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 June 30, 1996
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5139
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CENTRAL MAINE POWER COMPANY
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(Exact name of registrant as specified in its charter)
Incorporated in Maine 01-0042740
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
83 Edison Drive, Augusta, Maine 04336
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(Address of principal executive offices) (Zip Code)
207-623-3521
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(Registrant's telephone number including area code)
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(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
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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 August 1, 1996
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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 June 30, 1996 and 1995 1
Consolidated Statement of Earnings for the Six Months
Ended June 30, 1996 and 1995 2
Consolidated Balance Sheet - June 30, 1996 and December 31, 1995:
Assets 3
Stockholders' Investment and Liabilities 4
Consolidated Statement of Cash Flows for the Six Months
Ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Part II. Other Information 19
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 June 30,
--------------------
1996 1995
---- ----
ELECTRIC OPERATING REVENUES $216,358 $202,584
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OPERATING EXPENSES
Fuel Used for Company Generation 1,884 4,944
Purchased Power
Energy 95,253 92,346
Capacity 24,584 34,123
Other Operation 39,792 48,008
Maintenance 8,226 8,599
Depreciation and Amortization 14,551 14,037
Federal and State Income Taxes 5,975 (8,207)
Taxes Other Than Income Taxes 6,825 6,716
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Total Operating Expenses 197,090 200,566
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EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 1,227 2,034
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OPERATING INCOME 20,495 4,052
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OTHER INCOME (EXPENSE)
Allowance for Equity Funds Used During Construction 198 154
Other, Net 1,789 1,688
Income Taxes Applicable to Other Income (Expense) (605) (703)
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Total Other Income (Expense) 1,382 1,139
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INCOME BEFORE INTEREST CHARGES 21,877 5,191
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INTEREST CHARGES
Long-Term Debt 11,981 12,798
Other Interest 952 1,140
Allowance for Borrowed Funds Used During Construction (152) (128)
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Total Interest Charges 12,781 13,810
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NET INCOME (LOSS) 9,096 (8,619)
DIVIDENDS ON PREFERRED STOCK 2,519 2,609
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EARNINGS (LOSS) APPLICABLE TO COMMON STOCK $ 6,577 $(11,228)
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 32,442,752 32,442,752
EARNINGS (LOSS) PER SHARE OF COMMON STOCK $0.20 $(0.34)
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.225 $0.225
The accompanying notes are an integral part of these financial statements.
Central Maine Power Company
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
For the Six Months
Ended June 30,
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1996 1995
---- ----
ELECTRIC OPERATING REVENUES $490,497 $465,896
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OPERATING EXPENSES
Fuel Used for Company Generation 7,480 9,554
Purchased Power
Energy 212,981 206,704
Capacity 49,053 55,168
Other Operation 82,694 89,477
Maintenance 15,522 14,939
Depreciation and Amortization 28,019 28,314
Federal and State Income Taxes 23,936 8,435
Taxes Other Than Income Taxes 13,815 13,369
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Total Operating Expenses 433,500 425,960
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EQUITY IN EARNINGS OF ASSOCIATED COMPANIES 3,099 3,477
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OPERATING INCOME 60,096 43,413
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OTHER INCOME (EXPENSE)
Allowance for Equity Funds Used During Construction 384 310
Other, Net 3,340 2,946
Income Taxes Applicable to Other Income (Expense) (1,205) (1,243)
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Total Other Income (Expense) 2,519 2,013
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INCOME BEFORE INTEREST CHARGES 62,615 45,426
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INTEREST CHARGES
Long-Term Debt 24,014 25,617
Other Interest 1,948 2,308
Allowance for Borrowed Funds Used During Construction (300) (256)
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Total Interest Charges 25,662 27,669
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NET INCOME 36,953 17,757
DIVIDENDS ON PREFERRED STOCK 5,037 5,141
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EARNINGS APPLICABLE TO COMMON STOCK $ 31,916 $ 12,616
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 32,442,752 32,442,752
EARNINGS PER SHARE OF COMMON STOCK $0.98 $0.39
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $0.45 $0.45
The accompanying notes are an integral part of these financial statements
Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
June 30, Dec. 31,
1996 1995
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Unaudited)
ASSETS
ELECTRIC PROPERTY, at Original Cost $1,622,562 $1,611,941
Less: Accumulated Depreciation 579,302 560,078
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Electric Property in Service 1,043,260 1,051,863
Construction Work in Progress 18,577 15,928
Net Nuclear Fuel 1,188 1,391
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Net Electric Property and Nuclear Fuel 1,063,025 1,069,182
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INVESTMENTS IN ASSOCIATED COMPANIES, at Equity 66,763 54,669
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Net Electric Property, Nuclear Fuel and
Investments in Associated Companies 1,129,788 1,123,851
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CURRENT ASSETS
Cash and Temporary Cash Investments 34,502 57,677
Accounts Receivable, Less Allowance for Uncollectible
Accounts of $ 2,957 in 1996 and $3,313 in 1995
Service - Billed 74,672 87,140
- Unbilled 29,707 41,798
Other Accounts Receivable 13,502 15,131
Inventories, at Average Cost
Fuel Oil 5,522 3,772
Materials and Supplies 12,687 12,772
Funds on Deposit With Trustee 59,119 29,919
Prepayments and Other Current Assets 5,367 9,192
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Total Current Assets 235,078 257,401
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DEFERRED CHARGES AND OTHER ASSETS
Recoverable Costs of Seabrook 1 and Abandoned
Projects, Net 92,339 95,127
Regulatory Assets-Deferred Taxes 234,931 235,081
Yankee Atomic Purchase Power Contract 19,005 21,396
Other Deferred Charges and Other Assets 237,735 260,063
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Deferred Charges and Other Assets, Net 584,010 611,667
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TOTAL ASSETS $1,948,876 $1,992,919
========= =========
The accompanying notes are an integral part of these financial statements.
