SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
_X_ Annual Report Pursuant to Section 13 or 15(d)
-
of the Securities Exchange Act of 1934
___ Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
COMMISSION FILE NUMBER 1-8291
GREEN MOUNTAIN POWER CORPORATION
--------------------------------
(Exact name of registrant as specified in its charter)
Vermont 03-0127430
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
163 Acorn Lane
Colchester, VT 05446
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (802) 864-5731
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
COMMON STOCK, PAR VALUE NEW YORK STOCK EXCHANGE
$3.33-1/3 PER SHARE
________________________________________________________________________
Securities registered pursuant to Section 12 (g) of the Act: None
________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes __X__ No _____
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. _X_
-
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT AS OF MARCH 15, 2002, WAS APPROXIMATELY $102,348,759 BASED ON THE
CLOSING PRICE OF $17.98 FOR THE COMMON STOCK ON THE NEW YORK STOCK EXCHANGE AS
REPORTED BY THE WALL STREET JOURNAL.
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING ON MARCH 15, 2002, WAS
5,692,367
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Definitive Proxy Statement relating to its Annual Meeting of
Stockholders to be held on May 16, 2002, to be filed with the Commission
pursuant to Regulation 14A under the Securities Exchange Act of 1934, is
incorporated by reference in Items 10, 11, 12 and 13 of Part III of this Form
10-K.
2
Green Mountain Power Corporation
Form 10-K for the fiscal year ended December 31, 2001
Table of contents Page
Part I, Item 1, Business 3
Item 2, Properties 17
Item 3, Legal Proceedings 19
Item 4, Submission of Matters To a Vote of 19
Security Holders
Part II, Item 5, Market for Registrant's Common
Equity and Related Shareholder Matters 19
Item 6, Selected Financial Data 21
Item 7, Management's Discussion and Analysis 22
Of Financial Condition and Results
Of Operations
Item 8, Index to Consolidated Financial Statements
and Notes 39
Item 9, Changes In and Disagreements with Accountants 74
On Accounting and Financial Disclosure
Items 10 through 13, Certain Officer information 74
Item 14, Exhibits, Financial Statement Schedules, 74
And Reports on Form 8-K
PART I
There are statements in this section that contain projections or estimates
and that are considered to be "forward-looking" as defined by the Securities and
Exchange Commission (the "SEC"). In these statements, you may find words such
as believes, expects, plans, or similar words. These statements are not
guarantees of our future performance. There are risks, uncertainties and other
factors that could cause actual results to be different from those projected.
Some of the reasons the results may be different are discussed under Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD and A"), in the 2001 Annual Report to Shareholders ("Annual
Report"), and in the accompanying Notes to Consolidated Financial Statements
("Notes"), all included herein.
ITEM 1. BUSINESS
THE COMPANY
Green Mountain Power Corporation (the "Company" or "GMP") is a public
utility operating company engaged in supplying electrical energy in the State of
Vermont ("State" or "Vermont") in a territory with approximately one quarter of
the State's population. We serve approximately 87,000 customers. The Company
was incorporated under the laws of the State on April 7, 1893.
Our sources of revenue for the year ended December 31, 2001 were as
follows:
* 24.6% from residential customers;
* 26.0% from small commercial and industrial customers;
* 18.2% from large commercial and industrial customers;
* 29.6% from sales to other utilities; and
* 1.6% from other sources.
See the Annual Report and M D and A for further information about revenues.
During 2001, our energy resources for retail and wholesale sales of
electricity, excluding sales made pursuant to the agreement with Morgan Stanley
Capital Group, Inc. ("MS") discussed under MD and A-Power Contract Commitments,
were obtained as follows:
* 37.4% from hydroelectric sources (2.4% Company-owned, 0.1% New York Power
Authority ("NYPA"), 33.2% Hydro-Quebec and 1.7% small power producers);
* 30.8% from a nuclear generating source (the Vermont Yankee nuclear plant
described below);
* 3.2% from wood;
* 2.0% from oil;
* 2.2% from natural gas; and
* 0.5% from wind.
The remaining 23.9% was purchased on a short-term basis from other
utilities through the Independent System Operator of New England ("ISO"),
formerly the New England Power Pool ("NEPOOL").
In 2001, we purchased 93.0% of our energy resources to satisfy our retail
and wholesale sales of electricity (including energy purchased from Vermont
Yankee Nuclear Power Corporation ("Vermont Yankee" or "VY") and under other
long-term purchase arrangements). See Note K of Notes.
A major source of the Company's power supply is our entitlement to a share
of the power generated by the 531 megawatt (MW) Vermont Yankee nuclear
generating plant owned and operated by VY. We have a 17.9% equity interest in
Vermont Yankee. For information concerning Vermont Yankee, see Power Resources
- - Vermont Yankee.
The Company participates in NEPOOL, a regional bulk power transmission
organization established to assure reliable and economical power supply in the
Northeast. The ISO was created to manage the operations of NEPOOL in 1999. The
ISO works as a clearinghouse for purchasers and sellers of electricity in the
deregulated wholesale energy markets. Sellers place bids for the sale of their
generation or purchased power resources and if demand is high enough the output
from those resources is sold. We must purchase additional electricity to meet
customer demand during periods of high usage and to replace energy repurchased
by Hydro-Quebec under an arrangement negotiated in 1997. Our costs to serve
demand during such high usage periods such as warmer than normal temperatures in
summer months and to replace such energy repurchases by Hydro-Quebec rose
substantially after the market opened to competitive bidding on May 1, 1999.
The cost of securing future power supplies has also risen in tandem with higher
summer supply costs.
The Company's principal service territory is an area roughly 25 miles in
width extending 90 miles across north central Vermont between Lake Champlain on
the west and the Connecticut River on the east. Included in this territory are
the cities and towns of Montpelier, Barre, South Burlington, Vergennes,
Williston, Shelburne, and Winooski, as well as the Village of Essex Junction and
a number of smaller towns and communities. We also distribute electricity in
four separate areas located in southern and southeastern Vermont that are
interconnected with our principal service area through the transmission lines of
Vermont Electric Power Company, Inc. ("VELCO") and others. Included in these
areas are the communities of Vernon (where the Vermont Yankee plant is located),
Bellows Falls, White River Junction, Wilder, Wilmington and Dover. The
Company's right to distribute electrical service in its service territory is the
utility's most important asset. We supply at wholesale a portion of the power
requirements of several municipalities and cooperatives in Vermont. We are
obligated to meet the changing electrical requirements of these wholesale
customers, in contrast to our obligation to other wholesale customers, which is
limited to specified amounts of capacity and energy established by contract.
Major business activities in our service areas include computer assembly
and components manufacturing (and other electronics manufacturing), software
development, granite fabrication, service enterprises such as government,
insurance, regional retail shopping, tourism (particularly fall and winter
recreation), and dairy and general farming.
Operating statistics for the past five years are presented in the following
table.
GREEN MOUNTAIN POWER CORPORATION
Operating Statistics For the years ended December 31,
2001 2000 1999 1998 1997
----------- ----------- ----------- ----------- -----------
Total capability (MW) . . . . . . . . . . . . . . 408.0 411.1 393.2 396.9 416.9
Net system peak . . . . . . . . . . . . . . . . . 341.2 323.5 317.9 312.5 311.5
----------- ----------- ----------- ----------- -----------
Reserve (MW). . . . . . . . . . . . . . . . . . . 66.8 87.6 75.3 84.4 105.4
=========== =========== =========== =========== ===========
Reserve % of peak . . . . . . . . . . . . . . . . 19.6% 27.1% 23.7% 27.0% 33.8%
Net Production (MWH**)
Hydro . . . . . . . . . . . . . . . . . . . . . . 951,146 1,053,223 1,095,738 972,723 1,073,246
Wind. . . . . . . . . . . . . . . . . . . . . . . 12,135 12,246 7,956 - -
Nuclear . . . . . . . . . . . . . . . . . . . . . 736,420 803,303 731,431 607,708 772,030
Conventional steam. . . . . . . . . . . . . . . . 2,670,249 2,704,427 2,328,267 750,602 560,504
Internal combustion . . . . . . . . . . . . . . . 18,291 35,699 12,312 40,148 4,827
Combined cycle. . . . . . . . . . . . . . . . . . 72,653 73,433 99,962 118,322 104,836
Total production. . . . . . . 4,460,894 4,682,331 4,275,666 2,489,503 2,515,443
Less non-firm sales to other utilities. . . . . . 2,365,809 2,573,576 2,152,781 499,409 524,192
----------- ----------- ----------- ----------- -----------
Production for firm sales . . . . . . . . . . . . 2,095,085 2,108,755 2,122,885 1,990,094 1,991,251
Less firm sales and lease transmissions. . . . . 1,956,232 1,954,898 1,920,257 1,883,959 1,870,914
----------- ----------- ----------- ----------- -----------
Losses and company use (MWH). . . . . . . . . . . 138,853 153,857 202,628 106,134 120,337
=========== =========== =========== =========== ===========
Losses as a % of total production . . . . . . . . 3.11% 3.29% 4.74% 4.26% 4.78%
System load factor (***). . . . . . . . . . . . . 70.1% 74.2% 76.2% 72.7% 73.0%
Net Production (% of Total)
Hydro . . . . . . . . . . . . . . . . . . . . . . 21.3% 22.5% 25.6% 39.1% 42.7%
Wind. . . . . . . . . . . . . . . . . . . . . . . 0.3% 0.3% 0.2% 0.0% 0.0%
Nuclear . . . . . . . . . . . . . . . . . . . . . 16.5% 17.1% 17.1% 24.4% 30.6%
Conventional steam. . . . . . . . . . . . . . . . 59.9% 57.8% 54.5% 30.2% 22.3%
Internal combustion . . . . . . . . . . . . . . . 0.4% 0.8% 0.3% 1.6% 0.2%
Combined cycle. . . . . . . . . . . . . . . . . . 1.6% 1.6% 2.3% 4.8% 4.2%
----------- ----------- ----------- ----------- -----------
Total . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
=========== =========== =========== =========== ===========
Sales and Lease Transmissions(MWH)
Residential - GMPC. . . . . . . . . . . . . . . . 549,151 558,682 544,447 533,904 549,259
Commercial & industrial - small . . . . . . . . . 718,969 704,126 688,493 665,707 645,331
Commercial & industrial - large . . . . . . . . . 683,004 683,296 664,110 636,436 608,051
Other . . . . . . . . . . . . . . . . . . . . . . 2,030 6,713 3,138 3,476 3,939
----------- ----------- ----------- ----------- -----------
Total retail sales and lease transmissions. . . . 1,953,154 1,952,817 1,900,188 1,839,522 1,806,581
Sales to Municipals & Cooperatives (Rate W) . . . 3,078 2,081 20,069 44,437 64,333
----------- ----------- ----------- ----------- -----------
Total Requirements Sales. . . . . . . . . . . . . 1,956,232 1,954,898 1,920,257 1,883,959 1,870,914
Other Sales for Resale. . . . . . . . . . . . . . 2,365,809 2,573,576 2,152,781 499,409 524,192
----------- ----------- ----------- ----------- -----------
Total sales and lease transmissions(MWH) . . . . 4,322,041 4,528,474 4,073,038 2,383,368 2,395,106
=========== =========== =========== =========== ===========
Average Number of Electric Customers
Residential . . . . . . . . . . . . . . . . . . . 73,249 72,424 71,515 71,301 70,671
Commercial and industrial small . . . . . . . . . 12,984 12,746 12,438 12,170 11,989
Commercial and industrial large . . . . . . . . . 22 23 23 23 23
Other . . . . . . . . . . . . . . . . . . . . . . 65 65 66 70 75
----------- ----------- ----------- ----------- -----------
Total. . . . . . . . . . . . . . . . 86,320 85,258 84,042 83,564 82,758
=========== =========== =========== =========== ===========
Average Revenue Per KWH (Cents)
Residential including lease revenues. . . . . . . 13.33 12.50 12.32 11.56 11.18
Commercial & industrial - small . . . . . . . . . 10.83 10.00 9.88 9.29 9.10
Commercial & industrial - large . . . . . . . . . 7.69 6.51 6.55 6.32 6.22
Total retail including lease. . . . . . . . . . . 10.44 9.52 9.47 8.96 8.79
=========== =========== =========== =========== ===========
Average Use and Revenue Per Residential Customer
KWh's including lease transmissions . . . . . . . 7,497 7,717 7,617 7,488 7,772
Revenues including lease revenues . . . . . . . . $ 999 $ 965 $ 938 $ 865 $ 869
(*) MW - Megawatt is one thousand kilowatts.
(**) MWH - Megawatt hour is one thousand kilowatt hours.
(***) Load factor is based on net system peak and firm MWH production less
off-system losses.
STATE AND FEDERAL REGULATION
General. The Company is subject to the regulatory authority of the Vermont
Public Service Board ("VPSB"), which extends to retail rates, services and
facilities, securities issues and various other matters. The separate Vermont
Department of Public Service (the "Department"), created by statute in 1981, is
responsible for development of energy supply plans for the State of Vermont,
purchases of power as an agent for the State and other general regulatory
matters. The VPSB principally conducts quasi-judicial proceedings, such as rate
setting. The Department, through a Director for Public Advocacy, is entitled to
participate as a litigant in such proceedings and regularly does so.
Our rate tariffs are uniform throughout our service area. We have entered
into a number of jobs incentive agreements, providing for reduced capacity
charges to large customers applicable only to new load. We have an economic
development agreement with International Business Machines Corporation ("IBM")
that provides for contractually established charges, rather than tariff rates,
for incremental loads. See Item 7. MD and A - Results of Operations - Operating
Revenues and MWh Sales.
Our wholesale rate on sales to two wholesale customers is regulated by the
Federal Energy Regulatory Commission ("FERC"). Revenues from sales to these
customers were less than 1.0% of operating revenues for 2001.
We provide transmission service to twelve customers within the State under
rates regulated by the FERC; revenues for such services amounted to less than
1.0% of the Company's operating revenues for 2001.
On April 24, 1996, the FERC issued Orders 888 and 889 which, among other
things, required the filing of open access transmission tariffs by electric
utilities, and the functional separation by utilities of their transmission
operations from power marketing operations. Order 888 also supports the full
recovery of legitimate and verifiable wholesale power costs previously incurred
under federal or state regulation.
On July 17, 1997, the FERC approved our Open Access Transmission Tariff,
and on August 30, 1997 we filed our compliance refund report. In accordance
with Order 889, we have also functionally separated our transmission operations
and filed with the FERC a code of conduct for our transmission operations. We
do not anticipate any material adverse effects or loss of wholesale customers
due to the FERC orders mentioned above. The Open Access tariff could reduce the
amount of capacity available to the Company from such facilities in the future.
See Item 7. MD and A - Transmission Expenses.
The Company has equity interests in Vermont Yankee, VELCO and Vermont
Electric Transmission Company, Inc. ("VETCO"), a wholly owned subsidiary of
VELCO. We have filed an exemption statement under Section 3(a)(2) of the Public
Utility Holding Company Act of 1935, thereby securing exemption from the
provisions of such Act, except for Section 9(a)(2), which prohibits the
acquisition of securities of certain other utility companies without approval of
the SEC. The SEC has the power to institute proceedings to terminate such
exemption for cause.
Licensing. Pursuant to the Federal Power Act, the FERC has granted
licenses for the following hydro-electric projects owned by the Company:
Issue Date Licensed Period
--------------- ----------------------------------------
Project Site:
Bolton. . . . February 5,1982 February 5,1982 - February 4, 2022
Essex . . . . March 30, 1995 March 1, 1995 - March 1, 2025
Vergennes . . June 29, 1999 June 1, 1999 - May 31, 2029
Waterbury . . July 20, 1954 expired August 31, 2001, renewal pending
Major project licenses provide that after an initial twenty-year period, a
portion of the earnings of such project in excess of a specified rate of return
is to be set aside in appropriated retained earnings in compliance with FERC
Order #5, issued in 1978. Although the twenty-year periods expired in 1985,
1969 and 1971 in the cases of the Essex, Vergennes and Waterbury projects,
respectively, the amounts appropriated are not material.
The relicensing application for Waterbury was filed in August 1999. The
Waterbury reservoir was drained in 2001 to prepare for repairs to the dam by the
State, presently estimated for completion in 2004. Once repairs are complete,
the Company expects the project to be relicensed for a 30 year term and does not
have any competition for the Waterbury license.
Department of Public Service Twenty-Year Electric Plan. In December 1994,
the Department adopted an update of its twenty-year electrical power-supply plan
(the "Plan") for the State. The Plan includes an overview of statewide growth
and development as they relate to future requirements for electrical energy; an
assessment of available energy resources; and estimates of future electrical
energy demand.
In June 1996, we filed with the VPSB and the Department an integrated
resource plan pursuant to Vermont Statute 30 V.S.A. 218c. That filing is
still pending before the VPSB.
RECENT RATE DEVELOPMENTS
The Company reached a final settlement agreement with the Department in its
1998 rate case during November 2000. The final settlement agreement contained
the following provisions:
* The Company received a rate increase of 3.42 percent above existing rates,
beginning with bills rendered January 23, 2001, and prior temporary rate
increases became permanent;
* Rates were set at levels that recover the Company's Hydro-Quebec VJO
contract costs, effectively ending the regulatory disallowances experienced by
the Company from 1998 through 2000;
* The Company agreed not to seek any further increase in electric rates
prior to April 2002 (effective in bills rendered January 2003) unless certain
substantially adverse conditions arise, including a provision allowing a
request for additional rate relief if power supply costs increase in excess of
$3.75 million over forecasted levels;
* The Company agreed to write off in 2000 approximately $3.2 million in
unrecovered rate case litigation costs, and to freeze its dividend rate until it
successfully replaces short-term credit facilities with long-term debt or equity
financing;
* Seasonal rates were eliminated in April 2001, which generated
approximately $8.5 million in additional cash flow in 2001 that can be utilized
to offset increased costs during 2002 and 2003;
* The Company agreed to consult extensively with the Department regarding
capital spending commitments for upgrading our electric distribution system and
to adopt customer care and reliability performance standards, in a first step
toward possible development of performance-based rate-making;
* The Company agreed to withdraw its Vermont Supreme Court appeal of the
VPSB's Order in the 1997 rate case; and
* The Company agreed to an earnings limitation for its electric operations
in an amount equal to its allowed rate of return of 11.25 percent, with amounts
earned over the limit being used to write off regulatory assets.
The Company earned approximately $30,000 in excess of its allowed rate of
return during 2001 before writing off regulatory assets in the same amount.
On January 23, 2001, the VPSB approved the Company's settlement (the
"Settlement Order") with the Department, with two additional conditions:
* The Company and customers shall share equally any premium above book value
realized by the Company in any future merger, acquisition or asset sale, subject
to an $8.0 million limit on the customers' share; and
* The Company's further investment in non-utility operations is restricted.
For further information regarding recent rate developments, see Item 7. MD
and A - Rates, Liquidity and Capital Resources, and Note I of Notes.
SINGLE CUSTOMER DEPENDENCE
The Company had one major retail customer, IBM, metered at two locations
that accounted for 13.5 percent, 11.2 percent, and 11.8 percent of total
operating revenues, and 19.2 percent, 16.5 percent and 16.2 percent of the
Company's retail operating revenues in 2001, 2000 and 1999, respectively. IBM's
percent of total revenues and MWH sales in 2001 increased due to a rate increase
and a decrease in total operating revenues as a result of decreased sales for
resale pursuant to the MS agreement, which is discussed in greater detail in
Item 7 of the MD and A-Power Contract Commitments. No other retail customer
accounted for more than 1.0% of our revenue during the past three years. Under
the present regulatory system, the loss of IBM as a customer could have a
material adverse effect on the Company and would require the Company to seek
rate relief to recover the revenues previously paid by IBM from other customers
in an amount sufficient to offset the fixed costs that IBM had been covering
through its payments. See Note A of the Notes.
COMPETITION AND RESTRUCTURING
Electric utilities historically have had exclusive franchises for the
retail sale of electricity in specified service territories. Legislative
authority has existed since 1941 that would permit Vermont cities, towns and
villages to own and operate public utilities. Since that time, no municipality
served by the Company has established a municipal public utility.
During 2001, the Town of Rockingham ("Rockingham"), Vermont initiated
inquiries and legal procedures to establish its own electric utility, seeking to
purchase an existing hydro-generation facility from a third party, and the
associated distribution plant owned by the Company within the town. In March
2002, voters in Rockingham approved an article authorizing Rockingham to create
a municipal utility by acting to acquire a municipal plant which would include
the Bellows Falls Hydroelectric facility and the electric distribution systems
of the Company and/or Central Vermont Public Service Corporation. The Company
receives annual revenues of approximately $4.0 million from its customers in
Rockingham. Should Rockingham create a municipal system, the Company would
vigorously pursue its right to receive just compensation from Rockingham. Such
compensation would include full reimbursement for Company assets, if acquired,
and full reimbursement of any other costs associated with the loss of customers
in Rockingham, to assure that our remaining customers do not subsidize a
Rockingham municipal utility.
In 1987, the Vermont General Assembly enacted legislation that authorized
the Department to sell electricity on a significantly expanded basis. Before
the new law was passed, the Department's authority to make retail sales had been
limited to residential and farm customers and the Department could sell only
power that it had purchased from the Niagara and St. Lawrence projects operated
by the New York Power Authority.
Under the 1987 law, the Department can sell electricity purchased from any
source at retail to all customer classes throughout the State, but only if it
convinces the VPSB and other State officials that the public good will be served
by such sales. Since 1987, the Department has made limited additional retail
sales of electricity. The Department retains its traditional responsibilities
of public advocacy before the VPSB and electricity planning on a statewide
basis.
In certain states across the country, including the New England states,
legislation has been enacted to allow retail customers to choose their
electricity suppliers, with incumbent utilities required to deliver that
electricity over their transmission and distribution systems. Increased
competitive pressure in the electric utility industry may restrict the Company's
ability to charge energy prices sufficient to recover embedded costs, such as
the cost of purchased power obligations or of generation facilities owned by the
Company. The amount by which such costs might exceed market prices is commonly
referred to as stranded costs.
Regulatory and legislative authorities at the federal level and in some
states, including Vermont where legislation has not been enacted, are
considering how to facilitate competition for electricity sales. For further
information regarding Competition and Restructuring, See Item 7. MD and A -
Future Outlook.
CONSTRUCTION AND CAPITAL REQUIREMENTS
Our capital expenditures for 1999 through 2001 and projected for 2002 are
set forth in Item 7. MD and A - Liquidity and Capital Resources-Construction.
Construction projections are subject to continuing review and may be revised
from time-to-time in accordance with changes in the Company's financial
condition, load forecasts, the availability and cost of labor and materials,
licensing and other regulatory requirements, changing environmental standards
and other relevant factors.
For the period 1999-2001, internally generated funds, after payment of
dividends, provided approximately 82 percent of total capital requirements for
construction, sinking fund obligations and other requirements. Internally
generated funds provided 100 percent of such requirements for 2001. We
anticipate that for 2002, internally generated funds will provide approximately
90 percent of total capital requirements for regulated operations, the remainder
to be derived from bank loans.
In connection with the foregoing, see Item 7. MD and A - Liquidity and
Capital Resources.
POWER RESOURCES
On February 11, 1999, the Company entered into a contract with Morgan
Stanley Capital Group, Inc. (MS). In January 2001, the MS contract was modified
and extended to December 31, 2003. The contract provides us a means of managing
price risks associated with changing fossil fuel prices. For additional
information on the MS contract, see Note K of Notes.
The Company generated, purchased or transmitted 2,393,194 MWh of energy for
retail and requirements wholesale customers for the twelve months ended December
31, 2001. The corresponding maximum one-hour integrated demand during that
period was 341.2 MW on August 9, 2001. This compares to the previous all-time
peak of 323.5 MW on January 17, 2000. The following table shows the net
generated and purchased energy, the source of such energy for the twelve-month
period and the capacity in the month of the period system peak. See Note K of
Notes.
Net Electricity Generated and Purchased and Capacity at Peak
Generated and Purchased Capacity
During year At time of
Ended 12/31/2001 of annual peak
MWH percent KW percent
---------------- -------- -------------- --------
Wholly-owned plants:
Hydro . . . . . . . . . . . . . . 59,050 2.4% 32,410 8.4%
Diesel and Gas Turbine. . . . . . 18,291 0.8% 54,578 14.1%
Wind. . . . . . . . . . . . . . . 12,135 0.5% 480 0.1%
Jointly-owned plants:
Wyman #4. . . . . . . . . . . . . 6,960 0.3% 7,013 1.8%
Stony Brook I . . . . . . . . . . 49,822 2.1% 24,561 6.3%
McNeil. . . . . . . . . . . . . . 21,133 0.9% 6,443 1.7%
Owned in association with Others:
Vermont Yankee Nuclear. . . . . . 736,420 30.8% 89,370 23.1%
Long Term Purchases:
Hydro-Quebec. . . . . . . . . . . 793,800 33.2% 114,200 29.5%
Stony Brook I . . . . . . . . . . 22,831 1.0% 12,060 3.1%
Other:
NYPA. . . . . . . . . . . . . . . 1,609 0.1% 300 0.1%
Small Power Producers . . . . . . 98,296 4.0% 20,388 5.3%
Short-term purchases. . . . . . . 572,847 23.9% 25,700 6.6%
---------------- -------- -------------- --------
Total . . . . . . . . . . . . . . 2,393,194 387,503
Less system sales energy. . . . . - -
---------------- --------------
Net Own Load. . . . . . . . . . . 2,393,194 100.00% 387,503 100.00%
================ ======== ============== ========
Vermont Yankee.
On August 15, 2001, VY agreed to sell its nuclear power plant to Entergy
Corporation for approximately $180 million. The FERC approved the Entergy
purchase on January 30, 2002. The sale is subject to approval of the VPSB, the
U.S. Nuclear Regulatory Commission and other regulatory bodies. A related
agreement calls for Entergy to provide the current output level of the plant to
VY's present sponsors, including GMP, at average annual prices ranging from $39
to $45 per megawatt hour through 2012, subject to a "low market adjuster"
effective November, 2005, that protects the Company and other sponsors in the
event that market prices for power drop significantly. No additional
decommission liability funding or any other financing by VY is anticipated to
complete the transaction. The sale, if completed, will lower projected costs
over the remaining ten-year license period for VY. The Company would continue
to own its equity interest in VY, whose primary role would consist of
administering the power supply contracts between Entergy and VY's present
sponsors. On March 4, 2002, the Department announced its endorsement of the
proposed sale of the Vermont Yankee nuclear plant to Entergy Corporation. A
Memorandum of Understanding was filed on March 4, 2002 with the VPSB by Entergy,
Vermont Yankee, certain owners of Vermont Yankee, and the Department.
The Company and Central Vermont Public Service Corporation acted as lead
sponsors in the construction of the Vermont Yankee Nuclear Plant, a
boiling-water reactor designed by General Electric Company. The plant, which
became operational in 1972, has a generating capacity of 531 MW. Vermont Yankee
has entered into power contracts with its sponsor utilities, including the
Company, that expire at the end of the life of the unit. Pursuant to our power
contract, we are required to pay 20% of Vermont Yankee's operating expenses
(including depreciation and taxes), fuel costs (including charges in respect of
estimated costs of disposal of spent nuclear fuel), decommissioning expenses,
interest expense and return on common equity, whether or not the Vermont Yankee
plant is operating. In 1969, we sold to other Vermont utilities a share of our
entitlement to the output of Vermont Yankee. Accordingly, those utilities have
an obligation to pay us 2.338% of Vermont Yankee's operating expenses, fuel
costs, decommissioning expenses, interest expense and return on common equity,
whether or not the Vermont Yankee plant is operating.
Vermont Yankee has also entered into capital funds agreements with its
sponsor utilities that expire on December 31, 2002. Under our Capital Funds
Agreement, we are required, subject to obtaining necessary regulatory approvals,
to provide 20% of the capital requirements of Vermont Yankee not obtained from
outside sources.
In December 1996, August 1997 and July 1998, decisions were made to retire
three New England nuclear units, Connecticut Yankee, Maine Yankee and Millstone
1 effective immediately, with several years remaining on each license. The
NRC's most recently issued Annual Performance Review and Inspection Plan
assessment for Vermont Yankee, which showed all inspection findings being
classified as having a very low safety significance, are for the period April 1,
2000 to March 31, 2001.
During periods when Vermont Yankee power is unavailable, we occasionally
incur replacement power costs in excess of those costs that we would have
incurred for power purchased from Vermont Yankee. Replacement power is
available to us from the ISO and through contractual arrangements with other
utilities. Replacement power costs adversely affect cash flow and, absent
deferral, amortization and recovery through rates, would adversely affect
reported earnings. Routinely, in the case of scheduled outages for refueling,
the VPSB has permitted the Company to defer, amortize and recover these excess
replacement power costs for financial reporting and rate making purposes over
the period until the next scheduled outage. Vermont Yankee has adopted an
18-month refueling schedule. The 2002 refueling outage is tentatively scheduled
to begin October 2002, though it may occur earlier. In the case of unscheduled
outages of significant duration resulting in substantial unanticipated costs for
replacement power, the VPSB generally has authorized deferral, amortization and
recovery of such costs.
Vermont Yankee's current estimate of costs to decommission the plant, using
the 1993 FERC approved 5.4 percent escalation rate through 2000, and 4.25%
thereafter, is approximately $471 million, of which $297 million has been
funded. At December 31, 2001, our portion of the net non-funded liability was
$31 million, which we expect will be recovered through rates over Vermont
Yankee's remaining operating life. Vermont Yankee's current operating license
expires March 2012.
During the year ended December 31, 2001, we used 736,420 MWh of Vermont
Yankee energy representing 30.8% of the net electricity generated and purchased
("net power supply") by the Company. The average cost of Vermont Yankee
electricity in 2001 was $0.043 per KWh. Vermont Yankee's annual capacity factor
for 2001 was 91.2% compared with 99.2% for 2000, 90.9% in 1999, and 73.6% in
1998. The 2001 capacity factor is the best ever for Vermont Yankee in a year
that included a refueling outage.
See Note B of Notes for additional information.
Hydro-Quebec
Highgate Interconnection. On September 23, 1985, the Highgate transmission
facilities, which were constructed to import energy from Hydro-Quebec in Canada,
began commercial operation. The transmission facilities at Highgate include a
225-MW AC-to-DC-to-AC converter terminal and seven miles of 345-kV transmission
line. VELCO built and operates the converter facilities, which we own jointly
with a number of other Vermont utilities.
NEPOOL/Hydro-Quebec Interconnection. VELCO and certain other NEPOOL
members have entered into agreements with Hydro-Quebec which provided for the
construction in two phases of a direct interconnection between the electric
systems in New England and the electric system of Hydro-Quebec in Canada. The
Vermont participants in this project, which has a capacity of 2,000 MW, will
derive about 9.0% of the total power-supply benefits associated with the
NEPOOL/Hydro-Quebec interconnection. The Company, in turn, receives about
one-third of the Vermont share of those benefits. The benefits of the
interconnection include:
* access to surplus hydroelectric energy from Hydro-Quebec at competitive
prices;
* energy banking, under which participating New England utilities will
transmit relatively inexpensive energy to Hydro-Quebec during off-peak periods
and will receive equal amounts of energy, after adjustment for transmission
losses, from Hydro-Quebec during peak periods when replacement costs are higher;
and
* a provision for emergency transfers and mutual backup to improve
reliability for both the Hydro-Quebec system and the New England systems.
Phase I. The first phase ("Phase I") of the NEPOOL/Hydro-Quebec
Interconnection consists of transmission facilities having a capacity of 690 MW
that traverse a portion of eastern Vermont and extend to a converter terminal
located in Comerford, New Hampshire. These facilities entered commercial
operation on October 1, 1986. VETCO was organized to construct, own and operate
those portions of the transmission facilities located in Vermont. Total
construction costs incurred by VETCO for Phase I were $47,850,000. Of that
amount, VELCO provided $10,000,000 of equity capital to VETCO through sales of
VELCO preferred stock to the Vermont participants in the project. The Company
purchased $3,100,000 of VELCO preferred stock to finance the equity portion of
Phase I. The remaining $37,850,000 of construction cost was financed by VETCO's
issuance of $37,000,000 of long-term debt in the fourth quarter of 1986 and the
balance of $850,000 was financed by short-term debt.
Under the Phase I contracts, each New England participant, including the
Company, is required to pay monthly its proportionate share of VETCO's total
cost of service, including its capital costs. Each participant also pays a
proportionate share of the total costs of service associated with those portions
of the transmission facilities constructed in New Hampshire by a subsidiary of
New England Electric System.
Phase II. Agreements executed in 1985 among the Company, VELCO, other
NEPOOL members and Hydro-Quebec provided for the construction of the second
phase ("Phase II") of the interconnection between the New England Electric
System and that of Hydro-Quebec. Phase II expanded the Phase I facilities from
690 MW to 2,000 MW, and provides for transmission of Hydro-Quebec power from the
Phase I terminal in northern New Hampshire to Sandy Pond, Massachusetts.
Construction of Phase II commenced in 1988 and was completed in late 1990. The
Phase II facilities commenced commercial operation November 1, 1990, initially
at a rating of 1,200 MW, and increased to a transfer capability of 2,000 MW in
July 1991. The Hydro-Quebec-NEPOOL Firm Energy Contract provides for the import
of economical Hydro-Quebec energy into New England. The Company is entitled to
3.2% of the Phase II power-supply benefits. Total construction costs for Phase
II were approximately $487,000,000. The New England participants, including the
Company, have contracted to pay monthly their proportionate share of the total
cost of constructing, owning and operating the Phase II facilities, including
capital costs. As a supporting participant, the Company must make support
payments under 30-year agreements. These support agreements meet the capital
lease accounting requirements under SFAS 13. At December 31, 2001, the present
value of the Company's obligation was approximately $5,959,000. The Company's
projected future minimum payments under the Phase II support agreements are
approximately $426,000 for each of the years 2002-2006 and an aggregate of
$3,831,000 for the years 2007-2015.
The Phase II portion of the project is owned by New England
Hydro-Transmission Electric Company, Inc. and New England Hydro-Transmission
Corporation, subsidiaries of New England Electric System, in which certain of
the Phase II participating utilities, including the Company, own equity
interests. The Company owns approximately 3.2% of the equity of the
corporations owning the Phase II facilities. During construction of the Phase
II project, the Company, as an equity sponsor, was required to provide equity
capital. At December 31, 2001, the capital structure of such corporations was
approximately 42% common equity and 58% long-term debt. See Notes B and J of
Notes.
At times, we request that portions of our power deliveries from
Hydro-Quebec and other sources be routed through New York. Our ability to do so
could be adversely affected by the proposed tariff that NEPOOL has filed with
the FERC, which would reduce our allocation of capacity on transmission
interfaces with New York. As a result, our ability to import power to Vermont
from outside New England could be adversely affected, thereby impacting our
power costs in the future. See Item 7. MD and A - Transmission Expenses.
Hydro-Quebec Power Supply Contracts. We have several purchase power
contracts with Hydro-Quebec. The bulk of our purchases are comprised of two
schedules, B and C3, pursuant to a Firm Contract dated December 1987. Under
these two schedules, we purchase 114.2 MW. Under an arrangement negotiated in
January 1996 ("9601"), we received payments from Hydro-Quebec of $3,000,000 in
1996 and $1,100,000 in 1997. In accordance with such arrangement, we agreed to
shift certain transmission requirements, purchase certain quantities of power
and make certain minimum payments for periods in which power is not purchased.
In addition, in November 1996, we entered into a Memorandum of Understanding
with Hydro-Quebec under which Hydro-Quebec paid $8,000,000 to the Company in
exchange for certain power purchase options. The exercise of these options in
2001 resulted in an increase of approximately $7.6 million of power supply
expenses to meet contractual obligations under the Company's December 1997
sell-back arrangement with Hydro-Quebec. See Item 7. MD and A - Power Supply
Expenses, and Note K of Notes.
During 2001, we used 434,012 MWh under Schedule B, 297,543 MWh under
Schedule C3, and 62,245 MWh under the Hydro-Quebec arrangements representing
33.2% of our net power supply. The average cost of Hydro-Quebec electricity in
2001 was approximately $0.063 per KWh.
Stony Brook I. The Massachusetts Municipal Wholesale Electric Company
("MMWEC") is principal owner and operator of Stony Brook, a 352.0-MW
combined-cycle intermediate generating station located in Ludlow, Massachusetts,
which commenced commercial operation in November 1981. We entered into a Joint
Ownership Agreement with MMWEC dated as of October 1, 1977, whereby we acquired
an 8.8% ownership share of the plant, entitling us to 31.0 MW of capacity. In
addition to this entitlement, we have contracted for 14.2 MW of capacity for the
life of the Stony Brook I plant, for which we will pay a proportionate share of
MMWEC's share of the plant's fixed costs and variable operating expenses. The
three units that comprise Stony Brook I are all capable of burning oil. Two of
the units are also capable of burning natural gas. The natural gas system at
the plant was modified in 1985 to allow two units to operate simultaneously on
natural gas.
During 2001, we used 72,653 MWh from this plant representing 3.1% of our
net power supply at an average cost of $0.068 per KWh. See Note I and K of
Notes.
Wyman Unit #4. The W. F. Wyman Unit #4, which is located in Yarmouth,
Maine, is an oil-fired steam plant with a capacity of 620 MW. Central Maine
Power Company sponsored the construction of this plant. We have a
joint-ownership share of 1.1% (7.1 MW) in the Wyman #4 unit, which began
commercial operation in December 1978.
During 2001, we used 6,960 MWh from this unit representing 0.3% of our net
power supply at an average cost of $0.064 per kWh, based only on operation,
maintenance, and fuel costs incurred during 2001. See Note I of Notes.
McNeil Station. The J.C. McNeil station, which is located in Burlington,
Vermont, is a wood chip and gas-fired steam plant with a capacity of 53.0 MW.
We have an 11.0% or 5.8 MW interest in the J. C. McNeil plant, which began
operation in June 1984. In 1989, the plant added the capability to burn natural
gas on an as-available/interruptible service basis.
During 2001, we used 21,133 MWh from this unit representing 0.9% of our net
power supply at an average cost of $0.051 per kWh, based only on operation,
maintenance, and fuel costs incurred during 2001. See Note I of Notes.
Independent Power Producers. The VPSB has adopted rules that implement for
Vermont the purchase requirements established by federal law in the Public
Utility Regulatory Policies Act of 1978 ("PURPA"). Under the rules, qualifying
facilities have the option to sell their output to a central state-purchasing
agent under a variety of long- and short-term, firm and non-firm pricing
schedules. Each of these schedules is based upon the projected Vermont
composite system's power costs that would be required but for the purchases from
independent producers. The State purchasing agent assigns the energy so
purchased, and the costs of purchase, to each Vermont retail electric utility
based upon its pro rata share of total Vermont retail energy sales. Utilities
may also contract directly with producers. The rules provide that all
reasonable costs incurred by a utility under the rules will be included in the
utilities' revenue requirements for ratemaking purposes.
Currently, the State purchasing agent, Vermont Electric Power Producers,
Inc. ("VEPPI"), is authorized to seek 150 MW of power from qualifying facilities
under PURPA, of which our average pro rata share in 2001 was approximately 33.5%
or 50.2 MW.
The rated capacity of the qualifying facilities currently selling power to
VEPPI is approximately 74.5 MW. These facilities were all online by the spring
of 1993, and no other projects are under development. We do not expect any new
projects to come online in the foreseeable future because the excess capacity in
the region has eliminated the need for and value of additional qualifying
facilities.
In 2001, through our direct contracts and VEPPI, we purchased 98,296 MWh of
qualifying facilities production representing 4.0% of our net power supply at an
average cost of $0.117 per KWh.
Short Term Opportunity Purchases and Sales. We have arrangements with
numerous utilities and power marketers actively trading power in New England and
New York under which we may make purchases or sales of power on short notice and
generally for brief periods of time when it appears economic to do so.
Opportunity purchases are arranged when it is possible to purchase power for
less than it would cost us to generate the power with our own sources.
Purchases also help us save on replacement power costs during an outage of one
of our base load sources. Opportunity sales are arranged when we have surplus
energy available at a price that is economic to other regional utilities at any
given time. The sales are arranged based on forecasted costs of supplying the
incremental power necessary to serve the sale. Prices are set so as to recover
all of the forecasted fuel or production costs and to recover some, if not all,
associated capacity costs.
During 2001, we purchased 334,452 MWh pursuant to short term opportunity
purchases, representing 23.9% of our net power supply at an average cost of
$0.052 per kWh.
Company Hydroelectric Power. The Company wholly owns and operates eight
hydroelectric generating facilities located on river systems within its service
area, the largest of which has a generating output of 7.8 MW.
In 2001, Company owned hydroelectric plants provided 59,050 MWh of energy,
representing 2.4% of our net power supply at an average cost of $0.053 per kWh
based on total embedded costs and maintenance. Low river levels due to drought
and drainage of the Waterbury site reservoir in 2001 limited hydropower
production. See State and Federal Regulation - Licensing.
VELCO. The Company and six other Vermont electric distribution utilities
own VELCO. Since commencing operation in 1958, VELCO has transmitted power for
its owners in Vermont, including power from NYPA and other power contracted for
by Vermont utilities. VELCO also purchases bulk power for resale at cost to its
owners, and as a member of NEPOOL, represents all Vermont electric utilities in
pool arrangements and transactions. See Note B of Notes.
Fuel. During 2001, our retail and requirements wholesale sales were
provided by the following fuel sources:
* 37.4% from hydroelectric sources (2.4% Company-owned, 0.1% NYPA, 33.2%
Hydro-Quebec and 1.7% small power producers);
* 30.8% from a nuclear generating source (the Vermont Yankee nuclear plant
described below);
* 3.2% from wood;
* 2.0% from oil;
* 2.2% from natural gas;
* 0.5% from wind power producers; and
* 23.9% purchased on a short-term basis from other utilities through the
ISO.
Vermont Yankee has several requirement-based contracts for the four
components (uranium, conversion, enrichment and fabrication) used to produce
nuclear fuel. These contracts are utilized only if the need or requirement for
fuel arises. Under these contracts, any disruption of operating activity would
allow VY to cancel or postpone deliveries until actually required. The
contracts extend through various time periods and contain clauses to allow VY
the option to extend the agreements. Negotiation of new contracts and
renegotiations of existing contracts routinely occur, often focusing on one of
the four components at a time. The 2001 reload cost approximately $20.2
million. Future reload costs will depend on market and contract prices.
On January 20, 1997, Vermont Yankee entered into an agreement with a former
uranium supplier whereby the supplier could opt to terminate a production
purchase agreement dated August 4, 1978. Although there had been no
transactions under the production purchase agreement for several years, Vermont
Yankee maintained certain financial rights. In consideration for the option to
terminate the production purchase agreement and the subsequent exercise of the
option, Vermont Yankee received $600,000 in 1997, which was recorded as an
offset to nuclear fuel expense. The potential future payments over a ten-year
period range from zero to $2.4 million. No payments were received in 2001 or
2000 under this agreement. Due to the uncertainty of this transaction, any
benefits received will be recorded on a cash basis.
Vermont Yankee has a contract with the United States Department of Energy
("DOE") for the permanent disposal of spent nuclear fuel. Under the terms of
this contract, in exchange for the one-time fee discussed below and a quarterly
fee of 1 mil per kWh of electricity generated and sold, the DOE agrees to
provide disposal services when a facility for spent nuclear fuel and other
high-level radioactive waste is available, which is required by contract to be
prior to January 31, 1998. The actual date for these disposal services is
expected to be delayed many years. DOE currently estimates that a permanent
disposal facility will not begin operation before 2010. A DOE temporary
disposal site may be provided in a few years, but no decision has been made to
proceed on providing a temporary disposal site at this time.
The DOE contract obligates Vermont Yankee to pay a one-time fee of
approximately $39.3 million for disposal costs for all spent fuel discharged
through April 7, 1983. Although such amount has been collected from the Vermont
Yankee participants, Vermont Yankee has elected to defer payment of the fee to
the DOE as permitted by the DOE contract. The fee must be paid no later than
the first delivery of spent nuclear fuel to the DOE. Interest accrues on the
unpaid obligation based on the thirteen-week Treasury Bill rate and is
compounded quarterly. Through 2001 Vermont Yankee accumulated approximately
$115.0 million in an irrevocable trust to be used exclusively for settling this
obligation at some future date, provided the DOE complies with the terms of the
aforementioned contract.
We do not maintain long-term contracts for the supply of oil for our wholly
owned oil-fired peak generating stations (80 MW). We did not experience
difficulty in obtaining oil for our own units during 2001, and, while no
assurance can be given, we do not anticipate any such difficulty during 2002.
None of the utilities from which we expect to purchase oil- or gas-fired
capacity in 2002 has advised us of grounds for doubt about maintenance of secure
sources of oil and gas during the year.
Wood for the McNeil plant is furnished to the Burlington Electric
Department from a variety of sources under short-term contracts ranging from
several weeks' to six months' duration. The McNeil plant used 254,510 tons of
wood chips and mill residue, 461,490 gallons of fuel oil, and 116,586 million
cubic feet of natural gas in 2001. The McNeil plant, assuming any needed
regulatory approvals are obtained, is forecasting year 2002 consumption of wood
chips to be 300,000 tons, fuel oil of 100,000 gallons and natural gas
consumption of 36,000 million cubic feet.
The Stony Brook combined-cycle generating station is capable of burning
either natural gas or oil in two of its turbines. Natural gas is supplied to
the plant subject to its availability. During periods of extremely cold
weather, the supplier reserves the right to discontinue deliveries to the plant
in order to satisfy the demand of its residential customers. We assume, for
planning and budgeting purposes, that the plant will be supplied with gas during
the months of April through November, and that it will run solely on oil during
the months of December through March. The plant maintains an oil supply
sufficient to meet approximately one-half of its annual needs.
Wind Project. The Company was selected by the DOE and the Electric Power
Research Institute ("EPRI") to build a commercial scale wind-powered facility.
The DOE and EPRI provided partial funding for the wind project of approximately
$3.9 million. The net cost to the Company of the project, located in the
southern Vermont town of Searsburg, was $7.8 million. The eleven wind turbines
have a rating of 6 MW and were commissioned July 1, 1997.
In 2001, the plant provided 12,135 MWh, representing 0.5% of the Company's
net power supply at an average cost of $0.07 per kWh.
SEGMENT INFORMATION
Financial information about the Company's primary industry segment, the
electric utility, is presented in Item 6, Selected Financial Data, and in the
Annual Report and Notes included herein.
The Company has partially sold or disposed of most of the operations and
assets of Northern Water Resources, Inc. ("NWR"), formerly known as Mountain
Energy, Inc., classified as discontinued operations in 1999. Industry segment
information relating to the Company's discontinued operations is presented in
Note L of the Notes.
SEASONAL NATURE OF BUSINESS
Winter recreational activities, longer hours of darkness and heating loads
from cold weather usually cause our average peak electric sales to occur in
December, January or February. Summer air conditioning loads have increased in
recent years as a result of steady economic growth in our service territory.
Our heaviest load in 2001, 341.2 MW, occurred on August 9, 2001.
Under NEPOOL market rules implemented in May 1999, the cost basis that had
supported the Company's previous seasonally differentiated rate design was
eliminated, making a seasonal rate structure no longer appropriate. The
elimination of the seasonal rate structure in all classes of service effective
April 2001 was approved by the VPSB in January 2001.
EMPLOYEES
As of December 31, 2001, the Company had 193 employees, exclusive of
temporary employees. The Company considers its relations with employees to be
excellent.
ENERGY EFFICIENCY
In 2001, GMP did not offer its own energy efficiency programs. Energy
efficiency services were provided to GMP's customers by a statewide Energy
Efficiency Utility ("EEU") known as "Efficiency Vermont", created by the VPSB in
1999. The EEU is funded by a separate energy efficiency charge that appears as
a line item on each customer bill. In 2001, the charge was 1.798 percent of
each customer's total electric bill. Some charges, such as late fees and
outdoor lighting, are excluded. The funds we collect are remitted to a fiscal
agent representing the State of Vermont. Since 1992, the Company's efficiency
programs have achieved a cumulative annual saving of 89,000 megawatthours,
saving approximately $7.9 million per year for our customers. In 2001, the
Company spent approximately $80,000 on management of energy efficiency programs
existing prior to the creation of the EEU.
RATE DESIGN
The Company seeks to design rates to encourage the shifting of electrical
use from peak hours to off-peak hours. Since 1976, we have offered optional
time-of-use rates for residential and commercial customers. Currently,
approximately 1,882 of the Company's residential customers continue to be billed
on the original 1976 time-of-use rate basis. In 1987, the Company received
regulatory approval for a rate design that permitted it to charge prices for
electric service that reflected as accurately as possible the cost burden
imposed by each customer class. The Company's rate design objectives are to
provide a stable pricing structure and to accurately reflect the cost of
providing electric services. This rate structure helps to achieve these goals.
Since inefficient use of electricity increases its cost, customers who are
charged prices that reflect the cost of providing electrical service have real
incentives to follow the most efficient usage patterns. Included in the VPSB's
order approving this rate design was a requirement that the Company's largest
customers be charged time-of-use rates on a phased-in basis by 1994. At
December 31, 2001, approximately 1,495 of the Company's largest customers,
comprising 53% of retail revenues, continue to receive service on mandatory
time-of-use rates.
In May 1994, the Company filed its current rate design with the VPSB. The
parties, including the Department, IBM and a low-income advocacy group, entered
into a settlement that was approved by the VPSB on December 2, 1994. Under the
settlement, the revenue allocation to each rate class was adjusted to reflect
class-by-class cost changes since 1987, the differential between the winter and
summer rates was reduced, the customer charge was increased for most classes,
and usage charges were adjusted to be closer to the associated marginal costs.
No modifications to base rate redesign have taken place since the VPSB
Order issued on December 2, 1994, however, as previously noted, the VPSB
Settlement Order of January 2001 eliminated seasonal rate differentials
effective April 2001.
DISPATCHABLE AND INTERRUPTIBLE SERVICE CONTRACTS
In 2001, we had 28 dispatchable power contracts: 20 contracts were
year-round, while the 8 seasonal contracts include two major ski areas. The
dispatchable portion of the contracts allows customers to purchase electricity
during times designated by the Company when low cost power is available. The
customer's demand during these periods is not considered in calculating the
monthly billing. This program enables the Company and the customers to benefit
from load control. We shift load from our high cost peak periods and the
customer uses inexpensive power at a time when its use provides maximum value.
These programs are available by tariff for qualifying customers.
ENVIRONMENTAL MATTERS
We had been notified by the Environmental Protection Agency ("EPA") that we
were one of several potentially responsible parties for clean up at the Pine
Street Barge Canal site in Burlington, Vermont. In September 1999, we
negotiated a final settlement with the United States, the State of Vermont, and
other parties over terms of a Consent Decree that covers claims addressed in
earlier negotiations and implementation of the selected remedy. In October
1999, the federal district court approved the Consent Decree that addresses
claims by the EPA for past Pine Street Barge Canal site costs, natural resource
damage claims and claims for past and future oversight costs. The Consent
Decree also provides for the design and implementation of response actions at
the site. For information regarding the Pine Street Barge Canal site and other
environmental matters, see Item 7. MD and A- Environmental Matters, and Note I
of Notes.
