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[BAYCORP LOGO]

1997
ANNUAL REPORT
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 1-12527

BAYCORP HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)



DELAWARE 02-0488443
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
COCHECO FALLS MILLWORKS, 100 MAIN STREET, SUITE
201
DOVER, NEW HAMPSHIRE 03820-3835
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)


REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 742-3388

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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS)

AMERICAN STOCK EXCHANGE
(NAME OF EACH EXCHANGE ON WHICH REGISTERED)

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 ___

Indicate by check mark if disclosure of delinquent filers to Item 405 of
Regulations 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. [ ]

As of March 9, 1998, the approximate aggregate market value of the voting
stock held by non-affiliates of the registrant was $23,152,610 based on the last
reported sale price of the registrant's Common Stock on the American Stock
Exchange as of the close of business on March 9, 1998. There were 8,262,748
shares of Common Stock outstanding as of March 9, 1998.

DOCUMENTS INCORPORATED BY REFERENCE



PART OF FORM 10-K
DOCUMENT INTO WHICH INCORPORATED
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Portions of the Registrant's Proxy Statement Items 10, 11, 12 & 13
for the 1998 Annual Meeting of Shareholders of Part III


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PART I

ITEM 1. BUSINESS.

INTRODUCTION

BayCorp Holdings, Ltd. ("BayCorp" or the "Company") serves as a holding
company for Great Bay Power Corporation ("Great Bay"). Great Bay is an electric
generating company whose principal asset is a 12.1% joint ownership interest in
the Seabrook Nuclear Power Project in Seabrook, New Hampshire (the "Seabrook
Project"). Great Bay is an exempt wholesale generator ("EWG") under the Public
Utility Holding Company Act of 1935 ("PUHCA"). Unlike regulated public
utilities, Great Bay has no franchise area or captive customers. Great Bay sells
its power in the competitive wholesale power markets.

Great Bay became a wholly-owned subsidiary of BayCorp in a corporate
reorganization that involved a merger of a newly-formed wholly-owned subsidiary
of BayCorp with and into Great Bay on January 24, 1997. The consolidated assets
and liabilities of Great Bay and its subsidiaries immediately before the
reorganization were the same as the consolidated assets and liabilities of
BayCorp and its subsidiaries immediately after the reorganization. Currently,
Great Bay is the sole subsidiary of BayCorp. BayCorp's principal asset is its
100% equity interest in Great Bay. The new corporate structure enables BayCorp,
either directly or through subsidiaries other than Great Bay, to engage in
businesses that Great Bay would be prohibited from pursuing due to its status as
an EWG under the PUHCA. BayCorp may in the future enter into new businesses or
acquire existing businesses, both in energy related fields and possibly in
unrelated fields.

BayCorp was incorporated in Delaware in 1996. Great Bay was incorporated in
New Hampshire in 1986 and was formerly known as EUA Power Corporation. Great Bay
sells its share of the electricity output of the Seabrook Project in the
wholesale electricity market, primarily in the Northeast United States. Neither
BayCorp nor Great Bay has operational responsibilities for the Seabrook Project.
Great Bay's share of the Seabrook Project capacity is approximately 140
megawatts ("MW"). Great Bay currently sells all but 10 MW of its share of the
Seabrook Project capacity in the wholesale short-term market.

Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for the
District of New Hampshire on February 28, 1991. It conducted its business as a
Debtor in Possession until November 23, 1994, at which time it emerged from
Chapter 11.

THE SEABROOK PROJECT

The Seabrook Project is located on an 896-acre site in Seabrook, New
Hampshire. It is owned by Great Bay and ten other utility companies, consisting
of North Atlantic Energy Company, Connecticut Light and Power, The United
Illuminating Company, Canal Electric Company, Massachusetts Municipal Wholesale
Electric Company, Montaup Electric Company, New England Power Company, New
Hampshire Electric Cooperative, Inc., Taunton Municipal Lighting Plant and
Hudson Light & Power Department (together with Great Bay, the "Participants").

Seabrook Unit 1 is a 1,150-MW nuclear-fueled steam electricity generating
station. It employs a four loop, pressurized water reactor and support auxiliary
systems designed by the Westinghouse Electric Company. The reactor is housed in
a steel-lined reinforced concrete containment structure and a concrete
containment enclosure structure. Reactor cooling water is obtained from the
Atlantic Ocean through a 17,000-foot-long intake tunnel and returned through a
16,500-foot-long discharge tunnel. The station has a remaining expected service
life of 28 years. Seabrook Unit 1 transmits its generated power to the New
England 345 kilovolt transmission grid, a major network of interconnecting lines
covering New England, through three separate transmission lines emanating from
the station. On March 15, 1990, the Participants received from the Nuclear
Regulatory Commission (the "NRC") a full power operating license which
authorizes operation of Seabrook Unit 1 until October 2026. Commercial operation
of Seabrook Unit 1 commenced on August 19, 1990. Management believes that
Seabrook Unit 1 is in good condition.
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Since the Seabrook Project was originally designed to consist of two
generating units, Great Bay also owns a 12.1% joint ownership interest in
Seabrook Unit 2. Great Bay assigns no value to Seabrook Unit 2 because on
November 6, 1986, the joint owners of the Seabrook Project voted to dispose of
Unit 2. Certain assets of Seabrook Unit 2 have been and are being sold from time
to time to third parties. On July 22, 1996, the Participants completed the sale
of four unused steam generators from Seabrook Unit 2. Great Bay received
$7,036,792 in cash from the proceeds of this sale on July 19, 1996. Great Bay
had previously written off its investment in Unit 2 and recognized a gain from
this sale in the third quarter of 1996. There were no material sales of Unit 2
assets in 1997.

The Participants are considering additional plans regarding disposition of
Seabrook Unit 2, but such plans have not yet been finalized and approved. Great
Bay is unable to estimate the costs for which it will be responsible in
connection with the disposition of Seabrook Unit 2. Because Seabrook Unit 2 was
never completed or operated, costs associated with its disposition will not
include any amounts for decommissioning. Great Bay currently pays its share of
monthly expenses required to preserve and protect the value of the Seabrook Unit
2 components.

JOINT OWNERSHIP OF SEABROOK

Great Bay and the other Participants are parties to the Agreement for Joint
Ownership, Construction and Operation of New Hampshire Nuclear Units (the
"JOA"), which establishes the respective ownership interests of the Participants
in the Seabrook Project and defines their responsibilities with respect to the
ongoing operation, maintenance and decommissioning of the Seabrook Project. In
general, all ongoing costs of the Seabrook Project, other than taxes, are
divided proportionately among the Participants in accordance with their
ownership interests in the Seabrook Project. Each Participant is only liable for
its share of the Seabrook Project's costs and not liable for any other
Participant's share. Great Bay's joint ownership interest of 12.1% is the third
largest interest among the Participants, exceeded only by the approximately 40%
interest held by Northeast Utilities and its affiliates and the 17.5% interest
held by The United Illuminating Company.

A Participant may sell any portion of its ownership interest to any entity
that is engaged in the electric utility business in New England. Before such
sale, however, such selling Participant must give certain other Participants the
right of first refusal to purchase the interest on the same terms. Any
Participant may transfer, free from the foregoing right of first refusal, any
portion of its interest (a) to a wholly-owned subsidiary, (b) to another company
in the same holding company system or a construction trust for the benefit of
the transferor or another company in the same holding company system, or (c) in
connection with a merger, consolidation or acquisition of substantially all of
the properties or all of the generating facilities of a Participant.

The failure to make monthly payments under the JOA by owners of the
Seabrook Project other than Great Bay may have a material effect on Great Bay by
requiring Great Bay to pay a greater proportion of the Seabrook Unit 1 and
Seabrook Unit 2 expenses in order to preserve the value of its share of the
Seabrook Project. In the past, certain of the owners of the Seabrook Project
other than Great Bay have not made their full respective payments. At the
current time, the electric utility industry is undergoing significant changes as
competition and deregulation are introduced into the marketplace. Some
utilities, including certain Participants, have indicated in state regulatory
proceedings that they may be forced to seek bankruptcy protection if regulators,
as part of the industry restructuring, do not allow for full recovery of
stranded costs. If a Participant other than Great Bay filed for bankruptcy, and
that Participant was unable to pay its share of Seabrook Project expenses, Great
Bay might be required to pay a greater portion of Seabrook Project expenses. In
the past, the filing of bankruptcy by a Participant has not resulted in a
failure to pay Seabrook Project expenses or an increase in the percentage of
expenses paid by other Participants.

On February 28, 1997, the New Hampshire Public Utilities Commission
("NHPUC") issued an order requiring stranded cost recovery to be based on the
average market price of electricity in New England, rather than cost-based rate
making methods that are more favorable to certain Participants. On March 10,
1997, one of the Participants, Northeast Utilities (along with three of its
subsidiaries), received a temporary restraining order from the U.S. District
Court for the District of Rhode Island. This temporary restraining order stayed
the NHPUC's February 28, 1997 order to the extent that the order established a
rate methodology that is not

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designed to recover the cost of providing service and would require Northeast
Utilities and certain of its affiliates to write-off any regulatory assets. If
this stay or a similar court action does not remain in effect, the NHPUC's
methodology could require Northeast Utilities and certain of its affiliates to
remove certain regulatory assets from their respective balance sheets. According
to Northeast Utilities, the amount of that potential write-off is currently
estimated at over $400 million, after taxes.

The JOA provides for a Managing Agent to carry out the daily operational
and management responsibilities of the Seabrook Project. The current Managing
Agent, appointed by certain of the Participants on June 29, 1992, is North
Atlantic Energy Service Corporation ("NAESCO"), a wholly-owned subsidiary of
Northeast Utilities. Northeast Utilities, in conjunction with certain of its
affiliates, holds the largest joint ownership interest, as described above.
Certain material decisions regarding the Seabrook Project are made by an
Executive Committee consisting of the chief executive officers of certain of the
Participants or their designees. There are currently five members of the
Executive Committee. The Executive Committee acts by a majority vote of its
members, although any action of the Executive Committee may be modified by vote
of 51% of the ownership interests. Great Bay does not have a representative on
the Executive Committee, but does have a representative on the Audit Committee,
Budget Committee and Non-Operating Participants Committee related to the
Seabrook Project. John A. Tillinghast, the Company's President and Chief
Executive Officer, is currently Chairman of the Non-Operating Participants
Committee. Under the JOA, the managing agent of the Seabrook Project may be
removed and a new managing agent appointed by a 51% interest of the
Participants.

RECENT DEVELOPMENTS

On January 24, 1997, Great Bay completed the formation of a holding company
structure for Great Bay. As a result of the restructuring, Great Bay became a
wholly-owned subsidiary of BayCorp. Shareholders of Great Bay received one share
of BayCorp common stock for each share of Great Bay common stock that they
owned. In connection with the restructuring, Great Bay common stock ceased to be
quoted on the Nasdaq National Market and the new BayCorp common stock was listed
for trading on the American Stock Exchange under the symbol "MWH" on January 28,
1997.

On January 27, 1997, the NRC issued to Great Bay a temporary exemption from
the obligation of Great Bay to comply with the NRC's regulations applicable to a
non "electric utility" owner of an interest in a nuclear power plant. The NRC
staff stated in the exemption that it believed that Great Bay does not currently
satisfy the NRC definition of "electric utility." If Great Bay is an "electric
utility," then Great Bay may satisfy the NRC decommissioning requirements
through its monthly payments into a decommissioning trust fund. See
"-- Decommissioning." If Great Bay is not an "electric utility," the NRC could
require that Great Bay provide a surety bond or other allowable funding
assurance mechanism.

The temporary exemption granted Great Bay six months to establish itself as
an "electric utility" or obtain a surety bond or other allowable decommissioning
funding mechanism. In February 1997, Great Bay requested that the NRC reconsider
the staff's finding that Great Bay does not meet the NRC definition of "electric
utility." Great Bay also requested that the NRC consider granting an extension
to the temporary exemption as an alternative to making a final determination at
that time as to whether Great Bay is an "electric utility" under the NRC
definition.

On July 23, 1997, the NRC staff reaffirmed its finding that Great Bay is
not an "electric utility" and issued a one-year exemption to Great Bay from the
obligation of Great Bay to comply with the NRC's regulations applicable to a non
"electric utility" owner of an interest in a nuclear power plant. The exemption
gives Great Bay until the earlier of July 23, 1998 or 90 days following the
effective date of any revisions to the NRC's regulations regarding the NRC's
definition of "electric utility" to obtain a surety bond or other allowable
decommissioning funding assurance mechanism for Great Bay's decommissioning
liability related to its ownership in Seabrook.

On September 10, 1997, the NRC issued a proposed rule that would amend the
definition of "electric utility." The Company believes that Great Bay would not
be an "electric utility" under the proposed new definition. The NRC requested
and received comments in November 1997 on the proposed rule, but has not

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issued a final rule or amendments to the proposed rule. The Company cannot
predict when or if a revision to the NRC's definition of "electric utility" will
become effective or what form it could take.

On January 23, 1998, Great Bay filed with the NRC a six-month status report
on Great Bay's efforts to obtain a surety bond or other allowable
decommissioning funding assurance mechanism. After an exhaustive survey of the
insurance market, Great Bay notified the NRC that no such surety or insurance
product is currently available on financially reasonable terms.

On January 30, 1998, Great Bay filed a petition with the NRC seeking a
determination by the NRC that acceleration of decommissioning trust fund
payments provides reasonable assurance of decommissioning funding under NRC
regulations, or, in the alternative, merits the issuance by the NRC of a
permanent exemption to Great Bay. In its petition, Great Bay proposes to
contribute sufficient funds by the year 2015 to allow sufficient monies to
accumulate, with no further payments by Great Bay to the fund after 2015, to the
full estimated amount of Great Bay's decommissioning obligation by the time the
current Seabrook operating license expires in 2026.

The Company cannot predict whether Great Bay's accelerated funding proposal
will be acceptable to the NRC or whether the NRC will grant a permanent
exemption to Great Bay. Failure to obtain relief may have a material adverse
effect on Great Bay's business, financial condition, liquidity or results of
operation.

BANKRUPTCY PROCEEDINGS AND REORGANIZATION

Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of New Hampshire (the "Bankruptcy Court") on
February 28, 1991. Great Bay conducted its business as a Debtor in Possession
until November 23, 1994, at which time Great Bay's Amended Bankruptcy Plan
became effective and Great Bay emerged from Chapter 11. Financing for the
Amended Bankruptcy Plan was provided by affiliates of Omega Advisors, Inc. and
by Elliot Associates, L.P. (collectively, the "Investors"). At the time Great
Bay emerged from Chapter 11, the Investors purchased 4,800,000 shares of Great
Bay's Common Stock for $35,000,000.

CURRENT BUSINESS

BayCorp's principal asset is its 100% equity interest in Great Bay. The
business of Great Bay consists of the management of its joint ownership interest
in the Seabrook Project and the sale in the wholesale power market of its share
of electricity produced by the Seabrook Project. Great Bay does not have
operational responsibility for the Seabrook Project. To date, Great Bay has
entered into one long-term power contract for approximately 10 MW of Great Bay's
share of the Seabrook Project capacity. See "-- Purchased Power Agreements."
Great Bay's business strategy is to seek purchasers, either in the short-term
market or pursuant to medium or long-term contracts, for its share of the
Seabrook Project electricity output at prices in excess of the prices currently
available in the short-term market because sales at current short-term prices
result in revenues that are less than Great Bay's cash requirements for
operations, maintenance and capital expenditures.

As a result of Great Bay's reorganization into a holding company structure
on January 24, 1997, BayCorp may engage in business activities, either directly
or through subsidiaries other than Great Bay, that Great Bay would be prohibited
from pursuing due to its status as an EWG under PUHCA. BayCorp may in the future
enter into new businesses or acquire existing businesses, both in energy related
fields and possibly in unrelated fields.

MARKETING

Great Bay and PECO Energy Company ("PECO") entered into a Services
Agreement as of November 3, 1995 (the "PECO Services Agreement"), pursuant to
which PECO was appointed as Great Bay's exclusive agent to market and sell Great
Bay's uncommitted portion of electricity generated by the Seabrook Project.
Proceeds from the sale of Great Bay's electricity together with reservation fees
payable by PECO to

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Great Bay were shared between Great Bay and PECO in accordance with formulas set
forth in the PECO Services Agreement. In addition, PECO committed, under certain
circumstances, to provide back-up power during periods in which power was
partially or totally unavailable from the Seabrook Project. The PECO Services
Agreement became effective on December 31, 1995 and had initially provided for a
term of two years.

At the time that Great Bay entered into the PECO Services Agreement, Great
Bay entered into a Warrant Purchase Agreement (the "PECO Warrant Purchase
Agreement") pursuant to which, on February 15, 1996, PECO purchased a warrant
from Great Bay for $1,000,000. This warrant entitled PECO to purchase 4.99% of
the total shares outstanding, at that time, of the Company's Common Stock for
approximately $4.1 million.

On September 30, 1996, PECO exercised its warrant and purchased 417,800
shares, or 4.99% at that time, of Great Bay's Common Stock at a price of $9.75
per share. As a result of the exercise of the warrant by PECO, the PECO Services
Agreement was automatically extended through December 31, 1998. In addition, the
parties agreed to extend the PECO Services Agreement for an additional year
through December 31, 1999. Under the terms of the warrant, the $1,000,000
received for the purchase of the warrant was credited towards the purchase price
for the newly issued shares. Thus, Great Bay received an additional $3.1 million
as a result of PECO's exercise of the warrant.

