------------------------------------------------
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D. C. 20549
-----------------------------------
FORM
10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
FOR THE
QUARTERLY PERIOD ENDED MARCH 31, 2010
- OR
-
¨
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
-----------------------------------
Commission
File No. 333-103749
MAINE
& MARITIMES CORPORATION
A Maine
Corporation I.R.S.
Employer Identification No. 30-0155348
209 STATE
STREET, PRESQUE ISLE, MAINE 04769
(207)
760-2499
-----------------------------------
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 whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes
¨
. No
¨
.
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. (Check one):
|
Large
accelerated filer
¨
.
|
Accelerated
filer
¨
.
|
|
|
Non-accelerated
filer
¨
|
Smaller
reporting company
x
.
|
|
|
(Do not check
if a smaller reporting company)
|
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes
¨
. No
x
.
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of May 10, 2010.
Common
Stock, $7.00 par value – 1,683,274 shares
MAINE & MARITIMES
CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
(Unaudited)
(In
thousands of dollars, except basic and diluted share and per share
information)
|
|
Three
Months Ended
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Operating
Revenues
|
|
|
|
|
|
|
Regulated
Revenues
|
|
$
|
10,055
|
|
|
$
|
10,102
|
|
Unregulated
Utility Services Revenues
|
|
|
22
|
|
|
|
194
|
|
Total
Operating Revenues
|
|
|
10,077
|
|
|
|
10,296
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
Regulated
Operation and Maintenance
|
|
|
4,599
|
|
|
|
3,788
|
|
Unregulated
Utility Services Operation and Maintenance
|
|
|
9
|
|
|
|
134
|
|
Other
Unregulated Operation and Maintenance (1)
|
|
|
340
|
|
|
|
159
|
|
Depreciation
|
|
|
705
|
|
|
|
596
|
|
Amortization
of Stranded Costs
|
|
|
2,583
|
|
|
|
2,700
|
|
Amortization
|
|
|
75
|
|
|
|
30
|
|
Taxes
Other Than Income
|
|
|
488
|
|
|
|
451
|
|
Provision
for Income Taxes—Regulated
|
|
|
609
|
|
|
|
973
|
|
Benefit
of Income Taxes—Unregulated
|
|
|
(142
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
9,266
|
|
|
|
8,779
|
|
|
|
|
|
|
|
|
|
|
Operating
Income
|
|
|
811
|
|
|
|
1,517
|
|
|
|
|
|
|
|
|
|
|
Other
Income (Deductions)
|
|
|
|
|
|
|
|
|
Equity
in Income of Associated Companies
|
|
|
62
|
|
|
|
28
|
|
Interest
and Dividend Income
|
|
|
-
|
|
|
|
1
|
|
Benefit
of Income Taxes
|
|
|
19
|
|
|
|
2
|
|
Other—Net
|
|
|
(29
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Deductions)
|
|
|
52
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Income
Before Interest Charges
|
|
|
863
|
|
|
|
1,526
|
|
|
|
|
|
|
|
|
|
|
Interest
Charges
|
|
|
|
|
|
|
|
|
Long-Term
Debt and Notes Payable
|
|
|
421
|
|
|
|
451
|
|
Less
Stranded Costs Carrying Charge
|
|
|
(231
|
)
|
|
|
(331
|
)
|
|
|
|
|
|
|
|
|
|
Total
Interest Charges
|
|
|
190
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
Net
Income Available for Common Stockholders
|
|
$
|
673
|
|
|
$
|
1,406
|
|
|
|
|
|
|
|
|
|
|
Average
Shares of Common Stock Outstanding - Basic
|
|
|
1,682,599
|
|
|
|
1,679,699
|
|
Average
Shares of Common Stock Outstanding - Diluted
|
|
|
1,683,149
|
|
|
|
1,680,402
|
|
|
|
|
|
|
|
|
|
|
Basic
Earnings Per Share of Common Stock From Net Income
|
|
$
|
0.40
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
|
Diluted
Earnings Per Share of Common Stock From Net Income
|
|
$
|
0.40
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|
|
(1)
Unregulated operation and maintenance expense and income tax benefits
included in continuing operations is the activity of the holding company,
including operating expenses of MAM USG, other corporate costs directly
associated with unregulated operations, and other costs that cannot be
charged to the regulated utility.
|
|
See Notes to Consolidated Financial
Statements
MAINE & MARITIMES CORPORATION AND
SUBSIDIARIES
Statements of Consolidated Cash Flows
(Unaudited)
(In
thousands of dollars)
|
|
Three
Months Ended
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Cash
Flow From Operating Activities
|
|
|
|
|
|
|
Net
Income
|
|
$
|
673
|
|
|
$
|
1,406
|
|
Adjustments
to Reconcile Net Income to Net Cash Provided by
Operations:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
705
|
|
|
|
596
|
|
Amortization
of Intangibles
|
|
|
75
|
|
|
|
30
|
|
Amortization
of Seabrook
|
|
|
278
|
|
|
|
278
|
|
Deferred
Income Taxes—Net
|
|
|
(873
|
)
|
|
|
(688
|
)
|
Deferred
Investment Tax Credits
|
|
|
(4
|
)
|
|
|
(4
|
)
|
Change
in Deferred Regulatory and Debt Issuance Costs
|
|
|
1,683
|
|
|
|
1,950
|
|
Change
in Benefit Obligations
|
|
|
(315
|
)
|
|
|
(208
|
)
|
Change
in Deferred Directors' Compensation
|
|
|
397
|
|
|
|
(81
|
)
|
Change
in Current Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts
Receivable and Unbilled Revenue from Utility
|
|
|
299
|
|
|
|
1,422
|
|
Other
Current Assets
|
|
|
(67
|
)
|
|
|
191
|
|
Accounts
Payable
|
|
|
374
|
|
|
|
(363
|
)
|
Other
Current Liabilities
|
|
|
1,594
|
|
|
|
730
|
|
Other—Net
|
|
|
210
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
|
Net
Cash Flow Provided By Operating Activities
|
|
|
5,029
|
|
|
|
5,509
|
|
|
|
|
|
|
|
|
|
|
Cash
Flow From Financing Activities
|
|
|
|
|
|
|
|
|
Dividends
Paid
|
|
|
(84
|
)
|
|
|
(84
|
)
|
Repayments
of Long-Term Debt
|
|
|
(285
|
)
|
|
|
(349
|
)
|
Payments
of Capital Lease Obligations
|
|
|
(52
|
)
|
|
|
(48
|
)
|
Short-Term
Debt Repayments, Net
|
|
|
(2,800
|
)
|
|
|
(3,000
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Flow Used For Financing Activities
|
|
|
(3,221
|
)
|
|
|
(3,481
|
)
|
|
|
|
|
|
|
|
|
|
Cash
Flow From Investing Activities
|
|
|
|
|
|
|
|
|
Change
in Restricted Investments
|
|
|
1
|
|
|
|
(850
|
)
|
Investment
in Fixed Assets
|
|
|
(1,394
|
)
|
|
|
(2,231
|
)
|
|
|
|
|
|
|
|
|
|
Net
Cash Flow Used For Investing Activities
|
|
|
(1,393
|
)
|
|
|
(3,081
|
)
|
|
|
|
|
|
|
|
|
|
Increase
(Decrease) in Cash and Cash Equivalents
|
|
|
415
|
|
|
|
(1,053
|
)
|
Cash
and Cash Equivalents at Beginning of Period
|
|
|
747
|
|
|
|
1,846
|
|
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents at End of Period
|
|
$
|
1,162
|
|
|
$
|
793
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
Cash
Paid During the Period for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
426
|
|
|
$
|
476
|
|
Income
Taxes
|
|
$
|
35
|
|
|
$
|
1,088
|
|
Non-Cash
Activities:
|
|
|
|
|
|
|
|
|
Dividends
Declared, Not Yet Paid
|
|
$
|
84
|
|
|
$
|
84
|
|
Fair
Market Value of Stock Issued to Directors and Officers
|
|
$
|
24
|
|
|
$
|
34
|
|
See Notes
to Consolidated Financial Statements
MAINE & MARITIMES CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(In
thousands of dollars)
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
ASSETS
|
|
|
|
|
|
|
Plant:
|
|
|
|
|
|
|
Electric
Plant in Service
|
|
$
|
117,754
|
|
|
$
|
116,729
|
|
Non-Utility
Plant
|
|
|
77
|
|
|
|
101
|
|
Less
Accumulated Depreciation
|
|
|
(48,349
|
)
|
|
|
(47,690
|
)
|
|
|
|
|
|
|
|
|
|
Net
Plant in Service
|
|
|
69,482
|
|
|
|
69,140
|
|
Construction
Work-in-Progress
|
|
|
983
|
|
|
|
901
|
|
|
|
|
|
|
|
|
|
|
Total
Plant Assets
|
|
|
70,465
|
|
|
|
70,041
|
|
|
|
|
|
|
|
|
|
|
Investments
in Associated Companies
|
|
|
1,197
|
|
|
|
1,136
|
|
|
|
|
|
|
|
|
|
|
Net
Plant and Investments in Associated Companies
|
|
|
71,662
|
|
|
|
71,177
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
|
1,162
|
|
|
|
747
|
|
Accounts
Receivable (less allowance for uncollectible accounts of $410 in 2010 and
$439 in 2009)
|
|
|
6,475
|
|
|
|
6,584
|
|
Unbilled
Revenue from Utility
|
|
|
963
|
|
|
|
1,154
|
|
Inventory
|
|
|
1,298
|
|
|
|
889
|
|
Prepayments
|
|
|
309
|
|
|
|
651
|
|
Prepaid
Taxes
|
|
|
201
|
|
|
|
1,616
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
10,408
|
|
|
|
11,641
|
|
|
|
|
|
|
|
|
|
|
Regulatory
Assets:
|
|
|
|
|
|
|
|
|
Uncollected
Maine Yankee Decommissioning Costs
|
|
|
2,211
|
|
|
|
2,296
|
|
Recoverable
Seabrook Costs
|
|
|
6,951
|
|
|
|
7,229
|
|
Regulatory
Assets—Deferred Income Taxes
|
|
|
5,949
|
|
|
|
6,055
|
|
Regulatory
Assets—Post-Retirement Medical and Pension Benefits
|
|
|
1,371
|
|
|
|
1,379
|
|
Deferred
Fuel and Purchased Energy Costs
|
|
|
17,026
|
|
|
|
18,833
|
|
Unamortized
Premium on Early Retirement of Debt
|
|
|
426
|
|
|
|
478
|
|
Deferred
Regulatory Costs
|
|
|
2,461
|
|
|
|
2,527
|
|
|
|
|
|
|
|
|
|
|
Total
Regulatory Assets
|
|
|
36,395
|
|
|
|
38,797
|
|
|
|
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
|
|
|
|
Unamortized
Debt Issuance Costs
|
|
|
119
|
|
|
|
121
|
|
Restricted
Investments (at cost, which approximates market)
|
|
|
4
|
|
|
|
5
|
|
Miscellaneous
Assets
|
|
|
1,400
|
|
|
|
1,506
|
|
|
|
|
|
|
|
|
|
|
Total
Other Assets
|
|
|
1,523
|
|
|
|
1,632
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
119,988
|
|
|
$
|
123,247
|
|
See Notes
to Consolidated Financial Statements
MAINE & MARITIMES
CORPORATION AND SUBSIDIARIES
Capitalization and Liabilities
(Unaudited)
(In
thousands of dollars)
|
|
March
31,
|
|
|
December
31,
|
|
|
|
2010
|
|
|
2009
|
|
Capitalization
(see accompanying statement):
|
|
|
|
|
|
|
Shareholders’
Equity
|
|
$
|
47,338
|
|
|
$
|
46,708
|
|
Long-Term
Debt
|
|
|
23,360
|
|
|
|
23,645
|
|
|
|
|
|
|
|
|
|
|
Total
Capitalization
|
|
|
70,698
|
|
|
|
70,353
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
Long-Term
Debt Due Within One Year
|
|
|
1,140
|
|
|
|
1,140
|
|
Notes
Payable to Banks
|
|
|
2,000
|
|
|
|
4,800
|
|
Accounts
Payable
|
|
|
3,979
|
|
|
|
3,627
|
|
Accounts
Payable—Associated Companies
|
|
|
28
|
|
|
|
31
|
|
Accrued
Employee Benefits
|
|
|
1,224
|
|
|
|
1,198
|
|
Customer
Deposits
|
|
|
322
|
|
|
|
310
|
|
Taxes
Accrued
