ML20062B469
| ML20062B469 | |
| Person / Time | |
|---|---|
| Site: | Seabrook  |
| Issue date: | 12/31/1989 |
| From: | EASTERN UTILITIES ASSOCIATES |
| To: | |
| Shared Package | |
| ML20062A991 | List: |
| References | |
| NUDOCS 9010250081 | |
| Download: ML20062B469 (50) | |
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B Montaup Electric Wholesale Territory B Eastern Ediwn Service Area 7 \ Blackstone Valley Electric Senice Area
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On The Cover ' Table of Contents Line uurlers Doug i Highlights Wight fleft) and 2 Letter to Shareholders AfiAe O'Reilly typify 6 Eastern Utilitles . .
Leadership for the '90s
,n ,, n e, t ed 19 Review of Operations ity customer service.-
This report's theme 26 Selected Consolidated section, "!xadership Financial Data anagement's Discussion ose g li e as and Analysis haw enabled Eastern Utihties to become a 30 Consolidated Financial leader among utilities Statements 1
as av enter the 1990s. 34 Notes to Consolidated (See Page 6) F nancial Statements 43 Quarterly Financial and Common Share Information 43 Dividend Reinvestment and Common Share Purchase Plan
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Highlights
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1989 1988 . 9 Change I'
i Yinancial Data IJsdtars in dunnanda Operating Resenues $ 408,577 5 374,138 +9.2 Operating income 58,388 65.212 - 10.5
' Consolidated Net income 40,877 - 37.475 + 9.1 Nell'tility Plant 1.158,693 1,019,957 + 13.o Ca ,h Construction Espenditures 75,861 65,307 4, I o.2 Internall 3Generated Funds 32.734 38.894 - 15.8 i Return on Average Common Equity 12.101 12.8 % -5.5
. Common Share Data Earnings per Average Common Shaty $2.95 $2.85 +3.5 Dividends Paid per Share $2.475 $2.375 +4.2
, Aserage Common Shares Outstanding 13,877,091 13,107.915 +5.4 Book Value per Share (Year End) $24.57 $22.57 + 8.9 Market liiec(Year End) $41.75 531.50 + 32.5 t Operating Data Total Electric Sales (mw h) 5,127,000 4.900,000 + 4.6 System Requirements (mwh) 4.396,000 4.330.000 +1.5 ,
i System Peak Demand (mw) 831 813 +2.2 Sy stem Reserve Margin (At Peak) 26.7 % 22.07i + 21.4 l System Load Factor 60.4 % 60.8i - 0.7 Customers (Year End) 256,602- 252,807 + 1.5 Emplovees(Year End) 1,241 1,204 43.0 i i t.
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EUA S3 stem Pmfile Emics n I 'sihiier Anociates is art ontstor- three wraffiliated w lities for resale and EUA ou ne i riebhc indur holding company and the l'ouvr Corporation, which etrects to sellwhole-pa,, +n w>wam of Ihe EUA System. The EUA sale pouvr to osher m :luies widtut New E natand.
% e ,inorepalh encacedin Ihegeneration, in addition to the above utihty comtnanies.
o,v , .wn. dntribution and sale of electric- the EUA System inchodes EUA Cvgene.t Cor.
n; w arvoownately 237.000 customers. cover. poration, an energy management and coxen-ierg an area of about 340 square miles. The EUA eration company: EUA Eneruv Investment S3 siem inc!ndes Iwo retailelectric companies- Corporation, established to invest in coxenera.
Ca stern Edimo company serving 173.000 cue tion and smallpower prochection factluies: l tomers in sotaheastern Alassachusetts and EUA 0ccan State Corporation. a subsidiary l Blackstone %dley Electric Company serving established to invest in the Ocean State Pouvr 84.000 customers in northern Rhode island. project; and EUA Service Corp < nation, which
,m and tav wholesale generation companies- provides various nuanagemern sernces to all
't Alontaup Electric Contpany, wirich supplies EUA System companies. ;
L.) electricity to Eastern Edison. Blackstone and i
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f' ineteen hundred and eighty nine marked the conclusion of a dec-ates.The 1980s brought shareholders gruwth in their dividends N ade of significant cha and in the market value of their EUA sharts.The 1980s also enabled your Eastern Utilities team to establish a dynamic and diversified System that is ready to deal with the changes we will face in the decade ahead.
Earnings per average common share for 1989 werv $2.95 compared to $2.85 in 1988.
while our s dividend was increased to an annual rate of $2.50, This marks the eighth consecutive year of dividend increases and the 61st year of consecutive dividends paid by EUA.
The deferral of a significant portion of the non-cash Allowance for Funds Used Dur-ing Construction ( AFUDC) associated with EUA lbwer's ownenhip shair in the Seabrook nuclear project, mandated by Financial Accounting Standard 90, remained in effect through the end of the year,The reversal of deferred AFUDC by our EUA lbwer subsidiary will be linked to its ability to enter into long term power contracts to sell its 140 mega-watts of Seabrook capacity.
It appears that initially EUA ibwer will be selling its Seabmok capacity on a short-term basis at rates that will not fully cover all of its actual costs.We feel confident that long term contracts will ultimately be entered into, ahhough we cannot pivdict the tim-ing of these contracts.We firmly believe that EUA Ibwer's investment in Seabrook is a valuable asset that over the long term will provide an above average return for our shareholders.
Sales to commercial customers rose 5% to 1.5 billion kwh offsetting a decrease in sales to 'ndustrial customers and static trsidential sales. Moderate wrather patterns thivughout the sear combined with the region's economic slowdown impacted the over-all sales increase of only 1.5 percent. Retail customers of Eastern Edison and Blackstone Valley Electric did, howeser, push demand for electricity to an EUA System record peak 01831.270 kdouatts last July 27.
On M n t h I. Iwo the Nuclear Regulatory Commission voted tolift the last of its limitations on the issuance of a full power license to Seabrook Station. Although it is expected that opponents will appeal the N RC decision to the Federal court we e xp-ci that commercial operation could begin within two to three months of Seabrook's ini-tial start up. Supporters who travelled Seabrook's long and difficult tuad should be applauded for showing tenacity and dedication to a pmject that will help alleviate the region's pressing energy needs. We are pleased to have been instrumental in helping to
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save the Seabrook option through the establishment in 1986 of EUA lbwer which allowed us to purchase the Seabrook ownership interests of live participants who were ordered to disposeof theirownership.
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I Yhe nom. iohnis ai,es .ed Ch.e# isec.. ihe,e6, s,,nih enti, f
Ekhorn, Jr. has been syn. teve Oftcer from 1972 to essisted New England in earmous with testern 1989. A nationally recog. meeting its severe cepec.
Utilities Associates ter nised $gere in the energy ity requirements.
elmest two decades. New held, Ikhorn is Chairmen serving as the Assoc 6e. of the Joint Owners of the
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tion's (beirman, Ikhorn 5,ebrook nuclear power j '
was President from 1972 plent. Under his leader.
ship. IUA essured See.
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assisted New Englend in Eichora, Jr. has been syn. tive Othcor from 1971 to enymous with testern 1989. A nationally recog- meelag its are cores.
Utihtes Associates for abed hgere in the energy sty requirements.
elmest two decedes. how held, tschern is Cheitmen serv 6ag es the Associo- of the Joint Owners of the lion's (heirmen, tichern Seehteok nuclear power was Pres 6 dent from 1972 plent. Under h!: leader-ship, EU A ensured See-brook's viehikty and O
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f Visible,euessibleeyes and the last 4 yests, style is best llivstieled by tenevettve et, some of Hehos inmetod the hisfrequentd iet'stelha i the odi estivu used to development and imple- meehngs with 5ptom dourthe IU4's President mentonen of the System's employees and diums.
and %f hesvuve Oth- ptve Yeer Strategis tien siens with investers that sov Donald G.Perdes. A that emphostres (UA's enten bogte with the 30 yest vititty voleren sommitment to shore- odmenmon to" test sell Pendes hos been instes- holders, svitemess, me Don."
mentel te (UA's growth employees and semmuni-ties. His open lessetsb6p
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EUA is also pl:ying a ma}or role in further efforts to supply New England with much
,; needed generating capacity. Thivugh our EUA Ocean State subsidiary, we hold a 259
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equit'y imestment in Ocean State power, w hich is constructing twu 250 MW natural gas fired eener ating units in Burrillville, Rhode Island. These are the only major generating units under construction in New England at this time. EUA's investment should piuvide a piemium icturn to our sharvholders.
Addaionally. EUA embarked on a strategy of mergers and acquisitions,in April, we o made a f riendly offer to the managements of the UNITIL Corporation in New Hampshire and the Alassachusetts based Fitchburg Gas and Electric Light Company to purchase all of the common shares of both companies. hianagement ivjected our oflers. Subsequentiv, we commenced cash tendsr offers directly to the shareholders of both companies, We continue to believe that EUA's acquisition of both UNITIL and Fitchburg Gas and Elec-trie is in the best interest of all concerned and we reiterate our willingness to negotiate a f
transaction w hich assures their stockholders will receise fair value for their common stock.While the regulatory process has not moved as promptly as we would prefcr we remain fully committed to successfully completing these acquisitions.
In September, we agreed with NECO Enterprises of Pnavidence, Rhode Island to purchase its subsidiarv. Newport Electric Corporation,in exchange for 540.000 EUA common shares. Newport Eketric serves approximately 30.000 customers in the Rhode Island communities of Newport. Jamestown, hiiddletown, and portsmouth. Our pro-posed acquisition has been the recipient of support on all fmnts as being in the best interests of shareholders, customers and employees of both EUA and Newport Electric.
Our EUA Copenex subsidiary continues to make its mark in the field of energy man-agement. Since acquiring this start up company in 1987. EUA Cogenes has grown to become a recognized leader in providing energy savings and demand side management programs.
In November, Blackstone filed with the Rhode Island Public Utilities Commission for its first incirase in base rates in almost four years. The ivquest, il appnned in its entirety, wuuld generate almost $5 million in annual irvenue.
On March 5,1990 Atontaup filed a $20.5 million rate case with the Federal Energy Regulatory Commission.The principal reason for the filing is to include in base rates the halance of Montaup's 2.94 investment in Seabrook as well as the operating atul mainte-nance costs of Seabiuok. In addition, the rate increase includes the s ecovery of costs incurred to carry out our various conservation and hud management programs.
Our success in 1989-as in years past-is directly tied to the efforts of our entire EUA team. We appiuach the new decade with a rvnewed sense of purpose and determination to continue to deselop our existing System and to seek out new opportunities for the benefit of you.our shareholders.
Sincerely, p h,x M s.2 41 4.-
t John EG Eichorn,Jr. Donald G. pardus Chairman president hianth 5,1990
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jlh ansamma DeHIdes... respect in the '80s end prep: red it for the '90s."
Eichorn became a nationally recognized industryleader as Chairman of the Joint Owners of Seabrook Station.His decision to form EUA Power Corp. In 1986 and become the third largest ownerof the project was a major turning point in the plant's troubled history. - i Eichorn was instrumental in mov.
Ing the plant towards commercial operation and providing New Eng.
landers with much-needed generat-cadership is show.
ing capacity at a time when demand ing the way by was reaching record proportions.
going in advance, realizing that unless Eichorn's contributions to EUA you prepare for the n t only include the establishment f EUA Service and EUA Power, but future, you will be lef t in the past, als the addition of EUA Ocean State, an equity investor in the With the dawn of Ocean State Power generation proj.
9 the 1990s, the future has arrived for Eastern Utilities ect,and the acquisition of EUA Cogenex,a leader in the energy ser-Associates (EUA), with its opportu-vices and demand management nities and challenges. Striving to enhance our shareholders' invest, field, lie assembled a management ment . . . working to ensure a rell, team which by his own description is one of the best in the industry .
able energy supply for the decade a team consisting of both traditional
. keeping the cost of electricity and non traditional utility veterans seasonable for customers . . EUA 1.uised to provide EUA with Leader-is readv to accept the challenge.
ship for the 1990s, 11 the final test of a leader is that he is a catalyst and leaves in others the conviction and the will to carry on, then Chairman John E G.
E- 'a, J r., who retired in 1989 as Chief Executive Officer, epitomizes that legacy.
" John Eichorn made EUA a mod-ern day progressive utility." says President and Chief Executive Officer Donald G. Pardus."He led the System through the turbulent ,
'7oc br<umb, it r, c<mnition nnd I
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isustive Yko Presistent I Arther L Netch. "telent.
ing energy requirements with environmentel con.
P.c .e ,ie.s. 5ees. co-s e ,, de.e..
pecteer Propcts. Leber dont New Englead is e I Relet 6eas. Ad*ialstralien. test Iw tedey's stiltty finece. 5 pier tie <vtive menega," he seys.
vice Preident end Chief j opereting othcer John R. l
! si,, ens provides e diver.
A sihed bckgreved and 25
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to those companies which con compete by edepting to changing business conditions.* she continued enths.
siese displeted by ser ,
dediceied empi.yees wm j belp enture the ivinH.
mut of eer customers' i end shareholders' espa. ,-
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totions," seys (secutive Yko President Rebwt E.
Ilegoire, aw tti. o ity veteren with 40 years I el saperience.
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I $letet's Ell-where the industriel Rev-elvteen bogen- prov6 des on histork contrest with on EUA cree mainte6ning our modern underground distribution system 6n Pewtucket, Rhode island.
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3 E Uue,en.. provides Eenc,e, ,,e,, men, emergy sovings and personnel keep obreest demand side nianoge- of stock merket condi-ment programs to e tions end the daily actry-variety of clients. This ity of your EUA shares.
9 diversihcotvan inte complemeetary energy-related businesses is type-col of EUA's progressive culture.
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bewk nuclear genveting stet 6en to stey obreast of current energe related technology. IUA has e 15% 6nterest in Seebrook.
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asoing on active per-ticipent in the economic development of our com-g monities is importent to our evitomers." says esoph 1. Fitapettick David H. Gulvin, Presi.
isPres6 dent of IUA dent et tierkstone Volley (openes, e subs 6d6ery Electric. Gviven is one el e en the cutting edge of the group of business leeders emerging energy men- working to lacrecie inter-egement held. "Ibe abil- national trede in northern ity to provide e number O' Rhode Island.
of energy menegement options to ove customers will enhance our preht.
ebility in the '90s," g y ,, ,, Enestern (dison Pres-ident John D. Corney reminds employees of ove landementel mission: As we become e more diver.
sihed entity over the next
% 10 years, we must not
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lose sight Of our besic missien = to provide sete end reliable electric ser.
ske et reesonable prices to est costomers, and metimise the return le our sberebelders,"
be says.
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- i ers the idea that we are a progressive
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, utility on the cutting edge; that mea-
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I appreciation are synonymous with -
the letters 'EUAl" EUA has become more than just a-traditional utility company.While its prime focus continues to be on its core business-providing reliable electricity to its customers-EUA is ,
also a part of the emerging world of non traditional energy related ser-l' vices and cogeneration through sub-sidiaries like EUA Copenex and EUA .
t:
My-concept ofleadership can be likened Ocean State.
