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 September 30, 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 0-25748
GREAT BAY POWER CORPORATION
(Exact name of registrant as specified in its charter)
New Hampshire 02-0396811
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 Ladd Street, Portsmouth, New Hampshire 03801-408
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (603) 433-8822
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 such filing requirements for the past 90 days.
Yes X No
Indicate by check mark whether the registrant has filed all
documents required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution
of securities under a plan confirmed by a court.
Yes X No
Class Outstanding at November 1, 1995
Common Shares $0.01 Par Value 7,999,998
Page 1 of ____ pages.
Exhibit Index appears on page _____.
INDEX
Part I. Financial Information:
Item 1 - Financial Information:
Statements of Income and Loss - Three and Nine
Months Ended September 30, 1995 and 1994............................ 3
Balance Sheets at September 30, 1995
and December 31, 1994.............................................. 4-5
Statements of Cash Flow - Nine Months
Ended September 30, 1995 and 1994..................................... 6
Notes to Financial Statements........................................ 7-8
Item 2 - Financial Discussion:
Management's Discussion and Analysis of
Results of Operations.............................................. 9-13
Part II. Other Information:
Item 6 - Exhibits and Reports in Form 8-K:
Signature.............................................................. 15
Exhibit Index......................................................... 16
STATEMENTS OF INCOME AND LOSS STATEMENTS OF INCOME AND LOSS
(UNAUDITED)
(Dollars in Thousands, except shares and per share data)
SUCCESSOR COMPANY PREDECESSOR COMPANY
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1995 1995 1994 1994
Operating Revenues $6,350 $20,759 $4,586 $9,445
Operating Expenses:
Production 4,484 12,786 4,421 14,631
Transmission 231 705 149 702
Administrative & General
1,673 4,612 1,014 3,330
Depreciation and Amortization
784 2,304 2,276 6,827
Taxes Other than Income
1,005 3,027 1,145 3,584
Total Operating Expenses
8,177 23,434 9,005 29,074
Operating Income (Loss)
(1,827) (2,675) (4,419) (19,629)
Other (Income) Deductions:
Interest Expense 0 0 391 550
Other (401) (1,202) (55) (207)
Total Other (Income)
Deductions (401) (1,202) 336 343
Income Before Taxes (1,426) (1,473) (4,755) (19,972)
Income Taxes (94) (97) (1,518) (6,467)
Net Income (Loss) $(1,332) $(1,376) $(3,237) $(13,505)
Shares Outstanding
7,999,998 7,999,998
Earnings (Loss) Per Share
$(0.17) $(0.17)
(The accompanying notes are an integral part of these
statements.)
BALANCE SHEET
(UNAUDITED)
(Dollars in Thousands)
September 30, December 31,
1995 1994
ASSETS:
Net Utility Plant $100,356 $101,213
Nuclear Fuel 12,318 10,556
Less: Accumulated Depreciation
(5,659) (2,118)
Net Nuclear Fuel 6,659 8,438
Total Utility Plant and Nuclear Fuel
107,015 109,651
Other Property & Investments:
Decommissioning Trust Fund
4,478 3,290
Current Assets:
Cash & Cash Equivalents
12,876 18,533
Short-term Investments, at market
9,423 3,684
Accounts Receivable 2,089 2,598
Materials & Supplies 4,897 4,846
Prepayments & Other Assets
3,248 2,976
Total Current Assets
32,533 32,637
Deferred Debits & Other 96 88
TOTAL ASSETS $144,122 $145,666
(The accompanying notes are an integral part of these
statements.)
BALANCE SHEET
(UNAUDITED)
(Dollars in Thousands)
September 30, December 31,
1995 1994
LIABILITIES & STOCKHOLDERS' EQUITY:
Stockholders' Equity:
Common Stock Issued $80 $80
Paid in Capita 88,030 88,030
Retained Earnings (Deficit)
(1,194) 182
Total Capitalization
86,916 88,292
Operating Reserves:
Misc. Other Liability 719 719
Decommissioning Liability
49,622 48,530
Total Operating provisions
50,341 49,249
Current & Accrued Liabilities:
Accounts Payable & Accrued Expenses
113 303
Taxes Accrued 747 1,166
Reorganization Expenses 268 2,653
Misc. Current Liabilities
2,904 1,346
Total Current & Accrued Liabilities
4,032 5,468
Other Liabilities & Deferred Credits
Deferred Taxes -- 94
Other Liabilties & Deferred Credits
2,833 2,563
Total Other Liabilities & Deferred Credits
2,833 2,657
Total Liabilities & Capital
$144,122 $145,666
(The accompanying notes are an integral part of these
statements.)
