-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oyLESgSGEgD+exIUrgI73cvTa139zeWcayrACq+PtxnT57BCmlGAhLcjqek8Aqxm 4gFULxK1js8Q+H+utVE+Yw== 0000043704-94-000006.txt : 19940404 0000043704-94-000006.hdr.sgml : 19940404 ACCESSION NUMBER: 0000043704-94-000006 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREEN MOUNTAIN POWER CORP CENTRAL INDEX KEY: 0000043704 STANDARD INDUSTRIAL CLASSIFICATION: 4911 IRS NUMBER: 030127430 STATE OF INCORPORATION: VT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-08291 FILM NUMBER: 94519530 BUSINESS ADDRESS: STREET 1: 25 GREEN MOUNTAIN DR STREET 2: P.O.BOX 850 CITY: SOUTH BURLINGTON STATE: VT ZIP: 05402-0850 BUSINESS PHONE: 8028645731 10-K 1 FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1993 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K _X_ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee Required] For the fiscal year ended December 31, 1993 ___ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from ________________ to __________________ Commission file number 1-8291 GREEN MOUNTAIN POWER CORPORATION _____________________________________________ (Exact name of registrant as specified in its charter) Vermont 03-0127430 ___________________________ _____________________________ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) incorporation or organization) 25 Green Mountain Drive South Burlington, VT 05403 _________________________________ __________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (802) 864-5731 ___________________ Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of each exchange on which registered COMMON STOCK, PAR VALUE NEW YORK STOCK EXCHANGE $3.33-1/3 PER SHARE ________________________________________________________________________ Securities registered pursuant to Section 12 (g) of the Act: None ________________________________________________________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ___ The aggregate market value of the voting stock held by nonaffiliates of the registrant as of March 18, 1994, was $138,239,725.00 based on the closing price for the Common Stock on the New York Stock Exchange as reported by The Wall Street Journal. The number of shares of Common Stock outstanding on March 18, 1994, was 4,532,450. DOCUMENTS INCORPORATED BY REFERENCE The Company's Definitive Proxy Statement relating to its Annual Meeting of Stockholders to be held on May 19, 1994, to be filed with the Commission pursuant to Regulation 14A under the Securities Exchange Act of 1934, is incorporated by reference in Items 10, 11, 12 and 13 of Part III of this Form 10-K. PART I ITEM 1. BUSINESS THE COMPANY Green Mountain Power Corporation (the "Company") is a public utility operating company engaged in supplying electrical energy in the State of Vermont in a territory with an estimated population of 195,000. It serves approximately 79,500 customers. For the year ended December 31, 1993, the Company's sources of revenue were derived as follows: 33.2% from residential and lease customers, 31.6% from small commercial and industrial customers, 21.1% from large commercial and industrial customers, 9.6% from sales to other utilities, and 4.5% from other sources. For the same period, the Company's energy resources for retail and requirements wholesale sales were obtained as follows: 42.5% from hydroelectric sources (6.6% Company-owned, 1.6% New York Power Authority ("NYPA"), 28.6% Hydro- Quebec and 5.7% small power producers), 28.5% from nuclear generating sources (the Vermont Yankee plant described below), 14.8% from coal sources, 1.1% from natural gas, 0.7% from oil and 0.4% from wood. The remaining 12.0% was purchased on a short-term basis from other utilities and through the New England Power Pool ("NEPOOL"). In 1993, the Company purchased 91.8% of the energy required to satisfy its retail and requirements wholesale sales (including energy purchased from Vermont Yankee and under other long-term purchase arrangements). See Note K of Notes to Consolidated Financial Statements. A major source of the Company's power supply is its entitlement to a share of the power generated by the 520-MW Vermont Yankee nuclear generating plant owned and operated by Vermont Yankee Nuclear Power Corporation ("Vermont Yankee"), in which the Company has a 17.9% equity interest. For information concerning Vermont Yankee, see "Power Resources - - Vermont Yankee." The Company participates in NEPOOL, a regional bulk power transmission organization established to assure the reliability and economic efficiency of power supply in the Northeast. The Company's representative to NEPOOL is the Vermont Electric Power Company, Inc. ("VELCO"), a transmission consortium owned by the Company and other Vermont utilities, in which the Company has a 30% equity interest. As a member of NEPOOL, the Company benefits from increased efficiencies of centralized economic dispatch, availability of replacement power for scheduled and unscheduled outages of its own power sources, sharing of bulk transmission facilities and reduced generation reserve requirements. The principal territory served by the Company comprises an area roughly 25 miles in width extending 90 miles across north central Vermont between Lake Champlain on the west and the Connecticut River on the east. Included in this territory are the cities of Montpelier, Barre, South Burlington, Vergennes and Winooski, as well as the Village of Essex Junction and a number of smaller towns and communities. The Company also distributes electricity in four noncontiguous areas located in southern and southeastern Vermont that are interconnected with the Company's principal service area Note: Included in the energy sales and operating statistics described in this Annual Report on Form 10-K are NYPA lease transmissions. For information concerning NYPA lease transmissions, see "Power Resources - New York Power Authority." through the transmission lines of VELCO and others. Included in these areas are the communities of Vernon (where the Vermont Yankee plant is located), Bellows Falls, White River Junction, Wilder, Wilmington and Dover. During 1993, the Company also supplied six firm wholesale customers, including four municipal and two cooperative utilities in Vermont and two utilities in other states. The Company is obligated to meet the changing electrical requirements of these wholesale customers, in contrast to the Company's obligation to other wholesale customers, which is limited to specified amounts of capacity and energy established by contract. Major business activities in the Company's service areas include computer assembly and components manufacturing (and other electronics manufacturing), granite fabrication, service enterprises such as government, insurance and tourism (particularly winter recreation), and dairy and general farming. During the years ended December 31, 1993, 1992 and 1991, electric energy sales to International Business Machines Corporation ("IBM"), the Company's largest customer, accounted for 13.6%, 13.8% and 13.0%, respectively, of the Company's operating revenues in those years. No other retail customer accounted for more than one percent of the Company's revenue. RECENT RATE DEVELOPMENTS On October 1, 1993, the Company filed a request with the Vermont Public Service Board ("VPSB") to increase retail rates by 8.6%. The increase is needed primarily to cover the cost of buying power from independent power producers, the cost of energy conservation programs, the cost of plant additions made in the past two years, and costs incurred in 1992 and 1993 associated with the Company's response to the Environmental Protection Agency's ("EPA") Remedial Investigation/Feasibility Study ("RI/FS") and proposed remedy at the Pine Street Marsh site and with the Company's litigation against its previous insurers seeking recovery of past costs incurred and indemnity against future liabilities in connection with the site. On January 28, 1994, the Company and the other parties in the proceeding reached a settlement agreement providing for a 2.9% retail rate increase effective June 15, 1994, and a target return on equity for utility operations of 10.5%. The settlement agreement also provided for the Company's recovery in rates of $4,200,000 in costs associated with the Pine Street Marsh site. The agreement must be reviewed and approved by the VPSB before it can take effect. CONSTRUCTION The Company's capital requirements result from the need to construct facilities or to invest in programs to meet anticipated customer demand for electric service. The policy of the Company is to increase diversification of its power supply and other resources through various means, including power purchase and sales arrangements, and relying on sources that represent relatively small additions to the Company's mix to satisfy customer requirements. This permits the Company to meet its financing needs in a flexible, orderly manner. Planned expenditures for the next five years will be primarily for transmission, distribution and conservation projects. Capital expenditures over the past three years and forecasted for the next five years are as follows:
Total Net Generation Transmission Distribution Conservation Other Expenditures (Dollars in thousands and net of AFUDC and Customer Advances for Construction) Actual 1991 $ 2,038 $ 1,682 $ 7,628 $ 2,269 $ 2,564 $ 16,181 1992 868 1,766 7,320 3,144 2,925 16,023 1993 1,747 1,605 9,093 8,136 2,937 23,518 Forecasted 1994 $ 709 $ 829 $ 7,849 $ 6,975 $ 3,618 $ 19,980 1995 7,567 999 7,132 6,776 2,402 24,876 1996 1,978 1,499 7,301 6,497 2,251 19,526 1997 1,579 999 7,386 5,867 2,386 18,217 1998 1,579 999 7,386 5,430 2,386 17,780
Construction projections are subject to continuing review and may be revised from time-to-time in accordance with changes in the Company's financial condition, load forecasts, the availability and cost of labor and materials, licensing and other regulatory requirements, changing environmental standards and other relevant factors. For the period 1991-1993, internally generated funds, after payment of dividends, provided approximately 47% of total capital requirements for construction, sinking fund obligations and other requirements, including working capital. Internally generated funds provided 46% of such requirements for 1993. It is expected that funds so generated will provide approximately 67% of such requirements for the period 1994 through 1998, with the remainder to be derived through short-term borrowings and the issuance of senior securities and common stock. In November 1993, the Company sold $20 million of its first mortgage bonds in two components: $15 million that will mature in 2018 and $5 million that will mature in 2000. The 2018 and 2000 bonds will bear interest at the rates of 6.7% and 5.71%, respectively. The proceeds from the sale of such bonds were used to refinance existing debt, to finance construction and conservation expenditures, and for other corporate purposes. The Company anticipates issuing additional shares of its common stock in 1994. The amount and timing of such issuance will depend upon the financial condition of the Company, prevailing market conditions and other relevant factors. In connection with the foregoing, see Management's Financial Analysis in Item 7 herein and the material appearing under the caption "Power Resources." OPERATING STATISTICS For the Years Ended December 31
1993 1992 1991 1990 1989 ---------- ---------- ---------- ---------- ---------- Net System Capability During Peak Month (MW) Hydro (1)............................................ 174.9 160.6 161.3 119.6 121.4 Lease transmissions.................................. 3.9 5.7 5.7 9.4 9.4 Nuclear (1).......................................... 109.5 109.6 85.0 67.6 67.6 Conventional steam................................... 92.6 95.0 88.5 114.4 157.4 Internal combustion.................................. 71.0 47.4 52.0 47.7 13.9 Combined cycle....................................... 22.8 21.6 22.6 22.8 22.8 ---------- ---------- ---------- ---------- ---------- Total capability (MW).............................. 474.7 439.9 415.1 381.5 392.5 Net system peak...................................... 307.3 314.4 308.5 301.9 322.6 ---------- ---------- ---------- ---------- ---------- Reserve (MW)......................................... 167.4 125.5 106.6 79.6 69.9 ========== ========== ========== ========== ========== Reserve % of peak.................................... 54.5% 39.9% 34.6% 26.4% 21.7% Net Production (MWH) Hydro (1)............................................ 751,078 641,525 611,658 784,358 749,029 Lease transmissions.................................. 15,425 58,374 67,600 66,235 151,391 Nuclear (1).......................................... 598,245 665,034 731,582 671,563 618,102 Conventional steam................................... 748,626 762,451 799,781 859,059 928,184 Internal combustion.................................. 2,849 1,504 3,809 1,176 9,299 Combined cycle....................................... 40,966 60,138 104,344 90,825 138,732 ---------- ---------- ---------- ---------- ---------- Total production...................................2,157,189 2,189,026 2,318,774 2,473,216 2,594,737 Less nonrequirements sales to other utilities........ 271,224 273,087 448,110 587,475 710,055 ---------- ---------- ---------- ---------- ---------- Production for requirements sales....................1,885,965 1,915,939 1,870,664 1,885,741 1,884,682 Less requirements sales & lease transmissions (MWH)..1,749,454 1,794,986 1,742,308 1,759,393 1,726,177 ---------- ---------- ---------- ---------- ---------- Losses and company use (MWH)......................... 136,511 120,953 128,356 126,348 158,505 ========== ========== ========== ========== ========== Losses as a percentage of total production............. 6.33% 5.53% 5.54% 5.11% 6.11% System load factor (2)................................. 68.7% 68.5% 67.9% 69.5% 64.4% Sales and Lease Transmissions (MWH) Residential - GMP.................................... 541,579 505,234 483,998 500,163 446,972 Lease transmissons................................... 15,425 58,374 67,600 67,370 135,147 ---------- ---------- ---------- ---------- ---------- Total Residential.................................. 557,004 563,608 551,598 567,533 582,119 Commercial & industrial - small...................... 593,560 582,594 571,818 580,562 571,282 Commercial & industrial - large...................... 529,372 539,665 519,201 519,688 499,562 Other................................................ 8,868 6,312 2,770 (4,726) 11,197 ---------- ---------- ---------- ---------- ---------- Total retail sales and lease transmissions.........1,688,804 1,692,179 1,645,387 1,663,057 1,664,160 Sales to municipals and cooperatives and other requirements sales........................... 60,650 102,807 96,921 96,335 62,017 ---------- ---------- ---------- ---------- ---------- Total requirements sales...........................1,749,454 1,794,986 1,742,308 1,759,392 1,726,177 Other sales for resale............................... 271,224 273,087 448,110 587,474 725,382 ---------- ---------- ---------- ---------- ---------- Total sales and lease transmissions................2,020,678 2,068,073 2,190,418 2,346,866 2,451,559 ========== ========== ========== ========== ========== Average Number of Electric Customers Residential.......................................... 67,994 67,201 66,406 65,553 64,330 Commercial and industrial - small.................... 11,447 11,245 11,215 11,300 10,956 Commercial and industrial - large.................... 25 24 24 23 22 Other................................................ 74 73 71 71 69 ---------- ---------- ---------- ---------- ---------- Total.............................................. 79,540 78,543 77,716 76,947 75,377 ========== ========== ========== ========== ========== Average Revenue per KWH (Cents) Residential including lease revenues................. 8.94 8.44 8.06 7.54 6.76 Lease charges........................................ 0.06 0.41 0.26 0.25 0.42 ---------- ---------- ---------- ---------- ---------- Total Residential.................................. 9.00 8.85 8.32 7.79 7.18 Commercial and industrial - small.................... 7.97 7.82 7.53 6.99 6.78 Commercial and industrial - large.................... 5.96 5.89 5.72 5.30 5.16 Total retail including lease revenues................ 7.86 7.56 7.29 6.79 6.39 Average Use and Revenue Per Residential Customer Kilowatt hours including lease transmissions......... 8,192 8,387 8,306 8,658 9,049 Revenues including lease revenues.................... $733 $707 $670 $653 $611
(1) See Note K of Notes to Consolidated Financial Statements. (2) Load factor is based on net system peak and firm MWH production less off-system losses. DEMAND-SIDE MANAGEMENT The Company has committed itself to the development and implementation of demand-side management programs as part of its long-term resource strategy. These programs are aimed at improving the match between customer needs and the Company's ability to supply those needs at a reasonable cost. Energy conservation, load management and efficient electric use are central to these program efforts and provide the means for controlling operating expenses and requirements for additional capital investment. With more efficient electric consumption, the use of existing resources can be optimized. Demand-side management program components, energy conservation, load-management and efficient electric use also provide customers with options and choices with respect to their use and cost of electric service. Due to the economics of New England's current excess power supply market, the Company is expected to reevaluate demand-side management program design in 1994 to take into account lower marginal avoided costs. This program redesign may entail program modifications, curtailment or deferment, the addition of strategies for strategic efficient load growth, and modification of existing energy conservation measures. Integrated Resource Plan. In 1990, the Company entered into a collaborative design agreement with the Vermont Department of Public Service, the Conservation Law Foundation and other interested parties to assist with the development of its demand-side management plans. This collaborative design process culminated with an agreement on the design of eleven specific demand-side management programs and on issues related to regulatory approval and cost recovery for program implementation. These demand-side management programs were filed with the VPSB in May 1991. The VPSB approved these programs in September 1991. In October 1991, the Company completed development of its second formal Integrated Resource Plan. The Plan identified the most cost- effective composite of supply- and demand-side resource alternatives to meet the anticipated future energy needs of the Company's customers; integrated the planning functions of the energy supply, demand-side management, finance and engineering areas of the Company; and incorporated the implementation of those specific demand-side management programs approved by the VPSB in 1991. The Plan forecasted an increasing role for demand-side management in future Company operations. Planned demand-side management programs are projected to meet approximately one-third of the Company's expected load growth into the next century. Current engineering and economic assumptions vary from those used in the Company's October 1991 Integrated Resource Plan. Avoided power supply costs have declined considerably. As a consequence, it is likely that the pace of demand-side management expenditures could change. Rate Design. The Company seeks to design rates to encourage the shifting of electrical use from peak hours. Since 1976, the Company has offered optional time-of-use rates for residential and commercial customers. Currently, approximately 3,000 of the Company's residential customers continue to be billed on the original 1976 time-of-use rate basis. In 1987, the Company received regulatory approval for a new rate design that permits it to charge prices for electric service that reflect as accurately as possible the cost burden imposed by each customer class. The Company depends on fair pricing to keep customers satisfied and to make predictable the customer use of its power supply so that it can keep control of its costs. This rate structure helps to achieve these goals. Since inefficient use of electricity increases its cost, customers who are charged prices that reflect the cost of providing electrical service have real incentives to follow the most efficient usage patterns. Included in the VPSB's order approving this rate design was a requirement that the Company's 4,000 largest customers be charged time-of-use rates on a phased- in basis by 1994. As of April 1, 1991, approximately 1,300 of the Company's largest customers, comprising 48% of retail revenues, were successfully converted to time-of-use rates. During 1991 additional implementation of time-of-use rates was discontinued until further research on the cost effectiveness of time-of-use rates for small customers is performed. This work is continuing and will be reflected in the Company's next rate design proceeding, expected to be filed during the second quarter of 1994. Dispatchable and Interruptible Service Contracts. In 1993, the Company had dispatchable and interruptible power contracts with four major ski areas, interruptible only contracts with three other customers and dispatchable-only contracts with four customers. The dispatchable portions of the contracts allow customers to purchase additional energy when the Company has low-cost electricity available ("dispatchable hours"), while the interruptible portions of the contracts allow the Company to avoid power supply capacity charges by reducing the Company's capacity requirements. Due to the surplus capacity in the region, the Company suspended the interruptible portions of the contracts but continued to offer the dispatchable portions to its customers. In 1993, the Company revised its tariffs to permit other commercial customers to participate in the dispatchable and interruptable service contract program if their load requirements made it practical for them to do so. As of the end of 1993, three additional customers had signed contracts to participate in the program. By participating in the program these customers can now buy electricity from the Company during dispatchable hours without incurring a demand charge. The Company, in turn, is able to retain customer load requirements that otherwise might have been met through self-generation. Ripple Load-Management System. The Company has operated a remote- control load-management facility since 1976. This facility, referred to as a "Ripple" system, allows the Company, from a central signaling point, to switch off temporarily certain electrical appliances in customers' homes that have a storage capacity, such as water heaters and thermal storage heaters, thereby eliminating electric loads at discreet times. The Company's present Ripple system consists of 7,100 installed signal receivers, a central processing station and four signal injection stations. Approximately 25% of the Company's eligible customers are participating in this load-control program, which allows the Company to reduce system load by four to five MW. Commercial/Industrial Energy Management Services. In 1993, the Company offered five commercial and industrial energy efficiency programs to qualifying customers. These programs offer comprehensive technical assistance to identify cost-effective electric energy efficiency opportunities which may qualify for financial incentives. In addition, fuel-switching opportunities are identified for customers, although no direct financial incentives are provided. Approximately 1,000 customers participated in these programs in 1993, resulting in an approximate savings of 16,000 MWh. In 1993, the Company achieved approximately 160% of its energy savings targets developed in the collaborative design agreement discussed above, with the overall program performance (residential, commercial and industrial) of approximately 145% of the energy savings targets. Residential Energy Management Services. In 1993, the Company offered six demand-side management programs to serve residential customers. The VPSB had approved these programs in 1991. These programs offer a variety of services to assist customers to identify and implement appropriate electric energy strategies or fuel-switching opportunities for their residences. In the case of electric efficiency improvements, the Company will also offer various financial incentives for the installation of such measures. Approximately 6,000 residential customers participated in these programs in 1993 resulting in an annual savings of approximately 3,419 MWh. POWER RESOURCES The Company generated, purchased and (in the case of NYPA power) transmitted 1,848,608 MWh of energy for retail and requirements wholesale customers for the twelve months ended December 31, 1993. The corresponding maximum one-hour integrated demand during that period was 307.3 MW on February 1, 1993. This compares to the previous all-time peak of 322.6 MW on December 27, 1989. The following tabulation shows the annual average capacity, the source of such energy for the twelve-month period and the capacity in the month of the period system peak. See also "Power Resources - - Long-Term Power Sales."
> 1993 Average Net Generated and Net Generated and Monthly Net Purchased Year Purchased in Month Capability Ended 12/31/93 (a) of Annual Peak ____________ ___________________ ___________________ KW MWh % KW % WHOLLY OWNED PLANTS Hydro 34,363 123,946 6.65 35,660 7.51 Diesel and Gas Turbine 63,487 2,320 0.12 74,370 15.67 JOINTLY OWNED PLANTS Wyman #4 7,058 6,474 0.35 7,083 1.49 Stony Brook I 5,478 7,001 0.38 7,194 1.52 McNeil 6,412 11,561 0.62 6,567 1.38 OWNED IN ASSOCIATION W/OTHERS Vermont Yankee Nuclear (b) 79,823 531,997 28.56 80,663 16.99 NYPA LEASE TRANSMISSIONS State of Vermont (NYPA) 2,997 29,047 1.56 3,906 0.82 LONG-TERM PURCHASES Hydro-Quebec 99,946 532,452 28.59 89,064 18.77 Merrimack #2 30,457 230,812 12.39 30,457 6.42 Stony Brook I 12,947 13,590 0.73 13,788 2.91 Small Power Producers 22,064 106,647 5.73 21,743 4.58 Rochester Gas & Electric 0 0 0 0 0 SHORT-TERM PURCHASES Ontario Hydro #3 20,271 44,165 2.37 29,476 6.21 Other Utilities 40,597 218,100 11.71 73,739 15.54 NEPCO (STAMFORD) 664 4,465 0.24 901 0.19 ______ _______ _____ ______ _____ Less System Sales Energy (13,969) TOTAL 426,564 1,848,608 100.00 474,611 100.00 ======= ========= ====== ======= ======
NOTE: (a) Excludes losses on off-system purchases, totaling 37,357 MWh. (b) Average annual capability associated with the Vermont Yankee source is adjusted to reflect system sale obligations. See "Power Resources -- Long-Term Power Sales." Vermont Yankee. The Company and Central Vermont Public Service Corporation acted as lead sponsors in the construction of the Vermont Yankee nuclear plant, a boiling-water reactor designed by General Electric Company. The plant, which became operational in 1972, has a generating capacity of 520 MW. Vermont Yankee has entered into power contracts with its sponsor utilities, including the Company, that expire at the end of the life of the unit. Pursuant to its Power Contract, the Company is required to pay 20% of Vermont Yankee's operating expenses (including depreciation and taxes), fuel costs (including charges in respect of estimated costs of disposal of spent nuclear fuel), decommissioning expenses, interest expense and return on common equity, whether or not the Vermont Yankee plant is operating. In 1969, the Company sold to other Vermont utilities 2.735% of its entitlement to the output of Vermont Yankee. Accordingly, those utilities have an obligation to the Company to pay 2.735% of Vermont Yankee's operating expenses, fuel costs, decommissioning expenses, interest expense and return on common equity. Vermont Yankee has also entered into capital funds agreements with its sponsor utilities that expire on December 31, 2002. Under its Capital Funds Agreement, the Company is required, subject to obtaining necessary regulatory approvals, to provide 20% of the capital requirements of Vermont Yankee not obtained from outside sources. See Notes 1 and 2 of Notes to Financial Statements of Vermont Yankee. On April 27, 1989, Vermont Yankee applied to the Nuclear Regulatory Commission ("NRC") for an amendment to its operating license to extend the expiration date from December 2007 to March 2012, in order to take advantage of current NRC policy to issue operating licenses for a 40-year term measured from the grant of the operating license. (Prior NRC policy, under which the operating license was issued, called for a term of 40 years from the date of the construction permit.) On August 22, 1989, the State of Vermont, opposing the license extension, filed a request for a hearing and petition for leave to intervene, which petition was subsequently granted. On December 17, 1990, the NRC issued an amendment to the operating license extending the expiration date until March 21, 2012, based upon a "no significant hazards" finding by the NRC Staff and subject to the outcome of the evidentiary hearing on the State of Vermont's assertions. On July 31, 1991, Vermont Yankee reached a settlement with the State of Vermont, and the State filed a withdrawal of its intervention. The proceeding was dismissed on September 3, 1991. During periods when Vermont Yankee is unavailable, the Company incurs replacement-power costs in excess of those costs that the Company would have incurred for power purchased from Vermont Yankee. Replacement power is available to the Company from NEPOOL and through special contractual arrangements with other utilities. Replacement-power costs adversely affect cash flow and, absent deferral, amortization and recovery through rates, would adversely affect reported earnings. Routinely, in the case of scheduled outages for refueling, the VPSB has permitted the Company to defer, amortize and recover these excess replacement power costs for financial reporting and ratemaking purposes over the period until the next scheduled outage. Vermont Yankee has adopted an 18-month refueling schedule. In late August 1993, Vermont Yankee began a scheduled refueling outage which was completed on October 26, 1993. Vermont Yankee's next scheduled refueling is March 1995. In the case of unscheduled outages of significant duration resulting in substantial unanticipated costs for replacement power, the VPSB generally has authorized deferral, amortization and recovery of such costs. Vermont Yankee incurred capital expenditures of approximately $7,229,000 in 1993, $10,750,000 in 1992 and $6,596,000 in 1991. Vermont Yankee estimates capital expenditures amounting to approximately $15,650,000 for 1994. During the year ended December 31, 1993, the Company utilized 531,997 MWh of Vermont Yankee energy to meet 28.6% of its retail and requirements wholesale sales. The average cost of electricity produced by the plant in 1993 was 5.3 cents per KWh. In 1993, Vermont Yankee had an annual capacity factor of 76.9%, compared to 83.3% in 1992 and 91.2% in 1991. The Price-Anderson Act currently limits public liability from a single incident at a nuclear power plant to $9,400,000,000. Any liability beyond $9,400,000,000 is indemnified under an agreement with the NRC. The first $200,000,000 of liability coverage is the maximum provided by private insurance. The Secondary Financial Protection program is a retrospective insurance plan providing additional coverage up to $9,200,000,000 per incident by assessing retrospective premiums of $79,300,000 against each of the 116 reactor units in the United States that are currently subject to the Program, limited to a maximum assessment of $10,000,000 per incident per nuclear unit in any one year. The maximum assessment is to be adjusted at least every five years to reflect inflationary changes. The above insurance covers all workers employed at nuclear facilities prior to January 1, 1988, for bodily injury claims. Vermont Yankee has purchased a master worker insurance policy with limits of $200,000,000 with one automatic reinstatement of policy limits to cover workers employed on or after January 1, 1988. Vermont Yankee's estimated contingent liability for a retrospective premium on the master worker policy as of December 1993 is $3,100,000. The secondary financial protection program referenced above provides coverage in excess of the Master Worker policy. Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL II) to cover the costs of property damage, decontamination or premature decommissioning resulting from a nuclear incident. All companies insured with NEIL II are subject to retroactive assessments if losses exceed the accumulated funds available to NEIL II. The maximum potential assessment against Vermont Yankee with respect to losses arising during the current policy year is $5,800,000 at the time of the first loss and $12,300,000 at the time of a subsequent loss. Vermont Yankee's liability for the retrospective premium adjustment for any policy year ceases six years after the end of that policy year unless prior demand has been made. HYDRO-QUEBEC: Highgate Interconnection. On September 23, 1985, the Highgate transmission facilities, which were constructed to import energy from Hydro-Quebec in Canada, began commercial operation. The transmission facilities at Highgate include a 200-MW AC-to-DC-to-AC converter terminal and seven miles of 345-kV transmission line. VELCO built and operates the converter facilities, which are jointly owned by a number of Vermont utilities, including the Company. NEPOOL/Hydro-Quebec Interconnection. VELCO and certain other NEPOOL members have entered into agreements with Hydro-Quebec providing for the construction in two phases of a direct interconnection between the electric systems in New England and the electric system of Hydro-Quebec in Canada. The Vermont participants in this project, which has a capacity of 2,000 MW, will derive about 9% of the total power-supply benefits associated with the NEPOOL/Hydro-Quebec interconnection. The Company, in turn, receives about one-third of the Vermont share of those benefits. The benefits of the interconnection include access to surplus hydroelectric energy from Hydro-Quebec at a cost below that of the replacement cost of power and energy otherwise available to the New England participants; energy banking, under which participating New England utilities will transmit relatively inexpensive energy to Hydro-Quebec during off-peak periods and will receive equal amounts of energy, after adjustment for transmission losses, from Hydro-Quebec during peak periods when replacement costs are higher; and provision for emergency transfers and mutual backup to improve reliability for both the Hydro-Quebec system and the New England systems. Phase I. The first phase ("Phase I") of the NEPOOL/Hydro-Quebec Interconnection consists of transmission facilities having a capacity of 690 MW that traverse a portion of eastern Vermont and extend to a converter terminal located in Comerford, New Hampshire. These facilities entered commercial operation on October 1, 1986. Vermont Electric Transmission Company, Inc. ("VETCO"), a wholly owned subsidiary of VELCO, was organized to construct, own and operate those portions of the transmission facilities located in Vermont. Total construction costs incurred by VETCO for Phase I were $47,850,000. Of that amount, VELCO provided $10,000,000 of equity capital to VETCO through sales of VELCO preferred stock to the Vermont participants in the Project. The Company purchased $3,100,000 of VELCO preferred stock to finance the equity portion of Phase I. The remaining $37,850,000 of construction cost was financed by VETCO's issuance of $37,000,000 of long-term debt in the fourth quarter of 1986 and the balance of $850,000 was financed by short-term debt. Under the Phase I contracts, each New England participant, including the Company, is required to pay monthly its proportionate share of VETCO's total cost of service, including its capital costs, as well as a proportionate share of the total costs of service associated with those portions of the transmission facilities to be constructed in New Hampshire by a subsidiary of New England Electric System. Phase II. Agreements executed in 1985 among the Company, VELCO and other NEPOOL members and Hydro-Quebec, provided for the construction of the second phase ("Phase II") of the interconnection between the New England electric system and that of Hydro-Quebec. Phase II expands the Phase I facilities from 690 MW to 2,000 MW, and provides for transmission of Hydro- Quebec power from the Phase I terminal in northern New Hampshire to Sandy Pond, Massachusetts. Construction of Phase II commenced in 1988 and was completed in late 1990. The Phase II facilities commenced commercial operation November 1, 1990, initially at a rating of 1,200 MW, and increased to a transfer capability of 2,000 MW in July 1991. The Hydro- Quebec-NEPOOL Firm Energy Contract provides for the import of economical Hydro-Quebec energy into New England. The Company is entitled to 3.2% of the Phase II power-supply benefits. Total construction costs for Phase II were approximately $487,000,000. The New England participants, including the Company, have contracted to pay monthly their proportionate share of the total cost of constructing, owning and operating the Phase II facilities, including capital costs, for 30 years. The agreements providing for the operation and support of the Phase II facilities meet the capital lease accounting requirements under SFAS 13. At December 31, 1993, the present value of the Company's obligation was $11,000,000. The Company's projected future minimum payments under the Phase II support agreements are $501,311 for each of the years 1994-1998 and an aggregate of $8,522,270 for the years 1999-2020. The Phase II portion of the project is owned by New England Hydro- Transmission Electric Company, Inc. and New England Hydro-Transmission Corporation, subsidiaries of New England Electric System, in which certain of the Phase II participating utilities, including the Company, own equity interests. The Company owns approximately 3.2% of the equity of the corporations owning the Phase II facilities. During construction of the Phase II project, the Company, as an equity sponsor, was required to provide equity capital. At December 31, 1993, the capital structure of such corporations was 40% common equity and 60% long-term debt. Hydro-Quebec Power Supply Contracts. Under various contracts approved by the VPSB, the details of which are described in the table below, the Company purchases capacity and associated energy produced by the Hydro- Quebec system. Such contracts obligate the Company to pay certain fixed capacity costs whether or not energy purchases above a minimum level set forth in the contracts are made. Such minimum energy purchases must be made whether or not other, less expensive energy sources might be available. These contracts are intended to complement the other components in the Company's power supply to achieve the most economic power-supply mix reasonably available.
July 1984 December 1987 Contract Contract Schedule A Schedule B Schedule C3 __________ __________ __________ ___________ (Dollars in thousands) Capacity Acquired 50 MW 17 MW 68 MW 46 MW Contact Period 1985-1995 1990-1995 1995-2015 1995-2015 Minimum Energy Purchase 50% 50% 75% 75% (annual load factor) (1992-1995) Minimum Energy Charge $3,881 $2,134 $16,157 $11,060 (1993) (1993) (1995-2015)* (1995-2015)* $3,785 $2,281 (1994-1995)* (1994-1995) Annual Capacity Charge $3,379 $1,681 $16,663 $11,821 (1993) (1993) (1995-2015)* (1995-2015)* $3,355 $1,691 (1994-1995)* (1994-1995)* Average Cost per KWH 2.8 cents 5.5 cents 7.0 cents 7.3 cents (1993) (1993) (1995-2015)** (1995-2015)** 2.7 cents 4.6 cents (1994-1995)* (1994-1995)*
* Estimated average ** Estimated average in nominal dollars, levelized over the period indicated. On October 12, 1990, the VPSB granted conditional approval of the Company's purchases pursuant to the contract with Hydro-Quebec entered into December 4, 1987: (1) Schedule A -- 17 MW of firm capacity and associated energy to be delivered at the Highgate interconnection for five years beginning 1990; (2) Schedule B -- 68 MW of firm capacity and associated energy to be delivered at the Highgate interconnection for twenty years beginning in September 1995; and (3) Schedule C3 -- 46 MW of firm capacity and associated energy to be delivered at interconnections to be determined at a later time for 20 years beginning in November 1995. The opponents to the December 1987 contract (principally the Crees, native peoples living in northern Quebec) appealed the VPSB's October 1990 order to the Vermont Supreme Court. On October 2, 1992, the Vermont Supreme Court affirmed the VPSB's October 1990 order. On February 12, 1992, the VPSB issued an order finding that the Company had complied with substantial conditions imposed by the VPSB in its October 1990 order and approved the Company's purchase under the December 1987 contract. In March 1992, the opponents to the December 1987 contract appealed the VPSB'S February 1992 compliance order to the Vermont Supreme Court. On May 7, 1993, the Vermont Supreme Court affirmed the VPSB's compliance order approving the Company's purchases under the December 1987 contract. The Company anticipates that the Schedule C3 purchases will be delivered over its entitlement to the NEPOOL/Hydro-Quebec interconnection (Phase I and Phase II). If such interconnection is utilized, the Company must forego certain savings associated with other energy deliveries and capacity arrangements that would benefit the Company if the interconnection were not utilized for delivery of the Schedule C3 purchases. The Company believes that the benefits of the Schedule C3 purchases, if power is delivered over such interconnection, will offset the value of the foregone savings. In September 1993, the Company negotiated a renewal of a short-term "tertiary energy" contract with Hydro-Quebec under which Hydro-Quebec delivers 61 MW of capacity and energy to the Company over the NEPOOL/Hydro- Quebec interconnection. The electricity purchased under this tertiary contract is priced at less than 2.5 cents per KWh. The benefits realized by the Company from this favorably priced electricity will be greater than those associated with deliveries foregone by the Company otherwise available over the NEPOOL/Hydro-Quebec interconnection. This tertiary energy contract will expire in August 1994. The Company anticipates that purchases of tertiary energy will extend beyond August 1994, but will end when the Schedule C3 deliveries begin in November 1995. On September 27, 1990, the Canadian National Energy Board ("NEB") issued its decision approving the export by Hydro-Quebec pursuant to the December 1987 contract. The NEB, however, imposed a condition on its approval: Hydro-Quebec's export license was to be deemed valid so long as Hydro-Quebec obtained all federal and environmental approvals required for any of its new hydroelectric generating units advanced in order to satisfy Hydro-Quebec's contractual obligations. Hydro-Quebec and the Province of Quebec appealed the imposition of this condition to the Federal Court of Appeal. In a decision handed down on July 9, 1991, the Federal Court of Appeal agreed with Hydro-Quebec's assertion that the NEB has no authority to regulate the construction of hydroelectric generating units -- a matter that lies exclusively within provincial jurisdiction under the Canadian Constitution. The Federal Court of Appeal struck down the challenged NEB license condition and otherwise affirmed the license. The opponents to the December 1987 contract appealed the decision of the Federal Court of Appeal to the Supreme Court of Canada. On February 24, 1994, the Supreme Court of Canada rendered a decision reversing the judgment of the Federal Court of Appeal, and reinstated the NEB decision, including the condition that Hydro-Quebec had objected to. The December 1987 contract, like the July 1984 contract, calls for the delivery of system power and is not related to any particular facilities in the Hydro-Quebec system. Consequently, there are no identifiable debt- service charges associated with any particular Hydro-Quebec facility that can be distinguished from the overall charges paid under the contract. The December 1987 contract also contains a provision that prohibits Hydro-Quebec, for a period ending in 1995, from selling power under similar terms and conditions to any other United States utility at a price lower than the Company would pay unless the lower price is made available to the Company. The price of the energy acquired under the December 1987 contract will reflect adjustments in the United States Gross National Product Implicit Price Deflator over the term of the contract. The price of the capacity acquired will reflect adjustments in a pertinent construction cost index (the Handy Whitman Index of Public Utility Construction Costs) until the time deliveries begin. From the commencement of deliveries to the expiration of the contract, the capacity price is essentially frozen. (Some adjustments are made to reflect changes in financing costs over time.) Based on current integrated resource analyses, the Company believes that these contracts for Hydro-Quebec system power compare favorably with alternative long-term resources available to the Company. In 1993, the Company utilized 353,729 MWh of Hydro-Quebec energy under the July 1984 contract, 67,833 MWh under the December 1987 contract Schedule A and 110,890 MWh under the tertiary energy contract to meet 28.6% of its retail and requirements wholesale sales. The average cost of Hydro- Quebec electricity in 1993 was 3.4 cents per KWh. See Notes J and K-2 of Notes to Consolidated Financial Statements. New York Power Authority ("NYPA"). NYPA power provided 15,425 MWh to the Vermont Department of Public Service (the "Department") customers, delivered over the Company's facilities at an average retail rate of 0.9 cents per KWh. As of August 1993, the Department chose not to continue retailing NYPA power to the Company's customers. The Department now wholesales the allocation of NYPA power to the Company who, in turn, delivers the power to residential and farm customers. In addition, the Company purchased at wholesale 13,622 MWh of NYPA power at an average cost of 1.3 cents per KWh in 1993. Under the allocation currently made by NYPA of NYPA power to states neighboring New York, the amount of such power delivered to residential and farm customers in the Company's service territory will be as follows: Entitlements to Customers in the Company's Period Service Territory (MW) ------ ------------------------- July 1993 - June 1994 2.0 July 1994 - June 1995 0.3 July 1995 - June 1996 0.3 July 1996 - June 1997 0.3 Merrimack Unit #2. Merrimack Unit #2 is a coal-fired steam plant of 356-MW capacity located in Bow, New Hampshire, and owned by Northeast Utilities. The Company is entitled to 30.457 MW of capacity and related energy from the unit under a 30-year contract terminating May 1, 1998. During the year ended December 31, 1993, the Company utilized 230,812 MWh from the unit to meet 12.4% of its total retail and requirements wholesale sales. Merrimack Unit #2 operated at a 73.1% annual capacity factor in 1993 and 66.8% in 1992. The average cost of electricity from this unit was 3.0 cents per KWh in 1993. See Note K-1 of Notes to Consolidated Financial Statements. Stony Brook I. The Massachusetts Municipal Wholesale Electric Company ("MMWEC") is principal owner and operator of a 343.0-MW combined-cycle intermediate generating station -- Stony Brook I -- located in Ludlow, Massachusetts, which commenced commercial operation in November 1981. The Company entered into a Joint Ownership Agreement with MMWEC dated as of October 1, 1977, whereby the Company acquired an 8.8% ownership share of the plant, entitling the Company to 30.2 MW of capacity. In addition to this entitlement, the Company has contracted for 13.8 MW of capacity for the life of the Stony Brook I plant, for which it will pay a proportionate share of MMWEC's share of the plant's fixed costs and variable operating expenses. The three units that comprise Stony Brook I are primarily oil- fired. Two of the units are also capable of burning natural gas. The natural gas system at the plant was modified in 1985 to allow two units to operate simultaneously on natural gas. During 1993, the Company utilized 20,591 MWh from this plant to meet 1.1% of its retail and requirements wholesale sales at an average cost of 9.8 cents per KWh. See Note I-3 and K-1 of Notes to Consolidated Financial Statements. Ontario Hydro. The State of Vermont executed a five-year contract with Ontario Hydro, commencing November 1, 1987, and expiring October 31, 1992, which provides for the purchase by the State of 73 MW of high- availability power. The contract has options for increasing the power purchased starting November 1 of 1988, 1989, 1990 and 1991, to a maximum of 88 MW, 98 MW, 108 MW and 112 MW, respectively. This contract can be extended for three additional five-year periods. The maximum option increases have been exercised. The Company receives a share of the Ontario Hydro power imported by the State. The Company's obligation under this contract terminated as of December 1993. The Company's average share of such power for 1993 was 20.3 MW, and 44,165 MWh of Ontario Hydro energy were utilized to meet 2.4% of its retail and requirements wholesale sales. The average cost of this power was 5.3 cents per KWh in 1993. Wyman Unit #4. The W. F. Wyman Unit #4, which is located in Yarmouth, Maine, is an oil-fired steam plant with a capacity of 619 MW. The construction of this plant was sponsored by the Central Maine Power Company. The Company has a joint-ownership share of 1.1% (7.1 MW) in the Wyman #4 unit, which began commercial operation in December 1978. During 1993, the Company utilized 6,474 MWh from this unit to meet 0.3% of its retail and requirements wholesale sales at an average cost of 5.3 cents per KWh. See Note I-3 of Notes to Consolidated Financial Statements. McNeil Station. The J. C. McNeil station, which is located in Burlington, Vermont, is a wood chip and gas-fired steam plant with a capacity of 53.6 MW. The Company has an 11% or 5.9 MW interest in the J. C. McNeil plant, which began operation in June 1984. During 1993, the Company utilized 11,561 MWh from this unit to meet 0.5% of its retail and requirements wholesale sales at an average cost of 7.0 cents per KWh. In 1989, the plant added the capability to burn natural gas on an as- available/interruptible service basis. See Note I-3 of Notes to Consolidated Financial Statements. New York Power Purchases: Rochester Gas and Electric Corporation. In 1988, the Company entered into a ten-year contract with Rochester Gas and Electric Corporation ("RG&E") for the purchase of up to 50 MW of firm power and associated energy. This flexible contract allows the Company the discretion of purchasing from 0 MW to 50 MW on a weekly basis. The Company has no obligation to purchase power in any week. When the Company elects to schedule a purchase, however, it must take and pay for energy at a 75% load factor, or pay a penalty, in the week of the purchase. Although the Company has no fixed capacity payments, it must pay to reserve transmission from the Niagara Mohawk Power Corporation ("Niagara Mohawk") for the 50-MW maximum purchase. Both RG&E and the Company have the option to terminate the contract effective 1995. Pursuant to an agreement with Connecticut Light and Power Corporation ("CL&P") and Bozrah Light and Power Company ("Bozrah") that was finalized in December 1992, the Company exercised the option to terminate the RG&E contract and the transmission contract with Niagara Mohawk that supports it effective October 31, 1995. The Company also agreed to offer RG&E power to CL&P for purchase on a weekly basis through the remaining term of the RG&E contract, and to terminate a contract under which the Company supplied all of the electrical requirements of Bozrah, a small electric utility operating in Gilman, Connecticut. In return, CL&P, which will replace the Company as the supplier of electricity to Bozrah, will assume responsibility for approximately 75% of the fixed costs of the transmission contract with Niagara Mohawk, and will provide the Company with up to 50 MW of system power, to be scheduled on a weekly basis, at a total price expected to be lower than that provided under the existing RG&E contract. In addition, CL&P has offered the Company an option, which may be exercised in yearly increments starting in July 1994, to purchase up to 50 additional MW of system power for the period July 1995 through December 2004. The Company expects that the reductions in its purchased power and fixed transmission costs derived from this three-party agreement will more than offset the loss of revenues associated with the termination of its electricity sales contract with Bozrah. The arrangement was approved by FERC effective May 1, 1993. Estimated Charges 1993 Annual Transmission Reservations $300,000 Average Cost per kWh (1993)(1) 4.1 cents (1994-1995) (1) No power purchases were made under the RG&E or CL&P contracts described above during 1993. Small Power Production. The VPSB has adopted rules that implement for Vermont the purchase requirements established by federal law in the Public Utility Regulatory Policies Act ("PURPA") of 1978. Under the rules, small power producers have the option to sell their output to a central state purchasing agent under a variety of long- and short-term, firm and non-firm pricing schedules, each of which is based upon the projected Vermont composite system's power costs which would be required but for the purchases from small producers. The state purchasing agent assigns the energy so purchased, and the costs of purchase, to each Vermont retail electric utility based upon its pro rata share of total Vermont retail energy sales. Utilities may also contract directly with producers. The rules provide that all reasonable costs incurred by a utility under the rules will be included in the utilities' revenue requirements for ratemaking purposes. Currently, the state purchasing agent, Vermont Power Exchange, Inc., is authorized to seek 150 MW of power from qualifying facilities under PURPA, of which the Company's current pro rata share would be 32.6% or 48.8 MW. In 1993, the Company, through both its direct contracts and the Vermont Power Exchange, purchased 106,647 MWh of small power production to meet 5.7% of its retail and requirements wholesale sales at an average cost of 10.0 cents per KWh. Short-Term Opportunity Purchases and Sales. The Company has made arrangements with several utilities in New England and New York whereby the Company may make purchases or sales of utility system power on short notice and generally for brief periods of time when it appears economic to do so. Opportunity purchases are arranged when it is possible to purchase power from another utility for less than it would cost the Company to generate the power with its own sources. Purchases also help the Company save on replacement-power costs during an outage of one of its base load sources. Opportunity sales are arranged when the Company has surplus energy available at a price that is economic to other regional utilities at any given time. The sales are arranged based on forecasted costs of supplying the incremental power necessary to serve the sale. The price is set so as to recover the forecasted fuel and capacity costs. During 1993, the Company purchased 222,565 MWh, 11.9% of the Company's retail and requirements wholesale sales, at an average cost of 2.4 cents per KWh under such arrangements. NEPOOL. As a participant of NEPOOL, through VELCO, the Company takes advantage of pool operations with central economic dispatch of participants' generating plants, pooling of transmission facilities and economy and emergency exchange of energy and capacity. The NEPOOL agreement also imposes obligations on the Company to maintain a generating capacity reserve as set by the Pool, but which is lower than the reserve which would be required if the Company were not a Pool participant. Company Hydroelectric Power. The Company wholly owns and operates eight hydroelectric generating facilities, the largest of which has a generating output of 8.8 MW, located on river systems within its service area. In 1993, these plants provided 123,946 MWh of low-cost energy, meeting 6.6% of the Company's retail and requirements wholesale sales at an average cost of 0.9 cents per KWh. See "State and Federal Regulation." VELCO. The Company, together with six other Vermont electric distribution utilities, owns VELCO. Since commencing operation in 1958, VELCO has transmitted power for its owners in Vermont, including power from NYPA and other power contracted for by Vermont utilities. VELCO also purchases bulk power for resale at cost to its owners, and as a member of NEPOOL, represents all Vermont electric utilities in pool arrangements and transactions. See Note B of Notes to Consolidated Financial Statements. Long-Term Power Sales. The Company has entered into agreements for a unit sale of power to Fitchburg Gas and Electric Light Company of 10 MW of Vermont Yankee capacity and associated energy from September 1, 1990 through October 31, 1996. In 1986, the Company entered into an agreement for the sale to UNITIL of 23 MW of capacity produced by the Stony Brook I combined-cycle plant for a 12-year period commencing October 1, 1986. The agreement provides for the recovery by the Company of all costs associated with the capacity and energy sold. Fuel. During 1993, the Company's retail and requirements wholesale sales were provided by the following fuel sources: 42.5% from hydro (6.6% Company-owned, 1.6% NYPA, 28.6% Hydro-Quebec and 5.7% small power producers), 28.5% from nuclear, 14.8% from coal, 1.1% from natural gas, 0.7% from oil and 0.4% from wood. The remaining 12.0% was purchased on a short-term basis from other utilities and through NEPOOL. Vermont Yankee has approximately $165 million of "requirements based" purchase contracts for nuclear fuel needs to meet substantially all of its power production requirements through 2002. Under these contracts, any disruption of operating activity would allow Vermont Yankee to cancel or postpone deliveries until actually needed. Vermont Yankee has a contract with the United States Department of Energy ("DOE") for the permanent disposal of spent nuclear fuel. Under this contract, DOE will provide disposal services when a facility for spent nuclear fuel and other high level radioactive waste is available, which is required under current statutes to be prior to January 31, 1998. A facility is not yet available. Vermont Yankee also bills its sponsors, including the Company, a disposal fee, which is subject to annual DOE adjustment of $.001 per KWh of net generation. See Management's Financial Analysis in Item 7 herein, Note B of Notes to Consolidated Financial Statements and Note 8 to Vermont Yankee Notes to Financial Statements. The Company does not maintain long-term contracts for the supply of oil for the oil-fired peaking unit generating stations wholly owned by it (80 MW). The Company did not experience difficulty in obtaining oil for its own units during 1993, and, while no assurance can be given, does not anticipate any such difficulty during 1994. None of the utilities from which the Company expects to purchase oil- or gas-fired capacity in 1994 has advised the Company of grounds for doubt about maintenance of secure sources of oil and gas during the year. Coal for Merrimack #2 is presently being purchased by contract and on the spot market from northern West Virginia and southern Pennsylvania sources. The sponsor of Merrimack advises that, as of February 28, 1994, there was a 90-day supply of coal at the plant. Wood for the McNeil plant is furnished to the Burlington Electric Department from a variety of sources under short-term contracts ranging from several weeks' to six months' duration. The McNeil plant used 103,814 tons of wood chips and mill residue and 257,393,000 cubic feet of gas in 1993. The McNeil plant is forecasting consumption of wood chips for 1994 to be 120,000 tons and gas consumption of 600,000,000 cubic feet. Burlington Electric Department advises that, as of February 26, 1994, there were 9,200 tons of wood chips in inventory for the McNeil plant. The Stony Brook combined-cycle generating station is capable of burning either natural gas or oil in two of its turbines. Natural gas is supplied to the plant subject to its availability. During periods of extremely cold weather, the supplier reserves the right to discontinue deliveries to the plant in order to satisfy the demand of its residential customers. The Company assumes for planning and budgeting purposes that the plant will be supplied with gas during the months of April through November, and that it will run solely on oil during the months of December through March. The plant maintains an oil supply sufficient to meet approximately one-half of its annual needs. STATE AND FEDERAL REGULATION General. The Company is subject to the regulatory authority of the VPSB, which extends to retail rates, services, facilities, securities issues and various other matters. The separate Vermont Department of Public Service, created by statute in 1981, is responsible for development of energy supply plans for the State, purchases of power as an agent for the State and other general regulatory matters. The VPSB is principally responsible for quasi-judicial proceedings, such as rate proceedings. The Department, through a Director for Public Advocacy, is entitled to participate as a litigant in such proceedings and regularly does so. Vermont law pertaining to rate proceedings of the Company provides that the rates as filed become final and effective seven months after suspension of the filed rates (which can occur within 45 days of filing) if the VPSB fails to act on the permanent rate request by that time. Once filed, a request for permanent rate relief may not be amended or supplemented except upon approval of the VPSB after hearing. The VPSB must consider an application for and, in appropriate circumstances, order temporary rate relief pending a decision. If the VPSB fails to act on an application for temporary rate relief within 30 days, or within 45 days after suspension of the permanent rate request, the temporary rates take effect. If temporary relief is ordered, revenues recovered are subject to refund. The Company's rate tariffs are uniform throughout its service area. The Company's wholesale rate on sales to eight wholesale customers is regulated by the FERC. Revenues from sales to these customers were approximately 2.4% of operating revenues for 1993. Included within these customers is the Bozrah Light and Power Company, a private electric utility in Connecticut, with whom the Company had a contract to provide wholesale electric service on a full-requirements basis. Service to Bozrah began in March 1987 and terminated May 1, 1993. See "Power Resources - New York Purchases: Rochester Gas and Electric Corporation" for a discussion of the three-party agreement negotiated by the Company relating to the termination of full-requirements service to Bozrah. Late in 1989, the Company began serving two new municipal utilities, Northfield and Hardwick, under its wholesale tariff. These customers increased electricity sales by approximately 46,000 MWh and peak requirements by approximately 9 MW. Revenues in 1993 from Northfield and Hardwick were $1,727,058. Service to Hardwick under the Company's wholesale tariff terminated on April 30, 1993. The Company provides transmission service to ten customers within the State under rates regulated by the FERC; revenues for such services amounted to less than 1% of the Company's operating revenues for 1993. By reason of its relationship with Vermont Yankee, VELCO and VETCO, the Company has filed an exemption statement under Section 3(a)(2) of the Public Utility Holding Company Act, thereby securing exemption from the