|
|
|
297
|
|
|
|
113
|
|
Interest
Accrued
|
|
|
78
|
|
|
|
83
|
|
Dividends
Payable
|
|
|
84
|
|
|
|
84
|
|
Unearned
Revenue
|
|
|
23
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
9,175
|
|
|
|
11,423
|
|
|
|
|
|
|
|
|
|
|
Deferred
Credits and Other Liabilities:
|
|
|
|
|
|
|
|
|
Accrued
Removal Obligations
|
|
|
5,682
|
|
|
|
5,701
|
|
Fair
Value of Interest Rate Hedge
|
|
|
3,161
|
|
|
|
3,178
|
|
Uncollected
Maine Yankee Decommissioning Costs
|
|
|
2,211
|
|
|
|
2,296
|
|
Other
Regulatory Liabilities
|
|
|
762
|
|
|
|
1,005
|
|
Deferred
Income Taxes
|
|
|
19,750
|
|
|
|
20,719
|
|
Accrued
Postretirement Benefits and Pension Costs
|
|
|
5,814
|
|
|
|
6,137
|
|
Investment
Tax Credits
|
|
|
18
|
|
|
|
22
|
|
Miscellaneous
Liabilities
|
|
|
2,717
|
|
|
|
2,413
|
|
|
|
|
|
|
|
|
|
|
Total
Deferred Credits and Other Liabilities
|
|
|
40,115
|
|
|
|
41,471
|
|
|
|
|
|
|
|
|
|
|
Commitments,
Contingencies, and Regulatory Matters (Note 8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capitalization and Liabilities
|
|
$
|
119,988
|
|
|
$
|
123,247
|
|
See Notes
to Consolidated Financial Statements
MAINE
& MARITIMES CORPORATION AND SUBSIDIARIES
Statement
of Consolidated Shareholders’ Equity (Unaudited)
(in
thousands of dollars, except share data)
|
|
|
|
|
Common
Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Shares Issued and Outstanding
|
|
|
Par
Value Issued ($7/Share)
|
|
|
Paid-In
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
Total
|
|
Balance,
December
31, 2009
|
|
|
1,681,924
|
|
|
$
|
11,773
|
|
|
$
|
1,827
|
|
|
$
|
34,995
|
|
|
$
|
(1,887
|
)
|
|
$
|
46,708
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock Issued
|
|
|
675
|
|
|
|
5
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
673
|
|
|
|
|
|
|
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
Gain on Investments Available for Sale, Net of Tax Provision of
$4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
7
|
|
Change
in Fair Value of Interest Rate Hedge, Net of Tax Provision of
$7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
($0.05 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
(84
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
March
31, 2010
|
|
|
1,682,599
|
|
|
$
|
11,778
|
|
|
$
|
1,846
|
|
|
$
|
35,584
|
|
|
$
|
(1,870
|
)
|
|
$
|
47,338
|
|
MAM had
five million shares of $7 per share common stock authorized, with 1,682,599 and
1,681,924 shares issued and outstanding as of March 31, 2010, and December 31,
2009, respectively. At March 31, 2010, and December 31, 2009, MAM had 500,000
shares of $0.01 per share preferred stock authorized, with none issued or
outstanding.
See Notes
to Consolidated Financial Statements.
NOTES
TO CONSOLIDATED
FINANCIAL
STATEMENTS
1. ACCOUNTING
POLICIES
Consolidation
and Basis of Presentation
The
accompanying consolidated financial statements include the accounts of Maine
& Maritimes Corporation (“MAM” or the “Company”) and the following
wholly-owned subsidiaries and affiliates:
1.
|
Maine
Public Service Company (“MPS”) and its wholly-owned inactive Canadian
subsidiary Maine & New Brunswick Electrical Power Company, Ltd
(“Me&NB”); and
|
2.
|
MAM
Utility Services Group (“MAM USG”), a wholly-owned United States
subsidiary.
|
MAM is
listed on the NYSE Amex under the symbol “MAM.”
In the
opinion of management, the accompanying balance sheets and related interim
statements of income, cash flows, and stockholders’ equity include all
adjustments necessary for their fair presentation in conformity with accounting
principles generally accepted in the United States of America. These
adjustments consist only of normal recurring items, except for the
reclassification of $245,000 from depreciation expense to rent expense in the
first quarter of 2009 in accordance with FERC General Instruction No.
20.
Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and expenses.
Examples of such estimates and assumptions include assumptions around recovery
of regulatory assets and liabilities, the estimate of unbilled utility revenue,
assumptions for the Company’s postretirement medical and pension plans, estimate
of the allowance for doubtful accounts, estimate of asset retirement
obligations, the estimated fair value of the interest rate hedge, estimated
Maine Yankee decommissioning costs, and the estimated settlement cost for claims
related to the former TMG subsidiaries. Actual results and outcomes
may differ from management’s estimates and assumptions.
Interim
results are not necessarily indicative of results for a full
year. The information included in this Form 10-Q should be
read in conjunction with information included in the MAM 2009 Form 10-K
filed March 25, 2010, with the U.S. Securities and Exchange
Commission.
As
previously disclosed on the Company’s current report on Form 8-K filed with the
Securities and Exchange Commission on March 12, 2010, and the Company’s 2009
Form 10-K, the Company entered into a certain agreement and plan of merger by
and among the Company, BHE Holdings Inc. and BHE Holding Sub One Inc., dated as
of March 12, 2010 (the “Merger Agreement”), whereby BHE Holding Sub One Inc.
will merge with and into the Company, with the Company as the surviving
entity. Stockholders of the Company will receive $45.00 for each
share of common stock of the Company in the transaction.
The
Merger Agreement is subject to a number of conditions that must be fulfilled in
order to obligate the parties to close the merger. Those conditions include:
regulatory approval of the merger by the Federal Energy Regulatory Commission
(“FERC”), the Maine Public Utilities Commission (“MPUC”), and the Nuclear
Regulatory Commission, the expiration of the waiting period under the
Hart-Scott-Rodino Act, shareholder approval of the merger, the continued
accuracy of certain representations and warranties by both parties and the
performance by both parties of certain covenants and
agreements. There can be no assurance that the conditions to closing
the merger will be fulfilled or that the merger will be completed. In
addition, the Merger Agreement can be terminated in accordance with its
terms.
The
Company and its directors have received two complaints on behalf of our
shareholders, both seeking class action certification and alleging in substance
breach of fiduciary duty in connection with the board’s approval of the Merger
Agreement. Refer to Note 8 of these financial statements, Commitments,
Contingencies and Regulatory Matters, for more information regarding these
complaints.
All
inter-company transactions between MAM and its subsidiaries have been eliminated
in consolidation.
Accounting
Policies
The
Company’s accounting policies are those disclosed in its 2009 Annual Report on
Form 10-K, which is hereby incorporated by this reference.
2. INCOME
TAXES
A summary
of Federal and State income taxes charged (credited) to income is presented
below. For accounting and ratemaking purposes, income tax provisions (benefits)
included in “Operating Expenses” reflect taxes applicable to revenues and
expenses allowable for ratemaking purposes on MPS regulated activities and
unregulated activities for MAM and MAM USG. The tax effect of items
not included in rate base or normal operating activities is allocated as “Other
Income (Deductions).”
(In
thousands of dollars)
|
|
For
the Quarters Ending March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Current
income taxes
|
|
|
|
|
|
|
Federal
|
|
$
|
1,144
|
|
|
$
|
1,312
|
|
State
|
|
|
290
|
|
|
|
406
|
|
Foreign
|
|
|
(3
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
current income taxes
|
|
|
1,431
|
|
|
|
1,718
|
|
|
|
|
|
|
|
|
|
|
Deferred
income taxes
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(833
|
)
|
|
|
(676
|
)
|
State
|
|
|
(147
|
)
|
|
|
(119
|
)
|
|
|
|
|
|
|
|
|
|
Total
deferred income taxes
|
|
|
(980
|
)
|
|
|
(795
|
)
|
|
|
|
|
|
|
|
|
|
Investment
credits, net
|
|
|
(3
|
)
|
|
|
(4
|
)
|
Total
income taxes
|
|
$
|
448
|
|
|
$
|
919
|
|
|
|
|
|
|
|
|
|
|
Allocated
to:
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
|
|
|
|
|
|
- Regulated
|
|
$
|
609
|
|
|
$
|
973
|
|
- Unregulated
|
|
|
(142
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
Total
Operating
|
|
|
467
|
|
|
|
921
|
|
Other
income
|
|
|
(19
|
)
|
|
|
(2
|
)
|
Total
|
|
$
|
448
|
|
|
$
|
919
|
|
For the
three months ended March 31, 2010, and 2009, the effective income tax rates were
40.0% and 39.5%, respectively. The principal reasons for the
effective tax rate differing from the US federal income tax rate are the
earnings from investments and disallowed meals and lobbying
expenses.
The
Company has not accrued U.S. income taxes on the undistributed earnings of
Me&NB, as the withholding taxes due on the distribution of any remaining
amount would be principally offset by foreign tax credits. No dividends were
received from Me&NB in the first quarters of 2010 or 2009.
The
taxpayer must conclude that a tax position must be more likely than not to be
sustained by the Internal Revenue Service upon examination in order for the
position to be recognized in the financial statements. There were no
adjustments required to the reported tax benefits at March 31, 2010 or December
31, 2009, due to Management’s assessment of the likelihood that the Company’s
tax positions will meet that standard. Further, the Company does not
expect that the amounts of unrecognized tax benefits will change significantly
in the next twelve months.
Interest
on income taxes, if any, is presented within interest
expense. Penalties associated with income taxes, if any, are
presented within Other Income (Deductions). As of March 31, 2010 and
December 31, 2009, the Company has accrued no interest or penalties related to
uncertain tax positions.
