File No. 70-9343
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 7
TO
FORM U-1
(AMENDMENT NO. 9)
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
NORTHEAST UTILITIES
174 Brush Hill Avenue
West Springfield, Massachusetts 01090-0010
NU ENTERPRISES, INC.
107 Selden Street
Berlin, Connecticut 06037
(Name of companies filing this statement
and address of principal executive offices)
NORTHEAST UTILITIES
(Name of top registered holding company)
Gregory B. Butler, Esq.
Vice President, Secretary and General Counsel
Northeast Utilities Service Company
P.O. Box 270
Hartford, Connecticut 06141-0270
(Name of address of agent for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to:
David R. McHale Jeffrey C. Miller, Esq.
Vice President and Treasurer Assistant General Counsel
Northeast Utilities Northeast Utilities
Service Company Service Company
P.O. Box 270 P.O. Box 270
Hartford, Connecticut 06141-0270 Hartford, Connecticut 06141-0270
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
1. Northeast Utilities ("NU"), a Massachusetts business trust and
public utility holding company registered under the Public Utility
Holding Company Act of 1935 (the "Act"), with its principal office
located at 174 Brush Hill Avenue, West Springfield, MA, 01090, and its
wholly-owned subsidiary, NU Enterprises, Inc. ("NUEI"), a nonutility
holding company located at 107 Selden Street, Berlin, CT, 06037, file
this Post-Effective Amendment No. 7 (Amendment No. 9) to the
Application in this File No. 70-9343, as heretofore amended.
Background
2. By Order dated November 12, 1998 (HCAR No. 35-26939) in this File
No. 70-9343, the Commission authorized, among other things, (i) the
formation and financing by NU of a nonutility subsidiary holding
company (which is referred to therein as "Newco" but which is now known
as NU Enterprises, Inc.) to engage, through multiple subsidiaries, in a
variety of energy related and other activities and (ii) the acquisition
by NUEI of the securities of certain nonutility subsidiaries. The
Commission, through subsequent orders in this file (collectively, the
"Prior Orders"), also authorized NU and NUEI to issue guarantees or
provide other forms of credit support or enhancements (collectively,
"Guarantees") to or for the benefit of NUEI, NUEI's nonutility
subsidiaries ("Nonutility Subsidiaries"), and NU's other to-be-formed
direct or indirect energy-related companies, as defined in rule 58
under the Act, in an aggregate amount not to exceed $500 million
(the "Guarantee Limit"), at any one time, through December 31, 2002.
See Order dated May 19, 1999 (HCAR No. 35-27029) and Order dated
October 21, 1999 (HCAR No. 35-27093).
3. On January 25, 2002, NU filed an application/declaration in File
No. 70-10045, seeking certain relief from the financial restraints of
Rule 58 (the "Rule 58 Filing"). As part of that application, NU sought
an order from the Commission authorizing NU and NUEI to issue Guarantees
to or for the benefit of NUEI, the Nonutility Subsidiaries and NU's
other to-be-formed direct or indirect energy-related companies, through
September 30, 2005, which order would supersede and replace the
authorization granted in the Prior Orders.
4. As of December 31, 2002 (the expiration date of the Prior
Orders), the Commission had not yet acted on the Rule 58 Filing.
Accordingly, in Post-Effective Amendment No. 6 (Amendment No. 8) to
this Application filed December 17, 2002, NU and NUEI sought an interim
extension of the date through which the Guarantees may be provided
through September 30, 2003, under the terms and conditions of the Prior
Orders, pending action by the Commission on the Rule 58 File. The
Commission extended the authorization for NU and NUEI to issue
guarantees through September 30, 2003 (the "Guarantee Period") by order
dated December 18, 2002 (HCAR No. 35-27621).
5. As of the date of this filing, the Commission has not yet
acted on the Rule 58 Filing and the current Guarantee Period expires
September 30, 2003. For this reason, NU and NUEI file this
Post-Effective Amendment seeking an extension of the Guarantee Period
for an interim period of nine (9) months from the date of expiration of
such Guarantee Period, through June 30, 2004.
6. This post-effective amendment to the Application is filed to
obtain authorization for the extension of the Guarantee Period as
described above.
Amendment to the Application
7. To reflect the foregoing, the Application/Declaration in this
proceeding, as previously amended, is further amended as follows:
The first sentence of Paragraph 8 is deleted and replaced
with the following:
"NU and NUEI also propose to issue guarantees or provide
other forms of credit support or enhancements (collectively,
"Guarantees") to or for the benefit of NUEI, the Nonutility
Subsidiaries and NU's other direct and indirect Rule
58 subsidiaries to be formed by NU, NUEI or the Nonutility
Subsidiaries (the "Guaranteed Entities") in an aggregate
amount not to exceed $500 million ("Aggregate
Authorization"), through June 30, 2004 under the terms and
conditions of the orders issued by the Commission in this
File."