UNREGULATED BUSINESSES
In 1998, we sold the assets of our wholly owned subsidiary, Green Mountain
Propane Gas Company. In 1999, Green Mountain Resources, Inc. sold its remaining
interest in Green Mountain Energy Resources. During 1999, the Company
discontinued operations of Northern Water Resources, Inc.("NWR"), a subsidiary
of the Company that invests in wastewater, energy efficiency and generation
businesses. The loss in 2000 reflects the sale of most of NWR's remaining energy
assets and the current estimated costs of winding down NWR's wastewater
businesses. For information regarding our remaining unregulated businesses, see
Item 7a. MD and A - Unregulated Businesses.
EXECUTIVE OFFICERS
The names, ages, and positions of the Company's Executive Officers as of March
15, 2002 are:
Christopher L. Dutton 53
President, Chief Executive Officer of the Company and Chairman of the
Executive Committee of the Company since August 1997. Vice President, Finance
and Administration, Chief Financial Officer and Treasurer from 1995 to August
1997. Vice President and General Counsel from 1993 to January 1995. Vice
President, General Counsel and Corporate Secretary from 1989 to 1993.
Robert J. Griffin, CPA 45
Treasurer since February 2002. Controller since October 1996. Manager of
General Accounting from 1990 to 1996.
Walter S. Oakes 55
Vice President-Field Operations since August 1999. Assistant Vice
President-Customer Operations from June 1994 to August 1999. Assistant Vice
President, Human Resources from August 1993 to June 1994. Assistant Vice
President-Corporate Services from 1988 to 1993.
Mary G. Powell 41
Senior Vice President-Chief Operating Officer since April 2001. Senior
Vice President-Customer and Organizational Development since December 1999. Vice
President-Administration from February 1999 through December 1999. Vice
President, Human Resources and Organizational Development from March 1998 to
February 1999. Prior to joining the Company, she was President of HRworks,
Inc., a human resources management firm, from January 1997 to March 1998. From
1992 to January 1997, she worked for KeyCorp in Vermont, most recently as Senior
Vice President Community Banking. At KeyCorp, she also served as Vice President
Administration and Vice President of Human Resources.
Stephen C. Terry 59
Senior Vice President-Corporate and Legal Affairs since August 1999.
Senior Vice President, Corporate Development from August 1997 to August 1999.
Vice President and General Manager, Retail Energy Services from 1995 to August
1997. Vice President-External Affairs from 1991 to January 1995.
Officers are elected by the Board of Directors of the Company and its
wholly owned subsidiaries, as appropriate, for one-year terms and serve at the
pleasure of such boards of directors.
Additional information regarding compensation, beneficial ownership of the
Company's stock, members of the board of directors, and other information is
presented in the Company's Proxy Statement to Shareholders dated March 29, 2002,
and is hereby incorporated by reference.
ITEM 2. PROPERTY
GENERATING FACILITIES
Our Vermont properties are located in five areas and are interconnected by
transmission lines of VELCO and New England Power Company. We wholly own and
operate eight hydroelectric generating stations with a total nameplate rating of
36.1 MW and an estimated claimed capability of 35.7 MW. We also own two
gas-turbine generating stations with an aggregate nameplate rating of 59.9 MW
and an estimated aggregate claimed capability of 73.2 MW. We have two diesel
generating stations with an aggregate nameplate rating of 8.0 MW and an
estimated aggregate claimed capability of 8.6 MW. We also have a wind
generating facility with a nameplate rating of 6.1 MW.
We also own:
* 17.9% of the outstanding common stock, and are entitled to 17.662% (93.8
MW of a total 531 MW) of the capacity, of Vermont Yankee,
* 1.1% (7.1 MW of a total 620 MW) joint-ownership share of the Wyman #4
plant located in Maine,
* 8.8% (31.0 MW of a total 352 MW) joint-ownership share of the Stony Brook
I intermediate units located in Massachusetts, and
* 11.0% (5.8 MW of a total 53 MW) joint-ownership share of the J.C. McNeil
wood-fired steam plant located in Burlington, Vermont.
See Item 1. Business - Power Resources for plant details and the table
hereinafter set forth for generating facilities presently available.
TRANSMISSION AND DISTRIBUTION
The Company had, at December 31, 2001, approximately 2 miles of 115 kV
transmission lines, 6 miles of 69 kV transmission lines, 3 miles of 44 kV and
185 miles of 34.5 kV transmission lines. Our distribution system includes
approximately 2,300 miles of overhead lines of 2.4 kV to 34.5 kV, and
approximately 460 miles of underground cable of 2.4 kV to 34.5 kV. At such
date, we owned approximately 159,000 kVa of substation transformer capacity in
transmission substations, 570,00 kVa of substation transformer capacity in
distribution substations and 1,085,000 kVa of transformers for step-down from
distribution to customer use.
The Company owns 34.8% of the Highgate transmission inter-tie, a 225-MW
converter and transmission line used to transmit power from Hydro-Quebec.
We also own 29.5% of the common stock and 30% of the preferred stock of
VELCO, which operates a high-voltage transmission system interconnecting
electric utilities in the State of Vermont.
PROPERTY OWNERSHIP
The Company's wholly owned plants are located on lands that we own in fee.
Water power and floodage rights are controlled through ownership of the
necessary land in fee or under easements.
Transmission and distribution facilities that are not located in or over
public highways are, with minor exceptions, located either on land owned in fee
or pursuant to easements which, in nearly all cases, are perpetual.
Transmission and distribution lines located in or over public highways are so
located pursuant to authority conferred on public utilities by statute, subject
to regulation by state or municipal authorities.
INDENTURE OF FIRST MORTGAGE
The Company's interests in substantially all of its properties and
franchises are subject to the lien of the mortgage securing its First Mortgage
Bonds. See Note M, Subsequent Events, for information on recent events
concerning First Mortgage Bonds.
GENERATING FACILITIES OWNED
The following table gives information with respect to generating
facilities presently available in which the Company has an ownership interest.
See also Item 1. Business - Power Resources.
Winter
Capability
Location Name Fuel MW
--------------- --------------- -------- -----
Wholly Owned
Hydro . . . . . . . . . Middlesex, VT Middlesex #2 Hydro 3.3
Hydro . . . . . . . . . Marshfield, VT Marshfield #6 Hydro 4.9
Hydro . . . . . . . . . Vergennes, VT Vergennes #9 Hydro 2.1
Hydro . . . . . . . . . W. Danville, VT W. Danville #15 Hydro 1.1
Hydro . . . . . . . . . Colchester, VT Gorge #18 Hydro 3.3
Hydro . . . . . . . . . Essex Jct., VT Essex #19 Hydro 7.8
Hydro . . . . . . . . . Waterbury, VT Waterbury #22 Hydro 5.0 (1)
Hydro . . . . . . . . . Bolton, VT DeForge #1 Hydro 7.8
Diesel. . . . . . . . . Vergennes, VT Vergennes #9 Oil 4.2
Diesel. . . . . . . . . Essex Jct., VT Essex #19 Oil 4.4
Gas . . . . . . . . . . Berlin, VT Berlin #5 Oil 56.6
Turbine . . . . . . . . Colchester, VT Gorge #16 Oil 16.1
Wind. . . . . . . . . . Searsburg, VT Searsburg Wind 1.2
Jointly Owned
Steam . . . . . . . . . Vernon, VT Vermont Yankee Nuclear 93.8 (2)
Steam . . . . . . . . . Yarmouth, ME Wyman #4 Oil 7.1
Steam . . . . . . . . . Burlington, VT McNeil Wood/Gas 6.6 (3)
Combined. . . . . . . . Ludlow, MA Stony Brook #1 Oil/Gas 31.0 (2)
Total Winter Capability 256.3
=====
(1) Reservoir has been drained, dam awaiting repairs by the State of Vermont.
(2) For a discussion of the impact of various power supply sales on the
availability of generating facilities, see Item 1. Business - Power Resources.
(3) The Company's entitlement in McNeil is 5.8 MW. However, we receive up to
6.6 MW as a result of other owners' losses on this system.
CORPORATE HEADQUARTERS
The Company terminated an operating lease for its corporate headquarters
building and two of its service center buildings in the first quarter of 1999.
During 1998, the Company recorded a loss of approximately $1.9 million before
applicable income taxes to reflect the probable loss resulting from this
transaction. The Company sold its corporate headquarters building in 1999, but
retained ownership of its two service centers.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any material litigation at the present time.
See the discussion under Item 7. MD and A - Environmental Matters, Rates, and
Note I of Notes.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Outstanding shares of the Common Stock are listed and traded on the New
York Stock Exchange under the symbol GMP. The following tabulation shows the
high and low sales prices for the Common Stock on the New York Stock Exchange
during 2000 and 2001:
HIGH LOW
-------- --------
2000
First Quarter. $ 9 $6 9/16
Second Quarter 8 1/2 6 5/8
Third Quarter. 8 3/4 7 3/8
Fourth Quarter 14 3/4 7 9/16
2001
First Quarter. $ 19.50 $ 11.06
Second Quarter 16.65 14.88
Third Quarter. 17.74 15.56
Fourth Quarter 18.85 15.90
The number of common stockholders of record as of March 15, 2001 was 5,673.
Quarterly cash dividends were paid as follows during the past two years:
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
2000 $ 0.1375 $ 0.1375 $ 0.1375 $ 0.1375
2001 $ 0.1375 $ 0.1375 $ 0.1375 $ 0.1375
Dividend Policy. On November 23, 1998, the Company's Board of Directors
announced a reduction in the quarterly dividend from $0.275 per share to $0.1375
per share on the Company's common stock. The current indicated annual dividend
is $0.55 per share of common stock.
Our current dividend policy reflects changes affecting the electric utility
industry, which is moving away from the traditional cost-of-service regulatory
model to a competition based market for power supply. In addition, the
Settlement Order limits the dividend rate at its current level until short-term
credit facilities are replaced with long-term debt or equity.
Historically, we based our dividend policy on the continued validity of
three assumptions: The ability to achieve earnings growth; the receipt of an
allowed rate of return that accurately reflects our cost of capital; and the
retention of our exclusive franchise. The Company's Board of Directors will
continue to assess and adjust the dividend, when appropriate, as the Vermont
electric industry evolves towards competition. In addition, if other events
beyond our control cause the Company's financial situation to deteriorate, the
Board of Directors would consider whether the current dividend level is
appropriate or if the dividend should be reduced or eliminated. See Item 7. MD
and A - Liquidity and Capital Resources-Dividend Policy, Future Outlook,
Competition and Restructuring, and Note C of Notes for a discussion of dividend
restrictions.
ITEM 6. SELECTED FINANCIAL DATA
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
In thousands, except per share data
Operating Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $283,464 $277,326 $251,048 $184,304 $179,323
Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 267,005 272,066 243,102 178,832 163,808
--------- --------- --------- --------- ---------
Operating Income . . . . . . . . . . . . . . . . . . . . . . . 16,459 5,260 7,946 5,472 15,515
--------- --------- --------- --------- ---------
Other Income
AFUDC - equity . . . . . . . . . . . . . . . . . . . . . . . . 210 284 134 104 357
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,163 2,422 3,319 1,509 1,074
--------- --------- --------- --------- ---------
Total other income . . . . . . . . . . . . . . . . . . . . . . 2,373 2,706 3,453 1,613 1,431
--------- --------- --------- --------- ---------
Interest Charges
AFUDC - borrowed . . . . . . . . . . . . . . . . . . . . . . . (188) (228) (91) (131) (315)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,227 7,485 7,274 8,007 7,965
--------- --------- --------- --------- ---------
Total interest charges . . . . . . . . . . . . . . . . . . 7,039 7,257 7,183 7,876 7,650
--------- --------- --------- --------- ---------
Net Income (Loss) from continuing operations before. . . . . . . . . 11,793 709 4,216 (791) 9,296
preferred dividends
Net Income (Loss) from discontinued operations, including
provisions for loss on disposal . . . . . . . . . . . . . . . . . (182) (6,549) (7,279) (2,086) 142
Dividends on Preferred Stock . . . . . . . . . . . . . . . . . . . . 933 1,014 1,155 1,296 1,433
--------- --------- --------- --------- ---------
Net Income (Loss)Applicable
to Common Stock. . . . . . . . . . . . . . . . . . . . . . . . $ 10,678 $ (6,854) $ (4,218) $ (4,173) $ 8,005
========= ========= ========= ========= =========
Common Stock Data
Basic earnings per share-continuing operations . . . . . . . . $ 1.93 $ (0.06) $ 0.57 $ (0.40) $ 1.54
Basic earnings per share-discontinued operations . . . . . . . (0.03) (1.19) (1.36) (0.40) 0.03
--------- --------- --------- --------- ---------
Basic earnings per share . . . . . . . . . . . . . . . . . . . $ 1.90 $ (1.25) $ (0.79) $ (0.80) $ 1.57
========= ========= ========= ========= =========
Diluted earnings (loss) per share from discontinued operations $ 1.88 $ (0.06) $ 0.57 $ (0.40) $ 1.54
Diluted earnings (loss) per share from continuing operations . (0.03) (1.19) (1.36) (0.40) 0.03
--------- --------- --------- --------- ---------
Diluted earnings (loss) per share. . . . . . . . . . . . . . . $ 1.85 $ (1.25) $ (0.79) $ (0.80) $ 1.57
========= ========= ========= ========= =========
Cash dividends declared per share. . . . . . . . . . . . . . . . . . $ 0.55 $ 0.55 $ 0.55 $ 0.96 $ 1.61
Weighted average shares outstanding-basic. . . . . . . . . . . 5,630 5,491 5,361 5,243 5,112
Weighted average share equivalents outstanding-diluted . . . . 5,789 5,491 5,361 5,243 5,112
FINANCIAL CONDITION AS OF DECEMBER 31
- ------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
In thousands
ASSETS
Utility Plant, Net. . . . . . . . . . . $196,858 $194,672 $192,896 $195,556 $196,720
Other Investments . . . . . . . . . . . 20,945 20,730 20,665 20,678 21,997
Current Assets. . . . . . . . . . . . . 36,183 53,652 33,238 35,700 29,125
Deferred Charges. . . . . . . . . . . . 75,073 46,036 41,853 35,576 35,831
Non-Utility Assets. . . . . . . . . . . 1,075 1,518 11,099 27,314 42,060
-------- -------- -------- -------- --------
Total Assets. . . . . . . . . . . . . . $330,134 $316,608 $299,751 $314,824 $325,733
======== ======== ======== ======== ========
CAPITALIZATION AND LIABILITIES
Common Stock Equity . . . . . . . . . . $101,277 $ 92,044 $100,645 $106,755 $114,377
Redeemable Cumulative Preferred Stock . 12,560 12,795 14,435 16,085 17,735
Long-Term Debt, Less Current Maturities 74,400 72,100 81,800 88,500 93,200
Capital Lease Obligation. . . . . . . . 5,959 6,449 7,038 7,696 8,342
Current Liabilities . . . . . . . . . . 38,841 68,109 36,708 28,825 25,286
Deferred Credits and Other. . . . . . . 95,396 61,794 59,125 59,889 53,723
Non-Utility Liabilities . . . . . . . . 1,701 3,317 - 7,074 13,070
-------- -------- -------- -------- --------
Total Capitalization and Liabilities. . $330,134 $316,608 $299,751 $314,824 $325,733
======== ======== ======== ======== ========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
In this section, we explain the general financial condition and the results
of operations for Green Mountain Power Corporation (the "Company") and its
subsidiaries. This explanation includes:
* factors that affect our business;
* our earnings and costs in the periods presented and why they changed
between periods;
* the source of our earnings;
* our expenditures for capital projects and what we expect they will be in
the future;
* where we expect to get cash for future capital expenditures; and
* how all of the above affects our overall financial condition.
Our critical accounting policies are discussed in Item 7a, "Quantitative
And Qualitative Disclosures About Market Risk, And Other Factors", and in Item
8, Note 1, "Significant Accounting Policies". Management believes the most
critical accounting policies include the regulatory accounting framework within
which we operate and the manner in which we account for certain power supply
arrangements that qualify as derivatives. These accounting policies, among
others, affect the Company's more significant judgments and estimates used in
the preparation of its consolidated financial statements.
There are statements in this section that contain projections or estimates
and that are considered to be "forward-looking" as defined by the Securities and
Exchange Commission (the "SEC"). In these statements, you may find words such
as believes, expects, plans, or similar words. These statements are not
guarantees of our future performance. There are risks, uncertainties and other
factors that could cause actual results to be different from those projected.
Some of the reasons the results may be different are discussed under the
captions "Power Contract Commitments", "Future Outlook", "Transmission
Expenses", "Environmental Matters", "Rates" and "Liquidity and Capital
Resources", in this Management Discussion and Analysis and include:
* regulatory and judicial decisions or legislation;
* weather;
* energy supply and demand and pricing;
* contractual commitments;
* availability, terms, and use of capital;
* general economic and business environment;
* changes in technology;
* nuclear and environmental issues; and
* industry restructuring and cost recovery (including stranded costs).
These forward-looking statements represent our estimates and assumptions
only as of the date of this report.
EARNINGS SUMMARY
The Company reported consolidated earnings of $1.85 per share of common
stock, diluted, in 2001 compared to a loss of $1.25 per share in 2000 and a loss
of $0.79 per share in 1999. The 2001 earnings represent a consolidated return on
average common equity of 11.02 percent, and a return on regulated operations of
11.25 percent. The consolidated return on average common equity was negative
7.1 percent in 2000 and negative 4.0 percent in 1999. Income from continuing
operations was $1.88 per share, diluted, in 2001, compared with a loss of $0.06
per share in 2000 and earnings of $0.57 per share in 1999. Certain subsidiary
operations, classified as discontinued in 1999, lost $0.03 per share in 2001,
compared with a loss of $1.19 per share in 2000 and a loss of $1.36 per share in
1999.
On January 23, 2001, the Vermont Public Service Board ("VPSB") issued an order
(the "Settlement Order") approving a settlement between the Company and the
Vermont Department of Public Service (the "Department") that granted the Company
an immediate 3.42 percent rate increase, and allowed full recovery of power
supply costs under the Hydro-Quebec Vermont Joint Owners ("VJO") contract. The
Settlement Order paved the way for restoration of the Company's first mortgage
bond credit rating to investment grade status (See "Rates-Retail Rate Cases" and
"Liquidity and Capital Resources" in this section) and along with lower power
supply costs, enabled the Company to earn its allowed rate of return of 11.25
percent on utility operations during 2001.
The improvement in earnings from continuing operations in 2001 compared
with the prior year resulted from several factors, primarily:
* power supply costs were $10.5 million lower than during 2000, principally
due to decreased costs associated with the management of the Company's long-term
power supply sale commitments to Hydro Quebec, and a decrease in lower margin
wholesale sales of electricity;
* the 3.42 percent retail rate increase under the Settlement Order resulted
in an increase of $9.1 million in retail operating revenues; and
* the write-off in 2000 of $3.2 million or $0.35 per share in regulatory
litigation costs.
The consolidated loss in 2000 was greater than the prior year consolidated
loss as a result of the VPSB Settlement Order that provided for the write-off of
$3.2 million or $0.35 per share in regulatory litigation costs and higher power
supply costs that were not recovered in rates. Power supply expense increased
$28.3 million in 2000, outpacing revenue growth of $26.3 million and reductions
in depreciation and amortization expense of $0.9 million.
The Company's discontinued operations lost $0.03 per share in 2001,
compared with a loss of $1.19 per share in 2000, and a loss of $1.36 per share
in 1999. During 1999, the Company discontinued operations of Northern Water
Resources, Inc.("NWR"), formerly known as Mountain Energy, Inc., a subsidiary of
the Company that invested in wastewater, energy efficiency and generation
businesses. The loss in 2000 reflects the sale of most of NWR's remaining
energy assets and the estimated costs of winding down NWR's wastewater
businesses.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, AND OTHER
RISK FACTORS- The primary concern affecting future operating results is the
volatility of the wholesale electricity market. Inherent in our market risk
sensitive instruments and positions is the potential loss arising from adverse
changes in our commodity prices. Restructuring of the wholesale market for
electricity has brought increased price volatility to our power supply markets.
The price of electricity is subject to fluctuations resulting from changes
in supply and demand. To reduce price risk caused by these market fluctuations,
we have established a policy to hedge (through the utilization of derivatives)
our supply and related purchase and sales commitments, as well as our
anticipated purchases and sales. Changes in the market value of derivatives
have a high correlation to the price changes of the hedged commodities.
The Company has a contract with Morgan Stanley Capital Group, Inc. ("MS"),
which is used to hedge against increases in fossil fuel prices. MS purchases
the majority of the Company's power supply resources at index (fossil fuel
resources) or specified (i.e., contracted resources) prices and then sells to us
at a fixed rate to serve pre-established load requirements. This contract
allows management to fix the cost of much of its power supply requirements,
subject to power resource availability and other risks. The MS contract is a
derivative under Statement of Financial Accounting Standards No. 133 ("SFAS
133") and is effective through December 31, 2003. Management's estimate of the
fair value of the future net cost of this arrangement at December 31, 2001 is
approximately $11.6 million.
We also sometimes use future contracts to hedge forecasted wholesale sales
of electric power, including material sales commitments as discussed in Note K.
We currently have an arrangement with Hydro-Quebec that grants them an option to
call power at prices that are expected to be below current and estimated future
market rates. This arrangement is a derivative and is effective through 2015.
Management's estimate of the fair value of the future net cost for this
arrangement at December 31, 2001 is approximately $25.7 million.
A sensitivity analysis has been prepared to estimate the exposure to the market
price risk of our electricity commodity positions, using the Black-Scholes
model, over the next 13 years. Our daily net commodity position consists of
purchased electric capacity. Assumptions used within the model include a
ten-year government bond risk-free interest rate of 5.02 percent, volatility
equivalent to the peer weighted average from NEPOOL which varies from 36 percent
in the first year to 18 percent in year 13, locked in forward commitment prices
for 2002 and 2003, and an average of approximately 71,500 MWh per year with a
forward market price of $54.29 per MWh for periods beyond 2003. Actual results
may differ materially from the table. Under an accounting order issued by the
VPSB, changes in the fair value of derivatives are not recognized in earnings
until the derivative positions are settled. The table below presents market
risk estimated as the potential loss in fair value resulting from a hypothetical
ten percent adverse change in prices which for the Company's derivatives
discussed above totals approximately $1.8 million.
Commodity Price Risk At December 31, 2001
Fair Value Market Risk
--------------- ------------
(in thousands)
Net short position $ 37,313 $ 1,789
The major risk factors for the Company potentially arising from electric
industry restructuring, if adopted in Vermont, including risks pertaining to the
recovery of stranded costs, are:
* regulatory and legal decisions;
* cost and amount of default service responsibility;
* the market price of power; and
* the amount of market share retained by the Company.
There can be no assurance that any potential future restructuring plan
ordered by the VPSB, the courts, or through legislation will include a mechanism
that would allow for full recovery of our stranded costs and include a fair
return on those costs as they are being recovered. If laws are enacted or
regulatory decisions are made that do not offer an adequate opportunity to
recover stranded costs, we believe we have compelling legal arguments to
challenge such laws or decisions.
The largest category of our potential stranded costs is future costs under
long-term power purchase contracts, which, based on current forecasts, are
above-market. The magnitude of our stranded costs is largely dependent upon the
future market price of power. We have discussed various market price scenarios
with interested parties for the purpose of identifying stranded costs.
Preliminary market price assumptions, which are likely to change, have resulted
in estimates of the Company's stranded costs of between $167 million and $204
million over the life of the contracts. We intend to aggressively pursue
mitigation efforts in order to minimize the amount and maximize the recovery of
these costs.
If retail competition is implemented in Vermont, we cannot predict what the
impact would be on the Company's revenues from electricity sales.
Historically, electric utility rates have been based on a utility's cost of
service. As a result, electric utilities are subject to certain accounting
standards that apply only to regulated businesses. Statement of Financial
Accounting Standards Number 71, ("SFAS 71"), Accounting for the Effects of
Certain Types of Regulation, allows regulated entities, in appropriate
circumstances, to establish regulatory assets and liabilities, and thereby defer
the income statement impact of certain costs and revenues that are expected to
be realized in future rates.
The Company currently complies with the provisions of SFAS 71. If the
Company had determined that it no longer met the criteria for following SFAS 71,
at December 31, 2001 the accounting impact would have been an extraordinary,
non-cash charge to operations of $74.2 million. Factors that could give rise to
the discontinuance of SFAS 71 include:
* deregulation;
* a change in the regulators' approach to setting rates from cost-based
regulation to another form of regulation;
* increasing competition that limits our ability to sell utility services or
products at rates that will recover costs; and
* regulatory actions that limit rate relief to a level insufficient to
recover costs.
The enactment of restructuring legislation or issuance of a regulatory
order containing provisions that do not allow for the recovery of above-market
power costs would require the Company to estimate and record losses immediately,
on an undiscounted basis, for any above-market power purchase contracts and
other costs which are probable of not being recoverable from customers, to the
extent that those costs are estimable.
We are unable to predict what form future legislation, if passed, or an
order, if issued, will take, and we cannot predict if or to what extent SFAS 71
will continue to be applicable in the future. In addition, members of the staff
of the Securities and Exchange Commission have raised questions concerning the
continued applicability of SFAS 71 to certain other electric utilities facing
restructuring. However, we currently believe that the continued application of
SFAS 71 is appropriate at this time.
We cannot predict whether restructuring legislation enacted by the Vermont
General Assembly or any subsequent report or actions of, or proceedings before,
the VPSB or the Vermont General Assembly would have a material adverse effect on
our operations, financial condition or credit ratings. The failure to recover a
significant portion of our purchased power costs, or to retain and attract
customers in a competitive environment, would likely have a material adverse
effect on our business, including our operating results, cash flows and ability
to pay dividends at current levels.
UNREGULATED BUSINESSES
In 2000, we significantly reduced our investment in unregulated businesses,
continuing the process we began in June 1999, when we decided to sell or
otherwise dispose of the assets of NWR, and report its results as loss from
operations of a discontinued segment. NWR, which invested in energy generation,
energy efficiency and wastewater treatment projects, lost approximately $0.2
million in 2001, compared with a loss of $6.5 million in 2000, and a loss of
$7.3 million in 1999. The 2001 loss resulted primarily from provisions to
recognize adjustments to liability estimates under warrantees for past equipment
sales.
Risk factors associated with the discontinuation of NWR operations include
the outcome of warranty litigation, and future cash requirements necessary to
minimize costs of winding down wastewater operations. Several municipalities
using wastewater treatment equipment provided by Micronair, LLC, a wholly owned
subsidiary of NWR, have commenced or threatened litigation against Micronair.
The ultimate loss remains subject to the disposition of remaining NWR assets and
liabilities, and could exceed the amounts recorded.
The Company's unregulated rental water heater business earned $0.3
million in 2001, essentially unchanged from the prior year.
RESULTS OF OPERATIONS
OPERATING REVENUES AND MWH SALES-Operating revenues and megawatthour ("MWh")
sales for the years ended 2001, 2000 and 1999 consisted of:
Years ended December 31,
2001 2000 1999
-------------------------- ---------- ----------
(dollars in thousands)
Operating Revenues
Retail . . . . . . . $ 195,093 $ 185,944 $ 179,997
Sales for Resale . . 83,804 88,333 68,305
Other. . . . . . . . 4,567 3,049 2,746
-------------------------- ---------- ----------
Total Operating Revenues $ 283,464 $ 277,326 $ 251,048
========================== ========== ==========
MWH Sales-Retail . . . . 1,948,131 1,947,857 1,900,188
MWH Sales for Resale . . 2,368,887 2,575,657 2,172,849
-------------------------- ---------- ----------
Total MWH Sales. . . . . 4,317,018 4,523,514 4,073,037
========================== ========== ==========
Average Number of Customers
Years ended December 31,
2001 2000 1999
------------------------ ------ ------
Residential . . . . . . . 73,270 72,424 71,515
Commercial and Industrial 13,006 12,769 12,461
Other . . . . . . . . . . 65 65 66
------------------------ ------ ------
Total Number of Customers. . 86,341 85,258 84,042
======================== ====== ======
Differences in operating revenues were due to changes in the following:
Change in Operating Revenues 2000 to 1999 to
2001 2000
--------------- -------
(In thousands)
Retail Rates . . . . . . . . . $ 9,122 $ 4,551
Retail Sales Volume. . . . . . 27 1,396
Resales and Other Revenues . . (3,011) 20,331
--------------- -------
Increase in Operating Revenues $ 6,138 $26,278
=============== =======
In 2001, total electricity sales decreased 4.6 percent compared with 2000 due
principally to reduced sales for resale executed pursuant to the MS agreement,
described in more detail below under the headings "Power Supply Expenses" and
"Power Contract Commitments". Total operating revenues increased $6.1 million
or 2.2 percent in 2001 compared with 2000 primarily due to increases in retail
and other operating revenues, partially offset by a decrease in lower margin
wholesale sales. Retail operating revenues increased $9.1 million or 4.9
percent in 2001 compared with 2000 due to a 3.42 percent retail rate increase
that went into effect January 2001 and an additional increase in revenues from
an industrial customer pursuant to revisions in a special contract with that
customer approved in the Settlement Order.
In 2000 total electricity sales increased 11.1 percent compared with 1999
due principally to sales for resale executed pursuant to the MS agreement,
described in more detail below under the headings "Power Supply Expenses" and
"Power Contract Commitments". Total operating revenues increased $26.3 million
or 10.5 percent primarily for the same reason. Total retail revenues increased
$5.9 million or 3.3 percent in 2000 primarily due to:
* a 3.0 percent retail rate increase that went into effect January 2000; and
* a 2.6 percent increase in sales of electricity to both our commercial and
industrial and our residential customers resulting primarily from customer
growth and load growth for our largest customer.
International Business Machines Corporation ("IBM"), the Company's single
largest customer, operates manufacturing facilities in Essex Junction, Vermont.
IBM's electricity requirements for its main plant and an adjacent plant
accounted for approximately 26.6, 26.6, and 25.9 percent of the Company's retail
MWh sales in 2001, 2000, and 1999, respectively, and 19.2, 16.5, and 16.2
percent of the Company's retail operating revenues in 2001, 2000, and 1999,
respectively. No other retail customer accounted for more than one percent of
the Company's revenue in any year.
Since 1995, the Company has had agreements with IBM with respect to
electricity sales above agreed-upon base-load levels. On December 8, 2000, the
VPSB approved a new three-year agreement between the Company and IBM, ending
December 31, 2003. The price of power for the renewal period of the agreement is
above our marginal costs of providing incremental service to IBM.
POWER SUPPLY EXPENSES- Prior to 2001, our inability to recover our power supply
costs had been a primary reason for the poor performance of the Company's common
stock price during 1999 and 2000. The Settlement Order removed this obstacle by
allowing the Company rate recovery of its estimated power supply costs for 2001.
Furthermore, the Settlement Order allowed the Company to defer approximately
$8.5 million in rate levelization revenues for recognition in 2002 and 2003, if
necessary, to achieve its allowed rate of return. The deferred recognition of
rate levelization revenues provides us an opportunity to recover our power
supply costs in 2002 without further rate relief (See "Power Contract
Commitments", and "Rates-Retail Rate Cases" in this section).
Power supply expenses constituted 75.3, 77.7, and 75.4 percent of total
operating expenses for the years 2001, 2000, and 1999, respectively. Power
supply expenses decreased by $10.5 million or 5.0 percent in 2001 and increased
$28.3 million or 15.4 percent in 2000. The decrease in power supply expenses in
2001 compared with 2000 resulted from the following:
* a $7.7 million decrease in energy costs arising from a power supply
arrangement with Hydro-Quebec, discussed under the caption "Power Contract
Commitments", whereby Hydro-Quebec has an option to purchase energy at prices
that were below market replacement costs;
* a $5.9 million decrease in Vermont Yankee costs due primarily to the
timing of scheduled outages at the plant, where the outage costs including the
costs of replacement power are deferred and amortized over the subsequent
refueling cycle;
* a $4.5 million decrease from power purchased for resale, primarily under a
power supply agreement discussed under the caption "Power Contract Commitments"
below, whereby we buy power from MS that is sufficient to serve pre-established
load requirements at a pre-defined price; and
* a $3.0 million decrease in Company-owned generation costs reflecting a
reduction in generation used to maintain system reliability as compared to the
prior year when the unavailability of certain transmission equipment required
these units to run more frequently.
These amounts were partially offset by the disallowance in rates of 2000
Hydro Quebec power contract costs that required $7.5 million of those costs to
be charged in 1999 and amortized as a reduction of power supply expenses during
2000, $2.1 million in higher energy prices in 2001 under our MS agreement, and
higher capacity costs in 2001 of approximately $1.0 million.
Power supply expenses increased by $28.3 million or 15.4 percent from 1999
to 2000. The increase in power supply expenses from 1999 to 2000 resulted from
the following:
* a $20.0 million increase from power purchased for resale, primarily under
a power supply agreement discussed below, whereby we buy power from MS that is
sufficient to serve pre-established load requirements at a pre-defined price;
* a $7.7 million increase in energy costs arising from a power supply
arrangement with Hydro-Quebec, discussed below, whereby Hydro-Quebec has an
option to purchase energy at prices that were below market replacement costs;
* the costs to serve increased retail sales of electricity of 2.8 percent in
2001 and higher unit power supply costs; and
* a $3.6 million increase in capacity costs associated with our long-term
Hydro-Quebec power supply contract.
These amounts were partially offset by a reduction in 2000 of $9.7 million
in losses accrued for the Hydro-Quebec power cost disallowance under past
regulatory rulings. Results for 1999 reflected pretax charges of $2.2 million
in disallowed Hydro-Quebec power costs, compared with the amortization during
2000 of accrued power expenses of $7.5 million for 2000 that had been recorded
in 1999. The power supply costs of Company-owned generation increased 39.3
percent or $2.2 million in 2000 due to purchases by MS under a power supply
agreement discussed below and because units were dispatched for system
reliability requirements due to the unavailability of certain transmission
facilities.
The Independent System Operator of New England ("ISO") was created to
manage the operations of the New England Power Pool ("NEPOOL") effective May 1,
1999. The ISO works as a clearinghouse for purchasers and sellers of electricity
in the deregulated wholesale energy markets. Sellers place bids for the sale of
their generation or purchased power resources and if demand is high enough the
output from those resources is sold.
We must purchase electricity to meet customer demand during periods of high
usage and to replace energy repurchased by Hydro-Quebec under an arrangement
negotiated in 1997. Our costs to serve demand during periods of warmer than
normal temperatures in summer months and to replace such energy repurchases by
Hydro-Quebec rose substantially after the wholesale power markets became
deregulated in 1999, which caused much greater volatility in spot prices for
electricity. The cost of securing future power supplies had also risen
substantially in tandem with higher summer power supply costs. The Company
cannot predict the extent to which future prices will trade above historical
levels of cost. If the new markets continue to experience the volatility
evident during 1999 and 2000, our earnings and cash flow could be adversely
impacted by a material amount.
POWER CONTRACT COMMITMENTS- On February 11, 1999, we entered into a contract
with MS as a result of our power requirements solicitation in 1998. A master
power purchase and sales agreement ("PPSA") defines the general contract terms
under which the parties may transact. The sales under the PPSA commenced on
February 12, 1999 and will terminate after all obligations under each
transaction entered into by MS and the Company have been fulfilled. The PPSA
was filed with the Federal Energy Regulatory Commission ("FERC") and the VPSB
was notified as well. In January 2001, the PPSA was modified and extended to
December 31, 2003.
The PPSA provides us with a means of managing price risks associated with
changing fossil fuel prices. On a daily basis, and at MS's discretion, we sell
power to MS from either (i) all or part of our portfolio of power resources at
predefined operating and pricing parameters or (ii) any power resources
available to us, provided that sales of power from sources other than
Company-owned generation comply with the predefined operating and pricing
parameters. MS then sells to us, at a predefined price, power sufficient to
serve pre-established load requirements. MS is also responsible for scheduling
supply resources. We remain responsible for resource performance and
availability. MS provides no coverage against major unscheduled outages. The
Company and MS have agreed to the protocols that are used to schedule power
sales and purchases and to secure necessary transmission. We anticipate that
arrangements we make to manage power supply risks will be on average more costly
than the expected cost of fuel during the periods being hedged because these
arrangements would typically incorporate a risk premium.
During 1994, we negotiated an arrangement with Hydro-Quebec that reduced
the cost under our 1987 contract with Hydro-Quebec over the November 1995
through October 1999 period (the "July 1994 Agreement").
As part of the July 1994 Agreement, we were obligated to purchase $4.0
million (in 1994 dollars) worth of research and development work from
Hydro-Quebec over a four-year period (which was extended to 2001), and made a
$6.5 million (in 1994 dollars) payment to Hydro-Quebec in 1995. Hydro-Quebec
retains the right to curtail annual energy deliveries by 10 percent up to five
times, over the 2001 to 2015 period, if documented drought conditions exist in
Qu bec.
Hydro-Quebec also has the right to reduce the load factor from 75 percent
to 65 percent a total three times over the life of the 1987 contract. The
Company can delay such reduction by one year under the same contract. During
2001, Hydro-Quebec exercised the first of these options for 2002 and the Company
delayed the effective date of this exercise until 2003. The Company estimates
that the net cost of Hydro-Quebec's exercise of its option will increase power
supply expense during 2003 by approximately $0.4 million. During the first
year of the July 1994 Agreement (the period from November 1995 through October
1996), the average cost per kilowatt-hour of Schedules B and C3 combined was cut
from 6.4 to 4.2 cents per kilowatt-hour, a 34 percent (or $16 million) cost
reduction. Over the period from November 1996 through December 2000 and
accounting for the payments to Hydro-Quebec, the combined unit costs were
lowered from 6.5 to 5.9 cents per kilowatt-hour, reducing unit costs by 10
percent and saving $20.7 million in nominal terms.
Under a power supply arrangement executed in January 1996 ("9601"), we
received payments from Hydro-Quebec of $3.0 million in 1996 and $1.1 million in
1997. Under 9601 we were required to shift up to 40 megawatts of deliveries to
an alternate transmission path, and use the associated portion of the
NEPOOL/Hydro-Quebec interconnection facilities to purchase power for the period
from September 1996 through June 2001 at prices that varied based upon
conditions in effect when the purchases were made. 9601 also provided for
minimum payments by the Company to Hydro-Quebec for periods in which power was
not purchased under the arrangement. 9601 allowed Hydro-Quebec to curtail
deliveries of energy should it need to use certain resources to supplement
available supply. Hydro-Quebec did curtail deliveries in the fourth quarter of
2000. We estimate that 9601 has provided a benefit of approximately $3.0
million on a net present value basis over the past six years.
Under a separate arrangement executed on December 5, 1997 ("9701"),
Hydro-Quebec paid $8.0 million to the Company in 1997. In return for this
payment, we provided Hydro-Quebec options for the purchase of power. Commencing
April 1, 1998 and effective through the term of the 1987 Contract, which ends in
2015, Hydro-Quebec may purchase up to 52,500 MWh ("option A") on an annual
basis, at the 1987 Contract energy prices, which are substantially below current
market prices. The cumulative amount of energy that may be purchased under
option A shall not exceed 950,000 MWh.
Over the same period, Hydro-Quebec may exercise an option to purchase a
total of 600,000 MWh ("option B") at the 1987 Contract energy price. Under
option B, Hydro-Quebec may purchase no more than 200,000 MWh in any year. As of
December 31, 2001, Hydro-Quebec had purchased or called to purchase 432,000 MWh
under option B.
In 2001, Hydro-Quebec exercised option A and option B, and called for
deliveries to third parties at a net expense to the Company of approximately
$7.6 million, including capacity charges.
In 2000, Hydro-Quebec exercised option A and option B, and called for
deliveries to third parties at a net cost to the Company of approximately $14.0
million (including the cost of January and February, 2001 calls, and the cost of
related financial positions), which was due to higher energy replacement costs
incurred by the Company. Approximately $6.6 million of the $14.0 million net
9701 costs were recovered in rates on an annual basis.
In 1999, Hydro-Quebec called for deliveries to third parties at a net cost
to the Company of approximately $6.3 million. Hydro-Quebec's option to curtail
energy deliveries pursuant to the July 1994 Agreement can be exercised in
addition to these purchase options.
The VPSB, in the Settlement Order stated, "The record does not demonstrate
that any other New England utility foresaw the extent and degree of volatility
that has developed in the New England wholesale power markets. Absent that
volatility, the 97-01 Agreement would not have had adverse effects." In
conjunction with the Settlement Order, Hydro-Quebec committed to the Department
that it would not call any energy under option B of 9701 during the contract
year ending October 31, 2002.
On April 17, 2001, an Arbitration Tribunal issued its decision in the
arbitration brought by a group of Vermont electric companies and municipal
utilities, known as the Vermont Joint Owners ("VJO"), against Hydro-Quebec for
its failure to deliver electricity pursuant to the VJO/Hydro-Quebec power supply
contract during the 1998 ice storm. The Company is a member of the VJO.
In its award, the Arbitration Tribunal agreed partially with Hydro-Quebec
and partially with the VJO. In the decision, the Tribunal concluded (i) the
VJO/Hydro-Quebec power supply contract remains in effect and Hydro-Quebec is
required to continue to provide capacity and energy to the Company under the
terms of the VJO contract, which expires in 2015 and (ii) Hydro-Quebec is
required to return certain capacity payments to the VJO.
On July 23, 2001, the Company received approximately $3.2 million
representing its share of refunded capacity payments from Hydro-Quebec. These
proceeds reduced related deferred assets leaving a deferred balance of
unrecovered arbitration costs of approximately $1.4 million. We believe it is
probable that this balance will ultimately be recovered in rates.
Vermont Yankee Nuclear Power Corporation("VY")
On August 15, 2001, VY agreed to sell its nuclear power plant to Entergy
Corporation for approximately $180 million. The FERC approved the Entergy
purchase on January 30, 2002. The sale is subject to approval of the VPSB, the
U.S. Nuclear Regulatory Commission, and other regulatory bodies. A related
agreement calls for Entergy to provide the current output level of the plant to
VY's present sponsors, including the Company, at average annual prices ranging
from $39 to $45 per megawatt hour through 2012, subject to a "low market
adjuster" effective November 2005, that protects the Company and other sponsors
in the event that market prices for power drop significantly. No additional
decommission liability funding or any other financing by VY is anticipated to
complete the transaction. The sale, if completed, will lower projected costs
over the remaining license period for VY. The Company would continue to own its
equity interest in VY, whose role would consist primarily of administering power
supply contracts between Entergy and VY's present sponsors. On March 4, 2002,
the Vermont Department of Public Service announced its endorsement of the
proposed sale of the Vermont Yankee nuclear plant to Entergy Corporation, as
discussed in Note B.
The VY plant currently has several fuel rods that will require repair
during 2002, a maintenance requirement that is not unique to VY. There are
various means of addressing the maintenance, including an estimated ten-day
shutdown of the plant, or a delay in shutdown accompanied by a reduction in the
generation output at the plant. At the present time, the Company is unable to
estimate the duration of any future outage or its ultimate cost, but it could be
material.
OTHER OPERATING EXPENSES- Other operating expenses decreased $1.7 million, or
9.7 percent in 2001 compared with 2000. The decrease was primarily due to a
$3.2 million charge during 2000 for disallowed regulatory litigation costs,
ordered by the VPSB as part of the Settlement Order, offset in part by increased
outside service expense during 2001.
Other operating expenses increased $0.1 million in 2000 compared with 1999.
The increase was primarily due to a $3.2 million charge for disallowed
regulatory litigation costs, ordered by the VPSB as part of the Settlement
Order. The increase was offset by a $3.3 million decrease in administrative and
general expense caused by the Company's reorganization efforts that reduced the
size of the workforce and lowered building occupancy costs.
TRANSMISSION EXPENSES-Transmission expenses decreased $0.1 million or 0.8
percent in 2001 compared with 2000.
Transmission expenses increased $3.4 million or 31.8 percent in 2000
compared with 1999 primarily due to congestion charges that reflect the lack of
adequate transmission or generation capacity in certain locations within New
England. These charges are allocated to all ISO members. The Company is unable
to predict the magnitude or duration of future congestion charge allocation, but
amounts could be material.
In 2000, FERC issued a separate order ("Order 2000") requiring all
utilities to file plans for the formation and administration of regional
transmission organizations ("RTO"). In January 2001, the Company and other
Vermont transmission owning companies filed in compliance with Order 2000. The
Vermont companies support the Petition for Declaratory Order by various New
England transmission owning companies, with reservations. The Vermont companies'
principal concerns relate to:
* whether a New England RTO ("NERTO") will include all non-Pool Transmission
Facilities in the NERTO Tariff on a rolled in basis;
* whether Highgate and Phase I/Phase II transmission facilities will be
included in the Tariff without a separate transmission levy;
* whether NERTO will continue the transition to a single regional
transmission rate; and
* the percentage of equity that transmission owners may acquire in the new
organization.
It has become likely that New England will adopt separate local energy
prices that reflect transmission constraints between local regions within the
NERTO. The changes are expected to become effective during 2003. The
locational energy prices are likely to vary between local regions based on
variables that include the amount of local generation, the cost of local
transmission facilities and the congestion within the local transmission system.
The Company is unable to estimate how these transmission issues will be
resolved, but the negative impact on transmission expense could be material.
MAINTENANCE EXPENSES-Maintenance expenses increased $0.5 million or 7.2 percent
in 2001 compared with 2000 due to increased expenditures on right-of-way
maintenance programs. Maintenance expenses decreased in 2000 by $0.1 million or
1.4 percent compared with 1999 due to reductions in scheduled maintenance.
DEPRECIATION AND AMORTIZATION- Depreciation and amortization expense
decreased $1.0 million or 6.6 percent in 2001 compared with 2000 due to
reductions in amortization of demand side management costs that were only
partially offset by increased depreciation of utility plant in service.
Depreciation and amortization expenses decreased $0.9 million or 5.5 percent in
2000 compared with 1999 for the same reason.
INCOME TAXES-Income tax amounts increased in 2001 due to an increase in the
Company's taxable income. Income taxes decreased for 2000 due to an increase in
the Company's taxable loss.
OTHER INCOME-Other income decreased $0.3 million in 2001 compared with 2000 due
in part to reduced interest income from the reduced investment returns available
in 2001. Other income decreased $0.7 million in 2000 due to a $0.6 million
gain on the 1999 sale of Green Mountain Energy Resources, Inc.
INTEREST EXPENSE-Interest expense decreased $0.2 million or 3.0 percent in 2001
compared with 2000 primarily due to scheduled reductions in long-term debt
offset in part by a $12 million term loan made on August 24, 2001.
Interest expense increased $0.1 million or 1.0 percent in 2000 due to
increases in short-term debt and rising interest rates that were partially
offset by reductions in long-term debt.
DIVIDENDS ON PREFERRED STOCK- Dividends on preferred stock decreased
$81,000, or 8.0 percent in 2001 compared with 2000 due to repurchases of
preferred stock. In 2000, dividends on preferred stock decreased $141,000 or
12.2 percent for the same reason.
ENVIRONMENTAL MATTERS
The electric industry typically uses or generates a range of potentially
hazardous products in its operations. We must meet various land, water, air and
aesthetic requirements as administered by local, state and federal regulatory
agencies. We believe that we are in substantial compliance with these
requirements, and that there are no outstanding material complaints about our
compliance with present environmental protection regulations, except for
developments related to the Pine Street Barge Canal site.
PINE STREET BARGE CANAL SITE-The Federal Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), commonly known as the "Superfund"
law, generally imposes strict, joint and several liability, regardless of fault,
for remediation of property contaminated with hazardous substances. We have
previously been notified by the Environmental Protection Agency ("EPA") that we
are one of several potentially responsible parties ("PRPs") for cleanup of the
Pine Street Barge Canal site in Burlington, Vermont, where coal tar and other
industrial materials were deposited.
In September 1999, we negotiated a final settlement with the United States
EPA, the State of Vermont (the "State"), and other parties to a Consent Decree
that covers claims with respect to the site and implementation of the selected
site cleanup remedy. In November 1999, the Consent Decree was filed in the
federal district court. The Consent Decree addresses claims by the EPA for past
Pine Street Barge Canal site costs, natural resource damage claims and claims
for past and future oversight costs. The Consent Decree also provides for the
design and implementation of response actions at the site.
As of December 31, 2001, our total expenditures related to the Pine Street
Barge Canal site since 1982 were approximately $25.2 million. This includes
amounts not recovered in rates, amounts recovered in rates, and amounts for
which rate recovery has been sought but which are presently awaiting further
VPSB action. The bulk of these expenditures consisted of transaction costs.
Transaction costs include legal and consulting costs associated with the
Company's opposition to the EPA's earlier proposals for a more expensive remedy
at the site, litigation and related costs necessary to obtain settlements with
insurers and other PRPs to provide amounts required to fund the clean up
("remediation costs"), and to address liability claims at the site. A smaller
amount of past expenditures was for site-related response costs, including costs
incurred pursuant to EPA and State orders that resulted in funding response
activities at the site, and to reimburse the EPA and the State for oversight and
related response costs. The EPA and the State have asserted and affirmed that
all costs related to these orders are appropriate costs of response under CERCLA
for which the Company and other PRPs were legally responsible.
We estimate that we have recovered or secured, or will recover, through
settlements of litigation claims against insurers and other parties, amounts
that exceed estimated future remediation costs, future federal and state
government oversight costs and past EPA response costs. We currently estimate
our unrecovered transaction costs mentioned above, which were necessary to
recover settlements sufficient to remediate the site, to oppose much more costly
solutions proposed by the EPA, and to resolve monetary claims of the EPA and the
State, together with our remediation costs, to be $12.4 million over the next 32
years. The estimated liability is not discounted, and it is possible that our
estimate of future costs could change by a material amount. We also have
recorded an offsetting regulatory asset and we believe that it is probable that
we will receive future revenues to recover these costs.
Through rate cases filed in 1991, 1993, 1994, and 1995, we sought and
received recovery for ongoing expenses associated with the Pine Street Barge
Canal site. While reserving the right to argue in the future about the
appropriateness of full rate recovery of the site-related costs, the Company and
the Department, and as applicable, other parties, reached agreements in these
cases that the full amount of the site-related costs reflected in those rate
cases should be recovered in rates.
We proposed in our rate filing made on June 16, 1997 recovery of an
additional $3.0 million in such expenditures. In an Order in that case released
March 2, 1998, the VPSB suspended the amortization of expenditures associated
with the Pine Street Barge Canal site pending further proceedings. Although it
did not eliminate the rate base deferral of these expenditures, or make any
specific order in this regard, the VPSB indicated that it was inclined to agree
with other parties in the case that the ultimate costs associated with the Pine
Street Barge Canal site, taking into account recoveries from insurance carriers
and other PRPs, should be shared between customers and shareholders of the
Company. In response to our Motion for Reconsideration, the VPSB on June 8,
1998 stated its intent was "to reserve for a future docket issues pertaining to
the sharing of remediation-related costs between the Company and its customers".
The Settlement Order released January 23, 2001 did not change the status of Pine
Street Barge Canal site cost recovery.
CLEAN AIR ACT-Because we purchase most of our power supply from other utilities,
we do not anticipate that we will incur any material direct cost increases as a
result of the Federal Clean Air Act or proposals to make more stringent
regulations under that Act. Furthermore, only one of our power supply purchase
contracts, which expired in early 1998, related to a generating plant that was
affected by Phase I of the acid rain provisions of this legislation, which went
into effect January 1, 1995.
