SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: September 1, 1998
NEW ENGLAND ELECTRIC SYSTEM
(exact name of registrant as specified in charter)
Massachusetts 1-3446 04-1663060
(state or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation)
25 Research Drive, Westborough, Massachusetts 01582
(Address of principal executive offices)
(508) 389-2000
(Registrant's telephone number, including area code)
Item 2. Acquisition or Disposition of Assets
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On September 1, 1998, New England Electric System (NEES)
subsidiaries, New England Power Company (NEP) and The
Narragansett Electric Company, completed the sale of
substantially all of their non-nuclear generating business to
USGen New England, Inc. (USGen), an indirect who1ly owned
subsidiary of PG&E Corporation (PG&E). The NEES companies
received $1.59 billion for the sale. In addition, the NEES
companies were reimbursed approximately $140 million for costs
associated with early retirements and special severance programs
for employees affected by industry restructuring and the value of
inventories. For more information on the terms and events
leading to the sale, the accounting implications of the sale, and
the assets sold, see NEES' Annual Report on Form 10-K for the
year ended December 31, 1997.
As part of the sale, USGen purchased NEP's entitlement to
approximately 1,100 MW of power procured under long-term
contracts. NEP is required to make a monthly fixed contribution
towards the above-market cost of the purchased power from closing
through January 2008. USGen is responsible for the balance of
the costs under the purchased power contracts. Pursuant to the
transfer agreement, under certain conditions involving formal
assignment of the contracts to USGen and a release of NEP from
further obligations to the power supplier, NEP is required to
make a lump sum payment of the present value of its monthly fixed
contribution obligations. To date during 1998, NEP has made lump
sum payments of approximately $340 million which reduced the
monthly fixed contributions to an average of $9.5 million. The
lump sum payments and remaining monthly fixed contributions are
recoverable from customers as part of industry restructuring
settlements reached by NEP with various parties and approved by
state and Federal regulators.
Item 5. Other Events
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The NEES companies used approximately $300 million of the
sale proceeds for the defeasance or retirement of long-term debt.
Approximately $750 million was used to retire short-term debt.
(Note that these figures are as of September 1, 1998 and that the
attached pro forma financial statements are as of June 30, 1998.)
The NEES companies expect that their state and Federal tax
liability related to the sale (net of deductions related to power
contract lump sum payments) will equal approximately $200
million.
On August 26, 1998, the NEES Board of Directors authorized
the purchase from time to time of up to an additional 5 million
shares over the 5 million share buyback authorization announced
in August 1997. To date, NEES has purchased approximately 4.8
million shares under the August 1997 program.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
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Pro Forma Financial Information
The following unaudited pro forma consolidated financial
statements are filed with this report:
Pro Forma Consolidated Balance Sheet of New England Electric
System at June 30, 1998
Pro Forma Statements of Consolidated Income of New England
Electric System:
Year Ended December 31, 1997
Six Months Ended June 30, 1998
The Pro Forma Consolidated Balance Sheet of New England
Electric System (NEES) at June 30, 1998 reflects the financial
position of NEES after giving effect to the disposition of the
assets discussed in Item 2 and assumes the disposition took place
on June 30, 1998. The Pro Forma Statements of Consolidated
Income for the fiscal year ended December 31, 1997 and the six
months ended June 30, 1998 assume that the disposition occurred
on January 1, 1997, and are based on the operations of NEES for
the year ended December 31, 1997 and the six months ended June
30, 1998.
The unaudited pro forma consolidated financial statements
have been prepared by NEES based upon assumptions deemed
reasonable by it. The unaudited pro forma consolidated financial
statements presented herein are shown for illustrative purposes
only and are not indicative of the future financial position or
future results of operations of NEES, or the financial position
or results of operations of NEES that would have actually
occurred had the transaction been in effect as of the date or for
the periods presented. In particular, while the disposition of
the assets portrayed herein will have a significant impact on the
results of operations, such disposition is only one component of
the restructuring that NEES is undergoing at this time. A more
complete description of all such restructuring changes is
included in the NEES 1997 Annual Report on Form 10-K.
The unaudited pro forma consolidated financial statements
should be read in conjunction with the historical financial
statements and related notes of NEES.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this Current Report on
Form 8-K to be signed on its behalf by the undersigned thereunto
duly authorized.
NEW ENGLAND ELECTRIC SYSTEM
s/Michael E. Jesanis
By
Michael E. Jesanis
Senior Vice President and
Chief Financial Officer
Date: September 16, 1998
The name "New England Electric System" means the trustee or
trustees for the time being (as trustee or trustees but not
personally) under an agreement and declaration of trust dated
January 2, 1926, as amended, which is hereby referred to, and a
copy of which as amended has been filed with the Secretary of The
Commonwealth of Massachusetts. Any agreement, obligation or
liability made, entered into or incurred by or on behalf of New
England Electric System binds only its trust estate, and no
shareholder, director, trustee, officer or agent thereof assumes
or shall be held to any liability therefor.