Central Maine Power Company
CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
June 30, Dec. 31,
1996 1995
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(Unaudited)
STOCKHOLDERS' INVESTMENT AND LIABILITIES
CAPITALIZATION
Common Stock Investment $ 507,323 $ 490,005
Preferred Stock 65,571 65,571
Redeemable Preferred Stock 53,528 67,528
Long-Term Obligations 599,992 622,251
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Total Capitalization 1,226,414 1,245,355
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CURRENT LIABILITIES AND INTERIM FINANCING
Interim Financing 44,000 34,000
Sinking-Fund Requirements 10,454 10,455
Accounts Payable 72,236 108,170
Dividends Payable 9,823 9,823
Accrued Interest 12,324 12,648
Accrued Income Taxes 4,863 3,668
Miscellaneous Current Liabilities 18,499 13,870
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Total Current Liabilities and Interim Financing 172,199 192,634
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COMMITMENTS AND CONTINGENCIES
RESERVES AND DEFERRED CREDITS
Accumulated Deferred Income Taxes 356,751 351,868
Unamortized Investment Tax Credits 31,645 32,452
Regulatory Liabilities-Deferred Taxes 51,656 50,366
Yankee Atomic Purchased Power Contract 19,005 21,396
Other Reserves and Deferred Credits 91,206 98,848
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Total Reserves and Deferred Credits 550,263 554,930
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TOTAL STOCKHOLDERS' INVESTMENT
AND LIABILITIES $1,948,876 $1,992,919
========= =========
The accompanying notes are an integral part of these financial statements.
Central Maine Power Company
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
(Note 1)
For the Six Months
Ended June 30,
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1996 1995
CASH FROM OPERATIONS ---- ----
Net Income $36,953 $17,757
Items Not Requiring (Not Providing) Cash:
Depreciation and Amortization 40,189 41,161
Deferred Income Taxes and Investment Tax Credits, Net 5,323 6,708
Maine Yankee Sleeving Accrual, Net of Amounts Billed 12,151
Allowance for Equity Funds Used During Construction (384) (310)
Changes in Certain Assets and Liabilities:
Accounts Receivable 26,188 23,114
Other Current Assets 3,825 3,864
Inventories (1,665) (596)
Accounts Payable (35,029) (15,475)
Accrued Interest (324) (1,611)
Accrued Income Taxes 1,195 (1,422)
Miscellaneous Current Liabilities 4,629 8,140
Deferred Energy-Management Costs (409) (1,865)
Maine Yankee Outage Accrual 4,140 (8,814)
Purchased-Power Contracts (75) (4,550)
Other, Net (2,020) 1,435
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Net Cash Provided By Operating Activities 82,536 79,687
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INVESTING ACTIVITIES
Construction Expenditures (18,773) (17,468)
Investments in Associated Companies (11,685)
Changes in Accounts Payable - Investing Activities (905) (2,629)
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Net Cash Used by Investing Activities (31,363) (20,097)
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FINANCING ACTIVITIES
Issuances:
Medium-Term Notes 20,000
Redemptions:
Preferred Stock (14,000) (5,472)
Mortgage Bonds (11,500)
Medium-Term Notes (35,000)
Dividends:
Common Stock (14,611) (14,611)
Preferred Stock (5,037) (5,251)
Funds on Deposit With Trustee (29,200) -
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Net Cash Used by Financing Activities (74,348) (40,334)
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Net Increase In Cash (23,175) 19,256
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 57,677 58,112
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CASH AND CASH EQUIVALENTS, END OF PERIOD $34,502 $77,368
====== ======
The accompanying notes are an integral part of these financial statements.
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, 1995 (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).
The Company adopted Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," effective January 1, 1996. This statement requires impairment
losses on long-lived assets to be recognized when an asset's book value exceeds
its fair value. This statement also imposes a stricter criterion for retention
of regulatory assets on the financial statements by requiring that such assets
be probable of recovery at each balance sheet date. As of June 30, 1996, the
amount of assets not subject to rate recovery was immaterial. However, this may
change in the future as changes are made in the current regulatory framework or
as competitive factors influence wholesale and retail pricing in the electric
utility industry.
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 six months ended June 30,
1996 and 1995 for interest, net of amounts capitalized, amounted to $ 24.3
million and $27.4 million, respectively. Income taxes paid, net of amounts
refunded, amounted to $ 18.7 million and $4.5 million for the six months ended
June 30, 1996 and 1995, respectively. The Company incurred no new capital lease
obligations in either period.
2. Commitments and Contingencies
Maine Yankee Atomic Power Company - On January 11, 1996, the Maine Yankee
nuclear generating plant began start-up operations after an extended outage and
was up to 90-percent generation levels by January 24, 1996. Refer to Note 4 of
Notes to Consolidated Financial Statements for a detailed discussion on this
outage. On April 25, 1996, Maine Yankee submitted an analysis to the Nuclear
Regulatory Commission (NRC) which Maine Yankee believes met all federal
regulatory requirements for operating the Plant at the 100-percent level.
