UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-5139
CENTRAL MAINE POWER COMPANY
(Exact name of registrant as specified in its charter)
Incorporated in Maine 01-0042740
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Edison Drive, Augusta, Maine 04336
(Address of principal executive offices) (Zip Code)
207-623-3521
(Registrant's telephone number including area code)
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Shares Outstanding
Class as of May 10, 1995
Common Stock, $5 Par Value 32,442,752
Central Maine Power Company
INDEX
Page No.
Part I. Financial Information
Consolidated Statement of Earnings for the Three Months
Ended March 31, 1995 and 1994 1
Consolidated Balance Sheet - March 31, 1995 and
December 31, 1994:
Assets 2
Stockholders' Investment and Liabilities 3
Consolidated Statement of Cash Flows for the Three Months
Ended March 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information 14
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Central Maine Power Company
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
For the Three
Months Ended
March 31,
1995 1994
ELECTRIC OPERATING REVENUES $263,312 $241,026
OPERATING EXPENSES
Fuel Used for Company Generation 4,610 5,388
Purchased Power
Energy 114,358 122,932
Capacity 21,045 15,070
Other Operation 41,469 36,952
Maintenance 6,340 7,050
Depreciation and Amortization 14,277 13,881
Federal and State Income Taxes 16,642 8,328
Taxes Other Than Income Taxes 6,653 6,672
Total Operating Expenses 225,394 216,273
EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 1,443 1,480
OPERATING INCOME 39,361 26,233
OTHER INCOME (EXPENSE)
Allowance for Equity Funds Used During Construction 156 221
Other, Net 1,258 (4,357)
Income Taxes Applicable to Other Income (Expense) (540) 1,512
Total Other Income (Expense) 874 (2,624)
INCOME BEFORE INTEREST CHARGES 40,235 23,609
INTEREST CHARGES
Long-Term Debt 12,819 11,120
Other Interest 1,168 1,207
Allowance for Borrowed Funds Used During
Construction (128) (134)
Total Interest Charges 13,859 12,193
NET INCOME 26,376 11,416
DIVIDENDS ON PREFERRED STOCK 2,532 2,628
EARNINGS APPLICABLE TO COMMON STOCK $ 23,844 $ 8,788
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 32,442,752 31,441,356
EARNINGS PER SHARE OF COMMON STOCK $0.73 $0.27
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.225 $0.225
The accompanying notes are an integral part of these financial statements.
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Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
March 31, Dec. 31,
1995 1994
(Unaudited)
ASSETS
ELECTRIC PROPERTY, at Original Cost $1,582,596 $1,579,632
Less: Accumulated Depreciation 529,163 521,645
Electric Property in Service 1,053,433 1,057,987
Construction Work in Progress 13,337 13,647
Net Nuclear Fuel 1,959 2,181
Net Electric Property and Nuclear Fuel 1,068,729 1,073,815
INVESTMENTS IN ASSOCIATED COMPANIES, at Equity 51,487 49,602
Net Electric Property, Nuclear Fuel and
Investments in Associated Companies 1,120,216 1,123,417
CURRENT ASSETS
Cash and Temporary Cash Investments 81,149 58,112
Accounts Receivable, Less Allowance for
Uncollectible Accounts of $3,341 in 1995 and
$3,301 in 1994
Service - Billed 89,890 81,289
- Unbilled 28,459 38,153
Other Accounts Receivable 11,118 12,088
Prepaid Income Taxes 11,953 28,068
Inventories, at Average Cost
Fuel Oil 2,818 4,113
Materials and Supplies 13,589 13,026
Funds on Deposit With Trustee 27,910 27,820
Prepayments and Other Current Assets 7,545 9,337
Total Current Assets 274,431 272,006
DEFERRED CHARGES AND OTHER ASSETS
Recoverable Costs of Seabrook 1 and Abandoned
Projects, Net 99,859 101,976
Regulatory Assets-Deferred Taxes 233,234 233,234
Yankee Atomic Purchase Power Contract 35,965 38,777
Other Deferred Charges and Other Assets 270,271 276,597
Deferred Charges and Other Assets, Net 639,329 650,584
TOTAL ASSETS $2,033,976 $2,046,007
The accompanying notes are an integral part of these financial statements.
