SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required)
For the fiscal year ended June 30, 1999 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(No fee required)
For the transition period from to
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Commission File Number 0-29812
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Berkshire Energy Resources
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(Exact Name of Registrant as Specified in Its Charter)
Massachusetts 04-3408946
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
115 Cheshire Road, Pittsfield, MA 01201-1803
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(Address of Principal Executive Offices) (Zip Code)
(413) 442-1511
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(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
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Securities registered pursuant to Section 12(g) of the Act:
Common Shares No-Par Value
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(Title of Class)
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 [ ]
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
Aggregate market value of Common Shares no-par value of the Registrant
held by non-affiliates as of July 31, 1999 was $51,311,930. Total shares of
common stock of the Registrant outstanding as of July 31, 1999 were
2,519,170.
Documents Incorporated by Reference:
1. Berkshire Energy Resources' Annual Report to Shareholders for the
fiscal year ended June 30, 1999(Items 5, 6, 7, and 8 of Part II).
2. Berkshire Energy Resources' definitive Proxy Statement, to be filed on
October 1, 1999, pursuant to Regulation 14A under the Securities and
Exchange Act of 1934 (Items 10, 11, 12 and 13 of Part III).
Table of Contents
Item Page
PART I Number Number
------ ------ ------
Business 1 3
Properties 2 11
Legal Proceedings 3 11
Submission of Matters to a Vote of
Security Holders 4 12
Additional Items - 13
(Executive Officers of the Registrant)
PART II
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Market For Registrant's Common Equity and
Related Stockholder Matters 5 14
Selected Financial Data 6 14
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 14
Financial Statements and Supplementary Data 8 14
Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 9 14
PART III
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Trustees and Executive Officers of the Registrant 10 15
Executive Compensation 11 15
Security Ownership of Certain Beneficial
Owners and Management 12 15
Certain Relationships and Related Transactions 13 15
PART IV
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Exhibits, Independent Auditors' Report on
Supplemental Schedules, Financial Statement
Schedules, and Reports on Form 8-K 14 16
Item 1. Business
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General
The Berkshire Gas Company adopted a holding company corporate
structure effective December 31, 1998 to capitalize on competitive
opportunities associated with the deregulation of the natural gas industry.
Berkshire Energy Resources(the "Company") has been organized as a
Massachusetts Business Trust and initially has as its subsidiaries: The
Berkshire Gas Company ("Berkshire Gas"), Berkshire Propane, Inc. ("Berkshire
Propane"), and Berkshire Energy Marketing, Inc. ("Berkshire Energy
Marketing"). The adoption of a holding company structure effectively
reorganized and segregated the Company's regulated business activities from
its nonregulated markets.
Berkshire Gas is a subsidiary engaged in the distribution, sale and
transportation of natural gas for residential, commercial and industrial
use. Berkshire Gas also has an appliance rental division that sells and
leases gas burning equipment.
Berkshire Propane is the retail propane subsidiary that provides propane
distribution and service to more than 100 communities in western
Massachusetts, eastern New York and southern Vermont. Berkshire Propane is
not subject to the regulatory authority of the Massachusetts Department of
Telecommunications and Energy (DTE), formerly the Massachusetts Department
of Public Utilities. Propane is delivered to customers by trucks from
storage facilities located in the service territory. Approximately 30% of
Berkshire's annual liquid propane requirements are purchased at a fixed
price. The remaining requirements are purchased in the spot market.
Berkshire Energy Marketing, was established to capitalize on new
opportunities associated with the deregulation of the utility industry. The
Berkshire Energy Marketing subsidiary offers competitively priced natural
gas to meet a wide variety of customer needs. To gain additional supply and
price leverage, Berkshire Energy Marketing has entered into a strategic
alliance with Connectiv/CNE Energy Services, LLC, a regional energy marketer
with significant supply acquisition capabilities. Berkshire Energy Marketing
is extending its reach into new markets, providing a variety of energy
options.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of
the Private Securities Litigation Reform Act of 1995
This Annual Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Actual
results could differ materially from those contemplated by such statements.
Such statements reflect management's current views, are based on many
assumptions and are subject to risks and uncertainties.
Certain important factors which could cause such results to differ
include risks associated with the Company's maintaining contracts with
specific customers, government regulation, the increasingly competitive
nature of the markets in which the Company is engaged, and dependence on key
personnel. These factors are not intended to represent a complete list of
the general or specific risks that may affect the Company.
Territory Served
Berkshire Gas' utility service territory includes 19 communities in
the western portion of the Commonwealth of Massachusetts, including the
cities of Pittsfield and North Adams, the towns of Adams, Amherst, Great
Barrington, Greenfield and Williamstown, and twelve smaller municipalities.
The population of the area served is estimated at 190,000 and is primarily
residential in character, but the territory also includes industrial,
agricultural, educational, cultural and resort facilities. Berkshire
Propane markets propane throughout the western portion of Massachusetts,
eastern New York and southern Vermont. The Berkshire Gas Company currently
serves over 34,000 natural gas customers and Berkshire Propane, Inc., over
6,000 propane customers.
