SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Act of 1934
Date of Report (Date of Earliest event reported) July 21, 1999
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CHUGACH ELECTRIC ASSOCIATION, INC.
(Exact name of registrant as specified in its charter)
Alaska 33-42125 92-0014224
State or Other Jurisdiction (Commission File (IRS Employer
of Incorporation) Number) Identification No.)
5601 Minnesota Drive, Anchorage, Alaska 99518
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (907) 563-7494
None
(Former Name or Former Address, if Changed Since Last Report
Item 5. Other Events
Reference is made to the information set forth under the caption "Unsolicited
Acquisition Proposal by Matanuska Electric Association, Inc." in Item 5 of Part
II of the Report on Form 10-Q of Chugach Electric Association, Inc.("Chugach")
for the quarter ended March 31, 1999 with respect to the MEA Proposal (as
therein defined) and certain related matters. Such information is incorporated
herein by reference.
Having determined that 10% of its members have signed petitions solicited by
Matanuska Electric Association, Inc.("MEA") requesting a special meeting of
Chugach members to consider and vote on MEA's proposal to acquire Chugach's
assets, and having communicated that fact to MEA in a July 8, 1999 letter,
the Chugach Board of Directors decided at its meeting on July 21, 1999, to
convene a special meeting of Chugach members on November 18, 1999 to consider
and vote on MEA's proposal. In announcing the special meeting of members, the
Chugach Board stated that it hoped to avoid further costly litigation by a
vote of Chugach members against the proposal and it urged Chugach members to
vote "No". The Board also reiterated its position that the proposed
transaction cannot legally occur without Board approval.
The text of the ballot proposition on which Chugach members will vote was
supplied by MEA. It reads as follows:
Shall the Board of Directors of Chugach Electric Association, Inc.
("Chugach") be directed to sell all of the assets of Chugach to a wholly
owned subsidiary of Matanuska Electric Association, Inc. ("MEA") under the
following terms and conditions:
1. MEA will pay for these assets by assuming all of Chugach's liabilities,
including Chugach's responsibility to pay capital credits to its
members.
2. Concurrently with the sale of Chugach's assets, MEA's subsidiary will
sell all of the distribution assets it acquires from Chugach to MEA.
As partial consideration for the purchase of these assets, MEA will
assume the responsibility to pay the capital credits of Chugach's
former members.
3. All of Chugach's current members shall be eligible to become members
of MEA.
4. The terms and conditions of the proposed sale shall be contingent on
compliance with all statutory and regulatory requirements of the State
of Alaska, including approval by the Regulatory Commission of Alaska.
At the same time it decided to convene a special meeting of Chugach's members,
the Board of Directors also decided to hold a public hearing, pursuant to
Chugach's bylaws, to discuss MEA's acquisition proposal. The public hearing
is scheduled for August 24, 1999. Chugach has mailed to its members notice of
the special membership meeting and public hearing, along with a voting package
containing ballots that members may use to vote on MEA's proposal in lieu of
attending the special membership meeting. Chugach has also provided MEA a
list of all Chugach members to enable MEA to communicate directly with Chugach
members concerning MEA's proposal.
Chugach believes that any sale of its assets to MEA would require the approval
of both its members and its Board of Directors. MEA appears to take the
position that the approval of Chugach's Board is not required if a majority of
Chugach's 56,000 members vote in favor of the sale and at least 2/3 of the
members who actually vote favor the sale.
There continue to be significant uncertainties affecting the likelihood that
the sale of assets to MEA would be consummated, including whether a
supermajority of Chugach members will approve the proposed sale at the November
18 special meeting of members, whether member approval of the proposal would
have any legal effect in light of the rejection of the proposed sale by the
Chugach Board of Directors, and whether any acquisition -- even if approved by
Chugach -- would be approved by the Regulatory Commission of Alaska (formerly
known as the Alaska Public Utilities Commission).
The following information is provided as background for the Board's decision to
call a special meeting of Chugach's members to vote on MEA's proposal and
supplements the information set forth under the caption "Unsolicited
Acquisition Proposal by Matanuska Electric Association, Inc." in Item 5 of Part
II of Chugach's Report on Form 10-Q for the quarter ended March 31, 1999.
The Chugach Electric Association Board decided that it was not interested in
pursuing the suggestion from Matanuska Electric Association for a meeting with
the MEA Board to discuss a possible combination of the two utilities. In a May
25, 1999 letter to MEA conveying this decision, Chugach stated that it remained
willing to act cooperatively on matters of mutual benefit to the members of the
two Associations and, in doing so, to begin rebuilding good will between them.