The world of mergers and acquisi-tions tolls for EUA, too.There's the anticipated addition of Newport Electric and the continuing effort to l
to that of the role played by a sym. acquire Fitchburg Gas and Electric !
phony orchestra conductor who Light Company and UNITIL leads his professionals through the Corporation. l musements of a musical score"says Over the next few years, EUA will EUA president Pardus." lie brings also be capitalizing on its invest- ;
together the various sections of ments in ventures such as EUA j the orch stra to create a unified Ocean State and EUA Power.
i melody," "Our energy related diversified For EUA the musical score for approach to business should con-the '90s is it. Five Year Strategic tinue to pay dividends for our share- j plan. Its companion 13usiness Plan holders in the '90s," emphasizes emphasi/es the 5/ stem's commit. Stevens.
mem :vjts shareholders, customers, !
cmrlmen and communities it serves.
"These are the four elements that must play harmoniously for us to be l: a success l' Pardus says.
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"We have a special responsibility L to our shareholders" offers senior ,
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Operating Officer John R. Stevens.
"In the next decade, we must con- ,
tinue to reinforce in our sharehold-i
~aos e-poo Ret 4 (leh) and Dek teore 6nspect a boiler feed pump during sched.
vled meintenense that enabled Monteup floc-tr. . . 3 a :
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world over ter its high
'- quality cymbols, chose electric forneces for h peetise sentrols reqv6ted in its metal elloy6ng pro-cess et a modern plent 6e Norwell,16essochosetts.
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A m.el,,ose e des. Tho ose o,,er codes is centrol to the efficiency abled eviomobile. The sight of en testern Utih- of the computerited ties vehicle with its Redie metenels menagement Assist logo means help system in eV IUA 6s on the wey, summoned stochrooms.
through ove radic, comme-nicstions system.
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" Progressive prugroms thot team -
EUA with its customers are a critical ingredient in our commitment to be competitive in the '90s," says Hatch.
"Our employees are the arteries and nerves of our System"says Robert E. Maguire, Executive Vice President. "Without their contribu.
tions we would not be either what we are today or where we are today.
They exemplify our very character-our spirit!'
EUA will continue to retain quali-o our customers,' lied employees who will be part of we want to temain the team effort leading the System their' utility of into the next century.
choice'in the dec. EUA will meet this goal-ol pro-ade ahead l'says tiding leadership for the '90s and Executive Vice Pres. beyond-by rewarding performance ident Arthur A. and offering opportunities for
. Hatch. As the com. enhancing education un'd skills petition for business increases from - training.The ' Teaming Up for Per-a variety of sources, we must not formance' goals and incentives pro-
- take our customers for granted l' gram gives employees a personal i
in order to stay competitive in the stake in the success of the System
'90s, EUA will ensure its future by w hether it be in the areas of earn.
supporting reasonable rates with a ings growth, safety, reliability or cost contrel,
" full. service" utility concept; by continuing to provide customers Expanded training in perform.
w ith safe, reliable electric service: ""'" * """EC *""I"'I"*CIICI"'
d and by offering them an opportunity tions, affirmative action and other to save energy and money-while, at areas results in a more contempo-j the same time meeting the region's rary and diversified work force.
growing demand for energy.
EUA's conservation and load man-
- agement program-called 'ilelping You Save'-offers a variety of energy saving incentives for residential.
commercial and industrial cus-tomers while being a part of the D System's planned response to the region's capacity needs. i l
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y toner servke, testern (dison Vice President Derbers A. Hessen explains to employees
,,pfer Oifford 1. the importent role they
,,,,,, is reponsible for play in making EUA e suc-
,,,,,,mg EU A's tvivre cess in the '90s. " All g nong requirements- of our employees are set.
i, the nest decade. IUA ting the stenderd for
,,lt be cepetelismi on excellence 6n customer
.,es,ments made in EU A service.a
(,,e es EUA Power and IU4 0reen itete. Thee, end other eppertunities.
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,,,,eo EU A hos m the neewel community "
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m non traditionel villity crees is a molar part of UA Service Corporation ove stroiegy for svuess Vice President Robert G.
in Se 10s and beyond," Powderly is enponsible sov eresident for seeing that EUA 8 olft. He over- perswes a fair end ree-ms Wool Protects es seceble return on its well es tesource Pleaning investment es well es Ier end Power Renegement % edministration el %
-ell supporting the $ys. $tstem's costeener serv 6ce tem's efterts turough % operation. "Our 6 stent ti decade. to beience the interests of both eer shoreholders and costeners,"
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cient lighting instelled of Woonsocket. Rhode Island. High School is typical of EUrs conservo-14n end loed menege-
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be<t,uien s weiper r t .ek.rs 6 eve in.
llelleher prepares control toined the construction cables for installotion schedule for the two at o lystem trans.ission Ocean State Power entts g substation. in Barrillville, Rhode Island. The new generot-ing waits are expected
.. ..t. . .. . v ... in late 1990 and late 1991, respectively.
i.J j UA retirees perfici.
poted in a pliot progrom during wWh we devel-o,eune,g, .ing._ oor newest community pro-l l gram for seslors. )
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O
jN business and actively partic'iphte in promoting the quality oflife in areas they serve by involvement in local Chambers of Commerce and similar organizations. System companies !
' support activities like the Good ,
Neighbor Energy Fund and Adopt.
A Schpol programs. Employees speak, free of-charge, to community groups and students on topics such -
as electric safety, energy alterna-tives, career opportunities and con; servation as ambassadors of the all-pen, candid com. volunteer EUA Speakers Club.T hey munication are also involved in local economic -
between System activities and social service projects officers and as aethe members of service clubs employees is also and other organizations, a key to success EUA encourages its employees to
- in the '90s. A two-way communica, become involved in their communi.
- tions program called "Let's Talk" is ties."It's essential that we reaffirm an ongoing forum for all employees . our commitment to a higher quality whlch encourages open discussion oflife than our predecessorslefa us E and exchange of ideas. . . . and follow that mission relent-
"A company can be only as good lessly," says Pardus,
' As EUA readies itself for its future, as the people who work in it. At
' EUA, we strive to be one of the bestl- we,like Thomas Edison.are mind-fut that,when allis said and done.
says Maguire.
"Being a good corporate citizen - "There is still no substitute for hard work"in the process of providing .
is the fourth movement of our cor.
porate symphony l* notes Pardus. Leadership for the '90s.
" Community involvement allows us to communicate with our cus-tomers directly and demonstrate to them that we care about them as
< individuals."
-i EUA System companies and employees serve the public in a variety of business and private endeavors.They work to attract new d I I
q-. .t't
hf g f 3 i" Revisw of Operations prices sufficient to recoier its investment. Upon Seabrook's .
" "' E"" " " ' " #
- Earnings and Dividends
- we will be selling short term Shares in Eastern Utilities Asso-f 4A ,- , ciates earned $2.95 for the year g, ;
than our actual costs.We are . [
ended December 31; 1989,on reV ly marketing EUA Power's si enues of $408.6 mdlion, That is an Seabrook capacity in New
'. mercase of 10 cents per average
,, England and New York and we 1
- 3AL -. _a common share over 1988 earnings feel confident that EUA Power i of $2.85. )
wiH uh.unately enin .mto such The annual dividend was ngaanisa escondacts.
raised from $2.40 per share tu
" ""8h we ( annot pw&t p $2.50. cffecth e with the May 15,
.the tum.ng of dwse contrads, 1989. payment,This marked the eighth consecutive year of divi. Sales and Demand I dend increases. Kilowatt hoursalesof elec- 'f p An increase in the non cash tricity continued to grow in u
Allowanee for Funds Used During - our Massachusetts and Rhode .
Construction (AFUDC), higher Island service territories, but
- . base rates charged by our Massa- at a slower pace than in recent !
chusetts retail electric subsidiary- yeais. Overall, System require- t L Eastern Edison Company,and ments increased 1.5% !
amaae nmderate growth in kilowatt. The economy and inconsistent 'i hour sales for the year helped -weather patter'ns were dominant i 18""95"*lD*'lemh offset the diluting effect of our factors.The coldest December -
October issue of 1,500,000 addi' in the i19;vear history of Boston m one tional common shares. Weather liureau reco'rds boosted - -
residential sales late in the year.
AFUDC Deferral But annual sales were held down ;
l~ As previousiv reported, a conser.
m dnatesummnand hj vative interp'retation of Financial h ' '
Accounting Standard 90lFAS 90)
"""""# '"""EE*" "
required the deferralof a portion -
kI #"I I'h"" # ""i #' '" ""' '"* *
, of the AFUDCassociated with ""
"" " P EUA's ownership interest in the ""'Y '"'*)o*ffset the dampen.
1988 hgures Seabrook nuclear power project.
Ing impact of flat residential sales H ,. We have also mdicated the defer-and a downturn in sales to the ral would be discontinued as indmM cuma pup.
the commercial operation of The economic slowdown in our Seabrook draws closer, and the service territory directiv affected
-- amounts previously deferred our sales to ind'ustrial customers.
may be restored to earnings. f Closings of manufacturing facili-On March 1,1990 tiie Nuclear b by several major industrial s
lasL Regulatory Comnuss,on i soted customers reduced our industrial to litt the last of its hnutanons sales by approximately 4.3%
on the issuance of a full power .;.Omnd fd u-ichv bv license to Seabrook.
retail customers of Eastern Ed'. i Upon further review the reser- t2 son and Blackstone Vallev Elec-sat of any deferred AFUDC for tric Company, our Rhode Island our EUA Power subsidiary will be retail electric subsidiarv, created
- linked to the ability of EUA Power an EUA System record peak of
, , , , ,. to enter into long term power 831,270 kilowatts during July.
1- contracts to sell its 140 mega-This was a 2.3% increase over the oi watts of Seabrook capacity at Primorpna.s w,a System's previous peak of 812,750 kilowat ts.
<, . r.emer,w Implementation of conserva-
\
8[
a hwnd -
tion and load management pro.
grams offered to our lilackstone 8 ** and Eastern Edison customers
- ,me., - - < . , , - - . _ , , . , . ,- , , , - . ,s- ,,,n-,- - , , , , , . - - , - , .
T V
.,1
.i . ,
. (provided the equivalent of.- z We remain willing to negotiate.
f approximately 9,850 kilow:tts 7 the acquisitions on a friendly j of capacity savings, which effec. basis; ensuring that shareholders :
- tively slowed theirwreasein of each company receive fair b system demand. Reducing peak -value for their common stock and !
' demand lessens our need to invest avoiding the further unnecessary
'in' costly new generating faelitties . - expense of a contested transac. .
. and saves our customers money. - tion;We may continue to extend '
,* the deadlines forour separate ten *
. Nearly 8.200 commercial,
' industrial and residential cus- deroffers for FG&E and UNITIL, lR
- tomers participated in one or - in order to allow the Securities ,
more of the conservation and- and ExchangeCommission under :
' load management programs - . the Public Utility lloiding Com.
we offered.Taking advantage of pany Act of 1935 to continue its these programs will enable them - g review of our proposed to save approximately 52,1 mil. acquisitions.
lion in'their yearly energy bills. Acquisition of FG&E and UNITIL would add approximatelv
- Mergers and Acquisitions g 100.000 customers to the EUA 1
' In April. EUA uffered to purchase. System, for cash.all the outstanding com- Last September,we signed an mon shares of two other New agreement to purchase Newport .
England utility companids, UNI. Electric Corporation from its TIL Corporation in New flamp- #
parent,NECO Enterprises, for shire and Fitchburg Gas and 540,000 EUA common shares.
Electric Light Company (FG&E) The proposed acquisition has '
- in Massachusetts.The friendly. received support on all fronts as offers, representing a 20% pre. . being in the best interests of 1
mium mer market values of UNI- . shareholders. customers and TIL and FG&E shares at that' . employees of both companiesJ time, were rejected by the man
- NECO has scheduled a special t agements of UNITIL and FG& E. t , ' meeting of shareholders for
~
. We commenced cash tender offers March 15,1990, to approve the to the shareholders of both sale of Newport.
companies. Newport provides electric ser-Iteturn en Averer We remain committed to Conwnon iquiey - vice to 30,000 customers in the
~
acquiring FG& E and UNITIL- Rhode Island communities of-We continue to believe acquisi- Newport, Jamestown. Middle-Cllon of these Iwo companies is town and Portsmouth.Its 55-in the best interests of the cus- square-mile service territory 4 , tomers. shareholders, and extends to a point within live
- employees of UNITIL, FG&E milesof the Fall Riverdivision and EUA-as well as the New of Eastern Edison. Newport England region- has long been a customer of our wholesale generation and trans.
4 mission subsidiary, Montaup Electric Company.
,' Diversification Update in the past few years, EUA has become a more widely diversified energy company. No longer are we strictly an " electric utility" holding company, although we I i e? - . . s S
.((h 4 ll@;
1 4 ,
t litb remain committed to a philoso. -
phy of di ersifying into energ'v- +
fers;
w g
.. H related businesses where we
' have expertise,- ;
en A i b' b
. This diversification is most
- successfully exemplified by EUA f N~ Cogenex Corporation, our energy nd( management subsidiary.
ten, Since its purchase by EUA in ;
IL,~ -
1987 EUA Cogenex has become .
s- nationally known as a major :
der contractor working principally
' with regional utilities on energ'y ,
- s. "- savings and demand side man-
]
agement programs for their cus-tomers. EUA Cogenex is already l
- _ - a primary contractor for several - ;
stely- large New England utilities and i k has recently been selected by
- e Orange & Rockland Utilities in m
~
New York State and Jersey Cen. -
lan .,,,, ,,,,,
urt o tral Power & Light Company in J
. New Jersey as a prime contractor ;
o nan to provide comprehensive demand )
fri. side management services to : '
les large commercial and indtistrial '
hs tas. . customers of those eleetrie utilities. . 7
'ge Providing demand side man- =i agement services to h.mdreds of- ;
- h. .
hl individual buildings. EUA Coget .
nex services hotels, colleges, med; '1l e, - -
ical facilities and commercial' '
- and industrial facilities throughi w r- out the United States. Texas me , # Instruments: Hewlett Packard:
1! Newpor. Ilospital: Maidenform: 1 le- Coca Cola: Nordstrom's; Digital l- le Equipment Corporation: AT&T; ;
! Holiday Inn: TJ. Maxx: Globe L - Mfg; MIT: Sheraton: Best West . i
- m ern; and Le Meridien are all '
L familiar names on the list of EUA ;
l6ir ameaa Cogenex clients.
!mo ' EUA Cogenex made a positive 1 l*mogy Gewed fais contribution to 1989 earnings, I '8 8 Y' M and its contribution is expected to grow in the coming years.
