ML20072E548
| ML20072E548 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1993 |
| From: | Pardus D, Stevens J EASTERN UTILITIES ASSOCIATES |
| To: | |
| Shared Package | |
| ML20072E546 | List: |
| References | |
| NUDOCS 9408220292 | |
| Download: ML20072E548 (44) | |
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- eEASTERN UriuTIES ASSOCIATES 1993 ANNUAL REPORT
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5 *,i EUA SYSTEM PROHLE ,
m Eastem Utilities Associates is an infestorevned hold- ~
Boston a PN - . - ,
ing company whose shares are traded on theNew York and Pacific Stock Exchanges under the ticker symbol ,,
- EUA. Its subsidiaries are pnncipally engaged in the uassachusens
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,~I f generation, transmission, distribution and sale of elec-tricity; energy related servres such as energy may iJ [ ].'. 'J
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ment and oogeneration; and promoting the mnserva- ,
MYit3 4
tion and efficient useof energy To better reflect the competitive busmess envimnment .
Providence W in which it operates, EUA is organized in four distinct
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[ .[ ,f Core Bectric Business , [, .
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EUA's core electric business compnses two business units. The retail busmess unit provides electric servue to - - c.s-ers . -
Mamarinnetts, and northem and coastal Rhode Island.
Retail . electric miWiaries are Blackstone Valley Electnc N
Eastern Edison Company and Newport Electric tion. The wholesale busmess unit is q Biarir=* rune Valley Bectric Service Area Montaup Electric Company, EUA's generation and tnmsmission aihsidiary, which pmvides electricity at Eastern Edison Service Area wivdecale to the retail busmess units and two other norHtffiliated municipal electric utilities. ,
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Energy Related Business EUA's energy related busmess unit includes EUA .
Corporation, EUA O an State Corporation .
EUA Energy Investment Corporation. EUA 4 Cogenex is the most active of our energy related com-panies with over 700 energy services contracts in 32 % f states and the District of Columbia (map). EUA Ocean t~ :( 3 State owns a 29.9% partnership interest in theOcean
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/l State Power Project in northem Rhode Island. EUA T Energy makes investmenis in energy iei ied - s, L L ,l. , _7
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The corporate business unit is made up of Eastem Utilities Associates - the System's '
t company - (M and EUA Servi Corporation provides pmfes-sional and technical services to all EUA System compa- 1he 32 states and the District of Columbia, where EUA Coynes nies. does bh
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' #4 . Symboth d the electru 4rdustry and d Emtem Utshters Assoc 2ates weve used by fuited attratAllustrator Frank Meller to amate the cdlaer wmpnsirg the tront and te n ers d thrs Annual aepart indrvedual pnetsors d the collagr ase used for Alustration wathm the pubhcation
- u 1
r HIGHLIGHTS l s
1 1993 1992 1991 FINANCIAL DATA (dollars in thousands)
Operating Revenues S 566 477 $ M1,9M " $ 522,583'"
Consolidated Net Earnings 44,931 34,111 26,260 i Return on AverageCommon Equity 15.0% 13.2 % 10.8 %
Common Shareholder Equity-
% of Capitalization (Year End) 38.7% 34.5 % 31.8 %
Total Assets 1,203,137 1,203,320" 1,163,776 " i Cash Construction Expenditun's 60,767 55,736 57,570 l COMMON SHARE DATA Consolidated Earnings per Share $ 2.44 $ 2.00 $ 1.58 Dividends Paid per Share $ 1.42 $ 1.36 $ 1.45 Annual Dividend Rate $ 1.44 $ 1.36 $ 1.36 TotalCommon Shares Outstanding 19,032,598 17,237,788 16,831,% 2 AverageCommon Shares Traded Daily 42,854 30,511 56,874 Ikxik Value per Share (Year End) $ 17.50 $ 15.48 14.77 Market Price 'High 29% 25% 25
- Low 23% 20V 15%
- Year End 28 24% 20%
OPERATING DATA l Total Primary Sales (mwh) 4,352,000 4,279,000 4,265,000 l System Requirements (mwh) 4,599,000 4,520,000 4,545,000 l System Peak Demand (mw) 854 849 879 i System Reserve Margin (At Peak) 37.1 % 46.1 % 28.9 %
System Load Factor 61.5 % 57.5 % 59.0 %
Customers (Year End) 291,799 291,123 289,586 Ernployees O' ear End)- Core Electric 766 806 838
- Energy Related 238 150 75
-Corporate 440 443 450 m Restated to reflect consolidatwn of EUA Cogenex pritm rships pr viously refec!cd as equity irnatments.
Earnings & Dividends Per Share Dividend Payout Ratio
$2M gy;
$2m --
fM)q - -
51.50 - - -
$1.00 D 5()3) 60%
1W1 IW2 IW3 WI IW2 Iw3 a larning per Share ! Ihvidends per Wre a IUA L huiustryinden
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i1 To OUR SHAREHOLDERS R l; 9 -
- s In 1993 we achieved our goal of providing you Thmugh our Strategic Planning process, we have -
with an above average return on your investment segregated our business into four strategic units
! while continuing to position Eastern Utilities to meet which are described in the Business and Strategies the intensifying competition developing within the section which follows thisletter.
electric utility industry. Our constant emphasis on
" ## "S *
"am encouraging signs
- cost control and strategic planning has resulted in incmased earnings, a stronger core utility business -
that thelong awaited econonu.erecovery may finally d n ou n o < p ma sales and continued success in diversifying our energy-a related mvestments. mers were up for the second year in a row; residential cus-g Financial Results Earnings per common share in tomer sales increased after thrw years of decline.
/ 1993 were $2.44,a 22% Commercial sales,howev-improvement over 1992's , er, remained flat.
j $2.00. Consolidated This March weexpect
- return on average com- y * ,9 to request the Federal j mon equityincreased in ,
Energy Regulatory i 1993 to 15.0%,versus '
Commission toauthorizea l 1992's 1321 Total reductionin the rate
. retum on shareholder Montaup Electric,our i l
investment was201 Slightly more than one-half the1993 earnings i
h'{ (
, wholesale generating sub-sidiary,chargesits cus-tomers.This reduction, increase came from uti- coupled withincentive ha lization ofinvestment tax -
rates intended to encour- t credits associated with .
p7 '
. age economic develop-the EUA Power ment in our service territo-Settlement. Our energy- ' , ries,is expected toimpmve ,
related investments and , our competitive position :
effective cost control and help pmmote econom-measures also con- , ic growth in the communi-tributed to theincrease. #- ties we sen e.
In addition, we made considerable progressin .
[ T In 1993,we continued to seek and implement !
i strengthening our bal- economiesin operations - ;
ance sheet in 1993, without sacrificing our Your dividend was Smtnl Donald G. Pardus. Osirnwn and Chief Eucutnr Ohicm high standardsof service
. Standing: John R stevens, President and ChidOprating Offwm increased to an annual reliability and safety. We rate of $1.44, the first dividend increase since 1990. consolidated retail division functions and reduced :
This is the 65th consecutive year that Eastern Utilities our core electric business wouforce by almost 5%, ,
shareholders have received a dividend. mostly through attrition. Over the past three years, y
. the reduction has been 121 Through the diligence Competition Competitm.n, without a doubt,is the of our employees and the Teaming Up for most discussed issue in the ektric utility m. dustry
. Perforrnance incentive program, controllable opera- 3;
- y today. EUA recognized early on that competition tion and maintenance expenses were reduced about e would drive management to prioritize its resources and dramatically change the way we do business. T 6% compared to last year. We also refin ber of debt issues in 1993 to take advantage oflower prepare for an mtensified competitive em imament, -
interest rates.
EUA has reorganized to meet these challenges. j u
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V The outlook for our com ekttric business is rela- and meet customer needs. We have also made the tively stable in terms of annual camings potential. marketing of the products and services we offer a Each' company within this unit is expected to eam at priority and continue to stress the importance of or near its allowed rate of rerum without increasing employee training and better customer sen ice.
their rates. These companies will also finance their We are grateful to EUA System employees for cash construction requirements with intemally gener- their enthusiastic support and hard work. We appre-ated funds thus avoiding the negative impact of high- ciate your loyalty as shareholders. Your confidence er interest rates should they retum. Benefitting from will be rewarded as we remain dedicated to enhanc-the economic recovery in our service territories, this ing the value of yourinvestment.
business unit will continue to provide a stable contri-
) bution to EUA camings over the next few years.
Sincerely,'
Energy Related Businesses Our EUA Cogenex sub-sidiary remains a leader in the energy services field with a growing client list that includes the hg g /4 9 Department of Energy and its headquarters building Donald G. Pardus in Washington D.C.. That prqect won first place in a Chairman n,spected national trade publication's Efficient Building Awards program. EUA Cogenex also J acquired the James L. Day Co. of Victor, N.Y., which has been renamed EUA Day. It is one of the oldest p and largest distributors of Andover building automa-t"I tion controls in the country. The addition of Northeast Energy Management, Inc., a Maine based energy ser-J hn R.Stevens President vices company similar to EUA Cogenex, provid'es new growth opportunities in that state.
In keeping with our strategy to invest only in g'g energy related activities, our EUA Energy Investment Corporation subsidiary has invested in a limited part-nership, TransCapacity L.P., which will provide ser-vices nationally to all gas users as they struggle to cope with the impacts of the Federal Energy Regulatory Commission's Order 636 and gas pipeline deregulation.
We fully expect that as we move fonvard, our Energy Related business unit will contribute a grow-ing share of EUA's camings. While EUA has emerged as a diversified energy services company, we recognize that our core electric business remains the foundation of the EUA System.
Changing Times While there has always been com-petition for customers fmm other energy suppliers, competition from within the industry itself demands that we sharpen our focus to ensun> continued suc-cess in a changing environment. We have instituted procedures to tie strategic planning to our operating budget that will enhance our ability to control costs 3
Yb' ,
t BUSINESSES AND STRATEGIES .
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Le a Q__ A L Wholesale, Energy Related and Corporate. The Retail OVERVIEW Competition is the most discussed issue in the electric and Wholesale business units combine to form our Core ';
Electric Business, which mmains the foundation of the utility industry today. While competition is not new to EUA System. The Energy Related Business unit com-the industry,its role to date has been minor compared to the part it will play in the future. One of the major bines our energy related diversification efforts, while the ]
Corporate business unit provides professional and tedi-goals of the National Energy Policy Act of 1992 is to nical services to all EUA System companies. Stable capi-increase competition within the electric utility industry, in order to accelerate its restructuring. As competitio[1 tal requirements in our Core Electric Business over the y next few years will allow management to invest its shapes the future of the business, those companies that d resources in other business opportunities that present have recognized the need to change course will be in a greater potential for growth of your investment. The fol- ,
better position to compete - those still mired in the monopoly mindset will find it difficult to survive. I wing 1993 business mview maps EUA's strategic direc g tion to successfully meet the challenge of an intensifymg The " electric company" of monopoly days is gone.
EUA reco;;nized early on that competition would c mpetitiveemironment. a require it to prioritize resources and change the way it CORE El.ECTRIC BUSINESS 3
, does business. We have emerged as a diversified ener- The Core Electric Business is comprised of our Retail .,
gs gy services company, poised for competition, the chal- electric and Wholesale electric business units. In 1 - a
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lenges it poses and the opporttmities it provides. To these business units combined to contribute over $335 prepare for competition, EUA's Strategic Plan set goals million or $1.82 per share to EUA's consolidated earn- ;
and strategies for each of its business units: Retail, ings per share.
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I a The Retail Business Unit (Blackstone Valley Electric We recognize that historically ekttric utilities in the Company, Eastern Edison Company and Newport Northeastem United States have had rates that are Electric 3rporation) has prepared for increasing com- higher than many other sections of the country. The ultimate goal of the Retail Business Unit is to reduce petitive pressures by continuing strict cost control mea-sures which began four years ago; by re-emphasizing our costs relative to the other utilities in the region and our commitment to quality customer service; and by to be a provider of energy and related senices with filing economic development rates designed to help more competitive prices, while maintaining a level of existing customers expand and attract new business to service above that of any competitors.
the area. Our retail subsidiaries continue to consolidate The Wholesale Business Unit (Montaup Electric
. retail division functions by state, streamline organiza- Company) will respond to increasing competitive pres-J tions and further cut costs. During 1993, the Retail sures by continuing to contml costs and by seeking Business Unit saw its controllable operation and main- innovative ways to reduce its overall cost of providing tenance expenses decrease by more than 2% -in the electricity to its customers. Like the Retail Business Unit, our Wholesale Business Unit saw a reduction of face of an increase in the Consumer Price Index of approximately 31 This was accomplished both by more than l'7c in controllable operation and mainte-reducing our Retail Business Unit workforce by an nance costs ver- p 7 w, f}
additional 4 % , bringing the total reductions since 1990 sus a Consumer M..
to almost 12%, and by keeping tight rein on how our Price Index 4I L operations and maintenance expense dollars are spent. increaseof 3E ,j A
?[M As important as cost control is, quality customer ser- Our Wholesale D
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44 vice continues to be a pnmary focus of our Core Business Unit 3 J$
N N Ekrtric Business. We also are training employees to workforce was G ---
sharpen their marketing skills to better serve our cus- reduced anaddi- %.7. T %
tomers.
The economy in our service territory has bottomed tional7% in 1993. In March N46 t
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out and is starting to improve. Kilowatthour (kwh)
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1994,Montaup ;
sales to our customers were up 1.7'7c in 1993 - even expectstofilefor }R 1 fl though our successful consen ation programs reduced a reduction in 2h-g C
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sales by almost 11 Rising employment, increased the ratesit d JT g -
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retail sales, and a substantial increase in ind ustrial sales wholesale cus- ", s y
, -g of almost 4% are allindicators that our senice territory tomers, which y e 4 c economy is on a steady course to recovery.
We continue to monitor the potential impacts of com-willlower ulti-mate customer J
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petition. The fact that our industrial sales account for costs because the 4I .i' only 1W7c of the EUA System's total kwh sales and that reduction will susormu msurers sensice ,3e unacriymg they are derived from a diverse mix of many relatively flow through to strr"x'h olo"' G" Electric Basi"e*
small customers should mitigate potential negative our retailekttric businesses.
impacts from external competition in this sector. The Wholesale Business Unit expects to have suffi-The outhiok for our Retail Business Unit is relatively cient generating capacity available to meet the needs of stable in terms ofinvestment, rate base and annual its customers through the end of this decade. While a income potential. Each company within this Business declining rate base will result in lower annual income Unit is expected to earn at or near its allowed rate of contributions over the next few years, we expect con-j return and to cover all its cash construction require- struction requirements to be stable or to decline slightly.
ments with internally generakd funds. We expect that The primary goal of the Wholesale Business Unit is to this Business Unit will continue to provide a stable con- continue to lower its cost of wholesale power relative to tribution to EUA System financial results over the next other suppliers.
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t Power Project in Rhode Island, we expect its contributio ENERGY RELATED BUSINESS to decline gradually over the 20-year life of the plant The Energy Related Business Unit,- EUA Cogenex Our decision to invest only in er.ergy mlated opportuni-Corporation, EU A Ocean State Corporation and EUA ,
Energy Investment Corporation - contributed $7.2 mil- ties resulted in the establishment of EUA En '
investment in 1987. One such opportunity is a recent lion or 39 cents per share to consolidated earnings in 1943. As we move forward, we expect our Energy investment in TransCapacity Limited Partnership (LP.)'
The entim investment, $2.2 million, was charged to i Related Business Unit to contribute a growing percent-expense in 1993. TransCapacity LP. is developing special- 1
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age of EUA's net income and investment.
ized software and systems for assessing the gas pipeline !
EUA Cogenex's contribution to EUA's consolidated information that will become available as a result c f The I camings in 1993 increased by 25% to $3.5 million or 19 f Federal Energy Regulatory Commission's Oder o36 i
cents per sham. EU A Cogenex is the most active of our energy relat. which demgulated portions of the gas industry. More ed business- importantly, it has the potential to provide senices on a es with over fee basis nationally to all gas users as they struggle with
, 700 energy the impacts of Order 636 and gas pipeline deregulation.
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service con. While it is still too early to project earnings contributions from this investment with confidence, we are excited tractsin 32 states and about its potential for meaningful contributions in the the District future.