ITEM 2. FEES, COMMISSIONS AND EXPENSES
No additional fees, commissions or expenses will be incurred as a
result of the filing of this Amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Sections 6(b) and 12(b) of the Act and sections 45 and 54 of the
related regulations of the Commission are or may be applicable to the
transactions as herein proposed. To the extent any other sections of
the Act may be applicable to the proposed transaction, the Applicants
request appropriate orders thereunder.
Current Financial Condition
1. For the twelve (12) months ended March 31, 2003, NU's consolidated
gross revenues and net income were approximately $5.2 billion and $193
million, respectively. As of March 31, 2003, NU's consolidated
capitalization consisted of 33.4% common equity, 1.7% preferred stock,
27.8% of Rate Reduction Bonds issued by its utility subsidiaries, and
37.1% debt. When the Rate Reduction Bonds are excluded, NU's
consolidated capitalization consists of 46.2% common equity, 2.4%
preferred stock and 51.3% debt.
2. As of June 30, 2003, NU's Credit Ratings (Senior Unsecured
Debt) issued by Moody's was Baa1 and the rating issued by S&P was BBB.
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 March 31, 2003, NU's "aggregate investment," as defined
in Rule 53(a)(1), in EWGs and FUCOs was approximately $448.2 million,
or approximately 60% of NU's average "consolidated retained earnings,"
also as defined in Rule 53(a)(1), for the four quarters ended March 31,
2003 ($744.9 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 Co.
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 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 March
31, 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
$6,411,907 100.0
5. The consolidated capitalization ratios of NU as of March 31,2003,
with consolidated debt including all short-term debt and
non-recourse debt of the EWG, were as follows:
As of March 31, 2003
(thousands
of dollars) %
Common shareholders' equity $2,229,564 33.4
Preferred stock 116,200 1.7
Long-term and short-term debt 2,475,181 37.1
Rate Reduction Bonds 1,856,411 27.8
$6,677,356 100.0
If Rate Reduction Bonds are excluded, the consolidated capitalization
ratio of NU as of March 31, 2003 is as follows:
As of March 31, 2003
(thousands
of dollars) %
Common shareholders' equity $2,229,564 46.2
Preferred stock 116,200 2.4
Long-term and short-term debt 2,475,181 51.3
$4,820,945 100.0%
6. NGC has made a positive contribution to earnings by contributing
$134.3 million in revenues in the 12-month period ending March 31, 2003
and net income of $33.6 million for the same period. Although since the
date of the Rule 53(c) Order, the common equity ratio of NU on a
consolidated 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, the 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 4. REGULATORY APPROVAL
Other than as set forth above, no other consent or approval of any
other State commission or any Federal commission (other than the
Securities and Exchange Commission) is required for the transactions
contemplated herein.
ITEM 5. PROCEDURE
The Applicants respectfully request the Commission's approval,
pursuant to this Application, as amended, of all transactions described
herein. The current period during which Guarantees may be issued
expires September 30, 2003, accordingly, the Applicants further request
that the Commission issue an order authorizing the transactions proposed
herein at the earliest practicable date, but in any event no later than
September 30, 2003. The Applicants hereby waive any recommended
decision by a hearing officer or by any other responsible officer of the
Commission and waive the 30-day waiting period between issuance of the
Commission's order and the date on which it is to become effective,
since it is desired that the Commission's order, when issued, become
effective immediately. The Applicants consent that the office of Public
Utility Regulation within the Division of Investment Management may
assist in the preparation of the Commission's decision and/or order.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
F.2 Legal Opinion
H.5 Form of Notice
(b) Financial Statements
The pro-forma effect on NU's financial statements of the proposed
amendments extending the period in which Guarantees may be issued by NU
and NUEI is not material and therefore no new financial statements are
filed.
[SIGNATURE PAGE TO FOLLOW]
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, as amended, the undersigned have duly caused this Amendment
to be signed on behalf of each of them by the undersigned thereunto
duly authorized.
Date: July 23, 2003
NORTHEAST UTILITIES
NU ENTERPRISES, INC.
By: /s/ Randy A. Shoop
Name: Randy A. Shoop
Assistant Treasurer - Finance of Northeast Utilities
Service Company, as Agent for the above Companies
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As of June 30, 2003, NU's Nonutility Subsidiaries consisted of
Northeast Generation Services Company, Select Energy Portland Pipeline,
Inc. (inactive), Select Energy, Inc., Select Energy New York, Inc.,
Select Energy Services, Inc., Reeds Ferry Supply Corporation,
HEC/Tobyhanna Energy Project, Inc., Select Energy Contracting, Inc.,
Yankee Energy Services Company, R. M. Services, Inc., ERI/HEC EFA-Med,
LLC, E. S. Boulos Company, NGS Mechanical, Inc., HEC/CJTS Energy Center
LLC, Woods Electrical Co., Inc., Woods Network Services, Inc. and Mode 1
Communications, Inc.
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