The
statutes of limitations for audits by Federal, Maine, New Hampshire,
Massachusetts and Canadian tax authorities have expired for all tax years ending
December 31, 2005, or earlier.
Management
of the Company has evaluated the positive and negative evidence bearing upon the
likelihood of the Company realizing its deferred tax assets. For the
quarter ended March 31, 2010 and the year ended December 31, 2009, Management
determined a valuation allowance was needed on the earnings on
investments. Certain distributions from MPS’s investments have been
treated for tax as dividend income, resulting in deferred tax assets of $391,000
at March 31, 2010, and $392,000 at December 31, 2009. As this may
become a capital loss for tax purposes, the Company cannot be assured capital
gains will exist to allow for the use of this loss, and a full valuation
allowance has been provided. Management assessed the remaining
deferred tax assets at March 31, 2010, and December 31, 2009, which consisted
principally of pension and post-retirement benefits and accumulated other
comprehensive income associated with the interest rate hedge, and determined no
valuation allowance is required.
The
Company files consolidated federal and State of Maine income tax
returns. The results of operations of each segment are calculated as
though each were a stand-alone entity, with the related current and deferred
income taxes booked in that segment. MAM USG has recorded a
receivable from MAM of $228,000 at March 31, 2010 and $171,000 at December 31,
2009, for income taxes. MPS recorded a $1.2 million payable to MAM at
March 31, 2010 for income taxes. MAM and MPS had no intercompany
payables or receivables related to income taxes at December 31,
2009.
The
following summarizes accumulated deferred income tax (assets) and liabilities
established on temporary differences as of March 31, 2010, and December 31,
2009:
(In
thousands of dollars)
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
December
31, 2009
|
|
Seabrook
|
|
$
|
3,744
|
|
|
$
|
3,897
|
|
Property
|
|
|
12,631
|
|
|
|
12,539
|
|
Flexible
pricing revenue
|
|
|
(158
|
)
|
|
|
(191
|
)
|
Deferred
fuel
|
|
|
6,792
|
|
|
|
7,513
|
|
Pension
and post-retirement benefits
|
|
|
(2,285
|
)
|
|
|
(2,330
|
)
|
Other
Comprehensive Income
|
|
|
(1,221
|
)
|
|
|
(1,233
|
)
|
Deferred
Directors' Compensation
|
|
|
(698
|
)
|
|
|
(546
|
)
|
Other
|
|
|
945
|
|
|
|
1,070
|
|
|
|
|
|
|
|
|
|
|
Net
Accumulated Deferred Income Tax Liability
|
|
$
|
19,750
|
|
|
$
|
20,719
|
|
3. SEGMENT
INFORMATION
The
Company is organized based on products and services. Management
monitors the operations of the Company in the following operating
segments:
·
|
Regulated
electric utility: MPS and its inactive wholly-owned Canadian subsidiary,
Me&NB;
|
·
|
Unregulated
utility services: MAM USG; and
|
·
|
Other:
Corporate costs directly associated with the unregulated subsidiaries,
other costs not allocated to the regulated utility and inter-company
eliminations.
|
The
accounting policies of the segments are the same as those described in Note 1,
“Accounting Policies.” MAM provides certain administrative support
services to MPS and MAM USG. The costs of services provided to MPS
and MAM USG are billed to MPS and MAM USG based on a combination of direct
charges and allocations.
MPS also
provides services to MAM and other affiliates, including administrative
services, such as information technology, human resources and accounting, and
operational services. These administrative services are billed at
cost through inter-company transactions. Operational services for
which MPS has an established rate for charging third parties are charged at
those established rates.
|
|
(In
thousands of dollars)
|
|
|
|
Quarter
Ended March 31, 2010
|
|
|
|
Regulated
|
|
|
Unregulated
|
|
|
|
|
|
|
Electric
Utility
|
|
|
Utility
Services
|
|
|
Other
|
|
|
Total
|
|
Revenues
from External Customers
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated
Operating Revenues
|
|
$
|
10,075
|
|
|
$
|
-
|
|
|
$
|
(20
|
)
|
|
$
|
10,055
|
|
Unregulated
Utility Operating Revenues
|
|
|
-
|
|
|
|
22
|
|
|
|
-
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Revenues
|
|
|
10,075
|
|
|
|
22
|
|
|
|
(20
|
)
|
|
|
10,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated
Operation & Maintenance
|
|
|
4,599
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,599
|
|
Unregulated
Operation & Maintenance
|
|
|
-
|
|
|
|
166
|
|
|
|
183
|
|
|
|
349
|
|
Depreciation
|
|
|
701
|
|
|
|
4
|
|
|
|
-
|
|
|
|
705
|
|
Amortization
of Stranded Costs
|
|
|
2,583
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,583
|
|
Amortization
|
|
|
75
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75
|
|
Taxes
Other than Income
|
|
|
488
|
|
|
|
-
|
|
|
|
-
|
|
|
|
488
|
|
Income
Taxes
|
|
|
609
|
|
|
|
(61
|
)
|
|
|
(81
|
)
|
|
|
467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
9,055
|
|
|
|
109
|
|
|
|
102
|
|
|
|
9,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
|
1,020
|
|
|
|
(87
|
)
|
|
|
(122
|
)
|
|
|
811
|
|
Other
Income (Deductions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in Income of Associated Companies
|
|
|
62
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62
|
|
Interest
and Dividend Income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other
Deductions
|
|
|
(10
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income
|
|
|
52
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Interest Charges
|
|
|
1,072
|
|
|
|
(87
|
)
|
|
|
(122
|
)
|
|
|
863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Charges
|
|
|
185
|
|
|
|
4
|
|
|
|
1
|
|
|
|
190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
887
|
|
|
$
|
(91
|
)
|
|
$
|
(123
|
)
|
|
$
|
673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
119,367
|
|
|
$
|
622
|
|
|
$
|
(1
|
)
|
|
$
|
119,988
|
|
|
|
(In
thousands of dollars)
|
|
|
|
Quarter
Ended March 31, 2009
|
|
|
|
Regulated
|
|
|
Unregulated
|
|
|
|
|
|
|
Electric
Utility
|
|
|
Utility
Services
|
|
|
Other
|
|
|
Total
|
|
Regulated
Operating Revenues
|
|
$
|
10,119
|
|
|
$
|
-
|
|
|
$
|
(17
|
)
|
|
$
|
10,102
|
|
Unregulated
Utility Operating Revenues
|
|
|
-
|
|
|
|
194
|
|
|
|
-
|
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Revenues
|
|
|
10,119
|
|
|
|
194
|
|
|
|
(17
|
)
|
|
|
10,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulated
Operation & Maintenance
|
|
|
3,788
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,788
|
|
Unregulated
Operation & Maintenance
|
|
|
-
|
|
|
|
210
|
|
|
|
83
|
|
|
|
293
|
|
Depreciation
|
|
|
593
|
|
|
|
3
|
|
|
|
-
|
|
|
|
596
|
|
Amortization
of Stranded Costs
|
|
|
2,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,700
|
|
Amortization
|
|
|
30
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30
|
|
Taxes
Other than Income
|
|
|
451
|
|
|
|
-
|
|
|
|
-
|
|
|
|
451
|
|
Income
Taxes
|
|
|
973
|
|
|
|
(8
|
)
|
|
|
(44
|
)
|
|
|
921
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
8,535
|
|
|
|
205
|
|
|
|
39
|
|
|
|
8,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Income (Loss)
|
|
|
1,584
|
|
|
|
(11
|
)
|
|
|
(56
|
)
|
|
|
1,517
|
|
Other
Income (Deductions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in Income of Associated Companies
|
|
|
28
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
Interest
and Dividend Income
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
Other
Deductions
|
|
|
(20
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(Loss) Before Interest Charges
|
|
|
1,593
|
|
|
|
(11
|
)
|
|
|
(56
|
)
|
|
|
1,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Charges
|
|
|
107
|
|
|
|
2
|
|
|
|
11
|
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
1,486
|
|
|
$
|
(13
|
)
|
|
$
|
(67
|
)
|
|
$
|
1,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
130,354
|
|
|
$
|
1,252
|
|
|
$
|
(107
|
)
|
|
$
|
131,499
|
|
4. INVESTMENTS
IN ASSOCIATED COMPANIES
Maine
Yankee and MEPCO
MPS owns
5% of the common stock of Maine Yankee Atomic Power Company (“Maine Yankee”), a
jointly-owned nuclear electric power company, and 7.49% of the common stock of
MEPCO, a jointly-owned electric transmission company. Although MPS’s ownership
percentage of these entities is relatively low, it does have influence over the
operating and financial decisions of these companies through board
representation, and, therefore, MPS records its investment in MEPCO and Maine
Yankee using the equity method. This is consistent with industry
practice for similar jointly-owned units.
No
dividends were paid by Maine Yankee in the first quarters of 2010 or
2009. MPS received dividends of $2,000 from MEPCO in both the first
quarters of 2010 and 2009.
5. DILUTED
EARNINGS PER SHARE
The
dilutive earnings per share impact of outstanding stock options
was:
|
|
Quarters
Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Net
Income (in thousands)
|
|
$
|
673
|
|
|
$
|
1,406
|
|
Shares
Used in Computation of Earnings
|
|
|
|
|
|
|
|
|
Weighted-Average
Common Shares Outstanding in Computation of Basic Earnings per
Share
|
|
|
1,682,599
|
|
|
|
1,679,699
|
|
Dilutive
Effect of Common Stock Options
|
|
|
550
|
|
|
|
703
|
|
Shares
Used in Computation of Earnings per Common Share Assuming
Dilution
|
|
|
1,683,149
|
|
|
|
1,680,402
|
|
|
|
|
|
|
|
|
|
|
Net
Income per Share (Basic)
|
|
$
|
0.40
|
|
|
$
|
0.84
|
|
Net
Income per Share (Diluted)
|
|
$
|
0.40
|
|
|
$
|
0.84
|
|
6. DEFERRED
DIRECTORS’ COMPENSATION
The
compensation program for the MAM Board of Directors includes an option for the
director to defer some or all of his or her fees, rather than taking those fees
in cash each quarter. The first deferral option grants the director a
number of phantom shares of stock, with the number granted equivalent to the
fees earned for the quarter, divided by the closing share price on the last day
of that quarter. The cumulative deferred phantom shares are marked to
the closing share price on the last day of each quarter, and the adjustment is
recorded as expense. If applicable, any dividends paid are also
converted to an equivalent number of phantom shares, and are added to the
cumulative deferred total.
During
the first quarter of 2010, the equivalent of 658 shares was deferred, bringing
the total deferred through March 31, 2010, to the equivalent of 38,580
shares. The share price on that date was $44.05, resulting in a $1.7
million unfunded liability recorded on the Consolidated Balance Sheet under
“Miscellaneous Liabilities.” The plan allows for a lump sum
distribution or a monthly payment over ten years after termination of services
by the director. All directors currently participating in this
deferral plan have elected the ten-year payment option.
The
second deferral option allows directors to postpone payment of their fees in
cash and earn interest on the deferred amounts at a rate adjusted quarterly to
the five-year Treasury Note rate. The unfunded obligation under this
deferral program is $29,000, and is also recorded under “Miscellaneous
Liabilities” on the Consolidated Balance Sheets.
