ML20248C984
| ML20248C984 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 09/26/1989 |
| From: | Jonas S MASSACHUSETTS, COMMONWEALTH OF |
| To: | NRC COMMISSION (OCM) |
| References | |
| CON-#489-9228 ALAB-920, CLI-88-010, CLI-88-10, OL, NUDOCS 8910040086 | |
| Download: ML20248C984 (197) | |
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r UNITED STATES OF-AMERICA 89 SEP 27-' A10 :48.
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~before the NUCLEAR REGULATORY COMMISSION ~
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PIIBLIC SERVICE COMPANY OF
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Docket No.(s)
NEW HAMPSHIRE, EI AL.
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50-443/444-OL
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(Financial Qualifications).
'Seabrook Station, Units 1 and 2)
)
. September ~ 26,'1989
)
)
RESPONSE OF THE MASSACHUSETTS ATTORNEY GFJERAL TO THE COMMISSION'S ORDER OF AUGUST 2L 1989 On August 21, 1989 the Appeal Board certified to'the
' Commission the petition of the Massachusetts Attorney General
(" Mass AG") to waive the public utility exemption of the
~ financial qualification rules for: full power operation of Seabrook.
Public Service Co. of New Hampshire-(Seabrook Station, Units 1 and 2), ALAB-920, 30 NRC
("ALAB 920").
The Appeal Board reversed the Licensing Board's denial of the Mass AG's petition and concluded that it had satisfied all of the requirements under 10 C.F.R. S 2.758(b) and the l
Commission's low-power ruling, CLI-88-10, for a waiver of the i
financial qualifications regulations.
ALAB-920 at 27.
Egg Public Service Co. of New Hampshire (Seabrook Station Units 1 and 2), LBP-89-10, 29 NRC 297 (1989).
89i0040086 890926 PDR ADOCK 05000443-g PM bh
i All of the preliminary rulings having been made, the Commission must now decide whether it will allow the issuance of a full-power operating license to the only utility since the Great Depression to enter bankruptcy and one which is not now and cannot for the foreseeable future recover any of the costs of construction or operation of its nuclear plant.
The Staff, the Applicants and the Licensing Board have so skewed the arguments as to conclude that this remarkable situation does not even bear further inguir.y.
In fact, the bankruptcy of PSNH, the circumstances under which the business of the debtor will emerge from bankruptcy and the operation of the New 1
Hampshire anti-CWIP all operate to provide, at this time, no assurance that the debtor will not, because of its financial difficulties, be under pressure to take safety shortcuts.
ARGUMENT A.
THE BAP JPTCY PRESENTS SPECIAL CIRCUMSTANCES WHICH PRECLUDE ASSURANCES THAT THE DEBTOR CAN OPERATE SEABROOK WITHOUT PRESSURES TO TAKE SAFETY SHORTCUTS.
CLI-88-10 created a three part test for waiving the i
financial qualifications exemption a) the petition must present "special circumstances" not considered either explicitly or by necessary implication in the 1984 rulemaking, 49 Fed. Reg-35747 (September 12, 1984);
b) those special circumstances must undercut the rationale for the rule which was that electric utilities can and inevitably do recover the costs of construction and operation through the ratemaking process; and 1/
N.H.
Rev. Stat. Ann. 378:30a.
0 c) the special circumstances would undermine assurancesLthat a licensee would not be under i
pressure lto take safety shortcuts, l
28:NRC at 595-599.
L The Commission has already decided,.and rightly so, that u
~PSNH's status as a debtor-in-possession is a "special L
- circumstance." 128 NRC at'597.
The second prong of the test.is-met by virtue'of the operation of the anti-CWIp law and the effect of'the bankruptcy on the extent and timing of any rate recovery of the construction and operating costs of Seabrook.
See parts B and C, infra.
It is the third prong which the' Appeal Board unfortunately overlooked'in ALAB-920.
As the Commission put it in CLI-88-10:
The reason for conducting a financial qualifications-review and requiring a finding of. financial
-qualifications is solely to provide'some added-assurance that a license would not, because of financial difficulties, be under pressure to.take some safety shortcuts
. Shortcuts in safety at full power conceivably could avoid shutdowns or derating and thereby contribute to greater plant availability and revenue from power sales.
28 NRC at 600.
Bankruptcy is the paradigmatic case for a licensee being under pressure to take safety shortcuts.
The utility is unable to meet all of its creditor obligations and has been stretched beyond the breaking point.
No more powerful example of a company encountering severe i
pressures to cut corners can be imagined.I 2/ 'The financial pressures under which the debtor operates, according to the debtor itself, have already caused it to reduce its employees to a " bare bones" work force and threatens its service to customers.
See Complaint For Injunction Against Involuntary Rate Case To prevent Interference With Chapter 11 Case, filed January 26, 1989 in U.S. Bankruptcy Court, 11 26, j
L34, (Exhibit A hereto).
' I
I l.
The Appeal Board overlooked the following points:
- first, the pressure felt by a bankrupt company to cut costs exists even it it were recovering, through the ratemaking process, construction costs and operating expenses.
Because the susiness is in dire need of additional funds there is great pressure either to reduce actual expenses or to increase kilowatt hours per measure of expense or both.3#
In other words, the utility will have an incentive 1) to lower expenses by curtailing operating activities or deferring or eliminating maintenance and repair functions; 2) to increase the kilowatt hours per measure of costs by unwisely extending the reactor to avoid shutdown or derating; or 3) to do both.
Second, the purpose of any financial review is to provide assurance of the absence of cost cutting oressure.
28 NRC at 600.
It follows inexorably that a rule waiver petition that demonstrates the existence of that pressure (here by virtue of the bankruptcy) must be granted.
Once granted, the Applicants must demonstrate in the resulting proceeding that they have taken steps to mitigate those pressures.
At the present juncture, however, whatever measures Applicants may take are purely speculative.
The only certainties are the bankruptcy 1/
The Commission came to the same conclusion in CLI-88-10.
28 NRC at 600, The Steif noted in IR 50-443/88-13 at 19 that cost control measures !.sve been instituted and that " design changes are very critically scrutinized for cost impact and only these items that are required to support startup and power i
operations are approved." - _ _ _ _ _ _ _ _ _
.}'
J and.the pressure to cut. costs.SI Finally, the most recent' quarterly SEC filing by.the debtor confirmsethat financial difficulties will exist even beyond any emergence of the debtor from bankruptcy.
PSNH, Form 10-Q for Quarterly Period Ended June 30, 1989 (Exhibit B hereto).
The financial pressures even in the ordinary operation of the debtor's business include'a five-year $327 million construction program, the possibility of significantly greater expenditures to comply with environmental laws, a 1.8% decrease in operating revenues coupled with a 12.3% increase in operating expenses in
.the previous six months and, the continued effect of
-accumulated inflationary costs.
Exhibit B at 11, 16-19.
When coupled with the possibility that within 2 weeks the debtor may be-ordered to begin paying enormous interest costs to the Third 4/
The-Applicants put the cart before the horse in complaining that the Appeal Board ignores the self-serving Affidavit of the Chairman and CEO of New Hampshire Yankee, Apolicants' ResponsR To The Commission's Order of Aug, 22. 1989. at 13-15.
Once the record is opened on the Applicants' financial qualifications, Mr. Brown is free to provide whatever reassurances he wishes.
Until that time, however, his statements are irrelevant.
Moreover, Mr. Brown's affidavit is misguided because it relies on no circumstances of staffing or oversight unusual to Seabrook.
In effect, the Applicants urge the Commission to do here what it refused to do in the 1984 rulemaking -- find that regulatory controls generic to all plants mean that financial qualification reviews are never safety related and need never be undertaken.
Apolicants' Response at n. 18.
i Finally, the Applicants suffer from short term memory loss in referring in the affidavit to "the rigidity of license conditions" and "the existence of NRC onsite inspectors."
Applicants Response at 14.
Notwithstanding the existence of these controls, Seabrook's low-power license was suspended when its operators ignored them.
SRe Resoonse of Mass AG to ApplicantsAcolication For An_ Exemption From The RecuiramRRt Of 10 C.F.R. Part 50. Appendix E.
Section IV.F.1.,
filed with the. Commission on August 21, 1989 at 8-11, Exhibit A.,.
Mortgage Bondholders, the clear picture is one of a company under extraordinary financial pressure to cut ;orners-.
Exhibit B at 16.E B.-
RECOVERY OF THE CONSTRUCTION AND OPERATING COSTS OF;
+
SEABROOK WILL OCCUR OUTSIDE OF THE NORMAL RATEMAKING PROCESS AND WILL BE SIGNIFICANTLY AND MATERIALLY DELAYED.
ALAB-920 focussed on the effect of the regulatory delay in cost recovery' caused by the operation'of anti-CWIP coupled with
.PSNH's bankruptcy.
ALAB-920 at 19-29.
While these
-circumstances require a rule waiver, Egg Part C infra, ALAB-920 did not-consider a more fundamental issue.
Because of the existence of the bankruptcy, the recovery of the costs of Seabrook construction and operation can occur only by virtue of a rate agreement with the State of New Hampshire, ratified by the11egislature and effective when the new company emerges from bankruptcy.
The timing of'that agreement, and subsequent rate
~
increases, will in all likelihood be independent of the date a license issues for Seabrook.
Therefore, while the Appeal Board properly focussed on the effect of the delay in cost recovery on a ban',.
pt utility operating a nuclear plant, it was too narrowly focussed on anti-CWIP as the source of that delay and should have examined more broadly the effect of the various reorganization plans on the timing and extent of rate recovery.
5/
The suggestion by the Applicants that the debtor's minority status on the Executive Committee of the Joint Owners is somehow significant is directly contrary to the terms of their license.
Applicants' Response at 14.
The Appeal Board found, based on the license, that PSNH "has exclusive responsibility and control over the physical construction, operation and maintenance of the [Seabrook] facility."
AI.AB-920 n.30.,
l l
i At present, four plans are being considered in bankruptcy court:
attempted acquisitions by New England Power and New England Electric Systems ("NEES"), Northeast Utilities ("NU")
i 1
and United Illuminating ("UI") and a Joint Plan by the debtor and both official bankruptcy committees.
All of these plans are expressly contingent on the consummation of rate agreements between the State of New Hampshire and the "new-PSNH."
NU Plan, VII 7. 3, (Exhibit C hereto); NEES Plan, VI.A.9, (Exhibit D hereto);
UI Plan VIII.B.9 (Exhibit E hereto); Joint Plan VII.A.1-4 (Exhibit F hereto).
The rate agreements themselves provide for modest, temporary increases followed by yearly increases.
NU Rate Agreement T 5 (Exhibit G hereto); NEES Rate Agreement 4 5 (Exhibit H heteto); Joint Plan Rate Agreement 1 5 (Exhibit I hereto).
The temporary increases do not provide revenues to the utility until after the reorganization plan has been fully and finally approved by the courts and, with respect to the takeover plans, the necessary acquisitions are complete.
NU Rate Agreement 5 2; NEES Rate Agreement 4 2(a);
Joint Plan Rate Agreement 1 5(a)(i).
The subsequent yearly increases do not begin until January 1, 1991 at the earliest.
NU Rate Agreement 4 5(a)(ii); NEES Rate Agreement 4 5(a)(ii);
Joint Plan Rate Agreement T 5(a)(ii).E In short, the bankruptcy has triggered an entirely different rate setting process than that predicted by the S/
Legislation is necessary to implement these agreements.
NU Rate Agreement 4 13; NEES Rate Agreement T 13; Joint Plan Rate Agreement T 13. _ _ _ _ _ _ _ _ _ _ _ _ _ _
Commission in the 1984 rulemaking.
Rates will likely be increased at the earliest only in conjunction with and at the time of the approval by the bankruptcy court of a plan for reorganizing the debtor, irrespective of the date of Seabrook licensure.
If licensure were to occur prior to the completion of the bankruptcy a potentially very lengthy time period would exist in which a bankrtipt utility would have a full-power operating license with no or virtually no rate recovery of the costs of construction and operation of Seabrook.
When coupled with the financial pressures under which a company in bankruptcy operates, this delay provides even greater incentives to cut safety corners.
The Commission should conclude that the special circumstance of pSNH's bankruptcy hes undercut the rationale for the rule and, as a result of delays in cost recovery, has increased existing pressures to compromise safety.
Finally, it is likely that the rates, even when approved, will be inadequate to alleviate cost-cutting pressure.
PSNH contends that its bankruptcy came about because " traditional utility ratemaking practices" had prevented the recovery of the cost of its Seabrook investment.
Exhibit B at 11.
Even now, pSNH believes that any negotiated rate increases will be insufficient:
The essential element of a consensual plan is agreement as to the level of future rate increases.
In the course of negotiations it has become apparent that no such agreement can be reached unless it is assumed that the Seabrook nuclear generating plant will commence operation 1 L__________
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within a reasonable time.
Even on that assumption,.to date the State has endeavored to limit rato increases virtually to the anticipated rate of i Lation, thereby affording to the Company's
.curity holders recovery of only a small fraction of the investment in the Seabrook plant.
The State would have the security holders, rather than the customers, bear almost all of the expense of Seabrook even though the customers would receive this badly needed power.
In the negotiations the Company has been attempting to achieve a more equitable allocation of the Seabrook costs between its security holders and customers.
Exhibit B at 7.2/
That statement in itself, is fundamentally inconsistent with a rule:
promulgated on the Commission's belief that case-by-case review of financial qualifications for all electric utilities at the operating license state is unnecessary due to the ability of such utilities to recover to a sufficient degree, all or a portion of the costs of construction and sufficient costs of safe operation throuqh the ratemaking process.
49 Fed. Reg. at 35748.
The rule should be waived C.
THE APPEAL BOARD WAS CORRECT IN FINDING THAT COST RECOVERY DELAY DUE TO ANTI-CWIP DOES NOT DISAPPEAR UPON LICENSURE.
The Appeal Board properly found, based on an examination of New Hampshire utility law, that delay in the recovery of Seabrook costs, even after anti-CWIP uas satisfied, was to be 7/
See alan Response Of Equity Committee To PSNH Procedures Motion And Request That The Court (1) Modify Prio; Orders Permitting Potential Purchasers of PSNH Assets to Propose And Pursue Plans of Reorganization, (2) Authorize The Proponents Of The Joint Plan To Proceed With The Confirmation Of The Joint Plan, And (3) Impose A Moratorium On All Other Plans, filed in bankruptcy court on September 18, 1989, 1 18 ("[t]he agreement between the State and NEES has impaired the value of PSNH, has wrongfully interfered with the bidding and reorganization process, and has the potential of depriving shareholders of I
hundreds of millions of dollars.") (Exhibit J hereto).
-9 1
____-_D
expected.. ALAB-920 at 20.
Although the Appeal Board could not predict the length of.the delay,.it concluded that there was a virtual. certainty of some period of-delay.
ALAB-920'at 22.d' That delay would only further. increase the :already. existing pressures on the debtor'to cut corners.
Although the' Appeal Board's analysis came almost verbatim-
'from a memorandum provided by Applicents' counsel, age Applicants'. Response To Appeal Board Questions At Oral Argument, July-25, 1989, Exhibit A (Exhibit K hereto),.the Applicants now claim error.
First, they, along with the Staff, argue that the Commission considered regulatory delay in the 1984 rulemaking and, therefore, its presence here does not create grounds for a waiver.
Ap_plicants' Response at 9-12; Staff Response at 6-10.
They ignore the fact that the Commission.in CLI-88-10 expressly held that delays and temporary: shortfalls.in conjunction with a utility's bankruptcy R/' The Mass AG believes that the Appeal Board erred in its legal analysis of when the,New Hampshire law would be satisfied.
In brief, the New Hampshire PUC is likely to interpret the law consistent with the familiar concept of "used and useful" and will not adopt the " net generation to the grid" theory.
Significantly greater power levels and warranty runs are required to demonstrate that the new plant is "used and useful."
Because of the page limitations on this filing and because SAPL, in its filing, will address this issue, the Mass AG adopts the arguments of SAPL herein.
I I - _ _ - _ _ _ -. _ _ _ _ - _ _ _ _ _ - _ _ - _ _ - _ _ _ _
l is indeed "very unusual and serious."
28 NRC at 598.E Second, the Applicants and the Staff require the Commission to willingly suspend its disbelief when they argue that nothing prevents the Applicants from filing for rate increases well in advance of power levels above 5%.
Applicants' Response at 12; Staff Response at 8.
What prevents that from happening, as the Applicants are well aware, is reality.
A filing which reveals to the New Hampshire public what it will really cost PSNH (and the public if the plant operates) to recover its investment and to run Seabrook would create a political firestorm in New Hampshire.
More to the point it would end any hope of a consensual reorganization plan for PSNH or the completion of the bankruptcy proceedings within the forseeable future.
Since the decision to make such a filing is in the control of the Applicants, the Commission should draw the appropriate inferences from the fact that no filing has been made or announced.
Finally, the Staff predictably claims that the argument never should have been considered by the Appeal Board in the first place because it was not raised before the Licensing 2/
The Applicants at 10-12 of their Response completely misread the passage from CLI-88-10 they set out at 9-10.
In that passage, the Commission began by analyzing the anti-CWIP situation as analogous to any utility that confronts a regulatory delay in recovery of capital costs and expenses.
But then the Commission stated that such delay for a bankrupt constituted special circumstances.
Thus, instead of being limited, as the Applicants would have it, only to a situation where anti-CWIE applies to a low oower license, the cited passage runs to any kind af. Leyenug delav at any power lev _gl as lona as the anolicant is bankrupt!
The fact, stressed by the Applicants, that, if no license ever issues, Seabrook low power expenses will never be recovered was not mentioned in this passage and is not relevant to understanding the Commission's analysis.
i
~
-l Board.
Staff Respgnsa at 4-6.
Egg also ADolicants' Response-n.9.
The' claim is meritless.
First, the Appr.a1 Boaid has not only the authority'but also the obligation to consider sua sponte-serious safety, environmental, or security' issues.
'10 C.F.R. S 2.785(b)(2).
Egg Philadelphia Electric Co. (Peach Bottom Atomic power Station, Units 2 and 3), ALAB-509, 8'NRC 679 (1978).
Indeed the Appeal Board'may base its decision on grounds " completely foreign" to those relied upon by the Licensing Board, as long as the parties had sufficient opportunity to address the new issues.
Public Service Co. of New Hamoshire (Seabrook Station, Units 1 and 2), ALAB-422, 6 NRC 33, 42 (1977), aff'd CLI-78-1,
'7 NRC 1 (1978).
There can be no serious doubt that the Commission has already held, in CLI-88-10, that the absence of financial qualifications in a full-power setting is a-significant' safety matter.
28 NRC at 600.1E#
There can also be little doubt that the parties had sufficient opportunity to address the issues prior to a 1Q/
The Staff's claims to the contrary, Staff Rgap.onse at 11412, while clever, are mindlessly so and would make hash of the Commission's reasoning in CLI-88-10.
First, the Staff assumes away the delay in rate recovery by speculating about temporary rates.
Second, the Staff ignores the fact that no rate petition has been or is likely to be filed because of the banktuptcy.
Third, the Commission has already found that the ability to profitably cut corners at full-power by avoiding shutdowns or derating distinguish this case from the low-power one.
28 NRC at 600.
The amount of money and the safety risks are also significantly greater for full-power than for low-power.
Id.
The fact that these risks were not precisely quantified is beside the point.
The point is that the " safety rationale" alluded to in CLI-88-10 is very much in evidence here. _ _ - _ - _ _ _ _ _ - - _ -
l N,
decision.
They were thoroughly explored during oral argument and the1 parties were given the opportunity, taken by the Applicants, to' submit material in writing afterwards.11/
Second, the procedural context for the waiver petition is different from that-for.the, bulk of issues in the licensing proceeding.
The Licensing Board or Appeal Board, onLappeal of the denial of a waiver petition'by the Licensing Board,32#
can only certify the question to the Commission.
They are limited to a ruling that a prima facin showing has been made.
J10 C.F.R. S '2.758(d).
The Commission itself r.:y raise. issues
~and find facts not addressed by either of the Boards'below.
In fact, that is precisely.what the Commission did in CLI-88-10.by directly soliciting facts regarding the Applicants' low-power decommissioning plan and making its own factual findings independent of the lower boards.
28 NRC 581-582.
Sag public Service Cnspany of New Hamoshire (Seabrook Station, ll/
Any requirement that the Appeal Board have " specific facts" on which to launch its review,-seg Staff Resoonse n.6, has been satisfied as well.
The Appeal Board brief of SApL, explicitly relied upon by the Mass AG, raised these " specific facts" concerning the unti-CWIp law.
Brief On Behalf Of Seacoast Anti-pollution League On Appeal Of' Licensing Board Memorandum And Order Denying Financial Qualification Review Of Seabrook Joint Owners, April 13, 1989 at 12-13; Brief Of Massachusetts Attorney General In Support Of His Appeal Of The Denial Of His petition For A Waiver Of The Financial Qualification Rules For Full power Operation (LBp-89-10), April 21, 1989 at 2 n.l.
More specific facts, and those explicitly relied upon by the Appeal Board, came from the Applicants themselves.
Egg Exhibit K.
12/
San P_ublic service Company _of__New Hampshire (Seabrook
' Station, Units 1 and 2), ALAB-860, 25 NRC 63 (1987).
1 - - - _ _ - - _ _ _ _ _ - _ _ _ _ _ _ _ _
Units 1 and 2), CLI-88-07, 28 NRC 271 (1988).13' Third, the issues surrounding the operation of anti-CWIP are predominantly legal ones -- involving interpretations of New Hampshire law. A Even putting aside the exceedingly broad scope of review of the Appeal Board and the unique nature of a waiver petition, there is no reason to be concerned that the Licensing Board had no opportunity to address leaal issues which must be fully reexamined by the Appeal Board and the-Commission anyway.1E#
~
ll/
Of course, S 2.758(d) encourages the Commission to remand disputed factual issues to the Licensing Board, a process which should be followed here.
See Carolina Power & Licht Co.
(Shearson Harris Nuclear Power Plant), CLI-86-24, 24 NRC 769 (1986) (heari.ig rights on exemption requests).
14/
Indeed the Applicants saw fit to offer the opinion of one of their law firms in responding to the Appeal Board inquiry.
Exhibit K.
15/
The Commission should see through the Applicants' selective quoting from the transcript of the Appeal Board oral argument and reject the argument that the Mass AG disavowed the anti-CWIP argument.
Although the argument was not the Mass AG's principal one, it was expressly adopted, as well as thoroughly explored, during the oral argument, Tr. of July 12 oral argument at 84-85:
MR. TRAFICONTE:
Second point:
the SAPL issue with regard to the argument that perhaps has merit, and I underappreciated that merit, with regard to the timing of the anti-CWIP and :he regulatory rate gap I
that may, in fact, exist.
Whether it's a gap or a delay, but there still would be a period where you would have full-power license and no revenues.
I just want to repeat, if I was unclear, that our brief on this matter filed on April 21 at page two adopts the arguments made by SAPL in its pleadings.
If those arguments are sound I would certainly grab on to those coat tails.
JUDGE ROSENTHAL: 'And leaving nothing to chan[c]e.
l MR. TRAFICONTE:
I certainly don't want to indicate that silence is in some form of agreement with Mr. Dignan that we have waived the argument.
My point was, and I think it was clear on the record, I was stating how our petition is structured.
What the nature of our petition is. _ _ _ _ _ _ _ _ _ _.
4 I
1 CONCLUSION 6/
Forfall of the foregoing reasons,-the financial qualifications exemption should be waived with respect to full-power licensure of Seabrook Station.
The matter should be remanded to the Licensing Board with instructions to set a schedule for the filing of contentions.
Respectfully submitted, JAMES M.
SHANNON ATTORNEY GENERAL
' Stephen A. 6onas Deputy Attorney General Chief, Public Protection Bureau John Traficonte Assistant Attorney General Chief, Nuclear Safety Unit One Ashburton Place Boston, MA 02108 (617) 727-2200 Dated:
September 26, 1989 11/
The Staff's argument at 12-15 that it has authority to conduct essentially a threshold review of an applicant's financial qualifications to determine whether it should advise the Commission to waive the financial qualification exemption rule, is deeply circular.
Either an applicant is exempt or it is not.
If the Staff is aware of financial circumstances, like a bankruptcy, that would lead it to inquire further then the Staff, whether it likes on not, shares the Interveners' view that a prima facie case for waiver has been made out.
The Staff response in a contested proceeding should be to file for a waiver and not to proceed with an inquiry for the purpose of judging how bad or good things really are.
The Appeal Board made this same point when it stated that the issue of whether financial qualifications is material to licensing "cannot be determined by the staff's answer to the ultimate question.
ALAB-920 at 29 (emphasis in original).
The Staff just by P.QsiDs the financial question to the Applicants acknowledges the materiality of the issue and constructively, at least, sunnatts the Interveners' petition for waiver under UCS v. NRC, 735-F.2d 1437 (D.C. Cir. 1984).,
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EXHIBIT A
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UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE
)
Chapter 11 y
)
Case No. 88-00043 o
In re
)
Public Service Company of
)
Adversary Proceeding New Hampshire,
)
No.
)
Debtor
)
)
)
Public Service Company of
)
New Hampshire, Debtor and
)
Debtor in Possession,
)
)
Plaintiff
)
)
v.
)
)
The State of New Hampshire
)
and the State of New
)
Hampshire Public Utilities
)
Commission,
)
)
Defendants
)
)
COMPLAINT FOR INJUNCTION AGAINST INVOLUNTARY RATE CASE TO PREVENT INTERFERENCE WITH CHAPTER 11 CASE Plaintiff Public Service Company of New Hampshire ("Public Service" or the " Debtor") cor. plains against Defendants for an
~
injunction against an involuntary rate case that attempts to seize control over this chapter 11 case and its outcome away from this Court and that significantly interferes with and delays both the administration of this chapter 11 case and the Debtor's ability to negotiate, formulate, and consummate a plan.
In support thereof Public Service alleges:
arv:oe.no J
ALLEGATIONS COMMON TO EACH CLAIM FOR RELIEF Ihe Parties
(
1.
Public' Service is the Debtor and Debtor in Posscssion in this Chapter 11
- case, which Public Service commenced by a voluntary petition filed on January 28, 1988, and as such is the representative of the chapter 11 estate (the " Estate").
2.
The Debtor is an electric utility company whose retail distribution network is located entirely within the territorial boundaries of the State of New Hampshire.
3.
Defendant State of New Hampshire (sometimes referred to hereafter as. the " State")
is a governmental entity which is comprised of, and acts by and
- through, various
- agencies, including Defendant New Hampshire Public Utilities Commission, and is a party in interest in this chapter 11 case.
4.
Defendant New Hanpshire Public Utilities Commission
("NHPUC") is an agency of the State of'New Hampshire.
The NHPUC is charged with cserseeing the operations of State-regulated public utilities.
5.
Defendant State and Defendant NHPUC are each represented
~
by the State of New Hampshire Office of the Attorney General (the
" Attorney General").
The Attorney General has represented each Defendant in proceedings in the Bankruptcy Court and regularly advises each Defendant with respect to actions affecting the Debtor and the Estate and otherwise. uv:xw.so
d Jurisdiction
~ 6.
This Court has jurisdiction over this adversary proceeding under 28 U.S.C.
55 157 and 1334, in that it arises in and relates to the Debtor's Chapter ' 11 case and arises under title 11, including sections 105, 362, and 525 of title 11.
7.
This adversary proceeding is a core proceeding.
8.
Venue is proper in the this District under 28 U.S.C.
5-1409(a),
in that this ' chapter 11 case is pending in this District.
The Financial Backcround 9.
The Debtor owned and the Estate now owns a 35.56942%
interest in the Seabrcok Nuclear Generating Station ("Seabrook").
The Debtor's investment in Seabrook exceeds $2 billion.
10.
Over the course'of Seabrook's' construction,.the Debtor.
obtained financing for its construction ecsts a number of times.
In each case, when prior approval was required by New Hampshire law, Defendant NHPUC approved the financings as necessary.and for the public good.
11.
In 1979, Defendant State of New Hampshire adopted N.H.
Rev. Stat. Ann. 5 378:30-a, the so-called " anti-CWIP" law, which forbids utility rates to be based on any investment in construction work in progress ("CWIP") until the asset associated with the investment is providing service to customers.
The anti-
' CWIP law precluded the Debtor from including in rate base, and thereby earning a return on or recovery of, its investment in i
arvcxwe.ru ;
.)
w_-&
Seabrook'until it begins providing such service.
The result was to keep the Debtor's electric rates and therefore operating income too low to permit it to service the debt financings obtained to finance Seabrook construction.
After Defendants State of New Hampshire and NHPUC, based upon the anti-CWIP law, did not permit the Debtor to raise rates to meet debt service, the Debtor defaulted on some debt and filed this chapter 11 case.
Reorganization Plan Negotiations 12.
A consensual reorganization plan to solve the Debtor's financial difficulties can likely be accomplished only if the Debtor can recover in its rates a portion of its investment in Seabrook or its equivalent.
To that end, the Debtor has since before the beginning of this chapter 11 case attempted to find a j
means to avoid the negative effect of the anti-CWIP law on its revenues.
13.
Since filing its chapter 11 petition, the Debtor has announced both publicly and to the Defendants-that it has examined and considered several chapter 11 reorganization alternatives, including several to avoid the effect of the anti-CWIP law.
These include not only continued pursuit of Seabrook licensing and commercial operation but also a
corporate restructuring under which all retail assets and operations would be placed in a separate corporation, whose retail rates would remain under Defendant NHPUC's jurisdiction.
Under the restructuring alternative, the Debtor's. rates for wholesale sale i
arvcoe.su _ _ _ _ _ _ - _ _ _ _ _ _ - _ _ _ _ _ _ _ -
s4-4 of electricity and fer transmission services to the new retail-company would - be subject to the jurisdiction of the Federal
- Energy. Regulatory Commission.
14.
Also Jat '.various times.since filing chapter 11, the
- Debtor has attempted to ' reach an agreement with Defendant State of New Hampshire over'an increase in rates to recognize.a portion of the. Debtor's investment in Seabrook or its equivalent.