On February 12, 1998, Great Bay sent a letter to PECO informing PECO that
Great Bay had terminated PECO as Great Bay's exclusive marketing agent. On
February 24, 1998, Great Bay filed suit against PECO in the United States
District Court for the District of New Hampshire seeking a declaratory judgment
that Great Bay properly terminated the PECO Services Agreement and seeking
damages arising out of PECO's breach of the PECO Services Agreement. On March
10, 1998, PECO filed a motion seeking to prevent Great Bay from terminating the
PECO Services Agreement. At that time, PECO also filed counterclaims seeking
damages for alleged breach of contract and alleged loss of good will and harm to
PECO's reputation. See "Legal Proceedings."

As of March 1, 1998, Great Bay assumed all marketing responsibilities from
PECO. Great Bay expects there will be no interruption in its ability to market
its power in the New England region.

Great Bay currently sells most of its power to utility companies located in
the Northeast United States in the short-term wholesale power market. Great Bay
is currently not dependent on any single customer because many utilities and
marketers are willing to buy Great Bay's share of electricity from the Seabrook
Project at substantially the same price. Prices in the short-term market are
typically higher during the summer and winter because the demand for electrical
power is higher during these periods in the Northeast United States. Sales of
power to UNITIL Power Corporation ("UNITIL Power"), Northeast Utilities and
Connecticut Municipal Electric Energy Corp. each accounted for more than 10% of
Great Bay's revenues during 1997. See "Power Purchase Agreements."

PURCHASED POWER AGREEMENTS

Great Bay is party to a purchased power agreement, dated as of April 1,
1993 (the "UNITIL Purchased Power Agreement"), with UNITIL Power that provides
for Great Bay to sell to UNITIL Power approximately 10 MW of power. The UNITIL
Purchased Power Agreement commenced on May 1, 1993 and runs through October 31,
2010. The current price of power under the UNITIL Purchased Power Agreement is
5.18 cents per kilowatt-hour ("kWh"). In May 1998 and annually thereafter, the
price is subject to increase in accordance with a formula that provides for
adjustments at less than the actual rate of inflation. UNITIL Power has an
option to extend the UNITIL Purchased Power Agreement for an additional 12 years
until 2022.

The UNITIL Purchased Power Agreement is front-end loaded whereby UNITIL
Power pays higher prices, on an inflation adjusted basis, in the early years of
the Agreement and lower prices in later years. The amount of the excess paid by
UNITIL Power in the early years of the UNITIL Purchased Power Agreement is
quantified in a "Balance Account" which increases annually to $4.1 million in
July 1998, then decreases annually, reaching zero in July 2001. If the UNITIL
Purchased Power Agreement terminates prior to its

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scheduled termination, and if at that time there is a positive amount in the
Balance Account, Great Bay is obligated to refund that amount to UNITIL Power.

To secure the obligations of Great Bay under the UNITIL Purchased Power
Agreement, including the obligation to repay UNITIL Power the amount in the
Balance Account, the UNITIL Purchased Power Agreement grants UNITIL Power a
mortgage on Great Bay's interest in the Seabrook Project. This mortgage may be
subordinated to first mortgage financing of up to a maximum amount of
$80,000,000. The UNITIL Purchased Power Agreement further provides that UNITIL
Power's mortgage will rank pari passu with other mortgages that may hereafter be
granted by Great Bay to other purchasers of power from Great Bay to secure
similar obligations, provided that (i) the maximum amount of indebtedness
secured by the first mortgage on the Seabrook Interest may not exceed
$80,000,000, and (ii) the combined total of all second mortgages on the Seabrook
Interest may not exceed the sum of (a) $80,000,000 less the total amount of
Great Bay's debt then outstanding which is secured by a first mortgage plus (b)
$57,000,000.

Great Bay is also party to a Purchased Power Agreement, dated November 9,
1995 (the "Bangor Purchased Power Agreement"), with Bangor Hydro-Electric
Company ("Bangor Hydro") pursuant to which Bangor Hydro agreed to purchase from
Great Bay, subject to increase or reduction under certain circumstances, 10 MW
of electricity during the months of January through March 1996 and for the
months of November 1996 through March 1997 and November 1997 through March 1998.
Pursuant to the Bangor Purchased Power Agreement, Great Bay also granted to
Bangor Hydro an extension option to purchase from Great Bay, under certain
circumstances, up to 10 MW of electricity for the months of November 1998
through March 1999 and November 1999 through March 2000. This option must be
exercised by October 22, 1998.

During the year ended December 31, 1997, sales by Great Bay to Northeast
Utilities, UNITIL Power and Connecticut Municipal Electric Energy Corp.
accounted for 50%, 13% and 11%, respectively, of total operating revenues. See
Note 1J of Notes to the Financial Statements.

COMPETITION

Great Bay sells its share of Seabrook electricity into the wholesale
electricity market in the Northeast United States. There are a large number of
suppliers to this market and a surplus of capacity, resulting in intense
competition. A primary source of competition comes from traditional utilities,
many of which presently have excess capacity. In addition, non-utility wholesale
generators of electricity, such as independent power producers ("IPPs"),
Qualifying Facilities ("QFs") and EWGs, as well as power marketers and brokers,
actively sell electricity in this market.

Great Bay may face increased competition, primarily based on price, from
all the foregoing sources in the future. Great Bay believes that it will be able
to compete effectively in the wholesale electricity market because of the
current low cost of electricity generated by the Seabrook Project in comparison
with existing alternative sources and the reduction of Great Bay's capital costs
resulting from the implementation of the Chapter 11 reorganization plan.

NEPOOL

Great Bay is a party to the New England Power Pool ("NEPOOL") Agreement
(the "NEPOOL Agreement") and is a member of NEPOOL. NEPOOL is open to all
investor-owned, municipal and cooperative electric utilities in New England that
are connected to the New England power grid. Effective November 13, 1995, the
NEPOOL Agreement was amended to permit broader membership and participation in
NEPOOL by power marketers and other non-utilities that transact business in the
bulk power market in New England. The NEPOOL Agreement provides for coordinated
planning of future facilities as well as the operation of nearly all of existing
generating capacity in New England and of related transmission facilities as if
they were one system. The NEPOOL Agreement imposes on its participants
obligations concerning generating capacity reserves and the right to use major
transmission lines. On occasions when one or more transmission lines are out of
service, the quantity of power being produced by then operating generation
plants may exceed the quantity of power that can be carried safely by the
transmission system. In such instances, one

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or more generation plants may be taken off-line by NEPOOL. To date, the Seabrook
Project has not been taken off-line in these instances. Great Bay believes that
it is unlikely that the Seabrook Project would be taken off-line in such
instances because NEPOOL prefers to take off-line non-nuclear plants, which are
less complex and less difficult to schedule than nuclear units.

The NEPOOL Agreement also provides for central dispatch of the generating
capacity of NEPOOL members with the objective of achieving economical use of the
region's facilities. Pursuant to the NEPOOL Agreement, interchange sales
(purchases from or sales to the pool by a NEPOOL member) are made at prices
approximately equal to the fuel cost for generation without contribution to the
support of fixed charges, if NEPOOL has the right to schedule delivery of the
power. On rare occasions, unscheduled power is delivered, or "dumped", to the
pool, for which no payment is made by NEPOOL. Great Bay does not expect to
"dump" power to NEPOOL. NEPOOL members also jointly schedule generation plant
maintenance to avoid capacity shortages in the NEPOOL area. The number of
generation plants undergoing maintenance at any time affects the cost of
replacement power in the market. Thus, Great Bay's operating revenues and costs
are affected to some extent by the operations of other members.

On December 31, 1996, NEPOOL filed a restructuring plan with the Federal
Energy Regulatory Commission ("FERC"), including amendments to the NEPOOL
Agreement and an open access transmission tariff. The filing was intended not
only to comply with the FERC's open access for tight pools as set forth in FERC
Order No. 888, but also to (1) transfer the region's transmission grid and
generation operation to an independent system operator, (2) provide for a
competitive generation market through a combination of bilateral trading and the
formation of a regional power exchange and (3) qualify NEPOOL as a regional
transmission group. These changes are being implemented in stages that began in
mid-1997.

NUCLEAR POWER, ENERGY AND UTILITY REGULATION

The Seabrook Project and Great Bay, as part owner of a licensed nuclear
facility, are subject to the broad jurisdiction of the NRC, which is empowered
to authorize the siting, construction and operation of nuclear reactors after
consideration of public health and safety, environmental and antitrust matters.
Great Bay has been, and will be, affected to the extent of its proportionate
share by the cost of any such requirements made applicable to Seabrook Unit 1.

Great Bay is also subject to the jurisdiction of the FERC under Parts II
and III of the Federal Power Act and, as a result, is required to file with FERC
all contracts for the sale of electricity. FERC has the authority to suspend the
rates at which Great Bay proposes to sell power, to allow such rates to go into
effect subject to refund and to modify a proposed or existing rate if FERC
determines that such rate is not "just and reasonable." FERC's jurisdiction also
includes, among other things, the sale, lease, merger, consolidation or other
disposition of facilities, interconnection of certain facilities, accounts,
service and property records.

Because it is an EWG, Great Bay is not subject to the jurisdiction of the
Securities and Exchange Commission ("SEC") under PUHCA. In order to maintain its
EWG status, Great Bay must continue to engage exclusively in the business of
owning and/or operating all or part of one or more "eligible facilities" and to
sell electricity only at wholesale (i.e. not to end users) and activities
incidental thereto. An "eligible facility" is a facility used for the generation
of electric energy exclusively at wholesale or used for the generation of
electric energy and leased to one or more public utility companies. The term
"facility" may include a portion of a facility. In the case of Great Bay, its
12.1% joint ownership interest in the Seabrook Project comprises an "eligible
facility."

Great Bay is subject to regulation by the NHPUC in many respects including
the issuance of securities, the issuance of debt, contracts with affiliates,
forms of accounts, transfers of utility properties, mortgaging of utility
property and other matters. The NHPUC does not regulate rates charged for sales
of electricity at wholesale.

The NHPUC and the regulatory authorities with jurisdiction over utilities
in New Hampshire and state legislatures of several other states in which Great
Bay sells electricity are considering or have implemented initiatives relating
to the deregulation of the electric utility industry. Simultaneously with the
deregulation

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initiatives occurring in each of the New England states, NEPOOL is restructuring
to create and maintain open, non-discriminatory, competitive, unbundled markets
for energy, capacity, and ancillary services. NEPOOL's restructuring is designed
to function efficiently in a changing electric power industry and to permit
regional transmission at rates that do not vary with distance. All of the
deregulation initiatives open electricity markets to competition in the affected
states. While Great Bay believes it is a low-cost producer of electricity and
will benefit from the deregulation of the electric industry, it is not possible
to predict the impact of these various initiatives on Great Bay.

NUCLEAR POWER ISSUES

Nuclear units in the United States have been subject to widespread
criticism and opposition, which has led to construction delays, cost overruns,
licensing delays and other difficulties. Various groups have sought to prohibit
the completion and operation of nuclear units and the disposal of nuclear waste
by litigation, legislation and participation in administrative proceedings. The
Seabrook Project was the subject of significant public controversy during its
construction and licensing and remains controversial. An increase in public
concerns regarding the Seabrook Project or nuclear power in general could
adversely affect the operating license of Seabrook Unit 1. While the Company
cannot predict the ultimate effect of such controversy, it is possible that it
could result in a premature shutdown of the unit.

In the event of a permanent shutdown of any unit, NRC regulations require
that the unit be completely decontaminated of any residual radioactivity. While
the owners of the Seabrook Project are accumulating a trust fund to pay
decommissioning costs, if these costs exceed the amount of the trust fund, the
owners, including Great Bay, will be liable for the excess.

NUCLEAR RELATED INSURANCE

In accordance with the Price Anderson Act, the limit of liability for a
nuclear-related accident is approximately $8.9 billion, effective November 18,
1994. The primary layer of insurance for this liability is $200 million of
coverage provided by the commercial insurance market. The secondary coverage is
approximately $8.3 billion, based on the approximately 110 currently licensed
reactors in the United States. The secondary layer is based on a retrospective
premium assessment of $75.5 million per nuclear accident per licensed reactor,
payable at a rate not exceeding $10 million per year per reactor. In addition,
the retrospective premium is subject to inflation based indexing at five-year
intervals and, if the sum of all public liability claims and legal costs arising
from any nuclear accident exceeds the maximum amount of financial protection
available, then each licensee can be assessed an additional 5% ($3.965 million)
of the maximum retrospective assessment. With respect to the Seabrook Project,
Great Bay would be obligated to pay its ownership share of any assessment
resulting from a nuclear incident at any United States nuclear generating
facility. Great Bay estimates its maximum liability per nuclear accident
currently would be an aggregate amount of approximately $9.59 million per
accident, with a maximum annual assessment of about $1.21 million per incident,
per year.

In addition to the insurance required by the Price Anderson Act, the NRC
regulations require licensees, including the Seabrook Project, to carry all risk
nuclear property damage insurance in the amount of at least $1.06 billion, which
amount must be dedicated, in the event of an accident at the reactor, to the
stabilization and decontamination of the reactor to prevent significant risk to
the public health and safety.

Great Bay also independently purchases business interruption insurance from
Nuclear Electric Insurance Limited ("NEIL"). The current policy is in effect
from September 15, 1997 until September 15, 1998 and provides for the payment of
a fixed weekly loss amount of $520,000 in the event of an outage at the Seabrook
Project of more than 23 weeks resulting from the property damage occurring from
a "sudden fortuitous event, which happens by chance, is unexpected and
unforeseeable." The maximum amount payable to Great Bay is $70.3 million. Under
the terms of the policy, Great Bay is subject to a potential retrospective
premium adjustment of up to approximately $640,000 should NEIL's board of
directors deem that additional funds are necessary to preserve the financial
integrity of NEIL. Since NEIL was founded in 1980, there has been no
retrospective premium adjustment; however, there can be no assurance that NEIL
will not make retrospective

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adjustments in the future. The liability for this retrospective premium
adjustment ceases six years after the end of the policy unless prior demand has
been made.

NUCLEAR FUEL

The Seabrook Project's joint owners have made, or expect to make, various
arrangements for the acquisition of uranium concentrate, the conversion,
enrichment, fabrication and utilization of nuclear fuel and the disposition of
that fuel after use. Many of these arrangements are pursuant to multi-year
contracts with concentrate and service providers. Based on the Seabrook
Project's existing contractual arrangements, Great Bay believes that the
Seabrook Project has available, or under supply contracts, sufficient nuclear
fuel for operations through approximately 2000. The Seabrook plant management
has scheduled the next refueling outage for March 1999. Uranium concentrate and
conversion, enrichment and fabrication services currently are available form a
variety of sources. The cost of such concentrate and such services varies based
upon market forces.

NUCLEAR WASTE DISPOSAL

Costs associated with nuclear plant operations include amounts for disposal
of nuclear wastes, including spent fuel, as well as for the ultimate
decommissioning of the plants. Under the Nuclear Waste Policy Act of 1982 (the
"NWPA"), the United States Department of Energy (the "DOE") is required (subject
to various contingencies) to design, license, construct and operate a permanent
repository for high level radioactive wastes and spent nuclear fuel and
establish prescribed fees for the disposal of such waste and fuel. The NWPA
specifies that the DOE provide for the disposal of such waste and spent nuclear
fuel starting in January 1998.

The owners of the Seabrook Project, through its managing agent NAESCO, have
entered into contracts with the DOE for disposal of spent nuclear fuel in
accordance with the NWPA. In return for payment of the prescribed fees, the
federal government was required to take title to and dispose of the Seabrook
Project's high level wastes and spent nuclear fuel beginning no later than
January 1998. However, the DOE has announced that its first high level waste
repository will not be in operation earlier than 2010, notwithstanding the DOE's
statutory and contractual responsibility to begin disposal of high-level
radioactive waste and spent fuel, beginning not later than January 31, 1998.

On November 14, 1997 the U.S. District Court of Appeals ruled that the
Department of Energy has an obligation to begin disposing of spent nuclear fuel
from power plants by January 31, 1998. Since the DOE was unable to dispose of
spent fuel by the due date set by Congress in the NWPA, the DOE breached its
obligations as of that date. The DOE filed a Petition for Reconsideration of the
Appeals Court ruling and indicated costs for relief or damages would come from a
nuclear waste fund supported by owners of nuclear plants. These owners,
including Great Bay, oppose the DOE's position with respect to using funds
provided by nuclear owners to cover damages arising from the DOE's breach of its
obligations.

Until the federal government begins receiving nuclear waste materials in
accordance with the NWPA, operating nuclear generating units such as the
Seabrook Project will need to retain high level wastes and spent fuel on-site or
make other provisions for their storage. The Seabrook Project increased its
on-site storage capacity for Low Level Waste ("LLW") in 1996 and such capacity
is expected to be sufficient to meet the Project's storage requirements through
2006. In addition, the Managing Agent of the Seabrook Project has advised Great
Bay that the Seabrook Project has adequate on-site storage capacity for
high-level wastes until approximately 2010.

Disposal costs for LLWs that result from normal operation of nuclear
generating units have increased significantly in recent years and may continue
to rise. Cost increases are a function of increased packaging and transportation
costs and higher fees and surcharges charged by the disposal facilities.
Pursuant to the Low-Level Radioactive Waste Policy Act of 1980, each state is
responsible for providing disposal facilities for LLW generated within the state
and was authorized to join with other states into regional compacts to jointly
fulfill their responsibilities. However, pursuant to the Low-Level Radioactive
Waste Policy Amendments Act of 1985, each state in which a currently operating
disposal facility is located (South Carolina, Nevada and Washington) is allowed
to impose volume limits and a surcharge on shipments of LLW from states that are

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not members of the compact in the region in which the facility is located. On
June 19, 1992, the United States Supreme Court issued a decision upholding
certain parts of the Low-Level Radioactive Waste Policy Amendments Act of 1985,
but invalidating a key provision of that law requiring each state to take title
to LLW generated within that state if the state fails to meet federally mandated
deadlines for siting LLW disposal facilities. The decision has resulted in
uncertainty about states' continuing roles in siting LLW disposal facilities and
may result in increased LLW disposal costs and the need for longer interim LLW
storage before a permanent solution is developed.

