SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-1004
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 14, 1999
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Commission File Number 1-5324
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NORTHEAST UTILITIES
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(Exact name of registrant as specified in its charter)
MASSACHUSETTS 1-5324 04-2147929
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(State or other jurisdiction of Commission (I.R.S.
Employer
incorporation or organization) File No.) Identification
No.)
174 BRUSH HILL AVENUE, WEST SPRINGFIELD, MASSACHUSETTS 01090-0010
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(Address of principal executive offices) (Zip
Code)
(Registrant's telephone number, including area code): (413) 785-5871
(Former name or former address, if changed since last report): Not
Applicable
Item 5. Other events
(a) On June 15, 1999, Northeast Utilities (NU) and Yankee Energy
System, Inc. (Yankee) announced that they have agreed to a merger in which
Yankee will become a subsidiary of NU. The transaction is valued at $679
million, including the assumption of outstanding Yankee debt of approximately
$201 million. The purchase is subject to approval of Yankee shareholders and
several regulatory agencies and is expected to close in the first quarter of
2000.
Shareholders of Yankee will receive $45.00 a share, 45% payable in NU
shares and 55% payable in cash. If closing of the transaction does not occur
within six months after Yankee shareholder approval is received, the per
share consideration will increase by $0.005 per share per day. Shareholders
will be able to specify the percentage of the consideration they wish to
receive in stock and in cash, subject to proration. Yankee shareholders who
elect to receive stock will receive the number of shares of NU based on the
average price of NUs stock during the 20 trading day period prior to
closing. The transaction is expected to be tax free to Yankee shareholders
to the extent they receive common stock of NU. The combination will be
accounted for using the purchase method of accounting.
After the merger, Yankee will retain its corporate name and become a
subsidiary of Northeast Utilities. Executive management at Yankee will be
offered positions at either Yankee or other NU companies. A transition team
jointly chaired by the NU and Yankee CEOs will be formed shortly with the aim
of adopting the best practices of both companies.
Yankee Energy System, Inc. is the parent of Yankee Gas Services Company,
the largest natural gas distribution company in Connecticut serving
approximately 183,000 customers in 68 cities and towns. Yankees unregulated
businesses are comprised of Yankee Energy Services Company (YESCo), which
provides HVAC and other energy services; R. M. Services, which is engaged in
credit collections and receivables management; and Yankee Financial, which
provides customer financing to Yankees customers.
Northeast Utilities is New England's largest electric utility system
serving more than 1.7 million customers in Connecticut, Massachusetts and New
Hampshire.
(b) On June 14, 1999, Northeast Utilities (NU), its subsidiary,
Public Service Company of New Hampshire (PSNH) and the State of New
Hampshire signed a Memorandum of Understanding (MOU) intended to settle a
number of pending regulatory and court proceedings related to PSNH. Parties
to the agreement include the Governor of New Hampshire, the New Hampshire
Attorney General, the Staff of the New Hampshire Public Utilities Commission
(NHPUC), PSNH and NU. A copy of the MOU is attached hereto as an exhibit
and is incorporated herein by reference.
The MOU calls for PSNH and the state of New Hampshire to jointly submit
a request to suspend all pending litigation, and, on the effective date of
the agreement, for PSNH to withdraw a Federal lawsuit which had enjoined the
state from implementing its restructuring legislation. The effective date
will occur after all regulatory and other approvals have been secured and
beginning on the first day of the month following the issuance of rate
reduction bonds (securitization), as described below.
The principal features of the MOU include:
PSNH's rates will be reduced about 18 percent from current levels after
all regulatory and other approvals have been secured and beginning the
first day of the month following the issuance of rate reduction bonds.
PSNH's rates will be stable and predictable for three years after the
effective date. PSNH's customers will be able to choose their supplier
of energy effective the same day.
PSNH expects to recover approximately $1.5 billion of stranded costs
currently on PSNH's books as well as about $1.3 billion of nominal over
market future purchases from independent power producers (IPPs) that
can continue to be recovered in rates. PSNH will write off about $367
million (pretax) of its stranded costs (about $225 million after tax).
This write-off amounts to more than 30 percent of the equity currently
invested in PSNH by NU shareholders. A portion of this recovery is at
risk, as it is dependent upon retail load growth and various other
factors.
The issuance of $725 million of rate reduction bonds is a condition of
the agreement. However, use of rate reduction bonds requires the
initial approval of the NHPUC and final approval from the New Hampshire
Legislature via enactment of appropriate legislation.
PSNH is required to sell its power plants and certain power contracts,
including the sale of PSNH's current purchased power contract with North
Atlantic Energy Corporation (NAEC) for the output from Seabrook
Station. The net proceeds from all sales will be used to pay off a
portion of PSNH's stranded costs. The sales will be accomplished
through an auction process subject to approval by the NHPUC. An
affiliate of NU is expressly allowed to participate in the auction of
the fossil/hydro generating assets.
The MOU and a request to stay a dozen identified administrative
proceedings will be filed with the NHPUC within a week of the MOU's signing.
A detailed agreement is expected to be jointly filed with the NHPUC by the
parties in early August. The New Hampshire Legislature must review and
approve the use of securitization via enactment of appropriate legislation,
and other approvals are required from various federal and state regulatory
agencies and financial lenders. NU anticipates that the plan will become
effective in early 2000.
For more information on this matter, see NU's, PSNH's and NAEC's Form
10-K and quarterly reports on Form 10-Q for the quarter ending March 31,
1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
1. Agreement and Plan of Merger between Yankee Energy System, Inc. and
Northeast Utilities, dated as of June 15, 1999.
2. Memorandum of Understanding
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTHEAST UTILITIES
(registrant)
By: /S/ David R. McHale
David R. McHale
Vice President and Treasurer
Date: June 16, 1999