Customers
Utility Operations
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The largest group of Berkshire Gas' natural gas customers is the
residential class. During the fiscal years ended June 30, 1999, 1998 and
1997, residential consumers accounted for approximately 57%, 55% and 55%;
commercial and industrial consumers accounted for 35%, 41% and 40%; and
transportation consumers accounted for approximately 8%, 4% and 5% of
natural gas operating revenues, respectively. Transportation consumers
account for approximately 15%, 8%, and 9% of natural gas operating margin
for fiscal years 1999, 1998 and 1997, respectively. Net income could be
impacted by the loss of one or more significant transportation consumers,
who are all under contracts.
The number of natural gas customers increased 1% in 1999 over 1998,
from 34,166 to 34,494. Total Mcf sold and transported increased from
7,356,946 Mcf in 1998 to 7,880,066 Mcf in 1999 primarily due to increased
sales volumes due to 9.9% colder weather from January through March. Total
natural gas customers by classification at June 30 in each of the previous
five years were:
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Residential 30,172 29,911 29,682 29,707 29,565
Commercial & Industrial 4,322 4,255 4,205 4,056 4,031
Propane Operations
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Berkshire Propane, Inc., sells liquid propane gas to residential and
commercial customers in Massachusetts, New York and Vermont. At June 30,
1999, Berkshire Propane had 6,073 customers as compared to 5,489 in 1998.
As part of the Company's growth strategy, Berkshire Propane acquired a local
propane dealer in October 1998, in order to increase market share.
Competition
Natural Gas Operations
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Implementation of the Federal Energy Regulatory Commission's (FERC)
Order 636 has increased the potential for competition in gas procurement,
supply and sale. FERC's actions have sought to encourage competition and
natural gas market efficiency through deregulation and "unbundling of
services" at the interstate pipeline level. This unbundling has changed the
historical relationships, whereby producers sold to pipelines, pipelines
sold to local distribution companies (LDCs) such as Berkshire Gas and LDCs
sold to end-users. Now LDCs or end-users may utilize pipeline services
primarily for the transportation of gas purchased from third parties.
While historically Berkshire Gas has been subject to competition from
electricity, oil, propane, coal and other fuels for space heating, water
heating, cooking, air conditioning and industrial applications, regulatory
changes have created the competition among existing and new suppliers or
marketers of natural gas. Berkshire Gas takes a very positive view of the
changes occurring within the natural gas industry. The advent of customer
choice should enhance the value of the Berkshire Gas's products and
services. Berkshire Gas is taking an active role in the transformation of
the industry at the state level, through participation in collaborative
proceedings involving a wide range of market stakeholders and regulators.
This process resulted in the establishment of "unbundled" rates for all
customer classes that will enable all customers to select their own supplier
of natural gas with Berkshire Gas providing transportation service.
Rates and Regulations
The Berkshire Gas Company is subject to the regulatory authority of
the DTE with respect to various matters, including rates, financing, certain
gas supply contracts, demand-side management programs and planning and
safety matters.
The principal rate classifications are residential, commercial and
industrial. Berkshire Gas also offers firm and quasi-firm transportation
rates for large end-users as well as interruptible sales and transportation
service. The rate structure is based on the cost of providing service to
each customer class.
In compliance with requirements set forth by the DTE, The Berkshire
Gas Company filed revenue-neutral, unbundled rates that became effective
November 1, 1998. The unbundled rates were submitted in accordance with a
request for a Joint Motion for Approval of the Settlement Agreement (the
Settlement) reached by participants in the Massachusetts Gas Collaborative
(the Collaborative). Presently, residential rates are designed separately
for heating and non-heating purposes. Additionally, like most other utility
companies in Massachusetts, The Berkshire Gas Company offers subsidized
rates to residential customers who qualify for certain government
entitlements. These customers receive a 20% discount from the standard
residential rates. The commercial and industrial rates are based on load
factor; that is, the cost is based on how much gas is consumed and when it
is consumed. There are seven classifications of load factor rates. All but
the Extra Large Annual Use, High Load rate are volumetric rates. Berkshire
Gas also offers four Quasi-Firm demand-based transportation rates that are
grandfathered and are only available to customers who were taking service
under those rates on or before November 1, 1998.
The current firm rate structure is based on seasonal rates, whereby
base rates are higher in the winter (November through April) and lower in
the summer (May through October). In addition to the base rates, Berkshire
Gas offers Default Service to any customer who is not receiving gas service
from a supplier as set forth in The Berkshire Gas Company's Terms and
Conditions. The rate for Default Service is established by The Berkshire
Gas Company's Seasonal Cost of Gas Adjustment Clause (CGAC) rate schedule,
which is adjusted on a semi-annual basis in order for Berkshire Gas to
recover the cost of gas supplies. As part of its new unbundled rates, the
Company modified its existing CGAC to allow for the following regulatory
changes: (a) the addition of provisions that allow for the recovery of the
gas portion of bad-debt expenses; and (b) new formulas for the recovery of
gas costs.
In addition, Berkshire Gas has a Local Distribution Adjustment Clause
(LDAC) which allows for the recovery of Demand Side Management (DSM) costs,
environmental response costs, FERC Order 636 transition costs, and certain
costs incurred as a result of participation in the Massachusetts Gas
Collaborative. Additionally, this clause enables Berkshire Gas to return to
firm ratepayers a portion of non-firm distribution margins allocated to firm
distribution services. The charge is set on an annual basis and is applied
to all firm sales and transportation customers.
