May 16,1991 (the Reorganization Date) when PSNH emerged from bankruptcy as a stand alone company, subject to a Merger Agreement (the Merger Agreement) with NU's subsidiaries Northeast Uti!!!ies Service Company and NU Acquisition Corporation (NUAC). The final step in the affiliation plan occurred on June 5,1992, when NUAC was merged into the company pursuant to the Merger Agreement and the company became a wholly owned operating subsidiary of NU. In a related transaction, the company's 35.6 percent share of the Seabrook 1 nuclear power plant (Seabrook) and other Seabrook-related assets were transferred to North Atlantic Energy Corporation (NAEC), another wholly owned subsidiary of NU. On June 29,1992, PSNH's New n[ Hampshire Yankee dhdsion was dissolved and North Atlantic Energy Service Corporation, a wholly ( owned subsidiary of NU, received approval to manage Seabrook as age.1t for the Seabrook joint owners. The company's net income for the period June 5,1992 to December 31,1992 is $29.4 million. The eamings include the one-time impact of the recognition by the company of $15.8 million in revenues held in escrow until the consummation of the acquisition on June 5,1992. The weakened New England economy continues to adversely affect the company's financial health. The current economic downtum has been felt more severely in the New England region served by the company and the other NU operating subsidiaries than in many other parts of the United States. The recovery is expected to be later and considerably less robust in New England than for other regions of the United States, atthough the recove y in New Hampshire is expected to be somewhat better than in other parts of New England. The company's most recent projection is that retal sales wEl increase at a 3 percent annual growth rate over the next two years. Since 1990, when the 1,150-megawatt Seabrook plant began commercial operation at a time when the economic downtum had already begun, New England's electric generating capacity has substantially exceeded demand. The addition of new capacity in New England from the Hydro-Quebec Phase 11 Interconnection and from qua!!fying cogeneration and small-power production facElties that had been comm!tted during the 1980s has increased the amount of surplus capacity avalable in the region. As a result of the regional capacity surplus, which is expected to persist through 1995, the company may experience difficutty in the sale of surplus capacity to other utElties. !s
The price of Cectricity in New England is high relatNe to electricity in many other usas of th) United States. Relatkely high energy and other costs of doing business in New England contribute to competitive disadvantages for many industrial and commercial customers of the company. -These / disadvantages have aggravated the pressures on business customers in the current weakened regional ( and national economic environment. Management has recogn! zed that it needs to be responsNe to its business customers, in particular, in dealing with the cost of electricity, and to recognize that many business customers have attematives such as fuel sw!!ching, relocation, and self generation. Working independently, and in concert with the New Hampshire Office of Business and industrial Development, the company has taken actions to retain existing business customers and to attract business expansion to its service territory. These economic development activities may involve negotiated reductions in rates for fixed periods of times, as well as technical support and energy conservation services. Negotiated rates coupled with energy conservation services are designed to be flexible enough to attract and retain business, while minimizing lost contribution. The acquisition of the company by NU provides an opportunity to achieve an overall reduction in costs for current and future customers of the company. Specific areas for expected cost savings include a reduction in the operation and maintenance costs for Seabrook, the improved availabi!!!y of the company's fossil-steam generating facilities, the joint operation of the combined NU and PSNH systems, capa0lty cost benefits resutting from the diversity of peak loads between the company and the NU system, and a reduction in purchasing, administrative, and general costs. These cost reductions wl!! better enable the company to maintain affordable electric service and also reduce the threat that its largest electric customers wl!! seek a!!emathe sources of electricity. In October 1991, the States of Connecticut, Rhode Island, and Massachusetts filed an original jurisdiction complaint with the U.S. Supreme Court challenging the validity of a new property tax on Seabrook (the Seabrook Tax). They argued that the Seabrook Tax and the credit available under the New Hampshire Business Profits