A Financing Activities i illiel in September, Blackstone nego-dre tiated a private placement of s
!y" $15,000,000 of Series B First W Mortgage Bonds maturing in y
4 l
.- J' -
' 2004 at a rate ut 9'/A The lunds were used to repas esisting short-term bank borrowings and to pas
- the sinking fund requnernent 01 A Illackstone's Series A Bonds A sale of 1,500 AW new , om- E---------
,g mon shares of I L A r esu;ted m net proceeds to t hs ( 4.mpans of
$ 53.662.500 m Osti>hsi Ihese 4 lunds were ustd to r epas shoi t- E-ter m bank borrow mgs i edee m
$15,750.000 of El'Ai lo t A Sen.
mr Notes, and make intestments in oi loans to subsidiar ies. 318..
An additional 113.2 nullion was raised durmg 1969 through the issuante ut approximatels 391.000 commori shaies under 55 our Dnidend Remsestment and Emplosee Sasings Plans More than 349 ol our shar eholdei s par -
ticipate in the l' dend Reitnest- e ment Plan 5mpam Power Plant Status Market to Book Rote Follow ing a brichng on Januan
- 16. l'NO. Ihe stall of t he N ut lear l_N0_
Regulaton Comnussion ietom-mended the issuante at a tull-power opeiatmg htense to the E Seabrook nuclear generating statloti l' lie N ucleal Nepulatt sl \ luni
~~'-'
nossion issued its ht ense to Sea.
brook on Matth I. l'No. Although as-oppor cnts hate appealed to the Fedeial t oui t we expect that the plant u ill begm the stai t-up 400 _
- pt;it ess that should l cad to tull-pow ei t ununer t tal oper ation u n hm 2 --3 mont hs M-Duiing lus9 5caht ook suu css f ull\ ( timplt icJ a sci tes til iest s at ,
p.u t tal pa iw ei t a inu t hat al!
the t omponet as a p
= 'h nples 1 plant per li o n- 1 N <tes t e n s pet ilis at n m N a: tincJ 5ptem Capabihty/ Peak us tu si sell s a <m reas tion shot -
m .m . n % s,, w,,
June 11 low 8 ** W W mee UM kyr g EUA Scam %
=
E 9
s , , , . . . . . - - - - - - - - - - - - - - -
1
- a R
- tI C:ses b" The AtomkJp. den and d isEued t. fasor - .
Unit I is the first of two 250c megawatt nituril gas fueled gen . In November, Blackstone filed iiv"*i n un emergency, erating units planned for the site; with the Rhode Island Pub.
Q, lic Utilities Commission its
[
ble d m an$ deseloped by Sea. . Ground was broken at the site in November for construction of first increase in base rates in ,
r"Ij". nuemero f or commu- nearly four years.The requested .
A Wh[la d Lenslatein the
"* A a, on ane drill
. Unit 2, an identical 250-megawatt generator. 43?c increase,if granted in its
[
""' puow me We f rmed EUA Ocean State entirety,would add approximately. ;
g
- h $5,000,000 to Blackstone's annual -
9 O'$a% p cQ %m no con omssion evalua. Nuclear.Corporation to hold a 257c equity revenues.
g me. member Nuclear Reg- investment in the project when
. each unit enters commercial ser< Blackstone's rates now in elfeet : 1 c
n ommission team said are based on the cost of doing
' vice, scheduled in late 1990 and L' esponse during the drill business in 1985.The requested icmon,trated the ability to - late 1991.respectively. Montaup has signed life of-unit power pur- new rates are designed so cus-hplement the emergency plan in chase agreements for 55 mega. 'tomers' bills would cover the manner that would provide ade-watis of the output of each unit. actual costs incurred in more 4
h,nc protectis e measures for the
" . Each Ocean State unit is a recent years.The largest single -
.; ten of the health and public"
" combined cycle" type of genera- . portion of the requested increase the Pilgrim nuclear power -
j p nt,inwhich Montauphasa tor. Natural gas will fire a gas tur- is to cover our investment in the equipment necessary to bbst .
I power purchase interest, began bine used to generate electricity.
The hot exhaust gases leaving ihis serve our customers' growing i a return io service in March use of electricity.
p64 aber an o_utage that began in turbine are diverted to become the source of heat for a waste heat Under normal practice, the ,
April 196b.The unit reached full recovery boiler which produces Public Utilities Commission will .
pow er in October, In December 1989, we reached steam used to drive a second turi issue a decision on Blackstone's .
' bine. The " combined" output of rate request by mid; August 1990. '!
a settlement with the operator of pilgrim.under which Mon- ' both turbines produces more On March 5,1990 Montaup i .
raup will recoup a poi tion of its ' electricity than systems u hich do filed with the Federal Energy replacement power costs and not recover the waste heat, thus Regulatory Commission (FERC) conserving the amount of fuel a $20.500.000 increase in u hole-k & outage expenses for the time Pil.
sale rates. Montaup requested
[ grim was out of service,in addi-nnn, Montaup will receive an used per unit of output, Ocean State Power is owned by that the new rates become - ,
additional amount to support the an innovative partnership, com- effectiie the date Seabrook prising a consortium of three . enters commercial service.The 7 EUA S3 siem conservation and '
load management programs. The regional utilities, including EUA . requested increase puts in Mon-settlement. subject to Federal Ocean State; a Canadian gas . taup's rate base the balance ofits . :
Energy Regulatory Co:nmission pipeline company; and the pri- imestment in the Seabrook proi. 1' appros al, will result ta lower vate developer responsible for - ect.FERC previously perm?t ied bills for Montaup's wholesale project development nnd admin. Montaup to include in rate base _,
up to 509c of its Seabrook Con. !
customers. istration of the plant's construe-struction Work in Progress.
in northern Rhode Island, tion. Each member of the group construction of the Ocean State contributes its own diverse exper- Included in Montaup's rate -
- Pimer Unit I generating plant tise to the ptoject, request is apprmimately adjacent to an EUA.owaed trans- The Ocean State project repre- $7.000.000 to recover the costs M mission substanon s onlinued sents the first major utility gener- of conservation and load manage.
i within budget and on schedule ating units to be built in.Rhode ment programs.These programs fora commen ial cart up late Island in 50 years. It is the largest save moneyand energ3f orcus, 1, to;ners of Blackstone and Eastern this seat. Ste.un and gas tur- power plant under construction hines are in place; fuel and water in New England at this time. We Edison. T hey also reduce our pipelines are nearly linished; expect Ocean State Power to con- need to provide costly new gener-w construction nears completion tribute much needed generating ating capacity.
dav-bv dav. capacity to our region at the same time it provides EUA with yet another opportunity for an investment return that is in A excess of the traditional utility
. \ return,
.T )
i il lc
[t ,
1 A
y ,
y Cust :mer end Ccmmunity - tions.This program combines the for a day on the job; we're at R;litions l best attributes of entertainment Career Days to talk to students j, in 1989. EUA broadened its par- . and information.It addresses ' about various jobs in the utility 4, ticipation in~ community affairs individualconcerns as wellas field; and we sponsor Junior -
=- . by' expanding our emphasis on . providing more generalinforma- Achievement companies so stu-programs for senior citizens. At . tion.To ensure that Energy Bingo dents can learn about the free the same time we retained our appropriately serves the audience enterprise system.
' commitment to the pouth of the for which it is designed, the Edi- .The 91 members of our all-
, , . communities we sene by expand- son Pioneers-the organization volunteer EUA Speakers Club ing those prc3 cams with which of Eastern Edison retirees-was reached more than 14.000 cus-
' we have been so successful. invited to participate in a pilot tomers through presentations Senior citizens warrant special program. before community groups.Our a attention. Our " Gatekeeper" pro- Other community programs speakers addressed electricity-gram is designed to help cus- are also aggressively pursued.We - related topics directly affecting tomers-especially our elderly continue to place a high priority . the customer-reliability of elec-customers-head of f crises before on education.Our retail subsidi. tric service: rates: safety; conser-
- they occur.Our customer contact aries increased their classroom vation; and the need for future personnel are directed to report participation by 24% in 1989, pro- generating capacity,among .
situations that appear to be viding educators with nearly others.
abnormal, so the appropriate 95.000 teaching tools, These pro-
. Organizational changes source of help may be contacted grams-offered free of charge-for any suspected problem.With included curriculum materials, On April 25, the Board of Trustees computer sof tware, videos and -elected President Donald G. Par-
-the two9 ear old" Radio Assist" and " Traffic Net" programs,our - films, publications, vocational dus to the additional post of Chief employees in radio equipped materials, book covers, educa. Executive Officer of the EUA Sys-
- vehicles contact fire, police or . tional posters and talks by EUA tem. Mr. Pardus joined EUA as Vice President, Treasurer, and .
rescue personnel in emergen- Speakers Club members.The Chief Financial Officer in 1979, cies,and report highway and Eastern Utilities Teachers Advi-traffic hazards to radio traffic sorv Panel ensures that these He served as President and Chief broadcasters. classroom aids present a bal- Operating Officer prior to his i The " Good Neighbor Energy anced and objective approach most recent promotion.
Fund." co-sponsored with The to their energy related subject Mr. Pardus succeeds John E G.
Salvation Army, helps our cus- matter.The panel of working Eichorn,Jr., as Chief Executise tomers who are in a temporary classroom teachers from the com. Olticer. Mr. Eichorn remains financial crisis pay their heating . munities we serve suggests new Chairman of the Boardof I
materials for inclusion in our pro. Trustees,
- and utility bills.' Eastern Edison Russell A. Boss of Warwick, and Blackstone donate $1 to the grams and reviews each item Rhode Island, was elected to the fund for each $2 contribution before it is offered to the schools.
Our two bellwether safety pro- B ard of Trustees in August,suc-from our customers.
We launched a new program in grams: the third grade's "Electri- ceeding Robert 1. Dexter, who 1989. geared specifically to the cal Safety From A to Zap" and retired af ter 11 years as an EUA
-needs of senior citizens " Energy "Stav Clear, Stav Alive" for fifth Trustee. Mr. Dexter also retired
~
Bingo"-a form of esen body's graders continue in popularity. s a Directorof Eastern Edison fasorite game involving answers Since their inception in the late upon reaching the mandatory to energprelated quesnons-- 1970s, presenters have empha. retirement age for Trustees.
incorporates recom mendations sized the importance of electri. Mr. Boss is President of A.T.
cal safety to more than 150.000 Cross Co., the internationally by seniors f rom hud organua-students ( known Rhode Island based we reach students in non.
manufacturerof fine writing traditional.non classroom ways, instruments.
too. We participate in " Adopt.a.
School" programs inviting stu-dents tu shadow our employees
EA p.,s '
, q g > ,
1 x . John R. Stevens was elected to :
the Board of Trustees etfectise ;
q . January 1,1990; succeeding D.
V
^
Reid Weedon'twho had been a Trustee since 1972. Like Mr. Dex-Y ~ ter, Mr.Weedon retired from the A- Board. 1 Mr. Stevens was promoted effective January li1990. from Executise Vice President to Sen- .)
ior Executive Vice President and l' inc ,, , Chief Operating Officer of EUAJ 2s4c R d.n'd Arthur A. Hatch was promoted effective January 1.1990 from 26 u co~erc.at -President of Eastern Edison to 4 14 2c **'a' . Executive Vice President of EUA.
John D. Carney, who had been o,b.-
24
~
ac Vice President of Eastern Edison, 6 7c c3%., e. cine ut.i succeeded Mr. Hatch as Presi- ,
dent. Mr. Carney was. in turn. .
succeeded as Vice President bv . j
- l. Barbara A.Hassan.formerly ,;
Director of Customer Service for -
p 202c ro.i our EUA Service Corporation 17 8e Purchos. Pow.,
- i subsidiary. .
c=*.r op.,oi.on ond uo,ne.none.
ll 19 9c Robert P.Tassinari, who had ,
2ue ine.r.n ona p,.r., a ome.na,
~
bee'n Vice President of EUA. was E to... named Senlor Vice President.
s 2c o.pr.cio. ion and Arnortimtion David H. Gulvin succeeded a 2c ta<n.no,
~
William R. Bisson as President of 1 3
,p Blackstone effective November 1, .
,( upon Mr. Bisson's retirement - 1 Inconw/hrenw Dol;or after a 40 year career with the EUA System. He had been Presi- 'i dent of Blackstone Valley Electric. M since 1981.
Mr.Gulvin joined Blackstone in ,
1986 as Vice President He is suc-ceeded in that post byJohn S.
Meschisen, who had been Direc-tor of Engineering for EUA Ser- -(
' vice Corporation, y
p t
l- .,
)
3-n= - ,n...
m I; selected Comoolidated Financial Data
- a. .{,
e l' ears Ended December 31, .
).
' lin Thos. sands Excep: Cornmon Shares and -
1989 1988 1987- 1986 1985
' PerShare Amounts)
- Income Statement Datar Operating Revenues . $408,577 5374.138 $367,129 - $343,324 . $333,510 .
Operating income . 58,388 65,212- 62,195 61,725 48.072 '
Consolidated Net income 40,877- L 37,475 43,546- 32,490' -29.770 Balance Sheet Data:-
Plant in Service 687,833 671,192 653,371 614,330; 407,497-Construction Work in Progress 674,850 535,814 425,818 358,708 335,130 I Gross Utility Plant 1,362,683 1.207,006 1,079.189 973,038- 742.627
.' Accumulated Depreciation and
' Amortization . 203,990 187,049 173,813 157,813 143.497--
Net Utility Plant 1,158.693 1,019,957 905,376 815,225 599,130 Total Assets 1,376,032 1,202,635 1,071,21o 954,514 714,436, Capitalization: ,
Long Term Debt .
606,079 554,564- 479,217 423,789 ~ 285,491 -
Redeemable Preferred Stock 34,612 '34,614 29,852 29,852 31,457 Non. Redeemable Preferred Stock 15.079 15,079 15,079 15,079 15,079 -
Common Equity = 375,016 301.759 285.383 225,156 208.211 TotalCapitalization 1,030,786 906.016- 809.531 693,876 :540,238-
'Short Term Debt - 58.676 62,426 38.035 63,444 25.373l Common Share Data:
Earnings per Average Common Share $ 2.95 $ 2,85 $ 3.46 $ - 2.82 $ - 2.67 :
Average Number of Shares Outstanding 13,877,091 13,167,915 12,596,381 11.537,677 '11,18o,941-
~ Return on Average Common Equity 12.1% 12.8 % 17.1 % 15.0 % 14.9 %
Market Price-High 41 % 33 % 40%- 39 % -26%-
- Low 30n 21 % 24 25 % -lon
-Year End' . - 41% 31 % 28 38 % 25 %
. Cash Dividends Paid per Share $ 2.475 $ 2.375 $ 2.27 $ 2,15 $ 2.03 x
1g
)
e
] f -
'~ ~
- gesment's Discussion and Analysis of Operating RIvenues -
< c
- g ,1 Condition and Results of 0perations :
g
. The table below sets forth estimates of the factors Lw which caused Operating Revenues to change during the last twa years:
Cn I ated Net income for 989 increased $3.4 -
foc,upy,,,,, .
