ML19347F439
| ML19347F439 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 05/08/1981 |
| From: | Merrill D PUBLIC SERVICE CO. OF NEW HAMPSHIRE |
| To: | Office of Nuclear Reactor Regulation |
| Shared Package | |
| ML19347F435 | List: |
| References | |
| NUDOCS 8105190275 | |
| Download: ML19347F439 (60) | |
Text
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ILl' PUBLIC SERVICE '
' - . i
' Companyof NewHampshire May 8, 1981 United States Huclear Regulatory Commission Directorate of Licensing Office of Regulation Washington, D. C. 20045 Attention: Director Re: Amendment 42 to License Application Dated March 30, 1973 (Docket Nos. 50 443 & 50-444) and Reouest for Partial Transfer of Construc-tion Permits Nos. CPPR-135 and CPPR-136 Gentlemen:
Pursaant to the Atomic Energ/ Act of 1954, as caended, and the Commission's Rules and Regulations thereunder, Public Service Company of New Hampshire ("PSCo"), on behalf of itself and the other licensees named in the above Construction Permits, hereby amends the License Application filed on March 30, 1973, as here-tofore amended and supplemented, and, pursuant to 10 CFR S 50.80, requests Commission approval of the partial transfer described below of the above Construction Permits as heretofore amended.
In support hereof, the Applicants supply the following informa-tion:
A. Reauested Modifications of Construction Permits
- 1. The transfer by Commonwealth Electric Cocoany, formerly named New Bedford Gas and Edison LiFht Company (" Common-wealth") of its entire Ownership Share (3 52317f>) to
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Canal Electric Company-(" Canal") which is a new
. participant.
-B. Suoporting Material
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In support!of this request for partial transfer, the Appli-cants submit that the' Agreement for Joint Ownership, Construction' and Operation of New Hampshire Units, dated May 1, 1973 (initially
' filed in License Application,-~ Amendment 14--the'" Joint Ownership JAgreement"), provides in Paragraph'23 that "any Participant may at any time sell all or any portion of its Ownership Share" upon -
certain conditions.
Commonwealth and Canal are Massachusetts public service corporations authorized to generate, transmit, purchase and sell electricity and are both subsidiary corporations of the New England Gas and Electric Association.
Canal owns and operates a 572 MW fossil fuel electric gener-ating unit known as Canal Unit No. 1, located at Sandwich, Massa-chusetts,'and owns a 50% interest in, and operates, a 584 MW fossil fuel electric generating unit known as Canal Unit No. 2,
[ located on the same site. Canal is a primary supplier of whole-
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sale electricity to Commonwealth and to -Cambridge Electric Light Company (" Cambridge"). (Cambridge is likewise a subsidiary of HEGEA.) The principal ~ business of Canal is the generation and sale at wholesale of electric power to Commonwealthand Cambridge and to other electric companies.
Commonweal is a party to an Agreement for Joint Ownership, Construction and Operation of Hew Hampshire Nuclear Units, dated May 1, 1973, as amended (the "Seabrook Agreement"), which relates g,s .
y ,
- to the ownership, construction and operation of two' nuclear
- generating units known as Seabrook Units Nos.11 and 2-(the
-"Seabrook Units") which are'under construction in Seabrook, New: Hampshire.- Under the Seabrook Agreement, Commonwealth is presently a joint owner'of a 1 34927% Ownership. Share in the Seabrook Units. In. addition, Commonwealth has agreed, under the terms of the Seventh and Thirteenth Amendments to the Sea-brook Agreement, to acquire an additional 2.17390% Ownership
. Share in the Seabrook Units from the lead participant, PSCo.
Said acquisition was approved by the' Massachusetts Department of Public Utilities by Order dated October 30, 1980 and by the
-Commission in Amendments Nos. 3 to the above Construction Per-mits.- The background for this acquisition is set forth in
-Amendment No. 40 to the above License Application. Pursuant to to said Thirteenth Amendment, the Adjuttment Period relating to this. acquisition ~ began on March 1, 1981.
' Commonwealth and Canal further represent that the transfer of this-Ownership Share to Canal will be in the best interest of both companies. See Testimony of Earl G. Cheney before the Massachusetts Department of Public Utilities (Exhibit IX hereto).
In addition to Commission approval, this transfer requires
- the approval- of the Massachusetts Department of Public Utilities
'(MDPU)..and.the New Hampshire Public Utilities Commission. The requisite petitions have been filed with both agencies, proceed-ings have been completed before the MDPU and favorable orders are expected soon from both agencies.
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.a LIncfurther support of the. request.for partial transfer,
' the 'following information is supplied! herewith:
- 1. . Twenty-five copies of additional. financial in-formation with respect to Canal, demonstrating its financia1' qualifications to assume this Ownership Share in the Units (note that certain
,information with respect to Canal was previously filed as part of Supplement No. 5 to Amendment 40 to the License Application when the intent to make this proposed-transfer was first dis-closed to the Commission):
(1) -Source of Funds schedule (with under-lying assumptions).
(ii) Accountants' Certificate and Officers' Certificate, dated September 16, 1976, as to funded indebtedness and net earnings.
-(iii) No current prospectus outstanding.
(iv) 1980 Annual Report on Form 10-K.
(v) Restrictions applicable to issuance of additional series of bonds from Canal's First and General Mortgage Indenture dated as of September 1, 1976.
(vi) Rate Matters, see discussion under
" Regulation" on page 3 of the 1980 4-
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- Annual. Report on Form
- 10-K.
No rate proceedings are currently pending..
l-(vii)' Schedule of Plant Construction Projects.
(viii) . ~Financia1' Statistics.
p '(ix) Direct Testimony of Earl.G. Cheney.
- : Inasmuch as Canal.is an " affiliate".of, and "under common
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i~ . ownership" with, Commonwealth within the meaning of 10 CFR ,
Part: 50, Appendix.L, the Applicants submit that no further anti'?ust review is required in connection with the proposed l
transfer and that the' prior clearance issued with respect to Commonwealth encompasses Canal.
'C. General This amendment and request _(three signed originals, under f oath,~and. twenty-two copies):is being submitted by PSCo on be-t half oof all the current participants in the project. Copies of
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the Appointment cf Agent form authorizing PSCo to act on behalf of Canal are filed herewith.
The transfer herein requested-will in no.way affect the pro-
- : visions of.the Joint Ownership Agreement, which vest responsibility for the operation and control of the project in PSCo, the lead participant, nor in any way affect the design of the facility.
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-Accordingly, the transfer does not raise any issues with respect to-safeguards against hazards from radioactive materials (10 CFR 50.80(b)) or any alteration of a licensed facility or signi-
-ficant hazards consideration (10 CFR S 50 91).
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i Pursuant to 10'CFR S 50.80(b), the Applicants confirm their agreement _that they will'not permit any individual to have access to any Restricted Data until the Civil Service Commission shall have made an-investigation and reported to the Nuclear. Regulatory
-Commission on the character, associations and loyalty of such individual and the Nuclear Regulatory Commission shall'have determined that permitting such individual to have. access to Restricted Data will not endanger the common defense and security.
Pursuant to 10 CFR S 170.22 and in accordance with the determination made with respect to Amendment No; 39 in the above dockets, Applisants propose that this Amendment consti-tutes a Class III amendment involving a single issue and, accordingly, a check for $4,000 is enclosed herewith to cover the filing fee.
The Applicants submit that Canal is qualified to be the holder of a 3 52317% Ownership Share in the Seabrook Project
'under the Construction Permits and that the transfer would be consistent with applicable provisions of law, regulations and orders of the Commission. .
Respectfully submitted, PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE By k -
Y[M o '
D. N. Merrill Executive Vice President
.a.. -s'*
l STATE OF NEW HAMPSHIRE ,
COUNTY OF HILLSBOROUGH Personally. appeared before me this l \ day of [* 6 [ ,
1981, D. N. Merrill, who, being duly sworn, did state that he is Executive Vice President of Public Service Company of New Hampshire, an applicant herein, that he is duly authorized to execute and file the foregoing amendment and request in the name'and on behalf of Public Service Company of New Hampshire, and that the statements in said amendment and reauest are true to the best of his knowledge and belief.
Notary Public My Commission Expires
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Infomstion R;qu st: Itcm 1 (1) 4 b
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CANAL ELECTRIC COMPANY Pro-Forma Sources of Funds for Construction of Subject Nuclear Power Plant-Assuming Transfer of Jubject Nuclear Project from Commonwealth Electric to Canal Electric Company January 1982 (Millions of Dollars)
Request #2(i) 1981 1982 1983 1984 1985 1986 External Financing Common Stock $ $ 20.0 $ $ $ 20.0 $
Long-Term Debt 25.0 30.0 Notes Payable, Net 31.0 7.0 (37.0) 1.0 Total External Funds 45.0 31.0 7.0 13.0 1.0 Internally Generated Cash Net income 6.3 6.8 9.4 13.3 14.0 16.6 Less:
Common Dividends 6.3 4.8 6.6 9.3 9.8 11.6 Retained Earnings 2.0 2.8 4.0 4.2 5.0 Deferred income Taxes 1.1 5.0 6.4 6.1 6.3 6.6 Investment Tax Credit, Net 1.5 1.7 .7 1.0 .6 Depreciation and Amortization 4.8 4.9 4.9 7.7 8.C 10.7 Change in Working Capital (3.5) 29.6 (.3) .7 .6 1.1 Less:
AFUDC (2.0) (2.9) (1.9) (2.3) (1.6)
Total internal Funds 2.4 41.0 12.6 17.3 17.8 22.4 Total Funds 2.4 86.0 43.6 _24.3 30.8 23.4 Construction Expenditures
- Nuclear Power Plants 84.0 38.9 20.0 20.4 9.5 Other 1.6 1.2 3.9 3.5 9.6 13.1 Total Construction Expenditures 1.6 85.2 42.8 23.5 30.0 22.6 Other Capital Requirements Acquisition of Bonds for Sinking Funds .8 .8 .8 .8 .8 .8 Total Capital Requirements 1 2.4 $ 86.0 $ 43.6 1 24.3 $ 30.8 1 23.4 Subject Nuclear Power included in Nuclear Power Plant Expenditures (Above) $ $ 84.0 $ 24.7 $ 14.7 $ 14.3 $ 2.1 Capital Structure Long-Term Debt $ 49.1 48% .$ 73.1 49% $ 72.3 48% $ 71.5 47% $100.7 49% $ 99.9 47%
Common Equity 53.6 52 75.6 51 78.4 52 82.4 53 106.6 51 111.6 53 Total $392.7 10Q% $148.7 100% $150.7 100% $153.9 100% gg07.3 1Q0% 3211.5 100%
CANAL ELECTRIC CCMPANY Sources of runds Assumptions (a) Return on Average Common Equity 14%
(b) Preferred Stock Dividend Rate - Not Applicable (c) Long-term Interest Rate 12%
Short-term Interest Rate 13%
(d) Common Stock Sold at Book Value (e) Common Stock Dividend Payout Ratio 70%
(f) 5]/50 Long-term Debt, Common Stocks (g) Interest Coverage Indenture SEC Basis Basis 1981 3.97X 4.10X 1982 3.74 d.74 1983 3.73 3.73 1984 4.84 4.84 1985 3.86 3.86 1986 3.90 3.91 Tii) Annual Growth Rate in KWH Sales 1% Decrease Annual Increase in Price per Kim 15%
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Inf rm tion R:qu::;;t: Itan 1 (ii) l e
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Accountants' Certificate re Bondable Property The undersigned, an accountant as defined in the l'irst and Gencral Mortgage Indenture dated as of September 1,1976 between Canal Electric Company (the' " Company") and Citibank, N. A. , of New York, New York, Trustee (the " Indenture"), hereby certifies that he has examined Officers' Certificate No. 1 dated September 16, 1976 pursuant to Sections 3.02(al and 4.01(a) of the Indent'./.re, and hereby verifies paragraphs 2 and 5 as to
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the Cost of the Bondable Property described in Schedule A to such Officers' Certificate and paragraph o and such portions of paragraphs 1, 3 and 4 as are susceptible to verification by an accountant.