Tax, taken together discriminate in favor of local commerce in violation p of the Commerce Clause of the U.S. Constitution and other federal laws. On December 30,1992, a special master appointed by the U.S. Supreme Court rendered his opinion that the New Hampshire Law, which created the Seabrook Tax and granted a credit for the amount of Seabrook Tax paid against any New Hampshire Business Profits Tax, is unconstitutional. The report recommended that the Court order the State of New Hampshire to refund to the Seabrook owners the Seabrook Tax paid less any credtts taken by the owner against its liabl!!!y for the New Hampshire Business Profits Tax. The Supreme Court is expected to review the tax issue later this year. The company does not know what the impact on the company will be as a result of the Court's decision or any a'temative legis!ation that may be proposed in New Hampshire. On February 17,1993, President Clinton announced a proposed tax package that would include an increase in the corporate income tax rate from 34 percent to 36 percent and an energy tax. The company estimates that the increase in the corporate tax rate, which would be retroactNe to January 1, 1993, would require an annual increase in revenues to be recovered from customers of approximately $2 million. The company estimates that the proposed energy tax would increase revenues to be recovered from customers by approximately $25 million when it is fully implemented in 1997. The energy tax, as proposed, would be phased-in evenly over three years beginning on July 1,1994 Actual impacts on the company and on revenues to be recovered from customers could vary sign!!icantly depending on the final form any legislation would take and how rules for implementing and administering the tax would unfold. (s O
NU/PSNH Affiliation n On June 5,1992 NU completed its acquisition of the company at a cost of approximately $2.3 b!!! ion, l and the' company became a wholly owned subsidiary of NU. In a related transaction, the company's C 35.6 percent share of Seabrook 1 and other Seabrook-related assets was transferred to NAEC for $504 m!!! ion in cash and the assumption of the company's obligations under $205 mi!! ion of 15.23 percent notes (the 15.23 percent Notes). NU invested $425 million and $161 million of equity into the company and NAEC, respectkely, and NAEC issued $355 million of First Mortgage Bonds. The proceeds were used by the company to distribute $789 mlilion to the holders of the then-outstanding shares of the company's common stock, reduce the company's indebtedness under its Term Loan by $49 million, reimburse NU for $45 million of acquisition costs, pay a $7 million tax on the transfer of Seabrook to NAEC, and reduce the company's short-term debt. The Plan also called upon NU to issue to former PSNH equity security holders warrants entitling the holders to purchase approximately 8.4 million NU common shares over the next five years at an exercise price of $24 per share. At the Acquisition Date, the company and NAEC entered into the Seabrook Power Contract, under which the company is obligated to buy from NAEC, and NAEC is obligated to sell to the company, all of NAEC's capacity and output of Seabrook for a period equal to the length of the Nuclear Regulatory Commission fu!I. power operating license for Seabrook (through 2026). Under the contract, the company is unconditionally obligated to pay NAEC's
- cost of service" during the period whether or not Seabrook is operating and without regard to the cost of alternative sources of power. In add!! ion, the company will be obligsted to pay decommissioning and project cancellation costs after the termination of the operating license.
NAEC's " cost of service
- includes all of its prudently incurred Seabrook-related costs, including operation and maintenance expense, fuel expense, property tax expense, depreciation expense, certain overhead and other costs, and a phased-in retum on its Seabrook investment. The Seabrook Power Contract x
established the initial recoverable investment in Seabrook at $700 million, plus any capital add!tions, net of depreciation. Decommissioning costs are separately billed to PSNH and recovered by PSNH in hs base rates. See the Notes to FinancialStatements for additional information on the Seabrook Power Contract. When the company emerged from bankruptcy on May 16,1991, in accordance with the phase-in under the rate agreement with the State of New Hampshire (Rate Agreement), !! began accruing a deferred retum on a portion of its Seabrook investment. From May 16,1991 to the Acquisition Date, PSNH accrued a deferred retum of $50.9 mHlion. On the Acquisition Date, PSNH transferred the $50.9 million deferred retum to NAEC as part of the Seabrook-related assets. At the time the company transferred the deferred retum to NAEC, it rea!! zed, for income tax purposes, a gain that is deferred under the consolidated income tax rules. This gain will be restored for income tax purposes when the deferred retum of $50.9 million, and the associated income taxes of $32.9 m!!! ion, are collected by NAEC through the Seabrook Power Contract over the period beginning sbc months after the end of the rate period fixed under the P, ate Agreement (December 1997) through May 15,2001. When NAEC recovers the $32.9 mD! ion, it is obligated to make corresponding payments to PSNH. On the Acquisition Date PSNH recorded the $32.9 million obligation from NAEC as a deferred receNable i with a corresponding deferred revenue. . s