However, Maine Yankee cannot return to operating at 100 percent until the NRC
reviews the analysis submitted by Maine Yankee and approves operating at full
power. Maine Yankee has notified the Company that it is unable to predict when
or if the NRC will permit the plant to operate at full power generation. The
Company estimates that for as long as the plant continues to operate at a
90-percent level in 1996 it will continue to incur replacement-power costs
ranging from $300,000 to $400,000 per month. These additional costs are not
recoverable under a fuel-adjustment clause and will be charged against
operations in 1996.
Also as previously reported, in December 1995 the NRC's Office of the Inspector
General (OIG) and its Office of Investigations (OI) initiated separate
investigations of certain anonymous allegations of wrongdoing by Maine Yankee
and Yankee Atomic Electric Company (Yankee) in 1988 and 1989 in connection with
Maine Yankee Plant operating-license amendments. On May 9, 1996, the OIG, which
was responsible for investigating only the actions of the NRC Staff and not
those of Maine Yankee or Yankee, issued its report on its investigation. The
report found deficiencies in the NRC Staff's review, documentation, and
communications practices in connection with the license amendments, as well as
"significant indications of possible licensee violations of NRC requirements and
regulations." Any such violations by Maine Yankee or Yankee would be within the
purview of the OI investigation, which is not yet complete. A separate internal
investigation commissioned by the boards of directors of Maine Yankee and Yankee
and conducted by an independent law firm noted several areas that could have
been improved, including regulatory communications, definition of
responsibilities between Maine Yankee and Yankee, and documentation and tracking
of regulatory compliance, but found no wrongdoing by Maine Yankee or Yankee or
any of their employees.
On June 7, 1996, the NRC formally notified Maine Yankee that it planned to
conduct an "Independent Safety Assessment" of the Maine Yankee Plant to provide
an independent evaluation of the safety performance of Maine Yankee and as a
"follow-on" to the OIG report. The NRC stated that the overall goals and
objectives of the assessment were: "(a) provide an independent assessment of
conformance to the design and licensing basis; (b) provide an independent
assessment of operational safety performance; (c) evaluate the effectiveness of
licensee self-assessments, corrective actions and improvement plans and; (d)
determine root cause(s) of safety significant findings and conclusions." The NRC
further informed Maine Yankee that the assessment would be carried out by a team
of NRC personnel and contractors who were "independent of any recent or
significant involvement with the licensing, regulation or inspection of Maine
Yankee". The assessment is expected to last until early October, 1996. The
Company, however, cannot predict the outcome of the Independent Safety
Assessment or the unfinished OI investigation or how any findings from these
proceedings may impact the Plant's operating license, its cost of operations, or
any conditions required for continued operation, including whether or not the
Plant may be required to shut down or the duration of any required shutdown.
Reductions in plant output or a complete shutdown of the plant would impose
additional costs on the Company, which could be substantial, depending on the
magnitude and duration of any such operating restrictions and the amount and
cost of any replacement power.
Allegations by "whistleblowers" of wrongdoing at the Millstone nuclear units in
Connecticut, along with the allegations relating to Yankee and Maine Yankee
discussed above, have contributed to heightened public and regulatory attention
to operating practices at nuclear generating plants in New England. The Company
cannot predict whether such heightened attention will affect the operation of
the Plant.
On July 20, 1996, the Maine Yankee Plant was taken off-line after a
comprehensive review by Maine Yankee of the Plant's systems and equipment
revealed a need to add pressure-relief capacity to the Plant's primary component
cooling system. As of the date of this report, August 14, 1996, the Plant is in
the process of returning to service, but the Company cannot predict with
certainty when the Plant will return to its previous operating level of 90
percent of capacity. Assuming the duration of the outage does not exceed one
month, which the Company believes is likely, the Company estimates that its
replacement-power costs would range from $3 million to $4 million, depending on
the date of the return to service and based on a return to 90 percent of
operating capacity.
Two other nuclear generating plants in which the Company has interests,
Millstone Unit No. 3 (2.5 percent interest) and Connecticut Yankee (6 percent
interest), are currently out of service, the former to provide assurances to the
NRC concerning operating license requirements and the latter was taken off-line
as a precautionary measure to evaluate the plant's service water system, but has
remained shut down because of other safety issues. The Company estimates that it
will incur approximately $600,000 to $800,000 in replacement power costs for
each month these plants are out of service and will charge such costs against
operations, but cannot predict how long those plants will be out of service nor
the costs that may be required to return the plants to service.
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 was
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.
On October 10, 1995, the EPA approved a remedy to adjust the soil cleanup
standard to 10 parts per million from the one part per million established in
the EPA's 1989 Record of Decision, on the part of the site where PCBs were found
in their highest concentration. The EPA stated that the purpose of adjusting the
standard of cleanup was to accommodate the selected technology's inability to
reduce PCBs and other chemical components on the site to the original standard.
This remedy involves transporting the contaminated soil to a secure off-site
landfill.