provisions of such Act, except for Section 9(a)(2) thereof (which prohibits the acquisition of securities of certain other utility companies without approval of the Securities and Exchange Commission). The Securities and Exchange Commission has the power to institute proceedings to terminate such exemption for cause. Licensing. Pursuant to the Federal Power Act, the FERC has granted licenses for the following hydro projects: Project Issue Date Period - ------- ----------- ------ Bolton February 5, 1982 February 5, 1982 - February 4, 2022 Essex * January 21, 1969 May 1, 1965 - December 31, 1993 Vergennes June 29, 1979 June 1, 1949 - May 31, 1999 Waterbury July 20, 1954 September 1, 1951 - August 31, 2001 * The Company is in the process of relicensing this facility and anticipates the final FERC license to be issued by mid-1994. The facility is currently operating on an annual license. Major project licenses provide that after an initial twenty-year period, a portion of the earnings of such project in excess of a specified rate of return is to be set aside in appropriated retained earnings in compliance with FERC Order #5, issued in 1978. Although the twenty-year periods expired in 1985, 1969 and 1971 in the cases of the Essex, the Vergennes and the Waterbury projects, the amounts appropriated are not material. Department of Public Service Twenty-Year Power Plan. On October 15, 1988, the Department adopted an update of its twenty-year electrical power- supply plan (the "Plan") for the State of Vermont. The Plan includes an overview of statewide growth and development as they relate to future requirements for electrical energy; an assessment of available energy resources; and estimates of electrical energy demand. The Plan calls for exploring the potential reduction of electrical demand through conservation and load management. The Company continues to implement its Integrated Resource Plan in a manner consistent with the Department's Plan. The 1991 Integrated Resource Plan calls for the continued design and delivery of conservation and load management programs, customer programs and education programs as well as measures concerning the efficient distribution of power to the end user. ENVIRONMENTAL MATTERS In recent years, public concern for the physical environment has brought about increased government regulation of the licensing and operation of electric generation, transmission and distribution facilities. The Company must meet various land, water, air and aesthetic requirements as administered by local, state and federal regulatory agencies. Subject to the results of developments discussed below concerning the Pine Street Marsh site in Burlington, Vermont, the Company believes that it is in substantial compliance with such requirements, and no material complaints concerning compliance by the Company with present environmental protection regulations are outstanding. Because the regulations and requirements under existing legislation have not been fully promulgated (and, when promulgated, are subject to revision), because permits and licenses when issued may be conditional or may be subject to renewal and because additional legislation may be adopted in the future, the Company cannot presently forecast the costs or other effects which environmental regulation may ultimately have upon its existing and proposed facilities and operations. In 1982, the United States Environmental Protection Agency ("EPA") notified the Company that the EPA, pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA"), was considering spending public funds to investigate and take corrective action involving claimed releases of allegedly hazardous substances at a site identified as the Pine Street Marsh in Burlington, Vermont. On part of this site was located a manufactured-gas facility owned and operated by a number of separate enterprises, including the Company, from the late 19th century to 1967. In its notice, the EPA stated that the Company may be a "potentially responsible party" ("PRP") under CERCLA from which reimbursement of costs of investigation and of corrective action may be sought. On February 23, 1988, the Company received a Special Notice letter from the EPA stating that the letter constituted a formal demand for reimbursement of costs, including interest thereon, that were incurred and were expected to be incurred in response to the environmental problems at the site. On December 5, 1988, the EPA brought suit against the Company, New England Electric System, and Vermont Gas Systems, Inc. in the United States District Court for the District of Vermont seeking reimbursement for costs it incurred in conducting activities in 1985 to remove allegedly hazardous substances from the site, and requested a declaratory judgment that the Company and the other defendants are liable for all costs that have been incurred since the removal and that continue to be incurred in responding to claims of releases or threatened releases from the Maltex Pond Area -- the portion of the site where the removal action occurred. The complaint specifically alleged that the EPA expended at least $741,000 during the 1985 removal action and sought interest on this amount from the date the funds were expended and costs of litigation, including attorneys' fees. The Company entered a cross-claim against New England Electric System and third-party claims against UGI Corporation, Southern Union Corporation, the State of Vermont, and an individual property owner at the site for recovery of its response costs and for contribution. Fourth-party defendants subsequently were joined. In July 1990, the Company and other parties signed a proposed Consent Decree settling the removal action litigation. All 14 settling defendants contributed to the aggregate settlement amount of $945,000. Individual contributions were treated as confidential under the proposed Consent Decree. On December 26, 1990, upon the unopposed motion of the United States, the Consent Decree was entered by the Court. During the summer and fall of 1989, the EPA conducted the initial phase of the Remedial Investigation ("RI") and commenced the Feasibility Study ("FS") relating to the site. In the fall of 1990 and in 1991, the EPA conducted a second phase of RI work and studied the treatability of soils and groundwater at the site. In the fall of 1991, the EPA responded favorably to a request from the Company and other PRPs to participate in informal discussions on the EPA's ongoing investigation and evaluation of the site, and invited the Company and other interested parties to share technical information and resources with the EPA that might assist it in evaluating remedial options. Thereafter, the Company and other PRPs held several meetings with the EPA to discuss technical issues and received copies of the EPA's Supplemental Remedial Investigation Final Report, and its Baseline Risk Assessment Final Report. On November 6, 1992, the EPA released its final RI/FS and announced a proposed remedy with an estimated total cost of approximately $49,500,000, including 30 years' operation and maintenance costs with a net present value of approximately $26,400,000. The EPA's preferred remedy called for construction of a Containment/Disposal Facility ("CDF") over a portion of the site. The CDF would have consisted of subsurface vertical barriers and a low permeability cap, with collection trenches and a hydraulic control system to capture groundwater and prevent its migration outside of the CDF. Collected groundwater would have been treated and discharged or stored and disposed of off-site. The proposed remedy also would have required construction of new wetlands to replace those that would be destroyed by construction of the CDF, and a long-term monitoring program. On May 15, 1993, the PRP group in which the Company participated submitted extensive comments to the EPA opposing the proposed remedy. In response to an earlier request from the EPA, the PRP group also submitted a detailed analysis of an alternative remedy anticipated to cost approximately $20,000,000. In early June, in response to overwhelming negative comment, the EPA withdrew its proposed remedy and announced that it would work with all interested parties in developing a new proposal. Since then, the EPA has established a coordinating council, with representatives of PRPs, environmental groups, and government agencies, and presided over by a neutral mediator. The council is charged with determining what additional studies may be appropriate for the site and may also eventually address additional response activities. The Company is represented on the council. In early 1994, the Company and other PRPs met with the EPA to commence negotiations on an Administration Order of Consent pursuant to which the PRPs would conduct additional studies agreed to by the coordinating council. Although negotiations are not yet complete, it is likely that the EPA will consent to allowing the PRPs to conduct additional studies at the site and that the EPA will not require reimbursement for its past RI/FS study costs as a condition to allowing the PRPs to conduct these additional studies. The EPA has previously advised the Company that ultimately it will seek to hold the Company and the PRPs liable for such costs. In September 1991, the Company, New England Electric System and Vermont Gas Systems, Inc. entered into confidential negotiations with most other PRPs concerning allocation of unresolved liabilities concerning the site. Those negotiations are continuing. In December 1991, the Company brought suit against several previous insurers seeking recovery of unrecovered past costs and indemnity against future liabilities associated with environmental problems at the site. The parties to this action are engaged in discovery and motions practice. The Company has reached a confidential settlement with one of the defendants that provided the Company with second layer excess liability coverage for a seven month period in 1976. The Company has also reached a confidential agreement in principle with another insurance company defendant that provided the Company with comprehensive general liability insurance between 1976 and 1982, and with environmental impairment liability insurance from 1981 to 1984. These policies were in place in 1982 when the EPA first notified the Company that it might be a potentially responsible party at the Pine Street Marsh site. The Company is unable to predict at this time the magnitude of any liability resulting from potential claims for the costs of the RI/FS or the performance of any remedial action, or the likely disposition or magnitude of claims the Company may have against others, including its insurers, except to the extent described above. In its 1991 rate case, the Company, for the first time, sought recovery for expenses associated with the Pine Street Marsh site. Specifically, the Company proposed rate recognition of its estimated, unrecovered 1991 expenditures (approximately $400,000) for technical consultants and legal assistance in connection with the EPA's enforcement actions at the site and insurance litigation. While reserving the right to argue in the future about the appropriateness of rate recovery for Pine Street Marsh related costs, the Company and the Department reached agreement that the full amount of Pine Street Marsh costs reflected in the Company's 1991 rate case should be recovered in rates. The Company's rates approved by the VPSB on April 2, 1992, reflected the 1991 Pine Street Marsh related expenditures referred to above. In its rate increase request filed on October 1, 1993, the Company proposed rate recognition for its expenditures between January 1, 1992 and July 31, 1993 (approximately $4,200,000) for technical consultants and legal assistance in connection with the EPA's enforcement actions at the site and insurance litigation. The Department and the Company have reached the same agreement regarding recovery of these costs in rates that they reached with respect to the Company's 1991 Pine Street Marsh related expenditures. A comprehensive settlement of the Company's 1993 rate case, including the agreement regarding Pine Street Marsh costs, is currently pending before the VPSB. As of December 31, 1993, the Company had reserved approximately $680,000 for costs attributable to the site, other than those costs that are the subject of the agreements between the Department and the Company mentioned above. Management expects to seek and receive ratemaking treatment for other costs incurred beyond the amounts that have been reserved. As of December 31, 1993, such other costs are approximately $4,918,000, which includes the $4,200,000 in costs that are the subject of the most recent rate case settlement agreement referred to above. COMPETITION The Company serves a fixed area of Vermont under VPSB franchise. Except as noted below, the Company's electric business is substantially free from competition from other electric utilities, municipalities and other public agencies in its franchise area, as mandated by the VPSB. The Company, however, competes with other providers of energy for the home- heating market. Wood stoves, oil-burning furnaces and natural gas represent the principal alternatives to electric heat for customers in the Company's service territory. Fluctuations in the price of fossil fuels, especially oil and natural gas, affect the Company's position in the home- heating market. Legislative authority has existed since 1941 that would permit Vermont cities, towns and villages to own and operate public utilities. Since that time, no municipality served by the Company has established or, as far as is known to the Company, is presently taking steps to establish, a municipal public utility. In 1987, the Vermont General Assembly enacted legislation that authorized the Department to sell electricity on a significantly expanded basis. Before the new law was passed, the Department's authority to make retail sales had been limited: It could sell at retail only to residential and farm customers and could sell only power that it had purchased from the Niagara and St. Lawrence projects operated by the New York Power Authority. Under the new law, the Department can sell electricity purchased from any source at retail to all customer classes throughout the state, but only if it convinces the VPSB and other state officials that the public good will be served by such sales. The Department has made limited additional retail sales of electricity. The Department retains its traditional responsibilities of public advocacy before the VPSB and electricity planning on a statewide basis. BUSINESS DEVELOPMENT The Company has a plan of diversification into energy-related businesses intended to complement the Company's basic utility enterprise. These businesses are conducted through two subsidiaries, Green Mountain Propane Gas Company and Mountain Energy, Inc., and the Company's unregulated rental water heater activities. The Company plans to limit such diversification to 20% of the Company's consolidated revenue. Beginning in the first quarter of 1992, the Company consolidated four of its wholly owned subsidiaries, including Green Mountain Propane and Mountain Energy, in its financial statements. The Company's prior years' financial statements have been restated to reflect this consolidation. Prior to consolidation, the operations of these subsidiaries were reported on the equity basis as they were not material in relation to the consolidated group. Also included in the financial statements, in equity in earnings of affiliates and non-utility operations, are the results of the Company's rental water heater business. None of these activities is regulated by the VPSB. Included in equity in earnings of affiliates and non-utility operations in the Other Income section of the Statements of Consolidated Income are the results of operations of the Company's rental water heater program which is not regulated by the VPSB, and four of the Company's wholly owned subsidiaries, Green Mountain Propane Gas Company, Mountain Energy, Inc., GMP Real Estate Corporation, and Lease-Elec, Inc. (also unregulated). Summarized financial information of the Company's unregulated activities over the last two years is as follows: For the years ended December 31 1993 1992 ---- ---- (In thousands) Revenue . . . . . . . . . . . . . . . $11,487 $11,146 Expense . . . . . . . . . . . . . . . 11,527 11,409 --------- --------- Net Income (Loss) . . . . . . . . . . ($ 40) ($ 263) ========= ========= EMPLOYEES The Company had 387 employees, exclusive of temporary employees, as of December 31, 1993. In addition, subsidiaries of the Company had 58 employees at year end. SEASONAL NATURE OF BUSINESS The Company experiences its heaviest loads in the colder months of the year. Winter recreational activities, longer hours of darkness and heating loads from cold weather usually cause the Company's peak electric sales to occur in December, January or February. The 1993 peak of 307.3 MW occurred on February 1, 1993. The Company's retail electric rates are seasonally differentiated. Under this structure, retail electric rates produce average revenues per kilowatt hour during four peak season months (December through March) that are approximately 60% higher than during the eight off- season months (April through November). EXECUTIVE OFFICERS Executive Officers of the Company as of March 31, 1994: Name Age Douglas G. Hyde 51 President, Chief Executive Officer and Chairman of the Executive Committee of the Corporation since 1993. Executive Vice President, Chief Operating Officer and Director from 1989 to 1993. Executive Vice President and Director of the Corporation from 1986 to 1989. A. Norman Terreri 60 Senior Vice President and Chief Operating Officer since 1993. Senior Vice President from 1984 to 1993. President - Mountain Energy, Inc. since December 1989. Edwin M. Norse 48 Vice President, Chief Financial Officer and Treasurer since 1986. President-Green Mountain Propane Gas Company since October 1993. Christopher L. Dutton 45 Vice President and General Counsel since 1993. Vice President, General Counsel and Corporate Secretary from 1989 to 1993. General Counsel and Corporate Secretary from 1984 to 1989. Glenn J. Purcell 60 Controller since September 1986. Thomas C. Boucher 39 Vice President-Corporate Planning since December 1992. Assistant Vice President- Energy Planning from 1986 to 1992. Stephen C. Terry 51 Vice President-External Affairs since December 1991. Assistant Vice President- Corporate Relations from 1986 to 1991. Walter S. Oakes 47 Assistant Vice President-Corporate Services since December 1988. Director-Customer Services from 1987 to 1988. Robert C. Young 56 Assistant Vice President-Operations and Engineering since December 1992. Director of Engineering from August 1991 to December 1992. Director of Special Projects from August 1991 to March 1992. Prior to joining the Company, he was employed by the Burlington Electric Department for thirty- two years, including sixteen years as General Manager. Karen K. O'Neill 42 Assistant General Counsel since December 1989. Senior Attorney from 1988 to December 1989. Corporate Attorney from 1985 to 1988. Craig T. Myotte 39 Assistant Vice President-Operations and Maintenance since May 1991. Director- System Operations from 1986 to 1991. John J. Lampron 49 Assistant Treasurer since July 1991. Prior to joining the Company, he was employed by Public Service Company of New Hampshire as an Assistant Vice President from 1982 to 1990. Donna S. Laffan 44 Corporate Secretary since December 1993. Assistant Secretary from 1986 to 1993. Officers are elected by the Board of Directors for one-year terms and serve at the pleasure of the Board of Directors. ITEM 2. PROPERTY GENERATING FACILITIES The Company's Vermont properties are located in five areas and are interconnected by transmission lines of VELCO and New England Power Company. The Company wholly owns and operates eight hydroelectric generating stations with an aggregate effective capability of 35.7 MW. It also owns two gas-turbine generating stations with effective capabilities of 15.2 MW and 56.3 MW, respectively. The Company has two diesel generating stations with an aggregate effective capability of 8.4 MW, bringing wholly owned effective capability to 116.3 MW. The Company also owns 17.9% of the outstanding common stock, and is entitled to 17.265% (90.1 MW) of the capacity of Vermont Yankee, a 1.1% (7.1 MW) joint-ownership share of the Wyman #4 plant located in Maine, a 8.8% (30.2 MW) joint-ownership share of the Stony Brook I intermediate units located in Massachusetts and an 11% (5.8 MW) joint-ownership share of the J. C. McNeil wood-fired steam plant located in Burlington, Vermont. (See "Power Resources" under Item 1 above for plant details and the table hereinafter set forth for generating facilities presently available). TRANSMISSION AND DISTRIBUTION The Company had, at December 31, 1993, approximately 1.5 miles of 115- kV transmission lines, 9.4 miles of 69 kV transmission lines, 5.4 miles of 44-kV and 265.1 miles of 34.5 kV transmission lines. Its distribution system included about 2,336 miles of overhead lines, 2.4 kV to 34.5 kV, and about 392 miles of underground cable of 2.4 kV to 34.5 kV. At such date, the Company owned approximately 433,150 kVa of substation transformer capacity in distribution substations, 156,775 kVa of transformer capacity in transmission substations and 1,207,299 kVa of transformers for stepdown from distribution to customer use. The Company owns 33.8% of the Highgate transmission intertie, a 200-MW converter and transmission line utilized to transmit power from Hydro- Quebec. The Company also owns 29.5% of the common stock and 30% of the preferred stock of VELCO which operates a high-voltage transmission system interconnecting electric utilities in the State of Vermont. PROPERTY OWNERSHIP The principal wholly owned plants of the Company are located on lands owned in fee by the Company. Water power and floodage rights are controlled through ownership of the necessary land in fee or under easements. Transmission and distribution facilities which are not located in or over public highways are, with minor exceptions, located either on land owned in fee or pursuant to easements which, in nearly all cases, are perpetual. Transmission and distribution lines located in or over public highways are so located pursuant to authority conferred on public utilities by statute, subject to regulation by state or municipal authorities. INDENTURE OF FIRST MORTGAGE The Company's interests in substantially all of its properties and franchises are subject to the lien of the mortgage securing its First Mortgage Bonds. GENERATING FACILITIES OWNED The following table gives information with respect to generating facilities presently available in which the Company has an ownership interest. See also "Power Resources" in Item 1. Winter Capability Type Location Name Fuel MW(1) Wholly Owned Hydro Middlesex, VT Middlesex #2 Hydro 3.4 Marshfield, VT Marshfield #6 Hydro 5.0 Vergennes, VT Vergennes #9 Hydro 2.3 W. Danville, VT W. Danville #15 Hydro 1.2 Colchester, VT Gorge #18 Hydro 3.3 Essex Jct., VT Essex #19 Hydro 7.8 Waterbury, VT Waterbury #22 Hydro 5.0 Bolton, VT DeForge #1 Hydro 8.4 Diesel Vergennes, VT Vergennes #9 Oil 4.2 Essex Jct., VT Essex #19 Oil 4.2 Gas Berlin, VT Berlin #5 Oil 56.3 Turbine Colchester, VT Gorge #16 Oil 15.2 Jointly Owned Steam Vernon, VT Vermont Yankee Nuclear 90.1(2) Yarmouth, ME Wyman #4 Oil 7.1 Burlington, VT McNeil Wood 6.6(3) Combined Ludlow, MA Stony Brook #1 Oil/Gas 30.2(2) _____ Total Winter Capability 250.3 (1) Winter capability quantities are used since the Company's peak usage occurs during the winter months. Some units are derated for the summer months. Capability shown includes capacity and associated energy sold to other utilities. (2) For a discussion of the impact of various power supply sales on the availability of generating facilities, see "Long-Term Power Sales." (3) The Company's entitlement in McNeil is 5.8 MW. However, the Company receives up to 6.6 MW as a result of other owners' losses on this system. CORPORATE HEADQUARTERS For a discussion of the Company's operating lease for its Corporate Headquarters building, see Note I-2 of Notes to Consolidated Financial Statements. ITEM 3. LEGAL PROCEEDINGS See the discussion under "Environmental Matters" in Item 1 concerning a notice received by the Company in 1982, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Outstanding shares of the Common Stock are listed and traded on the New York Stock Exchange. The following tabulation shows the high and low sales prices for the Common Stock on the New York Stock Exchange during 1992 and 1993: HIGH LOW 1993 First Quarter 35 5/8 31 3/8 Second Quarter 36 1/2 32 5/8 Third Quarter 36 5/8 34 3/8 Fourth Quarter 35 1/8 30 3/4 1992 First Quarter 31 1/4 29 1/4 Second Quarter 30 3/4 29 Third Quarter 33 5/8 30 Fourth Quarter 33 1/4 30 1/8 The number of common stockholders of record as of March 18, 1994, was 6,693. Quarterly cash dividends were paid as follows for the past two years: First Second Third Fourth Quarter Quarter Quarter Quarter ------- ------- ------- ------- 1993 52 1/2 cents 52 1/2 cents 53 cents 53 cents 1992 51 1/2 cents 51 1/2 cents 52 1/2 cents 52 1/2 cents SELECTED FINANCIAL DATA Results of operations for the years ended December 31 - -----------------------------------------------------
1993 1992 1991 1990 1989 --------- --------- --------- --------- --------- Operating Revenues........................$147,253 $145,240 $143,555 $147,633 $144,028 Operating Expenses........................ 132,427 128,828 129,041 133,925 131,853 --------- --------- --------- --------- --------- Operating Income........................ 14,826 16,412 14,514 13,708 12,175 --------- --------- --------- --------- --------- Other Income AFUDC - equity.......................... 273 186 225 86 136 Other................................... 2,360 2,073 2,689 2,037 2,196 --------- --------- --------- --------- --------- Total other income.................... 2,633 2,259 2,914 2,123 2,332 --------- --------- --------- --------- --------- Interest Charges AFUDC - borrowed funds.................. (357) (202) (131) (394) (360) Other................................... 7,185 7,021 7,103 7,259 5,839 --------- --------- --------- --------- --------- Total interest charges................ 6,828 6,819 6,972 6,865 5,479 --------- --------- --------- --------- --------- Net Income................................ 10,631 11,852 10,456 8,966 9,028 Dividends on Preferred Stock.............. 811 831 852 421 292 --------- --------- --------- --------- --------- Net Income Applicable to Common Stock..... $9,820 $11,021 $9,604 $8,545 $8,736 ========= ========= ========= ========= ========= Common Stock Data Earnings per share...................... $2.20 $2.54 $2.45 $2.29 $2.36 Cash dividends declared per share....... $2.11 $2.08 $2.04 $2.00 $1.95 Weighted average shares outstanding..... 4,457 4,345 3,919 3,729 3,697
Financial Condition as of December 31 - -------------------------------------
1993 1992 1991 1990 1989 --------- --------- --------- --------- --------- Assets Utility Plant, Net.......................$171,411 $164,723 $159,730 $152,370 $131,754 Other Investments........................ 22,528 21,700 21,624 19,785 19,312 Current Assets........................... 26,944 28,067 26,778 25,891 26,818 Deferred Charges......................... 42,345 19,012 11,271 10,536 7,224 Non-Utility Assets....................... 28,626 23,716 19,832 11,078 9,209 --------- --------- --------- --------- --------- Total Assets............................$291,854 $257,218 $239,235 $219,660 $194,317 ========= ========= ========= ========= ========= Capitalization and Liabilities Common Stock Equity...................... $97,149 $92,645 $87,455 $71,942 $69,459 Redeemable Cumulative Preferred Stock.... 9,385 9,575 9,825 10,087 3,374 Long-Term Debt, Less Current Maturities.. 79,800 67,644 56,270 60,626 56,992 Capital Lease Obligation................. 11,029 11,950 12,627 12,797 -- Curent Liabilities....................... 38,879 30,099 32,893 32,399 34,263 Deferred Credits and Other............... 48,441 33,264 29,694 27,358 25,676 Non-Utility Liabilities.................. 7,171 12,041 10,471 4,451 4,553 --------- --------- --------- --------- --------- Total Capitalization and Liabilities....$291,854 $257,218 $239,235 $219,660 $194,317 ========= ========= ========= ========= =========
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Earnings Summary -- Earnings per average share of common stock in 1993 were $2.20 as compared with $2.54 in 1992 and $2.45 in 1991. The 1993 earnings represent an earned return on average common equity of 10.3 percent. In 1992 and 1991, the earned return on equity was 12.2 and 12.5 percent, respectively. The 1993 decrease in earnings resulted principally from a nearly two- fold increase in purchases of electricity from independent power producers mandated by federal and state law. These purchases are priced at rates set by the Vermont Public Service Board (VPSB) based on the VPSB calculations of the statewide long-term cost of electricity acquisitions avoided by such purchases. In 1993, these rates were substantially higher than the Company's overall cost of electricity. The principal factors contributing to the earnings results in 1992 were higher retail revenues, due primarily to a rate increase of 5.6 percent that took effect in April 1992, and stable energy prices. Operating Revenues and MWH Sales -- Operating revenues and MWH sales for the years 1993, 1992 and 1991 consisted of 1993 1992 1991 ---- ---- ---- (Dollars in Thousands) Operating Revenues: Retail . . . . . . . . . . . . . $ 130,061 $ 126,057 $ 118,021 Sales for Resale . . . . . . . . 14,441 17,258 23,663 Other . . . . . . . . . . . . . 2,751 1,925 1,871 ---------- ---------- ---------- Total Operating Revenues . . . . . $ 147,253 $ 145,240 $ 143,555 ========== ========== ========== Megawatthour Sales: Retail . . . . . . . . . . . . . 1,688,803 1,692,179 1,645,387 Sales for Resale . . . . . . . . 331,875 375,894 545,031 --------- --------- --------- Total Megawatthour Sales . . . . . 2,020,678 2,068,073 2,190,418 ========= ========= ========= Average Number of Customers: Residential . . . . . . . . . . 67,994 67,201 66,406 Commercial & Industrial . . . . 11,472 11,269 11,239 Other . . . . . . . . . . . . . 74 73 71 ------ ------ ------ Total Customers . . . . . . . . . . 79,540 78,543 77,716 ====== ====== ====== Differences in operating revenues were due to changes in the following: 1992 1991 to to 1993 1992 ---- ---- (In Thousands) Operating Revenues: Retail Rates . . . . . . . . . . . . . . . $4,269 $4,499 Retail Sales Volume . . . . . . . . . . . (265) 3,537 Resales and Other Revenues . . . . . . . . (1,991) (6,351) ------- ------- Increase in Operating Revenues . . . . . . . $2,013 $1,685 ======= ======= In 1993, total electricity sales decreased 2.3 percent due principally to a reduction in wholesale sales. Total operating revenues increased 1.4 percent in 1993 due primarily to a 5.6 percent retail rate increase that was effective in April 1992. Wholesale revenues declined 16.3 percent in 1993 due principally to the sluggish economy and the availability of inexpensive, excess power supply in New England. In 1992, total electricity sales decreased 5.6 percent due principally to a reduction in wholesale sales. Total operating revenues increased 1.1 percent in 1992, due primarily to a 5.6 percent rate increase that was effective in April 1992, and to increased sales of electricity to retail customers reflecting colder (but normal) temperatures in 1992 and higher usage by commercial and industrial customers. These factors were principally responsible for the 6.8 percent rise in retail revenues that occurred in 1992. Wholesale revenues declined 27.1 percent in 1992 due principally to the end of a multi-year contract under which the Company sold electricity to another New England utility, the sluggish economy, and the availability of inexpensive, excess power in New England. IBM, the Company's single largest customer, operates manufacturing facilities in Essex Junction. IBM's electricity requirements for its main plant and an adjacent plant accounted for 13.6, 13.8 and 13.0 percent of the Company's operating revenues in 1993, 1992 and 1991, respectively. No other retail customer accounted for more than one percent of the Company's revenue. Power Supply Expenses -- Power supply expenses constituted 59.7 percent, 58.1 percent and 60.7 percent of total operating expenses for the years ended 1993, 1992 and 1991, respectively. These expenses increased by $4.1 million in 1993 (5.5 percent), and decreased by $3.4 million (4.4 percent) in 1992. Power supply expenses increased in 1993 due primarily to a nearly twofold increase in purchases of electricity from independent power producers mandated by federal and state law. The average cost per kilowatthour of such electricity is substantially greater than the Company's embedded cost of electricity. The decrease in power supply expenses in 1992 was principally the result of lower fuel prices, abundant and inexpensive opportunity purchases, reduced levels of wholesale electricity sales and favorable changes in the Company's power purchase contracts with Hydro-Quebec. Other Operating Expenses -- Other operating expenses were virtually unchanged in 1993 from 1992. Higher pension and postretirement health care benefit costs and increased regulatory commission expenses resulted in an 8.2 percent increase in other operating expenses in 1992. Transmission Expenses -- The Company's restructuring of a series of transmission contracts produced a 3.0 percent decrease in transmission expenses in 1993. Transmission expenses decreased 4.8 percent in 1992 for the same reason. Maintenance Expenses -- Maintenance expenses decreased 7.3 percent in 1993 due principally to a scheduled increase in activity in various capital projects that had the effect of reducing activity by Company employees on maintenance projects. Maintenance expenses increased 8.1 percent in 1992 due principally to scheduled increases in tree trimming expenses and hydroelectric generating facilities maintenance. Depreciation and Amortization -- Depreciation and amortization expenses increased 6.3 percent in 1993, reflecting continuing additions to the Company's distribution facilities. Depreciation and amortization expenses increased 14.5 percent in 1992, reflecting continuing additions to the Company's distribution facilities and the amortization of costs of conservation programs. Income Taxes -- The effective federal tax rates for the years 1993, 1992 and 1991 were 28.9 percent, 28.8 percent and 28.5 percent, respectively. The various effects and components of the income tax provisions are detailed in Note G of the Notes to Financial Statements. Other Income -- Other income increased 16.6 percent in 1993 due primarily to an increase in earnings of the Company's wholly owned subsidiary, Mountain Energy, Inc., and to the VPSB's disallowance in the 1992 retail rate case of approximately $400,000 in construction costs. Diminished equity in earnings of affiliates and non-utility operations, primarily attributable to operating losses sustained by the propane subsidiary, was responsible for a 20.9 percent decrease in other income in 1992, compared to the previous year. Interest Charges -- Interest charges were virtually unchanged in 1993 from 1992. A 67.2 percent decrease in short-term debt interest expense, due to both lower interest rates and a reduction in short-term borrowings, was partially offset by an increase in long-term debt expense resulting in an overall decrease of 2.9 percent in interest charges in 1992. Dividends on Preferred Stock -- Dividends on preferred stock decreased 2.4 percent in 1993 due primarily to the repurchase by the Company in 1992 of the following preferred stock: 450 shares of 4.75 percent, Class B; 450 shares of 7 percent, Class C; and 1,600 shares of 9.375 percent, Class D, Series 1. Dividends on preferred stock decreased 2.5 percent in 1992 due primarily to the repurchase of preferred stock by the Company in 1991 of the same class and quantity. Future Outlook -- The Company continues to implement aggressive conservation programs to mitigate the increasing demand for electricity. The Company is reviewing its future conservation plans in light of various factors, including changing avoided electricity costs, its experience and increased effectiveness in delivering conservation programs, and its total resource mix. Even with continued existing conservation programs, the Company anticipates that the demand for electricity in its service territory will grow by approximately 1.0 percent per year over the next five years. Because the Company purchases most of its power supply from other utilities, it does not anticipate that it will incur any material direct cost increases as a result of the recently enacted Federal Clean Air legislation. Furthermore, only one of its power supply purchase contracts, which expires in 1998, relates to a generating plant that is likely to be affected by the acid rain provisions of this legislation. Overall, approximately 10 percent of the Company's committed electricity supply is expected to be affected by federal and State environmental compliance requirements. The Company regularly reviews rates and forecasts costs. As these forecasts change, the Company will seek changes in rates that will enable it to recover operating costs. Financial statements are prepared in accordance with generally accepted accounting principles and report operating results in terms of historic costs. This accounting provides reasonable financial statements but does not always take inflation into consideration. As rate recovery is based on these historical costs and known and measurable changes, the Company is able to receive some rate relief for inflation. It does not receive immediate rate recovery relating to fixed costs associated with Company assets. Such fixed costs are recovered based on historic figures. Any effects of inflation on plant costs are generally offset by the fact that these assets are financed through long-term debt. Diversification -- The Company has a plan of diversification into energy-related businesses intended to complement the Company's basic utility enterprise. The Company plans to limit diversification to 20 percent of the Company's consolidated revenue. Environmental Matters -- In recent years, public concern for the physical environment has brought about increased government regulation of the licensing and operation of electric generation, transmission and distribution facilities. The Company must meet various land, water, air and aesthetic requirements as administered by local, state and federal regulatory agencies. The Company maintains an environmental compliance and monitoring program that includes employee training, regular inspection of Company facilities, research and development projects, waste handling and spill prevention procedures and other activities. Subject to the results of developments discussed in Note I.1 of Notes to Consolidated Financial Statements concerning the Pine Street Marsh site in Burlington, Vermont, the Company believes that it is in substantial compliance with such requirements, and no material complaints concerning compliance by the Company with present environmental protection regulations are outstanding. During 1991, the Company incurred approximately $400,000 in costs associated with the Pine Street Marsh site for technical consultants and legal assistance in connection with the United States Environmental Protection Agency's (EPA) enforcement actions at the site and insurance litigation. In its 1991 rate increase proceeding, the Company, for the first time, sought to recover costs associated with the Pine Street Marsh site in retail rates. The Department of Public Service and the Company entered into an agreement providing that the Company was entitled to recover all such costs incurred in 1991. The agreement provided that such rate recovery is not intended to serve as a precedent for retail ratemaking treatment of future costs incurred by the Company in connection with the Pine Street Marsh site. The Company's rates approved by the VPSB on April 2, 1992, reflected the 1991 Pine Street related expenditures referred to above. From January 1, 1992 through July 31, 1993, the Company incurred approximately $4.2 million in such costs associated with the Pine Street Marsh site and insurance litigation. In its 1993 rate proceeding, the Company sought to recover these costs in retail rates. The Company and the other parties to the rate proceeding entered into an agreement providing that the Company was entitled to recover all such costs incurred in the January 1, 1992 through July 31, 1993 period. The agreement provided that such rate recovery is not intended to serve as a precedent for retail ratemaking of future costs incurred by the Company in connection with the Pine Street Marsh site. This agreement, which is a part of an overall 2.9 percent rate increase settlement reached by the parties, is pending before the VPSB. As of December 31, 1993, the Company has reserved approximately $680,000 for costs attributable to the site, other than those costs that are the subject of the two agreements between the Department and the Company mentioned above. Management expects to seek and receive ratemaking treatment for other costs incurred beyond the amounts that have been reserved. As of December 31, 1993, such other costs are approximately $4,918,000, of which $4.2 million is the subject of the agreement that is a part of the settlement of the Company's 1993 rate proceeding referred to above. As is more fully set forth in Note I.1 of Notes to Consolidated Financial Statements, the Company is unable to predict at this time the magnitude of liability that may be imposed on it resulting from potential claims for the cost of studies undertaken by the EPA or performance of any remedial action in connection with the Pine Street Marsh site. The Company is one of several parties that the EPA has identified as potentially responsible for the cost of studying and remedying the results of releases of allegedly hazardous substances at the site. To the degree that it is held liable for such claims, the Company will pursue claims against other responsible parties seeking to ensure that they contribute appropriately to reimburse the Company for any costs incurred. In December 1991, the Company brought suit against several previous insurers seeking recovery of all past costs and indemnity against future liabilities associated with the environmental problems at the site. The parties to the action are engaged in discovery and motions practice. The Company has reached a confidential settlement with one of the defendants, which provided the Company with second layer excess liability coverage for a seven-month period in 1976. The Company has also reached a confidential agreement in principle with another insurance company defendant that provided the Company with comprehensive general liability insurance between 1976 and 1982, and with environmental impairment liability insurance from 1981 to 1984. These policies were in place in 1982 when EPA first notified the Company that it might be a potentially responsible party at the Pine Street site. LIQUIDITY AND CAPITAL RESOURCES Construction -- The Company's capital requirements result from the need to construct facilities or to invest in programs to meet anticipated customer demand for electric service. The policy of the Company is to increase diversification of its power supply and other resources through various means, including power purchase and sales arrangements and relying on sources that represent relatively small additions to the Company's mix to satisfy customer requirements. This permits the Company to meet its financing needs in a flexible, orderly manner. Planned expenditures over the next five years will be primarily for distribution and conservation projects. Capital expenditures over the past three years and forecasted for the next five years are as follows: Total Net Actual Generation Transmission Distribution Conservation Other Expenditures (Dollars in thousands and net of AFUDC and Customer Advances For Construction) 1991 $2,038 $1,682 $7,628 $2,269 $2,564 $16,181 1992 868 1,766 7,320 3,144 2,925 16,023 1993 1,747 1,605 9,093 8,136 2,937 23,518 Forecasted 1994 $ 709 $ 829 $7,849 $6,975 $3,618 $19,980 1995 7,567 999 7,132 6,776 2,402 24,876 1996 1,978 1,499 7,301 6,497 2,251 19,526 1997 1,579 999 7,386 5,867 2,386 18,217 1998 1,579 999 7,386 5,430 2,386 17,780 Other Cash Requirements -- In its January 1991 rate order, the VPSB required that the Company set up a special trust account for monies currently accrued for postretirement health care benefits. This fund totaled $2.1 million at December 31, 1993, and $3.3 million at January 31, 1994. In 1994, the Company may devote $1 million to $4 million to unregulated investments. Insurance Settlement -- In January 1993, the Company settled a long- disputed claim with a former medical benefits insurance carrier relating to overcharged premiums dating back to 1984, resulting in an agreement under which the carrier paid the Company $360,000. The Company received this payment in the first quarter of 1993. Rates -- On October 1, 1993, the Company filed a request with the VPSB to increase retail rates by 8.6 percent. The increase is needed primarily to cover the cost of buying power from independent power producers, the cost of energy conservation programs, the cost of plant additions made in the past two years, and costs incurred in 1992 and 1993 associated with the Company's response to the EPA's RI/FS and proposed remedy at the Pine Street Marsh site and with the Company's litigation against its previous insurers seeking recovery of past costs incurred and indemnity against future liabilities in connection with the site. On January 28, 1994, the Company and the other parties in the proceeding reached a settlement agreement providing for a 2.9 percent retail rate increase effective June 15, 1994, and a target return on equity for utility operations of 10.5 percent. The settlement agreement also provided for the Company's recovery in rates of $4.2 million in costs associated with the Pine Street Marsh site, as described herein above. The agreement must be reviewed and approved by the VPSB before it can take effect. Financing and Capitalization -- For the period 1991 through 1993, internally generated funds, after payment of dividends, provided approximately 47 percent of total capital requirements for construction, sinking funds and other requirements. The Company anticipates that for the period 1994-1998, internally generated funds will provide approximately 67 percent of total capital requirements. In November of 1993, the Company sold $20 million of its first mortgage bonds in two components -- $15 million that will mature in 2018 and $5 million that will mature in 2000. The 2018 and 2000 bonds will bear interest at the rate of 6.7 percent and 5.71 percent, respectively. The proceeds from the sale were used to refinance existing debt, to finance construction and conservation expenditures, and for other corporate purposes. At December 31, 1993, the Company's capitalization consisted of 51.6 percent common equity, 43.4 percent long-term debt and 5.0 percent preferred equity. The Company has a comprehensive capital plan to maintain approximately this balance of common equity, long-term debt and preferred equity. The Company anticipates issuing additional shares of its common stock in 1994. The Company has not determined the date or the amount of the stock issuance. The Company's first mortgage securities are rated "A-" by Standard & Poor's. This rating was affirmed in November of 1993 by Standard & Poor's following its annual review of the Company. Standard & Poor's changed its "outlook" of the Company from "stable" to "negative," reflecting Standard & Poor's assessment that the electric utility industry is becoming increasingly more competitive. The Company's first mortgage securities are rated "A" by Duff & Phelps. See Note F of Notes to Consolidated Financial Statements for a discussion of bank lines of credit available to the Company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA GREEN MOUNTAIN POWER CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES Page Financial Statements Statements of Consolidated Income For the Years Ended December 31, 1993, 1992 and 1991 39 Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992 and 1991 40 Consolidated Balance Sheets as of December 31, 1993 and 1992 41-42 Consolidated Capitalization data as of December 31, 1993 and 1992 43 Notes to Consolidated Financial Statements 44-63 Report of Independent Public Accountants 64 Schedules For the Years Ended December 31, 1993, 1992 and 1991: V Property, Plant and Equipment 65-67 VI Accumulated Depreciation and Amortization of Property, Plant and Equipment 68 VIII Valuation and Qualifying Accounts and Reserves 69 IX Short-Term Borrowings 70 X Supplementary Income Statement Information 71 All other schedules are omitted as they are either not required, not applicable or the information is otherwise provided. Consents and Reports of Independent Public Accountants KPMG Peat Marwick 109 Arthur Andersen & Co. 110-111 STATEMENTS OF CONSOLIDATED INCOME GREEN MOUNTAIN POWER CORPORATION For the Years Ended December 31
1993 1992 1991 ----------------- --------------- --------------- (In thousands except amounts per share) Operating Revenues (Note A)..................................... $147,253 $145,240 $143,555 ----------------- --------------- --------------- Operating Expenses Power Supply (Notes A, B and K) Vermont Yankee Nuclear Power Corporation................... 29,785 29,230 27,464 Company-owned generation................................... 3,150 3,804 4,946 Purchases from others...................................... 46,066 41,878 45,951 Other operating............................................... 17,353 17,239 15,934 Transmission (Note J)......................................... 10,775 11,103 11,661 Maintenance................................................... 4,352 4,692 4,340 Depreciation and amortization (Note A)........................ 8,572 8,065 7,046 Taxes other than income....................................... 6,125 5,902 5,677 Income taxes (Note G)......................................... 6,249 6,915 6,022 ----------------- --------------- --------------- Total operating expenses................................... 132,427 128,828 129,041 ----------------- --------------- --------------- Operating Income......................................... 14,826 16,412 14,514 ----------------- --------------- --------------- Other Income Equity in earnings of affiliates and non-utility operations (Note B)............................ 2,341 2,178 2,755 Allowance for equity funds used during construction (Note A).. 273 186 225 Other income and deductions, net.............................. 19 (105) (66) ----------------- --------------- --------------- Total other income.......................................... 2,633 2,259 2,914 ----------------- --------------- --------------- Income before interest charges............................ 17,459 18,671 17,428 ----------------- --------------- --------------- Interest Charges Long-term debt................................................ 6,539 6,542 6,064 Other......................................................... 646 479 1,039 Allowance for borrowed funds used during construction (Note A)...................................... (357) (202) (131) ----------------- --------------- --------------- Total interest charges...................................... 6,828 6,819 6,972 ----------------- --------------- --------------- Net Income...................................................... 10,631 11,852 10,456 Dividends on preferred stock.................................... 811 831 852 ----------------- --------------- --------------- Net Income Applicable to Common Stock........................... $9,820 $11,021 $9,604 ================= =============== =============== Common Stock Data (Notes A and C) Earnings per share............................................ $2.20 $2.54 $2.45 Cash dividends declared per share............................. $2.11 $2.08 $2.04 Weighted average shares outstanding........................... 4,457 4,345 3,919 The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOW GREEN MOUNTAIN POWER CORPORATION For the Years Ended December 31
1993 1992 1991 --------- --------- --------- (In thousands) Operating Activities: Net Income........................................................... $10,631 $11,852 $10,456 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization (Note A)........................... 8,572 8,065 7,046 Dividends from associated companies less equity income (Note B).. 254 659 190 Allowance for funds used during construction (Note A)............ (630) (388) (356) Deferred purchased power costs (Note A).......................... (6,407) (5,347) 104 Amortization of purchased power costs (Note A)................... 3,717 3,825 1,840 Deferred income taxes (Note G)................................... 5,180 3,089 1,474 Amortization of gain on sale of property......................... (53) (53) (53) Amortization of investment tax credits (Note G).................. (283) (284) (230) Environmental proceedings costs.................................. (2,472) (2,612) (416) Changes in: Special deposits............................................... -- 90 -- Accounts receivable............................................ 2,384 (433) (2,885) Accrued utility revenues....................................... (538) (368) (16) Fuel, materials, and supplies.................................. 53 (113) 892 Prepayments and other current assets........................... 1,069 (1,401) (1,050) Accounts payable............................................... 513 1,521 (573) Taxes accrued.................................................. (418) (315) 420 Interest accrued............................................... 903 (733) (188) Other current liabilities...................................... (2,745) 1,175 2,015 Other.......................................................... (2,620) 97 4,433 --------- --------- --------- Net cash provided by operating activities.......................... 17,110 18,326 23,103 --------- --------- --------- Investing Activities: Construction expenditures.......................................... (15,949) (15,327) (19,475) Conservation expenditures.......................................... (7,418) (3,006) (1,958) Investment in nonutility property.................................. (5,950) (282) (2,305) Special fund for post-retirement benefits (Note A)................. (601) (56) (1,463) --------- --------- --------- Net cash used in investing activities............................ (29,918) (18,671) (25,201) --------- --------- --------- Financing Activities: Reduction in preferred stock (Note D).............................. (190) (250) (262) Issuance of common stock (Note C).................................. 4,077 3,195 13,989 Short-term debt, net (Note F)...................................... 7,402 (2,093) 2,302 Sale of first mortgage bonds (Note E).............................. 20,000 17,000 -- Reduction in long-term debt (Note E)............................... (8,530) (7,246) (5,116) Cash dividends..................................................... (10,204) (9,857) (8,837) Reacquired common stock............................................ -- -- (96) --------- --------- --------- Net cash provided by financing activities........................ 12,555 749 1,980 --------- --------- --------- Net increase (decrease) in cash and cash equivalents............... (253) 404 (118) Cash at beginning of year.......................................... 480 76 194 --------- --------- --------- Cash at End of Year.................................................... $227 $480 $76 ========= ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED BALANCE SHEETS GREEN MOUNTAIN POWER CORPORATION December 31
1993 1992 --------- --------- (In thousands) ASSETS Electric Utility Utility Plant (Notes A, E and I) Utility plant, at original cost....................$214,977 $201,643 Less accumulated depreciation...................... 64,226 58,516 --------- --------- Net utility plant................................ 150,751 143,127 Property under capital lease (Note J).............. 11,029 11,950 Construction work in progress...................... 9,631 9,646 --------- --------- Total utility plant, net......................... 171,411 164,723 --------- --------- Other Investments Associated companies at equity (Notes A,B and I)... 16,886 17,139 Other investments (Note A)......................... 5,642 4,561 --------- --------- Total other investments.......................... 22,528 21,700 --------- --------- Current Assets Cash............................................... 50 200 Accounts receivable, customers and others, less allowance for doubtful accounts............. 14,814 17,198 Accrued utility revenues (Note A).................. 6,138 5,600 Fuel, materials and supplies, at average cost...... 2,841 2,894 Prepayments........................................ 1,984 1,866 Other.............................................. 1,117 309 --------- --------- Total current assets............................. 26,944 28,067 --------- --------- Deferred Charges Future revenue due to income taxes................. 4,179 -- Unfunded future federal income taxes............... 4,590 -- Demand side management programs................... 12,809 6,429 Environmental proceedings costs.................... 5,356 2,969 Purchased power costs.............................. 4,134 1,445 Other.............................................. 11,277 8,169 --------- --------- Total deferred charges........................... 42,345 19,012 --------- --------- Non-Utility Cash and cash equivalents.......................... 177 280 Other current assets............................... 3,479 4,736 Property and equipment............................. 11,331 10,589 Intangible assets.................................. 3,484 4,032 Other assets....................................... 10,155 4,079 --------- --------- Total non-utility assets......................... 28,626 23,716 --------- --------- Total Assets...........................................$291,854 $257,218 ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
GREEN MOUNTAIN POWER CORPORATION December 31
1993 1992 --------- --------- (In thousands) CAPITALIZATION AND LIABILITIES Electric Utility Capitalization (See Capitalization Data) Common Stock Equity (Note C) Common stock..................................... $15,120 $14,712 Additional paid-in capital....................... 57,178 53,510 Retained Earnings................................ 25,229 24,801 Treasury stock, at cost.......................... (378) (378) --------- --------- Total common stock equity...................... 97,149 92,645 Redeemable cumulative preferred stock (Note D)..... 9,385 9,575 Long-term debt, less current maturities (Note E)... 79,800 67,644 --------- --------- Total capitalization........................... 186,334 169,864 --------- --------- Capital lease obligation (Note J)...................... 11,029 11,950 Current Liabilities Current maturuties of long-term debt............... 1,800 2,486 Short-term debt (Note F)........................... 19,015 11,614 Accounts payable, trade, and accrued liabilities... 8,373 7,701 Accounts payable to associated companies (Note B).. 4,302 4,461 Dividends declared................................. 199 203 Customer deposits.................................. 1,197 1,112 Taxes Accrued...................................... 397 815 Interest accrued................................... 2,070 1,167 Other.............................................. 1,526 540 --------- --------- Total current liabilities...................... 38,879 30,099 --------- --------- Deferred Credits Accumulated deferred income taxes (Note G)......... 20,683 15,504 Unamortized investment tax credits (Note G)........ 5,672 5,955 Future revenue reduction due to income taxes....... 4,366 -- Unfunded future federal income taxes............... 4,179 -- Other (Note A)..................................... 13,541 11,805 --------- --------- Total deferred credits......................... 48,441 33,264 --------- --------- Non-Utility Current liabilities................................ 666 3,524 Other liabilities.................................. 6,505 8,517 --------- --------- Total non-utility liabilities.................. 7,171 12,041 --------- --------- Total Capitalization and Liabilities...................$291,854 $257,218 ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
CONSOLIDATED CAPITALIZATION DATA GREEN MOUNTAIN POWER CORPORATION December 31
Issued and Outstanding CAPITAL STOCK Authorized 1993 1992 1993 1992 ----------- ---------- ---------- --------- --------- (In Thousands) Common Stock,$3.33 1/3 par value (Note C)..................10,000,000 4,536,042 4,413,537 $15,120 $14,712 ========= ========= ----------------------------------------------------------------------------------------------------------------- Authorized Outstanding and Issued 1993 1992 1993 1992 ----------- ---------- ---------- --------- --------- (In thousands) Redeemable Cumulative Preferred Stock $100 par value (Note D) 4.75%,Class B, redeemable at $101 per share........................................ 15,000 3,900 4,200 $390 $420 7%,Class C, redeemable at $101 per share........................................ 15,000 5,550 5,550 555 555 9.375%,Class D,Series 1, redeemable at $101 per share.......................... 40,000 14,400 16,000 1,440 1,600 8.625%,Class D,Series 3, redeemable at $105.751 per share...................... 70,000 70,000 70,000 7,000 7,000 --------- --------- Total Preferred Stock...................................... $9,385 $9,575 ========= ========= LONG-TERM DEBT (Note E) 1993 1992 --------- --------- (In thousands) First Mortgage Bonds 5 1/8% Series due 1996.............................................................................. $3,000 $3,000 7% Series due 1998.................................................................................. 3,000 3,000 8 5/8% Series due 1999.............................................................................. -- 600 9 1/8% Series due 2003 - Cash sinking fund,$100,000 annually.......................................................................................... -- 3,400 10.7% Series due 2000 - Cash sinking fund,$1,800,000 annually.......................................................................................... 12,600 14,400 10.0% Series due 2004 - Cash sinking fund,commences 1995............................................ 17,000 17,000 9.64% Series due 2020............................................................................... 9,000 9,000 8.65% Series due 2022 - Cash sinking fund,commences 2012............................................ 13,000 13,000 6.84% Series due 1997 - Cash sinking fund,commences 1995............................................ 4,000 4,000 5.71% Series due 2000............................................................................... 5,000 -- 6.7% series due 2018................................................................................ 15,000 -- Debentures 8 7/8% due 1994 - Cash sinking fund,$86,000 annually................................................ -- 980 12 5/8% due 1998 - Cash sinking fund,$500,000 annually.............................................. -- 1,750 --------- --------- Total Long-term Debt Outstanding...................................................................... 81,600 70,130 Less Current Maturities (due within one year)....................................................... 1,800 2,486 --------- --------- Total Long-term Debt, Net............................................................................. $79,800 $67,644 ========= ========= The accompanying notes are an integral part of these consolidated financial statements.