The undersigned hereby states that the terms used in this certificate which are defined in the Indenture are used as therein defined; that he has read the covenants and conditions in the Indenture relating to the evidencing of Bondable Property and the other matters certified herein, and the definitions contained in the Indenture relative thereto; that he is familiar with the matters
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herein certified by him by reason of his office as Comptroller of the Company (the Comptroller being the chief accounting officer of the Company), his familiarity with and knowledge of its business and affairs, and an examination of its records and accounts; that in his opinion he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not euch covenants and conditions have been complied with; and th'at in his opinion such covenants and conditions have been complied with."
Dated: September 16, 1976 1 0_ lt$
F John D. Heaton, Comptroller of Canal Electric Company
4 Officers' Certificate No. 1 Evidencing Bondable Property The undersigned President and Assistant Treasurer of Canal Electric Company (the " Company."), pursuant to Sections 3. 02(a) and 4. 01(a) of the First and General Mortgage Indenture dated as of September 1,1976 between the Company and Citibank, N. A. , of New York, New York, Trustee (the " Indenture"), .-
hereby certify that there has been acquired or constructed and added by the t
Company to the mortgaged and pledged property during the period from November 1,1968 through August 31, 1976, inclusive, the property described in the attached Schedule A, which is incorporated herein and made a part hereof, and further certify that:
- 1. Such property complies with the definition of Bondable Property;
- 2. TI'e Cost of such Bondable Property as of the date of this certificate is shown on the said Schedule A; the Current Fair Value of such Bondable Property is not less than the Cost as set forth in said Schedule A;
- 3. Such Bondable Property har not previously been evidenced to the Trustee;
- 4. No part of such Bondable Property was, at and immediately prior to the time of its acquisition, subject to an Underlying Mortgage;
- 5. The Amount of Bondable Property evidenced by this Officers' Certificate is s 71,922,000 .
- 6. The Net Amount of Bondable Property after evidencing such Bondable Property is $ 71,740,000 and a computation thereof is shown in said Schedule A; and
- 7. The terms used in this certificate which are defined in the Indenture are used as therein defined.
The undersigned hereby state that they have read the covenants and conditions in the Indenture relating to the evidencing of Bondable Property and the other matters certified herein, and the definitions contained in the Indenture relative thereto; that they have become familiar with the matters herein certified by them by reason of their respective offices in the Company, their familiarity with and knowledge of its business and affairs, and an examination of its records and accounts; that in their opinion they have made such examination or investigation as is necessary to enable them to express an informed opinion as to whether or not such covenants and conditions have been complied with; and that in their opinion such covenants and conditions have been complied with.
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G. H. Gowdy, President of Canal Electric Company
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Ronald L. Petrin, Assistant Treasurer of Canal Electric Company Dated: September 16, 1976 l
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s Schrdule A CANAL ELECTRIC COMPANY Schedule of bondable Property and ,
Net Amount of Bondable Property At Cost Under First and Genercl Mortgage Indenture Dated as of September 1, 1976 For the P'riod November 1,1968 to August 31, 1976 Account Amount No. Description Production Plant $ 99 000 310 Land 8 130 000 311 Structures 37 912 000 312 Boiler Plant Equipment 16 165 000 314 Turbogenerator Units 4 966 000 315 Accessory Electric Equipment 676 000 316 Miscellaneous Power Plant Equipment 13 000 346 Accessory Electric Equipment Transmission Plant 57 000 352 Structures 2 344 000 353 Station Equipment General Plant 2 000 1 Stractures 20 000 k .90 50. Office Furniture and Equipment 392 Transportation Equipment (excluded from Bondable Property) 5 000 393 Stores Eculpment 70 000 394 Toolc, Shep Equipment 44 000 395 Laboratory Equipment 39 000 396 Power Operated Equipment - 15 000 398 Miscellaneous Equipment 70 557 000 Total Plan; in Service 136 000 105 Property Held for Puture Use 1 229 000 107 Construction Work in Progress 71 922 000 Cost of Bond:ble Property D: ductions from Bondable Property Bondable Property constructed from proceeds of insurance $ Bondable Property constructed from the proceeds from the disposition of Bondable Property Bondable Property allocated,in satisfaction of renewal ^and replacement fund or sinking fund requirements 182 000 182 000 Retirements of Bondable Property Nc; Amount of Bondable Property $ 71 740 000 4
e CANAL ELECTRIC COMPANY Determination of " Net Earnings" as Prescribed in Article I Section 1.01 Twelve Months Ended December 31, 1980 (Dollars in Thousands) _ _
Gross Income
$197 256 Operating Revenues 2 802 Other Income 200 058 Aggregate Cross Income Deduct ruel oil used in production $161 722 Operating Expenses 6 882 7 705 Maintenance
- Provision for Depreciation 4 617 2 013 182 939 Provision for Taxes Other Than Federal Income Taxes Net Earnings
$ 17 119 Interest on Long-Term Debt $ 4 174 4.10 Times Long-Term Debt Interest Earned *
- Indenture Coverage Required - 2.0 Times Assuming an interest rate of 17.5% the Company could issue an additional $25,062,000 of long-term debt under the net earnings test as defined in the indenture. Under the current capitalization test, the Company could issue an additional $4,485,000 of long-term debt and still meet the required debt / capitalization ratio (50/50).
Additional long-term de;t can be issued in conjunction with issues of common stock as long as this capitalization test is met.
- Information R:qusst: Itcm 1 (iv) cnd 2 (vi) 9 e
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s SECURITIES AND EXCHANGE COMMISSION Washington D. C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1980 Commission file number 2-30057 CANAL ELECTRIC COMPANY (Exact name of registrant as specified in its cnarter)
Massachusetts 04-1733577 (State or other jurisdiction of (1.R.S. Employer incorporation or organization) Identification No.)
675 Massachusetts Avenue, Cambridge, Massachusetts 02139 (Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 617 - 864 - 3100
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on Title of each class which registerad _
None None Securities registered pursuant to Section 12(g) of the Act:
None (Title of Class)
Indicate by check mark whether the registrant (1) has filed .1 reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing rrquirements for the past 90 days.
Yes X No Shares of common stock outstanding at March 16, 1981 1,523,200 The Company meets the conditions set forth in Generel Instruction 1(1)(a) and (b) of Form 10-K as a wholly-owned subsidiary and is filing this Form with the reduced disclosure format.
Documents incorporated herein by reference - None Exhibit index begins on page 27 of this report.
1
o CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 PART 1.
Item 1. Business Canal Electric Company (" Company"), a wholly-owned subsidiary of New England Gas and Electric Association (" Association"), is a wholesale electric generating company organized in 1902 under the laws of the Commonwealth of Massachuset4. The Company essumed its present corporate name in 1966 after the sais to an affiliated company of its electric distribution and transmission properties together with the right to do business in the territories served.
The Company's generating station is located in Sandwich, Massachusetts at the eastern end of the Cape Cod Canal. The station consists of two oil-fired steam electric generating units: Canal Unit No.1, with a rated capacity of '
572 MW, is wholly-owned by Canal; and Canal Unit No. 2, with a rated capacity '
of 584 MW, is jointly-owned by Canal and Montaup Electric Company (a non-affiliated company). Canal Unit No. 2 is operated under an agreement with Montaup which provides for the equal sharing of output, costs and operating expenses.
Construction of Unit No.1 was completed in 1968 and Unit No. 2 commenced commercial operation February 1,1976. The Company expects to participate as a joint-owner of other generating units to be constructed by itself and other New England utilities.
By virtue of its charter which is unlimited in time, the Company generates ,
and sells electricity at wholesale to other utilities without direct competition in kind from any privately or municipally-owned utility.
Power Contracts The Company has entered into substantially identical life-of-the-unit power contracts with Boston Edison Company, Montaup Electric Company and New England Pov er Company (neighboring utilities), under each of which the customer is severally obligated to purchase one quarter of the capacity and energy of Unit No.1, and with Commonwealth Electric Company (" Commonwealth e Electric") and Cambridge Electric Light Company (" Cambridge Electric"), both distribution subsidiaries of the Association, under which the two are jointly obligated to purchase the remaining one quarter of the unit's capacity and energy.
A similar contract is in effect between the Company and Commonwealth Electric and Cambridge Electric, uncer which those companies are jointly obligated to purchase the Company's entire one-half share of the net capability l
of Unit No. 2.
The price of power under the power contracts is based on a two-part rate consisting of a demand rate and an energy rate. The demand rate covers all expenses except fuel costs and provides for a return on investment as well as recovery of investment over the economic lives of the units. The j 2
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l CANAL ELECTRIC COMPANY f
FORM 10-K DECEMBER 31, 1980 t
[~ item 1. . Business - (Continued) l
~ Power Contracts (Continued) energy rate is based on the cost of fuel and is billed to each purchaser in
- proportion to its consumption of power. Purchasers are billed monthly. The i
.. power contracts.are on file with the Federal Energy Regulatory Commission (FERC).
.New England Power Pool The Company is a member of the New England Power Pool (NEPOOL), ,
whose central dispatching facility (NEPEX) coordinates the operation of essentially
_ all of the generation and transmission facilities in New England. Under its i long-range program, NEPOOL will enable member utilities to install fewer but larger, more efficient generating units and higher voltage transmission lines for toe purpose of obtaining lower cost power and increased reliability.
, Under NEPEX the most economically available generating units of member l companies are operated to fill the demand for power in the entire region. In ,
, the past, this has required that Unit No.1 operate whenever possible since it is one' of the most efficient oil-fired units in the country. Unit No. 2 is i designed for cycling operation which provides for economic changes in unit load. .This design permits reduced generation during nights and weekends when demand in the region is lowest and it has performed as one of New England's most efficient units in this type of service.
The Company and the Association's other electric subsidiaries are also members of the Northeast Power Coordinating Council (NPCC), an advisory organization which establishes criteria and standards for reliability and serves
- as a' vehicle for coordination in the planning and operations of these systems
to enhance reliability.
4 Regulation The Company is subject to regulation by the Massachusetts Department .
- of Public Utilities (DPU) as to issue of securities, accounting, and other matters. The Company is a "pubile utility" within the meaning of Part ll of -
the Fede'ral Power Act and is subject to reguiation thereunder by the FERC 4
as to rates, accounting and other matters and has filed its power contracts I with' the FERC as rate schedules.
I During 1979 the Department of Energy (DOE) began to survey existing 1
electric generating stations which use oil as fuel in their boilers, as required
.under the Fuel Use section of the 1978 National Energy Act. The objective of i this portion of the Act is to reduce the nation's overall dependence on oil by ,
. requiring conversion of existing units to alternative types of fuel. The DOE l plan would prohibit the use of oil by those facilities which are deemed capable
~ of converting to coal-or an alternate fuel. In 1979, the Company's Unit No.1 was initially surveyed t.y- the DOE ant
- during 1980 the DOE issued a proposed 3
l CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 item 1. Business (Continued)
Regulation (Continued) prohibition order barring .the burning of oil in Unit No.1. The possible requirement to convert Canal Unit No.1 to a coal facility has been the subject of intensive r,tudy by Company personnel, who have determined that such a conversion would cost in the range of $200 million to $300 million in today's dollars and would take up to seven years to complete. The financial, technical, operational and environmental difficulCes were the subject of an extensive study which was presented to the DOE in October 1980, in opposition to the
, proposed order.
The Company has countered the DOE's plan with a proposal to construct a new coal-fired facility.
At this time the Company has yet to receive a response from the DOE regarding either the study or the proposed new facility.
Fuel Supply The Company is in the final stages of negotiation of a new long-term contract with Charter Oil (Massachusetts), Inc., for the purchase of the total estimated requirements of residual fuel oil for Unit No.1 and Unit No. 2.