The goals of our Energy Related Business Unit are to
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Recognized provide an increasing percentage of EUA System cam-ceruter-gennated light ray patternure used in dengn 4 as one of the ings, maintain EUA Cogenex's leadership in the en
'""#"*""8*"" leadersin services industry and investigate new energy related busi-ness opportunities that will enhance Shareholder value.
the energy services industry, EUA Cogenex nxently completed two strategic acquisitions designed to
SUMMARY
enhance its competitive position in this rapidly expand' As ahvavs, we will continue to carefully evaluate our I
ing industry. James L. Day Company, renamed EUA strategies to enhance sham value for our shareholders.
I Day,is one of the oldest and largest distributors af build' We will aggressively pursue diversification through ener-gy related businesses, while recognizing that our core > l ing automation contmls in the country and Northeast Energy Management,Inc., a Maine-based company pro' electric business remains our primary business. t vides energy services similar to EU A Cogenex.
j l in a mcent study done for the Department of Energy, j
the energy efficiency market was estimated to be up to '
- $27 billion domestically through the end of this decade.
i To maximize our participation in this market, EUA I l
Cogenex has been developing a highly-trained national
- sales force to actively pursue new customers in 1994 and beyond. This skilled staff will help drive EUA Cogenex's growth in 1995 and beyond. Annual sales growth of 20% is a realistic goal which should enable EU A Cogenex to continue increasing its contribution to consolidated earnings.
Our EUA Ocean State subsidiary contributed $5.3 mil-lion or 29 cents per share to EUA's Consolidated eam-ings in 1993. This equates to a retum on our invested
! equity of almost 32%. Since EUA Ocean State's only asset is its 29.9% ownership interest in the Ocean State
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SELECTED CONSOLIDATED FINANCIAL DATA (2)
/
Years Ended December 31, On Thousands Except Common Share Data) 1993 19922 19912 1990 1989 INCOME STATEMENT DATA:
Operating Revenues 5 566,477 $ 541,9M $ 522,583 $ 465,685 5 429,422 Operating income 75,406 M,347 66,336 55,385 58,388 Consolidated Net Earnings (b>ss) 44,931 34,111 26,260 (130,182) 40,877 l BALANCE SIIELT DATA:
l Plant in Service 1,016,453 1,002,717 990,726 985,138 687,833 l Construction Work in Progress 8,728 4,943 6,881 6,809 674,850 Gross Utibty Plant 1,025,181 1,007,660 997,607 991,947 1,362,683 Accumulated Depreciar;on and Amortization
_296,995 .
274,725
,_ 251,503 _ 241,128 _ _ _ 203,990
_ Net Utility Plant __ _ _ _728,186. _ . 732,935_ . 746,1N __ 750,819 _ _ _1,158,693 Total Assets _ __
_ 1,203,137 __1,203,3_20 _ 1,1_63,776__ 1,094,740 _ __ _ 1,376,032 CAPITALIZATION:
Long-Term Debt - Net 496,816 462,958 488,452 443,595 6(6,079 Redeemable Preferred Stock - Net 25,053 28,496 29,980 31,530 34,612 Non-Redeemable Preferred Stoc k - Net 6,900 15,850 15,850 15,850 15,079 Common Equity _
_333,165 266,855 248,598_ _ 237,393 375,016 JotalCapitalization_ _ _ _
861,934 _774,159. ___782,880 731,368 . _ 1_,030,786 Short-Term Debt __ _ _
37,1_68 _ _ _ 109,936 _ . 72,449. _ _ _ _ 43,071 58,676
( COMMON SHARE DATA:
L Consolidated Earnings (Loss)per Average Common Share $ 2.44 $ 2.00 $ 1.58 $ (8.18) $ 2.0 Average Number of Shares Outstanding 18,391,147 17,039,224 16,608,000 15,917,255 13,877,091 Retum on Average Common Equity 15.0 % 13.2% 10.8 % (42.5%) 12.1%
Market Price-High 29% 25W 25 41M 41 X
- h>w 23% 20X 15X 20X 30X
-Year End 28 24X 20X 23 % 41X Dividends Paid perShare $ 1.42 $ 1.36 $ 1.45 $ 2.575 $ 2.475 m includes fiwicialand operatmg statisticsfor Naqvrt Electric Cor;vratwnfrom April 1.1990and EUA Power Corivratim through Decemh r 31,1990 at which time EUA Power tms deconsklatbdprpnemcial rqvrting pur;m.
m income Statement and IVmce Sheet Data haw hrn restated to reflect amsohdatwn of EUA Cogenex partm rdtips previously reflected as equity investments.
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s 3 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL .
CONDITIONS AND REVIEW OF OPERATIONS
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M@hCA@MDn . i The 1993 results were impacted by a number of fac-OVERVIEW F tors described under each business unit below.
Eastem Utilities Associates' (EUA) Consolidated Net Eamings for 1993 increased 31.7% to $44.9 million or Core Electric Business: Positive earnings impacts
$2.44 per average common share, from 1992 included:
i Consolidated Net Earnings of $34.1 million, or $2.00 per a Rate increases implemented by EUA's retail elec-share. EamingsPerShareincreasedinspiteof a7.9% tric subsidiaries during 1992 and 1993; increase in the average number of common shares out- a increased kilowarthour (kwh) sales; standing primarily due to the April 1993 issuance of 1.3 m A marked reduction in long-term debt interest charges resulting from the recent financing actisity of j million common shares.
theCore Electric Business;and Net Earnings and Eamings Per Share By Business m EUA's continued commitment to contmiling Unit:
1993 iw2 costs wherever possible without impacting the safety, Net ' Net Earnings adequacy and reliability of its electric sertice.
These positive earnings impacts were somewhat off-N"sf IIr'"Sha% s P rS re
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set by the unrecovered expense related to the accrual of Core fJutric Business 533,461~ '51.82 ^ 33I558 51.88 7,243 0.39 9,768 0.57 post-retin > ment benefits other than pensions mandated Energy Related Business by the Financial Accounting Standards Board (FASB) .j 4,227 0 23 (7,615) (0.45)
Corporate consolidatui 144,931 s2.44 534.111 s2m Statement No.106 (FAS106.
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Core Electric Business: The revenue attributable to the Energy Related Business: The Energy Related Business Purchase Power Recovery reflects our retall companies' impacts on 1993 earnings were as follows:
s increased earnings contributions from EUA's method of recovery of purchased power capacity costs.
energy services subsidiary, EUA Cogenex Corporation Revenues attributable to Recovery of Fuel Costs result (EUA Cogenes); from the operation of fuel adjustment clauses. The a lower earnings contributions from EUA's invest- change in such revenues reflects corresponding under-ment in the Ocean State Power Project (OSP); and lying changes in fuel costs.
s ifwer earnings contributions from EUA Energy The Effect of Rate Changes reflects base rate increases investment Corporation (EUA Energy) resulting from for; (i) Montaup Electric Company (Montaup), effective start-up costs related to its initial investment in May 1991; (ii) Blackstone Valley Electric Company
) TransCapacity Limited Partnership (LP.). (Blackstone)effectivein April 1992;(iii) Newport Electric Corporation (Newport), effective October 1992, orate: The most significant impact on 1993 carn.
and (iv) Eastern Edison Company (Eastem Edison) was the utilization of investment tax credits which effectiveJanuary 1993.
re with the 1993 tax year and are related to the Revenues attributable to Unit Contracts and sales to ember 1992 EUA Power settlement agreement. The NEPOOL reflect revenues from such short-term con-tracts and Montaup's and Newport's interchange sales htilized taxtocredits ex 3ense amounted $4.9 million, or which 27 cents per lowered 1993 federal income to the New England Power Pool.
hare, are included in corporate results above.
The change in revenues associated with kwh Sales The EUA Power settlement also caused a significant and Other reflects the effect of kwh sales on base rev-decreasein legal expenses in 1993.
enues and changes m other operating revenues.
O COMPARISON OF FINANCIAL RESULTS Energy Related Business: EUA Cogenex revenues d In 1993 EUA consolidated the EUA Cogenex partner-
"'fket the change m total revenues of that company.
ships which had previously been accounted for as equi-The 1993 increase is due primarily to revenues from its tv investments. The 1992 and 1991 financial statements EUA Nova division which was acquired in December h' ave been restated to present these partnerships on a 1992 and increased revenues related to the sale of ener-consolidated basis. The restatements do not materially gv equipment. The 1992 increase is due primarily to an change amounts previously reported.
increase in revenues of the consolidated partnerships.
OPERATING REVENUES See offsetting increases in 1992 partnership expenses The table below sets forth estimates of the factors which below.
contributed to the change in Operating Revenues from CORE ELECTRIC BUSINESS KWH SALES 1991 through 1993:
Total Energy Sales decreased in 1993 from 1992 due to a Increase (Decread Frorn IWr Years significant decrease in short-term unit contract sales, nin rnd1iona 1m 1992 which include sales to NEPOOL. Short-term unit con-NENnclS. hang aunbutamo: tract and NEPOOL sales recover the underlying cost of Ibrchd l'ower Recoverv $ 7.0 $ 7.1 fuel only and therefore have no impact on earnings.
Ruweryof FuelCosts (2.3) (6.6) Total primary sales, however, increased by 1.7% in 1993, Effect of Rate Changes 8.6 3.6 paced by improvements of 3.9% and 3.1% in sales to Und Contracts and Sales to NEKXX. 03.1) 3.6 our industrial and residential dasses, respectively.
Kilmatthour sales and other 1.s (2.8) Contributing to these gains was the hotter than nomial Energy Relat(d Business: summer of 1993 and the slow but steady economic EUA Cogenex 22.8 14.5 recovery taking place in our retail service territories.
p Total s 24.s s19 4 Economic indicators suggest that this trend will contin-b ue for the foreseeable future.
9
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The 1992 versus 1991 increase in Total Energy Sales of primarily by a $2.9 million decrease in consen ation and the Core Electric Business was due to a significant load management (C&LM) expense recorded as pur-increase in short-tecm unit contract sales. Total primary chased power and a $LO million decrease attributable to sales increased by 03% primarily due to gains of nearly Newport purchases from sources other than Montaup.
Offsetting these decreases somewhat wem the incmased 1% in sales to both our conenercial and industrial cus-costs of $16 million billed by Montaup's suppliers, tomers. The positive effects of tne slow economic mcov-ery and colder 1992 winter months were mitigated by Operation And Maintenance: Overview: Other '
unusually mild weather in summer 1992. Tetal system Operation and Maintenance (O&M) expenses for 1993 requirements remained relatively flat due to changes in totaled $182.1 million an increase of $29.2 million over losses and Company Use. 1992. Total O&M expenses are comprised of thme com-
) ponents-Direct Controllable, Indirect and Energy Percentage Changes in Kwh Sales by Class of Customer: Related. Changes in these components for 1993 were as Percent increase (Decrease) follows:
From Prior Year increase
- D_ IN 1943 1992 (Decrease) 3.1 (03) (In %11 ions of Dollars)
Residential Direct Controllable $ 82.7 $ 885 $ (5.8) 0.0 _ _ _ _ 0.8 _
Cornmercial 14 0 36h Indirect 50 6 3.9 0.9 Industrial 27.8 Energy _Related _ 48 8 _ _ 21 0 Other Ekctric Utihties (9.9) 35 .
TotaN $ 1823 $152.9 $ 29.2 Other (0.3) (45)
Total Primary Saks 1.7 0.3 Direct Controllable expenses of our Core Electric and Imesandcimpan/UG ~~ ~ ~~~ ~ ~2 U 03:5J~
Corporate Business Units represent 45% of total O&M TotalSystem Requirementt _ _ _ _ L7 K)3) tsu) 23.0 and include expense items such as: salaries, fringe bene-Unit contracts Total Energy Sales 055> 3.7 fits, insurance, maintenance, etc. The reduction in Direct Controllable expenses in 1993 reflects our continued com-EXPENSES 1993 VS.1992 mitment to cost control. Our core electric workforce was Fuel And Purchased Powen The EU A System's most reduced an additional 5% in 1993 and through the dili- j significant expense items continue to be fuel and pur- gent efforts of our employees we were able to reduce direct controllable expenses in spite of an increase in the chased power expenses of our Core Electric Business Consumer Price Index of approximately 3%.
which together comprised about 45.8% of total operat-Indirect expenses include items over which we have ing expenses for 1993. j Fuel expense decreased approximately $11.5 million limited short-term control. Indirects would include such or 11.9%, from 1992, due largely to a decrease in total expense items as: O&M expenses related to EUA's own- l System generation msulting from outages experienced ership interests in nuclear generating facilities such as by company-owned units. Canal Unit 2, which is 50% Seabrook Unit 1 and Millstone Unit 3 (see Note I of Notes to Consolidated Financial Statements for other jointly owned by Montaup, began a schedukd outage on February 13,1993, and retumed to service on April 5, owned units), power contracts where transmission rental 1993 while Somerset Unit No. 6, a wholly-owned unit of fees are fixed, consen ation and load management Montaup, was out of service for most of 1993 due to expenses that are fully recovered in revenues and expens-es related to new accounting standards such as FAS87 unanticipated watenvall restoration. Also,Somerset Unit 5 was out of service for five months prior to being and FAS106, to name a few.
The Energy Related component relates to O&M expens-placed in deactivated reserve on January 25,1994.
Offsetting these impacts on fuel expense somewhat was es of our Energy Related Business Unit where increast a 3.7"o increase in Montaup's average cost of fuel for the are tied to new and expanded business activity. EUA Cogenex continues to be the fastest growing company in period.
this Business Unit as is reflected by its acquisitions of Purchased Power expense decmased $2.3 million or thme smaller companies over the past 13 months.
1.6%, as compamd to 1992. The decrease was caused 10
)
G The increase of $29.2 million in 1993 was due primarily amounted to approximately M.9 million in 1993 and to the following: are included in Other income (Deductions)- Net. The Core Electric Business: (i) increased C&LM expenses decrease more than offset the 1% increase in the federal of M.1 million;(ii) additional expenses of approximate- tax rate to 35% in 1993.
ly $3.5 million relating to EUA's adoption of FAS106 Otheritems: Depreciationand Amortization (iii) increases of approximately $1.5 million relating to increased by $1.9 million or 4.4% due primarily to an pension accrual; and (iv) increased expenses of appmx- increase in EUA Cogenex depreciation expense of $13 imately $3.9 million relating to Montaup's jointly million.
owned units. Allowance for Funds Used during Construction Energy Related Business: (i) increased EUA Cogenex (AFUDC) represents a non-cash element of income expenses of approximately $193 million, relating pri. and amounted to only 53% of Consolidated Net marily to the operations of its EUA Nova division; and Earnings in 1993. Total AFUDC and capitalized inter-(ii) increased expenses of $2.2 million related to EUA est for 1993 did not significantly change from the 1992 Energy's expensing of its initial investment in level.
TransCapacity L.P. Equity in Earnings of Jointly Owned Companies decreased in 1993 by approximately $2.7 million due Corporate: The incmases discussed above were offset primarilyt I wercamingson EUAOceanState somewhat by decreases of approximately $3.7 million Corporation's (EUA Ocean State) investment in the in corporate legal expenses due primarily to the fourth Ocean State Power Project.
quarter 1992 settlement of legal proceedings related to Other Income (Deductions)-Net decreased by $23 EUA Power.
p Interest Charges: Interest on long-tenn debt for 1993 million in 1993 due primarily to the 1992 mversal of certain previously established reserves relating to mat-decreased approximately $4.1 million or 9%, compared ters in litigation, the favorable resolution of which was ,
to 1992. This decrease is due,in part, to Eastem reached in 1992. Partially offsetting this decrease was a Edison's redemption of $30 million of 9-1/4% First mduction in federal income tax expense of M.9 million Mortgage and Collateral Trust ikmds (FMBs) in May as discussed above.
1992 and $15 million of 8-1/2% FMBs in June 1992. The The Prefermd Dividend requirement of the retail mdemptions wem made primarily with cash proceeds subsidiaries decreased by approximately $700,000 or from the early redemption of Montaup securities, 18% in 1993 due to Eastern Edison's 1993 Preferred which were owned by Eastern Edison. Eastern Edison Stock financing activity. See "EUA System Financing also refinanced $35 million of 10% FMBs with $35 mil- Activity" for further discussion.
lion of 7.78% Medium Term Notes in July 1992. See Inflation continues to have an impact on the opera- 1
" System Financing Activity" for additional factors con- tion of our System. At the federallevel, wholesale tributing to the decline in long-term debt interest ratemaking practices permit a forward looking test l expense. period which enables us to anticipate inflationary l
Offsetting these declines somewhat was the issuance increases. The traditional use of an historical test peri- I by EUA Cogenex of $15 million of 7.22% Unsecured od for retail ratemaking purposes in Massachusetts Notes in September 1992 and $50 million of 7% does not provide us this oppoi .mity.