The Company believes that its share of the remaining costs of the cleanup under
the new method could total approximately $3.4 million to $5 million. This
estimate is net of an agreed partial insurance recovery and the 1993
court-ordered contribution of 41 percent from Westinghouse Electric Corp., but
does not reflect any possible contributions from other insurance carriers the
Company has sued, or from any other parties. The Company has recorded an
estimated liability of $3.4 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. In addition, the Company has deferred, as a
regulatory asset, $4.1 million of costs incurred through June 30, 1996.
The Company cannot predict with certainty the level and timing of the cleanup
costs, the extent they will be covered by insurance, or their ratemaking
treatment, but believes it should recover substantially all of such costs
through insurance and rates. The Company also believes that the ultimate
resolution of current legal and environmental proceedings will not have a
material adverse effect on its financial condition.
3. Regulatory Matters
Alternative Rate Plan - The MPUC approved the Alternative Rate Plan (ARP)
effective January 1, 1995. Please refer to Note 3 to Consolidated Financial
Statements included in the Company's Form 10-K for a detailed description. The
ARP was established in response to an order by the MPUC 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 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.
Effective July 1, 1995, the MPUC approved a 2.43-percent increase pursuant to
the annual price-change provision in the ARP.
On June 28, 1996, the MPUC approved a 1.26-percent increase in rates and
rate-element caps under the ARP effective July 1, 1996. The increase does not
apply to fixed-price contracts and other target rate classes. The components of
the increase included the inflation index of 2.55 percent and earnings sharing
and mandated cost items of 0.64 percent, reduced by the productivity offset of
1.0 percent and sharing of contract restructuring and buyout savings of 0.93
percent. As part of the 1996 ARP compliance filing, the Company sought
affirmation of the recoverability through rates of a pre-ARP regulatory asset.
The MPUC's Order provided for recovery of the pre-ARP regulatory asset in rates
satisfying the Company's request for affirmation and therefore allowed the
Company to remove an accounting reserve it had established in December 1995,
based on the fact that recovery had not specifically been provided for in rates
at that time. The removal of this reserve resulted in a one-time, after-tax,
addition of $3.8 million to income for the second quarter of 1996.
4. Non-Utility Generators
During the second quarter of 1996, the Company entered into agreements
restructuring its purchased power agreement with Maine Energy Recovery Company,
Limited Partnership (Maine Energy), a waste-to-energy facility, and concurrently
entered into a capacity sales agreement with CL Power Sales One, L.L.C. (CL
One). The amended purchased power agreement provides for the Company to purchase
energy at reduced rates in exchange for the Company's consent to Maine Energy's
sale of the facility's capacity to CL One. The capacity sales agreement provides
for resale of the capacity from CL One to the Company. Combined, these
agreements are expected to reduce the Company's aggregate cost of purchased
power by approximately $24 million over the term of the agreement.
5. Ancillary Enterprises
As part of its strategy for moving to a more competitive arena, the Company is
seeking to diversify by expanding through developing ancillary enterprises. On
April 26, 1996, the Company invested $10 million in MaineCom Services
(MaineCom), a wholly-owned subsidiary. MaineCom will seek to develop
opportunities in expanding markets by arranging fiber-optic data service for
bulk carriers, offering support for cable-TV or "super-cellular"
personal-communication vendors, and providing other telecommunications
consulting services. MaineCom has invested in FiveCom, a Massachusetts company,
to construct and operate a fiber optics system in New England.
On July 16, 1996, the Company entered into an option agreement with Maritimes &
Northeast Pipeline, L.L.C. (M&N), and PanEnergy Power Services, Inc.
(PanEnergy), in which the Company agreed to provide an exclusive option to M&N
to acquire property interests in certain of the Company's transmission line
rights of way for the location of sections of M&N's proposed natural gas
pipeline from the United States-Canada border at Woodland, Maine, to Dracut,
Massachusetts. The option is contingent on, among other things, the acquisition
by PanEnergy of a portion of the Company's approximately 60-percent interest in
William F. Wyman Unit No. 4, a jointly-owned oil-fired electric generating unit
in Yarmouth, Maine, if the economic feasibility of converting that unit to a
natural gas-fired facility is favorably determined. The Company would also have
the option of acquiring an equity interest of up to 10 percent in M&N and in the
Canadian affiliate of M&N that would construct the pipeline from a natural-gas
processing plant in Nova Scotia to the Maine border. Consummation of the plans
contemplated by the option agreement is subject to a number of uncertainties,
including, among others, feasibility studies, valuation agreements, regulatory
approvals, development of the proposed Canadian source of natural gas, the
effect of competing pipeline proposals, and political considerations in the
United States and Canada. The Company cannot now predict whether the pipeline
will be built or, if it should be, its effects on the Company's business or
operations.
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion contains forecast information items that are "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995.
All such forward-looking information is necessarily only estimated. There can be
no assurance that actual results will not differ from expectations. Actual
results have varied materially and unpredictably from expectations.
Factors that could cause actual results to differ materially include, among
other matters, electric utility restructuring, including the ongoing state and
federal activities; future economic conditions; earnings-retention and
dividend-payout policies; developments in the legislative, regulatory, and
competitive environments in which the Company operates; and other circumstances
that could affect anticipated revenues and costs, such as unscheduled
maintenance or repair requirements and compliance with laws and regulations.