In April 1995, a privately owned facility in Utah was approved as a
disposal facility for certain types of LLW. Additionally, the Barnwell, South
Carolina disposal facility was reopened in July 1995 to all states except North
Carolina as a result of legislation passed by the South Carolina legislature.
The Seabrook Project began shipping certain LLW to the Utah facility in December
1995. All LLW generated by the Seabrook Project that exceeds the maximum
radioactivity level of LLW accepted by the Utah facility is currently stored
on-site at the Seabrook facility.

DECOMMISSIONING

NRC licensing requirements and restrictions are also applicable to the
decommissioning of nuclear generating units at the end of their service lives,
and the NRC has adopted comprehensive regulations concerning decommissioning
planning, timing, funding and environmental review. Any changes in NRC
requirements or technology can increase estimated decommissioning costs.

Great Bay is responsible for its pro rata share of the decommissioning and
cancellation costs for Seabrook. Great Bay pays its share of decommissioning
costs on a monthly basis. The decommissioning funding schedule is determined by
the New Hampshire Nuclear Decommissioning Financing Committee (the "NDFC"). The
NDFC reviews the decommissioning funding schedule for the Seabrook Project at
least annually and, for good cause, may increase or decrease the amount of the
funds or alter the funding schedule. The review of the current estimate and
funding schedule by the NDFC is scheduled to commence in April 1998. Although
the owners of the Seabrook Project, including Great Bay, are accumulating funds
in an external trust to defray decommissioning costs, these costs could
substantially exceed the value of the trust fund, and the owners, including
Great Bay, would remain liable for the excess. Great Bay may be required to
change the mechanism by which it funds its share of the Seabrook Project
decommissioning costs due to the recent NRC review of Great Bay's status as an
electric utility (see "-- Recent Developments"). Based on the currently approved
funding schedule, Great Bay's decommissioning payments will be approximately
$1.2 million in 1998 and escalate at 4% per year each year thereafter through
2026.

The current estimated cost to decommission the Seabrook Project, based on a
study performed in 1996 for the lead owner of the Seabrook Project, is
approximately $473 million in 1997 dollars and $2.2 billion in 2026 dollars,
assuming a remaining 28 year life for the facility and a future cost escalation
rate of 5.0%. Based on this estimate, the present value of Great Bay's share of
this liability as of December 31, 1997 was approximately $55.9 million.

On November 15, 1992, Great Bay's former parent, EUA, and certain other
parties entered into a settlement agreement. Under the settlement agreement, EUA
guaranteed an amount not to exceed $10 million of Great Bay's future
decommissioning costs of Seabrook Unit 1 in the event that Great Bay is unable
to pay its share of such decommissioning costs.

ENVIRONMENTAL REGULATION

The Seabrook Project, like other electric generating stations, is subject
to standards administered by federal, state and local authorities with respect
to the siting of facilities and associated environmental factors. The United
States Environmental Protection Agency (the "EPA"), and certain state and local
authorities, have jurisdiction over releases of pollutants, contaminants and
hazardous substances into the environment and have broad authority in connection
therewith, including the ability to require installation of pollution control
devices and remedial actions. The NRC has promulgated a variety of standards to
protect the public from radiological pollution caused by the normal operation of
nuclear generating facilities.

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The EPA issued a National Pollutant Discharge Elimination System ("NPDES")
permit, valid for a period of five years, to NAESCO on October 30, 1993
authorizing discharges from Seabrook Station into the Atlantic Ocean and the
Browns River in accordance with limitations, monitoring requirements and
conditions specified in the permit. Seabrook Station's current five-year NPDES
permit expires October 30, 1998. The Seabrook Project has assembled a
multi-disciplined project team led by an Environmental Compliance Supervisor to
develop the renewal application, which must be filed by April 30, 1998.

On August 31, 1994, the New Hampshire Department of Environmental Services
issued to NAESCO permits to operate two auxiliary boilers and two emergency
diesel generators in accordance with New Hampshire Revised Statutes Annotated
Chapter 125-C. These permits, which were effective until August 31, 1997,
prescribe limits for the emission of air pollutants into the ambient air as well
as record keeping and other reporting criteria. NAESCO filed an application on
July 16, 1996 for permits under Title V of the Clean Air Act. Upon the
expiration of the State of New Hampshire permits, the conditions authorized by
those permits remain in effect until the Title V permits are granted. NAESCO can
not estimate when the Title V permits will be granted. Because the liabilities
of the Participants under the JOA are several and not joint, in the event that
NAESCO violates the emissions limits contained in its permits, if at all, Great
Bay is liable for its pro rata share of any costs and liabilities assessed for
the emissions violations.

In some environmental areas, the NRC and the EPA have overlapping
jurisdiction. Thus, NRC regulations are subject to all conditions imposed by the
EPA and a variety of federal environmental statutes, including obtaining permits
for the discharge of pollutants (including heat, which is discharged by the
Seabrook Project) into the nation's navigable waters. In addition, the EPA has
established standards, and is in the process of reviewing existing standards,
for certain toxic air pollutants, including radionuclides, under the United
States Clean Air Act which apply to NRC-licensed facilities. The effective date
for the new EPA radionuclide standard has been stayed as applied to nuclear
generating units. Environmental regulation of the Seabrook Project may result in
material increases in capital and operating costs, delays or cancellation of
construction of planned improvements, or modification or termination of
operation of existing facilities. Management believes that Great Bay is in
compliance in all material respects with applicable EPA, NRC and other
regulations relating to pollution caused by nuclear generating facilities.

ENERGY POLICY ACT

The Energy Policy Act of 1992 addresses many aspects of national energy
policy and includes important changes for electric utilities and registered
holding companies. For example, the Energy Policy Act grants FERC new authority
to mandate transmission access for QFs, EWGs and traditional utilities. It is
not possible to predict the impact which the Energy Policy Act and the rules and
regulations that will be promulgated by various regulatory agencies pursuant to
the Energy Policy Act will have on the Company. It is also not possible to
predict the timing or content of future energy policy legislation and the
significance of such legislation to the Company. Various issues not addressed by
the Energy Policy Act, including regional planning and transmission
arrangements, could be addressed in future legislation.

EMPLOYEES AND MANAGEMENT

BayCorp has five employees, including its President and Chief Executive
Officer, John A. Tillinghast, and its Chief Operating Officer, Frank W. Getman
Jr. See "Executive Officers." BayCorp's wholly-owned subsidiary, Great Bay, has
one employee.

On January 24, 1997, a Management and Administrative Services Agreement
(the "Services Agreement") was signed between BayCorp and Great Bay, pursuant to
which BayCorp provides Great Bay a full range of management services, including
general management and administration, accounting and bookkeeping, budgeting and
regulatory compliance. Under the Service Agreement, Great Bay pays BayCorp a
monthly fee of $156,000 for such services. The Services Agreement has a one-year
term and provides for automatic one-year renewals.

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ITEM 2. PROPERTIES.

BayCorp's principal asset is its equity interest in Great Bay. In turn,
Great Bay's principal asset is its 12.1% joint ownership interest in the
Seabrook Project. The Seabrook Project is a nuclear-fueled, steam electricity,
generating plant located in Seabrook, New Hampshire, which was planned to have
two Westinghouse pressurized water reactors, Seabrook Unit 1 and Seabrook Unit 2
(each with a rated capacity of 1,150 megawatts), utilizing ocean water for
condenser coiling purposes. Seabrook Unit 1 entered commercial service on August
19, 1990. Seabrook Unit 2 has been canceled. See "Business -- The Seabrook
Project."

ITEM 3. LEGAL PROCEEDINGS.

For each of the tax years 1994, 1995, 1996 and 1997, Great Bay filed
property tax abatement applications with the town of Seabrook and two other New
Hampshire towns in which the Seabrook Project is located. Great Bay paid the
1994, 1995 and half of the 1996 property taxes billed by the Towns of Seabrook,
Hampton and Hampton Falls, New Hampshire (collectively, the "Towns") but
withheld payment of the second half of the 1996 property taxes billed by the
Towns, based on Great Bay's position that the portion of 1996 property taxes
paid to the Towns exceeded the amount of the total 1996 property taxes
appropriately payable by Great Bay to the Towns. Great Bay also withheld the
first half of its 1997 property taxes to the Towns. The abatement request for
tax years 1994, 1995 and 1996 were denied. Great Bay filed appeals for each of
those years with the New Hampshire Board of Tax and Land Appeals. The appeals
are currently pending and a hearing on the first phase of these appeals is
scheduled for May 12, 1998.

In December 1996, eight of the Joint Owners of the Seabrook Project (the
"Demanding Joint Owners") served a demand on Great Bay for arbitration of a
dispute between Great Bay and the Demanding Joint Owners concerning the
allocation among the joint owners of real property taxes assessed by the Towns
against the Seabrook Project. Great Bay claimed that the Joint Owners Agreement
does not provide for allocation of real estate tax liabilities in proportion to
each joint owner's ownership interest in the Seabrook Project. The Demanding
Joint Owners claimed that real estate taxes should be allocated in accordance
with each Participant's ownership interest.

In September 1997, the arbitrator issued a decision requiring Great Bay to
pay its share of all property taxes assessed upon the Seabrook Project in a
single tax bill in accordance with Great Bay's percentage ownership in the
Seabrook Project. Accordingly, in October 1997, Great Bay paid under protest
$3,168,903 for property taxes and accrued interest for the second half of 1996
and the first half of 1997 to the Towns. In December 1997, Great Bay paid
$1,266,194 for property taxes due to the Towns for the second half of 1997.

The arbitrator's decision does not affect the tax abatement litigation
pending against the Towns for tax years 1994 through 1997, nor does it affect
Great Bay's ability to assert that it is entitled to a separate tax bill and
assessment from the Towns. In addition, on February 28, 1997 and February 27,
1998, NAESCO, the current managing agent for the Seabrook Project, purported to
file tax abatement applications on behalf of all the Joint Owners for the 1996
and 1997 tax years, respectively.

On February 12, 1998, Great Bay sent a letter to PECO informing PECO that
Great Bay intended to terminate PECO as Great Bay's exclusive marketing agent.
On February 24, 1998, Great Bay filed suit against PECO in the United States
District Court for the District of New Hampshire seeking a declaratory judgment
that Great Bay properly terminated the PECO Services Agreement and seeking
damages arising out of PECO's breach of the PECO Services Agreement. In its
complaint, Great Bay alleges that (i) PECO has entered into a number of
wholesale power agreements in its own name and for its own benefit without
bringing these opportunities to Great Bay's attention or submitting bids on
behalf of Great Bay and (ii) PECO failed to offer Great Bay's power on a firm
basis to customers as required under the PECO Services Agreement. On February
27, 1998, Great Bay sent a letter to PECO notifying PECO that the Services
Agreement was terminated.

On March 10, 1998, PECO filed a motion in the United States District Court
for the District of New Hampshire for a preliminary injunction to prevent Great
Bay from terminating the PECO Services Agreement. At that time, PECO also filed
counterclaims seeking damages in an amount in excess of $5,000,000 for alleged
breach of contract, alleged loss of goodwill and alleged harm to PECO's
reputation. PECO's counterclaim contained seven counts: breach of
contract/wrongful termination, breach of exclusivity

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promise, breach of the covenant of good faith and fair dealing, unjust
enrichment, defamation, unfair trade practices and an action for declaratory
judgment. Great Bay believes that PECO's motion and counterclaims are without
merit. Great Bay intends to vigorously pursue its claims against PECO. On March
19, 1998 a hearing was held on PECO's motion for a preliminary injunction. The
judge took the matter under advisement and is expected to issue a decision
shortly.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not Applicable.

Executive Officers of the Registrant

The executive officers of BayCorp are:



NAME AGE POSITION
---- --- --------

John A. Tillinghast........................... 70 Chief Executive Officer, President, Treasurer
and Chairman of the Board of Directors
Frank W. Getman Jr............................ 34 Chief Operating Officer and Secretary


John A. Tillinghast has served as President, Treasurer and the Chairman of
the Board of Directors of the Company and its predecessor since November 1994
and Chief Executive Officer since April 1995. Since 1987, Mr. Tillinghast has
served as President and the sole stockholder of Tillinghast Technology
Interests, Inc., a private consulting firm. From 1986 to 1993, Mr. Tillinghast
served as Chairman of the Energy Engineering Board of the National Academy of
Sciences. He holds an M.S. in Mechanical Engineering form Columbia University.

Frank W. Getman Jr. has served as Chief Operating Officer of the Company
and its predecessor since September 17, 1996 and Vice President, Secretary and
General Counsel of Great Bay since August 1, 1995. From September 1991 to August
1995, Mr. Getman was an attorney with the law firm of Hale and Dorr LLP, Boston,
Massachusetts. Mr. Getman holds J.D. and M.B.A. degrees from Boston College and
a B.A. in Political Science from Tufts University.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Following are the reported high and low sales prices of BayCorp Common
Stock ("MWH") on the American Stock Exchange ("ASE") as reported in the Wall
Street Journal daily as traded, for each quarter during 1997 that BayCorp Common
Stock traded on the ASE and for Great Bay Common Stock ("GBPW") on the Nasdaq
National Market ("NNM") as reported in the Wall Street Journal daily as traded,
for each quarter during 1996 that the Great Bay Common Stock traded on the NNM:



HIGH LOW
---- ---

1996
- -----
First Quarter............................................. 8 3/4 6 3/4
Second Quarter............................................ 8 3/4 6 1/8
Third Quarter............................................. 10 3/8 6 7/8
Fourth Quarter............................................ 10 7 1/4

1997
- -----
First Quarter............................................. 8 7/8 7 7/8
Second Quarter............................................ 8 7
Third Quarter............................................. 8 3/8 7 3/8
Fourth Quarter............................................ 7 7/8 6 1/2


As of March 9, 1998, the Company had 33 holders of record of its Common
Stock. The Company believes that as of March 9, 1998, the Company had
approximately 420 beneficial holders of its Common Stock. The number of
beneficial owners substantially exceeds the number of recordholders because many
of the Company's stockholders hold their shares in street names.

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Neither the Company nor Great Bay has ever paid cash dividends on its
common stock. BayCorp currently expects that it will retain all of its future
earnings and does not anticipate paying a dividend in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA.

SELECTED FINANCIAL DATA

The following table sets forth selected financial data and other operating
information of BayCorp, as successor to Great Bay. The selected financial data
presented below for periods subsequent to November 23, 1994 give effect to the
consummation of Great Bay's Fifth Amended Plan of Reorganization dated February
11, 1994, as amended by a First Amendment dated September 9, 1994 (the "Amended
Bankruptcy Plan") of the predecessor of Great Bay and to the adoption of fresh
start reporting by Great Bay as of that date in accordance with the American
Institute of Certified Public Accountants' Statement of Position 90-7 Financial
Reporting by Entities in Reorganization under the Bankruptcy Code. Accordingly,
periods prior to November 23, 1994 have been designated "Predecessor Company" or
the "Predecessor" and periods subsequent to November 23, 1994 have been
designated "Reorganized Company" or the "Company." Selected balance sheet and
statement of income (loss) data of the Predecessor Company periods are not
comparable to those of the Reorganized Company periods and a line has been drawn
in the tables to separate the Predecessor financial data from the Company
financial data.

The following data presents (i) selected financial data of the Reorganized
Company as of and for the years ended December 31, 1997, December 31, 1996,
December 31, 1995, as of December 31, 1994 and for the period from November 24,
1994 to December 31, 1994 and (ii) selected financial data of the Predecessor
company for the period from January 1, 1994 to November 23, 1994 and as of and
for the year ended December 31, 1993. The information below should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's financial statements,
including the notes thereto, contained elsewhere in this Report.

SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS)



REORGANIZED COMPANY PREDECESSOR COMPANY
------------------------------------------------ ---------------------------
FOR THE YEAR ENDED NOVEMBER 24 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, NOVEMBER 23, DECEMBER 31,
------------------------------ --------------- ------------ ------------
1997 1996 1995 1994 1994 1993
-------- -------- -------- --------------- ------------ ------------

INCOME STATEMENT DATA:
Operating Revenues....... $ 26,642 $ 30,324 $ 24,524 $ 3,129 $ 13,989 $ 24,620
Fuel, Operation &
Maintenance........... 29,187 24,885 24,899 2,409 21,762 22,921
Net Income (Loss)........ (11,215) 4,100 (6,059) 182 131,385 (9,433)




FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- --------------- ------------

BALANCE SHEET DATA:
Cash & Cash
Equivalents........... 19,092 28,775 16,469 22,217 138
Working Capital.......... 23,079 30,552 20,516 27,169 (289,585)
Total Assets............. 140,158 152,418 138,771 145,666 324,590
Decommissioning
Liability............. 55,846 53,215 50,899 48,530 --
Capitalization:
Common Equity............ 78,139 89,625 82,233 88,292 (139,783)
Cumulative Convertible
Preferred Stock....... -- -- -- -- 63,090
Total Capitalization..... 78,139 89,625 82,233 88,292 (76,693)


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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

EMERGENCE FROM CHAPTER 11

On February 28, 1991, Great Bay filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code. On November 23, 1994
(the "Confirmation Date"), a formal confirmation order by the Bankruptcy Court
with respect to Great Bay's Amended Bankruptcy Plan became effective. At that
time, Great Bay emerged from bankruptcy. As a result of the Chapter 11
proceeding and in accordance with the provisions of the Amended Bankruptcy Plan,
the capital structure of Great Bay was completely changed. In particular, as
part of its Chapter 11 proceeding, Great Bay discharged all of its pre-petition
debt, which consisted primarily of the approximately $280 million principal
amount of outstanding Notes and unpaid accrued interest on the Notes of
approximately $14 million, and raised gross proceeds of $35 million in the
Amended Bankruptcy Plan. See "Business -- Bankruptcy Proceeding and
Reorganization." Thus, as a result, Great Bay's net worth increased
significantly and Great Bay was relieved of the obligation to make principal and
interest payments on the Notes.

