As filed with the SEC on November 27, 2002
File No. 70-10084
United States Securities and Exchange Commission
Washington, D.C. 20549
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Pre-Effective Amendment No. 2 to Form U-1
Application/Declaration
Under the
Public Utility Holding Company Act of 1935
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Concord Electric Company Exeter & Hampton Electric Company
One McGuire Street 114 Drinkwater Road
Concord, NH 03301 Kensington, NH 03833
Unitil Corporation
6 Liberty Lane West
Hampton, NH 03842-1720
(name and principal executive office of applicants
and top registered holding company)
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Mark H. Collin
Treasurer and Secretary
Unitil Corporation
6 Liberty Lane West
Hampton, NH 03842-1720
(name and address of agent for service for all applicants)
The Commission is also requested to send copies
of any communication in connection with this matter to:
Sheri E. Bloomberg Meabh Purcell
LeBoeuf, Lamb, Greene & MacRae, L.L.P. LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street 260 Franklin Street, Suite 23
New York, NY 10019-5389 Boston, MA 02110
(212) 424-8000 (617) 439-9500
Facsimile: (212) 424-8500 Facsimile: (617) 439-0341
TABLE OF CONTENTS
Item 1. Description of the Proposed Transaction................................1
A. Introduction...........................................................1
B. General Request........................................................2
C. Background.............................................................2
D. Summary of the Proposed Transition.....................................3
E. Intended Benefits from the Merger......................................9
Item 2. Fees, Commissions and Expenses........................................11
Item 3. Applicable Statutory Provisions.......................................11
A. Applicable Provisions.................................................11
Item 4. Regulatory Approvals..................................................13
Item 5. Procedure.............................................................14
Item 7. Information as to Environmental Effects...............................16
Signature.....................................................................17
i
This Pre-Effective Amendment No. 2 amends and restates the
Application-Declaration previously filed on August 30, 2002 and October 17, 2002
as follows:
Item 1. Description of the Proposed Transaction
A. Introduction
This Application-Declaration ("Application") seeks approvals relating
to the proposed merger (the "Merger") of Concord Electric Company ("CECo") and
Exeter & Hampton Electric Company ("E&H"), the two New Hampshire retail electric
utility subsidiaries of Unitil Corporation ("Unitil", and together with CECo and
E&H, the "Applicants"), a registered public utility holding company. Applicants
propose that upon receipt of all the necessary regulatory approvals, E&H will
merge with and into CECo to form a single retail electric utility subsidiary of
Unitil, under the new name of Unitil Energy Systems, Inc. ("UES").
The Merger is one of the elements of the Unitil system restructuring
proposal before the New Hampshire Public Utilities Commission ("NHPUC"), which
was adopted pursuant to and as required by the New Hampshire Electricity
Restructuring Law, codified at RSA 374-F. Unitil's restructuring proposal
contains four principal elements: (l) the merger of CECo and E&H into a single
distribution company, UES, that will be subject to the jurisdiction of the
NHPUC; (2) divestiture of the power supply portfolio of Unitil Power Corp.,
Unitil's power supply subsidiary, and the solicitation and acquisition by UES of
replacement sources of energy necessary for it to meet its obligation to provide
transition service and default service to its retail customers; (3)
implementation by UES of new unbundled rates to be approved by the NHPUC that
reflect the Merger and the implementation of the restructuring requirements of
New Hampshire RSA374-F; and (4) introduction of customer choice for UES's New
Hampshire customers.
On October 18, 2002, the Commission issued a notice of the filing of
the Application-Declaration in this proceeding and an order authorizing the
Applicants to solicit proxies from the holders of the outstanding shares of
E&H's preferred stock (the "Solicitation"), in favor of the Merger and related
transactions and the solicitation of consents from bondholders of E&H and CECo
in connection with a proposed indenture amendment.
B. General Request
Applicants request authorization under Sections 9(a)(2) and 10 of the
Act to effect the Merger. Applicants request authorization to amend and combine
CECo's and E&H's debt indentures into a single UES indenture and revise the
existing authorization for the Unitil system money pool, in each case to reflect
the Merger. The proposed form of amended indenture for UES is included in
Exhibit B-3 hereto.