The Berkshire Gas Company also provides several non-firm and special
rates to meet the varying needs of large customers. These rates include
Interruptible Sales and/or Transportation Service whereby a customer is
capable of either ceasing operations or switching to an alternate fuel.
Additionally, a Load Management Rate is available for non-residential
customers who agree to reduce demand to a predetermined minimum level on
peak days.
The DTE issued an order on capacity assignment, cost responsibility,
and related issues on February 1, 1999. The DTE ruled that mandatory
assignment of capacity on a "slice-of-the-system" would maintain reliability
and avoid improper transfer of cost responsibility. The DTE also found that,
until it determines that a sufficiently competitive market for upstream
capacity exists, the LDCs will maintain their obligation to serve.
Currently, the industry Collaborative is taking action on Model Terms and
Conditions to introduce the comprehensive unbundling of LDC services to
expanded customer classes as soon as November 1, 1999.
The Berkshire Gas Company is also subject to standards prescribed by
the Secretary of Transportation under the Natural Gas Pipeline Safety Act of
1968 with respect to the design, installation, testing, construction and
maintenance of pipeline facilities. The enforcement of these standards has
been delegated to the DTE, which has taken an active role in such
enforcement, including the application of civil penalties and the
requirement of remedial programs.
The regulation of prices, terms and conditions of interstate pipeline
transportation and sales of natural gas is subject to the jurisdiction of
FERC. The Berkshire Gas Company is not under the direct jurisdiction of
FERC, but monitors, and periodically participates in, proceedings before
FERC which involve the pipeline suppliers/transporters, the Berkshire Gas
Company's operations, and other matters pertinent to Berkshire Gas's
business. (See also "Competition".) The Berkshire Gas Company has recently
been an active participant in the FERC proceedings regarding the regulation
of short-term natural gas transportation services (Docket No. RM98-10-00)
"Notice of Proposed Rulemaking" (the NOPR), and the regulation of interstate
natural gas transportation services (Docket No. RM98-12-00) "Notice of
Inquiry" (the NOI). Through the NOPR and the NOI, the FERC is undertaking a
comprehensive review of the regulatory policies and procedures including
such issues as rate design, price caps, and negotiated terms and conditions,
that are currently in place for the natural gas industry. The FERC is still
reviewing comments from participants and at this point has not made a final
ruling on these dockets.
Environmental Matters
Federal, state and local laws and regulations establishing standards
and requirements for the protection of the environment have increased in
number and scope in recent years. The Company cannot predict the future
impact of such standards and requirements, which are subject to change and
can be retroactively applied.
During fiscal 1990, the DTE issued a generic ruling on cost recovery
for environmental cleanup with respect to former gas manufacturing sites.
Under the ruling, The Berkshire Gas LDAC will recover annual cleanup costs,
excluding carrying costs, over a seven-year period through the Company.
This ruling also provides for the sharing of any proceeds received from
insurance carriers equally between Berkshire Gas and its ratepayers, and
establishes maximum amounts that can be recovered from customers in any one
year.
During the year ended June 30, 1999, Berkshire Gas continued the
analysis and field review of two parcels of real estate formerly used for
gas manufacturing operations, which had been found to contain coal tar
deposits and other substances associated with by-products of the gas
manufacturing process. The review and assessment process began in 1985 with
respect to site #1, which is owned by Berkshire Gas, and in 1989 with
respect to site #2, which it formerly owned by Berkshire Gas.
With the review and approval of the Massachusetts Department of
Environmental Protection (MDEP), work at site #1 has resulted in proposed
remedial activities which are currently being permitted through local and
state agencies and will be pursued in the near future. Site monitoring
activities will continue for the foreseeable future.
It is difficult to predict the potential financial impact of the sites
until first, the nature and risk is fully characterized, and second, the
remedial strategies and related technologies are determined. The general
philosophy is one of source removal and/or reduction
coupled with risk minimization.
Beginning in fiscal year 2000, Berkshire Gas will likely begin
remediation of site #1. It is estimated that through 2014 the level of
expenditures for the sites will range from $3.3 to $12.7 million. Berkshire
Gas has recorded the most likely cost of $3.3 million in accordance with
SFAS No. 5. Ultimate expenditures cannot be determined until a remedial
action plan for site #2 is developed. Berkshire Gas's unamortized costs at
June 30, 1999, were $718 thousand and should be recovered using the formula
discussed above.
Seasonality
The Company's business has a distinct seasonal quality because a large
percentage of its sendout serves residential and commercial heating loads.
Gas and propane operating revenues reflect the seasonal nature of the
business. Such revenues are affected by temperature variations between the
heating and non-heating seasons and by seasonal pricing differentials
embodied in The Berkshire Gas Company's effective schedule of rates and
charges for gas services. (See also "Rates and Regulations".)
Employee Relations
The Company and its subsidiaries have 164 employees, approximately 53%
of whom are represented by the United Steelworkers of America, AFL-CIO-CLC,
under a contract which remains in effect until March 31, 2000. Relations
with employees are generally satisfactory.