Unsectmxi Notes in October 1993.
EXPENSES 1992 VS.1991 Income Taxes: EUA files a consolidated federal m.come Fuel And Purchased Power: Fuel expense decreased tax n turn for the EUA System. EUA's 1993 composite
$23 million, or 23%, when compared to 1991. This federal and state effective tax rate was approximately change was due to the offsetting effects of a 6%
273% as compared to approximately 32.4% in 1992.
decrease in the average cost of fuel due to greater C This decrease is primarily attributable to the mcome usage of less expensive natural gas in 1992 and an recognition of a portion of the expected utilization of increase in total energy sales of 5.7% due primarily to EUA Power's mvestment tax cmdits to reduce EUA's unit contract and system sales.
1993 consolidated tax liabibty. These tax cmdits 11
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ciples relating to certain matters in litigation, the favor-G.
Purchased power expense decreased $1.9 million to able resolution of which was reached in 1992;(ii) an
$141.8 million in 1992 due primarily to $9.5 million of incmase of $1.2 million in EUA Cogenex's interest ,
credits recognized by EUA's retail subsidiaries in 1992 income and other income; and, (iii) a decrease of $1.7 l relating to prior period billings. These credits were off-million in costs incurred for litigation from 1991 levels. {
set somewhat by an increase in net purchases under These factors were partially offset by a mduction in the expiring and new purchased power contracts (includ-i amount of income tax credits diocated to this account ing OSP Unit II) aggregating $4.6 n llion, increased in 1991 as a result of the utilization of EUA Parent tax purchased power costs billed by power suppliers of lossesincurred in 1991.
Montaup and Newport aggregating $800,000, and an increase in C&LM expense of $2.1 million. CORE ELECTRIC BUSINESS RATE ACTIVITY
) Montaup expects to file a rate reduction application Operation And Maintenance: Other operation and with the Federal Energy Regulatory Commission.This maintenance expenses increased $16.1 million, or application will match more closely Montaup's rev-11.8%, in 1992 over 1991 due primarily to a $14.6 mil-enues with its decreasing cost of doing business result-lion increase in EU A Cogenex partnership expenses.
ing from, among other things, a reduced rate base, Also contributing to the change was the offsetting lower capital costs and successful cost control efforts.
impacts of an increase of M.7 million in Corporate legal The application will also include a request for recovery expenses and decrease of $3.4 million in Eastem Edison of allof Montaup'sFAS106expensesasprovidedin amortization expense. Previously deferred costs of ;
FERC's generic order of December 1992. A decision on ;
Eastem Edison, including Hurricane Gloria and com- i this application is expected during the second half of j puter conversion costs,became fully amortized in , l 1994.
December 1991.
Interest Charges: Interest expense on long-term debt EUA SYSTEM FINANCING ACFIVITY Core Electric Business: As shown on the accompany-increased by $3 million, or 6.9%, in 1992 as compared to 199L This increase was due to new issuances of long- ing Consolidated Statement of Indebtedness, Eastem '
term debt in 1992 along with EUA Cogenex's October Edison issued new FMBs and Tax-Exempt Securities 1991 issuance of $20 million of 9.6% Unsecured Notes, aggregating $195 million during 1993, the proceeds of o
which were used to redeem a like amount of higher Partially offsetting this increase was the interest savings resulting from 1992 refinancing and redemption activi- cost debt.
ty of the Core Electric Business. L 1993 LONc-TERM DEBT AcTivrTY >
awweg,wm Other items: Depreciation and amortization expense increased by $1.1 million, or 2.6%, in 1992 over 1991
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j primarily due to an increase in depreciable plant of our 535 elon Refinancings: 90 e 6n Core Electric Business and an increase in depreciation n expense of EUA Cogenex partnerships.
y @ {}, g l5 ol 90e5a sept. $40 e 9a ,
Total AFUDC and capitalized interest, which repre- 57e4n Oct. 57o6n Sept.
sented 6.9% of 1992 Consolidated Net Eamings, s 8 o 6m 58e7n decreased $242,000 from 1991 due primarily to lower Oct. $5o46 Eastem Edison AFUDC rates used in 1992. ""*
The incmase in Equity Eamings of Jointly Owned 5 Companies in 1992 mlates primarily to EUA Ocean Eastem Edison June 55e8n RedemptimL _ __ _ ._ _
State's equity camings from its investment in OSP.
% su , jo ,
Other Income and (Deductions) - Net increased $6.9 $1.4 011 b Redemption:
million in 1992 when compared with 199L The -
increase was primarily due to the following: (i) a net -gjg reduction of M.3 million in the level of reserve:, to be g!,nce; iss established under generally accepted accounting prin-
)
In 1993 Eastem Edison used available cash to redeem all lion and 90.6 million, CASil CONSTRUCTION of its outstanding 4M%,8.32% and 9.00% series of respectively. EXPENDITURES /
1NTERNALLY Preferred Stock aggregating $21.6 million, and $10 million In the utility industry, GENERATED FUNDS of FMBs. cash construction require- g Eastem Edison also issued $30 million of 6 %% Preferred ments beyond those satis- ,
Stock in August, the proceeds of which were used to fied with intemally gener- ,
ated funds are customarily
- redeem $20 million ofits 9.80% Preferred Stock and for other corporate purposes.
On January 6,1994, Newport issued $7.9 million of vari-funded with short-term borrowings, which are ulti-ll h9 y L
~7 able rate Electric Energy Facilities Revenue Refunding mately funded with per- *- s 3' Bonds due 2011. The proceeds were used to redeem $6.0 million of 12% Series Energy Facilities Revenue Bonds and manent capital. In 1993, intemally generated funds
{
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$1.9 million of 8.5"6 Series Energy Facilities Revenue available after the pay- o Bonds. ment of dividends of our e ca+ c o rm e r m nuuns
. M InterrAGenerat Furnb Core Electric Business Energy Related Business: In October 1993, EUA Cogenex amounted to $51.8 milhon, ime.m m issued $50 million of 7% Unsecured Notes due September 15,2000, Proceeds were used to retire all outstanding r 162.3% of its cash construction requirements.
short-term bank loans and repay a portion of its short. In 1992,intemally generated funds amounted to $53.5 million or 240.7% of the cash construction requirements termloans to EUA.
of our Core Electric Business. Various laws, regulations Corporate: A sale of 1.3 million new common shares of and contract provisions limit the use of EUA's intemally EUA in April 1993 resulted m net proceeds to EUA of generated funds such that the funds generated by one p)
( approximately $35.1 million. These funds were used t subsidiary are not generally available to fund the opera-reduce EUA's short-term bank debt. tionsof anothersubsidiarv In addition to its public offering, EUA received proceeds Intemally generated funds are expected to supply
~
in 1993 of approximately $10.1 million from the issuance approximately 130% of 1994 estimated cash construction and sale of 385,823 common shares primarily through its requirements of the Core Electric Business.
Dividend Reinvestment and Common Share Purchase in addition to construction expenditures, projected I I^"*'
_ . mquirements for scheduled cash sinking fund payments In 1993 EU A registered 1.3 mdlion common shares with and mandatory mdemption of securities in 1994,1995 the Secunties and Exchange Commission (SEC) to be and 1996 are $1.9 million, $37.4 million, and $9.4 million, issued m connection with possible EUA Cogenex acquisi-respectively.
tions, of which 108,985 wem issued in connection with the -
December 1993 acquisition of James L. Day Co. Inc. (Day Energy Related Business: Construction expenditures of Co.) and 464,579 were issued in connection with the our Energy Related Business amounted to $28.5 million, January 1994 acquisition of Northeast Energy $32.6 million and $27.8 million in 1993,1992, and 1991, Management,Inc(NEM). See" Energy Related respectively. In addition, investments in energy related Fusinesses"below for more details, facilities, primarily those of EUA Cogenex and EUA Ocean State for 1993,1992, and 1991 amounted to FINANCIAL CONDmON AND LIQUIDITY approximately $13.2 million, $17.2 million and $39.9 The EUA System's need for permanent capital is primarily million.
mlated to investments in facilities required to meet the Estimated construction expenditures of the Energy needs of its existing and future customers. Related Business are M2.4 million, $49.0 million and e Core Electric Business: For 1993,1992 and 1991, the Core 99.5 million for 1994,1995, and 1996, respectively. In
{m) Eh ctric Business cash construction expenditures were addition, energy related investments of EUA Cogenex
$31.9 million, $21.8 million and $29.4 million, respectively. for the years 1994 through 1996 are estimated to be $11.3 Cash construction expenditures for 1994,1995 and 1996 million, $10.0 million, and $10.0 million, respectively.
are estimated to be approximately $44.2 million, $38.4 mil- Intemally generated funds are expected to supply
. 13
< r f,
EUA Cogenex: EUA Cogenex participates in energy approximately 70% of 1994 estimated cash construction conservation and cogeneration projects in 32 states and requimments. Continued growth at EUA Cogenex the District of Columbia. EUA Cogenex's contribution may require some extemal financing in 1994 which would require regulatory approval, to earnings incmased by 24.5% in 1993 due primarily to in addition to construction expenditums and energy operations of its EUA Nova Division, acquired in December 1992, and increased business activity.
related investments, projected mquirements for sched-uled cash sinking fund payments and mandatory EUA Cogenex continues to grow its business strategi- y cally as evidenced by two recent acquisitions. In f redemption of securities in 1994,1995 and 1996 are $2.5 million, S3.3 million, and $9.2 million, respectively. '
REGUL.ATION - PERCENT OF REVENUES 3,, nts ,n s Corporate: Pmjected requirements for scheduled cash
) sinking fund payments for the corporate operations for - %$ _-,r, <
C each of the three years following 1993 are $1.1 million. &Mn$U % w a$q tjy"L aj M % )1:
MW~Mk
+
~^v1 Short-Tenn Lines of Credit: At December 31,1993, h ww EUA System companies maintained short-term lines of l 9y ,
credit with various banks aggregating approximately i
$140 million. Short-term debt outstanding at year's 2
end was $37.2 million, a decrease of $72.8 million from 1989 l993 year end 1992 balances.
O aesuiatorv commissu,n O commissa,n Year End Short-Term Debt Outstanding By Business Unit ($000's): y,ss,cause,,s orp,,, men, ,, pogy N M2 E Unhte and Camen. O tur cosme, corn,. - , ,
Core EkrtricBusiness 5 0 $ 0 8,588 42,688 December 1993, EU A Cogenex completed its acquisiti Energy Related Business 28,580_ _ 67.248 of Day Co., of Victor, N.Y. Renamed EUA Day and Corporate 537'"'8 $*36 operating as a division of EU A Cogenex, the company is primarily engaged in the business of customization The decmase.m short-term debt is due to 1993 system installation and servicing of building temperature con-financing activity as previously discussed. EUA tml systems for the purpose of energy conservation.
expects to repay the outstanding balances of indebted- The acquisition will enable EU A Cogenex to increase its ness tiuough intemally generated funds, the issuance market sham in building control systems and provide 4 of additional common shares through its Dividend customers with additional expertise in system cus- 1 l Reinvestment and Common Share Purchase Plan, and 'l tomization and enhanced applications.
the possible issuance of additional EUA Cogenex Debt in January 1994, EUA Cogenex completed the acquisi-securities which, as noted above, would requin further tion of NEM of Brunswick, Me. NEM is an energy ser-regulatory approval. vices and demand side management contracting com-pany operating as a wholly-owned subsidiary of EUA ENERGY RELATED BUSINESSES O Cogenex.
Net Eamings and Eamings Per Share The acquisitions were accomplished by the exchange q Contributions of EUA's Energy Related Businesses: ~
of common stock of Day Co. and NEM to EUA Cogenex
. __ 7 1993 __ .m2 - - - for common shares of EUA. ]
tarning Earninp Eaminp Earning EU A Cogenex revenues are still subject to the SEC q 1000's) Per Share (000's) PerShare requirement that it earn more than 50% of its revenues ' i EUA Cogenex $3,536 50.19 52.834 50.17 in the New England /New York area, not induding rev-EUA Ocean State 5,258 0.29 7,043 0.41 enues derived from development of qualifying cogt
(
WAEnepngtnetjl,55Ly9L_ _ p$ Sh ation facilities and qualifying small power pmduction
!! i Eneny Related Business $7,243 $0.39 $4,768 50.57 facilities. To date, revenues have continued to grow within the New England /New York area so that they 14
p 1
l
(% l C) hase not limited EUA Cogenex's growth outside OPERATIONS that ~
For the year ended December 31,1993, approxi- The EUA System's fuel mix continues to be diverse. 3 ax I Nuclear power supplied 34% of EUA's energy needs in
"'# ,1y 72% of EUA Cogenex's revenues subject to this
"*triction were generated from within the New 1993, matchingits 1992 contri- FUEL Mix !
bution and continuing as A ""'""'"" % i land /New York area. The Day Co. and NEM bisitions will provide additional revenues from the EUA'slargest and lowest cost 1989 i England /New York area in 1994 and beyond. fuelsource. Natural gas plied 26% of EUA's energy sup- [' I Nevertheless, EUA Cogenex is actively pursuing kg-
@tive action and may pursue regulatory action to mit- requirementsin 1993 down ativeimpact that current geograph- from the 29% of1992. The sys-i 'f '
) jfateany uturenegmquirements maytemhave on future again increased revenues. If EUA its hydro- ,
1993 l Cogenex's endeavors are unsuccessful, revenues electric from capacityin 1993 28 outside the New England /New York area may be through Montaup's and restricted. Newport's 4.06% aggregate 26 shamin the HydroQuebec 6 EUA Ocean State: EUA Ocean State owns 29.9% of Phase II energy agnement each of the partnerships which developed and operate Units I and 11 of OSP, twin 250-megawatt gas-fired gen- with the New England Power 3993 erating units located in northern Rhode Island. Both Pool. Hydmelectric facilities y units have provided a premium retum since their accounted for6%of the l 31 System's energyin 1993. !
mspective in-service dates of December 31,1990, and '
October 1,19 1. The decrease in EUA Ocean State's Oilprovided 28%of energy O camings contribution was due primarily to a decrease needsin 1993, up from its 13% gg in the allowed rate of retum on equity billed by the pro. contributionin 1992. This a c.
Wt, slightly lower performance bonuses in 1993 and a increaseis due mainly to the aca lll Nudear unanticipated outages at decrease in the rate base and investment base from #"#
which the project's rates are determined. Montaup's coal fired Somerset Units. As a result, coal supplied only 6% of our energy EUA EnergyInvestment: EUA Energy Investment needs m 1993, down from 19% in 1992. EUA curmntly was organized to seek out investments in energy relat-pr jects that gas will supply approximately 31% of its ;
ed businesses. Prior to 1993 the company had Nvn, for energy needs by 1998; nuclear, approximately 30%; coal, ;
all intents and purposes, an inactive subsidiary of EUA.
ppr xim tely 14%;and oil,approximately 19%. The ;
The $1.5 million k>ss in 1993 was related to the expens-balanm wW come fmm a combination of hydroelectric ing of all of EUA Energy's initial investment in p wer and such non-traditional sources as cogeneration TransCapacity L.I? The partnership will develop and and independent power producers.
market a computer software system for the collection, On January 25,1994 Montaup announced that its 42-compilation and distribution ofinformation regarding year- Id,69-mw Somerset Station Unit #5 had been i natural gas pipeline capacity and capacity rights. The l j system developed by TransCapacity LP.'will allow cus- P aced in deactivated reserve. This unit had been out of '
smim f r the prior five months due to mechanical tomers to quickly sort and process the information sup-Problems. Montaup has determined that the costs to plied by gas pipelines in compliance with FERC Order repair the Unit and to bn,ng it into comph,ance with 636.
Clean Air Act requirements would not be economical.
