Maine & Maritimes Corporation History

Address:

209 State Street
P.O. Box 789
Presque Isle, Maine 04769-0789
U.S.A.

Telephone: (207) 762-3626
Toll Free: 877-272-1523

Public Company
Incorporated: 1918 as Gould Electric Company
Employees: 146
Sales: $138.1 million (2002)
Stock Exchanges: American
Ticker Symbol: MAM
NAIC: 221122 Electric Power Distribution

Company Perspectives:

Maine Public Service Company (MPS), now a direct subsidiary of Maine & Maritimes Corporation, is a transmission and distribution company dedicated to transmitting and distributing reliable, economical electric power to Northern Maine. MPS serves energy to approximately 35,000 retail customers in a 3,600 square mile area. Major business activities in the area center around agricultural and forest products. It is our aim to meet customer needs fully and efficiently, at the lowest possible cost, and highest reliability of service.

Key Dates:

1887:: The Presque Isle Electric Light Company is formed.
1903:: Maine and New Brunswick Electrical Power Company Ltd. is organized.
1905:: Maine & New Brunswick Electrical Power Company acquires Presque Isle Light Company.
1918:: Gould Electric Company is incorporated.
1926:: Capital stock of Maine & New Brunswick and Gould Electric are acquired by Central Public Service Company, a Chicago holding company.
1929:: Gould Electric's name is changed to Maine Public Service Company (MPS).
1942:: MPS becomes parent company and Maine & New Brunswick Electrical Power Company is its subsidiary.
1966:: Maine Yankee Atomic Power Company is organized.
1979:: MPS purchases interest in Seabrook, New Hampshire, nuclear facility.
1986:: MPS is able to sell its interest in troubled Seabrook investment.
1999:: MPS sells its generation assets in anticipation of state deregulation. The company establishes Energy Atlantic, LLC.
2000:: Deregulation in Maine takes effect March 1.
2002:: MPS board of directors approves plan to reorganize as a holding company.
2003:: Shareholders approve holding company structure and Maine & Maritimes Corporation is formed as holding company.

Company History:

Maine & Maritimes Corporation is the holding company for the subsidiaries Maine Public Service Company (MPS) and Energy Atlantic, LLC. MPS transmits and distributes electricity to both retail and wholesale customers in Aroostook County, the largest county east of the Mississippi River, and parts of Penobscot County, both in northern Maine. The company's service area of 3,600 square miles approximates the size of Rhode Island and Connecticut combined while servicing a customer base of 35,000. Energy Atlantic markets power and provides services to Maine's deregulated market. MPS maintains Maine and New Brunswick Electrical Power Company Ltd., an inactive Canadian subsidiary of MPS.

Rural Roots: 19th Century

In November 1886, Arthur R. Gould, a tobacco merchant in Bangor, Maine, sold his store and home to move to the northern Maine town of Presque Isle. His tobacco business thrived in this mill town in rural Aroostook County, and Gould soon took on private banking as well. As Gould was establishing himself in Presque Isle, Presque Isle Electric Light Company powered the lights for the city from its plant along the Presque Isle Stream.

Soon after Gould's arrival, he purchased a sawmill and a gristmill, gaining control of the dam and power rights of the stream. Following this purchase, Gould formed the Aroostook Lumber Company and became general manager of the light company. Gould was able to funnel the waste from his sawmill to the light plant for conversion to steam heat for the buildings along the city's Main Street. However, the light company was not profitable for its stockholders, and many were looking for a way out of their investment. Gould's business acumen provided just the win-win situation both he and the stockholders were looking for. Gould began to trade wooded lots of land he had purchased along the Presque Isle Stream in exchange for shares of stock. After a few years, Gould had acquired 90 percent of the stock in Presque Isle Electric Light Company.

As the population of Presque Isle grew, Gould's plant provided heat and light to homes and business, and the company inched toward profitability. In April 1904, however, fire destroyed the Aroostook Lumber Company and severely damaged the light company, which was adjacent to the lumber mill. At this time Gould was also looking towards alternate power sources besides the mill waste, and the Aroostook Falls located near the U.S.-Canada border appeared to be the most promising.

