ML20076E703
| ML20076E703 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 02/15/1983 |
| From: | Greenquist T, Haskell R BANGOR HYDRO-ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML20076E650 | List: |
| References | |
| NUDOCS 8308240644 | |
| Download: ML20076E703 (37) | |
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, Bangw H ydr o Electm Company is the wc ond Wst acti n ut o ', m he j . - @.D THE COMPANY
-k ' g, 5-(+. 4 9.g l, L itserves a l t was o,cor por ami m 1924. r esult mq bom the comtunation ut sever al smalier rrq.iuial uimpanms i opuutam of about 190.000 Lhout / /,000 customersi in an area ericominassuiq apor o lmately 4,8% s auar e . ., '
. , g.f.1 i ~ ' r m+s m easter n and east c oastal Maine The Company is a rm mber of the New E nglatut Pow P< d and l g {pQ m een ,,nnected with other New E ngland utiht s", to the south and a,t h the New Bi unswa L E M t r u. Powm . -- % / Mn N <,D ~
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1982/ YEAR AT A GLANCE 1982 1981 ( D ur ust Opm atmq Revenue t000i S 80,342 5 80.637 i4- i 'y ' WY 'd,..~M,A Qs d . p' " n g . S 70,648 $ 72.919 (31 g ,.s "J'. u. g v (Jumatmq E x penses 1000) , . 7 E mmoqs Apphcable to Common Stock (000) S 5,677 $ 3,191 / / 9% ,1 ],a 's M...".-",3. 0 V "
$ 41,794 31,966 30 73 " .1 i; U.. .' . . W ./ :.5' Common Stock Equity (000) S 3 S 18,918 29.039 (34 9) i
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Constructmn E xpenditures, excludmq AF DC (000) PLnt lovestment (Net of accumulated depreciation) (000) S 125,166 S S 103.740 20 /5 Q'bs m
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S*s (000 KWH) Non h ter rupnble (Fong 1,091,E94 1.063.84/ 261 5.I b k'u$.[ . 169,275 204.906 ( 17.4' ) .- Interruptihie Total 1,260,869 1.268.753 ( 6"a .' MM ,9(Y V,<
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.c A x Customers yem end 76,787 76.062 101 . t,-$ D .
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- 67,341 66.606 1.11 . ./
Resid .ntial Customers averaqo Numbm of Common Stockholders year end 9,446 . - _ _ _ -8.263 --__14-3_" s a[N y.; .& Number of Common Shares outstanding year end 3,416,609 2.608,774 31.0% .y Y?pb._b. .g.m ^g$g s P.. Numoer of Common Shares outstanding average 2,842,862 2.226.718 27 7' (yf d 'M %.h Divalends per Share Declared on Cornmon Stock
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l [54 S 1.52 1 31 g. .. .h.(c';[y(\. [. Earriings per Shares of Common Stock $ 2.00 S 1.43 39 9 % PT.. C 7 0f # 3
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t .,,T g , 3 ., CONTENTS M d.1IQ.N[ F . '
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1982 Year at a Glance 1 Statements of locome 21 'Q. k s r9 ..,.M
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3 Balance Sheets . 22 Letter ta the Stockholders 24 itjf y (*.,' . 2-l*ri:$ %, Du ettor s, Of f,cer s, Managers 4 Statements of Retamed Ear mngs. 5 Statements of Capitahration . 24 : .t. . ', ._ t, '; Guest Commentary O pe r at io n s 6 Staten,ents of Sources of Funds ' / : 7. 3 ]s . .M Fmoncmq 7 for Plant Additions. 25 .p.l p . - D7 .
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. g - ( Q ?. 'g g; 8 Notes to Financiai Statements . 26 Renulator y Activity 12 Auditor s' Repor t . 3R Q.,1J ,, " ,r 7 Power Supply Planning Conservation Activities 14 16 The Revenue Donar Stockholders. Stock Pnces, and Dividends 36 36 7 / . b - ?,h,N [h. :.
Doector s. Of ficers. Employees s# ' 16 Six / ear Statistical Summary 37 ..- Income Tax Status of Dividends . System Map 17 XD,%
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Management's Discussion and Analysis of i F mancial Condition and Results of Oper ations 18 k. m .1. = . 0 L.11 h:n,;g_ , e Q.;9 ;;g . 7
.,, .;>', y ih THE ANNUAL MEETING The annual meeting of stockholders of the Company will be held on Tues YO$QtN,C; , ' m.i
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.' M day. Apol 26,1983 at 10.00 A.M. at the Bangor Civic Center.100 Dutton Street. Bangor. Mame -
-: . . ..~ r STOCK TRANSFER AGENTS Nor theast Bank and Trust Company. 2 State Stro t. Bangm. Mmne 7 . V.[.g ]U[., -
s. 04401, Morgan Guaranty Trust Company. 30 West Broadway New Yor k. New Yor k 10015 (common stock .A. . J.?, .
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- y. 1 REGISTRARS OF STOCK The Meinil Trust Company. E xchance Street. Bangn, . Mame 04401 , y , .j, Br adford Tr ust Company, F or t Lee E xecutive Par k. One E xecutive Dove. Fio Lem N J. 07024 (common 9h g f.f . ' 'Nj, stoc k oniv).
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[g,k FORM 10-K The Company wm provide without charge to any stockhnider a copy of For m 10 K for the %
'p-vear 1982 as f ded with the Secuiit es and E xchange Commission R eq u m t s +nrcono s nf th . F mm 10 K should he do ected to Bangm Hydro Electric Compant Atto tmn Awstant To asurm 33 State Sin et Bangor. Mame 04401 (gg%l~",;.d.y{f g, ::/
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q The Seabrook nuclear units, in During the year we fost a good Good news for the Company which the Company has a 2.17% friend and valued advisor. The came early in the year when the ownership interest, continue to untimely death in December of Maine Public Utilities Commis- John Grant, Chairman of Merrill sion allowed an increase in the make the news. In November the lead participant, Public Ser- Bankshares Company and a di-Company's retail rates of $12 rector of the Company since vice Company of New Hamp-million. The rate order allowed 1973, was a loss to the commun-shire, announced higher cost a 16.4% rate of return on the ity and the many business in-estimates and a revised ccmple-common shareholders' invest. terests he served. His p!easant ment, and provided for in- tion schedule. The joint owners have had several meetings since nature and good judgment will creased cash flow and a recog-that announcement to study be missed by all of us. nition of the impact of con- 6 the revised estimates and their The remainder of this annual tinuinginflation. The results -> impact on the project and on report contains more detail of are clearly demonstrated in our the participants. In an effcst the items we have discussed as 1982 earnings per common share of $2.00, compared to tile to insure confidence in the new well as other items of irterest to 1981 earnings of $1.43. estimates, an independent con- shareholders. We wish to thank our shareholders for their sug-Current economic conditions sultant has been retained to con-have adversely impacted our in- duct a review which is ongoing gestions and support during the e at this time. year and look forward to serv-dustrial kilowatt hour sales. The Our Company needs additional ing you for the ensuing year. paper industry, a mainsta/ i n the local economy, is feeling the generating capacity beginning in Respectfully submitted, ef fects of national economic 1984. For the short and inter. conditions. Unemployment mediate term, that requirement rates in Maine are below the can be met by purchased power b o-national average but are still contracts, but for the long term R. N. Haskell Chairman of the Board 7 high. These and other factors our interest in Seabrook is neces- i have combined to hold down sary to meet some of that need. our sales, but if the general econ- Much has been said about the escalating cost of the project,
/ uh M omy improves, and there are in- T. A. Greenquis dications it will, we look for- but despite these increases Sea- President ward to reasonably good oper- brook's costs still compare fav-ating results for 1983. orably with other sources that '
We were not very active in the were considered, and Seabrook long-term financial markets dur- enjoys the additional advantage ing 1982 but plan to be more in that its progress has been sub. February 15,1983 active in 1983. The Company stantial. It is not just a hypo-was unable to issue first mort- thetical alternative. gage bonds during 1982 due to in November we again faced a interest coverage restrictions but referendum to shut down the in September we successfully Maine Yankee Atomic Power issued and sold 750,000 shares Company plant. For the second of new common stock. To date time in four years the voters in in 1983 we have raised $5 million the State of Maine turned down through the private placement a proposal to close the plant. of a new series of preferred Hopefully the issue has been re-stock, and later on in the year solved for at least the immediate we plan long-term debt and com- future. 1 mon stock issues. i 3
75 M~
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M M-3 4Md-BOARD OF DIRECTORS William C. Bullock, Jr. Bangor, Maine Chairman of the Board and President, Merrill Bankshares Company k George D. Carlisle 365 N Bangor, Maine - Chairman, Prentiss & Carlisle Company, Inc. (timberland management) Thomas A. Greenquist 3 Brewer, Maine President of the Company Robert N. Haskell @ Bangor, Maine Chairman of the Board of the Company J-John T. Maines Holden, Maine Retired Paper Industry Executive , James G. Sargent Hampden, Maine President, H.E. Sargent, Inc. (construction) i Earle R. Webster _4 Bangor, Maine- Retired Executive of the Company '% w OFFICERS A Robert N. Haskell Chairman of the Board Tal Thomas A. Greenquist M President j Gerald F. Ha t m. Vice President-Engineering M John P. O'Sullivan Vice President and Treasurer Q" ~ Robert S. Briggs Vice President and General Counsel, Clerk of the Company Paul A. LeBlanc 6 N Vice President-Administration Carroll R. Lee @ Vice President-Power Supply and Planning Carroll A. Brochu Assistant Treasurer M W5 DIVISION MANAGERS Robert G. Thomas James W. Logan Bangor Machias Barrett O. Young mE Bar Harbor Gary W. Brasslett Miliinocket 'E _ Edward L. Cameron Merle O. Boyer Z-Ellsworth Milo "E Mh Charles T. Dolan Lincoln r
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in Memoriam "-- John Grant, a director of the Company since a-1973, died unexpectedly on December 5,1982, tutions. He was active on the boards of several other businesses, and contributed much of his 31 Mr. Grant was Chairman of the Board of Merrill time to charitable and public service organiza-7g_ Bankshares Company and The Merrill Trust Com- tions. He was a valuable source of experience, pany, leading his bank to its present status as one q insight and advice, and his services to the Com- _- E - of New England's most successful financial insti- pany will be greatly missed. 3; I 4 NP J E EP'
i j Guest Commentary: Richard C. Hill 1 4; This year the Company is introducing a new item in its Annual Report - a guest h- column for comment on energy matters or other timely issues.
.'P This year's commentator is Richard C. Hill, Professor of Mechanical Engineering at the University of Maine in Orono. Prof. Hill has been with the University since
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, p 1946, and has for many years been active in research on various energy projects.
. . He is credited with the design of an ef ficient, small scale wood furnace which as 7, now being marketed commercially, and he has been active in the design of solar
'N buildmgs in Maine. He is called upon as a consultant on a variety of energy issues by private firms and public agencies in Maine and elsewhere.