During 1930 the Company has maintained an average daily inventory of approximately 485,000 barrels of fuel oil which represents 16 days of normal operation of the two units. This supply is maintained by tanker deliveries approximately every five to ten days. ;
Future Generating Plant Commitments The Corrwany or Commonwealth Electric has made commitments to participate as a joint-owner in three nuclear units which are planned or under construction by members of NEPOOL. The Company plans to purchase Commonwealth :
Electric's interest in such units after both companies have obtained required regulatory approvals.
The total planned capacity for these units is approximately 3,450 MW.
The Company's ultimate entitlement is 98 MW and is no greater than 5% with respect to any single unit, as shown in the table below. ,
E stl- Expendi- Esti-system mated tures mated Plant Entitle- scheduled Cost of through Cost Capacity ment Compte- Entitle- December Per Unit (b) (MW) (MW) Location tion Date ment 31, 1980 (MW) l (in Thousands) soebrook l
Nos. I and 2 2 300 80(a) seabrook, NH 1983 1985 $109 604 $18 478 $1 370 !
l Pilgrim ,
l No. 2 1 150 18(a) Plymouth, MA Not Determined $ 6 661 $ -
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CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 i tem _ _1_ . Business (Continued)
Future Generatina Plant Commitments (Continued)
(a) Commitment of Commonwealth Electric to be acquired by the Company.
(b) The lead participants for the nuclear units described above are Public Service Co. of New Hampshire and Boston Edison Company, respectively.
The Company expects to construct or acquire additional generating capacity in the future in order to meet the load requirements of the distribution subsidiaries of the Association.
Construction and Financin2 The Company has made substantial commitments in connection with its construction program. Estimated construction expenditures for the five-year period ending in 1985 are $157,300,000. Included in this amount is $25,100,000 representing Commonwealth Electric's cost as of December 31,1980 of its investment in jointly-owned generating facilities which the Company proposes to purchase and approximately $114,000,000 representing amounts presently committed by Commonwealth Electric applicable to such facilities for the five year period. The Company will also assume additional commitments for construction costs, related to participation in the jointly-owned plants, for years beyond 1985. These amounts are estimated at $8,800,000.
The estimated construction costs and completion dates for these projects have changed as a result of regulatory, financing, legal and other problems associated with construction of nuclear and other generating facilities. The Company is unable to predict what effect present or future construction difficulties related to these projects will have on its present construction estimates and the estimated completion dates.
The Company's construction program is subject to periodic review, and actual expenditures may vary from the above estimates because of factors such as changes in business conditions, rates of growth, effects of inflation, equipment delivery schedules, licensing delays, availability and cost of capital, and environmental factors.
During the construction period for the jointly-owned generating units each of the participating utility companies finances its own share of the individual units. When these units become operational, the lead participant acts as the operator and bills the participants for their proportionate share of the operating expenses and other costs associated with the unit. Estimated construction expenditures relating to the jointly-owned generating units are based upon the most recent information furrsished by the utility responsible for the construction of each unit.
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1 CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 item 1. Business (Continued)
Construction and Financing (Continued)
During the five-year period ending December 31, 1985, it is estimated that internally-generated funds will provide approximately $94,000,000 to be used for construction. The balance of the funds required will be provided on an interim basis by short-term borrowings which are expected to be replaced by long-term debt and equity securities.
Flasncings presently planned for the period ending Decembe.c 31, 1985 consist of long-term debt issues totaling $40,000,000 and $25,000,000 from the sale of equity securities to the Association. The exact type, timing and amount of future long-term debt and equity financings are subject to change because of market conditions and other factors.
Environmental Matters The Company's generating facilities are subject to Federal, state and local environmental quality control regulations. With respect to Unit No.1 and Unit No. 2, these regulations have required capital expenditures by the Company of approximately $16,256,000. Environmental regulations also require the burning of 1.0% sulphur content oil. However, the Company received an exemption from these regulations during 1979 and is burning 2.2% sulphur content oil. The exemption is t, abject to periodic review the first of which is scheduled for no later than July 1,1982.
Future compliance with existing regulations will require capital expenditures by the Company through 1985 of an estimated $20,600,000 including approximately
$19,600,000 for the Company's proportionate share of such costs to be incurred in connection with construction of jointly-owned generating plants. These amounts have been included in the construction estimates discussed under
" Construction and Financing".
Environmental regulations governing site selection for new electric generating facilities and imposing air and water pollution standards requiring the installation of costly pollution control facilities have had and may continue to have an effect upon the capital costs and construction schedules of NEPOOL generating facilities. The increases in cost cannot be predicted, since the standards and the technology required to meet them are in a state of rapid change. There has been particular public controversy concerning development of nuclear energy. Despite the safety record of the nation's nuclear power plants, these plants have become the target of certain groups claiming, through litigation or intervention in regulatory proceedings, that the present state of nuclear technology presents unacceptable risks to public health and safety and the environment. These claims may cause delays in, or interfere with, scheduled construction of new nuclear plants.
Although the Company is not aware of any existing or proposed environmental regulations having a significant effcct upon its electric business, 6
s c
CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 item 1. Business (Continued)
$nvironmental Matters (Continued) it !s unable to predict the possible effect on capital expenditures or earnings resulting from regulations which may be adopted in the future.
Employees The Company has approximately 100 regular employees, of whom 68 were represented by the Utility Workers' Union of America, A.F.L.-C.I.O. The existing collective bargaining agreement expires May 31, 1983. Employee relations have generally been satisfactory.
ltem 2. Properties The C,enpany operates a generating station located at the eastern end of the Cara Cod Canal in Sandwich, Massachusetts. The station consists of two oil-fit ed steam electric generating units: Canal Unit No.1 with a rated capacity of 572 MW, which is wholly-owned by Canal; and Canal Unit No. 2, with a rated capacity of 584 MW, which is jointly-owned by Canal and Montaup Electric Company.
Item 3. Legal Proceedings None
, 4 7
. CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 PART ll.
Item 5. Market for the Registrant's Common Stock and Related Security Holder Matters (a) Principal Market Not applicable. The Company is a wholly-owned subsidiary of New i England Gas and Electric Association.
(b) Approximate Number of Shareholders at December 31, 1980 One (c) Frequency and Amount of Dividends Paid in 1980 and 1979 (Dollars in Thousands) 1980 1979 Payment Date Amount Payment Date Amount April 29,1980 $1 904 May 1,1979 $1 447 July 29, 1980 1 447 July 31,1979 1 523 October 27, 1980 1 523 October 19, 1979 1 523 December 26, 1980 1 523 December 27, 1979 1 143
$6_391 $5_616 (d) Future dividends may vary depending upon the Company's earnings and capital requirements as well as financial and other conditions existing at that time.
I 8
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CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 Item 7. Management's Discussion and Analysis of the Results of Operations Results of Operations For the Years Ended December 31, 1980 1979 (Dollars in Thousands)
Electric operating revenues $197 256 $141 97.
Costs and Expenses:
Fuel oil used in production 161 722 110 832 Property taxes 1 791 1 623 Interest 4 299 4 178 Depreciation 4 617 4 596 Income taxes 6 459 5 653 All other, net 12 007 9 175 Total 190 895 136 057 Net income $ .6 361 $ 5 919 Cash dividends declared on common stock paid to New England Gas and Electric Association (Parent Company) $ 6 392 $_5_636 Number of common shares outstanding 1 523 200 1980 Compared With 1979 Operating revenues increased by $55.3 million or approximately 38.9%
over 1979. The power contracts for the sale of the capacity of the Canal units provide for the recovery of all operating expenses and fixed charges (including a return on equity) whether or not the unit is operating.
Variations in revenue result from changes in operating expenses, primarily the cost of fuel oil and to a lesser degree from changes in the length of outages for scheduled maintenance. Such variations have no effect on net income. Fuel expense is the Company's single most significant operating cost, representing over 82% of the total revenue dollar. The average annual cost '
of fuel oil per barrel increased during 1980 to approximately $23.00, up from
$16.00 in the prior year. Local property taxes increased by 10.4% due to a higher rate in effect and increased amounts of property. Income taxes increased as a result of higher pre-tax income. Other expenses of operations and mal.1tenance increased by 27.8%. These higher costs reflect inflationary increases in material and labor costs and significantly higher maintenance costs for the Company's generating units. This added maintenance was due in part to the use of higher sulphur content fuel which, although it is lower priced and reduces fuel cost, causes added maintenance. In addition', a major dredging operation in the Cape Cod Canal contributed to this increase.
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CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 item 8. Financial Statements and Supplementary Data REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Canal Electric Company:
We have examined the balance sheets of CANAL ELECTRIC COMPANY (a Massachusette corporation and wholly-owned subsidiary of New England Gas and Electric Association) as of December 31,1980 and 1979, and the related statements of income, retained earnings and se,urces of funds used for c.onstruction for each of the three years in the period ended December 31, 1980, and the supporting schedule lieted in the accompanying index. Our examinations were made in accordance with generally accepted auditing i
standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the financial statements referred to above present fairly the financial position of Canal Electric Company as of December 31,1980 and 1979, and the results of its operations and its sources of funds used for cor'struction for each of the three years in the period ended December 31, 1980, and the supporting schedule present fairiy the information required to be set forth therein, all in conformity with generally accepted accounting principles applied on a consistent basis.
ARTHUR ANDERSEN & CO.
Boston, Massachusetts, February 17, 1981.
10
INDEX CANAL ELECTRIC COMPANY INDEX TO FINANCIAL STATEMENTS AND SCHEDULES PART 11.
FINANCI AL STATEMENTS Balance Sheets at December 31,1980 and 1979 Statements of income for the Years Ended December 31,1980,1979 and 1978 i
Statements of Retained Earnings for the years ended December 31, 1980, ,
1979 and 1978 Statements of Sources of Funds Used for Construction for the years ended December 31,1980,1979 and 1978 t
Notes to Financial Statements PART IV.
SCHEDULE IX Short-term borrowings for the years ended December 31, 1980, 1979 and 1978 SCHEDULES OMITTED All other schedules are not submitted because they are not applicable or .
required or because the required information is included in the financial statements or notes thereto.
11
BALANCE SHEETS CANAL ELECTRIC COMPANY BALANCE SHEETS DECEMBER 31,1980 AND 1979 ASSETS-1980 1979 (Dollars in Thousands) r PROPERTY, PLANT AND EQUIPMENT, at original cost: $129 642 $128 854 Less - Accumulated depreciation 37 673 33 136 91 969 95 718 ,
Add - Construction work in progress 595 93 92 564 95 811 !
CURRENT ASSETS:
Cash 965 332 '
Temporary cash investments 25 900 5 400 Accounts receivable -
Affiliated companies 13 437 9 217 Other 18 322 9 626 ;
Prepaid taxes - t Property 983 816 :
Income -
139 Electric production fuel oil, at average cost 2 895 12 391 Other 357 237 i 62 859 38 158 DEFERRED CHARGES (Note 7) 2 512 2 348
$157 935 $136 317 ;
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t The accompanying notes are an integral part of these financial statements. !
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BALANCE SHEETS (Continued)
CANAL ELECTRIC COMPANY BALANCE SHEETS DECEMBER 31,1980 AND 1979 CAPITALIZATION AND LI ABILITIES 1980 1979 (Dollars in Thousands)
CAPITALIZATION:
Common Equity -
Common Stock, $25 par value -
Authorized and outstanding -
1,523,200 shares, wholly-owned by New England Gas and Electric Association (Parent) $ 38 080 $ 38 080 Amounts paid in excess of par value 8 321 8 321 Retained earnings 7 214 7 250 53 615 53 651 Long-term debt, including premiums, less current sinking fund requirements 49 130 49 893 102 745 103 544 CURRENT LIABILITIES:
Notes Payable to Banks (Schedule IX) -
1 300 Other Current Liabilities -
Current sinking fund requirements 890 686 Accounts payable -
Affiliated companies 220 183 Other 29 657 9 450 Accrued taxes -
Local property and other 983 817 income 3 482 418 Deferred income 500 807 Accrued interest and other 1 352 1 346 37 084 13 707 37 084 15 007 DEFERRED CREDITS:
Accumulated deferred income taxes 14 251 13 801 Unamortized investment tax credits 3 855 3 965 18 106 17 766 COMMITMENTS (Note 7)
$15L935
_ $l16_312 The accompanying notes are an integral part of these financial statements, i- j 13
STATEMENTS OF INCOME CANAL ELECTRIC COMPANY STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,1980,1979 AND 1978 1980 1979 1978 (Dollars in Thousands)
ELECTRIC OPERATING REVENUES $197 256 $141 976 $110 769 OPERATING EXPENSES: !