The following discussion focuses solely on operating revenues and operating
expenses which are presented in a substantially consistent manner for all of the
periods presented. As a result of the Chapter 11 proceeding and subsequent
effectiveness of the amended Bankruptcy Plan on November 23,1994, the 1994
Statement of Income represents separately the results of operations of Great
Bay's predecessor company prior to November 23, 1994 from the results of
operations of Great Bay after that date.

On the Confirmation Date, Great Bay adopted "Fresh Start" accounting, which
resulted in adjustments to the assets and liabilities of Great Bay to their
estimated fair values as of the Confirmation Date and includes the net proceeds
of the equity financing for the Amended Bankruptcy Plan, and eliminated
liabilities discharged under the Amended Bankruptcy Plan.

OVERVIEW

As a result of the corporate restructuring that occurred in January 1997,
BayCorp's principal asset is its 100% equity interest in Great Bay. Great Bay is
a public utility whose principal interest is a 12.1% joint ownership interest in
the Seabrook Nuclear Power Project in Seabrook, New Hampshire. Unless the
context requires otherwise, references to BayCorp for events and time periods
before January 1997 reflect treatment of BayCorp as successor to Great Bay.

BayCorp reported a net loss for the year ended December 31, 1997, reported
net income for the year ended December 31, 1996 and reported a net loss for the
year ended December 31, 1995. The 1997 net loss was primarily due to scheduled
and unscheduled outages at the Seabrook Project that occurred during the year.
The 1996 net income was primarily due to a gain of $7,036,792 from the sale of
unused steam generators from Seabrook Unit 2. The net loss in 1995 was primarily
due to sales of Great Bay's share of electricity from the Seabrook Project in
the short-term market at prices resulting in revenues substantially below
expenses.

The Seabrook Project from time to time experiences both scheduled and
unscheduled outages. Great Bay incurs losses during outage periods due to the
loss of all operating revenues and additional costs associated with the outages
as well as continuing operating and maintenance expenses and depreciation.
Unscheduled outages or operation of the unit at reduced capacity can occur due
to the automatic operation of safety systems following the detection of a
malfunction. In addition, it is possible for the unit to be shut down or
operated at reduced capacity based on the results of scheduled and unscheduled
inspections and routine surveillance by Seabrook Project personnel. It is not
possible for Great Bay to predict the frequency or duration of any future
unscheduled outages; however, it is likely that such unscheduled outages will
occur. The Managing Agent of the Seabrook Project has scheduled the next
refueling outage for March 1999. Refueling outages are scheduled generally every
18 to 24 months depending upon the Seabrook Project capacity factor and the rate
at which the nuclear fuel is consumed.

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RESULTS OF OPERATIONS

Operating Revenues

BayCorp's operating revenues for 1997 decreased by approximately $3.7
million, or 12.1%, to $26,642,000 for 1997 as compared with $30,324,000 for
1996. This decrease was primarily due to the scheduled and unscheduled outages
at the Seabrook Project during 1997. During 1997, the capacity factor at the
Seabrook Project was 78.3% of the rated capacity as compared to a capacity
factor of 96.5% for 1996. Operating revenues and capacity factor were adversely
impacted in 1997 by the scheduled refueling outage at the Seabrook Project that
began on May 10, 1997, lasting 50 days, and by the unscheduled outage that began
on December 5, 1997, lasting 41 days. In contrast, there was only a brief
unscheduled outage in January and February of 1996.

Sales of electricity decreased by approximately 19.3% to 964,038,400
kilowatt-hours in 1997 as compared to 1,194,391,000 kilowatt-hours in 1996.
Operating revenues were favorably affected in 1997 by an increase in the sales
price per kWh. During 1997 the sales price per kWh (determined by dividing total
sales revenue by the total number of kWhs sold in the applicable period)
increased 9.1% to 2.76 cents per kWh as compared with 2.53 cents per kWh in
1996. Great Bay's cost of power (determined by dividing total operating expenses
by Great Bay's 12.1% share of the power produced by the Seabrook Project during
the applicable period) increased 40.8% to 3.83 cents per kWh in 1997 as compared
to 2.72 cents per kWh in 1996. This increase was primarily the result of the
lower capacity factor at the Seabrook Project due to the scheduled and
unscheduled outages in 1997 and the associated costs of these outages. Scheduled
and unscheduled outage time increases Great Bay's cost of power because Seabrook
costs are spread over fewer kWhs.

Great Bay's operating revenues for 1996 increased by approximately $5.8
million, or 23.7%, to $30,324,000 as compared with $24,524,000 for 1995. This
increase was primarily due to higher availability and production at the Seabrook
Project due to fewer unscheduled and scheduled outages in 1996 compared to 1995.
During 1996, the capacity factor at the Seabrook Project was 96.5% of the rated
capacity versus a capacity factor of 83.2% for 1995. Operating revenue and
capacity factor were negatively affected in 1995 by the scheduled refueling
outage at the Seabrook Project that occurred during parts of November and
December 1995.

Sales of electricity increased by approximately 17.5% to 1,194,391,000
kilowatt-hours in 1996 as compared to 1,016,727,000 kilowatt-hours in 1995.
Operating revenues were also favorably affected in 1996 by an increase in the
sales price per kWh. During 1996 the sales price per kWh increased 5% to 2.53
cents per kWh as compared with 2.41 cents per kWh in 1995. Great Bay's cost of
power decreased 14.5% to 2.72 cents per kWh in 1996 as compared to 3.18 cents
per kWh in 1995. This decrease was primarily the result of the higher capacity
factor at the Seabrook Project in 1996 as compared to 1995.

Expenses

BayCorp's total operating expenses (excluding depreciation and all taxes)
for 1997 increased $4.3 million, or 17.3%, in comparison with 1996. This
increase was primarily the result of the costs associated with the scheduled
refueling outage in 1997 that lasted 50 days and the unscheduled outage that
began on December 5, 1997 and lasted 41 days. There was a slight increase in
depreciation and amortization (1.7%) and a slight decrease in taxes other than
income (1%), from 1996 to 1997.

Other Income decreased 115%, or $7.3 million, in 1997 as compared to 1996.
This decrease was primarily attributable to a $7.0 million gain on the sale in
July 1996 of four unused steam generators from Seabrook Unit 2. Great Bay had
previously written off its investment in Seabrook Unit 2. There were no material
sales of Unit 2 assets in 1997. Decommissioning cost accretion increased
$402,000, to $2,663,000 in 1997 as compared to $2,261,000 in 1996, primarily due
to the revised decommissioning funding schedule for the Seabrook Project
approved by the New Hampshire Nuclear Decommissioning Financing Committee on
October 30, 1996. The new study increased the present value of total
decommissioning costs as of January 1, 1997 and increased the cost escalation
rate from 4.25% to 5%. This accretion is a non-cash charge that reflects Great
Bay's liability related to the closure and decommissioning of the Seabrook
Project in current year

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dollars over the licensing period during which the Seabrook Project is licensed
to operate. This increase in decommissioning cost accretion also contributed to
the decrease in Other Income in 1997 in comparison with 1996. Decommissioning
trust fund income increased $142,000, or 43.3%, to $470,000 in 1997 as compared
to $328,000 in 1996. The increase in interest earned on the decommissioning
trust fund reflected the higher 1997 fund balance as Great Bay continued to make
contributions to the decommissioning trust fund.

There was a small overall increase in total operating expenses of $182,000,
or 0.6%, from $32,381,000 in 1995 to $32,563,000 in 1996 reflecting increases in
depreciation and amortization of 3.3%, taxes of 2% and administrative and
general expenses of 5.1%.

Other Income increased 263%, or $4.6 million, during 1996 as compared to
1995, reflecting a $7.0 million gain on sale of assets in July of 1996 as
mentioned above. There were no material sales of Unit 2 assets in 1995. This
increase in other income was offset in part by Great Bay's recognition in 1996
of its share of the Seabrook Project's decommissioning liability. During 1996,
Great Bay began to accrete it share of the Seabrook Project's decommissioning
liability in 1996 dollars rather than 1995 dollars. In 1995 there was no expense
for Great Bay's share of the Seabrook Project's decommissioning liability
because the entire amount of Great Bay's share of the Seabrook Project's
decommissioning liability was reflected as a liability on Great Bay's balance
sheet under fresh start accounting principles. This accretion is a non-cash
charge and recognizes Great Bay's liability related to the closure and
decommissioning of the Seabrook Project in current year dollars over the
licensing period during which the Seabrook Project is licensed to operate.

Net Operating Losses

For federal income tax purposes, as of December 31, 1997, the Company had
net operating loss carry forwards ("NOLs") of approximately $196 million, which
are scheduled to expire between 2005 and 2012. Because the Company has
experienced one or more ownership changes, within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, an annual limitation is imposed
on the ability of the Company to use $136 million of these carryforwards. The
Company's best estimate at this time is that the annual limitation on the use of
$136 million of the Company's NOLs is approximately $5.5 million per year. Any
unused portion of the $5.5 million annual limitation applicable to the Company's
restricted NOL's is available for use in future years until such NOL's are
scheduled to expire. The Company's other $60 million of NOLs are not currently
subject to such limitations.

LIQUIDITY AND CAPITAL RESOURCES

Great Bay is required under the JOA to pay its share of Seabrook Unit 1 and
Seabrook Unit 2 expenses, including, without limitation, operation and
maintenance expenses, construction and nuclear fuel expenditures and
decommissioning costs, regardless of the level of Seabrook Unit 1's operations.
Seabrook Project expenses to preserve and protect Unit 2 assets are
approximately $500,000 per year, of which Great Bay's share is approximately
$62,000 per year.

Great Bay currently sells most of its power in the Northeast United States
short-term wholesale power market. The cash generated from electricity sales by
Great Bay is and has been less than the Company's ongoing cash requirements. The
Company expects that it will continue to incur cash deficits until the prices at
which it is able to sell its share of the Seabrook Project electricity increase,
which may be a number of years, if ever. Great Bay intends to cover such
deficits with its cash and short-term investments which totaled approximately
$19.1 million at December 31, 1997. However, if the Seabrook Project operates at
a capacity factor below historical levels, or if expenses associated with the
ownership or operation of the Seabrook Project, including without limitation
decommissioning costs, are materially higher than anticipated, or if the prices
at which Great Bay is able to sell its share of the Seabrook Project electricity
do not increase at the rates and within the time expected by Great Bay, Great
Bay would be required to raise additional capital, either through a debt
financing or an equity financing, to meet its ongoing cash requirements.

BayCorp's principal asset available to serve as collateral for borrowings
is Great Bay's 12.1% interest in the Seabrook Project. Pursuant to a purchased
power agreement, dated as of April 1, 1993, between Great Bay and UNITIL Power
Corp., Great Bay's interest in the Seabrook Project is encumbered by a mortgage.
This

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mortgage may be subordinated to up to $80 million of senior secured financing.
See "Business -- Purchased Power Agreements."

BayCorp's cash and short-term investments decreased approximately $9.7
million during 1997. The principal factor affecting liquidity during 1997 was
the reduced operating income discussed above. Non-cash charges to income
included $3.5 million for depreciation, $4.0 million for nuclear fuel
amortization, $2.7 million for decommissioning trust fund accretion and a
decrease in accounts receivable of $2.5 million due to reduced December 1997
sales revenues resulting from the unscheduled December 1997 outage. Offsetting
these non-cash charges to income were cash charges of $4.5 million for capital
expenditures for plant and nuclear fuel. Cash charges also included an increase
in prepaids of $1.1 million primarily due to prepayments to Seabrook for funding
of operating expenses in 1997. In December 1996, the prepaid Seabrook balance
was a negative $1.3 million due to the timing differences between funding of
December 1996 budgeted Seabrook expenses and the payment of actual December 1997
expenses in February 1997. Other cash used in operating activities included a
decrease in taxes accrued due to the Company's payment of 1996 property taxes in
1997 and a decrease in miscellaneous liabilities of $2.5 million due in part to
the Seabrook funding balance of $1.3 million referred to above, classified as a
miscellaneous liability at year end 1996. The reduction in miscellaneous
liabilities also includes a $790,000 reduction in the outage accrual as the
Company had accrued, as of December 31, 1997, $1.1 million, or approximately six
months of projected outage expenses related to the 1999 refueling outage,
compared to the December 31, 1996 outage accrual of $1.9 million, or
approximately twelve months of projected outage expenses related to the 1997
refueling outage. Also in 1997, BayCorp purchased 66,955 shares of the Company's
Common Stock for an aggregate of $535,000 or an average of $7.99 per share.

Great Bay's 1997 decommissioning payments totaled approximately $1.1
million. The decommissioning funding schedule is determined by the NDFC, which
reviews the schedule for the Seabrook Project at least annually. An NDFC review
is scheduled to occur during 1998. Great Bay expects to use revenues from the
sale of power to make these decommissioning payments. The current review by the
NRC could substantially increase Great Bay's costs of decommissioning funding if
Great Bay does not meet the NRC's definition of an electric utility (see
"Business -- Recent Developments"). Failure to obtain relief may cause a
material adverse effect to Great Bay.

Great Bay anticipates that its share of the Seabrook Project's capital
expenditures for the 1998 fiscal year will total approximately $7.4 million for
nuclear fuel and various capital projects.

For each of the tax years 1994, 1995, 1996 and 1997, Great Bay filed
property tax abatement applications with the three New Hampshire towns in which
the Seabrook Project is located. The outcome of the Company's appeals with
respect to property tax assessments will affect the Company's liquidity and
obligation for property tax payments in the future. See "Legal Proceedings."

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects,"
"intends" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of BayCorp and/or Great Bay to differ materially from those indicated by such
forward-looking statements. These factors include, without limitation, those set
forth below and elsewhere in this Annual Report.

Ownership of a Single Asset. BayCorp's principal asset is it equity
interest in Great Bay. Great Bay owns a single principal asset, a 12.1% joint
interest in the Seabrook Nuclear Power Project in Seabrook, New Hampshire.
Accordingly, BayCorp's results of operations are completely dependent upon the
successful and continued operation of the Seabrook Project. In particular, if
the Seabrook Project experiences unscheduled outages of significant duration,
Great Bay's results of operations will be materially adversely affected.

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History of Losses; Implementation of Business Strategy. BayCorp has never
reported an operating profit for any year since its incorporation. The Company's
business strategy is to seek purchasers for its share of the Seabrook Project
electricity output at prices, either in the short-term market or pursuant to
medium or long-term contracts, significantly in excess of the prices currently
available in the short-term wholesale electricity market. Sales at current
short-term rates do not result in sufficient revenue to enable BayCorp to meet
its cash requirements for operations, maintenance and capital related costs.
Great Bay's ability to obtain such higher prices will depend on regional,
national and worldwide energy supply and demand factors that are beyond the
control of Great Bay. There can be no assurance that Great Bay ever will be able
to sell power at prices that will enable it to meet its cash requirements.

Liquidity Needs. As of December 31, 1997, BayCorp had approximately $19.1
million in cash and cash equivalents and short-term investments. The Company
believes that such cash, together with the anticipated proceeds from the sale of
electricity by Great Bay, will be sufficient to enable the Company to meet its
cash requirements until the prices at which Great Bay can sell its electricity
increase sufficiently to enable the Company to cover its annual cash
requirements. However, if the Seabrook Project operated at a capacity factor
below historical levels, or if expenses associated with the ownership or
operation of the Seabrook Project, including without limitation decommissioning
costs, are materially higher than anticipated, or if the prices at which Great
Bay is able to sell its share of the Seabrook Project electricity do not
increase at the rates and within the time expected by Great Bay, Great Bay or
the Company would be required to raise additional capital, either through a debt
financing or an equity financing, to meet ongoing cash requirements. There is no
assurance that Great Bay or the Company would be able to raise such capital or
that the terms on which any additional capital is available would be acceptable.
If additional funds are raised by issuing equity securities, dilution to then
existing stockholders will result.

Changes in Power Sale Contract Terms Available in Wholesale Power
Market. In the past, wholesale sellers of electric power, which typically were
regulated electric utilities, frequently entered into medium or long-term power
sale contracts providing for prices in excess of the prices available in the
short-term market, which includes contracts of one year or less in duration. In
recent years, increased competition in the wholesale electric power market,
reduced growth in the demand for electricity, low prices in the short-term
market and the uncertainty associated with deregulation of the industry have
reduced the willingness of wholesale power purchasers to enter into medium or
long-term contracts and have reduced the prices obtainable from such contracts.

Risks in Connection with Joint Ownership of Seabrook Project. Great Bay is
required under the Agreement for Joint Ownership, Construction and Operation of
New Hampshire Nuclear Units dated May 1, 1973, as amended, by and among Great
Bay and the other 10 utility companies that are owners of the Seabrook Project
(the "JOA"), to pay its share of Seabrook Unit 1 and Seabrook Unit 2 expenses,
including without limitation operations and maintenance expenses, construction
and nuclear fuel expenditures and decommissioning costs, regardless of Seabrook
Unit 1's operations. Under certain circumstances, a failure by Great Bay to make
its monthly payments under the JOA entitles certain other joint owners of the
Seabrook Project to purchase Great Bay's interest in the Seabrook Project for
75% of the then fair market value thereof.

In addition, the failure to make monthly payments under the JOA by owners
of the Seabrook Project other than Great Bay may have a material adverse effect
on Great Bay by requiring Great Bay to pay a greater proportion of the Seabrook
Project expenses in order to preserve the value of its share of the Seabrook
Project. In the past, certain of the owners of the Seabrook Project other than
Great Bay have not made their full respective payments. The electric utility
industry is undergoing significant changes as competition and deregulation are
introduced into the marketplace. Some utilities, including certain Participants,
have indicated in state regulatory proceedings that they may be forced to seek
bankruptcy protection if regulators, as part of the industry restructuring, do
not allow for full recovery of stranded costs. If a Participant other than Great
Bay filed for bankruptcy and that Participant was unable to pay its share of
Seabrook Project expenses, Great Bay might be required to pay a greater portion
of Seabrook Project expenses. In the past, the filing of bankruptcy by a
Participant has not resulted in a failure to pay Seabrook Project expenses or an
increase in the percentage of expenses paid by other Participants.