Maine and New Brunswick Electrical Power Company: 1903-26

In May 1903 a group of three Canadian men and two Americans had obtained a charter to form a corporate entity called the Maine and New Brunswick Electrical Power Company Ltd. Under the charter, the electric company was given all land and water rights privileges. An important provision to maintaining the charter was stipulated in that a plant had to be completed within six years to be located along the Aroostook River between the mouth of the St. John River and the U.S.-Canadian boundary. In 1904, John Stewart, a director of the charter, approached Gould to obtain the necessary financing for the plant. Gould accepted the deal provided he would receive the charter and corporation from Stewart and his associates. If the venture succeeded, Gould would pay the original group members the value of the company.

For the next several years as the managing director of the Presque Isle Electric Light Company, Gould worked to secure the capital for the venture and also negotiated the necessary legal steps through the New Brunswick legislature and the Maine legislature that would ensure the fair operation of the plant to be built in New Brunswick, Canada. Construction of the Aroostook Falls Plant (later renamed the Tinker Plant) began in 1906 and was put into service October 17, 1907. The project included a 27-foot-high and 246-foot-long concrete dam, a 2,200-foot canal, a powerhouse with two 500 kilowatt generators, and 16 miles of transmission line that ran to Presque Isle and 50 miles of line that ran to Houlton, Maine. Although Gould fixed a price tag of $275,000 for the entire project, at the time of completion there were still numerous outstanding bills.

By 1909, the company provided power to seven communities in Maine and the towns of Perth-Andover in New Brunswick, while also reporting its first net earnings of $7,096.78. Although the company continued to grow and show profits, it became increasingly difficult to manage as an international company. The company's board of directors voted to split into two corporations: the Maine and New Brunswick Electrical Power Company Ltd., which would own and operate the Canadian properties, and Gould Electric Company which would own and operate the Maine properties. Gould Electric Company was incorporated January 1, 1918.

Change in Ownership: 1926-60s

During the early 1920s the holding company of Central Public Service Corporation of Chicago was shopping around for small utilities to purchase. In 1926 Central Public acquired all the capital stock of both Gould Electric Company and the Maine and New Brunswick Electrical Power concern. Arthur Gould and his son, Louis E. Gould, who was being groomed to take over the business, resigned from their posts as officers of the company. The Goulds' resignations signaled a shift from a locally owned and operated utility toward an absentee ownership and management. Colonel E.A. Pierce, director of the Chicago holding company, hired Iowa electrical engineer Lawrence Alline, whose father had roots in Maine, to take on the position of chief executive officer in 1926. Through the holding company structure Gould Electric acquired the capital of numerous small utility companies in Maine by exchanging Gould stock at $100 par value for the individual company's stock. On August 31, 1929, Gould Electric was granted charter rights to Aroostook County, and the company's name was changed to Maine Public Service Company (MPS).

With the stock market crash of 1929 and the Great Depression that followed, Central Public Service declared bankruptcy in 1932. Operation of Central Public was taken over by Consolidated Gas and Electric Company, under which MPS remained a subsidiary until 1947. MPS withstood the lean years of the Depression with minimal construction and by the late 1930s was slowly gaining earnings and resuming construction. In 1939, the company built a new, modern 33,000-volt line that ran from the Tinker Plant to a substation in Presque Isle.

Prior to U.S. involvement in World War II, the northern Maine towns of Presque Isle and Houlton with proximity to the Canadian border were chosen as sites for Air Force bases, greatly changing the electrical needs of the largely agricultural communities. MPS applied for a permit to build a five-kilowatt steam plant to meet the higher demands for electricity, a particular concern should a drought occur and not enough power could be harnessed by the hydro plant. The company's request for a permit was turned down by the War Production Board because it was believed the increased usage would not continue after the war. MPS relied on purchasing power from Fraser Paper Company and Bangor Hydro in times of peak load or low water supply.

