SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8 - K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report - November 7, 2001
Commission Registrant, State of Incorporation I.R.S. Employer
File Number Address and Telephone Number Identification No.
- ------------------------- --------------------------------------------------------- -----------------------
0-30338 RGS Energy Group, Inc. 16-1558410
(Incorporated in New York)
89 East Avenue
Rochester, NY 14649
Telephone (716) 771-4444
1-672 Rochester Gas and Electric Corporation 16-0612110
(Incorporated in New York)
89 East Avenue
Rochester, NY 14649
Telephone (716) 546-2700
1
Item 2. Disposition of Assets
- -----------------------------
On November 7, 2001, Rochester Gas and Electric Corporation ("RG&E") sold its 14
percent share of the Nine Mile Point Unit 2 ("Nine Mile Two") nuclear plant to
Constellation Nuclear, L.L.C ("Constellation Nuclear") pursuant to an agreement
dated December 11, 2000. The information contained in the RGS Energy Group, Inc.
("RGS") and RG&E's combined Form 10-K for fiscal year ended December 31, 2000,
Part II, Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations under the heading "Nine Mile Nuclear Plants" and the Form
8-K that was filed by RGS and RG&E on August 9, 2001 is incorporated by
reference herein. Such information contains a complete discussion of the
background of this transaction and its regulatory treatment. The agreements with
Constellation Nuclear were filed as exhibits 2-1, 10-21 and 10-22 in RGS' and
RG&E's combined Form 10-K for fiscal year ended December 31, 2000.
At the closing on November 7, 2001, RG&E received cash proceeds of $50.5 million
and a promissory note in the principal amount of $50.5 million. As a result of
the sale, RG&E is obligated to establish a regulatory asset pursuant to the
Joint Settlement Agreement between RG&E and the New York State Public Service
Commission ("PSC"). The regulatory asset consists of all balance sheet items
related to Nine Mile Two and transaction costs associated with the sale, net of
the sale proceeds. This regulatory asset will immediately be reduced by $20.0
million on a pre-tax basis. Additionally RG&E will immediately recognize $13.1
million of investment tax credits ("ITCs"). In addition to the asset purchase
agreement, RG&E also signed a power purchase agreement ("PPA") with
Constellation Nuclear to purchase energy at negotiated competitive prices for
approximately ten years.
Item 7. Financial Statements
- ----------------------------
(b) Unaudited Pro Forma Financial Information
The following unaudited Pro Forma Consolidated Financial Information illustrates
the effects of the sale of Nine Mile Two described in Item 2 on RGS' and RG&E's
results of operations and financial position. The RGS and RG&E Pro Forma
Consolidated Statements of Income for the year ended December 31, 2000 and for
the six months ended June 30, 2001 were prepared as if the sale occurred on
January 1, 2000, but exclude nonrecurring items relating to the sale. Such
nonrecurring items include the $20 million non-cash reduction of the regulatory
asset in accordance with the October 26, 2001 PSC Order approving such sale and
the income that would be recognized from the unamortized ITCs of $13.1 million
associated with the plant. The RGS and RG&E Pro Forma Consolidated Balance
Sheets at June 30, 2001 were prepared as if the sale occurred on June 30, 2001.
None of the Unaudited Pro Forma Consolidated Financial Information includes any
returns that RGS or RG&E might have earned on the cash proceeds from the sale.
The unaudited Pro Forma Consolidated Financial Information is presented for
illustrative purposes only and does not purport to represent what RGS' or RG&E's
results of operations or financial position would have been if the sale had
occurred at the beginning of the periods or on the date indicated, or to project
RGS' or RG&E's results of operations or financial position for
2
any future period or date. The pro forma disposition adjustments are based upon
available information that RGS and RG&E believe is reasonable under the
circumstances.
The following unaudited Pro Forma Consolidated Financial Information is
dependent on the assumptions described in the footnotes and should be read in
conjunction with RGS' and RG&E's audited financial statements for the year ended
December 31, 2000, including footnotes, as contained in RGS Energy Group's and
RG&E's 2000 Annual Report on Form 10-K, and RGS Energy Group's and RG&E's
unaudited financial statements for the six months ended June 30, 2001, including
footnotes, as contained in the RGS and RG&E 2001 2nd quarter report on Form
10-Q.
3
RGS ENERGY GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------
Operating Revenues
Electric (Note 1) $ 731,006 $ (658) $ 730,348
Gas 340,014 340,014
Liquid fuels and other 377,099 377,099
---------- -------- ----------
Total Operating Revenues 1,448,119 (658) 1,447,461
Operating Expenses
Fuel Expenses
Fuel for electric generation (Note 2) 48,851 (4,702) 44,149
Purchased electricity (Note 2) 85,858 40,719 126,577
Gas purchased for resale 208,588 208,588
Unregulated fuel expenses 340,306 340,306
---------- -------- ----------
Total Fuel Expenses 683,603 36,017 719,620
Operating Revenues Less Fuel Expenses 764,516 (36,675) 727,841
Other Operating Expenses
Operations and maintenance expenses excluding fuel (Note 3) 313,721 2,415 316,136
Unregulated operating and maintenance expenses excluding fuel 31,125 31,125
Depreciation and amortization (Note 4) 116,184 (17,591) 98,593
Taxes - state, local and other (Note 5) 94,576 (6,084) 88,492
Income taxes (Note 6) 59,832 (5,395) 54,437
---------- -------- ----------
Total Other Operating Expenses 615,438 (26,655) 588,783
Operating Income 149,078 (10,020) 139,058
Other (Income) and Deductions
Allowance for other funds used during construction (Note 7) (825) 45 (780)
Income taxes (Note 6) 1,145 2,193 3,338
Other - net (Note 8) (9,521) (5,528) (15,049)
---------- -------- ----------
Total Other (Income) and Deductions (9,201) (3,290) (12,491)
Interest Charges
Long term debt 58,044 58,044
Other - net (Note 9) 5,995 (855) 5,140
Allowance for borrowed funds used during construction (Note 7) (1,319) 73 (1,246)
---------- -------- ----------
Total Interest Charges 62,720 (782) 61,938
Net Income 95,559 (5,948) 89,611
---------- -------- ----------
Preferred Stock Dividend Requirements 3,700 3,700
---------- -------- ----------
Net Income Applicable to Common Stock $ 91,859 $ (5,948) $ 85,911
---------- -------- ----------
4
RGS ENERGY GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- --------------------------------------------------------------------------------------------------------------------------------
Operating Revenues
Electric (Note 1) $368,631 $ (331) $368,300
Gas 224,662 224,662
Liquid fuels and other 262,923 262,923
-------- -------- --------
Total Operating Revenues 856,216 (331) 855,885
Operating Expenses
Fuel Expenses
Fuel for electric generation (Note 2) 26,004 (2,511) 23,493
Purchased electricity (Note 2) 42,441 20,963 63,404
Gas purchased for resale 152,832 152,832
Unregulated fuel expenses 231,065 231,065
-------- -------- --------
Total Fuel Expenses 452,342 18,452 470,794
Operating Revenues Less Fuel Expenses 403,874 (18,783) 385,091
Other Operating Expenses
Operations and maintenance expenses excluding fuel (Note 3) 137,242 1,208 138,450
Unregulated operating and maintenance expenses excluding fuel 22,332 22,332
Depreciation and amortization (Note 4) 61,096 (8,796) 52,300
Taxes - state, local and other (Note 5) 49,554 (2,702) 46,852
Income taxes (Note 6) 40,301 (2,973) 37,328
-------- -------- --------
Total Other Operating Expenses 310,525 (13,263) 297,262
Operating Income 93,349 (5,520) 87,829
Other (Income) and Deductions
Allowance for other funds used during construction (Note 7) (476) 46 (430)
Income taxes (Note 6) (55) 872 817
RGS/Energy East Merger Expenses 8,312 8,312
Other - net (Note 8) (3,076) (2,213) (5,289)
-------- -------- --------
Total Other (Income) and Deductions 4,705 (1,295) 3,410
Interest Charges
Long term debt 30,258 30,258
Other - net (Note 9) 3,173 (396) 2,777
Allowance for borrowed funds used during construction (Note 7) (763) 73 (690)
-------- -------- --------
Total Interest Charges 32,668 (323) 32,345
Net Income 55,976 (3,902) 52,074
-------- -------- --------
Preferred Stock Dividend Requirements 1,850 1,850
-------- -------- --------
Net Income Applicable to Common Stock $ 54,126 $ (3,902) $ 50,224
-------- -------- --------
5
ROCHESTER GAS AND ELECTRIC CORPORATION
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Revenues
Electric (Note 1) $ 721,737 $ (658) $ 721,079
Gas 322,412 322,412
---------- ------- ----------
Total Operating Revenues 1,044,149 (658) 1,043,491
Operating Expenses
Fuel Expenses
Fuel for electric generation (Note 2) 48,851 (4,702) 44,149
Purchased electricity (Note 2) 80,938 40,719 121,657
Gas purchased for resale 192,038 192,038
---------- ------- ----------
Total Fuel Expenses 321,827 36,017 357,844
Operating Revenues Less Fuel Expenses 722,322 (36,675) 685,647
Other Operating Expenses
Operations and maintenance expenses excluding fuel (Note 3) 313,721 2,415 316,136
Depreciation and amortization (Note 4) 112,110 (17,591) 94,519
Taxes - state, local and other (Note 5) 90,090 (6,084) 84,006
Income taxes (Note 6) 59,451 (5,395) 54,056
---------- ------- ----------
Total Other Operating Expenses 575,372 (26,655) 548,717
Operating Income 146,950 (10,020) 136,930
Other (Income) and Deductions
Allowance for other funds used during construction (Note 7) (825) 45 (780)
Income taxes (Note 6) 221 2,193 2,414
Other - net (Note 8) (8,897) (5,528) (14,425)
---------- ------- ----------
Total Other (Income) and Deductions (9,501) (3,290) (12,791)
Interest Charges
Long term debt 56,673 56,673
Other - net (Note 9) 5,568 (855) 4,713
Allowance for borrowed funds used during construction (Note 7) (1,319) 73 (1,246)
---------- ------- ----------
Total Interest Charges 60,922 (782) 60,140
Net Income 95,529 (5,948) 89,581
---------- ------- ----------
Dividends on Preferred Stock 3,700 3,700
---------- ------- ----------
Net Income Applicable to Common Stock $ 91,829 $ (5,948) $ 85,881
---------- ------- ----------
6
ROCHESTER GAS AND ELECTRIC CORPORATION
UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2001
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------------------------------
Operating Revenues
Electric (Note 1) $365,617 $ (331) $365,286
Gas 190,965 190,965
-------- -------- --------
Total Operating Revenues 556,582 (331) 556,251
Operating Expenses
Fuel Expenses
Fuel for electric generation (Note 2) 26,004 (2,511) 23,493
Purchased electricity (Note 2) 41,069 20,963 62,032
Gas purchased for resale 119,837 119,837
-------- -------- --------
Total Fuel Expenses 186,910 18,452 205,362
Operating Revenues Less Fuel Expenses 369,672 (18,783) 350,889
Other Operating Expenses
Operations and maintenance expenses excluding fuel (Note 3) 137,242 1,208 138,450
Depreciation and amortization (Note 4) 56,969 (8,796) 48,173
Taxes - state, local and other (Note 5) 47,253 (2,702) 44,551
Income taxes (Note 6) 38,491 (2,973) 35,518
-------- -------- --------
Total Other Operating Expenses 279,955 (13,263) 266,692
Operating Income 89,717 (5,520) 84,197
Other (Income) and Deductions
Allowance for other funds used during construction (Note 7) (476) 46 (430)
Income taxes (Note 6) (299) 872 573
RGS/Energy East Merger Expenses 8,079 8,079
Other - net (Note 8) (2,751) (2,213) (4,964)
-------- -------- --------
Total Other (Income) and Deductions 4,553 (1,295) 3,258
Interest Charges
Long term debt 29,644 29,644
Other - net (Note 9) 1,880 (396) 1,484
Allowance for borrowed funds used during construction (Note 7) (763) 73 (690)
-------- -------- --------
Total Interest Charges 30,761 (323) 30,438
Net Income 54,403 (3,902) 50,501
-------- -------- --------
Dividends on Preferred Stock 1,850 1,850
-------- -------- --------
Net Income Applicable to Common Stock $ 52,553 $ (3,902) $ 48,651
-------- -------- --------
7
RGS ENERGY GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2001
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- ----------------------------------------------------------------------------------------------------------------------------------
Assets
Utility Plant
Electric (Note 10) $2,494,765 $(879,763) $1,615,002
Gas 486,088 486,088
Common 176,613 176,613
Nuclear (Note 10) 292,454 (72,799) 219,655
---------- --------- ----------
3,449,920 (952,562) 2,497,358
Less: Accumulated depreciation (Note 10) 1,795,933 (561,354) 1,234,579
Nuclear fuel amortization (Note 10) 263,168 (65,860) 197,308
---------- --------- ----------
1,390,819 (325,348) 1,065,471
Construction work in progress (Note 10) 120,092 (6,158) 113,934
---------- --------- ----------
Net Utility Plant 1,510,911 (331,506) 1,179,405
---------- --------- ----------
Current Assets
Cash and cash equivalents (Note 11) 70,090 39,838 109,928
Accounts receivable, net of allowance for doubtful accounts:
2001 - $30,383 117,567 117,567
Notes receivable (Note 12) - 10,097 10,097
Unbilled revenue receivable 32,403 32,403
Fuels 20,980 20,980
Materials and supplies 7,696 7,696
Prepayments (Note 13) 25,828 (2,746) 23,082
Other current assets 17,604 17,604
---------- --------- ----------
Total Current Assets 292,168 47,189 339,357
---------- --------- ----------
Intangible Assets
Goodwill, net 26,251 26,251
Other intangible assets, net 20,719 20,719
---------- --------- ----------
Total Intangible Assets 46,970 46,970
---------- --------- ----------
Deferred Debits and Other Assets
Nuclear generating plant decommissioning fund (Note 14) 248,540 (33,161) 215,379
Nine Mile Two deferred costs 26,630 26,630
Unamortized debt expense 23,753 23,753
Other deferred debits 3,533 3,533
Regulatory assets (Note 15) 396,042 (54,543) 341,499
Regulatory assets - Nine Mile Two (Note 15) - 308,886 308,886
Notes receivable (Note 12) - 40,387 40,387
Other assets 3,117 3,117
---------- --------- ----------
Total Deferred Debits and Other Assets 701,615 261,569 963,184
---------- --------- ----------
Total Assets $ 2,551,664 $ (22,748) $2,528,916
=========== ========= ==========
8
RGS ENERGY GROUP, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2001
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- ----------------------------------------------------------------------------------------------------------------------------
Capitalization and Liabilities
Capitalization
Long term debt - mortgage bonds $ 579,711 $ 579,711
- promissory notes 209,782 209,782
Preferred stock redeemable at option of RG&E 47,000 47,000
Preferred stock subject to mandatory redemption 25,000 25,000
Common shareholder's equity
Common Stock
Authorized 100,000,000 shares; 38,956,726 shares issued at
June 30, 2001 704,304 704,304
Retained earnings (Note 16) 204,518 124 204,642
---------- -------- ----------
908,822 124 908,946
Less: Treasury stock at cost (4,379,300 shares at June 30, 2001) 117,238 117,238
---------- -------- ----------
Total Common Shareholder's Equity 791,584 124 791,708
---------- -------- ----------
Total Capitalization 1,653,077 124 1,653,201
---------- -------- ----------
Long Term Liabilities
Nuclear waste disposal 99,620 99,620
Uranium enrichment decommissioning 9,885 9,885
Other promissory notes 28,149 28,149
Site remediation 24,605 24,605
---------- -------- ----------
Total Long Term Liabilities 162,259 162,259
---------- -------- ----------
Current Liabilities
Long term debt due within one year 112,094 112,094
Accounts payable (Note 17) 91,772 (40) 91,732
Dividends payable 16,485 16,485
Taxes payable (Note 18) 28,004 7,617 35,621
Other 45,781 45,781
---------- -------- ----------
Total Current Liabilities 294,136 7,577 301,713
---------- -------- ----------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes (Note 19) 267,029 (27,606) 239,423
Pension costs accrued 14,910 14,910
Kamine deferred credit 48,618 48,618
Post employment benefits 56,664 56,664
Other (Note 20) 54,971 (2,843) 52,128
---------- -------- ----------
Total Deferred Credits and Other Liabilities 442,192 (30,449) 411,743
---------- -------- ----------
Total Capitalization and Liabilities $2,551,664 $(22,748) $2,528,916
========== ======== ==========
9
ROCHESTER GAS AND ELECTRIC CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 2001
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- -----------------------------------------------------------------------------------------------------------------------------------
Assets
Utility Plant
Electric (Note 10) $2,494,765 $(879,763) $1,615,002
Gas 486,088 486,088
Common 125,767 125,767
Nuclear (Note 10) 292,454 (72,799) 219,655
---------- --------- ----------
3,399,074 (952,562) 2,446,512
Less: Accumulated depreciation (Note 10) 1,778,952 (561,354) 1,217,598
Nuclear fuel amortization (Note 10) 263,168 (65,860) 197,308
---------- --------- ----------
1,356,954 (325,348) 1,031,606
Construction work in progress (Note 10) 120,092 (6,158) 113,934
---------- --------- ----------
Net Utility Plant 1,477,046 (331,506) 1,145,540
---------- --------- ----------
Current Assets
Cash and cash equivalents (Note 11) 57,915 39,838 97,753
Accounts receivable, net of allowance for doubtful accounts:
2001 - $29,482 88,279 88,279
Notes receivable (Note 12) - 10,097 10,097
Affiliate receivable 45,999 45,999
Unbilled revenue receivable 24,201 24,201
Fuels 12,313 12,313
Materials and supplies 7,696 7,696
Prepayments (Note 13) 24,602 (2,746) 21,856
Other current assets 28,007 28,007
---------- --------- ----------
Total Current Assets 289,012 47,189 336,201
---------- --------- ----------
Deferred Debits and Other Assets
Nuclear generating plant decommissioning fund (Note 14) 248,540 (33,161) 215,379
Nine Mile Two deferred costs 26,630 26,630
Unamortized debt expense 23,753 23,753
Other deferred debits 3,533 3,533
Regulatory assets (Note 15) 396,042 (54,543) 341,499
Regulatory assets - Nine Mile Two (Note 15) - 308,886 308,886
Notes receivable (Note 12) - 40,387 40,387
Other assets 1,988 1,988
---------- --------- ----------
Total Deferred Debits and Other Assets 700,486 261,569 962,055
---------- --------- ----------
Total Assets $2,466,544 $ (22,748) $2,443,796
========== ========= ==========
10
ROCHESTER GAS AND ELECTRIC CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 2001
Pro Forma
(Thousands of Dollars) As Filed Adjustments Pro Forma
- ---------------------------------------------------------------------------------------------------------------------------------
Capitalization and Liabilities
Capitalization
Long term debt - mortgage bonds $ 579,711 $ 579,711
- promissory notes 209,782 209,782
Preferred stock redeemable at option of RG&E 47,000 47,000
Preferred stock subject to mandatory redemption 25,000 25,000
Common shareholder's equity
Authorized 50,000,000 shares; 38,885,813 shares issued at
June 30, 2001 700,318 700,318
Retained earnings (Note 16) 188,156 124 188,280
---------- -------- ----------
888,474 124 888,598
Less: Treasury stock at cost (4,379,300 shares at June 30, 2001) 117,238 117,238
---------- -------- ----------
Total Common Shareholder's Equity 771,236 124 771,360
---------- -------- ----------
Total Capitalization 1,632,729 124 1,632,853
---------- -------- ----------
Long Term Liabilities
Nuclear waste disposal 99,620 99,620
Uranium enrichment decommissioning 9,885 9,885
Site remediation 22,356 22,356
---------- -------- ----------
Total Long Term Liabilities 131,861 131,861
---------- -------- ----------
Current Liabilities
Long term debt due within one year 104,149 104,149
Accounts payable (Note 17) 70,332 (40) 70,292
Affiliate payable 17,830 17,830
Dividends payable to parent 16,485 16,485
Taxes payable (Note 18) 22,852 7,617 30,469
Other 32,020 32,020
---------- -------- ----------
Total Current Liabilities 263,668 7,577 271,245
---------- -------- ----------
Deferred Credits and Other Liabilities
Accumulated deferred income taxes (Note 19) 263,429 (27,606) 235,823
Pension costs accrued 14,910 14,910
Kamine deferred credit 48,618 48,618
Post employment benefits 56,664 56,664
Other (Note 20) 54,665 (2,843) 51,822
---------- -------- ----------
Total Deferred Credits and Other Liabilities 438,286 (30,449) 407,837
---------- -------- ----------
Total Capitalization and Liabilities $2,466,544 $(22,748) $2,443,796
========== ======== ==========
11
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The accompanying pro forma consolidated financial information for RGS and RG&E
for the year ended December 31, 2000, the six months ended June 30, 2001, and at
June 30, 2001, is unaudited. This financial information does not contain the
detail or footnote disclosure concerning accounting policies and other matters
that would be included in full fiscal year financial statements.
NOTE 1 - ELECTRIC OPERATING REVENUES
The $0.7 million and $0.3 million decreases in electric operating revenues for
2000 and the six months ended June 30, 2001, respectively, reflect decreased
voltage support revenues due to the sale of the plant.
NOTE 2 - FUEL COSTS
The $4.7 million and $2.5 million decreases in fuel for electric generation for
2000 and the six months ended June 30, 2001, respectively, reflect the
discontinuance of expenses due to the sale of the plant. The $40.7 million and
$21.0 million increases in purchased electricity for 2000 and the six months
ended June 30, 2001, respectively, reflect the costs to replace the power which
would have been otherwise available from owning the plant. RG&E entered into a
PPA with Constellation Nuclear to purchase energy at negotiated competitive
prices for approximately ten years.
The adjustments assume that under the PPA with Constellation Nuclear, RG&E will
accept installed capacity and energy equal to 12.6 percent of the output from
Nine Mile Two (90 percent of RG&E's 14 percentage ownership of the plant) or
1,002,240 Megawatt-hours ("MWhs") in 2000 at a price of $36.86/MWh and 566,910
MWhs for the six months ended June 30, 2001 at a price of $33.49/MWh. The
adjustments also assume RG&E will purchase the additional 10% (111,360 MWhs) on
the electric wholesale market at an average price of $36.86/MWh.
NOTE 3 - OPERATIONS AND MAINTENANCE EXPENSES EXCLUDING FUEL
The $2.4 million and $1.2 million increases in operations and maintenance
expenses excluding fuel for 2000 and the six months ended June 30, 2001,
respectively, represent the amortization of the regulatory asset, offset by a
reduction of operation and maintenance expenses associated with the sale of the
plant. 100% of these expenses are direct expenses and include items such as the
operating and maintenance costs to run the plants, labor and related
employee-benefit costs and materials and supplies.
NOTE 4 - DEPRECIATION AND AMORTIZATION
The $17.6 million and $8.8 million decreases in depreciation and amortization
for 2000 and the six months ended June 30, 2001, respectively, reflect decreased
depreciation expense and nuclear decommissioning costs related to the sale of
the plant.
12
NOTE 5 - TAXES - STATE, LOCAL AND OTHER
The $6.1 million and $2.7 million decreases in taxes - state, local and other
for 2000 and the six months ended June 30, 2001, respectively, reflect decreased
taxes due to the sale of the plant.
NOTE 6 - INCOME TAXES
The $3.2 million and $2.1 million decreases in income taxes for 2000 and the six
months ended June 30, 2001, respectively, reflect the income tax effect of lower
net taxable income because of the items described above, calculated at the
federal statutory income tax rate of 35 percent.
NOTE 7 - ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
The $0.1 million decrease in allowance for funds used during construction for
2000 and the six months ended June 30, 2001, respectively, reflect the
elimination of capitalized interest relating to nuclear generation construction
projects due to the sale of the plant.
NOTE 8 - OTHER (INCOME) AND DEDUCTIONS - OTHER NET
The $5.5 million and $2.2 million increases in other (income) and deductions -
other net for 2000 and the six months ended June 30, 2001, respectively, reflect
interest income earned on the promissory note received from the sale of the
plant (using an 11.0 percent rate of return), offset by the elimination of
interest income resulting from the sale of the plant.
NOTE 9 - INTEREST CHARGES - OTHER NET
The $0.9 million and $0.4 million decreases in interest charges - other net for
2000 and the six months ended June 30, 2001, respectively, reflect the
elimination of interest expense related to the carrying costs on the inventory
for Nine Mile Two.
NOTE 10 - ELECTRIC PLANT AND NUCLEAR FUEL SOLD
The decrease of $879.8 million in electric plant and $6.2 million in
construction work in progress represents the original cost of utility property,
plant, and equipment sold to Constellation Nuclear. In addition, the entire
balance of nuclear fuel was sold to Constellation Nuclear in the amount of $72.8
million. Accumulated depreciation and amortization was reduced by $627.2 million
as a result of the sale of the plant.
NOTE 11 - CASH AND CASH EQUIVALENTS
The increase of $39.8 million in cash and cash equivalents represents the cash
proceeds, which includes a payment for the overfunding of the nuclear plant
decommissioning fund of $2.4 million, received from Constellation Nuclear for
the plant in the amount of $50.5 million, the elimination of the working fund
balance of $0.7 million, partially offset by the estimated unpaid
13
transaction costs associated with the sale in the amount of $4.5 million, and
the purchase of $6.9 million of inventory.
NOTE 12 - NOTES RECEIVABLE
The increase of $10.1 million in notes receivable represents the current portion
of the promissory note due from Constellation Nuclear. The increase of $40.4
million in notes receivable represents the long term portion of the promissory
note from Constellation Nuclear.
NOTE 13 - PREPAYMENTS
The decrease of $2.7 million in prepayments represents the elimination of
prepaid insurance, prepaid taxes and the prepayment to New York State for low
level radioactive waste as a result of the sale of the plant.
NOTE 14 - NUCLEAR GENERATING PLANT DECOMMISSIONING FUND
The decrease of $33.2 million in the nuclear generating plant decommissioning
fund represents the transfer of the Nine Mile Two portion of the fund to
Constellation Nuclear.
NOTE 15 - REGULATORY ASSETS
The net increase of $254.3 million in regulatory assets represents the deferral
for future recovery of the net loss resulting from the sale of the plant and the
reclassification of Nine Mile Two assets and liabilities as a results of the
sale of the plant in accordance with the October 26, 2001 PSC Order approving
such sale.
NOTE 16 - RETAINED EARNINGS
The increase of $0.1 million in Retained Earnings reflects the recognition of
ITCs of $13.1 million, offset by the after tax reduction of the regulatory asset
of $13 million in accordance with the October 26, 2001 PSC Order approving such
sale. Unamortized ITCs associated with the plant are not transferable to the new
owners, but flow through to income as a result of the sale. Because these items
constitute a one-time event resulting from the sale, retained earnings on the
pro forma balance sheets have been credited but these amounts have not been
reflected on the pro forma income statements.
NOTE 17 - CURRENT LIABILITIES - ACCOUNTS PAYABLE
The decrease of $40.0 thousand in current liabilities - accounts payable
represents the elimination of an accounts payable liability due to the sale of
the plant.
14
NOTE 18 - TAXES PAYABLE
The increase of $7.6 million in income taxes payable reflects the provision for
deferred taxes on the tax gain on the sale of the plant with a corresponding
decrease in accumulated deferred income taxes.
NOTE 19 - ACCUMULATED DEFERRED INCOME TAXES
The decrease of $27.6 million in accumulated deferred income taxes represents
the elimination of ITCs on the plant, the deferred taxes associated with the
recognition of tax gain and the tax benefit associated with the reduction of the
regulatory asset.
NOTE 20 - OTHER DEFERRED CREDITS
The decrease of $2.8 million in other deferred credits represents the
elimination of the Nine Mile Two outage accrual and New York State low level
radioactive waste liabilities due to the sale of the plant.
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS
This Form 8-K may contain forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. Forward-looking statements
should be read with the cautionary statements and important factors included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000,
before Item 1, "Business." Forward-looking statements are all statements other
than statements of historical fact, including, without limitation, those that
are identified by the use of the words "expects," "believes," "anticipates," and
similar expressions.
15
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned thereunto duly authorized.
RGS ENERGY GROUP, INC.
----------------------
(Registrant)
Date: November 8, 2001 By /s/ Mark Keogh
--------------------------------
Mark Keogh
Treasurer
Date: November 8, 2001 By /s/ William J. Reddy
--------------------------------
William J. Reddy
Controller
ROCHESTER GAS AND ELECTRIC CORPORATION
--------------------------------------
(Registrant)
Date: November 8, 2001 By /s/ Mark Keogh
--------------------------------
Mark Keogh
Vice President and Treasurer
Date: November 8, 2001 By /s/ William J. Reddy
--------------------------------
William J. Reddy
Vice President and Controller
16