} Rate Matters ~ The company's rates are deterrr,ined under a Rate Agreement executed by the Govemor and the Attomey General of New Hampshire in 1989, and subsequently approved by the New Hampshire Public Uti!!!ies Commission (NHPUC). The Rate Agreement se's out a comprehensive plan of rates for the company, providing for seven base rate increases of 5.5 percent per year and a comprehensive Fuel and Purchased Power Adjustment Clause (FPPAC). The first of these base rate increases was put into effect on January 1,1990. The additional revenues resulting from this increase, for the period January 1, 1990 through June 30,1990, of $15.8 million were held in escrow until the consummation of the acquisition on June 5,1992, when they were released to the company and included in samlngs. The second and third rate increases took place on May 16,1991 and June 1,1992, respectively, and the remaining four increases are to be effectNe annually on each June 1 beginning in 1993. The FPPAC recovers or refunds the difference between actual prudent energy and purchased power costs, including the costs incurred under the Seabrook Power Contract, and the costs included in base rates. The rate is calculated for a six-month period based on forecasted data and is reconcRed to actual data in subsequent periods. On June 1,1992, the FPPAC rate was reduced to zero at the same time the 5.5 percent base rate increase was effective resulting in a net increase in rates of 1.9 percent. On December 1,1992, an increase in the FPPAC rate resutted in a rate increase of 2.6 percent. The costs associated with purchases from certain small-power producers (SPPs) over a level assumed in the Rate Agreement are deferred and recovered over ten-year periods through the FPPAC. At December 31,1992, SPP deferrats are $71.1 mi!! ion. A majority of these purchases are under long-term arrangements (20-30 years) at prices significantly higher than the company's current or projected avoided costs. The company is negotiating with the SPPs to renegotiate these arrangements. The Rate Agreement also provides for the iecovery through rates of the amortization of the regulatory asset that was established under the company's reorganization plan with a retum each year on the unamortized portion of the asset. As of December 31,1992, the unrecovered balance of the regulatory asset is $868.7 million. See the Notes to FinanciaIStatements for further details on the regulatory asset. Although the Rate Agreement provides an unusually high degree of certainty as to the company's future rates, it also entalls a risk if sales are lower than anticipated, as they were in 1991 and 1992, or if the t company should experience unexpected increases in its costs other than those for fuel and purchased power, since the company has agreed that it will not seek additional rate relief before 1997, except in limited circumstances. In order to provide protection from significant variations from the costs assumed in base rates, the Rate Agreement established a rerum on equity (ROE) collar to prevent the company L from saming an ROE in excess of an upper limit or below a lower limit. No increases or decreases in base rates other than the seven 5.5 percent increases under the Rate Agreement wDi be granted to PSNH during the Fixed Rate Period, except for changes to rates caused i by the operation of the ROE col!ar, and except to adjust rates for legislative or regulatory changes such as changes to federal or state tax laws or regulations or environmental orders, regulations or laws, which require capital expenditures of at least $20 mR! ion or an increase or decrease in annual expense of at least $2 mt!!!on, or to reflect changes to PSNH's Seabrook decommissioning obligations, or to provide revenues to accomplish programs mandated for PSNH by legislators or regulators, or to reewer costs associated with conservation and load management programs undertaken with the specific approval of the NHPUC. In addition, PSNH wil be entitled to the same general treatment accorded other utilties by the NHPUC ll any new accounting standards are promulgated during the Fixed Rate Period., r,.