CASH FLOW STATEMENT
(UNAUDITED)
(Dollars in Thousands, except shares and per share data)
Successor Company Predecessor Company
Nine Months Ended Nine Months Ended
September 30, 1995 September 30, 1994
Cash Flows From Operating Activities:
Net Income (Loss) $(1,376) $(13,505)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization
2,304 6,131
Nuclear Fuel Amortization
3,541 2,003
Investment Tax Credit - Net
-- (139)
Deferred Taxes (94) (6,329)
Change in assets and liabilities:
(Increase) Decrease in:
Accounts receivable 509 277
Materials and supplies (51) --
Prepayments (272) 2,365
Increase (Decrease) in:
Accounts payable (190) --
Taxes accrued (419) (135)
Other (566) 2,357
Net Cash Provided From (Used In)
Operating Activities
3,386 (6,975)
Cash Flows From Investment Activities:
Gross Additions to Utility Plant
(899) (1,859)
Gross Additions to Nuclear Fuel
(1,762) --
Decommissioning Fund Payments
(643) --
Decrease (Increase) in Short-term Investments
(5,739) --
Net Cash (Used In) Investment Activities
(9,043) (1,859)
Cash Flow From Financing Activities:
Debtor-in-Possession Financing
-- 8,922
Net Cash Provided From Financing Activities
-- 8,922
Net Increase (Decrease) in Cash and Equivalents
(5,657) 88
Cash and Equivalents at Beginning of Period
18,533 138
Cash and Equivalents at End of Period
$12,876 $226
Cash paid for:
Interest --- ---
Income Taxes --- ---
(The accompanying notes are an integral part of these
statements.)
NOTES TO FINANCIAL STATEMENTS
Note A - THE COMPANY
Great Bay Power Corporation (the "Company") is a New Hampshire
corporation which emerged from bankruptcy on November 23, 1994.
The predecessor company, EUA Power Corporation ( the
"Predecessor") was incorporated in 1986. The Company is
authorized by the New Hampshire Public Utilities Commission
(NHPUC) to engage in business as a public utility for the
purposes of acquiring its 12.1% interest in the Seabrook Nuclear
Power Project (the "Seabrook Project"), participating as a joint
owner in the Seabrook Project and selling its share of the
electricity produced by Seabrook Project for resale. The
Seabrook Project consists of the Seabrook Unit 1 reactor
("Seabrook Unit 1"), a nuclear-fueled, steam electricity
generating plant located in Seabrook, New Hampshire. The
Predecessor became a wholesale generating company when Seabrook
Unit 1 commenced commercial operation on August 19, 1990. In
1993, the Predecessor became an Exempt Wholesale Generator under
the Energy Policy Act of 1992.
The Company currently has two employees, and substantially all
the Company's power marketing and administrative functions are
performed on the Company's behalf by third parties pursuant to
contractual agreements.
Note B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited financial statements included herein have been
prepared on behalf of the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission and include, in the opinion of management, all
adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of interim period results.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been omitted or condensed
pursuant to such rules and regulations. The Company believes,
however, its disclosures herein, when read in conjunction with
the Company's audited financial statements for the year ended
December 31, 1994, are adequate to make the information
presented not misleading. As further discussed in the
Management Discussion and Analysis, the results for the interim
periods are not necessarily indicative of the results to be
expected for the full fiscal year.
Note C - COMMITMENTS AND CONTINGENCIES
Nuclear Issues
Like other nuclear generating facilities, the Seabrook Project
is subject to extensive regulation by the Nuclear Regulatory
Commission ("NRC"). The NRC is empowered to authorize the
siting, construction and operation of nuclear reactors after
consideration of public health, safety, environmental and
anti-trust matters.
The NRC has promulgated numerous requirements affecting safety
systems, fire protection, emergency response planning and
notification systems, and other aspects of nuclear plant
construction, equipment and operation. The Company has been,
and may be, affected to the extent of its proportionate share by
the cost of any such requirements for Seabrook Unit 1.
Nuclear units in the United States have been subject to
widespread criticism and opposition. Some nuclear projects have
been canceled following substantial construction delays and cost
overruns as the result of licensing problems, unanticipated
construction defects and other difficulties. Various groups
have by litigation, legislation and participation in
administrative proceedings sought to prohibit the completion and
operation of nuclear units and the disposal of nuclear waste.