Under FERC Order 636, natural gas capacity rights M nt up's net plant investment in the unit was $6.4 mil-information will no longer be proprietary and must be n at amber 31,1993.
made accessible to the public in a non-discriminatorv' Current forecasts indicate that with a combination of manner. It is anticipated that the system will be opera-
\ owned generation, current long-term purchased power tionalbyJune 1,1994.
contracts, expected short-term purchased power oppor -
tunities and the EUA System's C&LM programs, no i 15
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additional capacity requirements will be needed ENVIRONMENTAL MATTERS The federal Emironmental Protection Agency (EPA),as through the year 1999. i well as state and local authorities, have jurisdiction CONSERVATION AND LOAD MANAGEMENT over releases of pollutants into the emironment. They The EUA System offers customers a comprehensive set have broad authority to set rules and regulations, i of C&LM programs. These programs provide EUA including the required installation of pollution control with a flexible, cost effective resource option, while serv- devices and remedial actions. The EPA has updated its ing customers with valued cost control opportunities to clean air standards regulating the emissions from utili-l develop and maintain a competitive advantage within ty power plants into the air, to take effect in 1995. Tests our service territories. The programs also offer opportu- at Montaup's Somerset Station indicate that Unit #6.
nities to EUA and our customers to comply with envi- will be able to utilize lower sulfur coal than is already ronmental standards and reduce air emissions. being burned to meet the 1995 air standards with only During 1993,23,272 customers participated in one or a minimal capital investment. Montaup determined d
more of the EUA System C&LM programs, resultingin that it would not be economical to repair Unit # 5 of the 38,309 megawatthours of annual energy savings. In Somerset Station and has placed it in deactivated addition, the programs delivered a reduction in cus- reserve. (See above).
- i tomers' demand of 7,028 kilowattsin 1993 and provided in April 1992, the Northeast States for Coordinated the long-term benefits of reducing the need to invest in Air Use Management (NESCAUM), an emironmental costly new generating facilities. advisory group for eight Northeast states induding Massachusetts and Rhode Island, issued recommenda-tions for nitrogen oxide (NOx) controls for existing 1
ity boilers required to meet the ozone non-attainmen i requirementsof theClean Air Act Amendmentsof 1990 (Clean Air Act). The NESCAUM recommenda-16
l's
(~h V tions are more restrictive than the Clean Air Act require- mates, have not been completed.
ments. The Massachusetts Department of As a result of the mcoverability of cleanup costs in rates Environmental hianagement has amended its regula- and the uncertainty regarding both its estimated liability, tions to mquire that Reasonably Available Control as well as its potential contributions from insurance carri-Technology be implemented at all stationary sources ers and other responsible parties, EUA does not believe potentially emitting 50 tons or more per year of NOx. that the ultimate impact of the emironmental costs will Rhode Island has not yet issued mgulations to imple- be material to the EUA System or to any individual sub-ment NOx reduction requirements. hiontaup is in the sidiary and thus no loss accrual has been made at this process of reviewing compliance strategies. Any com- time.
pliance strategy may require the implementation of A number of scientific studies in the past several years
) additional pollution control technology as early as 1995.
hiontaup would seek recovery of pollution control have examined the possibility of health effects from elec-tric and magnetic fields (Eh1F) that are found everywhere expenditures through rates. there is electricity. While some of the studies have indi-Because of the nature of the EUA System's business, cated there may be some association between exposure to various by-products and substances are produced or EN1F and health effects, many studies have indicated no handled which are classified as hazardous under the direct association. In addition, the research to date has mies and regulations promulgated by the EPA as well not conclusively established a direct causal relationship as state and local authorities. The EUA System general- between EhiF exposure and human health. Additional ly provides for the disposal of such substances through studies, which are intended to provide a better under-licensed contractors, but these statutory provisions gen- standing of the subject, are continuing.
erally impose potential joint and several responsibility Some states have enacted regulations to limit the Q
V on the generators of the wastes for cleanup costs.
Subsidiaries of EUA have been notified with respect to strength of magnetic fields at the edge of transmission line rights-of-way. Rhode Island has enacted a statute a number of sites where they may be responsible for which authorizes and directs the Energy Facility Siting such costs, including sites where they may have joint Board to establish rules and regulations governing con-and several liability with other responsible parties. It is struction of high voltage transmission lines of 69kv or the policy of the EUA System companies to notify liabil- more. Various bills are pending in the Niassachusetts ity insurers and to initiate claims; at this time, however, Legislature that would require certain disclosures about the no claims have twen filed against any insurer and EUA potential health effects of Eh1E hianagement cannot pre- l is unable to predict whether liability,if any, will be dict the ultimate outcome of the Eh1Fissue. I assumed by or can be enforced against, the insurance CHANGES IN ACCOUNTING STANDARDS !
carrier in these matters.
The EUA System adopted FAS106, " Accounting for Post- l As of December 31,1993, the EUA System has Retirement Benefits Other Than Pensions," as of January incurred costs of approximately $2.8 million in connec-
)
1,1993. This standard establishes accounting and report- I tion with these sites. Of this amount, approximately ing standards for such post-retirement benefits as health
$2.7 million relates to Blackstone. These amounts have care and life insurance. FAS106 further requires the ,
been financed primarily by internally generated cash. accrual of the cost of such benefits during an employee's Blackstone is currently amortizing substantially all of its years of service and the recognition of the actuarially i incurred costs over a five-year pedod and recovering determined total post-retirement benefit obligations those costs in rates. (Transition Obligation) earned by existing employees and EUA estimates that additional costs ranging from $2.0 retirees. Previously, EUA followed the " pay-as-you-go" million to 59.2 million may be incurred at these sites methodology of accounting for such costs. EUA ekrted l through 1995 by its subsidiaries and the other responsi- to recognize the Transition Obligation over a period of 20 l (L } ble parties. Of this amount,approximately 58A million relates to sites at which Blackstone is a potentially years, as permitted by FAS106. The resultant annual expense, including amortization of theTransition i
l responsible party. Estimates beyond 1995 cannot be Obligation and net of capitalized amounts, was approxi-made since site studies, which are the basis of these esti- mately $8.1 million in 1993. Regulatory decisions issued 17 \
l l
in December 1992 permitted EUA's retail subsidiaries to In December 1992, Montaup commenced a dedarato-recover through rates approximately $3.5 million of this ry judgment action in which it sought to have the amount in 1993. As a result of the December 1992 regu- Massachusetts Superior Court determine its rights latory decisions, EUA's retail subsidiaries established a under the Power Purchase Agmement between it and regulatory asset of approximately $1.5 million in 1993 Aquidneck Power Limited Partnership (Aquidneck).
due to the future recoverability of such amounts. Montaup sought a dedaration that the Power Purchase Montaup was allowed to defer FAS106 related expenses Agmement was binding on the parties according to its through 1995 or until it filed for recovery of sudi terms. Aquidneck asserted, in effect, that Montaup had amounts prior to that time. Accordingly approximately either an express or implied obligation to negotiate new
$1.4 million of FAS106 related expenses were deferred terms and conditions to the Power Purchase Agreement.
by Montaup in 1993. Montaup will request recovery of In January 1994, a counterdaim by Aquidneck all of its FAS106 expenses, including amortization of claimed certain bmaches of the Power Puntase deferred amounts in its March 1994 rate application. Agreement, including an alleged failum on the part of The EUA system has also established an irrevocable Montaup to renegotiate the terms and conditions of the extemal Voluntary Employee Benefit Association Trust PowerPurchase Agreement. AlsoinJanuary1994, Fund as required by the aforementioned regulatory Aquidneck sought to join EUA and EUA Senice decisions. Contributions to the fund began in March Corporation as parties to the suit.
1993 and totaled approximately $6.0 million during Montaup, EUA and EUA Service intend to defend 1993. the counterdaim vigorously and believe that Effective January 1993, EUA adopted FASB Statement Aquidneck's daims have no basis in law.
No.109, " Accounting for Income Taxes" (FAS109),
which essentially supersedes its Statement No. 96 (FAS96). As a result of the adoption of FAS96 in 1990, FAS109 resulted only in the reclassification of certain assets and liabilities and did not significantly impact ;
I EUA.
In November 1992, FASB issued Statement No.112, e-
" Employers' Accounting for Post-employment h Benefits." EUA is required to adopt this standard no [
later than January 1,1994. The estimated impact of this ;,
standard on EUA System is immaterial and therefore it ,
is anticipated that no liability will be recorded.
OTHER Montaup is recovering through rates its share of esti-mated decommissioning costs for the Millstone Unit 3 and Seabrook Unit 1 nuclear generating units. l)
Montaup's share of the currently allowed estimated total costs to decommission Millstone Unit 3 is approxi-mately $15.1 million in 1993 dollars and Seabrook Unit 1 is approximately $10.6 million in 1993 dollars. These figures are based on studies performed for the lead meners of the units. Montaup also pays into decornmis-sioning mserves, pursuant to contractual arrangements, at other nuclear generating facilities in which it has an
- equity ownership interest or life-of-unit entitlement.
Such expenses am currently recovemd through rates.
18
we(npw - . ...
r - . .
. ~ FINANCIAL TABLE OF CONTENTS -,
)
l I I
"~ .20 j Consolidated StatementofIncome
" .21 Consolidated Statement of Cash Flows
. " 22 Consolidated BalanceSheet - r Consolidated Statement of Retained Earnings _. ^ "~~"23
' Consolidated Statement of Equity Capital and Prefermd Stock-- . . 23 24 Consolidated Statement of Indebtedness -
25 Notes to Consolidated Financial Statements - -
) gepod ofIndependent Accountants
- 36 Repon of Management- 36 Quarterly Financial and Common Share Information - 37 Consolidated Operating and Fmancial Statistis_ 38 40 ShareholderInformation -
Trustees and Officers .. ...- Inside BackCover r
f
(
b LJ 19 ,
. t
L CONSOLIDATED STATEMENT OF INCOME i1
>l Years Ended Dmmber 31, On 1housands Except Common Shares and per Share Amounts) 1993 1992 0
1991 q OPERATING REVENUES $ 566,477 $ 541,964 $ 522,583 OPERATING EXPENSES:
Fuel 85,218 %,767 99.075 ,
Purchased Power-Demand 139,524 141,829 143,775 j 156,972 131,348 114,832 L OtherOperation 25,148 21,589 21,956 1 Maintenance 44,722 42,824 41,759 Depmciationand Amortization 24,468 23,785 22,486 Taxes -Other ThanIncome 15,019 19,475 12,364 IncomeTaxes 491,071' 477,617 4 %,247 j TotalOperating Expenses 75,406 ' 64,347 66,336 OperatingIncome 14,140 16,790 10,975 Equity.in Earnings of Jointly Owned Companies AllowanceforOther Funds Used DuringConstruction 379 549 616 OtherIncome (Deductions)- Net 3,898 6,1M (739) 93,823 87,870 77,188
_ Income BeforeInterest Charges INTEREST CHARGES:
41,530 45,646 42,691 Interest on Long-Term Debt 1,904 1,184 1,108 Amortization of Debt Expense and Premium - Net '
4,137 4,703 4,960 OtherInterest Expense Allowance for Borrowed Funds Used During (1,989) (1,813) (1,9 Constmetion(Credit) 45,582 49,720 46, NetInterest Charges 48,241 38,150 -30,417 NetIncome '^
3,310 4,039 4,157 Pmferred Dividends of Subsidiaries 5 44,931 $ 34,111 $ 26,260 Consolidated Net Eamings ,
18,391,147 17,039,224 16,608,090 Average Common Shares Outstanding Consolidated Earnings perShare $ 2.44 $ 2.00 $ 1.58 Dividends Paid per Share $ 1.42 $ 1.36 $ -1.45
.1 l
9i ;
ne ammying nas are an ingrawr pcynana ssarements.
f 20 j
yl
__ .- _ _ _ m
- 1. . .
CONSOLIDATED STATEMENT OF CASH flows I >
years Ended Dtumber 31, (In1housands) 1993 1992 1991 CASil FLOW FROM OPERATING ACTIVITIES:
NetIncome $ 48,241 $ 38,150 $ 30,417 Adjustments to ReconcileNetIncome to Net Cash Provided from Operating Activities:
Depreciationand Amortization 50,492 47,492 49,800 Amortization of Nuclear Fuel 5,136 5,054 4,219 Deferred Taxes 11,099 (3,645) 12,228 Investment Ta Cadit, Net (1,279) (1,452) 83 Allowance for Funds Used Dunng Construction (2,368) (2,362) (2,6(M)
Other-Net 13,010 22,175 (1,612)
Changes in Operating Assets and Liabilities:
Accounts Receivable (9,609) 6,572 (13,468)
Notes Receivable (5,603) 2,181 (8,676)
Materials and Supplies 452 5,221 (629)
Accounts Payable (1,885) 5,138 (7,665)
Taxes Accrued 3,382 1,610 4,491 Other- Net (10,154) (4,593) 3,290
[] Net Cash Provided from Operating Activities 100,914 1155(T1 75,694 CASH FLOW FROM INVESTING ACFIVITIES:
Construction Expenditures (60,767) (55,736) (57,570)
Increasein OtherInvestments (13,244) (17,205) (39,888)
EUA Power Obligations Paid by EUA (37,522) i I _ EUA Power Settlement _ __
(20,000)_
Net Cash Used in Investing Activities (74,011) (92,941) (131,980)
CASH FLOWITIOM FINANCING ACTIVITIES:
Issuances:
Common Shares >16,313 8,738 9,532 Long-Term Debt 245,000 50,000 66,000 Pmferred Stock
- 30,000 Redemptions:
long-Term Debt !.214,809) (86,203) (2,170)
Preferred Stock (41,700) (1,300) (1,300)
Premium on Reacquisition and Financing Expenses (14,956) (3,783) (942)
EUA Common Share Dividends Paid (26,101) (23,114) (23,952)
Subsidiary Preferred Dividends Paid (3,316) (4,039) (4,157)
Net (Decrease) Increase in Short-Term Debt (72,768) 37,487 29,378 Net Cash (Used in) Provided from Financing Activities (52,337) (22,214) 72,389 NETINCREASEIN CASH AND TEMPORARY CASH INVESTMENTS: (25,434) 536 13,103 Cash and Temporary Cash investments at Begmnmg of Year 29,614 29,078 15,975 -
Cash and Temporary Cash Investments at End of Year S 4,180 $ 29,614 $ 29,078 l
Cash Paid during the year for: '
Interest (Net of Amounts Capitalized) $ 45,057 $ 47,132 $ 45,236 incomeTaxes $ 12,919 $ 897 $ 4,812 l
l The accompanying notes are an integralpart of thefinancial statements.
21 )
N O
. 6 CONSOLIDATED BALANCE SHEET .
December 31, 1992 es .
1993 nn Thousand3)
ASSETS y U tility Plant and Other Investments: $ 1,002,717
$ 1,016,453 Utility PlantinService 274,725 A mortization_ 296,995 j less Accumulated Provisions for Depreciation and_ __
719,458 727,992 4 Net Utility Plant in Service 4,943
- 8,728 Construction Workin Progress __ _ _ _ _ .
732,935 i
_ _ _ _ 728,186 Net Utility Plant 87,276 . p, 99,791 Non-utility Property - Net Investments in Jointly Owned Companies 73,632 76,841 y 38,492 Other 51,282 935,544
]
t 952,891 Total Utility Plant and Other Investments -,
Current Assets:
Cash and Temporary Cash Investments 4,180 29,614 3t Accounts Receivable: M,408 E 57,473 Customers, Net Accrued Unbilkd Revenues 10,481 9,624 f 16,885 11,199 :.
Other 10,804 16,407 lf Notes Receivable Materials and Supplies (at average cost): 7,286. :
6,411 Fuel 6,298 Plant Materials and Operating Supplies 6,722 f 19,820 Other Current Assets _ _ _ _ ___ __ _
_ __340 _ .,
16, {
134,899 149,05. >
TotalCurrent Assets
_Other Assets] []___ )) ][ )) {[ ~~ $ 1,203,137 115,347
~[] _ 1i,8,723
$ 1,203,320 f
i Total Assets LIABILITIES AND CAPITALIZATION l j Capitalization: $ 266,855 5 333,165 ,
r Common Equity 15,850 6,900 Non-Redtunable Preferred Stock of Subsidiaries - Net 28,4 %
25,053 Redeemable Preferred Stock of Subsidiaries - Net 462,958 496,816
- LongJerm Debt.- Net _ _ _ _ _ _
774,159 861,934 TotalCapitalization _ _ _ _ _ _ _ _ ___ _ _ __ _ _ _
_ Current Liabilities: 109,936 37,168
! Notes Payable- Banks 9,943 5,415 Long-Term Debt Due Within One Year 37,996 36,111 Accounts Payable 1,450 Redeemable Preferred Stock Sinking Fund Requirement 50 12,299 8,917 Taxes Accrued
! 10,688 13,410 Interest Accmed 30,196 19,285 Other Current Liabilities -'
~
~
~
12i,'U16~ 211,848 TotafCurrentl.iitiilities 81,393 82,747 Other Liabilities 137,440 135,920 Accumulated Deferred Taxes _ _ __
Commitments and Contingencies (Note K)
$ 1,203,137 5 1,203,320 Total Liabilities and Capitalization O' 4 The accompanying notes are an integral part of the financial statements.