Notes to Consolidated Financial Statements A. Significant Accounting Policies 1. System of Accounts The Company's accounting records, rates, operations and certain other practices of its electric utility business are subject to the regulatory authority of the Federal Energy Regulatory Commission (FERC) and the Vermont Public Service Board (VPSB). 2. Basis of Presentation Included in equity in earnings of affiliates and non-utility operations in the Other Income section of the Statements of Consolidated Income are the results of operations of the Company's rental water heater program, which is not regulated by the VPSB, and four of the Company's wholly owned subsidiaries, Green Mountain Propane Gas Company, Mountain Energy, Inc., GMP Real Estate Corporation, and Lease-Elec, Inc. (also unregulated). Summarized financial information is as follows: For the years ended December 31 1993 1992 ---- ---- (In thousands) Revenue . . . . . . . . . . . . . . . $11,487 $11,146 Expense. . . . . . . . . . . . . . . . 11,527 11,409 --------- --------- Net Income (Loss) . . . . . . . . . . ($ 40) ($ 263) ========= ========= The Company carries its investments in various associated companies -- Vermont Yankee Nuclear Power Corporation (Vermont Yankee), Vermont Electric Power Company, Inc. (VELCO), New England Hydro-Transmission Corporation, and New England Hydro-Transmission Electric Company -- at equity. 3. Statements of Cash Flows The following amounts of interest (net of amounts capitalized) and income taxes were paid for the years ending December 31: 1993 1992 1991 ---- ---- ---- (In thousands) Interest . . . . . . . . . . . . . . . . $6,206 $7,683 $7,254 Income Taxes (Net of refunds) . . . . . $1,920 $3,511 $3,695 4. Utility Plant The cost of plant additions includes all construction-related direct labor and materials, as well as indirect construction costs including the cost of money (Allowance for Funds Used During Construction or AFUDC). The costs of renewals and betterments of property units are capitalized; the costs of maintenance, repairs and replacements of minor property items are charged to maintenance expense; the costs of units of property removed from service, net of removal costs and salvage, are charged to accumulated depreciation. AFUDC represents the composite interest and equity costs of capital funds used to finance construction. AFUDC, a non-cash item, is recognized as a cost of "Utility Plant" with offsetting credits to "Other Income" and "Interest Charges." This is in accordance with established regulatory ratemaking practice under which a utility is permitted a return on, and the recovery of, these capital costs through their ultimate inclusion in rate base and in the provisions for depreciation. When Construction Work in Progress (CWIP) is included in rate base and the utility is recovering the cost of financing this construction through rates, no AFUDC is included in the cost of such construction. The VPSB generally allows CWIP in rate base for short-term construction projects and projects for which completion is imminent. AFUDC, which is compounded semi-annually, was calculated using weighted average rates of 7.2 percent, 8.9 percent and 7.6 percent for the years 1993, 1992 and 1991, respectively. 5. Depreciation The Company provides for depreciation on the straight-line method based on the cost and estimated remaining service life of the depreciable property outstanding at the beginning of the year. The annual depreciation provision was approximately 3.6 percent, 3.5 percent and 3.5 percent of total depreciable property at the beginning of the year for 1993, 1992 and 1991, respectively. 6. Operating Revenues Operating revenues consist principally of sales of electric energy. The Company records accrued utility revenues, based on estimates of electric service rendered and not billed at the end of an accounting period, in order to match revenues with related costs. 7. Deferred Charges In a manner consistent with authorized or expected ratemaking treatment, the Company defers and amortizes certain replacement power, maintenance and other costs associated with the Vermont Yankee nuclear plant. In addition, the Company accrues other replacement power expenses to reflect more accurately its cost of service to better match revenues and expenses consistent with regulatory treatment. At December 31, 1993 deferred charges totaled $42.3 million, consisting of charges for conservation programs, response and litigation costs attributable to the Pine Street Marsh site discussed in Note I.1, repair costs for and relicensing of the Essex hydroelectric facility, repair costs for the Vergennes hydroelectric facility, Hydro-Quebec power contract negotiations and support charges, regulatory deferrals of storm damages, PCB clean-up, regulatory deferrals of rights-of-way maintenance, costs associated with the 1993 scheduled Vermont Yankee outage, postretirement health care costs, and various other projects and deferrals. 8. Earnings Per Share Earnings per share are based upon the weighted average number of shares of common stock outstanding during each year. 9. Major Customers The Company had one major retail customer, IBM, metered at two locations, that accounted for 13.6, 13.8 and 13.0 percent of operating revenues in 1993, 1992 and 1991, respectively. 10. Pension and Retirement Plans The Company has a defined benefit pension plan covering substantially all of its employees. The retirement benefits are based on the employees' level of compensation and length of service. The Company's policy is to fund all pension costs accrued. The Company records annual expense in accordance with methods approved in the rate-setting process. Net pension costs reflect the following components and assumptions: 1993 1992 1991 ---- ---- ---- (Dollars in thousands) Service cost-benefits earned during the period . $ 748 $ 676 $ 621 Interest cost on projected benefit obligations . 1,593 1,466 1,275 Actual (return) loss on plan assets . . . . . . . (3,107) (1,743) (3,109) Net amortization and deferral . . . . . . . . . . 1,141 (77) 1,440 Adjustment due to actions of regulator . . . . . 337 430 153 ------ ------- ------ Net periodic pension cost funded and recognized . $ 712 $ 752 $ 380 ====== ======= ====== Assumptions used to determine pension costs in 1993, 1992 and 1991 were: Discount rate . . . . . . . . . . . . . . . . 8.0% 8.0% 8.0% Rate of increase in future compensation levels 6.0% 6.0% 6.0% Expected long-term rate of return on assets . 9.0% 9.0% 9.0% The following table sets forth the Plan's funded status as of December 31: 1993 1992 1991 ---- ---- ---- (In thousands) Actuarial present value of benefit obligations: Accumulated benefit obligations, including vested benefits of $16,825, $15,100 and $12,567, respectively . . . . . ($17,105) ($15,262) ($12,704) ========= ========= ========= Projected benefit obligations for service rendered to date . . . . . . . . . ($21,002) ($19,235) ($16,563) Plan assets at fair value . . . . . . . . . . . 23,981 21,167 19,675 ------- ------- ------- Assets in excess of projected benefit obligations . . . . . . . . . . . . . 2,979 1,932 3,112 Unrecognized net loss (gain) from past experience different from that assumed . . . (272) 559 399 Prior service cost not yet recognized in net periodic pension cost . . . . . . . . . . . . 1,885 2,028 842 Unrecognized net asset at transition being recognized over 16.47 years . . . . . . (2,162) (2,391) (2,619) Adjustment due to actions of regulator . . . . . (2,430) (2,128) (1,734) ------ ------ ----- Prepaid pension cost included in other assets . $ --- $ --- $ --- ====== ====== ====== The Company has evaluated the effect of a reduction in the discount rate and compensation trend rate and has concluded that the net effect of such changes is insignificant. The plan assets consist primarily of cash equivalent funds, fixed income securities and listed equity securities. The Company also has a supplemental pension plan for certain employees. Pension costs for the years ended December 31, 1993, 1992 and 1991 were $384,000, $377,000 and $352,000, respectively, under this plan. This plan is supported through insurance contracts. 11. Fair Value of Financial Instruments If the first mortgage bonds, debentures, and preferred stock outstanding at December 31, 1993 were refinanced using new issue debt rates of interest, which are generally lower than the Company's outstanding rates, the present value of those obligations would differ from the amounts outstanding on the December 31, 1993 balance sheet by nine percent. The Company does not anticipate a refinancing; however, if such an event were to occur, there would be no gain or loss, inasmuch as under established regulatory precedent, any such difference would be reflected in rates and have no effect upon income. 12. Postretirement Health Care Benefits The Company provides certain health care benefits for retired employees and their dependents. Employees become eligible for these benefits if they reach normal retirement age while working for the Company. On January 1, 1993, the Company adopted the standard on accounting for postretirement health care and other benefits, SFAS 106, which requires the Company to use accrual accounting for postretirement benefits other than pensions. Prior to 1993, the Company recognized the cost of postretirement health care benefits by recording an amount equivalent to that which had been allowed in rates. The difference between total cost and claims paid was accrued on the balance sheet. In its January 4, 1991 rate order, the VPSB required the Company to establish a fund in which the Company will accumulate monies for postretirement health care expenses. At December 31, 1993, the Company had deposited $2.1 million in the investment fund, which is included in other investments in the accompanying balance sheet. In January 1994, the Company fully funded its accrued postretirement benefit cost of $3.3 million. In order to maximize the tax deductible contributions that are allowed under IRS regulations, the Company has amended its pension plan and established separate VEBA trusts for its union and nonunion employees. The Company will seek and expects to receive rate recovery for all amounts expended for postretirement health care benefits. Net postretirement benefits costs for 1993 reflect the following components and assumptions: (In thousands) Accumulated postretirement benefit obligation: Current retirees . . . . . . . . . . . . . . . . . ($ 3,628) Participants currently eligible . . . . . . . . . (2,288) All others . . . . . . . . . . . . . . . . . . . . (4,789) -------- Total accumulated postretirement benefit obligation . (10,705) Plan assets at fair value . . . . . . . . . . . . . . 0 ------- Accumulated postretirement benefit obligation in excess of plan assets . . . . . . . . . . . . . . . . . . (10,705) Unrecognized transition obligation . . . . . . . . . 6,845 Unrecognized net loss (gain) . . . . . . . . . . . . 538 -------- Accrued postretirement benefit cost . . . . . . . . . $3,322 ======== Net periodic postretirement benefit cost for 1993 includes the following components: (In thousands) Service cost . . . . . . . . . . . . . . . . . . . . $ 438 Interest cost . . . . . . . . . . . . . . . . . . . 940 Amortization and deferral . . . . . . . . . . . . . 380 -------- Total net periodic postretirement benefit cost . . . $ 1,758 ======== For measurement purposes, a 14.25 percent annual rate of increase in the per capita cost of covered benefits was assumed for 1993; the rate was assumed to decrease gradually to 5.5 percent by the year 2000 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rate by one percentage point would increase the accumulated postretirement benefit obligation as of December 31, 1993 by $1.7 million and the aggregate of the service and interest components of net periodic postretirement benefit cost for the year ended December 31, 1993 by $241,000. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 8 percent at December 31, 1993. The Company has evaluated the effect of a reduction in the discount rate and medical care trend rate and has concluded that the net effect of such changes is insignificant. 13. Deferred Credits The Company has deferred credits and other long-term liabilities of $22.1 million, consisting of operating lease equalization, general liabilities and damages reserves and accruals for employee benefits. B. Investments in Associated Companies The Company accounts for investments in the following companies by the equity method: Investment in Equity Percent Ownership December 31, at December 31, 1993 1993 1992 -------------------- ---- ---- (In thousands) VELCO - Common . . . . . . . . . 29.5% $ 1,816 $ 1,818 - Preferred . . . . . . . 30.0% 1,572 1,736 ------- ------ Total VELCO . . . . . . . . . . 3,388 3,554 Vermont Yankee - Common . . . . 17.9% 9,745 9,731 New England Hydro-Transmission - Common . . . . . . . . . . 3.18% 1,408 1,489 New England Hydro-Transmission Electric - Common . . . . . 3.18% 2,345 2,396 -------- -------- $16,886 $17,170 ======= ======== Undistributed earnings in associated companies totaled $1,140,000 at December 31, 1993. VELCO VELCO is a corporation engaged in the transmission of electric power within the state of Vermont. VELCO has entered into transmission agreements with the State of Vermont and other electric utilities, and under these agreements bills all costs, including interest on debt and a fixed return on equity, to the State and others using the system. The Company's purchases of transmission services from VELCO were $8.0 million, $7.8 million and $7.8 million for the years 1993, 1992 and 1991, respectively. Pursuant to VELCO's Amended Articles of Association, the Company is entitled to approximately 30 percent of the dividends distributed by VELCO. The Company has recorded its equity in earnings on this basis and also is obligated to provide its proportionate share of the equity capital requirements of VELCO through continuing purchases of its common stock, if necessary. Summarized financial information for VELCO is as follows: December 31, --------------------------- 1993 1992 1991 ---- ---- ---- (In thousands) Company's equity in net income . . . . . . . $ 406 $ 448 $ 466 ======= ======= ====== Total assets . . . . . . . . . . . . . . . . $70,199 $70,821 $69,949 Less: Liabilities and long-term debt . . . . . 58,806 58,889 57,395 ------- ------- ------- Net assets . . . . . . . . . . . . . . . . . $11,393 $11,932 $12,554 ======= ======= ======= Company's equity in net assets . . . . . . . $ 3,388 $ 3,554 $ 3,738 ======= ======= ======= Vermont Yankee The Company is responsible for 17.3 percent of Vermont Yankee's expenses of operations, including costs of equity capital and estimated costs of decommissioning, and is entitled to a similar share of the power output of the nuclear plant, which has a net capacity of 520 megawatts. Vermont Yankee's current estimate of decommissioning is approximately $253 million in 1993 dollars, of which $99 million has been funded. At December 31, 1993, the Company's portion of the net unfunded liability was $27 million, which it expects will be recovered through rates over Vermont Yankee's remaining operating life. As a sponsor of Vermont Yankee, the Company also is obligated to provide 20 percent of capital requirements not obtained by outside sources. During 1993, the Company incurred $27.7 million in Vermont Yankee annual capacity charges, which included $1.6 million for interest charges. The Company's share of Vermont Yankee's long-term debt at December 31, 1993 was $13.8 million. The Price-Anderson Act currently limits public liability from a single incident at a nuclear power plant to $9.4 billion. Any liability beyond $9.4 billion is indemnified under an agreement with the NRC. The first $200 million of liability coverage is the maximum provided by private insurance. The Secondary Financial Protection program is a retrospective insurance plan providing additional coverage up to $9.2 billion per incident by assessing retrospective premiums of $79.3 million against each of the 116 reactor units in the United States that are currently subject to the Program, limited to a maximum assessment of $10 million per incident per nuclear unit in any one year. The maximum assessment is to be adjusted at least every five years to reflect inflationary changes. The above insurance covers all workers employed at nuclear facilities prior to January 1, 1988, for bodily injury claims. Vermont Yankee has purchased a master worker insurance policy with limits of $200 million with one automatic reinstatement of policy limits to cover workers employed on or after January 1, 1988. Vermont Yankee's estimated contingent liability for a retrospective premium on the master worker policy as of December 1993 is $3.1 million. The secondary financial protection program referenced above provides coverage in excess of the Master Worker policy. Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL II) to cover the costs of property damage, decontamination or premature decommissioning resulting from a nuclear incident. All companies insured with NEIL II are subject to retroactive assessments if losses exceed the accumulated funds available to NEIL II. The maximum potential assessment against Vermont Yankee with respect to losses arising during the current policy year is $5.8 million at the time of the first loss and $12.3 million at the time of a subsequent loss. Vermont Yankee's liability for the retrospective premium adjustment for any policy year ceases six years after the end of that policy year unless prior demand has been made. Summarized financial information for Vermont Yankee is as follows: December 31, 1993 1992 1991 ---- ---- ---- (In thousands) Earnings: Operating revenues . . . . . . . . . . . $180,145 $175,919 $151,722 Net income applicable to common stock . 7,793 7,921 8,490 Company's equity in net income . . . . . 1,425 1,415 1,516 Total assets . . . . . . . . . . . . . . . $469,770 $438,208 $417,618 Less: Liabilities and long-term debt . . . . 415,606 383,933 363,354 -------- -------- -------- Net assets . . . . . . . . . . . . . . . . $ 54,164 $ 54,275 $ 54,264 ======== ======== ======== Company's equity in net assets . . . . . . $ 9,745 $ 9,731 $ 9,729 ======== ======== ======== C. Common Stock Equity The Company maintains a Dividend Reinvestment and Stock Purchase Plan (DRIP) under which 394,112 shares were reserved and unissued at December 31, 1993. The Company also funds an Employee Savings and Investment Plan (ESIP). At December 31, 1993, there were 47,067 shares reserved and unissued under the ESIP. In October 1991, the Company issued 429,600 additional shares of common stock at a price of $28.25 per share. The net proceeds were used to reduce the Company's outstanding short-term debt, to finance planned capital additions and to maintain an appropriate capital structure. In May 1993, the Company amended its Articles of Association increasing the number of authorized shares of common stock from 6,000,000 to 10,000,000. Changes in common stock equity for the years ended December 31, 1991, 1992 and 1993 are as follows:
Common Stock Treasury Stock ------------------------ Paid-in Retained ------------------------ Stock Shares Amount Capital Earnings Shares Amount Equity ------ ------ ------- -------- ------ ------ ------ (Dollars in thousands) BALANCE, December 31, 1990............... 3,779,623 $12,599 $38,438 $21,187 11,586 ($282) $71,942 Common Stock Issuance: Public:................................ 429,600 1,432 10,704 12,136 DRIP:.................................. 73,370 245 1,659 1,904 ESIP:.................................. 24,965 83 586 669 Purchase of Treasury Stock............... 4,270 (96) (96) Net Income............................... 10,456 10,456 Cash Dividends on Capital Stock: Common Stock -$2.04 per share..... (7,988) (7,988) Preferred Stock -$4.75 per share..... (24) (24) -$7.00 per share..... (45) (45) -$9.375 per share.... (176) (176) -$8.625 per share.... (604) (604) Other-Common Stock Issuance Expense...... (719) (719) ------------------------------------------------------------------------------------ BALANCE, December 31, 1991............... 4,307,558 14,359 50,668 22,806 15,856 (378) 87,455 Common Stock Issuance: DRIP:.................................. 84,637 282 2,251 2,533 ESIP:.................................. 21,342 71 591 662 Net Income............................... 11,852 11,852 Cash Dividends on Capital Stock: Common Stock -$2.08 per share..... (9,029) (9,029) Preferred Stock -$4.75 per share..... (22) (22) -$7.00 per share..... (41) (41) -$9.375 per share.... (161) (161) -$8.625 per share.... (604) (604) ------------------------------------------------------------------------------------ BALANCE, December 31, 1992............... 4,413,537 14,712 53,510 24,801 15,856 (378) 92,645 Common Stock Issuance: DRIP:.................................. 86,974 290 2,586 2,876 ESIP:.................................. 35,531 118 1,082 1,200 Net Income............................... 10,631 10,631 Cash Dividends on Capital Stock: Common Stock -$2.08 per share..... (9,396) (9,396) Preferred Stock -$4.75 per share..... (19) (19) -$7.00 per share..... (38) (38) -$9.375 per share.... (146) (146) -$8.625 per share.... (604) (604) ------------------------------------------------------------------------------------ BALANCE, December 31, 1993............... 4,536,042 $15,120 $57,178 $25,229 15,856 ($378) $97,149 ====================================================================================
Dividend Restrictions Certain restrictions on the payment of cash dividends on common stock are contained in the indentures relating to long-term debt and in the Restated Articles of Association. Under the most restrictive of such provisions, $17.9 million of retained earnings were free of restrictions at December 31, 1993. The properties of the Company include several hydroelectric projects licensed under the Federal Power Act, with license expiration dates ranging from 1993 to 2022. At December 31, 1993, $259,000 of retained earnings had been appropriated as excess earnings on hydroelectric projects as required by Section 10(d) of the Federal Power Act. D. Preferred Stock The holders of the preferred stock are entitled to specific voting rights with respect to the placement of restrictions on certain types of corporate actions. They are also entitled to elect the smallest number of directors necessary to constitute a majority of the Board of Directors in the event of preferred stock dividend arrearages equivalent to or exceeding four quarterly dividends. Similarly, the holders of the preferred stock are entitled to elect two directors in the event of a default in any purchase or sinking fund requirements provided for any class of preferred stock. Certain classes of preferred stock are subject to annual purchase or sinking fund requirements. The sinking fund requirements are mandatory. The purchase fund requirements are mandatory, but holders may elect not to accept the purchase offer. The redemption or purchase price to satisfy these requirements may not exceed $100 per share plus accrued dividends. All shares redeemed or purchased in connection with these requirements must be canceled and may not be reissued. The annual purchase and sinking fund requirements for certain classes of preferred stock are: Purchased and Sinking Fund 4.75%, Class B . . . . . . . . December 1 450 Shares 7%, Class C . . . . . . . . . December 1 450 Shares 9.375%, Class D, Series 1 . . December 1 1,600 Shares The 8.625%, Class D, Series 3, preferred stock issued in September 1990, requires no sinking fund. Under the Restated Articles of Association relating to Redeemable Cumulative Preferred Stock, the annual aggregate amounts of purchase and sinking fund requirements for the next five years are $250,000 for each of the years 1994 and 1995, and $1,650,000 for the years 1996 - 1998. All of the classes of preferred stock are redeemable at the option of the Company or, in the case of voluntary liquidation, at various prices on various dates. The prices include the par value of the issue plus any accrued dividends and a redemption premium. The redemption premium for Class B, C and D, Series 1, is $1.00 per share. The redemption premium for the Class D, Series 3, is $5.751 per share until September 1, 1994; $4.793 per share from September 1, 1994 to September 1, 1995; $3.835 per share from September 1, 1995 to September 1, 1996; $2.877 per share from September 1, 1996 to September 1, 1997; $1.919 per share from September 1, 1997 to September 1, 1998; and $0.916 per share from September 1, 1998 to September 1, 1999, after which there is no redemption premium. In May 1993, the Company amended its Articles of Association authorizing a new class of preferred stock, Class E, which may be divided into and issued in series. No shares of Class E preferred stock were issued as of December 31, 1993. E. Long-term Debt Utility Substantially all of the property and franchises of the Company are subject to the lien of the indenture under which first mortgage bonds have been issued. The annual sinking fund requirements (excluding amounts that may be satisfied by property additions) and long-term debt maturities for the next five years are: Sinking Funds Maturities Total ------- ---------- ----- (In thousands) 1994 . . . . . . . . . . . . . . $1,800 $ --- $1,800 1995 . . . . . . . . . . . . . . 4,833 --- 4,833 1996 . . . . . . . . . . . . . . 4,833 3,000 7,833 1997 . . . . . . . . . . . . . . 3,500 1,334 4,834 1998 . . . . . . . . . . . . . . 3,500 3,000 6,500 Non-Utility At December 31, 1993, Green Mountain Propane Gas Company, the Company's propane subsidiary, had long-term debt of $4,125,000, which was secured by substantially all of the subsidiary's assets. The annual sinking fund requirements and maturities for the next three years are: Sinking Funds Maturities Total (In thousands) 1994 . . . . . . . . . . . . . $1,100 $ --- $1,100 1995 . . . . . . . . . . . . . 1,100 --- 1,100 1996 . . . . . . . . . . . . . 550 1,375 1,925 F. Short-term Debt Utility At December 31, 1993, the Company had lines of credit with five banks totaling $30.5 million, with borrowings outstanding of $19.0 million. Borrowings under these lines of credit are at interest rates ranging from less than prime to the prime rate. The Company has fee arrangements on its lines of credit ranging from 1/4 to 3/8 percent and no compensating balance requirements. These lines of credit are subject to periodic review and renewal during the year by the various banks. Non-Utility At December 31, 1993, Green Mountain Propane Gas Company, the Company's propane subsidiary, had a line of credit with a bank for $2.0 million, with borrowings outstanding of $400,000. G. Income Taxes Utility On January 1, 1993, the Company adopted the standard on accounting for income taxes, SFAS 109, which requires an asset and liability approach for financial accounting and reporting for income taxes. When implementing SFAS 109 the Company created additional deferred tax assets of $4.8 million and deferred tax liabilities of $5.6 million to give recognition to certain temporary differences previously not recognized in the Company's financial statements. These additional deferred taxes will be collected from or returned to ratepayers in future periods and, accordingly, the Company recognized a regulatory liability and regulatory asset related to income taxes of $4.8 million and $5.6 million, respectively. The implementation of SFAS 109 on January 1, 1993, and the application of SFAS 109 had no material impact on the Company's results of operations or cash flows in the twelve months ended December 31, 1993. Additionally, the Company does not believe SFAS 109 will significantly impact future results of operations or cash flows based on current ratemaking policy. The implementation of SFAS 109 also requires the Company to consider now the future utilization of deferred tax assets. If there is doubt that the Company will be able to utilize these future tax benefits, it might be necessary to establish a valuation allowance. The Company has concluded that it is not necessary at this time to establish a valuation allowance. The Company has been in a tax-paying position for approximately ten years and does not foresee future events that will alter the Company's capacity to utilize these deductions when intended. The temporary differences which gave rise to the net deferred tax liability at January 1, 1993 and December 31, 1993, were as follows: At January 1, At December 31, 1993 1993 ------------- --------------- (In thousands) Deferred Tax Assets Contributions in aid of construction. . $ 4,584 $ 5,094 Deferred compensation and postretirement benefits . . . . . . . 3,046 3,387 Alternative minimum tax credit . . . . 305 749 Excess deferred taxes . . . . . . . . . 2,287 2,188 Unamortized investment tax credits . . 2,528 2,402 Other . . . . . . . . . . . . . . . . . 2,077 1,018 ------- ------- $14,827 $14,838 ------- ------- Deferred Tax Liabilities Property-related and other . . . . . . $22,659 $25,090 Demand side management costs . . . . . 2,856 5,841 Unamortized investment tax credit . . . 5,956 5,672 Reversal of previously flowed-through tax depreciation . . . . . . . . . . 4,865 4,182 AFUDC equity basis adjustment . . . . . 771 726 -------- -------- 37,107 41,511 -------- -------- Net accumulated deferred income tax asset (liability) . . . . . . . . . . ($22,280) ($26,673) ========= ========= The following table reconciles the change in the net accumulated deferred income tax liability to the deferred income tax expense included in the income statement for the period: Net change in deferred income tax liability per above table . . . $4,393 Change in income tax related regulatory assets and liabilities. . 503 Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . 849 ------ Deferred income tax expense for the period . . . . . . . . . . . $5,745 ====== The components of the provision for income taxes are: Year Ended December 31, 1993 1992 1991 ---- ---- ---- (In thousands) Current state income taxes . . . . . . . $ 134 $ 796 $ 991 Deferred state income taxes . . . . . . 1,225 716 332 Current federal income taxes . . . . . . 369 3,007 3,730 Deferred federal income taxes . . . . . 4,804 2,678 1,243 Investment tax credits -- net . . . . . (284) (284) (276) ------- ------- -------- Total income taxes . . . . . . . . . . . 6,248 6,913 6,020 Amounts included in "Other income" . . . 1 2 2 ------- ------- ------- Income taxes charged to operations . . . $6,249 $6,915 $6,022 ======= ======= ======= The following table details the components of the provisions for deferred federal income taxes: Year Ended December 31, 1993 1992 1991 ---- ---- ---- (In thousands) Deferred purchase power costs . . . . . $ 904 $ 475 $ (606) Excess tax depreciation . . . . . . . . 1,300 1,512 1,497 Demand side management . . . . . . . . 1,918 733 584 State tax benefit . . . . . . . . . . . (416) (211) (52) Contributions in aid of construction . (404) (746) (293) Supplemental benefit plans . . . . . . (182) (42) (383) Prepaid property taxes . . . . . . . . --- 8 36 Pine Street . . . . . . . . . . . . . . 817 237 152 Other . . . . . . . . . . . . . . . . . 867 712 308 ------- ------- ------- $4,804 $2,678 $1,243 ======= ======= ======= Total federal income taxes differ from the amounts computed by applying the statutory tax rate to income before taxes. The reasons for the differences are: Year Ended December 31, 1993 1992 1991 ---- ---- ---- (In thousands) Income before income tax . . . . . . . $16,880 $18,765 $16,476 Federal statutory rate . . . . . . . . 34% 34% 34% Computed "expected" federal income taxes . . . . . . . . . . . . $ 5,739 $ 6,380 $ 5,602 Increase (decrease) in taxes resulting from: Tax versus book depreciation . . . . 327 357 357 Dividends received and paid credit . (580) (597) (634) AFUDC - equity funds . . . . . . . . (93) (63) (77) Amortization of ITC . . . . . . . . (284) (284) (276) State tax benefit . . . . . . . . . (462) (514) (450) Excess deferred taxes . . . . . . . (60) (60) (60) Other . . . . . . . . . . . . . . . 302 182 235 ------- ------- ------- Total federal income taxes . . . . . . $4,889 $5,401 $4,697 ======= ======= ======= Effective federal income tax rate . . 28.9% 28.8% 28.5% Non-Utility The Company's non-utility subsidiaries had accumulated deferred income taxes of $2.3 million on its balance sheet at December 31, 1993, largely attributable to property-related transactions. The components of the provision for income taxes for the non-utility operations are: Year Ended December 31, 1993 1992 1991 ---- ---- ---- (In thousands) State income taxes . . . . . . . . . . $ (58) $(104) $ (40) Federal income taxes . . . . . . . . . (224) (314) (150) Investment tax credits . . . . . . . . (45) (45) (61) ------ ------ ------ Income taxes charged to operations . . $(327) $(463) $(251) ====== ====== ====== Total federal income taxes differ from the amounts computed by applying the statutory rate to income before taxes, primarily attributable to state tax benefits. The effective federal income tax rates for the non-utility operations were 34.2 percent, 33.3 percent and 43.1 percent for the years ended 1993, 1992 and 1991, respectively. H. Quarterly Financial Information (Unaudited) The following quarterly financial information, in the opinion of management, includes all adjustments necessary to a fair statement of results of operations for such periods. Variations between quarters reflect the seasonal nature of the Company's business and the timing of rate changes. 1993 Quarter Ended March June Sept. Dec. Total ----- ---- ----- ---- ----- (Amounts in thousands, except per share) Operating Revenues . . . . . . $40,751 $33,427 $35,647 $37,428 $147,253 Operating Income . . . . . . . 5,160 2,093 3,075 4,498 14,826 Net Income . . . . . . . . . . 4,302 966 2,051 3,312 10,631 Net Income Applicable to Common Stock . . . . . . . . 4,099 763 1,848 3,110 9,820 Earnings per Average Share of Common Stock . . . . . . . . $0.93 $0.17 $0.41 $0.69 $2.20 Weighted Average Number of Common Shares Outstanding . 4,415 4,442 4,470 4,503 4,457 1992 Quarter Ended March June Sept. Dec. Total ----- ---- ----- ---- ----- (Amounts in thousands, except per share) Operating Revenues . . . . . . $39,476 $33,288 $33,911 $38,565 $145,240 Operating Income . . . . . . . 5,636 2,420 3,888 4,468 16,412 Net Income . . . . . . . . . . 4,060 1,585 2,766 3,441 11,852 Net Income Applicable to Common Stock . . . . . . . . 3,852 1,377 2,558 3,234 11,021 Earnings per Average Share of Common Stock . . . . . . . . $0.89 $0.32 $0.59 $0.74 $2.54 Weighted Average Number of Common Shares Outstanding . 4,305 4,329 4,359 4,386 4,345 I. Commitments and Contingencies 1. Environmental Matters In 1982, the United States Environmental Protection Agency (EPA) notified the Company that the EPA, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), was considering spending public funds to investigate and take corrective action involving claimed releases of allegedly hazardous substances at a site identified as the Pine Street Marsh in Burlington, Vermont. On part of this site was located a manufactured-gas facility owned and operated by a number of separate enterprises, including the Company, from the late 19th century to 1967. In its notice, the EPA stated that the Company may be a "potentially responsible party" (PRP) under CERCLA from which reimbursement of costs of investigation and of corrective action may be sought. On February 23, 1988, the Company received a Special Notice letter from the EPA stating that the letter constituted a formal demand for reimbursement of costs, including interest thereon, that were incurred and were expected to be incurred in response to the environmental problems at the site. On December 5, 1988, the EPA brought suit against the Company, New England Electric System, and Vermont Gas Systems, Inc. in the United States District Court for the District of Vermont seeking reimbursement for costs it incurred in conducting activities in 1985 to remove allegedly hazardous substances from the site, and requested a declaratory judgment that the Company and the other defendants are liable for all costs that have been incurred since the removal and that continue to be incurred in responding to claims of releases or threatened releases from the Maltex Pond Area -- the portion of the site where the removal action occurred. The complaint specifically alleged that the EPA expended at least $741,000 during the 1985 removal action and sought interest on this amount from the date the funds were expended and costs of litigation, including attorneys' fees. The Company entered a cross-claim against New England Electric System and third-party claims against UGI Corporation, Southern Union Corporation, the State of Vermont, and an individual property owner at the site for recovery of its response costs and for contribution. Fourth-party defendants subsequently were joined. In July 1990, the Company and other parties signed a proposed Consent Decree settling the removal action litigation. All 14 settling defendants contributed to the aggregate settlement amount of $945,000. Individual contributions were treated as confidential under the proposed Consent Decree. On December 26, 1990, upon the unopposed motion of the United States, the Consent Decree was entered by the Court. During the summer and fall of 1989, the EPA conducted the initial phase of the Remedial Investigation (RI) and commenced the Feasibility Study (FS) relating to the site. In the fall of 1990 and in 1991, the EPA conducted a second phase of RI work and studied the treatability of soils and groundwater at the site. In the fall of 1991, the EPA responded favorably to a request from the Company and other PRPs to participate in informal discussions on the EPA's ongoing investigation and evaluation of the site, and invited the Company and other interested parties to share technical information and resources with the EPA that might assist it in evaluating remedial options. Thereafter, the Company and other PRPs held several meetings with the EPA to discuss technical issues and received copies of the EPA's Supplemental Remedial Investigation Final Report, and its Baseline Risk Assessment Final Report. On November 6, 1992, the EPA released its final RI/FS and announced a proposed remedy with an estimated total cost of approximately $49.5 million, including 30 years' operation and maintenance costs, with a net present value of approximately $26.4 million. The EPA's preferred remedy called for construction of a Containment/Disposal Facility "CDF" over a portion of the site. The CDF would have consisted of subsurface vertical barriers and a low permeability cap, with collection trenches and hydraulic control system to capture groundwater and prevent its migration outside of the CDF. Collected groundwater would have been treated and discharged or stored and disposed of off-site. The proposed remedy also would have required construction of new wetlands to replace those that would be destroyed by construction of the CDF and a long-term monitoring program. On May 15, 1993, the PRP group in which the Company participated submitted extensive comments to the EPA opposing the proposed remedy. In response to an earlier request from the EPA, the PRP group also submitted a detailed analysis of an alternative remedy anticipated to cost approximately $20 million. In early June, in response to overwhelming negative comment, the EPA withdrew its proposed remedy and announced that it would work with all interested parties in developing a new proposal. Since then, the EPA has established a coordinating council, with representatives of PRPs, environmental groups, and government agencies, and presided over by a neutral mediator. The council is charged with determining what additional studies may be appropriate for the site and may also eventually address additional response activities. The Company is represented on the council. In early 1994, the Company and other PRPs met with the EPA to commence negotiations on an Administration Order of Consent pursuant to which the PRPs would conduct additional studies agreed to by the coordinating council. Although negotiations are not yet complete, it is likely that the EPA will consent to allowing the PRPs to conduct additional studies at the site and that the EPA will not require reimbursement for its past RI/FS study costs as a condition to allowing the PRPs to conduct these additional studies. The EPA has previously advised the Company that ultimately it will seek to hold the Company and the PRPs liable for such costs. In September 1991, the Company, New England Electric System and Vermont Gas Systems, Inc. entered into confidential negotiations with most other PRPs concerning allocation of unresolved liabilities concerning the site. Those negotiations are continuing. In December 1991, the Company brought suit against several previous insurers seeking recovery of unrecovered past costs and indemnity against future liabilities associated with environmental problems at the site. The parties to this action are engaged in discovery and motions practice. The Company has reached a confidential settlement with one of the defendants that provided the Company with second layer excess liability coverage for a seven month period in 1976. The Company has also reached a confidential agreement in principle with another insurance company defendant that provided the Company with comprehensive general liability insurance between 1976 and 1982, and with environmental impairment liability insurance from 1981 to 1984. These policies were in place in 1982 when the EPA first notified the Company that it might be a potentially responsible party at the Pine Street Marsh site. The Company is unable to predict at this time the magnitude of any liability resulting from potential claims for the costs of the RI/FS or the performance of any remedial action, or the likely disposition or magnitude of claims the Company may have against others, including its insurers, except to the extent described above. In its 1991 rate case, the Company, for the first time, sought recovery for expenses associated with the Pine Street Marsh site. Specifically, the Company proposed rate recognition of its estimated, unrecovered 1991 expenditures (approximately $400,000) for technical consultants and legal assistance in connection with the EPA's enforcement actions at the site and insurance litigation. While reserving the right to argue in the future about the appropriateness of rate recovery for Pine Street Marsh related costs, the Company and the Vermont Department of Public Service (Department) reached agreement that the full amount of Pine Street Marsh costs reflected in the Company's 1991 rate case should be recovered in rates. The Company's rates approved by the Vermont Public Service Board (VPSB) on April 2, 1992, reflected the 1991 Pine Street Marsh related expenditures referred to above. In its rate increase request filed on October 1, 1993, the Company proposed rate recognition for its expenditures between January 1, 1992 and July 31, 1993 (approximately $4.2 million) for technical consultants and legal assistance in connection with the EPA's enforcement actions at the site and insurance litigation. The Department and the Company have reached the same agreement regarding recovery of these costs in rates that they reached with respect to the Company's 1991 Pine Street Marsh related expenditures. A comprehensive settlement of the Company's 1993 rate case, including the agreement regarding Pine Street Marsh costs, is currently pending before the VPSB. As of December 31, 1993, the Company had reserved approximately $680,000 for costs attributable to the site, other than those costs that are the subject of the agreement between the Department and the Company mentioned above. Management expects to seek and receive ratemaking treatment for other costs incurred beyond the amounts that have been reserved. As of December 31, 1993, such other costs are approximately $4,918,000, which includes the $4.2 million in costs that are the subject of the rate case settlement agreement referred to above. 2. Operating Leases The Company has an operating lease for its corporate headquarters building and two of its service center buildings, including related real estate. This lease has a base term of 25 years, ending June 30, 2009, with renewal options aggregating another 25 years. The annual lease charges will total $983,000 for each of the years 1994 through 2008 and $574,000 for 2009. The Company has options to purchase the buildings at fair market value at the end of the base term and at the end of each renewal period. 3. Jointly-Owned Facilities The Company had joint-ownership interests in electric generating and transmission facilities at December 31, 1993, as follows: Ownership Share of Utility Accumulated Interest Capacity Plant Depreciation (In %) (In MW) (In thousands) Highgate . . . . . . . . . . 33.8 67.6 $ 9,726 $2,310 McNeil . . . . . . . . . . . 11.0 5.9 $ 8,503 $2,464 Stony Brook (No. 1) . . . . . 8.8 30.2 $10,035 $4,660 Wyman (No. 4) . . . . . . . . 1.1 6.8 $ 2,372 $1,100 Metallic Neutral Return (1) . 59.4 --- $ 1,563 $ 181 (1) Neutral conductor for NEPOOL/Hydro-Quebec Interconnection The Company's share of expenses for these facilities is reflected in the Statements of Consolidated Income. Each participant in these facilities must provide for its own financing. 4. Rate Matters On October 1, 1993, the Company filed a request with the VPSB to increase retail rates by 8.6 percent. The increase is needed primarily to cover the cost of buying power from independent power producers, the cost of energy conservation programs, the cost of plant additions made in the last two years, and costs incurred in 1992 and through July 31, 1993, associated with the proposed remedy at the Pine Street Marsh site and with the Company's litigation against its previous insurers seeking recovery of past costs incurred and indemnity against future liabilities in connection with the site. On January 28, 1994, the parties to the rate proceeding reached an agreement resulting in a 2.9 percent retail rate increase and a return on equity of 10.5 percent, effective June 15, 1994. The agreement must be reviewed and approved by the VPSB. 5. Other Legal Matters The Company is involved in legal and administrative proceedings in the normal course of business and does not believe that the ultimate outcome of these proceedings will have a material effect on the financial position or the results of operations of the Company. J. Obligations Under Transmission Interconnection Support Agreement Agreements executed in 1985 among the Company, VELCO and other NEPOOL members and Hydro-Quebec, provided for the construction of the second phase (Phase II) of the interconnection between the New England electric systems and that of Hydro-Quebec. Phase II expands the Phase I facilities from 690 megawatts to 2,000 megawatts and provides for transmission of Hydro-Quebec power from the Phase I terminal in northern New Hampshire to Sandy Pond, Massachusetts. Construction of Phase II commenced in 1988 and was completed in late 1990. The Company is entitled to 3.2 percent of the Phase II power-supply benefits. Total construction costs for Phase II were approximately $487 million. The New England participants, including the Company, have contracted to pay monthly their proportionate share of the total cost of constructing, owning and operating the Phase II facilities, including capital costs. As a supporting participant, the Company must make support payments under thirty-year agreements. These support agreements meet the capital lease accounting requirements under SFAS 13. At December 31, 1993, the present value of the Company's obligation is $11.0 million. Projected future minimum payments under the Phase II support agreements are as follows: Year ending December 31, 1994 . . . . . . . . . . . $ 501,311 1995 . . . . . . . . . . . 501,311 1996 . . . . . . . . . . . 501,311 1997 . . . . . . . . . . . 501,311 1998 . . . . . . . . . . . 501,311 Total for 1999-2020 . . . 8,522,270 ----------- $11,028,825 =========== The Phase II portion of the project is owned by New England Hydro- Transmission Electric Company and New England Hydro-Transmission Corporation, subsidiaries of New England Electric System, in which certain of the Phase II participating utilities, including the Company, own equity interests. The Company holds approximately 3.2 percent of the equity of the corporations owning the Phase II facilities. K. Long-Term Power Purchases 1. Unit Purchases Under long-term contracts with various electric utilities in the region, the Company is purchasing certain percentages of the electrical output of production plants constructed and financed by those utilities. Such contracts obligate the Company to pay certain minimum annual amounts representing the Company's proportionate share of fixed costs, including debt service requirements (amounts necessary to retire the principal of and to pay the interest on the portion of the related long-term debt ascribed to the Company) whether or not the production plants are operating. The cost of power obtained under such long-term contracts, including payments required to be made when a production plant is not operating, is reflected as "Power Supply Expenses" in the Statements of Consolidated Income. Information (including estimates for the Company's portion of certain minimum costs and ascribed long-term debt) with regard to significant purchased power contracts of this type in effect during 1993 follows: Stony Vermont Merrimack Brook Yankee --------- ----- ------- (Dollars in thousands) Plant capacity . . . . . . . . . . . 320.0 MW 343.0 MW 520.0 MW Company's share of output . . . . . 8.9% 4.4% 17.3% Contract period . . . . . . . . . . 1968-1998 (1) (2) Company's annual share of: Interest . . . . . . . . . . . . . $ 589 $ 307 $ 1,403 Other debt service . . . . . . . . 297 270 --- Other capacity . . . . . . . . . . 1,560 353 26,327 ------ ------ ------- Total annual capacity . . . . . . . $2,446 $ 930 $27,730 ====== ====== ======= Company's share of long-term debt . $ 944 $5,983 $13,749 ====== ====== ======= (1) Life of plant estimated to be 1981 - 2006. (2) License for plant operations expires in 2012. 2. Hydro-Quebec System Power Purchases Under various contracts approved by the VPSB, the details of which are described in the table below, the Company purchases capacity and associated energy produced by the Hydro-Quebec system. Such contracts obligate the Company to pay certain fixed capacity costs whether or not energy purchases above a minimum level set forth in the contracts are made. Such minimum energy purchases must be made whether or not other, less expensive energy sources might be available. These contracts are intended to complement the other components in the Company's power supply to achieve the most economic power-supply mix reasonably available. On October 12, 1990, the VPSB granted conditional approval of the Company's purchases pursuant to the contract with Hydro-Quebec entered into December 4, 1987: (1) Schedule A -- 17 megawatts of firm capacity and associated energy to be delivered at the Highgate interconnection for five years beginning 1990; (2) Schedule B -- 68 megawatts of firm capacity and associated energy to be delivered at the Highgate interconnection for twenty years beginning in September 1995; and (3) Schedule C3 -- 46 megawatts of firm capacity and associated energy to be delivered at interconnections to be determined at a later time for 20 years beginning in November 1995. The opponents to the December 1987 contract appealed the VPSB's October 1990 order to the Vermont Supreme Court. On October 2, 1992, the Vermont Supreme Court affirmed the VPSB's October 1990 order. On February 12, 1992, the VPSB issued an order finding that the Company had complied with substantial conditions imposed by the VPSB in its October 1990 order and approved the Company's purchase under the December 1987 contract. In March 1992, the opponents to the December 1987 contract appealed the VPSB's February 1992 compliance order to the Vermont Supreme Court. On May 7, 1993, the Vermont Supreme Court affirmed the VPSB's compliance order approving the Company's purchases under the December 1987 contract. The Company anticipates that the Schedule C3 purchases will be delivered over its entitlement to the NEPOOL/Hydro-Quebec interconnection (Phase I and Phase II). If such interconnection is utilized, the Company must forego certain savings associated with other energy deliveries and capacity arrangements that would benefit the Company if the interconnection were not utilized for delivery of the Schedule C3 purchases. The Company believes that the benefits of the Schedule C3 purchases, if power is delivered over such interconnection, will offset the value of the foregone savings. In September 1993, the Company negotiated a renewal of a short-term "tertiary energy" contract with Hydro-Quebec under which Hydro-Quebec delivers up to 61 megawatts of capacity and energy to the Company over the NEPOOL/Hydro-Quebec interconnection. The electricity purchased under this tertiary contract is priced at less than 2.5 cents per kilowatthour. The benefits realized by the Company from this favorably priced electricity will be greater than those associated with deliveries foregone by the Company otherwise available over the NEPOOL/Hydro-Quebec interconnection. This tertiary energy contract will expire in August 1994. The Company anticipates that purchases of tertiary energy will extend beyond August 1994, but will end when the Schedule C3 deliveries begin in November 1995. On September 27, 1990, the Canadian National Energy Board (NEB) issued its decision approving the export by Hydro-Quebec pursuant to the December 1987 contract. The NEB, however, imposed a condition on its approval: Hydro-Quebec's export license was to be deemed valid so long as Hydro-Quebec obtained all federal and environmental approvals required for any of its new hydroelectric generating units advanced in order to satisfy Hydro-Quebec's contractual obligations. Hydro-Quebec and the Province of Quebec appealed the imposition of this condition to the Federal Court of Appeal. In a decision handed down on July 9, 1991, the Federal Court of Appeal agreed with Hydro-Quebec's assertion that the NEB has no authority to regulate the construction of hydroelectric generating units -- a matter that lies exclusively within provincial jurisdiction under the Canadian Constitution. The Federal Court of Appeal struck down the challenged NEB license condition and otherwise affirmed the license. The opponents to the December 1987 contract appealed the decision of the Federal Court of Appeal to the Supreme Court of Canada. On February 24, 1994, the Supreme Court of Canada rendered a decision reversing the judgment of the Federal Court of Appeal, and reinstated the NEB decision, including the condition that Hydro-Quebec had objected to. The December 1987 contract, like the July 1984 contract, calls for the delivery of system power and is not related to any particular facilities in the Hydro-Quebec system. Consequently, there are no identifiable debt-service charges associated with any particular Hydro-Quebec facility that can be distinguished from the overall charges paid under the contract. Based on current integrated resource analyses, the Company believes that these contracts for Hydro-Quebec system power compare favorably with alternative long-term resources available to the Company. July 1984 December 1987 Contract Contract Schedule A Schedule B Schedule C3 --------- ---------- ---------- ----------- (Dollars in thousands) Capacity Acquired . . . . 50 MW 17 MW 68 MW 46 MW Contract Period . . . . . 1985-1995 1990-1995 1995-2015 1995-2015 Minimum Energy Purchase (annual load factor) . 50% 50% 75% 75% (1992-1995) Minimum Energy Charge . . $3,881 $2,134 $16,157 $11,060 (1993) (1993) (1995-2015)* (1995-2015)* $3,785 $2,281 (1994-1995)* (1994-1995) Annual Capacity Charge . $3,379 $1,681 $16,633 $11,821 (1993) (1993) (1995-2015)* (1995-2015)* $3,355 $1,691 (1994-1995)* (1994-1995)* Average Cost per KWH . . 2.8 cents 5.5 cents 7.0 cents 7.3 cents (1993) (1993) (1995-2015)** (1995-2015)** 2.7 cents 4.6 cents (1994-1995)* (1994-1995)* *Estimated average. **Estimated average in nominal dollars, levelized over the period indicated. 3. Rochester Gas & Electric Purchase In 1988, the Company entered into a ten-year contract with Rochester Gas and Electric Corporation (RG&E) for the purchase of up to 50 megawatts of firm power and associated energy. This flexible contract allows the Company the discretion of purchasing from 0 megawatts to 50 megawatts on a weekly basis. The Company has no obligation to purchase power in any week. When the Company elects to schedule a purchase, however, it must take and pay for energy at a 75 percent load factor, or pay a penalty, in the week of the purchase. Although the Company has no fixed capacity payments, it must pay to reserve transmission from the Niagra Mohawk Power Corporation for the 50-megawatt maximum purchase. Both RG&E and the Company have the option to terminate the contract effective 1995. Pursuant to an agreement with Connecticut Light and Power Corporation (CL&P) and Bozrah Light and Power (Bozrah) that was finalized in December 1992, the Company exercised the option to terminate the RG&E agreement and the transmission contract with Niagara Mohawk that supports it effective October 31, 1995. The Company also agreed to offer RG&E power to CL&P for purchase on a weekly basis through the remaining term of the RG&E agreement, and to terminate a contract under which the Company supplied all of the electrical requirements of Bozrah, a small electric utility operating in Gilman, Connecticut. In return, CL&P, which will replace the Company as the supplier of electricity to Bozrah, will assume responsibility for approximately 75 percent of the fixed costs of the transmission contract with Niagara Mohawk, and will provide the Company with up to 50 megawatts of system power, to be scheduled on a weekly basis, at a total price expected to be lower than that provided under the existing RG&E contract. In addition, CL&P has offered the Company an option, which may be exercised in yearly increments starting in July 1994, to purchase up to 50 additional megawatts of system power for the period July 1995 through December 2004. The Company expects that the reductions in its purchased power and fixed transmission costs derived from this three-party agreement will more than offset the loss of revenues associated with the termination of its electricity sales contract with Bozrah. The arrangement was approved by FERC effective May 1, 1993. Estimated Charges 1993 Annual Transmission Reservations . . . . . . . . . $300,000 Average Cost per KWH . . . . . . . . . . . . . . . (1993)(1) 4.1 cents (1994 - 1995) (1)No power purchases were made under the RG&E or CL&P contracts described above during 1993. REPORT OF INDEPENDENT PUBLIC ACCOUNTS To the Board of Directors of Green Mountain Power Corporation: We have audited the accompanying consolidated balance sheets and capitalization data of Green Mountain Power Corporation (a Vermont corporation) as of December 31, 1993 and 1992, and the related consolidated statements of income and cash flows for each of the three years in the period ended December 31, 1993. 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Green Mountain Power Corporation as of December 31, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes A and G to the accompanying financial statements, effective January 1, 1993, the Company changed its method of accounting for post-retirement benefits other than pensions and income taxes. ARTHUR ANDERSEN & CO. Boston, Massachusetts February 1, 1994 Schedule V GREEN MOUNTAIN POWER CORPORATION PROPERTY, PLANT AND EQUIPMENT December 31, 1993
Balance at Other Changes Balance at Beginning of Additions Add End of Classification Period at Cost (1) Retirements (Deduct) Period - ----------------------------------- ------------- -------------- -------------- ------------- ------------- Electric Utility Electric Plant Intangible plant...................... $3,125,484 $1,555,539 $181,227 $71,406 $4,571,202 Steam production...................... 10,687,682 60,044 -- -- 10,747,726 Hydraulic production.................. 24,034,321 922,598 49,390 22,394 24,929,923 Other production...................... 17,533,239 886,850 18,474 -- 18,401,615 Transmission.......................... 25,623,292 3,171,249 69,184 (27,350) 28,698,007 Distribution.......................... 101,367,145 6,942,288 825,200 4,956 107,489,189 General............................... 19,271,489 1,685,095 745,253 (71,406) 20,139,925 ------------- -------------- -------------- ------------- ------------- Total plant in service............... 201,642,652 15,223,663 1,888,728 0 214,977,587 Property under capital lease.......... 11,949,580 -- -- (920,755) 11,028,825 Construction work in progress......... 9,646,810 (16,152) -- -- 9,630,658 Held for future use................... -- -- -- -- -- ------------- -------------- -------------- ------------- ------------- Total electric plant (2).............$223,239,042 $15,207,511 $1,888,728 ($920,755) $235,637,070 ============= ============== ============== ============= ============= Other................................. $567,124 $113,438 $239,009 $ -- $441,553 ============= ============== ============== ============= ============= Non-Utility Land, buildings and general structure. $2,395,853 $ -- $ -- $ -- $2,395,853 Vehicles.............................. 1,102,438 177,948 47,585 -- 1,232,801 Office furniture and equipment........ 130,471 55,221 $ -- -- 185,692 Containers and equipment.............. 7,883,391 1,237,199 58,941 -- 9,061,649 ------------- -------------- -------------- ------------- ------------- Total non-utility property........... $11,512,153 $1,470,368 $106,526 $ -- $12,875,995 ============= ============== ============== ============= ============= Other Rental water heaters................. $3,968,436 $148,428 $233,856 $ -- $3,883,008 ============= ============== ============== ============= ============= (1) Includes a credit for contributions received in aid of construction of $1,367,697. (2) For depreciation method and rates, see Note A-5 of Notes to Consolidated Financial Statements.
Schedule V GREEN MOUNTAIN POWER CORPORATION PROPERTY, PLANT AND EQUIPMENT December 31, 1992
Balance at Other Changes Balance at Beginning of Additions Add End of Classification Period at Cost (1) Retirements (Deduct) Period - ----------------------------------- ------------- -------------- -------------- ------------- ------------- Electric Utility Electric Plant Intangible plant...................... $4,582,132 $519,890 $1,976,538 -- $3,125,484 Steam production...................... 10,678,787 8,895 -- -- 10,687,682 Hydraulic production.................. 23,820,246 219,545 5,470 -- 24,034,321 Other production...................... 17,481,923 57,573 6,257 -- 17,533,239 Transmission.......................... 25,335,417 351,815 39,997 (23,943) 25,623,292 Distribution.......................... 94,142,001 8,290,182 1,088,981 23,943 101,367,145 General............................... 18,139,190 2,194,657 1,062,358 -- 19,271,489 ------------- -------------- -------------- ------------- ------------- Total plant in service............... 194,179,696 11,642,557 4,179,601 -- 201,642,652 Property under capital lease.......... 12,627,179 -- -- (677,599) 11,949,580 Consrtuction work in progress......... 8,581,476 1,065,334 -- -- 9,646,810 Held for future use................... -- -- -- -- -- ------------- -------------- -------------- ------------- ------------- Total electric plant (2).............$215,388,351 $12,707,891 $4,179,601 ($677,599) $223,239,042 ============= ============== ============== ============= ============= Other................................. $328,115 $239,009 $ -- $ -- $567,124 ============= ============== ============== ============= ============= Non-Utility Land, buildings and general structure. $2,289,745 $106,108 $ -- $ -- $2,395,853 Vehicles.............................. 881,843 220,595 -- -- 1,102,438 Office furniture and equipment........ 125,967 4,504 -- -- 130,471 Containers and equipment.............. 5,129,626 2,753,765 -- -- 7,883,391 ------------- -------------- -------------- ------------- ------------- Total non-utility property........... $8,427,181 $3,084,972 $ -- $ -- $11,512,153 ============= ============== ============== ============= ============= Other Rental water heaters................. $4,491,205 $137,496 $660,265 $ -- $3,968,436 ============= ============== ============== ============= ============= (1) Includes a credit for contributions received in aid of construction of $3,574,832. (2) For depreciation method and rates, see Note A-5 of Notes to Consolidated Financial Statements.
Schedule V GREEN MOUNTAIN POWER CORPORATION PROPERTY, PLANT AND EQUIPMENT December 31, 1991
Balance at Other Changes Balance at Beginning of Additions Add End of Classification Period at Cost (1) Retirements (Deduct) Period - ----------------------------------- ------------- -------------- -------------- ------------- ------------- Electric Utility Electric Plant Intangible plant...................... $3,336,411 $1,246,290 $2,818 $2,249 $4,582,132 Steam production...................... 10,645,867 32,920 -- -- 10,678,787 Hydraulic production.................. 20,892,720 2,962,727 59,700 24,499 23,820,246 Other production...................... 17,759,103 (283,626) 6,367 12,813 17,481,923 Transmission.......................... 23,934,794 1,521,265 20,324 (100,318) 25,335,417 Distribution.......................... 88,035,716 7,240,801 1,199,270 64,754 94,142,001 General............................... 17,688,502 2,081,321 1,626,606 (4,027) 18,139,190 ------------- -------------- -------------- ------------- ------------- Total plant in service............... 182,293,113 14,801,698 2,915,085 (30) 194,179,696 Property under capital lease.......... 12,797,448 -- -- (170,269) 12,627,179 Consrtuction work in progress......... 8,633,566 (52,090) -- -- 8,581,476 Held for future use.................. -- -- -- -- -- ------------- -------------- -------------- ------------- ------------- Total electric plant (2).............$203,724,127 $14,749,608 $2,915,085 ($170,299) $215,388,351 ============= ============== ============== ============= ============= Other................................. $172,449 $155,666 $ -- $ -- $328,115 ============= ============== ============== ============= ============= Non-Utility Land, buildings and general structure. $1,428,719 $861,026 $ -- $ -- $2,289,745 Vehicles.............................. 335,788 559,605 13,550 -- 881,843 Office furniture and equipment........ 77,356 50,976 2,365 -- 125,967 Containers and equipment.............. 1,785,428 3,348,106 3,908 -- 5,129,626 ------------- -------------- -------------- ------------- ------------- Total non-utility property........... $3,627,291 $4,819,713 $19,823 $ -- $8,427,181 ============= ============== ============== ============= ============= Other Rental water heaters................. $4,495,752 $125,321 $139,043 9,175 $4,491,205 ============= ============== ============== ============= ============= (1) Includes a credit for contributions received in aid of construction of $2,166,566. (2) For depreciation method and rates, see Note A-5 of Notes to Consolidated Financial Statements.
Schedule VI GREEN MOUNTAIN POWER CORPORATION ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT For the Years Ended December 31, 1993, 1992 and 1991
Additions Balance at Charged to Other Changes Balance at Beginning of Costs and Add End of Description Period Expenses Retirements (Deduct) Period - ----------------------------------- ------------- -------------- -------------- ------------- ------------- Year Ended December 31, 1993 Accumulated Depreciation Electric Plant.................... $58,516,131 $7,290,093 $2,129,716 (1) $549,293 (2) $64,225,801 Non-Utility Property................ $923,034 $657,858 $28,598 $ -- $1,552,294 Rental Water Heaters................ $2,949,238 $268,734 $233,856 $ -- $2,984,116 Year Ended December 31, 1992 Accumulated Depreciation Electric Plant...................... $55,658,400 $6,935,077 $4,603,309 (1) $525,963 (2) $58,516,131 Non-Utility Property................ $456,751 $466,283 $ -- $ -- $923,034 Rental Water Heaters................ $3,312,130 $297,373 $660,265 $ -- $2,949,238 Year Ended December 31, 1991 Accumulated Depreciation Electric Plant...................... $51,353,779 $6,078,261 $2,245,263 (1) $471,623 (2) $55,658,400 Non-Utility Property................ $381,464 $95,110 $19,823 $ -- $456,751 Rental Water Heaters................ $3,132,416 $318,757 $139,043 $ -- $3,312,130 (1) Principally retirement and cost of removal charged to accumulated depreciation, net of salvage. (2) Depreciation on transportation equipment charged to transportation clearing account.
Schedule VIII GREEN MOUNTAIN POWER CORPORATION VALUATION AND QUALIFYING ACCOUNTS AND RESERVES For the Years Ended December 31, 1993, 1992 and 1991
Additions Balance at ------------------------------- Balance at Beginning of Charged to Charged to End of Description Period Cost & Expense Other Accounts Deductions Period - ----------------------------------- ------------- -------------- -------------- ------------- ------------- Pine Street Marsh (1) 1993................................. $684,430 $ -- $ -- $ -- $684,430 1992................................. $687,136 $3,678 $ -- $6,384 $684,430 1991................................. $509,025 $240,606 $ -- $62,495 $687,136 Injuries and Damages 1993................................. ($2,357) $142,000 $ -- $33,983 $105,660 1992................................. ($12,413) $42,000 $ -- $31,944 ($2,357) 1991................................. $5,521 $42,413 $ -- $60,347 ($12,413) Bad Debt Reserve (3) 1993................................. $469,922 $410,000 $89,014 (2) $329,083 $639,853 1992................................. $351,049 $449,475 $44,338 (2) $374,940 $469,922 1991................................. $300,370 $336,252 $104,883 (2) $390,456 $351,049 (1) See Note I-1 of the Notes to Consolidated Financial Statements. (2) Represents collection of accounts previously written off. (3) Includes non-utility bad debt reserve.
Schedule IX GREEN MOUNTAIN POWER CORPORATION Short-term Borrowings For the Years Ended December 31, 1993, 1992 and 1991
Maximum Average Weighted Amount Amount Average Balance at Interest Rate Outstanding Outstanding Interest Rate Category of Aggregate End of at End of During the During the During the Short-term Borrowings Period Period Period Period (2) Period ----------------------------- ------------- -------------- -------------- ------------- ------------- Electric Utility Notes Payable to Banks (1) Period Ended - 1993................... $19,015,000 3.74% $26,100,000 $11,303,000 3.64% (3) Period Ended - 1992................... $11,614,000 3.94% $13,784,000 $4,648,000 4.59% (3) Period Ended - 1991................... $13,707,000 5.70% $16,400,000 $9,737,000 6.68% (3) Non-Utility Notes Payable to Banks Period Ended - 1993................... $400,000 6.75% $750,000 $135,000 6.75% (3) Period Ended - 1992................... $750,000 6.75% $750,000 $330,000 7.11% (3) Period Ended - 1991................... $540,000 7.25% $555,000 $265,000 8.83% (3) (1) The Company had lines of credit amounting to $30,500,000 at rates which ranged from 3.59% to 5.00% at December 31, 1993. The Company had fee arrangements on its lines of credit. (2) Average amount outstanding computed by using month-end debt balances. (3) The weighted average interest rate is computed by using month-end debt balances and month-end rates.
