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<SEC-DOCUMENT>0000898080-01-500013.txt : 20010504
<SEC-HEADER>0000898080-01-500013.hdr.sgml : 20010504
ACCESSION NUMBER:		0000898080-01-500013
CONFORMED SUBMISSION TYPE:	U-1/A
PUBLIC DOCUMENT COUNT:		13
FILED AS OF DATE:		20010503

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			EMERA INC
		CENTRAL INDEX KEY:			0001127248
		STANDARD INDUSTRIAL CLASSIFICATION:	 []
		IRS NUMBER:				868143132
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		U-1/A
		SEC ACT:		
		SEC FILE NUMBER:	070-09787
		FILM NUMBER:		1620715

	BUSINESS ADDRESS:	
		STREET 1:		P O BOX 910 CORPORATE SECY GENERAL COUNS
		CITY:			HALIFORC

	MAIL ADDRESS:	
		STREET 1:		P O BOX 910 CORPORATE SECY GENERAL COUNS
		CITY:			HALIFORC
</SEC-HEADER>
<DOCUMENT>
<TYPE>U-1/A
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>FORM U-1/A
<TEXT>

                                                                File No. 70-9787

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                ------------------------------------------------

                                 AMENDMENT NO. 1
                                       TO
                                    FORM U-1
                             APPLICATION-DECLARATION
                                      UNDER
                 THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
                ------------------------------------------------

          Emera Incorporated                       Bangor Hydro-Electric Company
             P.O. Box 910                                 33 State Street
         Halifax, Nova Scotia                           Bangor, Maine 04401
                Canada
                B3J2W5

                                                       Bangor Var Co., Inc.
                                                         33 State Street
                                                       Bangor, Maine 04401
                ------------------------------------------------
                                 Not applicable
                (Name of top registered holding company parent of
                          each applicant or declarant)
                ------------------------------------------------

            Richard J. Smith                          Frederick S. Samp
 Corporate Secretary and General Counsel        Vice President - Finance & Law
               Emera Inc.                       Bangor Hydro-Electric Company
              P.O. Box 910                               P.O. Box 932
          Halifax, Nova Scotia                         33 State Street
                 Canada                              Bangor, Maine 04401
                 B3J2W5
        -----------------------------------------------
                     (Name and address of agent for service)

<PAGE>


                The Commission is requested to send copies of all
                notices, orders and communications in connection
                            with this application to:

Markian Melnyk                                       David P. Falck
Lynn Robitaille                                      Pillsbury Winthrop LLP
LeBoeuf, Lamb, Greene & MacRae, L.L.P.               One Battery Park Plaza
1875 Connecticut Avenue, N.W.                        New York, N.Y. 10004-1490
Washington, D.C.  20009




<PAGE>


                                TABLE OF CONTENTS


ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS...................................1
   A.  Introduction............................................................1
   B.  Description of the Companies............................................1
        1.  Emera..............................................................1
        2.  BHE................................................................6
   C.  The Proposed Transaction................................................8
   D.  Utility Regulation.....................................................10
        1.  Divestiture of Generation Assets..................................10
        2.  Divestiture of Rights to Capacity and Energy......................13
        3.  Standard Offer Service............................................14
        4.  BHE's Ongoing Electric Utility Function...........................17
        5.  Intermediate Holding Companies....................................17
        6.  Financing the Merger..............................................18
        7.  Management and Operations of BHE Following the Merger.............19
   E.  Financing the Emera Registered Holding Company System..................19
        1.  Summary of Authorization Requested................................19
        2.  Parameters for Financing Authorization............................21
        3.  Use of Proceeds...................................................22
        4.  Description of Emera's Existing Capital Structure.................23
        5.  Description of Proposed Financing Program.........................24
            a.  Emera's External Financing....................................24
            b.  Common Stock..................................................24
            c.  Preferred Stock...............................................26
            d.  Long-Term Debt................................................26
            e.  Short-Term Debt...............................................27
            f.  Hedges and Interest Rate Risk Management......................28
            g.  Guarantees....................................................30
            h.  Subsidiary Financing..........................................30
            i.  Changes in Capital Stock of Wholly-Owned Subsidiaries.........32
            j.  Payment of Dividends Out of Capital or Unearned Surplus.......33
            k.  Financing Entities............................................35
            l.  Tax Allocation Agreement......................................36
            m.  Direct Stock Purchase and Dividend Reinvestment Plan, Incentive
                Compensation Plans and other Employee Benefit Plans...........36
   F.  Intra-System Service Transactions......................................37
        1.  Emera Services....................................................37
   G.  Nonutility Reorganizations.............................................44
   H.  Rule 58-type Subsidiaries..............................................46
   I.  EWG and FUCO Investments...............................................47
   J.  Reporting..............................................................50