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Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
March 31, Dec. 31,
1995 1994
(Unaudited)
STOCKHOLDERS' INVESTMENT AND LIABILITIES
CAPITALIZATION
Common Stock Investment $ 508,123 $ 491,323
Preferred Stock 65,571 65,571
Redeemable Preferred Stock 75,228 80,000
Long-Term Obligations 638,459 638,841
Total Capitalization 1,287,381 1,275,735
CURRENT LIABILITIES AND INTERIM FINANCING
Interim Financing 63,000 63,000
Sinking Fund Requirements 2,581 2,580
Accounts Payable 81,224 97,800
Dividends Payable 9,850 9,932
Accrued Interest 11,062 14,102
Miscellaneous Current Liabilities 12,314 10,535
Total Current Liabilities and Interim
Financing 180,031 197,949
COMMITMENTS AND CONTINGENCIES
RESERVES AND DEFERRED CREDITS
Accumulated Deferred Income Taxes 354,595 348,287
Unamortized Investment Tax Credits 33,764 34,167
Regulatory Liabilities-Deferred Taxes 53,937 53,937
Yankee Atomic Purchase Power Contract 35,965 38,777
Other Reserves and Deferred Credits 88,303 97,155
Total Reserves and Deferred Credits 566,564 572,323
TOTAL STOCKHOLDERS' INVESTMENT AND
LIABILITIES $2,033,976 $2,046,007
The accompanying notes are an integral part of these financial statements.
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Central Maine Power Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
(Note 1)
For the Three
Months Ended
March 31,
1995 1994
CASH FROM OPERATIONS
Net Income $ 26,376 $ 11,416
Items Not Requiring (Not Providing) Cash:
Depreciation and Amortization 20,769 17,880
Deferred Income Taxes and Investment Tax
Credits, Net 5,465 2,454
Allowance for Equity Funds Used During
Construction 156 (221)
Changes in Certain Assets and Liabilities:
Accounts Receivable 2,063 (621)
Other Current Assets 1,702 1,244
Inventories 732 1,598
Retail Fuel Costs 38,732
Accounts Payable (19,959) 3,856
Accrued Interest (3,040) (4,736)
Accrued Income Taxes 16,115 3,393
Miscellaneous Current Liabilities 1,779 (716)
Deferred Energy Management Costs (981) (1,200)
Maine Yankee Outage Accrual (7,666) (2,207)
Purchase Power Contracts (4,550)
Other, Net 2,755 4,754
Net Cash Provided By Operating Activities 41,716 75,626
INVESTING ACTIVITIES
Construction Expenditures (7,276) (6,883)
Changes in Accounts Payable - Investing
Activities 3,383 (3,036)
Net Cash Used by Investing Activities (3,893) (9,919)
FINANCING ACTIVITIES
Issuances:
Common Stock 927
Medium Term Notes 4,000
Redemptions:
Short-Term Obligations, Net (15,000)
Preferred Stock (4,772)
Dividends:
Common Stock (7,304) (7,305)
Preferred Stock (2,710) (2,178)
Net Cash Used by Financing Activities (14,786) (19,556)
Net Increase In Cash 23,037 46,151
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 58,112 1,956
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 81,149 $ 48,107
The accompanying notes are an integral part of these financial
statements.
-4-
Central Maine Power Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Certain information in footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted in
this Form 10-Q pursuant to the rules and regulations of the
Securities and Exchange Commission. However, the disclosures
herein, should be read with the Annual Report on Form 10-K for
the year ended December 31, 1994 (Form 10-K), and are adequate to
make the information presented herein not misleading.
The consolidated financial statements include the accounts of
Central Maine Power Company (the Company) and its 78 percent-
owned subsidiary, Maine Electric Power Company, Inc. (MEPCO).
The Company accounts for its investments in associated companies
not subject to consolidation using the equity method.
The Company's significant accounting policies are contained in
Note 1 of Notes to Consolidated Financial Statements in the
Company's Form 10-K. For interim accounting periods the policies
are the same. The interim financial statements reflect all
adjustments that are, in the opinion of management, necessary to
a fair statement of results for the interim periods presented.
All such adjustments are of a normal recurring nature.