Schedule X GREEN MOUNTAIN POWER CORPORATION Supplementary Income Statement Information For the Years Ended December 31, 1993, 1992 and 1991
Charged to Costs and Expenses ------------------------------------------------ Item 1993 1992 1991 - ------------------------ ------------- -------------- -------------- Electric Utility Taxes Other than Income Taxes Municipal property taxes............. $3,929,829 $3,801,888 $3,667,260 Payroll taxes........................ 885,897 843,042 831,433 Gross operating revenue tax.......... 1,310,052 1,256,933 1,178,722 ------------- -------------- -------------- Total............................. $6,125,778 $5,901,863 $5,677,415 ============= ============== ============== Non-Utility Depreciation.......................... $657,858 $466,284 $81,435 Amortization of intangible assets..... $549,504 $537,530 $305,184 Advertising........................... $76,625 $211,629 $89,665
All other items were not material or were disclosed in the Consolidated Financial Statements or the related notes. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None PART III ITEMS 10, 11, 12 & 13 Certain information regarding executive officers called for by Item 10, "Directors and Executive Officers of the Registrant," is furnished under the caption, "Executive Officers" in Item 1 of Part I of this Report. The other information called for by Item 10, as well as that called for by Items 11, 12, and 13, "Executive Compensation," "Security Ownership of Certain Beneficial Owners and Management" and "Certain Relationships and Related Transactions," will be set forth under the captions "Nominees for Director," "Compliance with the Securities Exchange Act," "Executive Compensation," "Pension Plan Information" and "Security Ownership of Certain Beneficial Owners and Management" in the Company's definitive proxy statement relating to its annual meeting of stockholders to be held on May 19, 1994. Such information is incorporated herein by reference. Such proxy statement pertains to the election of directors and other matters. Definitive proxy materials will be filed with the Securities and Exchange Commission pursuant to Regulation 14A in April 1994. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K Filed Herewith On Page Item 14(a)(1). The financial statements and financial 38 statement schedules of the Company are listed on the Index to financial statements set forth in Item 8 hereof. Item 14(a)(2). The financial statements and financial 84 statement schedules of Vermont Yankee Nuclear Power Corporation, together with report thereon of Arthur Andersen & Co. and KPMG Peat Marwick are bound and filed herewith as Item 14(d). ITEM 14(a)(3). EXHIBITS
Incorporated by Reference from Exhibit SEC Docket OR Number Exhibit Page Filed Herewith ______ _________________________________________ _______ ___________________ *3-a Restated Articles of Association, as certified 3-a June 6, 1991. *3-a-1 Amendment to 3-a above, dated as of May 20, 1993. 3-a-1 * 3-b By-laws of the Company, as amended 3-b March 8, 1994. 4-b-1 Indenture of First Mortgage and Deed of Trust 4-b 2-27300 dated as of February 1, 1955. 4-b-2 First Supplemental Indenture dated as of 4-b-2 2-75293 April 1, 1961. 4-b-3 Second Supplemental Indenture dated as of 4-b-3 2-75293 January 1, 1966. 4-b-4 Third Supplemental Indenture dated as of 4-b-4 2-75293 July 1, 1968. 4-b-5 Fourth Supplemental Indenture dated as of 4-b-5 2-75293 October 1, 1969. 4-b-6 Fifth Supplemental Indenture dated as of 4-b-6 2-75293 December 1, 1973. 4-b-7 Seventh Supplemental Indenture dated as of 4-a-7 2-99643 August 1, 1976. 4-b-8 Eighth Supplemental Indenture dated as of 4-a-8 2-99643 December 1, 1979. 4-b-9 Ninth Supplemental Indenture dated as of 4-b-9 2-99643 July 15, 1985. 4-b-10 Tenth Supplemental Indenture dated as of 4-b-10 Form 10-K 1989 June 15, 1989. (1-8291) 4-b-11 Eleventh Supplemental Indenture dated as of 4-b-11 Form 10-Q Sept September 1, 1990. 1990 (1-8291) 4-b-12 Twelfth Supplemental Indentrue dated as of 4-b-12 Form 10-K 1991 March 1, 1992. (1-8291) 4-b-13 Thirteenth Supplemental Indenture dated as of 4-b-13 Form 10-K 1991 March 1, 1992. (1-8291) *4-b-14 Fourteenth Supplemental Indenture dated as of 4-b-14 November 1, 1993. *4-b-15 Fifteenth Supplemental Indenture dated as of 4-b-15 November 1, 1993. 4-c Debenture Indenture dated as of August 1, 1967 4-c 2-75293 (6 5/8% Debentures due August 1, 1992). 4-c-1 First Supplemental Indenture dated as of 4-c-1 2-49697 August 1, 1969, amending Exhibit 4-c above. 4-d Debenture Indenture dated as of October 1, 1969 4-d 2-75293 (8 7/8% Debentures due October 1, 1994). 4-e Debenture Indenture dated as of December 1, 1976 4-d 2-99643 (9 3/8% Debentures due December 1, 1996). 4-f Debenture Indenture dated as of August 1, 1983 4-f Form 10K 1992 (12 5/8% Debentures due August 1, 1998). (1-8291) 10-a Form of Insurance Policy issued by Pacific 10-a 33-8146 Insurance Company, with respect to indemnification of Directors and Officers. 10-b-1 Firm Power Contract dated September 16, 1958, 13-b 2-27300 between the Company and the State of Vermont and supplements thereto dated September 19, 1958; November 15, 1958; October 1, 1960 and February 1, 1964. 10-b-2 Power Contract, dated February 1, 1968, between 13-d 2-34346 the Company and Vermont Yankee Nuclear Power Corporation. 10-b-3 Amendment, dated June 1, 1972, to Power Contract 13-f-1 2-49697 between the Company and Vermont Yankee Nuclear Power Corporation. 10-b-3 Amendment, dated April 15, 1983, to Power 10-b-3(a) 33-8164 (a) Contract between the Company and Vermont Yankee Nuclear Power Corporation. 10-b-3 Additional Power Contract, dated 10-b-3(b) 33-8164 (b) February 1, 1984,between the Company and Vermont Yankee Nuclear Power Corporation. 10-b-4 Capital Funds Agreement, dated February 1, 13-e 2-34346 1968, between the Company and Vermont Yankee Nuclear Power Corporation. 10-b-5 Amendment, dated March 12, 1968, to Capital 13-f 2-34346 Funds Agreement between the Company and Vermont Yankee Nuclear Power Corporation. 10-b-6 Guarantee Agreement, dated November 5, 1981, 10-b-6 2-75293 of the Company for its proportionate share of the obligations of Vermont Yankee Nuclear Power Corporation under a $40 million loan arrangement. 10-b-7 Three-Party Power Agreement among the Company, 13-i 2-49697 VELCO and Central Vermont Public Service Corporation dated November 21, 1969. 10-b-8 Amendment to Exhibit 10-b-7, dated June 1, 1981. 10-b-8 2-75293 10-b-9 Three-Party Transmission Agreement among the 13-j 2-49697 Company, VELCO and Central Vermont Public Service Corporation, dated November 21, 1969. 10-b-10 Amendment to Exhibit 10-b-9, dated June 1, 1981. 10-b-10 2-75293 10-b-12 Unit Purchase Contract dated February 10, 1968, 13-h 2-34346 between the Company and Vermont Electric Power Company, Inc., for purchase of "Merrimack" power from Public Service Company of New Hampshire. 10-b-14 Agreement with Central Maine Power Company et 5.16 2-52900 al, to enter into joint ownership of Wyman plant, dated November 1, 1974. 10-b-15 New England Power Pool Agreement as amended to 4.8 2-55385 November 1, 1975. 10-b-16 Bulk Power Transmission Contract between the 13-v 2-49697 Company and VELCO dated June 1, 1968. 10-b-17 Amendment to Exhibit 10-b-16, dated June 1, 1970. 13-v-i 2-49697 10-b-20 Power Sales Agreement, dated August 2, 1976, as 10-b-20 33-8164 amended October 1, 1977, and related Transmission Agreement, with the Massachusetts Municipal Wholesale Electric Company. 10-b-21 Agreement dated October 1, 1977, for Joint 10-b-21 33-8164 Ownership, Construction and Operation of the MMWEC Phase I Intermediate Units, dated October 1, 1977. 10-b-28 Contract dated February 1, 1980, providing for 10-b-28 33-8164 the sale of firm power and energy by the Power Authority of the State of New York to the Vermont Public Service Board. 10-b-30 Bulk Power Purchase Contract dated April 7, 10-b-32 2-75293 1976, between VELCO and the Company. 10-b-33 Agreement amending New England Power Pool 10-b-33 33-8164 Agreement dated as of December 1, 1981, providing for use of transmission inter- connection between New England and Hydro-Quebec. 10-b-34 Phase I Transmission Line Support Agreement 10-b-34 33-8164 dated as of December 1, 1981, and Amendment No. 1 dated as of June 1, 1982, between VETCO and participating New England utilities for construction, use and support of Vermont facilities of transmission interconnection between New England and Hydro-Quebec. 10-b-35 Phase I Terminal Facility Support Agreement 10-b-35 33-8164 dated as of December 1, 1981, and Amendment No. 1 dated as of June 1, 1982, between New England Electric Transmission Corporation and participating New England utilities for construction, use and support of New Hampshire facilities of transmission interconnection between New England and Hydro-Quebec. 10-b-36 Agreement with respect to use of Quebec 10-b-36 33-8164 Interconnection dated as of December 1, 1981, among participating New England utilities for use of transmission interconnection between New England and Hydro-Quebec. 10-b-39 Vermont Participation Agreement for Quebec 10-b-39 33-8164 Inter-connection dated as of July 15, 1982, between VELCO and participating Vermont utilities for allocation of VELCO's rights and obligations as a participating New England utility in the transmission inter- connection between New England and Hydro-Quebec. 10-b-40 Vermont Electric Transmission Company, Inc. 10-b-40 33-8164 Capital Funds Agreement dated as of July 15, 1982, between VETCO and VELCO for VELCO to provide capital to VETCO for construction of the Vermont facilities of the transmission inter-connection between New England and Hydro-Quebec. 10-b-41 VETCO Capital Funds Support Agreement dated as 10-b-41 33-8164 of July 15, 1982, between VELCO and partici- pating Vermont utilities for allocation of VELCO's obligation to VETCO under the Capital Funds Agreement. 10-b-42 Energy Banking Agreement dated March 21, 1983, 10-b-42 33-8164 among Hydro-Quebec, VELCO, NEET and parti- cipating New England utilities acting by and through the NEPOOL Management Committee for terms of energy banking between participating New England utilities and Hydro-Quebec. 10-b-43 Interconnection Agreement dated March 21, 1983, 10-b-43 33-8164 between Hydro-Quebec and participating New England utilities acting by and through the NEPOOL Management Committee for terms and conditions of energy transmission between New England and Hydro-Quebec. 10-b-44 Energy Contract dated March 21, 1983, between 10-b-44 33-8164 Hydro-Quebec and participating New England utilities acting by and through the NEPOOL Management Committee for purchase of surplus energy from Hydro-Quebec. 10-b-45 Firm-Power Agreement dated as of October 5, 1982, 10-b-45 33-8164 between Ontario Hydro and Vermont Department of Public Service. 10-b-46 Sales Agreement, dated January 20, 1983, between 10-b-46 33-8164 Central Maine Power Company and the Company for excess power. 10-b-48 Sales Agreement, dated February 1, 1983, 10-b-48 33-8164 betweenNiagara Mohawk and Vermont Electric Power Company for purchase of energy. 10-b-50 Agreement for Joint Ownership, Construction and 10-b-50 33-8164 Operation of the Highgate Transmission Interconnection, dated August 1, 1984, between certain electric distribution companies, including the Company. 10-b-51 Highgate Operating and Management Agreement, 10-b-51 33-8164 dated as of August 1, 1984, among VELCO and Vermont electric-utility companies, including the Company. 10-b-52 Allocation Contract for Hydro-Quebec Firm Power 10-b-52 33-8164 dated July 25, 1984, between the State of Vermont and various Vermont electric utilities, including the Company. 10-b-53 Highgate Transmission Agreement dated as of 10-b-53 33-8164 August 1, 1984, between the Owners of the Project and various Vermont electric distribution companies. 10-b-54 Lease and Sublease Agreement dated June 1, 1984, 10-b-54 33-8164 between Burlington Associates and the Company. 10-b-55 Ground Lease Agreement dated June 1, 1984, 10-b-55 33-8164 between GMP Real Estate Corporation and Burlington Associates. 10-b-56 Assignment of Lease and Agreement, dated June 1, 10-b-56 33-8164 1984, from Burlington Associates to Teachers Insurance and Annuity Association of America. 10-b-57 Mortgage dated June 1, 1984, from GMP Real Estate 10-b-57 33-8164 Corporation, Mortgagor, to Teachers Insurance and Annuity Association of America, Mortgagee. 10-b-58 Lease and Operating Agreement dated June 28,1985, 10-b-58 33-8164 between the State of Vermont and the Company. 10-b-59 Service Contract dated June 28, 1985, between the 10-b-59 33-8164 State of Vermont and the Company. 10-b-61 Agreements entered in connection with Phase II 10-b-61 33-8164 of the NEPOOL/Hydro-Quebec + 450 KV HVDC Transmission Interconnection. 10-b-62 Agreement between UNITIL Power Corp. and the 10-b-62 33-8164 Company to sell 23 MW capacity and energy from Stony Brook Intermediate Combined Cycle Unit. 10-b-63 Sales Agreement dated as of June 20, 1986, 10-b-63 33-8164 between the Company and UNITIL Power Corp. for sale of system power. 10-b-64 Sales Agreement dated as of June 20, 1986, 10-b-64 33-8164 between the Company and Fitchburg Gas and Electric Light Company for sale of 10 MW capacity and energy from the Vermont Yankee plant. 10-b-65 Sales Agreement dated September 18, 1985, 10-b-65 Form 10-K 1991 between the Company and Fitchburg Gas and (1-8291) Electric Light Company for the sale of system power. 10-b-66 Sales Agreement dated January 1, 1987, between 10-b-66 Form 10-K 1991 the Company and Bozrah Light and Power (1-8291) Company for sale of power. 10-b-67 Sales Agreement dated August 31, 1987, amending 10-b-67 Form 10-K 1992 the agreement dated June 20, 1986, between (1-8291) the Company and UNITIL Power Corp. for sale of system power. 10-b-68 Firm Power and Energy Contract dated December 4, 10-b-68 Form 10-K 1992 1987, between Hydro-Quebec and participating (1-8291) Vermont utilities, including the Company, for the purchase of firm power for up to thirty years. 10-b-69 Firm Power Agreement dated as of October 26, 1987, 10-b-69 Form 10-K 1992 between Ontario Hydro and Vermont Department of (1-8291) Public Service. 10-b-70 Firm Power and Energy Contract dated as of 10-b-70 Form 10-K 1992 February 23, 1987, between the Vermont Joint (1-8291) Owners of the Highgate facilities and Hydro- Quebec for up to 50 MW of capacity. 10-b-70 Amendment to 10-b-70. 10-b-70(a) Form 10-K 1992 (a) (1-8291) 10-b-71 Interconnection Agreement dated as of 10-b-71 Form 10-K 1992 February 23, 1987, between the Vermont Joint (1-8291) Owners of the Highgate facilities and Hydro-Quebec. 10-b-72 Participation Agreement dated as of April 1, 1988, 10-b-72 Form 10-Q between Hydro-Quebec and participating Vermont June 1988 utilities, including the Company, implementing (1-8291) the purchase of firm power for up to 30 years under the Firm Power and Energy Contract dated December 4, 1987 (previously filed with the Company's Annual Report on Form 10-K for 1987, Exhibit Number 10-b-68). 10-b-72 Restatement of the Participation Agreement filed 10-b-72(a) Form 10-K 1988 (a) as Exhibit 10-b-72 on Form 10-Q for June 1988. (1-8291) 10-b-73 Agreement dated as of May 1, 1988, between 10-b-73 Form 10-Q Rochester Gas and Electric Corporation and the Sept. 1988 Company,implementing the Company's purchase of up (1-8291) to 50 MW of electric capacity and associated energy. 10-b-74 Agreement dated as of November 1, 1988, between 10-b-74 Form 10-Q for the Company and Fitchburg Gas and Electric Light Sept. 1988 Company,for sale of electric capacity and (1-8291) associated energy. 10-b-74 Amendment to Exhibit 10-b-74. 10-b-74(a) Form 10-Q (a) Sept 1989 (1-8291) 10-b-75 Allocation Agreement dated as of March 25, 1988, 10-b-75 Form 10-Q between Ontario Hydro and the State of Vermont, Sept. 1988 for firm power and associated energy from (1-8291) Ontario Hydro. 10-b-76 Agreement dated as of October 1, 1988, between 10-b-76 Form 10-K 1988 the Company and Central Hudson Gas & Electric (1-8291) Corporation for the Company to purchase up to 50 MW of capacity and associated energy. 10-b-76 Transmission agreement dated February 28, 1989, 10-b-76(a) Form 10-K 1988 (a) between the Company and Consolidated Edison (1-8291) Company of New York, Inc. (Con Edison), that Con Edison will provide electric transmission to the Company from Central Hudson Gas & Electric Company. 10-b-77 Firm Power and Energy Contract dated December 29, 10-b-77 Form 10-K 1988 1988, between Hydro-Quebec and participating (1-8291) Vermont utilities, including the Company, for the purchase of up to 54 MW of firm power and energy. 10-b-78 Transmission Agreement dated December 23, 1988, 10-b-78 Form 10-K 1988 between the Company and Niagara Mohawk Power (1-8291) Corporation (Niagara Mohawk), for Niagara Mohawk to provide electric transmission to the Company from RochesterGas and Electric and Central Hudson Gas and Electric. 10-b-79 Lease Agreement dated November 1, 1988, between 10-b-79 Form 10-K 1988 the Company and International Business Machines (1-8291) Corporation (IBM) for the lease to IBM of the gas turbines and associated facilities located on land adjacent to IBM's Essex Junction, Vermont, plant. 10-b-80 Sales Agreement dated January 1, 1989, between 10-b-80 Form 10-K 1988 the Company and Public Service of New Hampshire (1-8291) (PSNH)for PSNH to purchase electric capacity from the Company. 10-b-81 Sales Agreement dated May 24, 1989, between 10-b-81 Form 10-Q the Town of Hardwick, Hardwick Electric Department June 1989 and the Company for the Company to purchase (1-8291) all of the output of Hardwick's generation and transmission sources and to provide Hardwick with all-requirements energy and capacity except for that provided by the Vermont Department of Public Service or Federal Preference Power. 10-b-82 Sales Agreement dated July 14, 1989, between 10-b-82 Form 10-Q Northfield Electric Department and the Company June 1989 for the Company to purchase all of the output (1-8291) of Northfield's generation and transmission sources and to provide Northfield with all- requirements energy and capacity except for that provided by the Vermont Department of Public Service or Federal Preference Power. 10-b-83 Power Purchase and Operating Agreement dated as 10-b-83 Form 10-Q of April 20, 1990, between CoGen Lime Rock, June 1990 Inc., and the Company for the production of (1-8291) energy to meet customer needs. 10-b-84 Capacity, Transmission and Energy Service 10-b-84 Form 10-K 1992 Agreement dated December 23, 1992, between (1-8291) the Company and Connecticut Light and Power Company (CL&P) for CL&P to supply power to Bozrah Light and Power Company. Management contracts or compensatory plans or arrangements required to be filed as exhibits to this form 10-K pursuant to Item 14(c). 10-c Contract dated as of October 15, 1983, between 10-c 33-8164 the Company and Thomas V. O'Connor, Jr. 10-c-1 Amendment dated as of March 31, 1988, to an 10-c-1 Form 10-Q agreement between the Company and March 1988 Thomas V. O'Connor, Jr (1-8291) 10-d-1a Green Mountain Power Corporation Amended and 10-d-1a Form 10-Q Restated Deferred Compensation Plans for March 1990 Directors and Officers. (1-8291) *10-d-1b Green Mountain Power Corporation Second Amended 10-d-1b and Restated Deferred Compensation Plan for Directors. *10-d-1c Green Mountain Power Corporation Second Amended 10-d-1c and Restated Deferred Compensation Plan for Officers. *10-d-1d Amendment No. 93-1 to the Amended and Restated 10-d-1d Deferred Compensation Plan for Officers. 10-d-2 Green Mountain Power Corporation Medical Expense 10-d-2 Form 10-K 1991 Reimbursement Plan. (1-8291) 10-d-3 Green Mountain Power Corporation Management 10-d-3 Form 10-K 1991 Incentive Plan. (1-8291) 10-d-4 Green Mountain Power Corporation Officer 10-d-4 Form 10-K 1991 Insurance Plan. (1-8291) 10-d-4a Green Mountain Power Corporation Officers' 10-d-4a Form 10-K 1990 Insurance Plan as amended. (1-8291) 10-d-5a Severance Agreements with J. V. Cleary, D. G. Hyde, 10-d-5a Form 10-K 1990 A. N. Terreri, E. M. Norse, T. V. O'Connor, Jr., (1-8291) C. L. Dutton, G. J. Purcell, S. C. Terry and T. C. Boucher. 10-d-6 Severance Agreements with W. S. Oakes, E. L. Shlatz 10-d-6 Form 10-K 1988 and J. H. Winer. (1-8291) 10-d-6a Restatement of 10-d-6 above. 10-d-6a Form 10-K 1990 (1-8291) 10-d-7 Severance Agreement with K. K. O'Neill. 10-d-7 Form 10-K 1990 (1-8291) 10-d-8 Green Mountain Power Corporation Officers' 10-d-8 Form 10-K 1990 Supplemental Retirement Plan. (1-8291) 10-d-9 Severance Agreement with C. T. Myotte. 10-d-9 Form 10-Q June 1991 (1-8291) 10-d-10 Severance Agreement with J. J. Lampron. 10-d-10 Form 10-K 1991 (1-8291) 10-d-11 Severance Agreement with D. R. Stroupe 10-d-11 Form 10-Q Sept 1992 (1-8291) 10-e-2 Agreement dated as of May 26, 1988, between the 10-e-2 Form 10-K for Company and Thomas P. Salmon, Chairman of the Board. 1988 (1-8291) 16-a Letter from former accountant, Coopers & Lybrand. Form 8-K for 1987 (1-8291) *23-a-1 Consent of Arthur Anderson & Co. *23-a-2 Consent of KPMG Peat Marwick
____________________ * Filed herewith ITEM 14(b) There were no reports on Form 8-K filed for the quarter ending December 31, 1993. OTHER MATTERS For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statement on Form S-8 No. 33-47985 (filed May 14, 1992): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GREEN MOUNTAIN POWER CORPORATION By: /s/D. G. Hyde Date: March 31, 1994 ---------------------------- (D. G. Hyde, President and Chief Executive Officer) Pursuant to the requriements 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/D. G. Hyde Chairman of the Executive Commit- March 31, 1994 (D. G. Hyde) tee, President, Chief Executive Officer and Director /s/E. M. Norse Vice President, Treasurer and March 31, 1994 (E. M. Norse) Chief Financial Officer (Principal Financial Officer) /s/G. J. Purcell Controller March 31, 1994 (G. J. Purcell) (Principal Accounting Officer) /s/T. P. Salmon Chairman of the Board and March 31, 1994 (T. P. Salmon) Director /s/R. E. Boardman Director March 31, 1994 (R. E. Boardman) /s/N. L. Brue Director March 31, 1994 (N. L. Brue) /s/W. H. Bruett Director March 31, 1994 (W. H. Bruett) /s/M. O. Burns Director March 31, 1994 (M. O. Burns) /s/J. V. Cleary Director March 31, 1994 (J. V. Cleary) /s/R. I. Fricke Director March 31, 1994 (R. I. Fricke) /s/E. A. Irving Director March 31, 1994 (E. A. Irving) /s/M. L. Johnson Director March 31, 1994 (M. L. Johnson) /s/R. W. Page Director March 31, 1994 (R. W. Page) ITEM 14(d) FINANCIAL STATEMENTS VERMONT YANKEE NUCLEAR POWER CORPORATION FINANCIAL STATEMENTS December 31, 1993, 1992 and 1991 (WITH INDEPENDENT AUDITOR'S REPORT THEREON) VERMONT YANKEE NUCLEAR POWER CORPORATION Index to Financial Statements and Financial Statement Schedules Financial Statements: Page Balance Sheets, December 31, 1993 and 1992 88-89 Statements of Income and Retained Earnings, years ended December 31, 1993, 1992 and 1991 90 Statements of Cash Flows, years ended December 31, 1993, 1992 and 1991 91 Notes to Financial Statements 92-105 Financial Statements: Schedule I - Marketable Securities and Other Investments at December 31, 1993 106 Schedule V - Property, Plant and Equipment, years ended December 31, 1993, 1992 and 1991 107 Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment, years ended December 31, 1993, 108 1992 and 1991 All other schedules are omitted as the required information is inapplicable or the required information is included in the financial statements or related notes. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS The Stockholders and Board of Directors of Vermont Yankee Nuclear Power Corporation: We have audited the accompanying balance sheet of Vermont Yankee Nuclear Power Corporation as of December 31, 1993, and the related statements of income and retained earnings and cash flows for the year then ended. 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 audit. The financial statements of Vermont Yankee Nuclear Power Corporation as of December 31, 1992 and 1991, were audited by other auditors whose report, dated February 5, 1993, expressed an unqualified opinion on those statements and included an additional paragraph discussing the Company's 1992 change in accounting for postretirement benefits other than pensions. We conducted our audit 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 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 audit provides 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 Vermont Yankee Nuclear Power Corporation as of December 31, 1993, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. As discussed in Note 10 to the accompanying financial statements, effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as whole. Supplementary schedules I, V and VI are presented for purposes of additional analysis and are not a required part of the basic financial statements. This information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in, all material respects, in relation to the basic financial statements taken as a whole. Boston, Massachusetts January 27, 1994 ARTHUR ANDERSEN & CO. INDEPENDENT AUDITORS' REPORT The Stockholders and Board of Directors Vermont Yankee Nuclear Power Corporation: We have audited the balance sheet of Vermont Yankee Nuclear Power Corporation as of December 31, 1992, and the related statements of income and retained earnings and cash flows for each of the years in the two-year period ended December 1992. In connection with our audits of the financial statements, we also have audited the financial statement schedules for each of the years in the two-year period ended December 31, 1992. These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules 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 Vermont Yankee Nuclear Power Corporation at December 31, 1992 and the results of its operations and cash flows for each of the years in the two-year period ended December 31, 1992, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in note 13, the Company adopted the provisions of Statement of Financial Accounting Standards Number 106, Employers' Accounting for Postretirement Benefits Other than Pensions, in 1992. KPMG Peat Marwick Boston, Massachusetts February 5, 1993 Balance Sheets Assets December 31, ------------ 1993 1992 ---- ---- (Dollars in thousands) Utility plant: Electric plant, at cost (note 6) $ 374,736 $ 362,278 Less accumulated depreciation 198,389 185,263 ________ ________ 176,347 177,015 Construction work in progress 597 6,408 ________ ________ Net electric plant 176,944 183,423 ________ ________ Nuclear fuel, at cost (note 6): Assemblies in reactor 69,063 74,025 Fuel in process --- 5,236 Spent fuel 287,700 259,199 ________ ________ 356,763 338,460 Less accumulated amortization of burned nuclear fuel 317,039 302,362 ________ ________ 39,724 36,098 Less accumulated amortization of final core nuclear fuel 7,220 6,487 ________ ________ Net nuclear fuel 32,504 29,611 ________ ________ Net utility plant 209,448 213,034 ________ ________ Current assets: Cash and temporary investments 2,349 1,922 Accounts receivable from sponsors 12,235 15,407 Other accounts receivable 4,522 2,715 Materials and supplies 17,081 16,862 Prepaid expenses 3,949 4,381 ________ ________ Total current assets 40,136 41,287 ________ ________ Deferred charges: Deferred decommissioning costs (note 2) 34,379 34,389 Accumulated deferred income taxes (note 10) 18,231 10,378 Deferred DOE enrichment site decontamination and decommissioning fee (note 4) 18,627 18,143 Net unamortized loss on reacquired debt 2,942 --- Other deferred charges (note 4) 3,643 4,994 ________ ________ Total deferred charges 77,822 67,904 ________ ________ Long-term funds at amortized cost: Decommissioning fund (notes 2, 5, and 7) 98,880 82,091 Disposal fee defeasance fund (notes 5, 7, and 8) 43,484 33,892 ________ ________ Total long-term funds 142,364 115,983 ________ ________ $469,770 $438,208 ======== ======== See accompanying notes to financial statements. Balance Sheets Capitalization and Liabilities December 31, ------------ 1993 1992 ---- ---- (Dollars in thousands) Capitalization: Common stock equity: Common stock, $100 par value; authorized 400,100 shares; issued 400,014 shares of which 7,533 are held in Treasury $ 40,001 $ 40,001 Additional paid-in capital 14,227 14,227 Treasury stock (7,533 shares at cost) (1,131) (1,131) Retained earnings 1,067 1,178 ________ ________ Total common stock equity 54,164 54,275 ________ ________ Long-term obligations, net (notes 6 and 7) 79,636 74,193 ________ ________ Total capitalization 133,800 128,468 ________ ________ Commitments and contingencies (notes 2, 14 and 15) Disposal fee and accrued interest for spent nuclear fuel (notes 7 and 8) 80,688 78,239 ________ ________ Current liabilities: Accrued liabilities 28,063 22,743 Accounts payable 2,117 2,591 Accrued interest 635 974 Accrued taxes 1,206 1,472 ________ ________ Total current liabilities 32,021 27,780 ________ ________ Deferred credits: Accrued decommissioning costs (note 2) 134,614 117,601 Accumulated deferred income taxes 56,478 58,963 Net regulatory tax liability (note 10) 8,351 --- Accumulated deferred investment tax credits 7,013 7,590 Net unamortized gain on reacquired debt --- 1,732 Accrued DOE enrichment site decon- tamination and decommissioning fee (note 4) 15,966 17,220 Other deferred credits 839 615 ________ ________ Total deferred credits 223,261 203,721 ________ ________ $469,770 $438,208 ======== ======== See accompanying notes to financial statements. Statements of Income and Retained Earnings Years ended December 31, ------------------------ 1993 1992 1991 ---- ---- ---- (Dollars in thousands except per share amounts) Operating revenues $180,145 $175,919 $151,722 ________ ________ ________ Operating expenses: Nuclear fuel expense 19,526 21,240 24,864 Other operating expense 74,013 72,967 59,666 Maintenance 31,405 27,878 13,664 Depreciation 13,707 13,253 11,800 Decommissioning expense (note 2) 11,315 10,649 8,065 Taxes on income (note 10) 3,777 3,401 3,485 Property and other taxes 9,961 10,227 10,294 ________ ________ ________ Total operating expenses 163,704 159,615 131,838 ________ ________ ________ Operating income 16,441 16,304 19,884 ________ ________ ________ Other income and (deductions): Net earnings on decommissioning fund (notes 2 and 5) 5,653 5,395 4,423 Decommissioning expense (note 2) (5,653) (5,395) (4,423) Allowance for equity funds used during construction 92 89 124 Interest 1,550 2,046 1,377 Taxes on other income (note 10) (623) (756) (447) Other, net (232) (199) (917) ________ ________ ________ 787 1,180 137 ________ ________ ________ Income before interest expense 17,228 17,484 20,021 ________ ________ ________ Interest expense: Interest on long-term debt 7,281 7,101 7,684 Interest on disposal costs of spent nuclear fuel (note 8) 2,450 2,801 4,312 Allowance for borrowed funds used during construction (297) (339) (465) ________ ________ ________ Total interest expense 9,434 9,563 11,531 ________ ________ ________ Net income 7,794 7,921 8,490 Retained earnings at beginning of year 1,178 1,166 1,982 ________ ________ ________ 8,972 9,087 10,472 Dividends declared 7,905 7,909 9,306 ________ ________ ________ Retained earnings at end of year $ 1,067 $ 1,178 $ 1,166 ======== ======== ======== Average number of shares outstanding in thousands 392 392 394 ======== ======== ======== Net income per average share of common stock outstanding $ 19.86 $ 20.18 $ 21.56 ======== ======== ======== Dividends per average share of common stock outstanding $ 20.14 $ 20.15 $ 23.71 ======== ======== ======== See accompanying notes to financial statements. Statements of Cash Flows Years ended December 31, ------------------------ 1993 1992 1991 ---- ---- ---- (Dollars in thousands) Cash flows from operating activities: Net income $ 7,794 $ 7,921 $ 8,490 ________ ________ ________ Adjustments to reconcile net income to net cash provided by operating activities: Amortization of nuclear fuel 15,410 18,143 21,002 Depreciation 13,707 13,253 11,800 Decommissioning expense 11,315 10,649 8,065 Deferred tax expense (979) (2,169) (801) Amortization of deferred investment tax credit (577) (641) (740) Nuclear fuel disposal fee interest accrual 2,450 2,802 4,312 Interest and dividends on disposal fee defeasance fund (1,402) (1,385) (1,495) (Increase) decrease in accounts receivable 1,365 688 (129) (Increase) decrease in prepaid expenses 432 (1,159) 163 (Increase) in materials and supplies inventory (219) (454) (1,531) Increase (decrease) in accounts payable and accrued liabilities 4,846 (7,453) 5,495 Increase (decrease) in interest and taxes payable (605) 306 (760) Other (1,228) (1,410) (1,665) ________ ________ ________ Total adjustments 44,515 31,170 43,716 ________ ________ ________ Net cash provided by operating activities 52,309 39,091 52,206 ________ ________ ________ Cash flows from investing activities: Electric plant additions (7,229) (10,750) (6,596) Nuclear fuel additions (18,303) (4,707) (18,444) Payments to decommissioning fund (11,250) (10,612) (8,323) Payments to disposal fee defeasance fund (8,190) (5,190) (8,216) ________ ________ ________ Net cash used in investing activities (44,972) (31,259) (41,579) ________ ________ ________ Cash flows from financing activities: Dividend payments (7,905) (7,909) (9,306) Purchase of treasury stock --- --- (1,131) Issuance of Series H first mortgage bonds, net --- --- 10,374 Issuance of Series I first mortgage bonds, net 75,125 --- --- Retirement of first mortgage bonds including redemption costs (74,629) (6,521) (13,178) Payments of long-term obligations (137,911) (107,763) (53,419) Borrowings under long-term agreements 138,410 111,215 53,798 ________ ________ ________ Net cash used in financing activities (6,910) (10,978) (12,862) ________ ________ ________ Net increase (decrease) in cash and temporary investments 427 (3,146) (2,235) Cash and temporary investments at beginning of year 1,922 5,068 7,303 ________ ________ ________ Cash and temporary investments at end of year $ 2,349 $ 1,922 $ 5,068 ======== ======== ======== See accompanying notes to financial statements. Notes to Financial Statements NOTE 1. Summary of Significant Accounting Policies (a) Regulations and Operations Vermont Yankee Nuclear Power Corporation ("the Company") is subject to regulations prescribed by the Federal Energy Regulatory Commission ("FERC"), and the Public Service Board of the State of Vermont with respect to accounting and other matters. The Company is also subject to regulation by the Nuclear Regulatory Commission ("NRC") for nuclear plant licensing and safety, and by federal and state agencies for environmental matters such as air quality, water quality and land use. Prior to November, 1993, the Company was subject to regulation by the Securities and Exchange Commission. As a result of the debt refinancing discussed in note 6, the Company is no longer subject to such regulation. The Company recognizes revenue pursuant to the terms of the Power Contracts and Additional Power Contracts. The Sponsors, a group of nine New England utilities, are severally obligated to pay the Company each month their entitlement percentage of amounts equal to the Company's total fuel costs and operating expenses of its Plant, plus an allowed return on equity (since December 1, 1989, 12.25%). Such contracts also obligate the Sponsors to make decommissioning payments through the end of the Plant's service life and the completion of the decommissioning of the Plant. All Sponsors are committed to such payments regardless of the Plant's operating level or whether the Plant is out of service during the period. Under the terms of the Capital Funds Agreements, the Sponsors are committed, subject to obtaining necessary regulatory authorizations, to make funds available to obtain or maintain licenses necessary to keep the Plant in operation. (b) Depreciation and Maintenance Electric plant is being depreciated on the straight-line method at rates designed to fully depreciate all depreciable properties over the lesser of estimated useful lives or the Plant's remaining NRC license life, which extends to March, 2012. Depreciation expense was equivalent to overall effective rates of 3.74%, 3.56% and 3.23% for the years 1993, 1992 and 1991, respectively. Renewals and betterments constituting retirement units are charged to electric plant. Minor renewals and betterments are charged to maintenance expense. When properties are retired, the original cost, plus cost of removal, less salvage, is charged to the accumulated provision for depreciation. (c) 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. The Company also provides for the costs of disposing of spent nuclear fuel at rates specified by the United States Department of Energy ("DOE") under a contract for disposal between the Company and the DOE. The Company amortizes to expense on a straight-line basis the estimated costs of the final unspent nuclear fuel core, which is expected to be in place at the expiration of the Plant's NRC operating license in conformity with rates authorized by the FERC. (d) Amortization of Materials and Supplies The Company amortizes to expense a formula 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. (e) Long-term Funds The Company accounts for its investments in long-term funds at amortized cost since it has both the intent and ability to hold these investments for the foreseeable future. Amortized cost represents the cost to purchase the investment, net of any unamortized premiums or discounts. (f) Amortization of Gain and Loss on Reacquired Debt The difference between the amount paid upon reacquisition of any debt security and the face value thereof, plus any unamortized premium, less any related unamortized debt expense and reacquisition costs, or less any unamortized discount, related unamortized debt expense and reacquisition costs applicable to the debt redeemed, retired and canceled, is deferred by the Company and amortized to expense on a straight-line basis over the remaining life of the applicable security issues. (g) Allowance for Funds Used During Construction Allowance for funds used during construction ("AFUDC") is the estimated cost of funds used to finance the Company's construction work in progress and nuclear fuel in process which is not recovered from the Sponsors through current revenues. The allowance is not realized in cash currently, but under the Power Contracts, the allowance will be recovered in cash over the Plant's service life through higher revenues associated with higher depreciation and amortization expense. AFUDC was capitalized at overall effective rates of 5.92%, 6.82% and 6.98% for 1993, 1992 and 1991, respectively, using the gross rate method. (h) Decommissioning The Company is accruing the estimated costs of decommissioning its Plant over the Plant's remaining NRC license life. Any amendments to these estimated costs are accounted for prospectively. (i) Taxes on Income Effective January 1, 1993, the Company began accounting for taxes on income under the liability method required by Statement of Financial Accounting Standard 109. See Note 10 for a further discussion of this change in accounting. Investment tax credits have been deferred and are being amortized to income over the lives of the related assets. (j) Cash Equivalents 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. (k) Reclassifications Certain information in the 1992 and 1991 financial statements has been reclassified to conform with the 1993 presentation. (l) Earnings per Common Share Earnings per common share have been computed by dividing earnings available to common stock by the weighted average number of shares outstanding during the year. NOTE 2. Decommissioning The Company accrues estimated decommissioning costs for its nuclear plant over its remaining NRC licensed life based on studies by an independent engineering firm that assumes that decommissioning will be accomplished by the prompt removal and dismantling method. This method requires that radioactive materials be removed from the plant site and that all buildings and facilities be dismantled immediately after shutdown. Studies estimate that approximately six years would be required to dismantle the Plant at shutdown, remove wastes and restore the site. The Company has implemented rates based on a settlement agreement with the FERC which allowed $190 million, in 1988 dollars, as the estimated decommissioning cost. This allowed amount is used to compute the Company's liability and billings to the Sponsors. Based on an assumed inflation rate of 6% per annum and an expiration of the Plant's NRC operating license in 2012, the estimated current cost of decommissioning is $253 million and, at the end of 2012, is approximately $769 million. The present value of the pro rata portion of decommissioning costs recorded to date is $134.6 million. On December 31, 1993, the balance in the Decommissioning Trust was $98.9 million. Billings to Sponsors for estimated decommissioning costs commenced during 1983, at which time the Company recorded a deferred charge for the present value of decommissioning costs applicable to operations of the Plant for prior periods. Current period decommissioning costs not funded through billings to Sponsors or earnings on decommissioning fund assets are also deferred. These deferred costs will be amortized to expense as they are funded over the remaining life of the NRC operating license. In 1994, the Company must file a revised estimate of decommissioning costs and a revised schedule of future annual decommissioning fund collections reflecting the historical differences between assumed and actual rates of inflation and the historical differences between assumed and actual rates of earnings on decommissioning fund assets. Filings are required to be made within four years of the most recent FERC approval of decommissioning cost estimates and rates. Cash received from Sponsors for plant decommissioning costs is deposited into the Vermont Yankee Decommissioning Trust in either the Qualified Fund (i.e., amounts currently deductible pursuant to the IRS regulations) or the Nonqualified Fund (i.e., excess collections pursuant to FERC authorization which are not currently deductible). Funds held by the Trust are invested in high-grade U.S. government securities and municipal obligations. Interest earned by the Decommissioning Trust assets is recorded in other income and deductions, with an equal and offsetting amount representing the current period decommissioning cost funded by such earnings reflected as decommissioning expense. Decommissioning expense for 1991 included an adjustment of approximately $2.1 million resulting from the Company's rate reduction filing approved by the FERC on February 28, 1991 as discussed in Note 3. NOTE 3. FERC Rate Case Matters On April 27, 1989, Vermont Yankee filed an application with the NRC to extend the term of the operating license from 2007 to 2012 so that the Plant may operate for 40 years after it entered commercial service in 1972. On December 17, 1990, the NRC issued an amendment to the operating license extending its term to March 21, 2012. The Company submitted a rate reduction filing with the FERC to reflect in rates the adjustments to decommissioning, depreciation and amortization resulting from the license extension. The Company proposed to make this reduction effective as of March 1, 1991 and, since the extension was issued in 1990, to reflect the necessary adjustment for the period January 1, 1990 through February 28, 1991. On February 28, 1991, the FERC approved the Company's rate reduction filing. The effects of this ruling were accounted for prospectively in fiscal 1991, producing a net revenue reduction ofapproximately $7.4 million in 1991, which reflected the retroactive treatment to January 1, 1990. This ruling resulted in reduced revenue requirements of approximately $3.5 million for both 1992 and 1993, and similar reductions are expected in future years. On March 26, 1993, the FERC initiated a review of the return on common equity component of the formula rates included in the Company's Power Contracts. On October 22, 1993, the FERC approved a settlement whereby the Company retained its 12.25% authorized rate of return on common equity and agreed to credit monthly power billings by approximately $139,000 beginning in June, 1993. In 1994, the Company will submit a rate filing to the FERC which will include, among other things, a revised estimate of decommissioning costs and a revised schedule of future annual decommissioning fund collections. NOTE 4. Other Deferred Charges and Credits In October, 1992, Congress passed the Energy Policy Act of 1992 which requires, among other things, that certain utilities help pay for the cleanup of the DOE's enrichment facilities over a 15- year period. The Company's annual fee is estimated based on the historical share of enrichment service provided by the DOE and is indexed to inflation. These fees will not be adjusted for future business as the DOE's future cost of sales will include a decontamination and decommissioning component. The Act stipulates that the annual fee shall be fully recoverable in rates in the same manner as other fuel costs. In 1993, the DOE billed and the Company paid the first of the 15 annual fees. As of December 31, 1993, the Company has recognized a current accrued liability of $2.6 million for the two fee payments expected to be made in 1994, a deferred credit of $16.0 million for the 12 annual fee payments that are due subsequent to 1994 and a corresponding regulatory asset of $18.6 million which represents the total amount includable in future billings to the purchasers under the Power Contracts. While these amounts are reflected in these financial statements, the Company is reviewing the DOE's calculation of the annual fee and believes that the annual fee will ultimately be reduced. Approximately $2.1 and $3.3 million of the $3.6 and $5.0 million in other deferred charges at December 31, 1993 and 1992, respectively, relate to payments made to the Vermont Low Level Radioactive Waste Authority ("VLLRWA"), an agency of the State of Vermont for the siting and construction of a low-level waste disposal facility. NOTE 5. Long-term Funds The book value and estimated market value of long-term fund investment securities at December 31, is as follows:
1993 1992 ---- ---- Book Market Book Market value value value value ----- ------ ----- ------ (Dollars in thousands) Decommissioning fund: U.S. Treasury obligations $17,262 $ 18,666 $22,000 $23,067 Municipal obligations 79,755 84,576 57,141 59,009 Accrued interest and money market funds 1,863 1,863 2,950 2,950 _______ _______ _______ _______ 98,880 105,105 82,091 85,026 _______ _______ _______ _______ Disposal fee defeasance fund: Short-term investments 39,870 39,870 26,457 26,457 Corporate bonds and notes 3,195 3,083 6,110 5,940 Accrued interest and money market funds 419 419 1,325 1,325 _______ _______ _______ _______ 43,484 43,372 33,892 33,722 _______ _______ _______ _______ Total long-term fund investments $142,364 $148,477 $115,983 $118,748 ======= ======= ======= =======
At December 31, 1993 and 1992, gross unrealized gains and losses pertaining to the long-term investment securities were as follows: 1993 1992 ---- ---- (Dollars in thousands) Unrealized gains on U.S. Treasury obligations $ 1,431 $ 1,071 ------- ------- Unrealized losses on U.S. Treasury obligations $ (27) $ (4) ------- ------- Unrealized gains on Municipal obligations $ 4,843 $ 1,895 ------- ------- Unrealized losses on Municipal obligations $ (22) $ (27) ------- ------- Unrealized losses on corporate bonds and notes $ (112) $ (170) ------- ------- Maturities of short-term obligations, bonds and notes (face amount) at December 31, 1993 are as follows (dollars in thousands): Within one year $ 42,200 Two to five years 16,977 Five to seven years 19,670 Over seven years 57,860 _______ $136,707 ======= NOTE 6. Long-term Obligations A summary of long-term obligations at December 31, 1993 and 1992 is as follows: 1993 1992 ---- ---- (Dollars in thousands) First mortgage bonds: Series B - 8.50% due 1998 $ --- $ 1,307 Series C - 7.70% due 1998 --- 1,612 Series D - 10.125% due 2007 --- 23,147 Series E - 9.875% due 2007 --- 5,703 Series F - 9.375% due 2007 --- 5,704 Series G - 8.94% due 1995 --- 25,000 Series H - 8.25% due 1996 --- 8,388 Series I - 6.48% due 2009 75,845 --- ______ ______ Total first mortgage bonds 75,845 70,861 Eurodollar Agreement Commercial Paper 3,791 3,292 Unamortized premium on debt --- 40 ______ ______ Total long-term obligations $79,636 $74,193 ====== ====== The first mortgage bonds are issued under, have the terms and provisions set forth in, and are secured by an Indenture of Mortgage dated as of October 1, 1970 between the Company and the Trustee, as modified and supplemented by 13 supplemental indentures. All bonds are secured by a first lien on utility plant, exclusive of nuclear fuel, and a pledge of the Power Contracts and the Additional Power Contracts (except for fuel payments) and the Capital Funds Agreements with Sponsors. On July 1, 1993, the Company retired the outstanding Series B and Series C first mortgage bonds. In November, 1993, the Company issued $75.8 million of Series I, first mortgage bonds stated to mature on November 1, 2009. The Company applied the proceeds of the bond issuance principally to retire the remaining Series D, Series E, Series F, Series G and Series H first mortgage bonds including call premiums totalling $3.7 million based on the early redemption of the bonds. Cash sinking fund requirements for the Series I first mortgage bonds are $5.4 million annually beginning in November, 1999. The Company has a $75.0 million Eurodollar Credit Agreement that expires on December 31, 1995 subject to three optional one-year extensions. The Company issued commercial paper under this agreement with weighted average interest rates of 3.22% for 1993 and 3.95% for 1992. Payment of the commercial paper is supported by the Eurodollar Credit Agreement, which is secured by a second mortgage on the Company's generating facility. NOTE 7. Disclosures About the Fair Value of Financial Instruments The carrying amounts for cash and temporary investments, trade receivables, accounts receivable from sponsors, accounts payable and accrued liabilities approximate their fair values because of the short maturity of these instruments. The fair values of long-term funds are estimated based on quoted market prices for these or similar investments. The fair values of each of the Company's long-term debt instruments are estimated based on the quoted market prices for the same or similar issues, or on the current rates offered to the Company for debt of the same remaining maturities. The estimated fair value of the Company's financial instruments as of December 31 are summarized as follows (dollars in thousands): 1993 1992 ---- ---- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------- ---------- -------- ---------- Decommissioning fund $98,880 $105,105 $82,091 $85,026 Disposal fee defeasance fund 43,484 43,372 33,892 33,722 Long-term debt 79,636 77,361 74,193 78,235 Disposal fee and accrued interest 80,688 80,688 78,239 78,239 Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. NOTE 8. Disposal Fee for Spent Nuclear Fuel The Company has a contract with the United States Department of Energy ("DOE") for the permanent disposal of spent nuclear fuel. Under the terms of this contract, in exchange for the one-time fee discussed below and a quarterly fee of 1 mil per kwh of electricity generated and sold, the DOE agrees to provide disposal services when a facility for spent nuclear fuel and other high-level radioactive waste is available, which is required by current statute to be prior to January 31, 1998. The DOE contract obligates the Company to pay a one-time fee of approximately $39.3 million for disposal costs for all spent fuel discharged through April 7, 1983. Although such amount has been collected in rates from the Sponsors, the Company has elected to defer payment of the fee to the DOE as permitted by the DOE contract. The fee must be paid no later than the first delivery of spent nuclear fuel to the DOE. Interest accrues on the unpaid obligation based on the thirteen-week Treasury Bill rate and is compounded quarterly. Through 1993, the Company deposited approximately $37.5 in an irrevocable trust to be used exclusively for defeasing this obligation at some future date, provided the DOE complies with the terms of the aforementioned contract. On December 31, 1991, the DOE issued an amended final rule modifying the Standard Contract for Disposal of Spent Nuclear Fuel and/or High-level Radioactive Waste. The amended final rule conforms with a March 17, 1989 ruling of the U.S. Court of Appeals for the District of Columbia that the 1 mil per kilowatt hour fee in the Standard Contract should be based on net electricity generated and sold. The impact of the amendment on the Company was to reduce the basis for the fee by 6% on an ongoing basis and to establish a receivable from the DOE for previous overbillings and accrued interest. The Company has recognized in its rates the full impact of the amended final rule to the Standard Contract. The DOE is refunding the overpayments, including interest, to utilities over a four-year period ending in 1995 via credits against quarterly payments. Interest is based on the 90-day Treasury Bill Auction Bond Equivalent and will continue to accrue on amounts remaining to be credited. At December 31, 1993 and 1992, respectively, approximately $0.9 and $1.6 million in principal and interest is reflected in other accounts receivable. NOTE 9. Short-term Borrowings The Company had lines of credit from various banks totalling $6.3 million at December 31, 1993 and 1992. The maximum amount of short-term borrowings outstanding at any month-end during 1993, 1992 and 1991 was approximately $0.2 million, $0.6 million and $0.4 million, respectively. The average daily amount of short-term borrowings outstanding was approximately $0.3 million for 1993, and $0.1 million for 1992 and 1991 with weighted average interest rates of 5.75% in 1993, 6.12 % in 1992 and 8.19% in 1991. There were no amounts outstanding under these lines of credit as of December 31, 1993 and 1992. NOTE 10. Taxes on Income In February, 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which required the Company to change from the deferred method to the liability method of accounting for income taxes on January 1, 1993. The liability method accounts for deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to differences between the book basis and the tax basis of assets and liabilities ("temporary differences"). This new statement requires recognition of deferred tax liabilities for (a) income tax benefits associated with timing differences previously passed on to customers and (b) the equity component of allowance for funds used during construction, and of a deferred tax asset for the tax effect of the accumulated deferred investment tax credits. It also requires the adjustment of deferred tax liabilities or assets for an enacted change in tax laws or rates, among other things. Although adoption of this new statement has not and is not expected to have a material impact on the Company's cash flow, results of operations or financial position because of the effect of rate regulation, the Company was required to recognize an adjustment to accumulated deferred income taxes and a corresponding regulatory asset or liability to customers (in amounts equal to the required deferred income tax adjustment) to reflect the future revenues or reduction in revenues that will be required when the temporary differences turn around and are recovered or settled in rates. In addition, this new statement required a reclassification of certain deferred income tax liabilities to liabilities to customers in order to reflect the Company's obligation to flow back deferred income taxes provided at rates higher than the current 35% federal tax rate. The Company has applied the provisions of this new statement without restating prior year financial statements. The components of income tax expense for the years ended December 31, 1993, 1992 and 1991 are as follows: 1993 1992 1991 ---- ---- ---- (Dollars in thousands) Taxes on operating income: Current federal income tax $ 4,236 $ 4,926 $ 4,003 Deferred federal income tax (1,059) (1,840) (1,285) Current state income tax 1,097 1,285 1,024 Deferred state income tax 80 (329) 483 Investment tax credit adjustment (577) (641) (740) ______ ______ ______ 3,777 3,401 3,485 ______ ______ ______ Taxes on other income: Current federal income tax 496 598 353 Current state income tax 127 158 94 ______ ______ ______ 623 756 447 ______ ______ ______ Total income taxes $ 4,400 $ 4,157 $ 3,932 ====== ====== ====== A reconciliation of the Company's effective income tax rates with the federal statutory rate is as follows: 1993 1992 1991 ---- ---- ---- Federal statutory rate 35.0% 34.0% 34.0% State income taxes, net of federal income tax benefit 6.9 6.1 6.1 Investment credit (4.7) (5.3) (6.0) Book depreciation in excess of tax basis 2.0 1.9 1.7 AFUDC equity 0.6 0.9 0.9 Flowback of excess deferred taxes (3.6) (3.1) (6.7) Other (0.1) (0.1) 1.7 ____ ____ ____ 36.1% 34.4% 31.7% ==== ==== ==== The items comprising deferred income tax expense are as follows: 1993 1992 1991 ---- ---- ---- (Dollars in thousands) Decommissioning expense not currently deductible $ (351) $ (104) $ 14 Tax depreciation over (under) financial statement depreciation (978) (679) 955 Tax fuel amortization over (under) financial statement amortization (255) (637) (1,389) Tax loss on reacquisition of debt over (under) financial statement expense 1,887 187 178 Pension expense not currently deductible (167) (192) (562) Postemployment benefits deduction over (under) financial statement expense 67 (141) --- Amortization of materials and supplies not currently deductible (335) (343) (239) Low-level waste deduction over (under) financial statement expense (596) 139 825 Flowback of excess deferred taxes (442) (376) (828) Other 191 (23) 245 ______ ______ ______ $ (979) $(2,169) $ (801) ====== ====== ====== The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 1993 and January 1, 1993 are presented below:
December 31, January 1, 1993 1993 ------------ ---------- (Dollars in thousands) Deferred tax assets: Accumulated amortization of final nuclear core $ 2,914 $ 2,559 Nuclear decommissioning liability 2,810 2,291 Regulatory liabilities 5,856 6,793 Accumulated deferred investment credit 2,830 2,984 Accumulated amortization of materials and supplies 2,281 1,851 Other 2,771 4,591 ______ ______ Total gross deferred tax assets 19,462 21,069 Less valuation allowance 1,231 1,142 ______ ______ Net deferred tax assets 18,231 19,927 ______ ______ Deferred tax liabilities: Plant and equipment (51,258) (51,399) Other (5,220) (5,574) ______ ______ Total gross deferred tax liabilities (56,478) (56,973) ______ ______ Net deferred tax liability (38,247) (37,046) ====== ====== The valuation allowance is the result of a provision in Vermont tax law which limits refunds resulting from carrybacks of net operating losses. NOTE 11. Supplemental Cash Flow Information The following information supplements the cash flow information provided in the Statements of Cash Flows: 1993 1992 1991 ---- ---- ---- (Dollars in thousands) Cash paid during the year for: Interest (net of amount capitalized) $7,632 $7,062 $7,990 ===== ===== ===== Income taxes $7,070 $6,192 $4,793 ===== ===== ===== NOTE 12. Pension Plans The Company has two noncontributory pension plans covering substantially all of its regular employees. The Company's funding policy is to fund the net periodic pension expense accrued each year. Benefits are based on age, years of service and the level of compensation during the final years of employment. The aggregate funded status of the Company's pension plans as of December 31, 1993 and 1992 is as follows: December 31, ------------ 1993 1992 ---- ---- (Dollars in thousands) Vested benefits $ 8,882 $ 6,548 Nonvested benefits 1,338 918 ______ ______ Accumulated benefit obligation 10,220 7,466 Additional benefits related to future compensation levels 8,540 7,728 ______ ______ Projected benefit obligation 18,760 15,194 Fair value of plan assets, invested primarily in equities and bonds 16,343 13,791 ______ ______ Projected benefit obligation in excess of plan assets $ 2,417 $ 1,403 ====== ====== The increase in the projected benefit obligation from $15.2 million in 1992 to $18.8 million in 1993 is the result of additional service accruals, interest costs and changed plan assumptions. Certain changes in the items shown above are not recognized as they occur, but are amortized systematically over subsequent periods. Unrecognized amounts still to be amortized and the amount that is included in the balance sheet appear below.
December 31, ------------ 1993 1992 ---- ---- (Dollars in thousands) Unrecognized net transition obligation $ 996 $ 1,057 Unrecognized net gain (4,086) (4,939) Pension liability included in balance sheet 4,866 4,610 Unrecognized prior service costs 641 675 ______ ______ Projected benefit obligation in excess of plan assets $ 2,417 $ 1,403 ====== ====== The following are pension plan assumptions as of December 31, 1993 and 1992: December 31, ------------ 1993 1992 ---- ---- Discount rate 7.0% 8.0% Compensation scale 5.5% 6.5% Expected return on assets 8.5% 8.5% Net pension expense for the three years ending December 31, 1993 included the following components: 1993 1992 1991 ---- ---- ---- (Dollars in thousands) Service cost - benefits earned $ 1,141 $ 1,275 $ 1,147 Interest cost on projected benefit obligation 1,288 1,305 1,104 Actual (return) loss on plan assets (1,792) (867) (2,124) Net amortization and deferral 631 78 1,452 ______ ______ ______ Net pension expense $ 1,268 $ 1,791 $ 1,579 ====== ====== ====== NOTE 13. Postretirement Benefits Other Than Pensions The Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (SFAS 106), on January 1, 1992. This statement requires companies to use accrual accounting for postretirement benefits other than pensions. Prior to 1992, the Company accrued and collected a portion of postretirement benefits costs through decommissioning billings while the remaining cost was expensed when benefits were paid. The incremental cost, above the amount collected through decommissioning billings, approximately $2.4 million, is now accrued and since January, 1992, has been included in the Company's monthly power billings to Sponsors. The Company is funding this liability by placing monies in separate trusts. In order to maximize the deductible contributions permitted under IRS regulations, the Company has amended its pension plans and established separate VEBA trusts for management and union employees. In December, 1992, the FERC issued its policy statement setting forth how utilities can recover in rates the increased costs associated with the implementation of SFAS 106. The policy statement specifies three conditions that must be met before FERC will consider companies' election of the accrual method: (a) the Company must agree to make cash deposits to an irrevocable external trust fund, at least quarterly, in amounts that are proportional and, on an annual basis, equal to the annual test period allowance for postretirement benefits other than pensions; (b) the Company must agree to maximize the use of income tax deductions for contributions to funds of this nature; and (c) in order to recover the transition obligation, the Company must file a general rate change within three years of adoption of SFAS 106. The following table presents the plan's funded status reconciled with amounts recognized in the Company's balance sheets as of December 31, 1993 and December 31, 1992 (dollars in thousands):
Accumulated postretirement benefit obligation: 1993 1992 ---- ---- Retirees $ 1,078 $ 1,277 Fully eligible active plan participants 921 1,332 Other active participants 8,071 9,935 ______ ______ Total accumulated postretirement benefit obligation 10,070 12,544 Fair value of plan assets, invested primarily in short-term investments 2,457 1,595 ______ ______ Accumulated postretirement benefit obligation in excess of plan assets $ 7,613 $10,949 ====== ====== Unrecognized net transition obligation $ 7,933 $10,314 Unrecognized net gain (1,980) (126) Accrued postretirement benefit cost collected through decommissioning billings and included in accrued liabilities 1,660 761 ______ ______ Accumulated postretirement benefit obligation in excess of plan assets $ 7,613 $10,949 ====== ======
The net periodic postretirement benefit cost for 1993 and 1992 includes the following components (dollars in thousands):
1993 1992 ---- ---- Service cost $ 735 $ 958 Interest cost 652 941 Net amortization and deferral 350 543 _____ _____ Net periodic postretirement benefit cost $1,737 $2,442 ===== =====
For measurement purposes, a 15% annual rate of increase in the per capita cost of covered benefits (i.e., health care cost trend rate) was assumed for 1993; the rate was assumed to decrease gradually to 6% by the year 2001 and remain at that level thereafter. The health care cost trend rate assumption has a significant effect on the amounts reported. For example, increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 31, 1993 by $2.2 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year ended December 31, 1993 by $0.3 million. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7% at December 31, 1993. The change in the accumulated postretirement benefit obligation from $12.5 million in 1992 to $10.0 million in 1993 is the result of adjustments made to reflect a lower actual medical cost increase during 1993 than projected. The reduction in the unrecognized net transition obligation from $10.3 million in 1992 to $7.9 million in 1993 is primarily the result of elimination of Medicare Part B coverage. NOTE 14. Lease Commitments The Company leases equipment and systems under noncancelable operating leases. Charges against income for rentals under these leases were approximately $3.7 million, $2.6 million and $3.7 million in 1993, 1992 and 1991, respectively. Minimum future rentals as of December 31, 1993 are as follows: Fiscal years ended Annual rentals - ------------------ -------------- (Dollars in thousands) 1994 $3,283 1995 3,060 1996 2,878 1997 2,798 1998 and after 5,053 The Company has entered into an agreement with General Electric Capital Corporation to lease certain equipment being constructed by General Electric Corporation valued at approximately $29 million including installation costs. Under the lease agreement, the Company will make 120 monthly payments of $342,358 per month commencing on the later of (1) April 15, 1995 or (2) the commissioning date of the equipment. The lease will also include the sale and leaseback of a $2 million turbine rotor forging previously owned by the Company. The lease will be classified as an operating lease for accounting purposes. The construction contract requires progress payments to be paid by Vermont Yankee prior to installation of the equipment. Just prior to delivery of the equipment, the lessor will reimburse Vermont Yankee for these payments and will continue to make the remaining payments until the commencement date of the lease. During the time period subsequent to equipment delivery before the equipment is commissioned, the Company will pay interim rent to the lessor based on the amount of outstanding progress payments. The final documentation of the lease is currently being negotiated, and if a final agreement cannot be reached, the Company would be responsible for substantial termination payments. NOTE 15. Commitments and Contingencies Low-level Waste In February, 1993, the Vermont Public Service Board issued an order which requires the Company to pay its share of expenses incurred by the Vermont Low Level Radioactive Waste Authority for the period April, 1993 through June, 1994, currently capped at $4.5 million. In addition, in accordance with Vermont Act 296, the order established a fund for the long-term care of any eventual Vermont low-level waste disposal facility. Based on this order, the Company must make annual payments of approximately $0.8 million into the long-term care fund. Payments made to the VLLRWA, not pertaining directly to the siting and construction of a low-level waste disposal facility, are being expensed currently. In parallel with siting a low-level radioactive waste facility in Vermont, there has been a three-state effort between Vermont, Maine, and Texas to form a compact to site such a facility in Texas. The Texas Legislature has approved, and Governor Ann Richards of Texas has signed into law, a bill that would form such a compact. On November 2, 1993, Maine voters ratified the compact. Early during its 1994 session, the Vermont Legislature is scheduled to vote to approve entry into the compact. Following approval by the Vermont Legislature, the compact will require approval of the U.S. Congress. If the compact is successful and proceeds on schedule, Vermont Yankee would begin sending its waste to a Texas facility during 1997. Under the proposed compact, Vermont would pay the State of Texas $25 million ($12.5 million when the U.S. Congress ratifies the compact and $12.5 million when the facility opens). In addition, Vermont must pay $2.5 million ($1.25 million when Congress ratifies the compact and $1.25 million when the facility is licensed) for community assistance projects in Hudspeth County, Texas, where the facility is to be located. Vermont would also pay one-third of the Texas Low-Level Radioactive Waste Disposal Compact Commission's expenses until the facility opens. The Disposal fees for generators in Vermont and Maine would then be set at a level that is the same for generators in Texas. The Company anticipates recovering the costs of the compact from sponsors. Nuclear Fuel The Company has approximately $165 million of "requirements based" purchase contracts for nuclear fuel needs to meet substantially all of its power production requirements through 2002. Under these contracts, any disruption of operating activity would allow the Company to cancel or postpone deliveries until actually needed. Insurance The Price-Anderson Act, as amended, currently limits public liability from a single incident at a nuclear power plant to $9.4 billion. Any damages beyond $9.4 billion are indemnified under an agreement with the NRC, but subject to Congressional approval. The first $200 million of liability coverage is the maximum provided by private insurance. The Secondary Financial Protection program is a retrospective insurance plan providing additional coverage up to $9.2 billion per incident by assessing retrospective premiums of $79.3 million against each of the 116 reactor units that are currently subject to the Program in the United States, limited to a maximum assessment of $10 million per incident per nuclear unit in any one year. The maximum assessment is to be adjusted at least every five years to reflect inflationary changes. The above insurance covers all workers employed at nuclear facilities prior to January 1, 1988, for bodily injury claims. The Company has purchased a Master Worker insurance policy with limits of $200 million with one automatic reinstatement of policy limits to cover workers employed on or after January 1, 1988. Vermont Yankee's estimated contingent liability for a retrospective premium on the Master Workers policy as of December, 1993 is $3.1 million. The Secondary Financial Protection program referenced above provides coverage in excess of the Master Worker policy. Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL II) to cover the costs of property damage, decontamination or premature decommissioning resulting from a nuclear incident. All companies insured with NEIL II are subject to retroactive assessments if losses exceed the accumulated funds available to NEIL II. The maximum potential assessment against the Company with respect to losses arising during the current policy year is $5.8 million at the time of a first loss and $12.3 million at the time of a subsequent loss. 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. VERMONT YANKEE NUCLEAR POWER CORPORATION Schedule I Marketable Securities - Other Investments
(Dollars in Thousands) _____________________________________________________________________________________ Name of Issuer and Number of Cost of Market Value Amount at Which Title of Each Issue Shares or Each Issue of Each Issue Each Portfolio Units - * at 12/31/93 of Equity Principal Security Issues Amounts of and Each Other Bonds and Security Issue Notes Is Carried on the Balance Sheet _____________________________________________________________________________________ Decommissioning fund: U.S. Treasury obligations $16,252 $17,262 $ 18,666 $17,262 Municipal obligations 78,055 79,755 84,576 79,755 Money market funds and Accrued Interest 1,863 1,863 1,863 1,863 ______ ______ _______ ______ $96,170 $98,880 $105,105 $98,880 ====== ====== ======= ====== Disposal fee defeasance fund: Short-term investments $40,200 $39,870 $39,870 $39,870 Corporate bonds and notes 3,200 3,195 3,083 3,195 Money market funds and Accrued Interest 419 419 419 419 ______ ______ _______ ______ $43,819 $43,484 $43,372 $43,484 ====== ====== ======= ====== *Cost includes accrued interest and amortization of premiums and discounts.