C. Background
In 1984, Unitil was formed through a statutory share exchange under
New Hampshire law as a result of which CECo and E&H became subsidiaries of
Unitil. At that time, Unitil Power Corp. ("UPC") and Unitil Service Corp.
("USC") were also formed as subsidiaries of Unitil. Fitchburg Gas and Electric
Light Company ("FG&E"), a Massachusetts combination gas and electric utility,
became a subsidiary of Unitil in 1992 as a result of a merger of a subsidiary of
Unitil into FG&E. As a result of this transaction, Unitil became a registered
holding company under the Act.
CECo is a public utility company within the meaning of the Act. CECo
is engaged in the transmission and distribution of electric energy at regulated
rates to approximately 28,000 customers in Concord and the capital region of New
Hampshire. CECo is regulated as a public utility in New Hampshire. As of June
30, 2002, CECo reported net utility plant of $37,417,000 and operating revenues
for the 12 months ended June 30, 2002 of $52,263,000.
E&H is a public utility company within the meaning of the Act. E&H is
engaged in the transmission and distribution of electric energy at regulated
rates to approximately 41,000 customers in Exeter and the seacoast region of New
Hampshire. E&H is regulated as a public utility by the New Hampshire Public
Utilities Commission. As of June 30, 2002, E&H reported net utility plant of
$43,221,000 and operating revenues for the 12 months ended June 30, 2002 of
$58,053,000.
While the utility operations of CECo and E&H are administered and
coordinated through Unitil's centralized service company, USC, and each company
has, since 1986, secured all of its requirements for electric energy from UPC,
the companies have different retail tariffs,
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rates and rate bases. The Merger will result in a new unified rate structure and
a single rate base, and the elimination of any inefficiencies and duplicative
costs resulting from the operation of the companies as two separate entities.
D. Summary of the Proposed Transaction
To accomplish the Merger, the companies entered into a Merger
Agreement that has been approved by their respective boards of directors.
Consummation of the transactions contemplated by the Merger Agreement will be
subject to the receipt of all necessary regulatory approvals and to the approval
of the shareholders of each company. Under the terms of the Merger Agreement,
E&H will be merged with and into CECo with CECo as the surviving corporation. In
connection with the Merger, CECo will change its name to Unitil Energy Systems,
Inc. ("UES"). As a result of the Merger, all of E&H's assets and liabilities
will, by operation of law, become the assets and liabilities of CECo.
1. Description of Outstanding Equity Securities of CECo and E&H.
CECo currently has 250,000 authorized shares of common stock (the
"CECo Common Stock"), of which 131,745 shares are issued and outstanding and
owned both of record and beneficially by Unitil; 2,250 authorized shares of
non-cumulative preferred stock (the "CECo Non-Cumulative Preferred Stock"), all
of which are issued and outstanding and none of which is owned, of record or
beneficially, by Unitil; and 15,000 authorized shares of cumulative preferred
stock (the "CECo Cumulative Preferred Stock"), of which 2,150 shares are issued
and outstanding in a single series designated the "8.70% Series," none of which
is owned, of record or beneficially, by Unitil. The CECo Non-Cumulative
Preferred Stock is entitled to vote on all matters brought before the
shareholders of CECo together with the CECo Common Stock, with each outstanding
share entitled to one vote. The CECo Non-Cumulative Preferred Stock is not
entitled to vote as a separate class. The CECo Cumulative Preferred Stock is not
entitled to vote on any matter, except as may otherwise be authorized or
required by the Business Corporation Act. Under the Business Corporation Act,
the CECo Cumulative Preferred Stock is not entitled to vote on the Merger and
related transactions.
E&H currently has 197,417 authorized shares of common stock (the "E&H
Common Stock"), of which 195,000 shares are issued and outstanding and owned
both of record and beneficially by Unitil; and 25,000 authorized shares of
cumulative preferred stock (the
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"E&H Cumulative Preferred Stock"), of which a total of 9,704 shares are issued
and outstanding in four series as follows: 840 shares of the "5% Dividend
Series", 1,680 shares of the "6% Dividend Series", 3,331 shares of the "8.75%
Dividend Series" and 3,853 shares of the "8.25% Dividend Series". None of the
E&H Cumulative Preferred Stock is owned, of record or beneficially, by Unitil.
