ML19327B001
| ML19327B001 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1988 |
| From: | Eichorn J, Pardus D EASTERN UTILITIES ASSOCIATES |
| To: | |
| Shared Package | |
| ML19327A998 | List: |
| References | |
| NUDOCS 8910240173 | |
| Download: ML19327B001 (49) | |
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The lineman's task of maintclning the elec-tric systIm, eyes tvre set en building nevt lines to the futurs,le symbolic of our thome. Whether building on the past, onsuring reliable servics today. or providing opportuni-tiIe fst the future, Etat 5rn Utilities is.
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'3 tion and sale of electricity to approximately 253,000 lt customers,in an area of about $40 square miles.
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ld customers in southeastern Massachusetts and Blackstone Valley Electric Company serving 83,000 h@ customers in northern Rhode Island and two whole.
^sale generation companiesi Montaup Electric r 7; Company, which supplies wholesale electricity to l 11 l Eastern Edison, Blackstone and three nonal(111ated 1 I iI atilities for resale, ts ,d E UA Power Corpotation, ;
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EUA Energyinvestanent Corporation, established to invest in cogeneration and sma)) power production facilities: EUA Ocean State Corporation, a new sub.
sidiary established to invest in the Ocean State power prolect, and EUA Service Corpotation, which provides various management services to all EUA I l
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o i. 4 1988 1987 % Change Financial Data Idollars in ahousands!
Operating Revenues > $ 374,138 $367,129 + 1.9 Operatingincome - 65,212 61,847 +5.4 Consolidated Net Income 37,475 43,546 - 13.9 ,
Net Utility Plant 1,019,957 905,376 + 12.7 :
Cash Construction Expenditures 65,307 68,929 - 5.2 Internally Generated Funds '38,894 14,554 + 167.2 Return on Average Common Equity 12.8 % 17.1 % - 25.1 Common Share Data Earnings per Average Common Share $2.85 $3.46 - 17.6 Dividends Paid per Share $2.375 $2.27 + 4.6 Average Common Shares Outstanding 13,167,915 12,596,381 +4.5 .
Book Value per Share (Year End) $22.57 $22.01 ~ +2.5 Market Price (Year End) $31.50 $28.00 + 12.5
' Operating Data ,
Tbtal Electric Sales (mwh) 4,900,000 4,746,000 + 3.2 System Requirements (mwh) 4,330,000 4,140,000 + 4.6 '
System Peak Demand (mw) '813 782 +4.0 ;
System Reserve Margin (At Peak) 22.0 % 25.8 % - 14.7 System Load Factor 60.8 % 60.4 % +0.7 Customers (Year End) 252,807. 248,233 +1.8 Employees (Year End) 1,204 1,164~ + 3.4 3
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luth summer and winter periods on our System, with j our August peak increasing 4.0% over the preceding r
year. Kilowatt hour sales in our retail service territo- _
ries rose 4.6% over 1987, with particularly strong growth rates of 6.3% and 7.5%, respectively,in the a residential and commercial sectors.
Since 1986, we have formed four new com-panies to increase your Association's competitiveness Nineteen eighty eight was a year of continuing in the rapidly changing energy field: EUA Power, EUA ,
change and challenge for Eastern Utilities. Over 'a Cogenex, EUA Energy Investment and EUA Ocean century ago, our founders embarked on a' tradition of State Corporations. All four organizations improve .
public service. Today, that basic function underlies all our ability to provide reliable and adequate energy ser- (
~. that we do. Over the years, howevercthe challenge has vices throughout New England and beyond. Ecch become more complex.
entity has been structured to enhance potemial 4 Energy conservation and demand management investment returns. ,
have become important means of ensuring an ade-EUA Power Corporation was formed in 1986 to quate supply of energy; environmental compatibility provide a means to purchase the interests in the sea. .
has become as important as economics, and increased brook nuclear plant of five utilities in Maine, Ver-
. prnfitability has become a requirement for survival in mont and Massachusetts, increasing our System's
. a more competitive world.
share from approximately 3% to 15% of the proicct. .
Earnings per common share were $2.85 in The establishment of EUA Power permitted the 1988, compared to $3.46 in 1987. The reduction was ,'
acquisition of valuable generating capacity at a frac-caused by the deferralof a significant portion of the tion of its actual cost. Because of extended delays in non cash Allowance for Funds Used During Con, licensing Seabrook Unit 1, it became necessary to struction associated with our ownership share of the restructure EUA Power's debt to conserve cash for Seabrook nuclear project, mandated by Financial ngoing project expenditures. Although the Seabrook .
Accounting Standard 90. The impact of this reduc-project poses additional financial risk, EUA Power's y . tion was somewhat mitigated by continued strong structure as a separate subsidiary provides EUA I growth in kilowatt hour sales. '
investors an opportunity for higher than average This deferral was caused by continued licens.
returns when the plant begins commercial operation.
l ing uncertainties surrounding the Seabrook project.
Severalobstacles in the path of Seabrook's oper-l While the deferral reduced reported earnings by $22.4 ating license were removed during 1988. In Novem.
million, or $1.70 per share, it had no impact on the ber, President Reagan signed an Executive Order, System's cash earnings. As the licensing of Seabrook giving the Federal Emergency Management Agency becomes more certain, we expect the deferral will be (FEM A) the authority to formulate radiologica' emer-discontinued, and those amounts previously deferred gency response plans, working with utility and local may be restored to earnings.
authorities, with or without the cooperation of state On the strength of the cash flow generated administrations. Both FEMA and the Nuclear Regula-1 by our core business and increased electric sales tory Commission (NRC) issued positive statements
! spurred by a healthy economy in our service area, and preliminary approvals of a graded exercise con-l we were able to increase your annual dividend from ducted last June in Massachusetts, and the NRC has
- l. 53.30 to 52.40 per share, cffective with the May 15, l approved the New Hampshire emergency plan. We 1988 dividend. This represents the seventh consecu, are confident that the combined efforts of the joint tive year of dividend increases, and the 60th year of owners, the financial community and local citizens consecutive dividends paid by EUA. We regard this will satisfy the NRC that Seabrook should be record as one of the hallmarks of our stewardship.
licensed in 1989. ,
Economic development and consequent increas.
We are pleased with the progress of EUA Coge- l ing demand for electricity continued at high levels nex, which we acquired in late 1986. Cogenex now throughout the year. New demand peaks were set for has more than 375 buildings under energy manage.
ment contracts and is rapidly expanding its " shared- l savings" programs. Progress in the installation of 35 l
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Three major refinancings were completed by l- packaged cogeneration systems har moved our new subsidiary into several states. In Cogenex, EUA has a competitive bidding for Eastern Edison during the vehicle with which to satisfy the expectations of reg- year. A $30 million first mortgage bond issue was ulators and the demands of customers. , placed in May at 9%%, and a $40 million issue was Both EUA Energy Investment and EUA Ocean placed in September at 9%%. Also in September, State also made significant progress in 1988. EUA Eastem Edison sold $20 million of preferred stock Energy Investment Corporation signed its first con- at 9.8%. Proceeds were used to retire higher cost l tract in 1988 for the development of a 16-megawatt securities.
wood fired generating plant in Pembroke, New Our employees' dedication and commitment to Hampshire. This subsidiary offers our System a service was confirmed by their first full vear of work-means of making strides in the area of small,inde- ing toward performance incentive goals specified in pendent power production, which is becoming an our five year Strategic Plan. In attaining the targets increasingly important part of New England's for earnings per share, customer service, cost control ,
power supply, and safety, they contributed to the strengthening and l In December 1988, the finallicensing hurdle profitability of Eastern Utilities and to their own per-was cleared for Ocean State Power Corporation to sonal development.
construct the first of two 250 megawatt natural gas- We take pride in the accomplishments of the fired generating stations. Located at a site in Burrill- past. Those accomplishments provide a sound foun-ville, Rhode Island, formerly owned by Blackstone dation upon which to build an even more dynamic Valley Electric, our Rhode Island retail subsidiary, the organi:ation for the future. With continued efforts by new plant will be the largest generating project ever our employees and the support of our many share-built in Rhode Island. The construction risk of this holders, we intend to do just that.
proicct will be carried by outside, third parties. Upon commercial operation, o ir EUA Ocean State subsid- Sincerely, inry will become a 25% eq.iity owner of the project.
In June, Eastern Edison Company, our Massa-chusetts retail electric subsidiary filed for its first rate increase in five years. The initial filing with WJ John F. G. Eichorn, Jr.
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Donald G. Pardus the Massachusetts Department of Public Utilities Chairman President (MDPU) sought an increase in annual revenues of
$11.9 million. After the hearings were complete, Eastern Edison was able to reach a settlement agree-ment with the Massachusetts Attorney General for an increase of $7.5 million. The MDPU approved the -
settlement on December 30,1988, and allowed the . "n' new rates to become cffective on January 13,1989. . g J, Holding the line on electric costs throughout our retail service areas is one of our important priori- h[* ,-
ties. Throughout 1988, our average residential cus- ..
tomer's bills decreased by approximately 3.1 %. In Y '
fact, over the past five years, the average bill, adjusted i" ' " -
for inflation, paid by our retail customers has declined s by approximately 24W Both the interests of share- 3,nn p, a g.,no,n,3,.
,i holders and consumers are served by our continuing ,
efforts to achieve cost savings through ef fcctive '
management and ef ficient operations.
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v Organized To Servo
, Change . . Adaptation . . Crowth . f l
At Eastern Utilities Associates, we strive to anti-cipate changes in the world in which we live. We understand that, in a world where change is the only constant, an organization must be able - and willing g s.' ,,,,ce.
,,,,,.o w Pg.gon - to adapt in order to survive -in order to prosper.
s.WaS- Eastern Utilities has done both. For more than a century, our subsidiaries have kept pace with the changing economic, political and social conditions, driven by one primary objective - to serve . .and serve well. To serve ou customers, our shareholders, our employees and the communities where we live and work. This Annual Report focuses on that spirit "Organi:cd to Serve."
- ., The 1988 Annual Report explores the changing
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structure of the EUA System by examiningits indi-vidual subsidiaries - their particular roles, inter-relationships and evolution. Understanding those components provides insight into our direction, plans J
b and prospects for the future.
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There is a core to every organization, a founda-tion to every structure. The more defined and stable, the better it is to build upon. Eastern Utilities' two retail subsidiaries, Blackstone Valley Electric Com-pany and Eastern Edison Company, provide that foun-dation. Together, they are the most visible elements of j the EUA System, providing electric service to a popu-lation of more than 670,000 throughout southeastern 5 Massachusetts and northern Rhode Island. l Blackstone Valley Electric traces its origms back to 1860, with the installation of 23 arc lights in 7
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= si s li- j employees serve 83,000 customers in seven northern T.j-H"'g?" ._ =l:'
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% s i Rhode Island communities. 1,{h };g=g,j .3 gjpggs-Eastern Edison Company's bloodline can .' .
i be traced to "the irwentor" himself - Thomas A. ., . ' + . . .c i 1 i Edison. On October 1,1883, New England's first cen- .
tral generating station, designed and built by Edison, '. ,
.e began operating in Brockton, Massachusetts. Three . . .
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communities in southeastern Massachusetts -
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For almost 110 years, Blackstone Valley Electric . +i 5 5 J 1, w ' , 1E. . . ,.
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gation-that of meeting their customers' electric (';..a; mig.;.p'RWy.n y"
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energy needs on demand. Now, New England's boom-
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ing economic growth has created even greater energy * %\s, -
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els predicted for the 1990s. Our efforts today are .
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With roots stretching back to the very begin-ning of the utility mdustry in this country, Black.
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,securie ,,,,****r 'o successful; decisiveness based on experience, versa- prees,, ,,
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From the start, the concept of centralized com- ;
] mon services made good common sense to the fore. l bears of Eastern Utilities. In 1923, five years before
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Today, Montaup is still working to ensure that our retail companies' energy requirements are met.
Montaup also supplies power to several non affiliated, f wholesale customers in Rhode Island and Massachu-setts. And, with its transmissic-) system iritercon-nected with the New England power grid, it continues to be an active participant in the New England po ver pool. l
,- J EUA Service Corporation is another example of I D I' the benefits of centralizing common services. By con-solidating various professional and technical disci-plines under one control, the overall management of activnies such as accounting, data processing, com-
munications, customer service, planning, enginect-7 ing and purchasing, has become more cost-effective. I Ocean sr.f. ,,**., '
< This consolidation saves expense for both the EUA e**"'"'8e. 49,,,,
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- per,- Syt, tem and its customers Keeping the System as er.nn, streamhned as possible increases our flexibility and l 6"8Oa Ne.
'n so ,,,,,' e,9'*no rebponsiveness to ch.mge i
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At Eastern Utilities, we recognize that change %;M, W p h.YUds.[StjPl## 3 of ten opens up new opportunities for growth. Our . hb w b
g i
newest companies have been created to capitalize on thee opportunities. ', l EUA Power Corporation is a wholesale elec- +-
l tric company with a 12.1% interest in the Seabrook .L l nuclear generating station. Once Seabrook goes on . l hne, EUA Power Corporation plans to sell electricity IfE - '
l at wholesale to other regional utilities, helping to f
sustain our region's econamic growth with a much- !
, needed, new source of power generation. Recent devel- i i
) optr:ents have helped clear many of the obstacles ;
towards beensing of the Seabrook facihty. EUA Pow- I i
er's acquisition of its interest in Seabnok at substan- ;
tially reduced costs should enhance the prohtabihty l of that investment. }
EUA Ocean State Corporation is a partner in l the development of the 250 megawatt Ocean State !
Power Corporation natural gas fired generating plant l
in northern Rhode Island. It will have a 25% interest
, in the project, due to be completed in 1991. Our part- !
i ners include two other New England utihties, a Cana.
l dian gas pipeline company, and a private developer. >
i .
This innovative arrangement is able to draw upon the l
best resources of each partner, helping to ensure that another new source of needed genetution is developed
+
in New England.