Given the present relative stability, or even the ex- about as much as a gallon of home heating oil. Any pectation of declines, in oil prices and the widely held active solar system that makes a significant contribu-percept on that some form of alternative energy source, tion to space heating must therefore be massive, and : especially solar, will be available, many Americans there is little hope that massive systems can be sub-take comfort in the belief that our future energy con- stantially reduced in cost. Commercial solar collectors sumption pattern will be pretty much unchanged from now cost about $60 per square foot, installed and net that to which we have become accustomed. of tax benefits, while a gallon of oil costs perhaps This comfort is certainly misplaced. $1.00, which suggests an unacceptably long payback First, a closer look at the petre!eum situation: To on the solar investment. spur production of domestic oil and gas the U.S. has Solar domestic hot water, although more attractive (1) opened the Alaska reserve, (2) doubled the annual than solar space heating, is still hard to justify at cur-rate of drill;ng now at some 70,000 miles per year, rent costs. At an estimated $2000 net cost (after . and (3) decontrolled the price of oil, in spite of these tax benefits), a solar system would provide about one-efforts, the production of domestic crude is less now half of a typical residential wster heating requirernent. than it was in 1972, if a typical Bangor Hydro water heating cu<.tomer now Oil imports have been very sensitive to tha total de. spends about $400 per year for electric hot water, the mand for oil. In 1978 we imported nearly one-half of $2000 investment to save S200 per year is still not, the oil we consuraed. Now we import about one- for most, a " rush out and buy" opportunity. third of the oil we consume. This reduction, how- Solar energy for electric power generation, along the ever, is not the result of increased domestic produc- lines of the U S. Department of Energy's " power tion. Rather, the drop in imports is the result of a tower" (130 acres of mirrors focused on a steam boil-decrease in domestic demand - from 19 million er), seems to have possibilities for utilities in sunny barrels per day to just over 15 now, areas with high air conditioning loads. This is not This decrease has been the result of conservation, much help to us in the Northeast. conversion to alternate energies, and the business re- Wood, used in a number of ways as an energy re-cession. A similar pattern of reduced oil consumption source, seems to have particularly attractive economic is evident worldwide. Consequently, world oi! prices advantages. However, the problems of safety, incon-have fallen, OPEC is in disarray, and we are enjoyin9 venience, air pollution, initial investment, and con-a respite from the spiralling rise in petroleum prices, tinuation of an inexpensive source of supply heve yet For us to continue to enjoy this benefit, however, at to be faced. On the topic of conversion to wood, one least four conditions must prevail: (1) stability in the skeptic commented,"The way you guys go about Middle East;(2) continuation of the business reces- burning wood, you must think it grows on trees." sion;(3) a timely implementation of solutions to the Our locale does not have satisfactory wind charac-environmental problems of using coal as a fuel; and teristics to make the installation of wind conversion (4) no Soviet intervention in critical energy supplies. technology an attractive option. Other areas may be
~~
It is folly to assume that we can rely upon the exis- more conducive to wind power, but at an elevation of tence or maintenance of these conditions for any 30 feet, the average wind energy potential in the c .; ; c, a significant length of time. Bangor area is about 100 watts per square meter of f.Y;,9 Second, should the public be confident in banking exposure to the wind, and at 160 feet, about 180 fe $ on availability of solar energy and other alternatives? watts. Even a good wind energy conversion system J.T .' Jc.i
- Solar energy as a substitute for our present methods generates electricity from the wind at only about 25% E9, ' '
of home heating first comes to mind. Aside from efficiency, so perhaps when the wind is blowing in y' %; passive solar construction, which is really only a viable our area one could power one or two medium size u - A option for those able to af ford new construction, the sun's rays would have to be used as an active energy lightbulbs for each square meter of wind harnessei The history of energy development in the United [d) gg source, to heat water or to produce electricity through States began with wood, then progressed to coal, oil np solar collectors. Using even the best equipment, a and natural gas. Each step brought us cleaner, cheaper, he" 1. solar collector utilized during the heating season in more convenient energy. We are now at the end of 7%; our local area could capture only enough energy per that line. We will not simply be replacing our oil ,y / square foot of collector to power a 4 to 8 watt light burners with solar panels and continuing on in the u"7 J bulb - about the size of a Christmas tree light. This future as we have in the past. Without doubt, the MJ d is a dilute energy source indeed. Data collected by amount of energy expended to produce our GNP will C,). g the U.S. Department of Energy indicates that the use- go down, but the percentage of our GNP devoted to 2l3.y fut energy produced is about 100,000 Btu's each heat- the cost of energy will rise. Stated another way, we . 7" ing season for each square foot of solar collector - will use less and pay more for it. 3 Q *; 5 gg :yy (
l, Earnings Improved
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in omc a ,- t <g a" o e," n + i AF oc i th. sur-n.. n t o+ H i 'a' s t a o mo t s H n u a.- 616.144 ui the s .qhted Iurane T h. < a o t ., +11 + r ia n < le t + : al" ' a i the C(m4'on'* , w ,aqr n, m n,, , t .,n.o , o u t < , o; , , t ao aco~o n . t h, ' s ' a on. a .on- an u;s h n 1982 . e r e < i r. t < > f t h e gnar<t ,p u j ' h r i >" t"' S2 00 p"r i < annu ni shar e i <>m r eu r 'mt<,.,the dri n e pared to $143 om < onunon 4 .aw n h- a th. w et<nu. KWH Sales Decline Slightly shar e m 1981. T h" M PU(' f r, plai m l - +'a.. .
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a r . u n d ,. r iJLotus m < r. t I die i J i (l*' r I3 <l't jN t '( l i f l rl)4 if t ,, { {) , nia at n y th. . a t h. , i < o i s, r v a (le f tll f1 a ! s t.* f .'( ! r a r i < > f t h ( t.<!t r th. S',i t . r ii i i t i f t.rel, Th. 4 o i< p r i y < i t t h. ar e a f ()r r f r Irl f . slltifis. " 1() th irit l,, , , , , , ,, , , , , , , , , , , , , , , , , ,,,7 i ;t ' ' l l fa ,1 f t i V i t . ( b f if l( fl( I lu i; enuq 1 ,rt ca r ri nqs, ri r iim i i iub atio iJ h """ ""' " "o r y t h e eul., (n a e Se p t -n me r th. B, rini od {)r.< (,, t a 'il h r ' ( a s ,1 l u ts t( 1 Ili s ,9,,9 7,,, 7 ,,,g 9 , y ti. . ,t ed a S 01 p. r A" + w >n A n h e h..< , , n , , r uind mr of<tMinturs Cr u ts y rrease i the ,pont,r',ll,. < j..e u i ca.nqunt u.. n . t N n.. ri
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ni 1981. a'thoiqh i t ,,<l.ffiuilt hvabout G due n, a decr rose b om rat h .ri 1982 c m 16 / - to irien tif g myihange m k.he ofaboutI/ in sams h > th" 24 0' a nd 59 3 - ,pm t nH v. Cof niun Is h8'P' 'n tor r upt bS as comparal with 173',275 sa tt hour ('KWH") w s b.- tw< en t he per ods at t r ibutabh uistomm. LCP Chem o as and and 55 7 ' m 19FU Although eday n,i nm vatain ihr Plastas. Inc (f or tm r ly Interna the sh uh t " duct mn m KW H ininal Mmerss & Ch-m n al sAsn 1982 wotad tmul to r- - - yrner al m onom / of the area has f(>llowal the r .at u n nd pat ter ri Co'In >r a tion ) t h;o the enm qv r equ:r em"o t
.e a : ded ned h om the p r e .n o u s Tota revenme f r om KWH sal. , f r om f ossa f uH sour ces, the v" o Weather var u t ,< o n l'i sas appr')x ,matel y the samo as m ailabilit , r >f erw r gy f r <im h y(jr(>
1382 s m " great"r tha'i"> 1981 m 1981 Him er. the f uei o r ui nuclef ar soijr tes d,rl not r e r evenue pr opor t mn of total mam the same as .n 1981 H y dr o wh a h '"n d, d n qua rase the usage of + tr iu t y The r eal revenues da reased f rom 60 gener ation s.as aoou t 4.5 t o c. m - m 1981 to 491 in 1982. whah m 1982 due to e x tens,ve o w n pi me o f elec t r iu t y. ch a.h .s measured by applying an m means that a qmatm pr opor tnin tenano at eno of the Com-flatmn tattor to the cur rent of the Company 's t ota e menor panv Nst a' runs and less adt an pr me of electr a t v. a( tiaally (i" con >istml < >f base r a'e r"ventie t a gs )u s 4. a t e r t i g ,(1: t . < >'is. N1 chned f r om its 1981 WH whah f rom which the Cc im pan y 's dear genm ated ener gy, obtained rnay have tmuled to muease var m nqs am dm e ed. h om th" Compan y's / .ntm est K W H sales ,r) 1982. Thenum m Ma:ne Yankee Attona Pi m e r her of custonwr s so ved ni 1982 Fossil Fuel Mix Slightly Company iwa,ne Y a'1 k m D remamed atmut th+ 3ame as m Higher us n n,,, hv about 13. 2 . t N o - - Eleco uty sini hv the Com m 1981 due 93 a shqhtlv longer 1981 Ud / """s h om t h r . e fuel ref uet nq aru! ma n tenant e sh u t These f act < r s u m'hu md t < > r e
' (b)Ofl st.lt iri af t illt r ease (if al H )l'I '
?6; ii fir t" or non mta r upt, owl e pemen taq" pr odut ed ble, KWH , des m 1982 al - - - - - - - - y+ Capital r equn ements m 1982
- though tota KWH 3 ales decr eased - see
*#s totaled $22 6 m A m Ah Financing ;
d though this is a s!qnit tant arnount. it is less then the $31 8
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e ,g , r f< a 1982 wer e met with .riter r eal a(l(h t u nia t f,r s t on;r t qage b< :r ids a r et'st ri (ni "iitiit y (> t I f> ? arul f y yerier ated fiir uis < >f $b 8 mil .u ul ai aither i < ;r n nu in sic >c k se $1 5 miilu n, ti, i r inu n :%te r < a lo in, the issue and sah> (;f 'at t r it a ni . t o m i r, < u i ( ausett hv
/50.000 shares of common ston Regulatory - - m - d -' -
who h raised 58 3 mahon . . pec ted to be e x per ienced af ter
$621, /9 / f r om shar ehokler par nc,panon .n the dwatend rem btMtf the mCum of th" un> w Retail Rate Case Most of pc ta uiar smmtmant e mas vestment ptan, aith the r e Significant t h" M PU C', alk nvam e. m per ma.ndei commy from sho# t Donunatmq the Compan y's ' d '""""u by the Com pan y f or ter m ban k bor rowmys. DM involvement m r equ!ator y mat a nye m r e nea ent m dend reuivrstmerit is substan .g, s, es peg i .y ,o the f.rst mm to imin ove the C,< m tiahv greater than the $266,444 quar te, of tne year ..as t he qen pon y's cash flot The Com "ah ad m 1981,due m por i ti > er al r ate mcr ease pr oceedmq at pany s f hnq muuded $4 6 nul .
the implementation (>f plan im the MPUC. The case was f inn l* M OMM W d 'N# piovements dur mq the year menced by the Company's f d - r y- .. , 3 t inc h..L oq a 5,1 < h scou n t on pu r mq m July 1981 for an mcrease -, ( hases of common stock made in base r ate r ewnues of $14 3
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o , mth remvested divub odsl and mdlu m annuady. The data sup the commentemen t m 1982 of por tin, the Compan y's case was ' u
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>f r emvestal publu u tih t y the course o f the pr oce edmqs.