The E&H Cumulative Preferred Stock is not entitled to vote as a separate class,
unless such a class vote is otherwise authorized or required by the Business
Corporation Act. Under the Business Corporation Act, each series of the E&H
Cumulative Preferred Stock is entitled to vote as a separate class on the
proposed Merger with CECo, since, as described below, the terms of the Merger
Agreement provide for the issuance to the holders of the E&H Cumulative
Preferred Stock in exchange for their shares of E&H Cumulative Preferred Stock
of an equal number of shares of CECo Cumulative Preferred Stock in four new
series which will have the same terms and conditions as the existing series of
the E&H Cumulative Preferred Stock for which they will be exchanged.
The authorized and unissued shares of CECo Cumulative Preferred Stock
may be issued in series by CECo from time to time upon authorization of its
board of directors, with the terms of each new series to be approved by the vote
of two-thirds of the outstanding shares of CECo Common Stock and CECo
Non-Cumulative Preferred Stock.
As part of the approval of the Merger Agreement, the board of
directors of CECo and the holders of the CECo Common Stock and CECo
Non-Cumulative Preferred Stock also approved an amendment to the CECo Articles
of Incorporation creating the four new series of CECo Cumulative Preferred Stock
to be issued in the Merger to the holders of the E&H Cumulative Preferred Stock.
As previously noted, these four new series will have the same terms as the four
series of E&H Cumulative Preferred Stock for which they will be exchanged.
2. Terms of the Merger Agreement.
Pursuant to the Merger Agreement, upon the effectiveness of the
Merger, all of the issued and outstanding shares of E&H Common Stock will be
converted into a single share of CECo Common Stock, and each share of E&H
Cumulative Preferred Stock will be converted into a share of a new series of
CECo Cumulative Preferred Stock, each such new series of CECo Cumulative
Preferred Stock to have the same terms and conditions as the existing series of
the E&H Cumulative Preferred Stock for which they will be exchanged. The shares
of CECo
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Common Stock, CECo Non-Cumulative Preferred Stock and CECo Cumulative Preferred
Stock issued and outstanding immediately prior to the Merger will remain
outstanding and will not be affected by the Merger.
3. Amendments to Debt Indentures
E&H is party to an Indenture of Mortgage and Deed of Trust dated as of
December 1, 1952 (the "E&H Indenture"), and CECo is party to an Indenture of
Mortgage and Deed of Trust dated as of July 15, 1958 (the "CECo Indenture").
There are currently three series of bonds outstanding under each of the E&H
Indenture and the CECo Indenture.
While CECo and E&H could accomplish the Merger without combining the
two indentures, which requires the consent of bondholders under the CECo
Indenture and the E&H Indenture, doing so would result in the surviving company
having to administer two separate indentures with somewhat differing provisions.
Accordingly, in connection with the Merger, CECo and E&H are proposing to
combine, amend and restate the E&H Indenture and the CECo Indenture into a
single Indenture under which all of the currently outstanding bonds of E&H and
CECo would remain outstanding. Bondholders under the new Indenture would be
secured ratably in all of the real property assets of UES on the same terms on
which they are currently secured in the real property assets of CECo and E&H.
The consent of each bondholder under the E&H Indenture and the CECo
Indenture will be necessary to accomplish the proposed combination, amendment
and restatement of the two Indentures. Pursuant to the Commission's order dated
October 18, 2002, Applicants received authorization to seek such consent to the
extent required under Rule 62 of the Act.
While the CECo Indenture and the E&H Indenture are largely identical
instruments, there are differences between them. As part of the combination,
amendment and restatement process, CECo and E&H propose to conform the
provisions of the Indentures. Any special provisions applicable to the separate
series of bonds under each Indenture which are contained in the Supplemental
Indentures pursuant to which those series were issued will be preserved in the
combination, amendment and restatement of the two Indentures. The proposed
combination, amendment and restatement will not effect any material economic
change in the
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provisions applicable to the bonds or any series thereof, such as their
respective rates of interest, maturities, amounts outstanding or redemption
features.