The New Hampshire Electric Cooperatke, Inc. (NHEC) is the company's largest customer, representing g 4.4 percent of the compar*y's revenues for the year ended December 31,1992. In 1991 NHEC filed a ) petition for reorganization under Chapter 11 of the Unhed States Bankruptcy -Code that was gv subsequently confirmed by the Bankruptcy Court and related rate filings were approved by the Federal Energy Regulatory Commission (FERC) and by the NHPUC Under the reorganization plan, PSNH will provide substantially all of NHEC's electric service for the next 15 years ard will purchase the entire amount of NHEC's 2.2 percent share of Seabrook capacity and energy and pay all of NHEC's Seabrook costs for a ten-year period which began July 1,1990. The FPPAC provides for the recovery of a portion of the costs associated with the company's buyback of NHEC's Seabrook costs. The costs not currently recovered are deferred for future recovery. At December 31,1992, NHEC deferrals are $11.1 million. The New Hampshire Supreme Court will hear appeals of the NHPUC decision filed by the Office of Consumer Advocate and the Campaign for Ratepayers' Rights. I The company could be affected by the abil!!y of other joint owners of Seabrook to fund their share of Scabrook costs. See the Notes to Financial Statements for information regarding EUA Power Corporation. The company owns a 7 percent interest in Yankee Atomic Electric Company (YAEC). On February 26, 1992, YAEC's owners voted to shutdown the YAEC unit to begin preparations for an orderly decommissioning of its nuclear facility. On June 1,1992, YAEC filed a rate filing to obtain FERC authorization to collect the closing and decommissioning costs and to recover the remaining investments in the YAEC nuclear power plant, over the remaining period of the plant's NRC operating license. YAEC, the FERC staff, and intervenors to the FERC proceeding have approved a settlement agreement for approximately $402.3 million that would resolve all outstanding issues. The settlement agreement is swalting FERC approval. At December 31,1992, the company's share of these estimated costs was approximately $28.2 mit!!on. Management expects that the company wl!! continue to be allowed to recover such FERC-approved costs from its customers. According!y, the company has f recognized these costs as a regulatory asset, with a corresponding obligation, on its Balance Sheets. The company had relied on YAEC for less than one percent of its capachy. Seabrook Performance Seabrook began commere!al operation on June 30,1990. Seabrook began its first scheduled refueling and maintenance outage on Ju!y 25,1991 and the unit retumed to service on October 29,1991. The unit was shut down on September 7,1992, for refueling and maintenance ard retumed to service on November 13,1992. The Seabrook plant operated at 77.9 percent of capacity for the year ended December 31,1992 compared with 67.6 percent in 1991 and a 1992 national average of 69.7 percent. Uquidity and Capital Resources Other than acquisition-related items, intematty generated funds provided the primary source of funds for the period June 5,1992 through December 31,1992, while the repayment of short-term debt and reacquisition and retirement of long-term debt were the primary uses of funds. Construction expend!tures and nuclear fuel expenditures amounted to $53.4 mt!! ion for the period June 5,1992 through December 31,1992. On December 17,1992, the company issued $75 mH! ion of tax-exempt bonds through the.New Hampshire Business Finance Authority (BFA). The proceeds of the issuance were used to refinance a ilke amount of outstanding taxable BFA bonds. PSNH stBI has $154 mHlion of taxable BFA bonds outstanding that may be refinanced by tax-exempt bonds with BFA approval. \\ J
As a resutt of the transactions established by the Plan, the company has a more leveraged caphal structure than most other investor-owned public utilities and is required to make substantial interest p payments. The company's indebtedness under the Term Loan, Revolving Credit Faclitty, and some of Q) the company's pollution control revenue bonds bear interest at floating rates to be set periodically, t causing the company to be sensitke to prevailing interest rates. The company has entered into interest rate cap agreements to reduce the potential impact of upward changes in interest rates on a portion of ts variable rate long-term debt. Management believes that, as a resu!! of the annual rate increases provided for by the Rate Agreement and the FPPAC, cash flow from operations should be sufficient to cover hs cash requirements. The company expects to meet cash requirements not covered by cash from operations through borrowings under the Revolving CredN FacDity and/or the NU system Money Pool. The Revolving Credit Facility's final maturky is May 14,1994. At December 31,1992, there were $35 m!!! ion in borrowings under the Revolving