The adoption of the Alternative Rate Plan (ARP), effective
January 1, 1995 eliminated the reconcilable fuel clause used
under traditional rate-of-return regulation to account for and
collect fuel and purchased-power energy costs. Fuel revenues are
now recorded as they are billed rather than deferred and
reflected in revenues over time periods established by the Maine
Public Utilities Commission (MPUC). These effects complicate
quarter-to-quarter comparisons, but seasonality issues will not
affect calendar year comparisons.
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments purchased having
maturities of three months or less to be cash equivalents.
Supplemental Cash Flow Disclosure - Cash paid for the three
months ended March 31, 1995 and 1994 for interest, net of amounts
capitalized, amounted to $16.0 million and $15.8 million,
respectively. Income taxes refunded amounted to $4.4 million for
the three months ended March 31, 1995. The Company incurred no
new capital lease obligations in either period. For the three
months ended March 31, 1994, income taxes paid totaled $1.0
million.
2. Commitments and Contingencies
Maine Yankee Atomic Power Company Steam Generator Tubes - The
Company, through its equity investment totaling approximately
$25.4 million at March 31, 1995, owns a 38-percent stock interest
in Maine Yankee Atomic Power Company (Maine Yankee), which owns
and operates a 860-megawatt nuclear generating plant in
Wiscasset, Maine (the Maine Yankee Plant or the Plant), and is
entitled under a cost-based power contract to an approximately
equal percentage of the Plant's output. The Maine Yankee plant,
like other pressurized water reactors, has been experiencing
-5-
degradation of its steam generator tubes, principally in the form
of circumferential cracking, which, until early 1995, was
believed to be limited to a relatively small number of tubes.
During the refueling-and-maintenance shutdown that commenced in
early February of 1995, Maine Yankee detected through new
inspection methods increased degradation of the steam generator
tubes at the plant well above its expectations, and has been
assessing the extent of degradation and evaluating available
courses of action to address the matter. The substantial
increase in the number of degraded tubes will adversely affect
the operation of the Maine Yankee plant and result in substantial
additional costs to Maine Yankee, with the Company being
responsible for its pro-rata share of non-capital costs. In
addition, the Company will also incur substantial replacement
power costs, the amount depending on the duration of the outage
and the prices paid for the replacement power.
With the termination of the reconcilable fuel-and-purchased-power
adjustment under the ARP, costs of replacement power during a
Maine Yankee outage will in general be treated like other Company
expenses, i.e., limited by the ARP's price-index mechanism, and
will not be deferred and collected through a specific fuel-rate
adjustment, as under pre-1995 ratemaking. Under the ARP no
additional price increase beyond the currently pending increase
associated with the price index will take effect in 1995 as a
result of the Maine Yankee outage. Although the ARP contains
provisions that could result in rate adjustments based on low
earnings or the incurring of extraordinary costs by the Company,
neither provision will affect prices in 1995. The result is that
costs associated with replacement power during an extended Maine
Yankee outage will have an adverse impact on Central Maine's
financial results for 1995.
After careful assessment of the extent of the tube degradation,
Maine Yankee has concluded that close to 60 percent of the
Plant's 10,000 steam-generator tubes could be cracked to some
degree. That conclusion has eliminated the possibility of
mitigating the degradation by plugging additional tubes and has
rendered most likely the option of repairing the degraded tubes
by welding short reinforcing sleeves in all the steam-generator
tubes, which Maine Yankee is still investigating. Similar
repairs have been undertaken at other nuclear plants in the
United States and abroad, but not on the scale of the Maine
Yankee project.
On April 14, 1995, the Nuclear Regulatory Commission (NRC) issued
a license approving such a sleeving process for the Maine Yankee
Plant. The NRC is considering Maine Yankee's application to
license a second sleeving process for the plant. While this
alternative sleeving process application is pending, Maine Yankee
is performing preparatory work that will support whichever
process is selected.
The Company estimates that its share of the costs of such repairs
could range from $10 to $15 million. In addition, the Company
expects to incur additional fuel costs over and above what it
would have incurred if the Maine Yankee Plant had continued to
operate in the range of approximately $3.5 million to $4.5
million per month while the outage persists. Maine Yankee has
informed the Company that such a sleeving project could be
completed in time for the Plant to return to service by the end
of 1995.
-6-
The Company cannot predict how long the Plant will be out of
service. The impacts of unbudgeted repairs and replacement power
needs are still being assessed and, therefore, have not been
reflected in first quarter results. However, such costs will
have a material adverse impact on the Company's financial results
for 1995.