ITEM 2. FEES, COMMISSIONS AND EXPENSES........................................51

ITEM 3. APPLICABLE STATUTORY PROVISIONS.......................................51
   A.  Applicable Provisions..................................................51
   B.  Legal Analysis.........................................................51
        1.  Section 10(b)(1)..................................................57
            a.  Interlocking Relationships....................................57
            b.  Concentration of Control......................................57
        2.  Section 10(b)(2)..................................................59
        3.  Section 10(b)(3)..................................................59
        4.  Section 10(c)(1)..................................................60
        5.  Section 10(c)(2)..................................................66
        6.  Section 10(f).....................................................68
        7.  Intermediate Holding Companies....................................73
        8.  Financing the Emera System........................................75

ITEM 4. REGULATORY APPROVALS..................................................76

ITEM 5. PROCEDURE.............................................................77

ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.....................................78

ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS...............................81


<PAGE>


          This pre-effective Amendment No. 1 replaces and revises the Form U-1
Application-Declaration in this proceeding, originally filed in File No. 70-9787
on November 6, 2000, in its entirety, except that it does not replace exhibits
previously filed.


ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS

     A.   Introduction.

          Emera Incorporated ("Emera") is seeking approval under the Public
Utility Holding Company Act of 1935 (the "1935 Act" or "Act") in connection with
its acquisition of the outstanding voting securities of Bangor Hydro-Electric
Company ("BHE") and its public-utility subsidiary companies (the "Merger").
Emera will register as a holding company under the Act after completion of the
Merger. Consequently, Emera also requests financing, affiliate transaction and
other authorizations necessary to operate a registered holding company system in
accordance with the Act.

     B.   Description of the Companies

          1.   Emera

          Emera is a corporation that was formed under the laws of the Province
of Nova Scotia, Canada in 1998. Emera is the parent of Nova Scotia Power Inc.
("NSPI"), a Canadian electric utility company that owns and operates a
vertically integrated electric utility system in Nova Scotia. NSPI serves
440,000 customers in Nova Scotia with 2,183 MW of generating capacity,
approximately 5,200 km of transmission lines, 24,000 km of distribution lines,
associated substations and other facilities. NSPI has no retail gas distribution
facilities.

          NSPI's electric generation, transmission and distribution facilities
are located exclusively within Nova Scotia. The transmission assets are used
primarily to transmit power within Nova Scotia and, on a limited basis, to
transmit power for sale to customers in New Brunswick and beyond./1

- --------
1 Under permits issued by Canada's National Energy Board ("NEB"), NSPI may
export energy over any international power line originating in New Brunswick or
Quebec. NSPI's permits expire on July 9, 2008. The permits authorize a total of
1200 GWh of energy export in any 12 month period.
- --------


          In 1999, NSPI generated 10,668 GWh of electricity and purchased 411
GWh. Of the amount generated or purchased, 10,882 GWh was consumed in the
province of Nova Scotia and 197 GWh was exported using the international lines
of New Brunswick Power Corporation ("NB Power"). NB Power's principal
interconnection with the U.S. is with the transmission facilities of Maine
Electric Power Company, Inc. ("MEPCO"), in which BHE has a minority interest. At
present, NSPI is not authorized to transmit power and energy within the U.S.,
and accordingly, all purchasers of energy from NSPI purchase the energy within
Canada or for export by the purchaser across the international border for
transmission via ISO-New England facilities. In connection with the proposed
Merger, Emera has undertaken that NSPI will qualify for exemption as a foreign
utility company or "FUCO" within the meaning of Section 33 of the Act.

          For the twelve months ending December 31, 2000, Emera had revenues of
approximately $604.4 million and NSPI had operating revenues of approximately
$548.2 million./2 As of December 31, 2000, Emera and NSPI had assets of
approximately $1,989.0 million and $1,913.3 million, respectively.

- --------
2 Unless otherwise noted, all amounts are stated in U.S. dollars. An exchange
rate of $1 CDN to $0.674 USD is assumed.
- --------


          Emera owns directly or indirectly a number of nonutility subsidiaries
that are described below. The Emera subsidiaries, including subsequently
acquired subsidiaries, but excluding NSPI, are referred to as the "Subsidiaries"
in this application. Emera, the Subsidiaries and NSPI are referred to as the
"Emera System."

     1. NS Power Services Ltd., a wholly owned subsidiary of Emera, was in the
business of providing energy services. NS Power Services Ltd. is currently
inactive.

        1.1. NSP Trigen Inc., is 50% owned by NS Power Services Ltd., and the
remainder is owned by a nonaffiliate. NSP Trigen Inc. is currently inactive.

     2. Enercom Inc., a wholly owned subsidiary of Emera, is a holding company
for Emera's diversified activities within the energy industry.

        2.1 Emera Fuels Inc. is a wholly owned subsidiary of Enercom Inc. that
is engaged in the supply of furnace and fuel oil, lubricants, diesel and
gasoline products.