Through its representatives Defendant' State of New Hampshire has expressed, both publicly and to the Debtor, a determination to keep retail electric rates-low, which would minimize the Debtor's ability to achieve a consensual chapter 11 reorganization plan.
15.
Defendant State of New Hampshire, both publicly - and
- privately,. has announced vehement opposition to any chapter-11 plan providing for_-separation into two or more companies of the Debtor's retail and wholesale assets and operations.
- 16..On numerous occasions-before December 27,
- 1988, Defendant State of New Hampshire attempted to deter the Debtor -
from filing such a plan.
Before the Debtor filed its chapter 11
- plan on December 27, 1988, the Governor of Defendant State of New Hampshire publicly threatened to pursue legislation that would permit Defendant State of New Hampshire to expropriate or to reduce the value of the property of the Estate if the Debtor i-filed such a chapter 11 plan, threatened to take action before the federal Nuclear Regulatory Commission to stop Seabrook licensing efforts, and threatened to use other avenues available w punish the Debtor and thwart such a plan.
i arvem e.z u L.
[ o.
.T ]
4 17.
The Debtor filed such a chapter 11 plan with this Court i
I on December 27, 1988 (the " Plan").
The Plan provides for a corporate restructuring and transfer of assets and operations without the approval of Defendant IMPUC, which approval would normally be required outside of chapter 11.
The Plan is based on the theory that the Bankruptcy Code permits a plan to effect such a restructuring without Defendant NHPUC's approval.
The State Reaction 18.
On December 28, 1988, the day following the filing of the Plan, the Governor-elect of Defendant State of New Hampshire held a
press conference to announce what Defendant State's response would be to the filing of the Plan.
Characterizing the Debtor's attempt to seek FERC regulation as "an assault on the people of this state," the Governor-elect said that the State would " aggressively fight" the Debtor's decision.
The Governor-elect was joined at the press conference by the President of the New Hampshire Senate, by the Speaker of the New Hampshire House, and by three of the four members of the New Hampshire Congressional delegation, who all pledged support for these efforts.
The Governor-elect and others present announced they would pursue "all avenues available to oppose adoption of the Plan," including legal avenues, administrative avenues and State legislation to expropriate the property of the Estate through creation of a
"New Hampshire Power Authority,"
and federal l
l uvcoe.1n..
?
legislation to amend the Bankruptcy Code to prevent the corporate restructuring proposed in the Plan.
19.
On January 11,.1989, the Governor of Defendant St.'te of New Hampshire publicly announced that "we will no longer participate" in the negotiations as they had progressed to date, and would
- push for.
. resolution.
. through litigation and legislation."
20.
On January 11,
- 1989, the Attorney General sent bankruptcy counsel for the Debtor and publicized a letter, a copy of which is attached to this Complaint as Exhibit A, that stated, among other things, that Defendant NHPUC was, that very day, opening an investigation.of the Debtor's electric rates and instituting a proceeding to establish temporary rates.
21.
On January 11, 1989, based on a finding that the Debtor was earning a rate of return of only 1.73% in excess of the
. authorized rate, the NHPUC issued an " Order of Notice" cor.mencing an administrative investigation into the permanent rates charged by the bebtor and setting a hearing to determine temporary rates pending the outcome of the investigation (the " Involuntary Rate Case").
A copy of the Order of Notice is attached to this Co plaint as Exhibit B.
22.
The Involuntary Rate Case involves only an evaluation and setting of rates charged and to be charged before and during this Chapter 11 case.
The Involuntary Rate Case does not involve rates to be charged under a plan of reorganization pursuant to 11 uv::oe.:n
~
')
y' l'
l U.S.C. I 1129(a) (6) and does not involve inclusion in rate base of any of the Debtor's Seabrook investment.
23.
The NHPUC has not instituted a rate investigation or temporary rate case against the Debtor (other than to impler.ent the changes required by the anti-CWIP law) in at least 30 years.
24.
On January 17, 1989, legislation was introduced in the New Hampshire General Court (Senate Bill No. SB 205-FN-A) that would permit Defendant State of New Hampshire to expropriate property of the Estate and thereby prevent consummation of the Plan.
25.
On or about January 25,
- 1989, legislation was introduced in the United States Senate by New Hampshire Senators to amend the Bankruptcy Code for " Clarification" to prevent confirmation of the Plan to the extent it includes the proposed corporate restructuring.
The Adverse Effect On The Reorganization 26.
During 1987, the Debtor instituted cash conservation i
measures which resulted in the reduction of the number of employees to a " bare bones" work force.
27.
Preparation of any rate case, including the Involuntary
~
Rate Case, involves a significant investment of the Debtor's personnel, resources, and time, including both internal personnel and external advisors.
28.
The Debtor's personnel involved in the preparation of a rate case, including the Involuntary Rate Case, include many of arv:x>e.m _ _ _ _ _ _ _ _ _ _ -
l, the same personnel who are involved in the preparation and evaluation of rate scenarios necessary to negotiate a chapter 11 rate agreement or pursue the Plan and related rate cases.
29.
To prepare for the Involuntary Rate Case, the Debtor will have to divert internal personnel and external advisors involved in rate scenarios which are crucial to these matters.
1 The effect of the continuation of the Involuntary Rate Case and the diversion of key personnel in connection therewith is to interfere with the Debtor'ts internal ability to prepare and evaluate negotiating positions necessary to formulate and consummate a consensual Chapter 11 plan of reorganization.
30.
The Order commencing the Involuntary Rate Case set a date of March 21, 1989 for a hearing on temporary rates pending full investigation of the Debtor's rates.
The Order requires the Debtor's pre-filed direct testimony and exhibits regarding tenporary rates by March 14, 1989, and the voluminous materials required by law to present a case regarding permanent rates by May 10, 1989.
31.
To meet the deadlines established by the January 11, 1989 NHPUC
- Order, the De,btor will have to begin diverting internal personnel and external advisors no later than the last
~
week of January, 1989.
32.
The Debtor is informed and believes, and thereupon alleges, that the Defendants, both through NHPUC's oversight of the Debtor's operations and otherwise, are aware of the adverse uv::oe.m _ _ _ _ _ _ _ _ _ _ _ _ _ _ - _ _ - _ _ _ _ _ _ -
effects their actions will have on.. the Debtor, as described in the preceding five paragraphs.
33.
The Debtor is informed and believes, and thereupon alleges, that the purposes and effects of the commencement and continuation of the Involuntary Rate Case might include the following:
(a) to interfere with and delay the administration of this chapter.11 case and the Debtor's ability to conduct negotiations within a Chapter 11 framework to resolve plan and reorganization issues; (b) to exert improper self-help designed both to enhance Defendant State of New Hampshire's position with respect to any plan and to induce the Debtor to abandon the Plan or any other plan that would reduce the regulatory jurisdiction, of Defendant State of New Hampshire or Defendant NHPUC.
(c) to utilize non-Chapter 11 procedures. to force resolution of a Chapter 11 case and issues, including the issue of preemption of Defendant NHPUC's jurisdiction; (d) to punish the Debtor for filing and pursuing the Plan; (e) to reduce the Debtor's electric rates and therefore revenues to the Estate, thereby depressing the l
value of the Estate.
34.
Continuation of the Involuntary Rate Case will cause uvcoe.1n 1
+.
,._,s.
}h i
the' Debtor to ~ suf fer irreparable harm in the following ways,
-I I
among others:
(a) the Debtor will be deprived of the benefits of Chapter 11 protection,- in that the Defendant State of New Hampshire will be permitted to use a regulatory proceeding to
- punish, discourage, interfere
- with, or stifle the-exercise of. the Debtor's federally created right under the Bankruptcy Code to file and seek confirmation of a plan.
(b) the Debtor will be required to divert the services of key internal personnel and outside advisors from the reorganization effort to the Involuntary Rate Case; (c) the Debtor's ability to formulate and implement a chapter 11 plan will be seriously impaired; (d) the value of the assets of the Estate, and of the Debtor as a
going concern, will be depressed, if the Involuntary Rate Case results in a rate reduction.
(e) the Debtor would be deprived of revenue at a time when it has already been forced into bankruptcy because of insufficient revenues, and when further reduction of revenue may threaten its ability to perform existing debt service stipulations and provide service to customers required by statute; and (f) such depression of value will cause potential l
acquirers to proffer lower bids, thus further impairing the chances for an expeditious consensual resolution of this Chapter 11 case.
i arv:wr.no - - -. -
p.
l' l
35.
The Debtor does not have an adequate remedy at law against Defendants, or any of them, for the harms that will be suffered by continuation of the Involuntary Rate Case or any other similar proceeding.
FIRST CLAIM FOR RELTEF (11 U.S.C. 5 362(a))
36.
The Debtor repeats and realleges each of Paragraphs 1 througn 35 above as if set forth fully herein.
37.
Correncing and continuing the Involuntary Rate Case are acts, are comprised of acts, and will result in future acts, (i) to obtain possession of property of the estate, (ii) to obtain possession of property from the estate, or (iii) to exercise control over property of estate.
38.
The Involuntary Rate Case was not corcnenced to protect and does not involve any issue of public health, velfare, morals, or safety, but rather was correnced for the purpose of lowering the revenues of the Estate, to the financial detriment of the Estate and benefit of Defendant State's position in this chapter 11 case.
39.
The Debtor is infor=ed and believes, and thereupon alleges, that Defendants, and each of them, have been aware since January 28, 1988 of the pendency of 'his chapter 11 case and of the automatic stay created upon the filing of this case.
40.
None of Defendants had sought relief from the tutomatic stay regarding any of the acts described in the preceding paragraph. uv:o e.:n
, er
.;g Zy.
.{
i 41.
Defendants have violated and continue to violate the 1
L automatic. stay imposed. by 11 U.S.C.
$ 362 by commencing and-continuing'the Involuntary Rate Case.
42.
Defendants' violation of, the stay described in ' the
. preceding paragraph was, and continues to'be, willful.
43.
The Debtor is entitled to an injunction against each of the Defendants, enforcing the automatic stay of 11 U.S.C l'362(a) and enjoining each-of them from continuing the Involuntary Rate Case or commencing or continuing any similar proceeding.
1 I"
l SECOND CLAIM FOR RELTEF (11 U.S.C. I 362(a))
1 44.
The Debtor repeats and realleges each of Paragraphs 1 through 35 and 38 through 42 above.
45.
Representatives of Defendant State of New Hampshire have expressed the intention to adopt legislation to create and authorize an agency of the State to seize and expropriate the business and assets of the Debtor and the Estate.
46.
The Involuntary Rate Case has the effect and purpose of depressing the value of the business and assets of the Debtor and the Estate.
47.
The Debtor is informed and believes and thereupon alleges that by commencing and continuing the Involuntary Rate Case Defendant State of New Hampshire, by and through its agency Defendant NHPUC, could depress the price that the proposed agency of Defendant State of New Hampshire would be required to pay in arecoe.nu 1
)
the event of expropriation of the business or assets of the Debtor and the Estate.
48.
The Debtor is entitled to an injunction against Defendants, and each of them, enforcing the auto =atic stay of 11 U.S.C.
5 362(a) and enjoining from continuing the Involuntary Rate Case or commencing and continuing any similar proceeding.
THIRD CLAIM FOR REI.1IZ (11 U.S.C. 5 525) 49.
The Debtor repeats and realleges each of Paragraphs 1 through 35 above.
50.
The Debtor is inferred and believes and thereupon alleges that Defendants would not have commenced the Involuntary Rate Case against the Debtor if it were not a debtor undet Title 11 and had not exercised rights granted to it as a debter under Title 11, including but not limited to filing a
plan of reorganization of its own choosing.
51.
The rates charged by the Debtor to its retail customers are, under nonbankruptcy law, established, imposed and enforced by Defendants.
52.
The rates charged by the Debtor to its retail customers are a license, permit, charter, franchise or similar grant.
53.
The continued operation of the Debtor as a public utility is subject to license, permit,
- charter, franchise or similar grant from defendants.
54.
Commencement of the Involuntary Rate Case, and any resolution thereof other than continuing the status
- quo, uv:xw.ru l
l l
I constitutes. imposition of a new condition on each of the grants I
l described in the preceding paragraph.
55..
Commencement of the Involuntary Rate Case, and any i
resolution thereof other than continuation of the status quo, 1
discriminates against the Debtor with respect to each of the grants on account of the chapter 11 case.
J 56.
The Debtor is entitled to an injunction enforcing 11
~
U.S.C.
I 525, prohibiting Defendants, and any of them, from continuing the Involuntary Rate Case or commencing and continuing any similar proceeding.
FOURTH CLAIM FOR RELIEF (11 U.S.C. 5 105) 57.
The Debtor repeats and realleges each of Paragraphs 1 through 35, 38 through 42, and 45 through 47 above.
58.
The Debtor is informed and believes and thereupon
- alleges that Defendants cccmenced the Involuntary Rate Case with the ulterior motives of increasing the State's leverage in chapter 11 rate negotiations, coercing the Debtor to abandon the Plan or any other plan which contemplates a
similar restructuring, and reducing the values of the property of the Estate for reorganization or seizure purposes or both.
59.
The Debtor is entitled to an injunction under 11 U.S.C.
5 105 prohibiting Defendants, and any of them, from continuing the involuntary Rate Case or commencement and continuation of any similar proceeding.
uv::oe.zc - _ _ _ _ _ _ _.
r2
.E l
L WHERETORE, Plaintiff Public Service Corpany of New Hampshire prays that this Court issue judgment against both Defendants, and each of them, as follows:
(a) enjoining the continuation of the Involuntary Rate j
Case begun by Defendant NHPUC's Order of Notice on January 11, 1989; (b) enjoining the institution of any proceeding designed to lower rates or revenues or to depress the value of the Debtor or the Estate at any time during the pendency of this chapter 11 case, without prior leave of this Court; (c) for costs of suit; and (d) for such other relief as the Court deems just.
Respectfully submitted,
(
Dated: January 26, 1989 g
Richard Levin, Isaac M. Pachulski and Don Willenburg, Merbers of Stutnan, Treister & Glatt 3699 Wilshire Boulevard, Suite 900 Los Angeles, California 90010 of Counsel:
(213) 251-5100 Sulloway, Hollis & Soden and 9 Capitol Street 225 Franklin Street, Suite 3100 concord, New Hampshire 03301 Boston, Massachusetts 02110 (603) 224-2341 (617) 423-9594 Attorneys for Public Service Company of New Hampshire, Debtor and Debtor in Possession uv::oe.m.
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I EXHIBIT B
-~ " ' - -
-A--_m.____ _ _, _ _,,_
"'""^-"-----u--____
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q
!/] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30,1989
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From_..._. To Commission File Number 16392 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE (Exact came of registrant as speci6ed in its chaner)
NEW HAMPSHIRE 02 0181050 (State or Ottur Jurisdiction of (1.R.S. Employer Incorporatico or Organization)
Identi6 cation No.)
1000 ELM STREET, MANCHESTER NEW HAMPSHIRE 03105 (Address of principal executive of5ces)
(Zip Code)
Registrant's telephone number, including area code (603) 669 4000 Indicate by check mark whether the registrant (1) has filed all repons required to be filed by Se:tions -
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shoner period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes.2 No...
l Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date.
i Common Stock,55 Par Value,42,138,072 shares outstanding at August 8,1989 l
L.j INDEX 3:
s Page L
Smber Cover 1
Index 2
Part I.' Financial Information Condensed Balance Sheets June 30,1989 and December 31,1988 3-4 Condensed Statements ofIncome Three Months Ended and Six Months Ended June 30,1989 and June 30,1988 5-Condensed Statements of Cash Flows
~ Six Months Ended June 30,1989 and June 30,1988
.6 Notes to Condensed Financial Statements 7 15 Management's Discussion and Analysis of
. Financial Condition and Results of Operations 16-19
. Exhibits Calculation of Earnings (Loss) Per Common and Common Equivalent Share 20 Report of Limited Review by Independent Auditors 21 Part II. OtherInformation 22
-Item 1. Legal Proceedings Item 3. Defaults Upon Senior Securities Item 6. Exhibits and Reports on Form 8 K Signamres 23 2
PART 1. FINANCIAL INFORMATION PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE CONDENSED BALANCE SHEETS (Unaudited)
ASSETS June 30.
December 31.
M M
(Thousands of Dottars)
Utility Plant at Cost Electric Plant S 992,185
$ 977,173 Less: Accumulated Provision for Depreciation 333,240 318,345 658,945 658,828 Unfinished Construction:
Seabrook (Notes 2 and 3) 1,794,823 1,794,823 Other 13,627 11.871 Total Unfinished Construction 1,808,450 1,806.694 Net Utility Plant 2.467,395 2,465,522 Investments Nuclear Generating Companies 12.200 12,131 Real Estate Subsidiary 9,177 9,099 Other, at Cost 156 155 Total Investments 21,533 21,385 Current issets Cash and Temporary Investments 91,750 94,830 Accounts Receivable, Net 45,333 57,122 Unbilled Revenue 12,739 16,740 Fuel, Materials and Supplies, at Cost 33,823 26,448 Prepaid Real Estr.re Taxes 15,618 4,849 Other 16,412 3,245 Total Current Assets 215,675 203.234 Other Assets
~
Deferred Charges 8,334 12,682 i
Other 964 965 Total Other Assets 9.298
_ 13,647
$2,713,901 52,703,788 See accompanying Notes to Condensed Financial Statements 3
-_U
v i
PUBLIC SERVICE CON 1PANY OF NEW HAStPSHIRE CONDENSED B ALANCE SHEETS
-i' (Unaudited)
CAPITALIZATION AND LIABILITIES June 30.
December 31.
12.6.2 19M (Thousands of Dollars)
Capitalization Common Stock'
$ 207,538
$ 186,006 Other Paid-In Capital 435,141 436,287 Accumulated Deficit (349.476)
(328,958)
Total Common Equity 293,203 293,335 Preferred Stock (Note 6)
With Mandatory Redemption Requirements 420,613 420,613 4
Without Mandatory Redemption Requirements 48,591 48,596 Liabilities Subject to Settlement Upon Reorganization (Note 4) 1,675,769 1,675,250 Total Capitalization 2,438,176 2,437,794,
Current Liabilities Estimated Future Seabrook Expenditures (Note 3) 65,005 102,519 Comprehensive Seabrook Settlement (Note 3) 29,030 Accounts Payable 30,438 30,776 Accrued Pension Costs 10,599 6.935 i
Accrued Taxes, Principally Property Taxes 15,027 1,604 Accrued Interest 7,646 7,869 Estimated Cancellation Costs for Seabrook Urut 2 12,639 12,795 Other 10,452 16,817 Total Current Liabilities 180.836 179.315 Deferred Credits Comprehensive Seabrook Settlement (Note 3) 16,000 Accumulated Deferred Investment Tax Credits 16,956 17.,243 1
Accumulated Deferred Taxes on Income f8,607 66,333 Other 3.326 3,103 Tml Deferred Credits 94,889 86.679 I
Commitments and Contingencies (Notes 1 and 2) l
$2,713,901
$2.703,788 l
l See accompanying Notes to Condensed Financial Statements 4
j
4 k
i
^
PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE CONDENSED STATEMENTS OF INCOME (Unsudited).
Three Months Six Months i
Ended June 30.
Eoded June 30.
j 1932 M
1232 19.B.B (ThousaAs Ex.ept Per Shm Amounts)
Operating Revenues
$ 132,812
$ 135,185 5 296.925 5302,507 Operating Expenses Operation Fuel 24,163 26,285 54,957 66,874 Purchased and Interchanged Power 34,685 34,764 76,685 66,275 Other Operating Expenses 25,323 23,193 52,371 44,499 Maimenance 10,733 9,591 21,807 19,018 Deprecia: ion 8,457 8,111 16,855 16,202 Taxes on Income 4,211 3,987
'13,105 16.546 Other Taxes. Principally Property Taxes 7,475 7,374 14,973 14,702 Total Operating Expsnses 115,047 113,305 250,753 244.116 Operating Income 17,765 21,880 46.172 58,391 Other Income and Deductions i
Allowance for Equiry Funds Used During Construction (Note 3) 117 161 251 370 Tues on Income 4,674 (2,858) 21.054 (2,872)
Interest ud Dividends 3,591 1,S05 5,735 2.842 Losses on Generating. Projects (Note 3)
(16,010)
(66,775)
Other - Net 577 375 1,250 (70)
Total Other Income and Deductions (7,051)
($17)
(38,485) 270 Income Before Interest Chuges 10,714 21,363 7,687 58,661 Interest Charges Interest on Long-Term Debt (Note 4) 23,497 23,210 46,763 54,516 Other Interest 445 609 498 3,053 Capitalized Interest (Note 3)
(9,460)
(12,025)
(18,537)
(29,646)
Allowance for Bormwed Funds Used Dunng Constmction (Note 3)
(242)
(180)
(519)
(610)
Net Interest Charges 14,240 11,614 2E205 n,313 Net Income (Loss)
(3,526) 9,749 (20,518) 31,348 Preferred Dividend Requirements (Note 6)
$ 28.2M 3,084 Earmngs (Loss) Available for Common Stock (3,526) $
9,749
$ (20,518)
Wcighted Average Common and Common Equivalent Shares (000's) 39,951 48,134 38,081 48,134 Earmngs (Loss) Per Common and Common Equivalent Share (Note $)
(0.09) $
0.22 (0.54) $
0.61 See accompanying Notes to Condensed Financial Statements 5
PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE CONDENSED STATEMENTS OF CASH FLOWS
?
Six Months Ended June 30.
1RB2 1218 (Thousands of Dollars)
Cash Flows From Operating Activities Net Income (Loss) 5(20,518) 531,348 Non-Cash Items Included in Income Depreciation 16,855 16,202 Deferred Taxes and Investment Credit Adjustments (8,013) 19,278 Losses on Generating Projects 66,775 Other - net 302 599 Changes in Operating Assets and Liabilities Current Assets Other han Cash and Temporary Investments (16,393)
(6,331)
Accounts Payable 471 24,415 Accrued Pension Costs 3,664 3,490 Accrued Interest 12,225 15,164 Other Current Liabilities 6,902 12,6i0 Deferred Charges 4,081 4,924 Compreh nsive Seabrook Settlement Payments (Note 3)
(4,958)
Other - net (1,071) 674 Net Cash Flows From Operating Activities 60,322 122,373 Cash Flows From Investing Activities Capital Expenditures (Net of Allowance for Equity Funds Used During Construction) *
(72,384)
(74,053)
Change in Accrued Interest -Investing Activities 8,270 16,140 Disposals of Property, Plant and Equipment 1,339 18 Net Cash Flows Used By Investing Activities (62,775)
(57,895)
Cash Flows From Financing Activities Bond Redemptions (627)
Net Cash Flows Used By Financing Activities (627)
~
Net Increase (Decrease) in Cash and Temporary Investments (3,080) 64,478 Cash and Temporary Investments at Beginning of Penod 94,830 19,378 Cash and Temporary Investments at End of Period 591,750 58),856
- beludes $53.5 million arad $$9.0 million charged to Esumated Future Seabrook Expenditures liability for the six mcaths erded June 30,1989 a x! 1988, respectively.
See Note 7 of Notes to Coodensed Financial Statements for Supplemental Cash Flow Information.
See accompanying Notes to Condensed Financial Statements 6
I
~
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE j
NOTES TO CONDENSED FINANCIAL STATEMENTS (Unsudited)
I l
J
- 1. Proceedings Under Chapter 11 l
On Januay 28,1988 the Company filed a voluntary petition for protection under Chapter 11 of the United States Bankmp'cy Code, and has since operated its business as a debtor-in-possession under the protection of the Bankruptcy Court. Two official comminees represent the interests of unsecured creditors and equiry security holders, respectively, in the bankruptcy proceedings. The State of New 1
Hampshire (" State")is a full pany in interest in the proceedmgs.
1 To enable the Company to resolve successfully its financial difficulties and emerge from Chapter 11, it is necessary that there be a plan of reorganization for the Company. The Company has been negotiating
{
with the State, the official committees representing unsecured creditors and equity security holders and j
others to attempt to achieve a consensual plan, that is, a plan of reorganization agreed to by the panies.
]
Such a consensual plan would avoid the extensive delays and the uncertainty which will result from litigation over a plan.
i
)
I The essential element of a consensual plan is agreement as to the level of future rate increasts. In the course of negotiations it has become apparent that no such agreement can be reached unless it is assumed that the Seabrook nuclear generating plant will cornmence operation within a reasonable time.
Even on that assumption, to date the State has endeavored to limit rate increases vir:ually to the anticipated rate of inflation, thereby affording to the Company's security holders recovery of only a small fraction of the investment in the Seabrook plant. The State would have the security h olders, rather than the customers, bear almost all of the expense of Seabrook even though the customers would receive this badly needed power. In the negotiations the Company has been attempting to achieve a more equitable allocation of the Seabrook costs between its security holders and customers.
On July 31,1989 the Examiner appointed by the Bankruptcy Coun filed a repon on the status of negotiations among the panies. This repon noted that whde consensus on a plan had not yet been reached, the range of disagreement among the panies had narrowed. Specifically,the report stated that the Company, both official committees and third mongage bond holders had "come together on the most important elements of a plan," a development the Examiner hailed as "a major advance in the i
negotiations." Additionally, the report indicated that the gap between rate increases ptoposed by the Company and those proposed by the State, while still significant, was narrower titan during prior -
negotiations. De Exammer's report also suggested that the $2.2 billion reorganization valuation proposed by the Company was, alone among valuations proposed by the panies, a " clearly reasonable" valuation and could serve as the basis for a consensual plan. The Examiner made several recommen-dations, including: (a) that the Company be given additional time to submit a new reorganization plan supponed by the major investor panies. (b) that potential acquirers proceed along a fair, equal and i
orderly bid process to enable all panies to ev aluate bids against each other and against a stand-alone plan l
that is a consensual plan of reorganization pursuant to which the Company's independent existance is assured, and (c) that all other plan disclosure and confirmation procedures be suspended during the time allowed for each of the foreping. He Company supports those recommendations. General suppen for the Examiner's recommendnons has been mdicated by the official committees and by certain holders 7
PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE notes TO CONDENSED FINANCIAL STATEMENTS (Comunued)
(Unaudned) of the Company's hird Mortgage Bonds. The State of New Hampshire and Northeast Utilities ("NU")
have submitted comments critical of the Examiner's recommendations.
On January 12,1989 NU submitted an offer to the Company for the purchase of the Company's assets, exclusive ofits interest in Seabrook, for cash and NU securities. This offer was fomialized into a plan of reorganization filed with the Bankruptcy Coun on March 22,1989. On July 27,1989 NU revised its offer to include Seabrook. The revised offer, included in an amended plan of reorganization filed with the Bankruptcy Coun, is valued by NU at $1.9 billion, including $1.325 billion for the Company's non Seabrook assets. ne revised pmposal contemplates the payment of cash in the amount of $1.625 billion and the purchase of the Company's interest in Seabrook; the Company would be reorganized into two new subsidiaries of NU, one holding the Company's Seabrook interest and the other its non-Seabrook assets. The NU proposal includes legislated rate increases fcr severalyears and is supported by the Govemor and Attomey General of the State.
On April 5,1989 New England Electric System ("NEES") submitted an offer to the Company f,or the purchase of the Company's assets, exclusive ofits interest in Seabrook, for cash and NEES securities.
This offer contemplates the Company retaining $100 million of accumulated cash and the purchase by NEES of power from Seabrook upon its operation at the market price. NEES hr.s reaffirmed its strong interest in the acquisition of the Company, and has indicated that it intends to submit a revised proposal by the end of August. Bids from other panies are expected.
In 1989 the State of New Hampshire created an Energy Authorig. De Energy Authority is empowered, in cenain circumstances, to acquire all or any pan of the business or propenies of the Company by eminent domain. It continues to be uncertain what role,if any,the Energy Authority will play in the resolution of the Company's Chapter 1I proceeding.
As indica'ed above, it is unlikely that a consensual plan can be achieved if Seabrook is not allowed to operate. In that event, the Company would consider whether to pursue a plan of reorganization first proposed by it and filed with the Bankruptcy Coun in December 1988. This plan would place the Company's assets used for retail distribution of electricity in a separate company, to be supplied power by the Company on a wholesale basis at rates which would be subject to the jurisdiction of the Federal Energy Regulatory Commission ("FERC"). Under current FERC policy it is believed that a substantial ponion of the Company's Seabrook investment could be reflected in these wholesale rates whether or not Seabrook becomes operational, which would result in significantly higher rates at the wholesale and retail levels. He Company is not presently pursuing this plan while working with the Examiner and other parties toward a consensual plan.
Any reorganization plan will require confirmation by the Bankruptcy Coun, which in tum may require acceptance by cenain of the Company's creditors and security holders and, as to rates to be charged by the reorganized entities, will require approval by the applicable regulatory agency.
Confirmation of any reorganization plan is likely to require a substantial period of time during which the Company will remain under the jurisdiction of the Bankruptcy Coun. De Company is unable to 8
l 1
i PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO CONDENSED FINANCtAL STATEMENT 3 (Conemued)
(Unaudated)
(
predict the likelihood that any particular plan will be confirmed by the B ankruptcy Coun, the nature or amount of any distributions to the Company's debt and equiry security holders under such plan, or the length of time it will take to achieve confirmation of, and to implement, a plan.
On June 15,1989 the Company did not make payment of $50 million in principal then due on the Series E 18% General and Refunding Mortgage Bonds (" Series E GacR Bonds"). On July 20,1989 the Company filed a motion with the Bankruptcy Coun seeking authorization to obtain funds with which to satisfy the principal payment due on the Series E G&R Bonds in fall and :o retain Bear Steams & Co.
as its agent for the purpose of completing the transaction. A hearing on this motion is scheduled for August 11,1989. On August 1,1989, the Company filed a petition with the New Hampshire Public Utilities Commission for authority to issue securities to refund the Series E G&R Bonds; no hearing dare has been set on that petition.