t h v u lerals nul as f malt v updated th. r e on Januar s 20.1983 th" quest stood at $15.5 mann 1 Com p an y w,ued and so!d m a pr' H wr ings &>r e hehl in Ute 1981 \ - vate placement tr ar sat t ar' and noiv 1982. Madmq to the de - 50 000 shar es o f 13 . Pr e f er r ed c e, n g , by the MPUC on Aprd 8, <# Stock at the pm value of $100 1982. The MPUC ahowed the . c ' G g >er sh ar e. O t hm f,nanc.nq Company an iricrease of aboist
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that. forrato rnak ny ;>ur poses i r u r ea-a , it m Ci >ni par i , ,o enu- cqu atu n r i <r thn L o a h:> the t o r "t.t < >+ t t m aiu nne tax r "r U ; r ern. r i t he giurin,e's< cr rat"saib deih.r t o h>rthe < nter ost e x t .r m < li r r e'ir f ates l+ al:c ml :t f uel Cost Adjustment was pm es > rru>ney t n >r r t,we<! t o ir n g u i n, , cash t h >w t j u t < h ms r u it lower f ui.pire r < ois t r iit t a ni he cle f e r r ed af ta i var iniigs Ir1 r eu xp ,: t o ni A'Who* , t h. Ci ,n g i,v i s ijn'ii the as a f . g e ar.e< f :r i se r i,f the Cr >nuiativ's riemi h" h H < ou I an 'it L i s i va i anal is r(ists (inclut t.nq th, irnpf i n ed cash t hin. the MPUC u.ivoi h,the MPU( c( >n
- c. apitah /m ! h oanung cost s ) are alh)wed inis r equest with r e re tho' hw rA r beaig r eu >ver eal thr t > ugh rates. sp"ct to a p(ir tion rif the C(>ni a > iri Nir ,t 1982 T u r at, T his r ate niaking technujue pany s const r uction e x penc h , y9, , ; ,. q j7 .h tures. which at h nvar u e accourit p o ' . < >< f . ,as est rnated ti) ( i >llm i ed f or $1.3 noihon <if th" S12 $7 nulison b.ss than the pr e v i
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- er ** Manaqenient was sileased s <'th nulliun s ariniiail/er t s i miui f a the over ah < >uti onie of the r ate t hat haan .e. e f f n t m. m Au qw Ud5e. b Xclu d e int th" aniounts 1981, t hi 'm or aMe> e M e '< t of attr it)ut ah!e t< > the ahiese nien , we r it >ssil f uri t,t his beinq e s io tioned cash flow itern' the Corn per mnced by the Cornpany has pany recoved 981 of the re dune much I. , of f se t the .nl quested increase The Com pact on our uistomers ist the pany's inipr oved r esults of 2 i
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- a. on " ,o( . . d r iq , , t he MPUC no<tthe r eosni r ate desgi ( <a, <>thm atitu .J $199 300.c.
pret,em a, f, n . I a n ma t a ni t h.. n n.por a, o iiusi v u th the C<>i ua'iv I > Oi t ' it " r the niit te r tr u t. t r e ne ' r im l u i ! > q h u a la rate o s at u n. b ia t i Pr a "P an i. Aho h as . t t ied ti, aqr , co n o i t i ,f t h e b2 r . , q l.q i t - d ( i ns t on o r s ar n ! r . 1 ,(lessfil>ml ai'h. ti r '<"i C' >n q Lo l y di al i t " i lth. r ; >ar t., p e au; it w,th a flat r ate om otoi* " < ' ro r,tthi .o n ,um ,1 mi, st q m pimq t r > a .1 ri V4 H o ' , ,,rqv us d in Ooote r wor n t c , v . o f $ 150.000 e f t s i the Compan y o u t t he ot h." 0 " "' " ' l 1982"'"'"""""" Rates for Service to Other , pa r t ie s i n v o N. d , o t he r .c,. .o $40 000 con tive Ju r 1 1983 Utihties is increased tm eo iiit< > an <ep eenn n t appr oval Sales ti; c ither a t ditim ( unst,tiate in July t he (:ompar t y f . h;d s ,i t h ny the M P U C a H ova r,q t h e flat the f edm W L raa gy Rmplator y " *"'V ""d' D'" "" ^"
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- P P ' v ' " > 't " ' " ' ' "' ' t o i num he < > hse r veil and i apa< i t s F o'nwr Chao man R alph Gehlg, e , t o t v. < J u t n n iu e n q u o t .o u . r e< no r enien ts must he nn o ,
i e n,tinues to wr ve on the MPUC D ' t h " C' '" H '"" V "" d ' t " ' " s t ' e nu s I thi c > ugh t he I n iinu it a,n - Chao man Br adtoni h,nl ser ved "rs T he basa sou u.es o f r u in of*,<nunnu A juu l ed i,o t he M PU C pr ev.ousi v. h i >m '"'f""d "P<"Div '"" I " '"- ( ' '"s"' v a t ion a < l lo.nl n ov i Deu m be r 19/1to 19 / /, and hV * ' ' "" " I ( "# i " "d ' " " "K '"1"" * " I P ' ' '4 ' a m s s as Chau m,ui f r om 19 /4 to '" Y ( * ' I M
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Power Supply Planning conr'ef. revised cost estimate and sche- ment. The Company has identi- system and the excessive use dnle for completion of the pro- fied possibilities for more hydro of energy where possible, ject. As of the last estimates, capacity and is in various phases of The Company is also nego-issued in April 1981, the project attempting to develop hydro pro. tiating with private power de-was expected to cost $2.47 bil- jects totalling approximately 50 velopers for purchases of the lion, exclusive of initial nuclear megawatts at West Enfield, output of their facilities. Two fuel and financing cests (AFDC), Orono and other sites. Despite purchase contracts with de-with Unit I to be completed in the advantages of hydro in terms velopers were signed in 1982 February 1984 and Unit 2 in of long term generation costs, for small facilities totaling al-May 1986. The November 1982 short construction periods and most 1 megawatt. Several other revision estimates the cost at relatively simple and well-devel- such possibilities are in various S3.54 billion, an increase of oped technology, the high capital stages of development. In the about 43% over the prior esti- cost requires careful planning if aggregate, these sources could mate, with Unit 1 to be com. financial resources of the Com- provide the Company signifi-pleted in December 1984 and pany are not to be overextended. cant amounts of capacity and Unit 2 in March 1987. Af ter a re- Hydro-Quebec Tie Line energy with no investment re-view of the financial impact of quirement n the part of the Going Ahead the revised estimates, the partic. Company. Progress has been made in the ipants agreed in December to con development of the transmission tinue to hold construction ac- line project be; ween Hydro-tivities duririg 1983 on Unit 2 at the level existing during the Quebec and New England in Conservation which the Conipany has a court appeal discussed above. 1.6% interest. The initial phase Activities Assuming construction on Unit of this line will provide a capac- The Conservation and Con-2 is then permitted to accelerate, ity of 690 megawatts to New sumer Services division per-such a program is estimated to England and is planned to be formed 525 residential energy __ cause about three months' addi- used principally to purchase tional delay in completion of audits during 1982. Although 7T
- surplus hydro-electric energy there were not as many audit re- h: [
Unit 2 and to add approximately from Hydro-Quebec. This 566 million to the cost of the quests as anticipated, the 1982 h~ project. energy will be purchased at audits identified potential annu- NMd including the Company's share rates below the cost of fossil- al energy savings in excess of N[-- of the initial nuclear fuel (S5.8 fuel sources and should be of major benefit to the New
$250,000 for the consumers in-volved.
h ~$ kf"' million) and estimated AFDC England utilities and their in November, the Company (S45.5 million), the Company customers. The second phase, now anticipates it2 investment in which might be completed in implemented a plan approved by the MPUC making available h}MC* the project at its completion will the early 1990's, would increase be approximately $129 million- the capacity of the line to 2000
$1 million to be used for low-in- '.$ d s
At year-end 1982 the Company terest loans of up to S2,000 to N:'" had invested $53 million in megawatts and would corre-spondingly increase the po-qualifying residential custo- D ' l-mers for certain energy conser- 9 i Qg, Seabrook (including nuclear tential benefits of the entity. vation measures. The program V (lY ' fue! of $4.1 million and AFDC is designed to assist and encour-
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. Status of Consnutwn conta Dividends hot water and/or space heating. director to fill the unexpired The Company has estimated As yet, consumer response to the term of John Grant, who died that 100% of dividends paid by program has not been enthusias- unexpectedly on December 5. the Company in 1982 on its tic. However, if the program is Mr. Bullock is Chairman of the common and preferred stock successful, it is expected to Board of Merrill Bankshares will be considered nontaxable benefit all customers in the long Company, The Merrill Trust for federal income tax purposes.
run by helping to reduce costly Company and Merrill Bank, The nontaxable dividends should and unnecessary investment in N. A. He has been associated be applied to reduce the tax additional generating facil ties. with the Merrill system of banks cost basis of the shares upon During 1983, the Company will since 1969. Before coming to which the dividends were paid. be working with the MPUC and Maine, he served in a number of On a preliminary basis, the the Mame Office of Energy officer positions with the Morgan Company projects that a sub-Resources to consider extending Guaranty Trust Company of stantial portion of its 1983 the program to non-residential New York. dividends on common stock customers. Also in December, the Board will also be nontaxable. Also in conjunction with the of Directors elected Carroll R. The Company's current inter-MPUC, the Company is consi- Lee to the position of Vice Pre- pretation of applicable federal dering a plan to subsidize the sident - Power Supply and tax law is that nontaxable divi-cost of water heater insulation Planning. Mr. Lee began with dends are not eligible for the blankets for residential custom- the Company in 1970 as an en- election to exclude from in-ers with electric hot water heat- gineering assistant, and was come up to S750 ($1500 for a ers, if approved by tha MPUC, most recently the Assistant Vice joint return) of reinvested pub-this program will take ef fect in President - Engineering. lic utility dividends. Therefore, 1983. At year end 1982, the Com- participants in the Company's Other activities of the Con- pany had 353 employees, of Dividend Reinvestment and servation and Consumer Ser- whom 185 are represented by Common Stock Purchase Plan vices division include energy the International Brotherhood who have been planning to take awareness and conservation pre- of Electrical Workers. The cur- advantage of this tax law provi-sentations in area schools and rent union contract expires sion should not be doing so with individual assistance to custom- December 31,1984. respect to the Company's non-ers on request. The Company's employees taxable dividends. are its most valuable resource, if further information on this representing many skills and subject is needed, shareholders D.irectors, teients. Tney e,e a c, edit to shouid consuit with inei, own
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17 N
BANGOR HYDRO ELECTRIC COMPANY MANAGEMENT'S DISCUSSION and ANALYSIS of FINANCIAL CONDITION and RESULTS of OPERATIONS Results of Operations 1980-1982 General rate revenue increased by 28% in 1982 by the Company's contract with Boston Edison and 9% in 1981. This growth reflects the base rate Company which provided for the purchase of 30 increases authorized by the MPUC of 38% in April MW from November 1,1979 through October 31, 1982 and 18% in August 1980. Highlights of the 1980,40 MW through October 31,1981, and 85 1982 rate decision are discussed in an earlier sec- MW through October 31,1982. Beginning Novem-tion of this report. This growth in base rate ber 1,1982 and running through the end of the revenue was tempered by a slight decrease in total contract (October 31,1984) 95 MW will be pur-KWH sales in both 1981 and 1982. chased in 1982, portions of this purchased power Fuel charge revenue declined by 19% in 1982 were resold to other New England utilities. af ter rising 30% in 1981. The level of fuel revenue The other operation and maintenance expense is generally tied to the cost of oil used to generate category includes the Company's 8.3% share of electricity and billed to customers through the expenses incurred at Wyman Unit No. 4, a jointly-fuel adjustment factor. The price of a barrel of owned generating facility operated by Centra! oil delivered to the Company has varied frcm Maine Power Company. Absent the Wyman ex-
$24.86 at January 1,1980, to $34.20 at January penses this category increased about 13% in both 1,1981, to $27.87 at January 1,1982 and to 1982 and 1981, generally as a result of inflation $29.38 at January 1,1983. As explained in Note 1 and wage increases. The expenses also reflect the to the Financial Statements, deferred fuel account- impact of a FERC audit which disallowed the cap-ing is employed by the Company. Consequently, italization of certain rehabilitation work to hydro-changes in fuel prices have a minimal impact on electric property starting in 1982. In addition, the earnings. 1982 expense includes $186,000 incurred in con-Operating expenses during this period have been nection with the severe storm in January and an impacted by a number of factors in addition to fuel $83,000, or 24%, increase in tree trimming ex-costs Purchased power expense is affected largely penses.