Operating Results
Net income was $9.1 million for the second quarter of 1996 compared to a net
loss of $8.6 million for the corresponding period in 1995. Year-to-date net
income was $37.0 million versus $17.8 million for the 1995 period. Earnings
applicable to common stock were $6.6 million or $0.20 per share for the second
quarter of 1996 compared to a loss of $11.2 million or $0.34 per share for the
comparable period in 1995. Year-to-date earnings applicable to Common Stock were
$31.9 million or $0.98 per share and $12.6 million or $0.39 per share in 1995.
The 1995 results were dominated by a one-time charge of $8.8 million, net of
tax, for the Company's share of steam generator tube sleeving at the Maine
Yankee Atomic Power Company (Maine Yankee Plant). Net income in the second
quarter of 1995 also reflected increased purchased-power expenses of $5.0
million (after tax) related to replacement power costs for the Maine Yankee
Plant.
Operating revenues in the second quarter of 1996 totaled $216 million, up 6.8
percent from $203 million in the second quarter of 1995. Operating revenues
increased by $24.6 or 5.3 percent to $490 million in the first half of 1996.
Revenues were affected by higher kilowatt-hour sales and a July 1995 price
increase for most customers.
Service-area sales for the second quarter of 1996 totaled approximately 2.2
billion kilowatt-hours, up 3.6 percent from the second quarter of 1995.
Service-area sales of electricity totaled approximately 4.6 billion
kilowatt-hours for the six-month period ended June 30, 1996, an increase of 2.7
percent compared to the first six months of 1995.
Service Area Kilowatt-hour Sales (Millions of KWHs)
Period Ended June 30,
Three Months Six Months
1996 1995 % Change 1996 1995 % Change
---- ---- -------- ---- ---- --------
Residential 648.3 634.5 2.2% 1,482.6 1,451.4 2.2%
Commercial 572.5 565.2 1.3 1,234.4 1,209.0 2.1
Industrial 914.1 876.7 4.3 1,770.5 1,744.4 1.5
Other 50.5 32.3 56.3 107.3 67.8 58.3
------- ------- ---- ------- ------- ----
2,185.4 2,108.7 3.6% 4,594.8 4,472.6 2.7%
======= ======= ==== ======= ======= ====
The changes in service area kilowatt-hour sales reflect the following:
Kilowatt-hour sales to residential customers increased by 2.2 percent
in the second quarter and for the six months ended June 30, 1996
compared to 1995; usage per customer was up 1.0 percent in the second
quarter and for the six months ended June 30, 1996.
Commercial sales increased by 1.3 percent and 2.1 percent for the
three- and six-month periods from 1995, reflecting increases in the
services and retail trade sectors.
Industrial kilowatt-hour sales increased by 4.3 percent in the second
quarter and by 1.5 percent for the six-months ended June 30, 1996
compared to 1995. Pulp and paper sales, which comprise approximately 60
percent of industrial sales, increased 4.6 percent for the quarter and
were flat year to date.
MEPCO's electric sales and transmission revenues from New England utilities
other than the Company amounted to $2.4 million and $2.8 million in the second
quarter of 1996 and 1995, respectively. These same totals for the six months
ended June 30, 1996 and 1995 were $4.1 million and $4.5 million, respectively.
Under a Participation Agreement that formally terminated July 1, 1996, all of
MEPCO's costs, including a return on invested capital, were paid by the
participating utilities (Participants), which included 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.
MEPCO filed with the Federal Energy Regulatory Commission (FERC) on May 1, 1996,
for a six-month extension of its then-current rates, and offered an extension of
the terms of the Participation Agreement to all Participants.
Effective July 9, 1996, MEPCO filed with FERC under Order 888 for new pro forma
tariff rates. Refer to "Industry Restructuring and Strandable Costs" below for
further discussion of this matter.
Purchased power-energy expense increased over the second quarter of 1995 and
year to date, reflecting increased kilowatt-hour sales, replacement power cost
due to the Maine Yankee outage which continued through most of January 1996 and
reductions from a contract restructuring which lowered energy costs, as
discussed in Note 4 to Consolidated Financial Statements.
Purchased power-capacity expense decreased by $9.5 million compared to the
second quarter of 1995 and $6.1 million year to date, principally because of the
$15 million of sleeving costs recorded in second quarter of 1995 for Maine
Yankee, and increased expenses from a contract restructuring with a non-utility
generator.
Other operation and maintenance expenses decreased by $8.2 million compared to
the second quarter of 1995 and $6.8 million year to date, primarily due to the
reversal of a reserve established in December 1995. As discussed in Note 3 to
Consolidated Financial Statements, in response to the Company's request for
affirmation of recovery through rates of a pre-ARP regulatory asset the June 28,
1996 ARP order provided recovery in rates of a pre-ARP regulatory asset, thereby
resulting a one-time pre-tax addition to income of $6.4 million. Also, a
one-time pre-tax charge of $4.8 million associated with the Company's Special
Retirement Offer was included in 1995. Contractual obligations under the
Company's energy management programs account for a $1.7 million increase year to
date over 1995. Distribution expenses also increased on a year to date basis
over 1995 by $2.7 million, due to a planned increase for line clearance.
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 1996, when compared to 1995.
Interest on long-term debt and other interest expense decreased during the
second quarter and year to date 1996 compared to 1995. The decrease reflects a
lower level of Medium-Term Notes outstanding than in 1995 and the end of
amortization of loss on reacquired debt for one issue.
Liquidity and Capital Resources
Approximately $82.1 million of cash was provided during the first half of 1996
from net income before non-cash items, primarily depreciation and amortization.