- 2. Commitments and Contingencies The Company is the pdncipal joint owner of Seabrook, a nucleal-fueled steam-electric generating plant located in Seabrook, New Hampshire. At June 30,1989 the Company's investment in Seabrook was approximately $1.8 billion representing 66% of the Company's total assets. Because of the New Hampshire anti-CWIP statute, no part of the Company's investment in Seabrook has been reflected in the Company's rates to date. The commencement of Seabrook operation may be essential to obtaining substantial rate increases and a successful reorganiz.ttion plan. See Note 1. While the Company is cautiously optimistic that an appropriate Nuclear Regulatory Commission ("NRC") authorization for operation will ultimately be granted, the Company is concemed that the process may be so prolonged as to jeopardize pre-operational funding of Seabrook by its Joint Owners, including the willingness of the Company's secured creditors and the B ankruptcy Court to permit the Company to continue funding its share of such expenditu'es.
r The process of obtaining approvals and permits for Seabrook has been long, complex, consistently opposed by a number ofintervening groups and plagued by lengthy delays. These factors have resulted in greatly increased costs for Seabrook. Continued opposition by intervenor groups at the regulatory level and through court appeals is virtually cenain. Seabrook was originally designed as a two unit -
facility. Construction of Unit I was completed in the fall of 1986; Unit 2 has been cancelled. A 40-year operating license for Unit I has been granted by the NRC subject to certain conditions. Among those conditions are completion of fuel loading, zero power testing and low power testing (now completed),
and NRC approval of radiological emergency response plans for eenain New Hampshire and Massachu-setts towns and cities within a ten-mile radius of Seabrook.
During low power testing, a violation of the testing procedures occurred. New Hampshire Yankee
("NHY"), a division of the Company, has filed a repon on the incident with the NRC which includes a detailed chronology of the incident, an analysis of management actions and communications, and a corrective action plan. A report by the staff of the NRC will also be issued regarding the incident which, 9
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES TO CONDENSED FINANCIAt. STATEMENTS (Contmued)
(Unsudited) inter alia,is anticipated to assess a monetary f'u e for the violation and to recommend corrective actions.
]
ne Company cannot predict whether the incident or any anticipated corrective actions resulting I
therefrom will delay full power operation.
)
Emergency response plans to be implemented in the event of a radiological emergency at Seabrook have been fdea with the NRC for New Hampshire and for Massachusetts and in June 1988 a graded exercise of the emergency response plans was held for New Hampshire and Massachusetts. On December 31,1988 an NRC hearing board issued a decision approving New Hampshire's emergency response plan. Interveners have appealed that order. The Atomic Safety and Licensing Appeal Board is expected to rule on the appeal this fall. The staffs of both the NRC and the Federal Emergency Management Agency have published positive reviews of the Massachusetts plan and the June exercise, concluding that both meet the requirement that public health and safety would be protected in the unlikely event of an emergency at Seabrook. While hearings before an NRC hearing board on these matters have concluded, the presiding judge indicated that the hearing board will most likely be unable to issue a decision until November 30,1989. A final review and vote by the NRC commissioners is then required. While the earliest possible date for the issuance of authorization to commence operation beyond low power is the end of 1989, the Company, for financial forecast purposes, has adopted an operation date of March 1,1990. See Note 3. Due to the uncertainties arising out of the politicizing of the NRC approval process for Seabrook and the overall negative political climate in New Hampshire in which the Company must operate, it is not possible to be certain when or if operation will in fact occur.
He Company intends to continue to fund its share of Seabrook expenditures as long as resources are available.
As of August 1,1989 a comprehensive settlement agreement (" Comprehensive Seabrook Settle-ment") between the Company and certain current and former Seabrook Joint Owners has been completed with respect to alleged claims of such Seabrook Joint Owners against the Company associated with the management, design and construction of Seabrook and with the acquisition of a portion of its Seabrook ownership interest by one current Joint Owner, Massachusetts Municipal Wholesale Electric Company ("MMWEC"). Pursuant to this agreement, the Company (1) has made certain payments in cash to five former Joint Owners and to MMWEC, (ii) has assumed MMWEC's share of Seabrook pre-operational funding commitments up to $30 million commencing as of December 1,1988,(iii) will assume portions ofdewmmissioning and cancellation costs allocable to MMWEC and five former Joint Owners in the event Seabrook does not become operational, and (iv)will make certain payments totaling $16 million to MMWEC for the first eight years following operation of Seabrook. MMWEC, five formerJoint Owners and current Joint Owners holding all but 2.5% ownership interests in Seabrook have covenanted not to sue the Company on such clairns. In addition, an agreement pursuant to which the Company was obligated to purchase at MMWEC's full cost a portion of MMWEC's capacity and energy from its share of Seabrook for a period of ten years following Seabrook's operation has been terminated. Claims in the bankruptcy proceeding have been or are expected to be fded by those Joint Owners which are not parties to the Comprehensive Seabrook Settlement as well as by cenain towns and cities ofMMWEC claimmg to be third party bene ficiaries under the terminated agreement; the Company
' intends to contest all such claims as are fded. See Notes 3 and 4.
10
o PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE l
notes TO CONDENSED FINANCIAL STATEMENT 3 (Coormued)
(Unaudited)
I l
I I
4 The Company currently does not have sufficient generating capacity to meet its demand and must
/
purchase substantial amounts of power. If Seabrook does not operate before the early 1990's, the availability of additional capacity at any price is unpredictable and the Company may be unabic to meet the increasing demand for electric energy in its service area. The Company continues to believe that l
Seabrook is needed as a source of reliable energy for New Hampshire and the New England region.
The Company has very substantial capital requirements to satisfy if it is to provide adequate service to its fast growing service area. The Company's construction program for the five-year period 1989-1993, exclusive of expenditures for Seabrook,is currently estimated to be approximately $ 327,300.000.
The Company's share of the pre-operational testing and other capital expenditures relating to Seabrook are estimated to aggregate 5137,300,000, based on Seabrook's assumed operational date for financial forecast purposes of March 1,1990. In addition, as described above, the Company has agreed to pay MMWEC's share of pre-operational expenditures and certain other amounts for Seabrook.
It is possible that additional expenditures may be required to meet regulatory and environinental requirements at Seabrook and the Company's other generating facilities. Any financing for the purpose of raising funds to make necessary capital expenditures, supplementing inadequate cash Dow, or otherwise, and the granting of any tien on Company assets to secure Snancing during the bankruptcy proceedings would require approval of the B ankruptcy Court and possibly other regulatory bodies. Any such financing and lien cciuld be opposed by any of the Company's creditors.
- 3. Losses on Generating Projects The Company's financial difficulties are directly related to the magnitude of its investment in Seabrook and to the Company's inability to base its rates upon the cost of this project prior to its operation (currently assumed to be March 1,1990 for financial forecast purposes). The Company determined that, should Seabrook be permitted to become operational, political and competitive pressures would not pemtit the Company to recover the recorded cost of its investment in accordance with traditional utility ratemaking practices. Accordingly, in 1987 the Company changed its method of accounting for its investment in Seabrook to elimmate AFUDC from capitalized costs and to recognize _
capitalized interest and associated income tax effects. This change in method of accounting effectively restated the cost hasis of Seabrook to eliminate the previously assumed effects of regulation.
The Company ceased capitalizing Seabrook costs effective December 31,1987. Accordingly, a loss of $212.0 million was recognized in 1987 associated with estimated remaining costs to be incurred prior to a previously assumed operating date of January 1,1990. In June 1989 the Company revised its assumed operating date to March 1,1990 and recorded an additionalloss of $16.0 million to reDect the anticipated additional two months. See Note 2.
I l
I 11 L
._ l J
1 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE j
NOTES TO CONDENSED FINANCIAL sTATEMESTS tCont2nued) j (l'naudited) l For the six months ended June 30,1989,553.5 million was charged to the accrual, including the
$18.5 million of capitalized interest associated with the Seabrook investment. If there are additional delays in the assumed operating date, Seabrook costs, approximating $8 million for each month of delay, will have to be accrued by the Company when the delay becomes probable.
As described in Note 2, the Company entered into a Comprehensive Seabrook Settlement which, inter alia, requires the Company to assume MMWEC's share of Seabrook pre operational expenditures J
and to pay certain other amounts. In March 1989, the Company expensed $50.8 million to reflect the anticipated total cost of the settlement.
- 4. Liabilities Subject to Settlement Upon Reorganization The Company ceased paying interest and maturities on its unsecured debt in October 1987. On January 28,1988, the date of the filing of the petition in bankruptcy, the Company ceased accruing interest on its unsecured debt and ceased paying interest and maturities, including sinking funds, on the remainder ofits debt. See Note 1. The Bankruptcy Coun has since granted a motion of the Company to perrnit, during the pendency of the bankniptcy case, payment ofinterest on the First Mortgage Bonds, the General and Refunding Mortgage Bonds and debt secured by any such bonds. Although the Bank-ruptcy Court denied an earlier motion of the holders of the Company's Third Mortgage Bonds seeking to receive interest payments during the pendency of the Chapter 11 case, the Third Mortgage Bondholders filed a new motion in June 1989; a hearing on this motion has been scheduled for October 5,1989. Any reorganization plans for the Company will have to address the extent to which payment will be made on the Company's debentures, other unsecured debt, prepetition trade payables and cenain prepetition accrued pension costs. Additionalliabilities resulting from the rejection ofleases and executory contracts may be recognized when claims are fixed by the Coun. The B ankruptcy Court established October 31,1988 as a bar date by which claims (with certain narrow exceptions) against the Company had to be filed with the Bankruptcy Coun or be forever barred. Additional claims in excess of the amounts listed below have been filed and cenain additional claims arising from matters not covered by the Comprehensive Seabrook Settlement referred to in Note 2 are anticipated to be filed. The l
Company intends to contest the validity of most, if not all, such claims.
Included in the Company's Accounts Receivable are approximately $1 million in receivables from vendors and customers who are clamung a nght to offset the receivable against prepetition liabilities of the Company. The Company expects that these amounts will also be settled upon reorganization.
All prepetition obligations of the Company are subject to settlement upon the adoption of a plan of reorganization. The following table lists the amounts of recorded liabilities which have been classified in noncurrent liabilities as liabilities subject to settlement upon reorganization.
l 12 l
l l
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE notes TO CoNDEr4 SED FINANCtAL sTATEMENrs (Continued) l (Unaudited) j i
June 30, December 31, 19.E9 101 6 (Thousmis of Dolhrs)
Long-Tenn Debt
$ 1,481,691
$ 1,503,929 3
Unamortized Premium and Disecunt (99,605)
(104,171)
Floating Rate Notes 100,000 100,000 q
Accrued Interest 163,462 145,696 Accounts Payable 19,740 19,315 Accrued Pension 10,481 10,481 11,675,769
$ 1,675,250 Interest of $65,352,000 and $59,566,000 on unsecured debt has not been recognized in the financial statements for the six months ended June 30,1989 and 1988, respectively.
- 5. Earnings (Loss) Per Common and Common Equivalent Share For the three and six months ended June 30,1989 the loss per share of common stock was calculated by dividing the loss available for common stock by the weighted average number of shares of common stock outstanding. Eamings per common and common equivalent share was calculated for the three and six months ended June 30,1988 by adjusting earnings available for common nock for the assumed interest income that would result from the investment in treasury bills of that ponion of the proceeds from the assumed exercise of 18,372,999 common stock purchase warrants, at an exercise price of $5 per share, which is in excess of the ponion of those proceeds used to repurchase 20% of the Company's outstanding shares of common stock. The resulting camings available for common stock was then divided by the weighted average number of shares of common stock outstanding and common stock assumed to be outstanding upon the exercise of warrants and assumed repurchases of common stock.
Had the Company not discontinued accruing preferred dividend requirements, camings (loss) available for common stock and eamings (loss) per common and common equivalent share would have been $(41,005,000) and $(1.08) and $ 10,858,0.M and $0.25 for the six momhs ended June 30,1989 and -
1988, respectively.
- 6. Cessation of Dividends and Sinking Fur.d Payments The Company ceased paying dividends on shares of its Common and Preferred Stock in 1984. Until the dividend arrearages with respect to shares of the Preferred Stock are cured, the holders thereof will continue to have the right to elect a majority of the Company's Board of Directors, a right which they have exercised since 1985. The Company ceased accruing dividends on shares of all series of its Preferred Stock on January 28,1988, the da.te of the filing of the voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code, resulting in a reduction of $20.5 million and $17.4 million in preferred dividend requirements for the six months ended June 30,1989 and 1988, respec-13
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NCrTEs To CONDENSED FINANCtAL STATEMENTS (Canunued)
(Unsudited) tively. The Company's cumulative Preferred Stock dividends not accrued since January 28,1988 amount to $58.4 million as of June 30,1989.
Any reorganization plan filed and confirmed in the bankruptcy cats is expected to result in substantial alteration or elimination of some or all of the current rights of the holders of shares of Common and Preferred Stock, The table below indicates the amounts of dividends in arrears as of January 28,1988 when the Company ceased accruing preferred dividends:
Dividend Edig Shnres Per Share Igg [
With Mancatory Redemption Regairements:
(Classified in Preferred Stock) 7.64 %
120,000
$30.180
$ 3,621,606 9.00 158,400 35.552 5,631,503 11.24 1,200,000 11.100 13,320,306 17.00 1,200,000 16.789 20,146,371
~
15.00 1,200,000 14.813 17,776,210 15.44 2,400,000 15.248 36,595,290 13.00 1,400,000 12.838 17,973,723 13.80 2,400,000 13.628 32,708.227
$147,773.236 Without Mandatory Redemption Requirements:
(Classified in Accumulated DeScit) 3.35 %
102,000
$13.233 1,349,806 4.50 75,000 17.776 1,333,216 5.50 (Convertible) 8,910 21,727 193,583 1
7.92 150,000 31.286 4,692,919 11.00 600,000 10.863 6,517,944 5 14,087,468
- 7. Condensed 5'tatements of Cash Flows Supplemental Cash Flow Information:
Six Months Ended June 30.
M 12M (Thousands of Dollars)
Cash paid for Tota 1 Interest
$ 25,528
$ 23,441 CapitalizedInterest 10,786 13,804 Interest (Net of Amount Capitalized)
$ '4.742
$ 9.637 Income Taxes 316 t
14
l 4
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE NOTES To CONDENSED FINANCtAL STATEMENT 3 (Cantanned)
(Unaudited)
Supplemental Schedule of Noncash Financing Activities:
As of June 30,1989, the Company has issued a total of 4,306.200 shares ofits Common Stock upon the exercise of warrants and the tender of the requisite principal amount ofits 171/2% Debentures under the terms of a settlement agrt.aent entered into between the Company and Spear, Leeds & Kellogg and Elliott Associates, LP., approved by th.* 3ank:vptcy Court and the United States District Coun for the Southem District of New York. The isttlement agreement provides that all holders of warrants are permined, during the period commencing May 1 and ending September 15,1989, to tender round lots of 200 warrants and $1,000 principal amount of 171/2% Debentures for the issuance of 200 shares of the Company's Common Stock. No cash exercises are permined. At the end of the exercise period, the suspension of the right to exercise the warrants, instituted in June 1986, will be reinstated. The warrants expire by their terms on October 15,1991.
The Company's Common Equity and Liabilities Subject to Settlement Upon Reorganization were affected by the warrant exercises as follows:
(Thousands of Dollars)
Common Stock and Other Paid-In Capital 5 20.381 17.5% Unsecured Debentures
$(21,531)
Accrued Interest (2,952)
Unamortized Discount 4,017 Unamortized Debt Expenses
_ 83
$(20.381) l i
15
e MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The condensed financial statements as of June 30,1989 and for the three and six months ended June 30,1989 and 1988 are unaudited and,in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fairpresentation of results ofoperations for the period.
De condensed financial statements have been reviewed by the Company's independent auditors whose report thereon appears on Page 21.
Capital Requirements and Liquidity On January 28,1988,the Company filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code. The Company is now operating its business as a debtor in-possession.
See Notes 1 and 2 of the Notes to Condensed Financial Statements for a discussion of the Company's bankruptc., case, reorganization plans and other items related to capital requirements and liquidity.
Cash Flow Concerns. Durmg the Chapter 11 case to date, the Company has ceased paying interest on all ofits unsecured indebtedness and on its Third Mortgage Bonds and indebtedness secured by those Bonds, but is paying interest on its First Mongage Bonds and its General and Refunding Mongage Bonds and indebtedness secured by such Bonds. See Note 4 of Notes to Condensed Financial Statements. By not paying such interest, or any principal on any of its outstanding indebtedness, the Company has generated sufficient funds intemally to satisfy its cash requirements. Assuming continued non-payment of such debt service, continued moderate growth (about 4% annually) in the Company's level of sales.
the continuance of the Company's present rate structure, and that there are no material additions to the Company's projected operating and capital expenditures, the Company estimates that it can satisfy its cash requirements through the end of 1991 without additional extemal financing even if Seabrook does not become operational until as late as January 1991 and is not reflected in rates during the period.
Nevertheless, the Company could encounter cash flow problems during the Chapter 11 case. The Company's construction expenditures for 1989-1993 are estimated at approximately $465 million, but could be significantly increased if the Company is required by environmentallaws to make additional expenditures, particularly in response to legislation reg arding acid rain. Although the B ankruptcy Cc,urt '
had denied an earlier motion of the holders of the Company's hird Mangage Bonds seeking to receive interest payments during the pendency of the Chapter 11 case, the Bird Mortgage Bondholders have filed an addttional motion seeking such payments, a hearing on which is scheduled for October 5,1989.
Any such additional expenditures would be difficult to accommodate without eventuady affecting the quality of utility service provided by the Company. De financial cownints under which the Company has been operating for the last several years have reduced operating budgets and restrained capital l
expenditures to the point that, should any substantial additional cash Dow savings be required in the future, the Company rnight be required to cease paying interest on First Mortgage Bonds and General and Refunding MortEage Bonds and such circumstances could erode support by the Company's secured creditors for continued funding of Seabrook's pre-operational expenditures.
l 16
)
Eo I;
l l-Construction Program. The Company has very substantial capital requirements to satisfy ifit is to provide adequate service to its fast growing service area. The Company's construction program for l
the five-year period 1989-1993, exclusive of expenditures for Seabrock,is currently estimated to be approximately $327,300,000. The Company's share of the pre operational testing and other capital expenditures relating to Seabrook are estimated to aggregate $137,300,000, based on Seabrook's assumed operational date for financial forecast purposes of March 1,1990. As indicated in Note 2 of Notes to Condensed Financial Statements, the actual operational date may be later, in which case the Company will need to accrue the aggregste amount of additional pre-operational expenditures involved in any delay as described in Note 3 of Notes to Condensed Fir:ancial Statements. In addition the Company has agreed to pay MMWEC's share of pre-operational expenditures for Seabrook as well as certain other amounts; the Company will obtain the funds for most of these payments from a $37.5 minion shon-term credit. Set forth below are the Company's estimatedexpenditures in these categories for each of the years in the 1989-1993 period, assummg for these purposes a Seabrook operational date of March 1,1990:
MMwTC Non-Seabrook Plant Seabroek Plant C.cmoany Total Sgniement 1989 5 49,400,000 5 56,700,000
$105,100,000
$29,300,000 1993 64,800,000 25.100,000 87,900,000 5,600.000 1991 79,200,000 17,100,000 95,300.000 2,000,000 1992 65,200,000 17,600,000 82,800,000 2,000,000 1993 68,7C0.000 20,800,000
_8_9,500,000 2.000.000 Total 5327.300.000 5137.300.000 5_464.600.000
$49300.000 l
A delay in the operational date of Seabrook would increw the estimated capital expenditures for l
Seabrook by approximately $5 million per month (not including capitalized interest of 53 million per i
month). The maximum amount by which the Company's obligation t:nder the MMWEC settlement can be increased due to a Seabmok delay of any duration is $1.6 million.
I i
\\
17
)
Results of Operations Operating revenues decreased 1.8% for the three months and six months ended June 30,1989, as compared with the respective period in 1988. The decrease was due to a 15.2% decline in fuel recovery revenues, offset by an increase in megawatt-hour ("MWH") sales of 5.0% and 3.9% for the three months and six months ended June 30,1989, respectively. The increase in MWH sales resulted mainly from a 3.3% increase in the number of customers served.
While the aggregate of fuel and purchased power expense remained stable, the components of those costs changed significantly in the first quarter of 1989. Fuel costs declined 17.8% and purchased power costs increased 15.7% for the six months ended June 30,1989 as a result of a signicant increase in capacity charges on MWHs purchased from other sources including small power producers. As all capacity charges are not included in the fuel recovery revenues, the recovery of such charges must be obtained throur,h the raremaking process. These increases are expected to continue in the future. To the extent that the Company does not recover these charges through rates, future camings will be negatively impacted.
Operating expenses, other than fuel and purchased power and taxes on income, increased 7.7% and 12.3% for the three months and six months ended June 30,1989 due to the resumption of postponed maintenance related expenditures, a substantial increase in extemal professional service costs due to the bankruptcy case, an increase in pension plan expenses and general increases in the costs needed to support the growth in the number of customers served.
De Company had overall provisions for income tax recoveries of $7.9 million for the six months ended June 30,1989 and expenses of $19.4 millica for the six months ended June 30,1988. These amounts. represent non-cash changes in accumulated deferred income taxes.
The Financial Accounting Standards Board has promulgated new income tax accounting rules which will require the Company to change from the deferred method to the liability method of accounting for income taxes. ne liability method accounts for deferred income taxes by applying enacted statutory rates in effect at each balance sheet date to differences between the book basis and the tax basis of assets and liabilities. The Company plans to adopt the new rules in the fourth quarter of 1990 without restating prior years' financial statements. It is estimated that adoption of the new rules will result in an increase in accumulated deferred taxes on income of approximately $140 million of which approximately $70 million will result in a regulatory asset representing amounts to be recovered from customers through _
future rates and approximately $70 miljion will be reported as the cumulative effect of the change in the method of accounting for income taxes in the statement of eamings.
Interest on Long-Term Debt and Other Interest for the three months ended June 30,1989 remained stable and decreased 17.9% for the six months ended June 30,1989. As of January 28,1988 the date of the filing of the Company's Chapter 11 petition, the Company ceased accruing interest on its unsecured debt. As a result, interest on unsecured debt of $65,352,000 and $59.566,000 has not been recognized in the financial statements for the six months ended June 30,1989 and 1988, respectively.
The Company ceased capitalizing Seabrook costs effective December 31,1987. Accordingly, a loss of $212.0 million was recognized in 1987 associated with estimated remaining costs to be incurred prior 18
to a previously assumed operating date of January 1,1990. In June 1989 the Company revised its assumed operating dare to March 1,1990 and recorded an additional loss of $16.0 million to reneet the anticipated additional two months. See Note 2 of Notes to Condensed Financial Statements.
For the six months ended June 30,1989 $53.5 million was charged to the accruel, including the
$18.5 million of capitalized interest associated with the Seabrook investment. If there are additional delays in the rssumed operating date, Seabrook costs, approximating $8 million for each month of delay, will have to be accrued by the Company when the delay becomes probable.
In March 1989 the Company expensed $50.8 million to reflect the financial impact of the.
Comprehensive Seabrook Settlement. See Notes 2 and 3 of Notes to Condensed Financial Statements.
The Company ceased accruing dividends on outstanding shares ofits Preferred Stock upon the Ging of the Chapter 11 petition in January 1988. Had the Company not discontinued accruing preferred dividend requirements, earnings (loss) avallable for common stock and camir:gs (loss) per common and common equivalent share would have been $(41,005,000) and $(1.08) and $10,858,000 and $0.25 for the six months ended June 30,1989 and 1988, respectively.
InGation continues to affect Company operations, since under existing regulatory practice the investment in utility plant has been recovered at historical cost but replaced, as necessary, at current cost.
In the case of Seabrook and 'other plants constructed over many years, the rates necessary to recover accumulated inflation and carrying costs will be in excess of what the customers for that power will ultimately pay. Thus something less than historical cost will be recovered. The effects of inflation on other expenses are generally recovered through energy cost recovery mecharusms or rate filings, as necessary.
The results of operations discussed above are not necessarily indicative of future earnings.
Continued growth in megawatt hour sales will depend upon the the rate of economic growth in New
- Hampshire, weather, the competition from other energy sources and suppliers, and the price of electricity. The reorganization of the Company will have a significant impact on future interest expense and earnings levels and could result in substantial decreases in the carrying value of assets.
1 19
EXHIBIT 11.1 PUBLIC SERVICE COMPANY OF NEW H AMPSHIRE CALCULATION OF EARNINGS (LOSS) PER COMMON AND -
l COMMON EQUIVALENT SH ARE (Unauckd)
Three Months Six Months Ended June 30.
Ended June 30.
19.E2 19.8.6 125.2 M
(Thousands except Per Share Amounts)
Reconciliation of eamings (loss) available for common to amount used in calculation:
Earrungs (1.oss) Available for Common Stock
$(3,526) $ 9,749 $(20,518) $
28,264 Add:
Assumed interest income from the investment in treasury bills of the proceeds from the exercise of wanams 641 1,215 in excess of 20% limitation l
Adjusted Earmngs (Loss) Available for Common Stock
$(3,526) $ 10,390 $(20,518) $
29,479 Reconciliation of weighted average number of shares outstanding to amount used in calculation:
Weighted average number of shares outstanding 38,951 37,201 38,081 37,201 Add:
Shares issuable from the assumed exercise 10,933 10,933 of warrants in excess of 20% limitation (a)
Adjusted weighted average number of shares 38,951 48,134 38,081 48,134 Eamings (Less) Per Common and Common Equivalent Sham
$(0.09)
$0.22
$(0.54) 50.61 i
(a) 18,372,999 shares from the assumed exercise of warrants less 20% limitation of assumed repur-l chases (7,440,225).
20
1 l
I INDEPENDENT AUDITORS
- REPORT l
The Board of Directors j
Public Service Company of New Hampshire:
We have made a review of the condensed balance sheet of Public Service Company of New Hampshire as of June 30,
- 1989, the related condensed statements of income for the three month and six-month periods ended June 30, 1989 and 1988, and the related condensed statements of cash flows for the six month periods ended June 30, 1989 and 1988, in accordance with standards established by the American Ins titute of Certified Public Accountants.
A review of interim financial information consists principally of obtaining an understanding of the system for the preparation of interim financial information, applying analytical review procedures to financial
- data, and making inquiries of persons responsible for financial and accounting matters.
It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the condensed financial statements referred to above for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing standards, the balance sheet and statement of capitalization of Public Se rvice Company of New Hampshire as of December 31, 1988, and the related statements of earnin5s, cash flows and changes in common stock equity for the year then ended (not presented herein);
and in our report dated Feb ruary 24, 1989, we expressed an unqualified opinion on those financial l
statements.
In our opinion, the information set forth in the accompanying l
condensed balance sheet as of December 31, 1988, is fairly presented, in all material respects, in relation to the balance sheet from which it has been derived.
Our report dated February 24, 1989 on the financial statements of Public Service Company of New Hampshire as of and for the year ended December 31, 1988 contains an explanatory paragraph that states that the company is seeking to put in place a plan of reorganization under Chapter 11 of the United States Bankruptcy Code and that approval of any plan is dependent
~
upon many factors.
The condensed balance sheet as of December 31, 1988 does not include any adj us tments relating to the recoverability and classification of reported asset amounts or the amounts and classification I
I of liabilities that might result from the outcome of that uncertainty.
PEAT MARWICK MAIN & CO.
r Boston, Massachusetts July 31, 1989 21
I i
PART II. OTHER INFORMATION l
M.
.Isent Proceedings Reference should be made to Mananement's Discussion and Analysis of Financial Condition and i
Results of Ooerations contained in Pan I of this Form 10-Q Repon for the Quarter ended June 30,1989.
In addition, legal proceedings of the nature required to be disclosed in response to Item 1 of Pan II of this Form 10-Q Repon are not specifically described herein, since substantially the same information has been "previously reponed" within the meaning ascribed to that term in the Instruction to Pan D of Form 10-Q and in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, in the Company's Annual Report on Form 10-K as filed March 31,1989 and in the Company's Fonn 10-Q Report for the quaner ended March 31,1989 as filed May 12,1989 and in the Company's Repons on Form 8-K, dated April 6,1989 and June 12,1989.
M.
Defaults Uoon Senior Securities (a) Reference should be made to Notes I and 4 to Notes to Condensed Financial Statements contained in Pan I of this Form 10-Q Report with respect to defaults in the payment of principal, interest, and siniting fund installments on the Company's secured and unsecured indebtedness.
(b) Reference should be made to Note 6 of Notes to Condensed Financial Statements contained in Pan I of this Form 10-Q Repon with respect to the current arreartges in the payment of dividends and sitdting fund payments on shares of the Company's cumulative preferred stock.
Item 6.
Erhibits Exhibits - Part I Reports on Form 8-K Current Repons on Form 8 K, dated April 6,1989 and June 12,1989, were filed during the quaner ended June 30,1989. In each such Current Repon,information was reponed under Item 5. Other materially t==a tant Events.
~
l 22
1 I'
i
\\
1
.9
'f e.
SIGNATURES
.y.
,I' Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE (Registrant)
Date: August 10,1989
/s/C.E. Bayless C.E. Bayless Senior Vice President and Chief Financial Officer (Principal Financial Officer) -
Date: August 10,1989
/s/B.W. Wiggett B. W. Wiggett Cornptroller (Principal Accounting Officer) 23
n y ygyg
.e m n
.. w;
.gygg EXIIIBIT C
.N i
f j
UNITED STATES BANKP.UPTCY COURT DISTRICT OF NEW HAMPSHIRE
)
Chapter 11 In re
}
Case No. 88-00043
)
Public' Service Company of
)
)
)
Debtor
)
)
September 15, 1989
)
NORTHEAST UTILITIES SERVICE COMPANY'S SECOND AMENDED PLAN OF REORGANIZATION
.i
. -TABLE OF CONTENTS I.
INTRODUCTION....................................