VERMONT YANKEE NUCLEAR POWER CORPORATION Schedule V - Property, Plant and Equipment Years Ended December 31, 1993, 1992, and 1991 ($000) 1993 1992 1991 ---- ---- ---- Electric Plant: Land and land rights $ 1,397 $ 1,127 $ 984 Structures and improvements 61,887 61,868 61,515 Reactor, turbogenerator and accessory equipment 304,388 292,561 285,808 Transmission equipment 5,948 5,606 6,141 Other 1,116 1,116 1,116 Construction work in progress 597 6,408 4,188 _______ _______ _______ 375,333 368,686 359,752 _______ _______ _______ Nuclear Fuel: Assemblies in reactor 69,063 74,025 83,213 Fuel in process --- 5,236 637 Fuel in stock --- --- 22,863 Spent fuel 287,700 259,199 227,040 _______ _______ _______ 356,763 338,460 333,753 _______ _______ _______ Total $732,096 $707,146 $693,505 ======= ======= ======= Neither total additions of $25,361,000, $15,167,000 or $25,002,000 nor total retirements of $411,000, $1,526,000, or $0 for the years ended December 31, 1993, 1992 and 1991, respectively, exceeded 10% of the utility plant balance at the end of the year. VERMONT YANKEE NUCLEAR POWER CORPORATION Schedule VI - Accumulated Depreciation, Depletion and Amortization of Property, Plant and Equipment Years Ended December 31, 1993, 1992 and 1991 (Dollars in Thousands)
Additions Other Balance Charged to Charges Balance Beginning Costs and and At End of Year Expenses Retirements (Deduct) of Year --------- ---------- ----------- -------- ------- Accumulated depreciation of electric plant: (A) 1993 185,263 13,707 (411) (170) (B) 198,389 1992 173,827 13,253 (1,526) (291) (B) 185,263 1991 162,065 11,800 --- ( 38) (B) 173,827 Accumulated amortization of nuclear fuel: 1993 308,848 19,526 --- (4,115) (C) 324,259 1992 291,013 21,240 --- (3,405) (C) 308,848 1991 270,011 24,864 --- (3,862) (C) 291,013 Total accumulated depreciation and amortization 1993 494,111 33,234 (411) (4,286) 522,648 1992 464,840 34,493 (1,526) (3,696) 494,111 1991 432,076 36,664 --- (3,900) 464,840 (A) Electric plant is being depreciated on the straight-line method at rates designed to fully depreciate all depreciable properties by 2012. (See Note 1 to the financial statements). (B) Represents net salvage and removal costs. (C) Represents disposal costs of spent nuclear fuel.
EXHIBIT 23-a-2 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Green Mountain Nuclear Power Corporation: We consent to the incorporation by reference in the Registration Statement on Form S-3, File No. 3-48882 and in the Registration Statement on Form S-8, File No. 33-47985, of our report dated February 5, 1993, relating to the balance sheet of Vermont Yankee Nuclear Power Corporation as of December 31, 1992 and the related statements of income and retained earnings and cash flows for each of the years in the two- year period ended December 31, 1992, which report is included in the December 31, 1993 Annual Report on Form 10-K of Green Mountain Power Corporation. Boston, Massachusetts March 28, 1994 KPMG Peat Marwick EXHIBIT 23-a-1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports dated February 1, 1994 included in this Form 10-K, into the Company's previously filed Registration Statement on Form S-3, File No. 33-48882, and into the Company's previously filed Registration Statement on Form S-8, File No. 33-47985. Boston, Massachusetts March 30, 1994 /s/ Arthur Andersen & Co. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of Green Mountain Power Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Green Mountain Power Corporation included in this Form 10-K and have issued our report thereon dated February 1, 1994. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedules listed in the index on page 38 of this Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements, and in our opinion, fairly state, in all material respects, the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Boston, Massachusetts February 1, 1994 /s/ Arthur Andersen & Co. EX-1 2 EXHIBIT 3-A TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1993 EXHIBIT 3-a RESTATED ARTICLES OF ASSOCIATION OF GREEN MOUNTAIN POWER CORPORATION SECTION 1 NAME, PRINCIPAL OFFICE AND DURATION SECTION 1.01. The name of this corporation is Green Mountain Power Corporation. It is a corporation organized for profit and has its principal office in the City of South Burlington, Vermont. The period of its duration is perpetual. SECTION 2 THE PURPOSES OF THE CORPORATION SECTION 2.01. The corporation is organized for the purposes of doing in the State of Vermont any and all of the things herein set forth, viz: To generate, produce, buy or in any manner acquire, and to sell, dispose of and distribute electricity for light, heat, power and other purposes and to carry on the business of furnishing, supplying, manufacturing and vending, light, heat and power, and further to manufacture, sell, produce or otherwise acquire, and to supply for public use, gas for light, heat or power and further to construct, develop, improve, acquire, hold, own, lease, maintain and operate plants, facilities, water powers and other works for the manufacture, generation, production, accumulation, transmission and distribution of electric energy for light, heat, power and other purposes, and to exercise rights of condemnation and eminent domain in connection with the doing of its business, objects and purposes as herein set forth so far as may be permissible by law; and to do any and all such other acts and things as are necessary or convenient to the attainment of the purposes of this corporation, or any of them to the same extent as natural persons lawfully might or could do, in so far as such acts and things are permitted to be done by a similar corporation organized under the Vermont Business Corporation Act of the State of Vermont. SECTION 3 AUTHORIZED CAPITAL STOCK SECTION 3.01. The number of authorized shares of capital stock of Green Mountain Power Corporation is 242,430 shares of Preferred Stock of the par value of one hundred dollars ($100) per share; 50,000 shares of Preference Stock of the par value of one hundred dollars ($100) per shares; and 6,000,000 shares of Common Stock of the par value of three dollars and thirty-three and one-third cents ($3.33 1/3) per share. A statement of the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of said classes of stock is as follows: SECTION 4 DEFINITIONS SECTION 4.01. The term "Preferred Stock" shall mean any class of Preferred Stock described in Section 5 and any other class of stock with respect to which dividends and amounts payable upon liquidation, dissolution or winding up of the Corporation shall be payable on a parity with the amounts thereof in respect of such Preferred Stock, notwithstanding that any such other class of Preferred Stock, may have a dividend rate, redemption prices, amounts payable thereon upon liquidation, dissolution or winding up, sinking or purchase fund, voting rights and other terms and provisions varying from those described in Section 5. SECTION 4.02. The term "Junior Stock" shall mean the Common Stock and stock of any other class ranking junior to the Preferred Stock in respect of dividends and amounts payable upon any liquidation, dissolution or winding up of the Corporation. SECTION 4.03. The term "accrued dividends" shall mean, in respect to each share of any class or series of stock, that amount which shall be equal to simple interest upon the par value at the annual dividend rate fixed for such class or series of stock and no more, from and including the date upon which dividends on such share become cumulative and (i) up to but not including the date fixed for payment in liquidation or for redemption, or, as the case may be (ii) up to and including the last day of any period for which such accrued dividends are to be determined, less the aggregate amount of all dividends theretofore paid or declared and set apart for payment thereon. Computation of accrued dividends in respect of any portion of a quarterly dividend period shall be by the 360-day year, 30-day month, method of computing interest. SECTION 4.04. The term "gross income of the Corporation available for payment of interest charges" shall mean the total operating revenues and other income of the Corporation less all proper deductions for operating expenses, taxes (including income, excess profits and other taxes based on or measured by income or undistributed earnings or income) and other appropriate items, including provisions for maintenance, and provision for retirements, depreciations and obsolescence but excluding any interest charges and any credits or charges on account of amortization of debt premium, discount and expense, all to be determined in accordance with sound accounting practice. In determining such "gross income of the Corporation available for payment of interest charges", no deduction or adjustment shall be made for or in respect of (1) profits or losses from sales of property carried in plant or investment accounts of the Corporation, or from the reacquisition of any securities of the Corporation, or taxes on or in respect of such profits or losses, (2) charges for the elimination, retirement or amortization of utility plant adjustment or acquisition accounts or other intangibles, or (3) any earned surplus adjustments (including tax adjustments) applicable to any prior period. SECTION 4.05. The term "net income of the Corporation available for dividends" shall mean the gross income of the Corporation available for payment of interest charges as defined in Section 4.04 less interest charges, provided that no deduction or adjustment shall be made for or in respect of the items described in clauses (1), (2) and (3) of Section 4.04 above, or any charge off against surplus of or in respect of expenses in connection with the redemption or retirement of any securities issued by the Corporation, including any amount paid in excess of the principal amount or par or stated value of securities redeemed or retired, or, in the event that such redemption or retirement is effected with the proceeds of the sale of other securities of the Corporation, interest or dividends on the securities redeemed or retired from the date on which the funds required for such redemption or retirement are deposited in trust for such purpose to the date of redemption or retirement. SECTION 4.06. The term "net income of the Corporation available for dividends on Junior Stock" shall mean "net income of the Corporation available for dividends", as defined above, less all dividends accrued from and after December 1, 1954 and prior to the date as of which such computation is being made, whether or not paid, (i) on all outstanding Preferred Stock, and (ii) on all outstanding stock of any class ranking as to dividends prior to such Preferred Stock. SECTION 4.07. The term "Common Stock Equity" shall mean the aggregate of the par value of, or stated capital represented by the outstanding Common Stock of the Corporation, plus the capital surplus and earned surplus of the Corporation and plus premiums on all capital stock of the Corporation, less any accumulated or unpaid dividends on any outstanding Preferred Stock and any outstanding stock of any other class ranking as to dividends prior to the Preferred Stock. SECTION 4.08. The term "sound accounting practice" shall mean recognized principles of accounting practice followed by companies engaged in a business similar to that of the Corporation, except as otherwise required by any applicable rules, regulations or orders of the Vermont Public Service Board or other public regulatory authority having jurisdiction over the accounts of the Corporation, provided that the Corporation may, at the time, contest in good faith the validity or applicability to the Corporation of any such rule, regulation or order, and pending such contest, such rule, regulation or order shall not be controlling. SECTION 5 PREFERRED STOCK SECTION 5.01. Of the authorized shares of Preferred Stock of the Corporation there shall be a class, to consist initially of 12,430 shares, designated as "5% Preferred Stock, Class A", which shall have the terms and provisions hereinafter in this Section 5.01 set forth or provided for. (a) Dividends. Out of any assets of the Corporation available for dividends, the holders of the 5% Preferred Stock, Class A, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at the rate of 5% and no more, payable quarterly on December 1, March 1, June 1 and September 1 in each year beginning March 1, 1955, to the stockholders of record on a date not more than 30 days prior to such payment date, as may be determined by the Board of Directors of the Corporation. Dividends on the 5% Preferred Stock, Class A, shall be cumulative from and after December 1, 1954. (b) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation the holders of the 5% Preferred Stock, Class A, shall be entitled to receive the amounts prescribed in Section 6.02. (c) Redemption Provisions. The Corporation may at its option expressed by resolution of its Board of Directors redeem the 5% Preferred Stock, Class A, in the manner provided in Section 6.03 (A) at any time or from time to time at $100 per share, together with all accrued dividends (whether or not declared), and plus a redemption premium of $4.50 per share as to any shares redeemed prior to December 1, 1957, $3.75 per share as to any shares redeemed on December 1, 1957 and thereafter prior to December 1, 1960, $3.00 per share as to any shares redeemed on December 1, 1960 and thereafter prior to December 1, 1963, $2.25 per share as to any shares redeemed on December 1, 1963 and thereafter prior to December 1, 1966, and $1.50 per share as to any shares redeemed on December 1, 1966 and thereafter. (d) Purchase Fund. The Corporation covenants and agrees for the benefit of holders of the 5% Preferred Stock, Class A, that in 1955 and each year thereafter so long as any shares of the 5% Preferred Stock, Class A, are outstanding, it will make an offer (hereinafter in this Paragraph called a Purchase Offer) to the holders of shares of the 5% Preferred Stock, Class A, to purchase on December 1 in each such year a number of shares of said Class equal to 3% of the maximum number of shares of the 5% Preferred Stock, Class A, theretofore issued prior to October 15 of such year, at the prices at which the same may be offered to the Corporation up to but not exceeding a price of $100 per share and accrued dividends, less such number of shares of said class theretofore purchased at prices not exceeding $100 per share and accrued dividends as the Corporation shall elect to surrender in such year to the Transfer Agent for the 5% Preferred Stock, Class A, all as hereinafter provided in this Paragraph. At the option of the Corporation the maximum number of shares in any year purchased pursuant to such Purchase Offer may be increased from 3% to not more than 6% of the 5% Preferred Stock, Class A, theretofore issued as above provided. At least 45 days prior to December 1 in each such year, the Corporation shall furnish the Transfer Agent for the 5% Preferred Stock, Class A, with a certificate, signed by the President or a Vice President of the Corporation, stating (a) the number of shares of the 5% Preferred Stock, Class A, if any, theretofore purchased by the Company and to be surrendered in such year and that said shares have been theretofore purchased by the Corporation at prices not exceeding $100 per share and accrued dividends to the date of purchase; and (b) the number of shares of the 5% Preferred Stock, Class A, if any, in respect of which a Purchase Offer is to be made in such year. If the certificate filed in any such year shall state that a Purchase Offer is to be made in such year, the Transfer Agent for the 5% Preferred Stock, Class A, shall, at least 30 days prior to December 1 of such year, mail to the holders of record of shares of said class as at the day prior to the mailing date, a notice, in the name of the Corporation, that the Corporation will on December 1 of that year, accept offers to sell the number of shares required to be covered by the Purchase Offer at the prices at which shares are offered to the Corporation up to but not exceeding a price of $100 per share and accrued dividends thereon. The Corporation may require, and in such event said notice shall specify, that all offers to sell the shares of the 5% Preferred Stock, Class A, shall be accompanied by the certificates for the shares offered, together with evidence, satisfactory to the Transfer Agent, of the right of the holders thereof to sell the same to the Corporation as aforesaid. In any year in which a Purchase Offer shall have been made, the Transfer Agent shall on December 1, on behalf of the Corporation, accept offers to sell shares of the 5% Preferred Stock, Class A, received by it up to the full number of shares covered by the Purchase Offer upon such basis as will result in the lowest aggregate cost to the Corporation. To that end the Transfer Agent shall accept offers at the same price on a pro rata basis, as nearly as may be. In case any person whose offer is accepted shall thereafter fail to make good such offer, said Transfer Agent shall, to the extent practicable, within 30 days after December 1, accept in lieu thereof, the best offers, if any, theretofore made and not theretofore accepted. On or prior to December 1 in each year, the Corporation shall surrender to said Transfer Agent for cancellation stock certificates for the number of shares of the 5% Preferred Stock, Class A, if any, specified in said certificate for such year and deposit with said Transfer Agent cash sufficient to purchase the shares of said class, if any, which have been accepted for purchase pursuant to the Purchase Offer made in such year and thereafter shall deposit any additional funds required to carry out the Purchase Offer for such year. The Transfer Agent shall, on the next succeeding February 1st, return to the Corporation any funds deposited with it and not applied to the purchase of shares of the 5% Preferred Stock, Class A, pursuant to the Purchase Offer for such year. If in any year the Corporation shall fail to make and carry out a Purchase Offer, if and to the extent a Purchase Offer is required to be made in such year, such failure shall be made good, in the manner hereinafter in this paragraph set forth, before any dividends shall be declared or paid upon or set apart for any shares of Common Stock or any shares of any class of stock ranking junior to the Preferred Stock or any sums applied to the purchase, redemption or other retirement of the Common Stock or any shares of any class of stock ranking junior to the Preferred Stock. Any such failure may be made good at any time by the making and carrying out of a Special Purchase Offer covering the number of shares of the 5% Preferred Stock, Class A, as to which such failure exists and, to that end, the Corporation shall file with the Transfer Agent a certificate signed by the President or a Vice President, specifying a date, not less than 45 days after the date of filing thereof, on which offers to sell shares of the 5% Preferred Stock, Class A, will be accepted. Such Special Purchase Offer shall otherwise be made and carried out on thirty days' notice and in the same manner as hereinabove provided for Purchase Offers to be carried out on December 1. Shares of the 5% Preferred Stock, Class A, purchased pursuant to any Purchase Offer or Special Purchase Offer or surrendered in reduction of the purchase obligation of the Corporation in any year shall be cancelled and shall not be reissued as shares of said class. (e) Voting Powers and other Rights. The holders of 5% Preferred Stock, Class A, shall have such voting power and other rights and be subject to such restrictions and qualifications, as are set forth in Sections 6 to 8 hereof, inclusive. SECTION 5.02. Of the authorized shares of Preferred Stock of the Corporation there shall be a class, to consist initially of 15,000 shares, designated as "4.75% Preferred Stock, Class B," which shall have the terms and provisions hereinafter in this Section 5.02 set forth or provided for. (a) Dividends. Out of any assets of the Corporation available for dividends, the holders of the 4.75% Preferred Stock, Class B, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at the rate of $4.75 per share per annum and no more, payable quarterly on March 1, June 1, September 1 and December 1 in each year beginning June 1, 1964, to the stockholders of record on a date not more than 30 days prior to any such payment date, as may be determined by the Board of Directors of the Corporation. Dividends on the 4.75% Preferred Stock, Class B, shall be cumulative from and after March 1, 1964. (b) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation the holders of the 4.75% Preferred Stock, Class B, shall be entitled to receive the amounts prescribed in Section 6.02. (c) Redemption Provisions. The Corporation may, at its option expressed by vote of its Board of Directors, redeem the 4.75% Preferred Stock, Class B, in the manner provided in Section 6.03(A) (except that no shares of the 4.75% Preferred Stock, Class B, shall be redeemed prior to March 1, 1969, directly or indirectly, out of the proceeds of or in anticipation of the issuance of Preferred Stock of any class by or for the account of the Corporation or any subsidiary of the Corporation, having an effective dividend rate [calculated after adjustment, in accordance with generally accepted financial practice, for any premium received or discount granted in connection with the issuance of such Preferred Stock] of less than 4.75% per annum) at any time or from time to time at $100 per share, together with all accrued dividends (whether or not declared), and plus a redemption premium of $4.75 per share as to any shares redeemed prior to March 1, 1967, $4.00 per share as to any shares redeemed on March 1, 1967 and thereafter prior to March 1, 1970, $3.00 per share as to any shares redeemed on March 1, 1970 and thereafter prior to March 1, 1973, $2.00 per share as to any shares redeemed on March 1, 1973 and thereafter prior to March 1, 1976, and $1.00 per share as to any shares redeemed on March 1, 1976 and thereafter. (d) Purchase Fund. The Corporation covenants and agrees for the benefit of holders of the 4.75% Preferred Stock, Class B, that in 1967 and each year thereafter so long as any shares of the 4.75% Preferred Stock, Class B, are outstanding, it will make an offer (hereinafter in this Section 5.02 called a Purchase Offer) to the holders of shares of the 4.75% Preferred Stock, Class B, to purchase on December 1 in each such year a number of shares of said class equal to 3% of the aggregate number of shares of the 4.75% Preferred Stock, Class B, theretofore issued prior to October 15 of such year, at $100 per share and accrued dividends. The Transfer Agent for the 4.75% Preferred Stock, Class B, shall, not less than 30 nor more than 45 days prior to December 1 of each such year, mail to the holders of record of shares of said class as at the close of business on the last business day prior to the mailing date a notice, in the name of the Corporation, of the Purchase Offer for such year, stating that the Corporation will on December 1 of that year, accept offers to sell the number of shares required to be covered by the Purchase Offer for such year at $100 per share and accrued dividends thereon. The Corporation may require, and in such event said notice shall specify, that all offers to sell the shares of the 4.75% Preferred Stock, Class B, shall be accompanied by the certificates for the shares offered, together with evidence, satisfactory to the Transfer Agent, of the right of the holders thereof to sell the same to the Corporation as aforesaid. The Transfer Agent shall on each such December 1 on behalf of the Corporation, accept offers to sell shares of the 4.75% Preferred Stock, Class B, received by it up to the full number of shares covered by the Purchase Offer for such year. If the aggregate number of shares of 4.75% Preferred Stock, Class B, offered for sale in response to any such Purchase Offer exceeds the number of shares required to be covered by such Purchase Offer, such offers for sale shall be accepted pro rata (as nearly as practicable without the purchase or issuance of fractional shares or scrip therefor) in proportion to the total number of shares of 4.75% Preferred Stock, Class B, offered for sale respectively by the holders thereof who shall have made such offers for sale, provided that in any event, each holder of 4.75% Preferred Stock, Class B, shall be entitled to offer for sale and to have purchased by the Corporation pursuant to each such Purchase Offer, at least the number of shares (as nearly as practicable without the purchase or issuance of fractional shares or scrip therefor) of the 4.75% Preferred Stock, Class B, held by such holder which bears the same ratio to the total number of shares to be purchased pursuant to such Purchase Offer as the number of shares held of record by such holder at the close of business on the last business day before the date of mailing of notice of such Purchase Offer bears to the total number of shares of 4.75% Preferred Stock, Class B, then outstanding. In case any person whose offer is accepted shall thereafter fail to make good such offer, said Transfer Agent shall, to the extent practicable, within 30 days after each such December 1, accept in lieu thereof any offers theretofore made and not theretofore accepted. On December 1 in each year, the Corporation shall deposit with said Transfer Agent cash sufficient to purchase on said December 1 any shares of said class which shall have been offered for sale pursuant to the Purchase Offer made in such year, but not in excess of the maximum number of shares which the Corporation shall have offered to purchase pursuant to such Purchase Offer, and thereafter shall deposit any additional funds required to carry out the Purchase Offer for such year. The Transfer Agent shall, on the next succeeding January 15, return to the Corporation any funds deposited with it and not applied to the purchase of shares of the 4.75% Preferred Stock, Class B, pursuant to the Purchase Offer for such year. If in any year the Corporation shall fail to make and carry out a Purchase Offer, if and to the extent a Purchase Offer is required to be made in such year, such failure shall be made good, in the manner hereinafter in this paragraph set forth, before any dividends shall be declared or paid upon or set apart for any shares of Common Stock or any shares of any class of stock ranking junior to the Preferred Stock or any sums applied to the purchase, redemption or other retirement of the Common Stock or any shares of any class of stock ranking junior to the Preferred Stock. Any such failure may be made good at any time by the making and carrying out of a Special Purchase Offer covering the number of shares of the 4.75% Preferred Stock, Class B, as to which such failure exists and, to that end, the Corporation shall file with the Transfer Agent a certificate, signed by the President or a Vice President, specifying a date, not less than 45 days after the date of filing thereof, on which offers to sell shares of the 4.75% Preferred Stock, Class B, will be accepted. Such Special Purchase Offer shall otherwise be made and carried out on not less than 30 nor more than 45 days' notice and in the same manner as hereinabove provided for Purchase Offers to be carried out on December 1. Shares of the 4.75% Preferred Stock, Class B, purchased pursuant to any Purchase Offer or Special Purchase Offer in any year shall be cancelled and shall not be reissued as shares of said class. (e) Voting Powers and other Rights. The holders of 4.75% Preferred Stock, Class B, shall have such voting power and other rights and be subject to such restrictions and qualifications, as are set forth in Sections 6 to 8 hereof, inclusive. SECTION 5.03. Of the authorized shares of Preferred Stock of the Corporation there shall be a class, to consist initially of 15,000 shares, designated as "7% Preferred Stock, Class C" (hereinafter referred to as the "Class C Preferred Stock"), which shall have the terms and provisions hereinafter in this Section 5.03 set forth or provided for. (a) Dividends. Out of any assets of the Corporation available for dividends, the holders of the Class C Preferred Stock, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at the rate of $7.00 per share per annum and no more, payable quarterly on March 1, June 1, September 1 and December 1 in each year beginning September 1, 1968, to the stockholders of record on a date not more than 30 days prior to any such payment date as may be determined by the Board of Directors of the Corporation. Dividends on the Class C Preferred Stock shall be cumulative from and after June 1, 1968. (b) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, the holders of the Class C Preferred Stock shall be entitled to receive the amounts prescribed in Section 6.02. (c) Redemption Provisions. The Corporation may, at its option expressed by vote of its Board of Directors, redeem the Class C Preferred Stock in the manner provided in Section 6.03(A) (except that no shares of the Class C Preferred Stock shall be redeemed prior to June 1, 1978 directly or indirectly (i) out of the proceeds of or in anticipation of the issuance of Preferred Stock of any class by or for the account of the Corporation or any subsidiary of the Corporation, having an effective dividend cost [calculated in accordance with generally accepted financial practice] of less than 7% per annum or (ii) out of the proceeds of or in anticipation of the incurring of indebtedness by or for the account of the Corporation or any subsidiary of the Corporation, having an effective interest cost [calculated in accordance with generally accepted practice] of less than 7% per annum) at any time or from time to time at $100 per share, together with all accrued dividends (whether or not declared), and plus a redemption premium of $7.00 per share as to any shares redeemed prior to June 1, 1971, $5.50 per share as to any shares redeemed on June 1, 1971 and thereafter prior to June 1, 1974, $4.00 per share as to any shares redeemed on June 1, 1974 and thereafter prior to June 1, 1977, $2.50 per share as to any shares redeemed on June 1, 1977 and thereafter prior to June 1, 1980, and $1.00 per share as to any shares redeemed on June 1, 1980 and thereafter. (d) Purchase Fund. The Corporation covenants and agrees for the benefit of holders of the Class C Preferred Stock that in 1971 and each year thereafter so long as any shares of the Class C Preferred Stock are outstanding, it will make an offer (hereinafter in this Section 5.03 called a Purchase Offer) to the holders of shares of the Class C Preferred Stock to purchase on December 1 in each such year a number of shares of said class equal to 3% of the aggregate number of shares of the Class C Preferred Stock theretofore issued prior to October 15 of such year, at $100 per share and accrued dividends. The Transfer Agent for the Class C Preferred Stock shall, not less than 30 nor more than 45 days prior to December 1 of each such year, mail to the holders of record of shares of said class as at the close of business on the last business day prior to the mailing date a notice, in the name of the Corporation, of the Purchase Offer for such year, stating that the Corporation will, on December 1 of that year, accept offers to sell the number of shares required to be covered by the Purchase Offer for such year at $100 per share and accrued dividends thereon. The Corporation may require, and in such event said notice shall specify, that all offers to sell the shares of the Class C Preferred Stock shall be accompanied by the certificates for the shares offered, together with evidence, satisfactory to the Transfer Agent, of the right of the holders thereof to sell the same to the Corporation as aforesaid. The Transfer Agent shall on each such December 1, on behalf of the Corporation, accept offers to sell shares of the Class C Preferred Stock received by it up to the full number of shares covered by the Purchase Offer for such year. If the aggregate number of shares of Class C Preferred Stock offered for sale in response to any such Purchase Offer exceeds the number of shares required to be covered by such Purchase Offer, such offers for sale shall be accepted pro rata (as nearly as practicable without the purchase or issuance of fractional shares or scrip therefor) in proportion to the total number of shares of Class C Preferred Stock offered for sale respectively by the holders thereof who shall have made such offers for sale, provided that in any event, each holder of Class C Preferred Stock shall be entitled to offer for sale and to have purchased by the Corporation pursuant to each such Purchase Offer, at least the number of shares (as nearly as practicable without the purchase or issuance of fractional shares or scrip therefor) of the Class C Preferred Stock held by such holder which bears the same ratio to the total number of shares to be purchased pursuant to such Purchase Offer as the number of shares held of record by such holder at the close of business on the last business day before the date of mailing of notice of such Purchase Offer bears to the total number of shares of Class C Preferred Stock then outstanding. In case any person whose offer is accepted shall thereafter fail to make good such offer, said Transfer Agent shall, to the extent practicable, within 30 days after each such December 1, accept in lieu thereof any offers theretofore made and not theretofore accepted. On December 1 in each year, the Corporation shall deposit with said Transfer Agent cash sufficient to purchase on said December 1 any shares of said class which shall have been offered for sale pursuant to the Purchase Offer made in such year, but not in excess of the maximum number of shares which the Corporation shall have offered to purchase pursuant to such Purchase Offer, and thereafter shall deposit any additional funds required to carry out the Purchase Offer for such year. The Transfer Agent shall, on the next succeeding January 15, return to the Corporation any funds deposited with it and not applied to the purchase of shares of the Class C Preferred Stock pursuant to the Purchase Offer for such year. If in any year the Corporation shall fail to make and carry out a Purchase Offer, if and to the extent a Purchase Offer is required to be made in such year, such failure shall be made good, in the manner hereinafter in this paragraph set forth, before any dividends shall be declared or paid upon or set apart for any shares of Common Stock or any shares of any class of stock ranking junior to the Preferred Stock or any sums applied to the purchase, redemption or other retirement of the Common Stock or any shares of any class of stock ranking junior to the Preferred Stock. Any such failure may be made good at any time by the making and carrying out of a Special Purchase Offer covering the number of shares of the Class C Preferred Stock as to which such failure exists and, to that end, the Corporation shall file with the Transfer Agent a certificate, signed by the President or a Vice President, specifying a date, not less than 45 days after the date of filing thereof, on which offers to sell shares of the Class C Preferred Stock will be accepted. Such Special Purchase Offer shall otherwise be made and carried out on not less than 30 nor more than 45 days' notice and in the same manner as hereinabove provided for Purchase Offers to be carried out on December 1. Shares of the Class C Preferred Stock purchased pursuant to any Purchase Offer or Special Purchase Offer in any year shall be cancelled and shall not be reissued as shares of said class. (e) Voting Powers and other Rights. The holders of Class C Preferred Stock shall have such voting power and other rights and be subject to such restrictions and qualifications as are set forth in Sections 6 to 8 hereof, inclusive. SECTION 5.04. Of the authorized shares of Preferred Stock of the Corporation there shall be a class, to consist initially of 200,000 shares, designated as "Preferred Stock, Class D" which may be divided into and issued in series and which shall have the terms and provisions hereinafter in this Section 5.04 set forth or provided for. (a) Designation. Each series of the Preferred Stock, Class D, shall be so designated in the manner hereinafter provided as to distinguish the shares thereof from the shares of all other series and classes. (b) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, the holders of each series of Preferred Stock, Class D, shall be entitled to receive the amounts prescribed in Section 6.02. (c) Dividends. Out of any assets of the Corporation available for dividends, the holders of each series of the Preferred Stock, Class D, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at such rates as may be determined by the Board of Directors of the Corporation, as hereinafter provided, payable quarterly on March 1, June 1, September 1 and December 1 in each year. Dividends on shares of the Preferred Stock, Class D, shall be cumulative from and after the dates of issue of such shares. (d) Voting Powers and Other Rights. The holders of the Preferred Stock, Class D, shall have such voting power and other rights and be subject to such restrictions and qualifications as are set forth in Sections 6, 7 and 8 hereof. (e) Other Rights and Preferences. All shares of the Preferred Stock, Class D, shall be identical except that there may be variations between different series of Preferred Stock, Class D with respect to: (1) the rate of dividend; (2) whether shares may be redeemed and, if so, the redemption price and the terms and the conditions of redemption; (3) the amount payable upon shares in event of voluntary or involuntary liquidation; (4) sinking fund provisions, if any, for the redemption or purchase of shares; and (5) the terms and conditions, if any, on which shares may be converted. The Board of Directors shall have authority within the limitations set forth herein and imposed by law, subject to restrictions contained in Section 6.04, to fix and determine the relative rights and preferences of the shares of any series of Preferred Stock, Class D established by the Board of Directors. (f) Procedure for Establishment of Series of Preferred Stock, Class D. In order for the Board of Directors to establish a series of Preferred Stock, Class D they shall adopt a resolution setting forth the designation of the series and fixing and determining the relative rights and preferences thereof. Prior to the issue of any shares of any series of Preferred Stock, Class D there shall be filed in the office of the Secretary of State of the State of Vermont, such statement as is required by law and upon the filing of such statement with the Secretary of State, the resolution establishing and designating the series of Preferred Stock, Class D, and fixing and determining the relative rights and preferences thereof shall become effective. SECTION 5.04(A). CLASS D, SERIES 1. Of the authorized but unissued shares of the Preferred Stock, Class D, of par value of One Hundred Dollars ($100) per share of this Corporation there shall be a series of such Preferred Stock consisting of Forty Thousand (40,000) shares, designated as 9 3/8% Preferred Stock, Class D, Series 1, (hereinafter referred as the "Preferred Stock, Class D, Series 1") and such Series shall have the following relative rights and preferences: (1) Dividends. Out of any assets of the Corporation available for dividends, the holders of the Preferred Stock, Class D, Series 1, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at the rate of 9 3/8% and no more, payable quarterly on March 1, June 1, September 1 and December 1 in each year beginning March 1, 1977, to the stockholders of record on a date not more than 30 days prior to such payment date, as may be determined by the Board of Directors of the Corporation. Dividends on the Preferred Stock, Class D, Series 1 shall be cumulative from and after the date of issue of such shares. (2) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation the holders of the Preferred Stock, Class D, Series 1 shall be entitled to receive the amounts prescribed in Section 6.02 hereof. (3) Redemption Provisions. This Corporation may, at its option expressed by vote of its Board of Directors, redeem the Preferred Stock, Class D, Series 1 in the manner provided in Section 6.03(A) (except that no shares of the Preferred Stock, Class D, Series 1 shall be redeemed prior to December 1, 1986 directly or indirectly out of the proceeds of or in anticipation of the issuance of Preferred Stock of any class or series by or for the account of the Corporation or any subsidiary of the Corporation, having an effective dividend cost [calculated in accordance with generally accepted financial practice] of less than 9 3/8% per annum) at any time or from time to time at $100 per share, together with all accrued dividends (whether or not declared), and plus a redemption premium of $9.38 per share as to any shares redeemed prior to December 1, 1979, $7.28 per share as to any shares redeemed on December 1, 1979 and thereafter prior to December 1, 1982, $5.19 per share as to any shares redeemed on December 1, 1982 and thereafter prior to December 1, 1985, $3.09 per share as to any shares redeemed on December 1, 1985 and thereafter prior to December 1, 1988, and $1.00 per share as to any shares redeemed on December 1, 1988 and thereafter. Shares of the Preferred Stock, Class D, Series 1 redeemed pursuant to the foregoing shall be cancelled and shall not be reissued. (4) Sinking Fund. (a) The Corporation covenants and agrees, for the benefit of holders of the Preferred Stock, Class D, Series 1, that the Preferred Stock, Class D, Series 1, shall be entitled to the benefits of a sinking fund as follows: (i) On December 1, of each year commencing with the year 1978 up to and including December 1, 2002, the Corporation shall, subject to the provisions of, and upon notice given as provided in, Paragraph A of Section 6.03, redeem at the price of $100 per share and accrued dividends thereon to the date of redemption, such number of shares of the Preferred Stock, Class D, Series 1, as shall equal 4% of the Preferred Stock, Class D, Series 1, theretofore issued prior to October 15 of such year. The obligation to redeem shares of the Preferred Stock, Class D, Series 1, described in this clause (i) is herein sometimes referred to as the "sinking fund obligation". (ii) The sinking fund obligation shall be cumulative so that if on any December 1 on or after December 1, 1978 the Corporation shall not have satisfied to the full extent specified above the sinking fund obligation then due, whether by reason of the provisions of Paragraph C of Section 6.03, or for any other reason whatsoever, then any such deficiency shall be made good before any dividends shall be declared or paid upon or set apart for any shares of the Common Stock or any other class of stock of the Corporation ranking junior to the Preferred Stock as to dividends or assets or any sums applied to the purchase, redemption or other retirement of the Common Stock or any shares of any other class of stock of the Corporation ranking junior to the Preferred Stock as to dividends or assets. (b) At least one day prior to any December 1 on which any shares of Preferred Stock, Class D, Series 1, shall have been called for redemption for the sinking fund, the Corporation shall deliver to the Transfer Agent for such stock, in trust for such redemption, an amount of money sufficient to redeem all such shares so called for redemption, to be held and applied as provided in Paragraph A of Section 6.03 hereof. (c) Shares of the Preferred Stock, Class D, Series 1, redeemed pursuant to the sinking fund obligation in any year shall be cancelled and shall not be reissued as shares of said Series. (5) Voting Powers and other Rights. The holders of Preferred Stock, Class D, Series 1, shall have such voting powers and other rights and be subject to such restrictions and qualifications as are set forth in Sections 6, 7 and 8 hereof, inclusive. SECTION 5.04(B). CLASS D, SERIES 2. Of the authorized but unissued shares of the Preferred Stock, Class D, of par value of One Hundred Dollars ($100) per share of this Corporation there shall be a series of such Preferred Stock consisting of Ninety Thousand (90,000) shares, designated as 16-7/8% Preferred Stock, Class D, Series 2 (hereinafter referred to as the "Preferred Stock, Class D, Series 2") and such Series shall have the following relative rights and preferences: (1) Dividends. Out of any assets of the Corporation available for dividends, the holders of the Preferred Stock, Class D, Series 2, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at the rate of 16-7/8% and no more, payable quarterly on March 1, June 1, September 1 and December 1 in each year beginning September 1, 1982, to the stockholders of record on a date not more than 30 days prior to such payment date, as may be determined by the Board of Directors of the Corporation. Dividends on the Preferred Stock, Class D, Series 2 shall be cumulative from and after the date of issue of such shares. (2) Liquidation. In the event of any liquidation, dissolution or winding up of this Corporation the holders of the Preferred Stock, Class D, Series 2 shall be entitled to receive the amounts prescribed in Section 6.02 hereof. (3) Optional Redemption Provisions. (a) Except as set forth in paragraph (b) below, the shares of the Preferred Stock, Class D, Series 2, are not redeemable at the option of this Corporation at any time prior to June 1, 1989. This Corporation may, at its option expressed by vote of its Board of Directors, redeem the Preferred Stock, Class D, Series 2, in the manner provided in Section 6.03(A) at any time or from time to time on or after June 1, 1989 at $100 per share, together with all accrued dividends (whether or not declared), and plus a redemption premium of $3.38 per share as to any shares redeemed on June 1, 1989 and thereafter prior to June 1, 1990 and $1.69 per share as to any shares redeemed on June 1, 1990 and thereafter prior to June 1, 1991. No redemption premium shall be paid as to any shares redeemed pursuant to this paragraph (a) on June 1, 1991 and thereafter. Shares of the Preferred Stock, Class D, Series 2, redeemed pursuant to the foregoing shall be cancelled and shall not be reissued as shares of said Series. (b) Without prejudice to the rights of the holders of the Preferred Stock, Class D, Series 2, under paragraph (2) above and Section 6.02 hereof, in the event of any voluntary liquidation, dissolution or winding up of this Corporation prior to June 1, 1989, this Corporation may, at its option, expressed by vote of its Board of Directors, redeem the Preferred Stock, Class D, Series 2, in the manner provided by Section 6.03(A), at $100 per share, together with all accrued dividends (whether or not declared), and plus a redemption premium in an amount per share equal to the amount set forth below for the period set forth below in which the redemption occurs: Period Redemption Premium Per Share _______________________ ________________ Prior to June 1, 1983 $16.88 from June 1, 1983 to May 31, 1984 14.95 from June 1, 1984 to May 31, 1985 13.02 from June 1, 1985 to May 31, 1986 11.09 from June 1, 1986 to May 31, 1987 9.16 from June 1, 1987 to May 31, 1988 7.23 from June 1, 1988 to May 31, 1989 5.30 (4) Mandatory Sinking Fund Redemption. (a) This Corporation covenants and agrees, for the benefit of holders of the Preferred Stock, Class D, Series 2, that the Preferred Stock, Class D, Series 2, shall be entitled to the benefits of a sinking fund as follows: (i) On June 1 of each year commencing with the year 1987 up to and including June 1, 1992, the Corporation shall, in the manner provided in Section 6.03(A) hereof, redeem at the price of $100 per share and accrued dividends thereon to the date of redemption, fifteen thousand (15,000) shares of the Preferred Stock, Class D, Series 2. The obligation to redeem shares of the Preferred Stock, Class D, Series 2, described in this clause (i) is herein sometimes referred to as the "sinking fund obligation". No purchase pursuant to the provisions of Section 6.03(B) hereof nor any other purchase shall be applied against or in any way offset the sinking fund obligation. (ii) The sinking fund obligation shall be cumulative so that if on any June 1 on or after June 1, 1987 this Corporation shall not have satisfied to the full extent specified above the sinking fund obligation then due, whether by reason of the provisions of Paragraph C of Section 6.03 or for any other reason whatsoever, then any such deficiency shall be made good before any dividends shall be declared or paid upon or set apart for any shares of the Common Stock or any other class of stock of this Corporation ranking junior to the Preferred Stock as to dividends or assets or any sums applied to the purchase, redemption or other retirement of the Common Stock or any shares of any other class of stock of this Corporation ranking junior to the Preferred Stock as to dividends or assets. (b) At least one day prior to any June 1 on which any shares of Preferred Stock, Class D, Series 2, shall have been called for redemption for the sinking fund, this Corporation shall deliver to any bank or trust company selected by this Corporation, in trust for such redemption, an amount of money sufficient to redeem all such shares so called for redemption, to be held and applied as provided in Section 6.03(A). (c) Shares of the Preferred Stock, Class D, Series 2, redeemed pursuant to the sinking fund obligation in any year shall be cancelled and shall not be reissued as shares of said Series. (5) Voting Powers and other Rights. The holders of Preferred Stock, Class D, Series 2, shall have such voting powers and other rights and be subject to such restrictions and qualifications as are set forth in Sections 6, 7 and 8 hereof, inclusive. SECTION 5.04(C). CLASS D, SERIES 3. Of the authorized but unissued shares of the Preferred Stock, Class D, of par value of One Hundred Dollars ($100) per share of this Corporation there shall be a series of such Preferred Stock consisting of Seventy Thousand (70,000) shares, designated as 8 5/8% Preferred Stock, Class D, Series 3 (hereinafter referred to as the "Preferred Stock, Class D, Series 3") and that such Series shall have the following relative rights and preferences: (1) Dividends. Out of any assets of the Corporation available for dividends, the holders of the Preferred Stock, Class D, Series 3, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at the annual rate of 8 5/8% of the par value thereof, calculated on the basis of a 360-day year of twelve 30-day months and no more, payable quarterly on March 1, June 1, September 1 and December 1 in each year beginning December 1, 1990, to the stockholders of record on a date not more than 30 days prior to such payment date, as may be determined by the Board of Directors. Dividends on the Preferred Stock, Class D, Series 3 shall be cumulative and shall accrue on a day-to-day basis from and after the date of issue of such shares whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. (2) Liquidation. In the event of any liquidation, dissolution or winding up of this Corporation the holders of the Preferred Stock, Class D, Series 3 shall be entitled to receive the amounts prescribed in Section 6.02. In furtherance of the rights of holders of Preferred Stock, Class D, Series 3 under said Section 6.02, for the purpose of specifying the amounts which such holders shall be entitled to receive in case such liquidation, dissolution or winding up shall have been voluntary, the amount of the redemption premium that would then be payable to the holder thereof if the Preferred Stock, Class D, Series 3 were to be redeemed at the option of the Corporation shall be deemed to be an amount per share equal to the amount set forth below for the period in which such voluntary liquidation, dissolution or winding up occurs: Period Redemption Premium Per Share _______________________ ________________ Prior to September 1, 1991 $8.625 from September 1, 1991 to September 1, 1992 7.667 from September 1, 1992 to September 1, 1993 6.709 from September 1, 1993 to September 1, 1994 5.751 from September 1, 1994 to September 1, 1995 4.793 from September 1, 1995 to September 1, 1996 3.835 from September 1, 1996 to September 1, 1997 2.877 from September 1, 1997 to September 1, 1998 1.919 from September 1, 1998 to September 1, 1999 0.916 from September 1, 1999 to September 1, 2000 and thereafter 0.000 (3) Sinking Fund Provision. (a) This Corporation covenants and agrees, for the benefit of holder(s) of the Preferred Stock, Class D, Series 3, that the Preferred Stock, Class D, Series 3, shall be entitled to the benefits of a sinking fund as follows: (i) On September 1 of each year commencing September 1, 1996, the Corporation shall, in the manner provided in Section 6.03(A), redeem at the price of $100 per share plus an amount equal to accrued and unpaid cumulative dividends thereon (whether or not declared or earned) to the date of redemption, fourteen thousand (14,000) shares of the Preferred Stock, Class D, Series 3. The obligation to redeem shares of the Preferred Stock, Class D, Series 3, described in this clause (i) is herein sometimes referred to as the "sinking fund obligation". No purchase pursuant to the provisions of Section 6.03(B) nor any other purchase shall be applied against or in any way offset the sinking fund obligation. (ii) In addition to the shares otherwise required to be redeemed on each sinking fund redemption date, the Corporation, at its option, may redeem up to 14,000 shares of the Preferred Stock, Class D, Series 3, at $100 per share, plus an amount equal to accrued and unpaid cumulative dividends thereon (whether or not declared or earned) to the redemption date. The right to redeem such additional shares will not be cumulative and will not reduce the sinking fund requirements in any subsequent year. (iii) The sinking fund obligation shall be cumulative so that if on any September 1 on or after September 1, 1996 this Corporation shall not have satisfied to the full extent specified above the sinking fund obligation then due, whether by reason of the provisions of Paragraph C of Section 6.03, or for any other reason whatsoever, then any such deficiency shall be paid in full before any dividends shall be declared or paid upon or set apart for any shares of the Common Stock or any other class of stock of this Corporation ranking junior to the Preferred Stock as to dividends or assets or any sums applied to the purchase, redemption or other retirement of the Common Stock or any shares of any other class of stock of this Corporation ranking junior to the Preferred Stock as to dividends or assets. (b) At least one day prior to any September 1 on which any shares of Preferred Stock, Class D, Series 3, shall have been called for redemption for the sinking fund, this Corporation shall deliver to any bank or trust company selected by this Corporation, in trust for such redemption, an amount of money sufficient to redeem all such shares so called for redemption, to be held and applied as provided in Section 6.03(A) hereof. (c) Shares of the Preferred Stock, Class D, Series 3, redeemed in full pursuant to the sinking fund obligation in any year shall be cancelled and shall not be reissued as shares of said Series. (4) Voting Powers and Other Rights. The holders of Preferred Stock, Class D, Series 3, shall have such voting powers and other rights and be subject to such restrictions and qualifications as are set forth in Sections 6, 7 and 8 hereof, inclusive. SECTION 6 PREFERENCES ON LIQUIDATION, REDEMPTION PROVISIONS, RESTRICTIONS ON CERTAIN CORPORATE ACTION, VOTING POWERS AND OTHER RIGHTS APPLICABLE TO ALL CLASSES OF PREFERRED STOCK SECTION 6.01. Dividend Rights. Dividends in full shall not be paid or set apart for payment on shares of any class of Preferred Stock for any dividend period unless dividends in full have been or are contemporaneously paid or set apart for payment on all outstanding shares of all classes of Preferred Stock for such dividend period and for all prior dividend periods. When the specified dividends are not paid in full on all classes of Preferred Stock, the shares of each class of Preferred Stock shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on said shares if all dividends were paid in full. So long as any shares of Preferred Stock are outstanding, no dividends shall be declared or paid upon or set apart for the shares of any class of Junior Stock, nor any sums applied to the purchase, redemption or other retirement of any class of Junior Stock, unless full dividends on all shares of Preferred Stock of all classes outstanding, and on all outstanding stock of any class ranking as to dividends prior to the Preferred Stock, for all past quarterly dividend periods shall have been paid or declared and a sum sufficient for the payment thereof set apart and the full dividend for the then current quarterly dividend period shall have been or concurrently shall be declared. The amount of any deficiency for past dividend periods may be paid or declared and set apart at any time without reference to any quarterly dividend payment date. Unpaid accrued dividends on the Preferred Stock shall not bear interest. SECTION 6.02. Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of Preferred Stock shall be entitled to receive, for each share thereof, the par value thereof, plus, in case such liquidation, dissolution or winding up shall have been voluntary, an amount per share equal to the redemption premium that would then be payable to the holder thereof if such Preferred Stock were to be redeemed at the option of the Corporation, together in each case with accrued dividends (whether or not declared), before any distribution of the assets shall be made to the holders of shares of any class of Junior Stock; but the holders of Preferred Stock shall be entitled to no further participation in such distribution. A consolidation or merger of the Corporation or the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation, or any purchase or redemption of Preferred Stock of the Corporation (or of any class ranking as to dividends prior to the Preferred Stock) shall not be deemed a dissolution, liquidation or winding up of the Corporation within the meaning of this Section 6.02. SECTION 6.03. Redemption Provisions. (A) Shares of Preferred Stock shall be subject to redemption at the applicable redemption prices provided therefor, in whole or in part, at such place and by such method, which, if in part, shall be by lot, as shall from time to time be determined by resolution of the Board of Directors, unless otherwise provided for by an agreement by holders of all shares of any class or series of Preferred Stock being redeemed. Notice of any proposed redemption of any class or series of Preferred Stock shall be given by the Corporation by mailing a copy of such notice, at least thirty (30) days but not more than ninety (90) days prior to the date fixed for such redemption, to the holders of record of any shares of Preferred Stock to be redeemed at their respective addresses then appearing on the books of the Corporation. On or after the date specified in such notice, each holder of shares of Preferred Stock called for redemption as aforesaid, shall be entitled to receive therefor the redemption price thereof, upon presentation and surrender at the place designated in such notice of the certificates for such shares of Preferred Stock held by him, bearing all necessary stock transfer tax stamps thereto affixed and cancelled, and (if required by the Corporation) properly endorsed in blank for transfer or accompanied by proper instruments of assignment or transfer in blank. On and after the date fixed for redemption, if notice is given as aforesaid, and unless default is made by the Corporation in providing moneys for payment of the redemption price, all dividends on the shares called for redemption shall cease to accrue; and on and after such redemption date, unless default be made as aforesaid or on and after the date of earlier deposit by the Corporation with a bank or trust company doing business in the City of New York, New York, having a capital and surplus of at least $5,000,000, in trust for the benefit of the holders of the shares of the Preferred Stock so called for redemption, of all funds necessary for redemption as aforesaid (provided in the latter case that there shall have been mailed as aforesaid to holders of record of shares to be redeemed, a notice of the redemption thereof or that the Corporation shall have executed and delivered to any Transfer Agent for the Preferred Stock or to the bank or trust company with which such deposit is made an instrument irrevocably authorizing it to mail such notice at the Corporation's expense) all rights of the holders of the shares called for redemption as stockholders of the Corporation, except only the right to receive the redemption price, shall cease and determine. Any funds so deposited which shall remain unclaimed by the holders of such Preferred Stock at the end of six (6) years after the redemption date, together with any interest thereon which shall have been allowed by the bank or trust company with which such deposit shall have been made, shall be paid by it to the Corporation, and thereafter such holders shall look only to the Corporation therefor, but without any liability on the part of the Corporation to pay interest thereon even though interest may have been allowed by said bank or trust company. (B) The Corporation may, subject to the provisions of paragraph (C) below, also from time to time purchase shares of Preferred Stock for any sinking or purchase fund provided for the benefit of any class or series of Preferred Stock and otherwise at not exceeding the applicable redemption prices thereof at the time in effect and accrued dividends thereon to the date of purchase, plus customary brokerage commissions. Shares of Preferred Stock so purchased not used to satisfy sinking or purchase fund obligations may in the discretion of the Board of Directors be reissued or otherwise disposed of from time to time to the extent permitted by law. (C) If and so long as there are dividends in arrears on any shares of Preferred Stock, the Corporation shall not redeem or purchase any shares of Preferred Stock, unless, in the case of redemption, all of the outstanding Preferred Stock is redeemed or, in the case of purchases, an offer to purchase on a comparable basis is made to the holders of all the outstanding Preferred Stock. If and so long as a default exists in any sinking or purchase fund obligation provided for the benefit of any one or more classes or series of Preferred Stock, the Corporation shall not redeem or purchase any shares of Preferred Stock, unless, in the case of redemptions, all of the outstanding Preferred Stock of such classes or series is redeemed or, in the case of purchases, are solely of such classes or series of Preferred Stock and are made pursuant to an offer to purchase on a comparable basis to the holders of all of the outstanding Preferred Stock of such classes or series. SECTION 6.04. Restrictions on Corporate Action. (A) So long as any Preferred Stock is outstanding, the Corporation shall not, without the consent (given in writing without a meeting or by vote in person or by proxy at a meeting called for the purpose) of the holders of at least two-thirds of the aggregate number of shares of all classes of Preferred Stock entitled to vote thereon -- (i) Create or authorize, or increase the authorized amount of, any shares of any class of stock ranking as to dividends or assets prior to the Preferred Stock, or of any obligation or security convertible into stock ranking as to dividends or assets prior to the Preferred Stock; or (ii) Amend, change or repeal any of the express terms of the Preferred Stock outstanding in any manner adverse to the holders thereof, except that, if such amendment, change or repeal is adverse to the holders of less than all classes and series of Preferred Stock, the consent of only the holders of two-thirds of the aggregate number of shares of the classes and series thereof entitled to vote thereon and so affected shall be required; or (iii) Issue shares of Preferred Stock in addition to 12,430 shares of 5% Preferred Stock, Class A, originally issued unless after giving effect to such additional shares -- (a) the net income of the Corporation available for dividends for any period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the calendar month within which such additional shares of stock are to be issued, shall have been at least two and one- half (2 1/2) times the aggregate annual dividend requirements upon the entire amount to be outstanding of Preferred Stock and of any stocks of the Corporation of any class ranking as to dividends prior to the Preferred Stock. b) the gross income of the Corporation available for payment of interest charges for any period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the calendar month within which such additional shares of stock are to be issued, shall have been at least one and one-half (1 1/2) times the sum of (1) the aggregate annual interest charges on all indebtedness of the Corporation to be outstanding, and (2) the aggregate annual dividend requirements upon the entire amount to be outstanding of Preferred Stock and of any stocks of the Corporation of any class ranking as to dividends prior to the Preferred Stock, and (c) the Common Stock Equity plus the aggregate of the capital allocable to all classes of Junior Stock other than the Common Stock shall not be less than the aggregate amount payable upon involuntary liquidation, dissolution or winding up of the Corporation to the holders of shares of all classes of Preferred Stock to be outstanding. In the foregoing computations, there shall be excluded (a) all indebtedness and all shares of Preferred Stock to be retired in connection with the issue of such additional shares, and (b) all interest charges on all indebtedness, and all dividend requirements on all shares of stock, to be retired in connection with the issue of such additional shares. The net earnings of any property which has been acquired by the Corporation during or after the period for which income is computed, or of any property which is to be acquired in connection with the issuance of any such additional shares, if capable of being separately determined or estimated, may be included on a pro forma basis in the foregoing computations; and if within or after the period for which income is computed, any substantial portion of the properties of the Corporation shall have been disposed of, the net earnings of such property, if capable of being separately determined or estimated, shall be excluded in the foregoing computations. Notwithstanding the foregoing provisions of this Paragraph (A), so long as any of the 5% Preferred Stock, Class A, is outstanding, the Corporation shall not without the consent (given in writing without a meeting or by vote in person or by proxy at a meeting called for the purpose) of the holders of at least two-thirds (2/3) of the aggregate number of shares of 5% Preferred Stock, Class A, then outstanding issue any shares of 5% Preferred Stock, Class A, in addition to the 12,430 shares thereof originally to be issued. (B) So long as any Preferred Stock is outstanding, the Corporation shall not, without the consent (given in writing without a meeting or by vote in person or by proxy at a meeting called for the purpose) of the holders of a majority of the aggregate number of shares of Preferred Stock entitled to vote thereon -- (i) Issue, create, guarantee or permit to exist any unsecured securities (whether notes, debentures or other evidences of indebtedness) evidencing indebtedness maturing more than one year from the date of issuance, creation or assumption thereof for any purpose, except for the purpose of refunding outstanding unsecured securities or effecting the retirement, by redemption or otherwise, of outstanding shares of the Preferred Stock or of a class of stock ranking prior thereto, if immediately after such issue, creation or assumption of the total principal amount of all such unsecured securities issued, created or assumed and then outstanding (including the unsecured securities then to be issued) would exceed twenty percent (20%) of the aggregate of (a) the total principal amount of all bonds and other securities representing secured indebtedness issued, created or assumed by the Corporation and then to be outstanding, and (b) the total of the capital and surplus (including premiums on capital stock) of the Corporation as then to be stated on its books; provided, that any unsecured securities issued under any authorization of holders of Preferred Stock (and any securities issued to refund the same) shall be excluded from the computation of the amount of unsecured securities which may be issued, created or assumed within the aforesaid twenty percent (20%) limitation; or (ii) Merge or consolidate with or into any other corporation or corporations, provided that the consent or vote of the holders of the Preferred Stock as aforesaid shall not be required if (1) such consolidation and merger is with or into any public utility principally engaged in the distribution of gas or electricity in areas in the State of Vermont, and (2) if after giving effect to such merger or consolidation, and the issuance and assumption of all securities to be issued or assumed in connection with any such merger or consolidation, the ratio of the capital (including premiums) represented by all classes of Preferred Stock of the Corporation or Preferred Stock of any corporation resulting from such merger or consolidation then to be outstanding to the total sum of (a) the Common Stock Equity plus (b) the principal amount of all outstanding indebtedness of the resulting corporation maturing more than twelve (12) months after the date of issue or assumption thereof, and (c) the par value of or stated capital represented by the outstanding shares of all classes of stock of the resulting corporation other than common stock shall be equal to or greater than such ratio in the case of the Corporation prior to such merger or consolidation; provided that the provisions of this clause (ii) shall not apply to a purchase or other acquisition by the Corporation of franchise or assets of another corporation, in any manner which does not involve a merger or consolidation, and provided that the provisions of this sub-paragraph (ii) shall not be deemed to alter or affect the restrictive provisions of Paragraph (A) of this section or sub-paragraphs (i) or (iii) of this Paragraph (B); or (iii) Sell, lease or otherwise dispose of all or substantial all of its property to any person. No consent of the holders of any class or series of Preferred Stock herein above set forth as specified in paragraphs (A) or (B) shall be required, if provision is made for the redemption of all shares of such class or series of Preferred Stock at the time outstanding, or provision is made that the proposed action shall not be effective unless provision is made for the purchase, redemption or other retirement of all shares of such class or series of Preferred Stock at the time outstanding. SECTION 6.05. Voting Rights. The holders of Preferred Stock shall not be entitled to vote except: (a) as provided above under Section 6.04, but in the case of any class of Preferred Stock other than the 5% Preferred Stock, Class A, subject to such changes, if any, as may be specified in any amendment or amendments to the Articles of Association