Fuel oil used in production 161 722 110 832 78 652 !
Other operation 6 882 6 301 6 269 ,
Maintenance 7 705 4 107 4 225 Depreciation 4 617 4 596 4 568 Taxes -
Income (Note 2) 6 459 5 653 6 455 Local property 1 791 1 623 1 552 Payroll and other 222 197 152 189 398 133 199 101 873 OPERATING INCOME 7 858 8 (! 8 896 OTHER INCOME:
Allowance for equity funds used during construction -
79 88 Other, net 2 802 1 351 1 217 2 802 1 430 1 305 INCOME BEFORE INTEREST CHARGES 10 660 10 097 10 201 INTEREST CHARGES:
Long-term debt 4 174 4 211 4 228 !
Other interest charges 161 43 - '
Allowance for borrowed funds used during construction (36) (76) (54) 4 299 4 178 4 174 NET INCOME $ 6 361 $ 5 919 $_fU)2Z i I
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The accompanying notes are an integral part of these financial statements.
14
STATEMENTS OF :
RETAINED EARNINGS CANAL ELECTRIC COMPANY STATEMENTS OF RETAINED EARNINGS ,
FOR THE YEARS ENDED DECEMBER 31,1980,1979 AND 1978 1980 1979 1978 i (Dollars in Thousands)
Balance at beginning of year $ 7 250 $ 6 967 $ 6 805 Add (Deduct):
Net income 6 361 5 919 6 027 Cash dividends on common stock (6 397) (5 636) (5 865)
Balance at end of year $ 7 214 $_I_25S $_6_962 f
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The accompanying notes are an integral part of these financial statements.
15
STATEMENTS OF SOURCES OF FUNDS USED FOR CONSTRUCTION CANAL ELECTRIC COMPANY STATEMENTS OF SOURCES OF FUNDS USED FOR CONSTRUCTION FOR THE YEARS ENDED DECEMBER 31,1980,1979 AND 1978 1980 1979 1978 (Dollars in Thousands)
SOURCES OF FUNDS -
Internal Sources From Operations -
Net ' income $ 6 361 $ 5 919 $ 6 027 Items not requiring or (providing) funds:
Depreciation 4 617 4 596 4 568 Deferred income taxes - long-term 451 1 997 1 352 ,
investment tax credits, net (110) (154) (124)
Allowance for equity funds used during construction -
(79) (88) 11 319 12 279 11 735 Less -
Payment of dividends 6 397 5 636 5 865 Retirement of long-term debt through sinking funds 763 669 779 Other 114 36 (56) 7 274 6 341 6 588 Changes in net current assets:
Cash and temporary cash investments (21 133) 8 334 3 484 Accounts receivable and unbilled revenue (13 171) (7 304) 2 595 income taxes, net 2 896 693 (3 205) !
Electric production fuel oil 9 496 (10 705) (1 127)
Accounts payable and other 20 588 2 354 (5 802) ,.
(1 324) (6 628) (4 055)
Net available from internal sources 2 721 (690) 1 092 Increase (Decrease) in interim Financing (1 300) 1 300 -
$ 1 421 $ 61R $ 1 092 ;
l FUNDS USED FOft CONSTRUCTION -
I Canal Unit No.1 $ 1 241 $ 121 $ 521 l
Canal Unit No. 2 180 183 323 Jointly-Owned Project -
385 336 1 421 689 -1 180 -
l Less - Allowance for equity funds used ,
! during construction -
79 88
$ 1 421 $ 610 $ 1 092 1 l
\
The accompanying notes are an integral part of these financial statements.
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NOTES TO FINANCI AL STATEMENTS CANAL ELECTRIC COMPANY NOTES TO FINANCI AL STATEMENTS (1) Accounting Policies Transactions with Affiliates The Company is a wholly-owned subsidiary of New England Gas and Electric Association. The # 3sociation is an exempt holding company under the provisions of the Public Utility Holding Company Act of 1935 and, in addition to its investment in the Company, has interests in other utility companies and several non-regulated companies.
Transactions between the Company and other system companies include purchase and sale of electricity and payment for management, accounting, data processing and other services. Transactions with other system companies are subject to review by the Federal Energy Regulatory Commission and the Massachusetts Department of Public Utilities.
Operating revenues include sales of electricity to affiliated companies of $105,279,000 in 1980, $75,870,000 in 1979 and $55,595,000 in 1978.
Other Major Customers The Company is a wholesale electric generating company which sells power under life of-the-unit power contracts to several utility companies in the New England area. Information regarding the customers and their participation in these contracts may be found in the " Business" section of this report.
Depreciation Depreciation is provided using the straight-line method at rates intended to amortize the origina! cost of properties over their estimated economic lives. The Company's composite deprecintion rate, based on average depreciable property in service, was 3.6% in 1980,1979 and 1978.
Maintenance Expenditures for repairs of property and replacement and renewal of items determined to be less than units of property are charged to maintenance expense. Additions, replacements and renewals of property considered to be units of property, are charged to the appropriate plant accoun ts . Upon retirement, accumulated depreciation is charged with the original cost of property units and the cost of removal net of salvage.
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CANAL ELECTRIC COMPANY NOTES TO FINANCI AL STATEMENTS (CONTINUED)
(1) Accounting Policies (Continued)
Allowance for Funds Used During Construction The Company includes as an element of the cost of construction of decrecirhie property an allowance for funds employed during periods when p >,erty is under construction. An amount equal to the allowance .
capitalized in the current period is reflected in the statements of income.
Under applicable rate-making practices, property under construction is not included in rate base on which the Company is permitted to earn a return. Amounts so capitalized, while not currently providing funds, are included in rate base when property is placed in service, and these amounts are recoverable in revenues over the service life of the constructed property.
The Company develops rates based upon its current cost of capital l and used a rate of 19% in 1980,11 1/2% in 1979 and 11% in 1978.
(2) Income Taxes For financial reporting purposes, the Company provides taxes on a separate return basis. However, for Federal income tax purposes, the Company's taxable income and deductions are included in the consolidated income tax return of its Parent and it makes tax payments or receives refunds on the basis of its ta : attributes in the consolidated income tax return in accordance with applicable Federal income tax regulstions.
The following is a summary of the provision for income taxes for the years ended DeceQr 31,1980,1979 and 1978:
1980 1979 1978 Total Federal State Total Federal State Total Federal State t (Dollars In~ Thousands)
Currently payable $6 436 $5 585 $851 $4 078 $3 537 $541 $5 183 $4 511 $672 Currently deferred (318) (275) (43) (268) (270) 2 44 48 (4)
Long-term -
deferred 451 392 59 1 997 1 735 262 1 352 1 181 171 investment tax credits 33 33 -
33 33 -
61 61 -
6 602 5 735 867 5 840 5 035 805 6 640 5 801 839 Less-Amortization of investment tax credits 143 143 -
187 187 -
185 185 -
16_452 15_592 $R61 $5_653 $4 848 1805 $6 455 $5 616 $339 1
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CANAL ELECTRIC COMPANY i
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(2) Income Taxes (Continued)
Income taxes are p:ovided for the tax effects of all timing differences other than certain construction-related costs. Timing differences result from reporting income and expense for tax purposes in periods different from those used for financial reporting purposes. The long-term deferred provision represents principally the tax effects arising from deducting depreciation for income tax purposes that currently exceeds the amounts provided in the accounts. The greater tax depreciation arises from the use of accelerated depreciation methods and shorter lives permitted by the Federal and state income tax laws. The tax effects of current timing differences are included in the current deferred provision and deferred income taxes. Investment tax credits are deferred and amortized over the life of the property giving rise to the credits.
The total income tax provision set forth above represents 50% in 1980, 49% in 1979 and 52% in 1978 of income before sut.. income taxes.
The table below reconciles the statutory Federal income tax rate to these percentages:
1980 1979 1978 i Statutory Federal income tax rate 46% 46% 48%
increase (decrease) from statutory rate:
State income tax net of Federal tax reduction 4 4 4 Other _- Q) _-
@% Q% 5%
1 The Company's long-term deferred provision for income taxes results from the use of the following:
1980 1979 1978 (Dollars in Thousands)
Accelerated depreciation for tax purposes $327 $1 242 $1 244 Allowance for borrowed funds used during construction 18 38 74 Other 106 717 33 Long-term deferred income tax provision $$ }L99Z _$1)jQ (3) Interim Financing and Long-Term Debt Notes Payable to Banks The Company and other system companies have banking relationships in which borrowings are arranged as required for interim financing of construction in progress. These arrangements are not formal lines of credit but provide for unsecured borrowings evidenced by notes payable which are due within one year. The Company had no short-term borrowings outstanding and no existing lines of credit at December 31, 1980.
19
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CANAL ELECTRIC COMPANY [
NOTES TO FINANCIAL STATEMENTS (CONTINUED) I f
5
.(3) Interim Financino and Lona-Term Debt (Continued) l t
Lono-Term Debt !
t Long-term debt outstanding, exclusive of current sinking fund requirements and related premiums, is as' follows- I t Original Balance December 31, l issue 1980 1979 (Dollars in Thousands) !
I j First Mortgage Bonds, .
l Series A, 7%, due 1996 $19 000 $14 440 $15 200 :
- Series B, 8.85%, due 2006 35 000 34 650 34 650 t idl,.QS_Q 1.41350 (
The Series A First Mortgage Bonds require an annual sinking fund h payment of $760,000 from 1980 to 1996. At December 31,1980 and 19'19 !
the Company had purchased $220,000 and $424,000 of its bonds, respectively, l-l In anticipation of future sinking fund requirements.
4 !
j The Series B First Mortgage Bonds require an annual sinking fund payment of $350,000. The requirement may be met by payment, repurchase ,
j of bonds or certification of an amount of property additions equal to 60% i
- of bondable property (as that term is defined in the indesaure). The i Company expects to certify additional bondable property in lieu of making .
1 sinking fund payments on these bonds. i 1 j (4) Dividend Restriction At December 31, 1980, approximately $3,579,000 of retained earnings
!- was restricted against payment of cash dividends by the terms of the !
. Indenture of Trust securing long-term debt.
- (5) Pension and Employee Savings Plans f
I The Company has a noncontributory pension plan covering substantially :
all regular employees who have attained the age of 25. Pension costs !
are funded as accrued and include amounts applicable to prior service l costs which are being amortized over a period of 30 years. Total pension !
expense was approximately $325,000 in 1980, $298,000 in 1979 and $195,000 l in 1978. The increases in expense are primarily due to changes in the l plan which provide improved benefits to employees and retired personnel. j A comparison of accumulated plan benefits and plan net assets for the i Company's benefit plan is presented on the following page: I i
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CANAL ELECTRIC COMPANY NOTES TO FINANCI AL STATEMENTS (CONTINUED)
(5) Pension and Employee Savings Plans (Continued)
January 1, 1980 1979 (Dollars in Thousands)
Actuarial present value of accumulated plan benefits:
Vested $1 217 $ 990 Nonvested 156 124 Total actuarial present value of accumulated plan benefits $L.323 $1_lL4 Net assets available for benefits $L 282 $_931 The plan uses a "5 year average of actual over expected return" method to determine the value of the accumulated plan benefits. Under this method an expected investment return is determined each year based on fund market value at the beginning of the year; contributions, benefit payments and expenses paid during the year; and the actuarial assumption as to rate of investment return, which is 6%. This expected return is compared to actual investment return and any excess is recognized over a five-year period.
The Company has an Employee Savings Plan which provides for Company contributions equal to contributions by eligible employees but not in excess of four percent of each employee's compensation rate. The total Company contribution was approximately $96,000 in 1980, $98,000 in 1979 and $78,000 in 1978.