RATES
RETAIL RATE CASES- The Company reached a final settlement agreement with the
Department in its 1998 rate case during November 2000. The final settlement
agreement contained the following provisions:
* The Company received a rate increase of 3.42 percent above existing rates,
beginning with bills rendered January 23, 2001, and prior temporary rate
increases became permanent;
* Rates were set at levels that recover the Company's Hydro-Quebec VJO
contract costs, effectively ending the regulatory disallowances experienced by
the Company from 1998 through 2000;
* The Company agreed not to seek any further increase in electric rates
prior to April 2002 (effective in bills rendered January 2003) unless certain
substantially adverse conditions arise, including a provision allowing a
request for additional rate relief if power supply costs increase in excess of
$3.75 million over forecasted levels;
* The Company agreed to write off in 2000 approximately $3.2 million in
unrecovered rate case litigation costs, and to freeze its dividend rate until it
successfully replaces short-term credit facilities with long-term debt or equity
financing;
* Seasonal rates were eliminated in April 2001, which generated
approximately $8.5 million in additional cash flow in 2001 that can be utilized
to offset increased costs during 2002 and 2003;
* The Company agreed to consult extensively with the Department regarding
capital spending commitments for upgrading our electric distribution system and
to adopt customer care and reliability performance standards, in a first step
toward possible development of performance-based rate-making;
* The Company agreed to withdraw its Vermont Supreme Court appeal of the
VPSB's Order in a 1997 rate case; and
* The Company agreed to an earnings limitation for its electric operations
in an amount equal to its allowed rate of return of 11.25 percent, with amounts
earned over the limit being used to write off regulatory assets.
The Company earned approximately $30,000 in excess of its allowed rate of
return during 2001 before writing off regulatory assets in the same amount.
On January 23, 2001, the VPSB approved the Company's settlement with the
Department, with two additional conditions:
* The Company and customers shall share equally any premium above book value
realized by the Company in any future merger, acquisition or asset sale, subject
to an $8.0 million limit on the customers' share; and
* The Company's further investment in non-utility operations is restricted.
LIQUIDITY AND CAPITAL RESOURCES
CONSTRUCTION-Our capital requirements result from the need to construct
facilities or to invest in programs to meet anticipated customer demand for
electric service. Capital expenditures, net of customer advances for
construction, over the past three years and forecasted for 2002 are as follows
Generation Transmission Distribution Conservation Other* Total
--------------- ------------- ------------- ------------- ------- -------
(In thousands)
Actual:
- ---------
1999. . . $ 211 $ 144 $ 5,930 $ 1,943 $ 9,038 $17,266
2000. . . 1,937 348 7,316 ** 5,876 15,477
2001. . . 2,323 1,219 8,567 ** 3,529 15,638
Forecast:
- ---------
2002. . . $ 3,258 $ 1,827 $ 9,173 ** $ 5,447 $19,705
* Other includes $6.1 million in 1999, $1.3 million in 2000, $1.5 million in
2001, and an estimated $2.2 million in 2002 for the Pine Street Barge Canal
site.
**A state-wide Energy Efficiency Utility set up by the VPSB in 1999 manages all
energy efficiency programs, receiving funds the Company bills to its customers
as a separate charge.
DIVIDEND POLICY- The annual dividend rate was $0.55 per share at December 31,
2001.
The Settlement Order limits the dividend rate at its current level until
short-term credit facilities are replaced with long-term debt or equity
financing. Retained earnings at December 31, 2001 were approximately $8.1
million. The Company recorded substantial improvement in retained earnings
during 2001 and, with continued growth in retained earnings, believes it will be
able to gradually increase the current dividend rate after restructuring its
credit arrangements. If retained earnings were eliminated, the Company would
not be able to declare a dividend under its Restated Articles of Association.
FINANCING AND CAPITALIZATION-Internally-generated funds provided approximately
100 percent, 41 percent, and 92 percent of requirements for 2001, 2000 and 1999,
respectively. Internally generated funds, after payment of dividends, provide
capital requirements for construction, sinking funds and other requirements.
We anticipate that for 2002, internally generated funds will provide
approximately 90 percent of total capital requirements for regulated operations,
the remainder to be derived by bank loans.
The Company is not dependent on the use of off-balance sheet financing
arrangements, such as securitization of receivables or obtaining access to
assets through special purpose entities. We do have material power supply
commitments that are discussed in detail under the captions "Power Contract
Commitments" and "Power Supply Expenses".
At December 31, 2001, our capitalization consisted of 51.2 percent common
equity, 42.5 percent long-term debt and 6.3 percent preferred equity.
The Company has a $15.0 million, 364-day revolving credit agreement
with Fleet Financial Services ("Fleet") joined by KeyBank National Association,
("KeyBank") expiring June 2002 (the "Fleet-Key Agreement"). The Fleet-Key
Agreement replaced a similar agreement with Fleet and Citizens Bank of
Massachusetts (the "Fleet agreement") in the amount of $15.0 million, with
borrowings outstanding of $500,000, with a weighted average rate of 9.5 percent,
at December 31, 2000. There were no amounts outstanding on the Fleet-Key
Agreement at December 31, 2001. There was no non-utility short-term debt
outstanding at December 31, 2001. The Fleet-Key Agreement is unsecured.
On September 20, 2000, we established a $15.0 million revolving credit
agreement with KeyBank. The Company was required to invest $15.0 million
provided by Energy East Corporation ("EE"), pursuant to a power supply option
agreement, in a certificate of deposit at KeyBank pledged by the Company to
secure the repayment of the Keybank revolving credit facility. The payment made
by EE was returned with accrued interest on September 11, 2001. The KeyBank
agreement expired on September 19, 2001.
On July 27, 2001, the VPSB approved a $12.0 million two-year unsecured loan
agreement, with Fleet, joined by KeyBank, and the loan was made to the Company
on August 24, 2001. The Company used this facility, along with proceeds from
the maturing KeyBank certificate of deposit, to terminate the KeyBank agreement
and repay the $15.0 million it received from EE pursuant to the power supply
option agreement. At December 31, 2001, there was $12.0 million outstanding
under the two-year loan agreement.
On March 12, 2002, the Company purchased $10.0 million of the Company's
7.32 percent, Class E, Series 1 preferred stock outstanding for approximately
$10.1 million.
On March 15, 2002, the Company will redeem all of its 10 percent First
Mortgage Bonds due June 1, 2004. The bonds total $5.1 million and are subject
to annual sinking fund requirements of $1.7 million. The call premium will be
approximately $0.1 million.
See Note D, Preferred Stock, Note F, Long Term Debt, and Note M, Subsequent
Events for additional information.
The Company anticipates that it will secure financing that replaces some or
all of its expiring facilities during 2002.
The credit ratings of the Company's securities at December 31, 2001 are:
Fitch Moody's Standard & Poor's
----- ------- -----------------
First mortgage bonds BBB Baa2 BBB
Preferred stock. . . BBB- Ba2 BB
During the first quarter of 2001, Moody's Investors Service and Fitch upgraded
the Company's first mortgage bond and preferred stock ratings. The rating
actions reflected the rating agencies' earnings and cash flow expectations for
the Company following the Settlement Order.
In the event of a change in the Company's first mortgage bond credit
rating to below investment grade, scheduled payments under the Company's first
mortgage bonds would not be affected. Such a change would require the Company
to post what would currently amount to a $4.3 million bond under our remediation
agreement with the EPA regarding the Pine Street Barge Canal site. The MS
contract requires credit assurances if the Company's first mortgage bond credit
ratings are lowered to below investment grade by any two of the three credit
rating agencies listed above.
The following table presents a summary of certain material contractual
obligations existing as of December 31, 2001.
Summary of certain material Payments Due by Period
----------------------
contractual obligations 2003 and 2005 and After
TOTAL 2002 2004 2006 2006
--------------- ------- -------- -------- --------
(In thousands)
Long-term debt. . . . . . . . . . . $ 84,100 $ 9,700 $ 23,400 $ 14,000 $ 37,000
Interest on long-term debt. . . . . 64,294 5,938 9,294 7,994 41,068
Preferred stock . . . . . . . . . . 560 235 150 115 60
Capital lease obligations . . . . . 5,959 426 851 851 3,831
Hydro-Quebec power supply contracts 715,579 48,473 94,960 100,561 471,585
MS power supply contract. . . . . . 30,331 17,227 13,104 - -
--------------- ------- -------- -------- --------
Total . . . . . . . . . . . . . $ 900,823 $81,999 $141,759 $123,521 $553,544
=============== ======= ======== ======== ========
See the captions "Power Supply Expense" and "Power Contract Commitments" for
additional information about the Hydro-Quebec and MS power supply contracts,
and Note M, Subsequent Events, for additional information about early
retirement of long-term debt and preferred stock.
FUTURE OUTLOOK
COMPETITION AND RESTRUCTURING-The electric utility business is experiencing
rapid and substantial changes. These changes are the result of the following
trends:
* disparity in electric rates, transmission, and generating capacity among
and within various regions of the country;
* improvements in generation efficiency;
* increasing demand for customer choice;
* new regulations and legislation intended to foster competition, also known
as restructuring; and
* increasing volatility of wholesale market prices for electricity.
Electric utilities historically have had exclusive franchises for the
retail sale of electricity in specified service territories. As a result,
competition for retail customers has been limited to:
* competition with alternative fuel suppliers, primarily for heating and
cooling;
* competition with customer-owned generation; and
* direct competition among electric utilities to attract major new
facilities to their service territories.
These competitive pressures have led the Company and other utilities to
offer, from time to time, special discounts or service packages to certain large
customers.
In certain states across the country, including all the New England states
except Vermont, legislation has been enacted to allow retail customers to choose
their electricity suppliers, with incumbent utilities required to deliver that
electricity over their transmission and distribution systems (also known as
retail wheeling). Increased pressure in the electric utility industry may
restrict the Company's ability to charge energy prices sufficient to recover
costs of service, such as the cost of purchased power obligations or of
generation facilities owned by the Company. The amount by which such costs
might exceed market prices is commonly referred to as stranded costs.
Regulatory and legislative authorities at the federal level and in some
states, including Vermont where legislation has not been enacted, are
considering whether, when and how to facilitate competition for electricity
sales at the retail level. Recent difficulties in some regulatory
jurisdictions, such as California, have dampened any immediate push towards
deregulation in Vermont. However, in the future, the Vermont General Assembly
through legislation, or the VPSB through a subsequent report, action or
proceeding, may allow customers to choose their electric supplier. If this
happens without providing for recovery of a significant portion of the costs
associated with our power supply obligations and other costs of providing
vertically integrated service, the Company's franchise, including our operating
results, cash flows and ability to pay dividends at the current level, would be
adversely affected.
During 2001, the Town of Rockingham ("Rockingham"), Vermont initiated
inquiries and legal procedures to establish its own electric utility, seeking to
purchase an existing hydro-generation facility from a third party, and the
associated distribution plant owned by the Company within the town. In March
2002, voters in Rockingham approved an article authorizing Rockingham to create
a municipal utility by acting to acquire a municipal plant which would include
the Bellows Falls Hydroelectric facility and the electric distribution systems
of the Company and/or Central Vermont Public Service Corporation. The Company
receives annual revenues of approximately $4.0 million from its customers in
Rockingham. Should Rockingham create a municipal system, the Company would
vigorously pursue its right to receive just compensation from Rockingham. Such
compensation would include full reimbursement for Company assets, if acquired,
and full reimbursement of any other costs associated with the loss of customers
in Rockingham, to assure that our remaining customers do not subsidize a
Rockingham municipal utility.
NUCLEAR DECOMMISSIONING-The staff of the SEC has questioned certain current
accounting practices of the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
units in financial statements. In response to these questions, the Financial
Accounting Standards Board ("FASB") had agreed to review the accounting for
closure and removal costs, including decommissioning. The FASB issued a new
statement in August 2001 for "Accounting for Asset Retirement Obligations",
which provides guidance on accounting for nuclear plant decommissioning costs.
The Company has not yet determined what impact, if any, the new accounting
standard will have on its investment in VY. We do not believe that changes in
such accounting, if required, would have an adverse effect on the results of our
operations due to our current and future ability to recover decommissioning
costs through rates.
EFFECTS OF INFLATION-Financial statements are prepared in accordance with
generally accepted accounting principles and report operating results in terms
of historic costs. This accounting provides reasonable financial statements but
does not always take inflation into consideration. As rate recovery is based on
these historical costs and known and measurable changes, the Company is able to
receive some rate relief for inflation. It does not receive immediate rate
recovery relating to fixed costs associated with Company assets. Such fixed
costs are recovered based on historic figures. Any effects of inflation on
plant costs are generally offset by the fact that these assets are financed
through long-term debt.
39
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GREEN MOUNTAIN POWER CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
Financial Statements Page
Consolidated Statements of Income 40
For the Years Ended December 31, 2001, 2000, and 1999
Consolidated Statements of Cash Flows For the 41
Years Ended December 31, 2001, 2000, and 1999
Consolidated Balance Sheets as of 42
December 31, 2001 and 2000
Consolidated Capitalization Data as of 44
December 31, 2001 and 2000
Notes to Consolidated Financial Statements 45
Quarterly Financial Information 70
Report of Independent Public Accountants 71
Schedules
For the Years Ended December 31, 2001, 2000, and 1999:
II Valuation and Qualifying Accounts and Reserves 72
All other schedules are omitted as they are either
not required, not applicable or the information is
otherwise provided.
Consent and Report of Independent Public Accountants
Arthur Andersen LLP 73
The accompanying notes are an integral part of the consolidated financial
statements.
PART I, ITEM 1
GREEN MOUNTAIN POWER CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2001 2000
--------------- --------
(in thousands)
ASSETS
UTILITY PLANT
Utility plant, at original cost $ 302,489 $291,107
Less accumulated depreciation 119,054 110,273
--------------- --------
Net utility plant 183,435 180,834
Property under capital lease 5,959 6,449
Construction work in progress 7,464 7,389
--------------- --------
Total utility plant, net 196,858 194,672
--------------- --------
OTHER INVESTMENTS
Associated companies, at equity 14,093 14,373
Other investments 6,852 6,357
--------------- --------
Total other investments 20,945 20,730
--------------- --------
CURRENT ASSETS
Cash and cash equivalents 5,006 341
Certficate of deposit, pledged as collateral - 15,437
Accounts receivable, less allowance for
doubtful accounts of $613 and $463 17,111 22,365
Accrued utility revenues 5,864 7,093
Fuel, materials and supplies, at average cost 4,058 4,056
Prepayments 1,976 2,525
Income tax receivable 1,699 1,613
Other 469 222
--------------- --------
Total current assets 36,183 53,652
--------------- --------
DEFERRED CHARGES
Demand side management programs 6,961 6,358
Purchased power costs 3,504 11,789
Pine Street Barge Canal 12,425 12,370
Power supply derivative deferral 37,313 -
Other 14,870 15,519
--------------- --------
Total deferred charges 75,073 46,036
--------------- --------
NON-UTILITY
Other current assets 8 8
Property and equipment 250 252
Other assets 817 1,258
--------------- --------
Total non-utility assets 1,075 1,518
--------------- --------
TOTAL ASSETS $ 330,134 $316,608
=============== ========
The accompanying notes are an integral part of these consolidated financial
statements.
GREEN MOUNTAIN POWER CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
2001 2000
--------- ---------
(in thousands except share data)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, $3.33 1/3 par value,
authorized 10,000,000 shares (issued
5,701,010 and 5,582,552) . . . . . . . . . . . . $ 19,004 $ 18,608
Additional paid-in capital . . . . . . . . . . . 74,581 73,321
Retained earnings. . . . . . . . . . . . . . . . 8,070 493
Treasury stock, at cost (15,856 shares). . . . . (378) (378)
--------- ---------
Total common stock equity. . . . . . . . . . . . 101,277 92,044
Redeemable cumulative preferred stock. . . . . . 12,325 12,560
Long-term debt, less current maturities. . . . . 74,400 72,100
--------- ---------
Total capitalization . . . . . . . . . . . . . . 188,002 176,704
--------- ---------
CAPITAL LEASE OBLIGATION . . . . . . . . . . . . 5,959 6,449
--------- ---------
CURRENT LIABILITIES
Current maturities of preferred stock. . . . . . 235 235
Current maturities of long-term debt . . . . . . 9,700 9,700
Short-term debt. . . . . . . . . . . . . . . . . - 15,500
Accounts payable, trade and accrued liabilities. 7,237 7,755
Accounts payable to associated companies . . . . 8,361 8,510
Rate levelization liability. . . . . . . . . . . 8,527 -
Customer deposits. . . . . . . . . . . . . . . . 971 696
Purchased power call option liability. . . . . . - 8,276
Interest accrued . . . . . . . . . . . . . . . . 1,100 1,150
Energy East power supply obligation. . . . . . . - 15,419
Other. . . . . . . . . . . . . . . . . . . . . . 2,945 1,103
--------- ---------
Total current liabilities. . . . . . . . . . . . 39,076 68,344
--------- ---------
DEFERRED CREDITS
Power supply derivative liability. . . . . . . . 37,313 -
Accumulated deferred income taxes. . . . . . . . 23,759 25,644
Unamortized investment tax credits . . . . . . . 3,413 3,695
Pine Street Barge Canal cleanup liability. . . . 10,059 11,554
Other. . . . . . . . . . . . . . . . . . . . . . 20,852 20,901
--------- ---------
Total deferred credits . . . . . . . . . . . . . 95,396 61,794
--------- ---------
COMMITMENTS AND CONTINGENCIES
NON-UTILITY
Net liabilities of discontinued segment. . . . . 1,701 3,317
--------- ---------
Total non-utility liabilities. . . . . . . . . . 1,701 3,317
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES . . . . . . $330,134 $316,608
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
GREEN MOUNTAIN POWER CORPORATION
CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31
2001 2000 1999
--------- --------- ---------
(In thousands, except per share data)
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $283,464 $277,326 $251,048
OPERATING EXPENSES
Power Supply
Vermont Yankee Nuclear Power Corporation . . . . . . . . . . . . . . . . . . 30,114 34,813 34,987
Company-owned generation . . . . . . . . . . . . . . . . . . . . . . . . . . 4,742 7,777 5,582
Purchases from others. . . . . . . . . . . . . . . . . . . . . . . . . . . . 166,209 168,947 142,699
Other operating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,924 17,644 17,582
Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,130 14,237 10,800
Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,108 6,633 6,728
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . 14,294 15,304 16,187
Taxes other than income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,536 7,402 7,295
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,948 (691) 1,242
--------- --------- ---------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . 267,005 272,066 243,102
--------- --------- ---------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,459 5,260 7,946
--------- --------- ---------
OTHER INCOME
Equity in earnings of affiliates and non-utility operations. . . . . . . . . . 2,253 2,495 2,919
Allowance for equity funds used during construction. . . . . . . . . . . . . . 210 284 134
---------
Other (deductions) income, net . . . . . . . . . . . . . . . . . . . . . . . . (90) (73) 400
--------- --------- ---------
Total other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,373 2,706 3,453
--------- --------- ---------
INCOME BEFORE INTEREST CHARGES . . . . . . . . . . . . . . . . . . . . . . . . 18,832 7,966 11,399
--------- --------- ---------
INTEREST CHARGES
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,073 6,499 6,716
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,154 986 558
Allowance for borrowed funds used during construction. . . . . . . . . . . . . (188) (228) (91)
--------- --------- ---------
Total interest charges . . . . . . . . . . . . . . . . . . . . . . . . . . 7,039 7,257 7,183
--------- --------- ---------
INCOME BEFORE PREFERRED DIVIDENDS AND
DISCONTINUED OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,793 709 4,216
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . 933 1,014 1,155
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . 10,860 (305) 3,061
Net loss from discontinued segment operations, net of applicable income taxes. - - (603)
Loss on disposal, including provisions for
operating losses during phaseout period, net of applicable income taxes. . . . (182) (6,549) (6,676)
--------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK . . . . . . . . . . . . . . . . . $ 10,678 $ (6,854) $ (4,218)
========= ========= =========
EARNINGS PER SHARE
Basic earnings (loss) per share from continuing operations . . . . . . . . . . $ 1.93 $ (0.06) $ 0.57
Basic earnings (loss) per share from discontinued operations . . . . . . . . . (0.03) (1.19) (1.36)
--------- --------- ---------
Basic earnings (loss) per share. . . . . . . . . . . . . . . . . . . . . . . . $ 1.90 $ (1.25) $ (0.79)
========= ========= =========
Diluted earnings (loss) per share from continuing operations . . . . . . . . . $ 1.88 $ (0.06) $ 0.57
Diluted earnings (loss) per share from discontinued operations . . . . . . . . (0.03) (1.19) (1.36)
--------- --------- ---------
Diluted earnings (loss) per share. . . . . . . . . . . . . . . . . . . . . . . $ 1.85 $ (1.25) $ (0.79)
========= ========= =========
Cash dividends declared per share. . . . . . . . . . . . . . . . . . . . . . . $ 0.55 $ 0.55 $ 0.55
Weighted average shares outstanding-basic. . . . . . . . . . . . . . . . . . . 5,630 5,491 5,361
Weighted average equivalent shares outstanding-diluted . . . . . . . . . . . . 5,789 5,491 5,361
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Balance - beginning of period. . . . . . . . . . . . . . . . . . . . . . . . . $ 493 $ 10,344 $ 17,508
Net Income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,611 (5,840) (3,063)
--------- --------- ---------
12,104 4,504 14,445
--------- --------- ---------
Cash dividends-redeemable cumulative preferred stock . . . . . . . . . . . . . 933 1,014 1,155
Cash dividends-common stock. . . . . . . . . . . . . . . . . . . . . . . . . . 3,101 2,997 2,946
--------- --------- ---------
4,034 4,011 4,101
--------- --------- ---------
Balance - end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,070 $ 493 $ 10,344
========= ========= =========
GREEN MOUNTAIN POWER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31,
2001 2000 1999
--------------- --------- --------
OPERATING ACTIVITIES: (in thousands)
Net income (loss) before preferred dividends. . . . . . $ 11,611 $ (5,840) $(3,063)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . 14,294 15,304 16,187
Dividends from associated companies less equity income. 280 (26) 169
Allowance for funds used during construction. . . . . . (398) (512) (224)
Amortization of deferred purchased power costs. . . . . 3,767 5,575 5,725
Deferred income taxes . . . . . . . . . . . . . . . . . (2,167) 161 1,530
Provision for chargeoff of deferred regulatory asset. . - 3,229 -
Deferred purchased power costs. . . . . . . . . . . . . 1,126 (6,692) (6,590)
Accrued purchase power contract option call . . . . . . (8,276) 8,276 -
Provision for loss on segment disposal. . . . . . . . . 182 6,549 6,676
Arbitration costs recovered (deferred). . . . . . . . . 3,229 (3,184) (1,684)
Rate levelization liability . . . . . . . . . . . . . . 8,527 - -
Environmental and conservation deferrals, net . . . . . (3,380) (2,073) (8,048)
Changes in:
Accounts receivable . . . . . . . . . . . . . . . . . . 5,254 (3,862) 474
Accrued utility revenues. . . . . . . . . . . . . . . . 1,229 (125) (358)
Fuel, materials and supplies. . . . . . . . . . . . . . (2) (766) (150)
Prepayments and other current assets. . . . . . . . . . 302 (165) 4,009
Accounts payable. . . . . . . . . . . . . . . . . . . . (666) 3,004 665
Accrued income taxes payable and receivable . . . . . . 1,187 (372) (1,611)
Other current liabilities . . . . . . . . . . . . . . . 794 (7,341) 1,722
Other . . . . . . . . . . . . . . . . . . . . . . . . . (1,603) (181) (324)
--------------- --------- --------
Net cash provided by continuing operations. . . . . . . 35,290 10,959 15,105
Net change in discontinued segment. . . . . . . . . . . (1,797) 245 (138)
--------------- --------- --------
Net cash provided by operating activities . . . . . . . 33,493 11,204 14,967
INVESTING ACTIVITIES:
Construction expenditures . . . . . . . . . . . . . . . (12,963) (13,853) (9,174)
Proceeds from subsidiary sales. . . . . . . . . . . . . - 6,000 -
Investment in nonutility property . . . . . . . . . . . (212) (187) (190)
--------------- --------- --------
Net cash used in investing activities . . . . . . . . . (13,175) (8,040) (9,364)
--------------- --------- --------
FINANCING ACTIVITIES:
Proceeds from term loan . . . . . . . . . . . . . . . . 12,000 - -
Reduction in preferred stock. . . . . . . . . . . . . . (235) (1,640) (1,650)
Issuance of common stock. . . . . . . . . . . . . . . . 1,655 1,250 1,054
Proceeds (purchases) of certificate of deposit. . . . . 16,173 (15,437) -
Power supply option obligation. . . . . . . . . . . . . (16,012) 15,419 -
Reduction in long-term debt . . . . . . . . . . . . . . (9,700) (6,700) (1,700)
Short-term debt, net. . . . . . . . . . . . . . . . . . (15,500) 7,600 900
Cash dividends. . . . . . . . . . . . . . . . . . . . . (4,034) (4,011) (4,101)
--------------- --------- --------
Net cash used in financing activities . . . . . . . . . (15,653) (3,519) (5,497)
--------------- --------- --------
Net increase (decrease) in cash and cash equivalents. . 4,665 (355) 106
Cash and cash equivalents at beginning of period. . . . 341 696 590
--------------- --------- --------
Cash and cash equivalents at end of period. . . . . . . $ 5,006 $ 341 $ 696
=============== ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid year-to-date for:
Interest (net of amounts capitalized) . . . . . . . . . $ 6,936 $ 7,185 $ 7,034
Income taxes, net . . . . . . . . . . . . . . . . . . . 9,622 1,191 997
The accompanying notes are an integral part of these consolidated financial
statements.
CONSOLIDATED CAPITALIZATION DATA
GREEN MOUNTAIN POWER CORPORATION At December 31,
SHARES
ISSUED AND OUTSTANDING
----------------------
AUTHORIZED 2001 2000 2001 2000
---------- --------- --------- --------------- -------
(In thousands)
COMMON STOCK
Common Stock, $3.33 1/3 par value 10,000,000 5,685,154 5,566,696 $ 19,004 $18,608
=============== =======
OUTSTANDING
AUTHORIZED ISSUED 2001 2000 2001 2000
---------- ------- ------- ------- --------------- -------
Shares (In thousands)
REDEEMABLE CUMULATIVE PREFERRED STOCK,
100 PAR VALUE
4.75%, Class B, redeemable at
101 per share. . . . . . . . . . . . . 15,000 15,000 1,150 1,450 $ 115 $ 145
7%, Class C, redeemable at
101 per share. . . . . . . . . . . . . 15,000 15,000 2,850 3,300 285 330
9.375%, Class D, Series 1,
redeemable at $101 per share. . . . . . 40,000 40,000 1,600 3,200 160 320
7.32%, Class E, Series 1. . . . . . . . 200,000 120,000 120,000 120,000 12,000 12,000
--------------- -------
TOTAL PREFERRED STOCK $ 12,560 $12,795
=============== =======
2001 2000
--------------- -------
(In thousands)
LONG-TERM DEBT
Fleet/Key Term Loan due August 2003 . . . . . . . . . . . . . . $ 12,000 $ -
FIRST MORTGAGE BONDS
6.21% Series due 2001 . . . . . . . . . . . . . . . . . . . . . - 8,000
6.29% Series due 2002 . . . . . . . . . . . . . . . . . . . . . 8,000 8,000
6.41% Series due 2003 . . . . . . . . . . . . . . . . . . . . . 8,000 8,000
10.0% Series due 2004 - Cash sinking fund, $1,700,000 annually. 5,100 6,800
7.05% Series due 2006 . . . . . . . . . . . . . . . . . . . . . 4,000 4,000
7.18% Series due 2006 . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
6.7% Series due 2018. . . . . . . . . . . . . . . . . . . . . . 15,000 15,000
9.64% Series due 2020 . . . . . . . . . . . . . . . . . . . . . 9,000 9,000
8.65% Series due 2022 - Cash sinking fund, commences 2012 . . . 13,000 13,000
--------------- -------
Total Long-term Debt Outstanding. . . . . . . . . . . . . . . . 84,100 81,800
Less Current Maturities (due within one year) . . . . . . . . . 9,700 9,700
--------------- -------
TOTAL LONG-TERM DEBT, LESS CURRENT MATURITIES . . . . . . . . . $ 74,400 $72,100
=============== =======
The accompanying notes are an integral part of these consolidated financial
statements.
Notes to Consolidated Financial Statements
A. SIGNIFICANT ACCOUNTING POLICIES
1. Organization and Basis of Presentation. Green Mountain Power
Corporation (the "Company") is an investor-owned electric services company
located in Vermont with a principal service territory that includes
approximately one-quarter of Vermont's population. Nearly all of the Company's
net income is generated from its regulated electric utility operation, which
purchases and generates electric power and distributes it to approximately
87,000 retail and wholesale customers. At December 31, 2001, the Company's
primary subsidiary investment was Northern Water Resources, Inc. ("NWR"),
formerly known as Mountain Energy, Inc., which had invested in energy
generation, energy efficiency and wastewater treatment projects across the
United States. In 2000, the Company disposed of most of the assets of NWR, and
reports its results as income (loss) from operations of a discontinued segment.
In 1998, the Company sold the assets of its wholly-owned subsidiary, Green
Mountain Propane Gas Company ("GMPG"). The Company's remaining wholly-owned
subsidiaries, which are not regulated by the Vermont Public Service Board
("VPSB" or the "Board"), are Green Mountain Resources, Inc. ("GMRI"), which sold
its remaining interest in Green Mountain Energy Resources in 1999 and is
currently inactive, and GMP Real Estate Corporation. The results of these
subsidiaries, excluding NWR, and the Company's unregulated rental water heater
program are included in earnings of affiliates and non-utility operations in the
Other (Deductions) Income section of the Consolidated Statements of Income.
Summarized financial information for these subsidiaries is as follows:
For the years ended December 31,
2001 2000 1999
--------------- ------ ------
(In thousands)
Revenues . . $ 1,012 $1,034 $1,286
Expenses . . 575 495 184
--------------- ------ ------
Net Income $ 437 $ 539 $1,102
=============== ====== ======
The Company accounts for its investments in various associated companies,
Vermont Yankee Nuclear Power Corporation ("Vermont Yankee" or "VY"), Vermont
Electric Power Company, Inc. ("VELCO"), New England Hydro-Transmission
Corporation, and New England Hydro-Transmission Electric Company using the
equity method of accounting. The Company's share of the net earnings or losses
of these companies is also included in the Other Income section of the
Consolidated Statements of Income. See Note B and Note L for additional
information.
2. Regulatory Accounting. The Company's utility operations, including
accounting records, rates, operations and certain other practices of its
electric utility business, are subject to the regulatory authority of the
Federal Energy Regulatory Commission ("FERC") and the VPSB.
The accompanying consolidated financial statements conform to
accounting principles generally accepted in the United States applicable to
rate-regulated enterprises in accordance with Statement of Financial Accounting
Standards No. 71 ("SFAS 71"), Accounting for Certain Types of Regulation. Under
SFAS 71, the Company accounts for certain transactions in accordance with
permitted regulatory treatment. As such, regulators may permit incurred costs,
typically treated as expenses by unregulated entities, to be deferred and
expensed in future periods when recovered in future revenues. Conditions that
could give rise to the discontinuance of SFAS 71 include increasing competition
that restricts the Company's ability to recover specific costs, and a change in
the manner in which rates are set by regulators from cost-based regulation to
another form of regulation. In the event that the Company no longer meets the
criteria under SFAS 71, the Company would be required to write off related
regulatory assets and liabilities as summarized in the following table:
SFAS 71 Deferred charges
At December 31,
2001 2000
----------------- -------
(in thousands)
Power Supply Derivative . . $ 37,313 $ -
Pine Street Barge Canal . . 12,425 12,370
Power Supply. . . . . . . . 6,112 15,689
Demand Side Management. . . 6,961 6,358
Preliminary Survey. . . . . 1,094 1,040
Storm Damages . . . . . . . 2,169 2,102
Regulatory Commission costs 873 459
Tree Trimming . . . . . . . 905 999
Restructuring Costs . . . . 3,502 4,788
Other . . . . . . . . . . . 2,895 3,749
----------------- -------
Total Deferred Charges. . . $ 74,249 $47,554
================= =======
The Company continues to believe, based on current regulatory circumstances,
that the use of regulatory accounting under SFAS 71 remains appropriate and that
its regulatory assets are probable of recovery. Regulatory entities that
influence the Company include the VPSB, the Vermont Department of Public Service
("DPS" or the "Department"), and FERC, among other federal, state and local
regulatory agencies.
3. Impairment. The Company is required to evaluate long-lived assets,
including regulatory assets, for potential impairment. Assets that are no
longer probable of recovery through future revenues would be revalued based upon
future cash flows. Regulatory assets are charged to expense in the period in
which they are no longer probable of future recovery. As of December 31, 2001,
based upon the regulatory environment within which the Company currently
operates, the Company does not believe that an impairment loss should be
recorded. Competitive influences or regulatory developments may impact this
status in the future.
4. Utility Plant. The cost of plant additions includes all
construction-related direct labor and materials, as well as indirect
construction costs, including the cost of money ("Allowance for Funds Used
During Construction" or "AFUDC"). As part of a rate agreement with the DPS, the
Company discontinued recording AFUDC on construction work in progress in January
2001. The costs of renewals and improvements of property units are capitalized.
The costs of maintenance, repairs and replacements of minor property items are
charged to maintenance expense. The costs of units of property removed from
service, net of removal costs and salvage, are charged to accumulated
depreciation.
5. Depreciation. The Company provides for depreciation using the
straight-line method based on the cost and estimated remaining service life of
the depreciable property outstanding at the beginning of the year and adjusted
for salvage value and cost of removal of the property. Accounting for costs of
removal could be affected by the new accounting standard on asset retirement
obligations as discussed under the caption "New Accounting Standards".
The annual depreciation provision was approximately 3.5 percent of
total depreciable property at the beginning of 2001, 3.5 percent at the
beginning of 2000 and 3.3 percent at the beginning of 1999.
6. Cash and Cash Equivalents. Cash and cash equivalents include short-term
investments with original maturities less than ninety days.
7. Operating Revenues. Operating revenues consist principally of sales of
electric energy at regulated rates. The Company accrues utility revenues, based
on estimates of electric service rendered and not billed at the end of an
accounting period, in order to match revenues with related costs.
8. Deferred Charges. In a manner consistent with authorized or expected
ratemaking treatment, the Company defers and amortizes certain replacement
power, maintenance and other costs associated with the Vermont Yankee Nuclear
Power Corporation's generation plant. In addition, the Company accrues and
amortizes other replacement power expenses to reflect more accurately its cost
of service to better match revenues and expenses consistent with regulatory
treatment. The Company also defers and amortizes costs associated with its
investment in its demand side management program.
Other deferred charges totaled $14.9 million and $15.5 million at December
31, 2001 and 2000, respectively, consisting of regulatory deferrals of storm
damages, rights-of-way maintenance, other employee benefits, preliminary survey
and investigation charges, transmission interconnection charges, regulatory tax
assets and various other projects and deferrals.
9. Earnings Per Share. Earnings per share are based on the weighted
average number of common and common stock equivalent shares outstanding during
each year. During the year ended December 31, 2000, the Company established a
stock incentive plan for all employees, and granted 335,300 options exercisable
over vesting schedules of between one and four years. During 2001, the Company
granted an additional 56,450 options. See Note C for additional information.
10. Major Customers. The Company had one major retail customer,
International Business Machines Corporation("IBM"), metered at two locations,
that accounted for 26.6 percent, 26.6 percent, and 25.9 percent of retail MWh
sales, and 19.2 percent, 16.5 percent and 16.2 percent of the Company's retail
operating revenues in 2001, 2000 and 1999, respectively. IBM's percent of
retail operating revenues in 2001 increased due to a rate increase.
11. Fair Value of Financial Instruments. The present value of the first
mortgage bonds and preferred stock outstanding, if refinanced using prevailing
market rates of interest, would decrease from the balances outstanding at
December 31, 2001 by approximately 7.3 percent. In the event of such a
refinancing, there would be no gain or loss because under established regulatory
precedent, any such difference would be reflected in rates and have no effect
upon net income.
12. Deferred Credits. At December 31, 2001, the Company had other deferred
credits and long-term liabilities of $20.9 million, consisting of reserves for
damage claims, and accruals for employee benefits compared with a balance of
$20.9 million at December 31, 2000.
13. Use of Estimates. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires the use of estimates and assumptions that affect assets and
liabilities, the disclosure of contingent assets and liabilities, and revenues
and expenses. Actual results could differ from those estimates.
14. Reclassifications. Certain items on the prior year's consolidated
financial statements have been reclassified to be consistent with the current
year presentation.
15. New Accounting Standards. In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended ("SFAS 133").
SFAS 133 establishes accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts) be recorded on the balance sheet as either an asset or
liability measured at its fair value. SFAS 133 requires that changes in the
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. SFAS 133, as amended by SFAS 137, was
effective for the Company beginning 2001.
One objective of the Company's risk management program is to
stabilize cash flow and earnings by minimizing power supply risks. Transactions
permitted by the risk management program include futures, forward contracts,
option contracts, swaps and transmission congestion rights with counter-parties
that have at least investment grade ratings. These transactions are used to
hedge the risk of fossil fuel and spot market electricity price increases.
Futures, swaps and forward contracts are used to hedge market prices should
option calls by Hydro-Quebec be exercised. The Company's risk management policy
specifies risk measures, the amount of tolerable risk exposure, and
authorization limits for transactions.
On April 11, 2001, the VPSB issued an accounting order that requires the
Company to defer recognition of any earnings or other comprehensive income
effects relating to future periods caused by application of SFAS 133. At
December 31, 2001, the Company had a liability reflecting the negative fair
value of the two derivatives described below, as well as a corresponding
regulatory asset of approximately $37.3 million. The Company believes that the
regulatory asset is probable of recovery in future rates. The regulatory
liability is based on current estimates of future market prices that are likely
to change by material amounts.
If a derivative instrument is terminated early because it is probable
that a transaction or forecasted transaction will not occur, any gain or loss
would be recognized in earnings immediately. For derivatives held to maturity,
the earnings impact would be recorded in the period that the derivative is sold
or matures.
The Company has a contract with Morgan Stanley Capital Group,
Inc. ("MS") used to hedge against increases in fossil fuel prices. MS purchases
the majority of the Company's power supply resources at index (fossil fuel
resources) or specified (i.e., contracted resources) prices and then sells to us
at a fixed rate to serve pre-established load requirements. This contract
allows management to fix the cost of much of its power supply requirements,
subject to power resource availability and other risks. The MS contract is a
derivative under SFAS 133 and is effective through December 31, 2003.
Management's estimate of the fair value of the future net cost of this
arrangement at December 31, 2001 is approximately $11.6 million.
We also sometimes use future contracts to hedge forecasted wholesale
sales of electric power, including material sales commitments as discussed in
Note K. We currently have an arrangement with Hydro-Quebec that grants them an
option to call power at prices below current and estimated future market rates.
This arrangement is a derivative and is effective through 2015. Management's
estimate of the fair value of the future net cost for this arrangement at
December 31, 2001 is approximately $25.7 million.
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, Business Combinations ("SFAS 141"), and Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
("SFAS 142"). SFAS 141 requires the use of the purchase method to account for
business combinations initiated after June 30, 2001 and uses a non-amortization
approach to purchased goodwill and other indefinite-lived intangible assets.
Under SFAS 142, effective for fiscal years beginning after December 15, 2001,
goodwill and intangible assets deemed to have indefinite lives, will no longer
be amortized, and will be subject to annual impairment tests. The Company does
not expect the application of these accounting standards to materially impact
its financial position or results of operations.
In August 2001, the FASB issued Statement of Financial Accounting
Standards No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"),
effective for fiscal years beginning after June 15, 2002, which provides
guidance on accounting for nuclear plant decommissioning costs. SFAS 143
prescribes fair value accounting for asset retirement liabilities, including
nuclear decommissioning obligations, and requires recognition of such
liabilities at the time incurred. The Company has not yet determined what
impact, if any, the accounting standard will have on its financial position or
results of operations.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-lived
Assets" ("SFAS 144"). SFAS 144 specifies accounting and reporting for the
impairment or disposal of long-lived assets. The Company has not yet quantified
the impact, if any, of adopting SFAS 144 on its financial position or results of
operations.
B. INVESTMENTS IN ASSOCIATED COMPANIES
The Company accounts for investments in the following associated
companies by the equity method:
PERCENT INVESTMENT IN EQUITY
OWNERSHIP AT AT DECEMBER 31,
DECEMBER 31,2001 2001 2000
----------------- --------------- -------
(IN THOUSANDS)
VELCO-common . . . . . . . . . . . . . . 29.50% $ 1,932 $ 1,916
VELCO-preferred. . . . . . . . . . . . . 30.00% 420 540
--------------- -------
Total VELCO 2,352 2,456
Vermont Yankee- Common . . . . . . . . . 17.88% 9,725 9,713
New England Hydro Transmission-Common. . 3.18% 761 827
New England Hydro Transmission Electric-
Common . . . . . . . . . . . . . . . 3.18% 1,255 1,377
--------------- -------
Total investment in associated companies $ 14,093 $14,373
=============== =======
Undistributed earnings in associated companies totaled approximately $522,000 at
December 31, 2001.
VELCO. VELCO is a corporation engaged in the transmission of electric
power within the State of Vermont. VELCO has entered into transmission
agreements with the State of Vermont and other electric utilities, and under
these agreements, VELCO bills all costs, including interest on debt and a fixed
return on equity, to the State and others using VELCO's transmission system.
The Company's purchases of transmission services from VELCO were $11.5 million,
$9.8 million, and $7.9 million for the years 2001, 2000 and 1999, respectively.
Pursuant to VELCO's Amended Articles of Association, the Company is entitled to
approximately 30 percent of the dividends distributed by VELCO. The Company has
recorded its equity in earnings on this basis and also is obligated to provide
its proportionate share of the equity capital requirements of VELCO through
continuing purchases of its common stock, if necessary.
Summarized financial information for VELCO is as follows:
At and for the years ended December 31,
2001 2000 1999
--------------- ------- -------
(In thousands)
Company's equity in net income $ 308 $ 395 $ 357
=============== ======= =======
Total assets . . . . . . . . . $ 89,370 $82,123 $67,294
Less:
Liabilities and long-term debt 81,448 73,874 58,731
--------------- ------- -------
Net assets . . . . . . . . . . $ 7,922 $ 8,249 $ 8,563
=============== ======= =======
Company's equity in net assets $ 2,352 $ 2,456 $ 2,529
=============== ======= =======
Vermont Yankee. At December 31, 2001, the Company was responsible for
approximately 17.9 percent of Vermont Yankee's expenses of operations, including
costs of equity capital and estimated costs of decommissioning, and is entitled
to a similar share of the power output of the nuclear plant, which has a net
capacity of 531 megawatts. Vermont Yankee's estimate of the current cost of
decommissioning is approximately $471 million, using the 1993 FERC approved
escalation rate of 5.4% through 2000, and 4.25% thereafter, of which $297
million has been funded. At December 31, 2001, the Company's portion of the net
unfunded liability was $31 million, which it expects will be recovered through
rates over Vermont Yankee's remaining operating life, if the plant is not sold.
As a sponsor of Vermont Yankee, the Company also is obligated to provide to VY
20 percent of capital requirements not obtained by outside sources. During
2001, the Company incurred $28.8 million in Vermont Yankee annual capacity
charges, which included $1.9 million for interest charges. The Company's share
of Vermont Yankee's long-term debt at December 31, 2001 was $10.6 million.
On August 15, 2001, VY agreed to sell its nuclear power plant to
Entergy Corporation for approximately $180 million. On January 30, 2002, the
Federal Energy Regulatory Commission approved the Entergy purchase. The sale is
subject to approval of the VPSB, the U.S. Nuclear Regulatory Commission and
other regulatory bodies. A related agreement calls for Entergy to provide the
current output level of the plant to VY's present sponsors, including the
Company, at average annual prices ranging from $39 to $45 per megawatthour
through 2012, subject to a "low market adjuster" effective November 2005, that
protects the Company and other sponsors in the event that market prices for
power drop significantly. No additional decommission liability funding or any
other financing by VY is anticipated to complete the transaction. The sale, if
completed, will lower projected costs over the remaining license period for VY,
and transfer the liability for decommissioning the plant to the buyer. The
Company would continue to own its equity interest in VY. See Note M, Subsequent
Events for additional information on recent events concerning regulatory
approval.
The VY plant currently has several fuel rods that will require repair
during 2002, a maintenance requirement that is not unique to VY. There are
various means of addressing the maintenance, including an estimated ten-day
shutdown of the plant, or a delay in shutdown accompanied by a reduction in the
generation output at the plant. At the present time, the Company is unable to
estimate the duration of any future outage or its ultimate cost, but it could be
material.
During January 2002, several VY stockholders who had asserted their
dissenters' rights sold their shares back to VY. As a result of the stock
buyback, the Company's ownership share of VY is expected to increase to
approximately 19 percent.
The Price-Anderson Act currently limits public liability from a
single incident at a nuclear power plant to $9.5 billion. Any damages beyond
$9.5 billion are indemnified under the Price-Anderson Act, but subject to
congressional approval. The first $200 million of liability coverage is the
maximum provided by private insurance. The Secondary Financial Protection
Program is a retrospective insurance plan providing additional coverage up to
$9.3 billion per incident by assessing each of the 106 reactor units that are
currently subject to the Program in the United States a total of $88.1 million,
limited to a maximum assessment of $10 million per incident per nuclear unit in
any one year. The maximum assessment is adjusted at least every five years to
reflect inflationary changes.
The Price-Anderson Act has been renewed three times since it was first
enacted in 1957. The Act will expire in August 2002 and Congress is considering
reauthorization of this legislation.
The above insurance covers all workers employed at nuclear facilities for
bodily injury claims. Vermont Yankee retains a potential obligation for
retrospective adjustments due to past operations of several smaller facilities
that did not join the above insurance program. These exposures will cease to
exist no later than December 31, 2007. Vermont Yankee's maximum retrospective
obligation is $3.1 million. Insurance has been purchased from Nuclear
Electric Insurance Limited ("NEIL") to cover the costs of property damage,
decontamination or premature decommissioning resulting from a nuclear incident.
All companies insured with NEIL are subject to retroactive assessments if losses
exceed the accumulated funds available. The maximum potential assessment
against Vermont Yankee with respect to NEIL losses arising during the current
policy year is $16.2 million. Vermont Yankee's liability for the retrospective
premium adjustment for any policy year ceases six years after the end of that
policy year unless prior demand has been made.
Summarized financial information for Vermont Yankee is as follows:
At and for the years ended December 31,
2001 2000 1999
-------- --------------- --------
(In thousands)
Earnings:
Operating revenues. . . . . . . . . . $178,840 $ 178,294 $208,812
Net income applicable to common stock 6,119 6,583 6,471
Company's equity in net income. . . . $ 1,131 $ 1,177 $ 1,165
======== =============== ========
Total assets. . . . . . . . . . . . . . $723,815 $ 706,984 $685,292
Less:
Liabilities and long-term debt. . . . 669,640 652,663 631,365
-------- --------------- --------
Net Assets. . . . . . . . . . . . . . . $ 54,175 $ 54,321 $ 53,927
======== =============== ========
Company's equity in net assets. . . . . $ 9,725 $ 9,713 $ 9,641
======== =============== ========
C. COMMON STOCK EQUITY
Changes in common stock equity for the years ended December 31, 2001, 2000 and 1999 are as follows:
COMMON STOCK PAID-IN RETAINED TREASURY STOCK STOCK
--------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT EQUITY
------------- -------- --------- ----------------------- -------------- -------- ---------
(Dollars in thousands)
BALANCE, DECEMBER 31, 1998 . . 5,313,296 $17,711 $ 71,914 $ 17,508 15,856 $ (378) $106,755
------------- -------- --------- ----------------------- -------------- -------- ---------
Common Stock Issuance:
DRIP . . . . . . . . . . . . . 67,525 225 418 643
ESIP . . . . . . . . . . . . . 48,277 161 345 506
Compensation Program:
Restricted Shares . . . . . (3,527) (12) (83) (95)
Net Loss (3,063) (3,063)
Cash Dividends
Common Stock (2,946) (2,946)
Preferred Stock:
4.75 per share (10) (10)
7.00 per share (29) (29)
9.375 per share (57) (57)
8.625 per share (181) (181)
7.32 per share (878) (878)
----------------------- ---------
BALANCE, DECEMBER 31, 1999 . . 5,425,571 $18,085 $ 72,594 $ 10,344 15,856 $ (378) $100,645
------------- -------- --------- ----------------------- -------------- -------- ---------
Common Stock Issuance:
DRIP . . . . . . . . . . . . . 73,859 246 363 609
ESIP . . . . . . . . . . . . . 83,931 280 401 681
Compensation Program:
Restricted Shares . . . . . (809) (3) (37) (40)
Net Loss (5,840) (5,840)
Cash Dividends
Common Stock (2,997) (2,997)
Preferred Stock:
4.75 per share (8) (8)
7.00 per share (26) (26)
9.375 per share (42) (42)
8.625 per share (60) (60)
7.32 per share (878) (878)
----------------------- ---------
BALANCE, DECEMBER 31, 2000 . . 5,582,552 $18,608 $ 73,321 $ 493 15,856 $ (378) $ 92,044
------------- -------- --------- ----------------------- -------------- -------- ---------
Common Stock Issuance:
DRIP . . . . . . . . . . . . . 30,087 100 352 452
ESIP . . . . . . . . . . . . . 75,680 252 866 1,118
Compensation Programs:
Restricted Shares and ISOP. 12,691 44 42 86
Net Income 11,611 11,611
Cash Dividends
Common Stock (3,101) (3,101)
Preferred Stock:
7.00 per share (7) (7)
9.375 per share (23) (23)
8.625 per share (25) (25)
7.32 per share (878) (878)
----------------------- ---------
BALANCE, DECEMBER 31, 2001 . . 5,701,010 $19,004 $ 74,581 $ 8,070 15,856 $ (378) $101,277
------------- -------- --------- ----------------------- -------------- -------- ---------
The Company maintains a Dividend Reinvestment and Stock Purchase Plan
("DRIP") under which 423,985 shares were reserved and unissued at December 31,
2001. The Company also funds an Employee Savings and Investment Plan ("ESIP").
At December 31, 2001, there were 105,067 shares reserved and unissued under the
ESIP.
During 2000, the Company's Board of Directors, with subsequent approval of
the Company's common shareholders, established a stock incentive plan. Under
this plan, options for a total of 500,000 shares may be granted to any employee,
officer, consultant, contractor or Director providing services to the Company.
Outstanding options become exercisable at between one and four years after the
grant date and remain exercisable until 10 years from the grant date.
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation,"("SFAS 123") the Company has elected
to follow Accounting Principles Board Opinion No. 25 ("APB 25") "Accounting for
Stock Issued to Employees", and related interpretations in accounting for its
employee stock options. Under APB 25, because the exercise price equals the
market price of the underlying stock on the date of grant, no compensation
expense is recorded. Options have only been issued to employees and directors.
