FILE NO. 70-10112
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM U-1
APPLICATION/DECLARATION UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
WITH RESPECT TO THE PAYMENT OF DIVIDENDS AND SHARE REPURCHASES
BY NORTHEAST NUCLEAR ENERGY COMPANY
NORTHEAST NUCLEAR ENERGY COMPANY
107 Selden Street
Berlin, CT 06037
(Names of companies filing this statement and addresses of principal
executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Gregory B. Butler
Senior Vice President, Secretary and General Counsel
Northeast Utilities Service Company
107 Selden Street
Berlin, CT 06037
(Name and address of agent for service)
The Commission is requested to mail signed copies of all orders, notices
and communications to:
Jeffrey C. Miller, Esq. David R. McHale
Assistant General Counsel Vice President and Treasurer
Northeast Utilities Service Northeast Utilities Service
Company Company
107 Selden Street 107 Selden Street
Berlin, CT 06037 Berlin, CT 06037
The Application/Declaration in this file, as heretofore amended, is
hereby amended and restated as follows:
DESCRIPTION OF PROPOSED TRANSACTIONS
Introduction
1. Northeast Utilities ("NU"), a public utility holding
company registered under the Public Utility Holding Company
Act of 1935, as amended ("the Act"), with offices at 174
Brush Hill Avenue, West Springfield, Massachusetts 01090,
and its wholly-owned subsidiary, Northeast Nuclear Energy
Company, located at 107 Selden Street, Berlin, CT 06037,
("NNECO" and collectively with NU, the "Applicants"), hereby
submit this application/declaration (the "Application")
pursuant to Sections 6(a), 7, and 12(c) of the Act and Rules
26(c)(3), 42, 43, 44 and 46(a) thereunder with respect to
the payment of dividends to, and/or the repurchase of stock
from, NU out of capital or unearned surplus by NNECO through
December 31, 2004 (the "Authorization Period").
2. NNECO was incorporated in 1950, and through a Special
Act of the Connecticut Legislature in 1967, has a valid
franchise under Connecticut law to sell electricity to
utility companies doing an electric business in Connecticut
and other states, and also has the right and power to
manufacture, generate and transmit electricity, and to erect
and maintain facilities on certain public highways and
grounds, all subject to such consents and approvals of
public authority and others as may be required by law.
NNECO's sole activity was to act as agent for the NU System
companies and other New England utilities in operating and
maintaining the Millstone Nuclear generating facilities
located in Waterford, Connecticut ("Millstone"). Up until
March 2001, such facilities were owned jointly by The
Connecticut Light and Power Company ("CL&P") and Western
Massachusetts Electric Company ("WMECO"), two public utility
subsidiaries of NU and affiliates of NNECO, and other
nonaffiliated utility companies. In March 2001, CL&P and
WMECO, along with most of the other joint owners of
Millstone, sold their interests in Millstone to a subsidiary
of Dominion Resources, Inc. CL&P and WMECO sold their 100%
interests in Millstone 1 and 2 and, with other selling
owners, 94% of Millstone 3. As a result of such sale, NNECO
no longer acts as agent for any owners of Millstone 1, 2 or
3 in the operation and maintenance of such facilities.
3. As a result of such sale, NNECO is now largely inactive
and winding up its role in managing Millstone. NU is
currently maintaining NNECO as a corporate entity in the
event there are any unforeseen liabilities which arise out
of NNECO's prior operations at Millstone. However, NU, in
an effort to simplify its corporate structure intends to
eventually liquidate and dissolve NNECO once NU believes it
is no longer necessary to be maintained and would like NNECO
to return up to $16.2 million to NU, which is equal to the
approximate amount of common stockholder's equity, as of
June 30, 2003, (paid in capital surplus equaled
approximately $15.3 million and retained earnings were
approximately $0.9 million). At June 30, 2003, NNECO had
approximately $48.3 million invested in the NU System money
pool and approximately $0.7 million in other current and
accrued assets. At June 30, 2003, NNECO had net liabilities
totaling approximately $32.8 million, mainly comprised of
approximately $20.6 million of net accrued pension costs
reflecting amounts due to former employees of NNECO (NNECO
has $48.9 million of accrued pension costs and an
accumulated deferred income tax credit in the amount of
$28.3 million which will be realized as NNECO makes
contributions to the pension plan), approximately $9.2
million of other employee related costs, approximately $1.4
million federal income taxes due, and approximately $1.6
million of other obligations. NNECO's net accrued pension
costs are owed to the Northeast Utilities Retirement Plan
and therefore it is not necessary that NNECO continue to
exist until all former employees have received their
respective pension benefits. These benefits to employees
are paid from the plan. NNECO's net accrued pension costs
will be paid into the plan or be otherwise satisfied prior
to the dissolution of NNECO by NU.