7. BENEFIT
PROGRAMS
The
Company provides certain pension, post-retirement and welfare benefit programs
to its employees. Benefit programs are an integral part of the Company’s
commitment to hiring and retaining employees, providing market-based
compensation that rewards individual and corporate performance. The Company
offers welfare benefit plans to all employees, consisting of health care, life
insurance, long-term disability, and accidental disability insurance. The
Company also offers a retirement savings program to most employees in the form
of a 401(k) plan. This plan allows voluntary contributions by the employee and
may contain a contribution by the Company.
U.
S. Defined Benefit Pension Plan
The
Company has a non-contributory defined benefit pension plan covering MPS and
certain former MAM employees. No employees of other unregulated
businesses are eligible for this benefit plan. Benefits under the plan are based
on employees’ years of service and compensation prior to
retirement.
On
December 31, 2006, future salary and service accruals for current participants
in the plan ceased, and any new employees hired on or after January 1, 2006, are
not eligible for the pension plan. The Company agreed to additional
employer contributions to the Retirement Savings Plan to compensate employees in
part or in full, depending on their number of years of service, for this lost
benefit. This additional contribution ranges from 5% to 25% of each
eligible employee’s gross base pay, and is immediately fully
vested. This contribution was $179,000 and $174,000 in the first
quarters of 2010 and 2009, respectively.
The
Company’s policy has been to fund pension costs accrued. The Company
contributed $200,000 for the 2009 plan year in the first quarter of 2010, and
does not anticipate any additional contributions for the 2009 plan
year. The Company also expects to contribute approximately $250,000
per quarter during 2010 for 2010 plan year estimated payments.
The
following table sets forth the plan’s net periodic benefit cost:
(In
thousands of dollars)
|
|
Pension
Benefits
|
|
|
|
Quarters
Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Interest
cost
|
|
$
|
266
|
|
|
$
|
271
|
|
Expected
return on plan assets
|
|
|
(295
|
)
|
|
|
(292
|
)
|
Recognized
net actuarial loss
|
|
|
65
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
Net
periodic benefit cost
|
|
$
|
36
|
|
|
$
|
15
|
|
Health
Care Benefits
The
Company provides certain health care benefits to eligible
employees. Eligible employees share in the cost of their medical
benefits, in addition to plan deductibles and coinsurance
payments. The plan also covers retiree medical coverage for employees
of Maine Public Service Company, the regulated utility. Employees
hired on or after October 1, 2005, are not eligible for post-retirement medical
coverage.
On
January 1, 2010, the Company transitioned all active and retired health
insurance plan participants and dependents to the New England Electrical Workers
Benefit Fund (“NEEWBF”). This transition will yield savings on
monthly premiums and the elimination of the contingent health insurance
premium. Employee contributions are estimated to cover 31% of the
2010 premium, compared to 29% in 2009. In addition, the NEEWBF plan
also provides significantly lower retiree premiums than the Company has
historically paid. The assumptions in the calculation of the
postretirement medical plan liability reflect these new rates. The
impact was an approximately $7.1 million reduction in the liability in
2009. This reduction will flow through the prior service cost
component of the net periodic postretirement medical cost over approximately ten
years.
There are
many assumptions inherent in the calculation of the postretirement medical
benefit valuation. The Company has assumed it will continue with the
NEEWBF plan for the foreseeable future, and that the premium structure of this
plan will remain the same, adjusted for healthcare inflation. Should
actual results differ from these or other assumptions made in the calculation of
the postretirement medical plan obligation, the actual liability could be
materially different from the obligation presented on the Consolidated Balance
Sheets.
The
following table sets forth the plan’s net periodic benefit cost:
(In
thousands of dollars)
|
|
Health
Care Benefits
|
|
|
|
Quarters
Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Service
cost
|
|
$
|
17
|
|
|
$
|
49
|
|
Interest
cost
|
|
|
41
|
|
|
|
139
|
|
Expected
return on plan assets
|
|
|
(45
|
)
|
|
|
(38
|
)
|
Amortization
of transition obligation
|
|
|
-
|
|
|
|
18
|
|
Amortization
of prior service cost
|
|
|
(179
|
)
|
|
|
(15
|
)
|
Recognized
net actuarial loss
|
|
|
64
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
Net
periodic benefit cost
|
|
$
|
(102
|
)
|
|
$
|
203
|
|
8. COMMITMENTS,
CONTINGENCIES AND REGULATORY MATTERS
Requests
for Approval of Reorganization
Bangor
Hydro Electric Company, MPS, MEPCO and Chester SVC Partnership filed a Request
for Approval of Reorganization with the MPUC under Docket No. 2010-089 on March
18, 2010. This joint petition requested that the MPUC approve BHE Holdings
Inc.’s proposed transaction to acquire all outstanding shares of Maine &
Maritimes Corporation. The initial case conference was held on April 15,
2010. While the initial schedule set at this conference anticipates
the process will take six months, the actual duration and the ultimate outcome
cannot be predicted at this time.
On April
23, 2010, MAM and Emera each respectively made a notice filing under the
Hart-Scott-Rodino Act, the federal pre-merger notification
program. Management is aware of no material competition issues
related to the proposed merger, and anticipates no delays or further action
directly resulting from this filing. However, Management cannot
predict the ultimate outcome at this time.
Purported
Class Action Complaints
On March
16, 2010, a purported class action lawsuit related to the proposed acquisition
of MAM by BHE Holdings Inc. (the “Acquisition”), captioned Duplisea v. Maine
& Maritimes Corporation, et al. (the “State Action”), was filed
in the Maine Superior Court, Aroostook County, against MAM and each of its
directors individually, alleging breach of fiduciary duty in connection with the
Acquisition. The State Action seeks to enjoin the proposed sale, but does
not seek financial penalties from the Company. Plaintiffs in the
State Action filed an amended complaint on April 22, 2010, and transferred the
State Action to the Maine Business and Consumer Court in Sagadahoc
County
A second
purported class action lawsuit relating to the Acquisition, captioned
Johnson-Gee v. Maine & Maritimes Corporation, et. al. (the “Federal
Action”), was filed on April 16, 2010 in U.S. District Court in Maine, against
MAM, each of its directors individually, BHE Holdings Inc., and BHE Holdings Sub
One Inc. The Federal Action asserts nearly identical claims and is
based on generally the same allegations as the State Action. The
Federal Action also seeks to enjoin the Acquisition.
The
Company continues to vigorously contest both the State and Federal Actions, but
cannot predict the outcome of either suit at this time.
Merger
Contingencies
There are
several provisions of the Merger Agreement that may result in liabilities or
accelerate the payment of certain long-term liabilities if the merger is
approved by regulators and shareholders. First, on March 12, 2010,
certain of our executive officers (Brent Boyles, Michael Williams, Patrick
Cannon, Tim Brown, Randi Arthurs and Michael Eaton)
entered into letter
agreements that modified certain pre-existing change in control agreements and
awards under the previously approved 2010 Executive Compensation Plan as a
condition to entering into the Merger Agreement. As a result, MAM’s Board (at
the Performance and Compensation Committee’s recommendation) approved the letter
agreements as part of approving the Merger Agreement. These letter
agreements benefit the Parent by providing incentives to the executives to
continue their employment with MAM through the closing of the merger and at
least an appropriate transition period following the closing. In
addition, these letter agreements require payment of the short- and long-term
incentive awards at target levels at the time of the closing of the merger,
which in the aggregate is approximately $741,000. An additional
aggregate payment of $247,000 may also be made by the Company to the executives
if the maximum goals for the short-term incentive award are
reached.
The
modified change in control agreements provide for payment of two times the
executive’s salary and benefits in the event of a change in control and
termination of the executive’s employment under certain
conditions. The estimated obligation for compensation and the value
of benefits, should the pending merger close, is approximately $1.83
million.
Neither
the short- nor long-term incentive awards nor the change in control agreements
have been accrued in these financial statements.
The
Merger Agreement also contains a provision that BHE Holdings Inc. will refinance
the promissory notes MPS owes to the Maine Public Utilities Financing Bank
(“MPUFB”). These notes total $22.6 million, $9 million of which is
due in 2025, and $13.6 million due in 2021. These notes are
classified as long-term debt in the Consolidated Balance Sheets.
Algonquin
Request for Certificate of Public Convenience and Necessity
On
December 21, 2009, Algonquin Power Fund (America) Inc. (“Algonquin”) filed a
Request for Certificate of Public Convenience and Necessity to Construct the
Northern Maine Interconnect Project (the “NMI Project”) with the MPUC under
Docket No. 2009-421. Algonquin seeks to construct a new transmission
line on the so-called Bridal Path owned by MPS, which is the location where
MPS and Central Maine Power (“CMP”) plan to construct the Maine Power
Connection. As an intervener in this proceeding, MPS has replied to
data requests from Algonquin, and plans to submit briefs in response to
threshold legal issues raised by the Hearing Examiner regarding how and whether
the case can move forward as currently postured by Algonquin. MPS is
actively contesting Algonquin’s right to use the Bridal Path and construct the
NMI Project as proposed. However, the outcome of this proceeding
cannot be predicted at this time.
FERC
Incentive Rate Treatment on MPC Transmission Line Project
In our
filing on July 18, 2008, MPS and CMP jointly filed with FERC for incentive rate
treatment on their MPC Project. For MPS, the incentive rate treatment
requested was 150 basis points above our current 10.5% return on equity for
transmission. Additionally, in the event the Project is cancelled,
MPS and CMP sought authorization to recover costs related to the abandonment of
the Project.
On
November 17, 2008, FERC conditionally approved the requested incentive rate
treatment and recovery of prudently incurred costs if the Project was abandoned
as a result of factors beyond the control of MPS and CMP. The
incentives are conditioned on the Project being included in ISO-NE’s Regional
System Plan as a Market Efficiency Transmission Upgrade.
On
November 19, 2009, under Docket No. EL08-77-001, FERC issued its Order Granting
Motion to Lodge and Dismiss Rehearing Requests, effectively rescinding the
incentive rate treatment and the abandoned plant approval, stating that the
Project is no longer active. MPS and CMP have requested
reconsideration of this decision on several grounds, including the ongoing
pursuit of the approvals needed for construction, and seek the recovery of
abandoned plant should the project ultimately be cancelled. MPS has
deferred $862,000 under “Miscellaneous Assets” on its Consolidated Balance
Sheets as of March 31, 2010. Management continues to
believe these costs are recoverable, through the construction of a line, as
abandoned plant through the FERC Order and/or through our Open Access
Transmission Tariff.
Federal
Energy Regulatory Commission 2009 Open Access Transmission Tariff Formula Rate
Filing
On June
15, 2009, pursuant to Section 205 of the Federal Power Act, 16 U.S.C. Section
824d, and Title 18 CFR Sections 35.11 and 35.13 of the regulations of
the FERC, MPS submitted for filing its proposed revisions to its FERC Open
Access Transmission Tariff (“OATT”) in Docket No. ER 05 to modify its
transmission rate formula. The proposed changes, if approved, will
not have a material impact on the revenue requirement.