Gas Supply
The Berkshire Gas Company's portfolio consists of five firm natural
gas contracts. As of November 1, 1999, Berkshire Gas will exercise its
option to terminate one of its contracts. The terms of the remaining gas
supply contracts range from approximately three to four years.
Under the terms of a fuel purchase agreement executed with U.S.
Generating Company (formerly Altresco, Inc.), Berkshire Gas is entitled to
receive gas peaking service during the Winter Period of November 1 through
March 31 of each year and back-up gas supplies in the event of proration or
curtailment of firm gas supplies (including propane).
In addition, Berkshire Gas executed two contracts with Distrigas of
Massachusetts Corporation (DOMAC). The first entitles Berkshire Gas to
receive up to 2,924 Mcf per day of vaporized Liquefied Natural Gas (LNG) for
365 days. The second contract entitles Berkshire Gas to receive up to 1,949
Mcf per day of LNG for 151 days. This contract provides Berkshire Gas with
the option to take the LNG in liquid or vapor form, thus providing the
necessary flexibility to serve its proposed permanent storage and
vaporization facility (see discussion below). The term of this contract is
for a five-year period ending October 31, 2003.
The Berkshire Gas Company has five Liquefied Petroleum Gas (LPG)
plants and one temporary portable LNG vaporizing unit that are utilized on
peak days to supplement the pipeline natural gas supply. Berkshire Gas
expects to replace this temporary facility with a permanent storage and
vaporization facility. The new facility should be operational by the 1999-
2000 heating season. By supplementing its natural gas supply with LPG and
LNG, Berkshire Gas is able to meet its customers' requirements during peak
periods. The Berkshire Gas Company's pipeline deliveries combined with LPG
facilities' storage and vaporization capacity yield a maximum daily sendout
of approximately 54,900 Mcf. Actual maximum daily sendout due to degree day
severity during the 1998-99 heating season was 45,335 Mcf. The composition
of gas supply for customer requirements during the fiscal year ended June
30, 1999, was: 99.81% natural gas and 0.19% LNG and LPG.
Berkshire Gas estimates that its supply of natural gas and
supplemental sources under contract are adequate to meet the anticipated
needs of their customers for the foreseeable future.
On April 16, 1997, the FERC approved an unopposed settlement offer of
Tennessee Gas Pipeline Company. The settlement established a cost sharing
mechanism between Tennessee and its customers. As a result of the order,
Tennessee implemented a reduced Gas Supply Realignment (GSR) surcharge
retroactively for the two-year period of January 1, 1997, through December
31, 1998. A refund from Tennessee, representing excess GSR surcharges from
January through March 1997, was returned to Berkshire's customers through
its CGAC during the fiscal year. The GSR surcharges did not significantly
affect The Berkshire Gas Company's competitiveness and were absorbed by
Berkshire's firm sales customers. On April 29, 1998, the FERC approved a
Settlement Agreement for future Gas Research Institute (GRI) funding. The
Agreement assures continued funding of GRI which will be phased down to a
voluntary program by the year end 2004. The GRI surcharges do not
significantly affect The Berkshire Gas Company's competitiveness. Finally,
Berkshire Gas is currently in confidential discussions with Tennessee Gas
Pipeline Company regarding the renegotiation of its long-haul and short-haul
contracts. It is anticipated the new contracts will be in effect as of
November 1, 1999 and will provide Berkshire Gas with a more operationally
flexible and competitive portfolio.
Item 2. Properties
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The Company's utility subsidiary, The Berkshire Gas Company, has
approximately 694 miles of distribution mains, the major portion of which
are constructed of coated steel, plastic or cast iron. Berkshire Gas owns
and operates five auxiliary liquefied petroleum gas plants for supplementing
its supply of natural gas. (See "Gas Supply".) Berkshire Gas Company has
five sales meter stations receiving gas from the interstate pipeline.
All the principal properties of the Company are owned in fee, subject
to the lien of the mortgage securing The Berkshire Gas Company's First
Mortgage Bond, and are also subject to covenants, restrictions, easements,
leases, rights-of-way and other similar minor encumbrances or defects common
to properties of comparable size and character; none of which in the opinion
of the Company's management materially interferes with Berkshire Gas's use
of its properties in order to conduct its business. Berkshire Gas's gas
mains are primarily located under public highways and streets. Where they
are under private property, Berkshire Gas has obtained easements or rights-
of-way from the record holders of title. These easements and rights are
deemed by Berkshire Gas to be adequate for the purposes for which they are
being used.
Item 3. Legal Proceedings
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With reference to the matters discussed in Item 1 "Environmental
Matters", Berkshire Gas notified its present and former insurance carriers
that it has incurred and will incur further costs associated with the
previously-referenced coal tar deposits, for which it will seek coverage
under applicable insurance policies. No litigation has yet commenced and it
is not possible to determine the extent to which recovery of costs will
ultimately be obtained from such insurance carriers.
The Company is also involved with other legal proceedings incidental
to its business. At the present time the Company cannot predict the
outcomes of these proceedings as described herein.
