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 POWER COMPANY
(exact name of registrant as specified in charter)
Massachusetts 1-6564 04-1663070
(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 Power Company (NEP) and The
Narragansett Electric Company, both subsidiaries of New England
Electric System (NEES), 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). NEP's share of the proceeds amounted to approximately
$1.55 billion. In addition, NEP was 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 NEP's 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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NEP used approximately $270 million of the proceeds of the
sale of assets described in Item 2 for the defeasance of long-term
mortgage debt, including (i) $38 million of tax-exempt pollution
control revenue bonds issued by the Connecticut Development
Authority and (ii) $230 million of publicly-held mortgage bonds.
A portion of the publicly-held mortgage bonds were acquired
through a tender offer. Approximately $372 million of mortgage
bonds securing a like amount of tax-exempt pollution control
revenue bonds (PCRB's) issued by various public agencies were
retired. The $372 million of PCRB's were then reoffered on an
unsecured basis. Approximately $410 million was used to retire
short-term debt and preferred stock held by NEES. (Note that the
above figures are as of September 1, 1998 and that the attached
proforma financial statements are as of June 30, 1998.) NEP
expects that its state and Federal tax liability related to the
sale (net of deductions related to power contract lump sum
payments) will equal approximately $200 million.
The NEP Board of Directors has authorized the repurchase of
up to five million shares (out of 6.5 million shares) of its common
stock held by NEES at the then book value per share. This
transaction has not been consummated pending approval of the
Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935 and is not reflected in the attached
pro forma financial statements.
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 Balance Sheet of New England Power Company at June 30,
1998
Pro Forma Statements of Income of New England Power Company:
Year Ended December 31, 1997
Six Months Ended June 30, 1998
The Pro Forma Balance Sheet of New England Power Company (the
Company) at June 30, 1998 reflects the financial position of the
Company 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 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 the Company for the year ended December
31, 1997 and the six months ended June 30, 1998.
The unaudited pro forma financial statements have been prepared
by the Company based upon assumptions deemed reasonable by it.
The unaudited pro forma 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 the
Company, or the financial position or results of operations of the
Company 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 the
Company is undergoing at this time. A more complete description
of all such restructuring changes is included in the Company's
1997 Annual Report on Form 10-K.
The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements and related
notes of the Company.
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 POWER COMPANY
s/John G. Cochrane
By
John G. Cochrane
Treasurer
Date: September 16, 1998