Legal and Environmental Matters - The Company is a party in legal
and administrative proceedings that arise in the normal course of
business. As discussed in Note 4 of Notes to Consolidated
Financial Statements in the Company's Form 10-K, in connection
with one such proceeding, the Company has been named a
potentially responsible party and has been incurring costs to
determine the best method of cleaning up an Augusta, Maine, site
formerly owned by a salvage company and identified by the
Environmental Protection Agency (EPA) as containing soil
contaminated by polychlorinated biphenyls (PCBs) from equipment
originally owned by the Company.
Initial tests on the site have been completed and more complex
technological studies are still in progress. The Company believes
that its share of the remaining costs of the cleanup will total
between $11 million and $15 million, depending on the level of
cleanup ultimately required and other variable factors. Such
estimate is net of an agreed partial insurance recovery and
includes the 1993 court-ordered contribution of 41 percent from
Westinghouse Electric Corp., but excludes contributions from the
other insurance carriers the Company has sued, or any other third
parties. As a result, the Company has recorded an estimated
liability of $11 million and an equal regulatory asset,
reflecting an accounting order to defer such costs and the
anticipated ratemaking recovery of such costs when ultimately
paid.
The Company cannot predict with certainty the level and timing of
the cleanup costs, the extent they will be covered by insurance,
or the ratemaking treatment of such costs, but believes it should
recover substantially all of such costs through insurance and
rates. The Company also believes that the ultimate resolution of
the legal and environmental proceedings in which it is currently
involved will not have a material adverse effect on its financial
condition.
3. Regulatory Matters
Alternative Rate Plan - In December 1994, the MPUC approved a
stipulation signed by most of the parties to the Company's ARP
proceeding. Please refer to Note 3 to Consolidated Financial
Statements included in the Company's Form 10-K for a detailed
description of the ARP. This follow-up proceeding to the
Company's 1993 base-rate case was ordered by the MPUC in an
effort to develop a five-year plan containing price-cap, profit-
sharing, and pricing-flexibility components. Although the ARP is
a major reform, the MPUC will continue to regulate the Company's
operations and prices, provide for continued recovery of deferred
costs, and specify a range for its rate of return.
The Company believes, as stated in the MPUC's order approving the
ARP, that operation under the ARP continues to meet the criteria
of SFAS No. 71. In its order, the MPUC reaffirmed the
applicability of previous accounting orders allowing the Company
to reflect amounts as deferred charges and regulatory assets. As
a result, the Company will continue to apply the provisions of
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SFAS No. 71 to its accounting transactions and in its future
financial statements.
The ARP contains a mechanism that provides price-caps on the
Company's retail rates to increase annually on July 1, commencing
July 1, 1995, by a percentage combining (1) a price index, (2) a
productivity offset, (3) a sharing mechanism, and (4) flow-
through items and mandated costs. The price cap applies to all of
the Company's retail rates, including the Company's fuel-and-
purchased power cost, which previously had been treated
separately. Under the ARP, fuel expense is no longer subject to
reconciliation or specific rate recovery, but is subject to the
annual indexed price-cap changes.
The ARP also provides for partial flow-through to ratepayers of
cost savings from non-utility generator contract buy-outs and
restructuring, recovery of energy-management costs, penalties for
failure to attain customer-service and energy-efficiency targets,
and specific recovery of half the costs of the transition to the
accounting method required by Statement of Financial Accounting
Standards No. 106, "Accounting for Postretirement Benefits Other
Than Pensions" (SFAS No. 106), the remaining 50 percent to be
recovered through the annual price-cap change. The ARP also
generally defines mandated costs that would be recoverable by the
Company notwithstanding the index-based price cap. To receive
such treatment, a mandated cost's revenue requirement must exceed
$3 million and have a disproportionate effect on the Company or
the electric power industry.
The ARP also contains provisions to protect the Company and
ratepayers against unforeseen adverse results from its operation.
These include review by the MPUC if the Company's actual return
on equity falls outside the designated range two years in a row,
a mid-period review of the ARP by the MPUC in 1997 (including
possible modification or termination), and a "final" review by
the MPUC in 1999 to determine whether or with what changes the
ARP should continue in effect after 1999.