On December 18, 1998, The Berkshire Gas Company was sued in the
Supreme Court of the State of New York, County of Kings, by the executrix of
the estate of a customer of Berkshire Gas's retail propane division relating
to an explosion at the home of such customer in Canaan, New York on July 28,
1997 and the death of the customer. Handi Mate, Inc., a New York
corporation that engages in the inspection of properties, was also named as
a defendant in the lawsuit.
The complaint alleges six counts against Berkshire Gas and seeks
damages of twenty million dollars ($20,000,000) per count, plus punitive
damages. Berkshire Gas intends to vigorously defend each of these claims
and expects to challenge certain claims that, upon initial review, appear
redundant to other claims.
Berkshire Gas has notified its insurance carrier of the filing of such
lawsuit and the carrier has assumed the defense of such claims. Berkshire
Gas has comprehensive liability insurance that provides up to thirty-five
million dollars ($35,000,000) of coverage per occurrence.
Berkshire Gas believes that the outcome will not have a material
adverse impact on its overall financial position or results of operations.
Item 4. Submission of Matters To A Vote Of Security Holders
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None.
Additional Items
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Executive Officers of the Registrant
The table set forth below shows the names, titles and ages
of all executive officers of the Registrant as of June 30, 1999. There is
no family relationship among officers of the Registrant. There is no
arrangement between any of the officers and any other person(s) pursuant to
which such officer has or is to be elected as an officer.
Served in This
Name Title Capacity Since Age
- ---- ----- -------------- ---
S.S. Robinson President and Chief 10-28-87 59
Executive Officer
M.J. Marrone Vice President, Treasurer 10-28-87 57
and Chief Financial Officer
R.M. Allessio Vice President, Utility 11-07-97 49
Operations of The Berkshire
Gas Company
The executive officers are elected annually.
Listed below is a brief account of the business of each of the above
executive officers during the past five years.
Name Capacity in Which Served During Past Five Years
- ---- -----------------------------------------------
S.S. Robinson President and Chief Executive Officer
M.J. Marrone Vice President, Treasurer and Chief Financial Officer
R.M. Allessio Vice President, Utility Operations of The Berkshire Gas
Company; Vice President of Marketing and Distribution of
The Berkshire Gas Company; Director of Marketing and
Distribution of The Berkshire Gas Company; Director of
Engineering and Distribution of The Berkshire Gas Company
Part II
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Item 5. Market For Registrant's Common Equity and Related Stockholder
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Matters
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The number of registered common shareholders of record of the
Registrant as of the close of business on July 31, 1999, was 1,967. The
other information required is contained in Berkshire Energy Resources's
Annual Report to Shareholders for the fiscal year ended June 30, 1999,
("Registrant's Annual Report") on page 31, under the heading "Consolidated
Quarterly Financial Information". This information is hereby incorporated
by reference in this report.
Item 6. Selected Financial Data
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The information required is contained in Registrant's Annual Report on pages
12 - 13, under the heading "10-Year Comparative Summary of Operations and
Statistics". This information is hereby incorporated by reference in this
report.
Item 7. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations
---------------------
The information required is contained in Registrant's Annual Report on
pages 14 - 16, under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations". This information is hereby
incorporated by reference in this report.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
The information required is contained in Registrant's Annual Report on
pages 17 - 31, in the financial statements of Berkshire Energy Resources for
the years ended June 30, 1999, 1998 and 1997, together with the related
notes to financial statements, under the heading "Independent Auditors'
Report", and under the heading "Consolidated Quarterly Financial
Information". This information is hereby incorporated by reference in this
report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -------------------------------------------------------------------------
Financial Disclosure
--------------------
None.
Part III
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Items 10, 11, 12 and 13
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The information required regarding the Executive Officers of the
Registrant is included in Part I under "Additional Items". Certain other
information called for by Items 10, 11, 12 and 13 has been omitted from this
report pursuant to General Instruction G(3), and is incorporated herein by
reference from the definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than
120 days after the close of the Company's last fiscal year.
PART IV
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Item 14. Exhibits, Independent Auditors' Report on Supplemental Schedules,
- ----------------------------------------------------------------------------
Financial Statement Schedules and Reports on Form 8-K
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(a) 1. Financial Statements
--------------------
The following financial statements and related notes are contained
in the Registrant's Annual Report for the fiscal year ended
June 30, 1999, and are incorporated herein by reference.
Report of Independent Auditors.
Consolidated Statements of Income for the years ended June 30, 1999,
1998 and 1997.
Consolidated Balance Sheets, June 30, 1999, 1998 and 1997.
Consolidated Statements of Shareholders' Equity for the years ended
June 30, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended June 30,
1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
Selected Consolidated Quarterly Financial Data (unaudited) for the
years ended June 30, 1999, 1998 and 1997.
2. Independent Auditors' Report on Supplemental Schedules
------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
Deloitte &
Touche LLP
- ----------------------------------------------------------------------------
City Place Telephone:(860)280-3000
185 Asylum Street Facsimile:(860)280-3051
Hartford, Connecticut 06103-3402
To the Shareholders of
Berkshire Energy Resources:
We have audited the consolidated financial statements of Berkshire Energy
Resources (as successor to The Berkshire Gas Company) as of June 30, 1999,
1998 and 1997 and for each of the three fiscal years in the period ended
June 30, 1999 and have issued our report thereon dated August 12, 1999;such
financial statements and report are included in Berkshire Energy Resources's
Annual Report to Shareholders and are incorporated herein by reference.