On June
15, 2009, MPS also filed its updated rates under the 2009 OATT formula for both
wholesale and retail customers. The revenue decreases were
approximately $81,000 or 14% for wholesale customers, effective June 1, 2009,
and $623,000 or 20% for retail customers, effective July 1,
2009. Under the OATT formula, the cost of transmission service and
the return on transmission assets is reduced by the wheeling revenue charged
during the year to determine the revenue requirement. Due to higher
wheeling revenue from generators exporting electricity off the MPS system, MPS
had a higher wheeling revenue credit in the formula for 2008 than the prior
year, resulting in the lower rates.
The
parties have reached a settlement accepting all formula changes and no change
from the rates as filed. This settlement is subject to FERC
approval. MPS cannot guarantee FERC will approve the settlement
agreement reached by the parties. Until FERC approval is received,
MPS cannot guarantee there will not be changes to the formula or
rates.
Wheelabrator-Sherman
MPS was
ordered into a Power Purchase Agreement with Wheelabrator-Sherman in 1986, which
required the purchase of the entire output (up to 126,582 MWH per year) of a
17.6 MW biomass plant through December 31, 2006. Total stranded costs
included as regulatory assets under the caption “Deferred Fuel and Purchased
Energy Costs” in the Consolidated Balance Sheet related to this contract are
$17.0 million and $18.8 million at March 31, 2010, and December 31, 2009,
respectively.
Poly
Chlorinated Bi-Phenol Transformers
In
response to a Maine environmental regulation to phase out Poly Chlorinated
Bi-phenol (“PCB”) transformers, MPS has a program to eliminate transformers on
its system that do not meet the State environmental guidelines. The Company is
in the process of inspecting almost 13,000 distribution transformers over a
ten-year period. MPS is currently in its ninth year of this ten-year program.
Approximately 35% of the transformers inspected require “in service” PCB oil
sampling. In addition, transformers that pass the inspection criteria will
be refitted with new lightning arrestors and animal guards, where necessary. The
current total estimated cost of the project is $3.0 million; as of March 31,
2010, $2.9 million of this total has been spent. The remaining cost of the
project has been accrued on the Consolidated Balance Sheet as “Accrued Removal
Obligations.”
Financial
Information System Hosting Agreement
The
Company has a Financial Information System hosting agreement with OneNeck IT
Services to host and provide technical and functional support for its integrated
Oracle Financial Information System. The base hosting fees are
$537,500 per year through 2013.
Off-Balance
Sheet Arrangements
The
Company has several operating leases for office and field equipment, vehicles
and office space. The following summarizes payments made in the first
quarters of 2010 and 2009 for leases for a period in excess of one
year:
|
|
Quarters
Ended March 31,
|
|
(In
thousands of dollars)
|
|
2010
|
|
|
2009
|
|
Equipment
|
|
$
|
4
|
|
|
$
|
20
|
|
Rights
of Way
|
|
|
-
|
|
|
|
28
|
|
Total
|
|
$
|
4
|
|
|
$
|
48
|
|
The
future minimum lease payments have not changed materially from the amounts
reported as of December 31, 2009. Please refer to MAM’s 2009 Form
10-K for these future lease payments.
9. CAPITAL
LEASES
MPS
financed certain of its 2006 and 2007 vehicle and computer equipment purchases
through capital leases, totaling $820,000. The remaining liability as
of March 31, 2010, for these capital lease arrangements is approximately
$233,000, and is recorded within “Miscellaneous Liabilities” on the Consolidated
Balance Sheet. Future minimum lease payments have not changed from
the amounts reported as of December 31, 2009. Please refer to MAM’s
2009 Form 10-K for these future lease payments.
From the
inception of the leases through December 31, 2008, the Company recorded
depreciation expense and accumulated depreciation on leased assets in accordance
with generally accepted accounting principles. FERC General
Instruction No. 20 requires this reduction in the value of computers, office
equipment and vehicles under capital lease be reported as rent expense within
Operation and Maintenance expense. The 2009 Consolidated Income
Statement reflects this reclassification of $245,000.
10. FAIR
VALUE DISCLOSURES
Fair
value measurements are determined based on the assumptions that market
participants would use in pricing the asset or liability. A
three-level fair value hierarchy is the basis for considering market participant
assumptions in fair value measurements. The input levels are defined
as follows:
·
|
Level
1 inputs: Unadjusted quoted prices in active markets for
identical assets or liabilities that the Company has the ability to
access.
|
·
|
Level
2 inputs: Inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly or
indirectly, including quoted prices for similar assets and liabilities in
active markets, as well as other observable inputs for the asset or
liability, such as interest rates, foreign exchange rates, and yield
curves that are observable at commonly quoted
intervals.
|
·
|
Level
3 inputs: Unobservable inputs for the asset or liability,
typically based on an entity’s own assumptions, as there is little, if
any, related market activity.
|
In
instances where the determination of the fair value measurement is based on
inputs from different levels of the fair value hierarchy, the level in the fair
value hierarchy within which the entire fair value measurement falls is based on
the lowest level input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety requires
judgment, and considers factors specific to the asset or liability.
Fair
value is a market-based measure, and is considered from the perspective of a
market participant, not the Company. When market assumptions are not
available, the Company uses assumptions intended to reflect the assumptions
market participants would use in setting the fair value at the measurement
date. In periods of market dislocation, observable market data may be
limited or unavailable for certain assets and liabilities, reducing the level of
the inputs (from a Level 1 to a Level 2, for example). The Company
has not experienced such conditions, and there have been no changes to valuation
methods in the current period.
The
Company uses interest rate swaps to manage its interest rate risk. At
March 31, 2010, MPS had two long-term debt issues outstanding with variable
interest rates. Pursuant to its rate order in MPUC Docket 2003-85,
MPS agreed to fix its interest rates and the MPUC allowed recovery of the fixed
interest costs in rates. On September 9, 2003, MPS executed swap
agreements for the three variable-rate issues then outstanding, locking in the
rates over the remaining terms of the issues. For the FAME 1998
Taxable Elective Rate Stabilization Revenue Notes due 2008, the effective fixed
interest rate was set at 2.79%. For the two series of tax-exempt
bonds issued by the MPUFB, the effective fixed interest rates for the 1996
Series due 2021 and the 2000 Series due 2025 are 4.42% and 4.53%,
respectively.
The
valuation of these instruments is determined using a discounted cash flow
analysis on the expected cash flows of each derivative. This analysis
reflects the contractual terms of the derivatives, including the period to
maturity, and uses observable market-based inputs, including treasury bill
rates, matched to the term of the swaps. As these rates are
observable inputs, but are not quoted prices for an identical swap, Management
determined these are Level 2 inputs, as described above.
This
valuation methodology is consistent with the process used to value the swaps at
March 31, 2010 and December 31, 2009. The only change in assumptions
are the reduction in the remaining term of the swaps for the passage of time and
the changes to the assumed variable rates and discount rates based on current
market conditions.
At both
March 31, 2010 and December 31, 2009, the fair value of these qualified cash
flow hedges was a $3.2 million liability, reflected as “Fair Value of Interest
Rate Hedges” in the accompanying Consolidated Balance Sheets. For the
quarter ended March 31, 2010, the difference between the fixed rates and the
underlying variable rates on the issues of approximately $233,000 was charged to
interest expense, along with the interest expense incurred on the corresponding
debt issues.
In
tabular form by swap, the notional amounts and estimated fair values of the
Company’s interest rate derivative contracts as of March 31, 2010 and December
31, 2009, are (in thousands):
|
|
|
March
31, 2010
|
|
|
December
31, 2009
|
|
|
Consolidated
Balance Sheet Location
|
|
Notional
Amount
|
|
|
Estimated
Fair Value
|
|
|
Notional
Amount
|
|
|
Estimated
Fair Value
|
|
Interest
rate derivatives designated as cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps on 1996 Series Notes
|
Other
Liabilities
|
|
|
13,600
|
|
|
|
(1,843
|
)
|
|
|
13,600
|
|
|
|
(1,822
|
)
|
Interest
rate swaps on 2000 Series Notes
|
Other
Liabilities
|
|
|
9,000
|
|
|
|
(1,318
|
)
|
|
|
9,000
|
|
|
|
(1,356
|
)
|
The
weighted-average rates paid and received for interest rate swaps outstanding
during the first quarter of 2010 were:
|
|
Weighted-Average
|
|
|
|
Interest
Received (Variable Rate on Debt)
|
|
|
Interest
Paid (Fixed Rate on Swaps)
|
|
Interest
rate swaps:
|
|
|
|
|
|
|
Interest
rate swaps on 1996 Series Notes
|
|
|
0.30
|
%
|
|
|
4.42
|
%
|
Interest
rate swaps on 2000 Series Notes
|
|
|
0.25
|
%
|
|
|
4.53
|
%
|
The
following table presents information about the effect of the Company’s
derivative instruments on Accumulated OCI and the Consolidated Statements of
Operations:
|
|
Gain
(Loss) Recognized in Accumulated OCI
|
|
|
Gain
(Loss) Reclassified from Accumulated OCI
|
|
|
|
|
At
March 31,
|
|
|
At
March 31,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
Location
of Gain (Loss) on Consolidated Statements of Operations
|
Interest
Rate Swaps
|
|
|
10
|
|
|
|
506
|
|
|
|
(233
|
)
|
|
|
(217
|
)
|
Long-term
Debt and Notes Payable Interest
Charges
|
Net
losses at March 31, 2010, will reverse into earnings as payments are made for
the difference between the fixed and variable interest rates. The
timing of this reversal is dependent on the variable interest rates going
forward.
Management believes the fixing of
interest rates over the terms of the Company’s debt will prove to protect both
shareholders and consumers from upward interest rate risk. MPS
received regulatory approval from the MPUC in Docket No. 2003-85 to enter into
these swaps, and has received regulatory treatment since inception of the swaps
in September 2003. Therefore, MPS has recorded the mark-to-market in
other comprehensive income within shareholders’ equity, instead of flowing the
changes in fair value through net income. These changes could impact
the Company’s net income if MPS’s shareholder’s common equity falls below the
minimum allowable 48% of common equity rates, the floor established by the MPUC
Order in Docket No. 2002-676 authorizing formation of the holding company,
MAM.
Specifically,
the gain in fair value on the interest rate swaps from December 31, 2009 to
March 31, 2010, of $17,000, less the deferred tax of $7,000, has been recorded
as Other Comprehensive Income, affecting common shareholder’s
equity. The decrease in the liability during 2010 is due to changes
in the long-term interest rate forecasts and the passage of three months of the
term of the instruments.
PART
1. FINANCIAL INFORMATION
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations
Forward-Looking
Statements
This
filing contains certain "forward-looking statements" as defined in the Private
Securities Litigation Reform Act of 1995, related to the expected future
performance of our plans and objectives, such as forecasts and projections of
expected future performance or statements of Management’s plans and
objectives. These forward-looking statements may be contained in
filings with the SEC and in press releases and oral statements. We
use words such as “anticipate,” “estimate,” “predict,” “expect,” “project,”
“intend,” “plan,” “believe,” and other words and terms of similar meaning in
connection with any discussion of future operating or financial
performance. These statements are based on the current expectations,
estimates or projections of Management and are not guarantees of future
performance. Some or all of these forward-looking statements may not
turn out to be what the Company expected. Actual results will differ,
and some of the differences may be material.