( 18
BANGOR HYDRO-ELECTRIC COMPANY in 1981, a benefit was recorded from federal creased its ownership interest in that project from and state income taxes. This income tax benefit .37% to 2.17%. Also impacting the amount of represented an excess of expenses over income for AFDC and the allocation between the borrowed income tax purposes, to be used to of fset the in- component and the equity component has been a come tax liabilities of other neriods. This excess change in the method used to compute the AFDC of tax expenses arose largely from the increasing rate, which is explained in Note 1 to the Financial amount of interest expense related to the growing Statements, construction program. The increase in the weighted average number of in 1982, the increase il pre-tax operating income common shares outstanding reflects the public more than of fset the continuing increase in interest issue of 750,000 shares in Septernber 1982 and expense, thus an income tax expense was recorded. 500,000 shares in September 1981. See Note 2 to the Financial Statements for further information on income taxes. Impact of inflation Interest payments have increased sharply over As noted above, inflation has increased the Cun-the 1980-1982 period due to the requirement for pany's operating expenses and costs of capital, in-additional funds for the Company's construction flation also increases the cost of the Company's program as well a a significant increase in the cost construction program and the replacement of its of these funds during 1981. Average short-term pl ant and equipment. Under the rate-making prac-borrowings were $13.1 million in 1980, $12.1 tices prescribed by the regulatory commissions to million in 1981 and $18.5 million in 1982, at aver- which the Company is subiect, only the allocation age short-term interest rates of 17.1%, 23.0% and of the Company's historical costs is included in the 17.4% respectively. Furthermore, interest expense cost of service and rate base used to establish the in 1982 on first mortgage bonds contains a full year Company's rates and hence its earnings. As a re-of expense related to the two issues totaling $20 sult, inflation tends to lower the value of the share-million which were sold during 1981. holders' current investment. While the rate-making Likewise, AFDC (both the borrowed portion process gives no recognition to the current impact and the equity portion) has grown due to the costs of inflation on the Company's rate base, it does of fmancing the growing investment in construc- allow the Company to earn on and recover the in-tion work in progress, principally Seabrook. The creased cost of net investment when the replace-average investment in Seabrook was $4.6 million ment of property, plant and equipment actually during 1980, $16.9 million during 1981 and $43.5 occurs. More information on the impact of in-million during 1982. During the period January flation on the Company is given in Note 12 to the 1981 through January 1982, the Company in- Financial Statements, t 19
7 \ x BANGOR HYDRO-ELECTRIC COMPANY Management's Discussion and Analysis cont'd. / Liquidity and Capital Resources , The Statements of Sources of Funds for Plant revolving credit and term loan agreement. Bor-Additions reflect the Company's liquidity and its rowings under the revoivmg credit agreement are , reouirement for capital resources for 1980 through expected to be replaced by long-term financing , 1982. During 1982, $22.6 million (including the through issuances of additional first mortgage borrowed component of AFDC) was required for bonds, preferred stock and ccmmoristock.l On plar t additions. The Company's estimated con. hnuary 20,1983, the Company sold 50,000 shares strucwn expenditures from 1983 through 1987 of preferred stock for $5 milhon.. , will total $97.9 million (mcluding AFDC of $35.9 The indenture sec&ing the Company's first million). This amount includes $76.3 million for ~ mortgagebonds provides that, jn addition to other the Seabrook project based on the November requirements, the Company .may issue additional 30,1982 revision to the Seabrook cost estimates ' bonds provided that net earnings (as defined in the issued by PSNH, and $21.6 million for normal con- indenture) of the Company are at least twice the struction activities related to the Company's trans- interest charghs on bonds presently outstanding mission and distribution system. .and tbose proposed. During 1982, this restr'iction Internal sources accounted for $5.8 million, prchibited the Company f rom issuing any signif ,
$6.0 million and $1.5 million in 1982,1981 and icwt amount of hrst mortgage bonds. However, 1980, respectively, of the funds required for plant earning's at Dectmber 31,1982 were suificient additions in those years. The 1981 internal funds to allow the Com'pany to is:;ue aboot $9 million were primarily the result of the collection of fuel ir; additional first n:ortgage bonds assuming an costs previously deferred. In 1982, the base rate interest rate of 13%%.
increase and changes in certain net current asset ; (AFDC continues to imp 6ct the Company ls accounts kept the level of internal funds the same liquidity with the inctVase in thp Company's invest-as in 1981 despite an undercollection of fuel costs ment in construction in progress. As discdsse'd ire in 1982. Other parts of this report ,the 1982 MPUC rate , The remaining $16.8 million of the 1982 con- ord6r granted an additional $1.3 million in revenue struction program was financed primarily by the to allow tne Company to defer the tax bendit , public sale of 750,000 common shares for $8.3 , from the interest expense related toyhe Company's million in September and an increase of $8.9 mil- 1981 (test year) construction amounts. This allow-lion in borrowings under the Company's revolving ' ance has some.what reduced the cash flow problems credit agreement. The Company's short-term fin- associated with the construction program. ancing is accomplished pursuant to a $30 million P
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'N 20
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..BANdOR Hi'C90 ELECTRIC COMPANY .
dTATEMdNTS OF INCOME - '
, Noi the ears EridEl December 31. 1982 1981 1980 3 - +-
Electric OperptinG Revenues (Note 1): m , ' General rate ievenue . S41,109,524 $32,105,015 $29,548,586
; ' k . Fuel chargeir'evenue 39,232,465 48,531,923 37,145,346
$80,341,989 $80,636,938 $66,693,932 s
Operating Expen:ies: Fuel for generation (Noie 1)
$39,488,719 $48,075,200 $37,234,901 Purchased powcr (Note 3) - 12,869,587 9,390,664 7,858,714 Other operation and msintenanbe 11,786,101 10.541,304 9,014,550 Depreciatien and im'ortization (Notes 1 and 9) - 3,500,044 3,412,791 3,111,502 f >
Taxes. i t'ocal proper 19 and .other -, s 2,194,469 2,066,088 1,857,820 income (Note 2) - , 8_09,455 (566,617) 938,426 7 c $70,648,375 $72,919,430 $60,015,913 v Oper: ting inr.ome ' S 9,693,614 $ 7,717,508 $ 6,678,019 4 Other incoine and (Deductions):
- Allowance forTquity funds used during construction (Note 1) 2,165,475 344,126 -
L' Other, net of applicable income taxes (Note 9)- - (189,012) (14,870) (10,819)
- Income Before Interest Expense ,
< $11,67_0,077 $ 8,046,764 $ 6,667,200 Intirest Expense:
First mortgage bonds (Note 5) $ 5,679,765 $ 4,089,447 $ 2,513,642 C ther (Note 6) 3,257,025 2,835,249 2,265,632 L A!!owance for br2rrowed funds used during g' construction (N7te 1) j 3,678,606) (2,804,332) (797,989)
$_5,25_8,184 $ 4,120,364 $ 3.981,285 fut income -
G 6,411,893 $ 3,926,400 $ 2,685,915 -
- ,Di vidends on Prefenred Stock 73_4,799 735,570 735.570 Etrnings Appliceble To CommoitStock -
> $ 5,677,094 $ 3,190.830 $1950,345 Earnings Per Common Share, based on the weighted average * , number of shares ouIstanding nf 2,842,862 in 1982, 2,220,718 in ,1981 and 1,833,979 in 1980 $ 2.00 $ 1.43 $ 1.06 Divid;nds Dee!ared Per Common Share S 1.54 $ 1.52 $_ 132
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? '- , l BANGOR HYDRO-ELECTRIC COMPANY l I
-BALANCE SHEETS 1 December 31, '
1982- 1981 l 1
' Assets investment in Utility Plant:
Electric plant in service, at original cost (Note 8) S106,006,II0 $101,880,089-Less - Accumulated depreciation (Note 8) - 39,123,652 36,323,839
$ 66,882,618_ $ 65,556,250 Construction in progress, including $53,068,852 in 1982 and $33,125,252 in 1981 for construction of a jointly-owned generating project (Notes 9 and 10) _ 53,424,795 33,328,203
$120,307,4?3 $ 98,884,453 investments in corporate joint ventures (Netes 1 and 8) -
Maine Yankee Atomic Power Company e ' S 4,703,122 $ 4,690.122
-Maine Electric Power Company, Inc. 155,317 165,929 S125 & 5,852 $103,740,504 Other investments, principally at cost '
S 570,109 $ 491,731 Current Assets: Cash . S 1,143,662 $ 1,313,335 Accounts receivable, net of reserve ($135,000 in 1982 and $113,866 in 1981) . 8,323,689 8,928,386 Unbilled revenue receivable (Note'1) 3,976,064 3,252,096
-Inventories, at average costs , ,
Material and supplies ~ 1,701,307 1,863,581
-Fuel Oil 1,724,906 '2,437,901 Prepaid expenses _
e 431,019 458,772 Deferred fuel costs (Note 1) 1,753,219 1,426,912 S 19,053,866 $ 19,680,983 Deferred Charges: . Cost of cancelled NEPCO nuclear units (Note 9) <
~
$ 900,065 $ 1,440,358
- Other 1,042,199 1,149,405 S 1,942,264 $ 2,589,763
$146,732,091 . $126,502,981 A
Y 4 The accompanying notes are an integral part of these financial statements.