(6) Property and Reserves The major sub-classifications of property, plant and equipment at December 31,1980,1979 and 1978 were as follows:
1980 1979 1978 (Dollars in Thousands)
Land and rights-of-way $ 229 $ 229 $ 229 Structures and lease improvements 15 558 15 314 15 285 Production equipment 107 611 107 543 107 261 Transmission equipment 5 018 5 016 5 019 General equiprient and vehicles 250 244 350 Total plant in service 123 666 128 346 128 144 Construction in progress 595 93 1 761 Nonutility property 840 372 234 Property held for future use 136 136 136 Total property, plant and equipment $J30_232 $128 947 $130_27.5 21
CANAL ELECTRIC COMPANY '
NOTES TO FINANCI AL STATEMENTS (CONTINUED)
(6) Property and Reserves (Continued) i Neither the total addit.nna to, nor reductions in property, plant and equipment during either of the years 1980,1979 or 1978 emounted to more than 10% of the balance at the end of the respective years. The i changes during the years are summarized as follows: .
1980 1979 1978 (Dollars in Thousands) i Balance at beginning of year $128 947 $130 275 $129 174 Additions, at original cost 1 421 689 1 180 130 368 130 964 130 354 Retirements, at original cost - l Charged to accumulated depreciation 131 34 79 Reclassification of joint-owned project -
1 983 -
Balance at end of year $130_231 $128 94Z $130lI5 Changes in accumulated depreciation of property, plant and equipment during the years 1980,1979 and 1978 are summarized as follows:
1980 1979 1978 (Dollars in Thousands)
Balance at beginning of yea.- $33 136 $28 S59 $24 058 Provisions, charged to -
Operating expense 4 617 4 596 4 568 Other 49 15 10 37 802 33 170 28 636 Deductions - t Retirements 131 34 79 Cost of removal, less salvage (2) -
(2) 129 34 77 Balance at end of year $31_6JZ $33J36 $2B_559 (7) Commi'.ments Cor struction Program Construction expenditures for the five-year period ending in 1985 are estimated at $157,300,000. Included in this amount is $25,100,000 representing Commonwealth Electric's cost as of December 31,1980 for the investment in jointly-owned generating facilities which the Company -
proposes to purchase. and approximately $114,000,000 representing t amounts presently committed by Commonwealth Electric applicable to such facilities for the five-year period. The Company will also assume additional >
commitments for construction costs, related to participation in the jointly- -
owned plants, for years beyond 1985. These amounts are estimated at l'
$8,800,000 and are based upon construction estimates of the lead participants.
22
CANAL ELECTRIC COMPANY I NOTES TO FINANCIAL STATEMENTS (CONTINUED) i (7) Commitments (Continued) ;
Construction F.Nram (Continued)
The estimated construction costs and completion dates for these !
projects have changed as a result of regulatory, financing, legal and ;
other problems associated with construction of nuclear and other generating ;
i facilities. The company is unable to predict what effect present or ,
future construction difficulties related to these projects will have on its f present construction estimates and the estimated completion dates.
Each of the participating utility companies finances its own share of [
the units. When these units become operational, the lead participant [
acts as the operator and bills the participants for their proportionate ;
share of the expenses of the unit. Additional information relating to these units is contained in a table in Part I of this report under " Future Generating Plant Commitments."
j Cancellation of Joint-Owned Project The Company had a commitment to participate as a joint-owner in two nuclear generating units to be built by New England Power Company, in December,1979 New England Power announced cancellation of its plans to build the power plants (NEP Units 1 and 2).
$ During 1980 the Company filed an application with the Federal Energy Regulatory Commission (FERC) seeking approval to write-off and recover its investment in the project which totaled approximately J $1,764,000 and is included in deferred charges. In mid-Decemoer,1980 FERC authorized the write-off of this investment over a three-year period beginning December 1,1980. Tnis investment is being recovered through capacity acquisition agreements with affiliated companies.
, (8) Supplementary information to Disclose the Effects of Changing Prices
, (Unaudited) .
The following supplementary information is supplied in accordance with the requirements of Financial Accounting Standards Board Statement No. 33 for the purpose of providing certain information about the effects of changing prices, it should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.
Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumer Price
, index for All Urban Consumers. Current cost amounts reflect the changes in specific prices of plant from the date the pl at was acquired to the ,
present, and differ from constant dollar amounts to the extent that l specific prices have increased more or less rapidly than prices in general. '
23
l CANAL ELECTRIC COMPANY NOTES TO FINANCI AL STATEMENTS (CONTINUED)
(8) Supplementary information to Disclose the Effects of Changing P Nes (Unaudited) (Continued)
The current cost of plant is determined primarily by indexing surviving plant using the Handy-Whitman index of Public Utility Construction Costs. Since the utility plant is not expected to be replaced in kind, current cost does not necessarily represent the replacement cost of the productive capacity. Depreciation is determined by applying the Company's depreciation rates to the revised asset amounts.
Fuel inventories and the cost of fuel used in generation have not been restated from their historical cost in nominal dollars. Regulation provides for the recovery of fuel costs through the operation of adjustment clauses. For this reason fuel inventories are effectively monetary assets.
Since only historical costs are deductible for income tax purposes, the income tax expense in the historical cost financial statements is not adjusted.
Under present ratemaking procedures prescribed by the regulatory commissions, only the historical cost of plant is recoverable in revenues as depreciation. Because the excess cost of plant stated in terms of constar.c dollars and current cost is not recoverable in rates, a write-down to net recoverable cost is requir ed. While the rate-making process does not recognize the current cost of replacing plant, regulated companies ,
have, historically, been allowed to earn a return on the increased cost l of its investment when replacement actually occurs. ;
During periods of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attributaole to the substantial amount of debt which has been used to finance property, plant and equipment. These gains are unrealized and, therefore, do not contribute to cash flow or .
distributable income. The Company does not have the opportunity to realize a gain on debt because it is limited to re<.overy only of the embedded cost of debt capital. ;
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CANAL ELECTRIC COMPANY NOTES TO FINANCI AL STATEMENTS (CONTINUED)
(8) - Supplementary information to Disclose the Effects of Changing Prices (Unaudited) (Continued)
FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (in thousands of average 1980 dollars)
Year Ended December 31, 1980 1979 1978 1977 1976 Operating revenues:
Actual $197 256 $141 976 $110 769 $128 638 $108 285 Adjusted to average 1980 dollars $197 256 $161 176 $139 907 $174 919 $156 743 Historical Cost Information adjusted for general inflation
$$ . Income from continuing operations (excluding reduction to net recoverable cost) $ 2 870 $ 2 438 Net assets at year-end at net recoverable cost $ 51 208 $ 57 556 Current Cost Informatior.
Income from continuing operations (exc!uding reduction to net recoverable cost) $ 1 875 $ 2 313 Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost $ 6 712 $ 9 760 Net assets at year-end at net recoverable cost $ 51 208 $ 57 556 General Information Gain from decline in purchasing power of net amounts owed $ 4 640 $ 6 041 Average consumer price index 246.8 217.4 195.4 181.5 170.5 Note: The Company's stock is entirely owned by tne Parent, therefore, per share information is not relevant.
J
CANAL ELECTRIC COMPANY NOTES TO FIN ANCI AL STATEMENTS (CONTINUED)
(8) Supplementary Information to Disclose the Effects of Changing Prices (Unaudited) (Continued)
STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED I-OR CHANGING PRICES For the Yaar Ended December 31, 1980 Conventional Constant Dollar Current Cost Historical Average Average Cost 1980 Dollars 1980 Dol!ars (Dollars in Thousarc'? 1 Operating revenues $197 256 $197 256 $197 256 Fuel usea in production 161 722 161 722 161 722 Depreciation expense 4 617 8 108 9 103 Other operating and maintenance expense 14 587 14 587 14 587 income and other taxes 8 472 8 472 8 472 Interest expense 4 299 4 299 4 299
,o Other income and deductions - net (2 802) (2 802) (2 802)
- 190 895 194 386 195 381 Income (loss) from continuing operations (excluding reduction to net recoverable cost) $ 6 361 $ 2 87Q* $ 1 875 increase in specific prices (current cost) of property, plant and equipment held during the year ** $ 20 555 Reduction to net recoverable cost $ (7 707) (6 615)
Effect of increase in general price level (20 652)
Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost (6 712)
Gain from decline in purchasing power of net amounts owed 4 640 4 640 i Net 5 (3 067) $ (2 912)
- Including the reduction tu net recoverable cost, the income (loss) from continuing operations on a constant dollar basis would have been ($4,837,000).
I
- At December 31, 1980, current cost of property, plant and equipmerit, net of accumulated depreciation i was $182,387,000, while historical cost or net cost recoverable through depreciation was $92,564,000. .
- ,, - . -. s -, y - - .-- . , - -, , ,
i CANAL CLECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 PART IV.
ltem 11. Exhibits, Financial Statement Schedules and Reports on Form 8-K incorporated Documents Filed SEC Herewith :
Exhibit File No. at Page (a) The following dccuments are filed as part of this report:
- 1. Financial statements of the Company together with the Report of Independent Public A*countants, are filed under item 8 of this report and listed on the index to Financial Statements and Schedules in Itera 8. 10
- 2. The following financial statement schedule is attached hereto:
Schedule IX - Short-term borrowings for the year-ended December 31, 1980, 1979 and 1978. 33 (o) No reports on Form 8-K have been filed by the Company during the last quarter of the period covered by this report.
(c) List of Exhibits:
Exhibit 3. Articles of incorporation and by-laws.
Filed herewith:
3(a) Articles of incorporation of the Canal Electric Company. (Exnibit 1) 36 3(b) By-laws of the Company as amended to November 20,1978. (Exhibit 2) 63 Exhibit 4. Instruments defining the rights of security holders, including indentures.
Incorporated herein by reference thereto:
4(b)1 Copy of Indenture of Trust and First Mortgage dated as of October 1,1968 between the registrant and State Street Bank and Trust Company, Trustee, has been filed with the Commission as an exhibit to Form S-1. 4(b) 2-30057 27 . _ . -
CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 item 11. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Continued)
Incorporated Documents Filed SEC Herewith Exhig File No. at P ce *
, 4(b)2 Copy of First and General Mortgage Indenture dated as of !
September 1,1976, between the ;
registrant and Citibank, N. A. ,
Trustee, together with Cross i Reference Sheet between Indenture and provisions of Trust indenture Act of 1939, has been filed with !
the Commission as an exhibit to Form S-1. 4(b)2 2-56915 4(b)3 Copy of First Supplemental t indenture dated as of September 1, 1976, to indenture of Trust and First Mortgage dated as of October 1,1968 between the registrant End State Street Bank and Trust Company, Trustee, closing such indenture, has bc.n filed with the Commission as an exhibit to Form S-1. 4(b)3 2-56915 Exhibit 10. Material contracts.
Incorporated herein by reference thereto: !
10(a) Power contracts.
10(a)(1) Copies of power contracts dated December 1,1965 between Canal Electric Company and other utility companies have been filed by Canal Electric Company with the Commission as an exhibit to Form S-1. 13(a)(1-4) 2-30057 10(a)(2) Copy of contract between Canal Electric Company and Montaup Electric Company and Stone & '
Webster Engineering Corporation, dated August 24,197?, effective as of October 27,19~,0, for the design and constru.: tion of Canal P: ant Unit No. 2 at Sandwich, Massachusetts has been filed with the Commission as an exhibit to the 1972 Form 10-K. 1 2-30057 >
28
CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 item 11. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Contir.ued) ,
incorporated Documents Filed SEC Herewith Exhibit File No. at Page 10(a)(3) The following have been filed '
with the Commission as exhibits to the 1975 Form 10-K of Canal Electric Company:
Copy of agreement between the registrant and Montaup Electric Company for use of common facilities by Canal Units I and ll and for allocation of related costs, executed October 14, 1975. 1 2-30057 Copy of agreement between the registrant and Montaup Electric Company for joint ownership of Canal Unit il, executed October 14, 1975. 2 2-30057 Copy of agreement between the registrant and Montaup Electric Company for lease relating to Canal Unit 11, executed October 14, 1975. 3 2-30057 10(a)(4) Copy of Contract dated January 12, 1976 between Canal Electric Company and New Bedford Gas ,
and Edison Light Company and Cambridge Electric Light Company, affiliated companies, for the sale of specified amounts of electricity from Canal Unit No. 2 has been filed with the Commission as an exhibit to the 1975 New England Gas and Electric Association Form 10-K. 4 1-7316 10(a)(S) Copy of amendment dated August 6,1976 to joint-ownership agreement between Canal Electric Company, New England Power Company, and other utilities dated January 11, 1976 has been filed with the Commission as an exhibit on Form 10-K of Canal Electric Company for the year ended December 31, 1976. 1 2-30057 ge .l
CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 item 11. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Continued) !
incorporated Documents Filed SEC Herewith b Exhibit File No. at Page 10(b) Other agreements. !