During such period, approximately $500,000 of cash was provided by fluctuations
in certain assets and liabilities and from other operating activities.
During the first half of 1996, dividends paid on common stock were $14.6
million, while preferred-stock dividends utilized $5 million of cash.
Investing activities utilized $31.4 million in cash during the first half of
1996 for generating projects, transmission, distribution, and general
construction expenditures and includes $11.7 million the Company invested in
associated companies, $10 million of that in MaineCom Services, a
telecommunications services company.
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.
On June 12, 1996, the Company repurchased $11.5 million of the outstanding
Series N 8.50%, due 2001, General and Refunding Mortgage Bonds. On July 1, 1996,
the Company redeemed $14 million of its 8 7/8% Series Preferred Stock at par
pursuant to its sinking-fund requirements.
On April 29, 1996, the Company deposited approximately $29.1 million in cash
with the Trustee under the Company's General and Refunding Mortgage Indenture in
satisfaction of the renewal and replacement fund and other obligations under the
Indenture. The total of such cash on deposit with the Trustee as of June 30,
1996, was approximately $59.1 million. Under the Indenture such cash may be
applied, at any time at the direction of the Company, to the redemption of bonds
outstanding under the Indenture at a price equal to the principal amount of the
bonds being redeemed, without premium, plus accrued interest to the date fixed
for redemption on the principal amount of the bonds being redeemed.
At June 30, 1996, the Company had a total of $130 million in unsecured committed
bank lines with commercial banks for the purpose of providing short-term
borrowing capacity to back commercial paper issuance and to finance general
corporate needs.
On November 6, 1995, the Company extended its $80-million unsecured Competitive
Advance and Revolving Credit Facility with several banks and Chemical Bank, as
agent for the lenders, to October 15, 1996. The Company's $50-million revolving
credit facility with several banks also has an expiration date of October 15,
1996. Both credit facilities have annual fees on the unused portion of the
credit lines of 3/8 of 1 percent and allow for various borrowing options
including LIBOR-priced, ABR-priced and competitive-bid priced loans. Under the
terms of these agreements, the Company had no borrowings at June 30, 1996.
Effective July 1, 1996, MEPCO refinanced $870,000 of its long-term debt through
Key Bank of Maine at a floating interest rate, due October 1, 1996. The Company
expects long-term financing with Key Bank to be in place by that time.
Industry Restructuring and Strandable Costs
As discussed fully in the Management's Discussion and Analysis of Financial
Condition and Results of Operations included in the Company's 1995 Form 10-K,
the enactment by Congress of the Energy Policy Act of 1992 accelerated planning
by electric utilities, including the Company, for transition to a more
competitive industry. The functional areas in which competition will take place,
the regulatory changes that will be implemented, and the resulting structure of
both the industry and the Company are all uncertain, but a transition to direct
competition to serve retail customers is increasingly widely anticipated. A
departure from traditional regulation, however, could have substantial impacts
on the value of utility assets and on the ability of electric utilities to
recover their costs through rates. In the absence of full recovery, utilities
would find their above-market costs to be "stranded," or unrecoverable, in the
new competitive setting. The Company estimates its potential strandable-cost
exposure to be as much as $2 billion, with above-market purchased-power
contracts with non-utility generators responsible for approximately 60 percent
of that amount and deferred regulatory assets approximately 25 percent.
On April 17, 1996, in part in reaction to developments in its service territory
discussed below, the Company filed with the Maine Public Utilities Commission
(MPUC) (1) a petition requesting that the MPUC re-open the terminated
stranded-cost rulemaking proceeding (Petition to Re-open), and (2) a proposed
"Interim Competitive Transition Charge Tariff" (Interim Tariff), including a
request for an effective date of April 29, 1996. In its filing the Company
stated that it was critical that utilities, customers and the financial markets
"know the rules and guidelines" that would be associated with the recovery of
strandable costs during the transition to competition. To that end, the Company
urged the MPUC to reinforce its earlier commitment to prevent shifting of
strandable costs from one group of customers to another and to hold departing
customers responsible for their allocable share of such costs. The Company also
pointed out that promulgation of a final stranded-cost rule on a parallel track
with the MPUC's contemporaneous electric-utility restructuring proceeding would
allow the MPUC to have in place a clear means for an "economic transition to
competition" when the MPUC offers its recommendations on restructuring to the
Maine Legislature at the end of 1996.
The Company's Petition to Re-open requested that the MPUC re-open its rulemaking
proceeding on stranded costs and issue a proposed rule for comment and
consideration that would broadly address its application to retail wheeling and
self-generation, rather than only municipalization issues, and that would adopt
several significant principles. The principles urged by the Company for adoption
by the MPUC include, among others: (1) that all legitimate, verifiable and
unmitigatable strandable costs should be allowed to be recovered; (2) that the
shifting of costs either to remaining customers or investors by departing
customers is not consistent with economic efficiency and should be avoided to
the greatest extent possible; and (3) that the mechanism established for
recovery of stranded costs be a non-bypassable charge applying whether customers
remain connected to the distribution or transmission system or depart from that
system. The other stated principles deal with the establishment of an
appropriate period for the transition to competition and an approach to
measuring such costs annually.