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On February 28, 1997, the NHPUC issued an order requiring stranded cost
recovery to be based on the average market price of electricity in New England,
rather than alternative regulatory accounting methods that are more favorable to
the Participants. On March 10, 1997, one of the Participants, Northeast
Utilities (along with three of its subsidiaries), received a temporary
restraining order from the U.S. District Court for the District of Rhode Island.
This temporary restraining order stayed the NHPUC's February 28, 1997 order to
the extent that the order established a rate methodology that is not designed to
recover the cost of providing service and would require Northeast Utilities and
certain of its affiliates to write-off any regulatory assets. If this stay or a
similar court action does not remain in effect and Northeast Utilities is unable
to pay its share of Seabrook Project expenses, Great Bay might be required to
pay a greater portion of Seabrook Project expenses.

The Seabrook Project is owned by Great Bay and the other owners thereof as
tenants in common, with the various owners holding varying ownership shares.
This means that Great Bay, which owns only a 12.1% interest, does not have
control of the management of the Seabrook Project. As a result, decisions may be
made affecting the Seabrook Project notwithstanding Great Bay's opposition.

Certain costs and expenses of operating the Seabrook Project or owning an
interest therein, such as certain insurance and decommissioning costs, are
subject to increase or retroactive adjustment based on factors beyond the
control of BayCorp or Great Bay. The cost of disposing of Unit 2 of the Seabrook
Project is not known at this time. These various costs and expenses may
adversely affect BayCorp and Great Bay, possibly materially.

Extensive Government Regulation. The Seabrook Project is subject to
extensive regulation by federal and state agencies. In particular, the Seabrook
Project and Great Bay as part owner of a licensed nuclear facility, are subject
to the broad jurisdiction of the NRC, which is empowered to authorize the
siting, construction and operation of nuclear reactors after consideration of
public health and safety, environmental and antitrust matters. Great Bay is also
subject to the jurisdiction of the FERC and, as a result, is required to file
with FERC all contracts for the sale of electricity. FERC has the authority to
suspend the rates at which Great Bay proposes to sell power, to allow such rates
to go into effect subject to refund and to modify a proposed or existing rate if
FERC determines that such rate is not "just and reasonable." FERC's jurisdiction
also includes, among other things, the sale, lease, merger, consolidation or
other disposition of facilities, interconnection of certain facilities,
accounts, service and property records. Compliance with the various requirements
of the NRC and FERC is expensive. Noncompliance with NRC requirements may
result, among other things, in a shutdown of the Seabrook Project.

The NRC has promulgated a broad range of regulations affecting all aspects
of the design, construction and operation of a nuclear facility, such as the
Seabrook Project, including performance of nuclear safety systems, fire
protection, emergency response planning and notification systems, insurance and
quality assurance. The NRC retains authority to modify, suspend or withdraw
operating licenses, such as the license pursuant to which the Seabrook project
operates, at any time that conditions warrant. For example, the NRC might order
Seabrook Unit 1 shut down (i) if flaws were discovered in the construction or
operation of Seabrook Unit 1, (ii) if problems developed with respect to other
nuclear generating plants of a design and construction similar to Unit 1, or
(iii) if accidents at other nuclear facilities suggested that nuclear generating
plants generally were less safe than previously believed.

Great Bay is also subject to the New Hampshire public utility law and
regulations of the NHPUC that affect, among other things, the issuance of
securities, transfer of utility property and contacts with affiliates as well as
the sale, lease, merger, consolidation or other disposition of facilities. The
NHPUC does not regulate wholesale electricity rates.

Risk of Nuclear Accident. Nuclear reactors have been used to generate
electric power for more than 35 years and there are currently more than 100
nuclear reactors used for electric power generation in the United States.
Although the safety record of these nuclear reactors in the United States
generally has been very good, accidents and other unforeseen problems have
occurred both in the United States and elsewhere, including the well-publicized
incidents at Three Mile Island in Pennsylvania and Chernobyl in the former
Soviet Union.

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The consequences of such an accident can be severe, including loss of life and
property damage, and the available insurance coverage may not be sufficient to
pay all the damages incurred.

Public Controversy Concerning Nuclear Power Plants. Substantial
controversy has existed for some time concerning nuclear generating plants and
over the years such opposition has led to construction delays, cost overruns,
licensing delays, demonstrations and other difficulties. The Seabrook Project
was the subject of significant public controversy during its construction and
licensing and remains controversial. An increase in public concerns regarding
the Seabrook Project or nuclear power in general could adversely affect the
operating license of Seabrook Unit 1. While Great Bay cannot predict the
ultimate effect of such controversy, it is possible that it could result in a
premature shutdown of the unit.

Waste Disposal; Decommissioning Cost. There has been considerable public
concern and regulatory attention focused upon the disposal of low- and
high-level nuclear wastes produced at nuclear facilities and the ultimate
decommissioning of such facilities. As to waste disposal concerns, both the
federal government and the State of New Hampshire are currently delinquent in
the performance of their statutory obligations. See "Business -- Nuclear Waste
Disposal." In April 1995, a privately owned facility in Utah was approved as a
disposal facility for certain types of LLW. Additionally, the Barnwell, South
Carolina disposal facility was reopened in July 1995 to all states except North
Carolina as a result of legislation passed by the South Carolina legislature.
The Seabrook Project began shipping certain LLW to the Utah facility in December
1995. All LLW generated by the Seabrook Project that exceeds the maximum
radioactivity level of LLW accepted by the Utah facility is stored on-site at
the Seabrook facility. Based on information provided by NAESCO, management
believes that the on-site storage capacity for LLW generated by the Seabrook
Project is adequate until at least 2006.

As to decommissioning, NRC regulations require that upon permanent shutdown
of a nuclear facility, appropriate arrangements for full decontamination and
decommissioning of the facility be made. These regulations require that during
the operation of a facility, the owners of the facility must set aside
sufficient funds to defray decommissioning costs. While the owners of the
Seabrook Project are accumulating a trust fund to defray decommissioning costs,
these costs could substantially exceed the value of the trust fund, and the
owners (including Great Bay) would remain liable for the excess. Moreover, the
amount that is required to be deposited in the trust fund is subject to periodic
review and adjustment by an independent commission of the State of New
Hampshire, which could result in material increases in such amounts.

In January 1997, the NRC issued a temporary exemption to Great Bay from the
obligation of Great Bay to comply with the NRC's regulations applicable to a non
"electric utility" owner of an interest in a nuclear power. In the exemption,
the NRC staff stated that it believes that Great Bay currently does not satisfy
the NRC definition of "electric utility." If Great Bay is an "electric utility,"
then Great Bay may satisfy the NRC decommissioning requirements through its
monthly payments into the decommissioning trust fund. If Great Bay is not an
"electric utility," the NRC could require that Great Bay provide a surety bond
or other allowable decommissioning funding mechanisms. On January 30, 1998,
Great Bay filed a petition with the NRC seeking a determination by the NRC that
acceleration of decommissioning trust fund payments provides reasonable
assurance of decommissioning funding under NRC regulations, or, in the
alternative, merits the issuance by the NRC of a permanent exemption to Great
Bay. Failure to obtain relief may have a material adverse effect on Great Bay's
business, financial condition, liquidity or results of operation. See
"Business -- Recent Developments."

Intense Competition. Great Bay sells its share of Seabrook Project
electricity primarily into the Northeast United States wholesale electricity
market. There are a large number of suppliers to this market and competition is
intense. A primary source of competition comes from traditional utilities, many
of which presently have excess capacity. In addition, non-utility wholesale
generators of electricity, such as IPPs, QFs and EWGs, as well as power
marketers and brokers, actively sell electricity in this market. Great Bay may
face increased competition, primarily based on price, from all sources in the
future.

Risk Related to Holding Company. In contrast with Great Bay, the
activities of BayCorp will not be subject to the extensive government regulation
related to public utilities and licensed nuclear facilities. Thus, BayCorp will
not receive the benefit of the scrutiny by federal and state agencies that Great
Bay receives. In
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addition, BayCorp may pursue activities with a greater business risk than those
associated with a regulated entity such as Great Bay. Depending on the success
of any new activities that BayCorp determines to pursue, it is possible that
BayCorp's earnings per share and dividends, if any, might be lower than if
BayCorp did not pursue such activities.

Year 2000. The Company has assessed the impact of the year 2000 issue on
its computer systems and applications. The Company believes that there are no
material year 2000 related costs to be incurred relative to its computer systems
and applications. However, Great Bay's share of the costs of addressing year
2000 issues at the Seabrook Project is currently estimated at $177,000,
according to NAESCO. If NAESCO is unable to complete year 2000 compliance
efforts in a timely manner or if year 2000 compliance costs exceed NAESCO's
estimate, the Company's operations, financial condition and liquidity could be
materially and adversely affected.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The response to this item is submitted in the response found under Item
14(a)(1) in this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

(a) Directors. The information with respect to directors required under
this item is incorporated herein by reference to the section captioned "Election
of Directors" in the Company's Proxy Statement with respect to the Annual
Meeting of Stockholders to be held on May 5, 1998.

(b) Executive Officers. The information with respect to executive officers
required under this item is incorporated by reference to Part I of the Report.

ITEM 11. EXECUTIVE COMPENSATION.

The information required under this item is incorporated herein by
reference to the sections entitled "Election of Directors -- Compensation for
Directors," "-- Executive Compensation," "-- Employment Agreements," "-- Report
of the Compensation Committee" and "-- Stock Performance Graph" in the Company's
Proxy Statement with respect to the Annual Meeting of Stockholders to be held on
May 5, 1998.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required under this item is incorporated herein by
reference to the section entitled "Security Ownership of Certain Beneficial
Owners and Management" in the Company's Proxy Statement with respect to the
Annual Meeting of Stockholders to be held on May 5, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required under this item is incorporated herein by
reference to the section entitled "Election of Directors -- Employment
Agreements" in the Company's Proxy Statement with respect to the Annual Meeting
of Stockholders to be held on May 5, 1998.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) Documents filed as a part of this Form 10-K:

1. Financial Statements. The Consolidated Financial Statements listed
in the Index to Consolidated Financial Statements and Financial Statement
Schedules are filed as part of this Annual Report on Form 10-K.

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25

2. Financial Statement Schedules. The Financial Statement Schedules
listed in the Index to Consolidated Financial Statements and Financial
Statement Schedules are filed as part of this Annual Report on Form 10-K.

3. Exhibits. The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of this Annual Report on Form
10-K.

(b) Reports on Form 8-K:

None.

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INDEX TO FINANCIAL STATEMENTS

BAYCORP HOLDINGS, LTD.



PAGE
----

Report of Independent Public Accountants.................... F-1
Balance Sheets as of December 31, 1997 and 1996............. F-2
Consolidated Statements of Income -- Years Ended December
31, 1997, December 31, 1996 and December 31, 1995......... F-3
Consolidated Statements of Changes in Stockholders' Equity--
Years Ended December 31, 1997, December 31, 1996 and
December 31, 1995......................................... F-4
Consolidated Statements of Cash Flows -- Years Ended
December 31, 1997, December 31, 1996 and December 31,
1995...................................................... F-5
Notes to Consolidated Financial Statements.................. F-6

27

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
BayCorp Holdings, Ltd.

We have audited the accompanying consolidated balance sheets of BayCorp
Holdings, Ltd. (a Delaware corporation) and its wholly-owned subsidiary, Great
Bay Power Corporation, as of December 31, 1997 and 1996 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. 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 generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of BayCorp Holdings, Ltd. and
its wholly owned subsidiary as of December 31, 1997 and 1996, and the results of
their operations and cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Boston, Massachusetts
January 30, 1998

(Except with respect to the matter
discussed in Notes 7, 8 and 11, as to
which the date is March 19, 1998.)

F-1
28

BAYCORP HOLDINGS, LTD.

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)



DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------

ASSETS:
CURRENT ASSETS:
Cash & Cash equivalents................................... $ 3,270 $ 16,412
Short-term Investments, at market......................... 15,822 12,363
Accounts Receivable....................................... 465 2,927
Materials & Supplies, net................................. 3,816 4,121
Prepayments & Other Assets................................ 1,570 434
-------- --------
Total Current Assets................................... 24,943 36,257
-------- --------
Property, Plant, & Equipment:
Utility Plant............................................. 108,584 106,656
Less: Accumulated Depreciation............................ (9,758) (7,152)
-------- --------
Net Utility Plant......................................... 98,826 99,504
Nuclear Fuel.............................................. 15,076 20,091
Less: Accumulated Amortization............................ (6,717) (9,692)
-------- --------
Net Nuclear Fuel.......................................... 8,359 10,399
Net Property, Plant & Equipment........................ 107,185 109,903
Other Assets:
Decommissioning Trust Fund................................ 8,025 6,234
Deferred Debits & Other................................... 5 24
-------- --------
Total Other Assets..................................... 8,030 6,258
-------- --------
TOTAL ASSETS...................................... $140,158 $152,418
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses..................... $ 270 $ 129
Taxes Accrued............................................. 0 1,504
Miscellaneous Current Liabilities......................... 1,594 4,072
-------- --------
Total Current Liabilities.............................. 1,864 5,705
Operating Reserves:
Decommissioning Liability................................. 55,846 53,215
Miscellaneous Other....................................... 564 621
-------- --------
Total Operating Reserves............................... 56,410 53,836
Other Liabilities & Deferred Credits........................ 3,745 3,252
Commitments & Contingencies
Stockholders' Equity:
Common stock, $.01 par value
Authorized -- 20,000,000 shares; issued and
outstanding --
8,417,800 at December 31, 1997 and December 31, 1996... 84 84
Less: Treasury Stock -- 145,000 and 78,045 shares,
respectively, at cost.................................. (1,168) (633)
Additional paid-in capital................................ 92,100 92,100
Holding Gain (Loss) on Investments........................ 115 (149)
Accumulated Deficit....................................... (12,992) (1,777)
-------- --------
Total Stockholders' Equity............................. 78,139 89,625
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $140,158 $152,418
======== ========


(The accompanying notes are an integral part of these consolidated statements.)
F-2
29

BAYCORP HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)



1997 1996 1995
---------- ---------- ----------

Operating Revenues......................................... $ 26,642 $ 30,324 $ 24,524
Operating Expenses:
Production............................................... 20,805 17,141 17,433
Transmission............................................. 857 880 934
Administrative & General................................. 7,525 6,864 6,532
Depreciation & Amortization.............................. 3,508 3,451 3,339
Taxes other than Income.................................. 4,185 4,227 4,143
---------- ---------- ----------
Total Operating Expenses.............................. 36,880 32,563 32,381
---------- ---------- ----------
Operating Income (Loss).................................... (10,238) (2,239) (7,857)
---------- ---------- ----------
Other (Income) Deductions:
Interest and Dividend (Income) Expense................... (1,252) (1,267) (1,546)
Decommissioning Cost Accretion........................... 2,663 2,261 0
Decommissioning Trust Fund Income........................ (470) (328) 0
Unit 2 Sales and Other (Income).......................... 36 (7,005) (198)
---------- ---------- ----------
Total Other (Income) Deductions....................... 977 (6,339) (1,744)
---------- ---------- ----------
Earnings (Loss) Before Income Taxes........................ (11,215) 4,100 (6,113)
---------- ---------- ----------
Provision for Income Taxes................................. 0 0 (54)
---------- ---------- ----------
Net Income (Loss).......................................... $ (11,215) $ 4,100 $ (6,059)
========== ========== ==========
Weighted Average Shares Outstanding........................ 8,292,534 8,083,576 7,999,998
Basic and Diluted Earnings/(Loss) Per Share................ $ (1.35) $ 0.51 $ (0.76)


(The accompanying notes are an integral part of these consolidated statements.)
F-3
30

BAYCORP HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)



COMMON
STOCK, $.01 PAR VALUE LESS:
------------------------- TREASURY
ISSUED AND ISSUED AND STOCK ADDITIONAL HOLDING TOTAL
OUTSTANDING OUTSTANDING ---------------- PAID-IN GAIN/ RETAINED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL (LOSS) EARNINGS EQUITY
----------- ----------- ------- ------- ---------- ------- -------- -------------

Balance at December 31, 1994..... 8,000,000 $80 -- -- $88,030 -- $ 182 $ 88,292
Financial Results,
January 1 to
December 31, 1995............ -- -- -- -- -- -- (6,059) (6,059)
--------- --- ------- ------- ------- ----- -------- --------
Balance at December 31, 1995..... 8,000,000 80 -- -- 88,030 -- (5,877) 82,233
Treasury Stock, at cost........ -- -- 78,045 ($ 633) -- -- -- (633)
Sale of Common Stock........... 417,800 4 -- 4,069 -- -- 4,073
Net Change in Unrealized
Holding Loss................... -- -- -- -- ($148) -- (148)
Financial Results,
January 1 to
December 31, 1996............ -- -- -- -- -- 4,100 4,100
--------- --- ------- ------- ------- ----- -------- --------
Balance at December 31, 1996..... 8,417,800 84 78,045 (633) 92,099 (148) (1,777) 89,625
Treasury Stock -- 66,955
shares, at cost.............. -- -- 66,955 (535) -- -- -- (535)
Net Change in Unrealized
Holding Loss................. -- -- -- -- -- 264 -- 264
Financial Results,
January 1 to
December 31, 1997............ -- -- -- -- -- -- (11,215) (11,215)
--------- --- ------- ------- ------- ----- -------- --------
Balance at December 31, 1997..... 8,417,800 $84 145,000 ($1,168) $92,099 $ 116 ($12,992) $ 78,139
========= === ======= ======= ======= ===== ======== ========


(The accompanying notes are an integral part of these consolidated statements.)