10(b)(1) The following contracts have been filed with the Commission as exhib.ts to Form S-7 of New .
England Gas and Electric !
Association: j t
Copy of Indenture of Lease i between Canal Electric Company, Montaup Electric Company and ,
Nepco Terminal, Inc. dated !
October 17, 1975 for the leasing of fuel oil tanks. 5(c)7 2-56476 i Copy of Amendatory Agreement dated October 17, 1975 between i Canal Electric Company and Nepco ;
Terminal, Inc. amending fuel oil i supply agreement dated June 2, l 1967. 5(c)8 2-56476 i 10(b)(2) Copy of Employees Stock i Ownership Plan and Trust of New f England Gas and Electric ,
Association and Subsidiaries has been filed with the Commission as an exhibit to Form S-7 of Now l r
England Gas and Electric !
Association. 5(c)8 2-55739 I i
- 10(b)(3) Copy of letter agreement dated l September 18, 1978 amending and l extending the agreement dated June 6,1967 between Canal Electric Company and Nepco Terminal, Inc. for the supply of l fuel oil to Canal Electric Company has been filed with the Commission I as an exhibit to the Association's 1978 Form 10-K. 4 1-7316 j l l !
l t
30
CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980
- Item 11. Exhibits, Financial Statement Schedules and Reports on Form 8-K (Continued)
Incorporated Documents Filed SEC Herewith Exhibit File No. at Page 10(b)(4) Copy of First Amendment to Tax Reduction Act of 1975 Employees Stock Ownership Plan and Trust of New England Gas and Electric Association and Subsidiary Companies dated May 11, 1978 has been filed with the Commission as an exhibit to the Association's 1978 Form 10-K. 3 1-7316 10(b)(5) Copy of. Employees Savings Plan of .
New England Gas and Electric Association and Subsidiary Companies as Amended January 1, 1979 has been filed as an exhibit to Form 8, Amendment to 1978 Form 10-K of New England Gas and Electric Association. 1 1-7316 10(b)(6) Copy of Pension Plan for Employees of New England Gas and Electric Association and Subsidiary Coinpanies as Amended as of August 1,1979 has been filed with the Commission as an exhibit to the Association's 1979 Form 10-K. 4 1-7316 10(b)(7) The following contracts have been filed with the Commission as exhibits to Form S-16 of New England Gas and Electric Association:
31
CANAL [f,ECTRIC COMPANY FORM 10-K DECEMDER 31, 1980 item 11. Exhibits, Financial Statement Schedules and Rep 6ets on Form 8-K (Continued)
~
Incorporated Documentr. Filed SEC Herewith Exhibit File No. at Page 10(b)(8) Copies of New England Power Pool Agreement (NEPOOL) dated September 1,1971 as amended ,
through August 1,1977, between NEGEA Service Corporation, as agent for Cambridge Electric Light Company, Canal Electric Compar y, New Bedford Gas and Edison Light Company, and various other electric utilities operating in New England, together with amendments dated August 15, 1978 and January 31, 1979. 5(c)13 2-64731 Copy of notice dated November 13, 1978 of non-extension of lease -
dated October 17, 1975 between '
Canal Electric Company and Montaup Electric Company for -
leasing of fuel oil tanks. 5(c)14 2-64731 Copy of amendment dated November 15, 1978 confirming and implementing letter agreement dated September 18, 1978 between Canal Electric Company and Nepco Terminal, Inc. for the ;upply of fuel oil. 5(c)15 2-64731 Copy of Facilities Lease and Operating Agreement dated l
November 15, 1978 between Canal Electric Company and Nepco Terminal, Inc. for the lease and operation of fuel oil terminal. 5(c)16 2-64731 l
l >
l l
f 32 ,
i
SCHEDULE IX CANAL ELECTRIC COMPANY Short-Term Borrowings For the Years Ended December 31,1980,1979 and 1978 (Dollars in Thousands)
Maximum Average Weighted Notes Weighted Amount Amount Average Outstanding Average Outstanding Outstanding Interest-at Interest During During Rate at Category (A) Year-End Rate the Year the Year (B) Year-End(C)
Year Ended December 31, 1980 Banks $ - -% $ -
Year Ended December 31, 1979 Banks $1_300 14.6% $1 750 $254 16Ji1 Year Ended December 31, 1978 Banks $ - -L $ -
(A) Refer to Note 3 of Notes to Financial Statements for the general terms of notes payable.
(B) The average amount of short-term debt outstanding is determined by averaging the level of short-term debt outstanding at month-end for the thirteen-month period ending December 31, 1980.
(C) The weighted average interest rate at year-end is determined by annualizing the interest cost based on rates in effect during December and dividing this by the notes outstanding at year-end.
33
CANAL ELECTRIC COMPANY FORM 10-K DECEMBER 31, 1980 SIGNATURES l
Pursuant to the requirements of Section 13 or 15(d) 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.
CANAL ELECTRIC COMPANY (Registrant) j By: GERALD E. ANDERSON Gerald E. Anderson, Chairman of the Board and President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Principal Executive Officer:
l f
GERALD E. ANDERSON March 30,1981 Gerald E. Anderson, Chairman of the Board and President Principal Finaricial Officer:
EARL G. CHENEY March 27,1981 Earl G. Cheney, i
Financial Vice President ,
I
- Principal Accounting Officer
JOHN A. WHALEN March 25,1981 l
John A. Whalen, ! ,
l Comptroller A majority of the Board of Directors:
March , 1981 !
Charles T. Abbott, Director GERALD E. ANDERSON March 30,1981 Gerald E. Ands.-'.on, Director 3 14
.. CANAL ELECTRIC COMPANY
! FORM 10-K DECEMBER 31, 1980 SIGNATURES (Continued)
EARL G. CHENEY March 27, .1981 t - Earl G. Cheney, Director LELAND R. CROWELL March 23,1981 Leland R. Crowell, Director JEREMI AH V. DONOVAN March 30,1981 Jeremiah V. Donovan, Director WILLI AM R. SMITH March 27,1981 William R. Smith, Director RICHARD G. VELTE March 27,1981 Richard G. Velte, Director f
i l
35 \
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- Inf rmation R qu2st: Itcm 1 (V) 1
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,w 51 Unless such opinion statns that no instruments, and no re-cording or filing, are necessary to vest in the Trustee, as part of the mortgaged and pledged property, free and clear of prior or a equalliens except as aforesaid, or to make effective and protect the lien hereof upon, all of the properties covered by such opin-ion, such opinion shall specify, and (unless the same shall already have been delivered) shall be accompanied by, such instrument 6 mil or instruments of conveyance, assignment and transfer, together with such other certificates, financing statements and other docu-ments, as shall be stated in such opinion to be necessary so to vest title in the Trustee, or to make effective and protect said lien, and shall specify all places, if any, where recording or filing of each such instrument, certificate, statement and docu-ment is reasonably called for.
' (e) The first Oflicers' Certificate delivered to the Trustee 3
pursuant to Section 4.01(a) shall bear the number 1 and each such Certificate filed with the Trustee thereafter shall be num-0 bered consecutively, j ARECLE V.
ISSUANCE OF BONDS OTIIER TIIAN SERIES B BONDS.
Srcnox 5.01. General Requirements. Subject to the pro-visions of Article II, the Trustee shall from time to time authenticate and deliver bonds other than Series B Bonds, in each case to or upon the order of the Company, of any one or more series in the amounts permitted by, and upon compliance by the Company with, the applie-able provision or provisions of Article II and of this Article V, but
- only if the Trustee shall have received:
(a) A written application by the Company, dated the date of the filing thereof with the Trustee but not more than five (5) days prior to the issuance of such bonds, requesting the authenti-cation and delivery of bonds of a stated principal amount of a specified series, and designating the Section or Sections of this Indenture (other than this Section 5.01) under which such bonds are to be issued;
. - ~
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A C.
52 (b) A resolution of the Board requesting the Trustee to nu-thenticate and deliver such bonds and specifying (i) any matters with respect therMo required or permitted by this Indenture, and (ii) the ofIicer ur officers of the Company to whom or upon whose written order such bonde shall be delivered; (c) An Officers' Certificate, dated the date of the delivery g of such bonds, stating that, so far as is known to the signers of the certificato, no event of default has occurred which has not been remedied and no condition or event will exist immediately
- after the authentication and delivery of the bonds (and after giving effect thereto) which with notice or lapse of time, or both, would become an event of default; (d) An Opinion of Counsel, dated the date of the delivery
- of such bonds, to the efTect that the issue of the bonds applied fo:
has been duly authorized by the Company, and by any and all.
governmental authorities the consent of which is requisite to the legalissue of such bonds (in which case it shall be accompanied i' or preceded by any appropriate certificates or other documents by which such consent is or may be evidenced), or that no consent of any governmental authority is requisite to the legal issue of such bonds, and that all of the requirements of this Indenture and of law for the due and lawful issue, authentication and de.
livery of such bonds have been duly complied with and such bonds, when issued, authenticated and delivered, will be the valid and legal obligations of the Company entitled to all the benefits w and security of this Indenture to the same extent as and on a parity, as to all the trust estate (except as provided in this In-denture), with all bonds theretofore issued and then outstanding hereunder; (c) A duly executed indenture or indentures supplemental to this Indenture in accordance with the provisions of Section 17.01, setting forth the terms and provisions of such series of bonds;and (f) Except in the event of the issue of bonds solely a ac-count of the ilelivery and pledge with the Trustee, or the pay-ment, cancellation, redemption or other discharge, of Series A Bonds or of Underlying Bonds, or the delivery, payment, can-t 9
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s,-
1 ,
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~j 53 6
cellation, redemption or other discharge of bonds issued here-under, which, in any such case, either (i) matured within two
- j years before or will mature within two years after the date of issue of the bonds to be issued hereunder or (ii) bear interest at
] i a higher rate than the rate of interest to be borne by the bonds j to be issued hereunder, an Officers' Certificate and an Account-ant's Certificate showing that, for a period of twelve (12) con-g secutive calendar months during the period of fifteen (15) calen-i dar months immediately preceding the first day of the meath during which there is filed with the Trustee the application a ". pursuant to Section 5.01(a), the Net Earnings of the Company have been at least equal to twice the interest for one year upon:
(1) all the bonds outstanding under this Indenture at the date of such authentication (excluding any bonds for the m, retirement of which provision in compliance with any re-
. quirement hereof has been made);
i
.j (2) the bondo requested to be authenticated hereunder; and
- (3) all other indebtedness for borrowed money then
{ secured by a lien equal or superior to the lien of this Inden-ture on any part of the Company's property (excluding any such indebtedness the evidence of which shall then be held, in any sinking fund or otherwise, by the Trustee under the provisions of this Indenture or by the trustee or mortgagee under any instrmnent constituting a lien equal or superior
- to the lien of this Indenture on any part of the Company's property, and any such indebtedness for the payment or redemption of which the necessary moneys shall have been deposited with the trustee or mortgagee under the mortgage securing the same).