In the event of a shutdown of any unit, NRC regulations require
that it be completely decontaminated of any residual
radioactivity. The cost of such decommissioning, depending on
the circumstances, could substantially exceed the owners'
investment at the time of cancellation.
Public controversy concerning nuclear power could adversely
affect the operating license of Seabrook Unit 1. While the
Company cannot predict the ultimate effect of such controversy,
it is possible that it could result in a premature shutdown of
the unit.
Liquidity and Capital Expenditures
The Company anticipates that its share of the Seabrook
Project's capital expenditures for the 1995 fiscal year,
including reactor refueling scheduled for November 1995, will
total approximately $7.0 million. The majority of these capital
expenditures are for nuclear fuel. This scheduled outage is
expected to last approximately 45 days, during which time the
plant will not generate any electricity for its owners.
The Seabrook Project experienced an unscheduled outage from
June 18, 1995 to July 5, 1995. During this period the Seabrook
Project did not produce electricity and the Company did not earn
any revenue. During unscheduled outages, in addition to the
expenses of routine operation and maintenance, the Company is
responsible for its pro rata share of expenses related to the
outage. In addition, as a result of the June 18, 1995 to July
5, 1995 unscheduled outage, the operation of Seabrook Unit 1 has
been limited to approximately 96% of maximum capacity. This
reduction in capacity continued until the start of a scheduled
refueling outage, which began on November 4, 1995, resulting in
a reduction of approximately 4% in the energy Great Bay had
available for sale. Seabrook Unit 1 is expected to return to
full operating capacity following the completion of the
refueling outage which began on November 4, 1995.
Note D - COMMON STOCK
The Company's authorized capital stock consists of 8,000,000
shares of common stock, with a par value of $0.01 per share.
A total of 7,999,998 shares of common stock were outstanding on
November 1, 1995.
The Company has never paid cash dividends on the Common Stock.
The Company currently intends to retain all of its future
earnings and does not anticipate paying a dividend in the
foreseeable future.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Great Bay Power Corporation (formerly known as EUA Power
Corporation) is a New Hampshire public utility whose principal
asset is its 12.1% joint ownership interest in the Seabrook
Nuclear Power Project in Seabrook, New Hampshire . The
Company's share of the Seabrook Project capacity is
approximately 140 megawatts . The Company sells its share of
the electricity produced by the Seabrook Project in the
wholesale electricity market, primarily in the Northeast United
States. Great Bay does not have operational responsibility for
the Seabrook Project. Instead, the daily operational and
management responsibilities of the Seabrook Project are carried
out by a Managing Agent, which is currently North Atlantic
Energy Service Corporation ("NAESCO"), a wholly-owned subsidiary
of Northeast Utilities.
The Company's operating results and the comparability of these
results on an interim and annual basis are directly impacted by
the operations of the Seabrook Project, including the cyclical
refueling outages (generally scheduled 18-24 months apart) as
well as any unscheduled outages. During outage periods at the
Seabrook Project, the Company has no electricity available for
resale and consequently no revenues.
The Company accrues reserves for the incremental costs of the
scheduled outages over the periods between such scheduled
outages. However, during outages, the Company continues to
record the normal operating and maintenance expenses of the
Seabrook Project as incurred. Accordingly, the Company will
incur losses during scheduled outage periods as a result of the
combination of a lack of revenues and the recognition of normal
recurring operating and maintenance costs, as well as the
continuing depreciation of the utility plant.
A scheduled refueling outage for the Seabrook Project began
on November 4, 1995 and is expected to extend to December 18,
1995. Based on the Seabrook Project budget for this scheduled
outage, assuming that the duration of the outage is forty-five
days and assuming that only refueling and routine maintenance is
performed, the Company anticipates incurring a loss in the range
of $3,700,000 in the fourth quarter of 1995 resulting from
decreased revenues coupled with continuing operating and
maintenance expenses and depreciation, as discussed above.
The Company also incurs losses during unscheduled outage
periods due to decreased revenues and additional costs
associated with unscheduled outages as well as continuing
operating and maintenance expenses and depreciation. It is
not possible for the Company to predict the frequency or
duration of future unscheduled outages; however, such outages
will most likely occur.
THIRD QUARTER OF FISCAL 1995 COMPARED TO THE THIRD QUARTER OF
FISCAL 1994
Results of Operation
The third quarter of 1995 was the Company's third full quarter
of operations since it emerged from bankruptcy on November 23,
1994. During this period the Company recorded a net loss of
$1,332,000, as compared to a net loss of $3,237,000 recorded by
the Predecessor Company during the third quarter of 1994. The
net loss recorded for the quarter ended September 30, 1995 was
primarily due to reduced capacity at the Seabrook Project as a
result of the June 18, 1995 to July 5, 1995 unscheduled outage.