-22
BANGOR HYDRO-ELECTRIC COMPANY December 31. 1982 1981 Stockholders' investment and Liabilities
' Capit-lization (see accompanying statement):
Common stock investment (Note 3) $ 41,794,410 $ 31,965,753 Preferred stock (Note 4) ~ 4,734,000 4,734,000 Redeemable preferred stock, exclusive of sinking fund requirements (Note 4) 4,800,000 4,900,000 First mortgage bonds, exclusive of sinking fund requirements and a current maturity in 1981 (Note 5) 50,835,000 51,005,000 Total capitalization - $102163,410 $ 92,604,753 i- Current Liabilities: Current maturity of long-term debt - S -
$ 1,000,000
' Notes payable to banks (Note 6) 21,671,250 12,800,000
.S 21,671,250 $ 13,800,000 Other current liabilities -
Current sinking fund requirements S 270,000 $ 270,000 Accounts payable 9,534,572 8,111,141 . Dividends payable _ 1,444,386' 1,104,013 Accrued interest . 1,888,145 1,886,840 Accrued current and short-term deferred income taxes (Note 2) 1,000,261 1,086,867 Customers' deposits ~ . 104,047 91,930 Accrued pension plan contribution (Note 7) 480,000 480,000 S 14,721,411 S 13,030,791 S 36,392,661 $ 26,830,791 C mmitments and Contingencies (Notes 8,9 and 10) Deferred Credits and Reserves (Note 2): Accumulated deferred income taxes S 6,570,202 $ 5,466,289 Unamortized investment tax credits 1,336,214 1,356,354 Other 269,604 _ 244.794 S -8,176,020 $ 7,067,437
$146,732 091 $126,502,981 s
23
BANGOR HYDRO ELECTRIC COMPANY. STATEMENTS of RETAINED EARNINGS For the Years Ended December 31, 1982 1981 1980 Balance at Beginning of Year S 7,500,250 $ 7,880,232 $ 8,798,703 Add: Net income 6,411,893 3,926,400 2,685,915 S13,912,143 S11,806,632 $11,484,618 Deduct: Cash dividends declared on - Preferred stock S 734,799 $ 735,570 $ 735,570 Common stock - $1,54 per share in 1982 and $1,52 per share in 1981 and 1980 4,651,294 3,570,812 2,868,816 S 5,386,093 $ 4,306,382 $ 3,604,386 Balance at End of Year S 8,526,050 $ 7,500,250 $ 7.880,232 STATEMENTS of CAPITALIZATION December 31, 1982 1981 Common Stock investment (Note 3): Common stock, par value $5 per share - Authorized - 5,000,000 shares Outstanding - 3,416,609 shares in 1982,2,608,774 shares in 1981 S 17,083,045 $13,043,870 Amounts paid in excess of par value 16,185,315 11,421,633 Retained earnings 8,526,050 7,500,250
$ 41,794,410 $31,965,753 Preferred Stock, non-participating, cumulative, par value
$100 per share, authorized 250,000 shares (Note 4):
Not redeemable or redeemable solely at the option of the issuer - 7%, Noncallable,25,000 shares authorized and outstanding S 2,500,000 $ 2,500,000 4%%, Caltable at $100,4,840 shares authorized and outstanding 484,000 484,000 4%, Series A, Callable at $110,17,500 shares authorized and oatstanding 1,750,0_00 1,750,000
$ 4,734,000 $ 4,734,000 Subject to mandatory redemption requirements -
9%%, Callable at $108.00 in 1982 and $108.50 in 1981, 30,000 shares authorized and outstanding S 3,000,000 $ 3,000,000 9%%, Callable at $104,91 in 1982 and $105.53 in 1981, Authorized - 20,000 shares Outstanding - 19,000 shares in 1982,20,000 shares in 1981 1,900,000 2,000,000 S 4,900,000 $ 5,000,000 Less - Sinking fund requirements 100,000 100,000 S 4,800,000 $ 4,900,000 First Mortgage Bonds (Note 5): 31/4% Series due 1982 S -
$ 1,000,000 31/8% Series due 1984 1,000,000 1,000,000 31/4% Series due 1985 1,500,000 1,500,000 4% Series due 1988 2,500,000 2,500,000 4% Series due 1993 3,500,000 3,500,000 6 3/4% Series due 1998 2,500,000 2,500,000 81/4% Series due 1999 3,500,000 3,500,000 101/2% Series due 2000 4,650,000 4,700,000 91/4% Series due 2001 2,730,000 2,775,000 8 3/5% Series due 2003 2,125,000 2,200 000 101/4% Series due 2004 7,000,000 7,000,000 151/4% Series due 1996 5,000,000 5,000,000 161/2% Series due 1996 15,000,000 15,000,000 S 51,005,000 $52,175,000 Less- Sinking fund requirements and a current maturity in 1981 170,000 1,170,000
$ 50,835,000 $51,005,000 Total capitalization $102,163,410 $92.604,753 The actorrpanying notes are an integral part of these finanaal staternents.
84
BANGOR HYDRO-ELECTRIC COMPANY STATEMENTS of SOURCES of FUNDS for PLANT ADDITIONS For the Years Ended December 31, 1982 1981 1980 Sources of Funds: 4 Internal sources - Operations -
- Net income S 6,411,893 $ 3,926,400 $ 2,685,915 Items not currently requiring or (providing) funds -
Depreciation and amortization 3,500,044 3,412,791 3,111,502 l Deferred income taxes 1,103,913 597,384 641,791 , Investment tax credit, net (20,140) (34,980) (96,000) Allowance for equity funds used during construction (2,165,475) (344,126) - Funds provided from operations S 8,830,235 $ 7,557,469 $ 6,343,208 Other sources (uses) of funds - Sinking fund requirements S (270,000) $ (270,000) .$ (170,000) Dividends declared (5,386,093) (4,306,382) (3,604,386) Other, net 282,722 (494.422) 128,463 j $(5,373,371) S(5,070,804) $ ( 3,645,923) l 'hange in not current assets, exclusive of interim financing - Cash, receivables and unbilled revenue S 50,402 $ (2,193,786) $ ( 1,966,233) Deferred fuel costs (326,307) 5,630,223 (1,572,447) l Other current assets 903,022 (906.488) (366,901) Accounts payable 1,423,431 702.930 2,278,970 Other current liabilities 267,188 274,548 398,662 S 2,317,736 $ 3,507,427 $ (1,227,949) f Funds available from internal sources -S 5,774,600 $ 5,994,092 S 1,469,336 4 External sources - Notes payable to banks S 8,871,250 $ 700,000 $ 4,550,000
- Retirement of fitst mortgage bonds (1,000,000) - (2,000,000)
Proceeds from issuance of - First mortgage bonds - 20,000,000 -
- Common stock - '
i Public of ferings (750,000 shares in 1982,
< 500,000 shares in 1981 and 250,000 shares in 1980) 8,328,750 4,882,500 2,286,000 Dividend reinvestment p!an (57,626 shares in 1982, 25,174 shares in 1981 and 21,577 shares in 1980) 621,797 266,444 255,011 Funds from external sources $16,821,79_7 S25,848,944 5 5,091,011 l
- Funds Available for Plant Additions $22,596,397 $31,843,036 5 6,560,347 4 Funds Used For
Wyman Unit No. 4 S 88,271 $ 51,092 $ 323,498 Seabrook Nuclear Units (Note 10) 17,788,790 27,364,595 1,727,362 Other plant additions 4,719,336 4,427,349 4,509,487 i Funds Used for Plant Additions $22,596,397 $31,843,036 S 6,560.347 1 f I l t I The accorr'panying notes are an integral par t of these financkii staterrients. 25
-._~, ._ __-,.._-,~.--____,,____,..-.__,___,._..,,__.,,._._._z
BANGOR HYDRO-ELECTRIC COMPANY-NOTES to FINANCIAL' STATEMENTS Note 1. -Summary of Significant Accounting Policies Electric Operating Revenues - Electric Operating Revenues include amounts for electricity delivered to customers during the period, both billed and unbilled. Deferred Fuel Accounting- Under the existing Maine Public Utilities Commission ("MPUC") fuel cost ad-justment regulation, the Company is allowed to recover its fuel costs on a current basis. The fuel charge is based on the Company's projected cost of fuel for a twelve month forward-looking period. Over- or under-collections resulting from differences be: ween estimated and actual fuel costs for a period are included in the computation of the estimated fuel costs of the succeeding fuel adjustment period. As a result, the Company utilizes deferred fuel accounting. Under this accounting method, fuel costs are expensed when they are recognized as revenue. Retail fuel costs not yet expensed are classified on the balance sheet as Deferred Fuel Costs. In December 1980 the MPUC modified the fuel cost adjustment regulations so that, effective Jar.uary 1,
-1981, the fuel cost adjustment rate includes a factor calculated to reimburse the Company or its customers for the carrying cost of funds used to finance under-collected (deferred) or over-collected fuel costs incurred af ter May 1980.
Equity Method of Accounting - The Company accounts for its investments in the common stock of Maine Yankee Atomic Power Company (" Maine Yankee") and Maine Electric Power Company, Inc. ("MEPCO") on the equity method of accounting and records its proportionate share of the net earnings of these companies (substantially all of these earnings are paid out in dividends) as a reduction of purchased power costs. See Note 8 for additional information with respect to these investments. Depreciation of Electric Plant and Maintenance Policy - Depreciation of electric plant is provided using the straight-line method at rates designed to allocate the original cost of the properties over their estimated service lives. The composite depreciation rate, expressed as a percentage of average depreciable plant in service, was approximately 3.1% during the periods presented.
- The Company follows the practice of charoing to maintenance the cost of repairs, replacements and renewals of minor items considered to be less than units of property. Costs of additions, replacements and renewals of items considered to be units of property are charged to the utility plant accounts and any items removed are retired from such accounts. The original costs'of units of property retired and removal costs, less salvage, are charged to the reserve for depreciation.
Equity Reserve for Licensed Hydro Projects - The Federal Energy Regulatory Commission ("FERC") re-quires that a reserve be maintained equal to one-half of earnings in excess of a prescribed rate of return on the Company's investment in licensed hydro property beginning with the twenty-first year of project operation under license. As required by an order of the FERC, the Equity Reserve provided for licensed hydro projects is classified as Retained Earnings. Allowance for Funds Used During Construction -The Company reflects as an element of the cost of con-struction of major units of depreciable property an allowance for funds (including common equity funds) em-p!oyed during the construction period ("AFDC"). Under the rate-making processes of applicable regulatory agencies the Company is permitted to recover these amounts, not currently, but over the useful life of the constructed property. Further, the unrecovered cost of constructed property, including the allowance, is an element of rate base on which the Company is permitted to earn a return. As part of its April 1982 rate order, the MPUC directed the Company to use an AFDC rate which reflects the Company's overall weighted cost of capital (including short-term debt and the cost of equity allowed in the MPUC's most recent rate decision). The Company commenced using this AFDC rate in April. Prior to the April 1982 rate order, the amount of the allowance recorded was determined by multiplying
.the portion of the average monthly dollar ba!ance of construction in progress financed by short-term borrow-ings by the weighted average interest rate applicable to short-term borrowings for the month and multiplying any remainder of the monthly dollar balance of construction in progress by the weighted average cost of long-term debt and equity as of the beginning of the year. The average rate produced by the Company's computa-tions was 13.9% for 1982,19.0% for 1981 and 17.1% for 1980.