Our audits also included the financial statement schedules of Berkshire
Energy Resources, listed in Item 14. These financial statement schedules are
the responsibility of Berkshire Energy Resources's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
August 12, 1999
3. Financial Statement Schedules
-----------------------------
The information called for by this item appears under the caption
"Financial Statement Schedules and Exhibits Filed with Annual Report
on Form 10-K" (page 1 hereof). Such information is incorporated by
reference herein.
4. Exhibits
--------
The information called for by this item appears under the caption
"Financial Statement Schedules and Exhibits Filed with Annual Report
on Form 10-K" (page 1 hereof). Such information is incorporated by
reference herein.
(b) Reports on Form 8-K
-------------------
A report on Form 8-K, was filed on December 18, 1998 to report the
filing of a lawsuit against The Berkshire Gas Company. The
information called for by this item appears under the caption "Legal
Proceedings".
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to
be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 25, 1999 By: /s/
------------------
Scott S. Robinson,
President & CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons in the
capacities on the dates indicated.
Signatures Capacity Date
- ---------- -------- ----
/s/------------------ Trustee August 25, 1999
Franklin M. Hundley
Chairman of the Board
/s/------------------ Principal Executive August 25, 1999
Scott S. Robinson Officer; Trustee
President and Chief
Executive Officer
/s/------------------------- Principal Financial August 25, 1999
Michael J. Marrone & Accounting Officer
Vice President, Treasurer
and Chief Financial Officer
/s/--------------- Trustee August 25, 1999
George R. Baldwin
/s/------------- Trustee August 25, 1999
John W. Bond
/s/------------ Trustee August 25, 1999
Paul L. Gioia
/s/--------- Trustee August 25, 1999
James R. Keys
/s/------------ Trustee August 25, 1999
Robert B. Trask
BERKSHIRE ENERGY RESOURCES
CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
and
EXHIBITS
Filed With
ANNUAL REPORT ON FORM 10-K
EXHIBIT INDEX
Certain of the following exhibits are filed herewith or will be filed
herewith by amendment. Certain other of the following exhibits have
heretofore been filed with the Commission and pursuant to Rule 411 are
incorporated herein by reference.
Exhibit
Number Description
2 Agreement and Plan of Merger dated February 19, 1998 by and among
The Berkshire Gas Company, the Company, and Berkshire Gas Mergeco
Gas Company, Inc., filed as Appendix A to the Company's
Registration Statement on form S-4, Registration Statement
No. 333-46799, and incorporated herein by reference.
3(i) Articles of Merger of The Berkshire Gas Company and Berkshire Gas
Mergeco Gas Company, and the Company, dated December 28, 1998, and
incorporated herein by reference.
3(ii) By-Laws of Berkshire Energy Resources. Filed as Appendix C to the
Company's Registration Statement on Form S-4, Registration
Statement No. 333-46799, and incorporated herein by reference.
4(a) First Mortgage Indenture and Deed of Trust, dated as of
July 1, 1954, between Pittsfield Coal Gas Company (now The
Berkshire Gas Company) and Chemical Corn Exchange Bank (now
Chemical Bank), Trustee. Filed as Exhibit 4(c) to Berkshire Gas's
Registration Statement on Form S-1, Registration Statement
No. 2-19808, and incorporated herein by reference.
4(b) First Supplemental Indenture, dated as of June 1, 1956, between
Berkshire Gas and Chemical Corn Exchange Bank (now Chemical Bank),
Trustee. Filed as Exhibit 4(d) to Berkshire Gas's Registration
Statement on Form S-1, Registration Statement No. 2-19808, and
incorporated herein by reference.
4(c) Second Supplemental Indenture, dated as of October 1, 1957,
between Berkshire Gas and Chemical Corn Exchange Bank (now
Chemical Bank), Trustee. Filed as Exhibit 4(e) to Berkshire Gas's
Registration Statement on Form S-2, Registration Statement
No. 2-19808, and incorporated herein by reference.
4(d) Third Supplemental Indenture, dated as of October 1, 1958, between
Berkshire Gas and Chemical Corn Exchange Bank (now Chemical Bank),
Trustee. Filed as Exhibit 4(f) to Berkshire Gas's Registration
Statement on Form S-1, Registration Statement No. 2-19808, and
incorporated herein by reference.
4(e) Fourth Supplemental Indenture, dated as of August 1, 1960, between
Berkshire Gas and Chemical Bank New York Trust Company (now
Chemical Bank), Trustee. Filed as Exhibit 4(e) to Berkshire Gas's
Registration Statement on Form S-2, File No. 33-1492, file
herewith.