In March 1995, the Company filed its first annual request for an
increase of 2.43% in rate and rate-element caps under the ARP.
The components of the increase included the inflation index of
2.92%, reduced by a productivity offset of 0.5% and increased by
0.01% for flowthrough items and mandated costs. The Company
believes its filing is in compliance with the requirements of the
ARP. After review of the compliance filing by the MPUC the
indexed price increase is scheduled to take effect July 1, 1995.
-8-
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
Operating Results
Net Income was $26.4 million for the first quarter of 1995
compared to $11.4 million for the corresponding period in 1994.
Earnings applicable to Common Stock were $23.8 million or $0.73
per share for the first three months of 1995 compared to $8.8
million or $0.27 per share for the comparable period in 1994.
Operating revenues in the first quarter of 1995 totaled $263
million, up 9.2 percent from $241 million in the first quarter of
1994. Revenues were affected by lower kilowatt-hour sales, a 1994
price increase for most customers, price discounts for
competitively targeted customer classes and the elimination under
the Alternative Rate Plan (ARP) that took effect January 1, 1995,
of reconciliation treatment for fuel and purchased-power
expenses.
The adoption of the ARP effective January 1, 1995 had a
significant impact on the results of operations for the first
quarter of 1995 when compared to 1994. The ARP price-cap method
of ratemaking effectively eliminates the reconcilable fuel clause
used under traditional rate-of-return regulation to account for
and collect fuel and purchased-power energy costs. One impact of
this change is that seasonality in prices and certain accounting
treatments for fuel revenues can produce more volatility in
quarterly results than occurred under the prior ratemaking
treatment. These effects complicate quarter-to-quarter
comparisons, but seasonality issues will not affect calendar year
comparisons.
Under that discontinued mechanism, fluctuations in fuel costs
required the Company to record unbilled fuel revenue for any fuel
costs incurred in excess of the amounts actually collected in
each respective period. If fuel collections exceeded fuel costs
a charge to revenue was made during that period. The effect of
the fuel cost adjustment mechanism was to ensure that all fuel
costs incurred were ultimately collected from customers at some
time in the future. This fuel mechanism also resulted in the
allocation of a greater portion of the customers' rates to fuel
revenues in the winter months and traditionally resulted in a
charge to revenues in the winter months as fuel revenues
collected normally exceed fuel costs. With the elimination of
the reconcilable fuel mechanism under the ARP, fuel revenues are
now recorded as they are billed. Therefore, the traditional
charge to revenues for fuel overcollections in the winter months
no longer occurs, resulting in the increase in first quarter 1995
revenues.
Service-area sales of electricity totaled approximately 2.36
billion kilowatt-hours for the three-month period ended March 31,
1995, a decrease of 4.8 percent compared to the first three
months of 1994.
-9-
Service Area Kilowatt-hour Sales (Millions of KWHs)
Three Months Ended March 31,
1995 1994 % Change
Residential 816.8 878.3 (7.0)%
Commercial 643.8 646.8 (0.5)
Industrial 867.8 916.3 (5.3)
Other 35.4 42.4 (16.3)
2,363.8 2,483.8 (4.8)%
The changes in service area kilowatt-hour sales reflect the
following:
Kilowatt-hour sales to residential customers decreased
significantly in the first quarter compared to 1994; usage
per customer was down 7.9 percent, and declines in the space
and water heating subclass usage contributed to this
decrease.
Commercial sales decreased slightly from 1994 reflecting
decreases or flat sales in most sectors.
Industrial kilowatt-hour sales decreased from 1994 due
primarily to decreased sales to the pulp and paper industry
of 10.5%. This sector accounts for approximately 60% of the
industrial sales category. The primary factor in the
decline in sales to this industry was the loss of 66 million
kilowatt-hours of sales formerly made to a customer who
began taking service from another utility in late 1994.
Please refer to Note 4 to Consolidated Financial Statements
in the Company's Form 10-K for a detailed discussion of this
matter. A sales increase of 5.1% occurred to all other
industrial customers as a group.