F-4
31

BAYCORP HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
(DOLLARS IN THOUSANDS)



1997 1996 1995
-------- ------- --------

Net cash flow from operating activities:
Net Income (Loss)......................................... $(11,215) $ 4,100 $ (6,059)
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Depreciation........................................... 3,508 3,451 3,339
Amortization of nuclear fuel........................... 4,010 4,366 4,520
Decommissioning trust accretion........................ 2,663 2,261 0
Decommissioning trust interest......................... (470) (357) 0
Deferred income taxes.................................. 0 0 (94)
Writedown of assets, net............................... 0 0 758
Gain on sale of assets................................. 0 (7,061) (193)
Payment of reorganization expenses..................... 0 0 (2,653)
(Increase) decrease in accounts receivable............. 2,463 (1,393) 1,021
(Increase) decrease in materials & supplies............ 124 (70) 113
(Increase) decrease in prepaids and other assets....... (1,117) 818 1,718
Increase (decrease) in accounts payable................ 140 (107) (66)
Increase (decrease) in taxes accrued................... (1,504) 211 126
Increase (decrease) in misc. current liabilities....... (2,477) 2,635 0
Other.................................................. 435 530 183
-------- ------- --------
Net cash provided by (used in) operating
activities...................................... (3,440) 9,384 2,713
-------- ------- --------
Net cash flows (used in) investing activities:
Utility plant additions................................... (2,555) (1,486) (1,770)
Nuclear fuel additions.................................... (1,970) (5,144) (5,703)
Payments to decommissioning fund.......................... (1,106) (994) (988)
Proceeds from sale of Unit 2 assets....................... 0 7,061 0
Short term investments, net............................... (3,535) (4,724) (3,911)
-------- ------- --------
Net cash used in investing activities....................... (9,166) (5,287) (12,372)
Net cash provided by financing activities:
Sale of common stock...................................... 0 4,074 0
Reacquired Capital Stock.................................. (535) (633) 0
-------- ------- --------
Net cash (used in) provided by financing activities......... (535) 3,441 0
-------- ------- --------
Net increase (decrease) in cash and cash equivalents........ (13,141) 7,538 (9,659)
Cash and cash equivalents, beginning of period.............. 16,412 8,874 18,533
-------- ------- --------
Cash and cash equivalents, end of period.................... $ 3,271 $16,412 $ 8,874
======== ======= ========


(The accompanying notes are an integral part of these consolidated statements.)
F-5
32

BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. THE COMPANY

BayCorp Holdings, Ltd. ("BayCorp" or the "Company") serves as a holding
company for Great Bay Power Corporation ("Great Bay"). Great Bay is an electric
generating company whose principal asset is a 12.1% joint ownership interest in
the Seabrook Nuclear Power Project in Seabrook, New Hampshire (the "Seabrook
Project"). Great Bay is an exempt wholesale generator under the Public Utility
Holding Company Act of 1935 ("PUHCA"). Unlike regulated public utilities, Great
Bay has no franchise area or captive customers. Great Bay sells its power in the
competitive wholesale power markets.

Great Bay became a wholly-owned subsidiary of BayCorp in a corporate
reorganization that involved a merger of a newly-formed wholly-owned subsidiary
of BayCorp with and into Great Bay on January 24, 1997. The consolidated assets
and liabilities of Great Bay and its subsidiaries immediately before the
reorganization were the same as the consolidated assets and liabilities of
BayCorp and its subsidiaries immediately after the reorganization. Currently,
Great Bay is the sole subsidiary of BayCorp. BayCorp's principal asset is its
100% equity interest in Great Bay. The new corporate structure enables BayCorp,
either directly or through subsidiaries other than Great Bay, to engage in
businesses that Great Bay would be prohibited from pursuing due to its status as
an exempt wholesale generator under the PUHCA.

BayCorp was incorporated in Delaware in 1996. Great Bay was incorporated in
New Hampshire in 1986 and was formerly known as EUA Power Corporation (the
"Predecessor"). Great Bay sells its share of the electricity output of the
Seabrook Project in the wholesale electricity market, primarily in the Northeast
United States. Neither BayCorp nor Great Bay has operational responsibilities
for the Seabrook Project. Great Bay's share of the Seabrook Project capacity is
approximately 140 megawatts ("MW"). Great Bay currently sells all but 10 MW of
its share of the Seabrook Project capacity in the wholesale short-term market.

The Seabrook Project is a nuclear-fueled, steam electricity, generating
plant located in Seabrook, New Hampshire, which was originally planned to have
two Westinghouse pressurized water reactors, Seabrook Unit 1 and Seabrook Unit 2
(each with a rated capacity of 1,150 megawatts), utilizing ocean water for
condenser cooling purposes. Seabrook Unit 1 entered commercial service on August
19, 1990. Seabrook Unit 2 has been canceled. Great Bay became a wholesale
generating company when Seabrook Unit 1 commenced commercial operation on August
19, 1990. In 1993, the Company became an Exempt Wholesale Generator ("EWG")
under the Energy Policy Act of 1992.

Great Bay and the other Participants are parties to the Agreement for Joint
Ownership, Construction and Operation of New Hampshire Nuclear Units (the "JOA")
which establishes the respective ownership interests of the Participants in the
Seabrook Project and defines their responsibilities with respect to the ongoing
operation, maintenance and decommissioning of the Seabrook Project. In general,
all ongoing costs of the Seabrook Project, other than taxes, are divided
proportionately among the Participants in accordance with their ownership
interests in the Seabrook Project. Each Participant is only liable for its share
of the Seabrook Project's costs and not liable for any other Participant's
share. Great Bay's joint ownership interest of 12.1% is the third largest
interest among the Participants, exceeded only by the approximately 40% interest
held by Northeast Utilities and its affiliates and the 17.5% interest held by
The United Illuminating Company.

The Predecessor never reported an operating profit since its incorporation
and filed for bankruptcy in 1991. The Company's current business strategy is to
seek purchasers for its share of the Seabrook Project electricity output at
prices, either in the short term market or pursuant to medium or long term
contracts, in excess of the prices currently available in the short term
wholesale electricity market since sales at current short term rates do not
result in sufficient revenue to enable the Company to meet its long term cash
requirements for operations, maintenance and capital related costs. The
Company's ability to obtain such higher prices will depend on regional, national
and worldwide energy supply and demand factors.

F-6
33
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

As of March 1, 1998 BayCorp has five employees, including its President and
Chief Executive Officer, John A. Tillinghast, and its Chief Operating Officer,
Frank W. Getman Jr. BayCorp's wholly-owned subsidiary, Great Bay, has one
employee.

B. BANKRUPTCY PROCEEDING AND REORGANIZATION

Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of New Hampshire (the "Bankruptcy Court") on
February 28, 1991. Great Bay conducted its business as a Debtor in Possession
until November 23, 1994, at which time Great Bay's Amended Bankruptcy Plan
became effective and Great Bay emerged from Chapter 11. Financing for the
Amended Bankruptcy Plan was provided by affiliates of Omega Advisors, Inc. and
by Elliot Associates, L.P. (collectively, the "Investors"). At the time Great
Bay emerged from Chapter 11, the Investors purchased 4,800,000 shares of Great
Bay's Common Stock for $35,000,000.

C. REGULATION

Great Bay is subject to the regulatory authority of the Federal Energy
Regulatory Commission ("FERC"), the Nuclear Regulatory Commission ("NRC"), the
New Hampshire Public Utilities Commission ("NHPUC") and other federal and state
agencies as to rates, operations and other matters. Great Bay's cost of service,
however, is not regulated. As such, Great Bay's accounting policies are not
subject to the provisions of Statement of Financial Accounting Standards
("SFAS") No. 71, "Accounting for the Effects of Certain Types of Regulation."

D. USE OF MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

E. UTILITY PLANT

The costs of additions to utility plant are recorded at original cost.

F. DEPRECIATION

Utility plant is depreciated on the straight-line method at rates designed
to fully depreciate all depreciable properties over the lesser of estimated
useful lives or the Seabrook Project's remaining NRC license life, which expires
in 2026.

Capital projects constituting retirement units are charged to electric
plant. Minor repairs are charged to maintenance expense. When properties are
retired, the original cost, plus costs of removal, less salvage, are charged to
the accumulated provision for depreciation.

G. AMORTIZATION OF NUCLEAR FUEL

The cost of nuclear fuel is amortized to expense based on the rate of
burn-up of the individual assemblies comprising the total core. Great Bay also
provides for the cost of disposing of spent nuclear fuel at rates specified by
the United States Department of Energy ("DOE") under a contract for disposal
between Great Bay, through its managing agent NAESCO, and the DOE.

F-7
34
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Great Bay recorded the estimated cost of the final unspent nuclear fuel
core, which is expected to be in place at the expiration of the Seabrook
Project's NRC operating license, as part of Great Bay's original "Fresh Start"
balance sheet.

H. AMORTIZATION OF MATERIALS AND SUPPLIES

Great Bay amortizes to expense an amount designed to fully amortize the
cost of the material and supplies inventory that is expected to be on hand at
the expiration of the Plant's NRC operating license.

I. DECOMMISSIONING

Based on the Financial Accounting Standards Board's ("FASB") tentative
conclusions, Great Bay has recognized as a liability its proportionate share of
the estimated Seabrook Project decommissioning. The initial recognition of this
liability was capitalized as part of the Fair Value of the Utility Plant at
November 23, 1994. The current estimated cost to decommission the Seabrook
Project, based on a study performed for the lead owner of the Plant, is
approximately $473 million in 1997 dollars and $2.2 billion in 2026 dollars,
assuming a remaining 28 year life for the facility and a future cost escalation
rate of 5%. Based on this estimate, the present value of Great Bay's share of
this liability as of December 31, 1997 is approximately $55.8 million.

During the first quarter of 1996, the Company began to accrete its share of
the Seabrook Project's decommissioning liability. This accretion is a non-cash
charge and recognizes the Company's liability related to the closure and
decommissioning of its nuclear plant in current year dollars over the licensing
period of the plant. As a result of this accretion, Great Bay's share of the
estimated decommissioning cost increased from $50.2 million as of December 31,
1995 to $53.2 million as of December 31, 1996 to $55.8 million as of December
31, 1997.

The Seabrook Project's decommissioning estimate and funding schedule is
subject to review each year by the New Hampshire Nuclear Decommissioning Finance
Committee ("NDFC"). This estimate is based on a number of assumptions. Changes
in assumptions for such things as labor and material costs, technology,
inflation and timing of decommissioning could cause these estimates to change,
possibly materially, in the near term.

The Staff of the Securities and Exchange Commission ("SEC") has questioned
certain of the current accounting practices of the electric utility industry
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations and joint owners in the financial
statements of these entities. In response to these questions, the FASB has
agreed to review the accounting for nuclear decommissioning costs. In 1996, the
FASB issued an Exposure Draft entitled "Accounting for Certain Liabilities
Related to Closure and Removal of Long-Lived Assets." The FASB continues to work
on this project. Either a revised exposure draft or a final statement may be
issued in 1998. The Company's accounting for decommissioning was based on the
FASB's original tentative conclusions. If the current exposure draft is adopted
or accounting practices for nuclear power plant decommissioning are changed,
Great Bay's decommissioning liability and annual provision for decommissioning
could change relative to 1997. The Company is unable to predict the impact, if
any, changes in the current accounting will have on the Company's financial
statements.

Funds collected by Seabrook for decommissioning are deposited in an
external irrevocable trust pending their ultimate use. The earnings on the
external trusts also accumulate in the fund balance. The trust funds are
restricted for use in paying the decommissioning of Unit 1. The investments in
the trust are available for sale. The Company has therefore reported its
investment in trust fund assets at market value and any unrealized gains and
losses are reflected in equity. There was an unrealized holding gain of $148,126
as of December 31, 1997 and an unrealized holding loss of $192,087 as of
December 31, 1996.

F-8
35
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Although the owners of Seabrook are accumulating funds in an external trust
to defray decommissioning costs, these costs could substantially exceed the
value of the trust fund, and the owners, including Great Bay, would remain
liable for the excess. The amount required to be deposited in the trust fund is
subject to periodic review and adjustment by the NDFC, which could result in
material increases in such amounts. Based on the currently approved funding
schedule, Great Bay's decommissioning payments will be approximately $1.2
million in 1998 and escalate at 4% per year each year thereafter through 2026.

On November 15, 1992, Great Bay, the Bondholder's Committee and the
Predecessor's former parent, Eastern Utilities ("EUA") entered into a settlement
agreement that resolved certain proceedings against EUA brought by the
Bondholder's Committee. Under the settlement agreement EUA reaffirmed its
guarantee of up to $10 million of Great Bay's future decommissioning costs of
Seabrook Unit 1.

J. OPERATING REVENUES

Revenues are recorded on an accrual basis based on billing rates provided
for in contracts and approved by FERC. During the year ended December 31, 1997,
three customers accounted for 50%, 13% and 11% of total operating revenues. For
the year ended December 31, 1996, three customers accounted for 26%, 15% and 13%
of total operating revenues.

K. TAXES ON INCOME

The Company accounts for taxes on income under the liability method
required by Statement of Financial Accounting Standards No. 109.

L. CASH EQUIVALENTS AND SHORT TERM INVESTMENTS

For purposes of the Statements of Cash Flows, the Company considers all
highly liquid short-term investments with an original maturity of three months
or less to be cash equivalents. The carrying amounts approximate fair value
because of the short-term maturity of the investments.

All other short-term investments with a maturity of greater than three
months are classified as available for sale and reflected as a current asset at
market value. Changes in the market value of such securities are reflected in
equity. The unrealized holding loss on short-term investments was $32,841 for
the year ended December 31, 1997, the unrealized holding gain was $43,378 for
the year ended December 31, 1996 and the change in market value was not material
in 1995.

M. SEABROOK UNIT 2

Since the Seabrook Project was originally designed to consist of two
generating units, Great Bay also owns a 12.1% joint ownership interest in
Seabrook Unit 2. Great Bay assigns no value to Seabrook Unit 2 because on
November 6, 1986, the joint owners of the Seabrook Project, recognizing that
Seabrook Unit 2 had been canceled in 1984, voted to dispose of Unit 2. Certain
assets of Seabrook Unit 2 have been and are being sold from time to time to
third parties. On July 22, 1996, the Participants completed the sale of four
unused steam generators from Seabrook Unit 2. Great Bay received $7,036,792 in
cash from the proceeds of this sale on July 19, 1996. Great Bay had previously
written off its investment in Unit 2 and recognized a gain from this sale in the
third quarter of 1996. There were no material sales of Unit 2 assets in 1997.

The Participants are considering plans regarding disposition of Seabrook
Unit 2, but such plans have not yet been finalized and approved. Great Bay is
unable to estimate the costs for which it will be responsible in connection with
the disposition of Seabrook Unit 2. Because Seabrook Unit 2 was never completed
or operated, costs associated with its disposition will not include any amounts
for decommissioning. Great Bay currently pays its share of monthly expenses
required to preserve and protect the value of the Seabrook Unit 2 components.
Any sales of Unit 2 property or inventory are reflected in other income as gains
on the sale or
F-9
36
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

transfer of assets. Transfers of Unit 2 items to Unit 1 were done at the
historical basis of Unit 2 property or components.

N. SEABROOK OUTAGE COSTS

The Company's and Great Bay's operating results and the comparability of
these results on an interim and annual basis are directly impacted by the
operations of the Seabrook Project, including the cyclical refueling outages
(generally 18-24 months apart) as well as unscheduled outages. During outage
periods at the Seabrook Project, Great Bay has no electricity for resale and
consequently no revenues. Therefore the impact of outages on the Company's and
Great Bay's results of operations and financial position is materially adverse.

Great Bay accrues for the incremental costs of the Seabrook Project's
scheduled outages over the periods between those outages. However, Great Bay
continues to expense the normal Seabrook operating and maintenance expenses as
incurred. Therefore, the Company will incur losses during scheduled outage
periods as a result of the combination of the lack of revenue and the
recognition of normal recurring operation and maintenance costs as well as the
continuing depreciation of the utility plant. The Seabrook plant management has
scheduled the next refueling outage for March 1999 based on expected fuel
consumption. The 1999 outage has an estimated cost of $31 million. The Company's
share is approximately $3.8 million. The estimate is based on a number of
assumptions. Changes in assumptions for such things as labor and contractor
costs, required repairs and days to perform the outage and plant operations in
the interim, could cause this estimate to change.

2. NUCLEAR ISSUES

Like other nuclear generating facilities, the Seabrook Project is subject
to extensive regulation by the NRC. The NRC is empowered to authorize the
siting, construction and operation of nuclear reactors after consideration of
public health, safety, environmental and anti-trust matters.

The NRC has promulgated numerous requirements affecting safety systems,
fire protection, emergency response planning and notification systems, and other
aspects of nuclear plant construction, equipment and operation. The Company has
been, and may be, affected to the extent of its proportionate share by the cost
of any such modifications to Seabrook Unit 1.

Nuclear units in the United States have been subject to widespread
criticism and opposition. Some nuclear projects have been canceled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction defects and other difficulties. Various
groups have by litigation, legislation and participation in administrative
proceedings sought to prohibit the completion and operation of nuclear units and
the disposal of nuclear waste. In the event of a shutdown of any unit, NRC
regulations require that it be completely decontaminated of any residual
radioactivity. The cost of such decommissioning, depending on the circumstances,
could substantially exceed the owners' investment at the time of cancellation.

Public controversy concerning nuclear power could adversely affect the
operating license of Seabrook Unit 1. While the Company cannot predict the
ultimate effect of such controversy, it is possible that it could result in a
premature shutdown of the unit.