Secvos 5.02. Bonds issuedytgainst Net Amount of_ Bondable
. Property. Upon compliance by the Company with the requirements of this Section and of Section 5.01, the Trustee shall from time to time authenticate and deliver additional bonds of one or more series in an amount not exceeding sixty percent (G0%) of a Net Amount of Bondable Property.
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e -
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4 i
l 54 i Bonds shall be authenticated and ' delivered by the Trustee under this Section 5.02 only if the Trustee shall have received: ,
$ (a) An Omccrs Certificate, dated not earlier than the date of the app. Nation by the Company pursuant to Section 5.01(a),
stating (1) the Net Amount of Bondable Property as of a date y (the " computation date") not more than sixty (60) days before the date of such Officers' Certificate and a computation thereof in reasonaide detail; (2) in reasonable detail, the Amount of Bondable Property v.hich has been allocated or used as a basis j for any credit under or pursuant to any provision of any Under-2 lying Mortgage or the 1968 Indenture since the computation date, j including any Amount of Bondable Property which is contempo-raneously being so allocated or used, and the Net Amount of i Bondable Property which has been allocated or used pursuant
.j to this Indenture since the computation date, including the Net 1
Amount of Bondable Property being used as the basis for the authentication and delivery of such additional bonds and all other contemporaneous uses or allocations of a Net Amount of Bond-able Property pursuant to this Indenture; and (3) the Net i
-- i Amount of Bondable Property remaining after the authentica-tion and blivery of such additional bonds and any other con- {s' temporaneoms use or allocation of a Net Amount of Bondable 1
Property pursuant to this Indenture, being the amount remain- .
ing after deducting the amount set forth in clause (2) of such Omcers' Certificate from the amount set forth in clause (1) of such Omcers' Certificate;
~ $4 (b) An Engineer's Certificate, dated not earlier than the date of such Omcers' Certificate, stating that the signer (or if the signer is not an individual, an authorized officer or representa-tive of the signer) has personally examined such Omcers' Cer-tificate and that all statements contained in such Oflicers' Cer-tificate relating to the Net Amount of Bondable Property are correct ; and (c) An Accountant's Certificate, dated not earlier than the date of such Omcers' Certificate, verifying such Om<ers' Cer-tit 1cate as to such portions thereof as are susceptible to verifica-tion by accountants.
D$
.a
/
55 Szc11ou 5.03. Bonds Issued For Payment, Cancellation, Re-demption or Discharge of Available Series A Bonds. Epon com-pliance by the Company with the requirements of this Section and of Section 5.01, the Trustee shall from time to time authenticate and deliver additional bonds of one or more series for or on account of the payment, cancellation, redemption or other discharge at, be-fore or after maturity, of a like, or at the option of the Company a greater, principal amount of Available Series A Bonds.
Bonds shall be authenticated and delivered by the Trustee under this Section 5.03 only if the Trustee shall have received:
(a) A resolution of the Board specifying the principal i
amount of Available Series A Bonds for or on account of the payment, cancellation, redemption or other discharge of which i
such bonds are authorind to be issued; (b) An Officers' Certificate, dated the date of delivery of such bonds, to the effect that the Series A Bonds specified in such resolution are Available Series A Bonds, accompanied by an appropriate certificate of the trustee under the 1968 Indenture to the effect that such Series A Bonds have not been allocated
(- or used as a basis for any credit pursuant to any provision of the 1968 Indenture; and (c) An Oflicers' Certificate, dated the date of delivery of such bonds, accompanied by an appropriate certificate of the trustee under the 1968 Indenture, stating that the Available Series A Bonds specified in such resolution, the principal amount of which shall be at least equal to the principal amount of bonds requested to be authenticated, have been paid, cancelled (in-cluding cancellation upon surrender by the Company for that purpose), redeemed or otherwise discharged, or that provision for such payment, cancellation, redemption or other ' discharge satisfactory to the trustee under,the 1968 Indenture has been made, including the deposit of any necessary money with such trustee.
Szcrion 5.04. Bonds issued for Delivery, Payment, Cancella-tion, Redemption or Discharge of Available Bonds. Upon compli-ance by the Company with the requirements of this Section and of Section 5.01, the Trustee shall from time to time authenticate and s
=
56 deliver additional bonds of one or more series for or on account of the ' delivery, payment, cancellation, redemption or other discharge at, before or after maturity, of a like, or at the option of the Com-pany a greater, principal amount of Available Bonds.
Bonds shall be authenticated and delivered by the Trustee under this Section 5.04 only if the Trustee shall have received:
(a) A resolution of the Board specifying the Available Bonds and the principal amount thereof for or on account of the delivery, payment, cancellation, redemption or other discharge of which such bonds are authorized to be issned; and (b) An Oflicers' Certificate, dated the date of delivery of such bonds, to the effect that the bonds specified in such reso-lution for or on account of the dclivery, payn ent, cancellation, redemption or other discharge of which such bonds are to be issued are Available Bonds; and (c) The Available Bonds, either cancelled or uncancelled (with all unmatured coupons, if any, appertaining thereto and if registered otherwise than to bearer, with duly executed endorse-ments or instruments of transfer if required by the Trustee),
specified in such resolution, the principal amount of which shall be at least equal to the principal amount of bonds requested to be authenticated; or (d) An amount in cash equal to the principal amount, and the interest thereon to maturity, of the Available Bonds specified in such resolution for the purpose of the payment of such Avail-able Bonds and the interest thereon to maturity; or (e) An amount in cash sufficient to redeem, and for the pur-pose of redeeming, the Available Bonds specified in such resolu-tion at the date designated in such resolution, together with an Officers' Certificate stating that a resolution has been adopted by the Board calling such Available Bonds for redemption (a copy of which resolution shall be incorporated in or accompany such Officers' Certificato) and, unless the requisite notice of such call shall have been given in accordance with Section 8.02, arrangements satisfactory to the Trustee shall have been made by the Company with the Trustee to insure the giving of the requisite notice of such call in accordance with Section 8.02; or L
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'(f): A combination of the documents,' instruments or cash dc3cribed in Sections 5.04(c), .(d) and (e) lwith respect to an P" . aggregate principal amount of Available Bonds at least equal to the principal amount of bonds requested to be authenticated.'
Any Available - Bond ' which' is delivered imcancelled to the .
Trustee and on account'of which a new bond is issued under this
- Section shall forthwith be cancelled by the Trustee, together with the unmatured coupons, if any, appertaining thereto.
Any cash deposited with the Trustee under the provisions of this
..Section shall be applied by the Trustee to the purposes for which such E :
-cash was so deposited; provided, however, that upon the surrender by the Company to the Trustee for cancellation of any bonds (with all unmatured coupons, if any, appertaining thereto and if registered otherwise than_ to bearer, with duly executed endorsements or in- '
struments of transfer if required by the Trustee), for the payment at maturity or for the redemption of which cash shall have been de-posited with the Trustee under the provisions of this Section, the
- Trustee shall return to the Company out of such cash an amount equal to the amount deposited for the payment at maturity or the re-
, (. demption, as the case may be, of such bonds so surrendered.
(.
3 S ncrio n 5.05. Bondsissued for Pledge, Payment, Cancellation, Redemption or Discharge of Available Underlying Bonds. (a) Hpon compliance by the Company with the requirements of this Section and of Section 5.01, the Trustee shall from time to time authenticate -
!~
and deliver additional bonds of one or more series for or on account of the delivery and pledge with the Trustee, or the payment, can-cellation, redemption or other discharge at, before or after maturity t
' of a like, or at the option of the Company a greater, principal amount of Available Underlying Bonds.
S Bonds shallbe authenticated and delivered by the Trustee under this Section 5.05 only if the Trustee shall have received:
(1) A resolution of the Board specifying the Availabl.
derlying Bonds and the principal amount thereof for or on
~ count of the delivery and pledge with the Trustee, or the pay-ment, cancellation, redemption or other discharge, of which such r bonds are authorized to be issued; and i
- 3" l
~A - . - - . , _ _ ,
i h
58
. ~ (2) . An Officers' Certificate, dated the date of delivery of such bonds, to the effect that the Underlying Bonds specified in such resolution are Available Underlying Bonds; and (3) If appropriate, a certificate of the trustee or mortgagee under the applicable Underlying Mortgage to the effect that the Available Underlying. Bonds specified in such resolution have -
not been allocated or used as a basis for any credit or pursuant to any provision of the Underlying Mortgage securing such Un-derlying Bonds; and (4) The Available Underlying Bonds, uncancelled-(with all unmatured coupons, if any, appertaining thereto and if regis-tered otherwise than to bearer, with duly executed endorsements or instruments of transfer or registered in the name of the Trus-tee), specified in such resolution, the principal amount of which shall be at least equal to the principal amount of the bonds re-quested to be authenticated; or (5) An OfHeers' Certificate, dated the date of delivery of such bonds, accompanied by an appropriate certificate of the trustee or mortgagee under the applicable Underlying Mortgage, J showing that the Available Underlying Bonds specified in such resolution, the principal amount of which shall be at least equal-to the principal amount of bonds requested to be authenticated, have been paid, cancelled, redeemed or otherwise discharged, or that provision for such payment, cancellation, redemption or other discharge satisfactory to the trustee or mortgagee under the applicable Underlying Mortgage has been made, including the deposit of the necessary money with such trustee or mort-gagee; or (6) A combination of the documents and instruments de-scribed in Sections 5.05(a)(4) and 5.05(a)(5) with respect to an aggregate principal amount of Available Underlying Bonds at least equal to the principal amount of bonds requested to be authenticated.
Each of the Underlying Bonds received by the Trustee pursuant to Section 5.05(a)(4) shall be held by the Trustee as the purchaser thereof, uncancelled and without extinguishment or impairment of lien, as additione.1 security for the psyment of the bonds secured by 1
e
'sJ
- a. ,
59
~ this Indenture until otherwise' disposed'of or released from the lien '
of this Indenture pursuant to the provisions of this Section 5.05.
(b) Whenever all~of the Underlying ~ Bonds outstanding under an Underlying Mortgage, except lost or destroyed Underlying Bonds
- for which satisfactory indemnity shall have been given, shall have ;
been delivered and pledged with the Trustee, or whenever a portion thereof shall have beca so delivered and pledged and payment, can-cellation, redemption or other discharge of the remainder shall have - ,
- been made or shall have been duly providnd for, the Trustee, at the ;
written request 'of the President or Treasurer of the Company and upon receipt of evidence satisfactory to the Trustee that the applie-l able Underlying Mortgage will concurrently or immediately there-
' after be discharged, shall stamp as paid and surrender to the trustee i or mortgagee under the applicable Underlying Mortgage, or if there is no such trustee or mortgagee, to the Company, for cancellation, all of the Underlying Bonds outstanding under such Underlying Mort- ;
gage then in its possession, together with all unmatured coupons, if .
any, appertaining thereto.
(c) So long as any Underlying Bonds deposited with the Trustee under any of the provisions of this Indenture shall be held by the :
.(; Trustee, neither the principal, premium, if any, nor the interest there- I on shall be collected nor be required to be paid except as provided in -
i Section 5.05(d) or until one or more of the events of default here-under or under the applicable Underlying Mortgage shall have hap- l pened and shall be continuing or until proceedings shall be instituted.
to enforce the applicable Underlying Mortgage, or to enforce any other mortgage superior to the lien hereof covering all or any part (*
of the mortgaged and pledged property', but upon any such default and its continuance as aforesaid, or upon any institution of any such i proceedings, the Trustee may take such steps to protect or enforce such deposited Underlying Bonds as it may deem proper. The Trus- :
tee shall hold any title, moneys and property which it may acquire,
~
or to which it may be entitled under or by means of or as a result of any such event of default or any proceeding for the enforcement of such deposited Underlying Bonds, upon the trusts herein declared concerning the mortgaged and pledged property, and any such moneys shall be applied as provided in Section 11.11. Before any such default and its continuance as aforesaid, or before any such proceedings shall be so instituted, the Trustee shall, upon the written request of the President or Treasurer of the Company, either stamp
\
9
60 as paid and surrender to the Company, or deliver to the Company, as specified in such request, allinterest coupons of each such deposited Underlying Bond in the possession of the Trustee as such coupons from time to time mature or deliver to the Company suitable orders for the payment of interest on each such deposited Underlying Bond as such interest matures.