Credit Facility and $8.5 million in borrowings outstanding under the Money Pool. (See the Notes to financial Statements for further information regarding the RevoMng Credit Facilhy and the Money Pool.) The company has substantial ongoing cash requirements for operation and maintenance expenses, including obligations under the Seabrook Power Contract and interest payments on its bonds and the Term Loan and the payment of preferred dividends. The company's construction program forecasts caphal expenditures of approximately $237 million (including AFUDC) for the period from 1993 through 1997, including $43 million for 1993. The company's share of the cost of nuclear fuel for Millstone 3 is estimated at $4,6 million, excluding AFUDC, for the period 1993 through 1997. The company expects to refinance a substantial portion of hs Series A and B bonds when they mature in 1996 and 1998, respectively. In addition, the company's Term Loan must be repaid in 16 quarter 1y installments of $23.5 million that commenced in August 1992. PSNH's Series A preferred stock has an annual sinking fund of $25 million beginning in 1997. Environmental Matters The company devotes substantial resources to identify and then to meet the mu!titude of environmental requirements it faces. The company has active auditing programs addressing a variety of dt!ferent regu!atory requirements, including an environmental auditing program to detect and remedy noncompliance with errdronmental laws or regulations. To date, the estimated environmental remediation costs for sites which the company expects to bear legal liability have not been material with respect to the eamings or financla! position of the company. The extent of additional future environmental cleanup costs is not estimable due to factors such as the unkrKrwn magnftude of possible contamination however, considering known facts and existing laws and practices, management does not expect these costs to have a material adverse impact on the company's financial position or future resutts of operations. Under the federal Clean Air Act, the Errdronmental Protection Agency (EPA) Fas promulgated national ambient air quality standards for certain air pollutants, including suffur oxides, particulate matter, nitrogen oxides (NOx) and ozone. The Dean Air Act Amendments of 1990 (CAAA) made extensNe revisions and additions to the Dean Air Act and imposed rnany stringent new requirements on air emissions sources. The CAAA contains provisions further regulating emissions of sulfur dioxide (SO,) and NO: for the purpose of controlling acid rain toxic air pollutants and other pollutants, requiring installation of Continuous Emissions Monitors and expanding permitting previsions. O (t
in February 1993, PSNH reached an agreement regarding NOx emissions w!!h various environmental groups. The agreement has been submitted to the New Hampshire Air Resources Board in the form -m } of proposed regulations. The egreement provides that PSNH is to reduce NOx emissions at 'both [V Merrimack Station units by 10 percent beginning in the summer of 1993 and to schedule future outages for the May 1 through September 30 summer period, where possible. Beginning in 1994, Merrimack Unh 2's emissions must be further contro!!ed to 50 percent of its uncontrolled total emissions during the summer period. By December 31,1994, PSNH must commit to retire or repower Merrimack Unit 2 by May 15,1999. Beginning in 1993 and 1994 NOx emission rates for Schiller Units 4,5, and 6, and Newington Station will be lim!!ed. The capital cost of a potential repowering of Merrimack Unit 2 could be substantial depending on the method chosen but the project would only be undertaken if it were economic for the company's customers. Compliance with the other provisions of the agreement wDI require a relatkely small capital investment, if any, depending on the particular unft. The Rate Agreement would permit the company to request an increase in rates for changes in environmental laws or regulations requiring a minimum capital expenditure of $20 m!!! ion or having a minimum annual expense impact of $2 mDlion. The CAAA mandates reductions in SO, emissions to control acid rain. These reductions are to occur in two phases. First, large high SO, emitting plants are required '.o reduce their em!caions beginning January 1,1995. The only units subject to the Phase I reduction requirements are Merrimack Units 1 and 2. Management plans to meet these requirements by buming low suffur coal and oli and by the use of pollution trading a!!owances. On January 1,2000, the start of Phase 11, a nationwide cap on utitty SO, emissions will be imposed and existing units w!!! be granted allowances to emit SO,. These allowances are freely tradable. The NU system expects to be allocated a!!owances by EPA that substantially exceed its expected SO, emissions for 2000 and subsequent years. See the Notes to Financial Statements