" From Prior nu,5 D i on or 9.19 over 1988 whi e 1988 decreased $6.1 d '." ""#"'"U 1989 10l l on or 13.99 from 1987. Earnings per average 19g 72L y share of 52.95 in 19f 9 increased 3.5% over Operating Revenue change attributable to:
.70 L y""
I s)w hile 1988 decr 9 ncrease principally rei ects additional earn.
eased Recovery Ioft.6%
Fuel Costs from 1987.The 5 (1.5) $(18.2) 197 Effect of Rate Changes 6.4 .-
'# rom f non. cash allowance for funds used during 130L truction (AFUDC) appli:able to EUA Power Cor. PPCA 14.8 5.3 tion's owners: iip in the Seabrook nuclear power kwh Sales 5.7. 19.8
'dr' F Unit Contracts 4.5 eet.in addition increased sales of electricity (1.1 )
new rates charged by our Massachusetts retail Non. Electric ' 4.5 1.2 j
.130 "97 - ubsidiary since January, had a positive impact on Total $34.4 $ 7.0 pp earnings.The dectease in 1988 is the result of 436-the Jeferral of a portion of non-cash AFUDC associ. The revenues attributable to fuel costs are the -
.acd with our ownership interest in Seabrook par- result of the recovery of such costs through the oper- t 91 yji3 offset by increases in kilowatt hour sales. ation of adjustment clauses. !
57 These changes in earnings per share are also influ- The effect of rate changes for 1989 is primariiv 79 - cwed b3 the increases in the number of average associated with an Eastern Edison rate increase,
,2 I I ,ummon shares outstanding of 5.4% and 4.5%. which was effective in January 1989 As of December
- 238 respectis ely- 31,1989, the EUA System has no base rate resenues j
'37'z -
subject to refund.
Aferralof AFUDC The revenue attributable to PPCA in the table The deferral of a portion of AFUDC associated with above reflects Blackstone's and Eastern Edison's '
h *,,, . ..ur imestment in Seabrook commenced January l' recovery of Montaup's purchased power capacity-Nu and is mandated by Financial Accounting Stan- costs through the operation of their Purchased Power 941,m
.ard 90(FAS 90). While the deferral resulted in a Cost Adjustment (PPCA) clauses. I 04[ '
") aduction in earnings of approximately $26.8 million i%ind $22.4 million for 1988,it has no impact Kilowatt. hour sales for 1989 continued to grow
. n our service territories, but at a slower pace than I
l
.n our cash flow. We had previously indicated that as 1988, This growth is demonstrated by the 5.1% and !
[#- the hcensing of Seabrook becomes more assured we I M 28.2% increases in kwh sales to our commercial wuld review the deferral requirement with the customers and our unit contract sales respectisely. I nient of restoring a portion of the deferred AFUDC Kilowatt. hour sales also were up in 1988 compared !
,carnmgs.Upon further review, the reversal of any to 1987.The commercial and residential sectors led i p uterred AFUDC for our EUA Power subsidiary will the way in 1988 with increases in kwh sales of 7.59 s knked to the ability of EUA Power to enter int ' and 65%, respectiveh.
wierm power contracts to sellits 140 megawatts The table below sets forth the percent changes in !
L : 3cabrook capacity at prices sufficient to recover !
kwh mies by class of customers for the last two L gmestment. Upon Seabrook's commercial opera' years:
,, o n likelv EUA Power will be selling short. term cum at rates that are lower than their actual fy,,u mqoy,,a g Ennn Prmr nun
^ he are aetisel marketing EUA Power's Sea.
3 4 uPacm in New England and New York and 1989 M
- l. Residential (0.3)G 6.3 G I' ' WIwnfident that EUA Power will ultimately Commercial 5.I 7.5 w uno such long. term sales contracts.althouch industrial (4,3) 0.7 l ynnot predict the timing of these contracts. See 5 Other 4.2 0.2 l wumon under EUA Power Sales below. Also see l te mmitments and Contingencies for fur. Total System Requirements 1.5 46 5- Unit Contracts _ 28.2 _5.9)
(_
_ Total Energy Sales 4.6 3.2 sm-
%/
'o Li
T Expenses _ Other Inter est Expense increased $5.7 raillion in
- The EUA System's inost significant expense items 1989 over 1988 and decreased ".3 million in 1908 continue to be Fuel and purchased power costs, from 1987.The increase in 15 39 is primarily the which comprised about 53.99 and 53.5% of total result of higher levels of sho' t-term borrowings at operating expenses for 1989 and 1988, respectively. increased rates and interest accrued with respect to g'
, Fuel expense for 1989 inereased $3.3 million or 3.4% the proposed tax disallowance of the Seabrook Unit U over 1988, primarth as a result of higheroil prices 2 abandonment loss (see "Seabmok Unit 2" under -
expet ienced durmg lu89. Fuel expense for 1988 Note J-Commitments and Contingencies for fur-decreased $15.1 niilhon or 13.49 f rom 1987.primar._ ther details).The decrease in 1988 is primarily the fly as a resub of lower oil prices experienced during ~ result of interest paid in 1987 on a Montaup rate 1988. Purchased Ibwer-Demand costs increased refund.
$20.3 million in 1989 oser 1988, primarily because of intiation continues to have an impact on the opera-additional purchases required as a result of higher tion of our System. At the Federallesel, wholesale system net generation due to the increased kw h sales rate making practices permit a forward looking test mention'ed abuse, additional purchases required period which enables us to anticipate inflationary under new purchased power contracts in effect in increases.The traditional use of an historical test 1989 ihat were not in ef feet in 1988,and tuo generat- period for retait rate making purposes at the state ing units being out of service lor scheduled annual level does not provide us this opportunity.-
maintenance for two months in 1989. purchased The tax effect of the cumulative amount of tau power-Demand costs in 1988 increased $10.2 million book timing differences, w hich has e previously o r '" C r mh vG..mmt kwh sales and addi- been flowed through, has not been recorded inas-tional demand charges from pilgrim Unit I which much as the tax liability on those flow through tim; was out of service for all of 1988.The 1989 increase in ing differences is recosered through rates as the other operation expenses reflects additional amorti- timing dilferences reverse.The Tax IReform Act of eation of costs previously deferred, recovery of which 1986 reduced the federal statutory corporate income commenced with the implementation of Eastern tax rate from 46% to 40% in 1987 and to 349 in 1988 EdisonN 1989 rate increase. costs related to an and ttiereafter. EUA has determined that the reduced increase in our work force and increased operating tax rates will cause the regulated subsidiaries' accu-costs resulting from EUA Cogenex's growing busi- mulated deferred income taxes to be adequate to ness activity. In addition,each year's increase provide for all timing ditferences, including those O -
reflects the effects of intlation on labor, materials and other costsm that were previously flowed through.
Financial Condition AFUDC represents a non cash element of income.
AFUDC increased $24.8 million in 1989 compared to The EUA System's need for permanent capital is
- 1988 primarily as a result of an increase in the base primarily related to the construction of facilities to which the AFUDC rate is applied, required to meet the needs ofits existing customers Long-term debt interest increased $7.8 million in and to meet the future requirements of these cus-1989 oser 1988 primarily as a result of EUA power's tomers as uell as new customers. For 1989,1988 and pa> ment of interest on its 17%9 Series B Secured 1987, the EUA System's cash construction expendi-Notes with the issuance of 17%9 Series C Secured tures(excluding AFUDC)were $75.9 million.5653 Notes instead of cash. (See "EUA Power" under million and $68.9 million, respectisely Of these -
Note J-Commitments and Contingencies for fur. amounts $26.9 million. $29.5 million, and $27.8 ther detailsL The 1988 increase over 1987 was again million, respectively, relate to cash construction related to the jouanseof Series C Secured Notes for expenditures on Seabrook, interest pas ments on the Series B Secured Notes The System expects cash construction expendi-and the issuante tw Elb\ Sers ice Corporation tures to decrease to about $64.7 million in 1990 prin-ol $20.000.000 oi 10 Sn Secured Notes.These cipally due to the completion of Seabrook. Cash con-inertases were panialh offset b3 Eastern Edison's struction expenditures for 1991,1992 and 1993 are ability to retinance certam of its high cost securities estimated to be approximately $59.3, $57.5 and in 1988.(See Consohdated Statement of Capitaliza. $60.8 million, respectisely.
tion for detailst Amortization of debt expense and Traditionally cash construction requirements not premium increased $14 million in 1989 0ver 1988 met with internally generated funds are obtained while 1988 was sirtually the same as 1987.The through short term borrowings which are ultimately increase in 1989 was primarily a result of the pre. funded with permanent cap;tal. In 1989 internally mium paid on the redemption of EUA's 10%G Senior generated funds available after the paymer of divi-Notes.(See further discussion on permanent financ- dends amounted to $32.7 million.or43.2% of the ings below.) cash construction requirements. In 1988, such inter-nally generated funds amounted to $39 million.or 59.6% of the cash construction iequirements.
The System expects that in 1990 it will internally generate a somewhat lesser percentage of its e .i i con <troceinn remnin m. m< 'han it did in Iom nri.
w e
g, p]
' N w Accounting St:ndards ments of EUA'Cogenex and the possible sale of EUA1 . . .
power's Seabrook capacity at rates lower than actual - See Notes A and J of Notes to Consolidated Financial l
Statements for information pertaining to Financial A costs.(See EUA Power Sales belowd it is expected that the System's internal cash generation will be in Accounting Standard (FAS) 96 " Accounting for edess of System cash construction expenditures income Taxes l' a new accounting standard which g [' once EUA Power enters into long term power con- has been issued but is not required to be imple-tracts for its capacith .
mented until 1992.
Permanent financings during 1989 included $15.0 million Series B First Mortgage Bonds issued by EUA Power Sales placksione. $53.7 million in proceeds from an EUA EUA Power expects to begin selling its 140 megawatts ,
of Seabrook Unit I capacity as of the commercial - i public issue of L5 million common shares and $13.2 operation date of Seabrook Unit L As of the balance ,
million from ihe issuance of 391.000 common shares i under our Dividend Reimestment and Employee sheet date. EUA Power has not entered into any Savings Plans The proceeds from Blackstone's issue power contracts for the sale of its power. Manage-were used primarily to ret.y short term bank bor. ment believes that it is likely that initially EUA- ,
~# Power will be selling its capacit3 at short term rates.
. rowings and pay a sinking fund requirement on its
- Series A Bonds due in 1989.The ptoceeds of the EUA that will be lower than EUA Power's actual costs. As . !
previously stated, manacement belieses that EUA l
' issues of common shares were used to redeem EUA's 10m Senior Notes: repay short term bank borrow. Power will ultimately enter into long term power ings; make investments in or loans to subsidiary sales contracts at prices sufficient to recuser its companies and for other corporate purposes. EUA investment,although the timing of these contracts ;
cannot be predicted.The sale of EUA Pomer's capac- i i-- Power issued $55.3 million of its 17%G Series C Secured Notes in 1989 in lieu of making cash interest ity below its cost for an extended period of time could have a materialimpact on future EUA System payments on its Series B and Series C Secured Notes.(See Consolidated Statement of Capitaliza. operating results.(See"EUA Power" under Note J-Commitments and Contingencies for further 4 tion for details.)
In addition to construction expenditures. pro. detailsa !
.iected requirements for scheduled sinking fund pay. i Report of Management ments and maturities of securities in 1990,1991,1992 and 1993 are: $3.0 million. $4.1 mi!! ion. 5103.7 mil, The management of Eastern Utilities A>sociates is [
responsible for the consolidated financial statements ,
tion and $219.1 million respectively.The maturity
{ )- nd related mformation included in this annual - !
of EUA Power's Series C Secured Nereuf $99 6 mil repon T he hnancial statements are prepared in lion in 1992 and its Series B Secured Notes of $180.0 l'ecordana with generally acecpted accounting
. million in 1993 are expected to be refinanced at or 4
before their respective due dates at marke' rates pre.
Nncif et l oppheable to rawremilated utilities and vailing at that time which are expected to be signiti.
include amounts bvw on ik om estimates and i mdgements of on gument ping appropriate con-cantiv lower than their c urrent cash interest rme at 17%d,(See also Note J-Cemmitments and Cont;n. sideration to mateduhn Fmanciat information indoded el ewhe re ia de annual report is consistent
. gencies for further information concerning dUA w ini che fincncial smtements. ;
Poweri need to carry out additional financing in M'e F0A Svstem maintains an accounting system i 1990.)
in April 1989. EUA commenced cash tenderoffers M d teo 9 stem of internal controls which are ;
3C'ded to provide reasonable assurance as to the !
to the shareholders of U NITIL Corporation R!NI flLi rei; ability of financial records and the protection of ,
and Fitchburg Gas and Electric Light Company ~
avets.The System's staff of internal auditors con-(FG&El.TI.e tutal amount of funds required to ducts reviews to maintain the effectiseness of inter-purchase all os the out tanding shares of UNITiland nal control procedures, FG& E and m nas relacd espenses is estimated to be Co pers & Lybrand. the S 3stem's independent cer4 ar.proximateli C;7 nillion EUA has arranged a 575 LUied public accountants. is engaged to examine and l! million term +un with a maior New York bank to express their opinion on our financial statements.
provide funds. if necessart tw these proposed acqui-sitions. In addition. EUA cannot predict Ihe timing Their examination includes a res iew of internal con.
trols to the extent required by generally accepted
?.'*
of required regulatorv approvals needed to consum, mate these transactions. For more details regarding auditing standards.
The Audit Committee of the Board of Trustees, the UNITIL and FG& E proposed acquishions. refer w hich consists solely of outside Trustees, meets with to" Mergers and Acquisitions"in the Resiew of management. internal auditors and Coopers &
Operations section of this report.
6l Lybrand to discu3s auditing, internal controls and financial reporting matters.The internal auditors and Coopers & Lybrand have free access to the Audit Committee without management present.
.M ir~
a 1
,n ,
~f_
.ik
'. Q Comeoudatedlocome Statesment l .h g b l . .T - : Years Erided December 31, .-
f V 1989 1988 _1467-lin Thousands Eseqr tununton Shares and PerShare Amounts) -
$408,577 ^ $374,128 $3p7,1291 l OperatingRevenues 1 -
, Operating Expenses:
100,462 - 97,202' 112,264
. Fuel . 57,892
.88,430 68,134 L i ' Purchased Poiver Demand-80,9511 - 69,156 62,280 p Other Operation !
18,332 ~ 17,285 14,668:
L, - Maintenance , . 21,964i 25.906 22,951 2 Depreciation and Amortization
-16,498 15,402 -15,155 Y Taxes-Other Than income 19,610 18,796 20,711.