The motivation behind the non utihty regulated g EUA Energy investment Corporation is the emergence of cogeneration and privately owned generating iacih- ,
ties as sources of new generating capacity The devel-
- opment and management of these new Iacihties may open up opportunities which can help meet our .
region's future energy needs while providing addi-tional investment avenues for increased earnings a c.,,,,, e,,
EUA Cogenex Corporation expands on the con- ,,,,,, ***cogen.
cept oldiversification it provides energy manage- c.eq,,, e o e ment and small cogeneration services to industrial, * *# "'
i la E.
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14
commerciel and ustitutmnal facihties. This is done under long term. shared savmg5 contracts Using
- energy more cif aciently plays an integral pari in empi'T,o .orP*
ynnee * " ,, our elforis to meet increasing electncity demands.
t t*s,,.... Encouraging energy efhciency accrues to the beneht l
,ot ** *,g . ... . j of consumers and provides new opportunities for Eastern Utihtics' investors as well.
l
.c... .
Eastern Utihties' commitment to serve is evi- ,
l dent in everything we do. But it's particularly visible in the communities we serve.
I That's w hy you'll see us teaching school chil.
dren about electncal safety, and prouding their teach-er> w nh f ac educational materiais on many other energy related subiects. We help students explore I
rewarding careers in the utthty business. We provide mformed and concerned speakers to schools and other community groups to discuss energy and related top-its of current interest.
- That's why we also support programs that help people in need And why we utih:e innovative pro
, .piv 'ivigi h grams that do the same. " Gatekeeper," for example, d
'"'*'.,,aw trains our customer contact personnel to be alert for
,,,ng vs,v.,v e signs which indicate our elderly customers may
,,,,,.m.
require assistance And " Radio Assist" provides a valuable commumcation hnk with operators of our S comp'ny voion- ,.
go, .ev **' *" .
s service vehicles and company dispatchers to report v.iwy
- '"' ,nso, emergency situations they encounter.
,,eme n t o# And company spont.ored programs aren't the only commumty at tn ities you'll find us involved in.
You 11 tmd us at pTA meetinr,s charitable fund-raisers. teaching Little Leaguers the valut of sporto manship or answering a call for help as volunteer firefighters We're Joing w hat any good neighbor would Jt, WL 're (UrntDlt ted t o IR lping to b, Jing invu}\ cd to sers mg We re crgam:cJ to serve' 15
_~. ,_. -
_. . . ,. t
& s
' i 9
- ' Financial Contents :
,, l 17 ' Review of Operations "* l Selected Consolidated financial Data i 24 '
D ' .% .. st's Discuulon and Analysis D Consolidated Financial $tatements ..?? , ' . L. .' s,.. C , . i 7 Noees to Conectidated TinancialState:nents' . l. ".".?-f -M:. .- r.NN,1 W,f.' / <
m: !
O Quarterly Tinancial and Common
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C . Dividend Reinvestment and Common Share -
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Purchue Plan
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i 44 Consolidated Operating Statistics ,
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Review of Operations ago, institutional holdings amounted to only 12%. individual shareholders
- 2) also demonstrated continued sup.
Earnings agd Dividends port.More than $,600 shareholders Despite record revenues of $374
- Invested 59.4 million during 1968 million, the deferral of a portion of through our dividend reinvestment the Allowance for Funds Used Dur-and common share purchase plan.
ing Construction (ATUDC) asso- ,
cisted with our imestment in the ** - Record Demand and Sales Seabrook nuclear generating station In the past year, we saw continued reduced consolidated net income for
.l cscalation in the demand for elec.
the EUA System to 537.5 million.
- l tricity throughout our System.Cus-The provisions of Financial Account. p
[ -
tomers of our iwo retall companics, ing 5tandard 90(FAS 90) led us to Blackstone Vasley Electric and Eat t-defer a portion of ATUDC because of ] ern Edison, drove demand to an EUA the :! censing uncertainties surround, 'j System record 612,750 kilowatts to Ing the Seabrook pMect. This nesa.
during the peak hour in August, tive impact on earnings was ,
g That represents a 4.0% increase o er somewhat offset by a significant '
the 1987 record demand of 762,000 increase in kilowatt hour sales.
8 kilowatts.Throughout New England.
Earnings per common share wcre u w w ,, , demand rose 6.8% mer 1987.
52.85, compared with 53.46 a year
.'.s in the past two years, our rate carlier.The decrease was due almost Eam%s and DMeends of kilowatt. hour sales grew at nearly entirely to the partial AFUDC defer.
twice the national average during tal, which amounted to a reduction a c,nn,.
e o'** 1988.Theincrease for allclasses of 81.70pershare.
of our retail customers was 5.4%.
While FAS 90 reduced the levelof While weather conditions were a reported earnings,it had no impact contributing factor, the dominant on the System's cash earnings. We ,
reason for the steadyincreasein were able toincrease your annual kilowatt. hour sales continued to dividend rate for the seventh consec.
be the region's economic prosperity.
utive year: from $2.30 per share to ,
52.40, effective in May 1968. Consis. This was reflected in the robust residential and commercialgrowth tent and regular increases in share.
rates of 6.3% and 7.5%, respectively, holder dividends cc.ntinue to be a ,
over 1987.
maior goalof your Association's management. EUA has been paying New commercial andindustrial construction projects are being consecutive quarterly dividends on ,,
its common shares since 1928, and 7 developed or have been completed throughout our service territories-hasincreased the dividend in each phaseIand flof Reebok's new world of the last seven years. , -
headquarters in Stoughton, Massa-Institutionalinvestors continued '
chusetts; the new headquarters of their interest in EUA. At year's end, Deknatel,a subsidiary of pfizer Cor-92 different ir.stitutions held abo . ,, ]
50% of our shares. Just four years poration,in Fall River, Mastachu.
.2 setts, and a new industrial park in 1incoln, Rhode Island, are three 9
....w....., examples.These projects are strong
"" 88 88 'I 88 indicators of further economic growth Intemaffy Genersted Funds os a % of Cash Construc-tion Expenditures 17
~
\
~ ,
1 1
'. and increased kalownt hour 6 ales, power plant Stat:s i and steest to business' faith in our As 1988 drew to a close, the Sea-abilay to provide reliable electric brook generating station awaited aervice a reasonable rates, final word for permission to begin
%e same surgingeconomy that now. power tests pilor to commercial has influenced salca is also stretch- operation, tle Pilgrim nuclear power lag our generating capacity to the plant began a carclully planrwd j restart procedure, and ground break- I fullest Part of our response has ,
~~
ing plans were finalized for con- j been an aggressive conservation and energy management program struction of the natural gas fueled l directed at all classes of customers. mas
~
)' Ocean State Power generating plant i Programsinstitutedin 1988 will in Burrillville, Rhode Island. j aave Eastern Utilitics' customers 4 S i Thelast remaining hurdle to a million kik) watt hours (kwh)of elec- pm E' low powerlicense for Seabrook is )
tricity per year, resulting in a sav- i tosatisiy the NRC that a plan filed ;
ings of more than $400,000.The ,
in October 1988 by Seabmok particl. !
goals for 1989 are even greater-an ~ tem 1 pants pmvides reasonable assurance ~
Jditional ti million kwh saved, or that adequate funding will be avall- l
}
approximately $2.2 mi' lion. ' able for safe decommissioning of the l To complement this cffort, Eastern su unit in the event that a full power t
. Edison has joined with other Massa- , license is not granted, chusetts utilities to find ways to Seabrook cleared rwarly every ;
design the most elicctive conserva- e i maior obstacle to obtaining its full- i tion programs possibic. ~ wsm- power license. But Massachusetts l
""""" officials remained adamant in their i
%e jolnt Utility Monitoring Pro-gram is an innovative program to refusal to cooperate in emergency l
%m monitor residential electricity use mm=wawv planning. .
patterns. Eastern Edison participates ,% , Early in 1988, the federal Emer-with five other Massachusetts utili- gercy Management Agency (TEMA) g -
ties in the cifort, the first of its am dropped its earlier opposition to New kind in the nation. For its participa- 80" llampshire's emergency plans for , {
tion, Eastern Edison received a State communities near the plant. in June, :
Energy Award for Energy innovation it gave passing grades to an exercise Irom the Massachusetts Executive of those plans and for plans that Sea- '
Office of Energy Resources and the brook participants draf ted for the six U.S. Department of Energy. Eastern Massachusette communities within ;
Edison was also involved in the for- 10 miles of the plant, matkm of the Massachusetts Col- A federal appeals court unani- !
labornive, an el(crt to pool the mously upheld a 1987 Nuclear Regu-resourc:s of utilities, consumers latory Commission (NRC) rule arhovernment agencies throughout allowing approval of emergency plans the state in planning and devek 9 tng developed by Seabrook management energy management programs. for the six Massachusetts tovcas The results of both cooperative within a 10 mile radius of the plant.
prc7ams will help us better accom- In November, an Executive Order by ,
modate the future energy reeds of president Reagan gave FEMA broad ;
our customers, rww gewers in nuclear plant emer-gency planning when state or kwal .
officials refuse to participate.The NRC bcensing hoard scheduled hear-ings on the Massachusetts plan to begin on March 21,1989.
18
1 4 . ]
=
. l The Pilgrim nucleor unit had been
( ,, out of service ainee April 1966 while its owner, Bo6 ton Edison Company, instituted operational changes and
' improvements to pknt equipment.
- 1. ate in the year, Boston Edison set-t' infiedtleNRCof theoperational ,
integrity of the plant and was given ;
permissiorn December to restart !
under close NRC supervision. Our l g }) wholesale generation subsidiary, Montaup Electric Company, pur-l chases 11% of Pilgrim's generat-
]
ing capacity.
I-lj Final contracts were signed and i construction financing was com- l N pleted at year's end to clear the way ,
, I """""'"'""**"
i for construction of the new com-bined cycle, natural gas fired Ocean State Power generating unit in north-crn Rhode Island. Groundbreaking l
took place in January 1989, and com- ;
ceswonstructu Empendnures '
rue aow w pletion of the first 250 megawatt unit is scheduled for 1991.
l
- Our EUA Ocean State Corporation subsidiary willown 25% of the plant when it goes into commercial opera- l tion. Ocean State will be the first .
I new power plant to be bu'ilt in Rhode i
taw Island since the 1920s, and the first l major generating unit to be started in ,
l New Engknd in more than a decade. .
i- was i i I
Rate Activity [
su Eastern Edison Company, our Mas-sachusetts retail electric subsidiary,
,,o y filed with the Massael usetts Depart-ment of Public Utilities (DPU)in June its first increase in base rates l since 1984.The filing-which i !"
j sought to increase annual revenues !
,,, j by $ll.9 :nillion- followed new DPU rate design guidelines. Under these guidelines, costs are allocated
' to each class of customer such that u es se each pays its proportionate share of the cost to meet its particular System Capabety'Pook requirements.
(uopmerai e balSystemCapataty a newv uapn -
a keenmunnsams '
e EUASystemPeak 19
_ - _ _ . - _ _ _ _ _ _ _ - _ _ . _ . _ . _ _ _ . _ . . _ _ _ _ , _ . . _ _ _ _ _ _ _ _ _ _ _ ~ .
1 I
j k , Duri_ng the DPU herring proccis on the rate request, Eastern Edison j reached an agreement with the sole '
intervenor in the case - the Attor- '
ney Generalof Massachusetts-i l that an increase of $7.5 million in annualrevenues would be equitable 88 l to all concerned.In December, the l DPU approved the compromise, and allowed new rates to become cffec- l
, l tive January 13,1989. ,
g j
. Inlanuary 1988, our Rhode Island y 7; retail tiectric subsidiary, Blackstone .,
't Wiley Electric Company,imple-mented the second phase of rate io @ j(O y i I
adjustments to reflect changes in l ;
i federal corporate income tax rates. 4 Montaup Electric Company, our s 3 f, i
wholesale generation and trans- A
- r( '
mission company, reduced its ratea l1 '
$1.5 million elfective November 1, as .
the result of Federal Energy Regula-
- - f 3 M ; i tory Commission approval of an d ~n e's 'sIA ' ,
agreement between Montaup and the E8' attorneys general of Rhode Island and Rg*,p {'
. Massachusetts. -
Filance ,
r Our Eastern Edison Company sub-
. sidiary successfully sold $90 million ci permanent securities during 1988, tio all at competitive bids, f A $30 million Iirst mortgage ,
bond issue was placed at 9% percent ,
in May and matures in 1993, $40
- SS million of 9% percent first mortgage bonds maturingin 1998 were issued j ;
in September, and $20 million of pre- }
ferred stock was sold at 9 8 percent.
- 4 I ,
Proceeds to Eastern Edison from these offerings were used to retire M esese7es higher cost securities and to repay Rauos eHo short term bank barrowings.
EUA power Corporation, our wholesale power subsidiary which ;
owns 12.1 percent of Seabrook Sta-tion (See the " Power Plants" section 6
20 -
m of this Review of Operations cnd management, cogenerrion and inde- in scale and scope than those nor- :
j",, '
Footnote I to the consolidated finan- perdent power production merkets mally undertaken by EUA Cogenex.
j cial statements), restructured its debt - markets expected to increase in 1988,it signed its first contract, by exchanging its 17% percent Series appreciably as the region's demand with Unicord power Associates, a l 'A Secured Notes, due November 15, for electricity continues to grow, partnership im'olved with the devel- i 1991, for a like principal amount of Acquired in 1986, EUA Cogenex opment of a 16 megawatt wood fired i
- 17% percent Series B Secured Notes, continues to make impressive gains plsnt in Pembroke, New Hampshire, ^
i due May 15,1993. Interest on the in both the cogeneration and energy EUA EnergyInvestment willbe a Series B Secured Notes is payable, at management markets. EUA Cosenex 50% equity partner in the venture, >
t the option of the Company,in cash currently services more than 375 scheduled to begin operation in 1991, i orin 17% percent Series C Secured individualbuildings through more A sales contract has been signed to :
Notes due November 15,1992 in a than 150 contracts. Highest prior- produce and sell electricity to UNI-principal amount equal to 133 per- ity was given to utility sponsored TIL Corporation, the parent com- j cent of the interest which would demand reduction programs and pany of Exeter Hampton and Con-otherwise have been paid in cash, packaged cogeneration systems. cord Electric Companiesin New In June, we withdrew our applica- Under demand management pro- Hampshire, tion to the Securities and Exchange grams offered by other New England EUA EnergyImestment also has Commission for approval to pur- utilities, Cogenex signed more than the advantage of being a non utility-chase the common shares of NECO 75 lighting management arrange- regulated business. This offers share- ,
Enterprises,Inc. NECO is the parent ments with such customers as holders the opportunity to achieve a .
of Newport Electric Corporationin Fischer Scientific, paul Revere Life higher rate of return on their invest-Newport, Rhode Island.We had Insurance, Millipore Corp., Brock- ment than that of the traditional agreed in December 1987 with way Smith Co., and Massachusetts utility.