The components of the change in electric operating revenues for
the three-months ended March 31, 1995, as compared to the same
period in 1994, are as follows:
(Dollars in Thousands)
Revenues from Kilowatt-hour Sales:
Total Service-Area Base Revenue $ (900)
Fuel Cost Recoveries 22,130
Non-Territorial Base Revenues 265
Revenues from Kilowatt-hour Sales 21,495
Other Operating Revenues, including
Maine Electric Power Company, Inc. 791
Total Change in Electric Operating Revenues $22,286
Total service-area base revenues decreased for the first quarter
of 1995 reflecting lower kilowatt-hour sales, a December 1994
annual price decrease totaling $5.6 million, and the discounted
rates given competitively positioned customers effective with the
ARP. For a complete discussion of discounted rates please refer
to Note 4 to consolidated Financial Statements in the Company's
Form 10-K.
Fuel revenue increases reflect the elimination under the ARP of
the reconcilable fuel clause, discussed above. Seasonal
fluctuations in fuel revenues will continue throughout the
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remainder of 1995.
MEPCO's electric sales and transmission revenues from New England
utilities other than the Company (included in other operating
revenues in the preceding table) amounted to $1.7 million and
$1.8 million in the first quarters of 1995 and 1994,
respectively. Under a Participation Agreement that terminates in
1996, all of MEPCO's costs, including a return on invested
capital, are paid by the participating utilities (Participants),
which include the Company and most of the larger New England
electric companies. The level of MEPCO's revenues and expenses
changes depending upon the level of energy purchases by
Participants.
Purchased power-other expense increased over the first quarter of
1994, principally because the 1994 amount included a one-time
$4.1 million credit representing reversal of a previously created
reserve related to the Company's "capacity deficiency fund." A
January 1994 MPUC-approved stipulation favorably resolved all
issues related to that fund.
Although the Company continues its cost-control programs, other
operation and maintenance expenses increased by $3.8 million
compared to the first quarter of 1994 primarily reflecting
increased monthly payments for and amortization of purchased-
power contract buy-outs.
Federal and state income taxes fluctuate with the level of pre-
tax earnings and the regulatory treatment of taxes by the MPUC.
This expense increased as a result of higher pre-tax earnings in
the first quarter of 1995, when compared to 1994.
Interest on long-term debt during the first quarter of 1995
increased by approximately $1.7 million while other interest
expense remained flat compared to 1994. The increase reflects
higher levels of outstanding long-term debt when compared to the
first quarter of 1994. The increased debt results from the
issuance of additional mortgage bonds during 1994 and the Finance
Authority of Maine note issued to finance the buy-out of a large
non-utility generator contract in 1994.
Please refer to Note 3 to Consolidated Financial Statements,
Commitments and Contingencies - Maine Yankee Atomic Power Company
Steam Generator Tubes," above for a detailed discussion of the
recent issues surrounding Maine Yankee.
On May 4, 1995, the Company announced a Special Retirement Offer
(SRO) to all employees aged 50 or more who have at least five
years of continuous service. The maximum allowable reduction in
employees through the SRO is 200, approximately ten percent of
the Company's existing workforce. The goal of the SRO is to help
the Company achieve financial savings and make the organizational
changes it needs to be an effective competitor in the energy
marketplace. The eligible employees have until June 30, 1995 to
decide on the SRO and must retire by July 1, 1995. The Company
has determined that a significant workforce reduction must be
made in the future and if the SRO does not meet its goal of
employee reductions, that goal will be met by involuntary
workforce reductions. The financial impacts of the SRO are
currently being assessed and once the actual number and mix of
employees accepting the offer is known the Company will reflect
the cost of the SRO at that time. Labor savings will be
reflected over time as those savings are generated.
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Liquidity and Capital Resources
Approximately $52.8 million of cash was provided during the first
quarter of 1995 from net income before non-cash items, primarily
depreciation and amortization. During such period, approximately
$11.1 million of cash was used for fluctuations in certain assets
and liabilities and from other operating activities.
During the first quarter of 1995, the Company reduced the level
of preferred stock outstanding by $4.8 million. Dividends paid
on common stock were $7.3 million, while preferred-stock
dividends utilized $2.7 million of cash.
Investing activities, primarily construction expenditures,
utilized $3.9 million in cash during the first quarter of 1995
for generating projects, transmission, distribution, and general
construction expenditures.