' ';t jncome and Deferred Taxes 308,926 304,934
~
350,189 Total Operating Expenses 58,388. 65,212 62,195 Operating income 1,670 1,372- 1,480 Equity in Earnings of Jointly' Owned Companies Allowance for Other runds Used During Construction 4,785 1,591 19,534
, Otherincome (Deductions)-Net . 2,119 961 (1,047) -
. 66,%2 69,136 82,162 1ncome Before Interest Charges '
Interest Charges:
87,906 - 80,140 '63,555 Interest on Long-Term Debt Amortization of Debt Expense and Premium 3,605 2,230 2,101 11,034 5,384 7,198' OtherInterest Expense-
- Allowance for Borrowed Funds Used During Construction (Credit) (80,592)* (59,025) (38,393) 21,953'- -28,729 34.461 Net Interest Charges 45,009 40,407 47,701 Income Af terInterest Charges .
4,132 2,932 , 4,155 Preferred Dividends of Subsidiaries Consolidated Net income 5 40,877 $ 37.475 - $ 43.546 13,877,091 13.167,915 12,596.381
' Average Common Shares Outstanding Consolidated Earnings Per Average Common Share $2.95 $2.85 $3.46
$2.475 $2.375 $2.27 Dividends Per Common Share Consolidated Retained Earnings Stateinent
. Years thuded Dwember 31, 1989- 1988 1987 lin Thomand5i - ,,
Conholidated Retained Earnings-Beginning of Year 5 86,077' $ 79,762 $ 64,698 40,877 '37,475 43,546 Consolidat'e d Net income 126,954 117,237 108,244
- Total ,
34,272 31,160 .28,482
- Dividends Paid-EUA Common Shares Consolidated _Reiained Earnings-End of Year 5 92,682 $ 86.077 - $ 79.762 -l 1
t-
- e ' The accontmmvung notes are an integralpart of thefinancial statements.
g 1
-6
p
' demolidated St0t3nne2t of Cash Flawa '
. ; yean Ended December 31; 1988 1967
- Iln Thousandst _ , _ _ _ 1989_
,t I.h
/J he Flow from Operating Activities:
$ 45,009 ' . $ 40,407 _$ 47,701 Income AfterInterest Charges
- Adjustments to Reconcile Net income to Net Cash Provided from Operating Activities:
~
Depreciation and Amortir.ation - 32,972 25,549 24,210 -
Amortiration of Nuclear Fuel 1,698 1,742_ _1,957 Deferred Taxes - 25,328' 25,056 ~ -15,757 investment Tax Credit. Net (8,348) (11 375) 6,578 OilConservation Adjustment 4,699 5.723 9.239 Al_lowance for Funds Used During Construction (85,377) (60.616) ;(57,927)
Non Cash Interest Expense 54,850 46.824 1,352 Other-Net 6,465 -- (8,812 ) (2,357)
Changes in Operating Assets and Liabilities:
Accounts Receivable' (8,187) (8.564) (7,331)-
Materials and Supplies (1,501) -. (292)' 1,310 Accounts Payable 2,654 1,388 3,481 Taxes Accrued 1,899 (3,893) 914 Oth_er-Net _ 3,437_ J ,328) _ ( 1,716) -
Net Cash Provided From Operating Activities 75,598 - 45,809 437118 bsh Flow from Investing Activities:
Construction Expenditures (75,861) (o5,307) (o8,929)
Increase in Other investments - (17,160) _(630) . (1,103)
Net Cash Used in Investing Activities (93,021) _ (65,937) (70,032)
Cash Flows from Financing Activities:
Issuances:
.I I Common Shares 66,857 10,067 45,260 Preferred Stock 20,000 Long-Term Debt-- 15.000' 90,000 - 10o,5o2 Redemptions:
Long-Term Debt (19,875) (80,875) .(53,125)
Preferred Stock (15,000)-
Premium on Reacquisition and Financing Expenses (1,628) (4.222) (4,808)
EUA Common Share Dividends Paid "(34,272) - (31,lo0) (28,482)-
Subsidiary Preferred Dividends Paid (4,132) - (2,932) (4,155)
Net ( Decrea,se) Increase in Short. Term Debt _(3,750) _ 24,391, _ (25.409)
Net Cash Provided From FinancingActivities 18,200 ._10,2_69, _ 35,843 Net increase (Decrease)ln Cash 777 (9,859) 8,929 Cash and Temporary Cash investments at Beginning of Year _
5,014 _ _ 14_,873. _ 5,944 5 5.014
~
Cash and Temporarv Cash lmestments at End of Year $ 5,791 $ 14,873 Cash paid durmg the scar for:
Interest $ 40,271 $ 37,537 $ 59.984 Income Taxes $ 6,872 $ 7,183 $ 5,921 The accompanvine notes a re an aniecralpart of the financial statements r
7
]!J '
I
.3 I
?
,40 s ,
1 7
I ; ', q . 1 . ,
h " Teasolidated Balance Sineet" d4 lY . Decerrther 31,' .
&,, !iln Thainand&'
+ - , _ . . -
1989 1988' 4
- .Annets =
/ Utility Plant ~and OtlNr'imesink niv . _ . .
- Utility Plant in Sersice. - 5: 687.833 5 671.192
'203,990 ~ 187,049
{7 e
i less Accumulated Prmpion for:lh preciation and Amortization '
L Net Utihts Plant in Sersice ' 483.843 484,143 ' '
b' , Construction Wor k in Pnytess t Notes t and J) _674,850 , 535.814. ;
1,019,957 I ENet Utiliti Plant 1.158,693
" O.L' Nonutility Propert,s -Nei '25,883 15,068' i LIEvestments in Jointiv On ned Companies : 16,766 9,409
[
Decommissioning Fund 10.000 10.000 ;
.a Not'es Receisable 11.466 905 i Other' .-
l.251- 1.801 k jTotal Utilitv Plant and Other imestments 1.224,059 1,057.200 3,
. = Current Assets!
Cash and Temporary Cash Imestments 5.791 5.014 ]
Adeotints Recenable:
Ctistomers. Net 42.386 32,542 -
Accrued Unbilled Revenues .9,416 7,2 I I Other . .
12.849 16,695 . ,
Materials and Supplies (at aierage cost):
Fuel 7.917- 6.8e7 Plant Materials and Operating Supplies 8,4171 7,966 ,
llb i OtherCurrent Assets 6,111 5.955 ^ q
~ TotalCurrent Assets' 92,887 ~ 82.250. ; j Deleired Debits: .- t 1 ; Unamortired Debt Expense 18,375 20.559
_/ g'p..Extraorghnary Property Loues 6.175 .7,861 ,
34.536 34.765 '
,' ' wJ 'Other Deferred Debits
. Total Deferred Debits 59,086 63.185 Total Asseis 51.376,032 $ 1.202.635
- Llibilities and Capitalization ~
j Capitalitation:
- , ! Common EquitV 5 375.016 5 301.759
, Non Redeemable Preferred Stock of Subsidiaries 15,079 15.079
' Redeemable Preferred Stock of Subsidiaries-Net 34.612 34.614 -
- _ q (onyJern(Debt-Net . 606,079 554.564 i Total Capitalization 1,030.786 906.016
- Current Liabilities
Notes Pasable-Banks 58,676 62.426 j
~
Long-Term Debt Due Within one Year 3.000 4,125 Accounts Pas able 28,506 25.852 Customer Depouis 2,238 2,120 Taxes Accrued 3,929 2,030 l, Deferred Taxes 752 1,505 -
L Interest Accrued 16.097 10,821 y l : O'her Current Liabilities 6,603 2.814 j TotalCurrent Liab.lities 119,801 117.693 i Deferred Credits:
Unamortised imestment Credit 28,109 36.457 Other Deferred Credits 54,478 26.041 Total Deferred Credits 82,587 _
e2.4,98 P n Accumulated Deferred Taxes _
_ 142,858 116.428 j Commitments and Contingencies (Notes B and J) _ _ _ _ _ , _
Total Liabilities and Capitalization $ 1.376.032 $1.202.e35 l
l= ,
The accontremrung notes are an meegralpart of rhe tinancnal staternents.
WV r c. a> ,
] ;r , , q ,' <
< m. -
6, o , M.(if e ' C,omestidated Ctatimiest of Ocpttalisatiss >
3
,;"- b 4,; ollar (j)ecemYr Antourtis its31,
< TImmandst -. 1989^ g9gg .
O
- n. -
n t; {(l' astern Utilities Associates:
r '
v, Common Shares:
- N - 55 par salue. 36.000,inuhares authorized.15.262.237 shares y outstandmg in 194 and 13.371.252 shares in 1988. _5 76.311 . $ oe,sse yq; = Other Paid in Capital 208.284 (2.261) 150.882 6 -
1 Comrnon Share Espenw - (2.056) -
, Retained Earnings ~ 92.682 86.077 n,
y c _- ,. -
375.016
. " Total Common Equity _ 36.4% 3 _01.7 _54_333.y; Preferred Stod of Subsidiaries: '
, Non redeemable Preferred:.
. Blackstone Valley Electric Company:
' 4.259. 5100 par value 35.000 shares (11 3.5001 3.500 -
15.609.5100 par salue 25.000 shares (t) 2.500 2.500 Premium ' 129 124' Eastern Edison Company 4.t+49,5100 par s alus- 60.000 shares (1) 6,000 , 6.000 -
,. 3.-
- ~ '
- 8.32% $100 par salue 30,000 shares (1) 3.000 - 3.000 (50) - (50) ~
m; .
Espense. Net of Premium
= 15,079 1.5 -
15.079: 1.7
- < -- Redeemable Preferred:
Eastern Edison Company:
- 9.004, $ 100 par salue 150.000 shares (l) 15.000 15.000 L9.80%,i100 par value 200.000 shares (l) > 20.000 20.000 =
i$
Expense. Net of Premium . .,
-(388) _ (38e) ,
- 34 612 3.3 -.
34.6 .14-lat Long Term Debit Eastern Utilities Amiciates:
, . Sdnior Notes 10%9 (10%% prior to July 1988)due 1999 :16.875
- EUA Service Corporation:
20,000 20.0tki 6' 10.29 Secured Notes due 2008
' L EUA Power forporation:(Note J)
'l7n% derles B Secured Notes due 1993 180.000 I80.000
-17%% Series C Secured Notes due 1992 99.597 44.336 ..
H Hlackstone Valley Electric Company:
L First Mortgage Elonds:
^ - 14%% due 1995(Series A) 18.000 21.000
- 9%% due 2004(Series H) 15.000 Variable Rate Demand Bonds due 2014 (2) 6.500 = 6.500 e
' Eastern Edison company:
- First Mortgage and CollateralTrust Bonds:
'4 9%% due lu93 30.000 - 30.000 4%9 due 1993 5.000 5.000
$' i 7.000 i! ! 6%9 due 1997 7.000
-35.000 35.000 10'A due 1997
-9%Q due tw8 40.000 40.000 8h9 due iW 5,000 5.000 7%9 due 2002 8.000 8.000 10.000 ;10 000 8%'i due 20tO 9h% due 201e $5,000 55.000 35.000 35.000
. 1in due 2017 Pollution Control Resenue llonds.
10%9 dut 2008 40.000 40.000 (18) (22)
Unamortized (DncutmO Premium-Net 609.079 ' 558.689 3.000 4.125 Less Ibrtion Due Within One Year 606.079 58.8 554,564 el 2 Total
$1.030.786 100.0% $406.016 10009
. Total Capitalization Il} Authori:ed and Outstandmg. [
(2I Wei titted as erage mterest rate u a s 6.7% lor 1939 and 5.7% for 19%. ;
The accompanymg notes are an inimalpart ut the tinancial statenwnss.
m,p
.o Netblear Fuel Disposal a nd Ndelear Plant Decommis.
Notes t $ Consolidated Financial Stateunente December 31,1939. /9u, and 1987 sioning Costs The Nuclear Waste Policy Act of 1982 , 3 establishes that the federal government is respon. *
~
sible for the disposal of spent nuclear fuel. Under i (A) Summary of Significant Accounting Policies:
the pmvisions of this act, the Federal government Basis ofconsolidation The consolidated financial - requires hiontaup to pay a fee based on its share of a ~ statements include the accounts of Eastern Utilities .
the generation from the htillstone 3 nuclear generat.
Associates (EUA) and all subsidiaries. All material ing unit. ht ntaup is recovering this fee through its intercompany transactions between the consoli-dated subsidiaries has e been eliminated. f"CI"di"SI*""ICI""$
Als ,M ntaupis recovering through rates its System ofAccomm:The accounts of EUA and its share of estimated decommissioning costs for hiill.
consolidated subsidiaries are maintained in accord- stone Unh 3E ntaup's share of the currently
-ance with the uniform svstem of accounts prescribed all wed estimated total costs to decommission the
' by the regulatory bodies having jurisdiction. unit is $7 A n illion in 1986 dollars, which is based on Jointiv Omried Contpaniest Montaup Electric studies performed by Northeast Utilities, the lead.
Company (Montaup) follows the equity method of ownerof ahe umt.
accounting for its investments in jointly owned com-Operating Revermes: Res enues are based on billing panies including four regional nuclear generating rates authorized by applicable federal and state reg.
companies. Montaup's investments in these compa-tdatoiy commissions. Eastern Edison Compev nies range from 2.50 to 4.50 percent.Montaup is (Eastern Edison)and Blackstone Valley Electric entitled to electricity produced from these facilities Company (Blackstone), the retail subsidiaries, follow based on its ownership interests and is billed pur-the policy of accruing the estimated amount of suant to contractual agreements which are approved unbilled base rate revenues for electricity provided f: by the Federal Energ*v Regulatory Commission at the end of the month to more closely match costs h
(FERC). and revenues. In addition they also record the differ-Montaup also has equity investments of 3.27% in ence between fuel costs incurred and fuel costs -
each of two companies which own and operate tie billed. Montaup and Blackstone also record the dif-lines used to transmit hydroelectric power between Ierence between purchased power costs incurred and the Hvdro-Quebec electric system and New England.