NECO's maiority shareholder to buy Institute of Technology. Thirty five In December 1988, the finallicens- ,
his $2% ownership interest in the operating cogeneration projects ing hurdle was clearedin Ocean ;
company.That agreement expired in include Coca-Cola Bottling Com- State power Corporation's effort to June of 1988, pany, Yonkers Hospital, and proceed to the construction stage Ee Meridien Hotel. of its 250 megawatt natural gas-fired Strategic planning and EUA Cogenex has grown to generating station in Burrillville, Estnings Growth become an important force in the Rhode Island. EUA Ocean State will [
In January 1988 we published and fields of cogeneration and energy have a 25% interest, as a partner in distributed our five year Strategic management.During 1988, new the venture. A second 250 megawatt plan to all employees. Implementa- markets were established in New unit is scheduled for construction tion of the various strategies designed England, New York, and elsewhere. at the same site, possibly as early ,
to meet the ultimate goals and objec. EUA Cogenex recently formed as 1992. !
tives set forth in the plan began in two limited partnerships to own and Groundbreaking for the first unit 1988, and is beingincorporated into operate 15 existing cogeneration prol- took place in January 1989, with a our 1989 Business plan, ects. These consist of seven operat- scheduled completion date oflate One of the maior objectives of- ing installations and eight additional 1991.Our wholesale company, Mon-the Strategic plan la to sustain earn- projects currently under construc- taup Electric, has contracted for 20%
ings growth through expansion and tion, totalling 4,447 kilowatts. of the output, diversification into other energy- EUA Energy Investment is further The innovative partnership, which related enterprises that are not regu. evidence of our commitment te- includes two other regional utilities, lated in the traditional utility man- cogeneration and independent power a Canadian gas pipeline company ner.This has been the principal . production as part of the answer to and a private developer, allows the motivation behind our newest sub- meeting increased demand and max. expertise of each to be used to the sidiaries- EUA power, EUA Coge- imi:ing profitability. lt was formed fullest. As a result, we expect the nex, EUA Energy Investment and to develop and manage proiccts larger plant to be completed on time and EUA Ocean State Corporations. They on budget. This plant will contribute are involved in developing the energy much needed capacity to our region, and has provided yet another oppor-l tunity for sound investment.
, 21 l
Customer end
- r ===menty Relations
, Eastern Utilities' commitment to make our neighborhoods better -
, places in which tolive and work, expanded in 1988. Our work with j community and business leaders, ,
schoolchildren and customers with f
special needs supports this theme. tow n=e esi
. The EUA Speakers Club, a group
- [
of 84employeesknowledgeable i about electric utility industry issues 80' "
}
and trained in public speaking, e me, addressed approximately 11,000 ,,, g, members of community clubs and }
organizations and school classes on ,
su,h topics as energy sources, elec- Espense tric r:::s, conservation, nuclear , g .
energy, electric safety and future ~, g %% ,
capacity requirements. , u_op,, op,,,,, ,S u,,m, :
Our volunteer speakers partici- port n.,.c .e,w.o om !
. pat:d in a broad based public aware- 73 _,I ness campaign designed to alert ut Depreenm em A m tisem {
business and the public to the B se Eanw a l region's serious electrical capacity i situation. *!he efIcctiveness of our ,
speakers in gaining public under-standingof thisissue helped shape a favorable outcome at the Massa- ,
chusetts polls in November for East- i ern Utilities and its customers. A referendum, which would have ;
cle:ed the state's two nuclear power plants-Pilgrim and Yankee Rowe ,
- was soundly defeated. ,
Tb support our young people and !
encourage quality energy education, Eastern Utilities continues to expand ,
and enhince its educational services.
program. Students used more than l
77,000 learning tools offered free- .
l of charge, such as curriculum pack- l l
ages, audiovisuals, publications, and computer sof ware. Vocational mate-l rials and posters, our newest offer-ings, were well received.
The electrical safety program for fif th graders, Stay Clear, Stay ;
Alive," celebrated its 10th anniver-s:ry. Students throughout our service 22
o <
We are committed to other com- Employeneet j f '. ,, area participated 12 ceremonies by hlling energy related time capsules muntry services as well."Cate. Nineteen-eighty eighs saw an i kit the trat generation to open, keeper /' established two years ago to increasein the number of employees !
During the past decule, more than help head off potential crises before in the EUA System. New employees i N,000 students have been exposed they occur, directs our customer- hired in 1988, brought the total to j to this program's safety lessons. contact personnel to seek help for an slightly more than 1,200.The 2.7%
Electric safety has always been elderly or infirm custorner if a prob- increase was due,in large measure, a high priority. "A to Zar,"is an lem is suspected at that customer's to our continued need for technical electric safety pre;; ram keyed to third home. personnel u we attempt to help meet graders. In addition, we continued 'pwo rww programs launched dur- the electric demands of our cus- !
another successful safety informa- ing 1988, were " Radio Assist" and tomers through the use of energy i tional program,in its third year, "'nalfic Net "" Radio Assist" for- conservation programs. j
' Tires and Wires" helped foster coop- malized an emergency communi- Steps aimed atincreasing i i
eretive rclationships with fire, police cations network that could save employee effectivenes:,, service to and Company personnel, while lives and property. Employees who our custonwrs, system cfficiency, and l heightening electrical safety aware- observe an emergency use their employee motivation were imple- ;
ness. And, a trw safety program for radio equipped vehicles to report mented during 1988.The issues building contractors provided a valu- incidents so our dispatchers can addressed by these steps were high-able eachange cdinformation for notify appropriate authorities - fire. lighted as part of our five year i individuals who routinely work near police or rescue.'Ib make traveling Strategic plan.
electricallines, on our roads safer, the Company par- Daming Up For Performance -
ticipates in "'nalfic Net," which the EUA System's first goals and Allthe educationalservices piograms offered to schools were reports road accidents and hazards incentives pny, ram - was initiated reviewed and approved by Entern to radio listeners, in early 1988. Employees were UtiliticsRachers Advisory panel, %e " Good Neighbor Energy offered monetary rewards for reach- ;
a cross section of educators from our Fund,"co sponsored with The Salva- ing System oriented targets for earn.
service area. An educator represent- tion Army for the past three years, ings per share, reliability of service, .;
ing the specialneeds discipline was helps people in a temporary financial cost control, safety and short term added in 1988 to ensure appropriate crisis pay their heating and utility absences.%e program was enthust-astically received. prior operating !
representation from all areas of the bills. We promoted the Fund by solic-cducational community, iting financial contributions from results were improved uponin all We diversified our energy educa- our customers. Our retail companies cues and, as a result, all goals tion elforts with "Adnpt A School," gave one dollar to the Fund for every were attained.
letting students " shadow" employ- two dollars contributed by customers. This program represents a con- 'l In addition, Blackstone Valley Elec- certed cffort on our part to attract, ecsj " Career Days," teaching stu-dents about various jobs at the tric sponsored its Second Annual keep and reward outstanding employ.
Company, and " Junior Achieve- Funid) Run to raise imancial ces. It also reinforces our commit- i ment," helping students utslerstand contributtons. ment to customers and shatcholders
%e Company strengthened its to serve them in a cost eflective, !
the free enterprise system.Our "Rach the nachers" workshops, commitmant to make the region caring, productive and profitable which introduced innovative, inex- stronger econornically by actively manner.
pensive ways to teach energy topics participatingin the Northern Rhode in the classroom, were co sponsored Island Marketing Council (an organi-by the Massachusetts Audubon zation dedicated to improving the Society and the Rhode Island economic environment in nortlern Energy Office. Rhode Island,)and in Chambers i
of Commerce and professional organizations.
l u
y -
L o.
! % Selected Consolidated Financial Data l
Years inded Decerni.er 31, tin 7housands Escept Cominon shores and j- hr Share Amounts) 19P8 1987 1986 1965 1984 lacesse Statessent Deta:
Operating Revenues $374,138 $367,129 $343,324 $333,510 $361,325 r Operatingincome 65,212 61,847 61,725 48,072 46,767 Consolidated Netincome 37,475 43,546 32,490 29,770 30,053 Salance Sheet Data:
671,192 653,371 614,330 407,497 394,107 Plantin $ervice Construction Work in Progress $35,814 425,818 , 3!S,708 335,130 283,216 Gross Utility Plant 1,207,006 1,079,189 973,038 742,627 677,323 Accumulated Depreciation 187,049 173,813 157,813 143,497 134,077 Net Utility Plant 1,019,957 905,376 815,225 $99,130 543,246 Tbtal Assets 1,202,635 1,071,216 954,514 714,436 661,471 [
Capitalisationt ;
Long Term Debt 554,564 479,217 423,789 285,49) 288,876 Redeemable Preferted Stock 34,614 29,852 29,852 31,457 S3,240
, Non Redeemable Preferred Stock 15,079 15,079 15,079 15,079 15,079 Common Equity 301,759 285,383 225,156 208.211 191,619 ,
Tbtal Capitali:stion 906,016 809,531 693,876 540,138 528,814 ,
Short Term Debt 62,426 38,035 63,444 25,373 0 r
Common Share Data:
Earnings per Average Common Share $ 2.85 5 3.46 $ 2.82 $ 2.67 $ 2.85 l Average Number of Shares Outstanding 13,167,915 12,596,381 11,537,677 11,156,941 10,562,324 .
Return on Average Common Equity 12.894 17.196 15.096 14.996 16.596 ..
Market Price- High 33 % 40 % 39% 26% 18 ,
- Low 21 % 24 25 % 16 % 12 %
-Year End 31 % 28 38% 25 % 18 Cash Dividends Paid per Share $ 2.375 $ 2.27 $ 2.15 $ 2.03 $ 1.91 P
t i
k 24
{,e . . p
., Managesnent's Discussion and ne revenues ctributable to fuel ec*ts are the result i
Analysis of Financial Condition and o' the recovery of such costs through the operation of i Resul ts of Operations adjustment clauses.
ne estimated ellect of rate changes for 1988 and 1987 :
i reflect the combined effects of inerenes in Montaup's l L Ourvirva Power Cost Adjustment Clause and decreases due to a l Consolidated Net income for 1988 decrened $6.1 mil.
lion or 13.9%, from 1987, while 1937, increned 34.0% reduction in the Fe3eral income taa ute and rate refunds !
over 1986. Earnings per awrage common share of by Montaup resulting from the settiement in 1988 of a !
82.85 in 1988 decreased 17.6% from 1997, while 1987 complaint brought against Montaup relating to its coct [
increased 22.7% over 1986.The decrease in 1988 was of equity and from the settlement in 1987 of all unre-the result of the deferral of a portion of non cash allow, solved inues from prior ute proceedings. As of Decem-
1 ance for funds used during construction (ATUDC) asso. ber 31,1988, the EUA System hn no revenues subject to cisted with our ownership interest in the Seabrook lossible refund.
Kilowatt hour sales for 1980 continued to improve nuclear power project. This decrene was partially offset ,
by increases in kilowatt hour sales. The 1987 increne over 1987.The increase was primarily the result of [
principally reflects additional carnings from non cash economic growth within our service territories. This l AFUDC applicable to EUA Power Corporation's owner, powth wn dramatically demonstrated by the 7.5%
ship in Seabrook. These changes in carnings per share increase in kwh sales to our commercial customers and i were also influenced by the increnes in the number the 6.3% increase to residential customers. Kilowatt-I of average common shares outstanding of 4.5% and hour sales also were up in 1987 compared to 1986. Again the commercial and residential sectors led the way with 9.2%, respectively, increnes in kwh sales of 6.6% and 5.2% respectively. ;
Delerralof AFUDC The table below sets forth the percent changes in kwh i
As a result of the licensing uncertainties of the Seabrook sales by clus of customers for the lut two years:
p?oiect, the deferral of a portion of AFUDC associated #
with our im estment in Seabrook is mandated by Finan- "'[o'$[o*yN$
f less 19st !
cial Accounting Standard 90 which became effective 6.3% 5.2%
, January 1,1988.While the deferral resulted in a teduc. Residential tion in earnings of approximately $22.4 million or $1.70 Commercial 7.5 6.6 l Industrial 0.7 0.9 per common share for 1988, it has no impact on our cash ,
Other 0.2 2.2 !
camings. As the licensing of Seabrook becomes more Tbts! System Requirements 4.6 4.3 i usured, we would expect to restore deferred AFUDC to earnings. See Note 1 - Commitments and Contin-nh Connacu (54 (12.5) ,
TbtalEnergy Sales 3.2 1.8 gencies for further details. i EPenu Operating Revenues nem s m u sign cant expenn hems ,
The table below sets forth estimates of the factors which c ntinue t be Fuel and Purchased Power costs, which caused Operating Revenues to change during the last comprised about $3.5% and 55.7% of total operating r
,,,y , expemes for 1988 and 1987, respectively. Fuel expense ;
increase (Decreme) for 1988 decreased $15.1 million, or 13.4%, from 1987, ,
$87 prirnarily as a result of lower oil prices experienced (3 in anilhons) 19s during 1988. Fuel expeme for 1987 increased $12.8 Operating Revenue change '
million, or 12.9%, over 1986 due to higher coal genera.
attributab!c to:
tion replacing inexpensive nuclear fuel as a result of Recovery of FuelCosts $(18.2) $10.9 5.3 cxtended outages at certain nuclear uni's in which the Effect of Rate Changes (5.5)
Kwh Sales 19.8 14.9 EUA System has an interest, and higher oil prices expc.