Disclosure of pro-forma information regarding net income and earnings
per share is required by SFAS 123. The information presented below has been
determined as if the Company accounted for its employee stock options under the
fair value method of that statement. The fair values of the options granted in
2001 and 2000 are $4.16 and $2.03 per share, respectively. They were estimated
at the grant date using the Black-Scholes option-pricing model. The following
table presents information about the assumptions that were used for each plan
year, and a summary of the options outstanding at December 31, 2001:
Plan Weighted Outstanding Remaining Assumptions used in option pricing model
-----------------------------------------
year average options Contractual Risk Free Expected Expected Dividend
exercise Life Interest Life in Stock Yield
price rate Years Volatility
--------- ----------------------------------------- -------- ----------
2000 $ 7.90 309,900 8.6 years 6.05% 7 30.58 4.5%
2001 $ 16.61 54,250 9.5 years 5.25% 6 32.69 4.0%
$ 9.20 364,150
========= ===========
Pro-forma net earnings (loss) per share and a summary of options outstanding are
as follows:
Pro-forma net income (loss) years ended December 31,
2001 2000
------- --------
In thousands, except per share amounts
Net income (loss) reported. . . . . . . $10,678 $(6,854)
Pro-forma net income (loss) . . . . . . $10,515 $(6,913)
Net income (loss)per share
As reported . . . . . . . . . . . . . $ 1.90 $ (1.25)
Pro-forma . . . . . . . . . . . . . . $ 1.87 $ (1.26)
Diluted earnings per share
As reported . . . . . . . . . . . . . $ 1.85 $ (1.25)
Pro-forma . . . . . . . . . . . . . . $ 1.82 $ (1.26)
Weighted Range of
Total Average Exercise Options
Options Price Prices Exercisable
------- ------ ------------- -----------
Outstanding at January 1, 2000 . - $ -
Granted. . . . . . . . . . . . . 335,300 7.90 $ 7.90
Exercised. . . . . . . . . . . . - -
Forfeited. . . . . . . . . . . . 3,400 7.90
Outstanding at December 31, 2000 331,900 $ 7.90 $ 7.90 -
------- ------ -------------
Granted. . . . . . . . . . . . . 55,450 $16.67 $14.50-$16.78
Granted. . . . . . . . . . . . . 1,000 12.28 $ 12.28
Exercised. . . . . . . . . . . . 17,400 7.90 $ 7.90
Forfeited. . . . . . . . . . . . 6,800 10.61 $ 7.90-$16.78
-------------
Outstanding at December 31, 2001 364,150 $ 9.20 $ 7.90-$16.78 95,350
======= ====== ============= ===========
Options granted are not exercisable until one year after the date of grant. The
pro-forma amounts may not be representative of future results and additional
options may be granted in future years. For 2000, the number of total shares
after giving effect to anti-dilutive common stock equivalents does not change.
The following table presents a reconciliation of net income to net
income available to common shareholders, and the average common shares to
average common equivalent shares outstanding:
Reconciliation of net income available For the years ended
for common shareholders and average shares December 31
2001 2000 1999
--------------- -------- --------
(in thousands)
Net income (loss) before preferred dividends $ 11,611 $(5,840) $(3,063)
Preferred stock dividend requirement . . . . 933 1,014 1,155
--------------- -------- --------
Net income (loss) applicable to common
stock . . . . . . . . . . . . . . . . . . $ 10,678 $(6,854) $(4,218)
=============== ======== ========
Average number of common shares-basic. . . . 5,630 5,491 5,361
Dilutive effect of stock options . . . . . . 159 - -
--------------- -------- --------
Average number of common shares-diluted. . . 5,789 5,491 5,361
=============== ======== ========
During 2000, the Compensation Program for Officers and Certain Key Management
personnel, that authorized payment of cash, restricted and unrestricted stock
grants based on corporate performance, was replaced with the stock incentive
plan discussed above. Approximately 1,262 restricted shares, issued during
1996 and 1997, remain unvested under this program at December 31, 2001.
Dividend Restrictions. Certain restrictions on the payment of cash
dividends on common stock are contained in the Company's indentures relating to
long-term debt and in the Restated Articles of Association. Under the most
restrictive of such provisions, approximately $8.0 million of retained earnings
were free of restrictions at December 31, 2001.
The properties of the Company include several hydroelectric projects
licensed under the Federal Power Act, with license expiration dates ranging from
2001 to 2025. At December 31, 2001, $168,000 of retained deficit had been
appropriated as excess earnings on hydroelectric projects as required by Section
10(d) of the Federal Power Act.
D. PREFERRED STOCK
The holders of the preferred stock are entitled to specific voting
rights with respect to certain types of corporate actions. They are also
entitled to elect the smallest number of directors necessary to constitute a
majority of the Board of Directors in the event of preferred stock dividend
arrearages equivalent to or exceeding four quarterly dividends. Similarly, the
holders of the preferred stock are entitled to elect two directors in the event
of default in any purchase or sinking fund requirements provided for any class
of preferred stock.
Certain classes of preferred stock are subject to annual purchase or
sinking fund requirements. The sinking fund requirements are mandatory. The
purchase fund requirements are mandatory, but holders may elect not to accept
the purchase offer. The redemption or purchase price to satisfy these
requirements may not exceed $100 per share plus accrued dividends. All shares
redeemed or purchased in connection with these requirements must be canceled and
may not be reissued. The annual purchase and sinking fund requirements for the
year 2002 for certain classes of preferred stock are as follows:
Purchase and Sinking Fund
Shares to
Class Due dates Retire
4.750% Class B . . . . . December 1 300
7.000% Class C . . . . . December 1 450
9.375% Class D, Series 1 December 1 1,600
Under the Restated Articles of Association relating to Redeemable Cumulative
Preferred Stock, the annual aggregate amount of purchase and sinking fund
requirements for the next five years are $235,000 for 2002, $75,000 each for
2003 and 2004, $70,000 for 2005 and $105,000 thereafter.
Certain classes of preferred stock are redeemable at the option of the
Company or, in the case of voluntary liquidation, at various prices on various
dates. The prices include the par value of the issue plus any accrued dividends
and an early redemption premium. The redemption premium for Class B, C and D,
Series 1, is $1.00 per share. See Note M, Subsequent Events, for additional
information concerning the early redemption of preferred stock.
E. SHORT-TERM DEBT
The Company has a $15.0 million 364-day revolving credit agreement
with Fleet Financial Services ("Fleet") joined by KeyBank National
Association("KeyBank"), expiring June 2002 (the "Fleet-Key Agreement"). The
Fleet-Key Agreement replaced a similar agreement with Fleet and Citizens Bank of
Massachusetts (the "Fleet agreement") in the amount of $15.0 million, with
borrowings outstanding of $500,000, with a weighted average rate of 9.5 percent,
at December 31, 2000. There was $0.0 outstanding on the Fleet-Key Agreement at
December 31, 2001. There was no non-utility short-term debt outstanding at
December 31, 2001 or 2000.
The Fleet-Key Agreement is unsecured, and requires the Company to
certify on a quarterly basis that it has not suffered a "material adverse
change". Similarly, as a condition to further borrowings, the Company must
certify that no event has occurred or failed to occur that has had or would
reasonably be expected to have a materially adverse effect on the Company since
the date of the last borrowing under this agreement. The Fleet-Key Agreement
allows the Company to continue to borrow until such time that:
* a "material adverse effect" has occurred; or
* the Company no longer complies with all other provisions of the agreement,
in which case further borrowing will not be permitted; or
* there has been a "material adverse change", in which case the banks may
declare the Company in default.
On September 20, 2000, we established a $15.0 million revolving credit
agreement ("KeyBank agreement") with KeyBank. Pursuant to a one year power
supply option agreement between the Company and Energy East Corporation ("EE"),
EE made a payment of $15.0 million to the Company. The Company was required to
invest the funds provided by EE in a certificate of deposit at KeyBank pledged
by the Company to secure the repayment of indebtedness issued under the Keybank
agreement. The payment made by EE was returned to EE along with accrued
interest on September 11, 2001. The KeyBank agreement expired on September 19,
2001. There was $15.0 million outstanding on the KeyBank agreement at December
31, 2000.
The Company anticipates that it will secure financing that replaces
some or all of its expiring facilities during 2002.
During the first quarter of 2001, Moody's Investors Service and Fitch
upgraded the Company's first mortgage bond and preferred stock ratings. The
rating action reflected the rating agencies' earnings and cash flow expectations
for the Company following the VPSB Order in the Company's 1998 retail rate case
(the "Settlement Order") issued January 23, 2001. See Note I-5, Rate Matters,
for further information regarding the settlement of the Company's 1998 retail
rate case with the Department and the VPSB.
F. LONG-TERM DEBT
Substantially all of the property and franchises of the Company are
subject to the lien of the indenture under which first mortgage bonds have been
issued. The weighted average rate on long term borrowings outstanding was 7.1
percent and 7.6 percent at December 31, 2001 and 2000, respectively. The annual
sinking fund requirements (excluding amounts that may be satisfied by property
additions) and long-term debt maturities for the next five years, as of December
31, 2001, are:
Sinking
Fund and
Maturities
-----------
2002 . . . . . . . . $ 9,700
2003 . . . . . . . . 21,700
2004 . . . . . . . . 1,700
2005 . . . . . . . . -
2006 . . . . . . . . 14,000
Thereafter . . . . . 37,000
Total Long-term debt $ 84,100
===========
The Company executed and delivered a $12.0 million, two-year, unsecured loan
agreement with Fleet, joined by KeyBank, as part of the Fleet-Key Agreement for
revolving credit. On July 27, 2001, the VPSB approved the financing
arrangement, and the loan was made on August 24, 2001. The Company used this
facility, along with proceeds from the maturing KeyBank certificate of deposit,
to terminate the KeyBank agreement and repay the $15.0 million it received from
EE pursuant to the power supply option agreement discussed above. At December
31, 2001, there was $12.0 million outstanding under the two-year loan agreement.
See Note M, Subsequent Events, for information about the early
redemption of certain first mortgage bonds.
G. INCOME TAXES
Utility. The Company accounts for income taxes using the liability method.
This method accounts for deferred income taxes by applying statutory rates to
the differences between the book and tax bases of assets and liabilities.
The regulatory tax assets and liabilities represent taxes that will be
collected from or returned to customers through rates in future periods. As of
December 31, 2001 and 2000, the net regulatory assets were $1,096,000 and
$1,908,000, respectively, and included in Other Deferred Charges on the
Company's consolidated balance sheets.
The temporary differences which gave rise to the net deferred tax
liability at December 31, 2001 and December 31, 2000, were as follows:
AT DECEMBER 31,
2001 2000
--------------- -------
(In thousands)
DEFERRED TAX ASSETS
Contributions in aid of construction $ 10,435 $10,018
Deferred compensation and
postretirement benefits 4,382 4,122
Self insurance and other reserves - -
Other 5,525 1,958
--------------- -------
$ 20,342 $16,098
--------------- -------
DEFERRED TAX LIABILITIES
Property related $ 39,518 $38,648
Demand side management 2,059 1,810
Deferred purchased power costs 1,450 84
Pine Street reserve 855 571
Other 219 629
--------------- -------
$ 44,101 $41,742
--------------- -------
Net accumulated deferred income
tax liability $ 23,759 $25,644
=============== =======
The following table reconciles the change in the net accumulated deferred income
tax liability to the deferred income tax expense included in the income
statement for the periods presented:
YEARS ENDED DECEMBER 31,
2001 2000 1999
--------------- ----- ------
(In thousands)
Net change in deferred income tax $ (1,885) $ 443 $1,812
liability
Change in income tax related
regulatory assets and liabilities (1,149) 184 176
Change in alternative minimum
tax credit - - -
--------------- ----- ------
Deferred income tax expense (benefit) $ (3,034) $ 627 $1,988
=============== ===== ======
The components of the provision for income taxes are as follows:
YEARS ENDED DECEMBER 31,
2001 2000 1999
--------------- -------- -------
(In thousands)
Current federal income taxes . $ 7,846 $ (786) $ (339)
Current state income taxes . . 2,418 (249) (125)
--------------- -------- -------
Total current income taxes . . 10,264 (1,035) (464)
Deferred federal income taxes. (2,296) 461 1,479
Deferred state income taxes. . (738) 166 509
--------------- -------- -------
Total deferred income taxes. . (3,034) 627 1,988
Investment tax credits-net . . (282) (283) (282)
--------------- -------- -------
Income tax provision (benefit) $ 6,948 $ (691) $1,242
=============== ======== =======
Total income taxes differ from the amounts computed by applying the federal
statutory tax rate to income before taxes. The reasons for the differences are
as follows:
YEARS ENDED DECEMBER 31,
2001 2000 1999
--------------- -------- --------
(In thousands)
Income (loss) before income taxes and
preferred dividends . . . . . . . . . . . . $ 18,559 $(6,531) $(1,821)
Federal statutory rate. . . . . . . . . . . . 35.0% 34.0% 34.0%
Computed "expected" federal income
taxes . . . . . . . . . . . . . . . . . . . 6,496 (2,221) (619)
Increase (decrease) in taxes resulting from:
Tax versus book depreciation. . . . . . . . . 45 83 92
Dividends received and paid credit. . . . . . (440) (435) (485)
AFUDC-equity funds. . . . . . . . . . . . . . (72) (33) (5)
Amortization of ITC . . . . . . . . . . . . . (282) (282) (282)
State tax (benefit) . . . . . . . . . . . . . 1,705 (83) 383
Excess deferred taxes . . . . . . . . . . . . (60) (60) (60)
Tax attributable to subsidiaries. . . . . . . 63 2,213 2,271
Other . . . . . . . . . . . . . . . . . . . . (506) 127 (53)
--------------- -------- --------
Total federal and state income tax (benefit). $ 6,948 $ (691) $ 1,242
=============== ======== ========
Effective combined federal and state
income tax rate . . . . . . . . . . . . . . 37.4% 10.6% (68.2%)
Non-Utility. The Company's non-utility subsidiaries, excluding NWR, had
accumulated deferred income taxes of approximately $2,000 on their balance
sheets at December 31, 2001, attributable to depreciation timing differences.
The components of the provision for the income tax expense (benefit)
for the non-utility operations are:
YEARS ENDED DECEMBER 31,
2001 2000 1999
-------------------------- ----- -----
(In thousands)
State income taxes . . . . . $ - $ 7 $ 99
Federal income taxes . . . . (1) 21 310
-------------------------- ----- -----
Income tax expense (benefit) $ (1) $ 28 $ 409
========================== ===== =====
The effective combined federal and state income tax rate for the continuing
non-utility operations was approximately 40 percent for each of the years ended
December 31, 2001, 2000 and 1999. See Note L for income tax information on the
discontinued operations of NWR.
H. PENSION AND RETIREMENT PLANS.
The Company has a defined benefit pension plan covering substantially all
of its employees. The retirement benefits are based on the employees' level of
compensation and length of service. The Company's policy is to fund all accrued
pension costs. The Company records annual expense and accounts for its pension
plan in accordance with Statement of Financial Accounting Standards No. 87,
Employers' Accounting for Pensions. The Company provides certain health care
benefits for retired employees and their dependents. Employees become eligible
for these benefits if they reach retirement age while working for the Company.
The Company accrues the cost of these benefits during the service life of
covered employees. The pension plan assets consist primarily of cash equivalent
funds, fixed income securities and equity securities.
Accrued postretirement health care expenses are recovered in rates to
the extent those expenses are funded. In order to maximize the tax-deductible
contributions that are allowed under IRS regulations, the Company amended its
pension plan to establish a 401-h sub-account and separate VEBA trusts for its
union and non-union employees. The VEBA plan assets consist primarily of cash
equivalent funds, fixed income securities and equity securities. The following
provides a reconciliation of benefit obligations, plan assets, and funded status
of the plans as of December 31, 2001 and 2000.
At and for the years ended December 31,
Pension Benefits Other Postretirement Benefits
---------------- -----------------------------
2001 2000 2001 2000
--------------- -------- -------- --------
(In thousands)
Change in projected benefit obligation:
Projected benefit obligation as of prior year end. $ 23,332 $22,444 $14,947 $11,955
Service cost . . . . . . . . . . . . . . . . . . . 537 655 241 216
Interest cost. . . . . . . . . . . . . . . . . . . 1,737 1,658 1,043 1,049
Participant contributions. . . . . . . . . . . . . - - 151 -
Change in actuarial assumptions. . . . . . . . . . 367 - - 2,328
Actuarial (gain) loss. . . . . . . . . . . . . . . 1,650 513 1,021 73
Benefits paid. . . . . . . . . . . . . . . . . . . (1,670) (1,707) (912) (674)
Administrative expense . . . . . . . . . . . . . . (58) (231) - -
--------------- -------- -------- --------
Projected benefit obligation as of year end. . . . $ 25,895 $23,332 $16,491 $14,947
=============== ======== ======== ========
Change in plan assets:
Fair value of plan assets as of prior year end . . $ 27,760 $31,477 $10,944 $11,062
Administrative expenses paid . . . . . . . . . . . (58) (231) - -
Participant contributions. . . . . . . . . . . . . - - 151 -
Employer contributions . . . . . . . . . . . . . . - - 761 673
Actual return on plan assets . . . . . . . . . . . (1,691) (1,779) (928) (118)
Benefits paid. . . . . . . . . . . . . . . . . . . (1,670) (1,707) (912) (673)
--------------- -------- -------- --------
Fair value of plan assets as of year end . . . . . $ 24,341 $27,760 $10,016 $10,944
=============== ======== ======== ========
Funded status as of year end . . . . . . . . . . . $ (1,554) $ 4,428 $(6,475) $(4,003)
Unrecognized transition obligation (asset) . . . . (241) (406) 3,608 3,936
Unrecognized prior service cost. . . . . . . . . . 986 766 (519) (577)
Unrecognized net actuarial gain. . . . . . . . . . (892) (6,848) 2,711 (130)
--------------- -------- -------- --------
Accrued benefits at year end . . . . . . . . . . . $ (1,701) $(2,060) $ (675) $ (774)
=============== ======== ======== ========
The Company also has a supplemental pension plan for certain employees. Pension
costs for the years ended December 31, 2001, 2000, and 1999 were $340,000,
$346,000, and $556,000, respectively, under this plan. This plan is funded in
part through insurance contracts.
Net periodic pension expense and other postretirement benefit costs
include the following components:
For the years ended December 31,
Pension Benefits Other Postretirement Benefits
2001 2000 1999 2001 2000 1999
--------------- -------- -------- ------- ------- ------
(In thousands)
Service cost . . . . . . . . . . . . . . . . . $ 537 $ 655 $ 620 $ 241 $ 216 $ 240
Interest cost. . . . . . . . . . . . . . . . . 1,737 1,658 1,780 1,043 1,049 855
Expected return on plan assets . . . . . . . . (2,379) (2,580) (2,721) (892) (940) (834)
Amortization of transition asset . . . . . . . (164) (164) (196) - - -
Amortization of net gain from earlier periods. - - - - - -
Amortization of prior service cost . . . . . . 147 121 128 (58) (58) (60)
Amortization of the transition obligation. . . - - - 328 328 340
Recognized net actuarial gain. . . . . . . . . (237) (474) (196) - - (19)
Special termination benefit. . . . . . . . . . - - 3,122 - - 888
Regulatory deferral. . . . . . . . . . . . . . - - (3,122) - - (888)
--------------- -------- -------- ------- ------- ------
Net periodic benefit cost (income) . . . . $ (359) $ (784) $ (585) $ 662 $ 595 $ 522
=============== ======== ======== ======= ======= ======
Assumptions used to determine postretirement benefit costs and the related
benefit obligation were:
For the years ended December 31,
Pension benefits Other Postretirement Benefits
---------------- -----------------------------
2001 2000 2001 2000
----- ----- ----- -----
Weighted average assumptions as of year end:
Discount rate. . . . . . . . . . . . . . . . 7.50% 7.50% 7.00% 7.50%
Expected return on plan assets . . . . . . . 9.00% 9.00% 8.50% 8.50%
Rate of compensation increase. . . . . . . . 4.50% 4.50% 4.25% 4.50%
Medical inflation. . . . . . . . . . . . . . - - 8.00% 6.00%
For measurement purposes, an 8.0 percent annual rate of increase in the per
capita cost of covered medical benefits was assumed for 2001. This rate of
increase gradually reduces to 6.0 percent in 2005. The medical trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rate by one percentage point for
all future years would increase the accumulated postretirement benefit
obligation as of December 31, 2001 by $2.4 million and the total of the service
and interest cost components of net periodic postretirement cost for the year
ended December 31, 2001 by $208,000. Decreasing the trend rate by one
percentage point for all future years would decrease the accumulated
postretirement benefit obligation at December 31, 2001 by $1.9 million, and the
total of the service and interest cost components of net periodic postretirement
cost for 2001 by $165,000.
In 1999, the Company deferred special termination pension benefit
costs of $3.1 million due to an early retirement program and other employee
separation activities. Curtailment and settlement gains of $2.3 million are
included in the special termination pension benefit cost. Also in 1999, the
Company deferred special termination postretirement benefit costs of $888,000
due to an early retirement program. Management believes that the amounts
deferred are probable of recovery.
I. COMMITMENTS AND CONTINGENCIES
1. INDUSTRY RESTRUCTURING. The electric utility business is being
subjected to rapidly increasing competitive pressures stemming from a
combination of trends. Certain states, including all the New England states
except Vermont, have enacted legislation to allow retail customers to choose
their electric suppliers, with incumbent utilities required to deliver that
electricity over their transmission and distribution systems. Recent power
supply management difficulties in some regulatory jurisdictions, such as
California, have dampened any immediate push towards de-regulation in Vermont.
There can be no assurance that any potential future restructuring plan ordered
by the VPSB, the courts, or through legislation will include a mechanism that
would allow for full recovery of our stranded costs and include a fair return on
those costs as they are being recovered.
2. ENVIRONMENTAL MATTERS. The electric industry typically uses or generates
a range of potentially hazardous products in its operations. The Company must
meet various land, water, air and aesthetic requirements as administered by
local, state and federal regulatory agencies. We believe that we are in
substantial compliance with those requirements, and that there are no
outstanding material complaints about our compliance with present environmental
protection regulations, except for developments related to the Pine Street Barge
Canal site. The Company maintains an environmental compliance and monitoring
program that includes employee training, regular inspection of Company
facilities, research and development projects, waste handling and spill
prevention procedures and other activities.
Pine Street Barge Canal Site. The Federal Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA"), commonly known as the
"Superfund" law, generally imposes strict, joint and several liability,
regardless of fault, for remediation of property contaminated with hazardous
substances. The Company has been notified by the Environmental Protection
Agency ("EPA") that it is one of several potentially responsible parties
("PRPs") for cleanup of the Pine Street Barge Canal site in Burlington, Vermont
where coal tar and other industrial materials were deposited.
In September 1999, we negotiated a final settlement with the United
States, the EPA, the State of Vermont, and other parties over terms of a Consent
Decree that covers claims addressed in the earlier negotiations and
implementation of the selected remedy. In November 1999, the Consent Decree was
filed in the federal district court. The Consent Decree addresses claims by the
EPA for past Pine Street Barge Canal site costs, natural resource damage claims
and claims for past and future oversight costs. The Consent Decree also
provides for the design and implementation of response actions at the site.
As of December 31, 2001, the Company's total expenditures related to
the Pine Street Barge Canal site since 1982 were approximately $25.2 million.
This includes those amounts not recovered in rates, amounts recovered in rates,
and amounts for which rate recovery has been sought but which are presently
awaiting further VPSB action. The bulk of these expenditures consisted of
transaction costs. Transaction costs include legal and consulting costs
associated with the Company's opposition to the EPA's earlier and more costly
proposals for the site, as well as litigation and related costs necessary to
obtain settlements with insurers and other PRP's to provide amounts required to
fund the clean up (remediation costs) and to address liability claims at the
site. A smaller amount of past expenditures was for site-related response
costs, including costs incurred pursuant to the EPA and State orders that
resulted in funding response activities at the site, and to reimburse the EPA
and the State for oversight and related response costs. The EPA and the State
have asserted and affirmed that all costs related to these orders are
appropriate costs of response under CERCLA for which the Company and other PRPs
were legally responsible.
We estimate that we have recovered or secured, or will recover,
through settlements of litigation claims against insurers and other parties,
amounts that exceed estimated future remediation costs, future federal and state
government oversight costs and past EPA response costs. We currently estimate
our unrecovered transaction costs mentioned above, which were necessary to
recover settlements sufficient to remediate the site, to oppose much more costly
solutions proposed by the EPA, and to resolve monetary claims of the EPA and the
State, together with our remediation costs, to be $12.4 million over the next 33
years. The estimated liability is not discounted, and it is possible that our
estimate of future costs could change by a material amount. We also have
recorded an offsetting regulatory asset, and we believe that it is probable that
we will receive future revenues to recover these costs. Although it did not
eliminate the rate base deferral of these expenditures, or make any specific
order in this regard, the VPSB indicated that it was inclined to agree with
other parties in the case that the ultimate costs associated with the Pine
Street Barge Canal site, taking into account recoveries from insurance carriers
and other PRPs, should be shared between customers and shareholders of the
Company. In response to our Motion for Reconsideration, the VPSB on June 8,
1998 stated its intent was "to reserve for a future docket issues pertaining to
the sharing of remediation-related costs between the Company and its customers".
The VPSB Settlement Order regarding the Company's 1998 retail rate request did
not change the status of Pine Street cost recovery.
Clean Air Act. The Company purchases most of its power supply from
other utilities and does not anticipate that it will incur any material direct
costs as a result of the Federal Clean Air Act or proposals to make more
stringent regulations under that Act.
3. OPERATING LEASES. The Company terminated an operating lease for its
corporate headquarters building and two of its service center buildings in the
first quarter of 1999. The Company sold its corporate headquarters building in
1999, but retained ownership of its two service centers.
4. JOINTLY-OWNED FACILITIES. The Company has joint-ownership interests in
electric generating and transmission facilities at December 31, 2001, as
follows:
Ownership Share of Utility Accumulated
Interest Capacity Plant Depreciation
--------- --------- --------------- -------------
(In %) (In MWh) (In thousands)
Highgate . . . . . . . . 33.8 67.6 $ 10,299 $ 4,388
McNeil . . . . . . . . . 11.0 5.9 8,866 4,779
Stony Brook (No. 1). . . 8.8 31 10,339 7,636
Wyman (No. 4). . . . . . 1.1 6.8 1,980 1,255
Metallic Neutral Return. 59.4 - 1,563 681
Metallic Neutral Return is a neutral conductor for NEPOOL/Hydro-Quebec
Interconnection
The Company's share of expenses for these facilities is reflected in
the Consolidated Statements of Income. Each participant in these facilities
must provide its own financing.
5. RATE MATTERS.
RETAIL RATE CASES- The Company reached a final settlement agreement with the
Department in its 1998 rate case during November 2000. The final settlement
agreement contained the following provisions:
* The Company received a rate increase of 3.42 percent above existing rates,
beginning with bills rendered January 23, 2001, and prior temporary rate
increases became permanent;
* Rates were set at levels that recover the Company's Hydro-Quebec Vermont
Joint Owners ("VJO") contract costs, effectively ending the regulatory
disallowances experienced by the Company from 1998 through 2000;
* The Company agreed not to seek any further increase in electric rates
prior to April 2002 (effective in bills rendered January 2003) unless certain
substantially adverse conditions arise, including a provision allowing a request
for additional rate relief if power supply costs increase in excess of $3.75
million over forecasted levels;
* The Company agreed to write off in 2000 approximately $3.2 million in
unrecovered rate case litigation costs, and to freeze its dividend rate until it
successfully replaces short-term credit facilities with long-term debt or equity
financing;
* Seasonal rates were eliminated in April 2001, which generated
approximately $8.5 million in additional cash flow in 2001 that can be utilized
to offset increased costs during 2002 and 2003;
* The Company agreed to consult extensively with the Department regarding
capital spending commitments for upgrading our electric distribution system and
to adopt customer care and reliability performance standards, in a first step
toward possible development of performance-based rate-making;
* The Company agreed to withdraw its Vermont Supreme Court appeal of the
VPSB's Order in the 1997 rate case; and
* The Company agreed to an earnings limitation for its electric operations
in an amount equal to its allowed rate of return of 11.25 percent, with amounts
earned over the limit being used to write off regulatory assets.
The Company earned approximately $30,000 in excess of its allowed rate of
return during 2001 before writing off regulatory assets in the same amount.
On January 23, 2001, the VPSB approved the Company's settlement with the
Department, with two additional conditions:
* The Company and customers shall share equally any premium above book value
realized by the Company in any future merger, acquisition or asset sale, subject
to an $8.0 million limit on the customers' share; and
* The Company's further investment in non-utility operations is restricted.
During 2001, the VPSB opened a review of "special" or off-tariff
contracts, which require specific VPSB approval. As a result of the review, the
Company became aware of one special contract for station service at the McNeil
generating facility which had not received prior VPSB approval. The Company
expects that a minor penalty will be levied by the VPSB for this omission, but
such penalty could be material.
6. DEFERRED CHARGES NOT INCLUDED IN RATE BASE. The Company has incurred
and deferred approximately $3.9 million in costs for tree trimming, storm damage
and federal regulatory commission work of which $1.2 million is being amortized
on an annual basis. Currently, the Company amortizes such costs based on
amounts being recovered and does not receive a return on amounts deferred.
Management expects to seek and receive ratemaking treatment for these costs in
future filings.
The Settlement Order directed the Company to write-off deferred
charges applicable to the state regulatory commission of $3.2 million as part of
the rate case agreement with the Department. The charge is included in other
operating expense for the year ended December 31, 2000. The Settlement Order
requires the remaining balance and future expenditures of deferred regulatory
commission charges be amortized over seven years.
7. COMPETITION. During 2001, the Town of Rockingham ("Rockingham"),
Vermont initiated inquiries and legal procedures, and on March 5, 2002, voters
in Rockingham authorized the town to establish its own electric utility, by
acting to acquire an existing hydro-generation facility from a third party, and
the associated distribution plant owned by the Company within Rockingham. The
Company receives annual revenues of approximately $4.0 million from its
customers in Rockingham. Should Rockingham create a municipal system, the
Company would vigorously pursue reimbursement such that our remaining customers
do not subsidize Rockingham.
8. OTHER LEGAL MATTERS. The Company is involved in legal and
administrative proceedings in the normal course of business and does not believe
that the ultimate outcome of these proceedings will have a material effect on
the financial position or the results of operations of the Company.
J. OBLIGATIONS UNDER TRANSMISSION INTERCONNECTION SUPPORT AGREEMENT
Agreements executed in 1985 among the Company, VELCO and other NEPOOL
members and Hydro-Quebec provided for the construction of the second phase
(Phase II) of the interconnection between the New England electric systems and
that of Hydro-Quebec. Phase II expands the Phase I facilities from 690
megawatts to 2,000 megawatts and provides for transmission of Hydro-Quebec power
from the Phase I terminal in northern New Hampshire to Sandy Pond,
Massachusetts. Construction of Phase II commenced in 1988 and was completed in
late 1990. The Company is entitled to 3.2 percent of the Phase II power-supply
benefits. Total construction costs for Phase II were approximately $487
million. The New England participants, including the Company, have contracted
to pay monthly their proportionate share of the total cost of constructing,
owning and operating the Phase II facilities, including capital costs. As a
supporting participant, the Company must make support payments under thirty-year
agreements. These support agreements meet the capital lease accounting
requirements. At December 31, 2001, the present value of the Company's
obligation is approximately $6.0 million.
Projected future minimum payments under the Phase II support
agreements are as follows:
Year ending December 31,
--------------------------
(In thousands)
2002. . . . . . . . $ 426
2003. . . . . . . . 425
2004. . . . . . . . 426
2005. . . . . . . . 425
2006. . . . . . . . 426
Total for 2007-2015 3,831
Total . . . . . $ 5,959
==========================
The Phase II portion of the project is owned by New England
Hydro-Transmission Electric Company and New England Hydro-Transmission
Corporation, subsidiaries of New England Electric System, in which certain of
the Phase II participating utilities, including the Company, own equity
interests. The Company holds approximately 3.2 percent of the equity of the
corporations owning the Phase II facilities.
K. LONG-TERM POWER PURCHASES
1. Unit Purchases. Under long-term contracts with various electric
utilities in the region, the Company is purchasing certain percentages of the
electrical output of production plants constructed and financed by those
utilities. Such contracts obligate the Company to pay certain minimum annual
amounts representing the Company's proportionate share of fixed costs, including
debt service requirements whether or not the production plants are operating.
The cost of power obtained under such long-term contracts, including payments
required when a production plant is not operating, is reflected as "Power Supply
Expenses" in the accompanying Consolidated Statements of Income.
Information (including estimates for the Company's portion of certain
minimum costs and ascribed long-term debt) with regard to significant purchased
power contracts of this type in effect during 2001 follows:
STONY VERMONT
BROOK YANKEE
----------------------- ----------
(Dollars in thousands)
Plant capacity 352.0 MW 531.0 MW
Company's share of output 4.40% 17.90%
Contract period expires: 2006 2012
Company's annual share of:
Interest $ 161 $ 1,932
Other debt service 401 -
Other capacity 527 26,819
----------------------- ----------
Total annual capacity $ 1,089 $ 28,751
======================= ==========
Company's share of long-term debt $ 2,797 $ 10,667
2. Hydro-Quebec System Power Purchase and Sale Commitments. Under various
contracts, the details of which are described in the table below, the Company
purchases capacity and associated energy produced by the Hydro-Quebec system.
Such contracts obligate the Company to pay certain fixed capacity costs whether
or not energy purchases above a minimum level set forth in the contracts are
made. Such minimum energy purchases must be made whether or not other, less
expensive energy sources might be available. These contracts are intended to
complement the other components in the Company's power supply to achieve the
most economic power supply mix reasonably available. There are specific step-up
provisions that provide that in the event any VJO contract member fails to meet
its obligation under the contract with Hydro-Quebec, the remaining VJO
participants, including the Company, will "step-up" to the defaulting
participants share on a prorated basis.
The Company's current purchases pursuant to the contract with
Hydro-Quebec entered into December 4, 1987 (the "1987 Contract") are as follows:
(1) Schedule B -- 68 megawatts of firm capacity and associated energy to be
delivered at the Highgate interconnection for twenty years beginning in
September 1995; and (2) Schedule C3 -- 46 megawatts of firm capacity and
associated energy to be delivered at interconnections to be determined at any
time for 20 years, which began in November 1995.
Hydro-Quebec also has the right to reduce the load factor from 75
percent to 65 percent under the 1987 Contract a total of three times over the
life of the contract. The Company can delay such reduction by one year under
the same contract. During 2001, Hydro-Quebec exercised the first of these
options for 2002, and the Company delayed the effective date of this exercise
until 2003. The Company estimates that the net cost of Hydro-Quebec's exercise
of its option will increase power supply expense during 2003 by approximately
$0.4 million.
During 1994, the Company negotiated an arrangement with Hydro-Quebec
that reduced the cost impacts associated with the purchase of Schedules B and C3
under the 1987 Contract, over the November 1995 through October 1999 period (the
"July 1994 Agreement"). Under the July 1994 Agreement, the Company, in essence,
will take delivery of the amounts of energy as specified in the 1987 Contract,
but the associated fixed costs will be significantly reduced from those
specified in the 1987 Contract.
As part of the July 1994 Agreement, we were obligated to purchase $4.0
million (in 1994 dollars) worth of research and development work from
Hydro-Quebec over a period ending October 1999, which has since been extended,
and made an additional $6.5 million (plus accrued interest) payment to
Hydro-Quebec in 1995. Hydro-Quebec retains the right to curtail annual energy
deliveries by 10 percent up to five times, over the 2001 to 2015 period, if
documented drought conditions exist in Quebec. The period for completing the
research and development purchase was subsequently extended to March 2001.
During the first year of the July 1994 Agreement (the period from
November 1995 through October 1996), the average cost per kilowatt-hour of
Schedules B and C3 combined was cut from 6.4 to 4.2 cents per kilowatt-hour, a
34 percent or $16 million cost reduction. Over the period from November 1996
through December 2000 and accounting for the payments to Hydro-Quebec, the
combined unit costs were lowered from 6.5 to 5.9 cents per kilowatt-hour,
reducing unit costs by 10 percent and saving $20.7 million in nominal terms.
All of the Company's contracts with Hydro-Quebec call for the delivery
of system power and are not related to any particular facilities in the
Hydro-Quebec system. Consequently, there are no identifiable debt-service
charges associated with any particular Hydro-Quebec facility that can be
distinguished from the overall charges paid under the contracts.
A summary of the Hydro-Quebec contracts through the July 1994
Agreement, including historic and projected charges for the years indicated,
follows:
THE 1987 CONTRACT
SCHEDULE B SCHEDULE C3
-------------------------------------- -------------
(Dollars in thousands except per KWh)
Capacity acquired 68 MW 46 MW
Contract period 1995-2015 1995-2015
Minimum energy purchase 75% 75%
(annual load factor)
Annual energy charge 2001 $ 11,891 $ 8,025
estimated 2002-2015 13,261 (1) 9,062 (1)
Annual capacity charge 2001 $ 16,850 $ 11,613
estimated 2002-2015 $ 17,103 (1) $ 11,687 (1)
Average cost per KWh 2001 $ 0.063 $ 0.064
estimated 2002-2015 $ 0.066 (2) $ 0.066 (2)
(1)Estimated average includes load factor reduction to 65 percent in 2003
(2)Estimated average in nominal dollars levelized over the period indicated
includes amortization of payments to Hydro-Quebec for the July 1994 Agreement
Under a power supply arrangement executed in January 1996 ("9601"), we
received payments from Hydro-Quebec of $3.0 million in 1996 and $1.1 million in
1997. Under 9601, the Company was required to shift up to 40 megawatts of its
Schedule C3 deliveries to an alternate transmission path and use the associated
portion of the NEPOOL/Hydro-Quebec interconnection facilities to purchase power
for the period from September 1996 through June 2001 at prices that varied based
upon conditions in effect when the purchases were made. The 9601 arrangement
also provided for minimum payments by the Company to Hydro-Quebec for the
periods in which power was not purchased under the arrangement. This
arrangement allowed Hydro-Quebec to curtail energy deliveries should it need to
use certain resources to supplement available supply. During the last three
months of 2000, Hydro-Quebec curtailed energy deliveries.
Under a separate arrangement established on December 5, 1997 (the
"9701 arrangement"), Hydro-Quebec provided a payment of $8.0 million to the
Company in 1997. In return for this payment, the Company provided Hydro-Quebec
an ongoing option for the purchase of power. Commencing April 1, 1998, and
effective through October 2015, Hydro-Quebec can exercise an option to purchase
up to 52,500 MWh ("option A") on an annual basis, at energy prices established
in accordance with the 1987 Contract. The cumulative amount of energy
purchased under the 9701 arrangement shall not exceed 950,000 MWh.
Hydro-Quebec's option to curtail energy deliveries pursuant to the 1987 Contract
and the July 1994 Agreement may be exercised in addition to these purchase
options.
Over the same period, Hydro-Quebec can exercise an option on an annual
basis to purchase a total of 600,000 MWh ("option B") at the 1987 Contract
energy price. Hydro-Quebec can purchase no more than 200,000 MWh in any given
contract year ending October 31. As of December 31, 2001, Hydro-Quebec had
purchased or called to purchase 432,000 MWh under option B.
In 2001, Hydro-Quebec exercised option A and option B, calling for
deliveries to third parties at a net expense to the Company of approximately
$7.6 million, including capacity charges.
In 2000, Hydro-Quebec called for deliveries to third parties at a net
cost to the Company of approximately $14.0 million (including the cost of the
January and February 2001 calls and related financial positions), which was due
to higher energy replacement costs. The 9701 arrangement costs are currently
being recovered in rates on an annual basis. The VPSB, in the Settlement Order
stated, "The record does not demonstrate that any other New England utility
foresaw the extent and degree of volatility that has developed in the New
England wholesale power markets. Absent that volatility, the 97-01 Agreement
would not have had adverse effects." In conjunction with the Settlement Order,
Hydro-Quebec committed to the Department that it would not call any energy under
option B of the 9701 arrangement during the contract year ending October 31,
2002. In 1999, Hydro-Quebec called for deliveries to third parties at a net
cost to the Company of approximately $6.3 million. The Company's estimate of
the fair value of the future net cost for the 9701 arrangement, which is
dependent upon the timing of any exercise of options, and the market price for
replacement power, is approximately $25.7 million. Future estimates could
change by a material amount.
On April 17, 2001, an Arbitration Tribunal issued its decision in the
arbitration brought by a group of Vermont electric companies and municipal
utilities, known as the Vermont Joint Owners ("VJO"), against Hydro-Quebec for
its failure to deliver electricity pursuant to the VJO/Hydro-Quebec power supply
contract during the 1998 ice storm. The Company is a member of the VJO.
In its award, the Arbitration Tribunal agreed partially with
Hydro-Quebec and partially with the VJO. In the decision, the Tribunal
concluded (i) the VJO/Hydro-Quebec power supply contract remains in effect, and
Hydro-Quebec is required to continue to provide capacity and energy to the
Company under the terms of the VJO contract, which expires in 2015 and (ii)
Hydro-Quebec is required to return certain capacity payments to the VJO.
On July 23, 2001, the Company received approximately $3.2 million
representing its share of refunded capacity payments from Hydro-Quebec. These
proceeds reduced related deferred assets. At December 31, 2001, the deferred
balance of unrecovered arbitration costs is approximately $1.2 million. We
believe it is probable that this balance will ultimately be recovered in rates.
3. Morgan Stanley Agreement - On February 11, 1999, the Company entered
into a contract with MS. In January 2001, the MS contract was modified and
extended to December 31, 2003. The contract provides us a means of managing
price risks associated with changing fossil fuel prices. On a daily basis, and
at MS's discretion, the Company will sell power to MS from either (i) all or
part of our portfolio of power resources at predefined operating and pricing
parameters or (ii) any power resources available to the Company, provided that
sales of power from sources other than Company-owned generation comply with the
predefined operating and pricing parameters. MS then sells to us, at a
predefined price, power sufficient to serve pre-established load requirements.
MS is also responsible for scheduling supply resources. The Company remains
responsible for resource performance and availability. MS provides no coverage
against major unscheduled outages.
The Company and MS have agreed to the protocols that are used to
schedule power sales and purchases and to secure necessary transmission. We
anticipate that arrangements we make to manage power supply risks will be on
average more costly than the expected cost of fuel during the periods being
hedged because these arrangements would typically incorporate a risk premium.
L. DISCONTINUED OPERATIONS.
The Company sold or otherwise disposed of a significant portion of the
operations and assets of NWR, which owned and invested in energy generation,
energy efficiency, and wastewater treatment projects. The provisions for loss
from discontinued operations reflect management's current estimate. Assets
remaining include two wind power partnership investments, a note receivable from
a regional hydro-power project, notes receivable and equity investments with two
wastewater treatment projects, one of which has risk factors that include the
outcome of warranty litigation, and future cash requirements necessary to
minimize costs of winding down wastewater operations. Several municipalities
using wastewater treatment equipment have commenced or threatened litigation.
The ultimate loss remains subject to the disposition of remaining assets and
liabilities, and could exceed the amounts recorded. The following illustrates
the results and financial statement impact of NWR during and at the periods
shown:
2001 2000 1999
-------------------------------- -------- --------
(In thousands except per share)
Revenues $ 156 $ 1,546 $ 2,296
-------------------------------- -------- --------
Net loss from operations $ - $ - $ (603)
Provisions for loss on disposal and
future operating losses (182) (6,549) (6,676)
Net loss $ (182) $(6,549) $(7,279)
================================ ======== ========
Net loss per share-basic $ (0.03) $ (1.19) $ (1.36)
Proceeds from asset sales $ 1,425 $ 6,000 $ -
Total assets $ 3,697 $ 8,411 $19,395
Income taxes for NWR for the years ended December 31, 2001, 2000 and 1999 are
summarized as:
YEARS ENDED DECEMBER 31,
2001 2000 1999
------ -------- --------
(In thousands)
State income taxes . . . . . $(175) $(1,064) $ (281)
Federal income taxes . . . . (550) (3,349) (1,371)
Investment tax credits . . . - - -
------ -------- --------
Income tax expense (benefit) $(725) $(4,413) $(1,652)
====== ======== ========
M. SUBSEQUENT EVENTS
On March 4, 2002, the Vermont Department of Public Service
announced its endorsement of the proposed sale of the Vermont Yankee nuclear
plant to Entergy Nuclear Corp. A Memorandum of Understanding was filed March 4,
2002 with the VPSB by Entergy, Vermont Yankee, certain owners of Vermont Yankee,
and the Department.
On March 12, 2002, the Company purchased $10.0 million of the
Company's 7.32 percent, Class E, Series 1 preferred stock outstanding for
approximately $10.1 million.
On March 15, 2002, the Company will redeem all of its 10 percent First
Mortgage Bonds due June 1, 2004. The bonds total $5.1 million and are subject
to annual sinking fund requirements of $1.7 million. The call premium will be
approximately $0.1 million.
N. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following quarterly financial information, in the opinion of
management, includes all adjustments necessary to a fair statement of results of
operations for such periods. Variations between quarters reflect the seasonal
nature of the Company's business and the timing of rate changes.
2001 Quarter ended
MARCH JUNE SEPTEMBER DECEMBER TOTAL
------- -------- ---------- ---------- ---------
(Amounts in thousands except per share data)
Operating revenues . . . . . . . . . . . . . . $74,796 $67,471 $ 76,051 $ 65,146 $283,464
Operating income . . . . . . . . . . . . . . . 4,575 4,275 4,573 3,036 16,459
Net income from continuing operations. . . . . $ 2,914 $ 2,884 $ 3,387 $ 1,675 $ 10,860
Net loss from
discontinued operations . . . . . . . . . . . - (150) - (32) (182)
Net Income applicable to common stock. . . . . $ 2,914 $ 2,734 $ 3,387 $ 1,643 $ 10,678
======= ======== ========== ========== =========
Basic earnings (loss) per share from:
Continuing operations. . . . . . . . . . . . . $ 0.52 $ 0.52 $ 0.60 $ 0.29 $ 1.93
Discontinued operations. . . . . . . . . . . . - (0.03) - - (0.03)
Basic earnings per share . . . . . . . . . . . $ 0.52 $ 0.49 $ 0.60 $ 0.29 $ 1.90
======= ======== ========== ========== =========
Weighted average common shares outstanding . . 5,588 5,615 5,644 5,672 5,630
Diluted earnings (loss) per share from:
Continuing operations. . . . . . . . . . . . . $ 0.51 $ 0.50 $ 0.58 $ 0.29 $ 1.88
Discontinued operations. . . . . . . . . . . . - (0.03) - - (0.03)
Diluted earnings (loss) per share: . . . . . . $ 0.51 $ 0.47 $ 0.58 $ 0.29 $ 1.85
======= ======== ========== ========== =========
Weighted average common and common equivalent. 5,741 5,777 5,814 5,848 5,789
shares outstanding
2000 Quarter ended
MARCH JUNE SEPTEMBER DECEMBER TOTAL
------- -------- ---------- ---------- ---------
(Amounts in thousands except per share data)
Operating revenues. . . . . . . . . . . . . . $67,712 $61,927 $ 78,143 $ 69,544 $277,326
Operating income (loss) . . . . . . . . . . . 4,613 (2,997) 3,271 373 5,260
Net income (loss) from continuing operations. $ 3,449 $(4,375) $ 1,961 $ (1,340) $ (305)
Net loss from
discontinued operations. . . . . . . . . . . - (1,530) - (5,019) (6,549)
Net Income (loss) applicable to common stock. $ 3,449 $(5,905) $ 1,961 $ (6,359) $ (6,854)
======= ======== ========== ========== =========
Earnings (loss) per share from:
Continuing operations . . . . . . . . . . . . $ 0.63 $ (0.80) $ 0.36 $ (0.25) $ (0.06)
Discontinued operations . . . . . . . . . . . - (0.28) - (0.91) (1.19)
Basic and diluted . . . . . . . . . . . . . . $ 0.63 $ (1.08) $ 0.36 $ (1.16) $ (1.25)
======= ======== ========== ========== =========
Weighted average common shares outstanding. . 5,437 5,472 5,505 5,551 5,491
1999 Quarter ended
MARCH JUNE SEPTEMBER DECEMBER TOTAL
-------- -------- ----------- ---------- ---------
(Amounts in thousands except per share data)
Operating revenues. . . . . . . . . . . . . . $59,018 $59,535 $ 68,478 $ 64,017 $251,048
Operating income. . . . . . . . . . . . . . . 3,906 977 1,412 1,651 7,946
Net income (loss) from continuing operations. $ 3,170 $ (412) $ (115) $ 418 $ 3,061
Net loss from
discontinued operations. . . . . . . . . . . (522) (81) (4,592) (2,084) (7,279)
Net Income (loss) applicable to common stock. $ 2,648 $ (493) $ (4,707) $ (1,666) $ (4,218)
======== ======== =========== ========== =========
Earnings (loss) per share from:
Continuing operations . . . . . . . . . . . . $ 0.60 $ (0.08) $ (0.02) $ 0.07 $ 0.57
Discontinued operations . . . . . . . . . . . (0.10) (0.02) (0.85) (0.39) (1.36)
Basic and diluted . . . . . . . . . . . . . . $ 0.50 $ (0.10) $ (0.88) $ (0.31) $ (0.79)
======== ======== =========== ========== =========
Weighted average common shares outstanding. . 5,318 5,344 5,374 5,291 5,361
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Green Mountain Power Corporation:
We have audited the accompanying consolidated balance sheets and consolidated
capitalization data of Green Mountain Power Corporation (a Vermont corporation)
and its subsidiaries as of December 31, 2001 and 2000, and the related
consolidated statements of income, retained earnings, and cash flows for each of
the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Green Mountain Power
Corporation and its subsidiaries as of December 31, 2001 and 2000, and the
consolidated results of its operations and cash flows for each of the three
years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
As discussed in Note A to the financial statements, effective January 1, 2001,
the company adopted Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended.
/s/ Arthur Andersen LLP
Boston, Massachusetts
March 12, 2002
Schedule II
GREEN MOUNTAIN POWER CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 2001, 2000, and 1999
Balance at Additions Additions Balance at
Beginning of Charged to Charged to End of
Period Cost & Expenses Other Accounts Deductions Period
----------- --------------- -------------- ---------- -----------
Injuries and Damages (1)
- ----------------------------------------------
2001 . . . . . . . . . . . . . . . . . . . . . $13,382,713 212,555 312,229 1,842,949 $12,064,548
2000 . . . . . . . . . . . . . . . . . . . . . 10,129,130 111,667 3,193,383 51,467 13,382,713
1999 . . . . . . . . . . . . . . . . . . . . . 7,898,785 100,000 3,814,874 1,684,529 10,129,130
Bad Debt Reserve
- ----------------------------------------------
2001 . . . . . . . . . . . . . . . . . . . . . 425,890 150,000 575,890
2000 . . . . . . . . . . . . . . . . . . . . . 390,495 35,395 - - 425,890
1999 . . . . . . . . . . . . . . . . . . . . . 400,000 261,697 12,762 283,964 390,495
(1) Includes Pine Street Barge Canal reserves
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited, in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of Green Mountain Power
Corporation included in this Form 10-K and have issued our report thereon dated
March 12, 2002. Our report included an explanatory paragraph indicating that
effective January 1, 2001, Green Mountain Power Corporation adopted Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," as amended. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed in the accompanying index to consolidated financial statements
and schedule is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements, and in our opinion,
fairly states, in all material respects, the financial data required to be set
forth therein in relation to the basic consolidated financial statements taken
as a whole.
/s/ Arthur Andersen LLP
Boston, Massachusetts
March 12, 2002
74
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEMS 10, 11, 12 AND 13
Certain information regarding executive officers called for by Item 10,
"Directors and Executive Officers of the Registrant," is furnished under the
caption, "Executive Officers" in Item 1 of Part I of this Report. The other
information called for by Item 10, as well as that called for by Items 11, 12,
and 13, "Executive Compensation," "Security Ownership of Certain Beneficial
Owners and Management" and "Certain Relationships and Related Transactions,"
will be set forth under the captions "Election of Directors," Board
Compensation, Meetings, Committees and Other Relationships, "Section 16(a)
Beneficial Ownership Reporting Compliance," "Executive Compensation and Other
Information", "Compensation Committee Report on Executive Compensation",
"Pension Plan Information and Other Benefits" and "Securities Ownership of
Certain Beneficial Owners and Management" in the Company's definitive proxy
statement relating to its annual meeting of stockholders to be held on May 16,
2002. Such information is incorporated herein by reference. Such proxy
statement pertains to the election of directors and other matters. Definitive
proxy materials will be filed with the Securities and Exchange Commission
pursuant to Regulation 14A in March 2002.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
Item 14(a)1. Financial Statements and Schedules. The financial statements and
financial statement schedules of the Company are listed on the Index to
financial statements set forth in Item 8 hereof.