4(f) Fifth Supplemental Indenture, dated as of June 1, 1962, between
the Company and Chemical Bank New York Trust Company (now Chemical
Bank), Trustee. Filed as Exhibit 4(f) to Berkshire Gas's
Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(g) Sixth Supplemental Indenture, dated as of February 1, 1965,
between Berkshire Gas and Chemical Bank New York Trust Company
(now Chemical Bank), Trustee. Filed as Exhibit 4(g) to Berkshire
Gas's Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(h) Seventh Supplemental Indenture, dated as of October 1, 1965,
between Berkshire Gas and Chemical Bank New York Trust Company
(now Chemical Bank), Trustee. Filed as Exhibit 4(h) to Berkshire
Gas's Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(i) Eighth Supplemental Indenture, dated as of September 1, 1967,
between Berkshire Gas and Chemical Bank New York Trust Company
(now Chemical Bank), Trustee. Filed as Exhibit 4(i) to Berkshire
Gas's Registration Statement on Form S-2, File No. 33-1492, and
incorporated herein by reference.
4(j) Ninth Supplemental Indenture, dated as of April 1, 1969, between
Berkshire Gas and Chemical Bank, Trustee. Filed as Exhibit 4(j)
to Berkshire Gas's Registration Statement on Form S-2, File
No. 3-1492, and incorporated herein by reference.
4(k) Tenth Supplemental Indenture, dated as of March 1, 1972, between
Berkshire Gas and Chemical Bank, Trustee. Filed as Exhibit 4(k)
to Berkshire Gas's Registration Statement on Form S-2, File
No. 33-1492, and incorporated herein by reference.
4(l) Eleventh Supplemental Indenture, dated as of April 15, 1975,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(l) Berkshire Gas's Registration Statement on Form S-2,
File No. 33-1492, and incorporated herein by reference.
4(m) Twelfth Supplemental Indenture, dated as of November 27, 1978,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(m) to Berkshire Gas's Registration Statement on Form
S- 2, File No. 33-1492, and incorporated herein by reference.
4(n) Thirteenth Supplemental Indenture, dated as of October 15, 1981,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(n) to Berkshire Gas's Registration Statement on Form
S-2, File No. 33-1492, and incorporated herein by reference.
4(o) Fourteenth Supplemental Indenture, dated as of August 19, 1983,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(o) to Berkshire Gas's Registration Statement on Form
S-2, File No. 33-1492, and incorporated herein by reference.
4(p) Fifteenth Supplemental Indenture, dated as of August 19, 1985,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(p) to Berkshire Gas's Registration Statement on Form
S-2, Registration No. 33-1492, and incorporated herein by
reference.
4(q) Sixteenth Supplemental Indenture, dated as of January 1, 1988,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(q) to Berkshire Gas's Registration Statement on Form
S-3, Registration No. 33-27785, and incorporated herein by
reference.
4(r) Seventeenth Supplemental Indenture, dated as of February 1, 1989,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(r) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-27785, and incorporated herein
by reference.
4(s) Eighteenth Supplemental Indenture, dated as of September 1, 1991,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(x) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-64302, and incorporated herein
by reference.
4(t) Nineteenth Supplemental Indenture, dated as of September 1, 1992,
between Berkshire Gas and Chemical Bank, Trustee. Filed as
Exhibit 4(z) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-64302, and incorporated herein
by reference.
4(u) Debenture Indenture, dated as of November 1, 1986, between
Berkshire Gas and Centerre Trust Company of St. Louis (now
Boatmen's Trust Company), as Trustee. Filed as Exhibit 4(q) to
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-9509, and incorporated herein by reference.
4(v) Senior Note Agreement, dated as of July 1, 1990, between Berkshire
Gas and Allstate Life Insurance Company. Filed as Exhibit 4(w) to
Berkshire Gas's Registration Statement on Form S-3, Registration
Statement No. 33-64302, and incorporated herein by reference.
4(w) Charter of Berkshire Gas. Filed as Exhibit 3(a) to Berkshire
Gas's Form 8, amending Berkshire Gas's Form 10-Q for the fiscal
quarter ended September 30, 1984, File No. 0-1857-3, and
incorporated herein by reference.
4(x) Amendment to Berkshire Gas's Charter, dated October 30, 1985.
Filed as Exhibit 3(b) to Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-1492, and incorporated
herein by reference.
4(y) Amendment to Berkshire Gas's Charter, dated July 14, 1986. Filed
as Exhibit 3(a) to Berkshire Gas's Form 10-K for the fiscal year
ended June 30, 1986, File No. 0-1857-3, and incorporated herein by
reference.
4(z) Amendment to Berkshire Gas's Charter, dated October 28, 1986.
Filed as Exhibit 4(v) to Berkshire Gas's Registration Statement on
Form S-3, Registration Statement No. 33-27785, and incorporated
herein by reference.
4(aa) Amendment to Berkshire Gas's Charter, dated June 15, 1992. Filed
as Exhibit 4(y) to Berkshire Gas's Registration Statement on Form
S-3, Registration Statement No. 33-64302, and incorporated herein
by reference.
4(bb) Amendment to Berkshire Gas's Charter, dated July 29, 1994. Filed
as Exhibit 4(bb) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
4(cc) Amendment to Berkshire Gas's Charter, dated September 10, 1996.
Filed as part of Exhibit 3(i) to Berkshire Gas's form 10-Q for the
fiscal quarter ended December 13, 1996. File No. 0-1857-3, and
incorporated herein by reference.