A. NUCLEAR FUEL

The Seabrook Project's joint owners have made, or expect to make, various
arrangements for the acquisition of uranium concentrate, the conversion,
enrichment, fabrication and utilization of nuclear fuel and the disposition of
that fuel after use. The owners and lead participants of each United States
nuclear unit have entered into contracts, either directly or through the
managing agents of their nuclear units, with the DOE for disposal of spent
nuclear fuel, in accordance with the Nuclear Waste Policy Act of 1982 (the
"NWPA"). The NWPA requires (subject to various contingencies) that the federal
government design, license, construct and
F-10
37
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

operate a permanent repository for high level radioactive wastes and spent
nuclear fuel and establish prescribed fees for the disposal of such wastes and
fuel. The NWPA specifies that the DOE provide for the disposal of such wastes
and spent nuclear fuel starting in January 1998.

On November 14, 1997 the U.S. District Court of Appeals ruled that the
Department of Energy has an obligation to begin disposing of spent nuclear fuel
from power plants by January 31, 1998. Since the DOE was unable to dispose of
spent fuel by the due date set by Congress in the NWPA, the DOE breached its
obligations as of that date. The DOE filed a Petition for Reconsideration of the
Appeals Court ruling and indicated costs for relief or damages would come from a
nuclear waste fund supported by owners of nuclear plants. These owners,
including Great Bay, oppose the DOE's position with respect to using funds
provided by nuclear owners to cover damages arising from the DOE's breach of its
obligations.

Objections on environmental and other grounds have been asserted against
proposals for storage as well as disposal of spent fuel. The DOE anticipates
that a permanent disposal site for spent fuel will be ready to accept fuel for
storage on or before the year 2010. However, the NRC, which must license the
site, stated only that a permanent repository would become available by the year
2025. At the Seabrook Project, there is on-site storage capacity, which, with
minimal capital expenditures, should be sufficient until the year 2010. No
near-term capital expenditures are anticipated to deal with any increase in
storage requirements after 2010.

B. FEDERAL DEPARTMENT OF ENERGY ("DOE") DECONTAMINATION AND DECOMMISSIONING
ASSESSMENT

Title XI of the Energy Policy Act of 1992 (the "Policy Act") provides for
decontaminating and decommissioning of the DOE's enrichment facilities to be
partially funded by a special assessment against domestic utilities. Each
utility's share of the assessment is to be based on its cumulative consumption
of DOE enrichment services. As of December 31, 1997, the Company had accrued its
pro rata estimated obligation of $698,000 related to the project's prior years'
usage to be paid over the 15-year period beginning October 1, 1992.

C. PRICE ANDERSON ACT

In accordance with the Price Anderson Act, the limit of liability for a
nuclear-related accident is approximately $8.9 billion, effective November 18,
1994. The primary layer of insurance for this liability is $200 million of
coverage provided by the commercial insurance market. The secondary coverage is
approximately $8.3 billion, based on the approximately 110 currently licensed
reactors in the United States. The secondary layer is based on a retrospective
premium assessment of $75.5 million per nuclear accident per licensed reactor,
payable at a rate not exceeding $10 million per year per reactor. In addition,
the retrospective premium is subject to inflation based indexing at five year
intervals and, if the sum of all public liability claims and legal costs arising
from any nuclear accident exceeds the maximum amount of financial protection
available, then each licensee can be assessed an additional 5% ($3.775 million)
of the maximum retrospective assessment. With respect to the Seabrook Project,
Great Bay would be obligated to pay its ownership share of any assessment
resulting from a nuclear incident at any United States nuclear generating
facility. Great Bay estimates its maximum liability per incident currently would
be an aggregate amount of approximately $9.59 million per accident, with a
maximum annual assessment of about $1.21 million per incident, per year.

In addition to the insurance required by the Price Anderson Act, the NRC
regulations require licensees, including the Seabrook Project, to carry all risk
nuclear property damage insurance in the amount of at least $1.06 billion, which
amount must be dedicated, in the event of an accident at the reactor, to the
stabilization and decontamination of the reactor to prevent significant risk to
the public health and safety.

F-11
38
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

D. NUCLEAR INSURANCE

Insurance has been purchased by the Seabrook Project from Nuclear Electric
Insurance Limited ("NEIL") to cover the costs of property damage,
decontamination or premature decommissioning resulting from a nuclear incident
and American Nuclear Insurance/Mutual Atomic Energy Liability Underwriters
("ANI") to cover workers' claims. All companies insured with NEIL and ANI are
subject to retroactive assessments, if losses exceed the accumulated funds
available to NEIL and ANI, respectively. The maximum potential assessment
against the Seabrook Project with respect to losses arising during the current
policy years are $26.4 million. The Company'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.

Great Bay also independently purchases business interruption insurance from
Nuclear Electric Insurance Limited ("NEIL"). The current policy is in effect
from September 15, 1997 until September 15, 1998 and provides for the payment of
a fixed weekly loss amount of $520,000 in the event of an outage at the Seabrook
Project of more than 23 weeks resulting from the property damage occurring from
a "sudden fortuitous event, which happens by chance, is unexpected and
unforeseeable." The maximum amount payable to Great Bay is $70.3 million. Under
the terms of the policy, Great Bay is subject to a potential retrospective
premium adjustment of up to approximately $640,000 should NEIL's board of
directors deem that additional funds are necessary to preserve the financial
integrity of NEIL. Since NEIL was founded in 1980, there has been no
retrospective premium adjustment; however, there can be no assurance that NEIL
will not make retrospective adjustments in the future. The liability for this
retrospective premium adjustment ceases six years after the end of the policy
unless prior demand has been made.

E. STATUS AS AN "ELECTRIC UTILITY" UNDER NRC REGULATIONS

On January 27, 1997, the NRC issued to Great Bay a temporary exemption from
the obligation of Great Bay to comply with the NRC's regulations applicable to a
non "electric utility" owner of an interest in a nuclear power plant. The NRC
staff stated in the exemption that it believed that Great Bay does not currently
satisfy the NRC definition of "electric utility." If Great Bay is an "electric
utility," then Great Bay may satisfy the NRC decommissioning requirements
through its monthly payments into a decommissioning trust fund. See
"-- Decommissioning." If Great Bay is not an "electric utility," the NRC could
require that Great Bay provide a surety bond or other allowable funding
assurance mechanism.

The temporary exemption granted Great Bay six months to establish itself as
an "electric utility" or obtain a surety bond or other allowable decommissioning
funding mechanism. In February 1997, Great Bay requested that the NRC reconsider
the staff's finding that Great Bay does not meet the NRC definition of "electric
utility." Great Bay also requested that the NRC consider granting an extension
to the temporary exemption as an alternative to making a final determination at
that time as to whether Great Bay is an "electric utility" under the NRC
definition.

On July 23, 1997, the NRC staff reaffirmed its finding that Great Bay is
not an "electric utility" and issued a one-year exemption to Great Bay from the
obligation of Great Bay to comply with the NRC's regulations applicable to a non
"electric utility" owner of an interest in a nuclear power plant. The exemption
gives Great Bay until the earlier of July 23, 1998 or 90 days following the
effective date of any revisions to the NRC's regulations regarding the NRC's
definition of "electric utility" to obtain a surety bond or other allowable
decommissioning funding assurance mechanism for Great Bay's decommissioning
liability related to its ownership in Seabrook.

On September 10, 1997, the NRC issued a proposed rule that would amend the
definition of "electric utility." The Company believes that Great Bay would not
be an "electric utility" under the proposed new definition. The NRC requested
and received comments in November 1997 on the proposed rule, but has not

F-12
39
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

issued a final rule or amendments to the proposed rule. The Company cannot
predict when or if a revision to the NRC's definition of "electric utility" will
become effective or what form it could take.

On January 23, 1998, Great Bay filed with the NRC a six-month status report
on Great Bay's efforts to obtain a surety bond or other allowable
decommissioning funding assurance mechanism. After an exhaustive survey of the
insurance market, Great Bay notified the NRC that no such surety or insurance
product is currently available on financially reasonable terms.

On January 30, 1998, Great Bay filed a petition with the NRC seeking a
determination by the NRC that acceleration of decommissioning trust fund
payments provides reasonable assurance of decommissioning funding under NRC
regulations, or, in the alternative, merits the issuance by the NRC of a
permanent exemption to Great Bay. In its petition, Great Bay proposes to
contribute sufficient funds by the year 2015 to allow sufficient monies to
accumulate, with no further payments by Great Bay to the fund after 2015, to the
full estimated amount of Great Bay's decommissioning obligation by the time the
current Seabrook operating license expires in 2026.

The Company cannot predict whether Great Bay's accelerated funding proposal
will be acceptable to the NRC or whether the NRC will grant a permanent
exemption to Great Bay. Failure to obtain relief may have a material adverse
effect on Great Bay's business, financial condition, liquidity or results of
operations.

3. TAXES ON INCOME

The following is a summary of the (benefit) provision for income taxes for
the years ended December 31, 1997, 1996 and 1995:



DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(000'S)

Federal
Current............................................. $(8,081) $(3,111) $(8,065)
Deferred............................................ 8,081 3,111 8,011
------- ------- -------
0 0 (54)
State
Current............................................. (1,927) (742) (1,923)
Deferred............................................ 1,927 742 1,923
------- ------- -------
0 0 0
------- ------- -------
Total (benefit) provision............................. $ 0 $ 0 $ (54)
======= ======= =======


F-13
40
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Accumulated deferred income taxes consisted of the following at December
31, 1997 and 1996:



1997 1996
-------- --------
(000'S)

Assets
Net operating loss carryforwards.......................... $ 76,622 $ 67,847
Decommissioning expense................................... 2,852 1,530
Unfunded pension expense.................................. 542 395
Accrued outage expense.................................... 163 727
Inventory................................................. 337 126
Other, net................................................ 59 19
Liabilities
Utility plant............................................. (19,230) (13,743)
-------- --------
Accumulated deferred income tax asset....................... 61,345 56,902
Valuation allowance......................................... (61,345) (56,902)
-------- --------
Accumulated deferred income tax asset, net.................. $ 0 $ 0
======== ========


The total income tax provision set forth above represents 0% in the years
ended December 31, 1997, 1996 and 1995. The following table reconciles the
statutory federal income tax rate to those percentages:



DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(DOLLARS IN THOUSANDS)

(Loss) Income before taxes............................ $(11,215) $ 4,100 $(6,113)
Federal statutory rate................................ 34% 34% 34%
Federal income tax (benefit) expense at statutory
levels.............................................. (3,813) 1,394 (2,078)
Increase (Decrease) from statutory levels
State tax net of federal tax benefit................ (513) 205 (1,269)
Valuation allowance................................. 4,442 (1,887) 2,703
Income of decommissioning trust..................... 0 0 305
Other............................................... (116) 288 285
-------- ------- -------
Effective federal income tax expense.................. $ 0 $ 0 $ (54)
======== ======= =======


Valuation allowances have been provided against any deferred tax assets,
net due to the limitations on the use of carryforwards, discussed below, and the
uncertainty associated with future taxable income. The valuation allowance of
$56,086,000 as of December 31, 1994, if subsequently recognized will be
allocated directly to paid in capital.

For federal income tax purposes, as of December 31, 1997, the Company had
net operating loss carry forwards ("NOLs") of approximately $196 million, which
are scheduled to expire between 2005 and 2012. Because the Company has
experienced one or more ownership changes, within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, an annual limitation is imposed
on the ability of the Company to use $136 million of these carryforwards. The
Company's best estimate at this time is that the annual limitation on the use of
$136 million of the Company's NOLs is approximately $5.5 million per year. Any
unused portion of the $5.5 million annual limitation applicable to the Company's
restricted NOL's is available for use in future years until such NOL's are
scheduled to expire. The Company's other $60 million of NOLs are not currently
subject to such limitations.

F-14
41
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

4. COMMON STOCK RESTRICTIONS

Neither the Company nor Great Bay has ever paid cash dividends on its
common stock in the past. BayCorp currently expects that it will retain all of
its future earnings and does not anticipate paying a dividend in the foreseeable
future.

5. CAPITAL EXPENDITURES

The Company's cash construction expenditures, including nuclear fuel, are
estimated to be approximately $7.4 million in 1998 and to aggregate
approximately $18.1 million for the years 1999 through 2002.

6. PURCHASED POWER AGREEMENTS

Great Bay is party to a purchased power agreement, dated as of April 1,
1993 (the "UNITIL Purchased Power Agreement"), with UNITIL Power that provides
for Great Bay to sell to UNITIL Power approximately 10 MW of power. The UNITIL
Purchased Power Agreement commenced on May 1, 1993 and runs through October 31,
2010. The current price of power under the UNITIL Purchased Power Agreement is
5.18 cents per kilowatt-hour ("kWh"). In May 1998 and annually thereafter, the
price is subject to increase in accordance with a formula that provides for
adjustments at less than the actual rate of inflation. UNITIL Power has an
option to extend the UNITIL Purchased Power Agreement for an additional 12 years
until 2022.

The UNITIL Purchased Power Agreement is front-end loaded whereby UNITIL
Power pays higher prices, on an inflation adjusted basis, in the early years of
the Agreement and lower prices in later years. The average price per kWh and the
contract formula rate in the contract are fixed over the life of the contract,
so that any excess cash received in the beginning of the contract will be
returned by the end of the contract, provided the contract does not terminate
early. The difference between revenue billed under each rate is recorded in a
"Balance Account" which increases annually to $4.1 million in July 1998, then
decreases annually, reaching zero in July 2001. Therefore, contract revenue is
recorded under Generally Accepted Accounting Principles and Emerging Issues Task
Force Ruling 91-6 based on the contract rates and no liability for the "Balance
Account" is recognized provided that it is not probable that the contract will
terminate early. If the UNITIL Purchased Power Agreement terminates prior to its
scheduled termination, and if at that time there is a positive amount in the
Balance Account, Great Bay is obligated to refund that amount to UNITIL Power.
Management believes it is not probable that either party will terminate this
contract prior to the end of its initial term.

To secure the obligations of Great Bay under the UNITIL Purchased Power
Agreement, including the obligation to repay UNITIL Power the amount in the
Balance Account, the UNITIL Purchased Power Agreement grants UNITIL Power a
mortgage on Great Bay's interest in the Seabrook Project. This mortgage may be
subordinated to first mortgage financing of up to a maximum amount of
$80,000,000. The UNITIL Power Purchase Agreement further provides that UNITIL
Power's mortgage will rank pari passu with other mortgages that may hereafter be
granted by Great Bay to other purchasers of power from Great Bay to secure
similar obligations, provided that (i) the maximum amount of indebtedness
secured by the first mortgage on the Seabrook Interest may not exceed
$80,000,000, and (ii) the combined total of all second mortgages on the Seabrook
Interest may not exceed the sum of (a) $80,000,000 less the total amount of
Great Bay's debt then outstanding which is secured by a first mortgage plus (b)
$57,000,000.

Great Bay is also party to a Purchased Power Agreement, dated November 9,
1995 (the "Bangor Purchased Power Agreement"), with Bangor Hydro-Electric
Company ("Bangor Hydro") pursuant to which Bangor Hydro agreed to purchase from
Great Bay, subject to increase or reduction under certain circumstances, 10 MW
of electricity during the months of January through March 1996 and for the
months of November 1996 through March 1997 and November 1997 through March 1998.
Pursuant to the Bangor Purchased Power Agreement, Great Bay also granted to
Bangor Hydro an extension option to purchase from

F-15
42
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Great Bay, under certain circumstances, up to 10 MW of electricity for the
months of November 1998 through March 1999 and November 1999 through March 2000.
This option must be exercised by October 22, 1998.

7. PECO SERVICES AGREEMENT AND WARRANT AGREEMENT

Great Bay and PECO Energy Company ("PECO") entered into a Services
Agreement as of November 3, 1995 (the "PECO Services Agreement"), pursuant to
which PECO was appointed as Great Bay's exclusive agent to market and sell Great
Bay's uncommitted portion of electricity generated by the Seabrook Project.
Proceeds from the sale of Great Bay's electricity together with reservation fees
payable by PECO to Great Bay were shared between Great Bay and PECO in
accordance with formulas set forth in the PECO Services Agreement. In addition,
PECO committed, under certain circumstances, to provide back-up power during
periods in which power was partially or totally unavailable from the Seabrook
Project. The PECO Services Agreement became effective on December 31, 1995 and
had initially provided for a term of two years.

At the time that Great Bay entered into the PECO Services Agreement, Great
Bay entered into a Warrant Purchase Agreement (the "PECO Warrant Purchase
Agreement") pursuant to which, on February 15, 1996, PECO purchased a warrant
from Great Bay for $1,000,000. This warrant entitled PECO to purchase 4.99% of
the total shares outstanding, at that time, of the Company's Common Stock for
approximately $4.1 million.

On September 30, 1996, PECO exercised its warrant and purchased 417,800
shares, or 4.99% at that time, of Great Bay's Common Stock at a price of $9.75
per share. As a result of the exercise of the warrant by PECO, the PECO Services
Agreement was automatically extended through December 31, 1998. In addition, the
parties agreed to extend the PECO Services Agreement for an additional year
through December 31, 1999. Under the terms of the warrant, the $1,000,000
received for the purchase of the warrant was credited towards the purchase price
for the newly issued shares. Thus, Great Bay received an additional $3.1 million
as a result of PECO's exercise of the warrant.

On February 12, 1998, Great Bay sent a letter to PECO informing PECO that
Great Bay had terminated PECO as Great Bay's exclusive marketing agent. On
February 24, 1998, Great Bay filed suit against PECO in the United States
District Court for the District of New Hampshire seeking a declaratory judgment
that Great Bay properly terminated the PECO Services Agreement and seeking
damages arising out of PECO's breach of the PECO Services Agreement. On March
10, 1998, PECO filed a motion seeking to prevent Great Bay from terminating the
PECO Services Agreement. At that time, PECO also filed counterclaims seeking
damages for alleged breach of contract and alleged loss of good will and harm to
PECO's reputation. See "Subsequent Events."