The letter noted that the hostility exhibited during the previous seven months
by MEA had severely damaged good will and trust between the Boards and
management of each entity, compelling Chugach to question the practicality of
MEA's suggestion for a combination. The letter reiterated the position of the
Chugach Board that MEA's acquisition proposal, which the Board unanimously
rejected last year, is misleading, flawed and contrary to the best interests of
Chugach's members. The letter further stated that the Chugach Board does not
see any substantial advantages for Chugach members in a different combination
of the two utilities and that any possible savings that might result from such
a combination are far outweighed by the disadvantages.
Because a pending recall of MEA's Board of Directors, if successful, could have
caused MEA to withdraw its proposal to acquire Chugach's assets, on April 29,
1999, Chugach advised MEA that it would defer verification of petition
signatures pending the outcome of MEA's recall election. MEA subsequently
agreed to that deferral. On May 28, 1999, following the reconvened session of
MEA's Annual Membership Meeting, MEA delivered a letter advising Chugach that
the effort to recall the MEA Board of Directors had failed. The letter stated
that any uncertainty on the part of Chugach as to MEA's continuing interest in
acquiring the assets and liabilities of Chugach had been resolved, and
requested Chugach to proceed as soon as possible with verification of
signatures on petitions submitted by MEA to Chugach on April 28, 1999.
On June 3, 1999, Chugach informed MEA that Chugach would proceed with the
process of signature verification and tabulation in accordance with its
customary procedures, and on the same day instructed its election contractor (a
local CPA firm) to proceed with counting and verification of petition
signatures. Chugach advised MEA that this process would take some time and
that Chugach would issue no statements regarding the status of its examination
of the documents prior to completion.
On June 28, 1999, MEA filed a complaint in Anchorage Superior Court alleging
that Chugach had not acted with sufficient speed to count petition signatures
and was seeking a preliminary injunction requiring Chugach to complete the
process of verifying and counting petition signatures and call a special
meeting of its members to consider and vote on the MEA acquisition proposal. On
July 8, Chugach delivered a letter to MEA and filed its answer to MEA's
complaint, in each case noting that it had completed the verification and
tabulation process, that 10% of Chugach's members had signed the MEA petitions
and that Chugach's Board of Directors would meet on July 21 to consider whether
to call a special meeting. MEA filed a notice of dismissal of this lawsuit.
Chugach opposed dismissal for the limited purpose of requesting attorney fees.
On July 26, 1999 the court granted Chugach's motion allowing Chugach to seek
attorney fees prior to entry of dismissal.
On July 7, 1999, MEA filed another complaint in Anchorage Superior Court
alleging (among other things) that Chugach had violated the Modified Agreement
for the Sale and Purchase of Electric Power and Energy among Chugach, MEA and
Alaska Electric Generation & Transmission Cooperative, Inc. (the "Tripartite
Agreement"), by failing to provide certain information to MEA and by failing to
refinance its bonds. Under that contract, Chugach sells to MEA substantially
all of the electric energy used by MEA. MEA's complaint seeks unspecified
damages and a declaratory order requiring Chugach to provide information "so as
to enable MEA to provide substantive comments to [Chugach] prior to [Chugach's]
undertaking or otherwise embarking upon any transaction or arrangement" within
the scope of the disclosure requirements contained in the Tripartite Agreement
and certain other information relating to Chugach's internet service provider
business, rate-lock contract and a study commissioned by Chugach relating to a
possible combination of Chugach and MEA. MEA's allegations and Chugach's
position with respect to the refinancing of Chugach's long-term bonds are
substantially similar to those previously presented to the Alaska Public
Utilities Commission and already described under the caption "Matanuska
Electric Association, Inc. v. Chugach Electric Association, Inc. U-98-180" in
Item 1 of Part II of Chugach's Report on Form 10-Q for the quarter ended March
31, 1999. Chugach also believes that it has provided MEA all information
required under the terms of the Tripartite Agreement and intends vigorously to
defend against MEA's allegations.
On July 26, 1999, MEA amended its complaint to allege that Chugach's mailing to
its members, prior to August 24, 1999 (the date of the scheduled public
hearing on the MEA proposal), of ballots and a brochure informing its members
why the Chugach Board rejected MEA's proposal will cause irreparable harm to
MEA, and to seek an injunction requiring Chugach not to send out ballots until
after August 24, 1999. MEA also filed a motion for preliminary injunction and
has sought expedited consideration of that motion. Chugach believes that MEA's
new claims are without merit and intends vigorously to defend against them.
Oral argument on MEA's motion for a preliminary injunction has not yet been
scheduled, but is expected to occur on or before August 9, 1999.
SIGNATURE
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 herewith duly authorized.
Date: July 28, 1999 CHUGACH ELECTRIC ASSOCIATION, INC.
By: /s/ Eugene N. Bjornstad
Eugene N. Bjornstad
General Manager