However, in the process of amending, restating and combining the two
Indentures, there are certain differences which the companies are proposing to
conform the Indentures. The following list summarizes the only material
differences between the two Indentures, and the manner in which the differences
are proposed to be resolved:
a. Section 4.04 of each Indenture contains a test governing the
issuance of additional bonds under the Indenture, based upon a calculation of
"Net Bondable Expenditures" for property additions. The E&H Indenture currently
permits the issuance of additional bonds to the extent of 60% of Net Bondable
Expenditures for property additions, while the Concord Indenture permits the
issuance of additional bonds to the extent of 68% of Net Bondable Expenditures
for property additions. The Applicants are proposing that to use the 68% test in
the amended and restated Indenture.
b. Section 6.01 of each of Indenture contains a test for the issuance
of bonds against cash deposits, which is based on a multiple of earnings
available for interest charges. The multiple in the case of the E&H Indenture is
2; and in the case of the Concord Indenture it is 2 1/2. The Applicants are
proposing that the amended and restated Indenture use a multiple of 2 in this
provision. It should be noted that neither company has ever issued bonds under
this provision.
c. Section 10.04A of each Indenture permits the release of property
from the lien of the Indenture under certain circumstances, including an annual
exemption for non-utility property having a value of not more than $150,000. The
Applicants are proposing to increase this amount to $350,000 in the amended and
restated Indenture.
d. Rather than being secured in the separate property of CECo and E&H,
the CECo and E&H bondholders will be secured ratably in all of the property of
the combined entity upon the effectiveness of the Merger and the amendment and
restatement of the two Indentures into a single Indenture.
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As previously noted, the existing holders of outstanding bonds issued
by E&H and CECo must consent to the amended and restated Indenture in accordance
with the terms of the respective Indentures governing their bonds.
The holders of the bonds outstanding under both the CECo Indenture and
E&H Indenture have executed consents to the Merger of E&H into CECo, and the
assumption by CECo of the E&H Indenture upon consummation of the Merger. They
have also agreed to the amendment, restatement and combination of the E&H
Indenture and CECo Indenture into a single indenture pursuant to which all of
the bonds will remain outstanding, pending completion of definitive
documentation for such amendment, restatement and combination. It is anticipated
that the closing of the amendment, restatement and combination of the E&H and
CECo Indentures will occur prior to December 31, 2002, but subsequent to the
effective date of the Merger.
4. Boards of Directors and Shareholder Approvals.
The Merger Agreement and the transactions contemplated thereby are
subject to the approval of the boards of directors of each of CECo and E&H,
which was obtained on June 20, 2002 and September 27, 2002. In addition, the
Merger Agreement and related amendments to CECo's Articles of Incorporation are
subject to the approval of the holders of the CECo Common Stock and the CECo
Non-Cumulative Preferred Stock, voting together as a single class, and to the
approval of the E&H Common Stock and each series of the E&H Cumulative Preferred
Stock, each voting as a separate class. Because Unitil effectively controls the
boards of directors of each of E&H and CECo as the result of its ownership of
all of the issued and outstanding shares of common stock of each company, the
approval of the Merger Agreement and related amendments to CECo's Articles of
Incorporation by those boards of directors was assured. The approval of the
holders of the CECo Common Stock and the CECo Non-Cumulative Preferred Stock of
the Merger Agreement and related amendments to CECo's Articles of Incorporation
was also assured, since Unitil controls the vote of more than 99% of all such
shares. At a duly called meeting held on November 27, 2002, the CECo Common
Stock and the CECo Non-Cumulative Preferred Stock approved the Merger Agreement
and related amendments to CECo's Articles of Incorporation.
The approval of the Merger Agreement by the holders of the E&H Common
Stock was assured, since Unitil controls the vote of all of such shares, and was
obtained. Unitil does not, however, control the vote of any outstanding series
of the E&H Cumulative Preferred Stock. Unitil solicited written consents in
favor of the Merger Agreement and related transactions from the holders of each
outstanding series of the E&H Cumulative Preferred Stock pursuant to the
Solicitation. Because neither E&H nor any series of its capital stock is
registered under the Securities Exchange Act of 1934, the Solicitation was
subject only to the requirements of New Hampshire law and the terms of E&H's
governance documents. Under Section 7.04 of the New Hampshire Business
Corporation Act (RSA 293-A:7.04), the E&H Cumulative Preferred Stock can take
action by unanimous written consent. Such action would also be consistent with
the terms of E&H's governance documents. E&H has the right to call each
outstanding series for redemption pursuant to the terms of each such series and
Unitil currently intends to cause E&H
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to redeem the shares of any series which does not consent to the Merger
Agreement and related transactions in accordance with the terms of Rule 42 of
the Act. Each holder of the 8.75% Dividend Series and the 8.25% Dividend Series
executed a written consent in favor of the Merger Agreement and related
transactions effective November 1, 2002. The 5% Dividend Series and 6% Dividend
Series were redeemed.