4. The Applicants now request authorization from the
Commission for NNECO to return up to $16.2 million of
capital to NU, in the form of dividends to and repurchases
of its common stock from NU during the Authorization Period.
LIABILITIES AND CAPITALIZATION OF NNECO
AS OF JUNE 30, 2003
Current Liabilities:
Accounts payable $ 134
Accounts payable to affiliated
companies 8
Accrued taxes 1,358
Accrued pension 48,934
Other 2
--------
50,436
--------
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes (28,353)
Other 10,742
--------
(17,611)
--------
Capitalization:
Common Stockholder's Equity:
Common stock 15
Capital surplus, paid in 15,350
Retained earnings 851
----------
Common Stockholder's Equity 16,216
----------
Total Capitalization 16,216
----------
Total Liabilities and Capitalization $49,041
5. The Commission has previously approved the payment of
dividends out of capital or unearned surplus by subsidiaries
of a registered holding company when the payment would not
impair the subsidiary's ability to meet its obligations and
the subsidiary's assets would be sufficient to meet any
anticipated expenses or liabilities. See, e.g., AEP
Generating Co., H.C.A. Rel. No. 26754 (August 12, 1997),
Northeast Utilities H.C.A. Rel. No. 27529, (May 16, 2002),
Northeast Utilities, H.C.A. Rel. No. 27147 (March 7, 2000),
Excel Energy, H.C.A. Rel. No. 27597 (November 7, 2002).
Because NNECO is no longer an active corporation, it is not
anticipated that there will be any further obligations
incurred which will require assets. Accordingly, the
payment of dividends or the repurchase of its stock from NU
out of paid-in-capital surplus, in the amount requested
herein will not impair NNECO's ability to meet its
obligations or render its assets insufficient to meet any
anticipated expenses or liabilities.
6. State law allows payments of dividends by corporations
provided that such payments do not render the company
insolvent. Any capital distributed by NNECO pursuant
to the authorization sought hereunder would be paid in
accordance with state law and thus would not cause NNECO to
face adverse financial consequences as a result.
Other Matters
1. Except in accordance with the Act, neither NU nor
any subsidiary thereof (a) has acquired an ownership
interest in an EWG or a FUCO, as defined in Sections 32 and
33 of the Act, or (b) now is or as a consequence of the
transactions proposed herein will become a party to, or has
or will as a consequence of the transactions proposed herein
have a right under, a service, sales, or construction
contract with an EWG or a FUCO. None of the proceeds from
the transactions proposed herein will be used by NU and its
subsidiaries to acquire any securities of, or any interest
in, an EWG or a FUCO.
2. NU currently meets all of the conditions of Rule 53(a),
except for clause (1). At June 30, 2003, NU's "aggregate
investment," as defined in Rule 53(a)(1), in EWGs and FUCOs was
approximately $448.2 million, or approximately 57.8% of NU's
average "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended June 30, 2003 ($775
million). With respect to Rule 53(a)(1), however, the Commission
has determined that NU's financing of its investment in Northeast
Generation Company ("NGC"), NU's only current EWG or FUCO, in an
amount not to exceed $481 million or 83% of its "average
consolidated retained earnings" would not have either of the
adverse effects set forth in Rule 53(c). See Northeast Utilities,
Holding Company Act Release No. 27148, dated March 7, 2000 (the
"Rule 53(c) Order"). NU continues to assert that its EWG
investment in NGC will not adversely affect the NU System.