     3. Stellarton Basin Coal Gas Inc. is a wholly owned subsidiary of Emera
that was formed to participate in a joint venture to explore and develop methane
gas reserves in Nova Scotia.

     4. Strait Energy Inc. is a wholly owned subsidiary of Emera that sells
steam energy to one large industrial customer located in Nova Scotia.

     5. 510845 N.B. Inc. is a wholly owned subsidiary of Emera engaged in the
provision of utility services, in particular, the supply and maintenance of
electric transformers.

          5.1 Cablecom Ltd., is a wholly owned subsidiary of 510845 N.B. Inc.
Cablecom Ltd. is engaged in the design and engineering, project management,
construction, structured cabling, maintenance and installation of fiber optic
and wireless communications applications.

               5.1.1 Fibretek Inc., is a wholly owned subsidiary of Cablecom Ltd
that engages in the same activities as its parent.

     6. NSP Pipeline Management Ltd. is a wholly owned subsidiary of Emera that
owns a 12.5% interest in Maritimes and Northeast Pipeline Management Ltd.

          6.1 Maritimes and Northeast Pipeline Management Ltd. is 12.5% owned by
NSP Pipeline Management Ltd. and the remainder is owned by nonaffiliates.
Maritimes and Northeast Pipeline Management Ltd. is the general partner of, and
owns a 1.25% interest in, Maritimes and Northeast Pipeline Limited Partnership.
Maritimes and Northeast Pipeline Management Ltd. operates and manages the
Canadian portion of the Maritimes and Northeast Pipeline, a natural gas pipeline
with its origin in Nova Scotia and its terminus near Boston.

     7. NSP Pipeline Inc. is a wholly owned subsidiary of Emera that owns a
12.375% interest in the Maritimes and Northeast Pipeline Limited Partnership.

          7.1 Maritimes and Northeast Pipeline Limited Partnership is 12.375%
owned by NSP Pipeline Inc. and 1% owned by Maritimes and Northeast Pipeline
Management Ltd. The remainder is owned by nonaffiliates. Maritimes and Northeast
Pipeline Limited Partnership owns the Canadian portion of the Maritimes and
Northeast Pipeline.

     8. NSP US Holdings Inc. is a wholly owned subsidiary of Emera that
indirectly owns a 12.5% interest in Maritimes and Northeast Pipeline L.L.C.
through the holding companies identified below.

          8.1 Scotia Holdings Inc. is a wholly owned holding company subsidiary
of NSP US Holdings Inc.

               8.1.1 Nova Power Holdings Inc. is a wholly owned holding company
subsidiary of Scotia Holdings Inc.

                    8.1.1.1 Scotia Power U.S. Ltd. is a wholly owned holding
company subsidiary of Nova Power Holdings Inc.

                        8.1.1.1.1 Maritimes and Northeast Pipeline, L.L.C. is
12.5% owned by Scotia Power U.S. Ltd. and the remainder is owned by
nonaffiliates. Maritimes and Northeast Pipeline L.L.C. owns the U.S. portion of
the Maritimes and Northeast Pipeline.

          Applicants request that the Commission permit Emera to retain its
direct or indirect interests in the Subsidiaries under Sections 9(a)(1), 10 and
11 of the Act. Applicants further request that the Commission find under Rule 16
that 1) Maritimes and Northeast Pipeline Management Ltd., 2) Maritimes and
Northeast Pipeline Limited Partnership, and 3) Maritimes and Northeast Pipeline,
L.L.C. (collectively, the "Maritimes Entities") are exempt from all obligations,
duties or liabilities imposed upon them by the Act as a subsidiary or as an
affiliate of a registered holding company thereof, as such terms are
respectively defined in Sections 2(a)(8)(A) and 2(a)(11) of the Act.

          As required by Rule 16: a) none of the Maritimes Entities is a public
utility company as defined in Section 2(a)(5) of the Act; (b) each of the
Maritimes Entities is or has been organized to engage primarily in the
exploration, development, production, manufacture, storage, transportation or
supply of natural or synthetic gas; (c) no more than 50% of the voting
securities or other voting interests of each of the Maritimes Entities would be
owned, directly or indirectly, by one or more registered holding companies; and
(d) the acquisition by the registered holding company or subsidiary thereof of
the interests in the Maritimes Entities "has been approved by the Commission
pursuant to Sections 9(a)(1) and 10 of the Act and applicable rules thereunder
upon a timely application to the Commission." The requirement in item (d) above
would be satisfied by the Commission's determination in this Application to
permit Emera to retain its interests in the Maritimes Entities under Section
11(b)(1) of the Act. See AGL Resources, Inc., Holding Co. Act Release No. 27243
(October 5, 2000) (finding the operations of a 25%-owned propane joint venture
to be exempt under Rule 16).