Item 14(b) The following filings on Form 8-K were filed by the Company on
the topic and date indicated:
None
The accompanying notes are an integral part of these consolidated financial
statements.
ITEM 14(A)3 AND ITEM 14(C). EXHIBITS SEC DOCKET
, INCORPORATED BY
EXHIBIT REFERENCE OR
NUMBER DESCRIPTION EXHIBIT PAGE FILED HEREWITH
- ---------- ----------------------------------------------------------- ---------- --------------------
3-A. . . . RESTATED ARTICLES OF ASSOCIATION, AS CERTIFIED 3-A FORM 10-K 1993
JUNE 6, 1991. (1-8291)
3-A-1. . . AMENDMENT TO 3-A ABOVE, DATED AS OF MAY 20, 1993. 3-A-1 FORM 10-K 1993
(1-8291)
3-A-2. . . AMENDMENT TO 3-A ABOVE, DATED AS OF OCTOBER 11, 1996. 3-A-2 FORM 10-Q SEPT.
1996 (1-8291)
3-B. . . . BY-LAWS OF THE COMPANY, AS AMENDED 3-B FORM 10-K 1996
FEBRUARY 10, 1997. (1-8291)
4-B-1. . . INDENTURE OF FIRST MORTGAGE AND DEED OF TRUST 4-B 2-27300
DATED AS OF FEBRUARY 1, 1955.
4-B-2. . . FIRST SUPPLEMENTAL INDENTURE DATED AS OF 4-B-2 2-75293
APRIL 1, 1961.
4-B-3. . . SECOND SUPPLEMENTAL INDENTURE DATED AS OF 4-B-3 2-75293
JANUARY 1, 1966.
4-B-4. . . THIRD SUPPLEMENTAL INDENTURE DATED AS OF 4-B-4 2-75293
JULY 1, 1968.
4-B-5. . . FOURTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-5 2-75293
OCTOBER 1, 1969.
4-B-6. . . FIFTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-6 2-75293
DECEMBER 1, 1973.
4-B-7. . . SEVENTH SUPPLEMENTAL INDENTURE DATED AS 4-A-7 2-99643
AUGUST 1, 1976.
4-B-8. . . EIGHTH SUPPLEMENTAL INDENTURE DATED AS OF 4-A-8 2-99643
DECEMBER 1, 1979.
4-B-9. . . NINTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-9 2-99643
JULY 15, 1985.
4-B-10 . . TENTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-10 FORM 10-K 1989
JUNE 15, 1989. (1-8291)
4-B-11 . . ELEVENTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-11 FORM 10-Q SEPT.
SEPTEMBER 1, 1990. 1990 (1-8291)
4-B-12 . . TWELFTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-12 FORM 10-K 1991
MARCH 1, 1992. (1-8291)
4-B-13 . . THIRTEENTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-13 FORM 10-K 1991
MARCH 1, 1992. (1-8291)
4-B-14 . . FOURTEENTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-14 FORM 10-K 1993
NOVEMBER 1, 1993. (1-8291)
4-B-15 . . FIFTEENTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-15 FORM 10-K 1993
NOVEMBER 1, 1993. (1-8291)
4-B-16 . . SIXTEENTH SUPPLEMENTAL INDENTURE DATED AS OF 4-B-16 FORM 10-K 1995
DECEMBER 1, 1995. (1-8291)
4-B-17 . . REVISED FORM OF INDENTURE AS FILED AS AN EXHIBIT 4-B-17 FORM 10-Q SEPT.
TO REGISTRATION STATEMENT NO. 33-59383. 1995 (1-8291)
4-B-18 . . CREDIT AGREEMENT BY AND AMONG GREEN MOUNTAIN POWER 4-B-18 FORM 10-K 1997
THE BANK OF NOVA SCOTIA, STATE STREET BANK AND (1-8291)
TRUST COMPANY, FLEET NATIONAL BANK, AND FLEET
NATIONAL BANK, AS AGENT
4-B-18(A). AMENDMENT TO EXHIBIT 4-B-18 4-B-18(A) FORM 10-Q SEPT.
1998 (1-8291)
10-A . . . FORM OF INSURANCE POLICY ISSUED BY PACIFIC 10-A 33-8146
INSURANCE COMPANY, WITH RESPECT TO
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
10-B-1 . . FIRM POWER CONTRACT DATED SEPTEMBER 16, 1958, 13-B 2-27300
BETWEEN THE COMPANY AND THE STATE OF VERMONT
AND SUPPLEMENTS THERETO DATED SEPTEMBER 19,
1958; NOVEMBER 15, 1958; OCTOBER 1, 1960 AND
FEBRUARY 1, 1964.
10-B-2 . . POWER CONTRACT, DATED FEBRUARY 1, 1968, BETWEEN THE COMPANY 13-D 2-34346
AND VERMONT YANKEE NUCLEAR POWER CORPORATION.
10-B-3 . . AMENDMENT, DATED JUNE 1, 1972, TO POWER CONTRACT 13-F-1 2-49697
BETWEEN THE COMPANY AND VERMONT YANKEE NUCLEAR
POWER CORPORATION.
10-B-3(A). AMENDMENT, DATED APRIL 15, 1983, TO POWER 10-B-3(A) 33-8164
CONTRACT BETWEEN THE COMPANY AND VERMONT
YANKEE NUCLEAR POWER CORPORATION.
10-B-3(B). ADDITIONAL POWER CONTRACT, DATED 10-B-3(B) 33-8164
FEBRUARY 1, 1984,BETWEEN THE COMPANY AND
VERMONT YANKEE NUCLEAR POWER CORPORATION.
10-B-4 . . CAPITAL FUNDS AGREEMENT, DATED FEBRUARY 1, 13-E 2-34346
1968, BETWEEN THE COMPANY AND VERMONT
YANKEE NUCLEAR POWER CORPORATION.
10-B-5 . . AMENDMENT, DATED MARCH 12, 1968, TO CAPITAL 13-F 2-34346
FUNDS AGREEMENT BETWEEN THE COMPANY AND
VERMONT YANKEE NUCLEAR POWER CORPORATION.
10-B-6 . . GUARANTEE AGREEMENT, DATED NOVEMBER 5, 1981, OF THE 10-B-6 2-75293
COMPANY FOR ITS PROPORTIONATE SHARE OF THE OBLIGATIONS
OF VERMONT YANKEE NUCLEAR POWER CORPORATION
UNDER A $40 MILLION LOAN ARRANGEMENT.
10-B-7 . . THREE-PARTY POWER AGREEMENT AMONG THE COMPANY, 13-I 2-49697
VELCO AND CENTRAL VERMONT PUBLIC SERVICE
CORPORATION DATED NOVEMBER 21, 1969.
10-B-8 . . AMENDMENT TO EXHIBIT 10-B-7, DATED JUNE 1, 1981. 10-B-8 2-75293
10-B-9 . . THREE-PARTY TRANSMISSION AGREEMENT AMONG THE 13-J 2-49697
COMPANY, VELCO AND CENTRAL VERMONT PUBLIC
SERVICE CORPORATION, DATED NOVEMBER 21, 1969.
10-B-10. . AMENDMENT TO EXHIBIT 10-B-9, DATED JUNE 1, 1981. 10-B-10 2-75293
10-B-14. . AGREEMENT WITH CENTRAL MAINE POWER COMPANY ET 5.16 2-52900
AL, TO ENTER INTO JOINT OWNERSHIP OF WYMAN
PLANT, DATED NOVEMBER 1, 1974.
10-B-15. . NEW ENGLAND POWER POOL AGREEMENT AS AMENDED TO 4.8 2-55385
NOVEMBER 1, 1975.
10-B-16. . BULK POWER TRANSMISSION CONTRACT BETWEEN THE 13-V 2-49697
COMPANY AND VELCO DATED JUNE 1, 1968.
10-B-17. . AMENDMENT TO EXHIBIT 10-B-16, DATED JUNE 1, 1970. 13-V-I 2-49697
10-B-20. . POWER SALES AGREEMENT, DATED AUGUST 2, 1976, AS 10-B-20 33-8164
AMENDED OCTOBER 1, 1977, AND RELATED
TRANSMISSION AGREEMENT, WITH THE MASSACHUSETTS
MUNICIPAL WHOLESALE ELECTRIC COMPANY.
10-B-21. . AGREEMENT DATED OCTOBER 1, 1977, FOR JOINT OWNERSHIP, 10-B-21 33-8164
CONSTRUCTION AND OPERATION OF THE MMWEC PHASE I
INTERMEDIATE UNITS, DATED OCTOBER 1, 1977
10-B-28. . CONTRACT DATED FEBRUARY 1, 1980, PROVIDING FOR 10-B-28 33-8164
THE SALE OF FIRM POWER AND ENERGY BY THE POWER
AUTHORITY OF THE STATE OF NEW YORK TO THE
VERMONT PUBLIC SERVICE BOARD.
10-B-30. . BULK POWER PURCHASE CONTRACT DATED APRIL 7, 10-B-32 2-75293
1976, BETWEEN VELCO AND THE COMPANY.
10-B-33. . AGREEMENT AMENDING NEW ENGLAND POWER POOL AGREEMENT 10-B-33 33-8164
DATED AS OF DECEMBER 1, 1981, PROVIDING FOR USE OF
TRANSMISSION INTER-CONNECTION BETWEEN NEW ENGLAND
AND HYDRO-QUEBEC.
10-B-34. . PHASE I TRANSMISSION LINE SUPPORT AGREEMENT 10-B-34 33-8164
DATED AS OF DECEMBER 1, 1981, AND AMENDMENT
NO. 1 DATED AS OF JUNE 1, 1982, BETWEEN
VETCO AND PARTICIPATING NEW ENGLAND UTILITIES
FOR CONSTRUCTION, USE AND SUPPORT OF VERMONT
FACILITIES OF TRANSMISSION INTERCONNECTION
BETWEEN NEW ENGLAND AND HYDRO-QUEBEC.
10-B-35. . PHASE I TERMINAL FACILITY SUPPORT AGREEMENT 10-B-35 33-8164
DATED AS OF DECEMBER 1, 1981, AND AMENDMENT
NO. 1 DATED AS OF JUNE 1, 1982, BETWEEN
NEW ENGLAND ELECTRIC TRANSMISSION CORPORATION
AND PARTICIPATING NEW ENGLAND UTILITIES FOR
CONSTRUCTION, USE AND SUPPORT OF NEW HAMPSHIRE
FACILITIES OF TRANSMISSION INTERCONNECTION
BETWEEN NEW ENGLAND AND HYDRO-QUEBEC.
10-B-36. . AGREEMENT WITH RESPECT TO USE OF QUEBEC 10-B-36 33-8164
INTERCONNECTION DATED AS OF DECEMBER 1, 1981,
AMONG PARTICIPATING NEW ENGLAND UTILITIES
FOR USE OF TRANSMISSION INTERCONNECTION
BETWEEN NEW ENGLAND AND HYDRO-QUEBEC.
10-B-39. . VERMONT PARTICIPATION AGREEMENT FOR QUEBEC 10-B-39 33-8164
INTERCONNECTION DATED AS OF JULY 15, 1982,
BETWEEN VELCO AND PARTICIPATING VERMONT
UTILITIES FOR ALLOCATION OF VELCO'S RIGHTS
AND OBLIGATIONS AS A PARTICIPATING NEW
ENGLAND UTILITY IN THE TRANSMISSION INTER-
CONNECTION BETWEEN NEW ENGLAND AND HYDRO-QUEBEC.
10-B-40. . VERMONT ELECTRIC TRANSMISSION COMPANY, INC. 10-B-40 33-8164
CAPITAL FUNDS AGREEMENT DATED AS OF JULY 15,
1982, BETWEEN VETCO AND VELCO FOR VELCO TO PROVIDE
CAPITAL TO VETCO FOR CONSTRUCTION OF THE VERMONT FACILITIES
OF THE TRANSMISSION INTER-CONNECTION BETWEEN NEW
ENGLAND AND HYDRO-QUEBEC.
10-B-41. . VETCO CAPITAL FUNDS SUPPORT AGREEMENT DATED AS 10-B-41 33-8164
OF JULY 15, 1982, BETWEEN VELCO AND PARTICIPATING VERMONT
UTILITIES FOR ALLOCATION OF VELCO'S OBLIGATION TO VETCO
UNDER THE CAPITAL FUNDS AGREEMENT.
10-B-42. . ENERGY BANKING AGREEMENT DATED MARCH 21, 1983, 10-B-42 33-8164
AMONG HYDRO-QUEBEC, VELCO, NEET AND PARTI-
CIPATING NEW ENGLAND UTILITIES ACTING BY AND
THROUGH THE NEPOOL MANAGEMENT COMMITTEE FOR
TERMS OF ENERGY BANKING BETWEEN PARTICIPATING
NEW ENGLAND UTILITIES AND HYDRO-QUEBEC.
10-B-43. . INTERCONNECTION AGREEMENT DATED MARCH 21, 1983, 10-B-43 33-8164
BETWEEN HYDRO-QUBEC AND PARTICIPATING NEW
ENGLAND UTILITIES ACTING BY AND THROUGH THE
NEPOOL MANAGEMENT COMMITTEE FOR TERMS AND
CONDITIONS OF ENERGY TRANSMISSION BETWEEN
NEW ENGLAND AND HYDRO-QUEBEC.
10-B-44. . ENERGY CONTRACT DATED MARCH 21, 1983, BETWEEN 10-B-44 33-8164
HYDRO-QUEBEC AND PARTICIPATING NEW ENGLAND
UTILITIES ACTING BY AND THROUGH THE NEPOOL
MANAGEMENT COMMITTEE FOR PURCHASE OF
SURPLUS ENERGY FROM HYDRO-QUEBEC.
10-B-50. . AGREEMENT FOR JOINT OWNERSHIP, CONSTRUCTION AND 10-B-50 33-8164
OPERATION OF THE HIGHGATE TRANSMISSION
INTERCONNECTION, DATED AUGUST 1, 1984,
BETWEEN CERTAIN ELECTRIC DISTRIBUTION
COMPANIES, INCLUDING THE COMPANY.
10-B-51. . HIGHGATE OPERATING AND MANAGEMENT AGREEMENT, 10-B-51 33-8164
DATED AS OF AUGUST 1, 1984, AMONG VELCO AND
VERMONT ELECTRIC-UTILITY COMPANIES, INCLUDING
THE COMPANY.
10-B-52. . ALLOCATION CONTRACT FOR HYDRO-QUEBEC FIRM POWER 10-B-52 33-8164
DATED JULY 25, 1984, BETWEEN THE STATE OF
VERMONT AND VARIOUS VERMONT ELECTRIC UTILITIES,
INCLUDING THE COMPANY.
10-B-53. . HIGHGATE TRANSMISSION AGREEMENT DATED AS OF 10-B-53 33-8164
AUGUST 1, 1984, BETWEEN THE OWNERS OF THE
PROJECT AND VARIOUS VERMONT ELECTRIC
DISTRIBUTION COMPANIES.
10-B-61. . AGREEMENTS ENTERED IN CONNECTION WITH PHASE II 10-B-61 33-8164
OF THE NEPOOL/HYDRO-QUEBEC + 450 KV HVDC
TRANSMISSION INTERCONNECTION.
10-B-62. . AGREEMENT BETWEEN UNITIL POWER CORP. AND THE 10-B-62 33-8164
COMPANY TO SELL 23 MW CAPACITY AND ENERGY FROM
STONY BROOK INTERMEDIATE COMBINED CYCLE UNIT.
10-B-68. . FIRM POWER AND ENERGY CONTRACT DATED DECEMBER 4, 10-B-68 FORM 10-K 1992
1987, BETWEEN HYDRO-QUEBEC AND PARTICIPATING (1-8291)
VERMONT UTILITIES, INCLUDING THE COMPANY, FOR
THE PURCHASE OF FIRM POWER FOR UP TO THIRTY YEARS.
10-B-69. . FIRM POWER AGREEMENT DATED AS OF OCTOBER 26, 1987, 10-B-69 FORM 10-K 1992
BETWEEN ONTARIO HYDRO AND VERMONT DEPARTMENT OF (1-8291)
PUBLIC SERVICE.
10-B-70. . FIRM POWER AND ENERGY CONTRACT DATED AS OF 10-B-70 FORM 10-K 1992
FEBRUARY 23, 1987, BETWEEN THE VERMONT JOINT (1-8291)
OWNERS OF THE HIGHGATE FACILITIES AND HYDRO-
QUEBEC FOR UP TO 50 MW OF CAPACITY.
10-B-70(A) AMENDMENT TO 10-B-70. 10-B-70(A) FORM 10-K 1992
(1-8291)
10-B-71. . INTERCONNECTION AGREEMENT DATED AS OF 10-B-71 FORM 10-K 1992
FEBRUARY 23, 1987, BETWEEN THE VERMONT JOINT (1-8291)
OWNERS OF THE HIGHGATE FACILITIES AND HYDRO-QUEBEC.
10-B-72. . PARTICIPATION AGREEMENT DATED AS OF APRIL 1, 1988, 10-B-72 FORM 10-Q
BETWEEN HYDRO-QUEBEC AND PARTICIPATING VERMONT JUNE 1988
UTILITIES, INCLUDING THE COMPANY, IMPLEMENTING (1-8291)
THE PURCHASE OF FIRM POWER FOR UP TO 30 YEARS
UNDER THE FIRM POWER AND ENERGY CONTRACT DATED
DECEMBER 4, 1987 (PREVIOUSLY FILED WITH THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR 1987,
EXHIBIT NUMBER 10-B-68).
10-B-72(A) RESTATEMENT OF THE PARTICIPATION AGREEMENT FILED 10-B-72(A) FORM 10-K 1988
AS EXHIBIT 10-B-72 ON FORM 10-Q FOR JUNE 1988. (1-8291)
10-B-77. . FIRM POWER AND ENERGY CONTRACT DATED DECEMBER 29, 10-B-77 FORM 10-K 1988
1988, BETWEEN HYDRO-QUEBEC AND PARTICIPATING (1-8291)
VERMONT UTILITIES, INCLUDING THE COMPANY, FOR THE
PURCHASE OF UP TO 54 MW OF FIRM POWER AND ENERGY.
10-B-78. . TRANSMISSION AGREEMENT DATED DECEMBER 23, 1988, 10-B-78 FORM 10-K 1988
BETWEEN THE COMPANY AND NIAGARA MOHAWK POWER (1-8291)
CORPORATION (NIAGARA MOHAWK), FOR NIAGARA
MOHAWK TO PROVIDE ELECTRIC TRANSMISSION TO
THE COMPANY FROM ROCHESTER GAS AND ELECTRIC
AND CENTRAL HUDSON GAS AND ELECTRIC.
10-B-81. . SALES AGREEMENT DATED MAY 24, 1989, BETWEEN 10-B-81 FORM 10-Q
THE TOWN OF HARDWICK, HARDWICK ELECTRIC DEPARTMENT JUNE 1989
AND THE COMPANY FOR THE COMPANY TO PURCHASE (1-8291)
ALL OF THE OUTPUT OF HARDWICK'S GENERATION AND
TRANSMISSION SOURCES AND TO PROVIDE HARDWICK
WITH ALL-REQUIREMENTS ENERGY AND CAPACITY EXCEPT
FOR THAT PROVIDED BY THE VERMONT DEPARTMENT OF
PUBLIC SERVICE OR FEDERAL PREFERENCE POWER.
10-B-82. . SALES AGREEMENT DATED JULY 14, 1989, BETWEEN 10-B-82 FORM 10-Q
NORTHFIELD ELECTRIC DEPARTMENT AND THE COMPANY JUNE 1989
FOR THE COMPANY TO PURCHASE ALL OF THE OUTPUT (1-8291)
OF NORTHFIELD'S GENERATION AND TRANSMISSION
SOURCES AND TO PROVIDE NORTHFIELD WITH ALL-
REQUIREMENTS ENERGY AND CAPACITY EXCEPT FOR
THAT PROVIDED BY THE VERMONT DEPARTMENT OF
PUBLIC SERVICE OR FEDERAL PREFERENCE POWER.
10-B-85. . POWER PURCHASE AND SALE AGREEMENT BETWEEN 10-B-85 FORM 10-K 1998
MORGAN STANLEY CAPITAL GROUP INC. AND THE (1-8291)
COMPANY
10-B-86. . REVOLVING CREDIT AGREEMENT WITH KEYBANK 10-B-86 FORM 10-Q SEPT.
2000 (1-8291)
10-B-87. . AMENDMENT TO FLEET REVOLVING CREDIT AGREEMENT 10-B-87 FORM 10-Q SEPT.
2000 (1-8291)
10-B-88. . ENERGY EAST POWER PURCHASE OPTION AGREEMENT 10-B-88 FORM 10-Q SEPT.
2000 (1-8291)
10-B-89. . SECOND AMENDED AND RESTATED CREDIT AGREEMENT BETWEEN 10-B-89 FORM 10-K 2001
KEYBANK NATIONAL ASSOCIATION, FLEET NATIONAL BANK, AND
THE COMPANY DATED JUNE 20, 2001
MANAGEMENT CONTRACTS OR COMPENSATORY PLANS OR ARRANGEMENTS
REQUIRED TO BE FILED AS EXHIBITS TO THIS FORM 10-K
PURSUANT TO ITEM 14(C)., ALL UNDER SEC DOCKET 1-8291
------------------------------------------------------
10-D-1B. GREEN MOUNTAIN POWER CORPORATION SECOND AMENDED 10-D-1B FORM 10-K 1993
AND RESTATED DEFERRED COMPENSATION PLAN FOR DIRECTORS.
10-D-1C. GREEN MOUNTAIN POWER CORPORATION SECOND AMENDED 10-D-1C FORM 10-K 1993
AND RESTATED DEFERRED COMPENSATION PLAN FOR
OFFICERS.
10-D-1D. AMENDMENT NO. 93-1 TO THE AMENDED AND RESTATED 10-D-1D FORM 10-K 1993
DEFERRED COMPENSATION PLAN FOR OFFICERS.
10-D-1E. AMENDMENT NO. 94-1 TO THE AMENDED AND RESTATED 10-D-1E FORM 10-Q
DEFERRED COMPENSATION PLAN FOR OFFICERS. JUNE 1994
10-D-2 . GREEN MOUNTAIN POWER CORPORATION MEDICAL EXPENSE 10-D-2 FORM 10-K 1991
REIMBURSEMENT PLAN.
10-D-4 . GREEN MOUNTAIN POWER CORPORATION OFFICER 10-D-4 FORM 10-K 1991
INSURANCE PLAN.
10-D-4A. GREEN MOUNTAIN POWER CORPORATION OFFICERS' 10-D-4A FORM 10-K 1990
INSURANCE PLAN AS AMENDED.
10-D-8 . GREEN MOUNTAIN POWER CORPORATION OFFICERS' 10-D-8 FORM 10-K 1990
SUPPLEMENTAL RETIREMENT PLAN.
10-D-15B GREEN MOUNTAIN POWER CORPORATION COMPENSATION PROGRAM 10-D-15B FORM 10-K 1997
FOR OFFICERS AND KEY MANAGEMENT PERSONNEL AS AMENDED
AUGUST 4, 1997
10-D-15C GREEN MOUNTAIN POWER 2000 STOCK INCENTIVE PLAN 10-D-15C FORM 10-K 2001
10-D-21. SEVERANCE AGREEMENT WITH N. R. BROCK 10-D-21 FORM 10-K 1998
10-D-22. SEVERANCE AGREEMENT WITH C. L. DUTTON 10-D-22 FORM 10-K 1998
10-D-23. SEVERANCE AGREEMENT WITH R. J. GRIFFIN 10-D-23 FORM 10-K 1998
10-D-27. SEVERANCE AGREEMENT WITH W. S. OAKES 10-D-27 FORM 10-K 1998
10-D-28. SEVERANCE AGREEMENT WITH M. G. POWELL 10-D-28 FORM 10-K 1998
10-D-29. SEVERANCE AGREEMENT WITH S. C. TERRY 10-D-29 FORM 10-K 1998
10-D-30. SEVERANCE AGREEMENT WITH J. H. WINER 10-D-30 FORM 10-K 1998
10-D-31. AMENDMENT TO SEVERANCE AGREEMENT WITH N. R. BROCK 10-D-31 FORM 10-K 2001
10-D-32. AMENDMENT TO SEVERANCE AGREEMENT WITH C. L. DUTTON 10-D-32 FORM 10-K 2001
10-D-33. AMENDMENT TO SEVERANCE AGREEMENT WITH R. J. GRIFFIN 10-D-33 FORM 10-K 2001
10-D-34. AMENDMENT TO SEVERANCE AGREEMENT WITH W. S. OAKES 10-D-34 FORM 10-K 2001
10-D-35. AMENDMENT TO SEVERANCE AGREEMENT WITH M. G. POWELL 10-D-35 FORM 10-K 2001
10-D-36. AMENDMENT TO SEVERANCE AGREEMENT WITH S. C. TERRY 10-D-36 FORM 10-K 2001
21 . . . SUBSIDIARIES OF THE REGISTRANT 21 FORM 10-K 1996
*23-A-1. CONSENT OF ARTHUR ANDERSEN LLP 23-A-1
24 . . . LIMITED POWER OF ATTORNEY 24
99 . . . GREEN MOUNTAIN POWER LETTER OF ASSURANCE OF AUDIT 99 FORM 10-K 2001
QUALITY.
81
SEC 2001 FORM 10-K EXHIBIT 10-B-89
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
by and among
GREEN MOUNTAIN POWER CORPORATION,
KEYBANK NATIONAL ASSOCIATION,
FLEET NATIONAL BANK
and
FLEET NATIONAL BANK,
AS AGENT
_______________________
_______________________
$27,000,000
_______________________
_______________________
Dated as of June 20, 2001
1. DEFINITIONS 87
1.1 DEFINED TERMS 87
1.2 OTHER DEFINITIONAL PROVISIONS 95
2. AMOUNT AND TERMS OF LOANS 95
2.1. REVOLVING CREDIT LOANS 95
2.2. TERM LOANS 96
2.3. PROCEDURE FOR BORROWINGS 96
2.4. NOTES 97
2.5. VOLUNTARY REDUCTIONS OF THE AGGREGATE REVOLVING CREDIT COMMITMENTS
98
2.6. PREPAYMENTS AND PAYMENT OF LOANS 98
2.7. CONVERSION OPTIONS 99
2.8. INTEREST RATE AND PAYMENT DATES FOR LOANS 100
2.9. SUBSTITUTED INTEREST RATE 100
2.10. ILLEGALITY 101
2.11. INCREASED COSTS 101
2.12. INDEMNITY 102
2.13. USE OF PROCEEDS 102
2.14. CAPITAL ADEQUACY 103
2.15. EXTENSION OF REVOLVING CREDIT TERMINATION DATE 103
2.16. NOTICE OF COSTS: SUBSTITUTION OF BANKS 104
3. FEES; PAYMENTS 104
3.1. FACILITY FEE 104
3.2 FEES OF THE AGENT. 105
3.3 COMPUTATION OF INTEREST AND FEES. 105
3.4 PRO RATA TREATMENT AND APPLICATION OF PRINCIPAL PAYMENTS 105
3.5. UPFRONT FEE. 106
4. REPRESENTATIONS AND WARRANTIES. 106
4.1 SUBSIDIARY. 106
4.2. CORPORATE EXISTENCE AND POWER. 106
4.3 CORPORATE AUTHORITY. 106
4.4 BINDING AGREEMENT. 106
4.5. LITIGATION 106
4.6. NON CONFLICTING AGREEMENTS 106
4.7. TAXES. 107
4.8. FINANCIAL STATEMENTS 107
4.9. COMPLIANCE WITH APPLICABLE LAWS 107
4.10. GOVERNMENTAL REGULATIONS 108
4.11. PROPERTY 108
4.12 FEDERAL RESERVE REGULATIONS 108
4.13. NO MISREPRESENTATION. 108
4.14. PENSION PLANS 108
4.15. PUBLIC UTILITY HOLDING COMPANY ACT. 108
4.16. APPROVALS. 108
4.18. NO ADVERSE CHANGE OR EVENT. 109
5. CONDITIONS OF BORROWING - FIRST BORROWING AND TERM LOAN EFFECTIVE DATE.
109
5.1. EVIDENCE OF CORPORATE ACTION. 109
5.2. REVOLVING CREDIT NOTES. 109
5.4. OPINION OF COUNSEL TO THE COMPANY. 109
5.5. FEES. 109
5.6. CONSENTS, LICENSES. 109
5.7. PROFITABILITY. 110
5.8. TERM LOAN EFFECTIVE DATE. 110
6. CONDITIONS OF BORROWING - ALL BORROWINGS. 110
6.1. COMPLIANCE. 110
6.2. LOAN CLOSINGS. 110
6.3. APPROVAL OF COUNSEL. 111
6.4. BORROWING REQUEST. 111
6.5. OTHER DOCUMENTS. 111
7. AFFIRMATIVE COVENANTS. 111
7.1. CORPORATE EXISTENCE. 111
7.2. TAXES. 111
7.3. INSURANCE. 111
7.4. PAYMENT OF INDEBTEDNESS AND PERFORMANCE OF OBLIGATIONS. 111
7.5. OBSERVANCE OF LEGAL REQUIREMENTS 111
7.6. FINANCIAL STATEMENTS AND OTHER INFORMATION. 112
7.7. INSPECTION. 113
8. NEGATIVE COVENANTS. 113
8.1 FUNDED DEBT. 113
8.2. LIENS. 114
8.3. MERGERS AND CONSOLIDATIONS. 114
8.4 SALE OF PROPERTY. 114
8.5. DIVIDENDS; DISTRIBUTIONS. 114
8.6. GUARANTIES. 114
8.7. AMENDMENT OF CHARTER OR BY-LAWS. 115
8.8. FUNDED DEBT TO CAPITALIZATION TEST. 115
9. EVENTS OF DEFAULT. 115
10. THE AGENT. 117
10.1. APPOINTMENT. 117
10.2. DELEGATION OF DUTIES, ETC. 117
10.3. INDEMNIFICATION. 117
10.4. EXCULPATORY PROVISIONS. 118
10.5. AGENT IN ITS INDIVIDUAL CAPACITY. 118
10.6. KNOWLEDGE OF DEFAULT. 118
10.7. RESIGNATION OF AGENT. 118
10.8. REQUESTS TO THE AGENT. 119
11. NOTICES. 119
11.1. MANNER OF DELIVERY. 119
11.2. DISTRIBUTION OF COPIES. 121
11.3. NOTICES BY THE AGENT OR A BANK. 121
12. RIGHT OF SET-OFF. 121
13. AMENDMENTS WAIVERS AND CONSENTS. 121
14. OTHER PROVISIONS. 122
14.1. NO WAIVER OF RIGHTS BY THE BANKS. 122
14.2. HEADINGS; PLURALS. 122
14.3. COUNTERPARTS. 122
14.4. SEVERABILITY. 122
14.5. INTEGRATION. 122
14.6. SALES AND PARTICIPATIONS IN LOANS AND NOTES, SUCCESSORS AND ASSIGNS,
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. 123
14.7. APPLICABLE LAW. 124
14.8. INTEREST. 124
14.9. ACCOUNTING TERMS AND PRINCIPLES. 124
14.10. WAIVER OF TRIAL BY JURY. 124
14.11. CONSENT TO JURISDICTION. 124
14.12. SERVICE OF PROCESS. 125
14.13. NO LIMITATION ON SERVICE OR SUIT 125
15. OTHER OBLIGATIONS OF THE COMPANY. 125
15.1. TAXES AND FEES. 125
15.2. EXPENSES. 125
15.3. LOST NOTES. 125
16. EFFECTIVE DATE. 126
EXHIBIT A ERROR! BOOKMARK NOT DEFINED.
COMMITMENTS ERROR! BOOKMARK NOT DEFINED.
EXHIBIT B ERROR! BOOKMARK NOT DEFINED.
SCHEDULE I ERROR! BOOKMARK NOT DEFINED.
SCHEDULE II ERROR! BOOKMARK NOT DEFINED.
EXHIBIT C ERROR! BOOKMARK NOT DEFINED.
FORM OF BORROWING REQUEST ERROR! BOOKMARK NOT DEFINED.
EXHIBIT D-1 ERROR! BOOKMARK NOT DEFINED.
FORM OF REVOLVING CREDIT NOTES ERROR! BOOKMARK NOT DEFINED.
GRID ERROR! BOOKMARK NOT DEFINED.
REVOLVING CREDIT NOTE ERROR! BOOKMARK NOT DEFINED.
EXHIBIT D-1 ERROR! BOOKMARK NOT DEFINED.
FORM OF TERM LOAN NOTES ERROR! BOOKMARK NOT DEFINED.
EXHIBIT E ERROR! BOOKMARK NOT DEFINED.
FORM OF CONVERSION/CONTINUATION REQUEST ERROR! BOOKMARK NOT DEFINED.
EXHIBIT F ERROR! BOOKMARK NOT DEFINED.
SUBSIDIARIES ERROR! BOOKMARK NOT DEFINED.
EXHIBIT G-1 ERROR! BOOKMARK NOT DEFINED.
FORM OF OPINION OF COUNSEL TO COMPANY ERROR! BOOKMARK NOT DEFINED.
EXHIBIT G-2 ERROR! BOOKMARK NOT DEFINED.
FORM OF OPINION OF COUNSEL TO COMPANY (FOR TERM LOAN EFFECTIVE DATE) ERROR!
BOOKMARK NOT DEFINED.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This SECOND AMENDED AND RESTATED CREDIT AGREEMENT, dated as of June 20,
2001, among GREEN MOUNTAIN POWER CORPORATION, a Vermont corporation (the
"Company"), the Signatory Banks hereto (each, a "Bank" and, collectively, the
"Banks"), and FLEET NATIONAL BANK, as agent hereunder (in such capacity, the
"Agent") amends and restates in its entirety the Amended and Restated Credit
Agreement dated of August 17, 1998 (the "Credit Agreement").
The Company has requested that the Banks agree to certain amendments to the
Credit Agreement and, subject to the terms and provisions hereof, the Banks are
willing to so amend the Credit Agreement and to restate the Credit Agreement in
its entirety, as follows:
1. DEFINITIONS1. DEFINITIONS.
- -- -----------
1.1. DEFINED TERMS1.1 DEFINED TERMS. As used in this Agreement, terms
- ---- --------------
defined in the paragraphs above have the meanings therein indicated, and the
following terms have the following meaning:
"Accountants" Arthur Andersen LLP, or such other firm of certified public
-----------
accountants of recognized national standing selected by the Company.
"Affected Loan": as defined in paragraph 2.9.
--------------
"Affected Principal Amount": (i) in the event that the Company shall fail
--------------------------
for any reason to borrow a Loan constituting a LIBOR Loan after it shall have
delivered a Borrowing Request to the Agent, an amount equal to the principal
amount of such LIBOR Loan; (ii) in the event that the right of the Company to
have a LIBOR Loan outstanding hereunder shall be suspended or shall terminate
for any reason prior to the last day of the Interest Period applicable thereto,
an amount equal to the principal amount of such LIBOR Loan; and (iii) in the
event that the Company shall prepay or repay all or any part of the principal
amount of a LIBOR Loan prior to the last day of the Interest Period applicable
thereto, an amount equal to the principal amount so prepaid or repaid.
"Affiliate": a Person that directly or indirectly, or through one or more
---------
intermediaries, controls or is controlled by or is under common control with
----
another Person. The term "control" means possession, directly or indirectly, of
--
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent's Fees": as defined in paragraph 3.2.
-------------
"Aggregate Commitments": the sum of the Commitments set forth in Exhibit
---------------------- -------
Aas the same may be reduced (through reductions in the Revolving Credit
Commitment portion thereof) pursuant to paragraph 2.5.
"Aggregate Revolving Credit Commitments": the sum of the Revolving Credit
-----------------------------------------
Commitments set forth in Exhibit Aas the same may be reduced pursuant to
---- ----------
paragraph 2.5.
----
"Aggregate Term Loan Commitments": the sum of the Term Loan Commitments set
----------------------------------
forth in Exhibit A.
-- ----------
"Agreement": this Second Amended and Restated Credit Agreement, as same may be
---------
amended, supplemented or otherwise modified from time to time.
"Alternate Base Rate": the higher of (a) the annual rate of interest publicly
---------------------
announced from time to time by the Agent at the Agent's head office as its
"prime rate" and (b) one-half of one percent ( %) above the Federal Funds
Effective Rate.
"Alternate Base Rate Loans": Loans (or any portion thereof) at such time as
----------------------------
they (or such portions) are made or are being maintained at a rate of interest
--
based upon the Alternate Base Rate.
"Applicable Lending Office": as to any Bank, such Bank's Domestic Lending
---------------------------
Office or LIBOR Lending Office, as the case may be.
----
"Applicable Margin": with respect to LIBOR Loans: (i) for Revolving Credit
------------------
Loans, the additional rate per annum to be added to LIBOR, determined by
---
reference to Schedule I on Exhibit B hereto based upon the Debt Rating of the
---
Company; provided that if the Company has no Debt Rating, the Applicable Margin
-
shall be the highest rate per annum (i.e., Pricing Level IV) applicable to such
Loans during the relevant period; and (ii) for Term Loans, the additional rate
per annum equal to one and one-quarter percent (1.25%) to be added to LIBOR.
"Authorized Signatory": the president, any vice president, the treasurer, the
---------------------
secretary, or any other duly authorized officer of the Company acceptable to
Agent.
"Bank" or "Banks": the signatory Banks to this Credit Agreement and any other
-----------------
bank or lender that becomes a signatory hereto pursuant to paragraph 14.6.
"Borrowing": a Borrowing of additional principal amounts pursuant to paragraph
---------
2.3 consisting of simultaneous Loans of the same Type made by each Bank.
"Borrowing Request": as defined in paragraph 2.3.
------------------
"Borrowing Date": any date specified in a Borrowing Request delivered pursuant
---------------
to paragraph 2.3 as a date on which the Company requests the Banks to make Loans
hereunder.
"Business Day": for all purposes other than as set forth in clause (ii) below,
-------------
(i) any day other than a Saturday, Sunday or other day on which commercial banks
located in New York City or Boston are authorized or required by law or other
governmental actions to close and (ii) with respect to all notices and
determinations in connection with, and payments of principal and interest on
LIBOR Loans, any day other than a Saturday, Sunday, or other day on which
commercial banks located in New York City or Boston are authorized or required
to close under the laws applicable to commercial banks located in New York City
or Boston and, if the applicable day relates to a LIBOR Loan or an interest
period for a LIBOR Loan, the day on which dealings in dollar deposits are also
carried on in the London interbank market and banks are open for business in
London.
"Code": the Internal Revenue Code of 1986, as the same may be amended from time
----
to time, or any successor thereto, and the rules and regulations issued
hereunder, as from time to time in effect.
"Commitment": in respect of any Bank, such Bank's undertaking to make Loans to
----------
the Company, subject to the terms and conditions hereof, in an aggregate
outstanding principal amount equal to but not exceeding the amount set forth
next to the name of such Bank on Exhibit Aunder the heading "Total Commitment",
---------
as the same may be reduced (through reductions in the Revolving Credit
Commitment portion thereof) pursuant to paragraph 2.5.
"Commitment Percentage": as to any Bank, the percentage set forth opposite
---------------------
the name of such Bank on Exhibit A under the heading "Commitment Percentage".
---------
"Commonly Controlled Entity": an entity, whether or not incorporated,
----------------------------
which is under common control with the Company within the meaning of Section
414(b) or 414(c) of the Code.
"Consolidated": the Company and its Subsidiaries taken as a whole.
------------
"Consolidated Net Worth": the means the aggregate of the capital stock and other
----------------------
equity accounts (including, without limitation, retained earnings and paid-in
capital) of the Consolidated Company.
"Conversion/Continuation Request": as defined in paragraph 2.7.
--------------------------------
"Conversion Date": the date on which a Loan of one Type is converted to a Loan
----------------
of another Type or continued as a Loan of the same Type.
"Debt Rating": the public debt rating of the Company's First Mortgage Bonds
------------
according to Standard & Poor's Corporation or Moody's Investor Service. In the
--
event of a split rating, the lower of the two ratings will apply. In the event
that neither Standard & Poor's Corporation nor Moody's Investor Service have a
public debt rating for the Company, the Company shall be deemed to have no Debt
Rating.
"Designated Documents": the Company's annual report on Form 10-K for the fiscal
---------------------
year ending December 31, 2000, the Company's filing of Form 8-K dated January 5,
2001, the Company's filing of Form 8-K dated January 23, 2001, the Company's
filing of Form 8-K dated January 26, 2001, the Company's filing of Form 8-K
dated March 6, 2001, the Company's quarterly report on form 10-Q for fiscal
quarter ending March 31, 2001, the Company's filing of Form 8-K dated April 25,
2001 and the Company's filing of Form 8-K dated May 2, 2001.
"Dollars" and "$": dollars in lawful currency of the United States of America.
-------
"Domestic Lending Office": as to any Bank, initially the office of such Bank
-------------------------
designated as such on the signature page hereof, and thereafter such other
-
office in the United States as reported by such Bank to the Agent, that shall be
-
making or maintaining Alternate Base Rate Loans.
"Effective Date": as defined in paragraph 16.
---------------
"End Date": (i) with respect to the Revolving Credit Loans, the Revolving Credit
--------
Termination Date; and (ii) with respect to the Term Loans, the Term Loan
Maturity Date.
"Environmental Law": Any and all federal, state, local and foreign statutes,
------------------
laws, regulations, ordinances, rules, judgments, orders, decrees, permits,
-
concessions, grants, franchises, licenses, agreements or other governmental
-
restrictions relating to the environment (but not including zoning and similar
-
land use laws and regulations which have no Material Adverse Effect on the
Company) or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes into the environment, including, without limitation,
ambient air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
"Environmental Notice": any summons, citation, directive, information request,
---------------------
notice of potential responsibility, notice of violation or deficiency, order,
claim, complaint, investigation, proceeding, judgment, letter or other
communication, written or oral, actual or threatened, from the United States
Environmental Protection Agency or other federal, state or local agency or
authority, or any other entity or individual, public or private, concerning any
intentional or unintentional act or omission which involves management of
hazardous substances or wastes on or off any property owned or leased by the
Company or any Subsidiary or Affiliate of the Company; the imposition of any
Lien on such property; and any alleged violation of or responsibility under
Environmental Laws.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
-----
from time to time, and the rules and regulations issued thereunder, as from time
to time in effect.
"Event of Default": any of the events specified in paragraph 9, provided that
------------------
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Federal Funds Effective Rate": for any day, the weighted average of the rates
-----------------------------
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers on such day, as published for the prior
day by the Federal Reserve Bank of Boston.
"First Mortgage Bonds": the Company's First Mortgage Bonds as set forth in the
---------------------
Company's 1997 Form 10-K filed on March 27, 1998 with the Securities and
Exchange Commission.
"FNB": Fleet National Bank, a national banking association.
---
"Facility Fee": as defined in paragraph 3.1.
--------------
"Financial Statements": as defined in paragraph 4.8.
---------------------
"Funded Debt": all obligations of the Company evidenced by bonds (including,
------------
without limitation, the First Mortgage Bonds), debentures, notes or other
-
similar instruments (including, without limitation, preferred stock not issued
-
and outstanding as of the date hereof that has maturities within the term of
this Agreement) and all other evidences of indebtedness of the Company
(including, without limitation, Short-Term Funded Debt), and any other
instrument or arrangement which would be treated as indebtedness under GAAP,
including, without limitation, capitalized leases but excluding trade
obligations and normal accruals, including accounts payable, in the ordinary
course of business not yet due and payable, or with respect to which the Company
is contesting in good faith the amount or validity thereof by appropriate
proceedings and then only to the extent that the Company has set aside on its
books adequate reserves therefor in accordance with GAAP and such contest does
not have a Material Adverse Effect.
"GAAP": generally accepted accounting principles from time to time
----
followed by companies engaged in a business similar to that of the Company,
-
except as otherwise required by any applicable rules, regulations or orders of
the VPSB, or other public regulatory authority having jurisdiction over the
accounts of the Company; provided that the Company may at any time contest or
controvert in good faith the validity or applicability to the Company of any
such rule, regulation or order; and provided, further, that the federal income
tax liability of the Company may be computed as if the Company were filing
separate returns notwithstanding the fact that it may file consolidated returns
as part of an affiliated group.
"Governmental Body": any nation or government, any state or other political
------------------
subdivision thereof, any entity exercising executive, legislative, judicial,
--
regulatory, or administrative functions, of, or pertaining to, government, and
--
any court or arbitrator.
"Interest Payment Date": (a) as to any Alternate Base Rate Loan, the last day
-----------------------
of each March, June, September and December commencing on the first such day to
occur after such Loan is made or any LIBOR Loan is converted to an Alternate
Base Rate Loan, and the date each Alternate Base Rate Loan is paid in full, (b)
as to any LIBOR Loan in respect of which the Company has selected an Interest
Period of one, two or three months, the last day of such Interest Period, and
(c) as to any LIBOR Loan having an Interest Period of six months, the last day
and, in addition, the numerically corresponding day (or, if there is no
numerically corresponding day, the last day) in the calendar month that is three
months after the first day, of such Interest Period.
"Interest Period":
----------------
(a) with respect to any LIBOR Loan comprising the same Borrowing:
(i) initially, the period commencing on, as the case may be, the
Borrowing Date or a Conversion Date with respect to such LIBOR Loan, and ending
one, two, three or six months thereafter, as selected by the Company in its
irrevocable Borrowing Request as provided in paragraph 2.3 or its irrevocable
Conversion/Continuation Request as provided in paragraph 2.7; and
(ii) thereafter, each period commencing on, as the case may be, the
Borrowing Date or a Conversion Date with respect to such LIBOR Loan and ending
one, two, three or six months thereafter, as selected by the Company in its
irrevocable notice of conversion as provided in paragraph 2.7; and
(b) [Reserved]
(c) All of the foregoing provisions relating to Interest Periods set forth
in paragraph (a) above are subject to the following:
(i) if any Interest Period pertaining to a LIBOR Loan comprising the
same Borrowing would otherwise end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day unless the
result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the immediately
preceding Business Day;
(ii) if, with respect to the conversion of any Loan, the Company shall fail
to give due notice as provided in paragraph 2.7 for such Loan, such Loan shall
be automatically converted to an Alternate Base Rate Loan upon the expiration of
the Interest Period with respect thereto;
(iii) any Interest Period pertaining to a LIBOR Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of a calendar month;
(iv) the Company shall select Interest Periods relating to LIBOR Loans so as
not to have more than twelve different Interest Periods relating to LIBOR Loans
outstanding at any one time; and
(v) the Company shall select Interest Periods pertaining to LIBOR Loans such
that, on the date the mandatory repayment is required to be made under paragraph
2.6(b), the outstanding principal amount of all Alternate Base Rate Loans and
LIBOR Loans with Interest Periods ending on the date of such payment shall equal
the aggregate principal amount of the Loans required to be repaid on such date.
"KeyBank Certificate of Deposit": the certificate of deposit issued by
---------------------------------
KeyBank National Association, in an amount not to exceed $15,150,000, for the
benefit of the Company, which the Company has pledged to KeyBank National
Association to secure its obligations under the KeyBank Credit Facility.
"KeyBank Credit Facility": the credit facility, in a principal amount not to
-------------------------
exceed $15,000,000, in effect pursuant to that certain Revolving Line of Credit
-
Agreement dated as of September 20, 2000, between KeyBank National Association,
or its successors and assigns, and the Company.
"LIBOR": as applicable to any LIBOR Loan, the rate per annum as determined
-----
on the basis of the offered rates for deposits in U.S. Dollars, for a period of
time comparable to the Interest Period for such LIBOR Loan which appears on the
Telerate page 3750 as of 11:00 a.m. London time on the day that is two (2)
Business Days (as such definition relates to LIBOR Loans) preceding the first
day of such LIBOR Loan; provided, however, if the rate described above does not
-----------------
appear on the Telerate System on any applicable interest determination date,
LIBOR shall be the rate (rounded upward, if necessary, to the nearest one
hundred-thousandth of a percentage point), determined on the basis of the
offered rates for deposits in U.S. dollars for a period of time comparable to
the Interest Period for such LIBOR Loan which are offered by four major banks in
the London interbank market at approximately 11:00 a.m. London time, on the day
that is two (2) Business Days (as such definition relates to LIBOR Loans)
preceding the first day of such LIBOR Loan as selected by Agent. The principal
London office of each of the four major London banks will be requested to
provide a quotation of its U.S. Dollar deposit offered rate. If at least two
such quotations are provided, the rate for that date will be the arithmetic mean
of the quotations. If fewer than two quotations are provided as requested, the
rate for that date will be determined on the basis of the rates quoted for loans
in U.S. dollars to leading European banks for a period of time comparable to
Interest Period for such LIBOR Loan offered by major banks in New York City at
approximately 11:00 a.m. New York City time, on the day that is two (2)
Business Days (as such definition relates to LIBOR Loans) preceding the first
day of such LIBOR Loan. In the event that Agent is unable to obtain any such
quotation as provided above, it will be deemed that LIBOR pursuant to a LIBOR
Loan cannot be determined. In the event that the Board of Governors of the
Federal Reserve System shall impose a Reserve Percentage (as defined below) with
respect to LIBOR deposits of member banks of the Federal Reserve System then for
any period during which such Reserve Percentage shall apply, LIBOR shall be
equal to the amount determined above divided by an amount equal to 1 minus the
Reserve Percentage. "Reserve Percentage" shall mean the maximum aggregate
reserve requirement (including all basic, supplemental, marginal and other
reserves) which is imposed on member banks of the Federal Reserve System against
"Euro-currency Liabilities" as defined in Regulation D.
"LIBOR Lending Office": as to any Bank, initially the office of such Bank
---------------------
designated as such on the signature page hereof, and thereafter such other
office as reported by such Bank to the Agent, that shall be making or
maintaining LIBOR Loans.
"LIBOR Loan": Loans (or any portions thereof) at such time as they (or such
-----------
portions) are made or being maintained at a rate of interest based upon LIBOR.
---
"Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement,
----
encumbrance, lien (statutory or other), or preference, priority or other
security agreement or security interest of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable law of any jurisdiction).
"Loan Documents": collectively, this Agreement, the Notes, and any document and
--------------
instrument executed and/or delivered in connection herewith or therewith.
"Loans": collectively, Revolving Credit Loans and Term Loans.
-----
"Majority Banks": either: (a) at any time when there are fewer than three
---------------
(3) Banks party hereto, (i) at any time prior to the termination or expiration
of the Commitments, Banks having at least 100% of the Aggregate Commitments; or
(ii) at any time upon or after the termination or expiration of the Commitments,
Banks holding at least 100% of the outstanding Loans; or (b) at any time when
there are three (3) or more Banks party hereto, (i) at any time prior to the
termination or expiration of the Commitments, Banks having at least 66 2/3% of
the Aggregate Commitments; or (ii) at any time upon or after the termination or
expiration of the Commitments, Banks holding at least 66 2/3% of the
outstanding Loans.