26
( Note 2. Income Taxes The individual components oi federal and state income taxes reflected in the Statements of Income for 1982,1981, and 1980 are as follows: Year Ended December 31, 1982 1981 1980 Current: Federal S (748,350) $ 1,627,129 $ (659,423) State (65,970) 271.962 (118,869)
$ (814,320) $ 1,899.091 S (778,292)
Deferred - Short Term: Federal S 561,317 S(2,574,069) $ 1,026,970 State 91,848 _. (421.190) 168.041 S 653,165 S(2,995.259) $ 1,195,011 Deferred - Other: Federal S 1,058,544 5 617,156 S 643,020 State 45,369 (19,772) (1,229)
$ 1,103,913 $ 597,384 _$_ 641,791 investment tax credits, net S (20,140) $ (34,980) $ (96.000)
Total Provision (Benefit) S 922,618 $ (533,764) S 962,510 Al:ocated to other income (113,163) (32,853) (24,084) Charged to operating exoense $ 809,455 $_ (566,617) S 938,426 The rate-making practices followed by the MPUC permit the Company to recover federal and state income taxes payable currently and to recover deferred taxes only when the tax law, in effect, requires such treat-ment or when MPUC approval is granted on specific timing dif ferences. Although this accounting dif fers from generally accepted accounting principles followed by non-rate-regulated companies, which are required to record deferred taxes related to all timing dif ferences, the Company expects that deferred taxes not recorded will be collected through customer rates in the future when such taxes become payable. In 1982,1980 and 1979 the Company experienced net losses for tax purposes while reporting earnings for financial statement purposes. The reasons for the differences between the losses experienced for tax purposes and the earnings reported in the financial statement are categorized as follows: (1) permanent reductions in tax expense resulting from statutory exclusions from taxable income, (2) timirg dif ferences between book and taxable income on which deferred taxes are not provided or recovered as a result of requirements by the MPUC, and (3) timing dif ferences on which deferred taxes are permitted to be recovered by the MPUC. The following table reconciles an income tax provHon calculated by multiplying income before federal income taxes (as reported on the financial statements, by the federal income tax rate to the federal income tax expense reported on the financial statements. The dif ference is represented by the permanent reductions and the timing dif ferences on which deferred taxes are not calculated. 27
1982 1981 1980 Amount % Amount % Amount % (Dollars in Thousands) Federal income tax provision at statutory rate $3,341 46% $1,638 46% $1,656 46% Less permanent reductions in tax expense resulting from statutory exclusions from taxable income: Dividend received deduction related to earnings of associated companies 188 3 199 6 198 5 Equity component of AFDC 996 14 158 4 - - Freferred dividends paid deduction 34 1 34 1 34 1 Amortization of investment tax credit 20 - 35 1 96 3 Other 2^ - ( 72) ( 2) - - Federal income tax provision before effect of timing dif ferences $2,077 28% $1,284 36% $1,328 37% Less t; ming dif ferences that are flowed through for rate-making and accounting purposes: Interest component of AFDC on which deferred taxes are not recorded 1,262 17 1,290 36 367 10 AFDC on cancelled NEPCO project (119) (1) - - - - Deduction of certain costs (primarily pension costs, payroll taxes and property taxes) for tax purposes that are included in the cost of electric property 240 3 67 2 58 2 State required construction - - 112 3 - - Deferred interest cost (120) (2) 120 3 - - Assets acquired before 1971: Book depreciation greater than tax depreciation (39) (1) - - - - Tax depreciation greater than book depreciation - - 55 2 - - Other 2 - 5 - (12) - Federal income tax provision S 851 12% $ (365) (10%) S 915 25% The differences between the federal income tax expense reported on the financial statements and the fed-eral income tax liability (income tax benefits for the loss years of 1982,1980 and 1979) as reflected on the Company's tax returns are caused by timing differences on which deferred taxes are provided and recovered through rates. These have been categorized as Deferred Taxes-Other (principally related to depreciation) and Deferred Taxes-Short Term. The Deferred Taxes-Short Term have been classified to correspond to the accounting for the related assets (deferred fuel costs and unbilled revenue). As part of its April 1982 rate order, the MPUC allowed the Company to record deferred taxes annually of
$657,066 representing the tax effect of interest expense on construction during 1981, the test year in the April 1982 rate order. Deferred taxes of $465,796 were recorded for this item in 1982 and are classified as Deferred Taxes - Other.
The tax benefits of the net operating loss for tax purposes in 1982 together with the net operating losses available from 1980 and 1979 have been recorde J as reductions of short-term deferred income taxes and may be used to offset income taxes payable in future / ears. Subject to review by the Internal Revenue Service, the potential reduction in income taxes from the carryovers (which expire between 1994 and 1997) amounts to $1,936,977. Under the federal income tax laws, the Compar.y receives investment tax credits at a rate of 10% on quali-fied property additions. Investment credits utilized are deferred and amortized over the life of the related property, investment tax :redits available of $7,313,392 have not been utilized or recorded and may be used prior to their expiration, which occurs between 1993 and 1997. The financial statements reflect a re-classification to reduce unamortized investment tax credits to amounts utilized in the Company's tax re-turns. Due to the adoption of a Tax Reduction Act Stock Ownership Plan (see Note 3), the Company receives an additional 1% investment tax credit which will be used to fund the plan through December 31, 1982. 28
Nate 3. C:mmon Stock' The Company issued and sold for cash 750,000 common shares (for proceeds of approximately $8.3 mil-tion) in September 1982,500,000 common shares (for proceeds of approximately $4.9 million) in September 1981 and 250,000 common shares (for proceeds of approximately $2.3 million) in December 1980.. The Company has an employee stock ownership plan which qualifies as a Tax Reduction Act Stcek Owner-ship Plan. Annual contributions to the Plan by the Company are made when the associated investment tax credit is utilized and are in the form of common stock of the Company having a market value equal to an ad-
- ditional 1% investment tax credit currently allowed by federal tax law, less administrative expenses. The Com-pany also has a Dividend Reinvestment and Common Stock Purchase Plan through which shareholders may purchase common stock without payment of brokerage commissions or service charges, in connection with these plans, at December 31,1982 the Company had reserved 497,101 shares of its authorized but unissued common stock.
N:te 4. Preferred Stock General- At December 31,1982, authorized preferred stock consisted of 250,000 shares, par value $100 per share, of which 96,340 shares were outstanding. The remaining 153,660 authorized but unissued shares (p'us additional shares equal in number to such presently outstanding shares as may be retired) may be issued
- with such preferences, restrictions or qualifications as the board of directors may determine. On January 20, 1983, the Company issued an additional 50,000 shares of such preferred stock at par value, in a series desig-nated as the 13% Preferred Stock.
The callable preferred stock may be called in whole or in part upon any dividend date by appropriate resolution of the board of directors. The 9%%, the 9%% and the 13% series of preferred stock are non-voting. Redeemable Preferred Shares - The 9%% Preferred Stock, the 9%% Preferred Stock and the 13% Preferred Stock are subject to mandatory redemption through the operation of sinking funds at the redemption price t of $100 per share plus dividends accrued. The Company must set aside in cash annually (1) on December 1 in each year commencing with December 1,1982, an amount sufficient to redeem 1,000 shares of the 9%% Preferred Stock, (2) on August 1 in each year commencing with August 1,1985, an amount sufficient to re-deem 2,000 shares of the 9%% Preferred Stock, and (3) on January 31 in each year commencing with January 31,1989, an amount sufficient to redeem a minimum of 2500 shares of the 13% Preferred Stock, with the 4 option in the holders thereof to require the redemption of up to an additional 2500 shares. The aggregate annual amounts of preferred stock redemption requirements for each of the five years follow-ing 1982 are as follows: 1983 and 1984, $100,000; and 1985-1987, $300,000. . N:te 5. First Mortgage Bonds Under the provisions of the ind'enture, substantially all of the Company's plant and property has been i mortgaged to secure the first mortgage bonds. Additional bonds may be issued under the first mortgage bond l indenture,' subject to certain restrictions and provisions specified in the indenture and supplements thereto. Sinking fund requirements and current maturities of long-term debt for the five years subsequent to Decem-ber 31,1982 aggregate $6,190,000 as follows: Sinking Fund Current Requirements Maturities Total 1983 $ 170,000 - $ 170,000 1984 170,000 1,000,000 1,170,000 1985 450,000 1,500,000 1,950,000 1986 450,000 - 450,000 1987 2,450,000 _ 2,450,000
$3,690,000 $2,500,000 $6,190,000 N te 6. Notes Payable to Banks In August 1980 the Company entered into a $30 million Revolving Credit and Term Loan Agreement with a syndicate of seven banks. Under the Agreement, the Company was able to borrow up to $17.4 million until the January 31,1981 commencement of the commitment to purchase the additional interest in the Seabrook nuclear units as described in Note 9. At that time, the credit available to the Company increased to $30 mil-l lion. The revolving credit portion of this facility terminates on June 30,1985, at which time the indebtedness may be converted to a term loan to be paid down by the Company over a three year period ending June 30, 1988.
29
The interest rate on the revolving credit is tied to the prime rate. For the periods ended June 30,1981 and June 25,1982 the interest rates were 106% and 108% of the prime rate respectively. For the periods ending June 25,1983 and June 29,1985 the rates will be 105% and 107% of the prime rate respectively. In addition, the Company is obligated to pay a commitment fee of one-half of one percent on the unused portion of the commitment and an additional fee of 3% (4% up to September 15,1982) of the prime rate applied to the available credit. The interest rate under the term loan portion of the facility is 110% of the prime rate. Under the terms of this agreement, the Company is prohibited from incurring over $1 million of other unsecured borrowings. The agreement was amended on September 15,1982 to allow the Company to participate in the commercial paper markets in order to reduce interest costs and fees. The Company has not yet been able to meet the re-quirements which would enable it to enter into the commercial paper market. The Company uses the borrowings under this agreement to initially finance construction and for other cor-porate purposes. The Company intends to refinance such borrowings with the proceeds from sales of long-term debt and equity securities. Prior to August 1980 the Company arranged for its short-term borrowings under separate lines of credit with individual banks. Certain inforrnation re!ated to short-term borrowings is as follows: 1982 1981 1980 Total credit available at end of period $30,000,000 $30,000,000 $17,400,000 Unused credit at end of period $ 8,328,750 $17,200,000 $ 5,300,000 Borrowings outstanding at end of period $21,671,250 $12,800,000 $12,100,000 Effective interest rate (exclusive of fees) on borrowings outstanding at end of period 12.1% 17.0% 22.8% Average daily outstanding borrowings for the period $18,540,000 $12,102,000 $13,129,000 Weighted daily average annual interest rate 17.4% 23.0% 17.1% Highest level of borrowings outstanding at any month-end during the period $22,500,000 $17,100,000 $16.050,000 Note 7. Supplementary income Statement Information The Company has a noncontributory pension plan covering substantially all of its employees. The Com-pany funds pension costs accrued. Pension costs were $480,000 for 1982, $480,000 in 1981, $445,000 in 1980, including amortization of unfunded prior service costs (approximately $718,300 as of January 1,1982) over a twenty-year period. i Pertineri pension plan information is as follows: January 1. i 1982 1981 1980 The actuarial present value of accumulated plan benefits: Vested $ 5,793,300 $ 5,589,000 $ 5,052,800 Non Vested 111,300 130,900 152,000 l $ 5.904,600 $ 5,719,900 $ 6,104,800 Net assets availab!e for benefits $10,251,700 $ 8,879,400 $ 7,977,989 i Assumed rate of return on plan benefits 6%% 6%% _ 5%% Maintenance expense, depreciation, and local property and other taxes not based on income which were charged to operating exoenses are stated separately in the income statement. Rents and advertising costs are not significant. No royalty or research and development expenses were incurred. Note 8. Capacity The Company owns 7% of the common stock. of Maine Yankee. Under purchased power arrangements, the Company is entitled to purchase 7.3% (approximately 6.9% af ter June 1983) of the output of Maine Yankee, and is obligateo to pay a like percentage of Maine Yankee's costs regardless of the level of electrical output. A Maine law enacted in 1982 requires that Maine Yankee submit a plan for the eventual decommissioning of the plant for approval by the MPUC, and that amounts being collected for that purpose be set aside in a segregated trust fund. As part of the decommissioning plan, each sponsor of Maine Yankee is required to acknowl edge ! responsibility for its share of the cost of decommission;ng the plant (currently estimated at $57.6 million in ! 1980 dollars). Maine Yankee's purchased power costs include an amount estimated to provide such decommis-sioning funds over the remaining life of the plant, and the Company's share of such costs (approximately
$133,000 annually) is included in customer rates.