In seeking approval of the second part of its MPUC filing, the Interim Tariff,
the Company asserted that the Interim Tariff would address the present and
potential risks caused by large customers bypassing the Company's system,
including such risks as: (1) the installation of "uneconomic" generation (where
the cost of the customer's alternative is higher than the market rate of power),
a practice that is contrary to long-standing Maine energy policy and statutory
law; (2) de facto restructuring, before either the Legislature or the MPUC has
completed its review, putting at risk any benefits for residential and other
remaining customers; (3) the appearance that an "escape mechanism" to avoidance
of responsibility for costs is available for those who leave the Company's
system before such responsibility for costs is settled; (4) the shifting of
costs from those who can "escape", typically large customers, to those who
cannot, typically smaller customers, or to utility investors; and (5) the
sending of a "negative message" to the financial markets, a stakeholder in
electric utility restructuring whose participation in restructuring is vital,
with ensuing increased uncertainty and risk. To overcome those risks, the
Company requested that the Interim Tariff become effective, subject to refund,
for all applicable situations that would arise on or after April 29, 1996, the
requested effective date of the Interim Tariff. The Company pointed out that it
was necessary, under the circumstances described in its filing, to have in place
an interim means to recover stranded costs from departing customers while the
longer-term issues were being decided in the re-opened stranded-cost rulemaking
in parallel with the ongoing restructuring proceeding. The Interim Tariff is
designed to provide for the recovery of a major portion, but only the uneconomic
portion, of those costs from departing large customers, subject to refund of any
amounts that exceed the amounts ultimately determined by the MPUC in its
re-opened stranded-cost proceeding to be appropriate.
Stressing the immediacy of the threat of uneconomic bypassing of the Company's
system and the resulting cost shifting and price risk to remaining customers,
the Company reported in its filing that Hannaford Bros. Co. (Hannaford), one of
its largest customers, had recently installed a natural-gas-fired
self-generation unit in Scarborough, Maine, at one of its larger supermarkets in
the Company's service territory. The Company pointed out that Hannaford had 33
locations in the Company's service territory, including a substantial number of
large supermarkets, and that Hannaford had informed the Company in discussions
with the Company of its intention to install widespread self-generation at its
stores in the Company's service territory by the end of 1996. On May 31, 1996,
the Company signed a service contract with Hannaford covering electricity sales
to all of its facilities located within the Company's service territory. This
agreement is expected to secure in excess of $27 million in retail revenues over
the next five years.
In May 1996, the Company requested the MPUC suspend the tariff proceeding on the
basis that the immediate threat of loss of a significant customer was removed.
In June 1996, the MPUC issued an order denying the Company's request, citing
that it was in the public interest to adjudicate the issues in the case, and
subsequently issued a revised schedule in the proceeding. The revised schedule
calls for the MPUC to reach a decision on this filing by mid-November 1996. The
Company cannot predict whether other customers of the Company will elect to
install self-generation units before the issues relating to responsibility for
stranded costs are resolved, or whether the MPUC will approve or allow the
recovery of some or all of the costs that may be stranded as a result of the
installation of self-generation facilities by customers of the Company.
On April 24, 1996, the Federal Energy Regulatory Commission (FERC) issued Order
No. 888, the Final Rule on Promoting Wholesale Competition Through Open-Access
Non-Discriminatory Transmission Services by Public Utilities and Recovery of
Stranded Costs by Public Utilities and Transmitting Utilities (Order No. 888)
and Order No. 889, Open Access Same-Time Information System (OASIS) (Order No.
889).
Order No. 888 requires all public utilities that own, control or operate
facilities used for transmitting electric energy in interstate commerce to file
open access non-discriminatory transmission tariffs that offer both load-based,
network and contract-based, point-to-point service, including ancillary service
to eligible customers containing minimum terms and conditions of
non-discriminatory service. This service must be comparable to the service they
provide themselves at the wholesale level; in fact, these utilities must take
wholesale transmission service they provide themselves under the filed tariffs.
The order also permits public utilities and transmitting utilities the
opportunity to recover legitimate, prudent and verifiable wholesale stranded
costs associated with providing open access and certain transmission services.
It further requires public utilities to separate transmission from generation
marketing functions and communications. Order No. 888 also clarifies
Federal/state jurisdiction over transmission in interstate commerce and local
distribution and provides for deference to certain state recommendations.
On July 9, 1996, the Company and MEPCO submitted its compliance filings to meet
the new pro forma tariff non-price minimum terms and conditions of
non-discriminatory transmission. Effective July 9, 1996, the Company and MEPCO
have been transmitting energy pursuant to their filed tariffs, subject to
refund.
Order No. 889 requires public utilities to completely separate their wholesale
power marketing and transmission operation function and to obtain information
about their transmission system for their own wholesale power transactions in
the same way their competitors do through the Open Access Same-time Information
System ("OASIS"). The rule also prescribed standards of conduct and protocols
for obtaining the information. The standards of conduct are designed to prevent
employees of a public utility engaged in marketing functions from obtaining
preferential information. The Company is participating in efforts to develop a
regional OASIS and a New England Power Pool-wide Open Access Tariff, and to
revise the New England Power Pool Agreement.
On July 19, 1996, the MPUC released for comment its Draft Plan on Electric
Utility Industry Restructuring. The Plan describes a market structure which
would fundamentally change the historical method of purchasing, delivering and
regulating electricity services. It embraces competition and consumer choice and
advocates cautious implementation.