3. In addition, NU and its subsidiaries are in compliance
and will continue to comply with the other provisions of
Rule 53(a) and (b), as demonstrated by the following
determinations:
(i) NGC maintains books and records, and prepares
financial statements, in accordance with Rule 53(a)(2).
Furthermore, NU has undertaken to provide the Commission
access to such books and records and financial statements,
as it may request;
(ii) No employees of NU's public utility subsidiaries
have rendered services to NGC;
(iii) NU has submitted (a) a copy of each Form U-1 and
Rule 24 certificate that has been filed with the Commission
under Rule 53 and (b) a copy of Item 9 of the Form U5S and
Exhibits G and H thereof to each state regulator having
jurisdiction over the retail rates of NU's public utility
subsidiaries;
(iv) Neither NU nor any subsidiary has been the subject
of a bankruptcy or similar proceeding unless a plan of
reorganization has been confirmed in such proceeding;
(v) NU's average CREs for the four most recent
quarterly periods have not decreased by 10% or more from the
average for the previous four quarterly periods; and
(vi) In the previous fiscal year, NU did not report
operating losses attributable to its investment in
EWGs/FUCOs exceeding 3 percent of NU's consolidated retained
earnings.
4. The proposed transactions, considered in conjunction
with the effect of the capitalization and earnings of NU's
EWGs and FUCOs, would not have a material adverse effect on
the financial integrity of the NU system, or an adverse
impact on NU's public-utility subsidiaries, their customers,
or the ability of State commissions to protect such public-
utility customers. The Rule 53(c) Order was predicated, in
part, upon an assessment of NU's overall financial condition
which took into account, among other factors, NU's
consolidated capitalization ratio and its retained earnings,
both of which have improved since the date of the order.
NU's EWG investment (it has no FUCO investment) has been
profitable for all quarterly periods ending June 30, 2000
through June 30, 2003 (NGC was acquired in March 2000). As
of December 31, 1999, the most recent period for which
financial statement information was evaluated in the Rule
53(c) Order, NU's consolidated capitalization consisted of
35.3% common equity and 64.7% debt (including long and short-
term debt, preferred stock, capital leases and guarantees).
As of June 30, 2000, the end of the first quarter after the
issuance of the Rule 53(c) Order, the consolidated
capitalization ratios of NU, with consolidated debt
including all short-term debt and non-recourse debt of the
EWG, were as follows:
As of June 30, 2000
(thousands
of dollars) %
Common shareholders' equity 2,365,854 36.9
Preferred stock 277,700 4.3
Long-term and short-term debt 3,768,353 58.8
Totals 6,411,907 100.0
5. The consolidated capitalization ratios of NU as of June
30, 2003, with consolidated debt including all short-term
debt and non-recourse debt of the EWG, were as follows:
As of June 30, 2003
(thousands
of dollars) %
Common shareholders' equity 2,214,494 32.9
Preferred stock 116,200 1.7
Long-term and short-term debt 2,586,828 38.4
Rate Reduction Bonds 1,816,998 27.0
Totals 6,734,520 100.0%
If Rate Reduction Bonds are not included, the consolidated
capitalization ratio of NU as of June 30, 2003 is as
follows:
As of June 30, 2003
(thousands
of dollars) %
Common shareholders' equity 2,214,494 45.0
Preferred Stock 116,200 2.4
Long-term and short-term debt 2,586,828 50.8
Totals 4,917,522 100.0%
6. As of June 30, 2000, the end of the first quarter after
the issuance of the Rule 53(c) Order, NU's consolidated
retained earnings were $640 million. As of June 30, 2003,
NU's consolidated retained earnings were $798.8 million.