"Material Adverse Change": a material adverse change in the business, assets,
-------------------------
liabilities, condition (financial or otherwise), results of operations or
business prospects of (a) the Company or (b) the Company and its Subsidiaries
"taken as a whole" which would reasonably be expected to render the Company
unable to perform its obligations under the Loan Documents. The term "Material
Adverse Change" shall include, without limitation, any change in any law,
regulation, treaty or directive or in the interpretation or application thereof
by any Governmental Body, charged with the administration thereof or compliance
by the Company with any request or directive from any Governmental Body, the
result of which would have a Material Adverse Effect. The term "Material
Adverse Change" shall also include, without limitation, the occurrence or
failure to occur of any event, which occurrence or failure to occur has a
Material Adverse Effect with respect to the Company.
"Material Adverse Effect": (a) with respect to any Person (including, without
--------------------------
limitation, the Company), any materially adverse effect on such Person's
business, assets, liabilities, condition (financial or otherwise), results of
operations or business prospects, (b) with respect to a group of Persons "taken
as a whole" (including, without limitation, the Company and its Subsidiaries),
any materially adverse effect on such Persons' business, assets, liabilities,
financial conditions, results of operations or business prospects taken as a
whole on, where appropriate, a consolidated basis in accordance with GAAP, and
(c) with respect to any Loan Document, any adverse effect, WHETHER OR NOT
MATERIAL on the binding nature, validity or enforceability thereof as an
obligation of the Company.
"Multiemployer Plan": a Plan which is a multiemployer plan as defined in
-------------------
Section 4001 (a)(3) of ERISA.
-----
"Non-Consenting Bank": as defined in paragraph 2.15.
--------------------
"Notes": as defined in paragraph 2.4.
-----
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
----
Subtitle A of Title IV of ERISA, or any Government Body succeeding to the
functions thereof.
"Person": an individual, partnership, corporation, limited liability company,
------
limited liability partnership, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Body or any other entity
of whatever nature.
"Plan": any pension plan which is covered by Title IV of ERISA and in respect
----
of which the Company or a Commonly Controlled Entity is an "employer" as defined
in Section 3(5) of ERISA.
"Property": all types of real, personal, tangible, intangible or mixed
--------
property.
"Regulation D": Regulation D of the Board of Governors of the Federal
-------------
Reserve System, as amended from time to time.
"Replacement Bank": as defined in paragraph 2.15.
------------------
"Reportable Event": any event described in Section 4043(b) of ERISA, other
----------------
than an event with respect to which the 30-day notice requirement has been
waived.
"Revolving Credit Commitment": in respect of any Bank, such Bank's
-----------------------------
undertaking to make Revolving Credit Loans to the Company, subject to the terms
-
and conditions hereof, in an aggregate outstanding principal amount equal to but
not exceeding the amount set forth next to the name of such Bank on Exhibit
-------
Aunder the heading "Revolving Credit Commitment", as the same may be reduced
pursuant to paragraph 2.5.
"Revolving Credit Commitment Percentage": as to any Bank, the percentage set
-----------------------------------------
forth opposite the name of such Bank on ExhibitA under the heading "Revolving
- -------
Credit Commitment Percentage".
-
"Revolving Credit Loans": Loans made pursuant to paragraph 2.1.
------------------------
"Revolving Credit Notes": as defined in paragraph 2.4.
------------------------
"Revolving Credit Termination Date": June 19, 2002 or any date subsequent
------------------------------------
thereto resulting from an extension of the Revolving Credit Termination Date
----
pursuant to paragraph 2.15.
--
"Short-Term Funded Debt": debt with initial maturities of less than one (1)
------------------------
year.
--
"Special Counsel": Brown, Rudnick, Freed & Gesmer, P.C., or such other firm
----------------
selected by the Agent.
--
"Subsidiary": any corporation a majority of the voting shares of which are
----------
at the time owned by the Company or by other subsidiaries of the Company or by
the Company and other subsidiaries of the Company.
"Taxes": any present or future income, stamp or other taxes, levies, imposts,
-----
duties, fees, assessments, deductions, withholdings, or other like charges, now
or hereafter imposed, levied, collected, withheld, or assessed by any
Governmental Body.
"Term Loans": Loans made pursuant to paragraph 2.2.
-----------
"Term Loan Commitment": in respect of any Bank, such Bank's undertaking to make
--------------------
Term Loans to the Company, subject to the terms and conditions hereof, in an
aggregate outstanding principal amount equal to but not exceeding the amount set
forth next to the name of such Bank on Exhibit Aunder the heading "Term Loan
---------
Commitment".
"Term Loan Commitment Percentage": as to any Bank, the percentage set forth
----------------------------------
opposite the name of such Bank on ExhibitA under the heading "Term Loan
-- -------
Commitment Percentage".
--
"Term Loan Effective Date": as defined in paragraph 5.8. Under no circumstances
------------------------
may the Term Loan Effective Date be later than October 12, 2001.
"Term Loan Maturity Date": the date that is two years after the Term Loan
--------------------------
Effective Date.
-----
"Term Loan Notes": as defined in paragraph 2.4.
-----------------
"Total Capitalization": the sum of (a) all Consolidated Net Worth plus (b)
---------------------
Funded Debt.
--
"Type": Loans made hereunder as Alternate Base Rate Loans or LIBOR Loans, as
----
the case may be.
-
"Usage Fee": as defined in paragraph 2.8(b).
----------
"VPSB": the Vermont Public Service Board.
----
1.2. OTHER DEFINITIONAL PROVISIONS1.2 OTHER DEFINITIONAL PROVISIONS.
- ---- -------------------------------
(a) All terms defined in this Agreement shall have the meanings given such
terms herein when used in any certificate, opinion or other document made or
delivered pursuant hereto or thereto, unless otherwise defined therein. All
terms defined in this Agreement and not defined in paragraph 1.1 shall have the
respective meanings given them in the text of this Agreement.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms relating to the Company
not defined in paragraph 1.1, and accounting terms partly defined in paragraph
1.1, to the extent not defined, shall have the respective meanings given to them
under GAAP.
(c) The words "hereof", "herein", "hereto" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and paragraph,
schedule and exhibit references, contained herein shall refer to paragraphs
hereof or schedules or exhibits hereto unless otherwise expressly provided
herein. The word "or" shall not be exclusive.
2. AMOUNT AND TERMS OF LOANS2. AMOUNT AND TERMS OF LOANS.
- -- -----------------------------
2.1. REVOLVING CREDIT LOANS2.1. REVOLVING CREDIT LOANS.
- ---- ------------------------
(a) Subject to the terms and conditions of this Agreement, each Bank
severally agrees to make Revolving Credit Loans to the Company from time to time
on and after the Effective Date to, but excluding, the Revolving Credit
Termination Date; provided that the aggregate unpaid principal amount of all
--------
Revolving Credit Loans made by or due to each Bank at any one time shall not
exceed an amount equal to such Bank's Revolving Credit Commitment; and provided
--------
further that the aggregate unpaid principal amount of the Revolving Credit Loans
- -------
at any one time outstanding shall not exceed the lesser of (i) the Aggregate
Revolving Credit Commitments and (ii) the aggregate outstanding principal
balance of all Revolving Credit Loans permitted to be outstanding hereunder
after giving effect to the mandatory repayments required to be made under
paragraph 2.6(b); and provided further that the aggregate unpaid principal
-----------------
amount of all Loans at any one time outstanding shall not exceed the lesser of
(i) the Aggregate Commitments and (ii) the aggregate outstanding principal
balance of all Loans permitted to be outstanding hereunder after giving effect
to the mandatory repayments required to be made under paragraph 2.6(b). During
the period from the Effective Date to the Revolving Credit Termination Date, the
Company may borrow, repay and reborrow Revolving Credit Loans hereunder, and may
convert all or any part of the Revolving Credit Loans from one Type to another
Type or continue all or any part of the Revolving Credit Loans as the same Type
in accordance with and subject to the terms and provisions hereof. In the event
the Company elects to extend the scheduled maturity of the Revolving Credit
Loans in accordance with paragraph 2.15 hereof, during the period from and after
the original Revolving Credit Termination Date to the extended Revolving Credit
Termination Date, the Company may prepay the Revolving Credit Loans and may
convert all or any part of the Revolving Credit Loans from one Type to Loans of
another Type or continue all or any part of the Revolving Credit Loans as the
same Type, all in accordance with and subject to the terms and provisions
hereof.
2.2. TERM LOANS2.2. TERM LOANS.
- ---- -----------
(a) Subject to the terms and conditions of this Agreement, each Bank
severally agrees to make Term Loans to the Company on the Term Loan Effective
Date in the amount of the Term Loan Commitment of such Bank. The Banks shall
have no obligation to make Term Loans on any date other than the Term Loan
Effective Date and shall have no obligation to make Term Loans in excess of the
Aggregate Term Loan Commitments. The Company may not reborrow any Term Loan (or
any portion thereof) it has repaid. The Company may prepay the Term Loans
and may convert all or any part of the Term Loans from one Type to Term Loans of
another Type or continue all or any part of the Term Loans as the same Type, all
in accordance with and subject to the terms and provisions hereof.
2.3. PROCEDURE FOR BORROWINGS2.3. PROCEDURE FOR BORROWINGS.
- ---- --------------------------
The Company may effect a Borrowing on any Business Day occurring on or
after the Effective Date (or, with respect to the Term Loans, only on the Term
Loan Effective Date) by giving the Agent an irrevocable written notice of
borrowing (each, a "Borrowing Request" in the form of Exhibit C) (which
----------
Borrowing Request must be received by the Agent (a) prior to 10:00 a.m., Boston
time, three Business Days (or fewer days, if each Bank in its sole discretion
agrees) prior to the requested Borrowing Date, if the Company is requesting that
LIBOR Loans be made as part of such Borrowing, and (b) prior to 10:00 a.m.,
Boston time, one Business Day prior to the requested Borrowing Date, if the
Company is requesting that Alternate Base Rate Loans be made as part of such
Borrowing), specifying (i) the amount(s) to be borrowed and whether and to what
extent the Borrowing consists of Term Loans or Revolving Credit Loans, (ii) the
requested Borrowing Date, (iii) whether such Borrowing is to consist of LIBOR
Loans, Alternate Base Rate Loans or a combination thereof, and (iv) if the Loans
are to be LIBOR Loans, the length of the initial Interest Period for each
thereof. Each Borrowing shall be in an aggregate principal amount equal to or
greater than $500,000 or, if less, the undrawn balance of the Commitments. The
principal amount of each Bank's Revolving Credit Loan made on a Borrowing Date
shall be in an amount equal to such Bank's Revolving Credit Commitment
Percentage of the Revolving Credit Loans made on such Borrowing Date. The
principal amount of each Bank's Term Loan made on the Term Loan Effective Date
shall be in an amount equal to such Bank's Term Loan Commitment Percentage of
the Term Loans made on such Borrowing Date. Subject to the provisions of
paragraphs 2.8 and 2.9, Loans may be Alternate Base Rate Loans or LIBOR Loans,
or any combination thereof. Upon receipt of each Borrowing Request from the
Company, the Agent shall promptly notify each Bank thereof (such notice to be
promptly confirmed in writing). Each Bank will make the amount of its Revolving
Credit Commitment Percentage (or Term Loan Commitment Percentage, if the
Borrowing is of the Term Loans) of each Borrowing available to the Agent for the
account of the Company at the office of the Agent set forth in paragraph 11.1,
not later than 12:00 noon, Boston time on the Borrowing Date requested by the
Company, in funds immediately available to the Agent at such office. Amounts so
made available to the Agent on a Borrowing Date will, subject to the
satisfaction of the terms and conditions of this Agreement as determined by the
Agent, be made immediately available on such date to the Company by the Agent at
the office of the Agent specified in paragraph 11.1 by crediting the account of
the Company on the books of such office with the aggregate of said amounts, in
like funds as received by the Agent. Unless the Agent shall have received prior
notice from a Bank (by telephone or otherwise, such notice to be promptly
confirmed by telex, telecopy or other writing) that such Bank will not make
available to the Agent such Bank's pro rata share of the Loans requested by the
Company, the Agent may assume that such Bank has made such share available to
the Agent on such Borrowing Date in accordance with this paragraph; provided
that such Bank received notice of the proposed borrowing from the Agent, and the
Agent may, in reliance upon such assumption, make available to the Company on
such Borrowing Date a corresponding amount. If and to the extent such Bank
shall not have so made such pro rata share available to the Agent on such
Borrowing Date, such Bank shall pay to the Agent on demand (in addition to such
Bank's pro rata share of the Loans to be funded on such Borrowing Date) an
amount equal to the product of (i) the average computed for the period referred
to in clause (iii) below, of the weighted average interest rate paid by the
Agent for federal funds acquired by the Agent during each day included in such
period, times(ii) the amount of such Bank's Revolving Credit Commitment
-----
Percentage of such Revolving Credit Loans (or the Term Loan Commitment
Percentage of such Term Loans, as the case may be), times(iii) a fraction, the
-----
numerator of which is the number of days that elapse from and including such
Borrowing Date to the date on which the amount of such Bank's Revolving Credit
Commitment Percentage of such Revolving Credit Loans (or the Term Loan
Commitment Percentage of such Term Loans, as the case may be) shall become
immediately available to the Agent, and the denominator of which is 365. Such
Bank shall not be entitled to receive interest on its pro rata share of the
Loans for any period prior to the date it actually funds is pro rata share. If
and to the extent such Bank shall not have so made such pro rata share available
to the Agent within three (3) days following such Borrowing Date (and if and to
the extent Agent has funded Bank's pro rata share of the Loans), the Company
shall pay to the Agent forthwith on demand (but without duplication) an amount
equal to such Bank's Revolving Credit Commitment Percentage of such Revolving
Credit Loans (or the Term Loan Commitment Percentage of such Term Loans, as the
case may be), together with interest thereon for each day from the date such
amount is made available to the Company until the date such amount is paid to
the Agent, at the applicable interest rate for such Revolving Credit Loans (or
Term Loans, as the case may be) as set forth in paragraph 2.8. Such payment by
the Company, however, shall be without prejudice to its rights against such
Bank.
2.4. NOTES2.4. NOTES. Revolving Credit Loans made by each Bank with
- ---- -----
respect to Alternate Base Rate Loans and LIBOR Loans shall be evidenced by a
- ---
promissory note of the Company, substantially in the form of Exhibit D-1,all
- --- ------------
with appropriate insertions therein (as endorsed and as amended or otherwise
- ---
modified from time to time, a "Revolving Credit Note" and, collectively, the
- ---
"Revolving Credit Notes"), payable to the order of such Bank and representing
- ---
the obligation of the Company to pay the aggregate unpaid principal amount of
- --
all Revolving Credit Loans made by such Bank, with interest thereon as
- --
prescribed or determined herein. Term Loans made by each Bank with respect to
- --
Alternate Base Rate Loans and LIBOR Loans shall be evidenced by a promissory
- --
note of the Company, substantially in the form of Exhibit D-2,all with
- --
appropriate insertions therein (as endorsed and as amended or otherwise modified
- --
from time to time, a "Term Loan Note" and, collectively, the "Term Loan
Notes"), payable to the order of such Bank and representing the obligation of
the Company to pay the aggregate unpaid principal amount of all Term Loans made
by such Bank, with interest thereon as prescribed or determined herein (the Term
Loan Notes and the Revolving Credit Notes, each a "Note", and collectively, the
"Notes"). Each Bank is hereby authorized to record the date and amount of each
Revolving Credit Loan made by such Bank and the other information applicable
thereto, and each payment or prepayment of principal of such Revolving Credit
Loan, on the applicable grid (and any continuations thereof annexed to and
constituting a part of its Notes. No failure to so record or any error in so
recording shall affect the obligation of the Company to repay such Revolving
Credit Loans, with interest thereon, as herein provided. Each Note shall (a) be
dated the date the initial Loans are made, (b) be stated to mature on the
respective End Date and (c) bear interest for the period from and including the
date thereof on the unpaid principal amount thereof from time to time
outstanding at the applicable interest rate per annum determined as provided
herein.
2.5. VOLUNTARY REDUCTIONS OF THE AGGREGATE REVOLVING CREDIT COMMITMENTS2.5.
- ---- -------------------------------------------------------------------
VOLUNTARY REDUCTIONS OF THE AGGREGATE REVOLVING CREDIT COMMITMENTS.
(a) Voluntary Reductions of Revolving Credit Commitments. During the period
- --- ----------------------------------------------------
from the Effective Date to the Revolving Credit Termination Date the
Company shall have the right, upon at least two Business Days' prior written
notice to the Agent, to reduce permanently the Aggregate Revolving Credit
Commitments in whole at any time, or in part from time to time, without premium
or penalty, provided that (i) each partial reduction of such Aggregate Revolving
Credit Commitments shall be in an amount equal to at least $500,000 or such
amount plus a whole multiple of $500,000, and (ii) such Aggregate Revolving
Credit Commitments shall not be reduced to an amount less than the aggregate
principal balance of the Revolving Credit Loans outstanding on the date of such
reduction (after giving effect to reductions in such balance made on such date).
(b) General. Reductions of the Aggregate Revolving Credit Commitments under
- --- -------
clause (a) above shall reduce each Bank's Revolving Credit Commitment pro rata
according to the Revolving Credit Commitment Percentage of such Bank. The Agent
shall promptly notify each Bank of each reduction in the Aggregate Revolving
Credit Commitments under clause (a) above upon its receipt of notice thereof,
and remit to each Bank its pro rata share of any accompanying prepayments of the
Revolving Credit Loans according to the outstanding principal balance of the
Revolving Credit Loans. Simultaneously with each reduction of the Aggregate
Revolving Credit Commitments under this paragraph 2.5, the Company shall prepay
the Revolving Credit Loans in the amount, if any, by which the aggregate unpaid
principal balance of the Revolving Credit Loans exceeds the amount of the
Aggregate Revolving Credit Commitments as so reduced.
If any prepayment is made under this paragraph 2.5 or paragraph 2.6 with
respect to any LIBOR Loans, in whole or in part, prior to the last day of the
applicable Interest Period with respect thereto, the Company agrees that it
shall indemnify the Banks in accordance with paragraph 2.12. After giving
effect to any prepayment with respect to LIBOR Loans, no LIBOR Loans made
(whether as a result of Borrowing or a conversion) on the same date and having
the same Interest Period shall be outstanding in an aggregate principal amount
of less than $500,000.
2.6. PREPAYMENTS AND PAYMENT OF LOANS2.6. PREPAYMENTS AND PAYMENT OF
- ---- ------------------------------------
LOANS.
- ---
(a) Voluntary Prepayments. The Company may, at its option, prepay Alternate
- --- ---------------------
Base Rate Loans or LIBOR Loans in whole or in part, without premium or
penalty, subject to its obligation to indemnify provided in paragraph 2.12 (in
the case of LIBOR Loans), at any time and from time to time upon at least one
Business Day's (or, with respect to Term Loans, two Business Day's) prior
irrevocable written notice to the Agent, specifying the amount to be prepaid,
and the date and amount of prepayment. Upon receipt of such notice, the Agent
shall promptly notify each Bank thereof. Any such notice shall be irrevocable
and the amount specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to the date of such payment on
the amount being prepaid. Prepayments shall be in an aggregate principal amount
of at least $500,000 or, if less, the outstanding principal balance of the
applicable Notes, provided, however, that after giving effect to any such
prepayment, no LIBOR Loans made (whether as the result of Borrowing or a
conversion) on the same date and having the same Interest Period shall be
outstanding in an aggregate principal amount of less than $500,000.
(b) Mandatory Repayment. On the Revolving Credit Termination Date, as may
- --- --------------------
be extended in accordance with the terms of paragraph 2.15 hereof, the Company
shall repay in full the aggregate principal balance of all Revolving Credit
Loans outstanding on such date, together with accrued interest on such amount to
such date and any Facility Fees, Usage Fees, Agent's Fees or other amounts owing
hereunder with respect to Revolving Credit Loans or under the Revolving Credit
Notes. On the Term Loan Maturity Date, the Company shall repay in full the
aggregate principal balance of all Term Loans outstanding on such date, together
with accrued interest on such amount to such date and any Facility Fees, Agent's
Fees or other amounts owing hereunder or under the Term Loan Notes.
2.7. CONVERSION OPTIONS2.7. CONVERSION OPTIONS.
- ---- -------------------
(a) Conversion of Loans. The Company may elect from time to time to convert
- --- -------------------
LIBOR Loans to Alternate Base Rate Loans by giving the Agent at least one
Business Day's prior written notice of such election (a "Conversion/Continuation
Request") (in substantially the form of the Conversion/Continuation Request
attached hereto as Exhibit E), specifying the amount to be so converted,
----------
provided, that any such conversion of LIBOR Loans shall only be made on the last
day of the Interest Period applicable thereto. In addition, in the absence of
an Event of Default, the Company may elect from time to time to convert
Alternate Base Rate Loans to LIBOR Loans, by giving the Agent at least three
Business Day's (or fewer days, if each Bank in its sole discretion agrees) prior
irrevocable notice of such election, specifying the amount to be so converted
and the Interest Period selected, provided that any such conversion of Alternate
Base Rate Loans to LIBOR Loans shall only be made on a Business Day. In either
case, the Conversion/Continuation Notice shall be substantially in the form of
the Conversion/Continuation Request in the form of Exhibit E. The Agent shall
---------
promptly provide the Banks with notice of any such election. Loans may be
converted pursuant to this paragraph 2.7, in whole or in part, provided that
conversions of Alternate Base Rate Loans to LIBOR Loans or LIBOR Loans to
Alternate Base Rate Loans shall each be in an aggregate principal amount of at
least $500,000. After giving effect to any such conversion, no LIBOR Loans made
(whether as the result of a borrowing or a conversion) on the same date and
having the same Interest Period shall be outstanding in an aggregate principal
amount of less than $500,000.
(b) Continuation of Loans. Any LIBOR Loans may be continued as such upon
- --- ----------------------
the expiration of any Interest Period with respect thereto by the Company's
- --
giving irrevocable written notice (in substantially the form of the
- --
Continuation/Conversion Request attached hereto as Exhibit E)to the Agent of its
- --
intention to do so three Business Days (or fewer days, if each Bank in its sole
discretion agrees) prior to the last day of such Interest Period, specifying the
new Interest Period therefor, provided, however,that (i) if the Company shall
-------- --------
fail to give notice as provided above, the relevant LIBOR Loan shall convert to
an Alternate Base Rate Loan immediately upon the expiration of the then current
Interest Period with respect thereto, (ii) any LIBOR Loans that are being
continued as such shall be in an aggregate principal amount of at least $500,000
and (iii) no LIBOR Loans may be continued as such when any Event of Default has
occurred and is continuing, but shall be automatically converted to an Alternate
Base Rate Loan on the last day of the Interest Period with respect thereto
during which the Agent obtained knowledge of such Event of Default. The Agent
shall notify the Banks promptly upon obtaining knowledge that an automatic
conversion will occur pursuant to clause (iii) hereof.
2.8. INTEREST RATE AND PAYMENT DATES FOR LOANS2.8. INTEREST RATE AND
- ---- ---------------------------------------------
PAYMENT DATES FOR LOANS.
- ---
(a) Interest Rates for Loans Prior to Maturity. (i) Loans made as Alternate
- --- ------------------------------------------
Base Rate Loans shall bear interest for the period from and including the
date thereof, or, in the case of a Loan that has been converted from a LIBOR
Loan, from the Conversion Date thereof, until maturity or until converted into
LIBOR Loans, on the unpaid principal amount thereof at the Alternate Base Rate,
and (ii) Loans made as LIBOR Loans shall bear interest for each Interest Period
with respect thereto on the unpaid principal amount thereof at the sum of the
applicable rate of interest per annum based on LIBOR for each such Interest
Period plus the Applicable Margin. Any change in the Applicable Margin with
----
respect to any Loans resulting from a change in the Debt Rating of the Company
shall be effective as of the opening of business on the day of the change in the
Debt Rating of the Company.
(b) Usage Fee. With respect to any period during which the unpaid aggregate
- --- ---------
principal balance of the Revolving Credit Loans exceeds $7,500,000, the Company
agrees to pay the Agent for the account of those Banks with Revolving Credit
Commitments or Revolving Credit Loans outstanding a per annum fee (the "Usage
Fee") equal to one-eighth of one percent (0.125%) of the unpaid principal
balance of all Revolving Credit Loans (whether consisting of Alternate Base Rate
Loans or LIBOR Loans), which Usage Fee shall be payable in arrears on the last
day of each March, June, September and December of each year, commencing on the
first such date following the Effective Date and continuing until the later of
the Revolving Credit Termination Date or the Date on which all Revolving Credit
Commitments are terminated and all sums due hereunder in respect of Revolving
Credit Loans and under the Revolving Credit Notes are paid in full.
(c) Overdue Amounts. If any amounts payable hereunder shall not be paid
- --- ----------------
when due (whether at the stated maturity thereof, by acceleration, notice of
- ---
intention to prepay or otherwise), such overdue amounts shall bear interest
- ---
payable on demand at a rate per annum equal to 2% above the (i) Alternate Base
- ---
Rate for Alternate Base Rate Loans at such time from the date of such nonpayment
until paid in full, and whether before or after the entry of any judgment
thereon and (ii) sum of the applicable LIBOR plus the Applicable Margin for
LIBOR Loans, from the date of such nonpayment until the end of the Interest
Period with respect thereto and whether before or after the entry of any
judgment thereon.
(d) General. Interest on the Loans shall be payable in arrears on each
- --- -------
Interest Payment Date and upon payment (including prepayment) in full thereof;
- ---
provided, however, that after an Event of Default has occurred and is
continuing, interest on all Loans shall be payable on demand made from time to
time.
(e) Interest Rate Hedging. The Company and each and every Bank, each in
- --- -----------------------
their individual discretion, may enter with each other into interest rate
- ---
hedging agreements or instruments with respect to the Company's obligations
- ---
under this Agreement.
- ---
2.9. SUBSTITUTED INTEREST RATE2.9. SUBSTITUTED INTEREST RATE. In the
- ---- ---------------------------
event that the Agent shall have reasonably determined in good faith (which
- --
determination shall be conclusive and binding upon the Company) that by reason
- --
of circumstances affecting the London interbank market, (i) either adequate and
reasonable means do not exist for ascertaining the applicable LIBOR applicable
pursuant to paragraph 2.8(a), or (ii) any Bank shall have notified the Agent
that it has reasonably determined in good faith (which determination shall be
conclusive and binding on the Company) that the applicable LIBOR will not
adequately and fairly reflect the cost to such Bank of making or maintaining its
funding of a LIBOR Loan with respect to (a) a proposed Loan that the
Company has requested be made as a LIBOR Loan, or (b) a LIBOR Loan that will
result from the requested conversion of any Loan into a LIBOR Loan (any such
Loan being herein called an "Affected Loan"), the Agent shall promptly notify
the Company and the Banks (by telephone or otherwise) of such determination no
later than 10:00 a.m. (Boston time) one Business Day prior to the requested
Borrowing Date for such Affected Loan, or the requested Conversion Date of such
Loan, as the case may be. If the Agent shall give such notice, the Company may
by no later than 11:00 a.m. (Boston time) on the same Business Day, (i) cancel
the Borrowing Request and/or Continuation/Conversion Request with respect to
such Affected Loan or request that such Affected Loan be made as an Alternate
Base Rate Loan in accordance with paragraph 2.3 hereof or (ii) cancel its
request to convert to an Affected Loan or request that any Loan that was to have
been converted to an Affected Loan be converted to an Alternate Base Rate Loan
in accordance with paragraph 2.7 hereof. Until such notice has been withdrawn
by the Agent (by notice to the Company promptly upon the Agent having been
notified by such Bank that circumstances would no longer render any Loan an
Affected Loan) no further Affected Loans shall be made and Company shall not
have the right to convert any Loan to an Affected Loan.
2.10. ILLEGALITY2.10. ILLEGALITY. Notwithstanding any provision hereof
- ----- ----------
to the contrary, if any change in any law, regulation, treaty or directive, or
in the interpretation or application thereof, shall make it unlawful for any
Bank to make or maintain LIBOR Loans as contemplated by this Agreement, (a) the
commitment of such Bank hereunder to make LIBOR Loans or to convert Alternate
Base Rate Loans to LIBOR Loans or to continue LIBOR Loans as such shall
forthwith be suspended and (b) such Bank's Loans then outstanding as LIBOR Loans
shall be converted to Alternate Base Rate Loans on the last day of the then
current Interest Period applicable thereto, or within such earlier period as
required by law. If the commitment of any Bank with respect to LIBOR Loans is
suspended pursuant to this paragraph 2.10 and it shall once again become legal
for such Bank to make or maintain its funding of LIBOR Loans, such Bank's
commitment to make or maintain such LIBOR Loans shall be reinstated. Each Bank
agrees to promptly notify the Company and the Agent upon learning of any change
referred to above, as well as of any reinstatement of its ability to make and
maintain LIBOR Loans as contemplated by this Agreement.
2.11. INCREASED COSTS2.11. INCREASED COSTS.
- ----- ----------------
Regulatory Changes. In the event that any change in any law, regulation,
-------------------
treaty or directive or in the interpretation or application thereof by any
Governmental Body charged with the administration thereof or compliance by any
Bank with any request or directive from any central bank or other Governmental
Body (a "Regulatory Change"):
(i) subjects any Bank to any tax of any kind whatsoever with respect to
any LIBOR Loan or its obligations under this Agreement to make LIBOR Loans, or
changes the basis of taxation of payments to such Bank of principal, interest or
any other amount payable hereunder in respect of its LIBOR Loans (except for
imposition of, or change in the rate of, tax on the overall net income of such
Bank);
(ii) imposes, modifies or makes applicable any reserve, special deposit,
compulsory loan, assessment or similar requirement against assets held by, or
deposits of, or advances or loans by, or other credit committed or extended by,
or any other acquisition of funds by, any office of such Bank in respect of its
LIBOR Loans which is not otherwise included in the determination of LIBOR; or
(iii) imposes on such Bank any other condition with respect to Loans hereunder
or the Commitments;
and the result of any of the foregoing is to increase the cost to such Bank of
making, renewing, converting or maintaining its LIBOR Loans, or to reduce any
amount receivable in respect of its LIBOR Loans, then, in any such case, the
Company shall promptly pay to, such Bank, upon its demand, any additional
amounts necessary to compensate such Bank for such additional cost or reduction
in such amount receivable. A statement setting forth the calculations of any
additional amounts payable pursuant to the foregoing sentence submitted by a
Bank to the Company shall be presumed to be correct absent manifest error.
2.12. INDEMNITY2.12. INDEMNITY. Notwithstanding anything contained
- ----- ---------
herein to the contrary, if the Company shall fail to borrow on a Borrowing Date
- ----
after it shall have given a Borrowing Request, to the extent only that such
Borrowing Request includes LIBOR Loans, or if the right of the Company to have
LIBOR Loans outstanding hereunder shall be suspended or terminated in accordance
with the provisions of this Agreement prior to the last day of the Interest
Period applicable thereto, or if, while a LIBOR Loan is outstanding, any
repayment or prepayment of the principal amount of such LIBOR Loan is made for
any reason (including, without limitation, as a result of acceleration or
illegality) on a date which is prior to the last day of the Interest Period
applicable thereto, the Company agrees to indemnify each Bank against, and to
pay on demand directly to such Bank, an amount, if greater than zero, equal to
(i):
A x (B-C) x D
-
365
where:
"A" equals the Affected Principal Amount;
"B" equals LIBOR (expressed as a decimal), as the case may be, applicable to
such LIBOR Loan;
"C" equals the applicable LIBOR (expressed as a decimal), as the case may be, in
effect on the date of such failure to borrow, termination, prepayment or
repayment, based on the applicable rates offered or bid, as the case may be, on
such date (or, if no such rate is determinable on such date, the rate or rates
offered or bid, as the case may be, determinable on the date closest thereto),
for deposits in an amount equal approximately to the Affected Principal Amount
with an Interest Period equal approximately to the period commencing on the
first day of such Remaining Interest Period and ending on the last day of such
Remaining Interest Period or ending on the last day of the applicable Interest
Payment Period, as the case may be, as determined by the Bank;
"D" equals the number of days from and including the first day of the Remaining
Interest Period to but excluding the last day of such Remaining Interest Payment
Period;
and (ii) any additional amounts necessary to compensate such Bank for such
additional cost or reduction in such amount receivable and any other
out-of-pocket loss or expense (including any internal processing charge
customarily charged by such Bank) suffered by such Bank in liquidating deposits
prior to maturity in amounts which correspond to the proposed borrowing,
prepayment or repayment. The determination by each Bank of the amount of any
such loss or expense shall be presumed to be correct absent manifest error.
2.13. USE OF PROCEEDS2.13. USE OF PROCEEDS. The proceeds of the Loans
- ----- -----------------
shall be used only for working capital and other general corporate purposes.
2.14. CAPITAL ADEQUACY2.14. CAPITAL ADEQUACY. If either (i) the
- ----- -----------------
introduction of, or any change or phasing in of, any law or regulation or in the
- -----
interpretation thereof by any Governmental Body charged with the
administration thereof or (ii) compliance with any directive, guideline or
request from any central bank or Governmental Body (whether or not having the
force of law) promulgated or made after the date hereof (but including, in any
event, any law, rule, regulation, interpretation, directive, guideline or
request contemplated by the report dated July 1988 entitled "International
Convergence of Capital Measurement and Capital Standards" issued by the Basle
Committee on Banking Regulations and Supervisory Practices) affects or would
affect the amount of capital required or expected to be maintained by a Bank (or
any lending office of such Bank) or any corporation directly or indirectly
owning or controlling such Bank (or any lending office of such Bank) and such
Bank shall have determined that such introduction, change or compliance has or
would have the effect of reducing the rate of return on such Bank's capital or
the asset value to such Bank of any Loan made by such Bank as a consequence,
directly or indirectly, of its obligations to make and maintain the funding of
Loans hereunder to a level below that which such Bank could have achieved but
for such introduction change or compliance (after taking into account such
Bank's policies regarding capital adequacy) by an amount deemed by such Bank to
be material then, upon demand by such Bank, the Company shall promptly pay to
such Bank such additional amount or amount as shall be sufficient to compensate
such Bank for such reduction on the rate of return. Each Bank shall calculate
such amount or amounts payable to it under this paragraph 2.14 in a manner
consistent with the manner in which it shall calculate similar amounts payable
to it by other borrowers having provisions in their credit agreements comparable
to this paragraph 2.14. Each Bank agrees to provide the Company with a
certificate setting forth a description of any such amount in respect of which
it seeks payment under this paragraph 2.14. Each Bank's determination of such
amount or amounts that will compensate such Bank for such reductions shall be
presumed correct absent manifest error.
2.15. EXTENSION OF REVOLVING CREDIT TERMINATION DATE2.15. EXTENSION OF
- ----- ------------------------------------------------
REVOLVING CREDIT TERMINATION DATE. The Company may request each Bank to extend
its Revolving Credit Commitment for up to two (2) additional three-hundred
sixty-four (364) day periods, each expiring on the 364th day of such period (or,
if such date is not a Business Day, on the immediately preceding Business
Day). If all Banks consent in writing in their sole discretion to the extension
of their respective Revolving Credit Commitments, such Revolving Credit
Termination Date shall be so extended pursuant to the terms of such written
consent. In the event that less than all of the Banks consent to an extension
of their respective Revolving Credit Commitments, the Revolving Credit
Termination Date shall not be extended, unless one of the consenting Banks or
another Bank designated by the Company and reasonably acceptable to the
consenting Banks agrees to offer its Revolving Credit Commitment to replace the
Revolving Credit Commitment of the non-consenting Bank in an equivalent amount
for the extension period (any such other bank, including any signatory Bank, to
the extent of such a replacement Commitment, being herein called a "Replacement
Bank"), and prior to the effective date of such extension, to assume the
then-existing Revolving Credit Commitment and obligations relating to the
Revolving Credit Loans (whether or not such Bank's Term Loan Commitment and
obligations relating to the Term Loans are assumed by the Replacement Bank) of
such non-consenting Bank or Banks (each, a "Non-Consenting Bank"), and to
purchase the outstanding Revolving Credit Note of such Non-Consenting Bank and
such Non-Consenting Bank's rights with respect to its Revolving Credit Loans,
without recourse or warranty, for a purchase price equal to the outstanding
principal balance of the Revolving Credit Note of such Non-Consenting Bank, plus
all interest accrued thereon and all other amounts owing to such Non-Consenting
Bank hereunder with respect to the Revolving Credit Loans. Upon such assumption
and purchase by a Replacement Bank, and provided that the Banks (excluding the
Non-Consenting Banks and each Replacement Bank) have consented to the extension
of the Revolving Credit Termination Date prior to the then scheduled Revolving
Credit Termination Date, (i) the Revolving Credit Termination Date shall be so
extended, (ii) each such Replacement Bank shall be deemed to be a "Bank" for
purposes of this Agreement with respect to the Revolving Credit Loans under this
Agreement (and also for purposes of Term Loans under this Agreement, if the
Replacement Bank has assumed the Term Loan Commitments and purchased the Term
Loans of the Non-Consenting Bank), and (iii) each Non-Consenting Bank shall
cease to be a "Bank" for all purposes of the Revolving Credit Loans under this
Agreement (and also for purposes of Term Loans under this Agreement, if the
Replacement Bank has assumed the Term Loan Commitments and purchased the Term
Loans of the Non-Consenting Bank) (except with respect to its rights hereunder
to be reimbursed for costs and expenses, and to indemnification with respect to,
matters attributable to events, acts or conditions occurring prior to such
assumption and purchase) and shall no longer have any obligations hereunder with
respect to the Revolving Credit Loans (and also with respect to the Term Loans
under this Agreement, if the Replacement Bank has assumed the Term Loan
Commitments and purchased the Term Loans of the Non-Consenting Bank).
Each Bank will use its best efforts to respond promptly to any request to
extend the Revolving Credit Termination Date, provided that no Bank's failure to
so respond shall create any claim against it or have the effect of extending the
Revolving Credit Termination Date.
2.16. NOTICE OF COSTS: SUBSTITUTION OF BANKS2.16. NOTICE OF
- ----- -------------------------------------------
COSTSSUBSTITUTION OF BANKS. Each Bank will notify the Company of any event that
- ----- --
will entitle such Bank to compensation under paragraphs 2.11 and 2.14 as
promptly as practicable, but in any event within 45 days after an officer of the
Bank responsible for matters concerning this Agreement has knowledge of such
event. If such Bank fails to give such notice, such Bank shall only be entitled
to such compensation for the period commencing forty-five (45) days prior to the
date of the giving of such notice. Each Bank shall use its best efforts to
avoid the need to give a notice under paragraph 2.11 or 2.14 by designating a
different Applicable Lending Office outside of the United States if such
designation would avoid the need to give such notice and will not, in the sole
opinion of such Bank, be disadvantageous to such Bank. In the event the Company
receives such notice or is otherwise required under the provisions of paragraphs
2.11 or 2.14 to make payments in a material amount to any Bank, the Company may,
so long as no Event of Default shall have occurred and be continuing, elect to
substitute such Bank as a party to this Agreement; provided that, concurrently
with such substitution, (i) the Company shall pay that Bank all principal,
interest and fees and other amounts (including without limitation, amounts, if
any, owed under paragraph 2.11, 2.12 or 2.14) owed to such Bank through such
date of termination, (ii) another commercial bank satisfactory to the Company
and the Agent (or if the Agent is also the Bank to be substituted, the successor
Agent) shall agree, as of such date, to become a Bank (whether by assignment or
amendment) for all purposes under this Agreement and to assume all obligations
of the Bank to be substituted as of such date, and (iii) all documents,
supporting materials and fees necessary, in the judgment of the Agent (or if the
Agent is also the Bank to be substituted, the successor Agent) to evidence the
substitution of such Bank shall have been received and approved by the Agent as
of such date.
3. FEES; PAYMENTS3. FEES; PAYMENTS.
- -- ---------------
3.1. FACILITY FEE3.1. FACILITY FEE. The Company agrees to pay to the
- ---- -------------
Agent for the account of the those Banks with Revolving Credit Commitments or
- --
Revolving Credit Loans outstanding a fee (the "Facility Fee") equal to the rate
- --
per annum determined by reference to Schedule II on Exhibit B hereto based upon
----------- ---------
the Debt Rating of the Company multiplied bythe Aggregate Revolving Credit
---------- --
Commitments, which Facility Fee shall be payable in arrears on the last day of
each March, June, September and December of each year, commencing on the first
such date following the Effective Date and continuing until the later of the
Revolving Credit Termination Date or the date on which all Revolving Credit
Commitments are terminated and all sums due hereunder in respect of Revolving
Credit Loans and under the Revolving Credit Notes are paid in full; provided
that if the Company has no Debt Rating, the Facility Fee shall be determined at
the highest rate per annum for the relevant period set forth on Exhibit B.
---------
3.2. FEES OF THE AGENT.3.2 FEES OF THE AGENT. The Company agrees to pay
- ---- -----------------
to the Agent for its own account, such fees (the "Agent's Fees") for its
services hereunder in such amounts and at such times as previously agreed upon
by the Company and the Agent under that certain Agent's Fee Letter dated as of
or about the date hereof.
3.3. COMPUTATION OF INTEREST AND FEES.3.3 COMPUTATION OF INTEREST AND
- ---- -----------------------------------
FEES.
- --
(a) Interest in respect of Alternate Base Rate Loans and all other fees
(other than the Facility Fee and the Usage Fee) payable by the Company hereunder
shall be calculated on the basis of a 365-day year (or 366-day year in a
leap year) for the actual number of days elapsed. Interest in respect of LIBOR
Loans, the Usage Fee, and the Facility Fee shall be calculated on the basis of a
360-day year for the actual number of days elapsed. Any change in the interest
rate on a Loan resulting from a change in the Alternate Base Rate or LIBOR shall
become effective as of the opening of business on the day on which such change
shall become effective. The Agent shall, as soon as practicable, notify the
Company and the Banks of the effective date and the amount of each such change
but failure of the Agent to do so shall not in any manner affect the obligation
of the Company to pay interest on the Loans in the amounts and on the dates
required.
(b) Each determination of the Alternate Base Rate or LIBOR by the Agent
pursuant to any provision of this Agreement shall be presumed to be correct
absent manifest error.
3.4. PRO RATA TREATMENT AND APPLICATION OF PRINCIPAL PAYMENTS3.4 PRO
- ---- ------------------------------------------------------------
RATA TREATMENT AND APPLICATION OF PRINCIPAL PAYMENTS. Each Borrowing by the
- ---
Company from the Banks, any conversion of Loans from one Type to the same or
- ---
another Type, and any reduction of the Aggregate Commitments of the Banks, shall
- ---
be made pro rata according to (i) in the case of Revolving Credit Loans,
the Revolving Credit Commitment Percentage of each Bank and (ii) in the case of
Term Loans, the Term Loan Commitment Percentage of each Bank. Subject to the
following sentence (a) prior to the occurrence of an Event of Default, all
payments (including prepayments) on account of principal and interest on Loans
shall be applied as directed by the Company; and (b) upon and following the
occurrence of an Event of Default, all payments (including prepayments) on
account of principal, interest, fees, and charges shall be applied to such
principal, interest, fees, and charges in the order and in the amounts
determined by the Agent in its discretion. All payments (including prepayments)
to be made by the Company on account of principal and interest on Loans
comprising the same Borrowing (whether such Borrowing is selected to be paid (or
prepaid) by the Company under clause (a) of the foregoing sentence or selected
to be paid (or prepaid) by the Agent under clause (b) of the foregoing sentence)
shall be made pro rata according to the outstanding principal amount of (i) in
the case of Revolving Credit Loans, each Bank's Revolving Credit Loans and (ii)
in the case of Term Loans, each Bank's Term Loans. All payments by the Company
on all Loans shall be made without set-off or counterclaim and shall be made
prior to 12:00 noon, Boston time, on the date such payment is due, to the Agent
for the account of the Banks at the Agent's office specified in paragraph 11.1,
in each case in lawful money of the United States of America and in immediately
available funds, and, as between the Company and the Banks, any payment by the
Company to the Agent for the account of the Banks shall be deemed to be payment
by the Company to the Banks; provided, however, that any payment received by the
Agent on any Business Day after 12:00 noon shall be deemed to have been received
on the immediately succeeding Business Day. The Agent shall distribute such
payments to the Banks promptly upon receipt in like funds as received. If any
payment hereunder or on any Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day (unless, in the case of LIBOR Loans, the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day) and, with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension.
3.5. UPFRONT FEE.3.5. UPFRONT FEE. The Company agrees to pay on or prior
- ---- -----------
to the Effective Date to the Agent for the account of the Banks an upfront
fee (the "UpFront Fee") in the amount of $54,000 to be divided among those Banks
that are parties hereto as of the Effective Date, pro rata according to the
Commitment Percentage of each Bank.
4. REPRESENTATIONS AND WARRANTIES.4. REPRESENTATIONS AND WARRANTIES. In
- -- -------------------------------
order to induce the Agent and the Banks to enter into this Agreement, the
Company hereby represents and warrants to the Agent and to each Bank that:
4.1. SUBSIDIARY.4.1 SUBSIDIARY. The Company has only the Subsidiaries
- ---- ----------
set forth in Exhibit F. The shares of each corporate Subsidiary owned by the
- - ---------
Company are duly authorized, validly issued, fully paid and non-assessable and
are owned free and clear of any Liens, except Liens permitted by paragraph 8.2.
4.2. CORPORATE EXISTENCE AND POWER.4.2. CORPORATE EXISTENCE AND POWER.
- ---- -------------------------------
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Vermont and has all requisite corporate
power and authority to own its Property and to carry on its business as now
conducted. The Company is in good standing and duly qualified to do business in
each jurisdiction in which the failure to so qualify would have a Material
Adverse Effect.
4.3. CORPORATE AUTHORITY.4.3 CORPORATE AUTHORITY. The Company has full
- ---- --------------------
corporate power and authority to enter into, execute, deliver and carry out the
terms of this Agreement and to make the borrowings contemplated hereby, to
execute, deliver and carry out the terms of the Notes and to incur the
obligations provided for herein and therein, all of which have been duly
authorized by all necessary corporate action on its part and are in full
compliance with its Charter and By-Laws. No consent or approval of, or
exemption by, shareholders or any Governmental Body is required to authorize, or
is required in connection with the execution, delivery and performance of,
this Agreement and the Notes, or is required as a condition to the validity or
enforceability of this Agreement and the Notes, except that the approval of the
VPSB referred to in paragraph 5.8(a) is required (and is all that is required by
any Governmental Body) for the making of the Term Loans
4.4. BINDING AGREEMENT.4.4 BINDING AGREEMENT. This Agreement
- ---- ------------------
constitutes, and the Notes, when issued and delivered pursuant hereto for value
- ---- -
received, will constitute, the valid and legally binding obligations of the
Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by equitable principles and
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally.
4.5. LITIGATION4.5. LITIGATION. Except for the matters set forth in the
- ---- ----------
Designated Documents, there are no actions, suits or arbitration
proceedings (whether or not purportedly on behalf of the Company or any
Subsidiary) pending or to the knowledge of the Company threatened against the
Company or any Subsidiary, or maintained by the Company or any Subsidiary, in
law or in equity before any Governmental Body which, if decided adversely to the
Company or such Subsidiary, would have a Material Adverse Effect upon the
Company after giving effect to reserves reflected in the Financial Statements or
the footnotes thereto. There are no proceedings pending or to the knowledge of
the Company threatened against the Company which call into question the validity
and enforceability of this Agreement or the Notes, except that the approval of
the VPSB referred to in paragraph 5.8(a) is required (and is all that is
required by any Governmental Body) for the making of the Term Loans.
4.6. NON CONFLICTING AGREEMENTS4.6. NON CONFLICTING AGREEMENTS. Except
- ---- ---------------------------
for the matters set forth in the Designated Documents, the Company is not in
default under any agreement to which it is a party or by which it or any of its
Property is bound, the effect of which would have a Material Adverse Effect upon
the Company. No provision of the Charter or By-Laws of the Company, and no
provision of any existing mortgage, indenture contract, agreement, statute
(including, without limitation, any applicable usury or similar law), rule,
regulation, judgment, decree or order binding on the Company or any Subsidiary
could in any way prevent the execution, delivery or carrying out of the terms of
this Agreement and the Notes (except that the approval of the VPSB referred to
in paragraph 5.8(a) is required (and is all that is required by any Governmental
Body) for the making of the Term Loans), and the taking of any such action will
not constitute a default under, or result in the creation or imposition of, or
obligation to create, any Lien not permitted by paragraph 8.2 upon the Property
of the Company pursuant to the terms of any such mortgage, indenture, contract
or agreement.
4.7. TAXES.4.7. TAXES. The Company has filed or caused to be filed all
- ---- -----
tax returns material to the Company required by law to be filed, and has paid,
or has made adequate provision for the payment of, all taxes shown to be due and
payable on said returns or in any assessments made against it. No tax
Liens have been filed and no claims are being asserted with respect to such
taxes which are required by GAAP to be reflected in the Financial Statements and
are not so reflected therein. The Internal Revenue Service has audited and
settled upon, or the applicable statutes of limitation have run upon, all
Federal income tax returns of the Company through the tax year ended December
31, 1999, and, to the extent required by GAAP, the results of all such audits
are reflected in the Financial Statements; provided, however, that the U.S.
-----------------
Internal Revenue Service is currently conducting an audit of WPP87, L.P., a
limited partnership in which the Company owns a limited partnership interest,
for its 1998 tax year. The charges, accruals and reserves on the books of the
Company with respect to all taxes are considered by the management of the
Company to be adequate, and the Company knows of no unpaid assessment which is
due and payable against the Company which would have a Material Adverse Effect,
except such thereof as are being contested in good faith and by appropriate
proceedings diligently conducted and for which adequate reserves have been set
aside in accordance with GAAP.
4.8. FINANCIAL STATEMENTS4.8. FINANCIAL STATEMENTS. The Company
- ---- ---------------------
heretofore delivered to each Bank (i) copies of the Consolidated Balance Sheet
- ----
at December 31, 2000, and the related Consolidated Statements of Income, Cash
Flows and Capitalization Data for the year ended December 31, 2000 and (ii)
copies of the Consolidated quarterly report of the Company and its Subsidiaries
as of March 31, 2001, containing a Consolidated balance sheet and Consolidated
statements of income and cash flows of the Company and its Subsidiaries (the
statements in (i) and (ii) above being sometimes referred to herein as the
"Financial Statements"). The financial statements set forth in (i) above were
audited and reported on by the Accountants on February 2, 2001 and the financial
statements set forth in (ii) above were prepared by the Company. The
Financial Statements fairly present the Consolidated financial condition and the
Consolidated results of operations of the Company and its Subsidiaries as of the
dates and for the periods indicated therein, and have been prepared in
conformity with GAAP. Except (a) as reflected in the financial statements
specified in (i) above or in the footnotes thereto, or (b) as otherwise
disclosed to the Banks in a writing specifically referring to this paragraph
4.8, neither the Company nor any Subsidiary has any obligation or liability of
any kind (whether fixed, accrued, contingent, unmatured or otherwise) which is
material to the Company and its Subsidiaries on a Consolidated basis and which,
in accordance with GAAP, should have been shown on such financial statements and
were not, other than those incurred in the ordinary course of their respective
businesses since December 31, 2000. Since December 31, 2000, each of the
Company and each Subsidiary has conducted its business only in the ordinary
course, and as of the Effective Date, except for the matters set forth in the
Designated Documents, there has been no Material Adverse Change.