1 l
II.
DEFINITIONS.....................................
1 III.
DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS..
9 A.
Allowed Secured Claims.....................
9 B.
Priority Unsecured Claims..................
10 C.
Unsecured Claims Without Priority..........
10 D.
Interests..................................
11 IV.
TREATMENT OF CLASSES OF CLAIMS AND INTERESTS....
11 A.
Genera1....................................
11 1.
Pro Rata Distribution.................
11 2.
Holders of Debt and Equity Securities Entitled to Receive Distributions.....
12 3.
Distribution Date.....................
12 4.
Disallowance of Post-Petition Date Interest on Interest..................
13 5.
Calculation of Residual Amount........
13 B.
Unclassified C1 aims........................
14 1.
Administrative Claims.................
14 a.
General..........................
14 b.
Bar Date for Administrative
' Claims...........................
14
-2.
Treatment of Priority Tax Claims......
14 C.
Treatment of Secured Claims................
15 1
Class 1 (First Mortgage Bonds)........
15 2.
Class 2 (General and Refunding Mortgage Bonds)..............
15 3.
Class 3 (Nuclear Material Lease)......
16 4.
Class 4 (Eurodollar Term Loan and Domestic Term Loan)..........
16 5.
Class 5 (Series A Third Mortgage Bonds).......................
16 6.
Class 6 (10-1/2% Pollution Control Revenue Bonds)...............
16 l
7.
Class 7 (Secured Tax Claims and other I
Secured Claims)..............
17 I
D.
Treatment of Classes of Unsecured Claims...
18 j
1.
Class 8 (Unsecured Claims Entitled j
to Priority).................
18
{
2.
Class 9 (Customer Deposits and Credits).....................
18 3.
Class 10 (General Unsecured Claims)...
18 E.
Treatment of Classes of Interests..........
18 l
)
m -----
- -~
1
{
-iii-1.
Class 11 (Existing PSNH Preferred Stock and Claims Arising from Existing PSNH Preferred Stock).............,........
18 2.
Class 12 (Existing PSNH Common Stock and Claims Arising from Existing PSNH Common Stock)......................
19 3.
Class 13 (Warrants ar.d Claims Arising from Warrants)..............
19 V.
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES..........................................
19 A.
Assumption.................................
19 B.
Cure Payments and Release of Liability.....
20 C.
Rejection..................................
20 VI.
MEANS FOR THE PLAN'S EXECUTION..................
21 A.
Actions occurring Priotfo the Effective Date.............................
21 1.
Transitional Management...............
21 2.
Incorporation of Newco................
21 3.
Management and Operation of Seabrook..
21 B.
Actions Occurring on the Effective Date 21 1.
Actions by NU.........................
21 2.
Actions by the Debtor.................
22 3.
Actions by Newco......................
23 4.
Actions Between the Debtor and Other NU Subsidiaries.................
23 5.
Implementation of Rate Agreement......
24 6.
Miscellaneous Credit Facilities.......
24 7.
Cancellation of Existing Securities and Rejected Executor;* Contracts and Unexpired Leases of the Debtor....
24 8.
Vesting and Revesting.................
25 9.
Distribution of Consideration.........
25 a.
DiLbursing Agent.................
25 b.
Distribution With Respect to Bonds, Debentures, or Notes......
25 c.
Disputed Claims or Interests.....
26 1
d.
Surrender of Securities..........
27 e.
Unclaimed Property...............
27 f.
Withholding Taxes................
28 C.
After the Effective Date...................
28 1.
Continuation of Debtor's Business.....
28 2.
Continued Implementation of Rate Agreement..............
28 3.
Rights and Privileges of Transferee Corporations..........................
28
~~-
-iv-(
~4.
Retention of Jurisdiction.............
28 5..
Discharge.............................-
29 6.
Limitation'of Liability...............
30 D.
Articles,of Agreement and Corporate Governance................................
30
{
1.
Reorganized PSNH......................
30 a.
Articles of Agreement............
30 b.
Directors and Officers...........
30 2.
Newco.................................
31 a.
Articles of Agreement............
31 b.
Directors and Officers...........
31 VII.
CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE...
32
.A.
Conditions to Confirmation.................
32 B.
Conditions to Occurrence of Effective
.Date.......................................
32 C.
Waiver of Conditions.......................
.35 D.
Effect of Nonoccurrence'of Conditions to the-Effective Date......................
35 VIII.
MISCELLANEOUS PROVISIONS........................
35 A.
Headings...................................
35 B.
Amendment and Modification..................
35 C.
Rules of Construction......................
36 IX..
CONFIRMATION REQUEST............................
36
~
Y
- l VII.
CONDITIONS TO CONFIRMA2 ION AND EFFECTIVE DATE I
A.
Conditions to Confirmation It shall be a condition to NUSCO's and NU's willingness to proceed to Confirmation of this Plan that, prior to Confirmation, each of the following conditions shall have occurred or been waived pursuant to Section C below:
1.
The Bankruptcy Court shall have approved a Disclosure Statement to accompany this Plan in form and substance reasonably acceptable to NU.
2.
The Confirmation Date shall occur no later than May 1, 1990.
3.
NUSCO, on behalf of NU, shall have entered into the Rate Agreement with the State of New Hampshire, and the NHPUC shall have placed in effect in accordance with the Rate Agreement a temporary rate increase of 5.5% in average annual base retail rates.
The additional revenues resulting from such increase shall be held in escrow until the Effective Date and not included in the Debtor's revenues and shall be released from escrow on the Effective Date for inclusion in Reorganized PSNH's revenues and for use by Reorganized PSNH.
4.
The Confirmation Order shall be in form and substance reasonably acceptable to NU.
5.
NU shall have been granted access to such personnel, facilities and books and records of the Debtor as it may reasonably require in order to perform its due diligence investigations and NUSCO shall not have withdrawn the Plan as a result of such investigations.
6.
The Bankruptcy Court shall have entered an order approving a plan for transitional management, as provided in Section VI.A.1 of this Plan, which order and plan (as approved)
~
shall be reasonably satisfactory to NU.
To the extent that such order has not become a Final Order on or before the Confirmation Date, NU shall otherwise be satisfied that its interests will be protected during the period prior to the Effective Date.
B.
Conditions to Occurrence of Effective Date The Effective Date of this Plan shall occur, and this Plan shall take effect, on the day designated by NU which is no sooner than the first business day on which no stay of the Confirmation Order is in effect that is more than ten (10) days
' )
)
(as calculated in accordance with Bankruptcy Rule 9006(a)) after L
the Confirmation Date and on which each of the following conditions has occurred or been waived pursuant to Section C j
i below and no later than forty-five (45) days after such date:
l 1.
All Regulatory Approvals shall have been obtained and shall be in full force and effect and shall not contain any provision or be subject to any condition unacceptable to NU.
2.
The Confirmation Order shall have become a Final Order and consummation of the transactions contemplated by this Plan to occur prior to, on, or after the Effective Date shall not be precluded by any order, stay, or injunction of a court of competent jurisdiction nor shall there be pending a suit or appeal challenging the consummation of the Plan or of any transaction related to consummation of the Plan, which, in the reasonable opinion of NU,-would have a material adverse effect on the business, operations, properties, condition (financial or otherwise), results of operations or prospects of NU or the Debtor.
3.
All appropriate HSR Act filings shall have been made and any applicable waiting period under the HSR Act shall have expired or been terminated.
4.
All necessary consents of all entities, if any, who are parties to agreements or unexpired leases contained on the List of Assumed Contracts, or which were entered into by the Debtor after the date of commencement of the Bankruptcy case and are deemed by NU to be material to the Debtor and any subsidiaries taken as a whole, shall have been obtained, and the Seabrook joint owners shall have provided all consents, if any, which are required for the transfer by Reorganized PSNH of the Seabrook Interest to Newco and the management and operation of Seabrook by a wholly owned subsidiary of NU, including amendments to the Seabrook joint ownership arrangements required by NU in its sole discretion in connection therewith, and, if required, shall have irrevocably waived all first refusal rights.
5.
Neither the United States Supreme Court, nor the United States Court of Appeals for the First Circuit nor the United States District Court for the District of New Hampshire shall have entered an order or issued an opinion, nor shall the Bankruptcy Code have been amended in a manner, so that NU could reasonably conclude that the benefits and projections that would be provided to Reorganized PSNH, Newco, NUSCO, NU and their affiliates by the provisions of the Confirmation Order would be narrower in any material respect than under current law.
.. 6.
No federal, state, or municipal government or agency,
)
norJany court or other tribunal, shall have enacted-a law, regulation, rule or ordinance,-or issued an order, which NU reasonably concludes would have a material adverse impact on the transactions contemplated by this Plan or on the prospects for the Debtor's business after the Effective Date.
7.
All contracts and unexpired leasee contained on the.
List of Assumed Contracts shall have been kasumed by the Debtor in accordance with Section 365.or Section ll23(b)(2) of the Bankruptcy Code and, except for those contracts, unexpired leases, franchises and permits to be assigned to Newco in connection with the transfer of-the Seabrook Interest, such contracts and leases and all of the Debtor's franchises and
. permits shall continue in effect for the benefit of Reorganized PSNH following the Effective Date without requiring the further consent of any other entity.
B.
There.shall not have been a material adverse change in the condition (financial or otherwise), business, properties, results of operations or prospects of the Debtor and its subsidiaries taken as a whole during the period from the filing of this Plan to the Effective Date, as reasonably determined by NU in good faith.
9.
No order shall have been entered and remain in effect as of the Effective'Date in the Reorganization Case, or in any judicial or administrative proceeding arising from or related to the Reorganization Case, which in NU's judgment has or reasonably can be expected to have a material adverse effect on the business, operations, properties, condition (financial or otherwise), business properties, results of operations or prospects of the Debtor and its subsidiaries, taken as a whole.
10.
The Rate Agreement shall be in full force and effect and the State of New Hampshire, by the adoption of legislation and such other action as may be appropriate in the reasonable judgment of NU, shall have authorized and approved the Rate Agreement, and the NHPUC shall have issued such orders or taken such other action as NU may reasonably determine are necessary to give effect to the Rate Agreement.
11.
The Industrial Development Authority of the State of New Hampshire shall have entered into the agreement referred to in Section VI.B.2.d of this Plan.
12.
NU shall have received from the Internal Revenue Service a tax ruling satisfactory to NU in connection with the consummation of this Plan.
~35-13.
NU shall have made bank or other financing arrangements satisfactory to NU to provide the funds required to satisfy the cash payment obligations of the Plan on the-Effective Date.
14.
The revised Articles of Agreennent of Reorganized PSNH contemplated by Section VI.B.2.a of this Plan shall have been filed with the New Hampshire Secretary of State.
15.
The Debtor shall have complied in all material respects with the plan for transitional management approved by the Bankruptcy Court pursuant to Section VII.A.6 of this Plan.
16.
The Effective Date shall have occurred no later than July 1, 1990.
C.
Waiver of Conditions NU may waive any of the conditions to Confirmation or to the Effective Date described in Sections VII.A and VII.B of this Plan and may extend or reduce any time period described in those sections.
To be effective, a waiver or an extension or reduction of a time period must be in writing, executed on behalf of NU and Filed with the Bankruptcy Court.
D.
Effect of Nonoccurrence of Conditions to the Effective Date If each of the conditions to the Effective Date has not occurred or been duly waived, by July 1, 1990, or by such later date as NU designates, then, upon motion by any party in interest made after the deadline for satisfying (or obtaining waivers of) the conditions to the Effective Date (as such deadline may be extended hereunder), and prior to the cime that each of said conditions has occurred or been duly waived, the Confirmation Order shall be vacated by the Bankruptcy Court.
Notwithstanding the foregoing, however, the Confirmation Order may not be vacated after each of the conditione to the Effective Date has either occurred or been waived.
VIII.
MISCELLANEOUS PROVISIONS A.
Headings l
The headings of the articles, paragraphs, and sections of 1
this Plan are inserted for convenience only and shall not affect the interpretation hereof.
1 B.
Amendment and Modification This Plan may be altered, amended, modified, or withdrawn by Northeast Utilities Service Company at any time subject,
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EXHIBIT D
.s
. 1064Z UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE
)
Chapter 11 In re
)
Case No. 88-00043
)
Public Service Company of
)
)
)
Debtor
)
)
)
PLAN OF REORGANIZATl.QH OF NEW E4 GLAND POWER COMPANY ON BEHALF OF ITSELF AND NEW ENGLAND ELECTRIC SYSTEM DATED SEPTEMBER 14, 1989 i
l BINGHAM, DANA & GOULD 150 Federal Street Boston, Massachusetts 02110 (617) 951-8000
-iO64Z J
j' j
1 PLAN OF REORGANIZATION OF NEW ENGLAND POWER COMPANY ON BEHALF OF ITSELF AND NEW ENGLAND ELECTRIC SYSTEM j
Table of Contents EAGE I.
INTRODUCTION.
1 II.
DEFINITIONS 2
III.
DESIGNATION OF CLASSES OF CLAIMS AND INTERESTS 18 A.
Allowed Secured Claims 19 B.
Priority Unsecured Claims 20 C.
Unsecured Claims Without Priority.
20 D.
Interests 22
'IV.
TREATMENT OF CLASSES OF CLAIMS AND INTERESTS.
23 A.
General 23 1.
Pro-Rata Distribution.
23
- 2. Holders of Debt and Equity Securities Entitled to Receive Distributions.
24 3.
Distribution Date 25
- 4. Disallowance of Post-Petition Date Interest on Interest.
26
- 5. Consideration.
26 a.
To Creditors 26 b.
To Equity Security Holders 27 B.
Unclassified Claims 30
- 1. Administrative Claims 30 a.
General 30 b.
Bar Date for Administrative Claims 30
- 2. Treatment of Priority Tax Claims 31
He
.}
a.
t 1
L t
h' 2
C.
- Treatment'of Secured Claims.
31
- 1. Class 1 (First Mortgage Bonds).
31 o
i
- 2. Class'2 (General and Refunding Mortgage.
Bonds)'....:
32
- 3. Class.3 (Nuclear Material Lease) 33-
- 4. Class 4 (Eurodollar Term Loan and Domestic
. Term Loan)
~
33'
.3
- 5. Class.5 (Third Mortgage Bonds)
........- 34 6.. Class 6 (10-1/2% Pollution Control Revenue Bonds) 34 p
- 7. Classd7 (Secured Tax Claims and Other
~
Secured' Claims).
35
~
35 D.
Treatment.of Classes of Unsecured. Claims
- 1. Class 8 (Unsecured Claims Entitled to F
Priority) 35 L
'2.
Class 9-(Customer Deposits and Credits) 36
- 3. Class 10'(General Unsecured Claims) 36 4.-. Class 10-A (Unsecured Claims of $900 or Less, or Which.Have.Been Reduced to
$900) 36 E.
Treatment of Classeslaf Interests'.
37
- 1. Class 11 (Preferred Stock and Damage or Rescission Claims re i-Preferred Stock) 37
- 2. Class 12 (Common Stock and Damage or Claims're Common Stock) 37
- 3. Class 13 (Warrants and Claims re Warrants) 37 V.
TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES.
38 A.
Assumption 38
~
, 38 B.
Cure Payments.
'C.
Rejection.
39 D.
Claims 40 VI..
IMPLEMENTATION OF THIS PLAN 40 A.
Transactions Occurring on or before the Effective Date 40
- 1. Conditions to Confirmation and Effective Date.
40 2.
Incorporation of NEESAC 40 3.
Execution of Merger Agreement 41 4.
Incorporation of SBCO 41 5.
Survival of GSP 41-
- 6. Transitional Management.
41
- 7. Management and Operation of Seabrook.
42
- 8. Incorporation of New Hampshire Yankee Electric Corporation 42 9.
Implementation of Rate Agreement 42 B.
Transactions Occurring on the Effective Date (or, Where So Indicated, Promptly Following the Effective Date) 43
- 1. Transactions by NEES 43
- 2. Transactions by the Debtor, NEESAC, and GSP 43
- 3. Transactions Between the Debtor and SBCO.
45
- 4. Miscellaneous Credit Facilities 45
- 5. Cancellation of Securities of the Debtor 46
~
4
- 6. Vesting and Revesting 47
- 7. Distribution of Consideration 47
g g
s. --
g..
a.-
Disbursing Agent 47 b.
' Distribution,with Respect to Bonds <
Debentures, or Notes.
48
'c.
Disputed. Claims or Interests.
48
- (i) ~ Reserve.
48-
-(ii)
Distribution...
50
'd.
Surrender of Securities 51 e.
. Unclaimed Property 51 f,
Withholding Taxes 52 i.
C.
After.the Effective Date 52-1.' Continuation of the Debtor's Business-.
52
- a.
General'.
52 b.'
Transmission.
53 2.
Continued Implementation of Rate Agreement 55
- 3. Rights and Privileges of Transferee Corporations 55 4.
Retention of' Jurisdiction 56
- 5. Disch'arge 57
- 6. Limitation of Liability 58 D.
Articles of Agreement and Corporate Governance.
58 1.
GSP.
58 a.
Articles of Agreement 58 b.
Directors and Officers 59 2.'SBCO 60 l.
a.
Articles of Incorporation.
60 L
b.
Directors and Officers 60 E,
.. VII.
CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE.
61
~A.
Conditions to Confirmation.
61 B.
Conditions to Occurrence of Effective Date.
62 i
C.
Waiver of Conditions
'67 D.
Effect of Non-occurrence of Conditions to the Effective Date.
67 I
VIII.
MISCELLANEOUS PROVISIONS 68 A.
Headings 68 B.
Incorporation of Merger Agreement.
68 C.
Amendment and Modification.
68
~
D.
Rules of Construction.
69 IX.
CONFIRMATION REQUEST 69 l
L and floating rate unsecured promissory notes due May 1,
1988, in tho aggregate principal amount of $100,000,000.
Without limiting the generality of the foregoing, if negotiations to reduce rates under Small Power Producer Contracts to levels acceptable to NEES have not been concluded ' prior to Confirmation, the Debtor /NEES hereby reserves the right to reject the Small Power Producer-Contracts which are listed on Exhibit D
to the Rate Agreement to the -extent, if
- any, that they constitute executory contracts or unexpired leases or that the Debtor has any liability thereunder.
D.
Claims All proofs of claim with respect to Claims arising from the rejection of executory contracts or unexpired leases must be filed with the Bankruptcy Court within thirty (30) days from and after the date of entry of an order of the Bankruptcy Court approving such rejection or such claims shall be barred.
VI.
IMPLEMENTATION OF THIS PLAN A.
Transactions Occurrina on or before the Effective Date 1.
Conditions to Confirmation and Effective Date All conditions to Confirmation and Effective Date which are enumerated in this Plan must be satisfied.
2.
_Incorocration of NEESAC NEESAC shall have been incorporated under the laws of the State of New Hampshire and authorized to merge with PSNH.
. 41 3.
' Execution of the Mercer Aareement The Merger Agreement forms the basis for this Plan.
Absent execution of the Merger Agreement this Plan will be deemed null and void.
The Merger Agreement and this Plan contemplate a merger between NEESAC and PSNH with PSNH (to be renamed GSP) as the surviving
- entity, in. exchange for certain consideration which is to be used to finance the reorganization of PSNH contemplated under this
- Plan, including certain distributions to creditors and equity security interests to resolve their claims against PSNH.
These distributions are more fully set forth above.
4.
Incorporation of SBCO SBCO shall have been incorporated under the laws of the State of New Hampshire and will be authorized under the laws of the State of New Hampshire to acquire and own the Seabrook Interest.
5.
Survival of CEP GSP shall have become the renamed survivor of the Merger of NEESAC into PSNH and be authorized under the laws of the State of New Hampshire to continue the Debtor's business pursuant to the terms of Section VI.C.
of this Plan.
6.
Transitional Manacamant After the Confirmation Date and prior to the Effective Date, the Debtor's business shall be managed in accordance with the terms of the Merger Agreement.
-l 7.
Manaaamant~and Operation of Seabrook The joint owners of Seabrook shall have entered into j
such arrangements as are necessary to provide for the-transfer of. the New Hampshire Yankee Division to NHYEC, a separate corporation to be owned by some or all of the joint owners of Seabrook whom shall thereupon look to NHYEC to provide for-the management and operation of Seabrook on and after the Effective Date.
Thereafter, GSP shall have no continuing obligations as to the New Hampshire Yankee Division or its employees, other than as may be set forth in agreements to which GSP is or may be a party which relate to the transfer of the New Hampshire Yankee Division to NHYEC.
8.
Incorporation of New Hamnshire Yankee Electric Corocration NHYEC shall have been incorporated under the laws of the State of New Hampshire and will be authorized under the laws of the State of New Hampshire to manage and operate Seabrook after the Effective Date.
9.
Imolamentation of Rate Aareement The Rate Agreement shall be in full force and effect.
Legislation acceptable to NEES shall have been enacted into New Hampshire law approving the rate plan as recorded in the Rate Agreement.
The NHPUC shall have taken such action as is required to permit the implementation of the provisions l
l of the Rate Agreement in accordance with their terms.
! l B.
Transactions Occurring on the Effective Date (or, Where I
So Indicated. Prompt 1v Followino the Effective Date) 1.
Transactions by NEES.
a.
NEES shall deliver the NEES Shares to NEESAC and PSNH creditors, as contemplated by this Plan.
b.
NEES shall enter into the Equity Funding Agreement with GSP/NEESAC and take all acts and perform all its obligations incident thereto which, under this Plan, are contemplated to occur on the Effective Date.
c.
NEES shall execute such documents and take such other action as is reasonably necessary to effectuate the transactions which, under this Plan, are contemplated to occur on the Effective Date.
d.
NEES shall use its reasonable efforts to arrange for a
secondary offering of the NEES Shares simultaneously with their distribution under this Plan.
2.
Transactions by the Debtor. NEESAC, and GSE a.
The Debtor shall effect the Merger pursuant to the terms of the Merger Agreement, resulting in GSP as the surviving entity, b.
Effective as of the Effective
- Date, the Debtor shall
- adopt, pursuant to the terms of the Merger Agreement, revised Articles of Agreement, not inconsistent with the provisions of this Plan.
Among other things, such Articles of Agreement shall provide for the name of the l
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EXHIBIT E h-
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UNITED STATES RANKRUPTCY COURT DISTRICT OF NEW EAMPSEIRE
)
Chap:er 11,
In re
)
Case No.'88-00043
)
Public Service Company of
)
)
)
Debtor
)
)
)
THE UNITE 0 ILLUMINATING COMPANY'S PLAN OF REORGAN!!AT!ON DATED SEPTEMBER 25, 1989
-_u-.
TABLE OF CONTENTS I.
INTRODUCTION..................................
1 II.
DEFINITIONS.............................
3 III.
DESIGNATION OF CLASSES OF CLAIMS AND I
INTERESTS..................................
18 A.
Allowed Secured Claims..................
18 B.
Pr!.ority Unsecured Claims................
20 C.
Unsecured Clcims Without Priority.......
20 D.
Interests................................
22 IV.
TREATMENT OF CLASSES OF CLAIMS AND INTERESTS.. 23 A.
General..................................
23 1.
Pro Rata Distribution...............
23 2.
Holders of Debt and Equity Securities Entitled to Receive
. Distributions.....................
24 3.
Distribution Date..................
25 4.
General Description of New Plan Securities.......................
26 a.
Securities to Be Issued by Reorganized PSNH.............
26 b.
Securities to Be Issued by New Holdco..................
30 5.
Fractional Interests...............
31 6.
Disallowance of Post-Petition Date Interest on Interest..............
32 B.
Unclassified Claims.....................
32 1.
Administrative Claims...............
32 a.
Genera1.......................
32 b.
Bar Date for Administrative Claims.....e.................
32 2.
Treatment of Priority Tax Claims...
33 3.
Calculation of Residual Amount...... 33 C.
Treatment of Secured Claims in a Seabrook Scenario.......
2.............
35 1.
Class 1 (First Mortgage Bonds)...... 35 2.
Class 2 (General and Refunding Mortgage Bonds)...................
36 3.
Class 3 (Nuclear Material Lease).... 37 4.
Class 4 (Eurodollar Term Loan and Domestic Term Loan)...........
37
-i-
5.
Class 5 (Third Mortgage Bonds)...... 38 6.
Class 6 (10-1/2% Pollution Control Revenue Bonds)....................
38 7.
Class 7 (Secured Tax Claims and Other Secured Claims).............
40 D.
Treatment of Classes of Unsecured Claims in a Seabrook Scenario.........
41 1.
Class 8 (Unsecured Claims Entitled to Prierity)......................
41 2.
Class 9 (Customer Deposits and Credits)..........................
41 3.
Class 10 (General Unsecured C1 aims)...........................
42 4.
Class 10A (Unsecured Claims of $900 or less, or which have been reduced to $900)........
42 E.
Treatment of Classes of Interests in a Seabrook Scenario.....................
42 1.
Class 11 (Existing Preferred Stock and Damage or Rescission Claims re:
Existing Preferred Stock)......
43 2.
Class 12 (Existing Common Stock and Damage or Rescission Claims re:
Existing Common Stock).........
43 3.
Class 13 (Warrants and Claims re:
Warrants)......................
44 F.
Treatment of Secured Claims in a Seabrook-Delayed Scenario......................
44 1.
Class 1 (First Mortgage Bonds)...... 44 2.
Class 2 (General and Refunding Mortgage Bonds)...................
45 3.
Class 3 (Nuclear Material Lease).... 47 4.
Class 4 (Eurodollar Term Loan and Domestic Term Loan)...............
48 5.
Class 5 (Third Mortgage Bonds)...... 49 6.
Class 6 (10-1/2% Pollution Control Revenue Bonds)....................
50 7.
Class 7 (Secured Tax Claims and Other Secured Claims).............
52 G.
Treatment of Classes of Unsecured Claims in a Seabrook-Delayed Scenario..............................
52 1.
Class 8 (Unsecured Claims Entitled to Priority).............
52 2.
Class 9 (Customer Deposits and Credits)..........................
52
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Class 10 (General Unsecured Claims)...........................
53 i
4.
Class 10A (Unsecured Claims of
$900 or less, or which have been reduced to $900).................
53 l
E.
Treatment of Classes of Interests in a Seabrook-Delayed Scenario..............................
53 V.
TREATMENT OF EXECUTORY CONTRACTS AND l
UNEXPIRED LEASES............................
54 i
A.
Assumption...............................
54 B.
Cure Payments and Release of Liability... 54 C.
Rejection...............................
55 VI.
RESOLUTION OF REGIONAL TRANSMISSION SERVICE ISSUES...............................
58 VII.
MEANS FOR THIS PLAN'S EXECUTION...............
59 A.
Transactions Occurring on or before the Effective Date.........................
59 1.
Transitional Management.............
59 2.
Incorporation of New Holdco.........
SC 3.
Incorporation of New Holdco Sub (U1)..............................
60 4.
Incorporation of New Holdco Sub (PSNH)............................
60 B.
Transactions Occurring on the Effective Date (or, Where So Indicated, Promptly
)
Following the Effective Date)..........
60 i
1.
Transactions by the Debtor.........
60 2.
Miscellaneous Credit racilities....
62 3.
Cancellation of Existing Securities i
of the Debtor.......................
62 4.
Vesting and Revesting..............
64 i
5.
Distribution of Consideration....... 64 a.
Disbursing Agent...............
64 b.
Distribution with Respect
- 1 to Bonds, Debentures, or j
Notes.......................
65 4
c.
Disputed Claims or Interests..
65 l
1 d.
Surrender of Securities.......
69 e.
Unclaimed Property............
69 f.
Withholding Taxes.............
70 i
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i C.
After the Effective Date................
70 1.
Continuation of Debtor's' Business..
70 2.
Retention of Jurisdiction..........
70 3.
Discharge...........................
72 4.
Limitation of Liability............
72 D.
Articles of Agreement and Corporate Governance.............................
73 1.
Reorganized PSNH....................
73 a.
Articles of Agreement.......... 73 b.
Directors and Officers........
74 E.
Merger Transactions of UI and of Reorganized PSNE....................... 75 1.
Merger of DI and New Boldco Sub (UI).......................... 75 2.
Merger of New Holdco Sub (PSNH) and the Debtor...................
75 3.
Conditions to the Mergers..........
77 VIII.
CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE........................................ 78 A.
Conditions to Confirmation..............
78 B.
Conditions to Occurrence of Effective Date...................................
79 C.
Waiver of Conditions....................
83 D.
Effect of Nonoccurrence of Conditions to the Effective Date..................
83 IX.
MISCELLANEOUS PROVISIONS......................
84 A.
Headings................................
84 B.
Amendment and Modification...............
84 C.
Rules of Construction....................
84 X.
CONFIRMATION REQUEST..........................
85
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i during the period from the Effective Date to the consummation of the mergers, as reasonably determined by UI in good faith; f..
No federal, state, or municipal government or agency, nor any court or other tribunal, shall have enacted a law, regulation, rule or ordinance, or issued an order, which UI reasonably concludes would have a material adverse impact on the mergers or on the prospects for Reorganized PSNH's business after the Effective Date; g.
All necessary UI Board of Directors and shareholder approvals of the merger of the New Boldco Sub (UI) and UI shall have been obtained; h.
Any necessary ESR Act filings shall have been made and any waiting periods elapsed; and i.
UI, the Debtor and New Holdco shall have received a private letter ruling from the Internal Revenue Service confirming to the satisfaction of counsel to UI that no gain or loss will be recognized by UI, New Holdco or any of their respective securities holders as a result of the exchange of securities pursuant to this Plan.
VIII.
CONDITIONS TO CONFIRMATION AND EFFECTIVE DATE A.
Conditions to Confirmation It shall be a condition to UI's obligation to proceed to Confirmation of this Plan that, prior to
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Y Confirmation, each of'the following conditions shall'have occurred or been waived pursuant to Section C, below:
1.
The Confirmation Date shall occur no later than 10 days after Seabrook Unit No. 1 is placed in service for Federal income tax purposes.
2.
The Confirmation Order shall be in form and substance reasonably acceptable to UI.