In contrast, the net loss for the quarter ended September 30,
1994 was primarily due to an outage from April 5, 1994 to July
31, 1994 which was the result of an unexpected extension of a
scheduled refueling outage. The decreased net loss in the 1995
quarter as compared with the 1994 quarter was the result of
increased sales and decreased operating expenses, primarily
lower depreciation due to the write-down of the Company's
Seabrook Project assets to fair value upon its emergence from
bankruptcy.
Operating Revenues
Operating revenues increased by approximately 38.5% to
$6,350,000 in the third quarter of 1995 as compared with
$4,586,000 in the third quarter of 1994 . The increase was due
to higher availability and production at the Seabrook Project,
resulting from a reduction in the amount of scheduled and
unscheduled outage time during the third quarter of 1995 as
compared with the same period during 1994. During the third
quarter of 1995, the average capacity factor at the Seabrook
Project was 90.44% of the rated capacity versus an average
capacity factor of 64.31% for the same period in 1994. Sales of
electricity increased by approximately 40.6% to 278,606,000
kilowatt hours in 1995 as compared with 198,121,000 kilowatt
hours in 1994. This increase in kWh sales during the third
quarter of 1995 was partially offset by a reduction in the sales
price per kWh received by the Company during the third quarter
of 1995, as compared to the same period of 1994. During the
third quarter of 1995 the sales price per kWh declined 4.6% to
2.27 cents per kWh as compared with 2.38 cents per kWh in the
1994 period.
Expenses
Administrative and General expenses increased by 65.0% to
$1,673,000 during the third quarter of 1995as compared with
$1,014,000 in the third quarter of 1994. This increase
primarily reflects the normal costs associated with the
ongoing management of the Company after its emergence from
bankruptcy.
Depreciation and amortization expenses decreased by 65.6% to
$784,000 in the third quarter of 1995 as compared with
$2,276,000 in the third quarter of 1994. This decrease was the
result of a reduction in the depreciable value of the Company's
investment in the Seabrook Project due to the write-down to fair
value of all the Company's assets following its emergence from
bankruptcy in November 1994.
Taxes Other Than Income decreased by approximately 12.2% to
$1,005,000 in the third quarter of 1995 as compared with
$1,145,000 in the 1994 period. This decrease was primarily due
to higher property tax accruals during the 1994 period.
Other
Other income increased by 629% to $401,000 during the third
quarter of 1995 as compared with $55,000 in the third quarter of
1994. This increase primarily reflects increased interest
income as a result of the Company's significantly higher cash
and investment balances in the current year.
FIRST NINE MONTHS OF FISCAL 1995 COMPARED TO THE FIRST NINE
MONTHS OF FISCAL 1994
Results of Operation
The Company recorded a net loss of $1,376,000 for the first
nine months of 1995, as compared to a net loss of $13,505,000
recorded by the Predecessor Company during the first nine months
of 1994. The net loss recorded for the period was due in part
to an unscheduled outage at the Seabrook Project, from June 18,
1995 to July 5, 1995, which resulted in an estimated decrease in
revenues for the period of approximately $1,537,000. In
contrast, the net loss for the nine months ended September 30,
1994 was primarily due to an outage from April 5, 1994 to July
31, 1994 which was the result of an unexpected extension of a
scheduled refueling outage. The decreased loss in the first
nine months of 1995 as compared with the same period of 1994 was
also the result of decreased operating expenses, primarily lower
depreciation due to the write-down of the Company's Seabrook
Project assets to fair value upon its emergence from bankruptcy.
Operating Revenues
Operating revenues increased by approximately 119.8% to
$20,759,000 in the first nine months of 1995 compared with
$9,445,000 in the first nine months of 1994. The increase was
primarily due to higher availability and production at the
Seabrook Project resulting from a reduction in the amount of
outage time during the first nine months of 1995 compared with
the same period during 1994. During the first nine months of
1995, the average capacity factor at the Seabrook Project was
92.8% of the rated capacity versus an average capacity factor of
48.6% for the same period in 1994. The increase in revenue for
the first nine months of 1995 was also due to a 1.7% increase in
sales price per kWh to 2.44 cents per kWh in 1995, compared with
2.40 cents per kWh in the 1994 period.