5. Tax and Accounting Consequences of the Merger.
The Merger has been structured to qualify for tax purposes as a
tax-free "reorganization" under Section 368(a) of the Internal Revenue Code. As
a result, no gain or loss will be recognized by CECo or E&H or the holders of
the CECo Common Stock, the CECo Non-Cumulative Preferred Stock, the CECo
Cumulative Preferred Stock, the E&H Common Stock or the E&H Cumulative Preferred
Stock. CECo and E&H expect that the Merger will qualify as a common control
merger for accounting and financial reporting purposes. The accounting for a
common control merger is similar to a pooling of interests. Under this
accounting treatment, the combination of the ownership interests of the two
companies is recognized and the recorded assets, liabilities, and capital
accounts are carried forward at existing historical balances to the consolidated
financial statements of UES (as the surviving company) following the Merger.
On a pro forma basis, giving effect to the Merger as of June 30, 2002,
UES will have total assets of approximately $112,047,000, including net utility
plant of $80,638,000, and operating revenues for the 12 months ended June 30,
2002 of approximately $110,316,000. UES's pro forma consolidation capitalization
as of June 30, 2002 (assuming the exchange of all of the E&H Cumulative
Preferred Stock for new shares of UES Cumulative Preferred Stock) will be as
follows:
------------------------- ---------------------- -----------------
Security Amount Outstanding Percentage
------------------------- ---------------------- -----------------
Common Stock Equity 28,411,000 35%
------------------------- ---------------------- -----------------
Preferred Stock 1,195,000 1.5%
------------------------- ---------------------- -----------------
Short-Term Debt 1,550,000 1.9%
------------------------- ---------------------- -----------------
Long-Term Debt 50,000,000 61.6%
------------------------- ---------------------- -----------------
Total: 81,156,000 100%
------------------------- ---------------------- -----------------
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6. Money Pool Matters.
CECo and E&H participate in the Until system money pool arrangement
("Money Pool") that is funded, as needed, through bank borrowings and surplus
funds invested by the participants in the Money Pool. See Holding Co. Act
Release Nos. 35-26737 (June 30, 1997); 35-27182 (June 9, 2000); 35-27307 (Dec.
15, 2000) and 35-27345 (Feb. 14, 2001). Participation in the Money Pool,
including short-term debt borrowings, by CECo and E&H are authorized by the New
Hampshire Public Utility Commission, and therefore exempt under Rule 52.
However, borrowings by and loans to Unitil's other utility subsidiary, Fitchburg
Gas and Electric Light Company ("Fitchburg"), are not exempt. Following the
Merger, it is proposed that UES be authorized to make loans to Fitchburg on the
same terms as CECo's and E&H's current authorization to make such loans. All
other terms, conditions and limitations under the Money Pool orders will
continue to apply without change.
E. Intended Benefits from the Merger.
By merging E&H into CECo, the Applicants will simplify the corporate
structure of Unitil's holding company system. The Merger will also permit the
achievement of cost efficiency and service quality improvements. Based upon
Unitil's already centralized service company structure, the two New Hampshire
distribution operating companies may only achieve nominal operational gains as a
result of having a single New Hampshire operating entity. However, the combined
knowledge and experience of the two companies will benefit the remaining
stand-alone company. On October 28, 2002, the NHPUC approved the Merger, finding
that the transaction would be consistent with the public interest. Re: Concord
Electric Company, et al., DE 01-247, Order No. 24,046 (NHPUC 2002). The NHPUC
accepted Unitil's determination, without specific quantitative evidence, that
the Merger would lead to a simpler, more efficient and effective corporate
structure resulting in improved New Hampshire utilities operations, regulatory
oversight and financial reporting.