3.
UI shall have been granted access to such personnel, facilities and books and records of the Debtor as it may reasonably require in order to perform its due diligence investigations and shall not have withdrawn this Plan as a result of such investigations.
B.
Conditions to Occurrence of Effective Date The Effective Date of this Plan shall occur, and this Plan shall take effect, on the first business day on which no stay of the Confirmation Order is in effect that is after ten (10) days (as calculated in accordance with Bankruptcy Rule 9006(a)) after the Confirmation Date and on which each of the following conditions has occurred or been waived pursuant to Section C below:
1.
All Regulatory Approvals shall have been obtained and shall be in full force and effect and shall not contain any provision or be subject to any condition unacceptable to UI.
1 0
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iT 2.
The consummation of the transactions contem-plated by this Plan to occur prior to, on, or after the Effective Date shall not be precluded by any order, stay, l
or injunction of a court of competent jurisdiction nor shall there be pending a suit or appeal challenging the consummation of this Plan or of any transaction related to consummation of this Plan, which, in the reasonable opinion of UI, would have a material adverse effect on the business, operations, properties, condition (financial or otherwise), business properties, results of operations or prospects of UI or the Debtor.
3.
All necessary consents of all entities, if any, who are parties to agreements or unexpired leases con-tained on the List of Assumed Contracts, or which were en-tered into by the Debtor after the date of commencement of the Bankruptcy Case and are material to the Debtor and any subsidiaries taken as a whole, shall have been obtained.
4.
Neither the United States Supreme Court, nor the United States Court of Appeals for the First Circuit nor the United States District Court for the District of New Hampshire shall have entered an order or issued an opinion, nor shall the Bankruptcy Code have been amended in a nana.er so that UI could reasonably conclude that the benefits and projections that would be provided to Reorganized PSNH, UI and their affiliates by the
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provisions of the Confirmation order would be narrever in any material respect'than under current law.
5.
No federal, state, or municipal government or agency, nor any court or other tribunal, shall have enacted a law, regulation, rule or ordinance, or issued an order,.which UI reasonably concludes would have a material adverse impact on the transactions contemplated by this Plan or on'the prospects for the Debtor's business after the Effective Date.
6.
All contracts and unexpired leases. contained on the List of Assumed Contracts shall have been assumed by the Debtor in accordance with Section 365 or Section 1123(b)(2) of the Bankruptcy Code and such contracts and leases and all of the Debtor's franchises and permits shall continue in effect for the benefit of Reorganized PSNH following the Effective Date without requiring the further consent of any other entity.
7.
There shall not have been a material adverse change in the condition (financial or otherwise),
business, properties, results of operations or prospects of the Debtor and its subsidiaries taken as a whole during the period from the filing of this Plan to the Effective Date, as reasonably determined by UI in good faith.
B.
No order shall have been entered and remain in effect as of the Effective Date in the Reorganization
t
. I case, or in any' judicial or administrative proceeding arising from'or related to the Reorganization Case, which in UI's judgment has or reasonably can be expected to have a material adverse effect on the business, operations,
. properties, condition.(financial or otherwise), business properties, results of operations or prospects of the Debtor and its subsidiaries, taken as a whole.
9.
The State of New Hampshire, by the adoption of legislation or such other i.ction as may be appropriate in the reasonable' judgment of UI, shall have executed such agreements as to rates and other' matters as are in the reasonable judgment of UI no less favorable in the l
aggregate to Reorganized PSNE and New Boldco as the
' Agreement between Northeast Utilities Service Company and the Governor and Attorney General of-the State of New Hampshire, attached as Exhibit 1 to the Letter of Intent by and between Northeast Utilities Service Company and the l
Governor of the State of New Hampshire and the New Hampshire Attorney General, dated July 27, 1989, and the NEPUC shall have issued cuch orders or taken such other action as UI may reasonably determine are necessary to give effect to such agreements.
10.
The revised Articles of Reorganized PSNE con-templated by Section VII.D.1.a. of this Plan shall have been filed with the New Hampshire Secretary of State.
L
. C.
Waiver of Conditions UI may waive the conditions to Confirmation or to the y;fective Date described in Sections VIII.A. and VIII.B. of this Plan.
To be effective, a waiver must be in writing and executed on behalf of UI.
D.
Effect of Nonoccurrence of Conditions to the Effective Date If each of the conditions to the Effective Date has not occurred or, if waivable, been waived, by July 1, 1990, or by such later date as is agreed to in writing by UI and approved by order of the Bankruptcy Court on notice to such parties in interest as the Bankruptcy Court orders, then, upon motion by any party in interest made after the deadline for satisfying (or obtaining waivers of) the conditions to the Effective Date (as such deadline may be extended hereunder), and prior to the time that all of said conditions has occurred or, if waivable, been duly waived, the Confirmation order shall be vacated by the Bankruptcy court.
Notwithstanding the foregoing, however, the Confirmation Order may not be vacated after all of the conditions to the Effective Date has either occurred or, if waivable, been waived.
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UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE
)
)
Chapter 11 In re
)
Case No. 88-00043
)
Public Service Company of
)
)
)
Debtor
)
)
)
JOINT PIAN OF REORGANIZATION OF PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS AND THE OFFICIAL COMMITTEE OF EQUITY SECURITY HOLDERS (September 15, 1989)
==
l
l lq TABLE OF CONTENTS Pace 1
I.
INTRODUCTION.
1 II.
DEFINITIONS.~.
III. DESIGNATION-OF CLASSES OF CLAIMS AND INTERESTS.
.14 a
.15 l
A.
Secured Claims.
B.
Priority Unsecured Claims.
.16 '
C.
Unsecured Claims Without Priority.
.16-D.
Interests and Claims Relating to Interests.
.18 l'
IV.
TREATMENT OF CLASSES OF CLAIMS AND INTERESTS.
.19 A.
General.
.19 1.
General Description of New Plan Securities.
.19 Reorganized PSNH Mortgage Bonds.
.19 a.
(1)
Reorganized PSNH Mortgage Bonds, Series A.
.20-(2)
Reorganized PSNH Mortgage Bonds, Series B.
.20 (3)
Reorganized PSNH Mortgage Bonds, Series C.
.20 (4)
Reorganized s'SNH Mortgage Bonds, Series D.
.21 b.
New PCRBs.
.21 c.
Reorganized PSNH Preferred Stock.
.22 (1)
Reorganized PSNH Preferred Stock, Series A.
.22 d.
Reorganized PSNH Common Stock.
.23 2.
Fractional Interests.
.23 a.
Bonds.
.24 b.
Stock.
.25-3.
Pro Rata Distribution.
.26 4.
Interest on Interest.
.26 i
B.
Unclassified Claims.
.26 l
1.
Administrative Claims.
.26 a.
General.
..26 b.
Bar Date for Administrative claims.
.27 2.
Treatment of Priority Tax Claims.
.27 C.
Tredtment of Secured Claims.
. 2 7.
1.
Class 1 (First Mortgage Bonds).
.27-
.27 a.
Ge.3eral.
.28 b.
- ledged Bonds.
2.
Class 2 (General and Refunding Mortgage Bonds)..29
.29 a.
General.
.29 b.
Pledged Bonds.
.30 3.
Class 3 (Nuclear Material Lease).
4.
Class 4 (Eurodollar Tern Loan and Domestic
.30 Tern Loan).
5.
Class 5 (Third Mortgage Bonds, Series A).
.31 6.
Class 5-A (Third Mortgage Bonds, Series B).
.31
.31 a.
General.
b.
Modification of 10-1/2% PCRB Indenture.
.32 7.
Class 6 (Secured Tax Claims and Other Secured
.33 Claims)
D.
Treatment of Classes of Unsecured Claims.
.33 1.
Class 7 (Unsecured Claims Entitled to Priority).33 (Customer Deposits and Credits)
.34 2.
ClanI a
.34 3.
Class 9 (General Unsecured Claims).
.34 Reorganized PSNH Mortgage Bonds.
a.
.34 b.
Preferred Stock.
.34 Reorganized PSNH Common Stock.
c.
[
4.
Class 9-A (Unsecured Claims of $900 or Less, 1
.35 or Which Have Been Reduced to $900)
.35 E.
Treatment of Classes of Interests.
ii
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1.
Class 10 (Existing Preferred. Stock and
)
Damage or Rescission Claims re Existing 1
.35 Preferred Stock).
2.
Class 11.(Existing Common Stock and Damage-or Rescission' Claims re Existing Common Stock)..35
~
3..
Class 12 (Warrants and Claims re Warrants).
..35.
I
..36 F.
CommonLStock Allocation Formula.
3
.36-1.
Class 9
..37 2.
Class 10.
.38 3.
Class 11.
.38 4.
Limitation.
.39 G.
Cash Option.
.39 TREATMENT OF EXECUTORY' CONTRACTS AND UNEXPIRED LEASES.
V.
.39' A.
' Assumption.
.40 B.
Cure Payments and Release of Liability.
.40 C.
Rejection.
.41 MEANS FOR EXECUTION AND IMPLEMENTATION OF THE PIAN.
VI.
Financial Restructuring, Revesting of Assets and A.-
.41 Rate Plan.
..44 B.
Financing.
Valuation and Distribution of Reorganized PSNH C.
.44 Common Stock.
.44 1.
Valuation.
.45 2.
Distribution.
.46 D.
. Cancellation of Existing Securities.
.46 E.
Indentures.
.46 l
1.
Cancellation of Existing Indentures.
2.
Allowed Fees and Expenses of Indenture
.47 Trustees.
iii
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.47 3.
Qualification of New Indentures.
..47 F.
Matters re Articles of Agreement 1
i
.48 1.
Common Stock.
.48 2.
Preferred Stcck.
.50 G.
Distribution of Consideration.
Holders of Debt and Equity Securities 1.
.50 Entitled to Iteceive Distributions.
.51 2 '.
Distribution Date.
.52 3.
Disbursing Jgent.
.52 4.
Disputed Claims or Interests.
.52 a.
Reserve.
.55 b.
Distribution.
.57 Status of Shares in Reserve.
c.
.57 5.
Surrender of Securities.
.58 6.
Unclaimed Property.
.59 7.
Withholding Taxes.
.59 H '.
Directors and Officers.
.59 1.
Designation.
.59 2.
Employment Contracts.
.60 I.
Retention of Jurisdiction.
.62 J.
Discharge.
.62 K.
Limitation of Liability..
.62 VII. CONFIRMATION CONDITIONS
.62 A.
Conditions to Confirmation.
.63 Wai'fer of Preferred Stock Rating Condition.
B.
.64 VIII. EFFECTIVE DATE.
.64 A.
Occurrence of Effective Date.
iv i
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B.' -
Waiver of Condition to the Effective Date.
.66 C.
Effect of Nonoccurrence of Conditions to the Effective Date
.66
.67 IX.
CONSUMMATION.
.68
. X.
MISCELLANEOUS PROVISIONS.
A.
Continuation of Committees After Effective Date...
.68 B.
Amendment and Modification.
.68 C..
Withdrawal As a Proponent.
.68
.69 D.
Headings.
E.
Rules of Construction.
.69
.70 XI.
CONFIRMATION REQUEST.
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applicable nonbankruptcy' law, with respect to any entity, to the full extent authorized by the Bankruptcy Code.
J.
Discharae The Order confirming this Plan shall act as a discharge of any and all claims against and all debts and liabilities of-
-the
- Debtor, as provided in sections 524 and 1141 of the Bankruptcy Code.
K.
Limitation of Liability Neither the Proponents nor any of their respective l
officers, directors, employees, or agents, nor any professional persons employed by any of them, shall have any liability for actions taken in good faith to pursue confirmation of this Plan or to ir.plement this Plan.
VII.
CONFIRMATION CONDITIONS A.
Conditions to Confirmation The following are conditions precedent to Confirmation:
1.
The State of New Hampshire, by the adoption of leg-islation and such other action as may be necessary in the l
1 l
reasonable judgment of at least two of the Proponents, shall have authorized and approved the Rate Plan.
2.
The Rate Plan shall be in full force and effect.
PLAW915 _ _ _ _ _ _ _ _ - - _ _ - _ _ _ - _ _ - - _ - - _ _ _ _ _ - _ _-
l 3.
The NHPUC shall have issued such orders or taken
)
such other action as at least two of the Proponents may reason-ably determine are. necessary to give effect to the Rate Plan.
l 4.
The NHPUC shall have placed in effect in accordance l
I with the Rate Plan a temporary rate increase of at least 5.5% in average retail rates not later than January 1,
1990.
The additional revenues resulting from such increase shall be held $n escrow until the Effective Date and not included in the Debtor's revenues and shall be released from escrew on the Effective Date for inclusion in Reorganized PSNH's revenues and for use by Reor-ganized PSNH.
5.
The Series A,
B, and D Reorganized PSNH Mortgage Bonds and the New PCRBs have been provisionally rated on a when issued basis at least Minimum Investment Grade by Moody's Investors Service, Inc., Standard & Poor's Corporation, and Duff
& Phelps Inc.
6.
The Series A Reorganized PSNH Preferred Stock has been provisionally rated on a when issued basis at least Minimum Investment Grade by Moody's Investors Service, Inc., Standard &
Poor's Corporation, and Duff & Phelps Inc.
B.
Ha_iver of Preferred Stock Ratina Conditior)
The Proponents may jointly waive the condition to Confirmation contained in Section VII.A.6 by a unanimous written agreement Filed before the approval of the Disclosure Statement. PLAW915
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. i EXHIBIT G L--_-___________
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. LETTER OF INTENT 1
)
by and between r
I Northeast Utilities Service Company, I
acting on behalfofits parent,
' Northeast Utilities and the Governor of the State of New Hampshire and the New Hampshire Attorney General, acting on behalfof the State ofNew Hampshire JULY 27,1989
+
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LETTER OF INTENT
]
d Northeast Utilities Service Company ("NUSCO"), acting on i
behalf of its parent Northeast Utilities ("NU"), and the j
Governor of the State of New Hampshire and the New Hampshire Attorney General, acting on behalf of the State of New Hampshire (the " State")(both NU-and the State being herein referred to collectively as the " Parties"), hereby express their intent to enter into a comprehensive agreement which contemplates, among other things, the resolution of the reorganization proceedings i
of Public Service Company of New Hampshire ("PSNH") under Chapter 11 of the Federal Bankruptcy Code.
m 1.
Terms of the Agreement.
It is the intent of the Parties to enter into an agreement substantially the same in form and substance as that attached hereto as Exhibit 1 (the
" Agreement").
The Agreement contemplates:
(i) the acquisition of PSNH, including PSNH's interest in Seabrook,.by NU or entities controlled by NU; (ii) the assumption of responsibilities for operation of Seabrook by an NU entity (subject to agreement with the other' joint owners of Seabrook);
(iii) the provision by NU system companies of certain capacity requirements to reorganized PSNH ("NUNH"); and (iv) the establishment of a rate plan for NUNH.
2.
Execution of Agreement.
This expression of our intent is being entered into at this time to permit NU to file an amended reorganization plan of PSNH and to negotiate with creditors an arrangement based on the proposed rate plan contained in the Agreement.
It is understood that the Agreement will be executed when an appropriate expression of support for NU's plan of reorganization of PSNH has been received from secured and unsecured creditors.
3.
Conditions.
The obligations of the Parties to consummate the transactions contemplated by the Agreement are expressly subject to requisite approvals by relevant and necessary state and federal executive, legislative and judicial authorities.
4.
Non-Exclusive Negotiations.
The Parties shall undertake their best efforts to achieve the prompt resolution of the
2 reorganization proceedings of PSNH in accordance with the terms of the Agreement.
Notwithstanding the foregoing, the State expressly reserves the right to enter into other arrangements to resolve such proceedings with other entities if it determines that such other arrangements would be in the best interests of the State of New Hampshire.
Dated as of July 27, 1989.
AGREED TO'AND ACCEPTED BY:
THE STATE OF NEW HAMPSHIRE NORTHEAST UTILITIES SERVICE COMPANY By:
By:
Governor of the State of New Hampshire By:
New Hampshire Attorney General l
EXHIBIT 1 AGREEMENT This Agreement dated as of 1989 (the
" Agreement") entered into, by and between Northeast Utilities Service Company ("NUSCO"), acting on behalf of its parent Northeast Utilities ("NU"), and the Governor and Attorney General of the State of New Hampshire, acting on behalf of the State of New Hampshire (the " State"), (together with any entity that may subsequently adopt or ratify this Agreement in accordance with paragraph 18 being referred to as the " Parties" or " Party") contemplates, among other things, the resolution of the reorganization proceedings of Public Service Company of New Hampshire ("PSNH") under Chapter 11 of the Federal Bankruptcy Code.
WHEREAS, it is expressly acknowledged by the Parties that the purpose of this Agreement is to express the obligations of NU and the State with respect to NU's proposed acquisition of l
PSNH and the consummation of NUSCO's plan of reorganization for PSNH (the reorganized company being referred to hereinafter as L
- "NUNH");
!L
l
,. WHEREAS, in consideration of the obligations under this Agreement, including those of the State, NU is agreeing to undertake good faith efforts (i) to restore PSNH's financial stability to permit PSNH (as NUNH) to provide continued service to its ratepayers, (ii) to' provide the residents of the State of New Hampshire with needed electric capacity pursuant to the terms of paragraph 3 of this Agreement, and (iii) to negotiate with the other joint owners of seabrook an arrangement under which an NU eystem company will assume responsibility for the operation of Seabrook; NOW, THEREFORE, in order to carry out the terms and conditions contemplated by this Agreement and in consideration of the mutual agreements below, the Parties agree as follows:
[.
1.
Reorganization of Public Service Company of New Hampshire - It is hereby acknowledged by all of the Parties that this Agreement constitutes an essential and necessary part of EU's proposed acquisition of PSNH and plan for its reorganization and that without this Agreement, NU will not consummate a plan of reorganization of PSNH (the " Plan") under which PSNH will become a wholly-owned subsidiary of NU upon
-_g--____
h terms that are acceptable to NU and favorable to the ratepayers of New Hampshire.
2.
Seabrook Understandings - (a) As part of its proposed acquisition of PSNH, NU agrees to acquire PSNH's interest in Seabrook and to undertake good faith efforts to negotiate with the other joint owners of Seabrook an arrangement under which an NU system company will assume responsibility for the operation of Seabrook effective at or as soon as practicable after the date of the consummation of the Plan (the " Consummation Date" which, for the purposes of this Agreement, shall mean the date of closing of NU's acquisition of PSNH).
(b) In accordance with Exhibit A hereto, PSNH's interest in Seabrook will be transferred to a public utility incorporated under the laws of New Hampshire which will be a wholly-owned subsidiary of NU (herein referred to as "NEWCO").
NdWOO and NUNH will enter into a long-term power contract covering NUNH's Seabrook Unit 1 output share and containing terms and conditions as described in Exhibit A (the " Power Contract").
NU is providing in Exhibit A that the value assigned to Seabrook is to be $500 million or any greater amount mutually agreed upon by NU and the State.
The excess of the
-4
. aggregate value placed by the Plan on PSNH's assets over the sum of (i) the amount allocated to Seabrook in accordance with Exhibit A and (ii) the amount of the net book value of the balance of PSNH's assets, will be reflected on NUNH's books as an acquisition premium to be recovered in part through rates.
The allocation of value between Seabrook and the balance of PSNH's assets and the final amounts of the premium and the Seabrook rate base asset will be fixed by mutual agreement of the State and NU no later than the time that the Plan is furnished to PSNH creditors and equity security holders for a vote.
(c)
Although NEWCO will be subject to FERC regulation, the initial terms of the Power Contract will be subject to the approval of the State and any change in the level of rates to be charged under the Power Contract will be restricted as provided in the Power Contract.
Any change ordered by FERC in the terms of the Power Contract will be deemed to constitute a modification of this Agreement subject to the provisions of paragraph 15 hereof.
3.
NU System Capacity - (a) To assure an adequate supply of electric service to the ratepayers of New Hampshire, NU
, system companies chall provide capacity to NUNH during the first ten years after the Consummation Date through a contract or contracts for unit entitlement designed to provide capacity at the average cost of the NU system.
(NU has provided the State l
with a designation of the generating units from which the capacity is expected to be provided and the estimated capacity cost per kilowatt ~ year-by-year in Appenfix A to a letter dated July 21, 1989 from counsel for NU to Larry Smukler, Senior Assistant Attorney General for the State of New Hampshire.)
The amount of capacity to be provided will be designed to be equal to (i) the expected total capability responsibility of NUNH determined as if it were a stand-alone member of the New England Power Pool ("NEPOOL") less (ii) the sum of: (1) a 25 percent share of the reduction in NEPOOL capability responsibility for NUNH and the NU system companies resulting from the combination of NUNH and the NU system companies as a single NEPOOL participant; and (2) NUNH's existing resources at the time, including any additional cogeneration and small power producer facilities placed in service during the period from which NUNH is required to purchase energy or capacity in accordance with New Hampshire energy policy.
_ _ _ _ _ _ _ _ _a
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(b)
In addition, prior to the Consummation Date, NU will file with the NHPUC for its approval a load and resource plan for a period of 20 years reasonably demonstrating that the ratepayers of New Hampshire will be provided with safe and adequate electric service at just and reasonable rates.
4.
NU System Arrangements - In addition to committing to the 25 percent capacity credit provided for in paragraph 3(a),
NU will enter into an agreement with NUNH pursuant to which NU will credit NUNH with 50 percent of any additional energy savings received under NEPOOL rules resulting from the combined operation of the NU system and NUNH.
5.
Base kates - (a) To improve and maintain the financial stability of PSNH (as NUNH) and to enable NUNH and NEWCO to attract capital on reasonable terms, and to ensure that the impact of future rate increases on New Hampshire ratepayers is minimized to the zaaximum extent practicable, the Parties agree that base retail rates shall be adjusted as follows:
(i)
A temporary increase of 5.5% in average annual base retail rates shall be placed in effect as of January 1, 1990, or as soon as practicable thereafter as the State and NU agree that there has been a sufficient demonstration of support
L I
L '
.for.the Plan, and shall become permanent as of the Consummation Date.
Such increase shall be computed on the basis of rates actually in effect on the date of this Agreement, i.e.,
total average retail rates of 9.02 cents per kilowatthour.
The additional revenues resulting from such increase shall be held
.in escrow until the Consummation Date and not included in revenues and shall be released from escrow on the Consummation l
Date to NUNH for inclusion in revenues and use by NUNH.
In the event the Plan is not consummated, the additional revenues shall be refunded to customers if so ordered by the NHPUC or applied in such other manner as the NHPUC shall direct.
Interest earned on such escrowed revenues shall be used to reduce rates recoverable under the fuel and purchased power mechanism in effect at the applicat$on or refund of such revenues; (ii)
NUNH's average base retail rates shall be further increased above the level provided in paragraph 5(a)(1) on the later of the Consummation Date or January 1, 1991 by 5.5%;
(iii) NUNH's average base retail rates shall be
, increased by a further 5.5% on each anniversary of the date on which the rates provided in paragraph 5(a)(ii) go into effect f'sr the next five years;
! (iv) a return on equity collar as described in Exhibit B shall be activated if NUNH's return on equity falls below or exceeds levels prescribed in that Exhibit; and (v) except for changes required by subparagraphs (ii),
(iii) and (iv) above, the only changes to base rates during the period commencing on the Consummation Date and ending six years after the effective date of the rate increase referred to in paragraph 5(a)(ii) (the " fixed rate period") will be onen to adjust rates for significant legislative or regulatory changes such as changes to federal or state tax laws or to reflect changes required by the Nuclear Decommissioning Financing Committee in the level of monthly payments to be made into the Nuclear Decommissioning Fund from the level prescribed in the Committee's Seventeenth Supplemental Order of June 2, 1989 or to provide revenues to accomplish programs mandated by legislators or regulators (e.g., conservation and load management).
(b)
Any portion of the part of the acquisition premium paid by NU referred to in paragraph 2(b) which is to be recovered through rates and which is not recovered in base rates within the fixed rate period (expected to be not more than $50,000,000
-_ l
.if the Plan values PSNH at $1,900,000,000) shall be included in NUNH's' rate base'and shall be fully recovered in the first year immediately following the end of such period, or over such longer period as may be fixed at the time the allocation of value between Seabrook and the remaining PSNH assets is fixed by mutual agreement of NU and the State.
.i 6.
Rate Design - The increase in annual base retail rates contemplated by paragraph 5(a)(1) and the increase in annual base retail rates contemplated by paragraph 5(a)(ii) shall be applied equally to all NUNH retail rates, unless a rate design proceeding is completed prior thereto by the NHPUC.
j 1
Prior to the time that the first annual 5.5% increase becomes effective pursuant to paragraph 5(a)(iii), the NHPUC shall hold a rate design hearing and determine how the paragraph 5(a)(iii) l rate increases shall be applied to individual rates.
Subsequent j
rate design proceedings during the fixed rate period may be initiated by the NHPUC on its own motion or on the motion of NUNH or another proper person, i
i 7.
ECRM Understandings - PSNH's existing ECRM fuel adjustment clause shall be replaced as of the Consummation Date 1
and for the ten-year period following the Consummation Date by t
l-l.the new clause covering fuel and purchased capacity ("FPPAC")
set out in Exhibit C hereto.
At the end of such 10-year period, the cost of fuel and purchased power shall be recovered in the manner established by the NHPUC.
Although the FPPAC is to continue beyond the fixed rate period, the Plan does not contemplate rate increases in the eighth, ninth and tenth years of the ten-year period.
It is intended that the FPPAC will have no impact on rates if reference assumptions as to the covered costs are achieved.
These cost assumptions are reflected by calendar year in Schedule 1 to Exhibit C.
8.
Decommissioning - Seabrook decommissioning costs will be collected by NUNH from ratepayers as a separate surcharge on rates in accordance with New Hampshire law and will be paid directly into the Nuclear Decommissioning Fund for the benefit of NEWOO.
In the event of a premature decommissioning of Seabrook, decommissioning costs, as fixed by the Nuclear Decommissioning Financing Committee, shall continue to be
, collected under the Power Contract with NEWCO and the NHPUC shall permit the pass through to ratepayers of the decommissioning costs in accordance with RSA 162-F:19, III.
l I
~11-9.
Pollution Control Bonds - The State shall support NU's request that the New Hampshire Industrial Development Authority agree to take action to permit the $100,000,000 of 10 1/2 percent pollution control revenue bonds due 2016 to remain outstanding after transfer of PSNH's Seabrook interest to NEWCO, including, but not limited to, instructing the trustee to consent to any modifications to the indenture and any other modifications that may be required.
10.
Permit Transfers - The State shall support NU's position in any request by PSNH, or NUNH, to be permitted to effect a transfer of permits, licenser or certificates which may be required as a result of a change in control of PSNH or a transfer of PSNH's Seabrook interest to NEWCO.
11.
Merrimack Contract, Small Power Producers and New Hampshire Electric Cooperative - NU will undertake its best efforts to renegotiate the Merrimack contract with Vermont Electric Power Company, the arrangements with the thirteen small
, power producer projects identified in Exhibit D and the Seabrook buy-back contract with the New Hampshire Electric Cooperative
("NHEC").
The State shall support NU's efforts to renegotiate i
. these contracts and to.have the NHPUC adjust the rates under the thirteen small power producer arrangements.
Any renegotiation of the contract with NHEC shall be subject to the approval of the NHPUC, both as to PSNH (or NUNH) and its ratepayers'and as to NHEC and its ratepayers.
The Parties reserve the right to renegotiate this-Agreement to reflect any changes in NUNH's rates resulting from such renegotiation of the NHEC contract or the.NHPUC's. action'or NU's inability to reach agreement with NHEC.
12.
Plan Approval - The Parties agree jointly to support the Plan with creditors and creditor groups, equity holders and equity holder groups, the bankruptcy court, small power producers, and the various state and federal regulatory bodies having jurisdiction over the Plan.
Notwithstanding this Agreement, the State expressly reserves the right to enter into similar agreements with other entities and/or to support reorganization plans proposed by itself, PSNH or other entities if it determines that this will be in the best interests of the State and its ratepayers.
13.
Legislation - The State shall initiate and support legislation needed to implement this Agreement as an enforceable
i obligation of the State and to provide any statutory changes required in order to implement this Agreement.
Such legislation shall be substantially similar to Exhibit E (to be drafted).
14.
Pending Proceedings - The Parties agree to terminate, as of the Consummation! Date, all pending rate proceedings or appeals and to terminate any obligation of PSNH to effect refunds with respect to ar.y collections arising out of such rate proceedings or appeals thereof prior to the Consummation Date, except that NUNH shall continue to be obligated to refund or credit to customers any over-collection under the ECRM fuel adjustment clause in the manner directed by the NHPUC.
15.
Modification of the Agreement - This Agreement shall not be modified, and no new Parties, other than PSNH and NEWCO and one or more additional officers of the State or other public bodies, chall be added hereto except upon the express written agreement of the State and NU.
The New Hampshire Attorney General is the person designated to act for the State with respect to modifications and in all other respects where the
,NHPUC is not designated to act; provided that any modification made after the enactment of the legislation contemplated in paragraph 13 will be subject to the approval of the NHPUC.
! l l
16.
Governing Law - This Agreement will be governed by the laws of the State of New Hampshire (regardless of the laws 0
that might be applicable under. principles of conflicts of law) as to all' matters, including but not limited to taatters of validity, construction, effect and performance.
17.
Counterparts - This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
18.
Subsacuent Part:as - Any entity ratifying, endorsing or adopting any part or all of thin Agreement subsequent to the date this Agreement was originally executed, shall do so in writing and shall be bound by all of the terms, conditions, representations and obligations provided herein unless otherwise agreed.
'~
19.
Exhibits - All Exhibits to this Agreement are incorporated herein and made a part hereof.
Terms defined in i
this Agreement shall have the same meaning when used in the Exhibits.
F. o 1
1 1
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i
'I I 20.
Effective Date - (a) This Agreement will become
)
)
effective upon execution by NUSCO and the State and shall become binding upon any entity complying with paragraph 18 immediately upon compliance with that paragraph.