22
l s 1
CONSOUDATED STATEMENT OF RETAINED EARNINGS years Ended Dtvember 31, 1993 1992 1991 an1housands) l I Sned Eanungs (Deficit)- Beginning of Year 5 21,434 $ 11,053 $ (78,313)
Accounting Reorganization 80,035 Consolidated Net Earnings _
44,931 34,111 26,260
' Toial 66,365 45,164 27,982 26,101 23,114 16,316 Dividends Paid- EUA Common Shares Other .__._ _ __ _
622 616 613 Retained Earnings -
Accumulated sinceJune 1991 Accounting Reorganization J which a deficit of $80,0M,506 was eliminated. 5 39,612 $ 21,434 $ 11,053 CONSOLIDATED STATEMENT OF EQurrY CAFffAL & PREFERRED STOCK pecember 31, (pollar AmountsIn Thousands) 1993 1992 EASTERN UTILITIES ASSOCIATES:
Conunon Shares:
$5 par value 36,000,000 shares authorized,19,032,598 slures outstanding in 1993 and 17,237,788 shares in 1992. $ 95,163 $ 86,189 Other Paid-In Capital 202,182 161,590 I Common Share Expense 0,822) (2,358)
Retained Eamings Accumulated sinceJune1991 Accounting Reorganization in which a deficit of $80,0M,506 was eliminated. 39,642 21,434
[TotalCommon Equity 333,165 266,855 q g CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES:
Non-Redeemable Preferred:
Blackstone Valley Electric Company:
4.25% $100 par value 35,000 shares (1) 3,500 3,500 5h0% $100 par value 25,000 shares (1) 2,500 2,500 Premium 129 129 Eastem Edison Company:
4M% $100 par value 60,000 shares (1) 6,000 832% $100 par value 30,000 shares (1) 3,000 Expense, Net of Premium (50)
Newport Electric Corporation:
3.75% $100 par value 7,689 shares (1) 769 769 Premium 2 2 Total Non-Redeemable Preferred Stock 6,900 15,850 Redeernable Preferred:
Eastern Edison Company-9.00% $100 par value 126,000 shares (1) 12,600 9.80% $100 par valee 200,000 shares (1) 20,000 6 % % $100 par value300,000 shares (2) 30,000 Expense. Net of Premium 030) (553)
Preferred Stock Redemption Costs (4,846) (2,472)
Sinking Fund Requirement Due Within One Year (1,400)
Newport Electric Corporation:
9.75% $100 par value 2,900 shares (1) 290 390 Expense (11) (14)
Sinking Fund Requirement Due Within One Year (50) (50) l I TotalRedeemable Preferred Stock 25,053 28,4 %
Total Pnefened Stock of Subsidiaries S 31,953 $ 44,346 ,
G) Authan edandOutstanding.
Gl Authon:cd D0,000 shares. Outstandmg 300,000at December 3L 1993.
The accompnying notes are an integral prt of the financial statements.
l 23
.-d Mi
[ p.;[
CONSOLIDATED STATEMENT OF INDEBTEDNESS 1 E'
v 1993 1 h' December 31, Il Gn1housands)
EUA 5ervice Cotporation: $ 15,600
$ 17,800 V 1p 10.27c Secured Notesdue 2008 15,000 c; EUA Cogenex Corporation: 15,000
,0 7.22% Unsecured Notes due1997 50,000 20,000 7.0% Unsecured Notes due2000 20,000 35,000 9.6% Unsecured Notesdue 2001 35,000 10.56% Unsecured Notes due2005 43,378 a EUA Ocean StateCorporation: 38,497 <
E 959% Unsecured Notes due 2011 Blackstone Valley Ekrtric Company- l J First Mortgage Bonds: 15,000 15,000 -
~
g 18,000 t 9 M% due20(M(SeriesB) 18,000 6,500 6,500 T!
10.357c due2010(SeriesC) E Variable Rate Demand Bonds due 2014 (1)
Eastern EdisonCompany $L 5,000 Fust Mortgage and Collateral Tmst Bonds:
4 M% due1993 10,000 10,000 '!: '
8.9% Secured Medium Term Notes due 1995 7,000 7,000 4 %% due 1996 35,000
' 6 M% due1997 l 10 %% due1997 20,000 5%% due1998 40,000
[t 5 %% due1998 40,000 l 5,000 9%7c due1998 8%7c due1999 7XVe due2002 35,000 7.78% Secturd Medium Term Notes due 2002 40,000 6% % due2003 8,000 10,000 6.35% due 2003 8 k7c due 2003 9 %% due 2016 40,000 8.0% due 2023 PollutionControlRevenue Bonds: .
10 %% due2008 40,000 1
5%% due2008 25,000 f Unsecured MediumTerm Notes: 25,000 9-9 %7c due 1995 (Series A)
Newport ElectricCorporation: 1,000 . , _
Fust Mortgage Bonds: 1,000 1,400 * -
4 %7c due1994 600 11 M% due1997 1,400 10.07c due 1998 1,400 8,000 .-
9.07c due 1999 8,000 5,850 9.8% due1999 5,200 8.95% due 2001 1,880 Second Mortgage Fonds: 1,880 6,lM5 85% due1998 6,(45 12.0% due 2011 SmallBusiness Administrationloan:
65% due2005 7 Promissory Notes:
(5) 12.0% due 1993 (866) 7 Unam_or_ti_ze_d_(Discount)- Net 5,415
$~M,816 5 ,
Irss Portion Due WithinOneYear T
~TitaH3nTTeriED5bt Net-
- 0) kghted awrage interest rate was 2.5% for 1993 and 3.2% for 1992.
The accompnying notes are an integral prt of the finan 24
. .c ,
e NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31,1993,1992 and 1991 O (A> summinv Or s>GNiriCiNr ACCOUNTING POLICIES:
1 d1rc<<<sars ,rerc st ecr1 s 8 , re 4,> . Per financial statement purposes, depreciation is computed on Basis of Consolidation: The consolidated financial state- the straight-line method based on estimated useful lives of ments indude the accounts of Eastern Utilities Associates the various dasses of property. On a consolidated basis, (EUA) and all subsidiaries. In 1993 EUA consolidated the pmvisions for depreciation on utility plant wem equivalent EUA Cogenex Corporation (EUA Cogenex) partnerships to a composite rate of approximatdy 3.4% in 1993 and 3.3%
which had pmviously been accounted for as equity in bcgh 1992 and 1991 based on the average depreciable investments. The 1992 and 1991 financial statements have pmperty balances at the begmrung and end of each year.
been mstated to pmsent these partnerships on a consoli- Non-utility property and equipment of EUA Cogenex is dated basis. The restatements do not materially change stated at original cost. For financial statement purposes,
) amountspreviouslyreported. Allmaterialintercompany depmciation on office fumiture and equipment and com-transactions between the consolidated subsidiaries have Puter equipment is computed on the straight-line method ,
been eliminated. based on estimated useful lives ranging from five to fifteen System of Accounts: The accounts of EUA and its con- years. Project equipment is depreciated over the term of solidated subsidiaries are maintained in accordance with the applicable contracts or based on the estimated useful the uniform system of accounts prescribed by the regula- lives, whichever is shorter, ranging fmm five to fifteen tory bodies having jurisdiction, years.
Jointly Owned Companies: Montaup Electric Allowance for Funds Used During Construction Company (Montaup) follows the equity method of (AFUDC) and Capitalized Interest: AFUDC repmsents amounting for its stock ownership investments in jointly the estimated cost of bormwed and equity funds used to owned companies induding four regional nuclear gener- finance the EUA System's construction program. In accor-ating companies. Montaup's investments in these nudear dance with mgulatory accounting, AFUDC is capitalized
_./ generating companies range from 2.25% to 4.50%. as a cost of utility plant in the same manner as certain gen-Montaup is entitled to electricity produced fmm these eral and administrative costs. AFUDC is not an item of facilities based on its ownership interests and is billed for cunent cash income but is recovered over the senice life of its entitlement pursuant to contractual agreements which utility plant in the form of increased revenues collected as a ,
are approved by the Federal Energy Regulatory result of higher depreciation expense. The combined rate !
Commission (FERC). One of the four facilities is being used in calculating AFUDC was 9.5% in 1993,10.8% in decommissioned, but Montaup is required to pay, and has 1992 and 11.5% in 1991. The caption Allowance for received FERC authorization to mcover,its proportionate Borrowed Funds Used During Construction also indudes sham of any unrecovered costs and costs incurred after interest capitalized for non-mgulated entities in accordance the plant's retirement. with Financial Accounting Standards Board (FASB)
Montaup also has a stock ownership investment of Statement No.34.
3.27% in each of two companies which own and operate Operating Revenues: Utility mvenues are based on certair transmission facilities between the Hydro Quebec billing rates authorized by applicable federal and state reg-electricsystem and New England. ulatory commissions. Eastern Edison Company (Eastem EUA Ocean State Corporation's (EUA Ocean State) fol- Edison), Blackstone Valley Electric Company (Blackstone) lows the equity method of accounting for its 29.9% part- and Newport Electric Corporation (Newport)(collectively, nership intemst in the Ocean State Power Project. the Retail Subsidiaries) accrue the estimated amount of Montaup's stock ownership inve3tments and EUA unbilled base rate revenues at the end of each month to .
(bn State's investment in the Ocean State Power Project match costs and mvenues more dosely. In addition they 1 are induded in " Investments in Jointly Owned also record the difference between fuel costs incurnxi and Companies" on the Consolidated Balance Sheet. fuel costs billed. Montaup recognizes revenues when Plant and Depreciation: Utility plant is stated at origi. bilkd Montaup, Blackstone, and Newport also record rev-(N nal cost. The cost of additions to utility plant includes enues related to rate adjustment mechanisms.
contractai work, direct labor and material, allocable over- EUA Cogenex's mvenues are recognized based on finan
- head, allowance for funds used during construction and cial arrangements established by each indisidual contract.
25
zw . m h:
-;p 4
f i
be immediately recognized in operating results because o
- b. p Under paid from savings contracts, revenues are mcog- rate making treatment and provisions in the Tax Refonn t Act of 1986. The adoption of FAS109 had no impact on the nized as energy savings are realized by customers. 9-Revenue from the sale of energy equipment is recognized results of operations for 1993. At December 31,1993 .
h tota F when the sale is complete. Revenue from sales-type lease defermd tax assets for which no valuation allowance w ccatracts is recognized when savings to be realized deemed by necessary wem M1.8 million and total deferred g tax7 m
I customers are verified. Energy Sales Contracts revenue liabilities is were $179 million. Total deferred tax a ~
mcognized as energy is provided to the customer. In cir-liabilities are compristd as follows:
Defmed Tax bb cumstances in which material uncertainties exist as to Defemd Tax f g contract pmfitability, cost recovery accounting is Assets._ _ _ usig ,
. _followed
_.__ _ _ 38 3 and revenues nreived under such contractsgaregfirst l" g accounted for as recovery of costs to the extent incurred. Differences $159,370 3 Federal Income Taxes: EUA and its subsidiaries gener- Dtfferences
$19,574 gefinancing
~ lg L w many, ally reflect in income the estimated amount of taxes cur- 9,507 Cmts 2,666 j Mtmmum Tax 1,981 g g mntly payable, and provide for defermd taxes on certain uls rensions utiphon $ g items subject to temporary timing diffemnces to theBad extent Debts 2.274 I
~
permitted by the various regulatory agencies. EUA's I""Si "S rate.
j mgulated subsidiaries generally defer recognition of annual investment tax credits and amortize these credits p- 'h k g "
over the pmductive lives of the related assets. As of December 31,1993 and 1992, EUA had recorded on s
Reclassifications: Certain prior period amounts on the its Consolidated Balance Sheet a mgulatory liability to' b.
financial statements have been reclassifiedratepayers to confonn of approximately $28.8 million and $35.9 m with current presentation.
l I lion, respectively. These amounts primarily repmsent Cash and Temporary Cash Investments: EU A consid~ ~
excess deferred income taxes resulting from the mduction -
eis all highly hquid investments and temporary cash -
investments with a maturity of three months or less when in the federal income tax rate and also include d taxes pmvided on investment tax credits. Also at '
acquired tobe cash equivalents December 31,1993 and 1992, a regtdatory asset of appmxi (B) ACCOUNTING REORGANIZATION: mately M6.7 million and $51.1 million, respectively, ha On June 30,1991, EU A effected an accounting reorganiza- been mcorded, mpresenting the cumulative amount of fe l
.t tion to eliminate a retained eamings deficit resulting prin. eral income taxes on temporary depreciation differenms '
~
cipally from EUA's 1990 write-off of its entire investment which were pmviously flowed through to ratepayers. 1 in EUA Po ver Corporation (EU A Power, now known as EUA has approximately M.9 million of investment tax p
Great Bay Power Corporation). The accounting reorgani- credit carryforwards which expire between the years -L 2
zation eliminated the accumulated deficit in andretained 2005.
earnings of $80,034,506 by transferring that amount from ";,
EUA also has $9.2 million of alternative minimum Other Paid-in Capital. The accounting reorganization did which can be utilized to reduce the con credits not involve any revaluation of assets or liabihties.
y regtdar tax liability and have no expiration.
Under the terms of the December 1992 settlemem -
r ag (C) INCOME TAXES: .
ment with EU A Power, EUA is entitled to utilize EUA EUA adopted FAS3 statement No.109, " Accounting for Hp Income Taxes" (FAS109) effective as of January 1,1993. Power's tax credits to reduce the 1W3 Consol Liability without compensation to EUA Power. m: ((
FAS109 superseded FASB Statement No. % (FAS96) which requimd mcognition of deferred income taxes Approximately for $6.9 milh.on of such creditswe :
1993 of which $4.9 million was charged agains temporary differences that am reported in different years for finanaal reporting and tax purposes using the liability W {
l-method. Under the liability method, deferred tax liabili-ties or assets are computed using the tax rates that will be ,i [
l in effect when temporary differences reverse. Generally, j< p; 1
for regulated companies, the change in tax rates may not ,>
9 Ot# ""
[
G;;f -
l l Components of income tax expense for the year 1993,1992 and 1991 areasfollows:
gghousands) 1993 1992 1991 j$75A1:
Current $ 9,390 $ 7,761 $ 2,570 Defemd 4,2M 9,977 6235 gvestment Tax Credit, Net (1,197) (1,371) 1(x5 12,397 16,367 8,970 4~ tate:
Cunvnt 2,289 1,900 1,027 peferred 333 1208 2,367 f ~
2,622 3,108 3,394
%dto Operations 15,019 19,475 12,3M Charged toOtherIncome:
Current 1,583 13,709 (1245) pefern'd 6,562 (14,830) 3,626 investment Tax Cnxiit, Net (5,M9) (82) (82)
] _
3,096 0,203) 2299 Tota [ ] _
$18,115 $18272 $ 14,663 Totalincome tax expense was different from the amounts computed by applying federal income tax statutory rates to book income i subject to tax for the following reasons:
an1housands) 1993 1992 1991
~ Federal Income Tax Computed at Statutory Rates $ 23,224 $ 19,184 5 15,327
{ }
(Decnase)Increasein Tax From-EquityComponent of AFUDC 033) 071) (209)
Depreciation of Equity AFUDC 1,230 745 373 i Amortization and Utilization ofITC (6,295) 0,338) (1,340) i State taxes, net of federal income tax benefit 2,237 2,307 2,358 Tax impact of EUA's write-off of its investment in EUA Power 0,999)
Cost of Removal (583) (8) (1,184)
Other 0.565) _ 448) ( (662) ,
TotalIncome Tax Eyrnse $ 18,115 5 18272 $ 14,663 I The provision for deferred taxes resulting from temporary differences comprises the following:
1 anhusands) 1993 1992 1991 !