MPS achieved high growth during the war, with an increase in revenues between 1941 and 1945 of 50 percent, an increase in kilowatt hour sales of 82.5 percent, and an increase in customer base of 14.9 percent. MPS purchased the stock of Maine and New Brunswick Co. in 1941, operating as affiliated companies until 1942 when MPS became the parent company and Maine and New Brunswick became its subsidiary.

In April 1947 a public offering of MPS was made of 1.5 million shares at $22 per share. MPS shares were quickly snatched up, as 1,650 new stockholders from 39 different states invested. With a new board of directors, the company's primary focus became construction of a thermal plant to meet the increased consumer demands for electricity that had been established during the war. Then, in the fall of 1947, a drought swept throughout Maine; MPS was no longer able to purchase power from Bangor Hydro because that company no longer had surplus to sell. MPS was forced to issue rationing of power during the winter of 1947 and 1948 and was not able to return to full production until that March when spring runoff replenished storage facilities.

In December, during the energy crisis, the Maine Public Utilities Commission (PUC) authorized construction of a thermal plant and an added surcharge of one cent per kilowatt hour. News of a rate increase along with the demands of rationing during the harsh Maine winter quickly aroused public outrage, and MPS suffered enormous publicity damage. Stock in MPS dropped to as low as $10.50 a share during the emergency. In the end, the PUC allowed the surcharge effective for the month of December only, and allowed MPS to amortize the emergency expense over a five-year period. Although the emergency was over, its effect on company earnings lingered. In 1946, earnings per share were $2.17, in 1947 they were $1.53, and in 1948 they were $0.74.

Atomic Energy: 1970s-80s

Throughout the 1950s MPS slowly recovered its financial standing, and by 1961 MPS stock had reached $24 on the American Stock Exchange. The company had thus far provided hydro, diesel, and steam energy, and by the 1960s MPS was ready to move toward a new, low-cost source. Plants in southern New England had experienced success with nuclear energy. In 1966 MPS joined ten other New England utilities, including Bangor-Hydro Company and Central Maine Power Company, to build a nuclear plant in Wiscasset, Maine. The 11 utilities formed the Maine Yankee Atomic Power Company and anticipated completing the plant by 1972. MPS's share in the venture was five percent or 35,000 kilowatts.

In 1978, after great success with the Maine Yankee Atomic plant, which was producing power below two cents per kilowatt hour, MPS, the state's third-largest electric utility, invested $34 million in the Seabrook, New Hampshire, nuclear plant. At the time of the investment, the estimated cost of the project was $2.36 billion. By 1981, huge cost overruns and delays had so hampered the construction that MPS was facing a bleak financial picture. At that time the estimated cost of the project had risen to $3.56 billion, leaving MPS with a share totaling $61.7 million.

The investment proved to be an albatross for MPS. By September 1981, MPS was granted a temporary rate hike totaling $1 million by the PUC, but there was growing concern that MPS would need to divest itself of its interest in Seabrook. In mid-1982 MPS attended hearings before the PUC again, this time requesting a $4.6 million rate hike and receiving only $1.6 million. MPS sought a buyer of its share, but there were no takers. In July 1983 MPS was able to sell 200,000 shares of common stock, netting the company $5.5 million, but even this seemed a temporary relief for the troubled utility as the PUC had forecast the company's commitment at $130 million. In 1984, in an attempt to drastically reduce cash expenditures, MPS temporarily halted trade on the American Stock Exchange, reduced quarterly dividends 40 percent, and cut board of director's fees 25 percent.

Still struggling with debt in 1985, MPS requested a $5 million rate hike. At the time, public advocate Paul A. Fritzsche recommended that MPS merge with the state's largest electric utility, Central Maine Power (CMP). In May 1985 the PUC ruled that 47 percent of MPS's investment in Seabrook was imprudent and must be absorbed by the company and that 53 percent of the investment could be passed to customers through a $4.5 million yearly rate hike until the Seabrook project's completion.

Tensions rose later that year as more pressure was placed on MPS to merge with CMP following Fritzsche's conclusion that CMP residential customers paid an average five dollars less a month than MPS customers. MPS president G. Melvin Hovey protested any notion of a takeover. Ironically, amid MPS's bleak situation, the company was listed on Forbes "The 200 Best Small Companies in America." In May 1986 the PUC recommended that a merger of MPS and CMP was warranted economically, though the commission was unable to mandate the merger. That year MPS took its case to the Maine State Supreme Court and was able to fend off the merger.