(b)
Although this Agreement shall become effective in accordance with paragraph 20(a), the Parties acknowledge that certain conditions must occur prior to the consummation of NU's proposed acquisition of PSNH and that such conditions may require modification of this Agrecment by mutual agreement pursuant to the terms ef paragraph 15.
21.
State's Expenses - MJ agrees that the State's reasonable expenses paid in connection with the retaining of outside counsel, accounting advisors and investment advisors with respect to the reorganization of PSNH shall be paid by NU to the extent such expenses are not paid out of the debtor's estate after an appropriate request by the State pursuant to 11 U.S.C.
$ S03 or other applicable authority.
NU further agrees
,to support any such request or application by the State for allowance of compensation.
22.
. Termination - If, despite the best efforts of the Parties, the legislation required pursuant to paragraph 13 should not be enacted, or, if for any other reason, despite the-best efforts of the Parties, the Plan cannot be consummated because one or more of the conditions to its effectiveness cannot be satisfied, any Party to this Agreement may terminate this Agreement, effective 30 days after the giving by it of notice to the other Parties and no Party shall have any rights against any other Party as a result of such termination.
IN WITNESS WHEREOF, each of the Parties has duly executed this Agreement.
Northeast Utilities The State of New Hampshire Service Company By:
By:
Governor of the State of New Hampshire By:
New Hampshire Attorney General e
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EXHIBIT H 4
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.i; LETTER.OF INTENT by and between
-New England Electric System
.and
'the Governor of the State of New Hampshire and the New Hampshire Attorney General, acting on behalf of the State of New Hampshire SEPTEMBER 12, 1989 9
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- l. ~
LETTER OF INTENT New England Electric System ("NEES"), and.the Governor of the State of New Hampshire and the New Hampshire Attorney General, acting on behalf of the State of New Hampshire (the
" State") (both NEES and the State being herein referred to collectively as the " Parties"), hereby express their intent to enter into.a comprehensive agreement which contemplates, among other things, the resolution of the reorganization proceedings of Public Service Company of New Hampshire ("PSNH") under Chapter 11 of the Federal Bankruptcy Code.
)
1.
Terms of the Acreement.
It is the intent of the PartiesEto enter into an agreement substantially the same in form and substance as that attached hereto as Exhibit 1 (the
" Agreement").
The Agreement contemplates:
(i) the acquisition of PSNH, including PSNH's interest in Seabrook, by NEES, Granite State Power (GSP), or other entities controlled by NEES; and (ii) the transfer of PSNH's interest in Seabrook to Seabrook Company-(SBCO), an entity owned by GSP or NEES and formed specifically to acquire PSNH's ownership share of Seabrook; (iii) the execution of a contract between GSP and SBCO for the purchase of power from SBCO's interest in Seabrook; (iv) the provision by NEES system companies of certain capacity requirements to GSP; and (v) the establishment of a rate plan for GSP and SBCO.
i 2'.
Execution.of Acreement.
This expression of our intent is being entered into at this time to permit NEES to file a reorganization plan of PSNH and to negotiate with creditors and equity holders an arrangement based on the proposed rate plan contained in the Agreement, It is understood that the Agreement will be executed Nhen an appropriate expression of
~'
support for NEES' plan of reorganization of PSNH has been received from secured and unsecured creditors and equity holders.
3.
Conditions.
The obligations of the Parties to consummate the transactions contemplated by the Agreement are expressly subject to requisite approvals by relevant and necessary state and federal executive, legislative and judicial authorities and to approval by NEES shareholders.
4.
Non-Exclusive Negotiations.
The Parties shall undertake their best efforts to. achieve the prompt resolution of the reorganization proceedings of PSNH in accordance with the terms of the Agreement.
Notwithstanding the foregoing, the State
_ _ _ - _ expressly reserves the right to enter into other arrangements
~to resolve such proceedings with other entities if it determines that such.other arrangements should be in the best Linterests of the State of New Hampshire.
' Dated as of' September 12, 1989.
' AGREED TO A'ND ACCEPTED BY:
NEW ENGLAND ELECTRIC SYSTEM 1/
'THE STATE OF NEW HAMPSHIRE By:
By:
Governor of.the State President and Chief of New Hampshire Executive Officer By:
New Hampshire' Attorney General E/
The name "New England Electric System" means the trustee or trurtees for the time being (as trustce or trustees but not dated personally) under an agreement and dec1hration of trust January 2, 1925,'as amended, which is hereby referred to, and a copy of which as & mended has been filed with the Secretary of the Commonwealth ef Massachusetts.
Any agroec.3nt, obligation or liability made, entered into or incurred by or on behalf of and no New England Electric System binds only its trust estate, l
shareholder, director, trustee, officer or agent thereof assumes or shall be held to any liability therefor.
i i
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EXHIBIT 1 i
AGREEMENT 1989 (the
'This Agreement dated as of
" Agreement") entered into, by and between New England Electric System ("NEES"), and the Governor and Attorney General of the.
State of New Hampshire, acting on behalf of the State of New Hampshire'(the " State") (together with any entity that may subsequently adopt or ratify this Agreement in accordance with referred to as the " Parties" or " Party"),
paragraph 19 being contemplates, among other things, the resolution of the reorganization proceedings of Public Service Company of New Hampshire ("PSNH") under Chapter 11 of the Federal Bankruptcy Code.
1 WHEREAS, it is expressly acknowledged by the Parties that the purpose of this Agreement is to express the obligations of 1
l L
NEES and the State with respect to the proposed acquisition of'
.PSNH by NEES, Granite State Power ("GSP"), or ar.other entity
~
[..
L contrclled by NEES, and by Seabrook Company ("SBCO"), another i
entity controlled by NEES and formed specifically to acquire PSNH's ownership share of Seabrook, and the' consummation of NEES' plan of reorganization for PSNH; WHEREAS, in consideration of the obligations under this Agreement, including those of the State, NEES is agreeing to
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)
l i undertake good faith efforts (i) to create a utility, GSP, with the financial stability to provide continued service to its
)
I I
1 customers, and (ii) to provide the residents of the State of New Hampshire with needed electric capacity pursuant to the terms of this Agreement; NOW, THEREFORE, in order to carry out the terms and conditions contemplated by this Agreement and in consideration of the mutual agreements below, the Parties agree as follows:
1.
Reorganization of Public Service Company of New Hampshire - It is hereby acknowledged by all of the parties that this Agreement constitutes an esuential and necessary part of NEES' proposed acquisition of PSNH and plan for PSNH's NEES will not reorganization and that without this Agreement, be able to consummate a plan or reorge.nization of PSNH (the
" Plan").
Under the Plan, NEES, GSP, or another NEES entity will acquire PSUH and transfer PSNH's Seabrook share to SBCO.
GSP will become a subsidiary of NEES, and SDCO will become a subsidiary of GSP or NEES, upon terms that are acceptable to NEES cnd favorable to the customers of Nev nampshire.
2.
Basic Understandings - (a) As part of NEES' proposed acquisition, GSP or another NEES entity agrees to acquire
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PSNH's interest in Seabrook and to transfer the Seabrook interest to SBCO, and to execute a contract with SBCO for the output from PSNH's interest in Seabrook as soon as practicable after the date of the consummation of the Plan (the
- _.. _ _ _. __ ___-_ " Consummation Date" which, for the purposes of this Agreement, shall mean the date of closing of NEES' acquisition of PSNH).
(b)
PSNH's interest in Seabrook will be transferred to SBCO, a public utility incorporated under the laws of New Hampshire which will be a wholly-owned subsidiary of GSP or NEES.
SBCO and GSP will enter into a long-term power contract covering SBCO's Seabrook Unit 1 output share and containing terms and conditions as described in Exhibit A (the " Power Contract").
As described in Exhibit A, the value assigned to the pre-consummation date investment in Seabrook is to be
$100 million, payable to PSNH only if the Seabrook unit enters commercial operation.
Expenditures, together with a return thereon, made by SBCO after January 1, 1993 but before commercial operation shall be deducted from the $100 million paid to PSNH.
(c)
The purchase price of PSNH's non-Seabrook assets, l
l togcther with all expenses and transaction ecsts incurred in the acquisition totals $3,900 million.
This amount shall be and allocated to such assets by mbtusl agreement of the States NEES no later than the tirae that the Plan is furnished to PSNH 1
i creditors and equity security helders for L vote.
NHbUC approval of the total purchase price, the amounts allocated to the Seabrook and non-Seabrook assets, and the inclusion of the allocated purchase price for the non-Seabrook assets in GSP's
}
1 rate base shall be a condition to this Agreement.
1
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_4_
(d)
Although SBCO will be subject to FERC regulation, the initial terms of the Power Contract will be subject to the approval of the State and any change in the level of rates to be charged under the Power Contract will be restricted as provided in the Power Contract.
Any change ordered by FERC in, the terms of the Power Contract will be deemed to constitute a modification of this Agreement subject to the provisions of paragraph 16 hereof.
Because the Subpooling Agreement referenced in paragraph 4 is subject to FERC's jurisdiction, its terms will be subject to the prior approval of the State.
3.
NEES System Capacity - (a) To assure an adequate supply of electric service to the customers of GSP, New England Power Company (NEP) shall provide capacity to GSP if needed during the first ten years after the Consummation Date through a contract or contrects for unit entitlement.
NEES has provided the State with a designation of the generating units from which the capacity is espected to be provided if available and the l
estimated unit costs year-by-year in a presentation to the State made en August 24, 1989.
However, it is the'NEES System companies' intent to provide GSP with the most economic capacity available for GSP's customers, and nothing in this l
Agreement is intended to limit the ability of the NEES System companies to procure lower cost capacity.
The amount of capacity to be provided will be designed to be equal to (i) the expected total capability responsibility of GSP determined as if it were a stand-alone member of the New England Power Pool
("NEPOOL") less (ii) the sum of:
(1) a 25% share of the
+
i reduction in NEPOOL capability responsibility for GSP and the j
I NEES system companies resulting from the combination of GSP and the NEES system companies as a single NEPOOL participant; and (2) GSP's existing resources at the time, including any additional cogeneration and small power producer facilities placed in service during the period from which GSP is required to purchase energy or capacity in accordance with New Hampshire energy policy.
(b)
In addition, prior to the Consummation Date, NEES system companies will file with the NHPUC for its approval a load and resource plan for a period of 20 years reasonably demonstrating that the customers of GSP wii be provided with l
l safe and adequate electric service at just and reasonable rates.
NEES System Arrangements - In addition to committing to 4.
the 25% capacity credit provided for in paragraph 3(a), NEES system companies will enter into a Subpooling Agreement with GSP nursuant to which NEES system comp 6nies will provide GSP l
1 with replacement energy in the event that GSP capacity entitlement
?nd power supplies under contract are not 2
available and will credit GSP with 50% of any additional energy savings received under NEPOOL rules resulting from the combined operation of the NEES system and GSP.
5.
Base Rates - (a) To maintain the financial stability of GSP, to enable GSP and SBCO to attract capital on reasonable and to ensure that the impact of future rate increases
- terms, u_
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' on GSP customers is minimized to the maximum extent practicable, the Parties agree that base retail rates shall be adjusted as follows:
l~
(i)' A temporary increase of 4.8% in average annual base retail rates shall be placed in effect as of January 1, 1990, or as soon as practicable thereafter as the State and NEES agree that there has been a sufficient demonstration of support for the Plan, and shall become permanent as of the Consummation Date.
Such increase shall be computed on the basis of rates actually in effect on September 15, 1989, i.e.,
The-total average retail rates of 9.02 cents per kilowatthour.
additional revenues resulting from such increase shall be held in escrow until the Consummati6n Date and not included in revenues and shall be released from escrow on the Consummation Date to GSP for inclusion in income and use by GSP.
In the event the Plan is not consummated, the additional revenues shall be refur.ced to customers if so ordered by the NHPUC or applied in such other manner as the NHPUC shall direct.
Interest earned on such escrowed rev(nues shall be used to reduce rater recoverable under the fuel and purchased poner mechanism in effect at the time of the application or refund of such revenues; (ii)
GSP's average base retail rates shall be further on the increased above the level provided in paragraph 5(a)(i) later of the Consummation Date or January 1, 1931 by 4.8%;
[W1 I
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~7-(iii)
GSP's average base retail rates shall be increased by a further 4.8% on each anniversary of the date on which the rates provided'in paragraph 5(a)(ii) go into effect for the next five years;
. i, (iv) a-return on equity collar as described in Exhibit B shall be activated if GSP's return on equity falls below or exceeds levels prescribed in that Exhibit; and i
(v) except for changes required by subparagraphs l
(ii), (iii), and (iv) above, the only changes'to base rates during the period commencing on the Consummation Date and ending six years after the effective date of the rate increase referred to in paragraph 5(a)(ii) (the " fixed rate period")
i will be ones to adjust rates for significant legislative or regulatory changes such as changes to federal or state tax or environmental orders, regulations, and laws, or to reflect
]
changes required by the Nuclear Decommissioning Financing Committee in the level of monthly payments to be made into the l
Nuclear Decommissioning Fund from the level prescribed in the l
Committee's Seventeenth Supplemental Order of June 2, 1989, or to provide revenues to accomplish programs mandated by legislators or regulators, or to recover costs associated with conservation and load management programs that have been undertaken with the specific approval of the NHPUC.
In the event that such change or circumstance occurs, GSP shall be entitled to file for a temporary rate subject to refund, and the temporary increase if granted by the NHPUC will remain in
I' -
l effect until.a final order by the NHPUC after a. determination that'the additional revenues are associated with the reasonable expenses caused by'such change.
Rate adjustments authorized under-this paragraph will increase or decrease the' ongoing base rate level which'is subject to the 4.8% annual-increases occurring in the remainder of the fixed rate period.
In addition, to the extent any new accounting standards are promulgated during the fixed rate period, GSP shall: be entitled
'to the same-general rate treatment accorded other' utilities in the State by the NHPUC, including, but not limited to, new accounting rules currently being contemplated by the Financial I
-Accounting Standards Board for post-retirement benefits other than pensions.
)
(b)
The purchase price for the non-Seabrook assets paid by 1
NEES or GSP referred to in paragraph 2(c) shall be included in GSP's rate base and shall be fully recovered with a return over 20 years unless some other period is fixed by mutual agreement of.NEES and the State.
l 12.
Balf_ Design - The increase in annual base retail rates contemplated by paragraph 5(a)(i) and the increase in annual base retail rates contemplated by paragraph 5(a)(ii) shall be applied equally to all GSP retail rates, unless a' rate design Prior to proceeding is completed prior thereto by the NHPUC.
the time that the first annual 4.8% increase becomes effective pursuant to paragraph 5(a)(iii), the NHPUC shall hold a rate design hearing and determine how the paragraph 5(a)(iii) rate
I i increases shall be applied to individual rates.
Subsequent rate design proceedings during the fixed rate period may be initiated by the NHPUC on its own motion or on the motion of l
GSP or another proper person.
7.
ECRM Understandings - PSNH's existing ECRM fuel adjustment clause shall be replaced as of the Consummation Date i
and for the ten-year period following the Consummation Date by the new clause covering fuel and purchased capacity ("FPPAC")
set out in Exhibit C hereto.
At the end of such 10-year period, the cost of fuel and purchased power shall be recovered in the manner established by the NHpUC.
Although the FPPAC is to continue beyond the fixed rate period, the Plan does not contemplate rate increases in the eighth, ninth and tenth years of the ten-year period if annual savings of $37 million are l
realized in payments to small power producers.
It is intended that the FPPAC will have no impact on rates if reference assumptions as to the covered costs are achieved.
These cost assumptions are reflected by calendar year in Schedule 1 to Exhibit C.
l 8.
Decommissionirig - Seabrook decommissioning costs will be collected by GSP from customers as a separate surcharge on rates in accordance with New Hampshire law and will be paid l
directly into the Nuclear Decommissioning Fund for the benefit of SBCO.
In the event of a premature decommissioning of Seabrook, decommissioning costs shall continue to be collected
i under the Power Contract with SBCO and the NHPUC shal1~ permit the pass through to customers of the decommissioning costs in accordance with RSA 162-F:19, III, provided, however, that-if Seabrook Unit 1 does not receive NRC authority to operate at full power, the decommissioning costs associated with low-power testing contemplated in the NRC Order CLI-88-10, dated December 21, 1988, will not be recovered from retail customers.
9.
Pollution Control Bonds - The State shall support NEES' request that the New Hampshire Industrial Development Authority agree to take action to permit the $100,000,000 of-10-1/2%
pollution control revenue bonds due 2016 to remain outstanding after transfer of PSNH's Seabrook interest to SBCO, including, but not limited to, instructing the trustee to consent to any modifications to the indenture and any other modifications that may be required.
10.
Permit Transfers - The State shall support NEES' position in any request by PSNH, SBCO or GSP, to be permitted to effect a transfer of permits, licenses or certificates which may be required as a result of the purchase of PSNH or a transfer of PSNH's Seabrook interest to SBCO.
11.
Merrimack Contract. Small Power Producers and New Hampshire Electric Cooperative - NEES will undertake its best efforts to renegotiate the Merrimack contract with Vermont Electric Power Company, the arrangements with the thirteen small power producer projects identified in Exhibit D, and the
. Seabrook buy-back contract together with the Agreement for Partial Requirements Service, the Agreement for Transmission Service for Power from the Seabrook and Maine Yankee Generating Units, and the All-Requirements Service Agreement between PSNH and the New Hampshire Electric Cooperative ("NHEC").
The State shall support NEES' efforts to renegotiate these contracts and to have the NHPUC adjust the rates under the thirteen small power producer arrangements.
In addition, the State shall support a review and revision of the pricing for, or rejection of, other SPP rate orders affecting projects that are not yet in service.
Any renegotiation of the contract with NHEC shall be subject to the approval of the NHPUC, both as to PSNH (or GSP) and its customers and as to NHEC and its customers.
The Parties reserve the right to renegotiate this Agreement to reflect any changes in GSP's rates resulting from such renegotiation of the NHEC contract or the NHPUO's action or NEES' inability to reach agreement with NHEC.
12.
Plan Approval - The Parties agree jointly to support the Plan with creditors an6 creditor groups, equity holders and equity holder groups, the bankruptcy court, small power I
producers, and the various state and federal regulatory bodies
)
having jurisdiction over the Plan.
Notwithstanding this Agreement, the State expressly reserves the right to enter into similar agreet ':nts with other entities and/or to support reorganization plans proposed by itself, PSNH or other entities if it determines that this will be in the best interests of the State an3 its citizens.
. 13.
Legislation - The State shall initiate and support legislation needed to implement this Agreement as an enforceable obligation of the State and to provide any statutory changes required in order to implement this 4* Agreement.
Such legislation shall be substantially similar to Exhibit E (to be drafted).
14.
Reculatory Approvals - The implementation of and limitations within this rate plan are expressly conditioned on the receipt prior to the Consummation Date of final approvals on conditions acceptable to NEES and the State by the NHpUC, FERC, SEC, and any other regulatory agencies having jurisdiction that NEES considers to be necessary or advisable in connection with the acquisition and post-closing business operations of GSp, SBCO, or NEES, including without limitation the following:
(a)
Approval on conditions acceptable to NEES and the l
L State by the NHpUC, FERC, SEC, and any other regulatory l
l agencies having jurisdiction, of the transfer of assets and franchises, including formal findings that the purchase price l
for all assets, property, and licenses of pSNH was just and reasonable.
(b)
Approval on conditions acceptable to NEES and the State by the NHpUC, SEC, and any other regulatory agencies I
having jurisdiction, of all financings, both bridge and permanent, necessary to complete the acquisition and to 1
. capitalize GSP and SBCO with a pro forma' capital structure that is fully satisfactory to NEES.
The financings shall be set forth fully in a petition to the NHPUC.
s (c)
Approval on conditions acceptable to NEES and the State by the NHPUC and any other regulatory agencies having-jurisdiction of the inclusion in rate base of the actual price paid to purchase the assets, property, and licenses of PSNH together with all expenses and transaction costs incurred in the acquisition.
The approval shall specify the accounting and ratemaking treatment for all acquisition costs, the capital structure changes associated with the implementation of the approved financing plan for GSP and SBCO, and the depreciation and amortization of all assets (including acquisition premium) acquired under this offer in a manner that is fully satisfactory to NEES.
15.
Pendina Proceedings - The Parties agree to terminate, as of the Consummation Date, all pending rate proceedings or appeals and to terminate any obligation of PSNH to effect refunds with respect to any collections arising out of such rate proceedings or appeals thereof prior to the Consummation Date, except that GSP shall continue to be obligated to refund or credit to customers any over-collection under the ECRM fuel adjustment clause in the manner directed by the NHPUC.
_ Modificati3n of the Aareement - This Agreement shall 16.
not be modified, and no new Parties, other than PSNH, GSP, and SBC0 and one or more additional officers of the State or other public bodies, shall be added hereto except upon the express written agreement of the State and NEES.
The New Hampshire Attorney General is the person designated to act for the State with respect to modifications and in all ether respects where the NHPUC is not designated to act; provided that any modification made after the enactment of the legislation contemplated in paragraph 13 will be subject to the approval of the NHPUC.
17.
Governino ljug - This Agraement will be governed by the laws of the State of New Hampshire (regardless of the laws that might be applicLble under principles of conflicts of law) as to all matters, including but not limited to matters of validity, construction, effect and performance.
18.
Counterparts - This Agreement may be executed in two or more counterparts, each of which shall be deemed an original l
but all of which together shall constitute one and the same 1
instrument.
19.
Subsecuent Parties - Any entity ratifying, endorsing or adopting any part or all of this Agreement subsequent to the date this Agreement was originally executed, shall do so in writing and shall be bound by all of the terms, conditions,
Rj
-s_ representations and obligations provided herein unless-otherwise agreed.
1 l-20.
Exhibits - All Exhibits to this Agreement are incorporated herein and made a part hereof.
Terms defined in this Agreement shall have the same meaning when used in the l
Exhibits.
21.
Effective Date - (a)
This Agreement will oecome effective upon execution by NEES and the State and shall become binding upon any entity complying with paragraph 19 immediately upon compliance with that paragraph.
(b)
Although this Agreement shall become effective-in accordance with paragraph 21(a), the Parties acknowledge that certain conditions must occur prior to the consummation of NEES' proposed acquisition of PSNH and that such conditions may require modification of this AgrcMment by mutual agreement pursuant to the terms of paragraph 16.
22.
State's Expenses - NEES agrees that the State's
~
reasonable expenses paid in connection with the retaining of outside counsel, accounting advisors and investment advisors with respect to the reorganization of pSNH shall be paid by NEES to the extent such expenses are not paid out of the debtor's estate after an appropriate request by the State pursuant to 11 U.S.C. S 503 or other applicable authority.
_ NEES further agrees to. support any such request or application by the State for allowance of compensation.
23.
Termination - If, despite the best efforts of the Parties,-the-legislation required pursuant to paragraph 13 should not be enacted, or, if for any other reason, despite the best efforts of the Parties, the Plan cannot be consutenated because one or more of the conditions to its effectiveness cannot be satisfied, any Party to this Agreement may terminate this Agreement, effective 30 days after the giving by it of notice to the other Parties and no Party shall have any rights against any other Party as a result of such termination.
IN WITNESS WHEREOF, each of the Parties has duly executed this Agreement.
THE STATE OF NEW HAMPSHIRE NEW E.1 GLAND ELECTRIC SYSTEMI/
By:
By:
Governor of the State of President and Chief New Hampshire Executive Officer By:
New Hampshire Attorney General l
l I/
The name "New England Electric System" means the trustee or l-trustees for the time being (as trustee or trustees but not l-personally) under an agreement and declaration of trust dated January 2, 1926, as amended, which is hereby referred to, and a copy of which as amended has been filed with the Secretary of the Commonwealth of Massachusetts.
Any agreement, obligation or liability made, entered into or incurred by or on behalf of New England Electric System binds only its trust estate, and no shareholder, director, trustee, officer or agent thereof assumes or shall be held to any liability therefor.
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EXHIBIT I I
________,___,-----------.u-----_
_ - - - - - - - ---ua---'
A
's, AGREEMENT This Agreement dated as'of
_, 1989 (the " Agreement")
entered into, by and between Public Service Company of Nev. Hampshire
'("PSNH"), and the Governor and Attorney General of the State.of New Hampshire, acting on behalf.of the State of New Hampshire (the
" State"), (together with any entity that may subsequently adopt or ratify this Agreement in accordance with paragraph IB being referred the to as the " Parties" or " Party") contemplates, among other things, resolution of the reorganization proceedings of PSNH under Chapter 11 of the Federal Bankruptcy' Code.
VHEREAS, it ir expressly acknowledged by the Parties that the purpose of this Agreement is to express the obligations of PSNH and the State with respect to the consummation of PSNH's plan of reorgani:ation.
VHEREAS, in consideration of the obligations under this Agreement, including those of the State, PSNH is agreeing to undertake good faith efforts (i) to restore PSNH's financial stability to permit PSNH to provide continued service to its ratepayers and (ii) to provide the residents of the State of New Hampshire with needed electric capacity pursuant to the terms of paragraph 3 of this Agreement. EXHIBIT A TO JOINT PLAN OF REORGANIZATION 1
e 1
NOV, THEREFORE, in order to carry out the terms and conditions contemplated by-this Agreement and in consideration of the mutual agreements belov, the Parties agree as follows:
1.
Reorganization of Public Service Company of New Hampshire -
It is bereby acknowledged by all-of the Parties that this Agreement constitutes an essential and necessary part of a plan for
' reorganization of PSNH on a stand-alone basis, on terms acceptable to PSNH, its investors and the State of New Hampshire.
2.
Seabrook. Understandings -
(a) As-part of.its Plan, PSNH vill continue its' efforts to transfer Seabrook operation to a separate company, New Hampshire Yankee Electric Co., Inc. ("NHY") as soon as practicable.
is not (b) Transfer of PSNH's Seabrook ovnership interest proposed at the present time, in order to reduce potential regulatory
- However, i
complexity, delay and risk associated with such transfer.
it vould the parties agree that in the future, if PSNH concludes'that l
l be advantageous to transfer its Seabrook ovnership interest to a separate subsidiary, the State vill support such transfer on the same terms the State has been prepared to agree to with any potential
-2 EXHIBIT A TO JOINT PLAN OF REORGANIZATION
acquirer of PSNH. Unless and until such transfer occurs, Seabrook forth cost recovery shall be defined by the accounting mechanism set in Exhibit A.
PSNH is pr? iding in Exhibit A that the value assigned to Seabrook is to be $500 million or any greater amount mutually The excess of the aggregate value agreed upon by PSNH and the State.
placed by the Plan'on PSNH's assets over the sum of (i) the amount alloca*ed to Seabrook in accordance with Exhibit A and (ii) the amount of the net book value of the balance of PSNH's assets, vill be to be reflected on PSNH's books as a reorganization adjustment recovered in part through rates. The allocation of value between Seabrook and the balance of PSN1Ps assets and the final amonnts of the reorganization adjustment and the Seabrook rate base asset, vill be fixed by mutual agreement of the State and PSNH no later than the time of approval of the Disclosure Statement accompanying the Plan.
(c) [ INTENTIONALLY DELETED - NO ADDITIONAL PERC REGULATION]
l 3.
PSNH System Capacity -
(a) To assure an adequate supply of electric service to the 3
ratepayers of New Hampshire, PSNH shall pursue a specific 10-year plan I
as set forth in Exhibit P.
(b) In addition, in accordance with the NHPUC's present
)
I EXHIBIT A TO JOINT PLAN OP REORGANIZATION
1 l
schedule, PSNH vill update and file with the NHPUC for its approval a load and resource plan (the " Integrated Least Cost Resource Plan") for a period of 20 years reasonably demonstrating that the ratepayers of New Hampshire vill be provided with safe and adequate electric service at just and reasonable rates.
4.
NU System Arrangements --[ INTENTIONALLY OMITTED) 5.
Base Rates -
(a) To improve and maintain the financial stability of PSNH and to enstle PSNH to attract capital on reasonable terms, and to ensure that the impact of future rate increases on New Hampshire the Parties ratepayers is minimized to the maximum extent practicable, agree that base retail rates shall be adjusted as follovs:
(i) A temporary increase of 5.5% in average annual base retail rates shall be placed'in effect as of January 1, 1990, and shall become permanent as of the effective date of the Plan of Such increase shall be reorganization the (" Consummation Date").
computed on the basis of rates actually in effect on the date of this i.e., total average retail rates of 9.02 cents per Agreement, kilowatt-hour. The additional revenues resulting from such increase 4
EXHIBIT A TO JOINT PLAN OF REORGANIZATION
i included shall be held in escrov until the Consummation Date and not j
in revenues and shall-be released.from escrow on the consummation Date
~
-In the event the to PSNH for inclusion in revenues and use by PSNH.
plan is not: consummated,.the additional revenues shall be refunded to' customers if'so ordered by the NHPUC or applied in such other manner Interest earned on such escroved revenues as the NHPUC shall direct.
shall'be used to reduce rates recoverable under the-fuel and purchased power mechanism.in effect at the application'or refund of such revenues; (ii) PSNH's average base retail rates shall be further increased above the level provided in paragraph 5(a)(1) on the later of-the Consummation Date or January 1, 1991 by 5.5%;
(iii) PSNH's average base.etail rates shall be increased by a J
further 5'5% on each anniversary of the date on which the rates provided in paragraph 5(a)(ii) go into effect for the next five years; (iv) a return on equity collar as described in Exhibit B shall be activated if PSNH's return on equity falls belov or exceeds levels prescribed in that Exhibit; and
_ Ey.HIBIT A TO JOINT PI).N OF FIORGANIZATION
(v) except for' changes required by subparagraphs (ii), (iii) and (iv) above, the only changes to base rates during the period commencing on the Consummation Date and ending six years after the effective date of the rate increase referred to in paragraph 5(a)(ii)
(the " fixed' rate period") vill be ones to adjust rates for significant legislative or regulatory changes such as changes to federal or state tax laws or to reflect changes required by the Nuclear Decommissioning Financing Committee in the level of monthly payments to be made into the Nuclear Decommissioning Fund from the level prescribed in the Committee's Seventeenth Supplemental Order of June 2, 1989 or to provide revenues to accomplish programs mandated by legislators or regulators (e.g., conservation and load management).