for further information regarding nuclear decommissioning and p other environmental matters. \\\\ Accounting Standards The company will adopt Statement of Financla! Accounting Standards (SFAS) No.109, Accounting for income Taxes in 1993. Under SFAS No.109, the company will reflect as a regu!atory asset and a deferred tax liability the cumulative amount of income taxes associated with timing differences for which deferred taxes have not been provided. When SFAS No.109 is adopted it wl!! not have a material effect on financial position or resutts of operations. The company wu! also adopt SFAS No.106, Accounting for Postretirement Benefits Other Than Pensions, in 1993 but it is not expected to have a material impact on financial condition or results of operations. The company expects to recover its SFAS No.106 costs in future rate proceedings. See the Notes to FinancialStatements for further information regarding these new accounting standards. j RESULTS OF OPERATIONS PSNH's resufts of operations cover the periods before and after the acquisition on June 5,1992 and before and after the reorganization on May 15,1991. The resutts for these periods are not comparable because of the significant impacts on the company of the acquisition and reorganization. l January 1,1992 to December 31,1992 Operating revenues for the year ended December 31,1992 increased $88.2 mBlion, compared to the same period in 1991, primarRy due to increases under the Rate Agreement and FPPAC and increased e
l 1 short-term power sales. Operating revenues for the year ended December 31,1992, include p $125.4 million in short4erm sales, of wtilch $96.0 mt!!!on was sold to NU compared to $108.2 million. ( of which $97.0 m!Ilion was sold to NU in 1991. In addition, retal sales increased approximately 2 percent. Operating revenues for the period June 5,1992 to December 31,1992, also indude the one-time impact of $15.8 million of revenues released from escrow. The payments made by PSNH to NAEC under the Seabrook Power Contract (excitx!!ng fuel expense) are reflected as purchased power capacity costs and are included in other operation expenses. The period June 5,1992 to December 31,1992, includes $77.0 million associated with the ' cost of service
- under the Seabrook Power Contract. Maintenance, depreciation, and taxes other than income taxes for this period do not reflect any Seabrook costs as a resutt of the transfer of the company's investment in Seabrook to NAEC and the inclusion of such costs in the Seabrook Power Contract.
Operating expenses, exduding income taxes, for the period January 1,1992 to June 4,1992, indude certain nonrecurring expenses induding a $1.5 million reserve associated with the vacancies of two floors in the company's leased headquarters for a f've-year period, $3.4 million in estimated severance r benefits as a result of the acquisition, $5.1 million in bankruptcy-related expenses, and approximately $4.0 million associated with a revision to the methodology to allocate pension expense to the joint owners of Seabrook. The company has not recorded a deferred Seabrook retum for the period June 5,1992 to December 31, 1992, because the company's investment in Seabrook was transferred to NAEC at the Acquisition Date. Prior to the transfer of Seabrook to NAEC, a deferred retum was calculated on the portion of the Seabrook investment not reflected in rate base in accordance with the Rate Agreement. Interest on long-term debt and other interest for the period of June 5,1992 to December 31,1992 are lower than previous periods due to the assumption by NAEC of the company's obligations under the 15.23 percent Notes, paydown of the Term Loan and a reduction in borrowings under tne revoMng credit facil!!y. .y Interest charges for tha period January 1,1992 to June 4,1992, reflect interest on the company's pre-acquisition debt. May 16,1991 to December 31,1991 Operating revenues increased $158.2 ml!! ion for the period May 16 to December 31,1991 as compared with the same period in 1990. The increase was principally due to the indusion in revenues of approximate!y $24 m!!! ion from the first 5.5 percent base rate increase for the period July 1,1990 to May 16,1991 which was released from escrow at the Reorganization Date, the recognition in revenues of the first 5.5 percent rate increase, the effects of the second 5.5 percent rate increase which became effective on May 16,1991, increased sales to wholesale customers and increased short4erm power sales. The increase in revenues was partially offset by a reduction in fuel revenues, as the FPPAC rate was set at zero untR September 1,1991, and lower sales to retal customers. Sales to retal customers decreased 1.5 percent due to poor economic conditions and reductions in sales to Seabrook station since the plant became operational. Sales to wholesale customers reflect the results of a settlement stiputation between the company and NHEC. Revenues for the period May 16 to December 31,1991 include $71.1 mBlion in short4erm power sales, of which $63.2 mIlion was sold to NU, compared to $26.4 mIlion in short4erm power sales, of which $22.8 mDlion was sold to NU, for the same period in 1990. Fuel, purchased and net interchange power expense decreased $27.5 mRiion for the period May 16 to December 31,1991 as compar9d w!th the same period in 1990. Fuel expense decreased because of f 37- \\