NGC has made a positive contribution to earnings by
contributing $135.4 million in revenues in the 12-month
period ending June 30, 2003 and net income of $34.6 million
for the same period. Although since the date of the Rule
53(c) Order, the common equity ratio of NU on a consolidated
capitalization basis has decreased, it still remains at a
financially healthy level, above the 30% benchmark required
by the Commission, and if Rate Reduction Bonds are excluded,
NU's consolidated common equity ratio has increased.
Accordingly, NU's investment in its EWG has not had an
adverse impact on NU's financial integrity.
ITEM 2
FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses paid or incurred, or to
be paid or incurred, directly or indirectly, in connection
with the proposed transactions by the Applicants are not
expected to exceed $10,000 and are expected to be comprised
primarily of fees for ordinary legal and accounting. None
of such fees, commissions or expenses will be paid to any
associate company or affiliate of the Applicants except for
payments to Northeast Utilities Service Company for
financial and other services.
ITEM 3
APPLICABLE STATUTORY PROVISIONS
Sections 6(a), 7 and 12(c) of the Act and Rules 26(c)(3),
42, 43, 44 and 46(a) thereunder are or may be applicable to
the proposed transactions. To the extent any other sections
of the Act or Rules thereunder may be applicable to the
proposed transaction, the Applicants request appropriate
orders thereunder.
ITEM 4
REGULATORY APPROVALS
No state or Federal regulatory approval, other than the
approval of the Commission pursuant to this Application, is
required to consummate the transactions described herein.
ITEM 5
PROCEDURE
The Applicants respectfully request the Commission's
approval, pursuant to this Application, of all transactions
described herein, whether under the sections of the Act and
Rules thereunder enumerated in Item 3 or otherwise. It is
further requested that the Commission issue an order
authorizing the transactions proposed herein at the earliest
practicable date. Additionally, the Applicants (i) request
that there not be any recommended decision by a hearing
officer or by any responsible officer of the Commission,
(ii) consent to the Office of Public Utility Regulation
within the Division of Investment Management assisting in
the preparation of the Commission's decision, and (iii)
waive the 30-day waiting period between the issuance of the
Commission's order and on the date on which it is to become
effective, since it is desired that the Commission's order
when issued, become effective immediately.
ITEM 6
EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits (previously filed)
F. Opinion of Counsel
H. Proposed Form of Notice
(b) Financial Statements (previously filed)
1. Northeast Nuclear Energy Company
1.1 Balance Sheet, per books and pro forma, as of
September 30, 2002 (previously filed).
1.2 Statement of Income, per books and pro forma, for 12
months ended September 30, 2002 and capital structure, per books and pro
forma, as of September 30, 2002 (previously filed).
1.3 Balance Sheet, per books and pro forma, as of December 31,
2002. (previously filed).
1.4 Statement of Income, per books and pro forma, for 12
months ended December 31, 2002 and capital structure, per books and pro
forma, as of December 31, 2002. (previously filed).
ITEM 7
INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) The financial transactions described herein do not
involve a major Federal action significantly affecting the
quality of the human environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed
transaction.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned companies have
duly caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
NORTHEAST UTILITIES
NORTHEAST NUCLEAR ENERGY COMPANY
By: /s/ Randy A. Shoop
Name: Randy A. Shoop
Title: Assistant Treasurer - Finance of
Northeast Utilities Service Company as Agent for
all of the above-named companies
Date: October 9, 2003
-----------------------------------------------------------------
Section 33-687(c) of the General Statutes of Connecticut
states: "(c) No distribution may be made if, after giving it
effect: (1) The corporation would not be able to pay its debts as
they become due in the usual course of business; or (2) the
corporation's total assets would be less than the sum of its
total liabilities plus, unless the certificate of incorporation
permits otherwise, the amount that would be needed, if the
corporation were to be dissolved at the time of the distribution,
to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those
receiving the distribution." In making its decision to authorize
a distribution, the board of directors is permitted to base its
decision "on financial statements prepared on the basis of
accounting practices and principles that are reasonable in the
circumstances, or on a fair valuation or other method that is
reasonable in the circumstances." Sec. 33-687(d).
-----------------------------------------------------------------