Unit Contracts (1.1) 0.8 rienced during 1987. Purchased power Demand costs Non Electric 1.2 2.7
'Ibtal g 7.0 $23.8 l
2.5
r ,
,q intcarst rat:6.(See Consohdat:d Statcment of Capitaliza-
^' lacreased &T 2 millum in 1988 arul $6.1 inillion in 1987, respectively, over prior periods primarily because tkm for details ) Amortizatkin of debt expenac and pre.
of additionalpurchases regulred as a result of higher mium increased $1.5 million in 1987 over 1986.This syssee requirements due to the increned kwh sales increase wn primarily a result of EUA Power debt mentioned aime and additional demand charges from capense amorti:ation. Other Interest Expense dectened Pilgrim Unk I whkh has been out of wryke since 1986. $1.8 millkm in 1988 from 1987 and inerened $3.0 mil-lion in 1987 over 1986. Thew changes were primarily
[ Other operation expenu increased each year primarily n a result of the effects ol lnflation on labor, materials the result of interest paid in 1987 on Montaup's rate
- and other costs. refund.
AFUDC reprewnts a non cash element of income. Inflation contimws to have an impact on the operation AFUDC increwed $2.7 million in 1988 over 1987 of our System. At the Federallevel, wholeule rate mak.
primarily as a result of an increara in the composite ing practices permit a forward looking test period which enables us to anticipate inflationary increase 1 The tra-
, AFUDC rate to 21.8%, whkh wn due to an increne in
' EUA Power's AFUDC rate to 25.$%, and to an increase ditional use of an historical test period for te tail rate-b the base to whkh the AFUDC rate was applied.The making purpons at the state level does not provide us
' increne in AFUDC would have been significantly this opportunity, higher had it not been for the deferral of a portion of The tax elfcct of the cumulative amount of tax / book AFUDC as previously discuned. AFUDC increned timing dilferences which have previously been flowed
$40.7 million in 1987 compared to 1986 primarily as a through, hu not been recorded inasmuch as the tax result c.I the inclusion of EUA Power AFUDC for a full liabihty on those flow through timing differences is year (versus one month in 19861, and an increne in the recovered through rates as the timing differences composite AFUDC rate from 13.61% to 16.59% due reverse. The Tax Reform Act of 19t16 reduced the federal C the 20.25% AFUDC rate for EUA Power.T he 1987 statutory corporare income tax rate from 46% to 40% in increase alsoincluded the elIccts of a Montaup rate 1987 and to 34% in 1988 and thereafter. IUA has deter-witlement whkh removed a small portion of Con- mined that the reduced tax rates will cause the regulated struction Work in Progren from rate bue and retro- subsidiaries' accumulated deferred income taxes to be actively increased the base to which the AFUDC rate adequate to provide for all timing differcues, including was applied. those that were previously flowed through. 1 Long term debt interest increased $16.6 million in 1988 over 1987 primarily as a result of EUA power's pay- Financial Condition The EUA System's need for permanent capital is pri-ment of interest on its 17%% Series B Secured Notes marily related to the construction of facilities required with the inuance of 17%% Series C Secured Notes to meet the needs of its cristing customers and to meet instead of cash (See "EUA Power" under Note J - Com-the future requirements of these customers as well as mitments and Contingencies for further details) and the tww customers. For 1986,1987 arul 1986, tie EUA
' issuance by EUA Service Corporation in January of
$20,000,000,10.20% Secured Notes.These increases were partially offset by Eastern Edison's ability to j
refinance certain of its high cost securities. The 1987 j
increne of $26.1 million over 1986 was primarily the '
res:lt of the full year elfcct of the 17%% notes inued by EUA Power Corporation in November 1986 and March i i
1987, partially ofistt by lower interest rates on new secu-rities inued to refinance certain issues having higher ,
26
7 .
ip i
R. Symmen's cash construction expenditures [encluding New /scoustius Standard AFUDC)were $65.3 million, $68.9 million and $47.1 See Note A d Notes to Consolidated Financial State.
million, respectively. Of these ammmts $29.S million, ments for informetion pertsining to Financial Aecount.
$17.8 million, and 814.6 million, respectively, relate to ing Standard (FAS) 96 Accounting for income 'Ihaes," s coh construction expenditures on Seabrook, new accounting standard which has been issued but is De System expects cash construction expenditures not required to be implemented until 1990, to incJosse to about 871.6 million in 1989 principally due to an increase in EUA Cgenes expenditures. Report of Management
. In the utility industry, cash construction require. %e management d Ewiern Utilities Anociates is ments not net with imernally serwroted funds are responsible for the consolidated financial statements and related information included in this annual report. ne customarily obtained through short term borruwings financial statements are prepared in accordance with which are ultimately funded with permanent t.apital. in 1988 internally generated funds amounted to $39 mil. generally accepted accounting principles applic5ble to rate regulated utilities and include amounts bued on the lion, or 59.6% d the cash construction requirements, best estimates and judgments d management giving in 1987, internally generated funds amounted to $14.6 million, or 11.1% of the cash construction require. appropriate consideration to materiality. Financial infor.
matka included clrcwhere in the annual report is con.
ments.nc 1987 amount included EUA power Corpora.
sistent with the financ!al statements, tion which prefinanced its 1987 interest charges and cuhconstructionrequirements ExcludingEUA power he EUA System maintains an accounting system from the 1987 amount results in internally generated and related system of internal controls which are funds of $26.4 million or S7% of the remaining cash designed to provide reasonabic assurance as to the rell.
construction requirements of the EUA System.The ability of finsncial records and the protection of usets, amounts for 1988 and 1987 excluding EUA power are The System's staff uf internal auditors conducts reviews prepared on the same buis as 1986 during which the to maintain the eflecth'eness of internal control procedures.
EUA System was able to generate 95.1% of its cash con.
struction requirements with internally generated funds, Coopers & Lybrand, :he System's independent certi.
with the balance coming from short term borrowings, fied public accountants, is engaged to examine and The System expects that in 1989 it will internally express their opinion on our financial statements. Their ,
generate a lower porcentage of its cash construction examination includes a review of internal controls to the extent required by generally accepted auditing standards. ;
requirements than it did in 1968, primarily because of Le Audit Committee of the Board of'Dustees,which !
increased construction requirements of EUA Cogenex.
consists solely of out:ide 'nustees, meets with manage.
perrnanent financings during 1968 included $70 mil.
ment, internal auditors and Coopers & Lybrand to dis. t lion First Mortgage and Collateral *nust Bonds issued by Entern Edison and $20 million of Eastern Edison pre. cuss auditing, internal controls and financial reporting :
matters.ne internal auditors and Coopers & Lybrand l ferred stock.The proceeds from these securities were used to retire at maturity or redeem various high cost have free access to the Audit Committee without man-i agement present, Mortgage Bonds and Preferred Stock. In addition, EUA '
Service issued $20 million of Secured Notes.ne pro-ceeds from this issue were used primarily to repy short.
term bank borrowings incurred to finance our new oper.
stions center. EUA Power luued $44.3 million of its 17%% Series C Secuted Notes in 1968 in lieu of making l
cash interest payments on its Series B and Series C Secured Notes. (See Consolidated Statement of Capitalization for details.]
27
n _
, ' Consolidated Income Statement j
( <
\ e i i
hers Laded December 31, ;
fin Thousands ascept Numbers of shares and per share Amounts) 1988 1987 1966 Operstica Revenues $374,138 1367,129 $343,324 l
Operating f.sponses:
Puol 97,202 112,264 99,436 l Purchased Power Demrmd 68,154 57,892 51,618 Other Operation 69,156 62,280 52,544 i~ l Maintenance 17,285 14,668 11,967 j Depreciation and Amortisation 22,951 21,964 20,886 l
,^ hace-Other Thanlacome 15,402 15,155 15,571 i tacome and Deferred %ses 18,796 21,059 29,377
! _ Tbtal Operating Expenses 308,926 305,282 281,599 !
, Operating !ncome 65,212 61,847 61,725 i Equky in Earn!ngs of Nuclear Generating Companies 1,372 1,480 1,692 Allowance for Other funds Used During Construction 1,591 19,534 6,852 Other Income (Deductlons)- Net 961 (699) (745)
Income BeforeInterest Charges 69,136 82,162 69,524 !
?
Interest Charges:
Interest on t ong. Term Debt 80,140 63,555 37,460 Amortisation of Debt Expense and Premium 2,230 2,101 611 .
OtherInterest Expense 5,344 7,198 4,238 i Allowance for Borrowed Funds Used During Construction (CrQt) (59,025) (38,393) (10,381)
{
NotInterest Charaes 28,729 34,461 31,938 Income AfterInterest Char 8es 40,407 47,701 37,596 l Preferred Dividends of Subsidiaries 2,932 4,155 5,106 l Consolida**d Net lneome $ 37,478 5 43.546 8 32,490 i Average Common Shares Outstanding 13,167,915 12,596,381 11,537,677 l
Consolidated Earnings Per Average Common Share $2.85 $3.46 $2.82 l Dividends Per Common Share $2.375 $2.27 $2.15 Consolidated Retained Earnings Statement
> hats inded December 31, ,
(in 7housands) 1988 1987 1986 Consolidated Retained Earnings -Beginning of Year 8 79,762 $ 64,698 $56,943 i Consolirtsted Net tricome 37,475 43,546 32,490
'Ibtal 117,237 108,244 89,433 Dividends Paid - EUA Common Shares 31,160 28,482 24,733 ;
Consolidated Retained Earnings - End of Wat 8 86,077 8 79,762 $64,698 The accompanying notes are an integralpart of the financialstatements.
b 28
y ,
i . Consolidated Statement of Cash Flows Ysers laded Detember 31, !
(In 7housands) 19H 1967 1966 '
Cash Flow freen Opeestlag Aetivities ;
Inconee Afterinterest Charges 8 40,407 $ 47,701 8 37,596 l i
Adjustments to Reconcile Netincome l i
, to Net Cash Provided from Operating Activities *
' 25,549 24,210 21,404 Depreciation and Amortisation l 1,742 1,957 1,846 i Amortizatio iof Nuclear Fuel 25,056 15,409 16,577 Deferred Tkxes l Irwestment Tkx Credit, Net (11,375) 6,578 10,607 l OilConservation Adjustment 5,723 9,2.39 3,559 Allowance for Funds Used During Construction (60,616) (57,927) (17,133)
Non CashInterest Expense 46,824 1,352 Other-Net (8,812) (2,009) (3,864) {
Net Changes toWorking Capital:
(8,564) (7,381) 2,017 l Accounts Receivable
- Materials and Supplies (292) 1,310 (1,303) i Accounts Payable 1,388 3,481 (3,676)
Tk , $ Accrued (3,893) 914 ($73)
(7,328) (1,716) 1,930 Other- Net _,
Net Cash Provided From Operating Activities 45,809 43,118 68,587 Cash Flow from Investing Activities:
Construction Expenditures (65,307) l68,929) (47,138)
Acquisition of Additional Seabrook Ownership (176,484)
Decommissioning Fund (10,01Il increase in Other Investments (630) (1,103) (1,l'!!) ;
Net Cash Used in Investing Activities (65,937) (70,032) (234,754)
Cash Tknys from Financing Activities .
Issuances: I Common Shaies 10,067 45,260 9,224 Preferred Stock 20,000 15,003 1,ong Thrm Debt 90,000 106,562 211,438 Redemptions:
Long Thrm Debt (80,875) (53,125) (49,125)
Preferred Stock (15,00'l) (17,690)
Premium on Reacquisition and Financing Expenses (4,122) (4,808) (11,095) :
EUA Common Share Dividends Paid (31,160) (28,482) (24,735)
Subsidiary Preferred Dividends Paid (2,932) (4,155) (5,106) ,
24,391 (25,409) 38,071 Net increase (Decreaselin Short Thrm Debt '
Net Cash Provided From Financing Activities 10,269 35,843 165,93 (9,859) 8,929 (185) !
Net (Decrease) Increase in Cash Cash and Thmporary Cash Investments at Beginning of Year 14,873 5,944 6,129 ;
Cash and Thrnporary Cash investments at End of Year $ 5,014 $ 14,873 $ 5.944 i
Cash paid during the year for:
Interest $ 37.537 $ 59,984 $ 38,024 Income Thres 5 7,183 $ 5,921 $ 1,104 The accornpanymg notes are on integralpart of the fmancialstaternents.
I 29
7.. ,
t ;,
' ConneHdsted Balance Sheet t
. Ossemlwr Al, 1988 1987 Aseses
[ Utility Plant and Other investenents: $ 671,192 8 653,371 Us6 hey Plant in Service 187,649 173,813 Laos Accumulated Pmiskm for Depreciation and Amortization l 484,143 479,558 Net Utihty Plant in Service $35,814 425,818
)
l Constructkm Work in Pro 8ress (Notes I andJ_ _ 1,019,957 905,376 Not Utility Plant 15,068 6,631 Nonutility Property- Net 9,409 9,115 l Investments in Nuckat Cencrating Companies 10,000 10,000 Decommisskming Tund 1,801 1,227
( Other 1,056,235 932,349 f bal Utillay Plant and Otlwr Investments Current Auets: 5,014 14,873 Cash and Temporary Cashinvest nents p Accounts Receivabk: 32,542 32,445 Customers, Net 7,211 7,069 i Accrued Unbilled Revenues 17,660 9,335 Materials and Supplies lat sverate cost): 6,867 7,218 Fuel 7,966 7,323 Plant Materials and Operating Supplies '
Other Cunent Assets 83,215 82,967 halCurrent Assets Delened Debits: 20,559 18,811 Unsinortized Debt Expense 7,861 9,760 Estraordinary Property Loucs . 34,765 27,329 Other Leferred Debits 63,185 55,900
%tal Defened Debits $1,202,635 $1.071.216
'Ibtal Assets Llabilities and Capitalization Capitalization: $ 301,759 $ 285,383 15,079 15,079 Non-Redeemabk Preferred Stock of Subsidiaries 34,614 29,852 Redeemabk Prefened Stock of Subsidiaries - Net '
- ,... Idrm Debt - Net 809,531 906,016 Tbtal Capitalizackm C:trent Llobilities: 62,426 38,035 Notes Payabk-Banks 4,125 26,125 Len84 tem Debt Due Within One Year 25,852 24,464 Accounts Payable '
Customer Deposits '
'Ihaes Accrued I,505 2,714 Interest Accrued 2,814 10,009 Other Current Liabilities _ _ _ _
!I7,693 122,606
'Ibtal Current Liabilitles Defened Credits: 36,457 47,832 1,191 UnamortizedInvestment Credit 26,041 Other Deferred Credits 62,498 4_9,023
'Ibtal Deferred Credits 90,056 116,428 _
Accumulated Deferred Taxes Commitmenn and Contin 6encies (Notes B and_lL _
Total liabilitles and Capatalizat son The accornpenytag notes are on integralpart of the fsnancialstaternents.