Factors
that could cause actual results to differ materially from our projections
include, among others, the proposed merger transaction, regulation and
legislation, construction of new transmission facilities, financing risk for new
transmission facilities, risk from joint development agreement, contract risks
at MAM USG, attraction and retention of qualified employees, economy of the
region and general economic conditions, competitive conditions, holding company
structure, financing risks, pension plan investments, information technology,
climate change, environmental risks, aging infrastructure and reliability,
weather, vandalism, terrorism and other illegal acts, alternative generation
options, and professional liability. Therefore, no assurances can be
given that the outcomes stated in such forward-looking statements and estimates
will be achieved.
Recent
Developments
On March
12, 2010, we announced that we had entered into an agreement and plan of merger
with BHE Holdings Inc. (“BHE Holdings”) and BHE Holding Sub One
Inc. BHE Holdings is the parent company of Bangor Hydro-Electric
Company, and is itself a wholly-owned subsidiary of Emera Inc., an energy and
services company with $5.3 billion in assets. Emera Inc. is also the
parent company of Nova Scotia Power Inc.
The
Merger Agreement provides for a business combination whereby the Company would
become a wholly-owned subsidiary of BHE Holdings and each outstanding share of
common stock of the Company will be converted into the right to receive $45.00
per share in cash, without interest.
Consummation
of the Merger is subject to various customary closing conditions, including the
requisite approval by our shareholders, the absence of injunctions or restraints
imposed by governmental entities, the receipt of required regulatory approvals
and the absence of any material adverse change to us. Requests for
the necessary approvals were made in April 2010, with the MPUC and the
FERC. Please see Part II., Item I. Legal Proceedings, for more
information on the status of these filings. While Management believes
these approvals will be successfully obtained, it cannot predict the final
outcome.
Until
closing, which could occur in the second half of 2010, we and our subsidiaries
will continue to operate in the ordinary course pursuant to the customary
covenants included in the Merger Agreement. For additional detailed
information related to the merger, please refer to the disclosures describing
the proposed merger on Forms 8-K on March 12, 2010 and in Form 10-K for
2009. In addition, the proxy statement for our annual meeting
includes a comprehensive discussion of the process leading up to the signing of
the proposed merger and the board’s recommendation to vote for its
approval.
We and
our directors have received two complaints on behalf of our shareholders,
both seeking class action certification and alleging in substance breach of
fiduciary duty in connection with the board’s approval of the Merger Agreement.
(See Part II, Item 1, Legal Proceedings).
Accounting
Policies
Critical
accounting policies are disclosed in the Company’s 2009 Annual Report on Form
10-K.
Results of
Operations and Executive Overview
Net Income and
Earnings Per Share
|
|
Quarters
Ended March 31,
|
|
(in
thousands except per share amounts)
|
|
2010
|
|
|
2009
|
|
Income
(Loss) from Continuing Operations
|
|
|
|
|
|
|
Regulated
Electric Utility
|
|
$
|
887
|
|
|
$
|
1,486
|
|
Unregulated
Utility Services
|
|
|
(91
|
)
|
|
|
(13
|
)
|
Other*
|
|
|
(123
|
)
|
|
|
(67
|
)
|
Net
Income
|
|
$
|
673
|
|
|
$
|
1,406
|
|
|
|
|
|
|
|
|
|
|
Basic
Income Per Share
|
|
$
|
0.40
|
|
|
$
|
0.84
|
|
*The
“Other” line includes activities of the holding company (including corporate
costs directly associated with the unregulated subsidiaries and costs not
allocated to the regulated utility or unregulated utility services) and
inter-company eliminations.
Net
income above is allocated based upon the segments as presented in Note 3,
“Segment Information,” of the Consolidated Financial Statements. The
results by segment are explained more fully in the following
sections.
The
consolidated net income of the Company was down $733,000 or 52.1% when compared
to the first quarter of 2009. The prevalent reasons for the stark
downturn were one-time charges related to the Company’s proposed merger
including, in pre-tax dollars, fees for financial advisory ($300,000), legal
($185,000), and the expenses for the change in the deferred directors’ liability
resulting from the $9.25 increase in share price for the quarter
($378,000). After tax, these items account for approximately 70.6% of
the difference from the prior year.
On the
surface, regulated revenues held fairly steady, down $47,000 or 0.5% compared to
the prior year. However, billed revenues were down
6.6%. This reduction was offset by booking a regulatory true-up of
revenues for the reduction in sales volume each month in 2010, as opposed to
only at year end as we did during 2009.
Since
2008, we have lost load from commercial and industrial customers, mostly from
the wood and lumber industry, as well as some decline from residential
customers, which partially is a result of a very mild winter in Northern
Maine. However, in the first quarter of 2010 compared to the first
quarter of 2009, the volume used by large commercial and industrial customers
increased, primarily due to the return to production or other increases in usage
by several of those wood and lumber customers. Management does not
know if this indicates a long-term trend toward stabilized
revenues. For commercial and industrial customers, this will depend
on the stability of their underlying businesses. For residential
customers, we expect some steadiness. In addition, performance could
be impacted by the weather. See the Regulated Operations,
Regulated Operating Revenues section below for more information.
Our
unregulated subsidiary, MAM USG, had no major projects for the first quarter of
2010, resulting in decreased revenue from that segment of $172,000.
The
remaining decrease in net income is largely from cost increases at the regulated
utility, including a $162,000 increase in vegetation management
costs.
In
previous filings, we have indicated that the increase in the cost to serve our
regulated customers will, at some point, require us to file for a rate
increase. While this is still the case, our decision to enter the
proposed merger with another regulated utility has delayed the filing for this
increase. As the approval process for the merger with our state
regulators unfolds, we will be in a better position to ascertain what
combination of cost synergies and/or rate increases will best serve our
customers while providing for a fair return on our assets.
MPS
continues to work with Central Maine Power Company on the Maine Power Connection
Project. The parties continue to focus on the Anchor Tenant Model
described in the Company’s 2009 Form 10-K. This line is currently
estimated to be approximately 26 miles long, and cost approximately $80 to $130
million. This would result in an investment of approximately $40 to
$65 million for MPS. The parties have entered into a System Impact
Study Agreement with ISO New England, and the parties plan to file a new
application with the MPUC for a certificate of public convenience and necessity
this summer.
Regulated
Operations
Regulated
operations include MPS and Me&NB, the Company’s regulated subsidiary and its
inactive unregulated Canadian subsidiary:
|
|
Quarters
Ended
|
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Net
Income — Regulated Electric Utility (In thousands)
|
|
$
|
887
|
|
|
$
|
1,486
|
|
Earnings
Per Share from Regulated Electric Utilities
|
|
$
|
0.53
|
|
|
$
|
0.88
|
|
Regulated Operating
Revenues
Consolidated
revenues (in thousands of dollars) and Megawatt Hours (“MWH”) for the quarters
ended March 31, 2010, and 2009, are as follows:
|
|
2010
|
|
|
2009
|
|
|
|
Dollars
|
|
|
MWH
|
|
|
Dollars
|
|
|
MWH
|
|
Residential
|
|
$
|
4,180
|
|
|
|
49,385
|
|
|
$
|
4,474
|
|
|
|
53,855
|
|
Large
Commercial
|
|
|
1,086
|
|
|
|
32,254
|
|
|
|
816
|
|
|
|
30,180
|
|
Medium
Commercial
|
|
|
1,751
|
|
|
|
24,197
|
|
|
|
1,743
|
|
|
|
25,081
|
|
Small
Commercial
|
|
|
2,413
|
|
|
|
24,981
|
|
|
|
2,492
|
|
|
|
26,359
|
|
Other
Retail
|
|
|
227
|
|
|
|
854
|
|
|
|
226
|
|
|
|
852
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Regulated Retail
|
|
|
9,657
|
|
|
|
131,671
|
|
|
|
9,751
|
|
|
|
136,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Regulated Operating Revenue
|
|
|
418
|
|
|
|
|
|
|
|
368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Regulated Revenue
|
|
$
|
10,075
|
|
|
|
|
|
|
$
|
10,119
|
|
|
|
|
|
Residential
sales volume decreased 4,470 MWH or 8.3% in the first quarter of 2010, compared
to the first quarter of 2009. The largest driver of the decrease was
the warmer weather. Heating degree days were down 21.4% in the first
quarter of 2010 compared to 2009. Small commercial customers are also
sensitive to heating degree days, as seen in the 1,378 MWH or 5.2% decrease in
volume for that group of customers. Medium commercial customer volume
decreased approximately 884 MWH or 3.5% year over year.
Large
commercial customer volume began to rebound in the first quarter of 2010, up
2,074 MWH or 6.9% over prior year after two years of decreases. The
wood and lumber industry in particular saw gains the first three months of
2010.
The
average billed rate for large commercial customers has decreased in 2010,
translating to a reduction in billed revenue dollars of approximately $44,000
despite the volume increase. The increase in large commercial customer revenue
dollars above is due to the stranded cost reconciliations. Within the
Order for the stranded cost rate case, MPUC Docket No. 2009-323, MPS was granted
permission to record the sales volume reconciliation adjustment monthly instead
of annually. MPS also continues to record the special discounts
reconciliation on a monthly basis. The combination of these two
reconciliations increased revenue dollars $566,000 overall, and $314,000 in
large commercial customers alone. The sales volume reconciliation
recorded in the fourth quarter of 2009, representing the reconciliation for the
entire year of 2009, was approximately $1.2 million.
For more
information on the status of the most recent rate filings, see Part II, Item 1,
“Legal Proceedings.”
MPS revenue is seasonal,
with higher rates in place during the winter months. The following
table presents regulated revenues for the twelve months ended March 31, 2010 and
2009:
|
|
Twelve
Months Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Total
Regulated Revenues
|
|
|
35,094
|
|
|
|
36,269
|
|
Revenue
is down approximately $1.2 million or 3.2% from the twelve months periods ended
March 31, 2009 to 2010. MPS experienced a significant decrease in
volume, primarily for large commercial customers, in 2008 and 2009, described
more fully in the MAM 2009 Form 10-K.
Regulated
Utility Expenses
For the
quarters ended March 31, 2010, and 2009, regulated operation and maintenance
expenses are as follows:
(In
thousands of dollars)
|
|
2010
|
|
|
2009
|
|
Regulated
Operation and Maintenance
|
|
|
|
|
|
|
Labor
|
|
$
|
1,346
|
|
|
$
|
1,207
|
|
Benefits
|
|
|
241
|
|
|
|
398
|
|
Outside
Services
|
|
|
463
|
|
|
|
301
|
|
Holding
Company Management Costs
|
|
|
1,180
|
|
|
|
295
|
|
Insurance
|
|
|
152
|
|
|
|
127
|
|
Regulatory
Expenses
|
|
|
321
|
|
|
|
311
|
|
Transportation
|
|
|
198
|
|
|
|
189
|
|
Maintenance
|
|
|
153
|
|
|
|
144
|
|
Rent
|
|
|
62
|
|
|
|
429
|
|
Other
|
|
|
483
|
|
|
|
387
|
|
Total
Regulated Operation and Maintenance
|
|
$
|
4,599
|
|
|
$
|
3,788
|
|
Holding
company management costs were the primary driver of the $811,000 or 21.4%
increase in regulated operation and maintenance expenses. These costs
are up due to the costs related to the proposed merger agreement, including
$300,000 for financial advisory services, $185,000 for legal services, and
$378,000 for the adjustment to deferred directors’
compensation. Approximately 97% of these costs are allocated to MPS
under the cost allocation manual most recently approved under MPUC Docket No.