i the commercial operation of Seabrook and the lower costs of nuclear fuel compared to the costs of fossil fuel. Purchased and net interchange power expense increased due to short-term power purchases p from NU totaling $14.1 mHlion, partially offset by lower average costs per kEowatt-hour on power ( purchase agreements. Other operating expenses, excluding taxes on income, increased $75.0 mHlion for the period May 16 to December 31,1991, as compared to the same period in 1990, due principally to the amortization expenses associated with the company's regulatory asset, increased maintenance expenses associated with Seabrook's refueling outage and increased Seabrook property taxes, partially offset by lower depreciation on the reduced Seabrook value. Seabrook was written 4own to $700 ml!! ion on the Reorgan!zation Date. The company had an effectree tax rate of 25.1 percent and a provision for income tax expenses of $17.7 m!!! ion for the period May 16 to December 31,1991 due to noncash changes in accumulated deferred income taxes and investment tax credits. At December 31,1991, the company had significant net operating loss carryforwards and investment tax credit carryforwards. Interest charges for the period May 16 to December 31,1991 reflect interest on the reorganized company's debt. Interest charges for the same period in 1990 include interest on secured debt and interest which was paid at the Reorganization Date, including post-petition date interest on unsecured debt, interest on the estimated cash to be distributed to unsecured credttors and interest on the 15.23 percent Notes. (See the Notes to financial Statements for information on the reorganization.) Pre-Reorganization Results January 1,1991 to May 15,1991 { Operating revenues decreased $32.3 million for the period January 1 to May 15,1991, as compared with the same period in 1990, primaruy because of a 13.1 percent reduction in rates mandated by a ,\\ December 31,1990 NHPUC decision to reduce the fuel recovery rate, and because of lower retall and wholesale sales, partially offset by higher short-term power sales. Sales to retaU customers decreased 6.1 percent due primarily to mild weather, poor economic conditions, and significant reductions in sales to Seabrook station since the plant became operational. Revenues for the period ended May 15,1991, include $37.1 million in short-term power sales, of which $33.8 mD! ion was sold to NU, compared to $0.9 million in total short-term power sales for the comparatNe period in 1990. Fuel, purchased and net interchange power expense decreased $19 mUllon for the period January 1 to May 15,1991, as compared with the same period in 1990. Fuel expense decreased primarDy because of the commercial operation of Seabrook and the lower costs of nuclear fuel as compared to fossil fuel costs. Purchased and net interchange power expense increased due to the short-term power purchases from NU of $14.1 ml!! ion, partiaHy offset by lower average costs per kBowatt-hour on power purchase agreements. Other operating expenses, excluding taxes on income, increased $31.1 mi!!!on for the period January 1 to May 15,1991, as compared with the same period in 1990, due principally to operation, maintenance and depreciation expenses associated with the operation of Seabrook. Interest expense for the period January 1 to May 15,1991 increased significant!y because, commencing July 1,1990, the company began to accrue interest on the expected cash distribution to unsecured creditors, the 15.23 percent Notes, and certain unpaid post-petition interest under the Plan. <
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Pubtle Service Company of New Hampshire n[V ) SELECTED FINANCIAL DATA June 5,1992* January 1,1992 May 16,1991" to to to For the Periods December 31.1992 June 4.1992 December 31.1991 (Thousands of Dollars) Operating Revenues $492,559 $381,769 $539,827 Operating income............ 61.206 34,250 82,755 Net income (Loss)....... 29,398 12,778 52,694 Cash DMdends on Common Stock.. At December 31.1992 June 4.1992* December 31.1991 (Thousands of Dollars) Total Assets... $2,793,768 $2,693,414 $2,636,525 Long. Term Debt ". 1,187,985 1,488,985 1,515.985 f"' ( Uabilities Subject to Settlement *... Preferred Stock Subject to Mandatory Redemption " 125,000 125,000 125,000 Preferred Stock Not Subject 1o Mandatory Redemption........ Obligation Uncer Seabrook Power Contract (a)....... 787,826 " Includes portions due wthin one year.