Utility Plant and Depreciaiion: Utflity plant is 0I'I'O' Federallncome Taxes:The general policy of EUA -
stated at original cost.The cost of additions to utility and its subsidiaries with respect to accounting for plant includes contracted work, direct labor and federal income taxes is to rellect in income the esti-material. allocatable overhead, allowance for funds mated amount of taxes currently payable and to pro-used during construction and indirect charges for vide for deferred taxes on certain items subject to engineering and supervision. For financial statement timing differences to the extent permitted by the purposes, depreciation is computed on the straight- varmus regulatory commissions. See Note B for -
line method based on estimated usefullives of the details f major deferred tax items. As permitted by s arious classes of property. Provisions for deprecia, the regulatory commissions it is the policy of the tion,on a consolidated basis, were equivalent to a subsidiaries to defer the annual investment tax cred-composite rate of approximately 3.37c in 1989 and its and to amortize these credits over the producthe 1988 and 3.29 in 1987 based on the average depreci-lives f the related assets.
able property balances at the beginning and end of In 1987, the Financial Accounting Standards each vear, Board issued Statement No.96," Accounting for Alllmunce for Funds Wed During Construction Inc me Taxes"(FAS 96), which retains the current (AFUDC): AFUDC represents ihe estimated cost of requirement to record deferred income taxes for borrowed and equits iunds used to finance the EUA temp rary differences that are reported in different Systemi construt tion program. in accordance with years I r financial reporting and tax purposes; how-regulatory accountmg. AFUDC is capitalized,as a ever, the methodology for calculating and recording
, cost of Utilitv Plant.in the same manneras certain deferred income taxes has changed. Under the liabil-general and administrati e costs. AFUDC is not ity method adopted by FAS 96, deferred tax liabili-an item of current cash income, but is recovered ties or assets are computed using the tax rates that over the service life of utility plant in the form of will be in effect when the tempornry differences increased revenues collected as a result of higher reverse. However, for regulated companies, the depreciation expense. The combined rate used in changes in tax rates applied to accumulated deferred calculating AFUDC was 22.057c in 1989,21.807c in income t xes may not be immediately recognized in 1988 and 16.597c in 1987. In accordance with regula-perating results because of ratemaking treatment tory authority, Montaup and EUA Power Corporation and provisions in the Tas Reform Act of 1986. EUA
. - (EUA Power) provide deferred income taxes on the ust adopt FAS 96 no later than 1992. EUA believes borrowed funds component of AFUDC. See Note J with respect to a change in accounting in 1988 for AFUDC.
m
' - ~ - - - - - - - - - - - - - _ - _
m j, y ,"
i
. 3 d: '
bb d g,aMption of FAS 96 will h' ave a podtive non,. cash ,
Cas/iand Temporarf CasIi lm estments: EUA con.
"' siders all highly liquid investments purchased ;
[hmPact upon in thethe sear results of operations of approxi
' '.E ately $15 million of adoption assuming .with a maturity of three months or less to be cash .
. equivalents.
t that the federalincome rate remams at 34%
- , ; (g)lncome and Deferred Tasest components of inkonw and deferred tax expense for ihe 3 ears 1989,19M and 1987 are as follows
1 L.f,)Thosnd'! d ip_ , _ _
1989 1 1988 1987 R! Fedirali . . .
Current ^ .$ (200) . $ 2,798. $(3,523) h ; pefe'r red . .
.25,197 24,082. 14,613-Imestm_ent_ Tax Credit. Net - (8,347) (11.375) 6,578
' 16,650 ~ 15,505 ~ 17,668 State:
Current E 2,285 ,2.318- 2,247..
Defernd_ 675 .973' 796 t
2,960 3,291 -3,043-19,610-chargejl to Operations = 'I8,796 20,711 l _
charged to other income:
u Current - 2,451 480 417)
Deferredi (544) 348 1.907 480 _3p '
,} Total' $21,517 ~ $ 19.276 $21.042 t
. Federal tax expense was less'than the amounts com-yy puted by applying Federal income tax statutory rates 4
io book income subject to tax for the following reasons:
h;d:
- sier (Infujdn 1989 1988 -1987 l: Federal income Tax Computed at Statutory Rates $21,782 $ 19,448 $26.569 -
I $. (Decreases) Increases in Tax From:
Equity Component of AFUDC (1,627) (541) (7,814) lO
- g Depreciation of Equity AFUDC 214 322 1,353 (1,989) -(3,411) (2.184) hifL Oth_er _,
Federal Inconie Tch Expense $18,380 $ 15.8 I 8 ' $17.924 :
i* (the provision foi deferred taxes resulting from timing f ditferences is comprised of the following:
\l
[j; , hr 17nnpurdd 1989 1988 1987.
O Ewess Tas Depreciation $ 4,726 $ 4,581 $ - 6,881 F - Estimated Unbilled Revenue (639) (1,076) (1,255) 160-f Unhilled Fuel Cost 3 Debt Component of AFUDC (258) 29,539 (179)~
22,366 14.090:
l Abandonment Losses (461) . (662) . '(590)
M Capitalized Overheads (931) 1,788 2,350 796 L$ Effect of State and Local Taxes 675 (1,534) 973 (227) (174)
' Deferred Charges Alternative Minimum Tax (4,723) (3,322) (6,807) other-Net (1,066) 814 306 m
R ' Total
$25,328 $25.056 $ 15.757
' The tax effect of the cumulatise amount of timing from customers when the taxes are ultimately pay-
~
l 4: differences at December 31,1989 for which deferred able.(See also Note A) federal income taxes have not been provided has not EUA has approximately $ 16 million of investmem p
been recorded because the regulatory process is tax credit carryforwards which expire between the t .etpected to allow such amounts to be recovered years 2001 and 2004.
A;- -
.I
, ,- s . ~ . -
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(C) AcquisillomL y _.
. (E) Redeem bic Prehrred Stockt
- EUA and NECO Enterprises Inc.(NECO) have - _
Eastern Edison's 9.00% and 9.80% Preferred Stock
, entered into a Stock Purchase Agreement whereby, issues are entitled to mandatory sinking funds sufli;
- EUA agreed to purchase from NECO allof the com- cient to redeem 6,000 and 8,000 shares, respectively,-
, ' mon siock of its wholiv; owned subsidiary Newport, during each twelve month period commencing July k i ; Electric Corporation i New port). In return EUA 1,1991 in the case of the 9.00% issue and September 1 would inue io NECO $40.000 EUA common shares. I,'1993 in the case of the 9.80% issue,
, DThe purchase is espected to he ratified by NECO L _ The redemption price for each issue is equal to the shareholders atUp' eeial meeting, currently sched- initial public offering price ($100) plus accrued divi-( uled for March 15,1990. Assuming such ratification ' dends. Eastern Edison also has the non-cumulative occurs and all regulatory apprm als are received, option of redeeming an additional 6,000 and 8,000 EUA expects to co'mplete the acquisition by the end shares, respeco el,. luring each period at such -
' of March and will account for it using purchase price. . .
accounting. In the event of involuntary liquidation the redeem.
' Newport is a Rhode Island corporation and an able preferred stock of Eastern Edison is entitled to 1 electric utility conipany serving a retail territory. $100 per share,in the event of voluntary liquidation, comprising thecommunitiesof Newport, James- 'or'if redeemed at the option of Eastern Edison, the town, Middlelow n and Portsmouth, all located in 9.00% issue is entitled to $109.00 prior to July 1,1991 -
.the County of Newport, Rhode Island, an area of and the 9.80% issue is entitled to $109.80 prior to'
- approximately 55 square miles with a population of September I,1993,The redemption premium -
apprmimately 70,000. reduces in subsequent years.
The aggregate amount of redeemable preferred (D) Capital Stock: stock sinking fund requirements, for each of the lise '
. The changes in the number of common share .out- years following 1989 are: none in 1990, $600.000 in -
i standing and the increases in other paid in capital 1991 and 1992 and $1,400,000 in 1993 and 1994, during the years ended December 31,1989,1988 and
- 1987 were as follows (dollard in thousands)
- (F) Long Term Debt .
The various first mortgage bond issues of Black-'
h avroi co m m uu m m i n d stone and Eastern Edison are secured by substan-tially all of their utility plant. In addition, Eastern fnE h $ Pul5lic P Edison's bonds are collateralized by securities of
_ u ._.Jdn' .
la.l?L_.y Par _ capual 1989- 390.985 1,500 000 $9.455 $57,402 Montaup in the principal amount of $287.897,828.
1988- .405.190 2.02o 8.041 Blackstone's Variable Rate Demand Bonds are col-1987 289,833. 1.000.000 b,449 38,81I lateralized by an irrevocable letter of credit which expires on December 6,1992.The letter of credit per-
' in the esent of involuntary liquidation the non- mits extensions on an annual basis upon mutual redeemable preferred stock of Blackstone Valley agreement of the bank and Blackstone.
Electric Company (Blackstone)and Eastern Edison . Pursuant to an exchange offer EUA Power cur-
-Compimy tEastern Edison)is entitled to $100 per rently has outstanding $180.000,000 of Series B share. In the esent of voluntary liquidation,or if Secured Notes and $99,597,200of Series C Secured
- redeemed at the option of those companies, the non. Notes. (See also . Note J-Commitments and Contin-redeemable preferred stock is entitled to: Black- gencies for further information concerning EUA atone's 4.259 issue. $1000: Blackstone's 5.60% Power's exchange offer and its need to carry out
- issue,5103.82; Eastern Edison's 4.64% issue, additional financing.) ln connection with the origi-
$102.9A; Eastern Edhoni 8 329 issue, $103.54, nal private placement of the Secured Notes and the
. prior to October 1, loo 3 and at reduced premiums subsequent exchange offer, EUA Power incurred fees in subsequent scar, of $11,300.000.These costs have been deferred and UndeE the terms and pmvisions of the issues of will be amortized to expense over the life of the prelerred stock vt Blackstone and Eastern Edison, Series B Secured Notes, certain restrietions are placed upon the paymeni of The Series B Secured Notes, which mature May 15,
. dividends on common stock by each company. At 1993, are non redeemable prior to November 15,1991 December 31,1989 and 1988 the respective capitali- and on or after that date are redeemable at 100.5% of zation ratios were in excess of the minimum which principal amount during tbe six month period end-would make these restrictions effective. ing May 14,1992, at 100.25% of principal amount during the six month perfod ending November 14
- - - 1992, and at 100.125% of principal amount there-after The Series C Secured Notes, which mature Nmember 15,1992, are non redeemable prior to maturity.
- n ; }
J in Sept:mber 1989, Bl;ckstone issued $ 15,000,000 . to 1(re of the aggregate principal amount of bonds 1 1
['
& principIl amount of 9.5'7c Series B First Mortgage j previously authenticated and delivered. Eastern .
~j. . Bonds due 2004?the proceeds of which were used to'
~
. Edison has satisfied this sinking fund requirement .
. repay its notes payable and sinking fund require- for 1989 under alternate provisions of its Indenture s.'
7 - ment on its Series A Bonds due in 1989. by certifying available property additions to the t f The aggregate amount of current EUA System Trustee.
L cash sinking f und requirements (which excludes amounts that may.be satisfied by available property ' (G) Lines of Credit:
- additions)and vitaturities for long-term debt, for = EUA System companies had unused short term each of the five 3 ears following 1989 are: $3.000,000 lines of credit with various banks of approximately in 1990, $4,100.000 in 1991, $103,697,000 in 1992, $56,324,000 at December 31,1989 In accordance
$219,100,000 in 1993 and $4,100,000 in 1994. with informal agreements with the various banks, Under terms of the Indenture securing its various commitment fees are required t'o maintain the lines bond issues Eastern Edison is required to deposit of credit.
annually with the Trustee cash in an amount equal (II) Jointly Owned Facilities: e At December 31,1989 EUA Power and Montaup
- owned the following interests in jointly owned elec-
~
tric generating facilities (dollars in thousands):
Percent '
Accumulated - Net . Const ruction j.
Plant in Depreciation Plant in Work in .
-j
. Ow ned Se: s ice and Amurtisation Sers ice Pt ogren
- EUA po";er; j Seabrook Unit i 12.13?c $ 213' .$ -
$ 213 $470,245
.Montaup: L Canal Unit 2.' 50.009c 65,725 ~ 31,534 34,191. -: L Wyman Unit 4 1.969c 4.021 1,332 2.e89 - ,
i Seabrook Unit 1 2.90'7e 63 18 45 198,961- .
[ 7 Millstone Unit 3' 4.0 l #/c 185,887 19,237 160,o50 ,51 4
/
4
'~
The foregoing amounts represent Montaup's and incur operating and maintenance expenses for Sea- H
- EUA Power's interest in each facility including brook Unit 1 in 1989 since the unit is not yet in ser.
nuclear fuel. Financing for any such interest is pro. vice. See Note J-Commitments and Contingencies vided by the respective company. Montaup's and . for information with respect to recent developments .
1
- EUA Power's share of related operating and mainte. affecting the Seabrook project, including the cancel. .f iiance expenses with respect to units reflected in the lation of Seabrook Unit 2, ;!
"" ~
table above are included in' the corresponding oper-g' ating expenses. Montaup and EUA Power did not 1
]
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i i
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L 1) peco' m missioning Fund: . after th'e motions are filed, but no later than March M(Under the agreements of purchase and sale with15,1990,it
, is expected that the Massachusetts Attor.
A tch of the five sellers from which EUA Power ' ney General and other intervenors will file such stay
' purchased its Seabrook interest; EUA power was motions with the Court of Appeals. Unless the N RC's required to establish a fund of $10,000.000 to secure Order is stayed by the Court of Appeals, Unit I will ~
payment of part of its shar e of decommissioning - begin the start up process that will lead to commer. I'.
' costs of Seabrook Unit I and anycosts of cancella- ~c ial operation.There are pending before the NRC tion of Unit I or Unit 2. Under an agreement entered - and its adjudicatory boards, a number of motions =
lintoamong EUA Power,a bank and theotherjoint and appeals relating to certain issues with respect to owners of Seabrook, the bank is empowered to use Unit 1, which,if adversely decided,could affect con.
securities of the fund should_a default of EUA Power tinued effectiveness of the full power license. Neither '
occur'with respect to its obligations to pay such Montaup nor EUA Power can predict the outcome of'
- : decommissioning and cancellation costs.The agree' these proceedings.However, EUA believes that Unit I '(
ment also provides that upon payment in full of the will ultimately operate at full power.
decommissioning and cancellation obligations, or Afontaupt dn March 5,1990, Montaup filed with -
upon the written agreement of EUA Power and the FERC for a $20.5 million increase in wholesale rates, then joint owners who certify to the bank that they to become effective with the commercial in service
- own at'least 80% of the ownership shares in the Sea- date of Unit 1.The requested increase would,among brook Project to terminate the agreement.or at such other things, place in Montaup's rate base the bali
. time as the fund requirement is reduced to zero as a ance ofits investment in Unit 1. FERC previousiv ~
. result of a w ritten guarantee by EUA or a purchase permitted Montaup to include in rate base about
'or purchases (under life of the unit contracts)of all 50% of its Seabrook construction work in progress.
of EUA Power's entitlement from Unit 1, the agree-The ultimate recovery of Montaup's total investment -
L ment shall terminate and the bank shallimmedi- n Seabrook Unit I th' rough rates will be subject to ately release and return to EUA Power allcollateral final apptoval by FERC as part of this rate proceed-then in the possession or control of the bank. In ing, and the prudence of a portion of such invest-ace'ordance with regulatory accounting principles, ment could be un issue in such rate proceeding.
-AFUDC is recorded on EUA Power's investment in - Montaup believes that its expenditures on Seabrook
' the decommissioning fund. Unit I were prudent and that FERC will continue t6 -
permit the recovery of prudently incurred costs'=
(J) Commitments and Contingencks- ' through rates for plants in commercial operation.
Seabrook Unit 1: .