establishing the terms thereof; (b) as may from time to time be required by the laws of Vermont; and (c) voting separately, as a single class, for the election of the smallest number of directors necessary to constitute a majority of the Board of Directors whenever and as often as dividends payable on any Preferred Stock outstanding shall be in arrears in an amount equivalent to or exceeding four (4) quarterly dividends, or for the election of two directors in the event of a default in any purchase or sinking fund provided for any one or more classes or series of Preferred Stock, which rights may be exercised at any annual meeting and at any special meeting of stockholders called for the purpose of electing directors, until such time as arrears in dividends on the Preferred Stock and the current dividend thereon shall have been paid or declared and set apart for payment, and any default in such purchase or sinking fund obligation shall have been remedied, whereupon all voting rights given by this clause (c) shall be divested from the Preferred Stock (subject, however, to being at any time or from time to time similarly revived and divested). So long as holders of the Preferred Stock shall have the right to elect directors under the terms of the foregoing clause (c), the holders of the Common Stock voting separately as a class shall, subject to the voting rights of any other class of Junior Stock, be entitled to elect the remaining directors. Whenever, under the provisions of the foregoing clause (c) the right of holders of the Preferred Stock, if any, to elect directors shall accrue or shall terminate, the Board of Directors shall, within ten (10) days after delivery to the Corporation at its principal office of a request or requests to such effect signed by the holders of at least five percent (5%) of the outstanding shares of any class of stock entitled to vote, call a special meeting in accordance with the By-Laws of the Corporation of the holders of the class or classes of stock of the Corporation entitled to vote, to be held within forty (40) days from the delivery of such requests, for the purpose of electing a full Board of Directors to serve until the next annual meeting and until their respective successors shall be elected and shall qualify; provided, however, that if the annual meeting of stockholders for the election of directors is to be held within sixty (60) days after the delivery of such request, the Board of Directors need not act thereon. If, at any special meeting called as aforesaid or at any annual meeting of stockholders after accrual or termination of the right of holders of the Preferred Stock to elect directors as in the foregoing clause (c) provided, any director shall not be re-elected, his term of office shall end upon the election and qualification of his successor, notwithstanding that the term for which such director was originally elected shall not at the time have expired. If, during any interval between annual meetings of stockholders for the election of directors while holders of the Preferred Stock shall be entitled to elect any director pursuant to the foregoing clause (c), the number of directors in office who have been elected by the holders of the Preferred Stock (voting as a class) or by the holders of the Common Stock (voting as a class), as the case may be, shall become less than the total number of directors subject to election by holders of shares of such class, whether by reason of the resignation, death or removal of any director or directors, or an increase in the total number of directors, the vacancy or vacancies shall be filled (1) by the remaining directors or director, if any, then in office who either were or was elected by the votes of shares of such class or succeeded to a vacancy originally filled by the votes of shares of such class, or (2) if there is no such director remaining in office, at a special meeting of holders of shares of such class called by the President of the Corporation to be held within forty (40) days after there shall have been delivered to the Corporation at its principal office a request or requests signed by the holders of at least five percent (5%) of the outstanding shares of such class, provided, however, that such request need not be so acted upon if delivered less than sixty (60) days before the date fixed for the annual meeting of stockholders for the election of directors. The lack of a quorum of either the Preferred Stock or the Common Stock at a meeting at which, under the terms of the foregoing clause (c), the Preferred Stock has the right to elect directors shall not prevent the holding of such meeting by the class having a quorum present, but at any meeting so held attended by a quorum of only one class, the specific directors to be superseded or succeeded shall be designated in the resolution or vote electing the new directors, provided that except upon the first exercise by the Preferred Stock of its right to elect directors, upon each accrual of such right under said clause (c), one class may not so designate any director (or his successor elected by directors) elected by the other class. SECTION 6.06. Dividend Restrictions on Junior Stock. So long as any shares of any class of Preferred Stock shall be outstanding, the Corporation shall not declare or pay any dividends on any shares of Junior Stock (other than dividends payable in shares of Junior Stock) or make any other distributions on any shares of Junior Stock or make any expenditures for the purchase, redemption or other retirement for a consideration of shares of Junior Stock (other than in exchange for or from the proceeds of the sale of other shares of Junior Stock) except from net income of the Corporation available for dividends on Junior Stock accumulated subsequent to December 31, 1954 plus the sum of $150,000. SECTION 6A PREFERENCE STOCK SECTION 6A.01. Of the authorized stock of the Corporation there shall be a class, to consist of 50,000 shares, designated as "Preference Stock", which may be divided into and issued in series, which shall rank junior to the Preferred Stock in respect of dividends and amounts payable upon any dissolution, liquidation, or winding up of the Corporation, shall be "Junior Stock" within the meaning of Section 4.02, and which shall otherwise have the terms and provisions hereinafter in this Section 6A.01 set forth or provided for. (a) Designation. Each series of such Preference Stock shall be so designated, in the manner hereinafter provided, as to distinguish the shares thereof from the shares of all other series and classes. (b) Dividend Rights. Dividends in full shall not be paid or set apart for payment on any series of Preference Stock for any dividend period unless dividends in full have been or are contemporaneously paid or set apart for payment on all outstanding shares of all series of Preference Stock for such dividend period and for all prior dividend periods. When the specified dividends are not paid in full on all series of Preference Stock, the shares of each series of Preference Stock shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on said shares if all dividends were paid in full. So long as any shares of Preference Stock are outstanding, no dividends shall be declared or paid or set apart for, nor any other distribution made in respect of, the shares of Common Stock (other than dividends or distributions payable in shares of Common Stock), nor any sums applied to the purchase, redemption or other retirement of Common Stock (other than in exchange for or from the proceeds of sale of other shares of Common Stock), unless full dividends on all shares of Preference Stock of all issues outstanding, and on all outstanding stock of any class ranking as to dividends prior to the Preference Stock, for all past quarterly dividend periods shall have been paid or declared and a sum sufficient for the payment thereof set apart and the full dividend for the then current quarterly dividend period shall have been or concurrently shall be declared. The amount of any deficiency for past dividend periods may be paid or declared and set apart at any time without reference to any quarterly dividend payment date. Unpaid accrued dividends on the Preference Stock shall not bear interest. (c) Liquidation Rights. In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of each series of Preference Stock shall be entitled to receive, for each share thereof, such amount as shall be provided for shares of such series in the manner hereinafter set forth, before any distribution of the assets shall be made to the holders of shares of Common Stock; but the holders of Preference Stock shall be entitled to no further participation in such distribution. A consolidation or merger of the Corporation or the sale, conveyance, exchange, or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation, or any purchase or redemption of stock of the Corporation of any series of Preference Stock (or of any class ranking as to dividends prior to the Preference Stock) shall not be deemed a dissolution, liquidation, or winding up of the Corporation within the meaning of this paragraph (c). (d) Voting Rights. The holders of Preference Stock shall not be entitled to vote except (i) as provided in paragraph (e) of this Section 6A.01, and (ii) as may from time to time be required by the laws of the State of Vermont. No consent of any of the holders of any series of Preference Stock specified in subparagraph (i) of this paragraph (d) shall be required, if provision is made for the redemption of all shares of such series of Preference Stock at the time outstanding, or provision is made that the proposed action shall not be effective unless provision is made for the purchase, redemption or other retirement of all shares of such series of Preference Stock at the time outstanding. (e) Restrictions on Corporate Action. So long as any Preference Stock is outstanding, the Corporation shall not, without the consent (given in writing without a meeting or by vote in person or by proxy at a meeting called for the purpose) of the holders of at least two-thirds of the aggregate number of shares of all series of Preference Stock entitled to vote thereon, (i) create or authorize any shares of any class of stock ranking as to dividends or assets prior to the Preference Stock, except Preferred Stock, or any obligation or security convertible into stock ranking as to dividends or assets prior to the Preference Stock, except Preferred Stock, or (ii) amend, change, or repeal any of the express terms of the Preference Stock outstanding in any manner adverse to the holders thereof, except that if such amendment change, or repeal is adverse to the holders of less than all series of Preference Stock, the consent of only the holders of two-thirds of the aggregate number of shares of the series thereof entitled to vote thereon and so affected shall be required. (f) Other Rights and Preferences. All shares of Preference Stock shall be identical except that there may be variations between different series of Preference Stock with respect to (1) the rate of dividend; (2) whether shares may be redeemed and, if so, the redemption price and the terms and conditions of redemption; (3) the amount payable upon shares in event of voluntary or involuntary liquidation; (4) sinking fund provisions, if any, for the redemption or purchase of shares; and (5) the terms and conditions, if any, on which shares may be converted. The Board of Directors shall have authority, within the limitations set forth herein and imposed by law, and subject to restrictions contained in Section 6.04 of these Articles of Association, to fix and determine the relative rights and preferences of the shares of any series established by the Board of Directors to the extent that such relative rights and preferences are not established by these Articles of Association. (g) Procedure for Establishment of Series of Preference Stock. In order for the Board of Directors to establish a series of Preference Stock they shall adopt a resolution setting forth the designation of the series and fixing and determining the relative rights and preferences thereof to the extent that such relative rights and preferences are not established by these Articles of Association. Prior to the issue of any shares of any series of Preference Stock there shall be filed in the office of the Secretary of State of the State of Vermont such statement as is required by law and upon filing of such statement by said Secretary of State the resolution establishing and designating the series of Preference Stock and fixing and determining the relative rights and preferences thereof shall become effective and shall constitute an amendment of these Articles of Association. SECTION 7 MISCELLANEOUS SECTION 7.01. Subject to the voting rights expressly conferred upon the Preferred Stock by Section 6 and the voting rights of any class of Junior Stock (other than Common Stock) outstanding, the holders of Common Stock shall exclusively possess full voting rights for the election of directors and for all other purposes. Each holder of record of shares of any class or series of stock entitled to vote at any meeting of stockholders, or of holders of any class or series of stock, shall, as to all matters in respect of which such stock has voting power, be entitled to one vote for each share of such stock held and owned by him, as shown by the stock books of the Corporation, and may cast such vote in person or by proxy. Except as herein expressly provided, or mandatorily provided by the laws of Vermont, a quorum of any one or more classes or series of stock entitled to vote as a class at any meeting shall consist of a majority of such classes or series, as the case may be, and a plurality vote of such quorum shall govern. No holders of any class or series of stock shall be entitled to receive notice of any meeting of holders of any other class or series of stock at which they are not entitled to vote. SECTION 7.02. Pre-emptive Rights. No holder of any stock, or of rights or options to purchase stock, of the Corporation of any class, now or hereafter authorized, shall have any preferential or preemptive right to purchase or subscribe for any part of any stock of the Corporation, now or hereafter authorized, or any bonds, certificates of indebtedness, debentures, options, warrants or other securities convertible into or evidencing the right to purchase stock of the Corporation, but any such stock or securities convertible into or evidencing the right to purchase stock may at any time be issued and disposed of by the Board of Directors to such purchasers, in such manner, for such lawful consideration and upon such terms as the Board of Directors may, in its discretion, determine without offering any thereof on the same terms or on any terms to all or any stockholders, as such, of the Corporation. SECTION 7.03. Scrip Certificates. No certificates for fractional shares of any class of stock shall be issued. In lieu thereof scrip certificates may be issued by the Corporation representing rights to such fractional shares and exchangeable, when accompanied by other certificates in such amount as to represent in the aggregate one or more full shares of stock, for certificates for full shares of stock. The holders of scrip certificates will not be entitled to any rights as stockholders of the Corporation until the scrip certificates are so exchanged. Such scrip certificates may, at the election of the Board of Directors of the Corporation, be in bearer form, shall be non-dividend bearing, non-voting and shall have such expiration date as the Board of Directors of the Corporation shall determine at the time of the authorization or issuance of such scrip certificates. SECTION 7.04. Amendments of Articles of Association. Unless otherwise required by law and subject to the rights of any class of stock hereafter created, these Articles may -- (a) without any vote or consent of holders of Preferred Stock, be amended to increase the maximum number of authorized shares of Preferred Stock and to create and authorize a number of shares of one or more different classes of Preferred Stock with terms and provisions permitted by Section 4.01; or (b) without any vote or consent of holders of Preferred Stock except as provided in Section 6.04, be amended in any other respect. The provisions of these Articles, except as expressly otherwise provided, may be amended or altered by a vote of the holders of a majority of the Common Stock of the Corporation then issued, outstanding and entitled to vote, unless a greater proportion thereof is required by law, in which case such greater proportion will control. SECTION 7.05. Prevention of Certain Repurchases of Common Stock. (A) Neither the Corporation nor any Subsidiary (as defined in Section 7.06) shall make any purchase or other acquisition, directly or indirectly, in one or more transactions, of any share of Common Stock of the Corporation known by the Corporation to be beneficially owned by any Related Person (as defined in Section 7.06), who has beneficially owned such shares for less than two years prior to the date of such purchase or acquisition, at a price that is greater than the Fair Market Value (as defined in Section 7.06), except as hereinafter expressly provided, unless such purchase or other acquisition is approved by the affirmative vote of the greater of (i) the holders of at least eighty percent (80%) of the outstanding Common Stock of the Corporation, and (ii) the holders of the sum of (a) the number of shares of Common Stock of the Corporation then beneficially owned by such Related Person, plus (b) a majority of the Common Stock of the Corporation not owned by such Related Person. The approval requirements set forth in the preceding sentence must be complied with notwithstanding the fact that no vote may be required or that a lesser percentage may be specified by law or any agreement with any national securities exchange, or otherwise, but compliance with the approval requirements set forth in the preceding sentence shall not be required with respect to any purchase or any other acquisition by the Corporation or any Subsidiary of Common Stock (1) as a part of a tender or exchange offer made on the same terms to all holders of Common Stock or to all holders of less than 100 shares of the Common Stock in compliance with the applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, (2) as part of an open-market purchase program approved by a majority of the Continuing Directors, or (3) from any employee benefit plan of the Corporation. (B) In addition to any affirmative vote otherwise required by law or the Articles of Association or Bylaws of the Corporation, the affirmative vote of the greater of (1) the holders of at least eighty percent (80%) of the outstanding Common Stock of the Corporation, and (2) the holders of the sum of the number of shares of Common Stock of the Corporation owned by all Related Persons plus a majority of the Common Stock of the Corporation not owned by any Related Person shall be required to alter, amend or repeal this Section 7.05; provided, however, that such affirmative vote shall not be required for any alteration, amendment or repeal recommended by a majority of the Continuing Directors (as defined in Section 7.06). SECTION 7.06. Mergers and Certain Other Business Combinations. (A) As used in this Section 7.06 or as otherwise expressly indicated in these Articles of Association, the following definitions shall apply: 1. An "Affiliate" of a Person, or a Person "Affiliated" with a specified Person, is a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified. For purposes of this definition, the term "control" (including the terms "controlling", "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 2. The term "Associate" when used to indicate a relationship with any Person shall mean (a) any corporation or organization of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities; (b) any trust or other estate in which such person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity; and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person or who is a director, officer, partner or direct or indirect beneficial owner of ten percent (10%) or more of any class of equity securities of any corporation or organization referred to in clause (a) above. 3. The term "Announcement Date" shall mean the date of the first public announcement of a proposed Business Combination. 4. A Person shall be a "beneficial owner" of any Common Stock of the Corporation (a) which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (b) which such Person or any of its Affiliates or Associates has, directly or indirectly, (i) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time) pursuant to any agreement, arrangement or understanding, or pursuant to the power to revoke, or the automatic termination of any trust, discretionary account or similar arrangement, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (c) of which such Person or any of its Affiliates or Associates has the right to dispose, or to direct the disposition. For the purpose of determining whether a Person or group of Persons is a Related Person, the number of shares of Common Stock of the Corporation deemed to be outstanding shall include shares deemed beneficially owned by such Person or group of Persons through application of this paragraph, but shall not include any other shares of Common Stock of the Corporation that may be issuable pursuant to any agreement, arrangement or understanding or upon exercise of conversion rights, warrants or options, or otherwise. 5. The term "Business Combination" shall mean (a) any merger or consolidation or share exchange of the Corporation or any Subsidiary with (i) any Related Person or (ii) any other Person or group of Persons (whether or not constituting a Related Person) which is or after such merger or consolidation or share exchange would be a Related Person or Affiliate or Associate of a Related Person, irrespective of whether the Corporation or any Subsidiary is the surviving entity; or (b) any of the following transaction (in one transaction or a series of transactions) with, to or for the benefit of any Related Person and involving the acquisition of assets or securities, or involving any commitments, of the Corporation or any Subsidiary by or for the benefit of any Related Person or any Affiliate or Associate of any Related Person: any sale, lease, exchange, mortgage, pledge, transfer or other disposition (other than a mortgage or pledge not made to avoid the requirements of this Section), investment, loan, advance, guarantee, agreement to purchase, agreement to pay, extension of credit, joint-venture participation or other arrangement having an aggregate Fair Market Value and/or involving aggregate commitments of $5,000,000 or more or constituting more than five percent (5%) of the book value of the total assets (in the case of transactions involving assets or commitments other than Common Stock of the Corporation) or five percent (5%) of the shareholders' equity (in the case of transactions in Common Stock of the Corporation) of the entity in question (the "Substantial Part"), as reflected in the most recent fiscal year-end consolidated balance sheet of such entity existing at the time the shareholders of the Corporation would be required to approve or authorize pursuant to Section 7.06(B) the Business Combination involving the assets, securities and/or commitments constituting any Substantial Part; or (c) the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of related transactions) of any securities of the Corporation or any Subsidiary to any Related Person or any Affiliate or Associate thereof (other than an issuance or transfer of securities which is effected on a pro rata basis to all shareholders of the Corporation or any such Subsidiary); or (d) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of, or voted for or consented to by, a Related Person or Affiliate or Associate thereof; or (e) any of the following actions that has the effect, directly or indirectly, of increasing the proportionate share of Common Stock of the Corporation or of any equity securities of a Subsidiary that is beneficially owned by any Related Person or any Affiliate or Associate of any Related Person: any reclassification of the securities (including any reverse stock split) or recapitalization or reorganization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with a Related Person or any Affiliate or Associate thereof); or (f) any other transaction or series of transactions that is similar in purpose or effect to, or any agreement, contract or other arrangement providing for any one or more of, the actions specified in the foregoing clauses (a) through (e). 6. The term "Continuing Director" means any member of the Board of Directors, while such person is a member of the Board of Directors, who (a) is not a Related Person or an Affiliate or Associate of a Related Person and (b) was a member of the Board of Directors prior to the time that a Related Person became a Related Person. "Continuing Director" shall include any successor of a Continuing Director as defined in the preceding sentence, while such successor is a member of the Board of Directors, who is recommended or elected to succeed the predecessor Continuing Director by a majority of Continuing Directors then in office. 7. The term "Determination Date" shall mean the date on which a Related Person becomes a Related Person. 8. The term "Fair Market Value" means (a) in the case of cash, the amount of such cash; (b) in the case of Common Stock of the Corporation or other stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for the New York Stock Exchange Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended, on which such stock is listed, or if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc., Automated Quotations System, or any similar system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by a majority of the Continuing Directors in good faith; and (c) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined in good faith by a majority of the Continuing Directors. 9. The term "Person" shall mean any individual, firm, corporation, unincorporated association or other entity of any kind. 10. The term "Related Person" shall mean (a) any Person or any Affiliate or Associate thereof (other than the Corporation or any Subsidiary and other than any profit-sharing, employee stock ownership or other employee benefit plan of the Corporation or any Subsidiary or any trustee of or fiduciary with respect to any such plan when acting in such capacity) who (i) is the beneficial owner of five percent (5%) or more of the then-outstanding shares of Common Stock of the Corporation (any such five percent (5%) or more ownership to be hereinafter referred to as a "Five Percent Interest"); or (ii) is an Affiliate or Associate of the Corporation and at any time within the five-year period immediately prior to the date in question was the beneficial owner of a Five Percent Interest; or (iii) is an assignee of or has otherwise succeeded to any shares of Common Stock of the Corporation which were at any time within five years prior to the date in question beneficially owned by any Related Person as described in the preceding subsections (i) and (ii), and such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933, as amended; and (b) any group of two or more persons who (i) through any agreement, arrangement or understanding, act together for the purpose of acquiring, holding, voting or disposing of Common Stock of the Corporation, and (ii) otherwise constitute, in the aggregate, a Related Person as described in the preceding clause (a). Any group within the meaning of clause (b) of the preceding sentence shall be deemed to have acquired beneficial ownership of all Common Stock of the Corporation beneficially owned by any Person who is a member of such group. 11. The term "Subsidiary" means any corporation of which a majority of the outstanding securities representing the right generally to vote for the election of directors is owned by the Corporation and/or one or more of the Corporation's other Subsidiaries. 12. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in subsection (C)(1) of Section 7.06 includes the shares of Common Stock of the Corporation and/or the shares of any other class or series of capital stock of the Corporation retained by the holders of such shares. (B) Unless a Business Combination shall have been approved by a majority of the Continuing Directors (whether such approval is made prior to or subsequent to the acquisition of beneficial ownership of the Common Stock of the Corporation that caused a Related Person to become a Related Person), then, in addition to any affirmative vote required by law or the Articles of Association or the Bylaws of the Corporation, a Business Combination shall require the affirmative vote of not less than eighty percent (80%) of the Common Stock of the Corporation then issued and outstanding. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage or separate class vote may be specified, by law or in any agreement with any national securities exchange or otherwise. (C) In addition to the voting requirements set forth in subsection (B) above, unless a Business Combination shall have been approved by a majority of the Continuing Directors, a Business Combination shall require that all of the following conditions be met with respect to the Common Stock of the Corporation, whether or not the Related Person has previously acquired beneficial ownership of any shares of the Common Stock of the Corporation: 1. The aggregate amount of cash and the Fair Market Value, as of the date of the consummation of the Business Combination, of consideration other than cash to be received per share by the holders of Common Stock of the Corporation in connection with such Business Combination shall be at least equal to the highest amount determined under clauses (a), (b), (c), (d) and (e) below: (a) the highest per-share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Related Person for any share of Common Stock of the Corporation in connection with the acquisition by the Related Person or beneficial ownership of any of its holdings of Common Stock of the Corporation; (b) the Fair Market Value per share of Common Stock of the Corporation on the Announcement Date or on the Determination Date, whichever is higher; (c) the price per share equal to the Fair Market Value per share of Common Stock of the Corporation determined pursuant to the immediately preceding clause (b), multiplied by the ratio of (x) the highest per-share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Related Person for any share of Common Stock of the Corporation in connection with the acquisition by the Related Person of beneficial ownership of any of its holdings of Common Stock of the Corporation to (y) the Fair Market Value per share of Common Stock of the Corporation immediately prior to the initial acquisition of any share of Common Stock of the Corporation by such Related Person (as determined by a majority of the Continuing Directors); (d) the Company's earnings per share of Common Stock of the Corporation for the four full consecutive fiscal quarters as reported in the most recent consolidated financial statements of the Corporation contained in the Corporation's most recent annual report or quarterly reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, immediately preceding the Announcement Date, multiplied by the higher of the then-price/earnings multiple (if any) of such Related Person or the highest price/earnings multiple of the Corporation within the two-year period immediately preceding the Announcement Date (such price/earnings multiples being determined as customarily computed and reported in the financial community); and (e) the per-share book value of the Common Stock as derived from the most recent consolidated financial statements of the Corporation contained in the Corporation's most recent annual or quarterly report filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended. 2. The consideration to be received by the holders of the Common Stock of the Corporation in a Business Combination shall be (a) in cash or (b) if the shares of the Common Stock of the Corporation beneficially owned by the Related Person shall have been acquired for a consideration in a form other than cash, in the same form and of the same kind as the consideration used to acquire the largest number of shares of the Common Stock of the Corporation previously acquired and beneficially owned by the Related Person. 3. After the Determination Date and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) payable in accordance with the terms of any outstanding capital stock of the Corporation; (b) there shall have been no reduction in the annual rate of dividends paid on the Common Stock of the Corporation, except as approved by a majority of the Continuing Directors; (c) there shall have been an increase in the annual rate of dividends paid on the Common Stock of the Corporation as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of Common Stock of the Corporation, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; (d) the Related Person shall not have become the beneficial owner of any additional shares of Common Stock of the Corporation except as part of the transaction that results in such Related Person becoming a Related Person and except in a transaction that would not result in any increase in the Related Person's percentage of Common Stock of the Corporation; and (e) the Related Person shall have taken steps to ensure that the Corporation's Board of Directors includes at all times representation by Continuing Directors proportionate to the ratio that the Common Stock of the Corporation which from time to time is owned by persons other than the Related Person bears to all Common Stock of the Corporation outstanding at such respective times (with a Continuing Director to occupy any resulting fractional board position). 4. A proxy or information statement complying with the requirements of the Securities Exchange Act of 1934, as amended, or any successor thereto, shall have been mailed to all shareholders of the Corporation at least 45 days prior to the consummation of the Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to the Exchange Act or successor provisions) unless such requirement for a proxy statement is waived by the vote of a majority of the Continuing Directors. The proxy statement shall contain: (a) at the front thereof, in a prominent place, any recommendations as to the advisability (or inadvisability) of the Business Combination which the Continuing Directors, or any of them, may have furnished in writing; and (b) if deemed advisable by a majority of the Continuing Directors, an opinion of a reputable investment banking firm as to the fairness (or lack of fairness) of the terms of such Business Combination, from the point of view of the holders of the Corporation's Common Stock other than any Related Person (such investment banking firm to be selected by a majority of the Continuing Directors, to be a firm which has not previously been associated with or rendered services to or acted as manager of an underwriting or as an agent for a Related Person, to be furnished with all information it reasonably requests and to be paid a reasonable fee for its services by the Corporation relating to such opinion). 5. After such Related Person has acquired ownership of not less than five percent (5%) of such outstanding shares of any class or series of Common Stock of the Corporation and prior to the consummation of such Business Combination, and unless approved by a majority of the Continuing Directors, such Related Person shall not have: (a) received the benefit, directly or indirectly (except proportionately as a shareholder) of any loans, advances, guarantees, pledges or other financial assistance provided by the Corporation, or tax credits or other tax advantages attributable to the Corporation or its activities and provided by law; (b) made any material change in the Corporation's business or equity capital structure or entered into any contract, arrangement or understanding with the Corporation; or (c) used any asset of the Corporation as collateral, or compensating balances, directly or indirectly, for any obligation of such Related Person. (D) A majority of the Continuing Directors shall have the power and duty to determine for the purposes of Sections 7.05, 7.06 and 7.07, on the basis of information known to them after reasonable inquiry, (1) whether a Person is a Related Person, (2) the number of shares of Common Stock of the Corporation or other securities beneficially owned by any Person, (3) whether a Person is an Affiliate or Associate of another, (4) whether the assets that are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of $5,000,000 or more, (5) whether the assets or securities that are the subject of any Business Combination constitute a Substantial Part, (6) whether a Person has an agreement, arrangement or understanding with another as to the matters referred to in subsection (C) of this Section 7.06, (7) whether two or more Persons constitute a group as referred to in subsection (A)(11) of this Section 7.06; (8) whether a mortgage or pledge is not made to avoid the requirements of subsection (A)(5) of this Section 7.06, and (9) any other matters with respect to which a determination is required under Sections 7.05, 7.06 and 7.07. Any such determination made in good faith shall be binding and conclusive on all parties. (E) Nothing contained in this Section 7.06 shall be construed to relieve any Related Person from any fiduciary obligations imposed by law. (F) The fact that any Business Combination complies with the provisions of this Section 7.06 shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or to recommend its adoption or approval to the shareholders of the Corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of any actions and response taken with respect to such Business Combination. (G) All references herein to the price of, Fair Market Value of, or dividends paid on Common Stock of the Corporation shall refer to such price, Fair Market Value or dividends as adjusted for any subsequent stock splits, stock dividend, subdivision or reclassification with respect to the Common Stock of the Corporation. (H) A Business Combination shall be subject to the requirements of this Section notwithstanding the fact that at any time no Continuing Director may be a member of the Board of Directors. (I) In addition to any affirmative vote otherwise required by law or by the Articles of Association or Bylaws of the Corporation, the affirmative vote of the holders of at least eighty percent (80%) of the Common Stock of the Corporation then issued and outstanding shall be required to alter, amend or repeal this Section 7.06; provided, however, that such eighty percent (80%) affirmative vote shall not be required for any alteration, amendment, or repeal recommended by a majority of the Continuing Directors. SECTION 7.07. Factors to be Considered in Connection with Proposals for Mergers and Certain Other Business Combinations. The Board of Directors, in evaluating any proposal by another party to (a) make a tender or exchange offer for any securities of the Corporation, or (b) effect a Business Combination (as defined in Section 7.06), whether with or by a Related Person (as defined in Section 7.06) or otherwise, shall, in connection with the exercise of its judgment as to what is in the best interest of the Corporation and its shareholders, give due consideration to the following: (A) the consideration to be received by the Corporation for its shareholders in connection with such transaction in relation not only to the then-current market price for the outstanding Common Stock of the Corporation, but also to the market price for the Common Stock of the Corporation over a period of years, the estimated price that might be achieved in a negotiated sale of the Corporation as a whole or in part through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation's financial condition, future prospects and future value as an independent corporation; (B) the character, integrity and business philosophy of the other party or parties to the transactions and the management of such party or parties; (C) the business and financial conditions and earnings prospects of the other party or parties to the transactions, including, but not limited to, debt service and other existing or likely financial obligations of such party or parties, the intention of the other party or parties to the transaction regarding the use of the assets of the Corporation to finance the acquisition and the possible effect of such conditions upon the Corporation and its Subsidiaries and the other elements of the communities in which the Corporation and its Subsidiaries operate or are located; (D) the projected social, legal and economic effects of the proposed action or transaction upon the Corporation or its Subsidiaries, its employees, suppliers, customers and others in similar relationships with the Corporation, and upon the communities in which the Corporation and its Subsidiaries do business; (E) the general desirability of the continuance of the Corporation as an independent entity; and (F) such other factors as the Continuing Directors (as defined in Section 7.06) may deem relevant. In addition to any affirmative vote otherwise required by law or the Articles of Association or Bylaws of the Corporation, the affirmative vote of the holders of at least eighty percent (80%) of the Common Stock of the Corporation then issued and outstanding shall be required to alter, amend or repeal this Section 7.07; provided, however, that such eighty percent (80%) affirmative vote shall not be required for any alteration, amendment, or repeal recommended by a majority of the Continuing Directors (as defined in Section 7.06). SECTION 8 SECTION 8.01. The payment of dividends upon the Common Stock of the Corporation shall be made only from earned surplus accruing subsequent to December 31, 1949. SECTION 9 SECTION 9.01. The Board of Directors of the Corporation is authorized to issue from time to time all or any part of the capital stock of the Corporation authorized by these amended Articles of Association, for such lawful consideration as may be determined by the Board of Directors. SECTION 10 SECTION 10.01. If any provisions of these amended Articles of Association is held invalid, the remainder of said articles shall not be affected thereby. SECTION 11 SECTION 11.01. The Restated Articles of Association of Green Mountain Power Corporation as herein contained correctly set forth without change the corresponding provisions of the Articles of Association of said Corporation as heretofore amended, and these Restated Articles of Association supersede the original Articles of Association and all amendments thereto. Dated at South Burlington, Vermont, this 4th day of June, 1991. John V. Cleary, Jr. ________________________________ President Christopher L. Dutton ________________________________ Secretary STATE OF VERMONT ) CHITTENDEN COUNTY ) At South Burlington in said County this 4th day of June, 1991, personally appeared the above-named John V. Cleary, Jr. and Christopher L. Dutton, President and Secretary respectively of GREEN MOUNTAIN POWER CORPORATION, and they made oath to the truth of the foregoing statement by them subscribed. Before me, /s/ Donna S. Laffan ________________________ Notary Public EX-2 3 EXHIBIT 3-A-1 TO FORM 10-K FOR YEAR ENDED DECEMBER, 31, 1993 EXHIBIT 3-a-1 AMENDMENT OF ARTICLES OF ASSOCIATION OF GREEN MOUNTAIN POWER CORPORATION (May 20, 1993) Section 3 of the Articles of Association is hereby changed, altered and amended so that the first sentence of said Section 3.01 will read as follows: Section 3.01. The number of authorized shares of capital stock of Green Mountain Power Corporation is 442,430 shares of Preferred Stock of the par value of one hundred dollars ($100) per share; 50,000 shares of Preference Stock of the par value of one hundred dollars ($100) per share; and 10,000,000 shares of Common Stock of the par value of three dollars thirty-three and one-third cents ($3.331/3) per share. Section 5 of the Articles of Association is hereby changed, altered and amended by adding a new Section 5.05 to read in its entirety as follows: Section 5.05. Of the authorized shares of Preferred Stock of the Corporation, there shall be a class, to consist initially of 200,000 shares, designated as "Preferred Stock, Class E," which may be divided into and issued in series and which shall have the terms and provisions hereinafter in this Section 5.05 set forth or provided for. (a) Designation. Each series of the Preferred Stock, Class E, shall be so designated in the manner hereinafter provided as to distinguish the shares thereof from the shares of all other series and classes. (b) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, the holders of each series of Preferred Stock, Class E, shall be entitled to receive the amounts prescribed in Section 6.02. (c) Dividends. Out of any assets of the Corporation available for dividends, the holders of each series of the Preferred Stock, Class E, shall be entitled to receive, but only when and as declared by the Board of Directors, dividends at such rates as may be determined by the Board of Directors of the Corporation, as hereinafter provided, payable quarterly on March 1, June 1, September 1, and December 1 in each year. Dividends on shares of the Preferred Stock, Class E, shall be cumulative from and after the dates of issue of such shares. (d) Voting Powers and Other Rights. The holders of the Preferred Stock, Class E, shall have such voting power and other rights and be subject to such restrictions and qualifications as are set forth in Sections 6, 7 and 8 hereof. (e) Other Rights and Preferences. All shares of the Preferred Stock, Class E, shall be identical except that there may be variations between different series of Preferred Stock, Class E, with respect to: (1) the rate of dividend; (2) whether shares may be redeemed and, if so, the redemption price and the terms and the conditions of redemption; (3) the amount payable upon shares in the event of voluntary or involuntary liquidation; (4) sinking-fund provisions, if any, for the redemption or purchase of shares; and (5) the terms and conditions, if any, on which shares may be converted. The Board of Directors shall have the authority within the limitations set forth herein and imposed by law, subject to restrictions contained in Section 6.04 of these Articles of Association, to fix and determine the relative rights and preferences of the shares of any series of Preferred Stock, Class E, established by the Board of Directors to the extent that such relative rights and preferences are not established by these Articles of Association. (f) Procedures for Establishment of Series of Preferred Stock, Class E. In order for the Board of Directors to establish a series of Preferred Stock, Class E, they shall adopt a resolution setting forth the designation of the series and fixing and determining the relative rights and preferences thereof to the extent that such relative rights and preferences are not established by these Articles of Association. Prior to the issue of any shares of any series of Preferred Stock, Class E, there shall be filed in the office of the Secretary of State of the State of Vermont such statement as is required by law and upon the filing of such statement with the Secretary of State, the resolution establishing and designating the series of Preferred Stock, Class E, and fixing and determining the relative rights and preferences thereof shall become effective and shall constitute an Amendment of these Articles of Association. The Articles of Association are hereby further changed, altered and amended by adding a new Section 6B. Said Section 6B will read in its entirety as follows: SECTION 6B MODIFIED RESTRICTIONS ON CERTAIN CORPORATE ACTION AND VOTING POWERS TO BE APPLICABLE TO CERTAIN CLASSES OF PREFERRED STOCK. Section 6B.01. From and after the first date on which all of the currently outstanding shares of the 4.75% Preferred Stock, Class B, the 7% Preferred Stock, Class C, the 9 3/8% Preferred Stock, Class D, Series 1, and the 8 5/8% Preferred Stock, Class D, Series 3, shall cease to be outstanding, the following terms and provisions of these Articles of Association shall apply: (a) Restrictions on Corporate Action. (i) Section 6.04(A)(iii)(a) of the Articles of Association shall no longer apply to the Preferred Stock and shall be of no further force and effect; and (ii) Section 6.04(B)(i) of the Articles of Association shall no longer apply to the Preferred Stock and shall be of no further force and effect. (b) Voting Power. Section 6.05(c) of the Articles of Association shall no longer apply to the Preferred Stock and shall be of no further force and effect. In lieu of said Section 6.05(c), the holders of the Preferred Stock shall not be entitled to vote except (i) as provided in Sections 6.05(a) and (b) of the Articles of Association and (ii) voting separately, as a single class, (A) for the election of two (2) directors whenever and as often as dividends payable on any Preferred Stock outstanding shall be in arrears in an amount equivalent to or exceeding four (4) quarterly dividends, and for each subsequent election while such arrearage shall continue, that number of directors, not exceeding the smallest number of directors necessary to constitute a majority of the Board of Directors, equal to two (2) times the number of full years that such arrearage shall have continued, or (B) for the election of two (2) directors in the event of a default in any purchase or sinking fund provided for any one or more classes or series of Preferred Stock, which rights may be exercised at any annual meeting and at any special meeting of stockholders called for the purpose of electing directors, until such time as arrears in dividends on the Preferred Stock and the current dividend thereon shall have been paid or declared and set apart for payment, and any default in such purchase or sinking fund obligation shall have been remedied, whereupon all voting rights given by this clause (ii) shall be divested from the Preferred Stock (subject, however, to being at any time or from time to time similarly revived and divested). EX-3 4 EXHIBIT 3-B TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1993 EXHIBIT 3-b BYLAWS OF GREEN MOUNTAIN POWER CORPORATION (As Amended Through March 8, 1994) ARTICLE I Stockholders Section 1. Annual Meeting. The annual meeting of the stockholders shall be held at such place within the State of Vermont as is designated in the notice of the meeting, on the third Thursday in May in each year, if it be not a legal holi-day, and if it be a legal holiday, on the next succeeding day not a legal holiday; provided, however, that a majority of the board of directors, acting at a regular or special meeting of such board, may specially determine an alternative time for the holding of any annual meeting. (Amended December 4, 1975 and August 31, 1982.) Section 2. Special Meetings. Special meetings of the stockholders may be called, to be held at such place within or without the State of Vermont as is designated in the notice of the meeting, by the chairman of the board of directors, the chief executive officer, the president or a majority of direc-tors, and, subject to the provisions of law and of the articles of association, as amended, shall be called by the secretary, or in case of the death, absence, incapacity or refusal of the secretary, by any other officers of the Corporation, upon writ-ten application of stockholders who are entitled to vote and who hold at least thirty-three percent of all the shares at the time issued and outstanding and entitled to vote at the meeting, stating the time, place and purpose of the meeting. (Amended May 13, 1981, and September 8, 1988.) Section 3. Notice of Meeting. A written or printed notice of each meeting of stockholders, stating the place, day and hour thereof and, in case of a special meeting, the purpose for which the meeting is called, shall be given by the secre-tary, at least 10 days and not more than 60 days before such meeting, to each stockholder entitled to vote thereat, by leav-ing such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid and addressed to such stockholder at his address as it appears upon the books of the Corporation. In the absence or disability of the secretary, such notice may be given by a person designated either by the secretary or by the person or persons calling the meeting or by the board of directors. No notice of the time, place or purpose of any regular or special meeting of the stockholders shall be required if every stockholder entitled to notice thereof is present in person or is represented at the meeting by proxy or if every such stockholder, or his attorney thereunto authorized by a writing which is filed with the records of the meeting, waives such notice. Notwithstanding the above, if the purpose for such a special meeting of stockholders requested by written application of stockholders under Section 2 of Article I of these bylaws relates to or involves in any way a merger or consolidation of the corporation or a sale, lease, exchange, pledge or other disposition of all, or substantially all, the property and assets of the Corporation not made in the usual and regular course of business, such notice must be given at least 30 days and not more than 60 days before such special meeting. (Amended September 8, 1988 and March 7, 1994.) Section 4. Quorum. At any meeting of the stockholders, a majority of interest of all stock issued and outstanding and entitled to vote upon a question to be considered at the meeting shall constitute a quorum for the consideration of such ques-tion, but a less interest may adjourn any meeting from time to time, and the meetings may be held as adjourned without further notice. When a quorum is present at any meeting, a majority of the stock represented thereat and entitled to vote shall, except where a larger vote is required by law, by the articles of asso-ciation, or by these bylaws, decide any question brought before such meeting. Section 5. Proxies and Voting. Stockholders who are entitled to vote shall have one vote for each share of stock owned by them. Stockholders may vote either in person or by proxy in writing dated not more than 11 months before the meet-ing named therein, which shall be filed with the secretary of the meeting before being voted. Such proxies shall entitle the holders thereof to vote at any adjournment of such meeting, but shall not be valid after the final adjournment of such meeting. ARTICLE II Directors Section 1. Powers. The board of directors shall have, and may exercise all the powers of the Corporation, except such as are conferred upon the stockholders by law, by the articles of association, and by these bylaws. Section 2. Election. The board of directors shall con-sist of twelve members and shall be elected at the annual meet-ing of the stockholders or at a special meeting held in place thereof. Subject to law, to the articles of association and to the other provisions of these bylaws, each director shall hold office until his or her term of office expires and until his or her successor shall have been elected and qualified. No direc-tor may be removed from office prior to the expiration of his or her term of office except for cause. For purposes of this Sec-tion, the term "cause" means a willful and continued failure to perform the duties of a director (other than failure resulting from incapacity due to physical or mental illness) or conduct which is demonstrably and materially injurious to the corpora-tion, monetarily or otherwise. Such removal from office can be effected only upon the affirmative vote of three quarters of the remaining membership of the board of directors. The board of directors shall elect from its members a chairman of the board of directors who will serve as such for one year or during the balance of his or her term as a director, whichever is less, and until a successor is elected and qualified. (Amended March 20, 1974; February 28, 1980; May 13, 1981; June 2, 1983; March 1, 1985; February 25, 1986, September 8, 1988, March 4, 1992 and March 8, 1994.) Section 3. Duties of the Chairman. The chairman of the board of directors shall, when present, preside at all meetings of the stockholders and at all meetings of the board of directors. He shall perform such other duties as may be from time to time delegated to him by the board of directors. (Amended May 13, 1981.) Section 4. Regular Meetings. Regular meetings of the board of directors may be held at such places and at such times as the board may by vote from time to time determine, and if so determined, no notice thereof need be given. A regular meeting of the board of directors may be held without notice immediately after, and at the same place as the annual meeting of the stock-holders, or the special meeting of the stockholders held in place of such annual meeting. Section 5. Special Meetings. Special meetings of the board of directors may be held at any time and at any place when called by the chairman of the board of directors, chief execu-tive officer, president, treasurer, or two or more directors, reasonable notice thereof being given to each director, or at any time without call or formal notice, provided all the direc-tors are present or waive notice thereof by a writing which is filed with the records of the meeting. In any case it shall be deemed sufficient notice to a director to give him personal notice or to send notice by mail or telegram at least forty-eight hours before the meeting addressed to him at his usual or last known business or residence address. Section 6. Quorum and Participation. (a) A majority of the board of directors shall constitute a quorum for the transaction of business, but a less number may adjourn any meet-ing from time to time, and the meeting may be held as adjourned without further notice. When a quorum is present at any meet-ing, a majority of the members in attendance thereat shall decide any question brought before such meeting. (b) Members of the board of directors and any committee designated by the board of directors, may participate in a meeting of such board or committee by means of a conference telephone or similar communica-tions equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting in such a manner shall constitute presence in person at such meeting for all purposes. (Amended September 21, 1973, and May 13, 1981.) ARTICLE III Executive and Other Committees Section 1. Executive Committee. The board of directors may, by vote of a majority of their entire number, elect from their own number an executive committee of not less than three members, which committee may be vested with the management of the current and ordinary business of the Cor-poration, including the declaration of dividends, the fixing and altering of the powers and duties of the several officers and agents of the Corporation, the election of additional officers and agents, and the filling of vacancies other than on the board of directors, and with power to authorize purchases, sales, contracts, offers, conveyances, transfers and negotiable instru-ments except as otherwise provided by law. A majority of the members of the executive committee shall constitute a quorum for the transaction of business, but a lesser number may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. The executive committee may make rules not inconsistent herewith for the holding and conduct of its meetings. The chief executive officer shall at all times be ex officio a member of the executive committee. The execu-tive committee shall elect from its members a chairman of the executive committee who shall preside at meetings of the execu-tive committee, when present, and, in his or her absence, the chief executive officer of the Corporation shall preside. The chairman shall also perform such other duties as may be from time to time delegated to him or her by the executive committee, and will serve as such for one year or during the balance of his or her term as a member of the executive committee, whichever is less, and until a successor is elected and qualified. In the absence of a quorum at any meeting of the executive committee, its chairman or, in his or her absence, the chief executive officer, may designate a director of the Corporation who is not a member of the executive committee temporarily as a member of the executive committee to act as such during such meeting. Any action taken by the executive committee will require the unani-mous vote of all members of the executive committee present and voting at any meeting. (Amended March 20, 1974; June 13, 1974; June 12, 1975; February 28, 1980; May 13, 1981, and March 1, 1985.) The executive committee shall report its action to the board of directors. The board of directors shall have the power to rescind any vote or resolution of the executive committee, but no such rescission shall have retroactive effect. Section 2. Other Committees. The board of directors may, by majority vote at any meeting, create any other commit-tees and delegate to such committees any powers, duties and responsibilities as may be consistent with the laws of the State of Vermont and the articles of association of the Corporation. The resolutions creating such committees or electing its members may provide for a chairman of the committee or such selection may be left to the committee itself. The compensation, if any, to be paid members of the committees for committee services shall be established by the board of directors or its executive committee. (Amended August 17, 1976.) ARTICLE IV Officers and Agents Section 1. Election and Appointment. The officers shall be a chief executive officer, a president, a secretary, a treasurer, and such other officers and agents as the board of directors and executive committee may elect. The chief executive officer, president, treasurer and secretary shall be elected annually by the board of directors after its election by the stockholders and will hold office for one year and until their successors are elected and qualified. Any two or more offices may be filled by the same person except the offices of president and secretary. The other officers and agents shall hold office during the pleasure of the board of directors or for such terms as the board of directors or executive committee shall prescribe. Each officer shall, subject to these bylaws, have in addition to the duties and powers herein set forth such duties and powers as are commonly incident to his office, and such duties and powers as the board of directors or executive committee shall from time to time designate. (Amended March 20, 1974, and May 13, 1981.) Section 2. (Repealed March 20, 1974.) Section 3. (Repealed March 20, 1974.) Section 4. Chief Executive Officer, President and Vice Presidents. The chief executive officer shall have all powers and perform all duties incidental to such office and, in the absence of the chairman of the board of directors, he shall preside at all meetings of the stockholders and the board of directors, and in the absence of the chairman of the executive committee, at all meetings of the executive committee. The president shall be the chief administrative officer of the Corporation and shall have all powers and perform all duties incidental thereto. He shall have custody of any treasurer's bond. Any vice president shall have such powers as the board of directors or executive committee shall from time to time desig-nate. (Amended March 20, 1974; February 28, 1980, and May 13, 1981.) Section 5. Secretary. The secretary shall record all votes and proceedings of the stockholders and of the directors or any executive committee thereof and shall have custody of the corporate seal and of the corporate records and keep such records at the principal office of the Corporation. He shall keep a record book containing the names of the stockholders, their addresses and the number of shares held by each, the time when they respectively acquired the shares and the time of any transfer thereof unless a majority of the stockholders approves a transfer agent to keep such record book, rather than the secretary. He shall procure and file in his own office certi-fied copies of all documents required to be filed with the secretary of state, except the annual report of the company. In the absence of the secretary at any meeting, a temporary secre-tary shall be chosen to record the proceedings of such meeting. (Amended May 13, 1976.) Any assistant secretary will have such powers as the board of directors or executive committee shall from time to time designate, except those powers set forth in Sec. 1894 of Title II of the Vermont Statutes Annotated. Section 6. Treasurer. The treasurer shall, subject to the direction and under the supervision of the board of direc-tors and executive committee, have general charge of the finan-cial concerns of the Corporation and the care and custody of the funds and valuable papers of the Corporation, except his own bond, and he shall have power to endorse for deposit or collec-tion all notes, checks, drafts, etc., payable to the Corporation or its order, and to accept drafts on behalf of the Corporation. He shall keep, or cause to be kept, accurate books of account, which shall be the property of the Corporation. If required by the board of directors, he shall give bond for the faithful per- formance of his duty in such form, in such sum, and with such sureties as the board of directors or executive committee shall require. Any assistant treasurer shall have such powers as the board of directors or executive committee shall from time to time designate. Section 7. Removals. The board of directors may remove from the executive committee any member thereof and remove from office any officer or agent of the Corporation whenever in its judgment the best interests of the Corporation will be served thereby. Section 8. Vacancies. If the office of any director or member of the executive committee or of any officer or agent, one or more, becomes vacant by reason of death, resignation, removal, disqualification or otherwise, the directors or the remaining directors, though less than a quorum, may choose by a majority vote of their entire number a successor or successors, who shall hold office for the unexpired term, subject to the provisions of the articles of association and Section 1 of this Article IV. The executive committee shall have like power to fill any such vacancy in any office to which the executive committee has power to appoint, unless such vacancy shall have been filled by the board of directors. Any directorship to be filled by reason of an increase in the number of directors, however, shall be filled by election at an annual meeting or at a special meeting of the stockholders called for that purpose. Section 9. Indemnification. This corporation shall indemnify any person threatened with or made a party to any action, suit or proceeding, civil or criminal, by reason of the fact that he, his testator or intestate, is or was a director or officer of this corporation or of any corporation which he served as such at the request of this corporation, against judgments, fines or penalties, and the reasonable cost and expenses, including but not restricted to attorney's fees, actually and reasonably incurred by him in connection with the defense of such action, suit or proceeding or in connection with any appeal therein, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such director or officer is liable for gross negligence or misconduct in the performance of duty to the Corporation; provided, however, that as to any matter disposed of by compromise by such person, pur-suant to a consent decree or otherwise, no indemnification either for a compromise payment or for any other expenses shall be provided unless such compromise shall be approved as in the best interests of the Corporation after notice that it involves such indemnification: (a) by a disinterested majority of the directors then in office; or (b) by a majority of the disinter-ested directors then in office, provided that there has been obtained an opinion in writing of independent legal counsel to the effect that such person, his testator or intestate, as the case may be, appears not to be liable for gross negligence or misconduct in the performance of duty to the Corporation; or (c) by the holders of a majority of the outstanding stock at the time entitled to vote for directors, voting as a single class, exclusive of any stock owned by any interested director or officer. Expenses reasonably incurred by any such person in connection with the defense or disposition of any such action, suit or other proceeding shall be paid from time to time by this corporation in advance of the final determination thereof upon receipt of a written undertaking from such person to repay the amounts so paid by the Corporation if it is ultimately deter-mined that indemnification for such expenses is not required under this section. The foregoing right to indemnity shall not be deemed exclusive of any other rights to which such director or officer may be entitled apart from the provisions of this paragraph. (Amended March 9, 1978, and March 2, 1983.) ARTICLE V Capital Stock Section 1. Certificates. Each stockholder shall be entitled to a certificate or certificates signed by the presi-dent and the treasurer or secretary and separately by the chief executive officer, if that position is not held by the presi-dent, and which shall certify the number and class of paid-up shares held by him in the Corporation. These signatures may be facsimiles if the certificate is countersigned by a transfer agent or registered with and signed by a registrar other than the Corporation or an employee thereof. Such certificate shall be in such form, consistent with the articles of association and Vermont law, as may be prescribed by the board of directors or the executive committee, duly numbered and sealed with the cor-porate seal of this corporation or a facsimile thereof. No cer-tificate for any share of this corporation shall be issued until it is fully paid. The board of directors or the executive com-mittee may appoint one or more transfer agents and/or registrars for its stock of any class or classes and may require stock cer-tificates to be countersigned and/or registered by one or more of them. In case any officer or officers who shall have signed or whose facsimile signature shall have been used or printed on any certificate or certificates for shares shall cease to be such officer or officers of the Corporation before such certifi-cate or certificates shall have been delivered by the Corpora-tion, such certificate or certificates shall nevertheless be conclusively deemed to have been adopted by the Corporation by the use and delivery thereof and shall be as effective in all respects as though signed by a duly elected, qualified and authorized officer or officers and as though the person or per-sons who signed such certificate or certificates or whose fac-simile signature or signatures had been used thereon had not ceased to be such officer or officers of this corporation. (Amended March 4, 1982.) Section 2. Transfer Books. The secretary or an assistant secretary appointed by the board of directors shall keep the stock and transfer books of the Corporation and a record of all certificates of stock issued and of all transfers of stock and a register of all the stockholders, their addresses, the number of shares held by each, the time when they acquired the shares and the time of any transfers thereof in books provided and approved by the board of directors or executive committee for that purpose, except that such books may be kept by a transfer agent rather than the secretary when such transfer agent is approved by the vote of a majority of the stockholders. The transfer books of the capital stock of the Corporation may be closed for such period from time to time in anticipation of stockholders' meetings or the declaration or payment of divi-dends, as the board of directors or executive committee may determine but such period shall not exceed 60 days, and, if the transfer books are closed for the purpose of determining stock-holders entitled to notice of or to vote at a meeting of stock-holders, such books shall be closed for at least 10 days imme- diately preceding such meeting. In lieu of closing the stock transfer books as provided in the preceding paragraph, the board of directors or the executive committee may fix in advance a date preceding the date of any meeting of stockholders, or the date for the payment of any div-idend, or the date for the allotment of rights, or the date when any change, conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of and to vote at any such meet-ing, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date fixed shall be entitled to such notice of and to vote at such meeting, or to receive pay-ment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid, but such record date shall not in any case be more than 60 days and, in the case of a meeting of stockholders, shall not be less than 10 days prior to the date on which the particular action, requiring such determination of stockholders, is to be taken. (Amended March 7, 1994.) Section 3. Transfer of Shares. Subject to the re-strictions, if any, imposed by the articles of association, title to a certificate of stock and to the shares represented thereby shall be transferred only by delivery of the certificate properly endorsed, or by delivery of the certificate accompanied by a written assignment of the same, or a written power of attorney to sell, assign, or transfer the same or the shares represented thereby, properly executed; but the person regis- tered on the books of the Corporation as the owner of shares shall have the exclusive right to receive dividends thereon and to vote thereon as such owner, shall be held liable for such calls and assessments, if any, as may lawfully be made thereon, and except only as may be required by law, may in all respects be treated by the Corporation as the exclusive owner thereof. It shall be the duty of each stockholder to notify the Corporation of his post office address. Section 4. Loss of Certificates. In case of the alleged loss or destruction, or the mutilation of a certificate of stock, a duplicate certificate may be issued in place thereof, upon such reasonable terms as the board of directors may prescribe. ARTICLE VI Seal The seal of the Corporation shall, subject to alteration by the board of directors or executive committee, consist of a flat-faced circular die with words Green Mountain Power Corporation: Corporate Seal 1893, cut or engraved thereon. ARTICLE VII Execution of Papers Except as the board of directors or executive committee may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the Corporation, shall be signed by the chairman of the board, chief executive officer, president, a vice president or the treasurer, or such other officer or employee as designated in writing by the president. (Amended May 13, 1981, and May 15, 1986.) ARTICLE VIII Fiscal Year Except as from time to time otherwise provided by the board of directors, the fiscal year of the Corporation shall be the calendar year. ARTICLE IX Amendments These bylaws may be amended, altered or repealed by the board of directors or at any meeting of the stockholders, by the holders of a majority of all stock issued, outstanding and entitled to vote, provided notice of the proposed amendment, alteration or repeal is given in the notice of said meeting. EX-4 5 EXHIBIT 4-B-14 TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1993 EXHIBIT 4-b-14 GREEN MOUNTAIN POWER CORPORATION to UNITED STATES TRUST COMPANY OF NEW YORK [successor to The Chase Manhattan Bank (National Association), successor to The Chase National Bank of the City of New York], Trustee ________________ FOURTEENTH SUPPLEMENTAL INDENTURE Dated as of November 1, 1993 _________________ Supplemental to Indenture of First Mortgage and Deed of Trust Dated as of February 1, 1955 _________________ This is a Security Agreement relating to Personal Property as well as a Mortgage upon Real Estate and Other Property This FOURTEENTH SUPPLEMENTAL INDENTURE dated as of November 1, 1993 made by GREEN MOUNTAIN POWER CORPORATION, as debtor (its Federal Tax Number being 03-0127430), a corporation duly organized and existing under the laws of the State of Vermont (hereinafter sometimes called the "Company"), whose mailing address and address of its chief executive office is 25 Green Mountain Drive, South Burlington, Vermont 05403, party of the first part, and UNITED STATES TRUST COMPANY OF NEW YORK [successor to The Chase Manhattan Bank (National Association), successor to The Chase National Bank of the City of New York], as Trustee and secured party (its Federal Tax number being 13-5459866), a corporation existing under the laws of the State of New York and having its principal corporate trust office at 114 West 47th Street, New York, New York 10036 (hereinafter sometimes called the "Trustee"), party of the second part. WHEREAS, the Company has heretofore executed and delivered an Indenture of First Mortgage and Deed of Trust dated as of February 1, 1955 (herein sometimes called the "Original Indenture"), to secure, as provided herein, its bonds (in the Original Indenture and herein called the "Bonds"), to be designated generally as its "First Mortgage Bonds", and to be issued in one or more series as provided in the Original Indenture; WHEREAS, the Company has heretofore executed and delivered a First Supplemental Indenture dated as of April 1, 1961, a Second Supplemental Indenture dated as of January 1, 1966, a Third Supplemental Indenture dated as of July 1, 1968, a Fourth Supplemental Indenture dated as of October 1, 1969, a Fifth Supplemental Indenture dated as of December 1, 1973, a Sixth Supplemental Indenture dated as of June 1, 1975, a Seventh Supplemental Indenture dated as of August 1, 1976, an Eighth Supplemental Indenture dated as of December 1, 1979, a Ninth Supplemental Indenture dated as of July 15, 1985, a Tenth Supplemental Indenture dated as of June 15, 1989, an Eleventh Supplemental Indenture dated as of September 1, 1990, a Twelfth Supplemental Indenture dated as of March 1, 1992 and a Thirteenth Supplemental Indenture dated as of March 1, 1992 supplementing and modifying the Original Indenture, each of which Supplemental Indentures provided for, among other things, the creation of a new series of First Mortgage Bonds; WHEREAS, pursuant to the Original Indenture, as heretofore supplemented and modified, there have been executed, authenticated, delivered and issued and there are now outstanding First Mortgage Bonds of series and in principal amounts as follows Issued and Title Outstanding ----- ----------- First Mortgage Bonds, 5 1/8% Series due 1996 . . . . . . . . . 