t 30
The Company owns 14.2% of the common stock of MEPCO, and is entitled to approximately 2% of a pur-chased power contract between MEPCO and the New Brunswick Electric Power Commission. To the extent that MEPCO's revenues from transmission services are insuf ficient to meet its expenses, the Company and the other participants pay MEPCO's costs based upon their relative system peaks. Information relating to the above purchased power arrangements and condensed financial information of Maine Yankee and MEPCO is as follows: MAINE YANKEE MEPCO Sales Contract Term 1973-2003 1976-1985 Capacity Entitlement 61 MW (58 MW af ter June 30.1983) 2.7 MW 1982 1981 1980 1982 1981 1980 (Dollars in Thousands) Operations: As reported by investee - Operating revenues $110,000 $102.650 $ 84,245 $111,522 $139,292 $111,604 Depreciation $ 11.295 $ 9,031 $ 8,319 $ 734 $ 734 $ 735 Interest and preferred dividends 16,223 18,037 16,585 895 1,044 1,270 Other, net 76,005 68.884 52,767 109,765 137.377 109,453
$103,523 $ 95,952 $ 77.671 $111,394 $139,155 $111,458 Earnings applicable to common stock $ 6,477 $ 6,698 $ 6,574 $ 128 $ 137 $ 146 Amounts reported by the Company Purchased power costs S 6,071 $ 5,077 $ 4,556 $ 178 $ 167 $ 590 Equity in net income (468) (468) (468) (18) (24) (24)
$ 5,603 $ 4,609 $ 4,088 $ 160 $ 143 $ 566 Financial Position:
As reported by investee - Plant in service $269,812 $262,315 $246,921 $ 18,589 $ 18,589 $ 18,588 Accumulated depreciation (79.305) (69,837) (61,803) (8,676) (7,942) (7,207) Other 164.284 135,950 111,946 16,900 13.208 19,719 Total assets $354,791 $328,428 $297,064 $ 26,813 $ 23,855 $ 31,100 Less - Preferred stock 10,796 11,295 11,980 - - - Long-term debt 139,575 129,862 134,823 8,580 9,240 9,900 Other liabilities and deferred credits 137.024 120.010 83.209 17.206 13.515 20.027 Net assets $ 67,396 $ 67,261 $ 67,052 $ 1,027 $ 1.100 $ 1,173 Company's reported equity - Equity in net assets $ 4,718 $ 4,708 $ 4,694 $ 146 $ 156 $ 167 Adjust Company's estimated to actual ( 15) ( 18) (5) 9 10 5
$ 4,703 $_4,690 $ 4<689 $ 155 $ 166 $ 172 The Company purchases energy pursuant to an agreement with Boston Edison Company from its Mystic Unit No. 7, a b92 MW plant which can be fueled by either oil or natural gas. Purchases under the contract were at a level of 30 MW for the power year ended October 31,1980,40 MW for the power year ended Ccto-ber 31,1981,85 MW for the power year ended October 31,1982, and will be 95 MW from November 1,1982 until the contract terminates on October 31,1984. The Company's share of non-fuel related expenses under this contract were $2,7 million in 1980, $4.1 million in 1981 and $6.5 million in 1982. In 1982, portions of the power purchased under this contract were resold to other New England utilities.
The Company owns 8.333% (50 MW) of the oil fired 600 MW Wyman No. 4 unit. The Company's propor-tionate share of the direct expenses of this unit is included in the corresponding operating expenses in the Statements of income, included in the Company's utility plant are the following amounts with respect to this "" December 31, December 31, 1982 1981 Electric plant in service $16,674,246 $16,429.652 Accumulated depreciation (2,174,915_) (1,518 &53)
$14,499,331 $14,910,799 31
Not39. Construction The Company is engaged in an ongoing construction program the major portion of which is an investment in the Seabrook nuclear units, a jointly-owned electric generating facility being built by Public Service Company of New Hampshire ("PSNH"). In December 1978 the Company purchased a .37249% interest (8.6 MW) in the Seabrook nuclear units, and acquired an additional 1.80142% interest (41.4 MW) during the period January 31,1981 to January 2,1982. The Company's participation in the project is summarized below: Under construction at December 31,1982: Construction and initial core nuclear fuel costs exclusive of allowance for funds $43,069,000 Estimated for completion (Unit 1 - December 1984, Unit 2 - July 1987): Construction and initial core nuclear fuel costs exclusive of allowance for funds 40,706,000 Total $83,775,000 The above estimates for completion are based on the latest estimates of the project's cost furnished by PSNH. See also Note 10 for a further discussion of this project. One of the projects in which the Company had an ownership interest was the New England Power Com-pany nuclear units originally p!anned for Cnarlestown, Rhode Island, at the site of an abandoned naval base. Ef forts to obtain the site were unsuccessful, and the lead owner's parent company determined that the capaci-ty from the units was not required to meet its system's fif teen year corporate plan. Accordingly, in Decem-ber 1979 the lead owner announced the cancellation of the project. In an August 1980 rate order, the Com-pany received approval from the MPUC to recover over a five year period its investment in the project less any salvage credits. As part of its April 8,1982 rate order the MPUC disallowed recovery of the unamortized amount of the AFDC portion of this investment which amounted to $239,849. Consequently the Company has charged to 1982 earnings this amount of its investment in the NEPCO nuclear units which reduced 1982 earnings by S.08 per share. This charge is shown in other deductions on the Statements of Income. Note 10. Contingencies Seabrook - As discussed in Note 9 above, the Company has a 2.17% interest (50 MW) in the Seabrook nuclear units. Construction of the Seabrook units has required numerous approvals and permits from various state and federal regulatory agencies. The process of obtaining these approvals and permits has been long and complex and has been opposed consistently by a number of intervening groups. Opposition to the project has in-cluded demonstrations at the Seabrook site. The project also has been plagued by lengthy delays which have resulted in greatly increased costs. Court appeals and administrative proceedings are continuing, and further appeals and proceedings are possible. On November 30,1982 PSNH issued a revised estimate of the cost and schedule for completion of the pro-ject. The cost (exclusive of AFDC and initial nuclear fuel) was estimated at approximately $3.54 billion, or about 43% higher than the most recent prior estimate of approximately $2.47 billion, issued in April 1981. The revised estimate of the schedule inriicated that Unit 1 would be completed in December 1984 and Unit 2 in March 1987, instead of February 1984 and May 1986, respectively, as estimated in April 1981. The revised estimates are being reviewed and evaluated by an independent consultant retained by PSNH. As a result of the revised estimates, the participants agreed in December 1982 that the construction level on Ur.it 2 will be held at a reduced level for 1983, which action will cause a relatively slight additional increase in the cost of the project and a modest additional delay in completion of Unit 2. Financing the construction of the Seabrook nuclear units has been and continues to be a major challenge for PSNH, the Company, and most of the other participants. Further delays and increases in the cost of the project could occur for a number of reasons, including difficulties in acquiring the necessary construction per-mit extensions or the operating licenses for either of the units from the Nuclear Regulatory Commission, the failure for any reason of some of the participants to fulfill their contractua! commitments to pay their share of the construction costs, additional substantial revisions to the cost estimates, the ef fect of ongoing and possible future regulatory proceedings with respect to individual participar,ts' involvement in the project, and other factors. The incurrence of such further delays and cost increases would aggravate any difficulties being ex-perienced by the Company and other participants in financing the project. 32
In addition, the timely inclusion of Unit 1, when it becomes operational, in the Company's rate base would substantially improve the Company's cash flow. Any difficulties or delay experienced in receipt of the necessary MPUC approval would further increase the Company's financing requirements. At December 31,1982, the Company's investment was $40.4 million for Unit 1 and common facilities (including AFDC of $7.6 million) and $12.6 million for Unit 2 (including AFDC of $2.4 million). If future developments led to the cancellation of either or both of the units, the Company would apply to regulatory authorities (principally the MPUC) to amortize its investment over an appropriate future period and recover such investment through customer rates. The Company cannot predict whether and to what extent recovery of the Company's investment would be permitted. The most recent policy of the MPUC, as indicated in Note 9 with respect to the NEPCO project, has been to disallow the recovery in customer rates of the AFDC por-tion of cancelled projects. Note 11. Unaudited Quarterly Financial Data Unaudited quarterly financial data pertaining to the results of operations are shown below: Quarter Ended March 31 June 30 Sent.30 Dec.31 (Dollars in Thousands Except Per Share Amounts) 1982 E!ectric Operating Revenues $20,590 $18,957 $19,971 $20,824 Operating locome 1,924 2,503 2,885 2,381 Net income 1,102 1,268 2,128 1,914 ' .38 .69 .61 Earnings Per Share of Common Stock' .32. 1981 Electric Operating Revenues $22,315 $19,520 $19,300 $19,502 Operating income 2,163 1,436 1,973 2,146 Net income 1,038 428 873 1,587 Earnings Per Share of Common Stock * .38 .11 . 3_1 _
.63
- Individual quarters recomputed bas'ed on weighted average common shares outstanding during the year.
Nots 12. Unaudited Information On The Effects Of Changing Prices The following supplementary information is supplied in accordance with the requirements of the Statement of Financial Accounting Standards No. 33, Financial Reporting and Changing Prices. This statement reqtires adjustments to historical costs to estimate the ef fects that general inflation (constant dollar) and changes in specific prices (current cost) have had on the Company's results of operations and the shareholders' invest-ment. The disclosure of both methods is required by the Financial Accounting Standards Board because there is presently no consensus on which method of reporting better portrays the effects of changing prices on the operations of business enterprises. These data are not intended as substitutes for earnings reported on a his-torical basis; they do, however, offer some perspective of the approximate ef fects of inflation rather than a precise measurement of the effects. Constant dollar amounts represent historical cost stated in terms of dollars of equal purchasing power, as measured by the Consumer Price Index for all Urban Consumers (CPI-U). The current cost of plant was de-termined by indexing each major class of plant using the Handy-Whitmar index of Public Utility Construction Costs. Current cost does not necessarily represent the replacement cost of existing productive capacity since utihty plant is not expected to be replaced precisely in kind. The current year's provisions for depreciation on the constant dollar and current cost amounts of utility plant were determined by applying the Company's de-preciation rates to the indexed plant amounts. Current cost amounts reflect changes in specific prices of plant from the date the plant was acquired to the present. They dif fer from constant dollar amounts to the extent I that specific prices have increased more or less rapidly than the general rate of inflation. Fuel inventories, the cost of fuel used in generation, and the energy component of purchased power costs have not been restated from their historical cost in nominal dollars. The fuel adjustment clause limits the re-covery of fue! and purchased power costs to actual cost incurred. For this reason fuel inventories are effec-tively monetary assets. 33 ' l l
Materials and supplies were treated as a monetary asset due to the fact that they are subject to rapid turn-over. The Company believes the historical cost of this item adequately represents its current cost. Income tax expense was not adjusted because only historical costs are deductible for income tax purposes. Under current rate-making policies prescribed by the MPUC, only the historical cost of utility property is included in the rate base upon which the Company is allowed to earn a return. Therefore, the cost of plant stated in terms of constant dollars or current cost that exceeds the historical cost of plant is not presently recoverable in rates, and accordingly has been adjusted down to its net recoverable cost. During periods of inflation, the holding of monetary assets such as cash and accounts receivable results in a loss of general purchasing power because such items will purchase less at a future date. The holding of mone-tary liabilities such as long-term debt results in a gain of general purchasing power because the amount of money required to ultimately settle the liabilities represents dollars of diminished purchasing power. The re-duction of utility plant to net recoverable cost should be offset by the gain from the decline in purchasing power of net amounts owed. This gain results from the Company's substantial use of debt financing and it should be noted that this is strictly an economic concept and that such gains will never be realized. Statement of Earnings Adjusted for Changing Prices for the Year Ended December 31,1982 (in Thousands of Average 1982 Dollars) Constant Dollar Current Cost Earnings Applicable to Common Stock, as Reported $ 5.677 $ 5.677 Erosion of Common Stockholders' Equity Because of Changing Prices: Cost in excess of the original cost of productive facilities not recoverable in rates as depreciation
- Reported as an additional provision for depreciation 4,537 5,503 Reported as a reduction to net recoverable cost 119 3.286 4,656 8,789 Excess of specific price changes in the current year over changes in the general level of prices -
(4,133) Total amount not specifically recoverable in rates 4,656 4,656 Gain frora decline in purchasing power of net amounts owed including preferred stock (3,119) (3,119) Net erosion of common stockholders' equity 1,537 1,537 Earnings Applicable to Common Stock, as Adjusted $ 4,140 $ 4,140
- At December 31,1982, constant dollar and current cost of property, plant and equipment, net of accumu-lated depreciation was $210,289,000 and $242,714,000 respectively, while historical cost or net cost recover-able through depreciation was $125,165,852.