(b) The.effect of the recovery of the reorganization The amortization period for adjustment shall be phased-in to rates.
the reorganization adjustment shall be 40 years.
Rate Design - The increases in annual base. retail rates 6.
contemplated by paragraph 5 shall be applied equally to all PSNH retail rate classes, unless and until rate design changes are ordered by the NHPUC.
ECRM Understandings - PSNH's existing ECRM fuel adjustment
- 7. EXHIBIT A TO JOINT PLAN OF REORGANIZATION D
1 v
. clause shall remain in effect until the earlier of'(a) the Consummation Date or (b) the date Seabrook actually. renders service to
-)
consumers. At the earlier of those dates, ECRM shall be replaced for-e the 10-year period following the Consummation Date by the new clause I
covering fuel and purchased capacity ("FPPAC") set out in Exhibit C l
hereto. At the end of such 10-year period, the cost of fuel and l
I purchased power shall be recovered.in the manner established by.the' NBPUC. Although the'FPPAC is to continue beyond the fixed rate l
period, the Plan does not contemplate rate increases in the eighth,
~
l ninth and tenth years of the 10-year period.
i
)
is intended that the FPPAC vill have no impact on rates if It These reference assumptions as to.the covered costs are achieved.
cost assumptions are reflected by calendar year in Schedule 1 to Exhibit C.
l 1
8.
Decommissioning - Seabrook decommissioning costs vill be collected by PSNH from ratepayers as a separate surcharge on rates 13 accordance with New Hampshire lav and vill be paid directly into the Nuclear Decommissioning Fund. In the event of a premature decommissioning of Seabrook, decommissioning costs, as fixed by the Nuclear Decommissioning Financing Committee, shall continue te be EXHIBIT A TO JOINT PLAN OF REORGANIZATION
l.
.collecte andlthe NHPUC shall permit the pass through to ratepayers of d
- the deco:mi:sfoning costs in accordance with RSA 162-F:19 III.
'9.. Pollution Control Bonds ~- The State shall support PSNH's request that the New Hampshire Industrial Development Authority (IDA) agree to take action to permit the issuance of up to $100,000,000 of interest rates for pollution control revenue bonds at current comparable federal tax-exempt securities, if such interest rates are at least 25 basis points lover'than 10-1/2% at the effective date of PSNH's plan of reorganization. Othervise, the State shall support PSNH's request that IDA agree to take action to permit the
$100,000,000 of 10-1/2% pollution control revenue bends due 2016 to remain outstanding after the effective date of PSNH's reorganization.
the In either case, the State shall support action by IDA to instruct to any modifications to the indenture and any other trustee to consent modifications that may be required.
Permit Transfers - The State shall support PSNH's position in 10.
any request by PSNH to be permitted to effect a transfer of permits, licenses or certificates which may be required as a result of this agreement. EXHIBIT A TO JOINT PLAN OF REORGANIZATION
Sniall Power Producers and New Hampshire 11.
Merrimack Contract.
Electric Cooperative - PSNH vill undertake its best efforts to renegotiate the Merrimack contract with' Vermont Electric Pover l
. Company, Inc. (unless the contract is rejected to address supp y issues. referenced in paragraph ~3), the arrangements with the thirteen small pover producer projects identified in Exhibit D and the Seabrook buy-back contract with the New Hampshire Electric Cooperative The State shall support PSNH's actions including
("NHEC").
renegotiation of these contracts and efforts to have the NHPUC adjust Any the rates under the thirteen small power producer arrangements.
to'the renegotiation of the contract with NHEC shall be subject approval of the NHPUC, both as to PSNH and its ratepayers and as to The Parties reserve the right to renegotiate NHEC and its ratepayers.
to reflect any changes in PSNH rates resulting from this Agreement such renegotiation of the NHEC contract or the NHPUC's action or PSNH's inability to reach agreement with NHEC or resulting from costs Electric Power associated with rejection of the contract with Vermont Company, Inc.
Plan Approval - The Parties agree jointly to support the Plan 12.
with creditors and creditor groups, equity holders and equity holder groups, the bankruptcy court, small power producers, and the various i EXHIBIT A TO JOINT PLAN OF REORGANIZATION
l 4
state and federal regulatory bodies having jurisdiction over the Plan.
the State expressly reserves the,right q
Notwithstanding this Agreement, to enter into similar agreements with other entities and/or to support reorganization plans proposed by itself, PSNH or other entities if it this vill be in the best interests of the State and determines that its ratepayers.
13.
Legislation - The State shall initiate and support legislation needed to implement this Agreement as an enforceable obligation of the State and to provide any statutory changes required in order to implement this Agreement.
Such legislation shall be substantially similar to Exhibit E (to be drafted) and shall be enacted no later than the end of the 1990 Legislative Session.
Pending Proceedings - The Parties agree to terminate, as of 14.
the Consummation Date, all pending rate proceedings or appeals and to to any terminate any obligation of PSNH to effect refunds vith respect ec11ections arising out of such rate proceedings or appeals thereof prior to the Consummation Date, except that PSNH shall continue to be obligated to refund or credit to customers any over-collection under the ECRM fuel adjustment clause in the manner directed by the NBPUC.
- EXHIBIT A TO JOI!U PLAN OF REORGANIZATION
15 ', Modification of the Agreement - This Agreement shall not be modified, and no new Parties, other than official committees of security holders of PSNH and one or more additional officers of the State or'other public bodies, shall be added hereto except upon the
.The New Hampshire
. express written agreement of the State and PSNH.
' Attorney General is the person designated to act for the State with to modifications and in all other respects where the NHPUC is respect not designated to act; provided that any modification made after the enactment of the legislation contemplated in paragraph 13 vill be subject to'the approval of the NHPUC.
Governing Lav - This Agreement t'ill be governed by the laws 16.
of the State of New Hampshire (regardless of the lavs the might be applicable under principles of conflicts of lav) as to all matters, including but not limited to matters of validity, construction, effect and performance.
Counterparts - This Agreement may be executed in two or more
)
17.
I l
counterparts, each of which shall be deemed an original but all of vhich together shall constitute one and the same instrument.
Subsequent Parties - Any entity ratifying, endorsing or
- 18. EXHIBIT A TO JOINT PLAN OF REORGANIZATION
to the date this adopting any part or all of this Agreement subsequent Agreement was originally executed shall do so in vriting and shall be i
bound by all of the terms, conditions, representations and obligations provided herein un'less otherwise agreed.
Exhibits - All Exhibits to this Agreement are incorporated 19 herein and made a part hereof. Terms defined in this Agreement shall have the same meaning when used in the Exhibits.
Effective Date - This Agreement vill become effective upon 20.
execution by PSNH and the State and shall become binding upon any entity complying with paragraph 18 immediately upon compliance with that paragraph.
State's Expenses - PSNH vill support the State's request for 21.
recovery of the State's expenses in connection with the reorganization, to the extent reasonable and authorized by in 11 U.S.C. sections 503 or 1129(a)4.
Termination - If, despite the best efforts of the Parties, 22.
the legislation required pursuant to paragraph 13 should not be enacted, or, if for any other reason, despite the best efforts of the EXHIBIT A TO JOINT PLAN OF REORGANIZATION o
Parties, the Plan cannot be consummated because one or more of the conditions to its effectiveness cannot be satisfied, any Party to this effective 30 days after the Agreement may terminate this Agreement, giving by it of notice to the other Parties and no Party shall have any rights against any other Party as a result of such termination.
IN VITNESS VHEREOP, each of the Parties has duly executed this Agreement.
The State of New Hampshire Public Service Company of New Hampshire By:
By:
Governor of the State of New Hampshire By:
New Hampshire Attorney General Joining in this Agreement:
Official Committee of Unsecured Creditors By:
Official Committee of Equity Security Holders By: EX2IBIT A TO JOINT PLAN OP REORGANIZATION
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EXHIBIT J 1.,
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- - - - - - - - - - - - - - - - - - - - - ^ - - - - - - - ^ - - - - - -
- ^ ^ ^ ^ ^ ' ^ ^ ^ - - ^ ^ ' ^ -
UNITED STATES BANKRUPTCY COURT DISTRICT OF NEW HAMPSHIRE
_____________________________________x Chapter 11 In re Case No. 88-00043 PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, Hearing Date:
Debtor.
September 22, 1989 9:30 A.M.
_____________________________________x RESPONSE OF EQUITY COMMITTEE TO PSNH PROCEDURES MOTION AND REQUEST THAT THE COURT (1) MODIFY PRIOR ORDERS PERMITTING POTENTIAL PURCHASERS OF PSNH ASSETS TO PROPOSE AND PURSUE PLANS OF REORGANIZATION, (2) AUTHORIZE THE PROPONENTS OF THE JOINT PLAN TO PROCEED WITH THE CONFIRMATION OF THE JOINT PLAN, AND (3) IMPOSE A MORATORIUM ON ALL OTHER PLANS The Official Committee of Equity Security Holders, (the " Equity Committee"), by its attorneys, Whitman & Ransom, as its Response to the Debtor's " Motion For Order Establishing Procedures for Hearing on Approval of Disclosure Statement (s) and For Related Matters", respectfully shows:
1.
The Equity Committee believes that very recent developments in this Chaptar 11 case, particularly the filing on September 15, 1989 of a consensual Joint Plan of Reorganization (the " Joint Plan") by the Debtor and both official Committees, compels the modification of the Court's j
J
prior orders dated. August 14, 1989 and August 18, 1989, fixing the procedures for moving toward confirmation of a. plan of reorganization.
Would be purchasers of Public Service company of New Hampshire ("PSNH" or " Debtor") should not be permitted to pursue their acquisition plans since such plans are likely to be counterproductive and delay confirmation of the Joint Plan.
2.
Using expedited notice procedures, PSNH has set
.for hearing on September 22, 1989, a " Motion and Notice Thereof For Order Establishing Procedures for Hearing on Approval of Disclosure Statement (s) and for Related Matters" (the "PFNH Procedure Motion").
3.
This Response raises issues which must necessarily be considered at.this juncture of the case.
The basic question is whether the Court should permit. potential
~
purchasers of PSNH to pursue their individual plans when such plans (i) conflict with the financial interests of unsecured creditors and investors as reflected in the consensual Joint Plan filed by PSNH and the two official Committees and (ii)
'will be opposed by the official Committees in any plan voting solicitation and therefore such other plans are highly unlikely to be confirmed.
THE JOINT PLAN IS THE ONLY l
FEASIBLE PLAN FOR CONSUMMATION IN 1990 4.
The Joint Plan contemplates that confirmation of the Joint Plan will occur in early 1990, with a plan "effectlve
_p_
2180t
1 I
date" in the first half of 1990, and that the merger /
acquisition process will take place and be completed pfter the l
Joint Plan is confirmed.
By comparison, the multitude of regulatory approvals required for an outsider's plan seeking a hostile takeover of PSNH means such plans could not be effective until et the earliest late 1990 and probably not until early 1991.
This inherent delay has compelled both official Committees to conclude that a structured acquisition process after confirmation of the Joint Plan is in their best interests.
Neither New England Electric System ("NEES"),
Northeast Utilities ("NU") or the State of New Hampshire
(" State") have any significant financial interest which justifies overriding the present wishes of the major financial parties in interest to have a confirmed plan as soon as possible.
THE JOINT PLAN RESOLVES THE EXPRESSED CONCERNS OF THE STATE OF__NEW HAMPSHIRE 5.
On or about July 27, 1989, NU and the State entered into a rate plan agreement set forth in a letter of intent (the "NU Letter of Intent").
At a hearing held on August 11, 1989, the Court, while questioning the examiner on the State /NU rate plan, said:
I'm wondering whether the State itself has held back any of the terms of the rate plan since thev have announced that the same rate olan would be available 2180t
to any other interested Darty that nicht want to better the Northeast offer.
(Emphasis supplied).
(Hearing Transcript August 11, 1989 p. 14, 1. 15-20).
At the same hearing, Mr. Levin described the State's agreement with PSNH as follows:
The State has said it is offering its rate plan on a non-exclusive basis and I think the State indicated during the recess that it means the State may be willing to support any of a number of plans that comply with that State rate plan.
(Hearing Transcript August 11, 1989 p. 47,
- 1. 13-18).
Mr. Smukler then confirmed that the State was negotiating with NEES "and we expect to reach agreement with them on the same basis and the debtor has indicated to us that it too wishes to engage in discussions on this same basis..."
(Hearing Transcript, August 11, 1989 p. 50, 1. 13-17).
This agreement by the State meant that the rate plan of the NU Letter of Intent would also be available to PSNH for a stand alone consensual Plan.
Based on this agreement with the State, the State and PSNH also agreed to a timetable for plan confirmation, subsequently reflected in the Court's orders of August 14tn and August 18th.
In effect, the State agreed that it would not discriminate against PSNH.
This agreement by the o
State was mandated by applicable law since PSNH still retains the legal right to seek rates through the customary rate setting regulatory process.
Similarly, the State agreed to
)
make similar rate plans available to other bidders.
l l 2180t w____-_-
6.
In its order of August 14, 1989, the Court acknowledged the importance of the State's agreement, stating:
"The agreement to use the state rate plan as a basis for a possible consensual plan to be submitted by September 15th is a significant step forward in these proceedings."
The Court also said that competing plan proponents should have a " fair start" and "that the process be as fair as possible to all parties in interest in the circumstances -- and be perceived to be so."
7.
While the State represented in open court on August 11, 1989 that it would make the NU rate plan available to PSNH, only a few days after the August 18th hearing the State unilaterally changed the terms of the rate plan in an arbitrary and capricious manner in order to try to cap the enterprise value of PSNH.
See letter dated August 21, 1989, from the State which is annexed as Exhibit "A".
Since this letter was sent on the Monday after the Friday, August lath hearing, it appears that the Court may not have been fully informed as to the State's real intentions.
8.
The State's sudden reversel of its position raises serious questions about the State's good faith in these proceedings and merits reconsideration of the August orders which were based, in part, on the representations made by the l
State.
The State's letter confirms that the State seeks to be both the judge, jury, final arbiter of enterprise value, and l 215.S t l
1
4 sales agent in this case.
The State specified the maximum consideration that a bidder may pay for PSNH -- a concept that' is outright confiscatory and contrary to bankruptcy law principles.
9.
Pursuant to a letter dated August 23, 1989, executed by Mr. Smukler on behalf of the State, the State agreed that it would not limit bidders from bidding more than
$2.0 billion.
A copy of this letter is attached as Exhibit "B".
10.
Upon information and belief, in the weeks immediately following the court hearings in August, PSNH met with the State and negotiated in good faith the " Rate Agreement" which is attached to the Joint Plan, which Rate I
Agreement'is consistent with the NU Letter cf Intent and the rate plan set forth therein.
11.
Consistent with the representations made by the State ^to this Court, the State has been requested to approve the Joint Plan Rate Agreement and to enact legislation to implement the Rate Agreement, which is a necessary condition to proceeding with the Joint Plan, as presently structured.
11.
The State has publicly stated that it is a potential bidder for PSNH.
The New Hampshire Energy Authority
("NHEA") is an agency of the State, created to oppose investor interests in PSNH, formed by legislation which became effective on May 11, 1989.
Through the NHEA the State has the express 2180t
l x
)
--power to file a plan seeking tha acquisition of PSNH.
N.H. RSA
)
)
c.
362-B:5 XV.
The statuts autnerizing the State to' acquire PSNH contains specific acquisition procedures'(N.H. RSA l
362-B:7-9) and authorizes the NHEA to issue bonds to finance the acquisition.. However, \\'io JHEA may not issue bonds.in amounts exceeding $2.0 billion in the aggregate.
N.H. RSA 362-B:14.
13.
Upon information and belief, the State has undertaken due diligence with respect to an acquisition of PSNH, has executed a confidentiality agreement in its capacity as a potential bidder and has reviewed the confidential documents available to bidders which are contained in the PSNH data room.
14.
Upon information and belief, NEES, a potential bidder for PSNH, advised the State that based on the rate plan set forth in the NU Letter of Intent NEES would offer $2.2 billien for PSNH.
15.
Upon information and belief, representatives of the State, acting in concert with the State's advisors and other entities, induced NEES to lower its offer for PSNH assets and entered into an agreement with NEES pursuant to which NEES would reduce its offer for PSNH to $2.0 billion.
16.
As a result, NEES, which had annou..ced a bid of
$2.35 billion on April 5, 1989, capped its plan value at $2.0 billion, the same ceiling the State seeks to impose on 2180t
N
.l creditors and shareholders contained in the legislation l
enacting the New Hampshire Energy Authority. (See NEES Press Release dated. April 5, 1989 attached as Exhibit "C" and NEES Press Release dated September 12, 1989 attached as Exhibit "D".)
17.
In a public statement made on September 12, 1989, John W. Rowe, the President and CEO of NEES, said, "The state negotiators were properly concerned with higher bids increasing PSNH's rate base.
They believe that the PSNH bankruptev can be resolved at the $2.0 billion level."
(See Press Release attached as Ex.
"D", p. 3).
18.
The agreement between the State and NEES has impaired the-value of PSNH, has wrongfully interfered with the bidding and reorganization process, and has the potential of depriving shareholders of hundreds of millions of dollars.
19.
The letters of intent between the State, a potential bidder for PSNH, and other potential bidders are contrary to public policy, violate the spirit of the Bankruptcy Code and of Chapter 11 and violate Section 363(n) of the Bankruptcy Code.
20.
As presently presented the NEES Plan, being based on an illegal agreement with the State, and being in violation of the prohibition of Bankruptcy Code 5 363(n), cannot meet the requirement of Code 5 1129 (a) (3) that the " plan has been
' 2180t
proposed in good' faith and not by any means forbidden by law."
Since the announced NEES plan cannot be confirmed, it is-a waste of resources to permit it to be considered as part of the 1
plan. confirmation process..
DISCOVERY OVER M&A PLANS WILL CREATE TOO MUCH DELAY 21.
The present status of the NU plan and the NEES plan is such that discovery cannot possibly be completed in the abbreviated time frame proposed in the PSNH Procedure Motion.- The Equity Committee intends to 1
take discovery by way of deposition testimony of NEES, NU 1
l and the State and will seek the testimony of the principal officers and advisors to such entities.
Significant discovery will be required in order to fully investigate the circumstances surrounding the acts complained of in this Response.
The Debtor's proposed discovery schedule i
does not permit sufficient time for discovery.*
Creditors and shareholders voting on a plan proposed by a potential 1.
L The time limits on plan amendments and the request that all testimony be pre-filed as if this were a utility rate case are not.only unworkable but also improperly restrict the scope of any hearing on disclosure statements. 2100t
bidder are entitled to a-full explanation of why bids have i
been reduced or capped, particularly where the effective 1
'date will be long delayed and consideration may be in the form of common stock or other securities..Similarly, creditors and shareholders are entitled to know if potential bidders are getting a " windfall" at their expense.
CQFCLUSION 22.
The Joint Plan is the product of hard won ccmpromise and is truly a consensual plan.
The Joint Plan has the support of both official Committees.
The Joint Plan meets the enunciated requirements of the State of New Hampshire.
Whenever bidding for PSNH has been discussed it has been 'Eus a means for determining the highest and best value of PSNH..The original intent of determining value has been perverted by the State's reneging on the agreement to make the NU rate plan available to both PSNH and other bidders.
As a result, at this time plans based on an acquisition of PSNH.are counterproductive and further action on such plans should be temporarily frozen, with the merger and acquisition process to continue in early 1990 as soon as the Joint Plan has been consummated.
This will prevent the State from continuing to l
manipulate PSNH's reorganization value and will restore integrity to the reorganization process.
! l 2150t
1 WHEREFORE, the Equity Committee respectfully requests that this Court (1) modify its prior order authorizing competing plans and disclosure statements to be filed by potential bidders, (2) schedule a hearing on approval on the Disclosure Statement for the Joint Ple.n, to the exclusion of a hearing on any other Disclosure Statement, and (3) grant such other and further relief as is proper.
Dated:
New York, New York September 18, 1989 Respectfully submitted, WHITMAN & RANSOM Attorneys for the Equity Committee e
By:
Richard N. Tilton BNH 01645 Howard J.
Berman 200 Park Avenue New York, New York 10166 (212) 351-3000 2180t
k' Certificate of Service I certify that I caused a copy of the foregoing Response,of Equity Committee to FSNH Procedures Motion and Request that the Court (1) Modify Prior Orders Permitting Potential Purchasers of PSNH Assets to Propose and Pursue Plans of Reorganization, (2) Authorize the Proponents of the Joint PJan to Proceed with the Confirmation of the Joint Plan, and (3) Impose a Moratorium on All Other Plans to be served by (a) regular first class mail, postage prepaid, upon all parties
/ hand delivery, telecopier, appearing on the Full List, and (b) Federal Express or overnight delivery to (i) the Debtor, (ii) counsel for.the Debtor, (iii) the United States Trustee, (iv) the Examiner and
/ counsel for each bidder, his counsel, and (v) counsel for and each member of the official committees appointed pursuant to 11 U.S.C. S 1102(a) on September 18, 1989.
j I
Howard J. Berman
. 2180t
-r--,-
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e a
EXHIBIT A
- TRANSMITTED FROM 603 669 4000 2430 06.21.09 14: 50 P.02
- PSNH EXEC.
AIMMBT CENN-THE STATE OF NEW HAMPSHIRE
$"gTLEa""*" '"*"'
PETERT. POLEY q
DePUTTNM GENEE A35tstuT AT70RMm CENERAL i
J5PPREY L N JOHN T. MPms ASSOCWS Ar10RNEY5 GENERAL PBCK SNT N ETEPHENJ.NDGE 805897 P.CHENEL JR.
DOUCIA8N.JONt3 l
SUSAN S. GEIGER DmX G. REE CHARLES T. PUTHAM j
womc4 A.c0Ln ROBERT E. DUNN.JR.
THE ATIORNEY GENERAL mRNm CWRI CIVIL BUREAU FIATE HOUSE ANNEX 25 CAPITOL STREET SU5AN LYTHER CONCORD.NEW HAMPS1HRE 033014397 (amrnma August 21, 1989 Martin L. Gross, Esquire Sulloway, Hollis & Soden PO Box 1256 Concord, New Hampshire 03301 Connie L. Rakowsky, Esquire Orr and Reno PO Box 709 Concord, New Hampshire 03301 Thomas D.
Rath, Esquire Rath, Young, Pignatelli and Oyer PO Box 854 Concord, New Hampshire 03301 Re PSNH Reorganization c.
Dear Martin,
Connie and Tom:
Discussions subsequent to the July 27, 1989 execution of the Letter of Intent between the State and Northeast Utilities (NU) have highlighted an issue that is not addressed in that agreement.
As you know, the State executed that agreement for tha purpose of supporting a $1.9 billion cash bid.
Since the agrec. ment provides for an approximation of cost of service ratemaking, the State was comfortable that the terms of the agreement appropriately allocated risks in the context of a revenue requirement to support a $1.9 billion investment.
I However, as higher bids come in, the application of the l
I EXHIBIT "A"
f TRANSMITTED FROM 603 669 4000 2438 08.21.89 14: 58 P.03
- PSNH EXEC.
1 Martin L. Gross, Esquire Connie L. Rakowsky, Esquire Thomas D.
Rath, Esquire August 21, 1989 Page 2 1
agreement as written has the effect of shifting risks to ratepayers because ratepayers must generate sufficient revenues to. support the higher investment.
Thus, the State has concluded 4
i l
that the agreement as written cannot apply to higher bids.
In developing the appropriate modifications to be applied to higher bids, the State has been guided by the principle that, although $1.9 billion should be sufficient, S2.0 billion in cash may realistically,be required to settle the case.
That is one reason why the State is comfortable with the $1.9 billion NU agreement and why the State will continue to allow comparable terms to be applied to any bid up to $2.0 billion.
It follows, however, that any bid in excess of $2.0 billion is not for the purpose of settling the case, but rather for the purpose of maximizing the probability that a particular bidder will be successful.
While the State will allow creditors and investors to retain the. incremental value generated by the desire of an entity to be the prevailing bidder, it does not believe that ratepayers should be subjected to enhanced risks thereby.
For the foregoing reasons, to the extent that a bidder seeks to recover from ratepayers an investment that is in excess of $2.0 billion, the Return on Equity (ROE) collar defined in paragraph S(iv) and Exhibit B of the agreement will be modified as follows:
1.
The low end of the collar as defined in paragraph B of Exhibit B will be calculated in all instances on the basis of the actual purchase price or $2.0 billion, whichever is lower.
2.
The high end of the collar as defined in paragraph A of Exhibit B will be calculated on the basis of the actual purchase price or S2.0 billion, whichever is lower, plus an Investment Adder.
The Investment Adder is defined as capitalized synergies, efficiencies or cther cost savings brought by the particular successful bidder.
The Investment Adder does not include the benefits of general economic factors applicable to all bidders, such as more optimistic assumptions or performance on matters such as inflation, load growth and fuel cost escalation.
The successful bidder will have the burden of justifying the Investment Adder in an appropriate proceeding before the New Hampshire Public Utilities Commission.
TRANSMITTED FROM 603 669 4000 2436 08.21.89 14: 58 P.04
- PSNH EXEC.
l j
Martin L. Gross, Esquire l
Connie L. Rakowsky, Esquire j
Thomas D. Rath, Esquire l
August 21, 1989 Page 3 l
This letter is being delivered to all.Ldentified bidders at
.the same time so as to maintain a " level playing field."
If you have any questions or require additional information about the State's position, please do not hesitate to contact us.
Sincerely, Larry Smukler Senior Assistant Attorney General
[
,,.m.
Mark Vaughn Devine, Millimet, Stahl & Branch LMS:MV:ab cc:
Mr. Paul Gioia O
I l
i
.---------.3 9
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EXHIBIT B
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AUG 23 '89 11:40 SULLOWW LAW OFFICES p,2f3 a
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t August 23, 1989 Larry M. Smukler, Esq.
Sr. Asst. Atter:ey General State House Concord, N.E. 03301 Re:
PSWE Recreaniza* ion - RCE Collar Modification
Dear La m.f:
This will memorialize our conversation of August 22, 1989, Nected at perfecting my unders*, dhg of you= letter of August 21, 1989, and the ROE collar modificatice. contained in that Ietter.
I understood you to confirm that the fo11erM are correct unders+=dd gs of your letter:
1 The purpose of your letter was to es*=M3 <h. a. manne *a Prevent the 20Z collar mer+="4==- from exposing ratapayers +w.
greater ::sk of rates higher than seven 5.5% increases, c.r lesser opportunity for rates icwer than seven 5.5% increases, which might result frem interaction of the mechanism with a rate base valce greater than 52.0 billion.
2.
Accordingly, the precise impact of your letter was to inform us that the State wishes to use a rate base value of no greater than 52.0 billion in calculations to determine whether the ROE collar mechanism has been triggered, in conjunction with the EXHIBIT "B"
, AUG 23 '89 11:40 SULLOWAY LAW CFFICES P.3/3
- l..
August 23, 1989 Page 2
{
rates of return specified in the triggers, subject to possible adjustment of the rate base value to reflect the " Investment Adder" described in your lette'.
r 3.
You were not telling us that the State wculd only accept a rate plan that postulates a S2.0 billion value to investers.
4.
You were mot telling us that NU's projections of cost cf capital, or ouher projections, must be incorporated by others in order to secure the State's approval.
5.
Accordingly, if reorganized PSNE's cost of capital were to be icwer than the cost of capital specified in the ROE collar triggers, with the result that PSNE could supper a rate base value of higher than 52.0 billion while main +24 4ng the rate path of seven 5.5% increases alcng with FFPAC adjustments, wi* lout triggering the RCE collar mechanism, that would be acceptable to the State.
I would' appreciata it if you confirm the accuracy of Ws nemorandum by si.gnin@ the enclosed copy and return it to me.
Many thanks for your cooperation Tour very *
" f Nactin L. Gr9ss
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EXHIBIT C
RECEIVED APR 0 51989
'7 NewEnglandElectricSystem 25 Pesearch Dnve Westcorougn. Massachusetts 01582 FOR IMMEDIATE RELEASE:
April 5,1989 CONTACT: Jeff Dennard 508-366-9011 (days), 401-885-6278 (evenings)
New England Electric System Bid For Public Service Company of New Hameshire Valued at $2.35 Billion: Cao on Rates Offered New England Electric System (NEES)(NYSE:NES) today offered to purchase the operating assets of Public Service Company of New Hampshire (PSNH)(NYSE:PNH),
exclusive of the Seabrook power plant, for cash and securities totaling $ 1.4 billion.
In addition, the NEES proposal leaves PSNH with an estimated $100 million of cash generated from ongoing operations, and includes a contract to purchase the power from Seabrook, valued at $850 million.
The total value of the offer is $2.35 billion.
l As part of its bid, NEES would provide rate stability for customers of PSNH by
.l operating in New Hampshire under New Hampshire Public Utilities Comission
-more-ah5Ns su se f 5
ALLY u ER AN AGR(( (NTANOCE LARATON Ftau57 aft JA uAar 9
AS A NCEO
=aswum:::::,'~en 7::,wam~ t:.'wc~uc N m ;~u ": = n;r. m A
8~ '!~n'.*'cW!M e'E"f#Ya'.'~e 2.i~##N""1;i'4'M"J# ***"'" ' '" '""' " '"""
EXHIBIT "C"
_=. _ _ _ _
l
' regulation and by charging cost-based rates that will not exceed a rate ceiling for 3 years. This rate cap of 7 percent per year applies to total rates, with l
adjustments only in the event of unanticipated fuel price increases. The ceiling is a cap,'not a target. Under the offer and based on current economic conditions, forecasts, and available information, NEES expects the ceiling will be reacned only in the first year after the acquisition followed by smaller increases of about 5 i
percent or less in the later years.