Excess Tax Depreciation $ 8,936 $ 9,656 $ 9,016 ,
Estimated Unbilled Revenue 250 118 1% 1 Unbilled FuelCosts 129 277 (400)
Debt Component of AFUDC (1,899) 0,899) - 0,924)
Abandonmentlosses (622)
- (706)
Capitalized Overheads (M) (371) (744)
Effect of Stateand localTaxes 321 1,498 2,367 Defemd Charges 350 (602) (13)
AlternativeMinimum Tax 545 n NetOperating Loss Carry forward 4,108 (2,955)
Pilgrim Refund ral 127 300 3,643 Provision for estimated tax liability resulting fmm q g the writeoff of EUA's investment in EUA Power 4,046 (15,986)
Deferred tax expense (benefits) associated with wnte-offs (56) (424) 2,995 Other-Net 0,041) (243) jotal $ 11,099 $ (3,M5) 753'
$ 12228 27
.W c em M *'
y.
1993 and 1992, each company was in excess of the muumtu .
(D) CAPITAL STOCK: mquirements which would make these restrictions effectiv ( ^
The changes in the number of common shares outstanding and related increases in Other Paid-In Capital during the (E) REDEEMABLE PREFERRED STOCK:
On June 1,1993, Eastem Edison used available cash to years ended December 31,1993,1992 and 1991 were as fol-redeem all of its 9.00% Series Pmfermd Stock. In con lows (dollarsin thousands): with this redemption, a premium of approxima Number of Common Shares issued was incurred and is included in Prefermd Stock Redemption y Dwidend Costs on the Consolidated Statement of Equity Capital andT Retnvestment Common Other Shares Paid 4n Preferred Stock Public and Employee J.L Day Co.
At Par Capital On August 11,1993, Eastem Edison issued 300,000 share Offenng Savings Plans ~ Acquisition
'im.985 5 8,974 5 40,334 iw3 i,3m,doo ~385.825 ~ of $100 par value,6 E Preferred Stock. The proceeds wem "~
2,0M 6,701 406,726 1992 2 392 7,140 used to redeem its outstanding 9.80% Series Pmferred Stock and for other corporate purposes. In connection with the ;'
1W1 4783M Pursuant to the rules and regulations of the Securities 9.80% Series redemption, Eastem Edison incurreci a premi-and Exchange Commission (SEC) under the Public Utilityum of approximately $1,352,000. This premiumisalso 4 '
Holding Company Act of 1935 (the 1935 Act), EUA induded in Preferred Stock Redemption Costs on the System companies are prohibited fmm paying dhidends Consolidated Statement of Equity Capital and Prefermd F out of capital or uneamed surplus without prior autho. Stock. Eastem Edison will seek recovery of these pmmiums g nzation. In 1991, EUA requested and received authority inits next rate proceeding. y from the 1935 Act to pay common share dividends for the Eastern Edison's 6 %% Preferred Stock issue is en second and third quarters of 1991 out of Other Paid-In mandatory sinking funds sufficient to redeem 15,000 Capital in an aggmgate amount not exceeding $8 million. during each twelve-month period commencing Septe
[E Dividends after the third quarter of 1991 are payable only 2003. The redemption price is $100 per share plus accru (
from mtained camings accumulated subsequent to the dividends. All outstanding shares of the 6 %% issue will be f';
June 1991 accounting reorganization. subject to mandatory redemption on September 1,2008r at Eastern Edison redeemed with available cash its 832% price of $100 per share plus accrued dividends.
Series and 4.f4% Series non-redeemable preferred stock on ;
Newport's 9.75% Preferred Stock issue is entitled to a June 1,1993 and December 1,1993, mspectively. In con. mandatory sinking fund sufficient to redeem 500 shams l nection with these mdemptions, Eastem Edison incurred '.
ing each twelve-month period until the year 2000, at premiums of approximately $106,000 miated to the 832% time any shares outstanding must be mdeemed. The Series and $179,000 related to the 4.64% Series. These redemption price is $100 per share plus accrued dhiden '
amounts are included in Preferred Stock Redemption In the event of liquidation, the holders of Eastem Edison's Costs on the Consolidated Statement of Equity Capital 6 X% Preferred Stock are entitled to $100 per share plus and Prefermd Stock. Eastem Edison will seek recovery of accrued dividends.
these amounts in its next rate proceeding, In the event of involuntary liquidation, the holders of In the event of involuntary liquidation, the holders of Newport's mdeemable preferred stock am entitled to $1 non-redeemable preferred stock of the Retail Subsidiaries per share plus accrued dividends. In the event of volu are entitled to $100 per share plus accrued dividends. In liquidation, or if redeemed at the option of Newport, th the event of voluntary liquidation, or if redeemed at the holders of the 9.75% issue are entitled to $104.88 per share optionof thesecompanies,eachshareof thenon- plus accrued dividends prior to October 1,1993 and mdeemable preferred stock is entitled to accrued dhi-per share plus accrued dividends thereafter.
dends plus the following- The aggregate amount of redeemable prefermd stock Amount Company _ _ _ _ _ _4.25% Issue issue
_ _ $10:40 ing fund requirements for each of the five years follow' Blackstone-Sh0% issue 103.82 1993 is $50,000' 3.75%ssue 103.50 Newport-j The prefermd stock provisions of the Retail Companies place certain restrictions upon the payment of dhidends on common stockby each company. A,t December 31, n
s.
~
L (F) LONG-TERM DEBT The EUA System's aggregate amount of current cash The various mortgage bond issues of Blackstone, Eastem sinking fund mquirements and maturities of long-term Edison, and Newport are collateralized by substantiauy all of debt, (excluding amounts that may be satisfied by available their utility plant. In addition, Eastem Edison's bonds are col. pmperty additions) for each of the five years following 1993 lateralized by securities of Montaup, which are whollw am: $5,416,000 in 1994, $41,721,000 in 1995, $19,626,000 in
~
owned by Eastem Edison,in the principal amount of approxi. 1996, $27,631,000 in 1997 and $73,916,000 in 1998.
mately $259 million.
(G) FAIR VALUE OF FINANCIAL Blackstone's Variable Rate Demand Bonds are collateral- INSTRUMENTS:
ized by an irrevocable letter of credit which expires on Ihe foHowing methods and assumptions were used to esti-January 21,1996. The letter of credit permits an extension of mate the fair value of each class of financial instruments for one year upon mutual agreement of the bank and Blackstone.
which itis practicable to estimate:
EUA Service Corporation's (EUA Service) 10.2% Secured Cash and Temporary Cash Investments: The carrying Notes due 2008 are collateralized by certain real estate and amount approximates fair value because of the short-term pmpertyof thecompany, maturity of theseinstruments.
In March 1993, Newport used available cash to redeem Preferred Stock and Long-Term Debt of Subsidiaries:
$600,000 of 10% and $1.4 million of 11 X% First Mortgage The fair value of the System's redeemable preferred stock Bonds (FMBs).
and long-term debt were based on quotcd market prices for In May 1993, Eastern Edison issued $100 million of FMBs in such securities at December 31,1993.
the following denominations: (i) $20 million of 5 TL Bonds The estimated fair values of the System's financial instru-due May 1,1998; (ii) 90 million of 6 %% Bonds d ue May 1, ments at December 31,1993 are as fouows (douars in thou-2003; and (iii) $40 miDion of 8% Bonds due May 1,2023. The sands):
g( ) pmceeds were used to redeem Eastem Edison's $55 million of 9 %%, $35 million of 10 %% and $10 million of 8 X% FMBs.
Cash and Temporary Cash investments
$^'";)"
$4,180
$4,180 I In June 1993, Eastem Edison used available cash to redeem Redeemable Preferred Stock 30,240 31,265
$5 million of 8 X% FMBs. Long-Term Debt 503,w7 521,583 In July 1993, Eastem Edison issued $40 million of 5 h% (H) LINES OF CREDTIl FMBs, proceeds of which wem used to redeem its 90 million EUA System companies maintain short-term lines of cadit
. of 97% FMBsin Septembor 1993. with various banks aggregating approximately $140 mil-Ea3 tem Edison redeemed in mid-August 1993 its $40 mil- lion. At December 31,1993, unused short-term lines of lion of 10 V% Pollution Control Revenue Bonds with the pro- credit were approximately $103 million. In accordance with i ceeds from the July issuance of $40 million of 5 %% Pollution informal agreements with the various banks, commitment
, Control Revenue Bonds. fees are requimd to maintain certain lines of credit.
In September 1993, Eastem Edison issued $8 million of 6.35% FMBs and $7 million of 4 %% FMBs. The proceeds (I) }OINTLY OWNED FACIUTIES: i At December 31,1993, in addition to the stock ownership were used to redeem $8 million of 7 %% FMBs and $7 million f 6 M%. interests discussed in Note A, Summary of Significant in October Eastern Edison used available cash to redeem $5 Accounting Policies - Jointly Owned Companies, Montaup i and Newport had direct ownership interests in the follow-million of 4 W % FMBs at maturity. )
ng electric generating facilities (dollars in thousands):
Also in October 1993, EUA Cogenex issued $50 million of w=m
- 7% Unsecured Notes. Proceeds were used to mtire all out-
$"j
% $$ u$ Y q.
standing bank loans and repay a portion of its short-term loans to EUA.
Montaup:
Q"L'" mL M $
On January 6,1994, Newport issued $7.9 million of variable Canal Unit 2 50 00 % $ 67,000 f40,142 $26,858 $873 rate Ekttric Energy Facilities Revenue Refunding Bonds due h"' N $ j'$ d$ 19$ 34$
2011. The proceeds were used to redeem Second Mortgage Miltstone Unit 3 4.01 % 1s3,938 33.491 150,447 486 Bonds of Newport in amounts of $6.0 million at 12% and $1.9 Newport:
million at 8.5% N#^"
- 4 U" l'3" 6U3 7U8 ~
29
. n.7 ~... - .. >
J
,1
. p. n c
D The foregomg amounts repmsent Montaup's and (J) FINANCIALINFORMATION BY Newport's intemst in each facility, induding nudear fuelBUSINESS SEGMENTS:
The Com Electric Business indudes results of the System's ij'^ <
where apprupriate, and are induded on the like captioned L r
lineson theConsolidatedBalanceSheet. At December 31, electric utility operat. ions of Blackstone, Eastern Edison, y 1993, Montaup's total net mvestment .m nudear fuelof the Newport and Montaup. y, Seabrook and Millstone Units amounted to $5.7 million Energy Related Business indudes results of our diversi-(i and $2.8 million, respectively. Montaup's and Newpods fied energy mlated subsidianes, EUA Cogenex, EUA shares of related operating and maintenance expenses with Ocean State and EUA Energy Investment Corporation C-respect to units mflected in the table above are induded (EUAin Energy). .
hl .
the corresponding operating expenses. Corporate results mdude the operations of EUA E
Service and EUA Parent. '
k i
Depreciation Cash Equityin Pre-Tax Subsidiary f Income and Construction Operating Operating Earnings b Taxes Amortization Expenditures Income (DollarsinThousands) Revenues ,
Year Ended )
December 31,1993
$ 84,654 5 18,443 $M,035 $ 31,928 5 1,750 l
Core Electric
$ 499,565 (3,523) 10,031 28,459 12,390 t 66,912 6,690 Energy Related
- 9 )_ _
,_. f Co ate _ _ ___
f Year Ended December 31,1992 $ 33,003 $ 21,849 $ 1,953
$ 497,810 $ 80,324 $17,869 Core Ekrtric 32,563 14,837 <
2,096 8,712 44,154 6,792 '
Energy Related
._3294)_
( _ _ .( _ 490)_ _ 1,109 _ _ _$ 55,736 1,324 _ _$ 16,790___ >
f Corporate _ _ _ . _$ _541,964 _ 7 _ _ _$ 83,822 $19,475 5 42.824
'i Total
'(,
YearEnded ll December 31,1991 $ 29,443 $ 2,011
$ 73,366 $11,743 $32339 Core Electric $ 492,855 571 8,338 27,785 8,964 J j, 29,728 5,204 Energy Related 1,082 M2 -
y 130 50 '
Corporate
$ 57,570 $10,975
$ 78,700 $12,3M $ 41,759 Total $ 522,583 December 31, 1992 e i 1993 y
Total Plant and OtherInvestments $ 723,6M $ 727,623 .'
Core Electric 208,457 186,187 )
Energy Related 21,734 ,
20y0_
. Corporate #_ 952,891 935,544s l TotalPlant and Otherinvestments i Other Assets 188,611 219,294' J 30,104 Core Electric 43,842 ' f Energy Related _1
_ _ _ _ 17,793_, _ __ . _ __ __
_Coqmr_ ate _ _ _ _ _
_ _ _ _ _ _ _ 250,246 26 TotalOther Assets $1203,137 5,1,203,320 Total Assets 30 i
i h '
e l l (K) CoMMrfMENTS AND CONTINGENCIES: fuel starting in 1998. DOE does not expect to achieve this Nudear Powerissues: Joint owners of nudear pmjects are date. As an interim strategy, DOE is considering makmg subject to the risk that one of their number may be unable available other federal government sites to temporarily or unwilling to finance its share of the pnject's costs, thus accommodate those firms that have depleted their own jeopardizing continuation of the project. On February 28, on-site spent nudear fuel storage capacity. The DOE 1991, Gmat Bay Power Corporation (formerly known as anticipates that a permanent displ site for spent fuel EUA Power Corporation) a 12.13% owner of the Seabrook i will be ready to accept fuel for storage or disposal on or !
nudear project, filed for protection under Chapter 11 of the before 2010. However, the NRC, which must license the ;
Federal Bankruptcy Code. On Afarch 5,1993, the United site, has stated only that a permanent repository will States Bankruptcy Court for the District of New Hampshire become available by the year 2025. Millstone Unit 3 man-(Bankmptcy Court) confirmed the fifth amended plan of agement has indicated it has sufhcient on-site storage reorganization as filed by the officially appointed commit- facilities to accommodate high level wastes and spent fuel !
tee representing the holders of Great Bay Power's out- for the projected life of the unit. No significant expendi- !
standing secured notes (Bondholders Committee). The tums am pmjected for the fomseeable futum. At Seabrook l plan was subject to securing a financing facility in an there is on-site storage capacity which, with nummal capi-amount sufficient to cover projected cash operating short- tal expenditums, should be sufficient for twenty years, or falls through December 1995.
to the year 2010. No near-term capital expenditures are On February 2,1994, the Ikmdholders Committee anticipated to accommodate an increase in storage announced that it accepted a plan of reorganization financ- mquirements after 2010. hiontaup is requind to pay a fee ing proposal which panided for a $35 mil! ion equity based on its share of the generation from hiillstone Unit 3 investment in exchange for 60% of the equity of the reorga- and Seabrook Unit 1. Montaup is recovering these fees i I nized Great Bay Power. A modified plan of reorganization thmugh its fueladjustment clause.
filed by the Bondholders Committee with the Bankruptcy Also, hiontaup is recovering through rates its share of Court awaits approval. The modified plan also mquires the estimated decommissioning costs for Millstone Unit 3 approval of various regulatory agencies including the and Seabrook Unit 1. Montaup's share of the current esti-Nudear Regulatory Commission (NRC). mate of total costs to decommission Millstone Unit 3 is In addition to its 2.9% ownership interest in Seabrook 515.1 million in 1993 dollars, and Seabrook Unit 1 is $10.6 Unit 1, Montaup also has a 2.9% ownership interest in million in 1993 dollars. These figures are based on studies Seabank Unit 2. On November 6,1986, the joint owners of performed for the lead owners of the plants. Montaup Seabmok, recognizing that Seabrook Unit 2 had been can- also pays into decommissioning reserves pursuant to con-celled, voted to dispose of the Unit. Plans regarding dispo- tractual arrangements with other nudear generating facil-sition of Seabrook Unit 2 are still under consideration, but ities in which it has an equity ownership interest or life of have not been finalized and approved. Montaup is unable, the unit entitlement. Such expenses are currently recover-therefore, to estimate the costs for which it would be able through rates.
responsible in connection with the disposition of Seabrook Shareholder Proceeding: The Superior Court of The Unit 2. Montaup must pay monthly charges with respect Commonwealth of Massachusetts, in approving a settle-to Seabrook Unit 2 in order to preserve and protect its com- ment agreement in connection with a dass action suit ponents and various warranties. These costs are currently filed on behalf of certain EUA shareholders in Superior being recovemd in rates. Court naming EUA and certain curent and former Nuclear Fuel Disposal and Nuclear Plant Trustees of EUA as defendants, permitted a former share-Decommissioning Costs: The Nudear Waste Polig Act of holder of approximately 540,000 shams to exdude hunself 1982 (NWPA) establishes that the federal govemment is from the plaintiff class. On February 11,1992 that former msponsible for the disposal of spent nudear fuel and oblig- shamholder filed a suit against EUA and three officers of ates the Department of Energy (DOE) to design, license, EUA in the Federal District Court of Massachusetts alkp build and operate a permanent repositog for high level ing fraudulent and negligent misrepresentations and vios radioactive wastes and spent nudear fuel. NWPA specifies lations of Rule 10b-5 under the Securities Exchange Act in that DOE provide for the disposal of the waste and spent connection with statements made regarding the business 31
_ a.
i j
e The following table sets forth the actuarial present valu prospects for EUA Power and the portion of EUA's com-of benefit obligations and funded status a't December 31, mon share dividends attributable to AFUDC from EUA L Power. The suit has been dismissed with respect to two of _1993,1992 and 1991(in thousands):
the office:3. EUA and the officer named in the Federal 1W3 IW2 1991 .