For example, the power contract management activities will become more
streamlined by eliminating one of the two New Hampshire retail operating
companies. Prior to restructuring, UPC provided a consolidated power supply
function for CECo and E&H. Under the New Hampshire restructuring scheme, and
Unitil settlement approved by the NHPUC, UPC will be divesting its power supply
portfolio and exiting the merchant function. Electric
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distribution companies such as CECo and E&H, however, will continue to have
responsibility for arranging for power supplies to provide both transition and
default services. The Merger will allow the Applicants to consolidate their
power supply planning, solicitation, contracting and administration activities,
resulting in savings by avoiding the cost of conducting two separate
solicitations, contract negotiations, and ongoing administration and reporting
functions.
In the Distribution Business Development (DBD) department, a benefit
will be a decrease in administrative tasks and reporting requirements. The
decrease in tasks will not be enough to decrease the employees assigned to this
function, but will allow the current employees additional time to work on other
tasks to improve the quality of support provided to the communities that Unitil
serves. Similarly, Customer Service operations, which are currently
consolidated, will be simplified by the consolidation of two tariffs and sets of
rates into one, leading to increased operating efficiency and improved service
to customers. A consolidated UES tariff will allow for more efficient regulatory
review, will be simpler for Unitil to administer and less confusing for
customers. The Operations Systems department views the Merger as a first step
towards the consideration of a consolidated meter reading system.
For the Finance and Treasury and Regulatory Services departments,
there will be a decrease in the number of required reports, analyses, and
filings, which will also lead to greater cost efficiencies and enhanced services
at the New Hampshire utilities. Currently CECo and E&H must plan, prepare and
file separate requests for rate changes, petitions for financings and other
mandated initiatives such as energy efficiency and low income programs. The two
companies must also separately arrange for long and short term debt, prepare tax
filings and file reports with various state and federal agencies. By
consolidating these activities under UES, the Applicants will avoid the cost and
expense of duplicative activities now being conducted independently by CECo and
E&H.
The Applicants believe that the Merger will generate cost efficiencies
which would not be available absent the Merger, with no adverse consequences for
either customers or shareholders. The consolidation of the planning, reporting,
tracking, finance and regulatory functions now required for two separate
corporate entities will allow the Applicants to achieve certain savings while
maintaining their quality of service. The Merger will not have a negative impact
on competition or on effective local regulation. In fact, the Merger is being
undertaken in
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the context of, and to ensure compliance with, a state-approved restructuring
plan designed to enhance competition and local regulation. Under the approved
Unitil restructuring settlement, UPC will be divesting its power supply
portfolio, and amending its FERC-regulated contractual relationship with the
Applicant's, to allow competitive suppliers to sell power directly to the
Applicants customers. At the same time, the Applicants will be undertaking the
Merger in order to consolidate their ongoing distribution and power supply
service activities, which will be primarily regulated by the NHPUC. Accordingly,
the Applicants believe that the Merger is in accordance with the applicable
standards of the Act and the rules and regulations thereunder.
Item 2. Fees, Commissions and Expenses
The total fees, commission and expenses paid or incurred in connection
with the Merger and related transactions are estimated to be not more than $1
million. These costs are expected to consist primarily of attorneys fees plus
additional miscellaneous fees.
Item 3. Applicable Statutory Provisions
A. Applicable Provisions
Sections 6, 7, 9, 10 and 12 of the Act, and Rules 43, 44, 45 and 54
thereunder are applicable to the Merger and related transactions, including the
amendment and combination of the debt indentures. The proposed transaction
involves the merger of two wholly-owned public utility subsidiaries of Unitil
Corporation and certain other related transactions. The electric utility
operations of the two companies will be unaffected by the Merger. The Merger
will allow the companies to achieve a greater level of coordination in
operations and will enable the companies to achieve greater cost efficiencies,
among other benefits. In addition, the Merger will simplify the Unitil corporate
structure. This merger of wholly-owned subsidiaries to simplify corporate
structure is consistent with existing Commission precedent (See Alliant Energy
Corporation, Holding Company Act Release No. 27456 (Oct. 24, 2001)), and is
designed to meet one of the primary goals of the Act, namely to facilitate state
regulation.
Following the Merger, the Unitil holding company system will remain an
integrated public utility system. In the 1992 order pursuant to which the
current Unitil holding company system was created (Holding Co. Act Release No.