2009-60.
Outside
services also increased, up $162,000 for the first three months of 2010 compared
to the same period in 2009. A vegetation management study performed
in 2009 recommended more aggressive tree trimming in an effort to reduce
long-term costs and preserve system reliability.
The
reduction in rent expense of $367,000 offset these increases. This
change was primarily due to the reclassification in 2009 of leased asset
depreciation from depreciation to rent expense in accordance with FERC General
Instruction No. 20.
Other
smaller changes account for the remaining difference.
Stranded
cost expenses of the regulated utility are as follows:
|
|
Quarters
Ended March 31,
|
|
(In
thousands of dollars)
|
|
2010
|
|
|
2009
|
|
Stranded
Costs
|
|
|
|
|
|
|
Maine
Yankee
|
|
$
|
(48
|
)
|
|
$
|
69
|
|
Seabrook
|
|
|
384
|
|
|
|
384
|
|
Deferred
Fuel
|
|
|
2,013
|
|
|
|
2,115
|
|
Sales
Volume Reconciliation
|
|
|
278
|
|
|
|
-
|
|
Special
Discounts Reconciliation
|
|
|
(87
|
)
|
|
|
-
|
|
Generation
Asset Transition Cost True-Up
|
|
|
20
|
|
|
|
-
|
|
Special
Discounts
|
|
|
23
|
|
|
|
132
|
|
Total
Stranded Costs
|
|
$
|
2,583
|
|
|
$
|
2,700
|
|
On
September 24, 2009, MPS filed its stranded cost revenue requirement and rates
for the two-year rate effective period beginning January 1, 2010 with the Maine
Public Utilities Commission under MPUC Docket No. 2009-323. The MPUC
issued its Order on March 3, 2010. Under this Order and consistent
with past stranded cost orders, stranded cost rates remain the same for the rate
effective period January 1, 2010 through December 31, 2011. However,
due to the decrease in sales volume since the previous stranded cost filing, the
revenue requirement decreased from $11.9 million for 2007 through 2009 to $11.1
million in 2010 and $10.7 million in 2011. This Order includes a
reduction in the allowed return on equity, from 10.2% in current rates to 9.4%
in 2010 and 8.6% in 2011, an assumed capital structure of 50% debt and 50%
equity, and recovery of the agricultural storage rate special
discount.
The
amortization expense for 2010, disclosed above, is in accordance with MPUC
Docket No. 2009-323, while the amortization for 2009 is in accordance with MPUC
Docket No. 2006-506. The amortization of the sales volume
reconciliation, the special discounts reconciliation and the generation asset
transition cost true-up was established in Docket 2009-323. In the
past, these costs were deferred for recovery or return to ratepayers and are now
flowing through rates. Consistent with past stranded cost orders, the
deferred fuel recovery was adjusted to maintain the current rates.
Unregulated
Utility Services
Unregulated
Utility Services is comprised of the operations of MAM USG.
|
|
Quarters
Ended March 31,
|
|
|
|
2010
|
|
|
2009
|
|
Revenue
|
|
$
|
22
|
|
|
$
|
194
|
|
Direct
Expenses
|
|
|
9
|
|
|
|
134
|
|
Gross
Profit
|
|
|
13
|
|
|
|
60
|
|
Other
Expenses
|
|
|
(122
|
)
|
|
|
(58
|
)
|
Common
Corporate Costs and Facilities Charges
|
|
|
(43
|
)
|
|
|
(23
|
)
|
Income
Tax Benefit
|
|
|
61
|
|
|
|
8
|
|
Net
Loss — Unregulated Utility Services
|
|
$
|
(91
|
)
|
|
$
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
Loss
Per Share from Unregulated Utility Services
|
|
$
|
(0.05
|
)
|
|
$
|
(0.01
|
)
|
MAM USG
lost $91,000 in the first quarter of 2010, compared to $13,000 in the same
period of 2009. The reduction in revenue is due to lack of active
projects, while the increase in expense represents the additional time and
expenses spent on marketing and bid development on new projects. MAM
USG is continuing the marketing and diversification efforts it began in 2009 and
has submitted bids for over $15 million of projects. Management
cannot predict at this time whether or not MAM USG will ultimately win these
bids or when the projects will occur.
Other
Continuing Operations
|
|
Quarters
Ended
|
|
|
|
March
31,
|
|
|
|
2010
|
|
|
2009
|
|
Net
Loss — Other Continuing Operations (in thousands)
|
|
$
|
(123
|
)
|
|
$
|
(67
|
)
|
Loss
Per Share from Other Continuing Operations
|
|
$
|
(0.07
|
)
|
|
$
|
(0.04
|
)
|
Other
continuing operations are the common costs of MAM that cannot be allocated to
MPS or MAM USG, the corporate costs of MAM directly associated with the former
unregulated businesses, and intercompany eliminations.
Interest
Expense
Interest
charges decreased from $451,000 in the first three months of 2009 to $421,000 in
the first three months of 2010, due to the repayment of short- and long-term
debt and lower interest rates. This $30,000 reduction in interest
charges, however, was more than offset by the reduction in stranded cost
carrying charges. As the stranded cost rate base, particularly
deferred fuel, continues to amortize as it is recovered in rates, the stranded
cost carrying charges are also decreasing, down $100,000 from $331,000 in 2009
to $231,000 in 2010, resulting in an increase in net interest charges of
$70,000.
Income
Tax Expense / Benefit
The
provision for regulated income taxes decreased from $973,000 in 2009 to $609,000
in 2010, due to the reduction in earnings at MPS. This reduction is a
combination of the factors described above, including lower revenue and higher
expenses, particularly due to the proposed merger.
The
benefit of income taxes for unregulated operations of $142,000 in the first
three months of 2010 is an increase of $90,000 from the $52,000 benefit reported
in the first quarter of 2009. Similar to the provision for regulated
operations, the change in the benefit from unregulated operations is due to
lower income, primarily at MAM USG.
Taxes
Other Than Income
Taxes
other than income are primarily payroll and property taxes. These
expenses increased $37,000 in the first quarter of 2010 compared to the first
quarter of 2009, of which approximately $20,000 is due to increases in property
taxes.
Off-Balance
Sheet Arrangements and Financial Information System Hosting
Agreement
Please
refer to Note 8 of the financial statements.
Liquidity
and Capital Resources
MAM
remains in a strong cash flow position as we continue through the stranded cost
free cash flow period. The Company’s cash on hand increased from
$747,000 at December 31, 2009 to $1.2 million at March 31, 2010. Cash flows from
operating activities for the first quarter of 2010 were $5.0 million, compared
to $5.5 million in the first quarter of 2009. The reduction in net
income of $733,000 was a significant factor in the change. Also, with
the milder weather and the related decrease in revenue, the change in accounts
receivable contributed $1.1 million less to operating cash flows than prior
year. These decreases were partly offset by improvements in cash flow
from 2009 from the change in accounts payable, which contributed $374,000 of
operating cash flow in the first quarter of 2010 compared to a reduction in
operating cash flows of $363,000 in 2009, and the change in other liabilities,
which contributed $1.6 million to operating cash flows in 2010, compared to the
$730,000 increase in cash flows from the change in other liabilities in
2009. The change in other liabilities is attributable to the lower
income tax obligation for the first quarter of 2010 than 2009.
The
Company repaid $3.1 million of its short- and long-term debt and capital lease
obligations in the first quarter of 2010, compared to $3.4 million in the first
quarter of 2009. The Company also maintained its $0.05 per share
dividend, a $84,000 use of cash for both quarters.
The
Company invested $1.4 million in fixed assets during the first quarter of 2010
and $2.2 million in the first quarter of 2009. Due to the Company’s
geographic location, the majority of the construction work is completed in the
second and third quarters.
Management
foresees a continued significant expense and use of cash related to the proposed
merger and its related costs. The Company’s insurance deductible for
defending the class action lawsuits is $500,000, approximately $36,000 of which
was spent through March 31, 2010. The Company also anticipates
significant legal expenses associated with obtaining the required regulatory
approvals. These cash requirements, coupled with the $8.8 million of
budgeted capital expenditures and the lower rates and volume traditionally
experienced in the summer months, will likely require the Company to resume
borrowing on its short-term line of credit, perhaps at amounts higher than in
recent years, until the higher winter rates and sales volume resume and the
capital expenditures decrease next fall.
In
accordance with rate stipulations approved by the MPUC, for ratemaking purposes,
MPS is required to maintain a capital structure not to include more than 51%
common equity for the determination of delivery rates. Also, in
the order approving the reorganization of MPS and the formation of MAM, the
parties stipulated to several restrictions on the capital structure of MPS and
MPS’s ability to make dividend payments to MAM. As of March 31, 2010,
MPS is in compliance with these conditions.
Under the
terms of their short- and long-term financing arrangements, MAM, MAM USG and MPS
agreed to certain financial and other covenants, such as debt service coverage
and earnings before interest and taxes ratios. In the event of a default, the
various lenders could require immediate repayment of the debt. A default could
also trigger increases in interest rates, difficulty obtaining other sources of
financings and cross-default provisions within the debt
agreements. MPS is in compliance with all debt covenants as of March
31, 2010. On May 10, 2010, the covenants for the MAM and MAM USG
two-year working capital agreement were retroactively amended to exclude costs
associated with the proposed merger with BHE Holdings, Inc. Without
this amendment, MAM and MAM USG were not in compliance with the interest
coverage ratio requirement as of March 31, 2010. Specifically, the
covenant requires a ratio of consolidated earnings before taxes to consolidated
interest expense of 2.50:1. The actual ratio, including
merger-related costs, for the twelve months ended March 31, 2010 was
1.45:1. There was no balance outstanding under this working capital
agreement at March 31, 2010, as either a line of credit or letter of
credit.
Regulatory
Proceedings
For
regulatory proceedings, see Part II, Item 1, “Legal Proceedings,” which is
incorporated in this section by this reference.
Item 4T. Controls and
Procedures
The
principal executive officer and principal financial officer evaluated the
effectiveness of the Company's disclosure controls and procedures as of the end
of the period covered by this report. "Disclosure controls and
procedures" are controls and other procedures of a company that are designed to
ensure that information required to be disclosed by the company in the reports
that it files or submits under the Securities Exchange Act of 1934, within the
time periods specified in the SEC rules and forms, is recorded, processed,
summarized and reported, and is accumulated and communicated to the Company's
Management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required
disclosure. Based on their evaluation, the Company’s principal
executive officer and principal financial officer concluded that the Company's
disclosure controls and procedures are effective.