4.9. COMPLIANCE WITH APPLICABLE LAWS4.9. COMPLIANCE WITH APPLICABLE
- ---- ----------------------------------
LAWS. Except as set forth in the Designated Documents, neither the Company nor
- ----
any Subsidiary is in default with respect to any judgment, order, writ,
injunction, decree or decision of any Governmental Body applicable to the
Company or such Subsidiary which default would have a Material Adverse Effect
upon the Company. Except as set forth in the Designated Documents, each of the
Company and each Subsidiary is complying in all material respects with all
applicable material statutes and regulations of all Governmental Bodies,
including ERISA and all Environmental Laws, a violation of which would have a
Material Adverse Effect upon the Company.
4.10. GOVERNMENTAL REGULATIONS4.10. GOVERNMENTAL REGULATIONS. The
- ----- -------------------------
Company is not an "Investment Company" as such term is defined in the Investment
- -----
Company Act of 1940, as amended.
4.11. PROPERTY.4.11. PROPERTY The Company has good and marketable title
- ----- --------
to all of its Property, title to which is material to the Company, subject
to no Lien, except as permitted by paragraph 8.2.
4.12. FEDERAL RESERVE REGULATIONS4.12 FEDERAL RESERVE REGULATIONS. The
- ----- ----------------------------
Company is not engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying any
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended. No part of the proceeds of the Loans
will be used (i) to purchase or carry any such margin stock, (ii) to extend
credit to others for the purpose of purchasing or carrying any margin stock,
(iii) for a purpose which violates the provisions of Regulations G, U and X of
the Board of Governors of the Federal Reserve System, as amended, or (iv) for a
purpose which violates any other applicable law, rule or regulation of any
Governmental Body.
4.13. NO MISREPRESENTATION.4.13. NO MISREPRESENTATION. No representation
- ----- --------------------
or warranty contained herein and no certificate or report furnished or to
be furnished by the Company in connection with the transactions contemplated
hereby, contains or will contain a misstatement of material fact, or omits or
will omit to state a material fact required to be stated in order to make the
statements herein or therein contained not misleading in the light of the
circumstances under which made.
4.14. PENSION PLANS4.14. PENSION PLANS. Each Plan, and to the best of
- ----- --------------
the Company's knowledge each Multiemployer Plan, established or maintained by
the Company and its Subsidiaries, is in material compliance with the applicable
provisions of ERISA and the Code, and the Company and its Subsidiaries have
filed all material reports required to be filed with respect to each such Plan
by ERISA and the Code. The Company and its Subsidiaries have met all
requirements with respect to funding the Plans imposed by ERISA or the Code.
Since the effective date of ERISA, there have not been, nor are there now
existing, any events or conditions which would permit any Plan and to the best
of the Company's knowledge any Multiemployer Plan to be terminated under
circumstances which would cause the Lien provided under Section 4068 of ERISA to
attach to the Property of the Company or any of its Subsidiaries. Since
the effective date of ERISA, no reportable event as defined in Title IV of
ERISA, which constitutes grounds for the termination of any Plan and to the best
of the Company's knowledge any Multiemployer Plan, has occurred and no Plan or
any related trust has been terminated in whole or in part which would have a
Material Adverse Effect.
4.15. PUBLIC UTILITY HOLDING COMPANY ACT.4.15. PUBLIC UTILITY HOLDING
- ----- -------------------------------------
COMPANY ACT. The Company is a public utility holding company under the Public
- --
Utility Holding Company Act of 1935, as amended, (the "Public Utility Act") and
each of its Subsidiaries are "subsidiaries" of a "holding company" under the
Public Utility Act. The Company and its Subsidiaries have filed an exemption
statement under Section 3(a)(2) of the Public Utility Act and are therefore
exempt from the provisions of the Public Utility Act, except for Section 9(a)(2)
thereof (which prohibits the acquisition of securities of certain other
utility companies without approval of the Securities and Exchange Commission).
4.16. APPROVALS.4.16. APPROVALS. The Company has obtained all
- ----- ---------
authorizations, approvals or consents of and made all filings or registrations
- -----
with all Governmental Bodies as are necessary to be obtained or made by the
Company for the execution, delivery or performance by the Company of this
Agreement or the Notes and all such authorizations, approvals and consents are
in full force and effect, except that the approval of the VPSB referred to in
paragraph 5.8(a) is required for the making of the Term Loans.
4.17. Reserved.
- ----- ---------
4.18. NO ADVERSE CHANGE OR EVENT.4.18. NO ADVERSE CHANGE OR EVENT.
- ----- ------------------------------
Except for the matters set forth in the Designated Documents, since December 31,
- -----
2000, no change in the business, assets, liabilities, condition (financial
or otherwise), results of operations or business prospects of the Company has
occurred, including, without limitation as a result of any decision of any
Governmental Body, and no event has occurred or failed to occur, including,
without limitation as a result of any decision of any Governmental Body, that
has had or would reasonably be expected to have, either alone or in conjunction
with all other such changes, events and failures, a Material Adverse Effect on
(a) the Company or (b) any Loan Document.
5. CONDITIONS OF BORROWING - FIRST BORROWING AND TERM LOAN EFFECTIVE DATE.5.
- -- ----------------------------------------------------------------------
CONDITIONS OF BORROWING - FIRST BORROWING AND TERM LOAN EFFECTIVE DATE. In
addition to the requirements set forth in paragraph 6, the obligations of the
Banks to make the first Revolving Credit Loans on the initial Borrowing Date are
subject to the fulfillment of the conditions precedent set forth in paragraphs
5.1 through 5.7 below.
5.1. EVIDENCE OF CORPORATE ACTION.5.1. EVIDENCE OF CORPORATE ACTION. The
- ---- ----------------------------
Agent shall have received a certificate, dated the Effective Date, of the
Secretary or an Assistant Secretary of the Company (i) attaching a true and
complete copy of the resolutions of its Board of Directors and of all documents
evidencing other necessary corporate action (in form and substance satisfactory
to the Agent and to Special Counsel) taken by the Company to authorize this
Agreement, the Notes and the borrowings hereunder, (ii) attaching a true and
complete copy of the Charter and the By-Laws of the Company, and (iii) setting
forth the incumbency of the officer or officers of the Company who sign this
Agreement and the Notes, including therein a signature specimen of such officer
or officers, together with a certificate of the Secretary of State of Vermont as
to the good standing of, and the payment of franchise taxes therein by, the
Company, together with such other documents as the Agent or Special Counsel
shall reasonably require.
5.2. REVOLVING CREDIT NOTES.5.2. REVOLVING CREDIT NOTES. The Agent shall
- ---- ----------------------
have received and be in possession of the Revolving Credit Notes executed
by the duly authorized officer or officers of the Company.
5.3. Reserved.
- ---- --------
5.4. OPINION OF COUNSEL TO THE COMPANY.5.4. OPINION OF COUNSEL TO THE
- ---- ------------------------------------
COMPANY. The Agent shall have received the opinion of Sheehey Furlong Rendall &
- --
Behm P.C., counsel to the Company, or its successor, if any, addressed to the
Banks and to the Agent, dated the Effective Date, substantially in the form of
Exhibit G-l.
-----------
5.5. FEES.5.5. FEES. The fees of Special Counsel and the UpFront Fee
- ---- ----
shall have been paid, together with any portion of the Agent's Fees that is
- ---
required to have been paid on the Effective Date.
- ---
5.6. CONSENTS, LICENSES.5.6. CONSENTS, LICENSES. The Agent shall have
- ---- -------------------
received a certificate of the Secretary of the Company to the effect that no
- --
other consents, approvals or licenses are necessary in connection with the
- --
borrowings hereunder, except that the approval of the VPSB referred to in
- --
paragraph 5.8(a) is required (and is all that is required by any Governmental
- --
Body) for the making of the Term Loans.
- --
5.7. PROFITABILITY. 5.7. PROFITABILITY. The Company shall have provided
- ---- -------------
evidence satisfactory to the Agent in its discretion that the Company has
performed, or expects to perform, for both of the two consecutive fiscal
quarters ending on June 30, 2001, consistently with the projections provided to
the Banks prior to the date hereof with respect to fiscal year 2001.
5.8. TERM LOAN EFFECTIVE DATE. 5.8. TERM LOAN EFFECTIVE DATE. In
- ---- ---------------------------
addition to the requirements set forth above and in paragraph 6, the obligations
- ----
of the Banks to make the Term Loans are subject to the fulfillment of the
following additional conditions precedent (the date on which such additional
conditions precedent, together with the fulfillment of the other conditions set
forth above and in paragraph 6, the "Term Loan Effective Date", provided that
the Banks shall have no obligation to make the Term Loans if the Term Loan
Effective Date has not occurred on or before October 12, 2001):
(A) VPSB APPROVAL. The Agent shall have received true copies for each Bank
- --- --------------
of any required order or orders of the VPSB approving the Term Loans to be made
under this Agreement in on the terms and conditions contemplated under this
Agreement, as executed and delivered to the Agent by the Company and each Bank
with no material changes to this Agreement. Such approval shall be final and
shall no longer be subject to appeal, shall be in full force and effect, shall
be in form and substance satisfactory to the Agent and Special Counsel.
(B) CONSENTS, LICENSES. The Agent shall have received a certificate of the
- --- -------------------
Secretary of the Company to the effect that no other consents, approvals or
licenses are necessary in connection with the borrowings hereunder.
(C) ADDITIONAL LEGAL OPINION. The Agent shall have received the opinion of
- --- -------------------------
Sheehey Furlong Rendall & Behm P.C., counsel to the Company, or its successor,
if any, addressed to the Banks and to the Agent, dated the Term Loan Effective
Date, substantially in the form of Exhibit G-2.
------------
(D) KEYBANK CREDIT FACILITY. The Company shall have paid all amounts due
- --- -------------------------
under the KeyBank Credit Facility, KeyBank's obligation to extend loans,
- --
advances, or financial accommodations thereunder shall have been terminated, and
- --
the pledge of the KeyBank Certificate of Deposit to KeyBank shall have been
terminated.
(E) TERM LOAN NOTES. The Company shall have executed and delivered the Term
- --- ---------------
Loan Notes.
6. CONDITIONS OF BORROWING - ALL BORROWINGS.6. CONDITIONS OF BORROWING -
- -- ----------------------------------------
ALL BORROWINGS. The obligations of the Banks to make all Loans hereunder on each
Borrowing Date are subject to the fulfillment of the following conditions
precedent:
6.1. COMPLIANCE.6.1. COMPLIANCE. On each Borrowing Date, and after
- ---- ----------
giving effect to the Loans to be made on such date (a) the Company and each
- ----
Subsidiary shall be in compliance with all of the terms, covenants and
- ----
conditions of this Agreement, (b) there shall exist no Event of Default, (c) the
- ----
representations and warranties contained in this Agreement, or otherwise in
writing made by the Company in connection herewith shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on such Borrowing Date (except such thereof as
specifically refer to an earlier date), and (d) no event shall have occurred or
failed to occur, that has had or would reasonably be expected to have, either
alone or in conjunction with all other such events and failures, a Material
Adverse Effect since the last Borrowing Date.
6.2. LOAN CLOSINGS.6.2. LOAN CLOSINGS. All documents required by
- ---- --------------
paragraphs 5 and 6 of this Agreement to be executed and/or delivered to the
- ----
Agent on or before the applicable Borrowing Date shall have been executed and
- ----
delivered at the office of the Agent set forth in paragraph 11 on or before such
- --
Borrowing Date.
6.3. APPROVAL OF COUNSEL.6.3. APPROVAL OF COUNSEL. All legal matters in
- ---- --------------------
connection with the making of each Loan on the Borrowing Date shall be
reasonably satisfactory to such counsel with whom the Agent may deem it
necessary to consult.
6.4. BORROWING REQUEST.6.4. BORROWING REQUEST. The Agent shall have
- ---- ------------------
received a Borrowing Request duly executed by the chief financial officer (or
- ----
the chief executive officer or controller, in the absence of the chief financial
- --
officer) of the Company.
6.5. OTHER DOCUMENTS.6.5. OTHER DOCUMENTS. The Agent shall have received
- ---- ---------------
such other documents as the Agent shall reasonably require.
7. AFFIRMATIVE COVENANTS.7. AFFIRMATIVE COVENANTS.
- -- ----------------------
The Company covenants and agrees that on and after the Effective Date until
the later of the termination of the Commitments or the payment in full of the
Notes and the performance by the Company of all other obligations of the Company
hereunder, unless the Agent shall otherwise consent in writing as provided in
paragraph 13, the Company will:
7.1. CORPORATE EXISTENCE.7.1. CORPORATE EXISTENCE. Maintain its
- ---- --------------------
corporate existence, in good standing in the jurisdiction of its incorporation
- ----
or organization and in each other jurisdiction in which the character of the
Property owned or leased by it therein or the transaction of its business makes
such qualification necessary, except as otherwise expressly permitted hereunder.
7.2. TAXES.7.2. TAXES. Pay and discharge when due all taxes, assessments
- ---- -----
and governmental charges and levies upon the Company, and upon the income,
profits and Property of the Company, which if unpaid would have a Material
Adverse Effect or become a Lien not permitted under paragraph 8.2, unless and to
the extent only that such taxes, assessments, charges and levies, (a) shall be
contested in good faith and by appropriate proceedings diligently conducted by
the Company, provided that such reserve or other appropriate provision, if any,
as shall be required in accordance with GAAP shall have been made therefor, or
(b) are not in the aggregate material to the financial condition, Property or
operations of the Company.
7.3. INSURANCE. 7.3. INSURANCE. Maintain insurance with financially
- ---- ---------
sound insurance carriers on such of its Property in such amounts, subject to
- ----
such deductibles and self-insured amounts and against such risks as is
- ---
customarily maintained by similar businesses, including, without limitation,
- ---
public liability, workers' compensation and employee fidelity insurance.
- ---
7.4. PAYMENT OF INDEBTEDNESS AND PERFORMANCE OF OBLIGATIONS.7.4. PAYMENT
- ---- ------------------------------------------------------
OF INDEBTEDNESS AND PERFORMANCE OF OBLIGATIONS. Pay and discharge promptly
as and when due all lawful indebtedness, obligations and claims for labor,
materials and supplies or otherwise (including, without limitation, Funded Debt)
which, if unpaid, would (a) have a Material Adverse Effect, or (b) become a Lien
not permitted by paragraph 8.2, provided that the Company shall not be required
to pay and discharge or cause to be paid and discharged any such indebtedness,
obligation or claim so long as the validity thereof shall be contested in good
faith and by appropriate proceedings diligently conducted by the Company, and
further provided that such reserve or other appropriate provision as shall be
required in accordance with GAAP shall have been made therefor.
7.5. OBSERVANCE OF LEGAL REQUIREMENTS7.5. OBSERVANCE OF LEGAL
- ---- --------------------------------------- ---------------------
REQUIREMENTS; ERISA. Observe and comply, and cause each Subsidiary to observe
- ---- ------------
and comply, in all material respects with all laws (including ERISA and all
Environmental Laws), ordinances, orders, judgments, rules, regulations,
certifications, franchises, permits, licenses, directions and requirements of
all Governmental Bodies, which now or at any time hereafter may be applicable to
the Company or such Subsidiary, a violation of which would have a Material
Adverse Effect upon the Company, except such thereof as shall be contested in
good faith and by appropriate proceedings diligently conducted by the Company or
such Subsidiary, provided that such reserve or other appropriate provision, if
any, as shall be required in accordance with GAAP shall have been made therefor.
7.6. FINANCIAL STATEMENTS AND OTHER INFORMATION.7.6. FINANCIAL
- ---- ----------------------------------------------
STATEMENTS AND OTHER INFORMATION. Furnish to the Agent and the Banks:
- ----
(a) as soon as available, but in no event more than 90 days after the close
of each fiscal year of the Company, copies of its audited Consolidated Balance
Sheet and the related audited Consolidated Statements of Income, Shareholders'
Equity and Changes in Financial Position for such fiscal year setting forth in
each case in comparative form the corresponding figures for the preceding fiscal
year all reported by the Accountants which report shall state that said
financial statements fairly present the financial position and results of
operations of the Company as at the end of and for such fiscal year except as
specifically stated therein, as of and through the end of such fiscal year,
prepared in accordance with GAAP and accompanied by a report with respect
thereto of the Accountants, together with a certificate signed on behalf of the
Company by the principal financial officer thereof to the effect that having
read this Agreement, and based upon an examination which in the opinion of such
officer was sufficient to enable such officer to make an informed statement, (x)
such statements fairly present the financial position and results of the
operations of the Company and its Subsidiaries on a Consolidated basis to the
best of such officer's knowledge, and (y) nothing came to such officer's
attention which caused such officer to believe that an Event of Default has
occurred, or if an Event of Default has occurred, stating the facts with respect
thereto and whether the same has been cured prior to the date of such
certificate, and, if not, what action is proposed to be taken with respect
thereto;
(b) as soon as available, but in no event more than 45 days after the close
of each quarter (except the last quarter) of each fiscal year of the Company a
Consolidated Balance Sheet and Consolidated Statements of Income and Changes in
Financial Position of the Company and its Subsidiaries as of and through the end
of such quarter, together with a certificate signed on behalf of the Company by
the principal financial officer thereof to the effect that having read this
Agreement, and based upon an examination which in the opinion of such officer
was sufficient to enable such officer to mike an informed statement, (x) such
statements fairly present the financial position and results of the operations
of the Company and its Subsidiaries on a Consolidated basis to the best of such
officer's knowledge, and (y) nothing came to such officer's attention which
caused such officer to believe that an Event of Default has occurred, or if an
Event of Default has occurred, stating the facts with respect thereto and
whether the same has been cured prior to the date of such certificate, and, if
not, what action is proposed to be taken with respect thereto;
(c) prompt notice if: (x) any obligation of the Company (other than its
obligations under this Agreement or the Notes) for a payment in excess of
$500,000 of any Funded Debt is not paid when due or within any grace period for
the payment thereof or is declared or shall become due and payable prior to its
stated maturity, or (y) to the knowledge of any Authorized Signatory of the
Company there shall occur and be continuing an event which constitutes, or which
with the giving of notice or the lapse of time, or both, would constitute an
event of default (or, in the case of this Agreement, an Event of Default) under
any agreement with respect to Funded Debt of the Company (including this
Agreement);
(d) prompt written notice in the event that (i) the Company or any
Subsidiary shall fail to make any payments when due and payable under any Plan
or Multiemployer Plan, or (ii) the Company or any Subsidiary shall receive
notice from the Internal Revenue Service or the Department of Labor that the
Company or such Subsidiary shall have failed to meet the minimum funding
requirements of any Plan or Multiemployer Plan, including therewith a copy of
such notice;
(e) promptly upon becoming available, copies of all regular, periodic or
special reports or other material which may be filed with or delivered by the
Company to the Securities and Exchange Commission, or any other Governmental
Body succeeding to the functions thereof;
(f) prompt written notice in the event the Debt Rating of the Company shall
change or the Company shall have no Debt Rating;
(g) prompt written notice and a copy of any Environmental Notice excluding,
however, any such Environmental Notices relating to the Pine Street canal site
in Burlington, Vermont (the "Pine Street Site") if the effect of such
Environmental Notice relating to the Pine Street Site (i) does not change the
status of the Pine Street Site as it exists as of the date hereof as it relates
to the Company and (ii) would not have a Material Adverse Effect;
(h) a certificate of the Company, dated the date of each such annual report
or quarterly report required pursuant to paragraphs 7.6(a) and (b), and signed
on behalf of the Company by the President, chief financial officer, chief
accounting officer or Treasurer, which sets forth all relevant calculations
needed to determine whether the Company is in compliance with paragraph 8.8
hereof, which calculations are based on the most recent fiscal quarter required
to be supplied pursuant to paragraphs 7.6(a) and (b); and
(i) such other information and reports relating to the affairs of the
Company and its Subsidiaries, as the Agent or any Bank at any time or from time
to time may reasonably request.
7.7. INSPECTION.7.7. INSPECTION. Permit representatives of the Agent or
- ---- ----------
any Bank to visit the offices of the Company, to examine the books and records
thereof and to make copies or extracts therefrom, and to discuss the affairs of
the Company with the officers, including the financial officers, thereof, at
reasonable times, at reasonable intervals and with reasonable prior notice.
7.8. Reserved.
7.9. Reserved.
- ---- ---------
8. NEGATIVE COVENANTS.8. NEGATIVE COVENANTS. The Company covenants and
- -- -------------------
agrees that from the Effective Date until the later of the termination of all of
the Commitments or the payment in full of all of the Notes and the performance
by the Company of all other obligations of the Company hereunder, unless the
Agent shall otherwise consent in writing as provided in paragraph 13, the
Company will not:
8.1. FUNDED DEBT.8.1 FUNDED DEBT. Create, incur, assume, guarantee or
- ---- ------------
suffer to exist any Short-Term Funded Debt (excluding the Loans) in excess of
- --
$500,000, individually or in the aggregate, excluding, however, the Company's
- --
payment obligations meeting the capital lease accounting requirements under SFAS
- --
13 pursuant to certain thirty-year support agreements among the Company,
VELCO and other New England Power Pool members and Hydro-Quebec in connection
with the construction of the second phase of the interconnection between the New
England electric systems and that of Hydro-Quebec, other than: (a) until the
Term Loan Effective Date, Short-Term Funded Debt up to the principal amount of
$15,000,000 under the KeyBank Credit Facility, or (b) Short-Term Funded Debt
permitted or allowed in connection with the provisions of the First Mortgage
Bonds specifically relating to restrictions on Funded Debt, which provisions are
incorporated by reference herein as if fully set forth herein.
8.2. LIENS.8.2. LIENS. Create, incur, assume or suffer to exist any Lien
- ---- -----
upon any of its Property, whether now owned or hereafter acquired, to
secure any indebtedness or other obligation, except for Liens existing as of
April 13, 1998 and arising in connection with the First Mortgage Bonds, except
for the following:
(i) materialmens', mechanics', suppliers', tax and other like Liens arising
in the ordinary course of business securing obligations which are not overdue,
or if overdue are being contested in good faith by appropriate proceedings and
then only to the extent that the Company has set aside on its books adequate
reserves therefor in accordance with GAAP and such contest does not have a
Material Adverse Effect; Liens arising in connection with workers' compensation,
unemployment insurance, and appeal and release bonds, and other Liens
incident to the conduct of business or the operation of property and assets and
not incurred in connection with the obtaining of any advance or credit and which
Liens do not, or would not, have a Material Adverse Effect;
(ii) Liens arising out of judgments or awards against the Company with
respect to which at the time an appeal or proceeding for review is being
prosecuted in good faith and with respect to which there shall have been secured
a stay of execution pending such appeal or proceeding for review and which Liens
do not, or would not, have a Material Adverse Effect;
(iii) any other Liens not in excess of $500,000 in the aggregate; and
(iv) until the Term Loan Effective Date, Liens to secure obligations on the
KeyBank Credit Facility on the KeyBank Certificate of Deposit.
8.3. MERGERS AND CONSOLIDATIONS.8.3. MERGERS AND CONSOLIDATIONS.
- ---- ----------------------------
Consolidate with or merge into any other Person.
- ----
8.4. SALE OF PROPERTY.8.4 SALE OF PROPERTY. Sell, lease or otherwise
- ---- ------------------
dispose of any significant part of its Property (including, without limitation,
- ---
the right to receive income), except (i) in the ordinary course of business and
(ii) obsolete or worn out Property which is no longer used or useful to the
Company.
8.5. DIVIDENDS; DISTRIBUTIONS.8.5. DIVIDENDS; DISTRIBUTIONS. Declare or
- ---- -------------------------
pay any dividends (other than dividends payable in shares of common stock of the
Company) on, or make any other distribution in respect of, any shares of
any class of capital stock of the Company, or apply any of its property or
assets to, or set aside any sum for, the payment, purchase, redemption or other
acquisition or retirement of, any shares of any class of capital stock of the
Company, if, after giving effect to such dividend or other distribution, the
result of such dividend or other distribution would have a Material Adverse
Effect.
8.6. GUARANTIES.8.6. GUARANTIES. Except as set forth in the Financial
- ---- ----------
Statements, the Company shall not guarantee, endorse or otherwise in any way
- --
become or be responsible for obligations of any other Person (including without
- --
limitation any officer, director, employee or stockholder of the Company) in
excess of $500,000 in the aggregate, whether by agreement to purchase the
indebtedness of any other Person or through the purchase of goods, supplies or
services, or maintenance of working capital or other balance sheet covenants or
conditions, or by way of stock purchase, capital contribution, advance or loan
for the purpose of paying or discharging any indebtedness or obligation of such
other Person or otherwise, unless the same is permitted or allowed in connection
with the provisions of the First Mortgage Bonds specifically relating to
the same, which provisions are incorporated by reference herein as if fully set
forth herein.
8.7. AMENDMENT OF CHARTER OR BY-LAWS.8.7. AMENDMENT OF CHARTER OR
- ---- -----------------------------------
BY-LAWS. The Company shall not amend its Charter or By-Laws or change its fiscal
- ----
year end if the result of any such amendment or change in its fiscal year
end would adversely affect or otherwise impair the rights and remedies of the
Banks hereunder or under any other Loan Document.
8.8. FUNDED DEBT TO CAPITALIZATION TEST.8.8. FUNDED DEBT TO
- ---- --------------------------------------
CAPITALIZATION TEST. Permit the total amount of Funded Debt to exceed fifty-two
- ---- ---
percent (52%) of Total Capitalization.
9. EVENTS OF DEFAULT.9. EVENTS OF DEFAULT. The following shall each
constitute an Event of Default hereunder:
(a) the failure of the Company to pay (i) any amounts of principal due
hereunder or under the Notes when such amounts are due or declared due, or (ii)
any other amounts, including interest and fees, due hereunder or under the Notes
within five (5) Business Days after such amounts are due or declared due,
in any case whether at stated maturity by acceleration or otherwise;
(b) the failure of the Company to observe or perform any covenant or
agreement contained in paragraph 8 and, with respect to paragraph 8.2 only, such
failure shall have continued unremedied for a period of five (5) Business Days
after the Company knows, or should have known, of such default; or
(c) the failure of the Company to observe or perform any other term,
covenant, or agreement contained in this Agreement and such failure shall have
continued unremedied for a period of 10 days after written notice, specifying
such failure and requiring it to be remedied, shall have been given to the
Company by the Agent; or
(d) any material representation or warranty made herein or in any
certificate, report, or notice delivered or to be delivered by the Company
pursuant hereto, shall prove to have been incorrect in any material respect when
made; or
(e) if the Company shall default (as principal or guarantor, surety or other
obligor) in the payment of any principal of, or premium, if any, or interest on
any Funded Debt in excess of $1,000,000 (other than its obligations under this
Agreement and the Notes), or with respect to any of the terms of any evidence of
such indebtedness or of any agreement relating thereto, and such default shall
entitle the holder of such indebtedness to accelerate the maturity thereof,
unless, in the case of any non-payment default, such default has been
affirmatively waived by or on behalf of the holder of such indebtedness; or
(f) the Company shall (i) make an assignment for the benefit of creditors,
(ii) admit in writing its inability to pay its debts as they become due or
generally fail to pay its debts as they become due, (iii) file a voluntary
petition in bankruptcy, (iv) become insolvent (however such insolvency shall be
evidenced), (v) file any petition or answer seeking for itself any
reorganization, arrangement, composition, readjustment of debt, liquidation or
dissolution or similar relief under any present or future statute, law or
regulation of any jurisdiction, (vi) petition or apply to any tribunal for any
trustee, receiver, custodian, liquidator or fiscal agent for any substantial
part of its Property, (vii) be the subject of any proceeding referred to in
clause (vi) above or an involuntary bankruptcy petition filed against it which
remains undischarged for a period of 60 days, (viii) file any answer admitting
or not contesting the material allegations of any such petition filed against
it, or of any order, judgment or decree approving such petition in any such
proceeding, (ix) seek, approve, consent to, or acquiesce in any such proceeding,
or in the appointment of any trustee, receiver, custodian, liquidator, or fiscal
agent for it, or any substantial part of its Property, or an order is entered
appointing any such trustee, receiver, custodian, liquidator or fiscal agent and
such order remains in effect for 60 days, (x) take any formal action for the
purpose of effecting any of the foregoing or looking to the liquidation or
dissolution of the Company or (xi) suspend or discontinue its business (except
as otherwise expressly permitted herein); or
(g) an order for relief is entered under the United States bankruptcy laws
or any other decree or order is entered by a court having jurisdiction (i)
adjudging the Company a bankrupt or insolvent, or (ii) approving as properly
filed a petition seeking reorganization, liquidation, arrangement, adjustment or
composition of or in respect of the Company under the United States bankruptcy
laws or any other applicable Federal or state law, or (iii) appointing a
trustee, receiver, custodian, liquidator, or fiscal agent (or other similar
official) of the Company or of any substantial part of its Property, or (iv)
ordering the winding up or liquidation of the affairs of the Company; or
(h) judgments or decrees against the Company in excess of $3,000,000 in the
aggregate (excluding such judgments or decrees which are insured and as to which
the insurer has admitted liability) or for an aggregate amount in excess of
$6,000,000 (whether or not insured) shall remain unpaid, unstayed on appeal,
undischarged, unbonded or undismissed for a period of 30 days; or
(i) any fact or circumstance, including any Reportable Event as defined in
Title IV of ERISA, at a time when there exists an underfunding of the Plan in an
amount in excess of $500,000, which constitutes grounds for the termination of
any Plan by the PBGC or for the appointment of a trustee to administer any Plan,
shall have occurred and be continuing for a period of 30 days; or
(j) the occurrence of a Material Adverse Change; or
(k) the occurrence of any Event of Default (other than an Event of Default
which is waived by the party or parties entitled to take remedial action upon
the occurrence of such Event of Default) under any of the other Loan Documents,
or any other document or instrument evidencing, securing or relating to the
liabilities or obligations of the Company to the Banks hereunder or thereunder.
Upon the occurrence and during the continuance of an Event of Default under
this paragraph 9, the Agent, upon the request of the Majority Banks, shall
notify the Company that the Commitments have been terminated and that the Notes,
all accrued interest thereon and all other amounts owing under this Agreement
are immediately due and payable, provided that upon the occurrence of an event
specified in paragraphs 9(f) or 9(g), the Commitments shall automatically
terminate and the Notes (with accrued interest thereon) and all other amounts
owing under this Agreement shall become immediately due and payable without
notice to the Company. Except for any notice expressly provided for in this
paragraph 9, the Company hereby expressly waives any presentment, demand,
protest, notice of protest or other notice of any kind. The Company hereby
further expressly waives and covenants not to assert any appeasement, valuation,
stay, extension, redemption or similar laws, now or at any time hereafter in
force which might delay, prevent or otherwise impede the performance or
enforcement of this Agreement or the Notes.
In the event that the unpaid principal balance of the Notes, all accrued
interest thereon and all other amounts owing under this Agreement shall have
been declared due and payable pursuant to the provisions of this paragraph 9,
the Agent may, and, upon (i) the request of the Majority Banks and (ii) the
providing by all of the Banks to the Agent of an indemnity in form and substance
satisfactory to the Agent in accordance with paragraph 10.3 against all expenses
and liabilities, shall, proceed to enforce the rights of the holders of the
Notes by suit in equity, action at law and/or other appropriate proceedings,
whether for payment or the specific performance of any covenant or agreement
contained in this Agreement or the Notes. The Agent shall be justified in
failing or refusing to take any action hereunder and under the Notes unless it
shall be indemnified to its satisfaction by the Banks pro rata according to the
aggregate outstanding principal balance of the Notes against any and all
liabilities and expenses which may be incurred by it by reason of taking or
continuing to take any such action. In the event that the Agent, having been so
indemnified, or not being indemnified to its satisfaction, shall fail or refuse
so to proceed, any Bank shall be entitled to take such action as it shall deem
appropriate to enforce its rights hereunder and under its Notes with the consent
of the Majority Banks, it being understood and intended that no one or more of
the holders of the Notes shall have any right to enforce payment thereof except
as provided in this paragraph 9 and in paragraph 12.
If an Event of Default shall have occurred and shall be continuing, the
Agent may, and at the request of the Majority Banks shall, notify the Company
(by telephone or otherwise) that all or such lesser amount as the Majority Banks
shall designate of the outstanding LIBOR Loans automatically shall be converted
to Alternate Base Rate Loans, in which event such LIBOR Loans automatically
shall be converted to Alternate Base Rate Loans on the date such notice is
given. If such notice is given, notwithstanding anything in paragraph 2.7 to
the contrary, no Alternate Base Rate Loan may be converted to a LIBOR Loan if an
Event of Default has occurred and is continuing at the time the Company shall
notify the Agent of its election to so convert.
10. THE AGENT.10. THE AGENT. The Banks and the Agent agree by and among
themselves that:
10.1. APPOINTMENT.10.1. APPOINTMENT. FNB is hereby irrevocably
- ----- -----------
designated the Agent by each of the other Banks to perform such duties on behalf
- -----
of the other Banks and itself, and to have such powers, as are set forth
herein and as are reasonably incidental thereto.
10.2. DELEGATION OF DUTIES, ETC.10.2. DELEGATION OF DUTIES, ETC. The
- ----- ----------------------------
Agent may execute any duties and perform any powers hereunder by or through
- ---
agents or employees, and shall be entitled to consult with legal counsel and any
- ---
accountant or other professional selected by it. Any action taken or
omitted to be taken or suffered in good faith by the Agent in accordance with
the opinion of such counsel or accountant or other professional shall be full
justification and protection to the Agent.
10.3. INDEMNIFICATION.10.3. INDEMNIFICATION. The Banks agree to
- ----- ---------------
indemnify the Agent in its capacity as such, to the extent not reimbursed by the
- -----
Company, pro rata according to their respective Commitments, from and
against any and all claims, liabilities, obligations, losses, damages,
penalties, actions, judgement, suits, costs, expenses or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this Agreement or the
Notes or any action taken or omitted to be taken or suffered in good faith by
the Agent hereunder or thereunder, provided that no Bank shall be liable for any
portion of any of the foregoing items resulting from the gross negligence or
willful misconduct of the Agent. Without limitation of the foregoing, each Bank
agrees to reimburse the Agent promptly for its pro-rata share of any reasonable
out-of-pocket expenses (including counsel fees) incurred by the Agent in
connection with the preparation, execution, administration or enforcement of, or
legal advice in respect of rights or responsibilities under, this Agreement and
the Notes, to the extent that the Agent, having sought reimbursement for such
expenses from the Company, is not promptly reimbursed by the Company. Any
reference herein and in any document executed in connection herewith, to the
Banks providing an indemnity in form and substance satisfactory to the Agent
prior to the Agent taking any action hereunder shall be satisfied by the Banks
executing an agreement confirming their agreement to promptly indemnify the
Agent in accordance with this paragraph 10.3.
10.4. EXCULPATORY PROVISIONS.10.4. EXCULPATORY PROVISIONS. Neither
- ----- -----------------------
Agent, nor any of its officers, directors, employees or agents, shall be liable
- -----
for any action taken or omitted to be taken or suffered by it or them hereunder
or under the Notes, or in connection herewith or therewith, including without
limitation any action taken or omitted to be taken in connection with any
telephonic communication pursuant to paragraph 2.3 hereof, except that the Agent
shall be liable for its own gross negligence or willful misconduct. The
Agent shall not be liable in any manner for the effectiveness, enforceability,
collectibility, genuineness, validity or the due execution of this Agreement or
the Notes, or for the due authorization, authenticity or accuracy of the
representations and warranties contained herein or in any other certificate,
report, notice, consent, opinion, statement, or other document furnished or to
be furnished hereunder, and the Agent shall be entitled to rely upon any of the
foregoing believed by it to be genuine and correct and to have been signed and
sent or made by the proper Person. The Agent shall not be under any duty or
responsibility to any Bank to ascertain or to inquire into the performance or
observance by the Company or any Subsidiary of any of the provisions hereof or
of the Notes or of any document executed and delivered in connection herewith or
therewith. Each Bank expressly acknowledges that the Agent has not made any
representations or warranties to it and that no act taken by the Agent shall be
deemed to constitute any representation or warranty by the Agent to any Bank.
Each Bank acknowledges that it has taken and will continue to take such action
and has made and will continue to make such investigation as it deems necessary
to inform itself of the affairs of the Company and each Subsidiary, and each
Bank acknowledges that it has made and will continue to make its own independent
investigation of the creditworthiness and the business and operations of the
Company and its Subsidiaries, and that, in entering into this Agreement, and in
agreeing to make its Loans, it has not relied and will not rely upon any
information or representations furnished or given by the Agent or any other
Bank.
10.5. AGENT IN ITS INDIVIDUAL CAPACITY.10.5. AGENT IN ITS INDIVIDUAL
- ----- ------------------------------------
CAPACITY. With respect to its Loans and any renewals, extensions or deferrals of
- ---
the payment thereof and any Note issued to or held by it, the Agent shall
have the same rights and powers hereunder as any Bank, and may exercise the same
as though it were not the Agent, and the term "Bank" or "Banks" shall, unless
the context otherwise requires, include the Agent in its individual capacity.
FNB and its affiliates may accept deposits from, lend money to, act as trustee
or other fiduciary in connection with transactions, including, without,
limitation, interest rate hedging agreements or instruments, involving, and
otherwise engage in any business with the Company and its affiliates and any
Person who may do business with or own securities of the Company or any
affiliate of the Company, all as if FNB were not the Agent hereunder and without
any obligation to account or report therefor to any Bank.
10.6. KNOWLEDGE OF DEFAULT.10.6. KNOWLEDGE OF DEFAULT. It is expressly
- ----- ----------------------
understood and agreed that the Agent shall be entitled to assume that no Event
of Default has occurred and is continuing, unless the offices of the Agent who
are responsible for matters concerning this Agreement shall have actual
knowledge of such occurrence or shall have been notified in writing by a Bank
that such Bank considers that an Event of Default has occurred and is continuing
and specifying the nature thereof.
In the event the Agent shall have acquired actual knowledge of any Event of
Default, it shall promptly give notice thereof to the Banks.
10.7. RESIGNATION OF AGENT.10.7. RESIGNATION OF AGENT. If at any time
- ----- ----------------------
the Agent deems it advisable, in its sole discretion, it may submit to each of
- --
the Banks a written notification of its resignation as Agent under this
Agreement, such resignation to be effective on the earlier to occur of (a) the
forty-fifth (45th) day after the date of such notice or (b) the date upon which
a successor Agent accepts its appointment as successor Agent. If the Agent
resigns hereunder, the Company shall have the right to appoint, with the prior
written approval of the Banks, which approval shall not be unreasonably
withheld, a successor Agent hereunder, provided, however that upon the
occurrence and during the continuance of an Event of Default, the Banks shall
have the right to appoint such successor Agent hereunder without the consent or
approval of the Company. The successor Agent shall be a commercial bank or
other financial institution organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $100,000,000. Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the Agent
hereunder, and the retiring Agent shall be discharged from any further duties
and obligations under this Agreement. The Company and the Banks agree to
execute such documents as shall be necessary to effect such appointment. After
the retiring Agent's resignation or removal hereunder, the provisions of this
paragraph 10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while the Agent under this Agreement. If at any time hereunder
there shall not be a duly appointed and acting Agent, the Company agrees to make
each payment due hereunder and under the Notes directly to the Banks entitled
thereto.
10.8. REQUESTS TO THE AGENT.10.8. REQUESTS TO THE AGENT. Whenever the
- ----- ------------------------
Agent is authorized and empowered hereunder on behalf of the Banks to give any
- --
approval or consent, or to make any request, or to take any other action on
behalf of the Banks, the Agent shall be required to give such approval or
consent, or to make such request or to take such other action only when so
requested in writing by the Majority Banks subject, however, to the provisions
of paragraph 13.
11. NOTICES.11. NOTICES.
- --- -------
11.1. MANNER OF DELIVERY.11.1. MANNER OF DELIVERY. Except as otherwise
- ----- --------------------
specifically provided herein, all notices and demands shall be in writing and
shall be mailed by certified mail return receipt requested or sent by telegram,
telecopy or telex or delivered in person or by nationally recognized overnight
courier, and all statements, reports, documents, consents, waivers, certificates
and other papers required to be delivered hereunder shall be mailed by
first-class mail or delivered in person, in each case to the respective parties
to this Agreement as follows:
if to the Company, to:
Green Mountain Power Corporation
163 Acorn Lane
Colchester, Vermont 05446-6611
Attention: Nancy Rowden Brock, CFO
Telephone: (802) 655-8451
Telecopy: (802) 655-8406
with a copy to:
Christopher Gannon, Esq.
Sheehey Furlong Rendall & Behm P.C.
30 Main Street
P.O. Box 66
Burlington, Vermont 05402
Telephone: (802) 864-9891
Telecopy: (802) 864-6815
if to the Agent, to:
Fleet National Bank
100 Federal Street
Mail Stop: MA DE 1000 8A
Boston, Massachusetts 02110
Attention: Robert Lanigan, Managing Director
Telephone: (617) 434-6515
Telecopy: (617) 434-3652
with a copy to:
Joseph F. Ryan, Esq.
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 856-8200
Telecopy: (617) 856-8201
if to the Banks, to:
Fleet National Bank
100 Federal Street
Mail Stop: MA DE 1000 8A
Boston, Massachusetts 02110
Attention: Robert Lanigan, Managing Director
Telephone: (617) 434-6515
Telecopy: (617) 434-3652
with a copy to:
Joseph F. Ryan, Esq.
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, MA 02111
Telephone: (617) 856-8200
Telecopy: (617) 856-8201
KeyBank National Association
149 Bank Street
Burlington, VT 05402
Attention: John W. Kingston, Senior Vice President
Telephone: (802) 660-4474
Telecopy: (802) 864-6908
or to such other Person or address as a party hereto shall designate to the
other parties hereto from time to time in writing forwarded in like manner. Any
notice or demand given in accordance with the provisions of this paragraph 11.1
shall be effective when received and any consent, waiver or other communication
given in accordance with the provisions of this paragraph 11.1 shall be
conclusively deemed to have been received by a party hereto and to be effective
on the day on which received by such party at its address specified above or, if
sent by first class mail, on the third Business Day after the day when deposited
in the mail, postage prepaid, and addressed to such party at such address,
provided that a notice of change of address shall be deemed to be effective when
actually received.
11.2. DISTRIBUTION OF COPIES.11.2. DISTRIBUTION OF COPIES. Whenever the
- ----- -----------------------
Company is required to deliver any statement, report, document, certificate or
other paper (other than Borrowing Request or Conversion/Continuation Request) to
the Agent, the Company shall simultaneously deliver a copy thereof to each
Bank.
11.3. NOTICES BY THE AGENT OR A BANK.11.3. NOTICES BY THE AGENT OR A
- ----- ----------------------------------
BANK. In the event that the Agent or any Bank takes any action or gives any
- ---
consent or notice provided for by this Agreement, notice of such action, consent
- ---
or notice shall be given forthwith to all the Banks by the Agent or the
Bank taking such action or giving such consent or notice, provided that the
failure to give any such notice shall not invalidate any such action, consent or
notice in respect of the Company.
12. RIGHT OF SET-OFF.12. RIGHT OF SET-OFF. Regardless of the adequacy of
any collateral, upon the occurrence and during the continuance of any Event of
Default, each Bank is hereby expressly and irrevocably authorized by the Company
at any time and from time to time, without notice to the Company, to set-off,
appropriate, and apply all moneys, securities and other Property and the
proceeds thereof now or hereafter held or received by or in transit to such Bank
from or for the account of the Company, whether for safekeeping, pledge,
transmission, collection or otherwise, and also upon any and all deposits
(general and special), account balances and credits of the Company with such
Bank at any time existing against any and all obligations of the Company to the
Banks and to each of them arising under this Agreement and the Notes, and the
Company shall continue to be liable to each Bank for any deficiency with
interest at the rate or rates set forth in subparagraph 2.8(c). Each of the
Banks agrees with each other Bank that (a) if an amount to be set off is to be
applied to any obligations of the Company to such Bank, other than obligations
evidenced by the Notes held by such Bank, such amount shall be applied ratably
to such other obligations and to the obligations evidenced by all such Notes
held by such Bank and (b) if such Bank shall receive from the Company, whether
by voluntary payment, exercise of the right of setoff, counterclaim, cross
action, enforcement of the claim evidenced by the Notes held by such Bank by
proceedings against the Company at law or in equity or by proof thereof in
bankruptcy, reorganization, liquidation, receivership or similar proceedings, or
otherwise, and shall retain and apply to the payment of the Note or Notes held
by such Bank any amount in excess of its ratable portion of the payments
received by all of the Banks with respect to the Notes held by all of the Banks,
such Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, pro tanto assignment of
claims, subrogation or otherwise as shall result in each Bank receiving in
respect of the Notes held by each Bank, its proportionate payment as
contemplated by this Agreement; provided that if all or any part of such excess
payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
13. AMENDMENTS WAIVERS AND CONSENTS.13. AMENDMENTS WAIVERS AND CONSENTS.
Except as otherwise expressly set forth herein, with the written consent of the
Majority Banks, the Agent shall, subject to the provisions of this paragraph 13,
from time to time enter into agreements amendatory or supplemental hereto with
the Company for the purpose of changing any provisions of this Agreement or the
Notes, or changing in any manner the rights of the Banks, the Agent or the
Company hereunder and thereunder, or waiving compliance with any provision of
this Agreement or consenting to the non-compliance thereof. Notwithstanding the
foregoing, the consent of all of the Banks shall be required with respect to any
amendment, waiver or consent (i) changing the Aggregate Commitments or the
Commitment of any Bank, (ii) changing the maturity of any Loan, or the rate of
interest of, time or manner of payment of interest on or principal of, or the
principal amount of any Loan, or the amount, time or manner of payment of any
fees hereunder, or (iii) modifying this paragraph 13 or the definition of
"Majority Banks". Any such amendment or supplemental agreement, waiver or
consent shall apply equally to each of the Banks and shall be binding on the
Company and all of the Banks and the Agent. Any waiver or consent shall be for
such period and subject to such conditions or limitations as shall be specified
therein, but no waiver or consent shall extend to any subsequent or other Event
of Default, or impair any right or remedy consequent thereupon. In the case of
any waiver or consent, the rights of the Company, the Banks and the Agent under
this Agreement and the Notes shall be otherwise unaffected. Nothing contained
herein shall be deemed to require the Agent to obtain the consent of any Bank
with respect to any change in the amount or terms of payment of the Agent's
Fees. The Company shall be entitled to rely upon the provisions of any such
amendatory or supplemental agreement, waiver or consent if it shall have
obtained any of the same in writing from the Agent who therein shall have
represented that such agreement, waiver or consent has been authorized in
accordance with the provisions of this paragraph 13.
14. OTHER PROVISIONS.14. OTHER PROVISIONS.
14.1. NO WAIVER OF RIGHTS BY THE BANKS.14.1. NO WAIVER OF RIGHTS BY THE
- ----- ---------------------------------
BANKS. No failure on the part of the Agent or of any Bank to exercise, and no
delay in exercising, any right or remedy hereunder or under the Notes shall
operate as a waiver thereof, except as provided in paragraph 13, nor shall any
single or partial exercise by the Agent or any Bank of any right, remedy or
power hereunder or under the Notes preclude any other or future exercise
thereof, or the exercise of any other right, remedy or power. The rights,
remedies and powers provided herein and in the Notes are cumulative and not
exclusive of any other rights, remedies or powers which the Agent or the Banks
or any holder of a Note would otherwise have. Notice to or demand on the
Company in any circumstance in which the terms of this Agreement or the Notes do
not require notice or demand to be given shall not entitle the Company to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Agent or any Bank or the holder of any
Note to take any other or further action in any circumstances without notice or
demand.
14.2. HEADINGS; PLURALS.14.2. HEADINGS; PLURALS. Paragraph and
- ----- ------------------
subparagraph headings have been inserted herein for convenience only and shall
- -----
not be construed to be a part of this Agreement. Unless the context otherwise
requires, words in the singular number include the plural, and words in the
plural include the singular.
14.3. COUNTERPARTS.14.3. COUNTERPARTS. This Agreement may be executed in
- ----- ------------
any number of counterparts, each of which shall be an original and all of
which shall constitute one agreement. It shall not be necessary in making proof
of this Agreement or of any document required to be executed and delivered in
connection herewith or therewith to produce or account for more than one
counterpart.
14.4. SEVERABILITY.14.4. SEVERABILITY. Every provision of this Agreement
- ----- ------------
and the Notes is intended to be severable, and if any term or provision
hereof or thereof shall be invalid, illegal or unenforceable for any reason, the
validity, legality and enforceability of the remaining provisions hereof or
thereof shall not be affected or impaired thereby, and any invalidity,
illegality or unenforceability in any jurisdiction shall not affect the
validity, legality or enforceability of any such term or provision in any other
jurisdiction.
14.5. INTEGRATION.14.5. INTEGRATION. All exhibits to this Agreement
- ----- -----------
shall be deemed to be a part of this Agreement. This Agreement, the exhibits
- ----
hereto and the Notes embody the entire agreement and understanding between the
- --
Company, the Agent and the Banks with respect to the subject matter hereof and
thereof and supersede all prior agreements and understandings between the
Company, the Agent and the Banks with respect to the subject matter hereof and
thereof.
14.6. SALES AND PARTICIPATIONS IN LOANS AND NOTES; SUCCESSORS AND ASSIGNS,
- ----- ----------------------------------------------------------------------
SURVIVAL OF REPRESENTATIONS AND WARRANTIES.14.6. SALES AND PARTICIPATIONS IN
- ------------------------------------------
LOANS AND NOTES, SUCCESSORS AND ASSIGNS, SURVIVAL OF REPRESENTATIONS AND
WARRANTIES.
(a) Each Bank shall have the right with the prior written consent of the
Company (which consent shall not be unreasonably withheld or delayed), provided,
however, that no such consent shall be required after and during the
continuance of an Event of Default, upon written notice to the Agent and the
Company to sell, assign, transfer or negotiate all or any part (but not less
than $5,000,000) of the Loans and the Notes and its Commitment to one or more
commercial banks or other financial institutions including, without limitation,
the Banks. In the case of any sale, assignment, transfer or negotiation of all
or any such part of the Loans and the Notes authorized under this paragraph
14.6(a), the assignee or transferee shall have, to the extent of such sale,
assignment, transfer or negotiation, the same rights, benefits and obligations
as it would if it were a Bank hereunder and a holder of such Note, including,
without limitation, (x) the right to approve or disapprove of actions which in
accordance with the terms hereof, require the approval of the Majority Banks and
(y) the obligation to fund Loans directly to the Agent pursuant to paragraph
2.3.
(b) Notwithstanding paragraph 14.6(a), each Bank may grant participations in
all or any part of its Loans and its Notes to one or more commercial banks,
insurance companies, or other financial institutions, pension funds or mutual
funds; provided that (i) any such disposition shall not, without the prior
written consent of the Company, require the Company to file a registration
statement with the Securities and Exchange Commission or apply to qualify the
Loans and the Notes under the blue sky laws of any state and (ii) the holder of
any such participation, other than an Affiliate of such Bank, shall not have any
rights or obligations hereunder and shall not be entitled to require such Bank
to take or omit to take any action hereunder except action directly affecting
the extension of the maturity of any portion of the principal amount of, or
interest on, the Loan allocated to such participation, or a reduction of the
principal amount of, or the rate of interest payable on, such Loans.