3,000,000 First Mortgage Bonds, 7% Series due 1998 . . . . . . . . . . . 3,000,000 First Mortgage Bonds, 8 5/8% Series due 1999 . . . . . . . . . . 600,000 First Mortgage Bonds, 9 1/8% Series due 2003 . . . . . . . . . 3,400,000 First Mortgage Bonds, 10.7% Series due 2000 . . . . . . . . . 12,600,000 First Mortgage Bonds, 10.0% Series due 2004 . . . . . . . . . 17,000,000 First Mortgage Bonds, 9.64% Series due 2020 . . . . . . . . . 9,000,000 First Mortgage Bonds, 8.65% Series due 2022 . . . . . . . . . 13,000,000 First Mortgage Bonds, 6.84% Series due 1997 . . . . . . . . . 4,000,000 WHEREAS, the Board of Directors of the Company has established a new series of Bonds to be designated First Mortgage Bonds, 6.70% Series due November 1, 2018 (herein sometimes called "Bonds of the 2018 Series"), and has authorized an issue of Fifteen Million Dollars ($15,000,000) principal amount thereof, and the Company has complied or will comply with all provisions required to issue additional Bonds provided for in the Original Indenture; WHEREAS, the Board of Directors of the Company has also established a new series of Bonds to be designated First Mortgage Bonds, 5.71% Series due November 1, 2000 (herein sometimes called "Bonds of the 2000 Series"), and has authorized an issue of Five Million Dollars ($5,000,000) principal amount thereof, and the Company has complied or will comply with all provisions required to issue additional Bonds provided for in the Original Indenture (said Bonds of the 2000 Series to be issued pursuant to the terms and conditions of a Fifteenth Supplemental Indenture of even date hereof); WHEREAS, the Company desires to execute and deliver this Fourteenth Supplemental Indenture, in accordance with the provisions of the Original Indenture, for the purposes, among others, of (a) further assuring, conveying, mortgaging and assigning unto the Trustee certain additional property acquired by the Company, (b) providing for the creation of a new series of Bonds, designating the series to be created and specifying the form and provisions of the Bonds of such series and (c) adding to the Original Indenture, as supplemented and modified, other covenants and agreements to be hereafter observed by the Company (the Original Indenture, as heretofore supplemented and modified and as hereby supplemented and modified, being herein sometimes called the "Indenture"); and WHEREAS, all acts and proceedings required by law and by the Restated Articles of Association and By-laws of the Company necessary to secure the payment of the principal of, premium, if any, and interest on the Bonds of the 2018 Series, to make the Bonds of the 2018 Series to be issued hereunder, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute the Indenture a valid and binding mortgage for the security of all of the Bonds, in accordance with its and their terms, have been done and taken; and the execution and delivery of this Fourteenth Supplemental Indenture have been in all respects duly authorized: NOW, THEREFORE, THIS FOURTEENTH SUPPLEMENTAL INDENTURE WITNESSETH, that in order to secure the payment of the principal of, premium, if any, and interest on all Bonds at any time issued and outstanding under the Indenture, according to their tenor, purport and effect, to confirm the lien of the Indenture upon the mortgaged property mentioned therein including any and all property purchased, constructed or otherwise acquired by the Company since the date of execution of the Original Indenture and to secure the performance and observance of all the covenants and conditions herein and in the Bonds and in the Indenture contained, to declare the terms and conditions upon and subject to which the Bonds of the 2018 Series are and are to be issued and secured, and held, and for and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds of the 2018 Series by the holders thereof, and of the sum of Ten Dollars ($10) duly paid to the Company by the Trustee, at or before the ensealing and delivery hereof, and for other valuable consideration, the receipt whereof is hereby acknowledged, the Company has executed and delivered this Fourteenth Supplemental Indenture, and by these presents, does grant, bargain, sell, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto United States Trust Company of New York, as Trustee, and to its successors in trust and to its and their successors and assigns forever, all and singular the property, rights, privileges and franchises (other than excepted property) of the character described in the Granting Clauses of the Original Indenture now owned of record or otherwise by the Company, whether or not constructed or acquired since the date of execution of the Original Indenture or which may hereafter be constructed or acquired by it, including, without limiting the generality of the foregoing, the property in Vermont, Massachusetts and Maine described in Article Five hereof, but subject to all exceptions, reservations and matters of the character therein referred to, and expressly excepting and excluding from the lien and operation of the Indenture all properties of the character specifically excepted by Paragraphs B through H of Granting Clause VII of the Original Indenture, to the extent contemplated thereby, and all property heretofore released or otherwise disposed of pursuant to the provisions of the Indenture. TO HAVE AND TO HOLD all of the property, real, personal and mixed, and all and singular the lands, properties, estates, rights, franchises, privileges and appurtenances hereby granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over or confirmed or intended so to be, unto the Trustee and its successors in the trust and to its and their successors and assigns, forever. BUT IN TRUST, NEVERTHELESS, for the equal and proportionate use, benefit, security and protection of those who from time to time shall hold the Bonds and coupons, or any of them, authenticated and delivered under the Indenture, and duly issued by the Company, without any discrimination, preference or priority of any one Bond or coupon over any other by reason of priority in the time of issue, sale or negotiation thereof or otherwise, except as provided in Section 12.28 of the Original Indenture, so that, subject to said Section 12.28, each and all of said Bonds and coupons shall have the same right, lien, and privilege under the Indenture, and shall be equally and proportionately secured by the Indenture (except as any sinking and improvement fund, depreciation fund or other fund established in accordance with the provisions of the Indenture may afford additional security for the Bonds of any particular series), with the same effect as if all the Bonds and coupons had been issued, sold and negotiated simultaneously on the date of the delivery of the Original Indenture. It is hereby covenanted, declared and agreed by and between the parties hereto that all Bonds and coupons, if any, are to be authenticated, delivered and issued, and that all property subject or to become subject to the Indenture is to be held, subject to the further covenants, conditions, uses and trusts set forth in the Indenture, and the Company for itself and its successors or assigns does hereby covenant and agree to and with the Trustee and its successor or successors in such trust, for the benefit of those who shall hold said Bonds, or coupons, or any of them, as follows: ARTICLE I BONDS OF THE 2018 SERIES AND CERTAIN PROVISIONS RELATING THERETO SECTION 1.01. A. Terms of Bonds of the 2018 Series. There shall be hereby established a series of Bonds, known as and entitled "First Mortgage Bonds, 6.70% Series due 2018" (herein sometimes referred to as the "Bonds of the 2018 Series"). The aggregate principal amount of the Bonds of the 2018 Series shall be limited to $15,000,000. The definitive Bonds of the 2018 Series shall be registered Bonds without coupons of the denominations of $1,000 or integral multiples thereof. All Bonds of the 2018 Series shall mature November 1, 2018 and will bear interest at the rate of 6.70% per annum until maturity, such interest to be payable semi-annually on May 1 and November 1 in each year commencing May 1, 1994. The principal of and the premium, if any, and interest on the Bonds of the 2018 Series will be paid in lawful money of the United States of America. Principal of and premium, if any, on the Bonds of the 2018 Series will be payable at the principal corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York, or its successor in trust, except that, in case of the redemption as a whole at any time of Bonds of the 2018 Series then outstanding, the Company may designate in the redemption notice other offices or agencies at which, at the option of the holders, Bonds of the 2018 Series may be surrendered. Interest on Bonds of the 2018 Series will be payable at the principal corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York, or its successor in trust, in each case to the holder of record on the record date as hereinbelow defined. Interest on the Bonds of the 2018 Series shall, unless otherwise directed by the holder, be paid by checks payable to the order of the respective holders entitled thereto, and mailed by the Trustee by first class mail, postage prepaid, to such holders at their respective registered addresses shown on the Bond register for the Bonds of the 2018 Series. Notwithstanding the foregoing, pursuant to the fourth paragraph of Section 10.04 of the Original Indenture, the Company has entered into agreements with the initial purchasers of the Bonds of the 2018 Series providing for the payment to such initial purchasers and any nominees thereof of all payments of principal of, premium, if any, and interest on the Bonds of the 2018 Series held by them by such methods as they shall direct and without the necessity of presenting or surrendering such Bonds, except that any Bond paid or redeemed in full shall thereafter be surrendered to the Trustee at its principal office, and further providing for the extension of such benefits of such agreements to any transferees of the foregoing which are institutional investors acquiring at least $1,000,000 principal amount of Bonds of the 2018 Series. The definitive Bonds of the 2018 Series may be issued in the form of Bonds engraved, printed or lithographed on steel engraved borders. Notwithstanding any provision in the Original Indenture to the contrary, the person in whose name any Bond of the 2018 Series (or one or more Predecessor Bonds, as hereinbelow defined) is registered at the close of business on any record date (as hereinbelow defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such Bond of the 2018 Series upon any transfer or exchange thereof (including any exchange effected as an incident to a partial redemption thereof) subsequent to such record date and prior to such interest payment date, except that, if and to the extent that the Company shall default in the payment of the interest due on such interest payment date, then the registered holders of such Bonds of the 2018 Series on such record date shall have no further right to or claim in respect of such defaulted interest as such registered holders on such record date, and the persons entitled to receive payment of any defaulted interest thereafter payable or paid on any Bonds of the 2018 Series shall be the registered holders of such Bonds of the 2018 Series on the record date for payment of such defaulted interest. The term "record date" as used in this Section 1.01, and in the form of the Bonds of the 2018 Series, shall mean the April 15 next preceding a May 1 interest payment date or the October 15 next preceding a November 1 interest payment date, as the case may be, or a special record date established for defaulted interest as hereinafter provided. The term "Predecessor Bond" as used in this Section 1.01, and in the form of the Bonds of the 2018 Series, with respect to any particular Bond of the 2018 Series, shall mean every previous Bond of the 2018 Series evidencing all or a portion of the same debt as that evidenced by such particular Bond of the 2018 Series; and, for the purpose of this definition, any Bond of the 2018 Series authenticated and delivered under Section 3.12 of the Original Indenture in lieu of a mutilated, lost, stolen or destroyed Bond of the 2018 Series shall be deemed to evidence the same debt as the mutilated, lost, stolen or destroyed Bond of the 2018 Series. In case of failure by the Company to pay any interest when due the claim for such interest shall be deemed to have been transferred by transfer of any Bond of the 2018 Series registered on the Bond register, and the Company by not less than 10 days written notice to Bondholders may fix a subsequent record date, not more than 15 days prior to the date fixed for the payment of such interest, for determination of holders entitled to payment of such interest. Such provision for establishment of a subsequent record date, however, shall in no way affect the rights of Bondholders or of the Trustee consequent on any default. Bonds of the 2018 Series shall be dated, and shall accrue interest, as provided in Section 3.05 of the Original Indenture. Interest on the Bonds of the 2018 Series shall be computed on the basis of a year of 360 days consisting of twelve 30-day months. As permitted by the provisions of Section 3.10 of the Original Indenture and upon payment at the option of the Company of a sum sufficient to reimburse it for any stamp tax or other governmental charges as provided in Section 3.11 of the Original Indenture, but without payment of any other charge, Bonds of the 2018 Series may be exchanged for other Bonds of the 2018 Series of different authorized denominations of like aggregate principal amount. The trustee hereunder shall, by virtue of its office as such Trustee, be the registrar and transfer agent of the Company and shall maintain the Bond register for the Bonds of the 2018 Series for the purpose of registering and transferring Bonds of the 2018 Series. Notwithstanding any provision in the Original Indenture to the contrary, neither the Company nor the Trustee shall be required to make transfers or exchanges of Bonds of the 2018 Series for a period of ten days next preceding any designation of Bonds of the 2018 Series to be redeemed and neither the Company nor the Trustee shall be required to make transfers or exchanges of any Bonds designated in whole for redemption or that part of any Bond designated in part for redemption. B. Form of Bonds of the 2018 Series. The Bonds of the 2018 Series and the Trustee's authentication certificate to be executed on the Bonds of said Series shall be in substantially the following forms, respectively: [FORM OF FACE OF BOND OF THE 2018 SERIES] No. R $________ Private Placement No. 393154 H@ 1 GREEN MOUNTAIN POWER CORPORATION FIRST MORTGAGE BOND, 6.70% SERIES DUE 2018 DUE NOVEMBER 1, 2018 GREEN MOUNTAIN POWER CORPORATION, a Vermont corporation (hereinafter sometimes called the "Company"), for value received hereby promises to pay to ___________ or registered assigns, _________ Dollars on November 1, 2018, and to pay to the registered holder hereof interest thereon from the date hereof, or if one or more payments of interest has or have theretofore been made or duly provided for, from the most recent interest payment date to which interest has been paid or duly provided for, semi-annually on May 1 and November 1 in each year, commencing with May 1, 1994, at the rate per annum specified in the title hereof, until maturity. The interest so payable upon any May 1 or November 1 will, subject to certain exceptions referred to on the reverse hereof, be paid to the person in whose name this bond (or one or more Predecessor Bonds, as defined in the Fourteenth Supplemental Indenture mentioned on the reverse hereof) is registered at the close of business on the April 15 preceding such May 1, or the October 15 preceding such November 1, as the case may be. The principal of, premium, if any, and interest on this bond will be paid in lawful money of the United States of America at the principal corporate trust office in the Borough of Manhattan, City and State of New York, of the Trustee under the Indenture mentioned on the reverse hereof, except that, in case of redemption as a whole at any time of the bonds of this series then outstanding, the Company may designate in the redemption notice other offices or agencies at which, at the option of the holder, this bond may be surrendered for redemption and payment. Interest on this bond may be paid by check payable to the order of the registered holder entitled thereto and mailed by the Trustee by first class mail, postage prepaid, to such holder at his address as shown on the Bond register for the bonds of this series. This bond shall not become or be valid or obligatory for any purpose until the authentication certificate hereon shall have been signed by the Trustee. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, GREEN MOUNTAIN POWER CORPORATION has caused these presents to be executed in its name and behalf by its President or one of its Vice Presidents, and its corporate seal or a facsimile thereof to be affixed hereto and attested by its Secretary or its Assistant Secretary. Dated:_____________________________ GREEN MOUNTAIN POWER CORPORATION By: _______________________________ Attest: ____________________________________ [FORM OF REVERSE OF BOND OF THE 2018 SERIES] This bond is one of the bonds, of the above designated series, of an authorized issue of bonds of the Company known as First Mortgage Bonds, not limited as to maximum aggregate principal amount, all issued or issuable in one or more series under and equally secured (except as any sinking and improvement fund, depreciation fund or other fund established in accordance with the provisions of the Indenture hereinafter mentioned may afford additional security for the bonds of any specific series) by an Indenture of First Mortgage and Deed of Trust dated as of February 1, 1955 (herein sometimes called the "Original Indenture"), duly executed and delivered by the Company to The Chase National Bank of the City of New York (now The Chase Manhattan Bank (National Association)), as Trustee, United States Trust Company of New York having succeeded The Chase Manhattan Bank (National Association) as Trustee (United States Trust Company of New York and its successors under said Indenture being herein sometimes called the "Trustee"), as supplemented and modified by thirteen indentures supplemental thereto, and as supplemented and modified by a Fourteenth Supplemental Indenture dated as of November 1, 1993 thereto (herein sometimes called the "Fourteenth Supplemental Indenture") and a Fifteenth Supplemental Indenture dated as of November 1, 1993 thereto (herein sometimes called the "Fifteenth Supplemental Indenture"), each duly executed and delivered by the Company to the Trustee, to which Indenture of First Mortgage and Deed of Trust and all indentures supplemental thereto (herein sometimes called the "Indenture") reference is hereby made for a description of the property mortgaged and pledged as security for said bonds, the nature and extent of the security, and the rights, duties and immunities thereunder of the Trustee, the rights of the holders of said bonds and of the Trustee and of the Company in respect of such security, and the terms upon which said bonds may be issued thereunder. The bonds of this series are limited to $15,000,000 aggregate principal amount. The bonds of this series are subject to redemption prior to maturity (a) at the option of the Company, as a whole at any time, or in part from time to time, on or after the date of original issue until and including October 31, 2013, upon payment of the principal amount thereof plus the Yield-Maintenance Premium (as herein defined), if any, (b) at the option of the Company, as a whole at any time or in part from time to time, on or after November 1, 2013 upon payment of the principal amount thereof plus a premium in the amount of the applicable percentage of the principal amount thereof set forth in the tabulation below under the heading "Regular Redemption Premium": If Redeemed If Redeemed During During Twelve Months' Regular Twelve Months' Regular Period Redemption Period Redemption Beginning Premium Beginning Premium November 1 % November 1 % ----------- --------- ------------- ---------- 2013 01.12 2016 00.28 2014 00.84 2017 and thereafter 00.00 2015 00.56 (c) at the option of the Company, as a whole at any time or in part from time to time, until and including October 31, 2013, upon payment of the principal amount thereof plus the Yield-Maintenance Premium (as herein defined), if any, by application of the proceeds of the sale or release of property of the Company subject to the lien of the Indenture, other than any sale referred to in clause (e) of this paragraph, as provided in said Fourteenth Supplemental Indenture, (d) at the option of the Company, as a whole at any time or in part from time to time, on or after November 1, 2013, upon payment of the principal amount thereof plus the applicable Regular Redemption Premium set forth in the table above, by application of the proceeds of the sale or release of property of the Company subject to the lien of the Indenture, other than any sale referred to in clause (e) of this paragraph, as provided in said Fourteenth Supplemental Indenture, and (e) as a whole at any time or in part from time to time, upon payment of the principal amount thereof, by application of the proceeds of any taking of all or any portion of property of the Company subject to the lien of the Indenture, or the proceeds of any sale of such property in anticipation of or in lieu of any such taking, as provided in said Fourteenth Supplemental Indenture; together in any case with interest accrued thereon to the date fixed for redemption; upon prior notice given by registered mail, postage prepaid, as provided in said Fourteenth Supplemental Indenture to the holders of record of each bond affected not less than 30 days nor more than 60 days prior to the redemption date, all as more fully provided in the Indenture. As used herein, "Yield-Maintenance Premium" shall mean, with respect to any Bond, a premium equal to the excess, if any, of the Discounted Value of the Called Principal of such Bond over the sum of such Called Principal plus interest accrued thereon as of the date on which such Called Principal is to be redeemed (including interest due on such date), provided that the Yield-Maintenance Premium shall in no event be less than zero; "Called Principal" shall mean, with respect to any Bond, the principal of such Bond that is to be redeemed pursuant to Clause (a) or (c) of the preceding paragraph; "Discounted Value" shall mean, with respect to the Called Principal of any Bond, the amount calculated by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the date on which such Called Principal is to be redeemed, in accordance with accepted financial practice and at a discount factor (applied on a semiannual basis) equal to the Reinvestment Yield with respect to such Called Principal, plus 0.50%; "Reinvestment Yield" shall mean, with respect to the Called Principal of any Bond, the yield to maturity implied by the Treasury Constant Maturity Series yields reported (for the latest day for which such yields shall have been so reported as of the fifth Business Day preceding the date on which such Called Principal is to be redeemed, in Federal Reserve Statistical Release H.15(519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the remaining weighted average life to final maturity (calculated in accordance with accepted financial practice) of such Called Principal as of the date scheduled for redemption thereof, such implied yield to be determined (a) by calculating the remaining weighted average life to final maturity of such Called Principal rounded to the nearest quarter-year and (b) if necessary, by interpolating linearly between Treasury Constant Maturity Series Yields; and "Remaining Scheduled Payments" shall mean, with respect to the Called Principal of any Bond, all payments of such Called Principal and interest thereon that would be due on or after the date scheduled for redemption thereof if no redemption of such Called Principal were made prior to its scheduled due date. If this bond or any portion thereof (One Thousand Dollars or a multiple thereof) is called for redemption and payment duly provided for as specified in the Indenture, this bond or such portion thereof, as the case may be, shall cease to be entitled to the lien of the Indenture from and after the date payment is so provided for and shall cease to bear interest from and after the redemption date. Except as otherwise provided in the Fourteenth Supplemental Indenture, in the event of the redemption of a portion only of the principal of this bond, payment of the redemption price will be made at the option of the registered holder, either (a) upon presentation of this bond for notation hereon of such payment of the portion of the principal of this bond so called for redemption, or (b) upon surrender of this bond in exchange for a registered bond or bonds (but only of authorized denominations of the same series) for the unredeemed balance of the principal amount of this bond. The Original Indenture (as supplemented and modified by all Supplemental Indentures executed prior to the date of the Tenth Supplemental Indenture) contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than sixty-six and two-thirds percent in principal amount of the bonds at the time outstanding (determined as provided in the Indenture, as so previously supplemented and modified) including, if more than one series of bonds shall be at the time outstanding, not less than sixty-six and two-thirds percent in principal amount of the bonds at the time outstanding of each series affected, to effect, by an indenture supplemental to the Indenture, modifications or alterations of the Indenture and of the rights and obligations of the Company and of the holders of the bonds and coupons. The Tenth Supplemental Indenture modifies the Indenture to permit the Company and the Trustee, with the consent of the holders of not less than sixty-six and two-thirds percent in principal amount of the bonds at the time outstanding (determined as provided in the Indenture) and affected (consenting as a single class), to effect, by an indenture supplemental to the Indenture, such modifications or alterations. In no event shall any such modification or alteration be made without the written approval or consent of the registered holder hereof which will (a) extend the maturity of this bond or reduce the rate or extend the time of payment of interest hereon, or reduce the amount of the principal hereof, or reduce any premium payable on the redemption hereof, or (b) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of the Indenture, or alter the equal and proportionate security afforded by the lien of the Indenture for the bonds issued thereunder, or (c) reduce the number or percentage of the principal amount of the bonds upon the consent of the holders of which modifications or alterations may be made as aforesaid or defaults may be waived. The foregoing modification made by the Tenth Supplemental Indenture shall become effective without the consent of the holders of any of the First Mortgage Bonds, 10.0% Series due 2004 which were issued under the Tenth Supplemental Indenture, the bonds of this series or any other series of bonds created and issued after the date of the Tenth Supplemental Indenture only (a) when all series of bonds created and issued prior to the date of the Tenth Supplemental Indenture shall have ceased to be outstanding or (b) with the written consent of the holders of the bonds at the time outstanding of each series created and issued prior to the date of the Tenth Supplemental Indenture in the manner provided in the Indenture. This bond is transferable by the registered holder hereof in person or by his duly authorized attorney, on books of the Company kept for the purpose at the principal corporate trust office of the Trustee upon surrender of this bond for cancellation and thereupon a new registered bond of the same series of like principal amount will be issued to the transferee in exchange therefor. The registered holder of this bond at his option may surrender the same for cancellation at said office and receive in exchange therefor the same aggregate principal amount of registered bonds of the same series but of other authorized denominations subject to the terms and conditions set forth in the Indenture. Neither the Company nor the Trustee shall be required to make transfers or exchanges of bonds of this series for a period of ten days next preceding any designation of bonds of said series to be redeemed, and neither the Company nor the Trustee shall be required to make transfers or exchanges of any bonds designated in whole for redemption or that part of any bond designated in part for redemption. The Fourteenth Supplemental Indenture provides that in the event of any default in payment of the interest due on any interest payment date, such interest shall not be payable to the holder of the bond on the original record date but shall be paid to the registered holder of such bond (or one or more Predecessor Bonds, as defined in the Fourteenth Supplemental Indenture) on the subsequent record date established for payment of such defaulted interest. If a default as defined in the Indenture shall occur, the principal of this bond may become or be declared due and payable before maturity in the manner and with the effect provided in the Indenture. The holders, however, of specified percentages in principal amount of the bonds at the time outstanding, to the extent and as provided in the Indenture, may waive certain defaults thereunder and the consequences of such defaults. No recourse shall be had for the payment of the principal of or the premium, if any, or the interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, against any incorporator, stockholder, director or officer, past, present or future, as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or such predecessor or successor corporation, under any constitution or statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, stockholders, directors and officers, as such, being waived and released by the registered holder hereof by the acceptance of this bond and as provided in the Indenture. The Company and the Trustee, any paying agent and any bond registrar may deem and treat the person in whose name this bond is registered, or his registered assigns, as the absolute owner hereof, whether or not this bond shall be overdue, for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustee nor any paying agent nor any bond registrar shall be affected by any notice to the contrary. [FORM OF TRUSTEE's AUTHENTICATION CERTIFICATE FOR BONDS OF THE 2018 SERIES] This is one of the bonds, of the series designated therein, described in the within mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, By:_________________________ Authorized Office [FORM OF ENDORSEMENT ON BONDS OF THE 2018 SERIES WITH RESPECT TO PAYMENTS ON ACCOUNT OF PRINCIPAL] PAYMENTS ON ACCOUNT OF PRINCIPAL ______________________________________________________________________ ______________________________________________________________________ Balance of Principal Date Amount Paid Amount Unpaid Authorized Signature ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ C. Form of Legend. Bonds of the 2018 Series shall bear a legend or legends with respect to (a) the status of such bond under the Securities Act of 1933, as amended, and (b) the existence of arrangements, if any, for the payment of the redemption price of Bonds of the 2018 Series without presentation or surrender thereof, which shall state substantially as follows: "This bond has not been registered under the Securities Act of 1933, as amended, and no transfer hereof may be effected unless (i) the transaction shall be exempt within the meaning of such Act and the rules and regulations of the Securities and Exchange Commission, including Rule 144A, adopted thereunder or (ii) pursuant to a registration statement. [Insert, if applicable - The registered holder of this bond is entitled to the benefits of a Bond Purchase Agreement, dated November 15, 1993, with the Company, approved by and on file with the Trustee, respecting payment of the redemption price of this bond without presentation or surrender thereof, except that any bond paid or redeemed in full shall thereafter be surrendered to the Trustee at its principal office.]" SECTION 1.02. Redemption Provisions for Bonds of the 2018 Series. A. The Bonds of the 2018 Series (i) shall be subject to redemption prior to maturity, at the option of the Company, as a whole at any time or in part from time to time, on or after the date of original issue until and including October 31, 2013, upon payment of the principal amount thereof plus the Yield-Maintenance Premium (as defined in the form of the Bonds of the 2018 Series set forth in Section 1.01.B hereof), if any; (ii) shall be subject to redemption prior to maturity, at the option of the Company, as a whole at any time or in part from time to time, on or after November 1, 2013, upon payment of the principal amount thereof plus the applicable Regular Redemption Premium (as set forth in the tabulation in the form of the Bonds of the 2018 Series set forth in Section 1.01.B hereof); (iii) shall be subject to redemption prior to maturity, at the option of the Company, as a whole at any time or in part from time to time, until and including October 31, 2013, upon payment of the principal amount thereof plus the Yield- Maintenance Premium (as defined in the form of the Bonds of the 2018 Series set forth in Section 1.01.B hereof), if any, through the application pursuant to Article Eight of the Original Indenture of any trust moneys held by the Trustee received from the proceeds of the sale or release of property of the Company subject to the lien of the Indenture (other than any sale referred to in clause (v) of this Subsection A); (iv) shall be subject to redemption prior to maturity, at the option of the Company, as a whole at any time or in part from time to time, on or after November 1, 2013, upon payment of the principal amount thereof plus the applicable Regular Redemption Premium (as set forth in the tabulation in the form of the Bonds of the 2018 Series set forth in Section 1.01.B hereof), through the application pursuant to Article Eight of the Original Indenture of any trust moneys held by the Trustee received from the proceeds of the sale or release of property of the Company subject to the lien of the Indenture (other than any sale referred to in clause (v) of this Subsection A); and (v) shall be subject to redemption prior to maturity, as a whole at any time or in part from time to time, upon payment of the principal amount thereof, through the application pursuant to Article Eight of the Original Indenture of any trust moneys held by the Trustee received from the proceeds of the taking of all or any portion of the property of the Company subject to the lien of the Indenture, or from the proceeds of any sale of such property in anticipation of or in lieu of any such taking; together in any case with interest thereon to the date fixed for redemption, upon not less than 30 days' nor more than 60 days' notice given by registered mail, postage prepaid, to the holder of record at the date of such notice of each Bond of the 2018 Series affected, at his address as shown on the bond register for Bonds of the 2018 Series. Such notice shall be sufficiently given if deposited in the United States mail within such period. Neither the failure to mail such notice, nor any defect in any notice so mailed to any such holder, shall affect the sufficiency of such notice with respect to other holders. The foregoing provisions with respect to notice shall be subject to all other conditions and provisions of the Indenture not inconsistent herewith. In the case of any redemption pursuant to clause (i) or (iii) of this Section 1.02.A, concurrently with the making of the deposit required by Section 10.04 of the Indenture the Company shall deliver to the Trustee a written statement setting forth the calculation of the Yield-Maintenance Premium to be paid. B. Whenever less than all the outstanding Bonds of the 2018 Series are to be redeemed, the Trustee shall redeem the Bonds of the 2018 Series or portions thereof as follows: (i) The Trustee shall prorate the principal amount of Bonds of the 2018 Series to be redeemed among all registered holders of Bonds of the 2018 Series in the proportion that the aggregate principal amount of Bonds registered in the name of each such registered holder bears to the aggregate principal amount of outstanding Bonds of the 2018 Series. In any prorating pursuant to this clause the Trustee shall, according to such method as it shall deem proper in its discretion, make such adjustments, by increasing or decreasing by not more than One Thousand Dollars ($1,000) the amount which would be allocable to any one or more registered holders of Bonds as may be necessary to the end that the principal amount so prorated shall be One Thousand Dollars ($1,000) or an integral multiple thereof. (ii) So long as any initial purchaser of Bonds of the 2018 Series, any nominee of any such initial purchaser, any institutional investor entitled to the benefits of home office payment pursuant to the agreements filed with and approved by the Trustee as referred to in Section 1.01.A hereof, or any other registered holder to which the Company and the Trustee shall have agreed to extend the provisions of this clause shall hold more than one Bond of the 2018 Series, for purposes of any proration pursuant to the procedure set forth in clause (i) above, all Bonds of the 2018 Series registered in the name of any such initial purchaser, nominee, institutional investor or other registered holder shall be deemed to be one Bond of the 2018 Series. In the event of a partial redemption of any Bonds of the 2018 Series registered in the name of such holder, the amount so redeemed shall be allocated (1) pro rata among such Bonds registered in the name of such holder in the proportion that the principal amount of each such Bond so registered bears to the principal amount of all such Bonds so registered or (2) by such other method as such holder reasonably may request. (iii) Subject to the specific provisions set forth hereinabove in this Section 1.02 and in the form of the Bonds of the 2018 Series in Section 1.01.B hereof, the provisions of Article Ten of the Original Indenture shall govern any redemption of the Bonds of the 2018 Series. SECTION 1.03. Depreciation Fund. Notwithstanding the provisions of Section 4.06 of the Original Indenture, the Company hereby covenants that so long as any of the Bonds of the 2018 Series shall remain outstanding (a) the covenants made by the Company in Section 4.04 of the Original Indenture shall continue in full force and effect and (b) Bonds delivered, redeemed or purchased pursuant to said Section 4.04 and any amount of unfunded Bond credits used as a credit in Item 7 of any annual depreciation fund certificate shall be deemed to be funded, unless and until the same shall have been reinstated as provided in said Section 4.04 or in Section 2.03 of the Original Indenture. SECTION 1.04. Restriction on Payment of Dividends on Common Stock. So long as any of the Bonds of the 2018 Series shall remain outstanding, the Company shall not (a) declare or pay any dividend (other than dividends payable in capital stock of the Company) or make any other distribution on any shares of Common Stock, or (b) make any expenditures for the purchase, redemption or other retirement for a consideration of any shares of Common Stock of the Company (other than in exchange for, or from the proceeds of, new shares of capital stock of the Company), if (i) after giving effect to and as a result of the declaration or payment of such dividend, distribution or expenditure, a default (as defined in the Indenture) would be deemed to exist or (ii) the aggregate amount of all such dividends, distributions and expenditures made after December 31, 1992, would exceed the aggregate amount of the net income of the Company available for such dividends, distributions or retirements, accumulated after December 31, 1992, plus the sum of $18,500,000. Net income of the Company for the purpose of this Section shall mean the total operating revenues of the Company, and other income, less all proper deductions for expenses, taxes (including without limitation, income, excess profits and other taxes based on or measured by income or undistributed earnings or income), interest charges and other appropriate items, including provision for maintenance and provision for retirements, depreciation or obsolescence which shall be the amount actually charged by the Company on its books of account (but in respect of utility property not subject to prior liens in an amount not less than the minimum provision for depreciation, as defined in Section 1.32 of the Original Indenture), and after provision for all dividends accrued (whether or not paid) on any outstanding stock of the Company having preference over the Common Stock as to dividends, and otherwise determined in accordance with sound accounting practice; provided, however, that in determining the net income of the Company for the purposes of this Section no deduction or adjustment shall be made for or in respect of (a) expenses in connection with the redemption or retirement of any securities issued by the Company, including any amount paid in excess of the principal amount or par or stated value of securities redeemed or retired, or, in the event that such redemption or retirement is effected with the proceeds of sale of other securities of the Company, any interest or dividends on the securities redeemed or retired from the date on which the funds required for such redemption or retirement are deposited in trust for such purpose to the date of redemption or retirement; (b) profits or losses from sales of property or other assets carried in plant or investment accounts of the Company or from the reacquisition of any securities of the Company, or taxes on or in respect of any such profits; (c) any change in or adjustment of the book value of any assets owned by the Company arising from a revaluation thereof; (d) charges to surplus on account of the amortization or elimination of utility plant adjustment or acquisition accounts or intangibles; and (e) any adjustment (including tax adjustments) applicable to any period prior to January 1, 1993; provided, further, however, that in the calculation of such net income any investments in associated companies and any net earnings of subsidiaries shall be included only to the extent that such amounts represent dividends declared or paid. SECTION 1.05. Minimum Provision for Depreciation. The Company convenants that the term "minimum provision for depreciation" shall have the meaning specified in Section 1.32 of the Original Indenture so long as any of the Bonds of the 2018 Series shall remain outstanding. SECTION 1.06. Duration of Effectiveness of Article One. This Article shall be in force and effect only so long as any of the Bonds of the 2018 Series are outstanding. ARTICLE II PRINCIPAL AMOUNT PRESENTLY TO BE OUTSTANDING SECTION 2.01. The total aggregate principal amount of First Mortgage Bonds of the Company issued and outstanding and presently to be issued and outstanding under the provisions of and secured by the Indenture will be Eighty-Five Million Six Hundred Thousand Dollars ($85,600,000), namely, Three Million Dollars ($3,000,000) principal amount of First Mortgage Bonds, 5 1/8% Series due 1996, Three Million Dollars ($3,000,000) principal amount of First Mortgage Bonds, 7% Series due 1998, Six Hundred Thousand Dollars ($600,000) principal amount of First Mortgage Bonds, 8 5/8% Series due 1999, Three Million Four Hundred Thousand Dollars ($3,400,000) principal amount of First Mortgage Bonds, 9 1/8% Series due 2003, Twelve Million Six Hundred Thousand Dollars ($12,600,000) principal amount of First Mortgage Bonds, 10.7% Series due 2000, Seventeen Million Dollars ($17,000,000) principal amount of First Mortgage Bonds, 10.00% Series due 2004, Nine Million Dollars ($9,000,000) principal amount of First Mortgage Bonds, 9.64% Series due September 1, 2020, Thirteen Million Dollars ($13,000,000) principal amount of First Mortgage Bonds, 8.65% Series due 2022 and Four Million Dollars ($4,000,000) principal amount of First Mortgage Bonds, 6.84% Series due 1997, now issued and outstanding, and Fifteen Million Dollars ($15,000,000) principal amount of First Mortgage Bonds, 6.70% Series due 2018, and Five Million Dollars ($5,000,000) principal amount of First Mortgage Bonds, 5.71% Series due 2000 to be issued upon compliance by the Company with the provisions of Sections 5.02 and 5.03 and/or 5.04 and/or 5.05 of the Original Indenture. ARTICLE III MODIFICATIONS AND AMENDMENTS SECTION 3.01. So long as any of the Bonds of the 2018 Series shall remain outstanding, Article One of the Original Indenture is hereby modified by adding a new Section 1.43 which shall read as follows: "Section 1.43. The term "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks located in The City of New York, or Burlington, Vermont or any other city in which the principal corporate trust office of the Trustee is located (if such office is not located in The City of New York) are authorized or required by law to be closed." SECTION 3.02. Pursuant to clause (i) of Section 18.01 of the Original Indenture, the modification of the Original Indenture effected by Section 3.01 of this Fourteenth Supplemental Indenture shall take effect without the consent of the holders of any of the Bonds at the time outstanding, notwithstanding any of the provisions of Section 18.02 of the Original Indenture. ARTICLE IV MISCELLANEOUS SECTION 4.01. This Fourteenth Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Original Indenture, and shall form a part thereof, and the Original Indenture, as heretofore supplemented and modified and hereby supplemented and modified, is hereby confirmed. Except to the extent inconsistent with the express terms hereof, all of the provisions, terms, covenants and conditions of the Original Indenture, as supplemented and modified, shall be applicable to the Bonds of the 2018 Series to the same extent as if specifically set forth herein. All terms used in this Fourteenth Supplemental Indenture shall be taken to have the same meanings as in the Original Indenture, except in cases where the context clearly indicates otherwise. SECTION 4.02. All recitals in this Fourteenth Supplemental Indenture are made by the Company only and not by the Trustee; and all of the provisions contained in the Original Indenture, as supplemented and modified, in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect hereof as fully and with like effect as if set forth herein in full. SECTION 4.03. This Fourteenth Supplemental Indenture may be executed in several counterparts, and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts, or as many of them as the Company and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 4.04. Although this Fourteenth Supplemental Indenture is dated for convenience and for the purpose of reference as of November 1, 1993, the actual date or dates of execution by the Company and by the Trustee are as indicated by their respective acknowledgments hereto annexed. ARTICLE V SCHEDULE OF PROPERTY ACQUIRED BY GREEN MOUNTAIN POWER CORPORATION AND NOT HERETOFORE SPECIFICALLY DESCRIBED IN THE INDENTURE (1) TRANSMISSION LINES ADDITIONS TO PROPERTY AS DESCRIBED IN ORIGINAL INDENTURE All of the transmission lines and equipment located in the State of Vermont in several cities and towns consisting of approximately 274.7 miles of overhead lines, including necessary crossarms, guys and insulators. 1.5 miles is rated at 115 KV, 9.4 miles is rated at 69 KV, 5.4 miles is rated at 44 KV, and 258.4 miles is rated at 34.5 KV. (2) DISTRIBUTION ADDITIONS TO PROPERTY AS DESCRIBED IN ORIGINAL INDENTURE All the distribution lines and equipment located in the State of Vermont in several cities and towns consisting of approximately 2,332 miles of overhead lines including necessary crossarms, guys, insulators, appurtenances, and line transformers and about 371 miles of underground cable. The Company's property includes approximately 823,300 kVa of transformer capacity and approximately 79,574 customers' metering. It is estimated that at least 80 percent of the above-mentioned lines are located upon public highways. With respect to such parts of the lines as are located upon private property, the Company has the necessary permits, rights in lands or easements enabling it to maintain said lines which said permits, rights in land or easements are part of the property hereby conveyed. (3) PRODUCTION EQUIPMENT UPGRADE PLANT #19 -- ESSEX, VERMONT The Company owns and operates a Hydro Plant in Essex, Vermont. Between May 1989 and December 1991, the Company completed an automation and upgraded facilities of this plant. (4) SUBSTATION IMPROVEMENTS DOVER SUBSTATION #90 -- DOVER, VERMONT The Company owns and operates a Distribution Substation in Dover, Vermont. Between 1989 and 1992, the Company rebuilt and upgraded this substation to increase the capacity in order to supply the increasing demands in the area. BARNET SUBSTATION #14 -- BARNET, VERMONT The Company owns and operates a Distribution Substation in Barnet, Vermont. Between 1990 and 1992, the Company built a new Distribution Substation in Barnet to replace the existing substation which had become obsolete. IN WITNESS WHEREOF, Green Mountain Power Corporation has caused this Indenture to be signed in its corporate name and behalf, by Edwin M. Norse, Vice President, Chief Financial Officer and Treasurer of the Company in that behalf duly authorized, and its corporate seal to be hereunto affixed and attested by its Secretary, and United States Trust Company of New York in token of its acceptance of the trust hereby created has caused this Indenture to be signed in its corporate name and behalf by one of its Assistant Vice Presidents, and its corporate seal to be hereunto affixed and attested by its Secretary or its Assistant Secretary, on the dates indicated by their respective acknowledgments hereto annexed, but as of the day and year first above written. GREEN MOUNTAIN POWER CORPORATION By: /s/Edwin M. Norse ---------------------------- Edwin M. Norse Vice President, Chief Financial Officer and Treasurer Attest: /s/Christopher L. Dutton -------------------------------- Christopher L. Dutton Vice President, General Counsel and Secretary Signed, sealed and delivered on behalf of GREEN MOUNTAIN POWER CORPORATION in the presence of: /s/Penny J. Collins -------------------- Name: Penny J. Collins /s/Ruth C. Dean --------------------- Name: Ruth C. Dean CORPORATE SEAL UNITED STATES TRUST COMPANY OF NEW YORK By: /s/Robert E. Patterson, III ---------------------------- Robert E. Patterson, III Assistant Vice President Attest: /s/Patricia Stermer ----------------------------------- Patricia Stermer Assistant Vice President Signed, sealed and delivered on behalf of UNITED STATES TRUST COMPANY OF NEW YORK in the presence of: /s/William Eising ---------------------------------- Name: William Eising /s/Cynthia Chaney ---------------------------------- Name: Cynthia Chaney CORPORATE SEAL STATE OF VERMONT ) ) SS.: COUNTY OF CHITTENDEN ) On this 27th day of October, A.D. 1993, before me, a Notary Public in and for said County in said State aforesaid, duly commissioned and acting as such, appeared Edwin M. Norse, personally known to me and known by me to be the person who executed the within and foregoing instrument in the name and on behalf of Green Mountain Power Corporation, who, being by me duly sworn, did depose and say that he is the Vice President, Chief Financial Officer and Treasurer of Green Mountain Power Corporation, one of the corporations described in and that executed the said instrument, and he acknowledged said instrument so executed to be his free act and deed and the free act and deed of said corporation, and on oath stated that said instrument was signed and sealed by him as agent and in behalf of said corporation by authority of its Board of Directors, and that the seal affixed to said instrument is the corporate seal of said corporation. Witness my hand and official seal the day and year aforesaid. /s/Donna S. Laffan --------------------------- Name: Donna S. Laffan Notary Public NOTARIAL SEAL State of Vermont Commission Expires: February 10, 1995 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On this 28th day of October, A.D. 1993, before me, a Notary Public in and for said County in said State aforesaid, duly commissioned and acting as such, appeared Robert E. Patterson, III, personally known to me and known by me to be the person who executed the within and foregoing instrument in the name and on behalf of United States Trust Company of New York, who, being by me duly sworn, did depose and say that he is an Assistant Vice President of United States Trust Company of New York, one of the corporations described in and that executed the said instrument, and he acknowledged said instrument so executed to be his free act and deed and the free act and deed of said corporation, and on oath stated that said instrument was signed and sealed by him on behalf of said corporation by authority of its By-Laws, and that the seal affixed to said instrument is the corporate seal of said corporation. Witness my hand and official seal the day and year aforesaid. /s/Thomas McCutcheon ----------------------------------------- Name: Thomas McCutcheon Notary Public NOTARIAL SEAL State of New York Qualified in Nassau County No. 4965095 Commission Expires: April 16, 1994 EX-5 6 EXHIBIT 4-B-15 TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1993 EXHIBIT 4-b-15 GREEN MOUNTAIN POWER CORPORATION to UNITED STATES TRUST COMPANY OF NEW YORK [successor to The Chase Manhattan Bank (National Association), successor to The Chase National Bank of the City of New York], Trustee ________________ FIFTEENTH SUPPLEMENTAL INDENTURE Dated as of November 1, 1993 _________________ Supplemental to Indenture of First Mortgage and Deed of Trust Dated as of February 1, 1955 _________________ This is a Security Agreement relating to Personal Property as well as a Mortgage upon Real Estate and Other Property This FIFTEENTH SUPPLEMENTAL INDENTURE dated as of November 1, 1993 made by GREEN MOUNTAIN POWER CORPORATION, as debtor (its Federal Tax Number being 03-0127430), a corporation duly organized and existing under the laws of the State of Vermont (hereinafter sometimes called the "Company"), whose mailing address and address of its chief executive office is 25 Green Mountain Drive, South Burlington, Vermont 05403, party of the first part, and UNITED STATES TRUST COMPANY OF NEW YORK [successor to The Chase Manhattan Bank (National Association), successor to The Chase National Bank of the City of New York], as Trustee and secured party (its Federal Tax number being 13-5459866), a corporation existing under the laws of the State of New York and having its principal corporate trust office at 114 West 47th Street, New York, New York 10036 (hereinafter sometimes called the "Trustee"), party of the second part. WHEREAS, the Company has heretofore executed and delivered an Indenture of First Mortgage and Deed of Trust dated as of February 1, 1955 (herein sometimes called the "Original Indenture"), to secure, as provided herein, its bonds (in the Original Indenture and herein called the "Bonds"), to be designated generally as its "First Mortgage Bonds", and to be issued in one or more series as provided in the Original Indenture; WHEREAS, the Company has heretofore executed and delivered a First Supplemental Indenture dated as of April 1, 1961, a Second Supplemental Indenture dated as of January 1, 1966, a Third Supplemental Indenture dated as of July 1, 1968, a Fourth Supplemental Indenture dated as of October 1, 1969, a Fifth Supplemental Indenture dated as of December 1, 1973, a Sixth Supplemental Indenture dated as of June 1, 1975, a Seventh Supplemental Indenture dated as of August 1, 1976, an Eighth Supplemental Indenture dated as of December 1, 1979, a Ninth Supplemental Indenture dated as of July 15, 1985, a Tenth Supplemental Indenture dated as of June 15, 1989, an Eleventh Supplemental Indenture dated as of September 1, 1990, a Twelfth Supplemental Indenture dated as of March 1, 1992 and a Thirteenth Supplemental Indenture dated as of March 1, 1992 supplementing and modifying the Original Indenture, each of which Supplemental Indentures provided for, among other things, the creation of a new series of First Mortgage Bonds; WHEREAS, pursuant to the Original Indenture, as heretofore supplemented and modified, there have been executed, authenticated, delivered and issued and there are now outstanding First Mortgage Bonds of series and in principal amounts as follows: Issued and Title Outstanding ----- ----------- First Mortgage Bonds, 5 1/8% Series due 1996 . . . .. . . 3,000,000 First Mortgage Bonds, 7% Series due 1998 . . . . . .. . . 3,000,000 First Mortgage Bonds, 8 5/8% Series due 1999 . . . .. . . . 600,000 First Mortgage Bonds, 9 1/8% Series due 2003 . . . .. . . 3,400,000 First Mortgage Bonds, 10.7% Series due 2000 . . . . . . 12,600,000 First Mortgage Bonds, 10.0% Series due 2004 . . . . . . 17,000,000 First Mortgage Bonds, 9.64% Series due 2020 . . . . . . . 9,000,000 First Mortgage Bonds, 8.65% Series due 2022 . . . . . . 13,000,000 First Mortgage Bonds, 6.84% Series due 1997 . . . . . . . 