The components of the bid are valued as follows:
1.
$1.19 billion in cash.
2.
9.25 million NEES common shares, valued at $210 million (at a price of
$22.75 per share).
3.
An estimated $100 million of cash accumulated by PSNH prior to purchase.
4 An offer by NEES to purchase the entire output of power from PSNH's share of Seabrook, at market-based prices.
The estimated value of this centract is $850 million based on New England Power Pool operating assumptions and fuel forecasts.
5.
$2.35 billion of total economic value.
The Seabrook power contract is not a condition of the NEES bid and PSNH would be free to sell Seabrook or its power to other utilities without affecting NEES' offer to purchase the non-Seabrook assets.
-more-
=
r-
"Our ultimate objective in making this bid is to create a successful, financially sound utility providing quality, low-cost, reliable electric service to New Hampshire's citi: ens," said John W. Rowe, president and chief executive officer "Our bid responds to the-interest of several different groups:
of NEES.
o PSNH customers will be protected from ' rate shock' by our proposed ceiling on rate hikes; Our bid provides resources for the safe, reliable operation of o
Seabrook ;
PSNH security owners and creditors will receive a f air value for their o
holdings; Otner utilities, electric power producers, and qualifying f acilities o
will be provided access to electric power transmission; PSHH non-Seabrook employees will be provided jobs in New Hampshire or o
at other NEES companies."
O HEES' offer is subject to regulatory and court approvals, including the New Hampshire Public Utilities Comission, and the bankruptcy court, prior to closing.
Under the terms of the offer, a new NEES subsidiary would acquire PSNH's non-Seabrook assets, and operate them subject to the New Hampshire Public Utilities Commission's jurisdiction and ra temaking authori ty.
The Commission also would review the purchase price of the non-Seabrook assets.
r.o ee -
,e Under the NEES of'fer, rates would be based upon the actual cost of providing service. NEES expects to realize savings from the lower costs associated with financing, operation and maintenance, and fuel purchasing. NEES also projects lower electric generation capability requirements af ter the acquisition. Under the cost-based rate plan, these savings would be passed on to customers.
Rowe cocinented, "Al though any buyer's proposal will be affected by the rates that are acceptable to New Hampshire, we believe that we can provide better service and more value at any given rate level tnan any other bidder."
i l
NEES has been in business in New Hampshire since 1906.
Its subsidiary,.New England Power Company, operates hydroelectric and transmission facilities in the state, and its Granite State Electric subsidiary serves 33,000 retail customers in 21 New Hampshire communities.
NEES is a public utility holding conpany headquartered in Westborough, Mass.
Subsidiaries include three retail operating companies -- Massachusetts Electric Company, which" serves 893,000 customers in 146 Massachusetts communities; The Narragansett Electric Company, which' serves 308,000 customers in 27 Rhode Island communities; and Granite State Electric Company, which serves 33,000 customers in 21 New Hampshire communities. Other subsidiaries include a wholesale generating company, New England Power Company, which operates 21 generating stations; an oil and gas exploration and fuel s company, New England Energy Incorporated; three transmission service companies: New England Electric Transmission Corporation, New England Hydro-Transmission Corporation, and New England Hydro-Transmission Ilectric Company, Inc.; a conservation service company, NEES Energy, Inc.; and a service company, New England Power Service Company.
- PJ -
i
RECENED FACT SHEET APR 051989 NEW ENGLAND ELECTRIC SYSTEM (NEES)
BID FOR NON-SEABROCK ASSETS OF PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE (PSNH)
Bid Date:
April 5,1989 -- Open for 30 days Total - Value:
$2.35 Billion Bid Components:
For the Purchase of Non-Seabrook assets:
Cash
$1,190 million NEES Common Equity 9.25 milllion shares at an average price of
$22.75 per share
$ 210 million Total Purchase Price
$1,400 million Value of Seabrook contract (NEP00L assumptions and fuel forecast)
$ 850 million Cash Accumulated by PSNH Remaining in Estate
$ 100 million Total Economic Value
$2,350 million Rate Proposal:
Cost-of-service ratemaking wi th annual cap on overall rate increases of 7% over current levels for 3 years following acquisition.
Recovery of base rates above ll cap over 5-year period Fuel price increase over 7% cap recovered
)
currently 1
Savings to be passed on to customers Cost-of-service rates continued after 3 years State control of rates I
1
Seabrook :
Resources provided for reliable and safe operation Transmission P oli cy:
Improved ac::ess i
PSNH Employees:
Jobs for all non-Seabrook PSNH employees
{
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4 1
I 1
EXHIBIT D
)
SEP 12 '89 17:48 RoTHSCHILD IK.
P.11 TAMalHiiIhD FROM cy$ coi vyv i f,4 00.
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. pim W.,.
PtE.CEIVED SEP 121989
@ 25 Research OrteNewEnglandElectricSystem Westerough. Massachusetts 01682 NEWS FOR D9EDIATI RELEASE:
Septemeer 12, 1989 CONTACT: Jeff Dennard 508-366 9011 (days) 401-885 6276 (evenings)
NEES Anncunces $2.0 tillion Bid for PSNH ar.d 4.8 Percent Rate Agreement with New Hampshire Governor and Attorney General New England Electric System (NEES) today announced a new $2.0 Dillion b to acquire Public Service Company of New Hampshire (PSNN) including PSW ownership share of Seabrook Unit 1.
NEES also announced a rats agreement with the Governor of New Hampshire under dich customers can expect annual rate
'A increases of 4.8 percent whether Seatrook operates or is cancelled.
previous rate proposal by Northeast Utilities called for annual rate increas of 5.5 percent if Seabrook operates and 6.6 percent if Saaerock is cancelled.
John W. Rowe, NEES president and enief executive officer, stated that
'our objective throughout this process has been to bring more value to PSNH's Our security holders with lower utes and less rii.k to PSNH's customers.
offer meets this objective.
-aQ re-MsU s7=o'vTe~sIIN' dN"E'IosYa'w'eNEoYe$15*Yo'[N#,'d'oiDM.$".1.*/Nuf.IN!.!aY
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EXHIBIT "D"
SCP 12 "s9 17:49 ROTHSCHILD INC.
P.12 TPArdti! TTED FRGrl oC3 e69 4000 2433 00.17. 89 1o: 46 P.o3
.PENM EXEC.
p 2
"Our bid of $2.0 billion provides higher value to PSNH's investors than any previous bid, and our rate plan of 4.8 percent increases provides lower i
costs to PSNH's customers than any prior proposal," Rowe continued.
"Our rate plan also exposes these New Hampshire customers to fewer risks than prior proposal s.
They will not pay 1.1 percent of additional rate increases for five years if Seabrook is cancelled. We have made reasonacle forecasts of our costs to small power producers, and our cust:eers will not. pay an additional
. 2.4' percent rate increase because of these costs in tat future.
We have focused our attention on bringing savings to New Hampshire customers. As a result, we can produce lower rates to customers and higher value to PSNN's investors. "
If Seabrook is in operation, NEES will purchase PSNH for $1.6 billion in cash and 11.25 million NEES shares that are worth $300 million at $26.50 per In addition, a NEES subsidiary will assume tne obligation to pay $100 share.
million of PSNH's pollution control bonds.
The reorganized PSNH, called Granite State Powr Company (ASP) under NEES' proposal, will own all of PSNH's non-Seabrock assets directly. GSP will also own the stock of a second company, SBC0, that will hold PSNH's ownersnip share of Seabrook. The effer to purchase all of PSNH including Seabrook was necessary to maintain a competitive bid and to bring the bankruptcy to a j
i tfmely conclusion. Under the offer, $100 million of the total purchase price is paid only if Seaerock reaches commercial operation.
In addition, any l
pre-commercial operations costs occurring af ter January 1,1993
-more-I
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SEP 12 'e9 17:50 RoTHSCHILD INC.
p,g 7
TFANIMiiTED FACM oo3 669 sooo 2436 09.12.09 Ac: 46 P.o4
- PSNm EXEC.
3 would be deducted from tne $100 million payment f f the vait has not yet reached commeref 41 operation by that date. NEES' offer submitted todey will be included in the company's reorganization plan for PSW tilat will be filec with the Bankruptcy Court by September 15 in accordance with Judge Yacos' schedule.
j Witn regard to the rate agreement, Rowe said, "The state negotiators were properly concerned with higher Dids increasing PSW's rate b4se. They believe that the PSNK bankruptcy can be resolved at the $2.0 billion level.
Consequently, we have offered $2.0 billion and reduced rate increasts from S.5 percent to 4.8 percent to reflect the savings that we bring to New Weepshire.
Our solid fit with PSNH allows us to operate successfully with smaller rate increases."
The rate agreemer.t reached with Governor Gregg aliows for 4.8 percent annual rate increases in base rates starting on January 1,1990 and continuing 3
for the six years af ter the NEES purchase of PSNH. The ra+Js are subject to further increases for higher.than-expected increases in fuel and purchased power expense, for tax and regulatory changes, or if GSP's earnings f all below l
a lower limit. The rate agreement includes no planned increases above 4.8 percent for Seabrook's cancellation or for small power producer costs.
)
l The WEES offer also provides:
o an assured supply of power with or without Seabrook in operation; o improved transmissico access; o jobs for PSNH's non-Seabrook empicyees within the NEES system; and o New Hampshire Tankte operation of Seabrook.
-more.
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SEP 12 '99 17:51 ROTHSCHILD INC.
p,.4 1
TENEMITTED F00M o03 c6+ 4000 2436 00 12.84 lo:46 P.05
- PSNM EXEC.
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NEES' of fer is subject to regulatory and court approvels, including these from the New Hampshire Public Utilities Commission and the bankruptcy cowet,
{
as well as New Hampshirs legislation, prior to closing.
NEES has been in business in New Hampshire since 1906.
Its suosidiary, t
\\
New England Power Company, operates hydroelectric and transmission facilities in the state, and its Granite State Electric subsidiary serves 33,000 retail
{
customers in 21 New Hampshire consunities.
New England Electric Eystem is a public utility holding compatyr headquartered in Westborcugh, Mass. Subsidiaries incluoe three retail i
operating companies. Massachusetts Electric Company. which cerves 893.000 customers in 146 Massachusetts communities; The Narragansett Electric Company, which serves 308,000 customers in 27 Rhode Island corsnunities; and Granita
$ tate Electric Company, which servet 33,000 customers in 21 New Hampshire connuni ties. Other subsidiaries incigde a wholesale genersting company, New England Power Company, which operates 21 generating stations; an of) and gas exploration and fuels company, New England Energy Incorporated; three transmission service companies: New England Electric Transmission Corporation, New England %dro-Transmission Corporation, sad New England Hydro-Transmission Electric Company. Inc.; a wholesale electric generation company, Narragansett Energy Rascurces Company; a conservation and energy management services company, NEES Energy, Inc.; and a service company, New England Power Service Company..
(
,*,I 'SES 12 's 17:51 ROTHSCHILD RC.
p,
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TNNEN17TEt, FRCM o03 6o9 4000 2420. _,g9.12. M Io: 4o F.co..PSNs EXEC.
E W ENGLAND ELE _CTRIC _SY$_n_ M_
i 1
0FFER *0 R OUIRE PUBL!_C SERV!CE CONPANY OF WW HAW SHIRE (PSW )
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Offer setnouncamen*.
g:
September 12, 1989 Total value:
$2.0 billion if seabrock is en line
$1.9 billion if SeabreoK is cancelled l
a Components of offer:
Seabrook Seabrook in operation cancelled tan lions J (mu nons)
To PSE credtters:
-- Cash
$1,600
$1,525
- NEES Equity 100 175
-- PSet Poll.ution Contro1 Sends 100 100
$1,800
$1,800 To PSNH equity:
-- NEES Equity 200 100*
Total Value:
$2,000
$1.900
'If Seabrook is not on line and has also not been cancelled at the time tne acquisition is completed, PSNH equity nolders will be issuco Seabroot certificates, redeemable for up to $100 million if Seabrock subsequently comes on line.
Structure I
of offer:
.. NEES acqu1res entire PSNH
-- All PSNH non-Seabrook assets are owned and operated by a new l
NEES subsidiary, Granite State Power Company (GSP)
-- A new EES subsidiary, S8C0, will own the PSMH Seabrook asset and will sell its share of tne power from Seabrook Unit l' to GSP
-- Seabrook will continue to be operated by New Hampshira Yankee
(-over-)
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SEP 12 '89 17:52 ROThSCHILD INC*
P.16
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FACT SHEET (continued)
Rate plan:
-- Seven annual 4.8 percent rate increases starting January 1, 1990
.- No additional 1.1 percent rate increases for Seabrook cancel 14 tion
-- No additional 2.4 percent rate increase for small power producer contracts
.- Adjustments for power costs above or below projections
-- Limited earnings protection
-- Stable cost of service rates after the fixed rate period Power supplyt==. Assured by NEES System compinf es with or without Seabrook in operation l
Transmission Policy:
-- Improved access PSMH I!ii"pToyees:
-- Jes assured for all non-Seabrook PSNH employees
-- Sedrock employees will work for New Hampshire Yankee Electric Corporation e
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EXHIBIT K
- 4 L
M o
Memorandum to Th'omas G. Dignan, Esquire From:
Martin L. Gross Re:
Financial Qualifications of PSNH You have asked us to prepare a memorandum addressing a question raised by the Appeals Board, regarding how long it would take for revenues to flow to PSNH under New Hampshire regulatory law, once a full power license for Seabrook is issued.
You relayed three specific questions through Meg Nelson.
We offer the following for your use in preparing a brief.
Question No. 1.
As a matter of law, when does the anti-CWIP law cease to preclude PSNH from recovering any of the costs associated with Seabrook Station?
Is the issuance of a full power license suf ficient or must Seabrook Station produce power at a specified level to satisfy the statute?
Response
On its face, the anti-CWIP law, N.H. RSA 378:30-a, prohibits recovery through rates of costs associated with utility plant construction until the plant is "actually providing service to consumers."
(See copy of statute attached).
There has been no judicial or regulatory decision applying this statutory language to a set of facts.
However, one of New Hampshire's canons of statutory interpretation requires that statutes be applied in accordance with their plain Ir.nguage, where l
possible.
This canon has previously been applied to the anti-CWIP 1
statute itself.
Appeal of Public Service Company of New
(
Hampshire, 125 N.H.
46, 480 A.2d 20 (1984).
l l
~
Applying this canon, the anti-CWIP statute contains no references to licenses or to technical requirements for specified operating levels, as prerequisites for lifting the statutory prohibition.
Instead, the statute uses the simple phrase "actually providing service to customers."
PSNH takes the
~
position that the statute should be read to mean what it says, without further elaboration.
Accordingly, PSNH believes that it is entitled to recovery through rates of costs associated with Seabrook Station when the plant is actually providing such
- service, i.e., providing net generation to the grid.
Question No.
2.
Will there be regulatory delay between the time the legal test has been satisfied and the date when revenues actually begin to flow?
Responser Some regulatory delay can be expected, because PSNH is entitled to charge rates only in accord with rate schedules which have been filed and have been permitted to become effective by the New Hampshire Public Utilities Commission (NHPUC).
See N.H. RSA 378:1, 14, 21 (copies attached).
A procedural rule of the NHPUC requires utilities to give notice of intent to file rate schedules at least 30 days in advance of actual filing.
N.H. Code of Adm.
R., Puc 1603.02 (copy attached).
Furthermore, a statute prevents rate changes from taking effect for 30 days,after changes in rate schedules have been filed with the NHPUC.
N.H. RSA 378:3 (copy attached).
Also, the NHPUC is authorized to suspend the effectiveness of tariff changes during l
l !
l i
1 the pendency of its investigation.-
N.H. RSA 378:6,I (copy
)
attached).
In the case of a Seabrook rate case, such a suspension could last as much as 18 months.
N.H. RSA 378:6,II (copy attached).
1 However, New Hampshire statutes also provide procedures ameliorate such regulatory delay.
One such procedure is " bonded rates".
Under the bonded rate procedure, even though the NHPUC has suspended a rate schedule for investigation, the utility may place the new rate schedule in effect 6 months after the originally proposed effective date by presenting to the NHPUC a bond to secure repayment to customers of any difference between revenues collected under the rate schedule and revenues that would a
have been collected under a rate schedule the NHPUC ultimately determines to be just and reasonable.
N.H. RSA 378:6,III (copy attached).
The NEPUC's authority is limited to approving the form of such a bond.
Also, the PUC may require sureties on such a bond, but has never done so in the case of PSNH.
Another procedure available to ameliorate regulatory delay is
" temporary rates".
Under this procedure, the NHPUC may order temporary rates to be in effect during the pendency of a rate D
investigation.
N.H. RSA 378:27 (copy attached).
The NHPUC may provide temporary rates in a case where the utility is seeking a rate increase.
Public Service Company of New Hampshire v. State, 102 N.H.
66, 150 A.2d 810 (1959).
If final disposition of the case results in a rate level higher than the temporary rate level, the utility is permitted to recoup the difference through a l
L _ _ _ - - _ -
surcharge.
N.H. RSA 378:25- (copy attached).
If final disposition produces rates lower than the' temporary rates, the utility is required to refund the difference and may be required to post bond to secure such a refund.
N.H. RSA 378:30 (copy attached).
- Thus, the temporary rate procedure would make it possible for PSNH to request a higher temporary rate level to recover some or all of the costs associated with Seabrook operation, from the inception and during the pendency of proceedings in which its filed rate schedule has been suspended for investigation.
While the statute does not require the NHPUC to allow temporary rates, where temporary rates are requested to cover costs associated with new plant in service, temporary rates may be required in order to avoid constitutional issues of confiscation.
N.H. RSA 378:27; see Public Service Company of N.H.
v.
State, 102 N.H.
66, 150 A.2d 810 (1959).
Question No. 3.
Assuming regulatory delay is likely, does New Hampshire law have a mechanism to allow recoupment of revenues which would have been earned but for the delay caused by the investigation?
1 Responset The temporary rate procedure previously described would permit PSNH to recoup the difference between revenues received under temporary rates and revenues ultimately determined.to be just and reasonable by the NHPUC in finally determining the case.
N.H. RSA 378:29.
In contrast, the bonded rate procedure (previously described) does not provide for !
____-_-__-__---_-__-__D
t recoupment of,' revenues that might be lost during the first 6 months of a rate investigation, prior to the point the new rate schedule has been placed in effect under bond.
Summary _
Under the anti-CWIP law, N.H. RSA 378:30-a, PSNH is entitled to claim rates to recover costs associated with Seabrook Station once the plant is actually rendering service to customers.
In PSNH's view, this point will be reached when Seabrook Station is actually 'urnishing net ger.eration tc the grid.
Furthermore, i
under eicher the temporary rate or bonded rate procedure, New i
Hsapshire law provides opportunity for PSNH to start recovering 1
such revenuer promptly, even though PSNH's new rate schedule might t e suspended for a lengthy investigation period.
i 1
[p t
l July 18, 1989 Martin ross i-1
-l l
I - _ _ _ _ - _ _ _ _ _ _ _ _ _
m.
I' M ENHIRE REVISED STATUTES ANNOTATED M8:1 Schedules. - Emy public utility shan file with the public utGities
===ibian, and shall print and knop open to public inspection, schedules showint the rates, fares, charges and prices for any service rendered or to be rendered in accordance with the rules adopted by the===h par-saant to RSA 541-A; provided, however, that public utilities which serve as seasonal tourist attractions only, as determined in accordance with rules adopted by the connussion pursuant to RSA 541-A, shall be exempt from the provisions of this chaptar.
378: 3 Changs. Unless the comnassion otherwise orders, no change shad be made in any rate, fare, charge or price, which shall have been Sed or published by a public utility in compliance with the requirements hereof, except after 30 days' notics to the commission and such notice to the pub-lic as the Commiazion shgG d{ rect.
378: 6 Sampension of Schedule.
L Pending any invesdration of a rate schedule and the decianon thereon, the comminaion may, or an order served upon the public utility afected, suspend the takirs efect of said schedule and forbid the d-hr or collecting of the rates, fares, charges or prices covered by the schedule 5
for such period or periods, not to exceed 12 months in aH, as in the judg-ment of the comuuasion.nay be necessary for such investigation, except as provided in paragrsph IL IL If a public utility submits a rate schedule which incorporates a newly completed genersting facility into the rate base and the capitalinvestment for the new facility a'rraaria 50 percent of the total capital investment of the puhile utility, the===ta===
may suspend the schedule as provided in paragrsph I, except that such suspenaton shad not exceed 18 months. The total capital investment of the public utility shallinclude the espital invest-ment of the new facility. The -
n may suspend a schedule under this paragraph only once in relation to each new facility.
IIL If for any reason the couansson is unable to :nake its determma-tion prior to the expiration af 6 months from the a@dy proposed efec-tive date of a rate schedule, the public uGty affected may place the filed schedule af rates in adfect, pending expiration of such 12 or 18 months' suspenmaa period, as provided in paragraph I or II, upon furnishes the c... with a band in such form and with such aureties, if any, as the
.. ~..... -
===ia='a= may detersma. The bond and sureties, if any, shaR secure the repayment to the customers af the public utility of the differensa, if any, between the aamounts collected under said schedule of rates and the schedule af roses determined by the===taman to be just and remannMda.
378: 14 Free Servlee, etc. No public utuity shall grant any free serv-
' ice, nor charge or receive a greater or lesser or different --. m-d=_- for any service rendered to any person, !Lrm or en:poradon than the conspen-sation fLxed for such service by the schedules on file with the -
and in effect at the time such service is rendered.
375: 21 Rebates, etc. No public utility shall, dho@ or isak-4 or by any special rate, rebate, drawback or other device or method, malos any deviadon from the rates, fares, charger or prices for any service rendered by it speczfied in its schedules on Se and in efect at the time sneh service was rendered.
n
378: 27 Tesaperary Rates.
In any proceeding involvmg the rates of a pubus utility brought either upon modos of the casumsonon or upoorcoun.
plant, the a=====aa man after reasonable notice and hearms, if it be of i
the oputian that the puhue interest so reqmres, unmediately fbt, deterame, and prescribe. for the duradon of said proceeding reasonable temporary mass; proruled, however, that such temperary rates shan be sufBeint to yield not less than a r===anam return on the cost of the property of the utility used and useful in the public service less accrued depreemdon, as shown by the reports of the udlity died with the commianian unless there appears to be rpasonable ground for quesdoning the $gures in such reports.
378: 29 Adjustment. Temporsry rates so fbcod, determined, and pre.
x:ribed under this subdivision shall be efective until the Anal determma-tion of the rate proceeding, unless terminated sooner by the commia= ion. In every proceeding in which temporary rates are fbred, determined and pre.
scribed under this subdivision, the comana= ion shall consider the efect of such rates in fbang, determimng, and prescribing rates to be thereafter demanded or received by such public utility on final determmadon of the rate proceeding. If, upon final disposition of the issues involved in such proceeding, the rates as finally determined are in excess of the rates pre.
scribed in such temporary order, then such public utility shah be permitted to amortase and recover, by means of a temporary increase over and above the rates Anally detar-M such sum as shall represent the diference be.
tween the grosa income obtained from the rates prescribed in such tem.
porary order and the gross inoame which would have been obtained under the rates finally determmed if applied during the period such temporary order was in efect.
378: 30 Bond. If temporary rstes are prescribed under RSA 378:27 which are higher than those previously in efect, the ea==i==an may re.
quire the puhde utuity to fue a band in such form and with such survdes, if any, as the aa==famaa may deterame, to secum the repayment te, the customers of the public utility of the difemace between the annants coDected under such tamparary rates and the rates which the commanon
$nds abould have been in efect during the continuance of such temporary rstes.
375: 36.a Puhte Utsty Rate Base; Excissions. Public utility rates or charsus shaR not in any manner be based on the cost of construcdon work in progress. At no time shau any rates or charges be based upon any costs aesselsted with construeden work if said construeden work is not com-plated. AH costs of construedon work in progress, including, but not limited toi any costs assodated with constructing, owmng, maintamar or Anancar construction work in pogress, shall not be included in a utility's rate base nor be allowed as an expmes for rate makmr purposes untu. and not before.
said construedon project is actually providag sorrice to consumers.
q
.)
1 g HAMPSHIRE PUBLIC UTILITIES COMMISSION Puc l'603.02 Notice of Intent to File Rate Schedules.
In order to f acilitate une seneculing anc preparation of race proceedings, the connaission requires that any utility intending to file proposed rate schedule changes pursuant to RSA chapter 378, file with the public utilities comunisdon and the department of the attorney general, a " Notice of Intent to File t
Race Schedules" at least 30 days prior to the actual filing of such schedules.
Such notice shall indicate the approximate amount of the proposed increase.
II. no race schedule changes are received within 60 days of commission receipt of the
" Notice of Intent to File Rate Schedules", or the date that the conunission approi?es or disappt rres a waiver pursuant to rule Puc 1603.07, such notice shall expire.
9 O
UNITED STATES OF' AMERICA h
NUCLEAR REGULATORY COMMISSION
'89 SEP 27 A10 :47 -
)
[ch -
In the Matter of
)
Docket Nos. 50-44Y20L)j o'i3
)
50-444-OL PUBLIC SERVICE COMPANY
)
(Emergency Planning Issues)
OF NEW HAMPSHIRE, EI AL.
)
)
(Seabrook Station, Units 1 and 2)
)
September 26, 1989
)
CERTIFICATE OF SERVICE I,.. Stephen A. Jonas, hereby certify that on September 26, 1989, I.made service of the within RESPONSE OF THE MASSACHUSETTS ATTORNEY GENERAL TO THE COMMISSION'S ORDER OF AUGUST 22, 1989, by First Class Mail, and by Federal Express as indicated by [*] to the'following~ parties:
Ivan W.
Smith, Chairman Kenneth A. McCollom Atomic Safety & Licensing Board 1107 W.
Knapp St.
U.S.' Nuclear Regulatory Commission Stillwater, OK 74075 East West Towers Building 4350 East West Highway Bethesda, MD -20814 Dr.-Richard F. Cole Robert R. Pierce, Esq.
Atomic Safety & Licensing Board Atomic Safety & Licensing Board U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission East West Towers Building East West Towers Building 4350 East West Highway 4350 East West Highway Bethesda, MD 20814 Bethesda, MD 20814
- Docketing and Service Thomas G. Dignan, Jr.
l U.S. Nuclear Regulatory Commission Ropes & Gray Washington, DC 20555 One International Place q
Boston, MA 02110 l i
l 1
Sherwin E. Turk, Esq.
Richard Donovan Gregory Barry, Esq.
FEMA Region 10 U.S. Nuclear Regulatory Commission 130 228th Street, S.W.
Office of the General Counsel Federal. Regional Center 130 11555 Rockville Pike, 15th Floor Bothell, WA 98021-9796 Rockville,- MD 20852
'H.
Joseph Flynn, Esq.-
Atomic Safety & Licensing Assistant General Counsel Appeal Board Office of General Counsel U.S. Nuclear Regulatory Commission Federal Emergency Management Washington, DC 20555 Agency 500 C Street, S.W.
Washington, DC 20472 Robert A.
Backus, Esq.
Atomic Safety & Licensing Board Backus, Meyer & Solomon U.S. Nuclear Regulatory Commission 116 Lowell Street Washington, DC 20555 P.O.
Box 516 Manchester, NH 03106 Jane Doughty Dianne Curran, Esq.
Seacoast Anti-Pollution League Harmon, Curran & Towsley Five Market Street Suite 430 Portsmouth, NH 03801 2001 S Street, N.W.
Washington, DC 20008 Barbara St. Andre, Esq.
Judith Mizner, Esq.
Kopelman & Paige, P.C.
79 State Street 77 Frank.lin Street Second Floor Boston, MA 02110 Newburyport, MA 01950 Charles P. Graham, Esq.
'R.
Scott Hill-Whilton, Esq.
Murphy & Graham Lagoulis,- Hill-Whilton & Rotondi 33 Low Street 79 State Street Newburyport, MA 01950 Newburyport, MA 01950 Ashod N. Amirian, Esq.
Senator Gordon J. Humphrey 145 South Main Street U.S.
Senate P.O. Box 38 Washington, DC 20510 Bradford, MA 01835 (Attn:
Tom Burack)
Senator Gordon J. Humphrey John P. Arnold, Attorney General One Eagle Square, Suite 507 Office of the Attorney General Concord, NH 03301 25 Capitol Street (Attn:
Herb Boynton)
Concord, NH 03301 Phillip Ahrens, Esq.
William S. Lord Assistant Attorney General Board of Selectmen Department of the Attorney General Town Hall - Friend Street Augusta, ME 04333 Amesbury, MA 01913 _ _ _ _ _ _ _ _ _ _ _ _ _ - _ -
1 1
I G. Paul Bollwerk, Chairman Alan S. Rosenthal Atomic Safety & Licensing Atomic Safety & Licensing Appeal Board Appeal Board U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission East West Towers Building East West Towers Building 4350 East West Highway 4350 East West Highway Bethesda, MD 20,814 Bethesda, MD 20814 Howard A. Wilber
- Kenneth M. Carr Atomic Safety & Licensing Chairman Appeal Board U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission 11555 Rockville Pike East West Towers Building Rockville, MD 20852 4350 East West Highway Bethesda, MD 208140555
- Thomas M. Roberts, Commissioner
- Kenneth C. Rogers, Commissioner U.S. Nuclear Regulatory Commission U.S. Nuclear Regulatory Commission 11555 Rockville Pike 11555 Rockville Pike Rockville, MD 20852 Rockville, MD 20852
- James R. Curtiss, Commissioner U.S. Nuclear Regulatory Commission 11555 Rockville Pike Rockville, MD 20852 Respectfully submitted, JAMES M. SHANNON ATTORNEY GENERAL Stephen i. Jonas Deputy Attorney General Chief, Public Protection Bureau Department of the Attorney General One Ashburton Place Boston, MA 02108 (617) 727-2200 Dated:
September 26, 1989 _ _ _ - _ _ _ _ - _ _ - _ _ _ _ -