Deregulation: 1990s

MPS slowly got back its financial footing in the 1990s and faced new challenges with deregulation measures. As a means to provide lower consumer utility costs, the PUC and the Maine State legislature hoped to deregulate the industry by the late 1990s so that consumers would be able to choose their energy supplier by 2000. Historically, Maine's energy suppliers included CMP, Bangor-Hydro, and MPS, and according to those in favor of deregulation, those companies represented a monopoly. Supporters also noted that New England charged higher rates than other regions in the United States and predicted rates would decrease with increased competition. Maine's three utilities were concerned about "stranded costs," the over $2 billion the companies had invested in operating costs to meet regulatory standards.

In early 1997 utilities were mandated by the Maine legislature to divest their generating assets by March 1, 2000. By September 1997, MPS placed all of its power plants up for sale, hoping to sell the seven plants by March 1, 1998. MPS president Paul Cariani stated, "We've put our generating assets out to bid early because the interest level of potential buyers seeking to own utility generation is high today. Our goal is to maximize the sale price to get the highest return to our customers and shareholders, thereby reducing the company's stranded investment to the greatest possible extent." In 1999 MPS sold its hydroelectric and fossil-fueled generating assets for $37.4 million to WPS Power Development, Inc., a subsidiary of the Wisconsin holding company WPS Resources Corporation. MPS continued to transmit and distribute service.

In January 2000, the PUC chose WPS Energy Services, Inc., another subsidiary of WPS Resources Corp., as the standard offer supplier of electricity in the MPS service territory. Beginning March 1, consumers who did not choose a power provider would be given service by WPS Energy by default. By 2003 the effects of deregulation fell mainly to large business consumers. For that market, standard offer rates were high, and this prompted companies to shop around for the best rates. However, most home customers used the standard offer service because the low standard rate did not attract a great deal of competition. MPS responded to the restructuring by offering "green power," renewable energy sources marketed as more environmentally friendly, through its subsidiary Energy Atlantic, LLC (EA). When introduced in 2000 EA was marketed as providing a cleaner source of energy from such renewable sources as waste wood, municipal trash, running water, and wind. While the price of renewable power was typically 25 percent higher than renewable sources, proponents of green energy claimed EA could compete by targeting those consumers who were willing to pay more for cleaner electricity. By 2003, the venture had achieved success in southern Maine, largely due to EA's contract as a residential standard offer service in CMP's service territory effective until February 2002. In northern Maine, where both home and business populations declined, EA was forced to exit the market, leaving WPS Energy Services the sole company marketing electricity in northern Maine.

Holding Company Structure in 21st Century

In October 2002, MPS announced that the company would seek to gain state and federal authority to reorganize as a holding company with MPS becoming a subsidiary of the proposed holding company. MPS president J. Nick Bayne stated in a company press release, "This strategic corporate alignment will give the Company the flexibility to implement a progressive growth and diversification strategy, while insulating the regulated utility's operations. Moving to a holding company is a more suitable corporate structure for responding rapidly to change and growth opportunities."

Securing overwhelming approval by stockholders at their annual meeting May 30, 2003, MPS announced the company would reorganize as the holding company Maine & Maritimes Corporation effective June 30, 2003. MPS shares trading under the ticker symbol MAP would be automatically converted to Maine & Maritimes shares traded under the symbol MAM. Following the reorganization MPS and EA would become subsidiaries of Maine & Maritimes. The inactive Canadian subsidiary Maine and New Brunswick Electrical Power Company would remain a subsidiary of MPS. As the company reached its centennial, its financial standing was solid with its best shareholder returns posted and management looked ahead to further growth.

Principal Subsidiaries: Maine Public Service Company; Energy Atlantic, LLC.

Principal Competitors: Central Maine Power Company; Bangor-Hydro Electric; Energy East; WPS Resources Corporation.

Maine & Maritimes Corporation History

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Key Dates:

Company History:

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