The Statement of Earnings Adjusted for Changing Prices reveals a decrease in reported net income when de-preciation expense is adjusted for either general inflation or changes in specific prices. As noted earlier, the regulatory process limits the amount of depreciation expense recoverable through revenues to the historical cost of the Company's investment in utility plant. This level of depreciation produces cash flows which are inadequate to replace property in future years or to preserve the purchasing power of common equity capital invested. As a result, the Company must increasingly rely on the capital markets to provic'e necessary finan-cial resources. This further exposes the Company to the effects of inflation in the form of increased financing costs. Consequently, the Company incurs a purchasing power loss which can only be overcome by adequate rate relief through the regulatory process. While the rate-making process gives no recognition to the current cost of replacing property, plant, and equipment, based on past practices the Company believes it will be a!- lowed to earn on the increased cost of its net investment when replacement facilities are placed in service. 1 34
Five Year C:mparison cf Selected Supplement:ry Financit! D ta
.- Adjusted for Effects of Changing Prices (in 1982 Dolk:rs)
Year Ended December 31, 193 2 193.] 1_MQ 1979 1978 (Dollars in Thousands Except Per Share Amounts)
' Operating revenues:
Historical, as reported $80,604 $80,637 $66,694 $51.748 $42,627
' Adjusted for ' general inflation
$80,604 $85,521 $78,071 $68,767 $63,024
. Historical cost information adjusted for general inflation *-
Earnings applicable to common stock Historical $ 5,677 Adjusted for additional depreciation $ 1,140 Earnings per share applicable to common stock Historical _$ 2.00 Adjusted for additional depreciation $ .40 Current cost information*- Earnings applicable to common stock . adjusted for additional depreciation $ 174 Earnings per share applicable to common stock adjusted for additional depreciation $ ,06 Excess of increase in specific prices over increase in general price level $ 4,133 General information:
. Gain from decline in purchasing power of
$ 3,119
~
net amounts owed
- r Common stockholders' investment at year end*
Historical, as reported $41,794 Adjusted for general inflation $41,097 . Dividends declared per share Historical, as reported $ 1.54 $ 1.52 $ 1.52 $ 1.52 $ 1.46 Adiusted for general inflation $ 1.54 $ 1.61 $ 1.78 $ 2.02 $ 2.16 l High bid price per share in December Historical, as reported $ 13.25 $ 10.75 $ 10.25 $ 12.00 $ 14.125 Adjusted for generalinflation $ 13.25 $ 11.40 $ 12.00 $ 15.95 $ 20.88 Average consumer price index 288.9 272.4 246.8 217.4 195.4
'Information not required for years prior to 1982.
AUDITORS' REPORT To thm Stockholders and Board of Directors of Bangor Hydro-Electric Company: We have examined the balance sheets and statements of capitalization of BANGOR HYDRO-ELECTRIC COMPANY (a Maine corporation) as of December 31,1982 and 1981, and the statements of income, re-tained earnings and sources of funds for plant additions for each of the three years in the period ended December 31,1982. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
'In our opinion, the financial statements referred to above present fairly the financial position of Bangor Hydro-Electric Company as of December 31,1982 and 1981, and the results of its operations and its sources of funds ' for plant additions for each of the three years in the period ended December 31,1982, in conformity with generally accepted accounting principles applied on a consistent basis.
Boston, Massachusetts, ARTHUR ANDERSEN & CO. January 21,1983. 35
1 The REVENUE DOLLAR Where it Came from. . . where it went. . . I
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Residential 38.74 Fuel and Purchased Power 60.7! ' Commercial 26.6d Wages and Employee Benefits 8.6d Industrial Power 25.74 Interest and Preferred Dividends 11.54 Pubhc Agencies 5.0d Taxes 3.54 O*.her Utikties 1.9d Depreciation and Amortizatic.n 4.1d Street Lighting .1.7d Common oividends 5.44 Miscellaneous .44 Other operating Expenses 5.0d Retained Earnings 1.2d STOCKHOLDERS, STOCK PRICES, and DIVIDENDS At December 31,1982 there were 3,416,609 shares of common stock outstanding, an increase of 807,835 over year-end 1981. At year-end there were 9,446 common stockholders, residing in each of the f?ty states and some foreign countries. Residents of Maine account for 50o'o of the Company's stockholders and own 36% of the outstanding shares. Approximately 21% of the stockholders are participating in the dividend rein-vestment plan. The Company's common stock is traded over-the-counter and is quoted on National Association of Securities Dealers Automated Quotations System ("NASDAQ") under the symbol BANG. The table below sets forth the high and low bid prices for the common stock as reported by the National Quotation Bureau incorporated. The prices shown represent prices between dealers and do not include retail markup, markdown or commis-sion. They may not represent actual transactions. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter High Low Hiah Low Hinh Low Hiah Low 1982 11 1/4 91/2 11 1/8 97/8 11 5/8 10 1/8 13 1/4 11 1/2 1981 10 3/8 97/8 11 3/8 9 7/8 11 1/2 95/8 10 3/4 9 5/8 Cash dividends of S.38 per share on common stock were declared in each quarter of 1981 and the first two quarters of 1982, The rate was increased to S.39 per share for the last two quarters of 1982. Taxability of Dividends As indicated in a prior section of this report, the Company estimates that 100 percent of the dividends on both common and preferred stock paid in 1982 will be considered nontaxable for federal income tax pur-poses. 36
SIX YEAR STATISTICAL
SUMMARY
FROM 1977 THROUGH 1982 1982 1981 1980 1979 1978 1912 Electric Plant (000) Total Electric Plant $ 164,290 $ 140,064 $ 108,696 $ 103,704 $ 97,717 $ 86,026 Depreciation Reserve 39.124 36.324 33,929 32,459 30.066 28,239 Net Electric Plant ' .$ 125,166 $ 103,740 $ 74,767 $ 71,245 $ 67,651 $ 57,787 Capital Structure (000) L Bonds ..
$ 50,835 $ 51,005 $ 32,175 $ 32,345 $ 27,515 $ 25,260 Redeemable Preferred Stock 4,800 4,900 5,000 5,000 2,000 2,000 Preferred Stock 4,734 4,734 4,734 4,734 4,734 4,734 Common Stock 17,083 13,044 10,418 9,060 8,949 7,430 Amounts Paid in Excess of Par Value fa,185 11,422 9,019 7,836 7,668 4,843 Retained Earnings _ 8,526 7,500 7,880 8,799 8,600 8,027 Total Capitalization 1 102,133 $ 92,605 $ 69,226 $ 67,774 $ 59,466 $ 52 29_4 Capital Structure Ratios (%)
8 ends 49.8 55.1 46.5 47.7 46.3 48.3 Preferred Stock 9.3 10.4 14.1 14.4 11.3 12.9 Common Stock Equity 40.9 34.5 39.4 37.9 42.4 38.8 Summary of Operations (000) Operating Revenue S 80,342 $ 80,637 $ 66,694 $ 51,748 $ 42,627 $ 38,294 Fuel & Purchased Power 52,358 57,466 45,094 33,055 26,763 22,548 Operation & Maintenance 11,786 10,541 9,015 8,344 6,612 6,687 Depreciation & Amortization 3,500 3,413 3,111 2,814 2,201 2,095 Taxes 3,004 1,499 2,796 2,545 2,643 2.894 Other income (expenses) 2,398 297 (1,478) (456) 855 407 Bond Interest 5.680 4,089 2.514 2.089 1.872 1.718 Net income $ 6,412 $ 3,926 $ 2,686 $ 3,488* $ 3,391 $ 2,759 Common Stock Number of Stockholders-End of Year 9,446 8,263 7,653 7,535 7,479 6.841 Shares Outstanding End of Year . 3,416,609 2,608,774 2,083,600 1,821,023 1,789,827 1,486,027 Shares Outstanding- Average 2,842,862 2,226,718 1,833,979. 1,801,906 1,658,985 1,317,816 Earnings per Common , Share- Averag' S 2.00 $ 1.43 $ 1.06 .$ 1.63* $ 1.77 $ 1.75 i Dividends Declared r er f Common Share $ 1.54 $ 1.52 $ 1.52 $ 1.52 $ 1.46 S 1.41 l Production Sources in KWH (000) Hydro Generation 229,094 239,855 228,038 246,052 213,195 245,821 Fuel Generation 144,014 157,200 184,186 77,209 15,910 11,498 Purchased Power 998,180 985,349 1,010,481 1,112,676 1,108,416 977,400 Total Generated & Purchased 1,371,288 1,382,404 -1,422,705- 1,435,937 ' 337,521 1,234,719 Sales in KWH (000) Residential 406,210 386,673 394,472 383,945 369,989 349,869 Commercial 296,974 . 293,579 226,433 219,196 213,777 198,384 Other 557,685 588,501 688,690 723,252 646,765 580,679 Total 1,260,869 1,268.753 1,309,595 1,326,393 1,230,531 1.128 19_32 Total Non Interruptible Sales 1,091,595 1,063,847 -1,065,175 1,011,374 959.845 904.107 Revenue from Electric Energy Sales (000) Res;dential $ 31,187 $ 28,654 $ 23,817 $ 18,698 $ 16,171 $ 14,994 Commercial 21,434 16,179 13,490 10.433 9,013 8,207 Other 27,680 ' 35,250 29,015 22,328 17,152 14,764
$ 80,301 $ 80,083 $ 66,322 $ 51,459 $ 42,336 $ 37,965 Total ,
Residential Customer Data Average Number of Customers 67,341 66,606 65,768 64,958 64,666 62,371 l i Kilowatt Hours per Customer 6,032 5,805 5,998 5,910 5,721 5.609 Revenue per Customer S 463.12 $ 430.20 $ 362.14 $ 287.86 $ 250.07 $ 240.40 Revenue per Kilowatt-hour 1.68L 7.41 d 6 04/ 4.876 4 _ .37( 4.29/
- Includes cumulative ef fect of change in accounting principle of $1,043,000 ($.58 per chare) and $658,729 ($.36 per share) attributable to the amount of fuel that would have been deferred at December 31,1978 had the current fuel regulations been ef fective at that date.
37
r _. BANGOR HYDRO-ELECTRIC COMPANY BULK RATE 33 STATE STREET U.S. POSTAGE BANGOR, MAINE 04401 PAID Bangor, Maine Permit No. 651
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