' EUA believes that the amount of any potential disal.
Backgroemd: Montaup and EUA Power have a 2.9% lowance of recovery of the expenditures would not
_ and 12.1% ownership interest, respectively in the have a substantial adverse effect on the EUA Sys-1150 megawatt Seabrook Unit I nuclear generat. tem's common equity.
( ing unit in Seabrook, New Hampshire, which has EUA Power: Since its inception on November 25i been completed and ready for operation since 1986. 1986, EUA Power has principally been engaged in the New Hampshire Yankee (NHY).a division of Public acquisition and financing of its 12.1% ownership l Service Company of New Hampshire,is currently- interest. Under the Seabrook Joint Ownership Agree-responsible for the operation of Seabrook. At Decem- ment, EUA Power is required to accept its share of ber 31,1989, Montaup's and EU.i Power's invest- power and pay for its share of all operating costs of Ements in Unit l_(including nuclear iwl) were power generated from the project once Unit I com-
'approximatelv $199.0 million and $470 A million. mences operation. EUA's recovery of its investment
' respectively. in EUA Power is contingent upon EUA Power's abili Licensing: On March 1, IWO, the Nuclear Regula- ity to enter into long term sales contracts to sell its tory Commission t N RC %ued an Order li! ting the share of the power generated by Unit I at prices suffi.
last of its limitations on ihe full power licease for - cient to recover its investment.
Unit I which had been issued in 1936.The NRC
-delayed the eflecth eness ofits Order until March 8, to permit the liling of stay motions. If stay motions are filed in the United States Court of Appeals (Court mf Appealskthen the effective date will be one week i
f .' [
EUA Power is blively marketing its Seabrooki .. Since EUA' Power desires to resume cash interest .
3dpacity in New Engirnd and New York. Dem:nd for pryments by May 15,1990, and since it is currenliv 3" electricity in New England has been exceeding pro- ' expected that EUA Power will not inillally be able to jections in recent years. New England Power Pool 1 sell its Seabrook capacity at rates which will cover -
planners haie projected that with a conservative - all of its actual costs (including the cash interest pap M ' Eannual growth rate of 29.significant amountsof ments), EUA and EUA Power are seeking authoriza-additional generating capacity beyond that already tion for EUA to provide funds to EUA Powerand for -
$ 9 planned (including Seabrook Unit 1) will be required EUA Power to issue additional securities to EUA.
by the mid 1940's. EUA Power believes that, because Such authorization will require approval from the of the actual growth in demand,it will ultimately Securities and Exchange Commission (SEC). In Feb-enter into long term sales contracts at prices suffi- ruary 1990, EUA and EUA Power filed with the SEC cient to recos er its investment, although it cannot to obtain such authorization. EUA Power expects predict the timing of these contracts. Upon commer- that such authorization will be received on a timely cial operation of Seabrook,it is likely that EUA basis. In the unlikely event the SEC authorization is
. _ Power will be selling short term capacity at rates not received,it is likely that EUA Power would not be -
lower than its actual costs. .
able to make the interest payments on its outstandi
- Beginning in May 1988, EUA Power made a sue. ing Notes, cessful exchange offer for all of its 17%% Series A Accotmting Change: Effective January 1,1988, EUA.
l Secured Notes due November 15,1991, pursuant Powerimplemented Financial Accounting Standard
, to which EUA Power currently has outstanding No.90(FAS 90)" Regulated Enterprises-Account-
$180,000,00017%% Series B Secured Notes due May ing for Abandonments and Disallowances of Plant 15,1993 and $99,597,20017%ct Series C Secured Costs." FAS 90,among other things, requires that Notes due November 15,1992 (collectively the AFUDC should be capitalized only if its inclusion in Notes).The terms of the Notes provide,among allowable costs for rate making purposes is proba-other things, that interest may be paid in cash or ble. As discussed above, EUA Power has not ent'ered additional Series C Notes. During 1989 and 1988 all into any power contracts for the sale of its share of interest was paid by the issuance of Series C Notes the electricity to be generated by Seabrook Unit I. .
in lieu of cash at a rate equal to 133% of the interest therefore,it is uncertain at this time whether all of .
which would otherwise have been paid in cash. As its costs will be recovered. Thus, FAS 90 mandat'es part of the exchange EUA Power also offered Contin- that the recording of a portion of AFUDC for finan-
< p gent Interest Certificates evidencing the right to cial reporting purposes be deferred. If and when
. W' '
receive additional payments contingent upon and . EUA Power enters into long-term power sales cons measured by EUA Power's income in certain years tracts at prices sufficient to recover its imestment, following the commercial operation of Unit 1. Addi- all or a portion of any AFUDC previously deferred tionally, EUA Power has issued $60,790,000 of 25% will be restored to earnings. For the twelve months preferred stock ($100 par value) to EUA. Should EUA ended December 31,1989, the deferral of EUA Pow.
Power be unable to ultimately enter into long term . . er's AFUDC reduced consolidated net income by sales contracts which provide sufficient revenue to $26.8 million. Since the implementation of FAS 90, cover its costs, EUA Power may be unable to make approximately $44.2 million of AFUDC related to cash interest payments,and to make principal pay- EUA Power's investment in Unit I has been deferred, ments, on its Notes described abow. Such Notes are Seabrook Unit 2: Montaup and EUA Power also
. solely the obligation of EUA Power and are not guar. have 2.9% and'12.1% ownership interests respec-anteed by EUA or any other person. These circum- tively in Unit 2. On November 6.1986. the joint' stances could also result in the inability of EUA to recover its equits investment ($93 A million at December 31,1089L EUA would thus be required to charge off such equity investment (net of related y taxes) to carnings. Management believes that should such a charge to earnings occur,it would not in itself l adversely affect EUA's ability to pay common share dividends.
O k
a
P, ; y '
x y
jj y
~u iw i . ' .. . .~ . .. .
L , owners, recognizing th:t Unit 2 had becn c:ncciledi ~ Net pension' expense (income) for 1989,1988 i '
W Noted to' dispose of the, Unit Pl:ns regarding disposi- . a' nd 1987 included the following comporients (in M thousands):
{4M O not E tion of Unitand2approved.Montaup been lihalizEd are now under consideration, but have,,,,,
and EUA .. ,,$, ,,37 ower urfursable, therefore, to estimate the costs ,
a r'which they would be responsible in connection : . Service cost benefits j wiih the disposition'ol Unit 2. Monthly charges are - earned during ~ . .
' required to be paid by Montaup and EUA Power with' the period . ' $ 1,573 ; $ 1,507 5 1,588 interest cost on l d ' respect to Unit 2 in order to preserve and protect its
~
~ components and various warranties. Montaup is cur. . projected benefit . .
, rently recovering its investment in Unit 2 under a obligations 5,437 : :4.932! 4,511 4 FERC approved rste case settiement. Actual return on 7
,. J f On June 23,1989, the Internal Revenue Service assets .
(16,883) (7,834) - ' (3,170) . !
- llRS) issued a report in connection with its examina. Net amortization .I and deferrals ' 9,485 692 (3,629) -
s
' tion of the consolidated income tax return of EUA-for the 3 ear 1984,The report included a proposed Net periodic pension , ,
H ' adjustment to disallow Montaup's Unit 2 abandon- (income) $ (388)= $ (703) - $ (700) a ment h>ss deduction of $.12.7 million claimed in the tdurn; The IRS's proposed disallowance is based on The following table set's forth the actuarial pres- ,
t' its positio.n that the necessary criteria to qualify for ent value of benefit obligations and funded status st O
. 'an abandonment' loss have not been met,The Com- December 31,1989,1988 and 1987 (in thousands):
- pany disagrees with the IRS's position and filed a Accumulated beneh.t p
- protest on Septe'mber 15,1989.The issue is currently
. . under consideration by the IRS Regional Directorof bligations,
' including vested ;
LAppeals. Should the tax benefit for the Unit 2 aban, I donment loss deduction ultimately be realized at a benefits of $53,173; m;
$43,076 and $41,456 1 tax rate or for periods different than on Montaup's . ,
respectively $ 53,416 $ 47,507 $ 45,485-Lliled tax return, Montaup would seek to have its
~ Unit 2 rate recovery modified to reflect such lower Projected benefit
- $(67,234) $(59,917) $(58,972) i benefit / J obligations - .
^
y Other A$tters: Public controversy concerning plan assets at fair -
shuelehr power could also affect the six operating value,primarily i' 88,701 75,617 -71,125 inuclear u'niis in which Montaup has an interest. it is stocks and bonds -
, possible,although such an event seems remote,-that Leas: Unrecognized ,
such controversy could result in the premature shut. net gain on assets (20,787) (13,689) - (10,692) : r
, Edown of one or more of the units. Unamortized net I
f /kmioneThe EUA System companies participate assets at January 1 1,460 (259) (412) t
.in a defined benefit pension plan covering substan- ~Netpension assets - $ 2,140 $ l.752 $ 1.049 tially all of Iheir employees. plan benefits are based on . sears of service and average compensation over The weighted average discount rate and rate of ;
g -
';the hve 3 ears prior to retirement. It is the EUA Sys- increase in future compensation levels used in deter-i2 itemN policy to fund the plan on a current basis in mining the actual present value of accumulated 'i'
?- tamounts determined to meet the funding standards benefit obligations in 1989 were 8.o% and 6.4E stablished by the Emplosee Retirement income respectively.The expected long term rate of return .
'~
- Security Act of 1974. on plan assets was 9.5%.
Certain health care benefits are provided to ,
substantially all retired employees. The cost of. ,
these benefits, which amounted to approximately r
$1,174,000 in 1989, $636,000 in 1988 and $562,000 in 1987, was charged to expense when paid.
.p L (;
1
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l i
I l
$i .
Y i ILong Term Purchased Power Contracts: The EUA ' EUn Guarantees: EUA,as parent companyof EUA
. System is commitled under long-term purchased - Ocean State Corporation (EUA Ocean State).' hasi power contracts, expiring on various dates through . guaranteed that up to $63,000,000 will be available i the year 2007, to pay demand charges.whether for EUA Ocean State to meet its equity commitment .
N - or not energy is recched; Under terms in effect at _ to Units I and 11 of the Ocean State Power project.
a ):'
- December 31,1989fthe aggregate annual mini; mum commitments for such contracts is approxi-Approximately $30,000,0000f such funds are not expected to be paid until late 1990 and the remain -
mately $92.000.000.in 1990, $111.000,000 in 1991, = der paid in late 1991, _ _
L $113,000,000 in 1992, and $111,000,000 in'1993 and . . Montaup, as one of the stockholders of each of will aggregate approximately $1,830,000,000 for three regional nuclear generating companies, has years af ter 1993. In addition, the EUA System is guaranteed its pro rata share of obligations of those' !
' required to pay additional amounts depending on companies as follows: 2.57c of a $40,000,000 nuclear the actual amount of energy received under such fuel financing of VermontYankee Nuclear Power, contracts. The demand costs associated with these ' Corporationi 4.57c of a $50,000,000 debenture issue
< contracts are reflected as Purchased Power Demand. :of Connecticut Yankee Atomic PowerCompany; and
- on the Consolidated Income Statement. 4
' .0?e of a $50,000,000 nuclear fuel fmancing of Maine Construction:The EUA System's construction pro- . Yankee Atomic Power Company.
gram is estimated at $103.000,000 for the year 1990 Montaup is a 3.27?c equity participant in two com- t and $288,000,000 for the years 1990 through 1993 panies who are constructing transmission facilities
- (including allowance for funds used during construe. to interconnect New England and_ the Hydro-Quebec -
tion of $45.000,000). These eytimates assume Sea- system in Canada. Montaup's share of the amounts brook Unit I will commence commercial operation ' committed as of December 31,1989 is approximately by April 1,1990. $13.0 million. All equity participants are required to :
ErwiromnentalControls:The Comprehensive Envi- guarantee, in addition to their own share, the obliga, ronmental Response, Compensation and Liability tion of those participants not meeting certain credit '
Act of 1980 and certain similar state statutes author. criteria. Amounts so guaranteed by Montaup'are ize various governmental authorities to seek court approximately $5.4 million at December 31,1989. In'-
= orders compelling responsible parties to take clean- addition, Montaup has minimum rental commit-up action at disposal sites determined to present an ments under this nuncancellable transmission iacili-imminent and substantial danger to the public and ties support agreement for years subsequent to 1989 ,
L/] to the environment because of an actual or threat _ which total approximately $60 million. {
V ' ened release of hazardous substances. Because of the
}
nature of the EUA System's business, various bs-
' {
I products and substances are produced or handled !
w hich are classified as hazardous under these laws. !
EUA System companies generally provide for the disposal of such substances ihrough licensed indi-vidual contractors but these statutory provisions generally impose potential joint and several respon- ,
sibility on the generators of the wastes for clean up j costs. Blackstone has been notified with respect I
.to a number of such sites,and the clean-up of such wastes, in general, is receiving increasing attention I from the gosernmental agencies involved. While EUA cannot estimate the costs which may result from these matters. n does not believe such costs l
- will he material, ,
h !
i 4
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ofIndependent - ..
i Cost 4 Sed Public Account 22ts S
- To the Trustees and Shanholden .
of Fmatern Utliities Associates :
- We b'akabdited the acconipanying consolidated - December 31,1989 and 1988, and the consolidated
- bilance sheets and consohdated statements of capi- results of its operations and its cash flows for each of
- 1:lization of Eastern Utilities Associates and subsidi. the three years in the period ended December 31,-
kries (the Company) as 01 December 31,1989 and - 1989 in conforinity with generally accepted account-
~
F. .1988.and the related consolidated statements of f . ing principles.
income, t etained earnings and cash ilows for each of ~ As discussed in Note 3 of" Notes to Consolidated
- the three years in the period' ended December 31, Financial Statements," the Company has a substan-1989.These financial statements are the responsi- tial investment in EUA Power Corporation (EUA bilityof the company's management.our respon- Power).a whollpowne su d sibdiary o t ef h Company sibility'is to express an opinion on these financial - whose principal asset is its investment in Unit I of statements based on our audits. the Seabruok Nuclear Power Project (Unit 1).There We conducted our audits in accordance with gen- are uncertainties regarding EUA Power's financing etully accepted auditing standards.Those standards - and the ultimate sale of Unit l's capacity at prices require that ue plan and perform the audit to obtain sufficient to recover EUA Power's investment in
. reasonable assurance about whether the financial Unit 1.Given these uncertainties,it is impossible to statements are free of material misstatement An s predict whether the Company will be able to fully Laudit' includes examining, on a test basis, evidence : recover its imestment in' EUA Power. No provision supporting the amounts and disclosures in the fman- for any potential loss that may result upon resolu-
~ ial statements. An audit also includes assessing the c tion of the above mentioned uncertainties has been
- f. ": Taceounting principles used and significant estimates made in the accompanying financial statements.
made by management, as well as evaluating the -
' overall financial statement presentation. We believe Jt hat our audits provide a reasonable basis for our Lupinion< .
h wo a.4
. In our opinion, the financial statements referred to Boston Massachusetts above present fairly,in all material respects, the con- February 27,1990 solidated financial position of the Company as of :
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_ f' Common Share Inforanation
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(Unaudited)
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4 h L m Thousands ofDellars : Earnings Income Consol- per-After idated - Average Conimon Share i i, - Operating Operating Inteiest: Net Common Dividends Market Price _
.. Resenues income Charges income ~ Share - Paid fliph Low
~ For the quarters ended 1989: ..