(c) Notwithstanding the foregoing provisions of this paragraph 14.6, each
Bank may at any time and from time to time sell, assign, transfer, or negotiate
all or any part of the Loans to any Affiliate of such Bank; provided that an
Affiliate to whom such disposition has been made shall not be considered a
"Bank", and the assigning Bank shall be considered not to have disposed of any
Loans so assigned for purposes of determining the Majority Banks under any
provision hereof, but such Affiliate shall otherwise be considered a "Bank", and
the assigning Bank shall otherwise be considered to have disposed of any Loans
so assigned, for purposes hereof, including, without limitation, paragraphs 3.1
and 12 hereof.
(d) In addition, notwithstanding anything to the contrary contained in this
paragraph 14.6, any Bank may at any time and from time to time pledge or assign
all or any portion of its rights under this Agreement with respect to its Loans,
its Commitments and its Notes to any of the twelve (12) Federal Reserve Banks.
No such pledge or assignment or enforcement thereof shall release the assignor
Bank from its obligations hereunder.
(e) No Bank shall, as between the Company and such Bank, be relieved of any
of its obligations hereunder as a result of granting participations in all or
any part of the Loans and the Notes of such Bank or other obligations owed to
such Bank.
(f) This Agreement shall be binding upon and inure to the benefit of the
Banks, the Agent and the Company and their respective successors and assigns.
All covenants, agreements, warranties and representations made herein, and in
all certificates or other documents delivered in connection with this Agreement
by or on behalf of the Company shall survive the execution and delivery hereof
and thereof, and all such covenants, agreements, representations and warranties
shall inure to the respective successors and assigns of the Banks and the Agent
whether or not so expressed.
(g) The Agent shall maintain a copy of each assignment delivered to it and a
register or similar list for the recordation of the names and addresses of the
Banks and the Commitment Percentages of the Banks and the principal amount of
the Loans and the Notes assigned from time to time. The entries in such
register shall be conclusive, in the absence of manifest error and provided that
any required consent of the Company has been obtained, and the Company, the
Agent and the Banks may treat each Person whose name is recorded in such
register as a Bank hereunder for all purposes of this Agreement. Upon each such
recordation, the assigning Bank agrees to pay to the Agent a registration fee in
the sum of Two Thousand Five Hundred Dollars ($2,500).
14.7. APPLICABLE LAW.14.7. APPLICABLE LAW. This Agreement and the Notes
- ----- ---------------
are being delivered in and are intended to be performed in The Commonwealth of
Massachusetts and shall be construed and enforceable in accordance with, and be
governed by, the internal laws of The Commonwealth of Massachusetts without
regard to its principles of conflict of laws.
14.8. INTEREST. 14.8. INTEREST. At no time shall the interest rate
- ----- --------
payable on the Loans and Notes, together with the Facility Fee, the UpFront Fee,
- -----
the Usage Fee and the Agent's Fees and all other fees and amounts payable
hereunder, to the extent same are construed to constitute interest, exceed the
maximum rate of interest permitted by law. The Company acknowledges that to the
extent interest payable on the Loans and Notes is based on the Alternate Base
Rate, such rate is only one of the bases for computing interest on loans made by
the Banks, and by basing interest payable on the Loans and Notes on the
Alternate Base Rate, the Banks have not committed to charge, and the Company has
not in any way bargained for, interest based on a lower or the lowest rate at
which the Banks may now or in the future make loans to other borrowers.
14.9. ACCOUNTING TERMS AND PRINCIPLES.14.9. ACCOUNTING TERMS AND
- ----- ----------------------------------
PRINCIPLES. All accounting terms not herein defined by being capitalized shall
- -----
be interpreted in accordance with GAAP, unless the context otherwise expressly
requires.
14.10. WAIVER OF TRIAL BY JURY.14.10. WAIVER OF TRIAL BY JURY. THE
- ------ ---------------------------
COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST
- -----
EXTENT PERMITTED OR NOT PROHIBITED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREIN.
FURTHER, THE COMPANY HEREBY ACKNOWLEDGES THAT NO REPRESENTATIVE OF THE AGENT OR
THE BANKS OR COUNSEL TO THE AGENT OR THE BANKS HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE AGENT OR THE BANKS WOULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE SUCH WAIVER. THE COMPANY ACKNOWLEDGES THAT THE
AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THE LOAN DOCUMENTS BY, INTER
ALIA, THE PROVISIONS OF THIS PARAGRAPH.
14.11. CONSENT TO JURISDICTION.14.11. CONSENT TO JURISDICTION. THE
- ------ -------------------------
COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY COURT OF THE
- -----
COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING IN THE COMMONWEALTH
- -----
OF MASSACHUSETTS OVER ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THE LOAN DOCUMENTS. THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED OR NOT PROHIBITED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. THE COMPANY HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH SUIT, ACTION
OR PROCEEDING BROUGHT IN ANY SUCH A COURT, AFTER ALL APPROPRIATE APPEALS, SHALL
BE CONCLUSIVE AND BINDING UPON IT.
14.12. SERVICE OF PROCESS.14.12. SERVICE OF PROCESS. PROCESS MAY BE
- ------ --------------------
SERVED IN ANY SUIT, ACTION, COUNTERCLAIM OR PROCEEDING OF THE NATURE REFERRED TO
- ----
IN PARAGRAPH 14.11 BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO THE ADDRESS OF THE COMPANY
SET FORTH IN PARAGRAPH 11.1 OR TO ANY OTHER ADDRESS OF WHICH THE COMPANY SHALL
HAVE GIVEN WRITTEN NOTICE TO THE AGENT. THE COMPANY HEREBY AGREES THAT SUCH
SERVICE (I) SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON
IT IN ANY SUCH SUIT, ACTION, COUNTERCLAIM OR PROCEEDING, AND (II) SHALL TO THE
FULLEST EXTENT PERMITTED OR NOT PROHIBITED BY APPLICABLE LAW, BE TAKEN AND HELD
TO BE VALID PERSONAL SERVICE UPON AND PERSONAL DELIVERY TO IT.
14.13. NO LIMITATION ON SERVICE OR SUIT14.13. NO LIMITATION ON SERVICE
- ------ ----------------------------------
OR SUIT. NOTHING IN THE LOAN DOCUMENTS, OR ANY MODIFICATION, WAIVER, OR
AMENDMENT THERETO, SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR LIMIT THE RIGHT OF THE AGENT OR
ANY BANK TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER
JURISDICTION OR JURISDICTIONS.
15. OTHER OBLIGATIONS OF THE COMPANY.15. OTHER OBLIGATIONS OF THE
- --- ----------------------------------
COMPANY.
15.1. TAXES AND FEES.15.1. TAXES AND FEES. Should any tax (other than a
- ----- ---------------
tax based upon the net income of any Bank), recording or filing fee become
payable in respect of this Agreement or the Notes or any amendment, modification
or supplement hereof or thereof, the Company agrees to pay the same
together with any interest or penalties thereon and agrees to hold the Agent and
the Banks harmless with respect thereto.
15.2. EXPENSES15.2. EXPENSES. Whether or not the transactions
- ----- --------
contemplated by this Agreement shall be consummated, the Company agrees to pay
- -----
the reasonable out-of-pocket expenses of the Agent (including the reasonable
fees and expenses of counsel to the Agent and, without limitation, Special
Counsel) in connection with the preparation, reproduction, execution and
delivery of this Agreement and the Notes and the other exhibits annexed hereto ,
and any modifications, waivers, consents or amendments hereto and thereto,
and the Company further agrees to pay the reasonable out-of-pocket expenses of
the Agent and the Banks (including the reasonable fees and expenses of their
respective counsel) incurred in connection with the interpretation and
enforcement of any provision of this Agreement or collection under the Notes,
whether or not suit is instituted.
15.3. LOST NOTES. 15.3. LOST NOTES. Upon receipt of an affidavit of an
- ----- -----------
officer of any Bank as to the loss, theft, destruction or mutilation of any Note
and, in the case of any such loss, theft, destruction or mutilation, upon
cancellation of such Note or other security document, Company will issue, in
lieu thereof, a replacement note in the same principal amount thereof and
otherwise of like tenor.
16. EFFECTIVE DATE.16. EFFECTIVE DATE. This Agreement shall be effective
as an instrument under seal as of the date first set forth above (the "Effective
Date").
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first written above.
GREEN MOUNTAIN POWER CORPORATION
By: /s/Nancy R. Brock
-------------------
Title: Vice President, Treasurer and Chief Financial Officer
FLEET NATIONAL BANK,
Individually and as agent
Domestic Lending Office:
Office listed in paragraph 11.1
By: /s/Robert D. Lanigan
----------------------
LIBOR Lending Office: Title: Senior Officer
Office listed in paragraph 11.1
KEYBANK NATIONAL ASSOCIATION
Domestic Lending Office
Office listed in paragraph 11.1
By: /s/John W. Kingston
---------------------
LIBOR Lending Office Title: Senior Vice President
Office listed in paragraph 11.1
128
SEC 2001 FORM 10-K EXHIBIT 10-D-15C
GREEN MOUNTAIN POWER CORPORATION
2000 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of the Plan is to promote the interests of the Company and its
shareholders by aiding the Company in attracting and retaining employees,
officers, consultants, independent contractors and non-employee directors
capable of contributing to the future success of the Company, to offer such
persons incentives to put forth maximum efforts for the success of the Company's
business and to afford such persons an opportunity to acquire a proprietary
interest in the Company.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set forth
below:
(a) "Affiliate" shall mean (i) any entity that, directly or indirectly
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, in each case as
determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award, Other Stock Grant or Other
Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and any regulations promulgated thereunder.
(f) "Committee" shall mean a committee of Directors designated by the
Board to administer the Plan. The Committee shall be comprised of not less than
such number of Directors as shall be required to permit Awards granted under the
Plan to qualify under Rule 16b-3, and each member of the Committee shall be a
"non-employee director" within the meaning of Rule 16b-3 and an "outside
director" within the meaning of Section 162(m) of the Code. The Company expects
to administer the Plan to the extent feasible in accordance with the
requirements for the award of "qualified performance-based compensation" within
the meaning of Section 162(m) of the Code.
(g) "Company" shall mean Green Mountain Power Corporation, a Vermont
corporation, and any successor corporation.
(h) "Director" shall mean a member of the Board.
(i) "Eligible Person" shall mean any employee, officer, consultant,
independent contractor or Director providing services to the Company or any
Affiliate whom the Committee determines to be an Eligible Person.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee. Notwithstanding the foregoing,
unless otherwise determined by the Committee, the Fair Market Value of Shares as
of a given date shall be, if the Shares are then quoted on the New York Stock
Exchange, the average of the high and low sales price as reported on the New
York Stock Exchange on such date or, if the New York Stock Exchange is not open
for trading on such date, on the most recent preceding date when it is open for
trading; provided, however, that the Committee may in its discretion designate
the actual sales price as Fair Market Value in the case of disposition of
Shares under the Plan.
(l) "Incentive Stock Option" shall mean an option granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision.
(m) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(n) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option, and shall include Reload Options.
(o) "Other Stock Grant" shall mean any right granted under Section 6(e)
of the Plan.
(p) "Other Stock-Based Award" shall mean any right granted under Section
6(f) of the Plan.
(q) "Participant" shall mean an Eligible Person designated to be granted
an Award under the Plan. A Participant shall cease to be such under the Plan
after all Awards granted to him or her are no longer exercisable.
(r) "Performance Award" shall mean any right granted under Section 6(d)
of the Plan.
(s) "Person" shall mean any individual, corporation, partnership,
association or trust.
(t) "Plan" shall mean the Green Mountain Power Corporation 2000 Stock
Incentive Plan, as amended from time to time, the provisions of which are set
forth herein.
(u) "Reload Option" shall mean any Option granted under Section 6(a)(iv)
of the Plan.
(v) "Restricted Stock" shall mean any Shares granted under Section 6(c) of
the Plan.
(w) "Restricted Stock Unit" shall mean any unit granted under Section 6(c)
of the Plan evidencing the right to receive a Share (or a cash payment equal to
the Fair Market Value of a Share) at some future date.
(x) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Exchange Act or any successor rule or regulation.
(y) "Shares" shall mean shares of Common Stock, $ 3.33 1/3 par value per
share, of the Company or such other securities or property as may become subject
to Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(z) "Stock Appreciation Right" shall mean any right granted under Section
6(b) of the Plan.
SECTION 3. ADMINISTRATION.
(a) Power and Authority of the Committee. The Plan shall be administered by
the Committee. Subject to the express provisions of the Plan and to applicable
law, the Committee shall have full power and authority to: (i) designate those
Eligible Persons who are to be Participants; (ii) determine the type or types of
Awards to be granted to each Participant under the Plan; (iii) determine the
number of Shares to be covered by (or with respect to which payments, rights or
other matters are to be calculated in connection with) each Award; (iv)
determine the terms and conditions of any Award or Award Agreement; (v) amend
the terms and conditions of any Award or Award Agreement and accelerate the
exercisability of Options or the lapse of restrictions relating to Restricted
Stock, Restricted Stock Units or other Awards; (vi) determine whether, to what
extent and under what circumstances Awards may be exercised in cash, Shares,
other securities, other Awards or other property, or canceled, forfeited or
suspended; (vii) determine whether, to what extent and under what circumstances
cash, Shares, promissory notes, other securities, other Awards, other property
and other amounts payable with respect to an Award under the Plan shall be
deferred either automatically or at the election of the holder thereof or the
Committee; (viii) interpret and administer the Plan and any instrument or
agreement, including an Award Agreement, relating to the Plan; (ix) establish,
amend, suspend or waive such rules and regulations and appoint such agents as it
shall deem appropriate for the proper administration of the Plan; and (x) make
any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Unless otherwise
expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at any
time and shall be final, conclusive and binding upon any Participant, any holder
or beneficiary of any Award and any employee of the Company or any Affiliate.
(b) Delegation. The Committee may delegate its powers and duties under the
Plan to one or more Directors or a committee of Directors, subject to such
terms, conditions and limitations as the Committee may establish in its sole
discretion.
(c) Power and Authority of the Board of Directors. Notwithstanding anything
to the contrary contained herein, the Board may, at any time and from time to
time, without any further action of the Committee, exercise the powers and
duties of the Committee under the Plan.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) Shares Available. Subject to adjustment as provided in Section 4(c)
of the Plan, the aggregate number of Shares that may be issued under all Awards
under the Plan shall be 500,000. Shares to be issued under the Plan may be
either authorized but unissued Shares or Shares acquired in the open market or
otherwise. Any Shares that are used by a Participant as full or partial payment
to the Company of the purchase price relating to an Award, or in connection with
the satisfaction of tax obligations relating to an Award, shall again be
available for granting Awards (other than Incentive Stock Options) under the
Plan. In addition, if any Shares covered by an Award or to which an Award
relates are not purchased or are forfeited, or if an Award otherwise terminates
without delivery of any Shares, then the number of Shares counted against the
aggregate number of Shares available under the Plan with respect to such Award,
to the extent of any such forfeiture or termination, shall again be available
for granting Awards under the Plan.
(b) Accounting for Awards. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available for
granting Awards under the Plan.
(c) Adjustments. In the event that the Committee shall determine that any
dividend or other distribution (whether in the form of cash, Shares, other
securities or other property), recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number and type of Shares (or
other securities or other property) that thereafter may be made the subject of
Awards, (ii) the number and type of Shares (or other securities or other
property) subject to outstanding Awards and (iii) the purchase or exercise price
with respect to any Award; provided, however, that the number of Shares covered
by any Award or to which such Award relates shall always be a whole number.
(d) Award Limitations Under the Plan. No Eligible Person may be granted
any Award or Awards under the Plan, the value of which Award or Awards is based
solely on an increase in the value of the Shares after the date of grant of such
Award or Awards, for more than 100,000 Shares (subject to adjustment as provided
for in Section 4(c) of the Plan), in the aggregate in any calendar year. The
foregoing annual limitation specifically includes the grant of any Award or
Awards representing "qualified performance-based compensation" within the
meaning of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY.
Any Eligible Person shall be eligible to be designated a Participant. An
Incentive Stock Option may only be granted to full or part-time employees (which
term as used herein includes, without limitation, officers and Directors who are
also employees), and an Incentive Stock Option shall not be granted to an
employee of an Affiliate unless such Affiliate is also a "subsidiary
corporation" of the Company within the meaning of Section 424(f) of the Code or
any successor provision.
SECTION 6. AWARDS.
(a) Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable under an
Option shall be determined by the Committee; provided, however, that such
purchase price shall not be less than 100% of the Fair Market Value of a Share
on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be fixed by the
Committee but no Option shall be exercisable more than ten years after the grant
date.
(iii) Time and Method of Exercise. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and the
method or methods by which, and the form or forms (including, without
limitation, cash, Shares, promissory notes, other securities, other Awards or
other property, or any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price) in which, payment of the
exercise price with respect thereto may be made or deemed to have been made.
(iv) Reload Options. The Committee is hereby authorized to grant
Reload Options, separately or together with another Option, pursuant to which,
subject to the terms and conditions established by the Committee, the
Participant will be granted a new Option (the Reload Option) when payment of all
or a portion of the exercise price of a previously granted option is made by the
delivery of Shares owned by the Participant, and/or when Shares are tendered or
withheld as payment of all or a portion of the amount to be withheld under
applicable income tax laws in connection with the exercise of an option. The
Reload Option will be an Option to purchase that number of Shares not exceeding
the sum of (A) the number of Shares used for payment of the exercise price of
the previously granted option to which such Reload Option relates and (B) the
number of Shares tendered or withheld as payment of the amount to be withheld
under applicable tax laws in connection with the exercise of the option to which
such Reload Option relates. Reload Options may be granted with respect to
Options previously granted under the Plan or with respect to options under any
other stock option plan of the Company or may be granted in connection with any
Option granted under the Plan or under any other stock option plan of the
Company at the time of such grant. Such Reload Options shall have a per share
exercise price equal to the Fair Market Value of one Share as of the date of
grant of the new Reload Option.
(b) Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under
the Plan shall confer on the holder thereof a right to receive upon exercise
thereof the excess of (i) the Fair Market Value of one Share on the date of
exercise (or, if the Committee shall determine, at any time during a specified
period before or after the date of exercise) over (ii) the grant price of the
Stock Appreciation Right as specified by the Committee, which price shall not be
less than 100% of the Fair Market Value of one Share on the date of grant of the
Stock Appreciation Right. Subject to the terms of the Plan and any applicable
Award Agreement, the grant price, term, methods of exercise, dates of exercise,
methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Restricted Stock and Restricted Stock Units to Participants
with the following terms and conditions and with such additional terms and
conditions not inconsistent with the provisions of the Plan as the Committee
shall determine:
(i) Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, a waiver by the Participant of the right to vote
or to receive any dividend or other right or property with respect thereto),
which restrictions may lapse separately or in combination at such time or times,
in such installments or otherwise as the Committee may deem appropriate.
(ii) Stock Certificates. Any Restricted Stock granted under the Plan
shall be registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions and restrictions applicable to such
Restricted Stock. In the case of Restricted Stock Units, no Shares shall be
issued at the time such Awards are granted.
(iii) Forfeiture. Except as otherwise determined by the Committee,
upon termination of employment (as determined under criteria established by the
Committee) during the applicable restriction period, all Shares of Restricted
Stock and all Restricted Stock Units at such time subject to restriction shall
be forfeited and reacquired by the Company; provided, however, that the
Committee may waive in whole or in part any or all remaining restrictions with
respect to Shares of Restricted Stock or Restricted Stock Units. Upon the lapse
or waiver of restrictions and the restricted period relating to Restricted Stock
Units evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holders of the Restricted Stock Units.
(d) Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock and Restricted Stock Units), other securities, other Awards or
other property and (ii) shall confer on the holder thereof the right to receive
payments, in whole or in part, upon the achievement of such performance goals
during such performance periods as the Committee shall establish. Subject to
the terms of the Plan and any applicable Award Agreement, the performance goals
to be achieved during any performance period, the length of any performance
period, the amount of any Performance Award granted, the amount of any payment
or transfer to be made pursuant to any Performance Award and any other terms and
conditions of any Performance Award shall be determined by the Committee.
(e) Other Stock Grants. The Committee is hereby authorized, subject to
the terms of the Plan and any applicable Award Agreement, to grant to
Participants Shares without restrictions thereon as are deemed by the Committee
to be consistent with the purpose of the Plan.
(f) Other Stock-Based Awards. The Committee is hereby authorized to grant
to Participants subject to the terms of the Plan and any applicable Award
Agreement, such other Awards that are denominated or payable in, valued in whole
or in part by reference to, or otherwise based on or related to, Shares
(including, without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in form or forms (including, without limitation,
cash, Shares, promissory notes, other securities, other Awards or other property
or any combination thereof), as the Committee shall determine, the value of
which consideration, as established by the Committee, shall not be less than
100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.
(g) General.
(i) No Cash Consideration for Awards. Awards shall be granted for no
cash consideration or for such minimal cash consideration as may be required by
applicable law.
(ii) Awards May Be Granted Separately or Together. Awards may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with or in substitution for any other Award or any award granted under
any plan of the Company or any Affiliate other than the Plan. Awards granted in
addition to or in tandem with other Awards or in addition to or in tandem with
awards granted under any such other plan of the Company or any Affiliate may be
granted either at the same time as or at a different time from the grant of such
other Awards or awards.
(iii) Forms of Payment under Awards. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made by the
Company or an Affiliate upon the grant, exercise or payment of an Award may be
made in such form or forms as the Committee shall determine (including, without
limitation, cash, Shares, promissory notes, other securities, other Awards or
other property or any combination thereof), and may be made in a single payment
or transfer, in installments or on a deferred basis, in each case in accordance
with rules and procedures established by the Committee. Such rules and
procedures may include, without limitation, provisions for the payment or
crediting of reasonable interest on installment or deferred payments or the
grant or crediting of dividend equivalents with respect to installment or
deferred payments.
(iv) Limits on Transfer of Awards. No Award (other than Other Stock
Grants) and no right under any such Award shall be transferable by a Participant
otherwise than by will or by the laws of descent and distribution; provided,
however, that, if so determined by the Committee, a Participant may, in the
manner established by the Committee, transfer Options (other than Incentive
Stock Options) or designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with respect to
any Award upon the death of the Participant. Each Award or right under any
Award shall be exercisable during the Participant's lifetime only by the
Participant or, if permissible under applicable law, by the Participant's
guardian or legal representative. No Award or right under any such Award may be
pledged, alienated, attached or otherwise encumbered, and any purported pledge,
alienation, attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
(v) Term of Awards. The term of each Award shall be for such period as
may be determined by the Committee, but in no event more than ten years.
(vi) Restrictions; Securities Exchange Listing. All Shares or other
securities delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such restrictions as the Committee may deem
advisable under the Plan, applicable federal or state securities laws and
regulatory requirements, and the Committee may cause appropriate entries to be
made or legends to be affixed to reflect such restrictions. If any securities
of the Company are traded on a securities exchange, the Company shall not be
required to deliver any Shares or other securities covered by an Award unless
and until such Shares or other securities have been admitted for trading on such
securities exchange.
SECTION 7. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary, in the event of a Change in Control:
All Options and Stock Appreciation Rights outstanding as of the date such Change
in Control occurs shall become fully vested and exercisable.
The restrictions and other conditions applicable to any Restricted Stock,
Restricted Stock Unit, Other Stock Grant or Other Stock-Based Awards, including
vesting requirements, shall lapse, and such Awards shall become free of all
restrictions and fully vested.
The value of all outstanding Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Other Stock Grants and Other Stock-Based Awards
shall, unless otherwise determined by the Committee at or after grant, be cashed
out on the basis of the "Change in Control Price," as defined in Section 7(c),
as of the date such Change in Control occurs or such other date as the Committee
may determine prior to the Change in Control.
Any Performance Award that has been earned but not paid shall become immediately
payable in cash.
(b) Definition of Change in Control. A "Change in Control" means the
happening of any of the following events:
if (A) any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities (a "20%
Holder"); or (B) during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board and any new Director (other
than a Director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clauses (A) or (C) of this
subsection) whose election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least three-fourths (3/4) of
the Directors then still in office who either were Directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Directors of the
Company; or (C) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
provided, however, that a Change of Control shall not be deemed to have occurred
under clauses (A) or (C) above if a majority of the Continuing Directors (as
defined below) determine within five business days after the occurrence of any
event specified in clauses (A) or (C) above that control of the Company has not
in fact changed and it is reasonably expected that such control of the Company
in fact will not change. Notwithstanding that, in the case of clause (A) above,
the Board shall have made a determination of the nature described in the
preceding sentence, if there shall thereafter occur any material change in facts
involving, or relating to, the 20% Holder or to the 20% Holder's relationship to
the Company, including, without limitation, the acquisition by the 20% Holder of
l% or more additional outstanding voting stock of the Company, the occurrence of
such material change in facts shall result in a new Change of Control for the
purpose of this Plan . In such event, the second immediately preceding sentence
hereof shall be effective. As used herein, the term "Continuing Director" shall
mean any member of the Board on the date of the adoption of this Plan and any
successor of a Continuing Director who is recommended to succeed the Continuing
Director by a majority of Continuing Directors
(c) Change in Control Price. "Change in Control Price" means the highest
price per share paid in any transaction reported on the New York Stock
Exchange-Composite Transactions or paid or offered in any bona fide transaction
related to a change in control of the Company at any time during the preceding
60-day period as determined by the Committee, except that, in the case of
Incentive Stock Options, such price shall be based only on transactions reported
for the date on which such Incentive Stock Options are cashed out.
Notwithstanding any other provision of the Plan, upon a Change in Control,
unless the Committee shall determine otherwise at grant, an Award recipient
shall have the right, by giving notice to the Company within the exercise
period, to elect to surrender all or part of the Option, Stock Appreciation
Right, Restricted Stock, Restricted Stock Unit, Other Stock Grant or Other
Stock-Based Award to the Company and to receive in cash, within 30 days of such
notice, an amount equal to the amount by which the "Change in Control Price" on
the date of such notice shall exceed the exercise or grant price under such
Award, multiplied by the number of Shares as to which the right granted under
this Section 7 shall have been exercised.
SECTION 8. AMENDMENT AND TERMINATION; ADJUSTMENTS.
(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue or terminate the Plan at any time; provided, however, that,
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval:
(i) would violate the rules or regulations of the New York Stock Exchange or
any securities exchange upon which the Shares are listed;
(ii) would cause the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan; or
(iii) would decrease the grant or exercise price of any Option, Stock
Appreciation Right, Other Stock Grant or Other Stock Based Award to less than
the Fair Market Value on the date of grant.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Award, prospectively or
retroactively. Except as otherwise provided herein or in the Award Agreement,
the Committee may not amend, alter, suspend, discontinue or terminate any
outstanding Award, prospectively or retroactively, if such action would
adversely affect the rights of the holder of such Award, without the consent of
the Participant or holder or beneficiary thereof.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or any Award in the manner and to the extent it shall deem desirable to
carry the Plan into effect.
SECTION 9. INCOME TAX WITHHOLDING; TAX BONUSES.
(a) Withholding. In order to comply with all applicable federal or state
income tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal or state payroll, withholding,
income or other taxes, which are the sole and absolute responsibility of a
Participant, are withheld or collected from such Participant. In order to
assist a Participant in paying all or a portion of the federal and state taxes
required to be withheld or collected upon exercise or receipt of (or the lapse
of restrictions relating to) an Award, the Committee, in its discretion and
subject to such additional terms and conditions as it may adopt, may permit the
Participant to satisfy such required tax obligation by (i) electing to have the
Company withhold a portion of the Shares otherwise to be delivered upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes or (ii) delivering to the Company
Shares other than Shares issuable upon exercise or receipt of (or the lapse of
restrictions relating to) such Award with a Fair Market Value equal to the
amount of such taxes. The election, if any, must be made on or before the date
that the amount of tax to be withheld is determined.
(b) Tax Bonuses. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions).
The Committee shall have full authority in its discretion to determine the
amount of any such tax bonus.
SECTION 10. GENERAL PROVISIONS.
(a) No Rights to Awards. No Eligible Person, Participant or other Person
shall have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Persons, Participants or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to any Participant or with respect to
different Participants.
(b) Award Agreements. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company and, if requested by the Company, signed
by the Participant.
(c) No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or continuing in
effect other or additional compensation arrangements, and such arrangements may
be either generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
any Affiliate, nor will it affect in any way the right of the Company or an
Affiliate to terminate such employment at any time, with or without cause. In
addition, the Company or an Affiliate may at any time dismiss a Participant from
employment free from any liability or any claim under the Plan or any Award,
unless otherwise expressly provided in the Plan or in any Award Agreement.
(e) Governing Law. The validity, construction and effect of the Plan or
any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the laws of the State of Vermont.
(f) Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction or
would disqualify the Plan or any Award under any law deemed applicable by the
Committee, such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full
force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments from
the Company or any Affiliate pursuant to an Award, such right shall be no
greater than the right of any unsecured general creditor of the Company or any
Affiliate.
(h) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall determine
whether cash shall be paid in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(i) Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings shall not
be deemed in any way material or relevant to the construction or interpretation
of the Plan or any provision thereof.
SECTION 11. EFFECTIVE DATE OF THE PLAN.
The Plan was approved by the Board on February 7, 2000, subject to approval by
the shareholders of the Company and the Vermont Public Service Board within
twelve (12) months theretofore. Any Award granted under the Plan prior to
shareholder and Vermont Public Service Board approval of the Plan shall be
subject to shareholder and Vermont Public Service Board approval of the Plan.
SECTION 12. TERM OF THE PLAN.
No Award shall be granted under the Plan after February 7, 2005 or any earlier
date of discontinuation or termination established pursuant to Section 7(a) of
the Plan. However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may extend beyond such
date.
OCTOBER 31, 2001 PAGE 138
138
SEC 2001 FORM 10-K EXHIBIT 10-D-31
PERSONAL AND CONFIDENTIAL
October 31, 2001
Nancy Rowden Brock
Chief Financial Officer
Green Mountain Power Corporation
P.O. Box 850
South Burlington, VT 05402-0850
Dear Ms. Brock:
Green Mountain Power Corporation (the "Company") considers it essential to
the best interests of its shareholders to foster the continuous employment of
key management personnel. In addition, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change of control of the
Company may exist and the uncertainty and questions which it may raise among
management may result in the distraction or departure of management personnel to
the detriment of the Company and its shareholders.
The Board had determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of the possibility of a change in control of the Company. In this
connection, the Company had previously entered into a letter agreement with you
dated December 6, 1998 which was initially effective December 6 , 1998 through
December 31, 1998 (the "Agreement"). Commencing January 1, 1999 and each
January 1 thereafter, the Agreement is automatically extended for one additional
year unless, not later than September 30 of the preceding year, the Company
shall have given you notice that it did not wish to extend the Agreement.
The Agreement includes a provision allowing the Executive to terminate
employment for good reason if the Executive tenders his or her resignation
during the thirty days immediately following the first twelve months after a
Change of Control (as defined by the Agreement). Upon such resignation, the
Executive shall receive the benefits set forth in the Agreement.
A Change of Control occurs on the first to occur of the events described in
Section 4(i) of the Agreement. One such event is approval by the shareholders
of a merger or consolidation of the Company with any other corporation. Given
the possibility that shareholder approval could occur well in advance of an
actual merger (as a result of the necessity of obtaining regulatory approval or
otherwise), the Board has determined that it is in the best interests of the
Company and the Executive to amend the Agreement to instead provide that the
Executive may terminate employment for good reason during the thirty days
immediately following the first twelve months after the merger has taken place.
The Executive then has an opportunity to experience employment at the successor
corporation for twelve months before he or she must make the election permitted
under the Agreement.
In accordance with the provisions of Section 10 of the Agreement, Section
5(iii)(J) of the Agreement is hereby modified to provide good reason for
termination by the Executive as follows:
"your resignation, if tendered during the thirty days immediately following the
first twelve months after Change of Control, provided however, that, if the
Change in Control occurs pursuant to Section 4(i)(C), your resignation must be
tendered during the thirty days immediately following the first twelve months
after the date the Company merges or consolidates with the corporation approved
by the shareholders pursuant to Section 4(i)(C) of the Agreement."
Except as modified herein, all other terms of the Agreement shall remain in
full force and effect. This letter is submitted in duplicate. If it sets forth
our agreement on the subject matter hereof, kindly sign both copies and return
one copy to me. These letters will then constitute our agreement on this
subject.
By: /s/ Thomas P. Salmon
-----------------------
Thomas P. Salmon, Chairman
Board of Directors
Green Mountain Power Corporation
Agreed to this 31st day of October, 2001.
/s/ Nancy Rowden Brock
- -------------------------
Nancy Rowden Brock
Chief Financial Officer
Green Mountain Power Corporation
OCTOBER 31, 2001 PAGE 139
139
SEC 2001 FORM 10-K EXHIBIT 10-D-32
PERSONAL AND CONFIDENTIAL
October 31, 2001
Christopher L. Dutton
President & Chief Executive Officer
Green Mountain Power Corporation
P.O. Box 850
South Burlington, VT 05402-0850
Dear Mr. Dutton:
Green Mountain Power Corporation (the "Company") considers it essential to
the best interests of its shareholders to foster the continuous employment of
key management personnel. In addition, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change of control of the
Company may exist and the uncertainty and questions which it may raise among
management may result in the distraction or departure of management personnel to
the detriment of the Company and its shareholders.
The Board had determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of the possibility of a change in control of the Company. In this
connection, the Company had previously entered into a letter agreement with you
dated December 6, 1998 which was initially effective December 6 , 1998 through
December 31, 1998 (the "Agreement"). Commencing January 1, 1999 and each
January 1 thereafter, the Agreement is automatically extended for one additional
year unless, not later than September 30 of the preceding year, the Company
shall have given you notice that it did not wish to extend the Agreement.
The Agreement includes a provision allowing the Executive to terminate
employment for good reason if the Executive tenders his or her resignation
during the thirty days immediately following the first twelve months after a
Change of Control (as defined by the Agreement). Upon such resignation, the
Executive shall receive the benefits set forth in the Agreement.
A Change of Control occurs on the first to occur of the events described in
Section 4(i) of the Agreement. One such event is approval by the shareholders
of a merger or consolidation of the Company with any other corporation. Given
the possibility that shareholder approval could occur well in advance of an
actual merger (as a result of the necessity of obtaining regulatory approval or
otherwise), the Board has determined that it is in the best interests of the
Company and the Executive to amend the Agreement to instead provide that the
Executive may terminate employment for good reason during the thirty days
immediately following the first twelve months after the merger has taken place.
The Executive then has an opportunity to experience employment at the successor
corporation for twelve months before he or she must make the election permitted
under the Agreement.
In accordance with the provisions of Section 10 of the Agreement, Section
5(iii)(J) of the Agreement is hereby modified to provide good reason for
termination by the Executive as follows:
"your resignation, if tendered during the thirty days immediately following the
first twelve months after Change of Control, provided however, that, if the
Change in Control occurs pursuant to Section 4(i)(C), your resignation must be
tendered during the thirty days immediately following the first twelve months
after the date the Company merges or consolidates with the corporation approved
by the shareholders pursuant to Section 4(i)(C) of the Agreement."
Except as modified herein, all other terms of the Agreement shall remain in
full force and effect. This letter is submitted in duplicate. If it sets forth
our agreement on the subject matter hereof, kindly sign both copies and return
one copy to me. These letters will then constitute our agreement on this
subject.
By: /s/Thomas P. Salmon
---------------------
Thomas P. Salmon, Chairman
Board of Directors
Green Mountain Power Corporation
Agreed to this 31st day of October, 2001.
/s/ Christopher L. Dutton
- ----------------------------
Christopher L. Dutton
President and Chief Executive Officer
Green Mountain Power Corporation
OCTOBER 31, 2001 PAGE 142
142
SEC 2001 FORM 10-K EXHIBIT 10-D-33
PERSONAL AND CONFIDENTIAL
October 31, 2001
Robert J. Griffin
Controller
Green Mountain Power Corporation
P.O. Box 850
South Burlington, VT 05402-0850
Dear Mr. Griffin:
Green Mountain Power Corporation (the "Company") considers it essential to
the best interests of its shareholders to foster the continuous employment of
key management personnel. In addition, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change of control of the
Company may exist and the uncertainty and questions which it may raise among
management may result in the distraction or departure of management personnel to
the detriment of the Company and its shareholders.
The Board had determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of the possibility of a change in control of the Company. In this
connection, the Company had previously entered into a letter agreement with you
dated December 6, 1998 which was initially effective December 6 , 1998 through
December 31, 1998 (the "Agreement"). Commencing January 1, 1999 and each
January 1 thereafter, the Agreement is automatically extended for one additional
year unless, not later than September 30 of the preceding year, the Company
shall have given you notice that it did not wish to extend the Agreement.
The Agreement includes a provision allowing the Executive to terminate
employment for good reason if the Executive tenders his or her resignation
during the thirty days immediately following the first twelve months after a
Change of Control (as defined by the Agreement). Upon such resignation, the
Executive shall receive the benefits set forth in the Agreement.
A Change of Control occurs on the first to occur of the events described in
Section 4(i) of the Agreement. One such event is approval by the shareholders
of a merger or consolidation of the Company with any other corporation. Given
the possibility that shareholder approval could occur well in advance of an
actual merger (as a result of the necessity of obtaining regulatory approval or
otherwise), the Board has determined that it is in the best interests of the
Company and the Executive to amend the Agreement to instead provide that the
Executive may terminate employment for good reason during the thirty days
immediately following the first twelve months after the merger has taken place.
The Executive then has an opportunity to experience employment at the successor
corporation for twelve months before he or she must make the election permitted
under the Agreement.
In accordance with the provisions of Section 10 of the Agreement, Section
5(iii)(J) of the Agreement is hereby modified to provide good reason for
termination by the Executive as follows:
"your resignation, if tendered during the thirty days immediately following the
first twelve months after Change of Control, provided however, that, if the
Change in Control occurs pursuant to Section 4(i)(C), your resignation must be
tendered during the thirty days immediately following the first twelve months
after the date the Company merges or consolidates with the corporation approved
by the shareholders pursuant to Section 4(i)(C) of the Agreement."
Except as modified herein, all other terms of the Agreement shall remain in
full force and effect. This letter is submitted in duplicate. If it sets forth
our agreement on the subject matter hereof, kindly sign both copies and return
one copy to me. These letters will then constitute our agreement on this
subject.
By: /s/ Thomas P. Salmon
-----------------------
Thomas P. Salmon, Chairman
Board of Directors
Green Mountain Power Corporation
Agreed to this 31st day of October, 2001.
/s/ Robert J. Griffin
- ------------------------
Robert J. Griffin
Controller
Green Mountain Power Corporation
OCTOBER 31, 2001 PAGE 142
142
SEC 2001 FORM 10-K EXHIBIT 10-D-34
PERSONAL AND CONFIDENTIAL
October 31, 2001
Walter S. Oakes
VP - Field Operations
Green Mountain Power Corporation
P.O. Box 850
South Burlington, VT 05402-0850
Dear Mr. Oakes:
Green Mountain Power Corporation (the "Company") considers it essential to
the best interests of its shareholders to foster the continuous employment of
key management personnel. In addition, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change of control of the
Company may exist and the uncertainty and questions which it may raise among
management may result in the distraction or departure of management personnel to
the detriment of the Company and its shareholders.
The Board had determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of the possibility of a change in control of the Company. In this
connection, the Company had previously entered into a letter agreement with you
dated December 6, 1998 which was initially effective December 6 , 1998 through
December 31, 1998 (the "Agreement"). Commencing January 1, 1999 and each
January 1 thereafter, the Agreement is automatically extended for one additional
year unless, not later than September 30 of the preceding year, the Company
shall have given you notice that it did not wish to extend the Agreement.
The Agreement includes a provision allowing the Executive to terminate
employment for good reason if the Executive tenders his or her resignation
during the thirty days immediately following the first twelve months after a
Change of Control (as defined by the Agreement). Upon such resignation, the
Executive shall receive the benefits set forth in the Agreement.
A Change of Control occurs on the first to occur of the events described in
Section 4(i) of the Agreement. One such event is approval by the shareholders
of a merger or consolidation of the Company with any other corporation. Given
the possibility that shareholder approval could occur well in advance of an
actual merger (as a result of the necessity of obtaining regulatory approval or
otherwise), the Board has determined that it is in the best interests of the
Company and the Executive to amend the Agreement to instead provide that the
Executive may terminate employment for good reason during the thirty days
immediately following the first twelve months after the merger has taken place.
The Executive then has an opportunity to experience employment at the successor
corporation for twelve months before he or she must make the election permitted
under the Agreement.
In accordance with the provisions of Section 10 of the Agreement, Section
5(iii)(J) of the Agreement is hereby modified to provide good reason for
termination by the Executive as follows:
"your resignation, if tendered during the thirty days immediately following the
first twelve months after Change of Control, provided however, that, if the
Change in Control occurs pursuant to Section 4(i)(C), your resignation must be
tendered during the thirty days immediately following the first twelve months
after the date the Company merges or consolidates with the corporation approved
by the shareholders pursuant to Section 4(i)(C) of the Agreement."
Except as modified herein, all other terms of the Agreement shall remain in
full force and effect. This letter is submitted in duplicate. If it sets forth
our agreement on the subject matter hereof, kindly sign both copies and return
one copy to me. These letters will then constitute our agreement on this
subject.
By: /s/ Thomas P. Salmon
-----------------------
Thomas P. Salmon, Chairman
Board of Directors
Green Mountain Power Corporation
Agreed to this 31st day of October, 2001.
/s/ Walter S. Oakes
- ----------------------
Walter S. Oakes
VP - Field Operations
Green Mountain Power Corporation
OCTOBER 31, 2001 PAGE 146
146
SEC 2001 FORM 10-K EXHIBIT 10-D-35
PERSONAL AND CONFIDENTIAL
October 31, 2001
Mary G. Powell
Chief Operating Officer
Green Mountain Power Corporation
P.O. Box 850
South Burlington, VT 05402-0850
Dear Ms. Powell:
Green Mountain Power Corporation (the "Company") considers it essential to
the best interests of its shareholders to foster the continuous employment of
key management personnel. In addition, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change of control of the
Company may exist and the uncertainty and questions which it may raise among
management may result in the distraction or departure of management personnel to
the detriment of the Company and its shareholders.
The Board had determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of the possibility of a change in control of the Company. In this
connection, the Company had previously entered into a letter agreement with you
dated December 6, 1998 which was initially effective December 6 , 1998 through
December 31, 1998 (the "Agreement"). Commencing January 1, 1999 and each
January 1 thereafter, the Agreement is automatically extended for one additional
year unless, not later than September 30 of the preceding year, the Company
shall have given you notice that it did not wish to extend the Agreement.
The Agreement includes a provision allowing the Executive to terminate
employment for good reason if the Executive tenders his or her resignation
during the thirty days immediately following the first twelve months after a
Change of Control (as defined by the Agreement). Upon such resignation, the
Executive shall receive the benefits set forth in the Agreement.
A Change of Control occurs on the first to occur of the events described in
Section 4(i) of the Agreement. One such event is approval by the shareholders
of a merger or consolidation of the Company with any other corporation. Given
the possibility that shareholder approval could occur well in advance of an
actual merger (as a result of the necessity of obtaining regulatory approval or
otherwise), the Board has determined that it is in the best interests of the
Company and the Executive to amend the Agreement to instead provide that the
Executive may terminate employment for good reason during the thirty days
immediately following the first twelve months after the merger has taken place.
The Executive then has an opportunity to experience employment at the successor
corporation for twelve months before he or she must make the election permitted
under the Agreement.
In accordance with the provisions of Section 10 of the Agreement, Section
5(iii)(J) of the Agreement is hereby modified to provide good reason for
termination by the Executive as follows:
"your resignation, if tendered during the thirty days immediately following the
first twelve months after Change of Control, provided however, that, if the
Change in Control occurs pursuant to Section 4(i)(C), your resignation must be
tendered during the thirty days immediately following the first twelve months
after the date the Company merges or consolidates with the corporation approved
by the shareholders pursuant to Section 4(i)(C) of the Agreement."
Except as modified herein, all other terms of the Agreement shall remain in
full force and effect. This letter is submitted in duplicate. If it sets forth
our agreement on the subject matter hereof, kindly sign both copies and return
one copy to me. These letters will then constitute our agreement on this
subject.
By: /s/ Thomas P. Salmon
-----------------------
Thomas P. Salmon, Chairman
Board of Directors
Green Mountain Power Corporation
Agreed to this 31st day of October, 2001.
/s/ Mary G. Powell
- ---------------------
Mary G. Powell
Senior Vice President-Chief Operating Officer
Green Mountain Power Corporation
OCTOBER 31, 2001 PAGE 147
147
SEC 2001 FORM 10-K EXHIBIT 10-D-36
PERSONAL AND CONFIDENTIAL
October 31, 2001
Stephen C. Terry
Sr. VP - Corporate & Legal Affairs
Green Mountain Power Corporation
P.O. Box 850
South Burlington, VT 05402-0850
Dear Mr. Terry:
Green Mountain Power Corporation (the "Company") considers it essential to
the best interests of its shareholders to foster the continuous employment of
key management personnel. In addition, the Board of Directors of the Company
(the "Board") recognizes that the possibility of a change of control of the
Company may exist and the uncertainty and questions which it may raise among
management may result in the distraction or departure of management personnel to
the detriment of the Company and its shareholders.
The Board had determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company's
management, including yourself, to their assigned duties without distraction in
the face of the possibility of a change in control of the Company. In this
connection, the Company had previously entered into a letter agreement with you
dated December 6, 1998 which was initially effective December 6 , 1998 through
December 31, 1998 (the "Agreement"). Commencing January 1, 1999 and each
January 1 thereafter, the Agreement is automatically extended for one additional
year unless, not later than September 30 of the preceding year, the Company
shall have given you notice that it did not wish to extend the Agreement.
The Agreement includes a provision allowing the Executive to terminate
employment for good reason if the Executive tenders his or her resignation
during the thirty days immediately following the first twelve months after a
Change of Control (as defined by the Agreement). Upon such resignation, the
Executive shall receive the benefits set forth in the Agreement.
A Change of Control occurs on the first to occur of the events described in
Section 4(i) of the Agreement. One such event is approval by the shareholders
of a merger or consolidation of the Company with any other corporation. Given
the possibility that shareholder approval could occur well in advance of an
actual merger (as a result of the necessity of obtaining regulatory approval or
otherwise), the Board has determined that it is in the best interests of the
Company and the Executive to amend the Agreement to instead provide that the
Executive may terminate employment for good reason during the thirty days
immediately following the first twelve months after the merger has taken place.
The Executive then has an opportunity to experience employment at the successor
corporation for twelve months before he or she must make the election permitted
under the Agreement.
In accordance with the provisions of Section 10 of the Agreement, Section
5(iii)(J) of the Agreement is hereby modified to provide good reason for
termination by the Executive as follows:
"your resignation, if tendered during the thirty days immediately following the
first twelve months after Change of Control, provided however, that, if the
Change in Control occurs pursuant to Section 4(i)(C), your resignation must be
tendered during the thirty days immediately following the first twelve months
after the date the Company merges or consolidates with the corporation approved
by the shareholders pursuant to Section 4(i)(C) of the Agreement."
Except as modified herein, all other terms of the Agreement shall remain in
full force and effect. This letter is submitted in duplicate. If it sets forth
our agreement on the subject matter hereof, kindly sign both copies and return
one copy to me. These letters will then constitute our agreement on this
subject.
By: /s/ Thomas P. Salmon
-----------------------
Thomas P. Salmon, Chairman
Board of Directors
Green Mountain Power Corporation
Agreed to this 31st day of October, 2001.
/s/ Stephen C. Terry
- -----------------------
Stephen C. Terry
Sr. VP - Corporate & Legal Affairs
Green Mountain Power Corporation
SEC 2001 FORM 10-K EXHIBIT 23-A-1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports dated March 12, 2002 included in this Form 10-K into the company's
previously filed registration statements, File Nos. 333-38722, 333-39822 and
333-42356.
/s/ Arthur Andersen LLP
Boston, Massachusetts
March 19, 2002
EXHIBIT 24
POWER OF ATTORNEY
-----------------
We, the undersigned directors of Green Mountain Power Corporation, hereby
severally constitute Christopher L. Dutton, Mary G. Powell, and Robert J.
Griffin, and each of them singly, our true and lawful attorney with full power
of substitution, to sign for us and in our names in the capacities indicated
below, the Annual Report on Form 10-K of Green Mountain Power Corporation for
the fiscal year ended December 31, 2001, and generally to do all such things in
our name and behalf in our capacities as directors to enable Green Mountain
Power Corporation to comply with the provisions of the Securities Exchange Act
of 1934, as amended, all requirements of the Securities and Exchange Commission,
and all requirements of any other applicable law or regulation, hereby ratifying
and confirming our signatures as they may be signed by our said attorney, to
said Annual Report.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/Christopher L. Dutton President and Director March 12, 2002
- --------------------------
Christopher L. Dutton (Principal Executive
Officer)
/s/Thomas P. Salmon March 13, 2002
- ---------------------
Thomas P. Salmon Chairman of the Board
/s/Nordahl L. Brue March 12, 2002
- --------------------
Nordahl L. Brue Director
/s/William H. Bruett March 18, 2002
- ----------------------
William H. Bruett Director
/s/Merrill O. Burns March 13, 2002
- ---------------------
Merrill O. Burns Director
/s/Lorraine E. Chickering March 12, 2002
- ---------------------------
Lorraine E. Chickering Director
/s/John V. Cleary March 12, 2002
- -------------------
John V. Cleary Director
/s/David R. Coates March 15, 2002
- --------------------
David R. Coates Director
/s/Euclid A. Irving March 18, 2002
- ---------------------
Euclid A. Irving Director
149
EXHIBIT 99
March 19, 2002
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0408
Ladies and Gentlemen:
This letter is written pursuant to Temporary Note 3T to Article 3 of Regulation
S-X.
Green Mountain Power Corporation and subsidiaries has received a representation
letter from Arthur Andersen LLP ("Andersen") stating that the audit of the
consolidated balance sheets of Green Mountain Power Corporation and subsidiaries
as of December 31, 2001 and 2000, and the related consolidated statements of
income, retained earnings and cash flows for each of the three years in the
period ended December 31, 2001, was subject to Andersen's quality control system
for the U.S. accounting and auditing practice to provide reasonable assurance
that the engagement was conducted in compliance with professional standards,
that there was appropriate continuity of Andersen personnel working on the
audit, and availability of national office consultation. Availability of
personnel at foreign affiliates of Arthur Andersen was not relevant to this
audit.
Very truly yours,
/s/ ROBERT J. GRIFFIN
-------------------
Robert J. Griffin
Treasurer and Controller
Green Mountain Power Corporation and subsidiaries
82
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
GREEN MOUNTAIN POWER CORPORATION
By: _/s/ Christopher L. Dutton______
-----------------------------------
Christopher L. Dutton, President
and Chief Executive Officer
Date: March 20, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------- ---------------- --------
/s/ Christopher L. Dutton_ President, Chief Executive March 20, 2002
- ---------------------------
Christopher L. Dutton Officer, and Director
/s/ Mary G. Powell_______ Chief Operating Officer, March 20, 2002
- ---------------------------
Mary G. Powell Senior Vice President
/s/ Robert J. Griffin Controller, Treasurer March 20, 2002
- -------------------------
Robert J. Griffin (Principal Accounting Officer)
*Thomas P. Salmon Chairman of the Board
*Nordahl L. Brue )
*William H. Bruett )
*Merrill O. Burns )
*David R. Coates )
*Lorraine E. Chickering )
*John V. Cleary )
Directors
*Euclid A. Irving )
*By: _/s/ Christopher L. Dutton March 20, 2002
--------------------------
Christopher L. Dutton
(Attorney - in - Fact)