C11 -
F bi Consolidated Statentent of Capitallution I
y
'i Detember 31, 1968 1987
, (Dollar Arnounts in Thousands)
{ Iantees Usilit6ee Associates
> Comnum Shares:
, $5 pas value,36,000,000 shares authortred,13,371,252 shares outstanding in 1968 and 11,966,062 shares in 1987. 8 66,454 6 64,830 Oile: Pa6d-in Capital 150,682 142,841 Common Share Expense (2,056) [2,050) 86,077 79,762 Retaired Earnin8s ,
Thtal Common Equity 301,759 33.3 % 265,383 35.2 %
p helervedGiotkof Subsidiaries:
Non reocemable Preferred:
Blackstone Wiley Electric Company:
4.25%,5100pt value 35,(00 shares (1) 3,500 3,500 5 60%,5100 par value 25,000 share:11) 2,500 2,500 Premium 129 129 i
Eastern Edison Company:
4 64%,510'ipar value 00,000 share:(1) 6,000 6,000 8.32%,5100 par vr.lue 30,000 shares (1) 3,000 3,(00 $
Expense, Net ol Premium (50) (50) 15,079 1.7 15,079 1.9 i Redeemable heferred:
f astein Edison Company: ;
9.00%,5100 par value !50,000 shares (1) 15,000 15,000 9.80%,5100 par value 100.000 shates il) 20,000 13.25%,5100 par value 150,000 shares (l) I5,000 Expense, Nct of hemium (186) l148) ,
34,614 3.8 29,852 3.7 14es Trrin Debt:
Eastern Utilities Associates:
Senior Notes 10%% (10%% prior to luly 1968)due 1999 16,875 18,000 EUA Service Corporat6nn:
Notes Payable p'arious Maturities at Money Market rates)
' l$,750 10.2% Secured Notes due 2006 (Note E) 20,000 EUA hnver Corporation:(Nute 1)
' 160,000 17%% Series A Secured Notes due 1991 17%% Series B Secured Notes due 1993 180,000 17%% Series C Secured Notes due 1992 44,336 Blackstone Wiley Electric Compny: '
first Mortgage Bonds:
21,000 24,000 14%% due 1995 tScries A)
Wrlable Rate Demand Bonds due 2014 (2) 6,500 6,500 Eastern Edison Company:
First Mortga8e and Collateral *nust Borx!s:
- 19,000 14.2% due 1968 (second series) a%% due 1988 3,000 9%% due 1993 30,000 4%% due 1993 5,000 5,000 '
7,000 7,000 6b% duc 1997 10%% due 1997 35,000 35,000 9%% due 1998 40,000 5,000 5,000 8%% due 1999 7%% due 2002 8,000 8,000 10,000 10,000 8%% due 2003 39,000 12%% due 2013 55,000 55,000 9%% due 2016 10% due 2017 35,000 35,000 -
Pollution Control Revenue Borwis:
40,000 40,000 10%% due 2008 Unarrorilted (Discount) Premium - Net {22) 92 558,689 505,342 4,125 26,125 Less Foriion Due Within One Yeat Tbtal 554,564 61.2 479,217 59 2 5906.016 100.0 % 1809,531 100 0 %
Tbtal Capualization (1) Aushr>ttted ond outstanding.
(2) Westhted ovetoge anterest rote was 5 7% for 1988 and 5 2% for 1987.
The accompnywg notes are on integralpart of the fmancialstatements.
31
]
l Notes to Consolidated Financial St:tenuents Nuclear Fue1 D;sposal and Nuclear Plant Decorn-
! December 31.1968.1987, and 1986 inissioning Costs: ne Nuclear Waste Polley Act of 1982 l establishes that the federal government is responsible for f the disposal of spent nuclear fuel. Under the provisions t (A) Summary ol$ignificant Accounting Policies: !
of this act, the federal government requires Montaup to f Seals of Consolidation: The consolidated financial l pay a fee based on its share of the nuclear fuel used at the l s'am-include the accounts of Eastern Utilities Millstone 3 nuclear generating unit. Montaup is recover- .
Amociates (EUA) and all subsidiaries. All material inter. !
ing this fee through its fuel adjustment clause.
company transactions between the consolidated subsid. l Also, Montaup is recovering through rates its share of laries have been eliminated.
estimated decommissioning costs for Millstone Unit 3. i
- System of Aecounts
- "Ihe accounts of EUA and its l Montaup's share of the currently allowed estimated total consolidated subsidiaries are maintained in accordance !
costs to decommission the unit is $7.4 million in 1986
, with the uniform system of accounts prescribed by the dollars, which is based on studies performed by North- i regulatory bodies having jurisdiction.
cast Utilities, the lead owner of the unit. l Nucle tr Generating Cornpanies: Montaup Electric Operating Revenues: Revenues are based on billing i Company (Montaup) follows the equity method of j rates authorized by applicable federal and state regula-accounting for its investments in four regional nuclear J tory commissions. Eastern Edison and Blackstone Valley
- generating companies. Montaup's investments in these l Electric Company (Blackstonel, the retail subsidiaries, companies range from 2.50 to 4.50%. Montaup is enti.
follow the policy of accruing the estimated amount of l tied o electricity produced from these facilities based unbilled base rate revenues for electricity provided at the i on its ownership interests and is billed pursuant to con-end of the month to more closely match costs and reve. !
tractual agreements which are approved by the Federal j nues. In addition they also record the difference between Energy Regulatory Cornminion (FERC).
fuel costs incurred and fuel costs billed. Montaup and l Utility Plant and Depreciation: Utility plant is stated I Blackstone also record the difference between purchased C original cost, The cost of additions to utility plant power costsincurred and billed. "
includes contracted work, direct labor and material, Federallacome Taxes: The general policy of EUA and allocatable overhead, allowance for funds used during its subsidiaries with respect to accounting forfederal construction and indirect charges for engineering and income taxes is to reflect in income the estimated supervision. For financial statement purposes, deprecia-amount of taxes currently pavable and to provide for ,
tion is computed on the straight line method based on ;
deferred taxes on certain items subject to timing differ-estimated usefullives of the various classes of property.
ences to the extent permitted
- v the various regulatory Provisions for depreciation, on a consolidated basis were commissions. See Note B for uetails of major deferred equivalent to a composite rate of approximately3.3% in tax items. As permitted by the regulatory commissions, 1988,3.2% in 1987 and 3.4% in 1986 based on the aver, it is the policy of the subsidiaries to defer the annual ;
age depreciable prope:ty balances at the beginning and Investment tax credits and to amortire these credits over end of each year.
the productive lives of the related anets.
Allowance for Funds Used buring Construction I in 1987, the Financial Accounting Standards Board (AFUDC): AFUDC represents the estimated cost of i issued Statement No. 96, " Accounting for Income borrowed and equity funds used to finance the EUA Taxes"(FAS 96), which retains the current requirement System's construction program. In accordance with to record deferred income taxes for temporary differ-regulatory accounting, AFUDC is capitalized, as a cost ences that are reported in different years for financial '
of utility plant, in the same manner as certain general reporting and tax purposesshowever, the methodology and administrative costs. AFUDC is not an item of cur, for calculating and recording deferred income taxes has rent cash income, but is recovered over the service life changed. Under the liability method adopted by FAS 96, of utility plant in the form of increased revenues col, deferred tax liabilities or assets are cornputed using the lected as a result of higher depreciation expense.
tax rates that will be in effect when the temporary dif.
'Itc combined rate used in calculating AFUDC was ferences reverse. However, for regulated companies, the 21.8% in 1988,16.59% in 1987 and 13.61% in 1986. In changes in tax rates applied to accumulated deferred accordance with regulatory authority, Eastern Edison income taxes may not be immediately recognized in Company (Eastern Edison), Montaup and EUA Power operating results because of ratemaking treatment and Corporation (EUA power) provide deferred income provisions in the Tax Reform Act of 1986. EUA must taxes on the borrowed funds component of AFUDC.
adopt FAS 96 no later than 1990. EUA has not quantified See Note I with respect to a change in accounting in the effect adoption of FAS 96 will have, however it is not 1988 for AFUDC.
expected to have a material effect on EUA's results of operations.
32 _ _ _ _ . . _ _ . _ _ __ _ - _ _ _ . _ .
, Cash Flows:In 1988 EUA implemented Financial of Cnh Flows, EUA considers all highly liquid invest.
- - Accounting Standard No. 95, " Statement of Cash ments purchased with a maturity of three months or less
' to be cash equivalents.
-- Flows"(FAS 95). Accordingly, the 1987 and 1986 consol-idated statements of changes in financial position have Reclassifications: Certain amounts in the 1987 and been reclusified to conform to the presentation required 1986 financial statements have been reclusified to con-by FAS 95. For purposes of the Consolidated Statement form with the 1988 presentation.
F.
l (B) Income and Defened haea:
Components of income and defened tax expense for the years 1988,1987 and 1986 are as follows:
1968 1987 1986 (In Thousands)
Federal:
Current 8 2,798 $ (3,523) $ 647 Defened 24,082 14,961 15,077 +
Investment Tax Credit, Net (11,375) 6,578 10,607 15,505 18,016 26,331 i State:
2,318 2,247 1,546 Current 973 796 1,500 Deferred 3,291 3,043 3,046 Charged to Operations 18,796 21,059 29,377 Charged to Other income 480 (17) 170 Tbtal $19,276 $21,042 $29,547 Federal tax expense was less than the amounts com- '
pated by applying Fedcralincome tax statutory rates ;
to book income subject to tax for the following renons: ;
1988 1987 1986 l (In Thousa' ds)
Federal income Tax Computed at Statutory Rates $19,448 $26,569 $30,175 (Decreases)Increasesin Tax From:
EquityComponentof AFUDC (541) (7,814) (3,152)
Excess Tax Depreciation 1,148 2,194 1,671 Other (4,137) (3,025) 12,193)
Federallncome Tkx Expense $15,818 $17,924 $26,501 ;
}
Tbc provision for deferred taxes resulting from timing differences is comprised of the following:
i 1988 1987 1986 (In Thousands)
Excess Thx Depreciation 8 4,581 $ 6,881 $ 5,379 f (1,076) (1,255) 228 Estimated Unbilled Revenue Unbilled fuelCosts (179) 160 528 Debt Component of AFUDC 22,366 14,090 4,305 Abandonment Losses (662) (590) (964) l Capitali:ed Overheads 1,788 2,350 902 l 973 796 1,500 i Effect of State and Local Taxes l Deferred Charges (227) (174) 5,;04 Alternative Minimum Thx (3,322) 16,807)
Other - Net 814 (41) (605)
T6tal $25,056 $15.409 $16,577 l ~
The tax effect of the cumulative amount of timing dif- because the regulatory process is expected to allow such ferences at December 31,1988, for which deferred federal amounts to be recovered from customers when the taxes income taxes have not been provided, is approxirnately are ultimately payable. (See also Note A) l l . $6.6 million. This amount has not been recorded l 33 l
a The aggreg:te amount of redeemable preferred stock f , %e (C)changes CapitalSimkt in the number of common shares outstand- sinking fund requirements, for each of the five years fol-
. ing and the increases in other paid in capitalduring the lowing 1988 are: none in 1989 and 1990, $600,000 years ended December 31,1988,1987 and 1986 were as in 1991 and 1992 and $ 1,400,000 in 1993. -
i follows(dollars in thousands):
(E) Retained Earningst Under the prodstons of EUA's SMw We Agreemem, avest n mon in Other and Employee Pubhc Shares paidin Retained Earnings in the amount of $78,$97,853 were l Piens Sales Atpar capital unrestricted as of December 31,1988, as to the payment 1988 405,190 $2,026 & 8,041 of cash dividi:nds on EUA Common Shares.
!. 1Z7 289,833 1,000,000 6,449 38,811 i 1986 299,758 1,499 7,725 (F) long Term Debt:
Under terms of the indentures securing their various
< In the event of invuluntary liquidation the non- 1,ond issues Blackstone and Eastern Edison are required L redeemable preferred stock of Blackstone and Eastern to deposit annually with their respective trustec cash
- Edison is entitled to $100 per share in the event of vol- in an amount equal to: 1% of the aggregate principal untary liquidatkut, or il redeemed at the option of those amount of bonds previously authenticated and delivered, companies, the non redee:nable preferred stock is enti- in the case of Eastern Edison and 2.2596 of the average ded c: Blackstone's 4.25% issue, $104.40, Blackstone's gioss investment in depreciable property, in the case
- 5.60% issue, $103.82, Eastern Edison's 4.64% issue, of Blackstone.