' December 31* $ 105,732 ~ $ 16,072 $12,170 $11,138 $0.75 . $0.625 41 % _3ow :
. September 30_ 101,038 14,686 11,273 10,240 0.75. 0.625 37 35% :
June 30 99.178 12,196- 8,879 7,848 0.58 0.625 37 % - ' 32
' March 31 102,629 15,434 12,688 ,11,651 0.87- 0.60 - 32% - 30w ,
. For the quarters ended 1988:
December 31" $94,094 - $ 12,754 $ 9,782 5 8.750' $0.66 $0.60 33 % . 127 % -
. September 30 - 93,977 17,933 11,799 11,247 0.85 0.60 29 .- 24 % '
June 30 - 86,629 15,487 7,926 7,385 0.56 0.60 - .25% - 21 %
March 31 99,438- 19,038 - -10,900 -
10,093 0.78 - 0.575 29 % 24 i >
The common shares of Ea stern Utihties'A ssociates are listed on the New York Stock Exchange and the Pacific StocL Exchange under'the "
ticker symbol "EUA." The appratimate number of Common Shareholders ofrecord on February 1.1990 was ILM
- Consohdated Net income jor the fourth quarter ofl989 included $18 million related to the recognitian ofA FUDC. 51/ milhon u hich represents a writedown of a project by EUA Energy u'nd $U milhon which represents the recordmg ofaccrued interest related to a proposed .
tus disallowance of the Seabrook Unit 2 abandonment tos s. These adjustments had the net etlect of increasing tourth quarter Earm orgi per
. Average common Share by 10 cents. ,
t Y " Consolidated Net income for the limrrh quarter of1983 included $13 million whsch represents the Ikdlyear elfeet of AFUDC related to the uecommissiomng fund as described in Note I and $03 million related to property tan abatements receind in February 1983. These ad iu st-ments had the elket of increasing fourth quaner Earnings per Average Common Share by 11 cents.
t
' Dividend Reinvestment and Common Share Purchase Plan
. A Dividend Reiniestment and Common Share Purchase Complete details regarding the Plan may be obtained by H
Plan.is available to all registered shareholders and Sys- writing:
tem' company employees. William F.O'Connor, Secretary
' Participants in the Plan are given a 5% discount on Eastern Utilities Associates -
T shares purchased with reinvested dividends. Partici- Post Office Box 2333
- pants may also make additional cash payments as fre- Boston, MA 02107 quently as once a month to purchase additional shares .,. g with no discount. Optional cash payments are imuted The First National Bank of Boston to a masimum ot $5.000 per calendar quarter and must Post Office Box 644
> be recened no later than the 5th day preceding the Boston, MA 02102 Investment Date to be imested in that month.
(Common and Preferred Shares)
The Imestment Date for all shares purchased under
(' the Plan is the do idend payment date for the months in Bond Trustee
- w hich disidends are payable. For each month in which State Street Bank and Trust company a dividend is not payable the Investment Date is the 225 Franklin Street 15th of such month.The price of shares purchased is Boston, MA 02110
-based on the average closing price of EUA shares for the (Bonds of all series) live trading days preceding each investment Date.
,y
+
' Consedidated OPeretl28 16tati; llc 8 l'eap / mkdikwmive U. 1999 19814 1987 19 9 1985 1984 ig79
_ Energy Generated and Purchased i (niillions of im h h w Gence nted
__in N oncisci % a'uo 1.296 1 190 1.294 887 1.3 l o i 180 792
- tw Nus lear t on 956 472 390 541 1 Oo A 45o 1 012
- hs hunt h Ow ni u l n.: 2.075 I k to 2.0%0 2 101 1 ',95 1 *>07 1.79;
-- bs Los ut t he l in t ( ont i as t . 836 884 %d9 oo7 o97 8I4 70o liitt et havigc w ith NI Poul (446) 23 23d 147 i387i ilion io00i Purt based Pours i rn; Pows 410 495 207 309 223 doo 410 Total (,ence aird and Purs based 5.127 4 'MKi 4 746 4 boa 4 sov 4 103 4 II8 Operating ResenuesIthousandst Residennal 5141,254 1127 881 5124 047 il15 744 il to o82 1121 o24 i o 094 turnenetsial 131.306 119362 !14.8%7 105.777 98 82o 105.310 (3 012 Industrial 70.852 69 5 le 72.218 e7 97 4 oo 707 7 8 8'io 38 Iv2 J Other i.let is a t uhties 20.783 23 ooo 18740 lo 189 15 ??9 21WN 12 415 Other 12.799 10 290 I i .192 15 Olu 8 990 9 tuo 7 'iO2 Total er iniai s sa'.cs Res enues 376.994 3%07II 14I.054 320 702 100 984 3to088 174 53*
l eni( ontrat is 23.213 19318 21.'72 22 o22 32.52e 2%.2 47 I I .2de Non 1.let tr n 8.370 1 909 2 704 lotal Opcianny Resenut
- 540M.577 1174 138 5167 129 1143324 1341 510 $ 1o l 12 5 $185 801
- l'.nerg) Sales tinillions of kss h);
Res:dennal 1.416 I 412 1.128 1.262 1.212 1 208 I l 'io lovnincitial 1.497 1.424 1.425 1.241 1. l ou I lin 10 52 J! Indusn ial 832 869 ko3 845 844 8(o 359 Othei l:lettin t ohnes 3149 377 to; 172 482 tuo 19s
()iber 28 28 2h 28 24 %U 44
- loial Pi mian hales 4.162 4 Ilo 1 909 1.7 o0 1 d2% 1 600 4504 Lowes and t ornpans I sc 234 220 231 21I lu7 2IL 22e lotal M sicm Requncince:is 4.396 4 110 4 140 3 97l 1 822 1 81* *729 k nil ( oilti sh i s 731 $IO 60e Dul 687 4%h Ibo loial l.nci p hales 3.127 4 900 4.74o 4 eo4 4 . *iO9 4303 4 l 15 Nuniher of Custoeners:
Residential 227.440 224.933 221480 217.899 214 454 21Io22 201 J3%
( ornincit ial 27.890 26.e l l 25 480 24 3 %e. 2 4 lol 2j 17' 20 07 T Indusu ial I.237 1.2 2u 1.237 1.250 1.2 43 l.209 1.222 Dihti 1.!cs ti a l nhiics 5 5 15 15 lo 16 (lihet 30 29 29 30 to 29 I50 loial ( u sioinci s 256.602 252 807 248 233 244.550 218 898 215043 222 8vo Asciaps R c s c o ut ps i Rt > niennal l ustoinci
- 621 Aou ;oo All klo 57A 11A ht i ags lm in ' k s a i. t tisii Int i ikuhi 6.226 e277
- 99o % 7u2 (ca2 a oud ; 703 herage Resenue per kw h Resuh mial 9.9hs 9 0oe 9 14 e 917c u i tv I U Ouc 5 (2e
( 8 Hlilllel s 1.d b.77 G M $$C 8 DIC 8 5li h d i 9 4eV 5 04i Inslusii laI $.32f 5 00g 8 47g 7 u;g 8 p]g is 3cc 4 44g
s ,
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'L Commelldated Operating Watletics-Gesneral t
,M. _li ard....n__.d_ed Da. em_/w .ll. 1989 1988 1987 1986 1985 m _,
19_84._ _ 1_979 Capitalisation (thousandsl:
Ibnda (Neil $306.500 $294.500 $267.500 $246.500 $263.500 $26o.500 $ 80.ug 5
_Other tong-1ce m Debt _ 299.579_j60.064 211.717 177.289 21.091 2237o __ 42300 Total lone lei m -
Debt - Net 606.079 554.564 479.217 423.789 285.491 288.876 123,485 Preferred Sun k 49.691 49.693 44.931 44,931 46.53o 48319 20, ego
_Cymmon Equin 375.016 301.759 285383 225.156 208.211 19l.619_ __ 93.765
_ Total Cugtahiasimi _ _ $1.030.786 1906.016 $809.531 5e93.876 $ $40.238 5%28 814 $2 t7.93o Common Sharr Data 1:arnings per Ascrage Commun Share t$) 2.95 2.85 3 46 2.82 2.67 2.85 1.74 Dividends per 5 hate ($) 2.475 2375 2.27 2.15 2.03 1.91 1.60 Puyout 6'd 83.9 83 3 65.6 76.2 76.0 ts7.0 92.0 Aserage Common Shates Outstanding 13.877.091 13.167.915 12.596 381 11.537.677 11.156.941 10.562.324 4,871.6o7 7otal Common Shares Outstanding 15.262.237 13.371.252 12.966.062 11.676.229 11.376.471 10.892.886 5.438.9o9 tkmL Wlue per Share ll) 24.57 22.57 22.01 19.28 1830 17.59 1724 lYnent Eurned On .kerage Common Equits Fi) 12.1 12 8 17.1 15.0 14.9 16 3 94 Market Price ($t lisyh 41% 33 % 40 % 39% 26% 18 15%
low 30 % 21% 24 25 % 16 % 12 % 11 %
Year End 41 % 31 % 28 38 % 25% 18 11 %
Miscellaneous ($ in housandsl:
Total Construction 1:spenditurrs($1 188.599 151,148 126.856 64.371 78.192 95.211 30.498 Cash Construction thpenditures($1 75.861 65;307 68.929 47.137 54.406 73.159 24.230 Internally Generated runds($1 32.734 38.894 14.554 44.832 27.501 40.858 o 4ol internalls Generated Funds as aei ut Cash Construction (9 ) 43.2 59.6 21.1 95.1 $0.5 55.8 26.7 Installed Capab6113 - MW l.169 1.090 1.091 971 987 931 90o l ew: Unit Contract Sales-9.W _ _ _ _ _ .. _ _. . _ . I l s ,_,, _ , _,,_ 9 81,,_, , _ l 0, 8. _ .,_ ,,, l 0,8 , ,_ _ ,,_l 10 _
. - _ 75 88 Sutem Capabilitt- MW l.053 992 983 863 877 856 908 Sutem reaL Demand-MW 831 813 782 691 738 716 e77 Re*.erse Margin tei) 26,7 22.0 25 8 24.9 18.9 19.5 34 1 Sptem i.nad i'aeto Fi) 60.4 o0.8 60 4 65.6 59.1 60.6 62.8 Sout ces of 1:ner g) Fi L Nucleat 26.8 18.2 15.1 19.0 26.2 10.9 21 9 Coal 28.9 27.0 31.1 22.0 34.1 293 Oil 44.3 54 8 53.8 59 0 39.7 59.8 78 i Cost of l'uct i %Ils Per lo ht N ut le.u 7.6 82 9.2 86 7.0 8,9 3.5 Coal 20.1 20.5 20.5 23.7 23.7 27.8 ,
Oil 24.7 22.6 283 23.6 412 43 o 25 1 l All Fuels Cumbmed 18.8 19.4 23 0 20.8 2o3 ' To 1 19 o l
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1reastees OMicers 4-o
,( Oliver F. Arnes( A.C)
John F.G.Elchorn,Jr.
- f)irector, fiducia ry 1 rtnt Compa ny. c nd . Chairnsan
.,~ -' ' ' Private trustee. Boston. Alauachusetts Ik nald G. Pardus Russell A. Boss (E P) President and President andChief Operatinc oljicer, ChiefExecutive Oljicer A.T Cross Contpany Liticoln. Rinde Istand John R. Stevens Senior Executiw \' ice
. John E. Conu my ( A. C) President andChief .
Chairntan of the Board, Jack Cornear & Co., Inc. Operating Officer Nonvell. Afanachusetts Arthur A. Hatch John E G. Elehorn, Jr.(E P) Executiw t' ice President Chatrman ofthe BoardofTrustres ofthe Association Robert E. Maguire Executiw Vice President Peter H. Freeman (F. P)
Corporate ()irector and Trustee, Robert P.Tanelnarl Providence. Rhode lsland Senior \' ice President Nathan H.Garrick,Jr.( A.C) Richard M. Hurns Retired Contptroller Robert E.Maguire Clifford J. Hebert, Jr.
Executive \' ice President of the Treasurer.
') A uociation William E O'Connor
~
Wesley W. Marple. Jr. ( A, C) Secretary Professorof Business Adoninistration, NortheastertI University, Boston, Alassachusetts Ikinald G. Pardus President and ChiefE.tecutire Ollicer ofthe Association Margaret M.Stapleton(F.P)
\' ice President. John llancock AlutualI.ile let sto ance Contpany, Boston. Afanachusetts
. John R.Stesens Senior Esecutive Ytcc President and Chiel O;3 era tine Oflicer of the Associanon i
i A-indscato membcrof Anda commutce C-Indsca to member al Comtwn sanon and Nominasang Consmutee F -Indscates member of I mance Comminee P-Indscates memlwr of Pension Tru ICommtttre J
-a 9 :
I
- 96ysteen Cesapaales
, o I
Esatern Utilities Asenciates Tine name Eastern Utilities Associates is time designa-tion ofIlse Trustees for Ihe time being smder a Declara-
- EUA service Corporation tion of Trust dated April 2.1928, as amended. and all EUA Fower Corporation persons dealing wills Eastern Utilities Associates must Montaup Electr\c Company look solely to the trust property for the enforcentent of EUA Energy investment Corporation an' claims agc. inst Eastern Utilities Associates as nei.
EUA Ucran Statt Corporation l'ser the Trustees,0Hicers nor Shareholders assume any one Liberts Square personalliability for obligations e ntered into on behalf f\>st Othee Box 2333 4 Eastern Utilities Associates.
Boston, M A 02107 (til7)357 9590 Annual Meeting John F. G. Eichorn, J r., Chairman The 1990 Annual Shareholders Meeting will be held Donald G. Pardus. President on Tuesday, April 24,1990 at 10 a.m. In the Forum Room on the 5th Floor at State Street Dank and Eastern Edison Company Trust Company. 225 Franklin Street. Boston, 110 Mulberry Street Massachusetts.
Brockton, M A 02403 (508)580 1213 Financial Supplement John D. Carney, President l'p9n request EUA will furnish a copy of its Financial Supplement which includes financial statements of filackstone Valley Electric Company its major operating companies.
Washington liighway Lincoln. RI 02865 (401) 333 14(K)
David 11. Gulvin, President EUA Cogenen Corporation One Liberty Square Hoston. M A 02107 m!7) 357 9590 Joseph S. Fitipatrick, President i
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