In order to accommodate existing and future loads on its electric
system the Company is engaged in a continuing construction
program. The Company's plans for improvements and expansions,
its load forecast and its power-supply sources are under a
process of continuing review. Actual construction expenditures
will depend upon the availability of capital and other resources,
load forecasts, customer growth and general business conditions.
The ultimate nature, timing and amount of financing for the
Company's total construction programs, refinancing and energy-
management capital requirements will be determined in light of
market conditions, earnings and other relevant factors.
To support its short-term capital requirements, the Company
maintains an unsecured $50-million revolving credit agreement
with several banks that can be used to support commercial paper
borrowing or as short-term financing. However, access to
commercial paper markets has been substantially reduced, if not
eliminated, as a result of the downgrading of the Company's
credit ratings during 1993. The amount of outstanding short-term
borrowing will fluctuate with day-to-day operational needs, the
timing of long-term financing, and market conditions.
On November 9, 1994, the Company entered into a Competitive
Advance and Revolving Credit Facility (Revolving Credit
Facility), with several banks and Chemical Bank, as agent for the
lenders, to provide up to $80 million of revolving credit loans.
The Revolving Credit Facility supplements the existing $50
million revolving-credit agreement and replaces the Company's $73
million of individual lines of credit.
Several credit-rating actions relating to the Company's
securities took place in early 1995, when the Company's actions
taken during 1994 with respect to cost control, NUG cost
reductions, the regulatory reform under the ARP, and the
competitive pricing agreements with large customers, were
recognized by Moody's, Investors Service (Moody's) which upgraded
the Company's ratings on preferred stock and commercial paper,
and Duff & Phelps Credit Rating Co. (Duff & Phelps), which
upgraded its preferred stock rating. After announcement of the
Maine Yankee steam generator tube issues Duff & Phelps placed the
Company on "credit watch" for possible downgrade. Moody's and
Standard and Poor's Corp. continue to monitor the Maine Yankee
situation and its impact on their ratings of the Company's
securities.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Environmental Matters. For a discussion of administrative and
judicial proceedings concerning cleanup of a site containing soil
contaminated by PCB's from equipment originally owned by the
Company, see Note 2, "Commitments and Contingencies," "Legal and
Environmental Matters," which is incorporated herein by
reference.
Regulatory Matters. For a discussion of certain other Regulatory
matters affecting the Company, see Note 3, "Regulatory Matters,"
which is incorporated herein by reference.
Item 2. through Item 4. Not applicable
Item 5. Other Information.
Maine Yankee Steam Generator Tubes. For a discussion of issues
arising from the discovery of a large number of degraded steam
generator tubes at the Maine Yankee plant see Note 2,
"Commitments and Contingencies," "Maine Yankee Atomic Power
Company Steam Generator Tubes," which is incorporated herein by
reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None.
(b) Reports on Form 8-K. The Company filed the following
reports on Form 8-K during the first quarter of 1995
and thereafter to date:
Date of Report Items Reported
January 27, 1995 Item 5
On January 10, 1995 the Maine Public Utilities Commission issued
its "Detailed Opinion and Subsidiary Findings" formally adopting
the Alternative Rate Plan. On January 27, 1995, The Company
announced its financial results for 1994.
March 23, 1995 Item 5
The Company reported the detection of increased degradation of
the steam generator tubes at the Maine Yankee plant.
March 29, 1995 Item 5
a. The Company reported its estimated share of the costs to
repair the Maine Yankee steam generator tubes, through inserting
reinforcing sleeves in all of the tubes could range from $10 to
$15 million and additional fuel costs over and above what it
would have incurred had the Maine Yankee plant continued to
operate in the range of $3.5 million to $4.5 million per month.
b. The Company reported the Federal Energy Regulatory
Commission's March 29, 1994 issuance of a Notice of Proposed
Rulemaking that it said was intended to "facilitate the
development of a competitive market by ensuring that wholesale
buyers and sellers can reach each other and to eliminate any
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competitive and discriminatory practices in transmission
services."
c. The Company reported first quarter 1995 financial results.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CENTRAL MAINE POWER COMPANY
(Registrant)
Date: May 10, 1995 /S/R. S. Howe
R. S. Howe, Comptroller (Chief Accounting
Officer)
/S/D. E. Marsh
David E. Marsh, Vice President, Corporate
Services and Chief Financial Officer
(Principal Financial Officer and duly
authorized officer)
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