25524 (Apr. 24, 1992)), the Commission found that CECo, E&H and Fitchburg
constitute an integrated public utility system
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within the meaning of the Act. The order noted that contract paths and, in
particular, the tight power pool system used in New England (to which all of
Unitil's subsidiaries belonged) created an interconnected system that was
located in the New England region. While the Merger will result in the
combination of two of the corporate entities in which the system's utility
operations are located, it will not change the fundamental fact that the same
assets will be operated as one coordinated system and will be a part of ISO-New
England. Therefore, the same analysis used by the Commission, and favorably
cited in recent cases remains applicable./1 Indeed, as a result of the
efficiencies and service quality improvements discussed above, Applicants
believe that the Merger tends to the even more economic and efficient
development of an integrated public utility system.
Section 12(e) of the Act and Rule 62 are applicable to the
Solicitation as well as obtaining the consent of bondholders under the two
indentures. As indicated, the Commission has granted Applicants authorization to
solicit the holders of each outstanding series of E&H Cumulative Preferred Stock
for approval the Merger as a separate class and the bondholders of the CECo
Indenture and E&H Indenture to consent to the amendment and combination of those
indentures.
B. Rule 54 Analysis
Neither Unitil nor any subsidiary thereof presently has, or as a
consequence of the proposed transactions will have, an interest in any exempt
wholesale generator ("EWG") or foreign utility company ("FUCO"), as those terms
are defined in Sections 32 and 33 of the Act, respectively. None of the proceeds
from the proposed transactions will be used to acquire any securities of, or any
interest in, an EWG or FUCO. Moreover, neither Unitil nor any of the
subsidiaries is, or as a consequence of the proposed transactions will become, a
party to, and such entities do not and will not have any rights under, a
service, sales or construction contract with any affiliated EWGs or FUCOs except
in accordance with the rules and regulations promulgated by the Commission with
respect thereto. Consequently, all applicable requirements of Rule 53(a)-(c)
under the Act are satisfied as required by Rule 54 under the Act.
--------
1 Nat'l Rural Elec. Coop. Ass'n, v. SEC, 2002 U.S. App. LEXIS 777 (D.C. Cir.
Jan. 18, 2002).
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Item 4. Regulatory Approvals
The federal and state regulatory requirements described below must be
complied with before the Applicants can complete the Merger and related
transactions. The Applicants have received all of these regulatory approvals.
Except as set forth below, no additional approvals from federal or state
regulatory commissions are required to complete the Merger and related
transactions.
State Approvals
New Hampshire
CECo and E&H are subject to the jurisdiction of the New Hampshire
Commission as public utilities, and the approval of the New Hampshire Commission
is required to implement the Merger and the related transfer of all existing
franchises, rights, works and systems of CECo and E&H to UES, pursuant to RSA
374:33, 374:30 and 369:1. The NHPUC will also approve the issuance of the four
new series of preferred stock by UES in connection with the Merger. On January
25, 2001, CECo and E&H filed an application seeking the approval of the New
Hampshire Commission consistent with these requirements. The New Hampshire
proceeding is being conducted in phases: Phase I addresses the divestiture of
Unitil's power supply portfolio and acquisition of transition service and
default service and Phase II relates to the Merger and the realignment of
Unitil's rate structure.
The NHPUC issued a written order approving Phase I settlement, with
conditions, on September 4th. The parties subsequently filed a first Amendment
to the Phase I Settlement Agreement on September 11th, which the Commission
approved in oral deliberation on September 13th.
The Parties filed the Phase II Settlement on September 3rd. The
Commission held hearings on September 10, 11, 12 and 13 and approved the Merger
Agreement in oral deliberations on September 18th. Copies of the initial
petition to the NHPUC and the Phase II settlement agreement are filed herewith
as exhibits C-1 and C-1.1, respectively. A copy of the Oral Deliberations of the
NHPUC relating to Phase II is filed herewith as exhibit C-3.1. The NHPUC's
written order approving the Phase II Settlement Agreement and the amendment to
the Phase I Settlement Agreement, dated October 25, 2002, is attached as Exhibit
C-3.
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Federal Approvals
Federal Power Act
The FERC must approve the Merger. Under Section 203 of the Federal
Power Act, the FERC is directed to approve a merger if it finds such merger
consistent with the public interest. In reviewing a merger, the FERC generally
evaluates:
o whether the merger will adversely affect competition;
o whether the merger will adversely affect rates; and
o whether the merger will impair the effectiveness of
regulation.