- PSNH was acquired by NU on June 5,1992 - See Note 1 of Notes to Financial Statemerits.
- PSNH was georganized on May 16,1991 - See Note 1 of Notes to Financial Statements.
40-p) tv
r~% January 1,1991 January 1,1990 January 1,1989 January 1,1988 to 10 to 10 May 15.1991 December 31.1990 December 31.1989 December 31.1988 Fr.ousands of Dollars) $246,281 $660,122 $624,137 $607,592 21,616 63,059 98,126 110,494 (100,791) (210,012) (203.237) 55,273 May 15.1091 ** December 31.1990 December 31.1989 December 31.1988 Uhousands of Dollars) $2,502,237 $2,490,534 $2,447,521 $2,703,788 1,901,803 1,864,681 1,681,199 1,675,250 420,613 420,613 420,613 48,587 48,587 48,596 k t I \\ i 1 1
Public Service Company of New Hampshire STATISTICS Gross Electric Utility Plant Average December 31, Annual Electric (Thousands of W/h Sales Residential Customers Employees Dohars) (MilHond m'h Use (Averace) (December 31.) 1992* 1,894,359 12.293,625 2,342,989 394,045 1,600 1991 " 1,782,894 11,377,458 2,304,945 390,793 2,639 1990 2,585.890 8,323,722 2,360,799 336,720 2,766 1989 2,555,404 7,655,828 2,437,106 383,497 2,786 1988 2,783,867 7,449,649 2,388,712 373,158 2,613 1987 2,754,461 6,952,547 2,253,206 358,619 2,592 STATEMENTS OF QUARTERLY FINANCIAL DATA (Unsudtted) April 1 - June 5 - 1992* March 31. June 4 June 30 Sect 30 Dec. 31 (Thousands of Dollars) [ Operating Revenues, $252 707 1129 062 5 74 182 $204.161 $214 216 Operating income.. $ 34 044 156 $ 17.112 $ 22 452 $ 21.642 Net income (Loss).. $ 27 810 $(15 032) $ 12 478 $ 10 379 $ 6 541 April 1 - May 16 - 1991 " March 31. May15 June 30 Sect. 30 Dec 31 (Thousands of Dollars) Operating Revenues. $173 505 $ 72 776 $125 067 $205 411 $209.349 Operating income... $ 20157 $ 1 459 $ 36 760 $ 24 655 $ 21.340 Net income (Loss).. $(22.059) $(39 410) $ 27.497 $ 12.104 $ 13.093 'PSNH was acquired by NU on June 5,1992 - See Note 1 of Notes to Financial Statemeres. "PSNH was reorgan! zed on May 16,1991 - See Note 1 of Notes to Fulancial Statements c)
/m(j) Public Service Company of New Hampshire First and Refundino Mortoace Bonds Trustee and interest Paying Agent First Fidelity Bank, N.A. 765 Broad Street Newark, NJ 07102 Preferred Stock Transfer Agent, DMdend Disbursing Agent and Registrar Northeast Utilities Service Company Shareholder Services P.O. Box 5006 Hartford, Connecticut 06102-5006 1993 DMdend Payment Dates r 10.60% Series A ( March 31, June 30, September 30, and December 31 Address General Correspondence in Care of: Northeast Utitties Service Company investor Relations Department P.O. Box 270 Hartford, Connecticut 06141-0270 Tel. (203) 665-5000 General Offee 1000 Sm Street Manchester, New Hampshire 03105 The data contained in this Report is submitted for the sole purpose of providing inFm to present stockholders about the Company. .x}}