5102.98, Eastern Edison's 8.32% issue, $ 103.54, prior Both companies have satisfied sinking iund require-f- to October 1,1993 and at reduced premiums in subse* ments for 1988 under alternate provisions of their quent years, respective indentures liy certifying to the trustee Under the terms and provisions of tbc issues of pre * "available property additions."
ferred stock of Blackstone and Eastern Edison, certain ne various fits: mortgage bond lasues of Blackstone restrictions are placed upen the payment of dividends on and Eastern Edison are secured by substantially all of common stock by each company. At December 31,1988 their utility plant. In addition, Eastem Edison's bonds '
and 1987 the respective capitalization ratios were in are collateralized by securities of Montaup in the prin-excess of the minimum which would make these cipal amount of $287,774,337.
restrictions effective. Blackstone's Variable Rate Demand Bonds are coliat-eralized by an irrevocable letter of credit which expires ;
(D) Redeernable preferred Stock: on December 1,1989. The letter of credit permits exten-Easrrn Edison's 9.00% and 9.80% Preferred Stock sions on an annual basis upon mutual agreement of issues are entitled to mandatory sinking funds suffi- the bank and Blackstone.
cient to redeem 6,000 and 8,000 shares during each EUA power's Series A Secured Notes were originally v , twelve month period commencing July 1,1991,in the issued in November 1986 and March 1987 in the amount '
case of the 9.00% issue and September 1,1993,in the of $180,000,000 at an interest rate of 17%%. As of case of the 9.80% issue. December 31,1988, the holders of all of EUA power's i The redemption price for each issue is equal to the Series A Secured Notes have exchanged their Series A initial public offering price ($ 100) plus accrued divl' Notes for equal amounts of Series B Secured Notes and dends. Eastern Edison also has the non cumulative accompanying 180,000 Contingent Interest Certificates.
option of redeeming an additional 6,000 and 8,000 EUA power has also issued $44,336,600 of its Series C shares during each period at such price. Secured Notes,in lieu of the May 1988 and November In the event of involuntary liquidation the redeem- 1988 cash interest payments. (See also Note 1 - Com-able preferred stock of Eastern Edison is entitled t mitments and Contingencies - for further information
$100 per share. In the event of voluntary liquidation, concerning EUA Power's exchange offer and its impact or il redeemed at the option of Eastern Edison, the on EUA Power's interest rate). In connection with the 1 9.00% issue is entitled to $ 109.00 prior to July 1,1991, original private placement of the Series A Secured Notes and the 9.80% issue is entitled to $ 109.80 prior to Sep- and the subsequent exchange offer, EUA power incurred tember 1,1993. The redemption premium reduces in fees of approximately $10,900,000.These costs have .
subsequent years. I cen deferred and are being amortized to expense over the life cil the Series B Secured Notes.
34
q -.
, v o ,
. The Series B Secured Notes which mature May 15, by a mortgage on EUA Service's new operations i 199",, are non redeemable prior to November 15,1991, building. :
i and on or af ter that date are redeemable at 100.5% of The aggregate amount of current EUA System cash ,
principal . mount during the six month period ended sinking fund requirements and maturities for long- -
May 14,1992, at 100.25% d principal amount during term debt for each of the five years following 1988 are: .
the six month period ended November 14,1991, and at $4,125,000 in 1989 and 1990, $5,225,000 in 1991, 100.125% of principal amount thereafter. The Series C $49,561,600 in 1992 and $220,225,000 in 1993.
Secured Notes which mature November 15,1992, are non redeemable prior to maturity. (G) Lines of Credit:
In January 1988, EUA Service issued $20,000,000 EUA System companies had unused short term principal amount of 10.20% Secured Notes, duc 2008, lines of credit with various banks of approximately the proceeds of which were used to repay all of its Notes $47,574,000 at December 31,1988. In accordance with Payable which were classified as long term debt at informal agreements with the various banks, commit.
L December 31,1987. Such Notes are secured primarily ment fees are required to maintain the lines of credit.
l I
(H) Jointly Owned Tacilities: the following interests in jointly owned electric generat-At December 31,1988, EUA Power and Montaup owned ing facilities (dollars in thousands):
Net Construction Percent plant in Accumulated plant in Work in '
Owned Service Depreciation Service progress EUA Power:
Seabrook Unit 1 12.13 % $ 213 - 213 282,134 ,
Montaup:
CanalUnit 2 50.00 % 65,649 29,189 36,460 -
Wyman Unit 4 1.96 % 4,006 1,207 2,799 -
' Seabrook Unit 1 2.90 % 63 16 47 165,197 Millstone Unit 3 4.01% 178,460 11,930 166,530 '
300 The foregoing amounts represent EUA Power's and unas reflected in the table above are included in the cor.
Montaup's inteiest in each facility excluding nuclear responding operating expenses. Montaup and EUA Power fuel. In the case of Montaup, net nuclear fuel for Sea- did not incur operating and maintenance exp:nses for brook Unit I and Millstone Unit 3 amounts to $13.1 mil- Seabrook Unit 1 in 1988 since the unit is not yet in ser-tion and 35.5 million respectively. EUA Power's nuclear vice. See Note J - Commitments and Contingencies -
fuel for Seabrook Unit I amounts to $65 million. Financ- for information with respect to recent developments ing for any such interest is provided by the respective affecting the Seabrook project, including the cancella-l l company Montaup's and EUA Power's share of related tion of Seabrook Unit 2.
operating and maintenance expenses with respect to 20
l
)C Decomsmiuloalagfund: The Licensing Process: The NRC ha luued a 40 year
. Under the agreements of purchne and sale with each operating license for Unit I subject to certain condi. -
el the five sellers from which EUA Power purchned its tions. The conditions which have not yet been utisfir:d :
Seabrook interest, EUA Power was required to establish include succeuful low power testing and NRC apprtwal a fund of $10,000,000 to secure payment of part of its of the radiological emergency response plan for the s.tx l ahare of decommluioning costs of Seabrook Unit I and Musachusetts towns wkhin a ten mile radius of the !
any costs of cancellation of Unit 1 or Unit 2, Under an Seabrook plant. l i
agreement entered into among EUA Power, a bank and la an Order issued in Decerr.ber 1988, the NRC deter-I the other )olnt owners of Seabrook, the bank is empow- mined that renonable assurance must be provided that ered to use securities of the fund should a default of EUA $72.1 million of funds will be availabic for decommis - )'
Power occur with respect to its obligations to pay such sioning before a low power license can be issued. A low decommluioning and cancellation costs. The agreement power license may be issued af ter the NRC's Staff har also provides that upn payment in full of the decom- been satisfied that all decommissioning terms of the .
missioning and cancellation obligations, or upon the Order are met. l' written agreement of EUA Power and the then )oint own- Under current federal regulations, state governun are J
ers who certify to the bank that they own at least 80% of normally responsible for preparing emergency response the ownership shares in the Seabrook Project to termi- plans which provide for public off site warning and the '
i nate the agreement, or at such time as the fund require- evacuation,if necenary, of areas within a ten mile ment is reduced to zero as a result of a written guarantee radius of a nuclear facility in the event of a radiological by EUA or a purchase or purchases of all of EUA Power's emergency. However, under applicable NRC regulations a l entitlement from Unit 1, the agreement shall terminate utility. prepared plan may be substituted if the plan pro- l'
.a the bank shall immediately release and return to vides renonable suurance of adequate protection to the
' EUA Power all collateral then in the possculon or public and the utility has made a good ialth effort to control of the bank. In accordance with regulatory secure the participation of the governmental authorities.
accounting pnnciples, AFUDC is recorded on EUA The affected states for Unit I are New Harnpshire and Power's investment in the decommissioning fund. Manachusetts. The New Hampshire plan was submit. '
ted to the NRC for review in December 1985. Hearings
- 0) Commitments and Contingencies: before an NRC licensing board have been concluded and on December 30,1988, the licensing board issued a i Seabrook Unit 1:
decision. Intervenon have appealed this decision to the .
Background:
Montaup and EUA Power have 2.9%
Atomic Safety and 1.icensing Appeal Board, and a final and 12.1% owrwnhip intermts, respectively, in the 1,150 decision is expected by late June 1989. i megawatt Seabrook Unit I nuclear generating unit in Sc; brook, New Hampshire, on which construction is The Governor of Massachusetts has refused to submit an emergency response plan for the six Massachusetts ;
complete. At December 31,1988, Montaup's and EUA i Power's investments in Unit 1 (excluding nuclear fuel) communities within the ten mile radius of Seabrook. In September 1987, New Hampshire Yankee (NHY), the were approximately $165.2 million and $282.3 million, !
division of PSNH responsible for Seabrook, submitted respectively.
an mergency response plan for the Massachusetts com-Licensing of Unit 1 by the Nuclear Regulatory Com.
munities designed to meet the NRC's requirements for a mission (NRC)is being actively opposed by intervenors.
Due to uncertainties over the authorization of low power utility. prepared plan in lieu of a state sponsored plan.
This plan sets forth measures intended to compensate
. testing, and the approval of the Massachusetts emer.
for the lack of participation by state and local govern-gency response plan, the possibility of further litigation rnental officials in the planning process. Hearings before before the NRC and appeals from its decisions by state and municipal officials and private parties, and the financial difficulties of certain joint owners, including the bankruptcy of Public Service Company of New Hampshire (PSNH), EUA cannot predict when or whether commercial operation will occur. EUA has assumed, for financial planning purposes, a commercial operation date of January 1,1990.
36- -_ . . ._ -_
p_ r (F.
i
- !. " - an NRC licennns board on this plan will commence on In June 1988, the Massachusetts Municipal Wholesale Electric Company (MMWEC), which owns an 11.59%
- i. March 21,1989. NHY expects that before commercial interest in Seabrook, announced its intention to withdraw 5 operation la permitted, all major emergency response plan issues, including public woming and evacuation, from the project and stated that it would seek an spee. l
, willbe the subject of lengthy and cueful scrutiny bh yi e ment v.ith the other joint owners "to take MMWEC out - ~
of the project in a financially responsible manner." !
NRC and will be susceptible to clsliense by opponents of the Seabrook project. In November 1988, PSNH and MMWEC signed in late June 1988, a combined, two day fully graded a Memorandum of Understanding under which exercise of the New Hampshire emergency response PSNH would pay up to an aggregate of $30 million of ,
plan and NHY's plan for the six Massachusetts commu- MMWEC's project expenses until the date of either can- )
nities was performed and observed by boa the NRC and cellation or commercial operation of Seabrook Unit 1.
the Federal Emergency Management Agency (FEMA 1. In The agreement was made subject to a number of condi.
Its final report, FEMA indicated that no deficiencies were tions including a covenant containing a mutual telease identified and that the emergency plans are adequate to of legal cla;ms arising out of participation in Seabrook protect the health and safety of the public. Massachu- by all past and present joint owners, as well as their setts officials did not partic!pate in the exercise, atvl acceptance of tir 'erms of'the agreement between PSNH have filed contentions claiming that the Massachusetts and MMW EC. PSNH requested approval of the agres-exercise was inadequate in scope and execution. ment from the Bankruptcy Court on February 16,1989.
PinancialDifficulties of.ceabrook
Participants:
In EUA cannot predict when or whether the agreement will ;
January 1988, PSNH, which has a 35.6% interest in the become effective.
- Seabrook Project, filed for protection from its creditor 4 With the exception of the above, all of the joint owners are currently fulfilling their contractual commitments i under Chapter 11 of the Federal B:nkruptcy Code, f
Tiw, /SNH Chapter 11 filing has been made a basis for to pay on a timely basis their share of Unit I costs. How-contention by the opponents of the Seabrook project that ever, if due to regulatory action, financial difficulties the financic] qualifications of the jolat owners must be or any other reason, one or more of the other Seabrook examine.1 in the licensing proceeding. It is impossible to joint owners should be unable or unwilling to fulfill such contractual commitments, commercial opera-predict what ellect, if any, PSNH's filing will have in connection with the licensing of Unit I for commercial tion of Unit I could be jeopardized. See also "EUA operatien. PSNH's management stated, following its Power" below.
bankruptcy filing, that PSNH intends to continue pay. Montaup Montaup currently has slightlyless than <
ingits share of Seabrook costs, and PSNH has made all 50% of its Seabrook Unit 1 investment in rate base earn-of its monthly payments on schedule. There can be no ing a cash retum.The ultimate r covery of Montaup's assurance, however, that PSNH will continue to make total investment in Seabrook Unit i through rates will be subject to final approval by FERC at part of rate pro- i such payments in the future, it appears likely that the l ceedings, and the prudence of a portion of such invest-Chapter 11 proceedings will continue for an extetxled ment could be an issue in such rate proceedings. Montaup L periodof time, ,
Since March 1986, the Vermont Electric Generation believes that its expenditures on Seabrook Unit I were
- l. prudent and that FERC will continue to permit the
! and 'nansmission Corporation, Inc. (Vermont G&T) has been unable to make payments to the Seabrook project recovery of prudently incurred costs through rates for f,
T for its 0.41% ownership share (such payments amount to plants in commercial operation. EUA believes that the approximately $41,000 per month). Five joint owners (or amount of any potential disallowance of recovery of the l~ expenditures, assuming Unit I achieves commercial
! affiliates, including EUA) are making advances to assure I that funds are available to meet Vermont G&T's share. operation, would not have a substantial adverse effect on Vermont G AT is unabic to dete mine whether or when it will be able to resume meeting its obligations to the Seabrook project.
37 !
, .~ - _
m e,
' the EUA Syst:m's common equity,if Seabtook Unit 1 IUA Power: Since its inception on November 25,
' were 2 be cancelled under current FERC policy regard- 1986, EUA Power has principally been engaged in the ing recovery of cancelled plant costs, the impact on . acquisition and financing of its 12.1% Seabrook owner-EUA's common equity would be substantial. Current ' ship interest. Such financing was initially achiewd pre- -
Hl(C pohey permits recovery of 50% of the prudemly dominantly by the private placement of $180,000,000 ,
incurred costs (including : elated AFUDC) to be amor- principal amount 17%% Series A Secured Notes (Series tized over what would have been the life of the plant, A Notes) duc November 15,1991, and the purchase of
? had it gone into service. The unamortized portion of the $44,990,000 of 25% preferred stock ($100 par value) by ,
recoverable costs can be included in rate base, thereby EUA.Under the Seabrook joint Ov nership Agreement, earning a return. The remaining 50% would be required EUA Power is required to accept its share of power and c be written off as a loss. Montaup cannot predict the pay for its share of all operating costs of power generated outcome of any future rate proceeding involving its from the project once Unit I commences operation.