Expenses
Production expenses for the first nine months of 1995 decreased
by 12.6% to $12,786,000 as compared with $14,631,000 in the
1994 period, despite increased power production during the 1995
period. This decrease was primarily the result of reduced
maintenance expenses at the Seabrook Project during the1995
period compared with the 1994 period, during which an extended
outage increased maintenance costs. The reduction in production
expenses was also the result of reduced nuclear fuel costs
during the first nine months of 1995 due to a revision in the
fuel amortization rate adopted upon reorganization.
Administrative and General expenses increased by 38.5% to
$4,612,000 during the first nine months of 1995 as compared with
$3,330,000 in the 1994 period. This increase primarily
reflects the normal costs associated with the ongoing management
of the Company after its emergence from bankruptcy.
Depreciation and amortization expenses decreased by 66.3%to
$2,304,000 in the first nine months of 1995 as compared with
$6,827,000 in the 1994 period. This decrease was the result of
a reduction in the depreciable value of the Company's investment
in the Seabrook Project due to the write-down to fair value of
all the Company's assets following its emergence from bankruptcy
in November 1994.
Taxes Other Than Income decreased by approximately 15.5% to
$3,027,000 in the first nine months of 1995 as compared with
$3,584,000 in the 1994 period. This decrease was primarily due
to higher property tax accruals during the year earlier period.
Other
Other income increased by 480% to $1,202,000 during the first
nine months of 1995 as compared with $207,000 in the first nine
months of 1994. This increase primarily reflects increased
interest income as a result of the Company's significantly
higher cash and investment balances in the current year.
Net Operating Losses
For federal income tax purposes, as of December 31, 1994, the
Company had net operating loss carryforwards ("NOLs") of
approximately $139,400,000 which are scheduled to expire
between 2005 and 2009. Because the Company has experienced one
or more ownership changes within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, an annual
limitation has been imposed on the ability of the Company to
deduct the NOLs it generated prior to any date on which it
experienced an ownership change. The Company believes that such
annual limitation is approximately $5,500,000 and, accordingly,
that the ability of the Company to utilize annually its NOLs and
depreciation deductions attributable to its property and/or
equipment will be substantially restricted.
Liquidity
The Company's cash and short-term investments decreased
approximately $82,000 during the first nine months of 1995. Principal factors
affecting liquidity during the nine months ended September 30,
1995 included the operating loss discussed above plus $2,661,000
of capital expenditures for plant and nuclear fuel, payments of
$643,000 to the decommissioning trust fund and payments of
$2,385,000 for bankruptcy-related reorganization expenses.
Partially offsetting the items listed above were non-cash
charges to income of $5,845,000 for depreciation and
amortization and $1,589,000 for accrued outage costs.
For the quarter ending December 31, 1995, the Company expects
to use a significant amount of its cash and equivalents to fund
its share of a planned refueling outage of approximately 45 days
(assuming that the duration of the outage is forty-five days and
assuming that only refueling and routine maintenance is
performed, the decrease in cash and equivalents during the
fourth quarter of 1995 is estimated to be in the range of
$8,300,000). This outage will reduce revenues for such quarter
and increase operating expenses and capital expenditures,
primarily for nuclear fuel.
The cash generated from electricity sales by the Company is and
has been less than the Company's ongoing cash requirements. The
Company expects that it will continue to incur cash deficits
until the prices at which it is able to sell its share of the
electricity generated by the Seabrook Project increase, which
may be a number of years, if ever. The Company intends to cover
such deficits with its cash reserves, which totalled
approximately $22,299,000 at September 30, 1995.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index
(b) There were no reports on Form 8-K submitted for the
three months ended September 30, 1995
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.
GREAT BAY POWER CORPORATION
/s/ John A. Tillinghast
John A. Tillinghast
President
(Principal Financial Officer)
Dated: November 14, 1995
EXHIBIT INDEX
Exhibit No. Description Page Number
10.1 Services Agreement, dated as of November 3, 1995,
by and between PECO Energy Company and the Company.
10.2 Warrant Purchase Agreement, dated as of
November 3, 1995, by and between PECO
Energy Company and the Company.
27 Financial Data Schedule.
99 Press Release of the Company, dated
November 6, 1995, with respect to the
Services Agreement by and between PECO
Energy Company and the Company.
_________________________
(1) Confidential treatment requested as to certain portions
which are indicated by an asterisk and filed separately with the Securities and
Exchange Commission with an Application for Confidential Treatment pursuant to
Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended.