SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR SECTION
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended SEPTEMBER 30, 2002 Commission File No. 1-10922
------------------ -------
BANGOR HYDRO-ELECTRIC COMPANY
-----------------------------
(Exact Name of Registrant as specified in its Charter)
MAINE 01-0024370
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
33 STATE STREET, BANGOR, MAINE 04401
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code 207-945-5621
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NONE
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
-------------------
7% Preferred Stock, $100 Par Value
4 1/4% Preferred Stock, $100 Par Value
4% Preferred Stock Series A, $100 Par Value
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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FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2002
PAGE
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Cover Page 1
Index 2
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
Consolidated Statements of Income 3
Consolidated Balance Sheets - September 30, 2002
And December 31, 2001 4
Consolidated Statements of Capitalization 6
Consolidated Statements of Cash Flows 7
Consolidated Statements of Common Stock Investment 8
Notes to the Consolidated Financial Statements 9
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 16
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 34
Item 4. Controls and Procedures 35
PART II - OTHER INFORMATION
- ---------------------------
Item 5 - Other Information 36
Item 6 - Exhibits and Reports on Form 8-K 36
Signature Page 37
Certifications 38
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
000's Omitted Except Share and Per Share Amounts
(Unaudited)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2002 2001 2002 2001
----------- ------------ ----------- ------------
Operating Revenues:
Electric operating revenue $ 28,891 $ 28,053 $ 83,874 $ 83,946
Off-system sales 12,107 4,989 31,435 14,718
Standard offer service (117) 22,528 12,502 67,113
----------- ------------ ----------- ------------
$ 40,881 $ 55,570 $ 127,811 $ 165,777
----------- ------------ ----------- ------------
Operating Expenses:
Purchased power and fuel for generation $ 16,907 $ 9,299 $ 45,482 $ 25,978
Standard offer service purchased power (209) 22,220 11,914 65,894
Other operation and maintenance 7,194 8,103 25,445 27,297
Depreciation and amortization 2,645 2,404 7,955 7,827
Regulatory amortizations 3,578 4,339 10,410 13,381
Taxes -
Local property and other 1,193 1,173 3,730 3,773
State and federal income 2,565 1,933 5,016 4,732
----------- ------------ ----------- ------------
$ 33,873 $ 49,471 $ 109,952 $ 148,882
----------- ------------ ----------- ------------
Operating Income $ 7,008 $ 6,099 $ 17,859 $ 16,895
Other Income:
Allowance for equity funds used
during construction $ 126 $ 146 $ 371 $ 465
Other, net of applicable income taxes 239 216 818 814
----------- ------------ ----------- ------------
Income Before Interest Expense $ 7,373 $ 6,461 $ 19,048 $ 18,174
----------- ------------ ----------- ------------
Interest Expense:
Long-term debt $ 2,759 $ 3,276 $ 9,481 $ 10,429
Other 429 252 822 723
Allowance for borrowed funds used
during construction (116) (129) (349) (423)
----------- ------------ ----------- ------------
$ 3,072 $ 3,399 $ 9,954 $ 10,729
----------- ------------ ----------- ------------
Net Income $ 4,301 $ 3,062 $ 9,094 $ 7,445
Dividends On Preferred Stock 66 66 199 199
----------- ------------ ----------- ------------
Earnings Applicable To Common Stock $ 4,235 $ 2,996 $ 8,895 $ 7,246
=========== ============ =========== ============
Weighted Average Number of Shares Outstanding 7,363 7,363 7,363 7,363
=========== ============ =========== ============
Earnings Per Common Share:
Basic $ .58 $ .41 $ 1.21 $ .98
Diluted .58 .37 1.21 .89
=========== ============ =========== ============
Dividends Declared Per Common Share $ .54 $ .20 $ 1.02 $ .60
=========== ============ =========== ============
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
Sept. 30, Dec. 31,
Assets 2002 2001
----------- -----------
Investment In Utility Plant:
Electric plant in service, at original cost $ 330,960 $ 328,560
Less - Accumulated depreciation and amortization 96,920 93,985
----------- -----------
$ 234,040 $ 234,575
Construction work in progress 7,612 7,308
----------- -----------
$ 241,652 $ 241,883
Investments in corporate joint ventures:
Maine Yankee Atomic Power Company $ 4,284 $ 4,422
Maine Electric Power Company, Inc. 963 853
----------- -----------
$ 246,899 $ 247,158
----------- -----------
Other Investments, at cost $ 3,332 $ 3,498
----------- -----------
Funds held by trustee, at cost $ 21,537 $ 22,695
----------- -----------
Current Assets:
Cash and cash equivalents $ 956 $ 885
Accounts receivable, net of reserve
of $1,183 for 2002 and $761 for 2001 19,395 19,269
Unbilled revenue receivable 6,459 15,380
Inventories, at average cost:
Material and supplies 2,504 2,532
Fuel oil 43 53
Prepaid expenses (23) 671
----------- -----------
Total current assets $ 29,334 $ 38,790
----------- -----------
Regulatory Assets and Deferred Charges:
Goodwill-EMERA Acquisition $ 82,537 $ 82,537
Investment in Seabrook nuclear project 22,297 23,572
Costs to terminate/restructure purchased
power contracts 77,630 92,057
Maine Yankee decommissioning costs 29,052 37,307
Above-market purchased power contract obligations 66,696 73,954
Other regulatory assets 58,066 52,657
Other deferred charges 4,943 4,020
----------- -----------
Total regulatory assets and deferred charges $ 341,221 $ 366,104
----------- -----------
Total Assets $ 642,323 $ 678,245
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
000's Omitted
(Unaudited)
Sept. 30, Dec. 31,
2002 2001
Stockholders' Investment and Liabilities ----------- -----------
Capitalization:
Common stock investment $ 206,999 $ 205,557
Preferred stock 4,734 4,734
Long-term debt, net of current portion 98,592 131,968
----------- -----------
Total capitalization $ 310,325 $ 342,259
----------- -----------
Current Liabilities:
Notes payable - banks $ 38,500 $ 8,000
----------- -----------
Other current liabilities -
Current portion of long-term debt $ 33,982 $ 43,246
Accounts payable 20,183 22,492
Dividends payable 66 66
Accrued interest 3,070 2,663
Customers' deposits 565 573
Current income taxes (refundable) payable (883) 1,917
----------- -----------
Total other current liabilities $ 56,983 $ 70,957
----------- -----------
Total current liabilities $ 95,483 $ 78,957
----------- -----------
Regulatory and Other Long-term Liabilities:
Deferred income taxes - Seabrook $ 11,559 $ 12,224
Other accumulated deferred income taxes 47,026 47,405
Maine Yankee decommissioning liability 29,052 37,307
Deferred gain on asset sale 10,680 14,574
Above-market purchased power contract obligations 66,696 73,954
Other regulatory liabilities 14,737 18,962
Unamortized investment tax credits 1,217 1,312
Accrued pension and postretirement benefit costs 43,694 39,655
Other long-term liabilities 11,854 11,636
----------- -----------
Total regulatory and other long-term liabilities $ 236,515 $ 257,029
----------- -----------
Total Stockholders' Investment and Liabilities $ 642,323 $ 678,245
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
000's Omitted
(Unaudited)
Sept. 30, Dec. 31,
2002 2001
---------- ----------
Common Stock Investment
Common stock, no par value, stated value
$5 per share $ 36,817 $ 36,817
-Authorized--10,000,000 shares
-Outstanding--7,363,424 shares
Amounts paid in excess of par value 165,352 165,352
Accumulated other comprehensive loss - (47)
Retained earnings 4,830 3,435
----------- -----------
Total common stock investment $ 206,999 $ 205,557
----------- -----------
Preferred Stock
Non-participating, cumulative, par value
$100 per share,
authorized 600,000 shares, not redeemable or
redeemable solely at the option of the issuer-
7%, Noncallable, 25,000 shares
authorized and outstanding $ 2,500 $ 2,500
4.25%, Callable at $100, 4,840 shares
authorized and outstanding 484 484
4%, Series A, Callable at $110, 17,500 shares
authorized and outstanding 1,750 1,750
----------- -----------
$ 4,734 $ 4,734
----------- -----------
Long-Term Debt
First Mortgage Bonds-
10.25% Series due 2020 $ 30,000 $ 30,000
8.98% Series due 2022 20,000 20,000
7.38% Series due 2002 - 20,000
7.30% Series due 2003 15,000 15,000
----------- -----------
$ 65,000 $ 85,000
----------- -----------
Other Long-Term Debt-
Finance Authority of Maine - Taxable
Electric Rate
Stabilization Revenue Notes,
7.03% Series 1995A, due 2005 $ 55,400 $ 71,500
Medium Term Notes, Variable interest rate-
LIBO rate plus 1.125%, due 2002 - 5,460
Municipal Review Committee Note, 5%, due 2008 12,158 13,235
Other Miscellaneous Notes Payable, 3.90%,
due 2003 16 19
----------- -----------
$ 67,574 $ 90,214
Less: Current portion of long-term debt 33,982 43,246
----------- -----------
$ 33,592 $ 46,968
----------- -----------
Total Long-Term Debt $ 98,592 $ 131,968
----------- -----------
Total Capitalization $ 310,325 $ 342,259
=========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
000's Omitted
(Unaudited)
Nine Months Ended
Sept. 30, Sept. 30,
2002 2001
------------------------
Cash Flows From Operating Activities:
Net income $ 9,094 $ 7,445
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 7,955 7,827
Amortization of Seabrook nuclear project 1,274 1,274
Amortization of contract buyouts and
restructuring 15,320 16,918
Amortization of deferred asset sale gain (3,890) (5,971)
Other amortizations 182 1,194
Allowance for equity funds used during
construction (371) (465)
Deferred income tax provision and amortization of
investment tax credits (339) (5,676)
Changes in assets and liabilities:
Costs to restructure purchased power contract (750) (750)
Deferred standard-offer service costs (2,444) 4,580
Deferred special rate contract revenues (249) (2,276)
Employee transition costs (3,406) -
Exercise of PERC warrants-cash paid in lieu
of issuing shares - (9,227)
Accounts receivable, net and unbilled revenue 8,794 1,299
Accounts payable (3,987) (2,773)
Accrued interest 406 837
Current income taxes (2,800) 3,356
Accrued pension and postretirement
benefit costs 2,817 2,183
Other current assets and liabilities, net 725 581
Other, net (2,254) (2,337)
------------------------
Net Increase in Cash From Operating Activities: $ 26,077 $ 18,019
------------------------
Cash Flows From Investing Activities:
Construction expenditures $ (7,318)$ (10,274)
Allowance for borrowed funds used during
construction (349) (423)
------------------------
Net Decrease in Cash From Investing Activities $ (7,667)$ (10,697)
------------------------
Cash Flows From Financing Activities:
Dividends on preferred stock $ (199)$ (199)
Dividends on common stock (7,500) (4,418)
Payments on long-term debt (42,639) (19,720)
Capital reserve funs used in repayment on
long-term debt 1,500 -
Short-term debt, net 30,500 6,000
------------------------
Net Decrease in Cash From Financing Activities $ (18,338)$ (18,337)
------------------------
Net Increase (Decrease) in Cash and Cash Equivalents $ 72 $ (11,015)
Cash and Cash Equivalents at Beginning of Period 884 12,463
------------------------
Cash and Cash Equivalents at End of Period $ 956 $ 1,448
========================
Cash Paid During the Period for:
Interest (Net of Amount Capitalized) $ 8,903 $ 9,058
Income Taxes 9,349 7,772
========================
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF COMMON STOCK INVESTMENT
000's Omitted
(Unaudited)
Accum.
Amounts Other Total
Paid in Compre- Common
Common Excess of Retained hensive Stock
Stock Par Value Earnings Loss Investment
----------- ----------------------------------- -----------
Balance December 31, 2000 $ 36,817 $ 58,643 $ 41,960 $ - $ 137,420
Net income - - 7,445 - 7,445
Other comprehensive loss
net of taxes:
Unrealized loss on interest
rate swap - - - (69) (69)
-----------
Total comprehensive income 7,376
-----------
Cash dividends declared on-
Preferred stock - - (199) - (199)
Common stock - - (4,418) - (4,418)
Exercise of warrants-cash paid
in lieu of issuing shares - (4,025) - - (4,025)
----------- ----------- ----------- ----------- -----------
Balance September 30, 2001 $ 36,817 $ 54,618 $ 44,788 $ (69) $ 136,154
=========== =========== =========== =========== ===========
Balance December 31, 2001 $ 36,817 $ 165,352 $ 3,435 $ (47)$ 205,557
Net income - - 9,094 - 9,094
Other comprehensive loss
net of taxes:
Unrealized gain on interest
rate swap - - - 47 47
-----------
Total comprehensive income 9,141
-----------
Cash dividends declared on-
Preferred stock - - (199) - (199)
Common stock - - (7,500) - (7,500)
----------- ----------- ----------- ----------- -----------
Balance September 30, 2002 $ 36,817 $ 165,352 $ 4,830 $ - $ 206,999
=========== =========== =========== =========== ===========
See notes to the consolidated financial statements.
BANGOR HYDRO-ELECTRIC COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(Unaudited)
(1) BASIS OF PRESENTATION AND ACCOUNTING POLICIES:
Certain information and footnote disclosures, normally included in
financial statements prepared in accordance with generally accepted
accounting principles, have been condensed or omitted in this Form 10-Q
pursuant to the Rules and Regulations of the Securities and Exchange
Commission. However, in the opinion of Bangor Hydro-Electric Company
(the Company), the disclosures contained in this Form 10-Q are adequate
to make the information presented not misleading. The year end
condensed balance sheet data was derived from audited consolidated
financial statements but does not include all disclosures required by
generally accepted accounting principles. These statements should be
read in conjunction with the consolidated financial statements,
footnotes and all other information included in the 2001 Form 10-K.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements reflect all adjustments, including
normal recurring accruals, necessary to present fairly the financial
position as of September 30, 2002 and the results of operations and
cash flows for the periods ended September 30, 2002 and 2001.
The Company's significant accounting policies are described in the
Notes to the Consolidated Financial Statements included in its 2001
Form 10-K filed with the Securities and Exchange Commission. For
interim reporting purposes, the Company follows these same basic
accounting policies but considers each interim period as an integral
part of an annual period. Accordingly, certain expenses are allocated
to interim periods based upon estimates of such expenses for the year.
(2) INCOME TAXES:
The following table reconciles a provision calculated by
multiplying income before federal income taxes by the statutory federal
income tax rate to the federal income tax provision:
Nine Months Ended Sept. 30,
2002 2001
Amount % Amount %
------ - ------ -
(Dollars in Thousands)
Federal income tax provision
at statutory rate $5,146 35.0 $4,541 35.0
(Less)Plus permanent reductions
in tax expense resulting
from statutory exclusions
from taxable income (213) (1.4) 140 1.1
------ ---- ------ ----
Federal income tax provision before
effect of temporary differences
and investment tax credits $4,933 33.6 $4,681 36.1
Less temporary differences that
are flowed through for rate-
making and accounting purposes (337) (2.4) (378) (2.9)
Less utilization and amortization
of investment tax credits (95) (.6) (105) (.8)
------ ---- ------ ----
Federal income tax provision $4,501 30.6 $4,198 32.4
====== ==== ====== ====
(3) INVESTMENT IN JOINTLY OWNED FACILITIES:
Condensed financial information for Maine Yankee Atomic Power
Company (Maine Yankee)and Maine Electric Power Company, Inc. (MEPCO) is
as follows:
MAINE YANKEE MEPCO
------------ -----
(Dollars in Thousands - Unaudited)
Operations for Nine Months Ended
--------------------------------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2002 2001 2002 2001
OPERATIONS: -------- -------- -------- --------
As reported by investee-
Operating revenues $ 44,019 $ 47,419 $ 3,241 $ 3,606
======== ======== ======== ========
Earnings applicable to
common stock $ 2,898 $ 3,336 $ 806 $ 1,085
======== ======== ======== ========
Company's reported equity-
Equity in net income $ 203 $ 234 $ 114 $ 154
Add-Effect of
adjusting Company's
estimate to actual 10 7 6 45
-------- -------- -------- --------
Amounts reported by Company $ 213 $ 241 $ 120 $ 199
======== ======== ======== ========
MAINE YANKEE MEPCO
------------ -----
(Dollars in Thousands - Unaudited)
Financial Position at
----------------------------------------
Sep. 30, Dec. 31, Sep. 30, Dec. 31,
2002 2001 2002 2001
FINANCIAL POSITION: --------- --------- --------- --------
As reported by investee-
Total assets $ 714,164 $ 802,118 $ 7,068 $ 6,870
Less-
Long-term debt 24,000 31,200 - -
Other liabilities and
deferred credits 628,990 707,643 234 770
---------- ---------- -------- --------
Net assets $ 61,174 $ 63,275 $ 6,834 $ 6,100
========== ========== ======== ========
Company's reported equity-
Equity in net assets $ 4,282 $ 4,429 $ 970 $ 866
Add (deduct) effect of
adjusting Company's
estimate to actual 2 (7) (7) (12)
---------- ---------- -------- --------
Amounts reported by Co. $ 4,284 $ 4,422 $ 963 $ 854
========== ========== ======== ========
(4) EARNINGS PER SHARE:
The following table reconciles basic and diluted earnings per
common share assuming all outstanding stock warrants were converted to
common shares, for the 2001 periods only.
(Amounts in 000's, except per share data)
For the Three For the Nine
Months Ended Months Ended
-------------------- ------------------
Sep. 30, Sep. 30, Sep. 30, Sep. 30,
2002 2001 2002 2001
-------- -------- -------- ---------
Earnings applicable
to common stock $ 4,235 $ 2,996 $ 8,895 $ 7,246
-------- -------- -------- --------
Average common
shares outstanding 7,363 7,363 7,363 7,363
Plus: incremental
shares from assumed
conversion - 704 - 792
------- -------- -------- -------
Average common shares
outstanding plus
assumed warrants
converted 7,363 8,067 7,363 8,155
------- -------- -------- -------
Basic earnings
per common share $ .58 $ .41 $ 1.21 $ .98
======= ======= ======= =======
Diluted earnings
per common share $ .58 $ .37 $ 1.21 $ .89
======= ======= ======= =======
(5) ALTERNATIVE RATE PLAN AND REORGANIZATION:
As reported in the 2001 Form 10-K, on February 14, 2002, the
Company presented to the Maine Public Utilities Commission (MPUC) a
proposed resolution of the ongoing Alternative Rate Plan (ARP)
proceeding that called for a multi-year freeze in the distribution
portion of the Company's rates. The ARP proceeding, as well as
proposed proceedings to implement a general increase in the Company's
distribution rates and to initiate a management investigation of the
Company, were suspended to provide the Company and interested parties
additional time to negotiate a potential settlement of these
interrelated proceedings. On April 25, 2002, the Company and other
parties to the proceeding executed a stipulation to present to the MPUC
a single comprehensive ARP applying to the Company's MPUC jurisdictional
distribution revenue requirement and rates. On June 6, 2002, the MPUC
approved the ARP and also dismissed the pending management investigation
of the Company.
The terms of the ARP include a rate plan to be in effect through
December 31, 2007, with the Company's core distribution rates being
adjusted downward on July 1 of each year from 2003 to 2007, at annual
rates ranging from 2% to 2 3/4%. The Company is also allowed rate
adjustments associated with certain specified categories of costs. The
ARP also includes a mechanism whereby distribution returns on common
equity outside of a certain range will be shared evenly between the
Company and ratepayers. The Company is also required to meet certain
customer service quality standards during the term of the ARP, and rate
reduction penalties will result from not meeting the various performance
measures as set forth in the stipulation. Finally, the ARP provides the
Company with an accounting order allowing for the deferral of employee
transition costs during 2002 and 2003 in connection with reductions in
operating costs, which are discussed below. These deferred costs are
being amortized over a ten year period, starting in June 2002.
Successful implementation of the ARP necessitated a significant
decrease in the Company's operating costs. The restructuring, which
encompasses all aspects of the Company, is expected to reduce operating
costs by approximately 20%. The Company will also begin to transfer a
portion of its fixed costs to variable costs, and improve processes to
enhance long-term performance. As part of the restructuring, employment
levels have been adjusted downward in the second and third quarters of
2002 by in excess of 100 employees through early retirement and
severance arrangements. The total employee transition costs incurred in
were approximately $8.1 million and recorded as a component of Other
Regulatory Assets on the consolidated balance sheets.
(6) NEW ACCOUNTING PRONOUNCEMENT:
In July 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill and Other
Intangible Assets", effective for years beginning after December 15,
2001. Statement 142 addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes APB Opinion
No. 17, "Intangible Assets". Goodwill will no longer be amortized, but
it will be reviewed at least annually for impairment. Statement 142
specifies that at the time of adoption an impairment review should be
performed. If an impairment of the existing goodwill is determined,
any charge would be recorded as a cumulative effect of a
change in accounting principle. Subsequent impairment charges would
be presented within operating results. In 2001, the Company adopted the
non-amortization provision for goodwill associated with its acquisition
by Emera, Inc (Emera). The Company adopted the remaining provisions of
Statement 142 effective January 1, 2002. As a result of its initial
goodwill impairment test, the Company has determined that no goodwill
impairment exists.
There is no pro forma effect of Statement 142, assuming the Company
had adopted this standard as of January 1, 2001, since the goodwill
associated with the Emera acquisition has not been amortized.
(7) RECLASSIFICATIONS:
Certain 2001 amounts have been reclassified to conform with the
presentation used in Form 10-Q for the quarter ended September 30, 2002.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Management's Discussion and Analysis of the Results of Operations and
Financial Condition contained in Bangor Hydro-Electric Company's (the
Company) Annual Report on Form 10-K for the year ended December 31, 2001
(2001 Form 10-K) should be read in conjunction with the comments below.
EARNINGS
For the quarters ended September 30, 2002 and 2001 basic earnings per
common share were $.58 and $.41, respectively. The largest single item
positively impacting the increased earnings in the third quarter of 2002 was
the establishment of a reserve in the third quarter of 2001 ($.13 reduction
in earnings per common share in 2001) in connection with potential loss
exposure associated with regulatory proceedings in which the Company was a
party in 2001. Also positively impacting earnings in the third quarter of
2002 was a reduction in labor costs as a result of the corporate
restructuring that took place in the second quarter of 2002 ($.11 increase in
earnings per common share in 2002). These increases in earnings in the third
quarter of 2002 were offset to some extent by an increase in bad debt expense
as compared to the third quarter of 2001 ($.03 decrease in earnings per
common share in 2002). Additionally, in the third quarter of 2001, the
Company received an accounting order from the Federal Energy Regulatory
Commission allowing the Company to defer previously incurred expenses
associated with the Company's involvement in the development of a regional
transmission organization (RTO) in New England. This resulted in the Company
recording deferred RTO costs previously charged to operating expense in 2001,
prior to the third quarter, resulting in a $.03 per common share increase in
earnings. For a more complete discussion of the RTO see the Form 2001 10-K.
IMPORTANT CURRENT ACTIVITIES
CURRENT REGULATORY PROCEEDINGS AND REORGANIZATION - As reported in the 2001
Form 10-K, on February 14, 2002, the Company presented to the Maine Public
Utilities Commission (MPUC) a proposed resolution of the ongoing ARP
proceeding that called for a multi-year freeze in the distribution portion of
the Company's rates. The ARP proceeding, as well as proposed proceedings to
implement a general increase in the Company's distribution rates and to
initiate a management investigation of the Company, were suspended to provide
the Company and interested parties additional time to negotiate a potential
settlement of these interrelated proceedings. On April 25, 2002, the Company
and other parties to the proceeding executed a stipulation to present to the
MPUC a single comprehensive ARP applying to the Company's MPUC juris-
dictional distribution revenue requirement and rates. On June 6, 2002, the
MPUC approved the ARP and also dismissed the pending management investigation
of the Company.
The terms of the ARP include a rate plan to be in effect through
December 31, 2007, with the Company's core distribution rates being adjusted
downward on July 1 of each year from 2003 to 2007, at annual rates ranging
from 2% to 2 3/4%. The Company is also allowed rate adjustments associated
with certain specified categories of costs. The ARP also includes a mechanism
whereby distribution returns on common equity outside of a certain range will
be shared evenly between the Company and ratepayers. The Company is also
required to meet certain customer service quality standards during the term
of the ARP, and rate reduction penalties will result from not meeting the
various performance measures as set forth in the stipulation. Finally, the
ARP provides the Company with an accounting order allowing for the deferral
of employee transition costs during 2002 and 2003 in connection with
reductions in operating costs, which are discussed below. These deferred
costs are being amortized over a ten year period, starting in June 2002.
Successful implementation of the ARP necessitated a significant
decrease in the Company's operating costs. The restructuring, which
encompasses all aspects of the Company, is expected to reduce operating costs
by approximately 20%. The Company will also begin to transfer a portion of
its fixed costs to variable costs, and improve processes to enhance long-term
performance. As part of the restructuring, employment levels were adjusted
downward in the second and third quarters of 2002 by in excess of 100
employees through early retirement and severance arrangements. The total
employee transition costs incurred in the second and third quarters of 2002
were approximately $8.1 million and are recorded as a component of Other
Regulatory Assets on the consolidated balance sheets.
In February 2002, the MPUC issued an Order in connection with changes
in the Company's stranded cost rates. As a result of the Order, and to
recover the stranded costs created as a result of the restructuring of the
electric utility industry in the State of Maine, the Company's stranded cost
rates were increased effective March 1, 2002. The stranded cost rate
increase resulted in the Company's total electric rates increasing by
approximately 6.5%. The stranded cost rates are set for a period not to
exceed three years, although the Company has the right to seek adjustments to
these rates if certain economic situations occur.
Also effective March 1, 2002, the Company is no longer responsible
for being the standard-offer service provider. The Company, though, still
has a standard-offer related power supply commitment with a third party
through February 2004 amounting to approximately $57 million. The power
delivered under this contract is being resold to one of the new standard-
offer service providers, with estimated revenues to be realized of
approximately $40 million. The difference between the cost of the power and
the resale revenues are being recovered in the Company's stranded cost rates
starting March 1, 2002. As a result of the Company no longer being the
standard-offer provider effective in March 2002, and the previously discussed
power contract obligation, there is an impact on the comparability of
revenues and expenses for the 2002 periods presented in this filing in
relation to 2001.
REVENUES
With the implementation of competition in the electric utility
industry starting March 1, 2000, and excluding the standard-offer service
through February 2002, the Company no longer sells electricity to its
customers. The Company's transmission and distribution (T&D) and stranded
cost charges to customers, though, continue to be based on customers'
electricity usage measured in kilowatt-hours (kWh). Consequently, discussion
related to electric operating revenues will continue to have a kWh sales, or
hereafter referred to as energy sales, component.
Electric operating revenue increased by $838,000 in the third quarter
of 2002 as compared to the third quarter of 2001. The increase was
principally the result of the previously discussed 6.54% rate increase
associated with stranded cost recovery. Also impacting the increased
revenues in the third quarter of 2002 was a 1.6.% increase in energy sales,
which excludes certain large special contract customers.
Energy sales volume in gigawatt hours is as follows for each of the
quarters ending September 30, 2002 and 2001:
2002 2001 Change
Residential 139.1 130.5 8.6
Commercial 157.6 160.6 -3.0
Industrial 52.8 53.1 -.3
Other 3.2 3.1 .1
------ ----- -----
Subtotal 352.7 347.3 5.4
Large Special Contracts 59.3 68.9 -9.6
------ ----- -----
Total Energy Sales 412.0 416.2 -4.2
------ ----- -----
Off-system sales, which are sales related to power pool and inter-
connection agreements and resales of purchased power, were approximately $7.1
million greater in the third quarter of 2002 in relation to the comparable
2001 quarter. The increase is due principally to the previously discussed
resale of power associated with the former standard-offer power supply
contract.
The $22.6 million decrease in standard-offer service revenues in the
third quarter of 2002 is due to the Company no longer being the standard-
offer provider effective March 1, 2002. The standard offer revenues recorded
in the third quarter of 2002 are a result of residual standard offer related
adjustments.
EXPENSES
Fuel for generation and purchased power expense, excluding the cost
of standard-offer service purchased power, increased $7.6 million in the
third quarter of 2002 as compared to 2001. The largest item affecting the
increased expense was approximately $9.1 million of costs in the third
quarter of 2002 associated with the previously discussed former standard-
offer power contract obligation. This increase was offset to some extent by
a $907,000 reduction in Maine Yankee costs in the third quarter of 2002, due
mostly to the previously discussed establishment of a reserve in connection
with potential loss exposure associated with regulatory proceedings in which
the Company was a party in 2001. Also, effective July 1, 2001, the Company
entered into a special rate contract with a large industrial customer to
provide fully bundled electric service (both T&D and energy) to this
customer. Formerly, the Company was only providing T&D service to this
customer. The Company entered into a power purchase contract to procure the
power necessary to serve this customer under this contact. In the third
quarter of 2001, the Company incurred $1.1 million of purchased power expense
associated with serving the customer.
Standard-offer purchased power expense decreased by approximately
$22.4 million in the third quarter of 2002 relative to the third quarter of
2001. The decrease was due to the Company no longer being the standard offer
service provider on March 1, 2002. As discussed above, there were some small
residual standard offer related purchased power adjustments in the third
quarter of 2002.
Other operation and maintenance (O&M) expense decreased by
approximately $909,000 in the third quarter of 2002 in comparison to the
third quarter of 2001. Principally as a result of the workforce reductions in
the second quarter of 2002, O&M payroll expense was approximately $1.4
million lower in the third quarter of 2002 relative to the 2001 quarter.
This decrease was offset to some extent by the previously discussed increase
in bad debt expense in the third quarter of 2002 by approximately $329,000.
Depreciation and amortization expense increased by approximately
$241,000 in the third quarter of 2002 relative to the third quarter of 2001
principally as a result of electric plant in service additions.
Regulatory amortizations represent current amortizations allowed in
the Company's distribution and stranded cost rates as allowed by the MPUC in
prior rate orders. These include the amortization of purchased power
contract buyouts/restructurings, Seabrook investment, deferred asset sale
gain, and other regulatory amortizations. Effective March 1, 2002, in
connection with the implementation of new stranded cost electric rates, the
Company began amortizing stranded cost related regulatory assets and
liabilities that had been previously deferred on the Company's balance
sheets. Also, certain existing stranded cost related amortizations were
modified effective March 1, 2002 in connection with the stranded cost rate
change. The following summarizes the components of the regulatory
amortizations for the third quarter of 2002 as compared to the third quarter
of 2001 (in 000's):
2002 2001
---- ----
Contract buyouts and restructurings $4,954 $5,639
Seabrook investment 425 425
Deferred asset sale gain (791) (2,112)
Other stranded cost related
regulatory assets and liabilities (1,496) 97
Distribution related regulatory
assets and liabilities 290 290
Employee transition costs 196 -
------ ------
Total Regulatory Amortizations $3,578 $4,339
====== ======
The increase in total federal and state income taxes was principally
a function of greater earnings in the third quarter of 2002 as compared to
the 2001 quarter. See Footnote 2 to the Consolidated Financial Statements
for a reconciliation of the Company's effective federal income tax rate.
INTEREST EXPENSE
Long-term debt interest expense decreased $517,000 in the third
quarter of 2002 relative to 2001 due primarily to a $16.1 million principal
payment on the Company's Finance Authority of Maine (FAME) Revenue Notes at
the end of June 2002, the impact of monthly principal payments on the $24.8
million medium term notes, and the retirement of the $20 million in 7.38%
first mortgage bonds at the end of July 2002. These decreases were offset to
some extent by additional interest expense in the third quarter of 2002
resulting from the issuance of a $13.7 million note in October 2001 with the
Municipal Review Committee (MRC) in connection with the exercise of common
stock warrants.
Other interest expense increased $177,000 in the third quarter of
2002 quarter due principally to higher interest expense as a result of
increased borrowings under the Company's revolving credit facility. The
increased borrowings were necessitated to some extent by the funding of debt
service payments ($16.1 million in principal plus interest) on the FAME
Revenue Notes at the end of June 2002 and the retirement of $20 million in
7.38% first mortgage bonds in July 2002.
NINE MONTHS OF 2002 AS COMPARED TO THE NINE MONTHS OF 2001
EARNINGS
For the nine months ended September 30, 2002 and 2001 basic earnings
per common share were $1.21 and $.98, respectively. The increased earnings
in the 2002 period were due to several factors, including the establishment
of a reserve ($.13 reduction in earnings per common share in 2001) in
connection with potential loss exposure associated with regulatory
proceedings in which the Company was a party in 2001. Earnings were
positively impacted by a $1.2 million reduction in O&M labor costs in 2002
($.09 increase in comparable earnings per common share in 2002) due primarily
to the corporate restructuring. Also, the New England independent system
operator (ISO New England) costs associated with transmission constraints
were approximately $554,000 greater ($.04 increase in comparable earnings per
common share in 2002) in 2001 as compared to 2002. These earnings
improvements in 2002 were offset somewhat by an approximately $488,000
increase ($.04 reduction in comparable earnings per common share in 2002) in
expense associated with pension and other postretirement benefits.
REVENUES
Electric operating revenue decreased by approximately $72,000 in the
first nine months of 2002 in comparison to the 2001 period. The decrease was
due to several factors. Negatively affecting electric operating revenue in
the first nine months of 2002 was the impact of a 1% decrease in energy
sales, which excludes certain large special contract customers. The Company
experienced above average temperatures in the first nine months of 2002
relative to 2001. Electric operating revenues were lower in 2002 as a result
of a $2.8 million reduction in certain stranded cost related revenue
deferrals. The decrease is due to the implementation of new stranded cost
rates on March 1, 2002, as well as the impact of the previously discussed
reserve established in the third quarter of 2001 associated with potential
loss exposure associated with regulatory proceedings in which the Company was
a party. Also, other revenues associated with charging electric generators
for wheeling power over the Company's transmission lines and out of its
service territory were approximately $1.7 million lower in first nine months
of 2002 compared to the 2001 period. The decrease is due primarily to the
fact that the new standard offer service provider is purchasing power from
the Company to resell to standard offer customers in the Company's service
territory that, prior to March 1, 2002, was wheeled outside of the service
territory.
Offsetting these decreases to a great extent was the impact of the
previously discussed 6.54% stranded cost rate increase on March 1, 2002.
Energy sales volume in gigawatt hours is as follows for each of the
nine months ending September 30, 2002 and 2001:
2002 2001 Change
Residential 413.4 409.1 4.3
Commercial 439.0 447.5 -8.5
Industrial 148.1 154.7 -6.6
Other 8.8 8.5 .3
------- ------- -----
Subtotal 1,009.3 1,019.8 -10.5
Large Special Contracts 184.4 182.4 2.0
------- ------- -----
Total Energy Sales 1,193.7 1,202.2 -8.5
------- ------- -----
Off-system sales were approximately $16.7 million greater in the 2002
period in relation to the 2001 period. The increase is due principally to
the previously discussed resale of power associated with the former standard-
offer power supply contract.
For the reason previously discussed, standard-offer service revenues
decreased approximately $54.6 million in the first nine months of 2002 as
compared to the first nine months of 2001.
EXPENSES
Fuel for generation and purchased power expense, excluding the cost
of standard-offer service purchased power, increased $19.5 million in the
2002 period as compared to 2001. The largest item affecting the increased
expense was approximately $20.7 million of costs in 2002 associated with the
previously discussed former standard-offer power contract obligation.
Offsetting this somewhat was an approximately $1.2 million decrease in Maine
Yankee costs, due mostly to the reason previously discussed for the third
quarters of 2002 as compared to 2001, as well as a $1.1 million decrease in
purchased power costs in 2002 in connection with serving a portion of a power
sale contract. This reduction was due to decreases in the market prices of
power in 2002 as compared to 2001.
Consistent with the previously discussed reasons associated with the
quarters ending September 30, 2002 and 2001, standard-offer purchased power
expense for the first nine months of 2002 relative to the first nine months
of 2001 decreased by approximately $54 million.
Other O&M expense decreased by approximately $1.9 million in the
first nine months of 2002 relative to the first nine months of 2001. As a
result of the previously discussed corporate restructuring in the second
quarter of 2002, O&M labor costs were approximately $1.2 million lower in
2002 as compared to 2001. The Company also incurred approximately $404,000
less in non-labor expense in 2002 associated with regulatory and legal
activities, due to the end of the Company's term as the standard offer
service provider and fewer regulatory related activities at the MPUC. Also,
as a result of cost reduction efforts in 2002, other O&M non-labor expenses
were generally lower as compared to 2001. Other O&M expense was increased in
2001 by the establishment of a $318,000 environmental remediation reserve
related to a waste disposal site with which the Company was previously
associated. Offsetting these decreases in comparable O&M expense to some
extent was an approximately $488,000 increase in pension and other
postretirement benefits expense in 2002. The increased expense is principally
attributable to decreases in the discount rate used to actuarially compute
the expense as well as reduced returns on plan assets as a result of poor
stock market performance.
The reason for the $128,000 increase in depreciation and amortization
expense in 2002 as compared to 2001 is consistent with the previous
discussion for the third quarters of each year.
The following summarizes the components of the regulatory
amortizations for the first nine months of 2002 as compared to the first nine
months of 2001 (in 000's):
2002 2001
---- ----
Contract buyouts and restructurings $15,320 $16,918
Seabrook investment 1,274 1,274
Deferred asset sale gain (3,890) (5,971)
Other stranded cost related
regulatory assets and liabilities (3,425) 290
Distribution related regulatory
assets and liabilities 870 870
Employee transition costs 261 -
------ -----
Total Regulatory Amortizations $10,410 $13,381
======= =======
The increase in total federal and state income taxes in 2002 relative
to 2001 was principally a function of higher earnings in 2002, as well the
impact of $183,000 in additional income tax expense in 2001 in connection
with disallowed investment tax credits.
OTHER INCOME AND (DEDUCTIONS) AND INTEREST EXPENSE
Allowance for funds used during construction, which includes carrying
costs on certain regulatory assets and liabilities, decreased by $168,000 in
first nine months of 2002 relative to the 2001 period. The decrease was
primarily a result of the implementation of new stranded cost rates on March
1, 2002, whereby the rate recovery of various regulatory assets began and the
accrual of carrying costs ended.
The decrease in long-term and increase in other interest expense in
the 2002 period in comparison to 2001 were principally attributable to the
reasons previously discussed for the quarters ending September 30, 2002 and
2001. Also, other interest expense was impacted somewhat by a $95,000
reduction in amortization of debt issuance costs in 2002 due to the
expiration of certain amortizations.
LIQUIDITY AND CAPITAL RESOURCES
The Consolidated Statements of Cash Flows reflect events in the first
nine months of 2002 and 2001 as they affect the Company's liquidity. Net
increase in cash from operating activities was $26.1 million in the 2002
period as compared to $18 million in 2001. The single largest item
affecting the comparability of operating cash flows in the two periods was
approximately $9.2 million in payments in 2001 in connection with the
exercise of the Company's common stock warrants. Operating cash flows are
also impacted in each period by the standard-offer service. In 2002, the
Company's standard-offer service costs exceeded revenues by approximately
$2.4 million, while in 2001, revenues exceeded associated costs by
approximately $4.6 million. Changes in accounts receivable and accounts
payable in the statement of cash flows are also greatly impacted by the
standard-offer related revenues and purchased power obligations. Negatively
impacting operating cash flows in 2002 was $3.4 million in payments
associated with benefits provided to terminated employees in connection with
the previously discussed cost reduction efforts.
Construction expenditures were approximately $3 million lower in the
2002 period as compared to 2001 due to reductions in the Company's capital
spending in 2002.
In the 2002 period, the Company made $7.5 million common dividend
payments to its parent company, Emera, Inc., while in 2001, which preceded
the Emera acquisition, common dividends of $.20 per share were paid to
shareholders in each of the first three quarters.
The increase in payments on long-term debt is due principally to
higher monthly principal payments on the $24.8 million medium term notes in
the 2002 period as compared to 2001, and at the end of June 2002 the Company
made a $16.1 million principal payment on the FAME revenue notes, as compared
to a $15.1 million principal payment at the end of June 2001. Also, in July
2002 the Company retired $20 million of 7.38% first mortgage bonds. Finally,
the Company made approximately $1.1 of principal payments in 2002 on the
$13.7 million MRC note.
The Company had maintained full borrowing capacity under its
revolving credit facility from the second quarter of 1999 through June 2001,
but it became necessary to renew borrowings under the revolving line in June
2001 to fund the $15.1 million FAME debt payment. The Company's utilization
of the line of credit was also impacted by the merger related costs and the
cash payments to common stock warrant holders in 2001. The Company also
utilized this line of credit to provide the funds necessary to make the FAME
and 7.38% first mortgage bond debt payment in 2002. The Company's borrowings
under this arrangement amounted to $38.5 million at September 30, 2002 as
compared to $8 million at September 30, 2001. On June 29, 2001, the Company
extended the revolving credit agreement until October 1 and then until March
31, 2002, and the agreement has since been further extended until June 30,
2003 with some modifications. The facility was increased to $60 million to
accommodate the previously discussed debt retirements in 2002 and act as a
bridge financing until permanent financing is put in place. The terms are
similar to the prior amendment, with the major differences being the addition
of another pricing level to recognize the Company's improved credit and
modifications to some of the financial covenants. Also, the Company extended
until June 1, 2003 the promissory note that was entered into in 2001. This
note allows the Company to borrow up to an additional $10 million. This
unsecured facility is used by the Company to manage working capital needs,
and the interest rate setting mechanism and other major terms of the note are
similar to terms in the revolving credit agreement.
The Company is currently in the process of completing a financing
arrangement for the private placement of up to $20 million of unsecured
medium term notes, the proceeds of which will be used to pay down a portion
of the outstanding borrowings under the revolving credit facility.
The Company is currently evaluating its pension benefit plan
assumptions including asset return performance. Any changes in the benefit
plan assumptions as well as the funded status of the plan, may impact funding
and expense levels in the future.
ENVIRONMENTAL MATTERS
The Company is regulated by the United States Environmental
Protection Agency (EPA) as to compliance with the Federal Water Pollution
Control Act, the Clean Air Act, and several federal statutes governing the
treatment and disposal of hazardous wastes. The Company is also regulated by
the Maine Department of Environmental Protection (DEP) under various Maine
environmental statutes. The Company is actively engaged in complying with
these federal and state acts and statutes, and it has not, to date,
encountered material difficulties in connection with such compliance.
In 1992, the Company received notice from the DEP that it was
investigating the cleanup of several sites in Maine that were used in the
past for the disposal of waste oil and other hazardous substances, and that
the Company, as a generator of waste oil that was disposed at those sites,
may be liable for certain cleanup costs. The Company learned in October 1995
that the EPA placed one of those sites on the National Priorities List under
the Comprehensive Environmental Response, Compensation and Liability Act and
would pursue potentially responsible parties. With respect to this site, the
Company is one of a number of waste generators under investigation.
The Company has recorded a liability, based on currently available
information, for what it believes are the estimated environmental remediation
costs that the Company expects to incur for this waste disposal site.
Additional future environmental cleanup costs are not reasonably estimable
due to a number of factors, including the unknown magnitude of possible
contamination, the appropriate remediation methods, and possible effects of
future legislation or regulation and the possible effects of technological
changes. At September 30, 2002, the liability recorded by the Company for
its estimated environmental remediation costs amounted to approximately
$416,000. The Company's actual future environmental remediation costs may
change as additional factors become known.
The Company estimates that during 2002 it will incur approximately
$171,000 in operations expense to comply with environmental standards for
air, water and hazardous materials. This amount may change based on facts
and circumstances that occur in 2002.
OTHER
Management's discussion and analysis of results of operations and
financial condition contains items that are "forward-looking" as defined in
the Private Securities Litigation Reform Act of 1995. These statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking statements.
Readers should not place undue reliance on forward-looking statements, which
reflect management's view only as of the date hereof. The Company undertakes
no obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances. Factors that might cause such differences
include, but are not limited to, the Company's reorganization, future
economic conditions, relationships with lenders, developments in the
legislative, regulatory and competitive environments in which the Company
operates and other circumstances that could affect revenues and costs.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2002, the Financial Accounting Standards Board issued
Statement No. 143, "Accounting for Asset Retirement Obligations". This
Statement addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to legal obligations
associated with the retirement of long-lived assets that result from
acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. This Statement
is effective for financial statements issued for fiscal years beginning after
June 15, 2002. Management does not believe that the implementation of this
Statement will materially impact the Company's financial position, earnings
or cash flows, principally as a result of the regulatory accounting utilized
by the Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's major financial market risk exposure is changing
interest rates. Changes in interest rates will affect interest paid on
variable rate debt and the fair value of fixed rate debt. The Company
manages interest rate risk through a combination of both fixed and variable
rate debt instruments. The Company also was a party to an interest rate swap
associated with the variable rate medium term notes (See Note 13 to the 2001
Form 10-K). This debt was fully repaid in July 2002.
Item 4. CONTROLS AND PROCEDURES
During the 90-day period prior to the filing date of this report,
management, including the Company's Principal Executive Officer and Chief
Financial Officer, evaluated the effectiveness of the design and operation of
the Company's disclosure controls and procedures. Based upon, and as of the
date of that evaluation, the Principal Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures were effective,
in all material respects, to ensure that information required to be disclosed
in the reports the Company files and submits under the Exchange Act is
recorded, processed, summarized and reported as and when required.
There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal
controls subsequent to the date the Company carried out its evaluation.
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION
Robert Briggs and Richard Smith resigned from the Company's Board of
Directors effective April 25, 2002. Robert Briggs has stayed on as a
Director of Emera, Inc., a parent of the Company, and Rick Smith has stayed
on as Assistant Secretary to the Company and as Corporate Secretary and Clerk
to Emera, Inc, a parent of the Company. Carroll Lee resigned from the
Company's Board of Directors effective August 1, 2002.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits - None.
Reports on Form 8-K - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BANGOR HYDRO-ELECTRIC COMPANY
-----------------------------
(Registrant)
/s/ David R. Black
Dated: November 4 , 2002 _____________________________
David R. Black
Chief Financial Officer
CERTIFICATIONS
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Bangor Hydro-Electric Company (the
Company) on Form 10-Q for the period ending September 30, 2002 as filed with
the Securities and Exchange Commission on November , 2002, we, the
undersigned, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934, and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of the Company.
/s/ David R. Black
- ------------------
David R. Black
Chief Financial Officer
November 4, 2002
/s/ Raymond R. Robinson
- -----------------------
Raymond R. Robinson
Principal Executive Officer
November 4, 2002
This certification is made solely for purpose of 18 U.S.C. Section 1350,
subject to the knowledge standard contained therein, and not for any other
purpose.
I, David R. Black, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bangor Hydro-
Electric Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 4, 2002
/s/ David R. Black
- ------------------
David R. Black
Chief Financial Officer
I, Raymond R. Robinson, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Bangor Hydro-
Electric Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
Date: November 4, 2002
/s/ Raymond R. Robinson
- -----------------------
Raymond R. Robinson
Principal Executive Officer