Seabrook Unit 1 investment. EUA's recovery of its investment in EUA Power is con-Accounting Change: Effective lanuary 1,1988 EUA tingent upon the commercial operation of Unit I and implemented Financial Accounting Standard No. 90 EUA Power's ability to enter into contracts to scil its ,
(FAS 90)" Regulated Enterprises - Accounting for share of the power generated by Unit 1. Because of the Abandonments and Ditallowances of Plant Costs." FAS delays in commercial operation of Seabrook Unit 1, 90 among other things revises the accounting require. EUA Power was unable to make its May 15,1988, and sments for plant abandonments and regulatory disallow- November 15,1988, cash interest payments on its out- ~
ances of completed plant costs. FAS 90 requires that, in standing notes. In accordance with the terms of the the event of a plant abandonment where no return is Series B Secured Notes (Series B Notes) and Series C suthorized on the unamortized property loss balance, Secured Notes (Series C Notes) discussed below, such
- those unamortized amounts would I t recorded at a dis- interest payments were made in the form of additional
. counted value and the effect of such ducounting would Series C Notes.
be cht.rged to income. Also, disallowances of recovery On the basis of a review of its cash requirements and ,
d beestments in completed plants would require an cash resources, EUA Power determine & late 1987 immediate charge to income equal to the amount of that it would be necessary for it to carry out 6t'onal such disallowance. Such potential charges to income financing or make other arrangemenu in order to meet could be material to the results of operations or retained its 1968 cash interest obligations under its outstanding earnings of the EUA System in the year of the write off. Series A Notee and its share of Seabrook Unit ) cons.
Also, FAS 90 requires that AFUDC should be capitalized Being advised that there was considerable doubt as to the only if its subsequent inclusion in allowable costs for feasibility of finding purchasers for an addkianal issue of rate making purposes is probable. Thus, FAS 90 man- its Secured Notes to be sold for cash, EUA Power asked dates that the recording of a portion of AFUDC for the holders of the Series A Notes to exchange their Series financial reporting purposes be deferred until Seabrook's A Notes for 17%% Series B Notes to be due May IS,1993,
' licensing is closer to resolution. For the twelve months the terms of which permit EUA Power to pay inter-u ended December 31,1988, the deferral of AFUDC est by the issuance of 17%% Series C Notes due Novem-icduced consolidated net income by $22.4 million. This ber 15,1992 in lieu of cash interest payments, and to pay deferralis being reviewed on an on-going basis, interest on the Series C Notes by the issuance of addi-tional Series C Notes. The exchange offer also provided that the principal amount of any Series C Notes issued in lieu of cash interest payments would be equal to 133% of the interest which would otherwise have been payable in cash. EUA Power offered to the hc!ders of Series A Notes, as part of the exchange, Contingent interest Certifieres (CICs) evidencing the right to receive additional payments contingent upon and men-sured by EUA Power's income in certain years following the commercial operation date of Seabrook Unit 1.
I i
'38-
1 <.
n ,
- i. F be forced t) dehult in the payment of interest on out-
[,, Pursuant to the exchange offer, the holders of all of ]
EUA Power's Series A Notes, aggregating $180,000,000 standing Series B and Series C Notes. In addition, if the l
[ i in principal amount, have exchanged their Series A SEC clocs grant the release, the currently authorized L
. Notes for equal amounts of Series B Notes and accort- amount of Series C Notes will be virtually exhausted by s
! - panying 180,000 CICs. EUA Power has also issued their issuance in payment of the May 15 and November
$44,336,600 of its Series C Notes,in lieu of the 1988 15,1989 installments of interest on Series B and Series C ,
cash interest payment *, and $7,300,000 of its $100 par Notes. Unless EUA Power is able to resume ecsh interest value preferred stock, in addition to the $44,990,000 of payments by May 15,1990, it will have to obtain authori-ration for the issuance c4 additional Series C Notes, such preferred stock originally issued to EUA. Should the commercial operation of Seabrook Unit I be signifi- which will require regulatory approvals and an amend-cantly further delayed or ultimately cancelled, EUA ment to the Indenture of Mortgage under which the Power would be unable to make cash interest payments, Notes are issued.
and to make principal payments, on its Notes described As of the balance sheet date, EUA Power has not above. Such Notes are solely the obligation of EUA Pcwcr entered into any power contracts for the sale for its share and are not guaranteed by EUA or any other person. of the electricity to be generated by Seabrook Unit 1.
These circumstances would also result in the inability Demand for electricity in New England has been exceed-of EUA to recover its equity investment ($71.8 million at ing projections in recent years. New England Power Pool December 31,1988). EUA would thus be required to planners have projected that with a conservetive annual ,
i charge off such equity investment (net of related taxes) growth rate of 2%, significant amounts of additional gen-to retained earnings. Management believes that should crating capacity beyond that already planned (including such a charge to retained earnings occur, it would not in Seabrook Unit 1) will be required by the mid 1990s.
itself adversely affect EUA's ability to pay common share Although there is no assurance that EUA Power will be dividends, able to generate sufficient revenues to meet its contrac-Prior to consummating the exchange offer, EUA tual obligations if Seabrook Unit I commences commer-Power received the requisite approvals of the New cial operation, management believes that, because of Hampshire Public Utilities Commission and the Securi- the actua growth in demand, it will be able to obtain ties and Exchange Commission (SEC). The SEC order, power contracts for the sale of its share of Seabrook l while generally approving the issue of the Series B and Unit I power. ,
In the event of an abandonment of Unit 1, EUA Power Series C Notes (the Notes) and the CICs, is subject to a reservation of jurisdiction with respect to all transac- would immediately write off its entire investment in tions which are to be effected on or after May 15,1989, that Unit. Thus, the plant abandonment provisions of including the issuance of Series C Notes in payment of FAS 90, discussed above, would be inapplicable. As a ;
interest due on or after that date. The reservation of result of the substantial discount at which EUA Power rurchased its Seabrook ownership interest, and consis- ;
jurisdiction does not contemplate alteration of the terms of the Notes and the CICs as originally approved, but tent with the treatment afforded by FERC, EUA Power l- EUA Power will have to obtain a release of the reserved does not expect that the partial disallowance provi- [
j jurisdiction in order to make interest payments with sions of FAS 90 will have any effect on its financial l Series C Notes on or after May 15,1989. In February statements.
r 1989 EUA Power filed with the SEC to obtain such Seabrook Unit 2: Montaup and EUA Power also have release of jurisdiction. EUA Power expects the SEC will 2.9% and 12.1% ownership interests respectively in Unit 2. On November 6,1986, the joint owners, recog-grant such a release. If, however, the SEC does not permit the issue of additional Series C Notes to pay interest due nizing that Unit 2 had been cancelled, voted to dispose on or after May 15,1989, it is likely that EUA Power will of the Unit. Plans regarding disposition of Unit 2 are now under consideration, but have not been finalized and i approved. Montmp an3 EUA Power are unable, therefore, ,
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f,
~
?, m: stimate the cc:ts for which they would be respon- Net pension expense for 1988,1987 and 1986 induded
, L sible in connection with the disposition of Unit 2. the following components (in thousands):
' Monthly charges are required to be paid by Montaup and g,, gg7 .gg EUA Power with respect to Unit 2 in order to preserve L Service c st benefits
' and protect its components and various warranties. In
- "I' i 1966 Montaup entered into a rate case a:ttlement relative $1,507 $1,588 $1,650 q the cancelled Unit 2. The settiement permitted, Interest cost on ,
among other things, that Montaup recover 82% of its projected benefn investment in Unh 2 over a 7 % year period. The settie- obligations 4,932 4,511 4,271 ment was approved by FERC, Accordingly,in December Actual return on 1986 Montaup wrote off approximately $1,784,000 of assets (7,834) (3,170) (7,771)
Unit 2 costs, net of related taxes, which it will not Net amortlzation and 692 (3,629) 1,501 ',
recover from its customers.The charge had the elfect deferrsts of reducing EUA's 1986 carnings per share by $0.15. Net periodic pension
- Approximately$1,390,000of thenetwrite offis (income) expense $ (703) $ (700) $ (349) included in the Consolidated Income Statement in the line captioned Other Income (Deductions)- Net and the The following table sets forth the actuarial present -
, balance was recorded as an adjustment to operating reve- value of benefit obligations and funded status at Decem. ,
nues. At December 31,1988, Montaup's unrecovered ber 31,1988,1987 and 1986 (in thousands):
costs cmounted to $7,861,000. EUA power's ownership g g interest in Unit 2 was acquired at no cost, consequently obligations,includ-no value for this investment is reflected in the financial ing vested benefits ;
statements, of $43,706, $41,456 and $37,756, Othen respectively $47,507 $ 45,485 $41,546
. Other Matters: The continuing public controversy ,
concerning nuclear power ceuld also aficct the six oper-sting nuclear units in which Montaup has an interest.
[
pg,,,,,,,,,,g,g, (59,917) $(58,972) ${52,927)
While the ultimate effect of this controversy cannot be value, primarily ,
predicted, it is possible that it will result in the prema- stocks and bonds $75,617 71,125 69,722 ture shutdown of one or more of the units. Less: Unrecognized Pensions: The EUA system companies participate in a net gain on ,
defined benefit pension plan covering substantially all of assets (13,689) (10,692) (11,410) their employees, plan benefits are based on years of ser. Unamortized vice and average compensation over the five years prior net assets at January 1 (259) ' $ (412l (5,036)
. to retirement. h is the EUA System's policy to fund the plan on s current basis in amounts determined to meet Net pension assets 5 1,752 $ 1,049 $ 349 the funding standards established by the Employee Retirement income Security Act of 1974. The weighted average discount rate and rate of increase in future compensation levels used in deter-mining the actual present value of accumulated benefit obligations in 1988 were 8.8% and 6.5%, respectively.
The expected long term rate of return on plan assets was 9.5%.
i Certain health care benefits are provided to substan-tially all retired employees. The cost of these benefits, which amounted to approximately $636,000 in 1988,
$562,000 in 1987 and $498,000 in 1986 was charged to expense when paid.
ep 40'
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, Long 7kim Purchased Power Contracts: The EUA Gurrantees: EUA, as parent company of EUA Coge.
System is committed under long term purchased power nex Corporation (EUA Cogenex) and EUA Ocean State contracts, expiring on various dates through the year Corporation (EUA Ocean Ststel, has guaranteed certain 2007, to pay demand charges whcther or not energy is obligations of those subsidiaries.In the case of EUA' Cosencx, EUA has guaranteed repayment of up to $15.0 l received. Under terms in elfcct at December 31,1988, the aggregate annual minimum commitments for million in short term bank borrowings. In the case of such contiacts is approximately $84,000,000 in 1989, EUA Ocean State, EUA has guaranteed that up to 130.0 ,
$91,000,000 in 1990, $89,000,000 in 1991, and million will be svallable for EUA Ocean State to meet its
$70,000,000 in 1992 and will aggregate $807,000,000 for equity committnent to the Ocean State project. Such years after 1992. In addition, the EUA System is required funds for EUA Ocean State are not expected to be ,
to pay additional amounts depending on the actual required prior to 1991. l' amount of energy received under such contracts. The Under terms of EUA's Senior Note Agreements dated demand costs associated with these contracts are May 23,1979, as amended, certain restrictions are reflected as Purchased Power Demand on the placed on the issuance of funded debt, including sli Consolidated Income Stetement. guarantees. At December 31,1988, the capitalization i Constnction:The EUA Syrtem's construction ratios were in excess of the minimum which would program is estimated at $179,300,000 for 1989 and make these restrictions elfective.
$378,800,000 for 1989 through 1993 (including Montaup, as one of the stockholders of each of threc ,
allowance for funds used during constructica of regional nuclear generating companies, has guaranteed
$129,100,000).These estimates assume Seabrook Unit 1 its pro rata share of obligations of those companies as fol-will coramence commercial operation January 1,1990. lows: 2.5% of a $40,000,000 nuclear fuel financing of Environmental Controls: The Comprehensive Envi- Vermont Yankee Nuc! car Power Corporation 34.5% of a ronmental Response, Compensation and Liability Act of $50,000,000 debenture issue of Connecticut Yankee 1980 and certain sindlar state statutes authorize various Atomic Power Company, and 4.0% of a $50,000,000 governmental authorities to seek court orders compel- nuclear fuel financing of Maine Yankee Atomic ling responsible parties to take clean up action at dis- Power Company.
posal sites, determined to present an imminent and substantial danger to the public and to the environment because of an actual or threatened release of hazardous substances.Because of the nature of the EUA System's bustr> m, various by products and substances are pro-ducea or handled which are classified as hazardous under these laws. EUA system companies generally pro-
! vide for the disposal of such substances through licensed Individual contractors, but these statutory provisions l.
l generally impose potential joint and several responsibil-lty on the generators of the wastes for clean up costs.
l Blackstone has been notified with respect to a number of
)
l such sites, and the clean up of such wastes,in general, is i
receivingincreasing attention from the governmental l' agencies involved. While EUA cannot estimate the ulti-mate costs to the EUA system which may result from l
I these matters, it does not believe such costs will be material.
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q L 4 s
< r Y Report of Independent Certified Public Accountants
'Ib the Trustees and Shareholders i
' of Eastern Utilities Associates l I
We have audited the accompanying consolidated balance operations and its cash flows for each uf the three years a ; sheets and consolidated statements of capitalization of in the period ended December 31,1988 in conformity (
Eastern Utilities Associates and subsidiaries (the Com- with generally accepted accounting principles.
panyl as of December 31,1988 and 1987, and the related As discussed in Note J of " Notes to Consolidated consolidated statements of income, retained earnings Financial Statements," the Company changed its and crsh flows for each of the three years in the period method of recording Allowance for Funds used During ended December 31,1988. These financial statements Construction. Also, as more fully described in Notes H ]
are the responsibility of the Company's management, and J, through two of its subsidiaries, EUA Power Corpo-Our responsibility is to express an opinion on these ration (EUA Power) and Montaup Electric Company financial statements based on our audits. (Montsup), the Company has a substantial investment We conducted our audits in accordance with generally in Unit 1 of the Seabrook Nuclear Power Project (Unit 1) accepted auditing standards. Those standards require and there is uncertainty with respect to when or whether that we plan and perform the audit to obtain reasonable Unit I will be granted a commercial operating license, assurance about whether the financial statements are Recovery of EUA Power's investment in Unit 1 is
' free of material misstatement. An audit includes exam- entirely dependent on commercial operation of Unit 1, a ining, on a test basis, evidence supporting the amounts whereas ultimate recovery of Montaup's investment in and disclosures in the financial statements. An audit Unit 1 is also dependent upon the outcome of future Fed-also includes sssessing the accounting principles used eral Energy Regulatory Commission rate proceedings, and significant estimates made by management, as well whether or not Unit 1 operates. Given these uncertain-as evaluating the overall financial statement presenta- ties,it is impossible to predict what portion,if any, of the tion. We believe that our audits provide a reasonable Company's investment in thp Seabrook Nuclear Power ,
Project may not be recovered. Accordingly, no provision u basis for our opinion.