4,000,000 WHEREAS, the Board of Directors of the Company has established a new series of Bonds to be designated First Mortgage Bonds, 5.71% Series due November 1, 2000 (herein sometimes called "Bonds of the 2000 Series"), and has authorized an issue of Five Million Dollars ($5,000,000) principal amount thereof, and the Company has complied or will comply with all provisions required to issue additional Bonds provided for in the Original Indenture; WHEREAS, the Board of Directors of the Company has also established a new series of Bonds to be designated First Mortgage Bonds, 6.70% Series due November 1, 2018 (herein sometimes called "Bonds of the 2018 Series"), and has authorized an issue of Fifteen Million Dollars ($15,000,000) principal amount thereof, and the Company has complied or will comply with all provisions required to issue additional Bonds provided for in the Original Indenture (said Bonds of the 2018 Series to be issued pursuant to the terms and conditions of a Fourteenth Supplemental Indenture of even date hereof); WHEREAS, the Company desires to execute and deliver this Fifteenth Supplemental Indenture, in accordance with the provisions of the Original Indenture, for the purposes, among others, of (a) further assuring, conveying, mortgaging and assigning unto the Trustee certain additional property acquired by the Company, (b) providing for the creation of a new series of Bonds, designating the series to be created and specifying the form and provisions of the Bonds of such series and (c) adding to the Original Indenture, as supplemented and modified, other covenants and agreements to be hereafter observed by the Company (the Original Indenture, as heretofore supplemented and modified and as hereby supplemented and modified, being herein sometimes called the "Indenture"); and WHEREAS, all acts and proceedings required by law and by the Restated Articles of Association and By-laws of the Company necessary to secure the payment of the principal of, premium, if any, and interest on the Bonds of the 2000 Series, to make the Bonds of the 2000 Series to be issued hereunder, when executed by the Company, authenticated and delivered by the Trustee and duly issued, the valid, binding and legal obligations of the Company, and to constitute the Indenture a valid and binding mortgage for the security of all of the Bonds, in accordance with its and their terms, have been done and taken; and the execution and delivery of this Fifteenth Supplemental Indenture have been in all respects duly authorized: NOW, THEREFORE, THIS FIFTEENTH SUPPLEMENTAL INDENTURE WITNESSETH, that in order to secure the payment of the principal of, premium, if any, and interest on all Bonds at any time issued and outstanding under the Indenture, according to their tenor, purport and effect, to confirm the lien of the Indenture upon the mortgaged property mentioned therein including any and all property purchased, constructed or otherwise acquired by the Company since the date of execution of the Original Indenture and to secure the performance and observance of all the covenants and conditions herein and in the Bonds and in the Indenture contained, to declare the terms and conditions upon and subject to which the Bonds of the 2000 Series are and are to be issued and secured, and held, and for and in consideration of the premises and of the mutual covenants herein contained and of the purchase and acceptance of the Bonds of the 2000 Series by the holders thereof, and of the sum of Ten Dollars ($10) duly paid to the Company by the Trustee, at or before the ensealing and delivery hereof, and for other valuable consideration, the receipt whereof is hereby acknowledged, the Company has executed and delivered this Fifteenth Supplemental Indenture, and by these presents, does grant, bargain, sell, alien, remise, release, convey, assign, transfer, mortgage, pledge, set over and confirm unto United States Trust Company of New York, as Trustee, and to its successors in trust and to its and their successors and assigns forever, all and singular the property, rights, privileges and franchises (other than excepted property) of the character described in the Granting Clauses of the Original Indenture now owned of record or otherwise by the Company, whether or not constructed or acquired since the date of execution of the Original Indenture or which may hereafter be constructed or acquired by it, including, without limiting the generality of the foregoing, the property in Vermont, Massachusetts and Maine described in Article Five hereof, but subject to all exceptions, reservations and matters of the character therein referred to, and expressly excepting and excluding from the lien and operation of the Indenture all properties of the character specifically excepted by Paragraphs B through H of Granting Clause VII of the Original Indenture, to the extent contemplated thereby, and all property heretofore released or otherwise disposed of pursuant to the provisions of the Indenture. TO HAVE AND TO HOLD all of the property, real, personal and mixed, and all and singular the lands, properties, estates, rights, franchises, privileges and appurtenances hereby granted, bargained, sold, aliened, remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over or confirmed or intended so to be, unto the Trustee and its successors in the trust and to its and their successors and assigns, forever. BUT IN TRUST, NEVERTHELESS, for the equal and proportionate use, benefit, security and protection of those who from time to time shall hold the Bonds and coupons, or any of them, authenticated and delivered under the Indenture, and duly issued by the Company, without any discrimination, preference or priority of any one Bond or coupon over any other by reason of priority in the time of issue, sale or negotiation thereof or otherwise, except as provided in Section 12.28 of the Original Indenture, so that, subject to said Section 12.28, each and all of said Bonds and coupons shall have the same right, lien, and privilege under the Indenture, and shall be equally and proportionately secured by the Indenture (except as any sinking and improvement fund, depreciation fund or other fund established in accordance with the provisions of the Indenture may afford additional security for the Bonds of any particular series), with the same effect as if all the Bonds and coupons had been issued, sold and negotiated simultaneously on the date of the delivery of the Original Indenture. It is hereby covenanted, declared and agreed by and between the parties hereto that all Bonds and coupons, if any, are to be authenticated, delivered and issued, and that all property subject or to become subject to the Indenture is to be held, subject to the further covenants, conditions, uses and trusts set forth in the Indenture, and the Company for itself and its successors or assigns does hereby covenant and agree to and with the Trustee and its successor or successors in such trust, for the benefit of those who shall hold said Bonds, or coupons, or any of them, as follows: ARTICLE I BONDS OF THE 2000 SERIES AND CERTAIN PROVISIONS RELATING THERETO SECTION 1.01. A. Terms of Bonds of the 2000 Series. There shall be hereby established a series of Bonds, known as and entitled "First Mortgage Bonds, 5.71% Series due 2000" (herein sometimes referred to as the "Bonds of the 2000 Series"). The aggregate principal amount of the Bonds of the 2000 Series shall be limited to $5,000,000. The definitive Bonds of the 2000 Series shall be registered Bonds without coupons of the denominations of $1,000 or integral multiples thereof. All Bonds of the 2000 Series shall mature November 1, 2000 and will bear interest at the rate of 5.71% per annum until maturity, such interest to be payable semi-annually on May 1 and November 1 in each year commencing May 1, 1994. The principal of and the premium, if any, and interest on the Bonds of the 2000 Series will be paid in lawful money of the United States of America. Principal of and premium, if any, on the Bonds of the 2000 Series will be payable at the principal corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York, or its successor in trust, except that, in case of the redemption as a whole at any time of Bonds of the 2000 Series then outstanding, the Company may designate in the redemption notice other offices or agencies at which, at the option of the holders, Bonds of the 2000 Series may be surrendered. Interest on Bonds of the 2000 Series will be payable at the principal corporate trust office of the Trustee in the Borough of Manhattan, City and State of New York, or its successor in trust, in each case to the holder of record on the record date as hereinbelow defined. Interest on the Bonds of the 2000 Series shall, unless otherwise directed by the holder, be paid by checks payable to the order of the respective holders entitled thereto, and mailed by the Trustee by first class mail, postage prepaid, to such holders at their respective registered addresses shown on the Bond register for the Bonds of the 2000 Series. Notwithstanding the foregoing, pursuant to the fourth paragraph of Section 10.04 of the Original Indenture, the Company has entered into an agreement with the initial purchaser of the Bonds of the 2000 Series providing for the payment to such initial purchaser and any nominees thereof of all payments of principal of, premium, if any, and interest on the Bonds of the 2000 Series held by them by such methods as they shall direct and without the necessity of presenting or surrendering such Bonds, except that any Bond paid or redeemed in full shall thereafter be surrendered to the Trustee at its principal office, and further providing for the extension of such benefits of such agreement to any transferees of the foregoing which are institutional investors acquiring at least $1,000,000 principal amount of Bonds of the 2000 Series. The definitive Bonds of the 2000 Series may be issued in the form of Bonds engraved, printed or lithographed on steel engraved borders. Notwithstanding any provision in the Original Indenture to the contrary, the person in whose name any Bond of the 2000 Series (or one or more Predecessor Bonds, as hereinbelow defined) is registered at the close of business on any record date (as hereinbelow defined) with respect to any interest payment date shall be entitled to receive the interest payable on such interest payment date notwithstanding the cancellation of such Bond of the 2000 Series upon any transfer or exchange thereof (including any exchange effected as an incident to a partial redemption thereof) subsequent to such record date and prior to such interest payment date, except that, if and to the extent that the Company shall default in the payment of the interest due on such interest payment date, then the registered holders of such Bonds of the 2000 Series on such record date shall have no further right to or claim in respect of such defaulted interest as such registered holders on such record date, and the persons entitled to receive payment of any defaulted interest thereafter payable or paid on any Bonds of the 2000 Series shall be the registered holders of such Bonds of the 2000 Series on the record date for payment of such defaulted interest. The term "record date" as used in this Section 1.01, and in the form of the Bonds of the 2000 Series, shall mean the April 15 next preceding a May 1 interest payment date or the October 15 next preceding a November 1 interest payment date, as the case may be, or a special record date established for defaulted interest as hereinafter provided. The term "Predecessor Bond" as used in this Section 1.01, and in the form of the Bonds of the 2000 Series, with respect to any particular Bond of the 2000 Series, shall mean every previous Bond of the 2000 Series evidencing all or a portion of the same debt as that evidenced by such particular Bond of the 2000 Series; and, for the purpose of this definition, any Bond of the 2000 Series authenticated and delivered under Section 3.12 of the Original Indenture in lieu of a mutilated, lost, stolen or destroyed Bond of the 2000 Series shall be deemed to evidence the same debt as the mutilated, lost, stolen or destroyed Bond of the 2000 Series. In case of failure by the Company to pay any interest when due the claim for such interest shall be deemed to have been transferred by transfer of any Bond of the 2000 Series registered on the Bond register, and the Company by not less than 10 days written notice to Bondholders may fix a subsequent record date, not more than 15 days prior to the date fixed for the payment of such interest, for determination of holders entitled to payment of such interest. Such provision for establishment of a subsequent record date, however, shall in no way affect the rights of Bondholders or of the Trustee consequent on any default. Bonds of the 2000 Series shall be dated, and shall accrue interest, as provided in Section 3.05 of the Original Indenture. Interest on the Bonds of the 2000 Series shall be computed on the basis of a year of 360 days consisting of twelve 30-day months. As permitted by the provisions of Section 3.10 of the Original Indenture and upon payment at the option of the Company of a sum sufficient to reimburse it for any stamp tax or other governmental charges as provided in Section 3.11 of the Original Indenture, but without payment of any other charge, Bonds of the 2000 Series may be exchanged for other Bonds of the 2000 Series of different authorized denominations of like aggregate principal amount. The trustee hereunder shall, by virtue of its office as such Trustee, be the registrar and transfer agent of the Company and shall maintain the Bond register for the Bonds of the 2000 Series for the purpose of registering and transferring Bonds of the 2000 Series. Notwithstanding any provision in the Original Indenture to the contrary, neither the Company nor the Trustee shall be required to make transfers or exchanges of Bonds of the 2000 Series for a period of ten days next preceding any designation of Bonds of the 2000 Series to be redeemed and neither the Company nor the Trustee shall be required to make transfers or exchanges of any Bonds designated in whole for redemption or that part of any Bond designated in part for redemption. B. Form of Bonds of the 2000 Series. The Bonds of the 2000 Series and the Trustee's authentication certificate to be executed on the Bonds of said Series shall be in substantially the following forms, respectively: [FORM OF FACE OF BOND OF THE 2000 SERIES] No. R $_______ Private Placement No. 393154 J# 7 GREEN MOUNTAIN POWER CORPORATION FIRST MORTGAGE BOND, 5.71% SERIES DUE 2000 DUE NOVEMBER 1, 2000 GREEN MOUNTAIN POWER CORPORATION, a Vermont corporation (hereinafter sometimes called the "Company"), for value received hereby promises to pay to ___________ or registered assigns, _________ Dollars on November 1, 2000, and to pay to the registered holder hereof interest thereon from the date hereof, or if one or more payments of interest has or have theretofore been made or duly provided for, from the most recent interest payment date to which interest has been paid or duly provided for, semi-annually on May 1 and November 1 in each year, commencing with May 1, 1994, at the rate per annum specified in the title hereof, until maturity. The interest so payable upon any May 1 or November 1 will, subject to certain exceptions referred to on the reverse hereof, be paid to the person in whose name this bond (or one or more Predecessor Bonds, as defined in the Fifteenth Supplemental Indenture mentioned on the reverse hereof) is registered at the close of business on the April 15 preceding such May 1, or the October 15 preceding such November 1, as the case may be. The principal of, premium, if any, and interest on this bond will be paid in lawful money of the United States of America at the principal corporate trust office in the Borough of Manhattan, City and State of New York, of the Trustee under the Indenture mentioned on the reverse hereof, except that, in case of redemption as a whole at any time of the bonds of this series then outstanding, the Company may designate in the redemption notice other offices or agencies at which, at the option of the holder, this bond may be surrendered for redemption and payment. Interest on this bond may be paid by check payable to the order of the registered holder entitled thereto and mailed by the Trustee by first class mail, postage prepaid, to such holder at his address as shown on the Bond register for the bonds of this series. This bond shall not become or be valid or obligatory for any purpose until the authentication certificate hereon shall have been signed by the Trustee. The provisions of this bond are continued on the reverse hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place. IN WITNESS WHEREOF, GREEN MOUNTAIN POWER CORPORATION has caused these presents to be executed in its name and behalf by its President or one of its Vice Presidents, and its corporate seal or a facsimile thereof to be affixed hereto and attested by its Secretary or its Assistant Secretary. Dated: GREEN MOUNTAIN POWER CORPORATION By: _______________________________ Attest: _______________________________ [FORM OF REVERSE OF BOND OF THE 2000 SERIES] This bond is one of the bonds, of the above designated series, of an authorized issue of bonds of the Company known as First Mortgage Bonds, not limited as to maximum aggregate principal amount, all issued or issuable in one or more series under and equally secured (except as any sinking and improvement fund, depreciation fund or other fund established in accordance with the provisions of the Indenture hereinafter mentioned may afford additional security for the bonds of any specific series) by an Indenture of First Mortgage and Deed of Trust dated as of February 1, 1955 (herein sometimes called the "Original Indenture"), duly executed and delivered by the Company to The Chase National Bank of the City of New York (now The Chase Manhattan Bank (National Association)), as Trustee, United States Trust Company of New York having succeeded The Chase Manhattan Bank (National Association) as Trustee (United States Trust Company of New York and its successors under said Indenture being herein sometimes called the "Trustee"), as supplemented and modified by thirteen indentures supplemental thereto, and as supplemented and modified by a Fourteenth Supplemental Indenture dated as of November 1, 1993 thereto (herein sometimes called the "Fourteenth Supplemental Indenture") and a Fifteenth Supplemental Indenture dated as of November 1, 1993 thereto (herein sometimes called the "Fifteenth Supplemental Indenture"), each duly executed and delivered by the Company to the Trustee, to which Indenture of First Mortgage and Deed of Trust and all indentures supplemental thereto (herein sometimes called the "Indenture") reference is hereby made for a description of the property mortgaged and pledged as security for said bonds, the nature and extent of the security, and the rights, duties and immunities thereunder of the Trustee, the rights of the holders of said bonds and of the Trustee and of the Company in respect of such security, and the terms upon which said bonds may be issued thereunder. The bonds of this series are limited to $5,000,000 aggregate principal amount. The bonds of this series are subject to redemption prior to maturity as a whole at any time or in part from time to time, upon payment of the principal amount thereof, by application of the proceeds of any taking of all or any portion of property of the Company subject to the lien of the Indenture, or the proceeds of any sale of such property in anticipation of or in lieu of any such taking, as provided in said Fifteenth Supplemental Indenture, together in any case with interest accrued thereon to the date fixed for redemption; upon prior notice given by registered mail, postage prepaid, as provided in the said Fifteenth Supplemental Indenture to the holders of record of each bond affected not less than 30 days nor more than 60 days prior to the redemption date, all as more fully provided in the Indenture. If this bond or any portion thereof (One Thousand Dollars or a multiple thereof) is called for redemption and payment duly provided for as specified in the Indenture, this bond or such portion thereof, as the case may be, shall cease to be entitled to the lien of the Indenture from and after the date payment is so provided for and shall cease to bear interest from and after the redemption date. Except as otherwise provided in the Fifteenth Supplemental Indenture, in the event of the redemption of a portion only of the principal of this bond, payment of the redemption price will be made at the option of the registered holder, either (a) upon presentation of this bond for notation hereon of such payment of the portion of the principal of this bond so called for redemption, or (b) upon surrender of this bond in exchange for a registered bond or bonds (but only of authorized denominations of the same series) for the unredeemed balance of the principal amount of this bond. The Original Indenture (as supplemented and modified by all Supplemental Indentures executed prior to the date of the Tenth Supplemental Indenture) contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than sixty-six and two-thirds percent in principal amount of the bonds at the time outstanding (determined as provided in the Indenture, as so previously supplemented and modified) including, if more than one series of bonds shall be at the time outstanding, not less than sixty-six and two-thirds percent in principal amount of the bonds at the time outstanding of each series affected, to effect, by an indenture supplemental to the Indenture, modifications or alterations of the Indenture and of the rights and obligations of the Company and of the holders of the bonds and coupons. The Tenth Supplemental Indenture modifies the Indenture to permit the Company and the Trustee, with the consent of the holders of not less than sixty-six and two-thirds percent in principal amount of the bonds at the time outstanding (determined as provided in the Indenture) and affected (consenting as a single class), to effect, by an indenture supplemental to the Indenture, such modifications or alterations. In no event shall any such modification or alteration be made without the written approval or consent of the registered holder hereof which will (a) extend the maturity of this bond or reduce the rate or extend the time of payment of interest hereon, or reduce the amount of the principal hereof, or reduce any premium payable on the redemption hereof, or (b) permit the creation of any lien, not otherwise permitted, prior to or on a parity with the lien of the Indenture, or alter the equal and proportionate security afforded by the lien of the Indenture for the bonds issued thereunder, or (c) reduce the number or percentage of the principal amount of the bonds upon the consent of the holders of which modifications or alterations may be made as aforesaid or defaults may be waived. The foregoing modification made by the Tenth Supplemental Indenture shall become effective without the consent of the holders of any of the First Mortgage Bonds, 10.0% Series due 2004 which were issued under the Tenth Supplemental Indenture, the bonds of this series or any other series of bonds created and issued after the date of the Tenth Supplemental Indenture only (a) when all series of bonds created and issued prior to the date of the Tenth Supplemental Indenture shall have ceased to be outstanding or (b) with the written consent of the holders of the bonds at the time outstanding of each series created and issued prior to the date of the Tenth Supplemental Indenture in the manner provided in the Indenture. This bond is transferable by the registered holder hereof in person or by his duly authorized attorney, on books of the Company kept for the purpose at the principal corporate trust office of the Trustee upon surrender of this bond for cancellation and thereupon a new registered bond of the same series of like principal amount will be issued to the transferee in exchange therefor. The registered holder of this bond at his option may surrender the same for cancellation at said office and receive in exchange therefor the same aggregate principal amount of registered bonds of the same series but of other authorized denominations subject to the terms and conditions set forth in the Indenture. Neither the Company nor the Trustee shall be required to make transfers or exchanges of bonds of this series for a period of ten days next preceding any designation of bonds of said series to be redeemed, and neither the Company nor the Trustee shall be required to make transfers or exchanges of any bonds designated in whole for redemption or that part of any bond designated in part for redemption. The Fifteenth Supplemental Indenture provides that in the event of any default in payment of the interest due on any interest payment date, such interest shall not be payable to the holder of the bond on the original record date but shall be paid to the registered holder of such bond (or one or more Predecessor Bonds, as defined in the Fifteenth Supplemental Indenture) on the subsequent record date established for payment of such defaulted interest. If a default as defined in the Indenture shall occur, the principal of this bond may become or be declared due and payable before maturity in the manner and with the effect provided in the Indenture. The holders, however, of specified percentages in principal amount of the bonds at the time outstanding, to the extent and as provided in the Indenture, may waive certain defaults thereunder and the consequences of such defaults. No recourse shall be had for the payment of the principal of or the premium, if any, or the interest on this bond, or for any claim based hereon, or otherwise in respect hereof or of the Indenture, against any incorporator, stockholder, director or officer, past, present or future, as such, of the Company or of any predecessor or successor corporation, either directly or through the Company or such predecessor or successor corporation, under any constitution or statute or rule of law, or by the enforcement of any assessment or penalty, or otherwise, all such liability of incorporators, stockholders, directors and officers, as such, being waived and released by the registered holder hereof by the acceptance of this bond and as provided in the Indenture. The Company and the Trustee, any paying agent and any bond registrar may deem and treat the person in whose name this bond is registered, or his registered assigns, as the absolute owner hereof, whether or not this bond shall be overdue, for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustee nor any paying agent nor any bond registrar shall be affected by any notice to the contrary. [FORM OF TRUSTEE's AUTHENTICATION CERTIFICATE FOR BONDS OF THE 2000 SERIES] This is one of the bonds, of the series designated therein, described in the within mentioned Indenture. UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee, By: Authorized Office [FORM OF ENDORSEMENT ON BONDS OF THE 2000 SERIES WITH RESPECT TO PAYMENTS ON ACCOUNT OF PRINCIPAL] PAYMENTS ON ACCOUNT OF PRINCIPAL - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- Balance of Principal Date Amount Paid Amount Unpaid Authorized Signature - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- - --------------------------------------------------------------------------- C. Form of Legend. Bonds of the 2000 Series shall bear a legend or legends with respect to (a) the status of such bond under the Securities Act of 1933, as amended, and (b) the existence of arrangements, if any, for the payment of the redemption price of Bonds of the 2000 Series without presentation or surrender thereof, which shall state substantially as follows: "This bond has not been registered under the Securities Act of 1933, as amended, and no transfer hereof may be effected unless (i) the transaction shall be exempt within the meaning of such Act and the rules and regulations of the Securities and Exchange Commission, including Rule 144A, adopted thereunder or (ii) pursuant to a registration statement. [Insert, if applicable - The registered holder of this bond is entitled to the benefits of a Bond Purchase Agreement, dated November 15, 1993, with the Company, approved by and on file with the Trustee, respecting payment of the redemption price of this bond without presentation or surrender thereof, except that any bond paid or redeemed in full shall thereafter be surrendered to the Trustee at its principal office.]" SECTION 1.02. Redemption Provisions for Bonds of the 2000 Series. A. The Bonds of the 2000 Series shall be subject to redemption prior to maturity, as a whole at any time or in part from time to time, upon payment of the principal amount thereof, through the application pursuant to Article Eight of the Original Indenture of any trust moneys held by the Trustee received from the proceeds of the taking of all or any portion of the property of the Company subject to the lien of the Indenture, or from the proceeds of any sale of such property in anticipation of or in lieu of any such taking; together in any case with interest thereon to the date fixed for redemption, upon not less than 30 days' nor more than 60 days' notice given by registered mail, postage prepaid, to the holder of record at the date of such notice of each Bond of the 2000 Series affected, at his address as shown on the bond register for Bonds of the 2000 Series. Such notice shall be sufficiently given if deposited in the United States mail within such period. Neither the failure to mail such notice, nor any defect in any notice so mailed to any such holder, shall affect the sufficiency of such notice with respect to other holders. The foregoing provisions with respect to notice shall be subject to all other conditions and provisions of the Indenture not inconsistent herewith. B. Whenever less than all the outstanding Bonds of the 2000 Series are to be redeemed, the Trustee shall redeem the Bonds of the 2000 Series or portions thereof as follows: (i) The Trustee shall prorate the principal amount of Bonds of the 2000 Series to be redeemed among all registered holders of Bonds of the 2000 Series in the proportion that the aggregate principal amount of Bonds registered in the name of each such registered holder bears to the aggregate principal amount of outstanding Bonds of the 2000 Series. In any prorating pursuant to this clause the Trustee shall, according to such method as it shall deem proper in its discretion, make such adjustments, by increasing or decreasing by not more than One Thousand Dollars ($1,000) the amount which would be allocable to any one or more registered holders of Bonds as may be necessary to the end that the principal amount so prorated shall be One Thousand Dollars ($1,000) or an integral multiple thereof. (ii) So long as any initial purchaser of Bonds of the 2000 Series, any nominee of any such initial purchaser, any institutional investor entitled to the benefits of home office payment pursuant to the agreements filed with and approved by the Trustee as referred to in Section 1.01.A hereof, or any other registered holder to which the Company and the Trustee shall have agreed to extend the provisions of this clause shall hold more than one Bond of the 2000 Series, for purposes of any proration pursuant to the procedure set forth in clause (i) above, all Bonds of the 2000 Series registered in the name of any such initial purchaser, nominee, institutional investor or other registered holder shall be deemed to be one Bond of the 2000 Series. In the event of a partial redemption of any Bonds of the 2000 Series registered in the name of such holder, the amount so redeemed shall be allocated (1) pro rata among such Bonds registered in the name of such holder in the proportion that the principal amount of each such Bond so registered bears to the principal amount of all such Bonds so registered or (2) by such other method as such holder reasonably may request. (iii) Subject to the specific provisions set forth hereinabove in this Section 1.02 and in the form of the Bonds of the 2000 Series in Section 1.01.B hereof, the provisions of Article Ten of the Original Indenture shall govern any redemption of the Bonds of the 2000 Series. SECTION 1.03. Depreciation Fund. Notwithstanding the provisions of Section 4.06 of the Original Indenture, the Company hereby covenants that so long as any of the Bonds of the 2000 Series shall remain outstanding (a) the covenants made by the Company in Section 4.04 of the Original Indenture shall continue in full force and effect and (b) Bonds delivered, redeemed or purchased pursuant to said Section 4.04 and any amount of unfunded Bond credits used as a credit in Item 7 of any annual depreciation fund certificate shall be deemed to be funded, unless and until the same shall have been reinstated as provided in said Section 4.04 or in Section 2.03 of the Original Indenture. SECTION 1.04. Restriction on Payment of Dividends on Common Stock. So long as any of the Bonds of the 2000 Series shall remain outstanding, the Company shall not (a) declare or pay any dividend (other than dividends payable in capital stock of the Company) or make any other distribution on any shares of Common Stock, or (b) make any expenditures for the purchase, redemption or other retirement for a consideration of any shares of Common Stock of the Company (other than in exchange for, or from the proceeds of, new shares of capital stock of the Company), if (i) after giving effect to and as a result of the declaration or payment of such dividend, distribution or expenditure, a default (as defined in the Indenture) would be deemed to exist or (ii) the aggregate amount of all such dividends, distributions and expenditures made after December 31, 1992, would exceed the aggregate amount of the net income of the Company available for such dividends, distributions or retirements, accumulated after December 31, 1992, plus the sum of $18,500,000. Net income of the Company for the purpose of this Section shall mean the total operating revenues of the Company, and other income, less all proper deductions for expenses, taxes (including without limitation, income, excess profits and other taxes based on or measured by income or undistributed earnings or income), interest charges and other appropriate items, including provision for maintenance and provision for retirements, depreciation or obsolescence which shall be the amount actually charged by the Company on its books of account (but in respect of utility property not subject to prior liens in an amount not less than the minimum provision for depreciation, as defined in Section 1.32 of the Original Indenture), and after provision for all dividends accrued (whether or not paid) on any outstanding stock of the Company having preference over the Common Stock as to dividends, and otherwise determined in accordance with sound accounting practice; provided, however, that in determining the net income of the Company for the purposes of this Section no deduction or adjustment shall be made for or in respect of (a) expenses in connection with the redemption or retirement of any securities issued by the Company, including any amount paid in excess of the principal amount or par or stated value of securities redeemed or retired, or, in the event that such redemption or retirement is effected with the proceeds of sale of other securities of the Company, any interest or dividends on the securities redeemed or retired from the date on which the funds required for such redemption or retirement are deposited in trust for such purpose to the date of redemption or retirement; (b) profits or losses from sales of property or other assets carried in plant or investment accounts of the Company or from the reacquisition of any securities of the Company, or taxes on or in respect of any such profits; (c) any change in or adjustment of the book value of any assets owned by the Company arising from a revaluation thereof; (d) charges to surplus on account of the amortization or elimination of utility plant adjustment or acquisition accounts or intangibles; and (e) any adjustment (including tax adjustments) applicable to any period prior to January 1, 1993; provided, further, however, that in the calculation of such net income any investments in associated companies and any net earnings of subsidiaries shall be included only to the extent that such amounts represent dividends declared or paid. SECTION 1.05. Minimum Provision for Depreciation. The Company convenants that the term "minimum provision for depreciation" shall have the meaning specified in Section 1.32 of the Original Indenture so long as any of the Bonds of the 2000 Series shall remain outstanding. SECTION 1.06. Duration of Effectiveness of Article One. This Article shall be in force and effect only so long as any of the Bonds of the 2000 Series are outstanding. ARTICLE II PRINCIPAL AMOUNT PRESENTLY TO BE OUTSTANDING SECTION 2.01. The total aggregate principal amount of First Mortgage Bonds of the Company issued and outstanding and presently to be issued and outstanding under the provisions of and secured by the Indenture will be Eighty-Five Million Six Hundred Thousand Dollars ($85,600,000), namely, Three Million Dollars ($3,000,000) principal amount of First Mortgage Bonds, 5 1/8% Series due 1996, Three Million Dollars ($3,000,000) principal amount of First Mortgage Bonds, 7% Series due 1998, Six Hundred Thousand Dollars ($600,000) principal amount of First Mortgage Bonds, 8 5/8% Series due 1999, Three Million Four Hundred Thousand Dollars ($3,400,000) principal amount of First Mortgage Bonds, 9 1/8% Series due 2003, Twelve Million Six Hundred Thousand Dollars ($12,600,000) principal amount of First Mortgage Bonds, 10.7% Series due 2000, Seventeen Million Dollars ($17,000,000) principal amount of First Mortgage Bonds, 10.00% Series due 2004, Nine Million Dollars ($9,000,000) principal amount of First Mortgage Bonds, 9.64% Series due September 1, 2020, Thirteen Million Dollars ($13,000,000) principal amount of First Mortgage Bonds, 8.65% Series due 2022 and Four Million Dollars ($4,000,000) principal amount of First Mortgage Bonds, 6.84% Series due 1997, now issued and outstanding, and Fifteen Million Dollars ($15,000,000) principal amount of First Mortgage Bonds, 6.70% Series due 2018, and Five Million Dollars ($5,000,000) principal amount of First Mortgage Bonds, 5.71% Series due 2000 to be issued upon compliance by the Company with the provisions of Sections 5.02 and 5.03 and/or 5.04 and/or 5.05 of the Original Indenture. ARTICLE III MODIFICATIONS AND AMENDMENTS SECTION 3.01. So long as any of the Bonds of the 2000 Series shall remain outstanding, Article One of the Original Indenture is hereby modified by adding a new Section 1.43 which shall read as follows: "Section 1.43. The term "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks located in The City of New York, or Burlington, Vermont or any other city in which the principal corporate trust office of the Trustee is located (if such office is not located in The City of New York) are authorized or required by law to be closed." SECTION 3.02. Pursuant to clause (i) of Section 18.01 of the Original Indenture, the modification of the Original Indenture effected by Section 3.01 of this Fifteenth Supplemental Indenture shall take effect without the consent of the holders of any of the Bonds at the time outstanding, notwithstanding any of the provisions of Section 18.02 of the Original Indenture. ARTICLE IV MISCELLANEOUS SECTION 4.01. This Fifteenth Supplemental Indenture is executed and shall be construed as an indenture supplemental to the Original Indenture, and shall form a part thereof, and the Original Indenture, as heretofore supplemented and modified and hereby supplemented and modified, is hereby confirmed. Except to the extent inconsistent with the express terms hereof, all of the provisions, terms, covenants and conditions of the Original Indenture, as supplemented and modified, shall be applicable to the Bonds of the 2000 Series to the same extent as if specifically set forth herein. All terms used in this Fifteenth Supplemental Indenture shall be taken to have the same meanings as in the Original Indenture, except in cases where the context clearly indicates otherwise. SECTION 4.02. All recitals in this Fifteenth Supplemental Indenture are made by the Company only and not by the Trustee; and all of the provisions contained in the Original Indenture, as supplemented and modified, in respect of the rights, privileges, immunities, powers and duties of the Trustee shall be applicable in respect hereof as fully and with like effect as if set forth herein in full. SECTION 4.03. This Fifteenth Supplemental Indenture may be executed in several counterparts, and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts, or as many of them as the Company and the Trustee shall preserve undestroyed, shall together constitute but one and the same instrument. SECTION 4.04. Although this Fifteenth Supplemental Indenture is dated for convenience and for the purpose of reference as of November 1, 1993, the actual date or dates of execution by the Company and by the Trustee are as indicated by their respective acknowledgments hereto annexed. ARTICLE V SCHEDULE OF PROPERTY ACQUIRED BY GREEN MOUNTAIN POWER CORPORATION AND NOT HERETOFORE SPECIFICALLY DESCRIBED IN THE INDENTURE (1) TRANSMISSION LINES ADDITIONS TO PROPERTY AS DESCRIBED IN ORIGINAL INDENTURE All of the transmission lines and equipment located in the State of Vermont in several cities and towns consisting of approximately 274.7 miles of overhead lines, including necessary crossarms, guys and insulators. 1.5 miles is rated at 115 KV, 9.4 miles is rated at 69 KV, 5.4 miles is rated at 44 KV, and 258.4 miles is rated at 34.5 KV. (2) DISTRIBUTION ADDITIONS TO PROPERTY AS DESCRIBED IN ORIGINAL INDENTURE All the distribution lines and equipment located in the State of Vermont in several cities and towns consisting of approximately 2,332 miles of overhead lines including necessary crossarms, guys, insulators, appurtenances, and line transformers and about 371 miles of underground cable. The Company's property includes approximately 823,300 kVa of transformer capacity and approximately 79,574 customers' metering. It is estimated that at least 80 percent of the above-mentioned lines are located upon public highways. With respect to such parts of the lines as are located upon private property, the Company has the necessary permits, rights in lands or easements enabling it to maintain said lines which said permits, rights in land or easements are part of the property hereby conveyed. (3) PRODUCTION EQUIPMENT UPGRADE PLANT #19 -- ESSEX, VERMONT The Company owns and operates a Hydro Plant in Essex, Vermont. Between May 1989 and December 1991, the Company completed an automation and upgraded facilities of this plant. (4) SUBSTATION IMPROVEMENTS DOVER SUBSTATION #90 -- DOVER, VERMONT The Company owns and operates a Distribution Substation in Dover, Vermont. Between 1989 and 1992, the Company rebuilt and upgraded this substation to increase the capacity in order to supply the increasing demands in the area. BARNET SUBSTATION #14 -- BARNET, VERMONT The Company owns and operates a Distribution Substation in Barnet, Vermont. Between 1990 and 1992, the Company built a new Distribution Substation in Barnet to replace the existing substation which had become obsolete. IN WITNESS WHEREOF, Green Mountain Power Corporation has caused this Indenture to be signed in its corporate name and behalf, by Edwin M. Norse, Vice President, Chief Financial Officer and Treasurer of the Company in that behalf duly authorized, and its corporate seal to be hereunto affixed and attested by its Secretary, and United States Trust Company of New York in token of its acceptance of the trust hereby created has caused this Indenture to be signed in its corporate name and behalf by one of its Assistant Vice Presidents, and its corporate seal to be hereunto affixed and attested by its Secretary or its Assistant Secretary, on the dates indicated by their respective acknowledgments hereto annexed, but as of the day and year first above written. GREEN MOUNTAIN POWER CORPORATION By: /s/Edwin M. Norse Edwin M. Norse Vice President, Chief Financial Officer and Treasurer Attest: /s/Christopher L. Dutton Christopher L. Dutton Vice President, General Counsel and Secretary Signed, sealed and delivered on behalf of GREEN MOUNTAIN POWER CORPORATION in the presence of: /s/Penny J. Collins Name: Penny J. Collins /s/Ruth C. Dean Name: Ruth C. Dean CORPORATE SEAL UNITED STATES TRUST COMPANY OF NEW YORK By: /s/Robert E. Patterson, III Robert E. Patterson, III Assistant Vice President Attest: /s/Patricia Stermer Patricia Stermer Assistant Vice President Signed, sealed and delivered on behalf of UNITED STATES TRUST COMPANY OF NEW YORK in the presence of: /s/William Eising Name: William Eising /s/Cynthia Chaney Name: Cynthia Chaney CORPORATE SEAL STATE OF VERMONT ) ) SS.: COUNTY OF CHITTENDEN ) On this 27th day of October, A.D. 1993, before me, a Notary Public in and for said County in said State aforesaid, duly commissioned and acting as such, appeared Edwin M. Norse, personally known to me and known by me to be the person who executed the within and foregoing instrument in the name and on behalf of Green Mountain Power Corporation, who, being by me duly sworn, did depose and say that he is the Vice President, Chief Financial Officer and Treasurer of Green Mountain Power Corporation, one of the corporations described in and that executed the said instrument, and he acknowledged said instrument so executed to be his free act and deed and the free act and deed of said corporation, and on oath stated that said instrument was signed and sealed by him as agent and in behalf of said corporation by authority of its Board of Directors, and that the seal affixed to said instrument is the corporate seal of said corporation. Witness my hand and official seal the day and year aforesaid. /s/Donna S. Laffan Name: Donna S. Laffan Notary Public NOTARIAL SEAL State of Vermont Commission Expires: February 10, 1995 STATE OF NEW YORK ) ) SS.: COUNTY OF NEW YORK ) On this 28th day of October, A.D. 1993, before me, a Notary Public in and for said County in said State aforesaid, duly commissioned and acting as such, appeared Robert E. Patterson, III, personally known to me and known by me to be the person who executed the within and foregoing instrument in the name and on behalf of United States Trust Company of New York, who, being by me duly sworn, did depose and say that he is an Assistant Vice President of United States Trust Company of New York, one of the corporations described in and that executed the said instrument, and he acknowledged said instrument so executed to be his free act and deed and the free act and deed of said corporation, and on oath stated that said instrument was signed and sealed by him on behalf of said corporation by authority of its By-Laws, and that the seal affixed to said instrument is the corporate seal of said corporation. Witness my hand and official seal the day and year aforesaid. /s/Thomas McCutcheon Name: Thomas McCutcheon Notary Public NOTARIAL SEAL State of New York Qualified in Nassau County No. 4965095 Commission Expires: April 16, 1994 EX-6 7 EXHIBIT 10-B-1B TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1993 EXHIBIT 10-b-1b GREEN MOUNTAIN POWER CORPORATION SECOND AMENDED AND RESTATED DEFERRED COMPENSATION PLAN FOR DIRECTORS WHEREAS, Green Mountain Power Corporation (the "Company") established a deferred compensation plan for directors and set forth the terms of such plan by instrument dated September 6, 1985; WHEREAS, on July 16, 1993, pursuant to Paragraph 11 of said instrument, the Board of Directors of the Company exercised its ability to amend the Deferred Compensation Plan for Directors; AND WHEREAS, the Board of Directors of the Company retained the ability, in its sole discretion, under Paragraph 11 of said Amended and Restated Plan, to amend the plan; NOW THEREFORE, the Company hereby amends and restates the Amended and Restated Deferred Compensation Plan for Directors and sets forth the second amended plan (the "Plan") below: 1. Purpose. The purpose of this Plan is to provide a foundation for continued growth of the Company by strengthening its capacity to attract and retain outstand-ing directors in continued service. 2. Participants. All Directors of the Company are eligible to participate in the Plan (the "Participant"). 3. Participant's Election. (a) For the purpose of this Plan, "compensation" shall mean all fees paid by the Company to said Participant as a director or officer of the Company (including any amount of such stipends and fees which a Participant elects to defer under this Plan, but not including amounts paid as expense reimbursement). (b) For the year 1985, a Participant, by filing a written election with the Treasurer on or before October 3l, may elect not to receive a part or (but not to exceed $20,000 per year) all of the compensation that would have otherwise been paid during the remainder of the year. (c) For the year 1986, and each year thereafter, a Participant, by filing a written election with the Treasurer on or before December 31 of the preceding year, (except as herein provided) may elect not to receive a part or all of the compensation (not to exceed $20,000 per year for 1993, and $45,000 per year thereafter) that other-wise would have been paid during such year. For the year 1994 only, a Participant who previously elected not to receive $20,000 of the compensation that otherwise would have been paid during 1994, may elect not to receive up to an additional $25,000 of future 1994 compensation, by filing an additional written election with the Treasurer on or after the effective date of this amendment, January 18, 1994, but not later than February 1, 1994, provided that, such additional election for 1994 shall be subject to the same election of Growth Percentage and time and manner of dis-tribution that the Participant originally elected on or before December 31, 1993. (d) Individuals who first become eligible to participate in this Plan after the election dates specified above, by filing a written election with the Treasurer before becoming eligible to participate, may elect not to receive a part or all of the compen-sation that would have otherwise been paid during the remainder of such year. (e) An election shall not be effective unless the Participant also specifies the manner in which the account will be distributed (see Section 5) and whether the Growth Percentage shall be fixed or floating (see Section 4). Fixed Growth Percentage shall be available only for directors who are less than 68 years old at time of election. (f) Any election to defer compensation under this section shall be irrevoc-able for that year or the remainder of that year (or longer in the case of fixed Growth Percentage) and may not be cancelled for any reason except that if the Board of Directors of the Company or any committee appointed by it (the "Board") amends the Plan pursuant to Section 11, the Participant may elect, prior to the effective date of such amendment, to discontinue contributions for the remainder of the year (or other election period) commencing with the effective date of such amendment. If the Company shall hereafter amend the Plan to modify the maximum amount of deferral (see Section 3(c)) or the Growth Percentage option (see Section 4), a Partici-pant affected by such change may elect that such modified provisions shall apply to the deferral of compensation to be paid during the remainder of the year (or other election period) commencing fifteen days after the date on which the amendment was adopted. (g) If Participant's deferral or deferrals under this Plan result in a reduction in benefits otherwise payable under the Company's Employees' Retirement Plan, the Company will, in addition to the payments otherwise due under this Plan, pay the amount of such reduction at the times and in the manner that such Retirement Plan benefits would have been paid if the Participant had not made any deferrals under this Plan. (h) The Company acknowledges that the deferred compensation provided hereunder constitutes an important and integral portion of the Participant's finan-cial and retirement planning and that in reliance on the availability of these bene-fits, Participant will forego obtaining benefits from other sources. 4. Deferral Account. (a) The Company shall establish a bookkeeping account (the "Deferral Account") for each Participant to record the amounts deferred according to the provisions of Section 3. The Company shall make a credit to each Participant's Deferral Account equal to the portion of the compensation designated in the Deferred Compensation Election Form. Such credit shall be made at the times that payment to the Participant of current compensation would have been made if the deferral had not been elected hereunder. (b) If the Participant shall elect a floating Growth Percentage (hereinafter defined), the Company shall also make a credit to each such Participant's Deferral Account on the last day of each month by an amount equal to a percentage (the "Growth Percentage") of the balance recorded in the account as of the fifteenth day of said month. The Growth Percentage shall equal one-twelfth of the average annual yield on Public Utility Bonds as determined by Moody's Investors Service and published in the issue of "Moody's Public Utility" issued closest to the fifteenth day of said month, or such other Growth Percentage as the Board may from time to time determine to be substantially equivalent to the average annual yield on Public Utility Bonds as determined by Moody's Investors Service. The rating level to be used for computing the Growth Percentage for each deferral shall be the Company's rating at the time the deferral election is executed. (c) If the Participant shall elect a fixed Growth Percentage, such as may, from time to time, be offered by the Company, the Participant shall so signify on his Deferred Compensation Election Form and Growth Percentages will be credited to such Participant's account in accordance with the terms and schedule as shown on the Deferred Compensation Election Form executed by the Participant. (d) As close to the end of each calendar year as possible, the Company shall provide each Participant with a statement setting forth the Deferral Account balance. 5. Distribution of Deferral Account. Upon (a) the termination of a Partici-pant's service as a director for any reason, whether by death, disability, retirement or resignation (hereinafter collectively the "Termination Date"), or (b) during the course of the Participant's service as a director, the Company shall pay to the Parti- cipant the balance then credited to the account, in the amount and at the times indicated by the Participant in writing at the time of executing the Deferred Com-pensation Election Form, provided that, if the Participant has executed a Deferred Compensation Election Form indicating that payment shall be made before his or her Termination Date, no such election shall be for a deferral period of less than three (3) years. At the request of a Participant because of that Participant's hardship or disability, the Board may, in its sole discretion, vary the manner and time for making any of the aforementioned distributions of the Deferral Account. However, neither a Par-ticipant nor the Board may defer the distribution of the Deferral Account more than ten years from the Termination Date. During the period of time that payments are being made to a Participant who has elected a floating Growth Percentage, the Growth Percentage shall be applied to the unpaid balance of the Deferral Account in the manner prescribed herein, and the resulting growth amount shall be paid to the Participant upon the due date of the next regular distribution payment. Participants who elect a fixed Growth Per-centage will be paid in accordance with the provisions of the Deferred Compensa- tion Election Form. 6. Nature of Accounts. All amounts credited to Deferral Accounts shall remain the sole property of the Company and shall be usable by it as a part of its general funds for any legal purpose whatever. The Deferral Account shall exist only for the purpose of facilitating the computation of benefits hereunder. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust or escrow of any kind, or a fiduciary relationship between the Company and the Participant, the designated beneficiary or any other person. To the extent that any person acquires a right to receive payments from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. 7. Beneficiary Designation. A Participant may designate a beneficiary to re-ceive, in the event of Participant's death all amounts which are then and thereafter payable under the Plan. Beneficiaries shall receive such amounts in accordance with the Participant's specifications (see Section 5). Such designation and any subsequent changes thereto shall be made in writing and filed with the Treasurer. In the event of the Participant's death prior to receipt of the total Deferral Account and without so designating a beneficiary, the balance of said Deferral Account shall be paid to Participant's spouse, if then living, otherwise to Participant's estate in accordance with the election made pursuant to Section 5. 8. Nontransferability. No right to payment under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right to payment shall, in any manner, be liable for or subject to the debts, contracts, liabilities or torts of the person entitled thereto. If, at the time when payments are to be made hereunder, Participant or the beneficiary are in-debted to the Company, then any payments remaining to be made hereunder may, at the discretion of the Company, be reduced by the amount of such indebtedness. An election by the Company not to reduce such payments shall not constitute a waiver of its claim for such indebtedness. 9. Plan Interpretation. The Board shall have full power and authority to interpret, construe and administer this Plan, and the Board's interpretations and construction thereof, and actions thereunder, including any valuation of the Deferral Account, or the amount or recipient of the payment to be made therefrom, shall be binding and conclusive on all persons for all purposes. No member of the Board shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to that member's own willful misconduct or lack of good faith. 10. Successors and Assigns. This Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant and the Parti-cipant's heirs, executors, administrators and legal representatives. 11. Amendment and Termination. The Board may, at its sole discretion, at any time, amend or terminate this Plan with respect to any future period, provided that in no event shall such amendment or termination result in a reduction in benefits if the Participant has completed the scheduled deferral of compensation. If the Participant has not completed the scheduled deferral of compensation at the time of the Plan amendment or termination, the Participant's benefits may be reduced only on a pro rata basis computed on the proportion of deferrals not yet made. Notice of any such amendment or termination shall be given to the Parti-cipants not later than sixty (60) days before the effective date(s) thereof. 12. Reorganization of the Company. The Company agrees that it will not merge or consolidate with any other company, business, corporation, partnership, or organization, and/or that it will not permit any of its activities to be taken over unless and until the succeeding or continuing corporation expressly assumes all rights, duties, privileges and obligations herein set forth. In the event the Company fails to comply with this provision, Participant shall be entitled to benefits equal to one hundred twenty-five percent (125%) of those benefits otherwise provided for herein. 13. Applicable Law. This Plan shall be construed in accordance with and governed by the laws of the State of Vermont. 14. Arbitration. Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by arbitration in Burlington, Vermont, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. In the event that the Participant prevails and is awarded benefits or money damages by the arbitrator, such benefits or money damages shall be equal to one hundred twenty- five percent (125%) of the amount otherwise due under this Plan; however, if the arbitrator finds that the Company acted in good faith, such benefits or damages shall only be equal to one hundred percent (100%) of the amount due under this Plan. 15. Attorney's Fees. The Company shall pay the Participant all costs and ex-penses, including reasonable attorney's fees and arbitration costs, incurred by the Participant in reasonably exercising any of his/her rights hereunder or enforcing any terms, conditions or provisions hereof. ACKNOWLEDGMENT OF ARBITRATION This Plan contains an agreement to arbitrate. After the Participant signs an election pursuant to this Plan, the Company and the Participant understand that they will not be able to bring a lawsuit concern-ing any dispute that may arise which is covered by the arbitration agreement, unless it involves a question of constitutional or civil rights. Instead, the Company and the Participant agree to submit any such dispute to an impartial arbitrator. IN WITNESS WHEREOF, the Company has caused this Amended and Restated Plan to be executed by its duly authorized officer as of the 18th day of January, 1994. IN THE PRESENCE OF: GREEN MOUNTAIN POWER CORPORATION /s/ Donna S. Laffan By: /s/ Douglas G. Hyde Secretary Its President and Chief Executive Officer EX-7 8 EXHIBIT 10-D-1C TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1993 EXHIBIT 10-d-1c GREEN MOUNTAIN POWER CORPORATION SECOND AMENDED AND RESTATED DEFERRED COMPENSATION PLAN FOR CERTAIN OFFICERS WHEREAS, Green Mountain Power Corporation (the "Company") established a deferred compensation plan for certain officers and set forth the terms of such plan by instrument dated September 6, 1985; WHEREAS, on July 16, 1993, pursuant to Paragraph 11 of said instrument, the Board of Directors of the Company exercised its ability to amend the Deferred Compensation Plan for Certain Officers by adopting the Amended and Restated Deferred Compensation Plan For Certain Officers; AND WHEREAS, the Board of Directors of the Company retained the ability, in its sole discretion, under Paragraph 11 of said Amended and Restated Plan, to amend the plan; NOW THEREFORE, the Company hereby amends and restates the Amended and Restated Deferred Compensation Plan for Certain Officers and sets forth the second amended and restated plan (the "Plan") below: 1. Purpose. The purpose of this Plan is to provide a foundation for continued growth of the Company by strengthening its capacity to attract and retain outstanding executives in key positions. 2. Participants. An officer of the Company with one of the following titles, or an officer or employee designated by resolution of the Board of Directors, is eligible to participate in the Plan: President, Executive Vice President, Senior Vice President, Vice President, Assistant Vice President, General Counsel, Assistant General Counsel, Secretary, Treasurer, Assistant Treasurer and Controller. A person once eligible to participate in the Plan shall be known as a "Participant." 3. Participant's Election. (a) For the purpose of this Plan, "compensation" shall mean the salary paid by the Company to said Participant as an officer of the Company (including any amount of such salary which a Participant elects to defer under this Plan, but not including amounts credited to gross pay under the Company's automobile policy). (b) For the year 1985, a Participant, by filing a written election with the Treasurer on or before October 31, may elect not to receive a part or all (but not to exceed $20,000 per year) of the compensation that would have otherwise been paid during the remainder of the year. (c) For the year 1986, and each year thereafter, a Participant, by filing a written election with the Treasurer on or before December 31 of the preceding year (except as herein provided), may elect not to receive a part or all of the compensation (not to exceed $20,000 per year through the year 1992, and $35,000 per year thereafter) that otherwise would have been paid during such year. For the year 1993 only, a Participant who previously elected not to receive $20,000 of the compensation that otherwise would have been paid during 1993 may elect not to receive up to an additional $15,000 of future 1993 compensation, by filing an additional written election with the Treasurer on or after the effective date of this amendment, July 16, 1993, but no later than August 1, 1993, provided that, such additional election for 1993 shall be subject to the same election of Growth Percentage and time and manner of distribution that the Participant originally elected on or before December 31, 1992. (d) Individuals who first become eligible to participate in this Plan after the election dates specified above, by filing a written election with the Treasurer before becoming eligible to participate, may elect not to receive a part or all of the compensation that would have otherwise been paid during the remainder of such year. (e) An election shall not be effective unless the Participant also specifies the manner in which the account will be distributed (see Section 5) and whether the Growth Percentage shall be fixed or floating (see Section 4). Fixed Growth Percentage shall only be available for officers who are less than 61 years old at time of election. (f) Any election to defer compensation under this section shall be irrevocable for that year or the remainder of that year (or longer in the case of fixed Growth Percentage) and may not be cancelled for any reason except that if the Board of Directors of the Company or any committee appointed by it (the "Board") amends the Plan pursuant to Paragraph 11, the Participant may elect, prior to the effective date of such amendment, to discontinue contributions for the remainder of the year (or other election period) commencing with the effective date of such amendment. If the Company shall hereafter amend the Plan to modify the maximum amount of deferral (see Paragraph 3(c)) or the Growth Percentage option (see Paragraph 4), a Participant affected by such change may elect that such modified provisions shall apply to the deferral of compensation to be paid during the remainder of the year (or other election period) commencing fifteen days after the date on which the amendment was adopted. (g) If Participant's deferral or deferrals under this Plan result in a reduction in benefits otherwise payable under the Company's Employees' Retirement Plan, the Company will, in addition to the payments otherwise due under this Plan, pay the amount of such reduction at the times and in the manner that such Retirement Plan benefits would have been paid if the Participant had not made any deferrals under this Plan. (h) The Company acknowledges that the deferred compensation provided hereunder constitutes an important and integral portion of the Participant's financial and retirement planning, and that in reliance on the availability of these benefits, the Participant will forego obtaining benefits from other sources. 4. Deferral Account. (a) The Company shall establish a bookkeeping account (the "Deferral Account") for each Participant to record the amounts deferred according to the provisions of Section 3. The Company shall make a credit to each Participant's Deferral Account equal to the portion of the compensation designated in the Deferred Compensation Election Form. Such credit shall be made at the times that payment to the Participant of current compensation would have been made if the deferral had not been elected hereunder. (b) If the Participant shall elect a floating Growth Percentage (hereinafter defined), the Company shall also make a credit to each such Participant's Deferral Account on the last day of each month by an amount equal to a percentage (the "Growth Percentage") of the balance recorded in the account as of the fifteenth day of said month. The Growth Percentage shall equal one-twelfth of the average annual yield on Public Utility Bonds as determined by Moody's Investors Service and published in the issue of "Moody's Public Utility" issued closest to the fifteenth day of said month, or such other Growth Percentage as the Board may from time to time determine to be substantially equivalent to the average annual yield on Public Utility Bonds as determined by Moody's Investors Service. The rating level to be used for computing the Growth Percentage for each deferral, shall be the Company's rating at the time the deferral election is executed. (c) If the Participant shall elect a fixed Growth Percentage, such as may, from time to time, be offered by the Company, the Participant shall so signify on his Deferred Compensation Election Form and Growth Percentages will be credited to such Participant's account in accordance with the terms and schedule as shown on the Deferred Compensation Election Form executed by the Participant. (d) As close to the end of each calendar year as possible, the Company shall provide each Participant with a statement setting forth the Deferral Account balance. 5. Distribution of Deferral Account. Upon the termination of a Participant's employment for any reason, whether by death, disability, retirement or resignation (hereinafter collectively the "Termination Date"), the Company shall pay to the Participant the balance then credited to the account, in the amount and at the times indicated by the Participant in writing at the time of executing the Deferred Compensation Election Form. At the request of a Participant because of that Participant's hardship or disability, the Board may, in its sole discretion, vary the manner and time for making any of the aforementioned distributions of the Deferral Account. However, neither a Participant nor the Board may defer the distribution of the Deferral Account more than ten years from the Termination Date. During the period of time that payments are being made to a Participant who has elected a floating Growth Percentage, the Growth Percentage shall be applied to the unpaid balance of the Deferral Account in the manner prescribed herein, and the resulting growth amount shall be paid to the Participant upon the due date of the next regular distribution payment. Participants who elect a fixed Growth Percentage will be paid in accordance with the provisions of the Deferred Compensation Election Form. 6. Nature of Accounts. All amounts credited to Deferral Accounts shall remain the sole property of the Company and shall be usable by it as a part of its general funds for any legal purpose whatever. The Deferral Account shall exist only for the purpose of facilitating the computation of benefits hereunder. Nothing contained in this Plan and no action taken pursuant to the provisions of this Plan shall create or be construed to create a trust or escrow of any kind, or a fiduciary relationship between the Company and the Participant, the designated beneficiary or any other person. To the extent that any person acquires a right to receive payments from the Company under this Plan, such right shall be no greater than the right of any unsecured general creditor of the Company. 7. Beneficiary Designation. A Participant may designate a beneficiary to receive, in the event of Participant's death all amounts which are then and thereafter payable under the Plan. Beneficiaries shall receive such amounts in accordance with the Participant's specifications (see Section 5). Such designation and any subsequent changes thereto shall be made in writing and filed with the Treasurer. In the event of the Participant's death prior to receipt of the total Deferral Account and without so designating a beneficiary, the balance of said Deferral Account shall be paid to Participant's spouse, if then living, otherwise to Participant's estate in accordance with the election made pursuant to Section 5. 8. Nontransferability. No right to payment under this Plan shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right to payment shall, in any manner, be liable for or subject to the debts, contracts, liabilities or torts of the person entitled thereto. If, at the time when payments are to be made hereunder, Participant or the beneficiary are indebted to the Company, then any payments remaining to be made hereunder may, at the discretion of the Company, be reduced by the amount of such indebtedness. An election by the Company not to reduce such payments shall not constitute a waiver of its claim for such indebtedness. 9. Plan Interpretation. The Board shall have full power and authority to interpret, construe and administer this Plan, and the Board's interpretations and construction thereof, and actions thereunder, including any valuation of the Deferral Account, or the amount or recipient of the payment to be made therefrom, shall be binding and conclusive on all persons for all purposes. No member of the Board shall be liable to any person for any action taken or omitted in connection with the interpretation and administration of this Plan unless attributable to that member's own willful misconduct or lack of good faith. 10. Successors and Assigns. This Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the Participant and the Participant's heirs, executors, administrators and legal representatives. 11. Amendment and Termination. The Board may, at its sole discretion, at any time, amend or terminate this Plan with respect to any future period, provided that in no event shall such amendment or termination result in a reduction in benefits if the Participant has completed the scheduled deferral of compensation. If the Participant has not completed the scheduled deferral of compensation at the time of the Plan amendment or termination, the Participant's benefits may be reduced only on a pro rata basis computed on the proportion of deferrals not yet made. Notice of any such amendment or termination shall be given to the Participants not later than sixty (60) days before the effective date(s) thereof. 12. Reorganization of the Company. The Company agrees that it will not merge or consolidate with any other company, business, corporation, partnership, or organization, and/or that it will not permit any of its activities to be taken over unless and until the succeeding or continuing corporation or business entity expressly assumes all rights, duties, privileges and obligations herein set forth. In the event the Company fails to comply with this provision, the Participant shall be entitled to benefits equal to one hundred twenty-five percent (125%) of those benefits otherwise provided for herein. 13. Applicable Law. This Plan shall be construed in accordance with and governed by the laws of the State of Vermont. 14. Arbitration. Any dispute or controversy arising under or in connection with this Plan shall be settled exclusively by arbitration in Burlington, Vermont in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. In the event that the Participant prevails and is awarded benefits or money damages by the arbitrator, such benefits or damages shall be equal to one hundred twenty-five percent (125%) of the amount otherwise due under this Plan; however, if the arbitrator finds that the Company acted in good faith, such benefits or damages shall only be equal to one hundred percent (100%) of the amount due under this Plan. 15. Attorney's Fees. The Company shall pay the Participant all costs and expenses, including reasonable attorney's fees and arbitration costs, incurred by the Participant in reasonably exercising any of his/her rights hereunder, or in enforcing any terms, conditions, or provisions hereof. ACKNOWLEDGMENT OF ARBITRATION This Plan contains an agreement to arbitrate. After the Participant signs an election pursuant to this Plan, the Company and Participant understand that they will not be able to bring a lawsuit concerning any dispute that may arise which is covered by the arbitration agreement, unless it involves a question of constitutional or civil rights. Instead, the Company and the Participant agree to submit any such dispute to an impartial arbitrator. IN WITNESS WHEREOF, the Company has caused this Second Amended and Restated Deferred Compensation Plan for Certain Officers to be executed by its duly authorized officer as of the 16th day of July, 1993. IN THE PRESENCE OF: GREEN MOUNTAIN POWER CORPORATION /s/ C. L. Dutton By: /s/ Douglas G. Hyde Secretary Douglas G. Hyde Its President and Chief Executive Officer EX-8 9 EXHIBIT 10-D-1D TO FORM 10-K FOR YEAR ENDED DECEMBER 31, 1993 EXHIBIT 10-d-1d Amendment No. 93-1 To The Deferred Compensation Plan For Certain Officers As Amended and Restated Effective July 16, 1993 ____________________________________________________ Effective December 8, 1993, the first paragraph of Section 5 of said Plan shall be amended to read as follows: ******************** 5. Distribution of Deferral Account. Upon (a) the termination of a Participant's employment for any reason, whether by death, disability, retirement or resignation (hereinafter collectively the "Termination Date"), or (b) during the course of the Participant's employment, the Company shall pay to the Participant the balance then credited to the account, in the amount and at the times indicated by the Participant in writing at the time of executing the Deferred Compensation Election Form, provided that, if the Participant has executed a Deferred Compensation Election Form indicating that payment shall be made before his or her Termination Date, no such election shall be for a deferral period of less than three (3) years. The provisions of subparagraph (b) of this section shall be effective with respect to all Deferred Compensation Forms executed with respect to compensation for calendar years after 1993. ******************** In witness whereof, the Company has caused this Amendment to be executed by its duly elected officer this 22nd day of December 1993. GREEN MOUNTAIN POWER CORPORATION By: /s/Douglas G. Hyde Its President & Chief Executive Officer Attest: /s/ Donna S. Laffan Witness (seal) (Board of Directors: 12/8/93) -----END PRIVACY-ENHANCED MESSAGE-----