4(dd) Senior Note Agreement, dated November 1, 1996, between Berkshire
Gas and First Colony Life Insurance Company. Filed as Exhibit 4
to Berkshire Gas's form 10-Q for the fiscal quarter ended
December 31, 1996. File No. 0-1857-3, and incorporated herein by
reference.
4(ee) Declaration of Trust of Berkshire Energy Resources dated
February 17, 1998. Filed as Appendix B to the Company's
Registration Statement on Form S-4, Registration Statement
No. 333-46799, and incorporated herein by reference.
4(ff) Amendment to Medium-Term Loan Agreement, dated April 1, 1999.
Filed as Exhibit 4(ff) to Berkshire Energy Resources's Form 10-K
for the fiscal year ended June 30, 1999, File No. 0-29812,
filed herewith.
10(a) Employment Contract between Berkshire Gas and Scott S. Robinson.
Filed as Exhibit 10(f) to Berkshire Gas's Form 10-K for the fiscal
year ended June 30, 1985, File No. 01857-3, and incorporated
herein by reference.
10(b) Contract for the operation and maintenance of a cogeneration
pipeline between Berkshire Gas and Altresco Financial, Inc., dated
December 11, 1992. Filed as Exhibit 10(n) to Berkshire Gas's
Form 10-K for the fiscal year ended June 30, 1993,
File No. 0-18573, and incorporated herein by reference.
10(c) Year-to-year contract for the purchase of propane gas between
Berkshire Gas and Enron Gas Liquids, dated June 1, 1993. Filed as
Exhibit 10(c) on Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(d) Contract for the transportation of natural gas under IT rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 103250-8, dated September 1, 1993. Filed as
Exhibit 10(d) on the Company Registration Statement on Form S-2,
Registration Statement No. 33-83828, and is incorporated herein by
reference.
10(e) Contract for the transportation of natural gas under FT-A rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 2030, dated September 1, 1993. Filed as
Exhibit 10(e) on Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(f) Contract for the transportation of natural gas under FT-A rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 2064, dated September 1, 1993. Filed as Exhibit
10(f) on Berkshire Gas's Registration Statement on Form S-2,
Registration Statement No. 33-83828, and is incorporated herein by
reference.
10(g) Contract for the transportation of natural gas under FT-A rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 779, dated September 1, 1993. Filed as
Exhibit 10(g) on Berkshire Gas's Registration Statement on
Form S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(h) Contract for the transportation of natural gas under CGT-NE rate
schedule between Berkshire Gas and Tennessee Gas Pipeline Company,
contract number 2063, dated September 1, 1993. Filed as
Exhibit 10(h) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(i) Contract for the purchase of natural gas between Berkshire Gas and
Tenngasco Corporation, dated September 14, 1993. Filed as
Exhibit 10(i) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(j) Contract for the purchase of natural gas between Berkshire Gas and
Natural Gas Clearinghouse, dated as of November 1, 1993. Filed
as Exhibit 10(j) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(k) Gas Storage Agreement between Berkshire Gas and Tennessee Gas
Pipeline Company, dated as of September 1, 1993. Filed as
Exhibit 10(k) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(l) Company Corporate Incentive Compensation Plan ("ICP"). Filed as
Exhibit 10(l) on Berkshire Gas's Registration Statement on Form
S-2, Registration Statement No. 33-83828, and is incorporated
herein by reference.
10(m) Severance Agreement, dated September 28, 1993, by and between
Berkshire Gas and Robert M. Allessio. Filed as Exhibit 10(n) on
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-83828, and is incorporated herein by reference.
10(n) Severance Agreement, dated October 15, 1993, by and between
Berkshire Gas and Michael J. Marrone. Filed as Exhibit 10(o) on
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-83828, and is incorporated herein by reference.
10(o) Severance Agreement, dated October 15, 1993, by and between
Berkshire Gas and Cheryl M. Clark. Filed as Exhibit 10(q) on
Berkshire Gas's Registration Statement on Form S-2, Registration
Statement No. 33-83828, and is incorporated herein by reference.
10(p) Employment Agreement, dated June 30, 1999, by and between the
Company and Scott S. Robinson. Filed as Exhibit 10(p) to
Berkshire Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(q) Severance Agreement, dated June 9, 1999, by and between Berkshire
Gas and Cheryl M. Clark. Filed as Exhibit 10(q) to Berkshire
Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(r) Severance Agreement, dated June 9, 1999, by and between Berkshire
Gas and Michael J. Marrone. Filed as Exhibit 10(r) to Berkshire
Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(s) Severance Agreement, dated June 9, 1999, by and between Berkshire
Gas and Robert M. Allessio. Filed as Exhibit 10(s) to Berkshire
Energy Resources's Form 10-K for the fiscal year ended
June 30, 1999, File No. 0-29812, filed herewith.
10(t) Company Corporate Incentive Compensation Plan ("ICP")as secured
and amended. Filed as Exhibit 10(t) to Berkshire Energy
Resources's Form 10-K for the fiscal year ended June 30, 1999,
File No. 0-29812, filed herewith.
13(a) Annual Report to Shareholders
Filed Herewith:
A copy of the Company's Annual Report to Shareholders for fiscal
year ended June 30, 1999.
27(a) Financial Data Schedule
Filed Herewith:
Financial Data Schedule for the fiscal year ended June 30, 1999.