As of March 1, 1998, Great Bay assumed all marketing responsibilities from
PECO. Great Bay expects there will be no interruption in its ability to market
its power in the New England region.

8. TRANSACTIONS WITH RELATED PARTIES

In addition to the transactions with PECO discussed in Footnote 7, the
Company has the following related party transaction.

Under the PECO Services Agreement, PECO acted as the Company's exclusive
agent to market and sell the Company's approximately 130MW of uncommitted
capacity generated by the Company's 12% ownership in the Seabrook Nuclear Power
Plant. This Services Agreement commenced on November 3, 1995 and had been
extended through December 31, 1999. PECO paid the Company a reservation fee
based on the hours during which Seabrook generates energy. The Company paid PECO
a service fee based on net revenues and a Seabrook operating capacity factor.
This service from PECO was expected to permit the Company to compete

F-16
43
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

more effectively for firm, all requirements power contracts. This arrangement
also provided for the Company and PECO to jointly pursue other opportunities
that were intended to maximize the value of the Company's interest in Seabrook.
For the year ended December 31, 1997, the Company expensed $1,813,062 for PECO's
net marketing fees.

On February 12, 1998, Great Bay sent a letter to PECO informing PECO that
Great Bay had terminated PECO as Great Bay's exclusive marketing agent. On
February 24, 1998, Great Bay filed suit against PECO in the United States
District Court for the District of New Hampshire seeking a declaratory judgment
that Great Bay properly terminated the PECO Services Agreement and seeking
damages arising out of PECO's breach of the PECO Services Agreement. On March
10, 1998, PECO filed a motion seeking to prevent Great Bay from terminating the
PECO Services Agreement. At that time, PECO also filed counterclaims seeking
damages for alleged breach of contract and alleged loss of good will and harm to
PECO's reputation. See "Subsequent Events."

8. STOCK OPTION PLAN

On April 24, 1995, the Board of Directors of the Company established the
1995 Stock Option Plan (the "Plan"), which received shareholder approval at the
Company's annual meeting on April 16, 1996. The purpose of the Plan is to secure
for the Company and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company who are expected to contribute to the Company's future growth
and success. Options granted pursuant to the Plan may be either incentive stock
options meeting the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet the requirements of Section
422. The maximum number of shares of Common Stock that may be issued and sold
under the Plan is 600,000 shares. The Plan will be administered by the Board of
Directors of the Company and may be modified or amended by the Board in any
respect, subject to shareholder approval in certain instances.

Upon the merger of Great Bay and a newly-formed wholly-owned subsidiary of
BayCorp on January 24, 1997, each holder of Great Bay options under the Great
Bay Option Plan was granted substitute options by BayCorp under the BayCorp
Stock Option Plan to purchase an equal number of shares of BayCorp Common Stock
on the same terms and at the same exercise price per share as presently provided
for by the Great Bay Options. The BayCorp Stock Option Plan is identical to the
Great Bay Stock Option Plan. The Great Bay Stock Option Plan was terminated as
of the effective date of the merger.

The Company accounts for the plan under APB Opinion No. 25, under which no
compensation cost has been recognized as the options are granted at Fair Market
Value.

Had compensation cost for the plan been determined consistent with FASB
Statement No. 123, Accounting for Stock Based Compensation, the Company's net
income and earnings per share would have been reduced to the following pro forma
amounts.



(DOLLARS IN THOUSANDS)
1997 1996
-------- ------

Net Income: As Reported................................... $(11,215) $4,100
Pro Forma..................................... (11,414) 3,475
EPS: As Reported................................... $ (1.35) $ 0.51
Pro Forma..................................... (1.38) 0.43


Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in

F-17
44
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

future years. A summary of the Company's stock option plan at December 31, 1997,
1996 and 1995, and changes during the years then ended, is presented in the
table and narrative below:



1997 1996
------------------- -------------------
WTD AVG WTD AVG
SHARES EX PRICE SHARES EX PRICE
------- -------- ------- --------

Outstanding at beg. of year........................ 445,000 $8.15 335,000 $8.17
Granted............................................ 60,000 7.33 110,000 8.09
Exercised.......................................... -- -- --
Forfeited.......................................... -- -- --
Expired............................................ -- -- --
Outstanding at end of year......................... 505,000 8.05 445,000 8.15
Exercisable at end of year......................... 425,000 8.04 285,000 8.17
Weighted average fair value of options granted..... $ 3.32 $ 4.51


The 505,000 options outstanding at December 31, 1997 have exercise prices
between $7.25 and $9, with a weighted average price of $8.05, and a remaining
weighted average contractual life of 5.8 years.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants in 1997, 1996 and 1995 respectively: weighted average risk-free interest
rates of 6.7, 6.7 and 6.8 percent; expected dividend yields of 0 percent;
weighted average expected lives of 7, 6 and 9 years; and expected volatility of
27 percent.

9. NEW ACCOUNTING PRONOUNCEMENTS

In February 1997, the FASB issued SFAS 128, "Earnings Per Share" effective
for both interim and annual periods ending after December 15, 1997. SFAS 128
establishes standards for computing and presenting earnings per share ("EPS").
The Company has adopted SFAS 128 and it did not have any material impact on the
Company's computation and presentation of basic EPS.

10. PROPERTY TAXES

For each of the tax years 1994, 1995, 1996 and 1997, Great Bay filed
property tax abatement applications with the town of Seabrook and two other New
Hampshire towns in which the Seabrook Project is located. Great Bay paid the
1994, 1995 and half of the 1996 property taxes billed by the Towns of Seabrook,
Hampton and Hampton Falls, New Hampshire (collectively, the "Towns") but
withheld payment of the second half of the 1996 property taxes billed by the
Towns, based on Great Bay's position that the portion of 1996 property taxes
paid to the Towns exceeded the amount of the total 1996 property taxes
appropriately payable by Great Bay to the Towns. Great Bay also withheld the
first half of its 1997 property taxes to the Towns. The abatement request for
tax years 1994, 1995 and 1996 were denied. Great Bay filed appeals for each of
those years with the New Hampshire Board of Tax and Land Appeals. The appeals
are currently pending and a hearing on the first phase of these appeals is
scheduled for May 12, 1998.

In December 1996, eight of the Joint Owners of the Seabrook Project (the
"Demanding Joint Owners") served a demand on Great Bay for arbitration of a
dispute between Great Bay and the Demanding Joint Owners concerning the
allocation among the joint owners of real property taxes assessed by the Towns
against the Seabrook Project. Great Bay claimed that the Joint Owners Agreement
does not provide for allocation of real estate tax liabilities in proportion to
each joint owner's ownership interest in the Seabrook Project. The Demanding
Joint Owners claimed that real estate taxes should be allocated in accordance
with each Participant's ownership interest.

F-18
45
BAYCORP HOLDINGS, LTD.

NOTES TO FINANCIAL STATEMENTS -- CONTINUED

In September 1997, the arbitrator issued a decision requiring Great Bay to
pay its share of all property taxes assessed upon the Seabrook Project in a
single tax bill in accordance with Great Bay's percentage ownership in the
Seabrook Project. Accordingly, in October 1997, Great Bay paid under protest
$3,168,903 for property taxes and accrued interest for the second half of 1996
and the first half of 1997 to the Towns. In December 1997, Great Bay paid
$1,266,194 for property taxes due to the Towns for the second half of 1997.

The arbitrator's decision does not affect the tax abatement litigation
pending against the Towns for tax years 1994 through 1997, nor does it affect
Great Bay's ability to assert that it is entitled to a separate tax bill and
assessment from the Towns. In addition, on February 28, 1997 and February 27,
1998, NAESCO, the current managing agent for the Seabrook Project, purported to
file tax abatement applications on behalf of all the Joint Owners for the 1996
and 1997 tax years, respectively.

11. SUBSEQUENT EVENTS

On February 12, 1998, Great Bay sent a letter to PECO informing PECO that
Great Bay intended to terminate PECO as Great Bay's exclusive marketing agent.
On February 24, 1998, Great Bay filed suit against PECO in the United States
District Court for the District of New Hampshire seeking a declaratory judgment
that Great Bay properly terminated the PECO Services Agreement and seeking
damages arising out of PECO's breach of the PECO Services Agreement. In its
complaint, Great Bay alleges that (i) PECO has entered into a number of
wholesale power agreements in its own name and for its own benefit without
bringing these opportunities to Great Bay's attention or submitting bids on
behalf of Great Bay and (ii) PECO failed to offer Great Bay's power on a firm
basis to customers as required under the PECO Services Agreement. On February
27, 1998, Great Bay sent a letter to PECO notifying PECO that the Services
Agreement was terminated.

On March 10, 1998, PECO filed a motion in the United States District Court
for the District of New Hampshire for a preliminary injuction to prevent Great
Bay from terminating the PECO Services Agreement. At that time, PECO also filed
counterclaims seeking damages in an amount in excess of $5,000,000 for alleged
breach of contract, alleged loss of goodwill and alleged harm to PECO's
reputation. PECO's counterclaim contained seven counts: breach of
contract/wrongful termination, breach of exclusivity promise, breach of the
covenant of good faith and fair dealing, unjust enrichment, defamation, unfair
trade practices and an action for declaratory judgment. Great Bay believes that
PECO's motion and counterclaims are without merit. Great Bay intends to
vigorously pursue its claims against PECO. On March 19, 1998, a hearing was held
on PECO's motion for a preliminary injuction. The judge took the matter under
advisement and is expected to issue a decision shortly.

F-19
46

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.

BayCorp Holdings, Ltd.

March 24, 1998 By: /s/ JOHN A. TILLINGHAST
------------------------------------
John A. Tillinghast
President

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/ JOHN A. TILLINGHAST President, Treasurer and Chief March 24, 1998
- --------------------------------------------- Executive Officer (principal executive
John A. Tillinghast officer, principal financial officer
and principal accounting officer)

Director
- ---------------------------------------------
Kenneth A. Buckfire

/s/ STANLEY I. GARNETT Director March 24, 1998
- ---------------------------------------------
Stanley I. Garnett

/s/ ANDREW J. KURTZ Director March 24, 1998
- ---------------------------------------------
Andrew J. Kurtz

Director
- ---------------------------------------------
Charles A. Leeds, Jr.

47

EXHIBIT INDEX



EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------

3.1 -- Certificate of Incorporation of the Registrant.(1)
3.2 -- By-laws of the Registrant.(1)
10.1 -- Agreement Between Bangor Hydro-Electric Company, Central
Maine Power Company, Central Vermont Public Service
Corporation, Fitchburg Gas and Electric Light Company, Maine
Public Service Company and EUA Power Corporation relating to
use of certain transmission facilities, dated October 20,
1986.(2)
10.2 -- Limited Guaranty by Eastern Utilities Associates of
Decommissioning Costs in favor of Joint Owners of the
Seabrook Project, dated May 5, 1990.(2)
10.3 -- Composite Agreement for Joint Ownership, Construction and
Operation of New Hampshire Nuclear Units, as amended, dated
November 1, 1990.(2)
10.4 -- Seventh Amendment to and Restated Agreement for Seabrook
Project Disbursing Agent as amended through and including
the Second Amendment, by and among North Atlantic Energy
Service Corporation, Great Bay Power Corporation and other
Seabrook Project owners, dated November 1, 1990.(2)
10.5 -- Seabrook Project Managing Agent Operating Agreement by and
among the North Atlantic Energy Service Corporation, Great
Bay Power Corporation and parties to the Joint Ownership
Agreement, dated June 29, 1992.(2)
10.6 -- Settlement Agreement by and among EUA Power Corporation,
Eastern Utilities Associates and the Official Bondholders'
Committee, dated November 18, 1992.(2)
10.7 -- Purchased Power Agreement between UNITIL Power Corporation
and Great Bay Power Corporation, dated April 26, 1993.(2)
10.8 -- Power Purchase Option Agreement between UNITIL Power
Corporation and Great Bay Power Corporation, dated April 26,
1993.(2)
10.9 -- Second Mortgage and Security Agreement between UNITIL Power
Corporation and Great Bay Power Corporation, dated December
22, 1993.(2)
10.10 -- Third Mortgage and Security Agreement between UNITIL Power
Corporation and Great Bay Power Corporation, dated December
22, 1993.(2)
10.11 -- Registration Rights Agreement between Great Bay Power
Corporation and the Selling Stockholders, dated April 7,
1994 (the "Registration Rights Agreement").(2)
10.12 -- Amendment to Registration Rights Agreement between Great Bay
Power Corporation and the Selling Stockholders, dated
November 23, 1994.(2)
10.13 -- Stock and Subscription Agreement among Great Bay Power
Corporation and the Selling Stockholders, dated April 7,
1994.(2)
10.14 -- Acknowledgment and Amendment to Stock and Subscription
Agreement, dated November 23, 1994.(2)
10.15 -- Settlement Agreement by and among Great Bay Power
Corporation, the Official Bondholders' Committee and the
Selling Stockholders, dated September 9, 1994.(2)
10.16 -- Letter Agreement, dated December 20, 1994, between Great Bay
Power Corporation and the Selling Stockholders amending
Registration Rights Agreement, as previously amended on
November 23, 1994.(2)
10.17 -- Letter Agreement, dated March 29, 1995, between Great Bay
Power Corporation and the Selling Stockholders amending
Registration Rights Agreement, as previously amended on
November 23, 1994 and December 20, 1994.(2)


II-1
48



EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------

10.18 -- Employment Agreement between John A. Tillinghast and Great
Bay Power Corporation, dated October 8, 1996.(3)(8)
10.19 -- Incentive Stock Option Agreement, dated as of April 24,
1995, by and between John A. Tillinghast and Great Bay Power
Corporation.(4)(8)
10.20 -- Employment Agreement between Frank W. Getman Jr. and Great
Bay Power Corporation, dated August 1, 1995.(5)(8)
10.21 -- Amendment No. 1 to Employment Agreement between Frank W.
Getman Jr. and Great Bay Power Corporation, dated September
17, 1996.(3)(8)
10.22 -- Incentive Stock Option Agreement, dated as of August 1,
1995, by and between Frank W. Getman Jr. and Great Bay Power
Corporation.(4)(8)
10.23 -- Incentive Stock Option Agreement, dated as of September 17,
1996, by and between Frank W. Getman Jr. and Great Bay Power
Corporation.(3)(8)
10.24 -- Services Agreement between PECO Energy Company and Great Bay
Power Corporation, dated November 3, 1995.(6)(7)
10.25 -- Warrant Purchase Agreement between PECO Energy Company and
Great Bay Power Corporation, dated November 3, 1995.(5)
10.26 -- 1996 Stock Option Plan of the Registrant.(1)(8)
21.1 -- List of Subsidiaries of the Registrant.(9)
23.1 -- Consent of Arthur Andersen LLP.(9)


- ---------------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-4
(Registration Statement 333-3362) filed on July 12, 1996 and incorporated
herein by reference.

(2) Filed as an exhibit to the Registration Statement on Form S-1 of Great Bay
Power Corporation (Registration No. 33-88232) declared effective on April
17, 1995 and incorporated herein by reference.

(3) Filed as an exhibit to the Company's Annual Report on Form 10-K (File No.
1-12527) on March 26, 1997 and incorporated herein by reference.

(4) Filed as an exhibit to the Quarterly Report on Form 10-Q of Great Bay Power
Corporation for the quarter ended March 31, 1995 (File No. 0-25748) on May
9, 1995 and incorporated herein by reference.

(5) Filed as an exhibit to the Quarterly Report on Form 10-Q of Great Bay Power
Corporation for the quarter ended June 30, 1995 (File No. 0-25748) on August
14, 1995 and incorporated herein by reference.

(6) Filed as an exhibit to the Quarterly Report on Form 10-Q of Great Bay Power
Corporation for the quarter ended September 30, 1995 (File No. 0-25748) on
November 14, 1995 and incorporated herein by reference.

(7) Confidential treatment granted as to certain portions.

(8) Management contract or compensation plan or arrangement required to be filed
as an exhibit pursuant to Item 14(c) of Form 10-K.

(9) Filed as an exhibit to this Annual Report on Form 10-K.

II-2
49

BOARD OF DIRECTORS

JOHN A. TILLINGHAST
Chairman of the Board
President

KENNETH A. BUCKFIRE
Managing Director,
Wasserstein Perella & Co.

STANLEY I. GARNETT
Executive Vice President
Florida Progress Corporation

ANDREW J. KURTZ
Portfolio Manager,
Elliot Associates, L.P.

CHARLES A. LEEDS, JR.
Portfolio Manager,
Omega Advisors, Inc.

OFFICERS

JOHN A. TILLINGHAST
Chairman of the Board
Chief Executive Officer
President
Treasurer

FRANK W. GETMAN JR.
Chief Operating Officer
General Counsel
Secretary

CORPORATE COUNSEL

Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109

TRANSFER AGENT

American Stock Transfer and Trust Company
40 Wall Street
New York, New York 10005

INDEPENDENT AUDITORS

Arthur Andersen LLP
225 Franklin Street
Boston, Massachusetts 02110

CORPORATE OFFICES

Cocheco Falls Millworks,
100 Main Street, Suite 201
Dover, New Hampshire 03820-3835

ANNUAL MEETING

The Annual Meeting of Stockholders
will be held on May 5, 1998
at 10:00 a.m. EST at the offices of the
American Stock Exchange, 86 Trinity Place,
New York, New York.

FORM 10-K

For a copy of the Form 10-K Annual Report
filed with the Securities and Exchange
Commission, write to the Company's Corporate
Offices or call (603) 742-3388.

STOCK INFORMATION

The Company's stock is listed on
the American Stock Exchange under
the symbol 'MWH'.
50

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