We
maintain a system of internal control over financial reporting designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with accounting principles generally accepted in the United States of America.
There was no change in our internal control over financial reporting that
occurred during the most recent fiscal quarter that materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.
PART
II. OTHER INFORMATION
Item 1. Legal
Proceedings
Requests
for Approval of Reorganization
Bangor
Hydro Electric Company, MPS, MEPCO and Chester SVC Partnership filed a Request
for Approval of Reorganization with the MPUC under Docket No. 2010-089 on March
18, 2010. This joint petition requested that the MPUC approve BHE Holding Inc.’s
proposed transaction to acquire all outstanding shares of Maine & Maritimes
Corporation. The initial case conference was held on April 15,
2010. While the initial conference schedule set at this conference
anticipates the process will take six months, the actual duration and the
ultimate outcome cannot be predicted at this time.
On April,
23, 2010, MAM and Emera each respectively made a notice filing under the
Hart-Scott-Rodino Act, the federal pre-merger notification
program. Management is aware of no material competition issues
related to the proposed merger, and anticipates no delays or further action
directly resulting from this filing. However, Management cannot
predict the ultimate outcome at this time.
Purported
Class Action Complaints
On March
16, 2010, a purported class action lawsuit related to the proposed acquisition
of MAM by BHE Holdings Inc. (the “Acquisition”), captioned Duplisea v. Maine
& Maritimes Corporation, et al. (the “State Action”), was filed in the Maine
Superior Court, Aroostook County, against MAM and each of its directors
individually, alleging breach of fiduciary duty in connection with the
Acquisition. The State Action seeks to enjoin the proposed sale, but does
not seek financial penalties from the Company. Plaintiffs in the State
Action filed an amended complaint on April 22, 2010, and transferred the State
Action to the Maine Business and Consumer Court in Sagadahoc
County.
A second
purported class action lawsuit relating to the Acquisition, captioned
Johnson-Gee v. Maine & Maritimes Corporation, et. al. (the “Federal
Action”), was filed on April 16, 2010 in U.S. District Court in Maine, against
MAM, each of its directors individually, BHE Holdings Inc., and BHE Holdings Sub
One Inc. The Federal Action asserts nearly identical claims and is
based on generally the same allegations as the State Action. The
Federal Action also seeks to enjoin the Acquisition.
The
Company continues to vigorously contest both the State and Federal Actions, but
cannot predict the outcome of either suit at this time.
Merger
Contingencies
There are
several provisions of the Merger Agreement that may result in liabilities or
accelerate the payment of certain long-term liabilities if the merger is
approved by regulators and shareholders. First, on March 12, 2010,
certain of our executive officers (Brent Boyles, Michael Williams, Patrick
Cannon, Tim Brown, Randi Arthurs and Michael Eaton)
entered into letter
agreements that modified certain pre-existing change in control agreements and
awards under the previously approved 2010 Executive Compensation Plan as a
condition to entering into the Merger Agreement. As a result, MAM’s Board (at
the Performance and Compensation Committee’s recommendation) approved the letter
agreements as part of approving the Merger Agreement. These letter
agreements benefit Parent by providing incentives to the executives to continue
their employment with MAM through the closing of the merger and at least an
appropriate transition period following the closing. In addition,
these letter agreements require payment of the short- and long-term incentive
awards at target levels at the time of the closing of the merger, which in the
aggregate is approximately $741,000. An additional aggregate payment
of $247,000 may also be made by the Company to the certain executives if the
maximum goals for the short-term incentive award are reached.
The
modified change in control agreements provide for payment of two times the
executive’s salary and benefits in the event of a change in control and
termination of the executive’s employment under certain
conditions. The estimated obligation for compensation and the value
of benefits, should the pending merger close, is approximately $1.83
million.
Neither
the short- nor long-term incentive awards nor the change in control agreements
have been accrued in these financial statements.
The
Merger Agreement also contains a provision that BHE Holdings Inc. will refinance
the promissory notes MPS owes to the Maine Public Utilities Financing
Bank. These notes total $22.6 million, $9 million of which is due in
2025, and $13.6 million due in 2021. These notes are classified as
long-term debt in the Consolidated Balance Sheets.
Algonquin
Request for Certificate of Public Convenience and Necessity
On
December 21, 2009, Algonquin Power Fund (America) Inc. (“Algonquin”) filed a
Request for Certificate of Public Convenience and Necessity to Construct the
Northern Maine Interconnect Project (the “NMI Project”) with the MPUC under
Docket No. 2009-421. Algonquin seeks to construct a new transmission
line on the so-called Bridal Path owned by MPS, which is the location where
MPS and Central Maine Power (“CMP”) plan to construct the Maine Power
Connection. As an intervener in this proceeding, MPS has replied to
data requests from Algonquin, and plans to submit briefs in response to
threshold legal issues raised by the Hearing Examiner regarding how and whether
the case can move forward as currently postured by Algonquin. MPS is
actively contesting Algonquin’s right to use the Bridal Path and construct the
NMI Project as proposed. However, the outcome of this proceeding
cannot be predicted at this time.
FERC
Incentive Rate Treatment on MPC Transmission Line Project
In our
filing on July 18, 2008, MPS and CMP jointly filed with FERC for incentive rate
treatment on their MPC Project. For MPS, the incentive rate treatment
requested was 150 basis points above our current 10.5% return on equity for
transmission. Additionally, in the event the Project is cancelled,
MPS and CMP sought authorization to recover costs related to the abandonment of
the Project.
On
November 17, 2008, FERC conditionally approved the requested incentive rate
treatment and recovery of prudently incurred costs if the Project was abandoned
as a result of factors beyond the control of MPS and CMP. The
incentives are conditioned on the Project being included in ISO-NE’s Regional
System Plan as a Market Efficiency Transmission Upgrade.
On
November 19, 2009, under Docket No. EL08-77-001, FERC issued its Order Granting
Motion to Lodge and Dismiss Rehearing Requests, effectively rescinding the
incentive rate treatment and the abandoned plant approval, stating that the
Project is no longer active. MPS and CMP have requested
reconsideration of this decision on several grounds, including the ongoing
pursuit of the approvals needed for construction, and seeks the recovery of
abandoned plant should the project ultimately be cancelled. MPS has
deferred $862,000 under “Miscellaneous Assets” on its Consolidated Balance
Sheets as of March 31, 2010. Management continues to
believe these costs are recoverable, through the construction of a line, as
abandoned plant through the FERC Order and/or through our Open Access
Transmission Tariff.
Federal
Energy Regulatory Commission 2009 Open Access Transmission Tariff Formula Rate
Filing
On June
15, 2009, pursuant to Section 205 of the Federal Power Act, 16 U.S.C. Section
824d, and Title 18 CFR Sections 35.11 and 35.13 of the regulations of
the FERC, MPS submitted for filing its proposed revisions to its FERC Open
Access Transmission Tariff (“OATT”) in Docket No. ER 05 to modify its
transmission rate formula. The proposed changes, if approved, will
not have a material impact on the revenue requirement.
On June
15, 2009, MPS also filed its updated rates under the 2009 OATT formula for both
wholesale and retail customers. The revenue decreases were
approximately $81,000 or 14% for wholesale customers, effective June 1, 2009,
and $623,000 or 20% for retail customers, effective July 1,
2009. Under the OATT formula, the cost of transmission service and
the return on transmission assets is reduced by the wheeling revenue charged
during the year to determine the revenue requirement. Due to higher
wheeling revenue from generators exporting electricity off the MPS system, MPS
had a higher wheeling revenue credit in the formula for 2008 than the prior
year, resulting in the lower rates.
The
parties have reached a settlement accepting all formula changes and no change
from the rates as filed. This settlement is subject to FERC
approval. MPS cannot guarantee FERC will approve the settlement
agreement reached by the parties. Until FERC approval is received,
MPS cannot guarantee there will not be changes to the formula or
rates.
Item 1A. Risk
Factors
The Risk
Factors identified in Item 1A. of MAM’s 2009 Form 10-K are incorporated herein
by reference. The following risk factors include new risk factors
identified during the quarter, as well as risk factors that have changed
materially since year-end.
Proposed
Merger
There can
be no assurance that BHE Holdings Inc.’s acquisition of the Company will be
completed. Consummation of the proposed merger is subject to
satisfaction of various closing conditions, including obtaining approvals or
consents from the MPUC and FERC. We cannot predict whether such authorizations
will be obtained on satisfactory terms or the timing of required regulatory
approvals. If the merger is not completed and the Merger Agreement is
terminated, the market price of our common stock may decline to the extent that
the then-current market price of those shares reflects an assumption as to the
completion of the merger. Under certain circumstances, we could be obligated to
pay BHE Holdings Inc. a termination fee of approximately
$2,000,000, plus expense
reimbursement of up to $1,000,000. While the merger is pending, we
have agreed to operate our businesses in the ordinary course and certain
significant business actions or changes from our ordinary course will require
the consent of BHE Holdings Inc.
Construction
of New Transmission Facilities
As
previously reported, MPS, working with CMP, has been seeking to develop the
Maine Power Connection transmission line project (“MPC” or the
“Project”). MPS became involved with this Project coincident with a
system impact study at ISO-NE. Interconnection requests in connection
with proposed new generation projects triggered the
study.
Since the
initial filings, MPS and CMP have re-evaluated the physical scope of the Project
and are considering alternative means of constructing a transmission line to
allow MPS to interconnect its system with the New England Grid and to support
renewable energy projects in its service territory. The parties are
currently focused on an Anchor Tenant Model pursuant to an Elective Transmission
Upgrade with ISO New England, as described in the Company’s 2009 Form
10-K. The current projected scope of the Project is a 26-mile line
with an investment of approximately $80 to $130 million combined, or $40 to $65
million for MPS.
The
Project and its alternatives depend on, among other factors, (i) the development
of additional generation and the needs of generators in our service territory,
and (ii) one of the following developments – (a) MPS joins ISO-NE and ISO-NE
socializes the line, or (b) one or more generators agree to pay for the
line. The inability to obtain regional socialization or agreements
with generators, each on terms acceptable to MPS and CMP, is likely to have an
impact on whether MPS and CMP construct the line and the form that line would
take. Other factors, such as cost and availability of materials,
labor and subcontractors, may increase the cost of the project or delay its
completion.
Other
companies have proposed competing lines to the MPC project. One
proposal has petitioned the MPUC for a CPCN. Any of these could
threaten the development of the MPC line by MPS and CMP. MPS will
aggressively defend its property rights and franchise service territory rights
against these and other developments in its territory but can give no assurances
it will be successful.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior
Securities
None
Item 4. Removed and
Reserved
None
Item 5. Other
Information
None
Item 6. Exhibits
The
following exhibits are attached:
·
|
Exhibit 32
Certification of Financial Reports
Pursuant to 18 USC Section 1350
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
MAINE
& MARITIMES CORPORATION
(Registrant)
Date: May
10, 2010
/s/ Randi
J. Arthurs
-----------------------
Randi J.
Arthurs
Vice
President Accounting, Controller
and
Assistant Treasurer
28
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