District Court suit deny all allegations of liability and all of Accumulated benefitobligations 5 101,279 5 81,466 5 73,401 the claims and contentions alleged by the former share- vested 358 291 256 ,
holder, and are vigorously contesting the suit. Discovery Non-vested Total 5 101,637 5 81,757 5 73.660 ;
has proceeded through 1993 and the deadline for discov- '
projated benefit obligations 5 (121,082) 5(99,862) 5 (90379) ery has been extended until April 30,1994. EUA believes that the outcome of this litigation will not have a material Plan assets at fairvalue, primarily stocks and bonds 130,040 117,373 114391 t:
impact onits financialposition.
Pensions: The EUA System companies' retirement l%""*S"i2Cd "" S^i" 9) co m M l plans are non-contributory defined benefit pension plans unamortiud net f.
assets at January 1 ,_ 5,944 _ 6,383 _ 3,105 j covering substantially all of their employees. Regular plan Net pension assets 5 3,213 5 3332 5 3.123 i benefits are based on years of service and average com-pensation over the four years prior to retimment or in the i The assumptions used to determine pension costs case of the supplemental retimment plan for certain offi.
changed effective January 1,1994 to 7.25%,4.75% and [
cers of the EUA System, benefits are based on compensa.
9.50% for the discount rate, compensation increase rate and tion at retirement date. It is the EUA System's policy to
' ~
expected long-term return on assets, mspectively. These ;
fund the regular plan on a current basis in amounts deter. :
rates were used to calculate the plans funded status at mined to meet the funding standards established by the December 31,1993. j Employee Retimment income Security Act of 1974.
All benefits provided under the supplemental plan art .
Net pension (income) expense for the regular plan for '
unfunded and any payments to plan participants are made 1993,1992 and 1991 included the following components ,
by EUA. As of December 31,1993 approximately $2.1 mil-(dollarsin thousands): '
lion was induded in accrued expenses and other liabilities 1993 1992 1991
~~~
- i t&fseHed
~~
for this plan. For the years ended December 31,1993,1992 sMicec&t dunng the period 5 2,567 5 2J95 5 2,169 and 1991 expenses related to the supplemental plan were Interest cost on projected $23 million, $03 million and $0.2 million, respectively.
benefit obligations 8,761 8.050 7,408 Post-Retirement Benefits: Retired employees are enti-(18,005) (7,971) (22,510)
Actual return on assets tied to participate in health care and life insurance benefit Net amortization and deferrals 6,35 (2,683) 12.211 plans. Health care benefits are subj&t to deductibles and Net periodic penmon other limitations. Health care and life insurance benefits are expense (inmme) s 118 5 cm) 5 (722) partially funded by EUA System companies for all quali-fied employees.
Assumptions used to detennine pension costs:
8.75 % 8.75 % 8.75 % Retirement Benefits Other Than Pensions," as of January 1, I~
Discount Rate 1993. This standard establishes accounting and reporting
- @cr" ease" Rate 62% 6.00 % 6.00%
standards for such post-retimment benefits as health care tong. Term Return on Assets 10.00% 10.00% 10.00 % and life insurance. FAS106 further requires the accrual of the cost of such benefits during an employee's years of ser-vice and the mcognition of the actuarially determined total ,
post-retimment benefit obligations (Transition Obligation) , l earned by existing employees and retirees. EUA elect )
recognize the Transition Obligation over a period of 20 ,
l years, as permitted by FAS106. The resultant anmlal expense,indudingamortizationof theTransition l I
Obligation and net of capitalized amounts, was approxi-32
E
.m l
1 l I mately $8.1 million in 1993. Regulatory decisions issued in cost trend and long-term health care cost tmnd, mspx-December 1992 permit EUA's retail subsidiaries to recover tively. These assumptions were used to calculate the through rates approximately $3.5 million of this amount in funded status of Post-Retimment benefits at December 31, 1993. As a result of the December 1992 regulatory deci- 1993.
sions, EUA's retail subsidiaries established a regulatory Incmasing the assumed health care cost tmnd rate by asset of approximately $1.5 million in 1993 due to the 1% each year would increase the total post-retirement i futum mcoverability of such amounts. Montaup was benefit cost for 1993 by $1.1 million and increase the total allowed to defer FAS106-related expenses through 1995 or accumulated post-retimment benefit obligation by $10.8 until it fik d for mcovery of such amounts prior to that million.
time. Accordingly approximately $1.4 million of FAS106- Prior to 1993 the EUA System followed the " pay-as-
) related expenses were deferred by Montaup in 1993. you-go" methodology for accounting for post retirement Montaup has requested recovery of all ofits FAS106 benefits other than pensions. The costs of the benefits, expenses including amortization of deferred amounts in its which amounted to $2,367,000 in 1992 and $1,872,000 in 1994 rate application. 1991, wem charged to expense.
The total cost of post-retirement benefits other than pen- The EUA System, has also established an irrevocable sions for 1993 includes the following components external Voluntary Employee Benefit Association Trust (in thousands): Fund as required by the aforementioned regulatory deci-Iw3 sions. Centributions to the fund commenced in March service cost 5 1,337 1993 and totaled approximately $6.0 million during 1993.
Intenst cost 5883 Post-Employment Benefits: In November 1992, Actual retum on plan assets (68) FASBissued Statement No.112," Employers' Accounting Amortizationof transitionobligation 3.429
{ } for Post-employment Benefits" EUA is required to adopt Other amortizations & deferrals -net __ (60) this standard no later than January 1,1994. The estimated Total post-n t rement benefit cost 5 10,621 mpact of this standard on the El[A System is immaterial Assumptions: and therefore it is anticipated that no liability will be Discount rate 8E" mCorded.
Health can cost trend rate -near4erm 1396 Long-Term Purchased Power Contracts: The EUA
-long-term 6.25Sb System is committed under long-term purchased power Salary increase rate 6.0lfa contracts, expiring on various dates through September Rate of return on plan assets-union 8.50 %
2021, to pay demand charges whether or not energy is
__ _ --nion __ _ _ _ _ _5M mceived. Under terms in effect at December 31,1993, the Reconciliation of funded status: aggregate annual minimum commitments for such con-
_- -_ _ __ _ _ _ m3 tracts are approximately $139 million in 1994, $136 mil-lion in 1995 and 1996, $133 million in 1997, $137 million in Accumulated post-retirement benefit obligation (APDO): 1998 and will aggmgate $L6 billion for the ensuing years.
Retuas 5(38M) In addition, the EUA System is requimd to pay additional Active employees fully eligible for benef ts (15,324) amounts depending on the actual amount of energy jtheactnyemple (25,357) received under such contracts. The demand costs associ-Total 598M ated with these contracts are mflected as Purchased Power-Demand on the Consolidated Statement of
. Fair value of assets, primarily notes and bonds 3,522 Income. Such costs are recoverable through rates.
Unrnognized transition obbgation 65,147
[
Construction and Eneq;y Related Investments: '1he Unrnognized prior service cost -
5,368 EUA System's cash construction mquirements am esti-Unrecognized net loss (gain)
~
(AcNued)/.pnpaid post. .retiremen_t benefit ms_t _ _ _ _ 5. (4452)~-- mated at $M.0 million for the year 1994 end $342.7 mi!-
lion for the years 1995 through 1998. This includes esti-The assumptions used to determine post-retirement benefit mated construction expenditures of EUA Cogenex of
- costs were changed effective January 1,1994 to 7.25%, M2.4 million for 1994 and $197.5 million for the years 13.0% and 5.0% for the discount rate, near-term health care 1995 through 1998.
33
.p.
D l I In addition, energy related investments of EUA not been completed.
Cogenex are estimated to be $113 million for 1994 and As a msult of the recoverability of cleanup costs in rates aggregate $40.0 million for the years 1995 through 1998. and the uncertainty regarding both its estimated liability, Environmental Matters: The Comprehensive as well as its potential contributions fmm insurance carri-Envimnmental Response, Compensation Liability Act of ers and other responsible parties, EUA does not believe 1980, as amended by the Superfund Amendments and that the ultimate impact of the emironmental costs will be Reauthorization Act of 1986, and certain sinular state material to the EUA System or to any indisidual sub-statutes authorize various governmental authorities to sidiary and thus no loss accrual has been made.
seek court orders compelling responsible parties to take The Clean Air Act Amendments of 1990 (Clean Air Act) cleanup action at disposal sites which have been deter- cmated new regulatory programs and generally updated
}
mined by such governmental authorities to pmsent an and strengthened air pollution contmllaws. These imminent and substantial danger to the public and to the amendments will expand the mgulatory mle of the emironment because of an actual or threatened release of United States Em*ironmental Protection Agency (EPA) hazardous substances. Because of the nature of the EUA mgarding emissions from electric generating facilities and System's business, various by-products and substances a host of other sources. EUA System generating facilities are produced or handled which am classified as haz- will most probably be first affected in 1995, when EPA ,
an.lous under the mies and regulations promulgated by regulations will take effect tor facilities owned by the L
the EPA as well as state and local authorities. The EUA EUA System. Tests at Montaup's coal-fired Somerset Unit '
System generally provides for the disposal of such sub- #6 indicate it will be able to utilize lower sulfur coal than , l stances through licensed contractors, but these statutory is'already being burned to meet the 1995 air standards .
pmvisions generally impose potential joint and several with only a minimal capitalinvestment. Montaup deter-mined that it would not be economical to repair Unit #5 responsibility on the generators of the wastes for cleanup of the Somerset Station and therefore has placed it in costs. Subsidiaries of EUA have been notified with respect to a number of sites where they may be msponsi-deactivated reserve. EUA does not anticipate the impact ble for such costs, including sites where they may have fmm the Amendments to be material to the financial posi-joint and several liability with other responsible parties. It tionof theEUASystem.
is the policy of the EUA System companies to notify liabil- in April 1992, the Northeast States for Coordinated Air ity insurers and to initiate claims; at this time, however, no Use Management (NESCAUM), an environmental advi- [
claims have been filed against any insurer and EUA is sory group for eight Northeast states including Massachusetts and Rhode Island, issued recommenda-unable to pmdict whether liability, if any, will be assumed '
by, or can be enfomed against, the insurance carrier in tions for nitrogen oxide (NOx) controls for existing utility these matters. boilers required to meet the ozone non-attainment (I As of December 31,1993, the EUA System had incurred requirements of theClean Air Act. 'IheNESCAUM rec-ommendations are more restrictive than the Clean Air Act ?
costs of approximately $2.8 million in connection with these sites. Of this amount, approximately $2.7 million mquirements. The Massachusetts Department of
?
relates to Blackstone. These amounts have been financed Emironmental Management has amended its regulations I
primarily by internally generated cash. Blackstone is cur- to require that Reasonably Available ContmlTechnology t
rently amortizing substantially all of its incurred costs be implemented at all stationary sources potentially emit-over a five-year period, and mcovering those costs in ting 50 tons or mom per year of NOx. Rhode Island has p rates. not yet issued regulations to implement NOx reduction l requirements. Montaup is in the process of reviewing 1 EUA estimates that additional costs ranging from $2.0 million to $9.2 million may be incurred at these sites compliance strategies. Any compliance strategy may 7 thmugh 1995 by its subsidiaries and the other responsible mquim the implementation of additional pollution control L parties. Of this amount,approximately $8.4 million technology as early as 1995. Montaup would seek recov- [
relates to sites at which Blackstone is a potentially respon- ery of pollution control expenditures thmugh rates. , y sible party. Estimates beyond 1995 cannot be made since A number of scientific studies in the past several years site studies, which are the basis of these estimates, have have examined the possibility of health effects fmm elec-L o
34
l l tric and magnetic fields (EMF) that are found everywhere lion and $1.8 million, mspectively under a noncancelable I them is ekttricity. While some of the studies have indi- transmission facilities support agreement for yean subse-l cated there may be some association between exposure to quent to 1993.
l EMF and health effects, many studies have indicated no Othen In December 1992, Montaup commenced a direct association. In addition, the rescan-h to date has declaratory judgment action in which it sought to have not conclusively established a direct causal relationship the Massachusetts Superior Court determine its rights i
between EMF exposum and human health. Additional under the Power Purchase Agreement between it and studies, which are intended to provide a better under- Aquidneck Power Limited Partnemhip (Aquidneck).
standing of thesubject,arecontinuing. Montaup sought a declaration that the Power Purchase Some states have enacted mgulations to limit the Agmement was binding on the parties according to its strength of magnetic fields at the edge of transmission terms. Aquidneck asserted that Montaup had either an line rights-of-way. Rhode Island has enacted a statute express or implied obligation to negotiate new terms and which authorizes and dimets the Energy Facility Siting conditions to the Power Purchase Agreement.
Ikurd to establish mles and regulations goveming con- Specifically, the defendants sought to amend, through stniction of high voltage transmission lines of 69kv or negotiations, certain milestone events to which they were more. Various bills are pending in the Massachusetts bound in the Power Purchase Agreement as written.
Irgislature that would require certain disclosures about Aquidneck failed to meet the first milestone of January 1, the potential health effects of EME Management cannot 1993. Accordingly, on January 5,1993, Montaup exer-pmdict the ultimate outcome of the EMFissue. cised its rights to terminate the Power Purchase Guarantee of Financial Obligations: EUA has guaran- Agreement effectiveimmediately.
teed or entered into equity maintenance agreements in In January 1994 a counterclaim by Aquidneck claimed
{ ) connection with certain obligations ofits subsidiaries. certain breaches of the Power Purchase Agreement, EUA has guaranteed the mpayment of EUA Cogenex's induding an alleged failure on the part of Montaup to
$35 million 10.56% unsecured long-term notes due 2005 renegotiate the terms and conditions of the Power and EUA Ocean State's $38.6 million 9.59% unsecured Purchase Agreement relating to the first milestone event.
long-temi notes due 2011. In addition, EUA has entered Also in January 1994, Aquidneck sought tojoin EUA and into equity maintenance agreements in connection with EUA Senice as parties to the suit.
the issuance of EUA Senice's 10.2% Secured Notes and Aquidneck apparently claims $11 million of damages EUA Cogenex's 7.22% and 9.6% Unsecured Notes. on the theory that EUA can " avoid an approximately $11 Under the December 1992 settlement agreement with million obligation to purchase capacity and power which EUA Power, EUA maffirmed its guarantee of up to $10 it does not currently need." Aquidneck seeks treble darn-million of EUA Power's share of the decommissioning ages claiming Montaup, EUA and EUA Senice violated costs of Seabrook Unit 1 and any costs of cancellation of statelaws willfully and knowingly.
Unit 1 or Unit 2. EUA guaranteed thi3 obligation in 1990 Montaup, EUA and EUA Service intend to defend the i in order to secure the mlease to EUA Power of a $10 mil- counterclaim vigorously and believe that Aquidneck's lion fund established by EUA Power at the time EUA claims have no basis inlaw.
Power acquired its Seabrook interest. EUA has not pro-vided a mserve for this guarantee because management believes that it is unlikely that EUA will ever be requimd to honor the guarantee.
Montaup is a 3.27% equity participant in two compa-nies which own and operate transmission facilities inter-connecting New England and the Hydro Quebec system l in Canada. Montaup has guaranteed approximately $5.0 million of the outstanding debt of these two companies.
In addition, Montaup and Newport have muumum rental commitments which total approximately $14.3 mil-35
a REPORT OF MANAGEMENT REPORT OF INDEPENDENT .