On August 30, 2002, the parties filed an application with the FERC
requesting approval of the Transaction under Section 203 of the Federal Power
Act. A copy of the application filed with the FERC is filed herewith as exhibit
C-2. The FERC order approving the Merger was issued on October 23, 2002 and is
attached hereto as Exhibit C-4.
In addition, the Applicants will file a Notice of Succession for UES
to succeed to the rate schedules and tariffs of CECo and E&H.
Item 5. Procedure
The requisite notice under Rule 23 with respect to the filing of this
Application-Declaration was issued and published by the Commission on October
18, 2002, and specified a date not later than November 12, 2002 by which
comments may be entered and an order of the Commission granting and permitting
this Application to become effective may be entered by the Commission. The
Applicants are unaware of any comments having been time filed with respect to
this Application-Declaration. The Applicants expect to close the proposed Merger
on or about December 1, 2002. The Applicants request that the Commission's order
with respect to the Merger and related matters be issued as soon as practicable
and that such order remain effective through February 28, 2003.
The Applicants waive a recommended decision by a hearing or other
responsible officer of the Commission for approval of the Merger and consent to
the Division of Investment Management's assistance in the preparation of the
Commission's decision. There should not be a waiting period between the issuance
of the Commission's order and the date on which it is to become effective.
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Item 6. Exhibits and Financial Statements
A. EXHIBITS
A-1 Articles of Incorporation of CECo. (Previously filed in
paper format on Form SE)
A-2 Bylaws of CECo, as amended. (Previously filed)
A-3 Articles of Incorporation of E&H. (Previously filed in paper
format on Form SE)
A-4 Bylaws of E&H, as amended. (Previously filed)
B-1. Proposed form of Agreement and Plan of Merger between CECo
and E&H. (Previously filed)
B-2 Proposed form of Solicitation material. (Previously filed)
B-3 Proposed form of Indenture for UES.
C-1 Copy of Petition to the New Hampshire Public Utilities
Commission. (Previously filed)
C-1.1 Settlement Agreement dated September 3, 2002 as filed with
the NHPUC. (Previously filed)
C-2 Copy of Petition to the FERC. (Previously filed)
C-3 Order of NHPUC.
C-3.1 Oral Deliberations of the NHPUC. (Previously filed)
C-4 Copy of Order of the FERC.
C-5 Order of the NHPUC with respect to CECo short-term debt
authority. (Previously filed)
C-6 Order of the NHPUC with respect to E&H short-term debt
authority. (Previously filed)
D Map of CECo and E&H Service Areas. (Previously filed in
paper format on Form SE)
E Opinion of Counsel
F Form of Federal Register Notice. (Previously filed)
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B. FINANCIAL STATEMENTS
FS-1 Unaudited Statement of Income of CECo for the twelve months
ended June 30, 2002. (Previously filed)
FS-2 Unaudited Balance Sheet of CECo as of June 30, 2002.
(Previously filed)
FS-3 Unaudited Statement of Income of E&H for the twelve months
ended June 30, 2002. (Previously filed)
FS-4 Unaudited Balance Sheet of E&H as of June 30, 2002.
(Previously filed)
FS-5 Unaudited Pro Forma Combined Balance Sheet of UES as of June
30, 2002. (Previously filed)
FS-6 Unaudited Pro Forma Combined Statement of Income of UES for
the twelve months ended June 30, 2002. (Previously filed)
Item 7. Information as to Environmental Effects
The Merger and related transactions do not involve a "major federal
action" nor does it "significantly affect the quality of the human environment"
as those terms are used in section 102(2)(C) of the National Environmental
Policy Act. The Merger and related transactions will not result in changes in
the operation of the Applicants that will have an impact on the environment. The
Applicant are not aware of any federal agency that has prepared or is preparing
an environmental impact statement with respect to the transactions that are the
subject of this Applicant-Declaration.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, Applicants have duly caused this Pre-Effective Amendment No. 2 to the
Application-Declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
UNITIL CORPORATION
CONCORD ELECTRIC COMPANY
EXETER & HAMPTON ELECTRIC COMPANY
By: /s/ Mark H. Collin
________________________
Name: Mark H. Collin
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