The Draft Plan was prepared in response to Legislative Resolve 1995, ch. 48
"Resolve, to Require a Study of Retail Competition in the Electric Industry"
which became law on July 3, 1995. Through the Resolve, the Legislature directed
the Commission to begin to study restructuring Maine's electric utility industry
no later than January 1, 1996, and to submit a report to the Legislature by
January 1, 1997.
The draft calls for allowing all retail customers to choose their generation
supplier beginning January 2000. Customers would be allowed to aggregate in any
manner. Reciprocity based on retail access in other states or Canada would not
be required.
Investor-owned utilities would be required to structurally separate generation
by January 2000, and to divest all generation assets by January 2006. These
utilities would transfer the right to market output of all non-utility contracts
by January 2000. The contracts would be unaffected, and the legal obligations
would rest with the transmission and distribution companies, which would remain
regulated utilities. Standard offer service would be provided for customers who
do not choose an alternative generation provider, and that service would be
provided through periodic competitive bids. The requests for bids would contain
a cap so the retail price for generation service combined with regulated rates
of the transmission and distribution company would not exceed the bundled rate
for electricity prior to retail access.
Utilities would be provided a reasonable opportunity, comparable to that
existing under present regulation, to recover generation-related costs stranded
as a result of retail access, but would be required to take all reasonable steps
to mitigate stranded costs. The MPUC would determine generation-related stranded
costs existing as of January 2000. The amount would be reviewed and subject to
adjustment until 2006. In 2006, stranded costs associated with generation assets
would be fixed. Stranded costs associated with non-utility contracts would be
subject to adjustment on a periodic basis until contract termination. No
generation costs or obligations incurred after March 1995 would be recovered
through rates as stranded costs.
The MPUC is soliciting comments on the Draft Plan and will submit its final plan
to the Legislature in December 1996. The Company will actively participate in
this proceeding but cannot predict what the final recommendations to the
Legislature dealing with these issues will contain.
The Company believes there is nothing in the draft plan as currently written
that causes it to believe that the provisions of Statement of Financial
Accounting Standards No. 71, "Accounting for the Effects of Certain Types of
Regulation" (SFAS No. 71), should be discontinued and will continue to apply its
provisions to current accounting transactions and its historical financial
statements. However, because the Company is unable to predict what form the
final requirements will take, it cannot predict if or to what extent SFAS No. 71
will continue to be applicable in the future.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of certain significant regulatory matters affecting the
Company, including, among others, (1) the release on July 19, 1996, by the Maine
Public Utilities Commission (MPUC) of its "Draft Plan on Electric Utility
Restructuring", and (2) investigations by the Nuclear Regulatory Commission of
Maine Yankee Atomic Power Company, see Management's Discussion and Analysis of
Financial Condition and the Results of Operations, "Industry Restructuring and
Strandable Costs" and Note 2 "Commitments and Contingencies, "Maine Yankee
Atomic Power Company", respectively.
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.
Item 2. through Item 3. Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of the stockholders of the Company was held on May 22, 1996.
Proxies for the meeting were solicited pursuant to Regulation 14 under the
Securities Exchange Act of 1934. There was no solicitation in opposition to the
management's nominees as listed in the proxy statement, and all of such nominees
were elected.
Three matters were voted on at the meeting. One was the election of four
directors to Class III of the Company's Board of Directors for a three-year
term. All four nominees were elected, with the following vote tabulations:
Charleen M. Chase
Votes for - 2,373,616
Votes withheld - 59,743
Abstentions - 98,179
Broker nonvotes - 718,450
David T. Flanagan
Votes for - 2,375,740
Votes withheld - 57,619
Abstentions - 98,179
Broker nonvotes - 718,450
Robert H. Gardiner
Votes for - 2,375,053
Votes withheld - 58,307
Abstentions - 98,178
Broker nonvotes - 718,450
Peter J. Moynihan
Votes for - 2,377,553
Votes withheld - 55,806
Abstentions - 98,179
Broker nonvotes - 718,450
Two other matters voted on at the meeting were:
1. Approval of the appointment of Coopers & Lybrand L.L.P., Boston,
Massachusetts, as the Company's auditors for the year 1996. The appointment was
approved, with the following vote tabulations:
Votes for - 2,390,332
Against 17,199
Votes withheld - 98,179
Abstentions - 25,828
Broker nonvotes - 718,450
2. A shareholder proposal recommending that the Company divest its interest in
Maine Yankee Atomic Power Company by the end of 1996. The proposal was defeated,
with the following vote tabulations:
Votes for - 170,246
Against 1,735,726
Votes withheld - 494,191
Abstentions - 131,375
Broker nonvotes - 718,450
Item 5. Not Applicable.
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 second quarter of 1996 and thereafter
to date:
Date of Report Items Reported
April 17, 1996 Item 5
------
On April 17, 1996, the Company filed with the MPUC (1) a petition requesting
that the MPUC re-open the terminated stranded-cost rulemaking proceeding, and
(2) a proposed "Interim Competitive Transition Charge Tariff", including a
request for immediate effectiveness.
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: August 14, 1996 /S/R. E. Tuoriniemi
----------------------------------------
Robert E. Tuoriniemi, Comptroller (Chief
Accounting Officer)
/S/D. E. Marsh
----------------------------------------
David E. Marsh, Vice President,
Corporate Services, Treasurer, and Chief
Financial Officer (Principal Financial
Officer and duly authorized officer)