ACCOUNTANTS I I The management of Eastern Utilities Associates is To the Tmstees and Shareholders of responsible for the consolidated financial statements and Eastern Utilities Associates related information induded in this annual report. The financial statements am pmpared in accordance with gen-We have audited the accompanying consolidated bal- .
ance sheets and consolidated statements of equity capital erally accepted accounting principles and indude amounts based on the best estimates and judgments of and prefermd stock and indebtedness of Eastern Utilities Associates and subsidiaries (the Company) as of management, giving appmpriate consideration to materi-December 31,1993 and 1992, and the related consolidated ality. Financial information induded elsewhere in this statements of income, retained earnings and cash flows annual report is consistent with the financial statements.
The EU A System maintains an accounting system and for each of the three years in the period ended December related internal controls which am designed to provide 31,1993. These fmancial statements are the responsibility reasonable assurances as to the mliability of financial of the Company's management. Our responsibility is to records and the protection of assets. The system's staff of express an opinion on these financial statements based on internal auditors conducts reviews to maintain the effec-our audits.
We conducted our audits in accordance with generally tiveness of internal control procedures.
Coopers & Lybrand, an independent accounting finn,is accepted auditing standards. Those standards require engaged by EUA to audit and express an opinion on our that we plan and perform the audit to obtain reasonable financial statements. Their audit indvdes a resiew of assurance about whether the financial statements are freeinternal contmls to the extent requind by generally of material misstatement. An audit indudes exammmg, on a test basis, evidence supporting the amounts and dis- accepted auditing standards for such audit.
The Audit Committee of the Board of Trustees, which dosures in the financial statements. An audit also consists solely of outside Trustees, meets with manage-includes assessing the accounting principles used and sig-ment,intemal auditors and Coopers & Lybrand to discuss nificant estimates made by management, as well as evalu-auditing, intemal controls and financial reporting matters. ( )
ating the overall financial statements presentation. We The internal auditors and Coopers & Lybrand have free believe that our audits provide a reasonable basis for our access to the Audit Committee without management pre-opinion.
sent.
In our opinion, the consolidated financial statements ,
referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31,1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31,1993 in conformi-ty with generally accepted accounting principles.
+
c L
Boston, Massachusetts March 4,1994 I
l h u
36
ae 1
QUARTERLY FINANCIAL AND COMMON SHARE INFORMATION (UNAUDITED) l
< > l (Thousands of Dollars, Except Per Share and Share Price Amounts) c=oiuae v $>.YrY DJiw[ !
MDu [Dfi i[A t 7mgs 'w"I$ D'" ne tow FOR TIIE QUARTERS ENDED 1993: l 1
December 31 $ 146,941 $21,372 $ 10,282 $ 9,652 $ 0.51 $036 29X 26M September 30 156,238 21,439 14,719 13,913 0.74 036 29% 28%
June 30 125,596 12,8 % 9,999 9,119 0.49 0.36 2SX 25%
March 31 137,702 19,699 13,241 12,247 0.71 034 27% 23%
FOR TIIE QUARTERS ENDED 1992:
December 31 $ 139,976 $ 9,703" $ 8,177 $ 7,183 $0.42 5034 25X 22M September 30 134 512 17,392 11,087 10,090 0.59 034 244 22X June 30 126,353 16,593 7,439 6,414 0.38 034 23M 20%
March 31 141,093 20,659 11,447 10,424 0.62 034 21X 20%
(1) Restated to reflect conschdation of EUA Cogenex partnerships pretiously reflectalas equity intatnumts.
(2) The sum of the quarterly amounts may not equal unnual carnings pr awrage common share due to change in shares outstanding.
(3) Op ratmg iacomefor thefourth quarter of1992 uns impaded by the recognition of certain non-recurring oprating expmses related t storm damage costs not recovered in rates and legal expmses related to fitigatson actintin. A correspmding increuse m OtherIncome (Datuctions1 ing from the reduction of pretkusly estabbshat resertafor matters in litigation, thefawrable resolution ofuhich uns ratchal in 1992, of(se l k l
}
37
e -a*
-,-eW .
.. c r
i CONSOLIDATED OPERATING AND FINANCIAL STATISTICS * .
1991 1990 1989 1988 1983 I k Years Ended Decemtvr31, 1993 1992 ENERGY GENERATED AND PURCllASED(mibrsofkunk .
Generated 1,190 l 1,123 319 936 957 985 1296
-by Somerset Station 1,019
-by Nuclear Units 1,033 1,050 1,109 1,635 956 472 l 1,724 2,053 1,793 2,075 1,836 1,809 2,105 ;
- by Jointly-Owned Units 884 452 602 793 863 753 836 ;
-byLifeof theUnitContracts 1 1 1 7
-by Newport 23 (285) 157 191 298 262 Interchange with NEPOOL 360 1,396 1,489 1,006 380 410 495 ! 168 Purchased Power- Unit Power 4,900
{ 5,520 6,531 6,180 5,851 5,835 4201 I TotalGenerated and Purchased OPERATING REVENUES (thousandsk $ 127,883 . $ 1N,101
$189,470 176,538 $ 178,812 $ 156,883 $141254 Residential 119,362 l 89,225 170,0M 171,732 149,514 131,306 Commerdal 179,145 81,445 76,946 78,273 69,885 70,852 69,516 ( 58,901 Industrial 19,625 23,660 i 16212 5,098 5,103 4,828 4,317 Other Electric Utilities 11,M2 10,290 ! 13,463 21,790 21,314 17,984 22,748 Other 476,948 449,'935 (55,529 403, 5 7 35,67f750,711 l 5i,502
~TotaiPrimary5ald Refe~nu~ei 20,548 22,617 47,875 41225 43,670 46,373 19,518 ;
Unit Contracts 8,370 3,909 i 66,912 44,1M 29,729 18,668 Non-Electric
- 5 429,422 5 374,138 i $ 302,450 5 566,477 M1,964 5 522,583 $ 465,685 TotalOperaiing Revenues 1
ENERGY SALES (millims ofh*t 1,412 ! 1,197 {
Residential 1,624 1,575 1,579 1,531 1,416 )
1,704 1,7N 1,689 1,623 1,497 1,424 l 1,103 Commercial 816 785 777 834 832 869 1 810 l Industrial 386 68 66 130 389 377 Other Electric Utilities 61 121 28 28 34 ,
Other - -. -
147 .- 147.. - 154 249 234 220 201 247 241 280 Losses and Company Use 4,599 4,520 4,545 4,488 4,3% 4330 ' 3,731 p TotalSystem Requirements 470 Unit Contracts 921 2,011 1,635 1,363 1,439 570 . l 5,520 6,531 6,180 5,851 5,835 4,900 l 4201 TotalEnergy Sales I
NUMBER OF CUSTOMERS: 224,933 ! 209,678 i 259,654 257,026 255,620 254,928 227,440 Residential 21,605 30,805 32,851 32,745 32,836 27,890 26,611 f c Commenial 1,189 Industrial 1,294 1,197 1,172 1,175 1,222 1217 l 15 12 14 13 i 12 Other Electric Utilities 12 15 Other 34 34 M 34 29 29 l 31 I 291,799 291,123 289,586 288,985 256,595 252,803 i 232,515 l Total Customers Average AnnualRevenue ,
4%
687 699 636 621 569 per ResidentialCustomer(dollars) 730 Average AnnualUse per Residential (
6,226 5,708 Customer (hch) 6,2M 6,128 6,177 6,221 6277 ,.
[.
i AVERAGE REVENUE PER KWII(centsk l [
11.67 11.21 1132 10.25 9.98 9.06 ! 8.70 Residential Commercial 10.51 9.98 10.17 9.21 8 77 838 l 8.09 { g 9.98 9.80 10.07 838 8.52 8.00 ' 7.27 Industrial (1lincludes financial and operating statistics tiw Neuport Electric Corpration fnnn Arni 1,1900 and EUA Pouvr Corporation (' through D time EUA Power Corporatwn uns deconsoldatedfiwfmancial reprtmg purpm (2) 1992 and 1991 amounts restated to retlect consoldation of EUA Cogenex partnerships previously reflected as equity investments. f 38
. . 1 1
l CONSOLIDATED OPERATING AND FINANCIAL STATISTICSm ;
{ h Years Endd Ehemirr31, 1993 1992 1991 1990 1989 1988 1983 CAPITALIZATION Ohousards):
13onds- Net $ 300,389 306,898 $ M6,146 $ 363,566 $ 306,500 $294,500 $ 226219 Other long-Term Debt - Net 196,427 - 156,060 142,306 80,029 299,579 260,061 30,179 Totallong-Teim Debi-Net ~496,816 ~462,958 488,452' 443,$95 606,079 554,5WI2%398 !
Preferred Stock - Net 31,953 44,M6 45,830 50,380 49,691 49,693 j 49234
_ Common EquityE____ _ 333,165
. _266_,855_.
248,598 237,393 _ 375,016 301,759 172,327 TotalCapitalization $861,934 _ 774,159 $ 782,880 $ 731,368 $ 1,030,786 $906,016 i $477,959 CAPITALIZATION RATIOS (%)
Long-Term Debt 57 60 62 l
61 59 61 54 1
Preferred Stock Common Equity 39 4 6 6 7 5 6l 10 34 32 32 36 33 36
/ COMMON SHARE DATA:
Earnings (Loss)per Average Common Share ($) 2.44 2.00 158 (8.18)(2) 2.95 2.85 ; 2.80 Dividends perShare($) 1.42 136 1.45 2575 2.475 2375 ! 1.79 Payout (%) 58.2 68.0 91.8 (31 5) 83.9 833 i 63.9 AverageCommon SharesOutstanding 18,391,147 17,039,224 16,608,090 15,917255 13,877,091 13,167,915 ,l 9,062,81 TotalCommon Shares Outstanding 19,032,598 17,237,788 16,831,062 16,352,708 13,371252 15262237 10,192,301 Book Value perShare($) 17.50 15.48 14.77 2457 14.52 2257 16.91 Percent Earned On Average Common Equity 15.0 13.2 10.8 (42.5) 12.1 12.8 162 Market Price ($):
g High 29% 25% 25 41M 41 % 33 % 18%
low 23% 20X 15% 20 % 30 % 21 % 13%
Year End 28 244 20 % 31 M ,i 23 % 41 % 14%
i MISCELLANEOUS ($ in thousands):
Total Construction Expenditures ($P 63,134 58.089 60,174 133,629 188,599 151,198 ' 103,309 Cash Construction Expenditures ($P 60,767 55,736 57,570 59,929 75,861 65,307 78,912 Internally Generated Funds ($) 84,290 53,256 63,681 35,024(4) 32,7M 38,894 27,258 Internally Generated Funds as a % of Cash Construction (%) 138.7 126.2 123.0 58.4(4) 43.2 59.6 34 5 Installed Capability- MW 1,256m 1,325 1,349 1,359 1,169 1,090 931 Less: Unit Contract Sales- MW 85 85 216 86 11 6 98 75
~SystemCapabilitpTMW ~~ 1,1 71 --1,240 1,133~1273~ 1,053 System Peak Lkmand -MW 854 849 "992] 856 879 850 831 813 ' 7tX)
Reserve Margin (%) 37.1 46.1 28.9 49.8 26.7 22.0 22 3 j System Load Factor (%) 61.5 57.5 59.0 603 60.4 60.8 60.8 Soun es of Energy (%h l Nuclear l 34.0 M.1 31 3 37.8 26.8 182 23.8 I Coal 5.4 18.6 21.0 22.6 28.9 27.0 163 Oil 283 12.7 26.9 37.9 44 3 54.8 59.9 Gas 26.0 293 172 1.7 l
l Other 63 53 3.6 Cost of Fuel (Mills per kwhh l Nuclear 7.5 7.7 87 83 7.6 82
)
65 l Coal 24.1 21.2 21.4 21 2 20.1 20.5 21.6 Oil 25.5 26.0 18.9 263 24.7 22.6 415 Cas 15.1 13.0 16.2 30.6 AllFuels Combined 15.5 14.8 15.7 18.4 18.8 19.4 l 30.7 (1)Indudes financialand ofcrating statistics for Neu port Eledric Coryvration from Apr:I 1,1990 and EUA Pouvr Convration through Decembe time EU.A Power Convration uns deconsolidated for fmancial rqvrtmg purposes. <
(2) After additional charges to 1990 earnings.
(3) 1992 and 1991 amounts restated to nfkct consohdaaon of EUA Cogenex yurtnerships previomly refktd as equity imestments.
(4) Exchdes EUA Pouvr Corporation's cash interest guyments.
(5I E.tchda the 69 M WSomerset Station Unit #5 uhich uns plac& in daictiwtal resent on January 25,1994.
y l
a SHAREHOLDER INFORMATION -
Shams of Eastem Utilities Associates are listed on the common stock. Participants in the Plan receive a 5% dis-New York and Pacific Stock Exchanges, under the ticker count on shams purchased with reinvested disidends.
symbol EUA. As of February 1,1944, them were 13,274 Participants also may make cash payrnents to purchase common shareholders of mcord. additional shams with no discount. You may obtain com-FORM 10-K Pl ete details by writing to:
A copy of EUA's 1993 Annual Report on Form 10-K filed William E O'Connor, Secretary with the Securities and Exchange Commission is available Eastern Utihties Associates to shamholders without charge by writing to us. Post Office Box 2333 Boston, MA 02107 ANNUAL MEETING The 1994 Annual Meeting of Shareholders will be held on DUPLICATE MAILINGS Monday, May 16,1994, at 9 30 a.m.,in the Duplicate mailings are costly. Shamholders may be Enterprise Room,5th Floor mceiving duplicate copies of annual and quarterly reports State Street Bank and Tmst Company due to multiple stock accounts in the same household. To 225 Franklin Stmet eliminate additional mailings of these reports, please Ikiston. Massachusetts write to us and enclose label (s) or label information fmm REGISTRAR, TRANSFER AGENT the dup licate mports. Dividend checks and proxy materi-I "* *" f*"" *"' I " * """"" "*'d -
AND DIVIDEND DISBURSING AGENT FOR EUA is mquimd by law to cmate a separate account for COMMON AND PREFERRED SHARES each name when stock is held m similar but diffemnt Shamholder Services -Investor Relations names (e.gd n A m ,J. A. Smith, John A.and Mary MailSto 450209 The First National B.mk of Boston
'd se mnuddompany forinsk-
"" "* """ #
- P #""
Post Office Box M4 Ik>ston, MA 02102-0644 QUARTERLY REPORT TO SHAREHOLDERS Benef cial wners f urstockswhosesharesammgis-LOST OR STOLEN STOCK CERTIFICATES
"~ n mes other than their own (e.g., a broker or bank U your stock certificate is lost, destroyed or stolen, you n minee) may btain copies of our Quarterly Reports to should notify the transfer agent immediately so a "stop
" """ "I *E * *# 8 ""
transfer" order can be placed on the missing certificate.
mquest to our General Offices address to the attention of
.the transfer agent then will send you the requimd docu~
the Investor Relations Department. Note that the Annual ments to obtain a replacement certificate.
Report will continue to be mailed to beneficial owners DIVIDENDS directly by their bank orbroker.
Schedule of anticipated record and payment dates for 1994 disidends on EUA Lommon Shares: FINANCIAL COMMUNITY INQUIRIES Institutional investors and securities analysts should Record Payment dimet inquiries to:
February 1 Febmary 15 Clifford J. Hebert,Jr., Treasurer May 2 May 16 Eastem Utilities Associates August 1 August 15 Post Office Box 2333 November 1 November 15 Boston,MA 02107 REPLACEMENT OF DIVIDEND CHECKS (617)357-9590 If you do not receive your dividend check within ten busi-The name Eastern Utilities Associates is the designation ness days after the dividend payment date, or if your of the Trustees for the time being under a Declaration of check is lost, destroyed or stolen, you should notify the
.lrust dated April 2,1928, as amended. All persons deal-disbursing agent m wnting for a mplacement.
ing with Eastern Utihties Associates must look solely to DIVIDEND REINVESTMENT AND COMMON the trust pmperty for the enforcement of any claims -
SHARE PURCHASE PLAN against Eastern Utilities Associates, as neither the A Dividend Reinvestment and Common Share Purchase Trustees, Officers nor Shareholders assume any personal Plan is available to all ngistemd shareholders and EUA liability for obligations entemd into on behalf of Eastem.
System company employees. It is a simple and conve- Utilities Associates.
nient method of purchasing additional shares of EUA 40 .
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