In our opinion, the financial statements referred to for any potentialloss that may result upon resolution of
- i abcvc present fairly, in all material respects, the consoli- the above mentioned uncertainties has been made in the datedfinancialpositionof theCompanyasof Decem- accompanying financial staternents.
ber 31,1988 and 1987, and the consolidated results of its Boston, Massachusetts February 27,1989 i
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,- Quarterly Fina:cialand Common Share Information (Ucsudited) - ,
Thousands of Dollars Earnings income Consol- per After idated Average Common Share Operating Operating Interest Net Common Dividends Markt Price t Revenues Income Charges income Share Paid High Low For the quarters ended 1988:
' December 31' $94,094 $12,754 $ 9,782 8 8,750 $0.66 $0.60 33 % 27 %
September 30: 93,977 17,933 !!,799 11,247 0.85 0.60 29- 24 %
86,629 15,487 7,926 7,385 0.56 0.60 25 % 21 %
June 30 March 31 99,438 19,038 10,900 10,093 0.78 0.575 29 % 24 For the quarters ended 1987:
December 31 $95,400 $15,790 $12,024 $10,984 $0.85 $0.575 30 % 24 September 30 88,335 13,270 12,139 11,101 0.86 0.575 33 % 28 %
June 30 90,520 15,260 10,397 9,359 0.73 0.575 35 % 30 March 31 92,874 17,527 13,141 12,102 1.03 0.545 40 % 34 %
The common shares of Eas:ern Utilities Associates are listed on the New Ybrk Stock Exchange and the Pacific Stock Exchange under -
the ticker symbol"EUA." The approximate number of Common Shareholders of record on December 31,1988, was 16.600. -
- Consolidated Net income for the fourth quarter of 1988 included $1.3 million which represents the fullyear effect of AFUDC related to the decommissioning fund as described in Note I and $0.3 million related to property tax abatements received in February 1988.
These adjustments had the effect ofincreasing fourth quarter Earnings per Average Common Shore by 11 cents.
Dividend Reinvestment and Common Share Purchase Plan A Dividend Reinvestment and Common Share iurchase Complete details regarding the Plan may be obtained Plan is available to all registered shareholders and Sys- by writing:
tem company caployees. William F.O'Connor, Secretary l Participants in the Plan are given a 5% discount on Easter:' Utilities Associates shares purchased with reinvested dividends. Participants Post Office Box 2333 may also make additional cash payments as frequently as Boston, MA 02107 once a month to purchase additional shares with no dis- 'nansfer Agent count. Optional cash payments are limited to a maxi- The First National Bank of Boston mum on $5,000 per calendar quarter and must be Post Office Box 644 received no later than the 5th day preceding the Invest- Boston, MA 01102 ment Date to be invested in that month.
{ Common and Preferred Shares)
The Investment Date for all shares purchased under the Plan is the dividend payment date for the months in Bond Trustee which dividends are payable. For each month in which a State Street Bank ud "nust Company dividend is not payable the Investment Date is the 15th of 225 Franklin Street such month. The price of shares purchased is based on Boston, MA 02110 the average closing price of EUA shares for the five trad. (Bondsof allseries) l ing days preceding each investment late.
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L ~7. , l 3 Consolidated Operating Statistics 1988 1987 1986 1985 1984 1983 1978
[ . Yeait Ended Decernber31. ,
, Energy Generated and Purchased l > (millions of kwh):
Generated 1,180 1,123 660
-by Somerset Station 1,190 1,294 887 1,316 472 390 543 1,065 458 1,019 1,011 !
t -by Nuclear Units 1,836 2,050 2,101 1,595 1,507 1,724 1,865
-by Jointly Owned Units 884 569. 667 697 814 452 705
-by Life of the Unit Contracts Interchange with NEPOOL 23 236 157 (387) (136) (285) (620) 495 207 309 223 480 168 304 l Purchased Power-Unit Power 4,900 4,746 4,664 4,509 4,303 4,201 3,925
- Ibtal Cenerated and Purchased ,
Operating Revenues (thousands):
Residential $127,883 $124,047 $115,744 $110,682 $121,623 $104,101 $ 55,731 119,362 114,857 105,777 98,826 105,310 89,225 46,976 Commercial 69,516 72,218 67,973 66,707 75,850 58,901 32,440
. Industrial 23,660 18,740 16,189 15,779 23,909 16,212 10.220
! Other Electric Utihties 10,290 11,192 15,019 8,990 9,396 13,463 7,505 ;
Other 350,711 341,054 320,702 300,984 336,088 281,902 152,872 Tbtal Primary Sales Revenues 19,518 23,372 22,622 32,526 25,237 20,548 5,441 Unit Contracts
' Non Electric 3,909 2,703
- 1btal Operating Revenues $374,138 $367,129 $343,324 $333,510 $361,325 $302,450 $158,313 ,
Energy Sales (millions of kwbi:
1,412 1,328 1,262 1,212 1,205 1,197 1,123 l- Residential 1,424 1,325 1,243 1,10 1,113 1,103 1,0!!
l Comhaercial 869 863 855 833 856 810' 815 l
Industrial -
377 365 372 382 396 386 403 Other Electric Udlities 28 28 28 29 30 34 49
' Other 4,110 3,909 3,760 3,625 3,600 3,530 3,401 ibtal Primary Sales l 215 201 290 Losses and Company Use 220 231 211 197 4,330 4,140 3,971 3,822 3,815 3,731 3,691 7btal System Requirements 570 606 693 687 488 470 234 Unit Contracts 4,900 4,746 4,664 4,509 4,303 4,201 3,925
'Ibtal Energy Sales L N:mberof Customers:
224,933 221,480 217,899 214,454 211,622 209,678 198,910 Residential i
26,611 25,480 24,356 23,161 22,177 21,605 19,781 i'
Commercial 1,237 1,250 1,238 1,209 1,189 1,213 j Industrial 1,229 5 7 15 15 16 12 15 I Other Electric Utilities 29 29 30 30 29 31 171 Odwr 252,807 248,233 243,550 238,898 235,053 232,515 220,090 Total Cttstomers Average Revenue per Residential 569 560 531 516 575 496 280 Customer ($)
Average Use per Residential l '. 6,277 5,996 5,792 5,652 5,694 5,708 5,646 Customer (kwh)
- l. Average Revenue per kwh:
9.06c 9.34c 9.17c 9.13c 10.09c 8.70c 4.96c l~ . Residential 8.38c 8.67c B.51c 8.45c 9.46c 8.09c 4.65c Commercial 8.00c 8.37c 7.95c 8. Ole 8.86c 7.27c 3.98c i
Industrial 1
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';, ' Consolidated Operati:3 Statistics - General 1985 1984 1983 1978 '1 Years Ended Decernber 31, 1988 1987 1986 L Capitalisation(thousands):
Bonds (Net)
$294,500 $267,500 $246,500 $263,500 $266,500 $226,219 $ 81,203 !
260,064 211,717 177,289 21,991 22,376 30,179 16,667 Other t aarThrm Debt 1
lbtal Long 'Ibrm Debt-Net 554,564 479,217 423,789 285,491 288,876 256,398 97,820 49,693 44,931 44,931 46,536 48,319 49,234 21,000 '
Preferred Stock Common Equity 301,759 285,383 225,156 208,211 191,619 172,327 85,842 :
Tbtal Capitalization $906,016 $809,531 $693,876 $50,0,238 $528.814 $477,959 $204,712 Common Share Data:
Eamings per Average ,
2.85 3.46 2.82 2.67 2.85 2.80 1.92 Common Share ($)
Dividends per Share ($) 2.375 2.27 2.15 2.03 1.91 1.79 1.60 76.0 67.0 63.9 83.3 ' .
Payout (%) 83.3 65.6 76.2 Average Common Shares Outstanding 13,167,915 12,596,381 11,537,677 11,156,941 10,562,324 9,062,810 4,266,921 7btalCommon Shares Outstanding 13,371,252 12,966,062 11,676,229 11,376,471 10,892,686 10,192,304 4,835,598 Book Value per Share ($) 22.57 22.01 19.28 18.30 17.59 16.91 17.75 Percent Earned On Average Common Equity (%) 12.8 17.1 15.0 14.9 16.5 16.2 10.2 Market Prices ($):
High 33 % 40 % 39 % 26 % 18 18 % 17 21 % 24 25 % 16% 12 % 13 % 14 %
Low 31 % 28 38 % 25 % 18 14 % 14 %
Year End Miscellaneous ($ in thousands):
' 7btal Construction ,
Expenditures ($) 151,198 126,856 64,371 78,192 95,211 103,309 25,948 Cash Construction Expenditures l$) 65,307 68,929 47,137 54,406 73,159 78,912 22,028
- Internally Generated Funds ($) 38,894 14,554 44,832 27,501 40,858 27,258 11,893 Internally Generated Funds as a %
59.6 21.1 95.1 50.5 55.8 34.5 54.0 of Cash Construction (%)
Installed Capability-MW 1,090 1,091 971 987 931 931 1,005 Less: Unit Contract Sales-MW 98 108 108 110 75 75 36 System Capability- MW 992 983 863 877 856 856 969 System Peak Demand-MW 813 782 691 738 716 700 666 Reserve Margin (%) 22.0 25.8 24.9 18.9 19.5 22.3 45.5 i System Load Factor (%) 60.8 60.4 65.6 59.1 60.6 60.8 62.7 Sources of Energy (%):
Nuclear 18.2 15.1 19.0 26 2 10.9 23.8 22.0 Coal 27.0 31.1 12.0 34.1 29.3 16.3 Oil 54.8 53.8 59.0 39.7 59.8 59.9 78.0 Cost of Fuel (Mills Per kwhl:
Nuclear 8.2 9.2 8.6 7.0 8.9 6.5 3.0
' Coal 20.5 20.5 23.7 23.7 27.8 21.6 Oil 22.6 28.3 23.6 41.2 43.6 41.5 18.1 AllFuels Combined 19.4 23.0 20.8 26.3 36.1 30.7 14.3 45
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n 'Dustees~ Offic. cts .
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Oliver F. Ames (A, P) . John F. U. Elchorn, Jr.
' Director. Fiduciary Trust Cornpany, and Chairman and
- private trustee. Boston, Massachusetts Chief Executive Officer }
John E. Conway (A, C) . Donald G.Pardus '
Chairman. lock Conway e) Co.,Inc, President and Norwell. Massachusetts ~ Chief Operating Officet
. Robert 1. Dexter (A, P) Robert E.Maguire
' ' Chairman, Abington Mutual Fire Executive Vice President . ,
~ Insurance Company, Abington, Massachusetes John R.Stevens Executive Vice President >
John F. G. Eichorn, Jr.
Robert P.Tsastnarl ,
Ch:ltman and Chief Executive Officer .
Vice President of the Ass'ociation ,
Peter B. Freeman (F, P) Richard M. Burns C:tporate Director and Trustee, Comptroller
- Providence, Rhode Island Clifford J. Hebert, Jr.
Nathan H. Garrick, Jr.(A, C) Treasuru .
' Retired i William F.O'Connor '
Robert E.Maguire Sectetary l
Executive Vice President of the Association :
, . Wesley W. Marple, Jr.(C, F)
- l. ; Ptolessor of Business Administration. ~
l Northeastern University, Boston, Massachusetts Donald G.Pardus President and Chief Operating Officer '
- of the Association L
Margaret M.Stapleton(F, P)
Vice President, John Hancock
' ' Mutua1 Life Insurance Company.
- Baston. Massachusetts
' D. Reid Weedon, Jr. (C, F)
/ Senior Vice Pre?ident, Arthur D, Little,Inc.
. Cambridge, Massachusetts A-Indicates member of Audit Committee C-Indicates member of Compensation and Nominating Committee F -Indicates member of Finance Committee
! P -Indicates member of Pension Trustee Committee J46' s
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' System Companies -
{ i".
Eastern Utilities Associates The name Eastern Utihtles Associates is the designa.
tion of the Trustees for the time being under a Declara.
- '
- EUA Service Corporation tion of Trust dated April 2,1928, as amended, and all EUA Power Corporation persons dealing with Eastern Utilities Associates must Montaup Electric Company 1001< solely to the trust property for the enforcement of EUA Enetsy investment Corporation any claims against Eastern Utilities Associates as nei. -
V EUA Ocean State Corpotetion ther the Trustees. Officers nor Shareholders assume One Liberty Square . any personalliability for obligations entered into on : ?
Post Ollice Box 2333 behalf of Eastern Utilities Associates.
ll Boston, MA 02107 I (617)357 9590 Annual Meeting e John F. C. Eichorn, Jr., Chairman The 1989 Annual Shareholders Meeting will be held on Donald G. Pardus, President 7besday, April 25,1989 at 10 a.m. in the Board Room on .
the 33rd Floor at State Street Bank and Trust Company, ,
Eastern Edison Company 225 Franklin Street, Boston, Massachusetts.
110 Mulberry Street Brockton, MA 02403 , Financial Supplement (508)S80 1213 Upon request EUA will furnish a copy of its Financial Arthur A. Hatch, President Supplement whIch includes financial statements of its .
major operating companies.
Blackstone Valley Electric Company Washington Highway 1.incoln, R102865 (401)333 1400-William R. Bisson, President e
EUA Cogenex Corporation i
One Liberty Square
, Boston, MA 02107 (617)357 9590 Joseph S. Fitzpatrick, President t
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