(d) In case any Underlying Bond held hereunder by the Trustee shall mature or shall be called in whole or in part for redemption or purchase pursuant to any sinking, purchase or other fund under the applicable Underlying Mortgage or olharve 3, and the Trustee shall have received evidence satisfactory to it th. he money necessary to pay, redeem or purchase such Underlying Bond or part thereof has been deposited with the trustee or mortgagee under the applicable Underlying Mortgage, then the T stee hereunder shall, upon the request of the Company, deliver such Underlying Bond or part thereof to or upon the written order of the President or Treasurer of the Company. The Company shall be entitled, upon surrendering any such bond to the trustee or mortgagee under the applicable Under-lying Mortgage, to receive and retain all moneys payable with respect thereto.
Sncinos 5.06. Bonds Issued for Deposited Cash; Payment of )
Deposited Cash. Upon compliance by the Company with the re-quirements of this Section and of Section 5.01, the Trustee shall from time to time authenticate and deliver additional bonds of one or more series upon deposit by the Company with the Trustee for such p,ur-pose of an amount of cash equal to the aggregate principal amount of bonds requested to be authenticated.
If money received by the Trustee under the provisions of this Section 5.06 is to be withdrawn or applied in connection with the delivery, payment, cancellation, redemption or other discharge of Available Bonds, Available Series A Bonds or Available Underlying Bonds, the Company shall deliver to the Trustee an Officers' Certifi-cate specifying any Available Bonds, Available Series A Bonds or Available Underlying Bonds and the principal cmount thereof which have been or are to be delivered, paid, cancelled, redeemed or other-wise discharged, and their respective rates of interest, premium, if any, and the dates of the payment or redemption thereof.
Money received by the Trustee under the provisions of this Sec-tion 5.06 is sometimes referred to in this Indenture as " deposited I
I
I 61 cash", and shall, until paid out as provided in this Section, be held by the Trustee as part of the mortgaged and pledged property.
Whenever the Co apany shall be entitled to the authentication and delivery of any bonds under the provisions of any one or more of Sections 5.02 te 5.05, inclusive, and the Trustee shall have in its possession deposited cash sufficient for the purpose, the Trustee shall, on the written request of the Company and upon the order of its Pres; dent or Treasurer, in each case authorized by a resolution of the Board, which resolution shall have been delivered to the Trustee, and upon receipt by the Trustee of the documents of the character required to be given for the authentication and delivery of bonds under such of Sections 5.02 to 5.05, inclusive, as may be applicable, but with sucli changes or differences as may be appropriate or re-quired by reason of the fact that the Company's application is for j
deposited cash instead of for the authentication of bonds:
(a) in the case of Section 5.02, pay to the Company out of such deposited cash an amount equal to the principal amount of bonds which might then be issued pursuant to Section 5.22; (b) in the case of Section 5.03, pay to the Company or to the
( trustee under the 1968 Indenture out of such deposited cash an amount equal to, but at the option of the Company evidenced by a resolution of the Board less than, the principal amount of the Available Series A Bonds which have been or are to be paid, cancelled, redeemed or otherwise discharged, but excluding the premium,if any, and interest payable in connection therewith; (c) in the case of Section 5.04, (i) pay to the Ccmpany out of such deposited cash an amount equal to, but at the option of r
the Company evidenced by a resolution of the Board less than, I the principal amount of Available Bonds delivered to the Trustee, or (ii) in the event of the payment, cancellation, redemption or other discharge of Available Bonds, pay to the Company or apply to such payment, enneellation, redemption or other dis-charge out of ruch deposited cash an amount equal to, but at the option of the Company evidenced by a resolution of the Board less than, the principal amount of Available Bonds which have been or are to be paid, cancelled, redeemed or otherwise discharged, but excluding the premium, if any, and interest pay-able in connection therewith; or A
62 ,
(d) in the case of Section 5.05, (i) pay to the Company out of such deposited cash an amount equal to, but at the option of the Company evidenced by a resolution of the Board less than, the principal amount of Available Underlying Bonds delivered to and pledged with the Trustee, or (ii) in the event of the pay-ment, cancellation, redemption or other discharge of Available Underlying Bonds, pay to the Company er to the trustee or mort-gagee under the applicable Underlying Mortgage out of such de.
- posited cash an amount equal to, but at the option of the Com-pany evidenced by a resolution of the Board less than, the prin-cipal amount of the Available Underlying Bonds which have been or are to be paid, cancelled, redeemed or otherwise discharged, but excluding the premium, if any, and interest payable in con-nection therewith.
In the event of the payment, cancellation, redemption or other dis-charge of Available Series A Bonds or Available Underlying Bonds, the Trustee shall also receive assurances satisfactory to it that any cash paid by it to the Company or to the trustee under the 1968 In-denture or to the trustee or mortgagee under the applicable Under-lying Mortgage (together with such other moneys as have been pro-vided by the Company to pay the premium, if any, and interest pay- ;
able in connection therewith, which moneys the Company covenants to provide) have been or will be used to pay, redeem or otherwise dis-charge the appropriate principal amount of Available Series A Bonds or Available Underlying Bonds, as the case may be; that satis-factory arrangements have been made to assure the giving of any requisite notice of any call for redemption; and that such Available Series A Bonds or Available Underlying Bonds, as the case may be, will be cancelled and a certificate of cancellation will be delivered by such trustee or mortgagee to the Trustee.
ARTICLE VL' PARTICULAR COVENANTS OF TIIE COMPANY.
The Company hereby covenants as follows:
SECTIoN 6.01. Of Seizin. The Company is lawfully seized and possessed of the mortgaged and pledged property specifically de-scribed or referred to in Schedule A to this Indenture, subject to no liens, charges or encumbrances prior to or on a parity with the lien
76 in kilowatts, of Substantial Units, or (ii) an amount, expressed in kilowatts, determined by adding (A) the aggregate net capability of the Company's ownership interests in all electric generating units, and (B) the capacity (at the time of the peak load of the Company referred to below) purchased under contracts with a remaining term (at the time of such peak load) exceeding one year, and subtracting therefrom (C) one-hundred fifteen percent (115%) of the peak load recorded by the Company's retail electric distribution business, if any, during the preceding twelve consecutive calendar months.
(b) The power contracts referred to in Section 6.19(a) above shall meet all of the following criteria:
(i) provision shall be made for payments by the power purchaser or purchasers at least adequate to recover ratably 'dur-ing the term of the power contract all of the Company's capital investment and operating costa (determined in accordance with sound utility accounting practice) in respect of the power to which it relates; (ii) no material default in respect of a payment due from a power purchaser shall exist and have continued for a period of sixty (60) days:
(iii) no circumstance shall exist which relieves, or with the giving of notice or passage of time or both would relieve, any power purchaser of its payment obligation; and (iv) the termination date shall be not less than one year in the future, provided that any such power contract may terminate at an earlier date with respect to any portion of the power to which it relates if there is in effect another power contract for the sale of such portion meeting all of the criteria set forth in subparagraphs (i) through (iv) of this Section 6.19(b).
(c) The foregoing provisions of this Section 6.19 shall have no effect at any time at which the amount determined pursuant to See-tion 6.19(a)(ii) above shall be 'ess than thirty-three and one-third percent (33%%) of the amount determined pursuant to clause 6.19 (a)(i) above.
y Szenos 6.20. Limitation on Creation of Certain Indebtedness.
The Company will not incur, assume or guarantee any indebtedness maturing mo:e than one year after thulate..thereof gimmediately
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77 thereafter the total of such indebtedness would exceed the total of i
the Company's. capital >tock,. cap.tal. surplus.and retained earnings accounts; provided, that nothing in this Indenture shall prevent the Company from issuing evidences of indebtedness for temporary loans in the usual course of business, maturing not more than one year from their dates. The provisions of this Section 6.20 shall apply only so long as the Company is a subsidiary of New England Gas and Electric Association or of another holding company as def'med in the Public Utility IIolding Company Act of 1935.
ARTICLE VIL BONDHOLDERS
- LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE.
Szanou 7.01. Semiannual Lists of Bondholders. The Com-pany will furnish or cause to be furnished to the Trustee annually between February 15 and March 1 and between August 15 and Sep-tember 1 beginning with the year 1977 and at such other times as the Trustee may request in writing, within thirty (30) days after receipt by the Company of any such request, a list, in such form as the Trus-tee may reasonably require, containing allinformation in the posses-sion or control of the Company or of any of its paying agents, as to the names and addresses of the holders of bonds obtained since the date as of which the next previous list, if any, was furnished; provided, however, that so long as the Trustee maintains the register for any series of fully registered bonds without coupons, no such list need be furnished with respect to such series. Any such list may be dated as of a date not more than fifteen (15) days prior to the time such information is furnished, and need not include information re-ceived after such date.
Szerron 7.02. Preservation of Information. The Trustee shall preserve, in as current a form as is reasonably practicable, all infor-mation as to the names and addresses of the holders of bonds (a) contained in the most recent list furnished to it under Seeton 7.01, (b) received by it in the capacity of registrar or paying agent hereunder, or
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CANAL ELECTRIC COMPANY Schedule of Plant Construction Projects During Period of Construc+.lon of Subject Nuclear Power Plant (Millions of Dollars)
Request #2 (vil) 1981 1982 1983 1984 1985 1986 Construction Expenditures Seabrook Nuclear Units $ $84.0 $24.7 $14.7 $14.3 $ 2.1 Pilgrim Unit #2 14.2 5.3 6.1 7.4 Canal Unit #3 .8 3.4 3.0 9.1 12.6 All other, minor projects 1.6 .4 .5 .5 .5 .5 Total Expenditures $1.6 185.2 142.8 123.5 130.0 122.6 s
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' ' CANAL ELECTRIC COMPANY ATTACHMENT POR' ITEM NO.'v111
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-TINANCIAL STATISTICS-i 12 Months'S..ded December 31, _;
'1980 1919 ,
t (Dollars in Millions)- r
$ 7.2 .$ 7.3
- Earnings 7.vailable to? common equity
'$53.6 $53.5 ;
sAverage common equity' .
j Rate of return on average common equity' 13.43% 13.64%
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- Times' total interest earned before FIT: '
. Gross income (incl. APUDC) + current and -
~
Edeferred rIT ~ . total-interest charges + 3.51 amortization of debt-discount and expense
~
3.76 H
Times long-term interest carred before FIT:
Gross income (incl;'AFUDC) + current and.
deferred FIT
- long-term interest charges +.
. amortization of debt discount and expense 3.91: 3.56 Bond-ratings (end of period) A-
-A-TStandard and Poor's Aa Aa l- Moody's.
! Times interest'and preferred dividends' earned
- l. after FIT:
Gross income,(incl. AFUDC) total interest l
charges + amortization:of. debt discount and 2.39 2.47
- i. ' expense'~+ preferred dividends
- $ .1 APUDC.(Debt and Equity)
$ 6 $ S
. Net income after preferred dividends
$14.375 $14.25 Market price of. common (Parent)
$20.65 $19.48 Book value of common (Parent) .73
-Market-book ratio (end of period)* .70 i.
t ,
^ Earnings. avail. for common less ATUDC +
depreciation and amortization, deferred
' taxes, and invest. tax credit adjust. - $17.7
' deferred- $16.1
$ 6.4 $ 5.6 Common dividends
-Ratio. 2.5 3.2
, Short-term dAbt $ -
- Commercial Paper $ -
$ - =$ 1.3
. Bank' loans Parent-Amount % Amount %
Capitalization'(Amount:5 Percent) 1Long-term; debt- $49.1 47.8 $49.9 48.2 Preferred stock . 52.2 53.6 51.8
~ 1 Common ; equity..' 53.6 h .
- -If' subsidiary company,Juse parent's data.
Information R qu:st: Ittm 1(ix) 9
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