          On February 6, 2001, Emera offered to purchase 8.4% of the Sable
Offshore Energy Project ("SOEP") infrastructure assets for approximately CDN
$90.0 million. The offer is subject to certain rights of first refusal, and
other approvals. The SOEP infrastructure assets comprise a gas processing plant
at Goldboro, Nova Scotia; a natural gas liquids fractionation plant at Point
Tupper, Nova Scotia; a natural gas liquids line connecting the Goldboro and
Point Tupper operations; and offshore production platforms and sub-sea gathering
pipelines. Applicants request Commission authorization to acquire the SOEP
assets, if they have not been acquired prior to Emera's registration under the
Act, and to retain the SOEP assets if they have already been acquired when Emera
registers. See American Electric Power Company, Inc., Holding Co. Act Release
No. 26933 (November 2, 1998) (authorizing AEP to acquire energy assets to
include, without limitation, natural gas production, gathering, processing,
storage and transportation facilities and equipment, liquid oil reserves and
storage facilities, and associated facilities).

          2.   BHE

          BHE is a public utility and holding company currently exempt by order
under Section 3(a)(1) of the 1935 Act./3 BHE holds a 14.2% equity interest in
MEPCO, a Maine utility that owns and operates electric transmission facilities
from Wiscasset, Maine to the Maine-New Brunswick border. MEPCO is owned jointly
by Central Maine Power Company ("CMP") (78.3%), BHE (14.2%) and Maine Public
Service Company (7.5%). In addition, BHE owns a 50% general partnership interest
in Chester SVC Partnership ("Chester SVC"), through BHE's wholly-owned
subsidiary Bangor Var. Chester SVC is a single-purpose financing entity formed
to own a static var compensator, which is electrical equipment that supports the
New England Power Pool (NEPOOL)/Hydro Quebec Phase II transmission line.

          By order dated July 12, 1990, the Maine Public Utilities Commission
("MPUC") authorized the creation of Chester SVC and the formation of Bangor Var
as a subsidiary of BHE for the single purpose of owning the Chester SVC
partnership interest. Bangor Var has no assets other than its Chester SVC
interest./4

          BHE provides the transmission and distribution system for the delivery
of electricity to approximately 123,000 Maine customers. For the twelve months
ending December 31, 2000, BHE had approximately $212 million of utility
operating revenues./5 As of December 31, 2000 BHE had approximately $532 million
in utility assets.

- --------
3 Bangor Hydro-Electric Company, Holding Co. Act Release No. 2704 (Oct. 25,
1999). BHE obtained that order in connection with its acquisition of a 50%
interest in Bangor Gas Company LLC ("Bangor Gas"), a start up natural gas system
in the Bangor area that the company was developing with Sempra Energy
("Sempra"). BHE has since sold its interest in Bangor Gas to Sempra. Prior to
the issuance of the 1999 order, BHE was exempt under Rule 2.

4 Application of Central Maine Power Co., et al, Maine Public Utilities
Commission Docket No. 90-100, Stipulation (July 12, 1990).

5 As explained infra, under Maine's electric restructuring law, BHE exited the
power supply aspect of its traditional utility function as of March 1, 2000.
Nonetheless, BHE's revenues for the twelve months ending December 31, 2000
continue to include revenue associated with power supply because (1) BHE had
responsibility for power supply until March 1, 2000, so until then BHE's
revenues were derived in part from regulated rates that included the costs
associated with power supply, and (2) since March 1, 2000, under the direction
of the Maine Public Utilities Commission, BHE has been acquiring the power
supply to fulfill the MPUC's obligation to provide for "standard offer service",
for which the MPUC sets the rate charged to customers. Revenues in 2000
associated with providing the power supply for the standard offer service were
approximately $66 million.
- --------


          BHE owns directly or indirectly a number of nonutility subsidiaries
that are described below.

     1. Bangor Energy Resale, Inc., a wholly owned subsidiary of BHE permits BHE
to use a power sales agreement as collateral for a bank loan.

     2. CareTaker, Inc., a wholly owned subsidiary of BHE provides security
alarm services.

     3. East Branch Improvement Company ("EBIC") formerly provided water storage
services for hydroelectric facilities. Its dams have been sold and EBIC is now
inactive. BHE owns 60% of the common stock of EBIC.

          3.1 Godfrey's Falls Dam Company ("Godfrey's Falls") holds rights that
would permit future water storage development in the basin of the East Branch of
the Penobscot River. Godfrey's Falls is wholly owned by EBIC and is also
inactive.

          3.2 The Sawtelle Brook Dam & Improvement Company ("Sawtelle") controls
certain water rights in the basin of the East Branch of the Penobscot River.
Sawtelle is wholly owned by EBIC and is also inactive.

     4. The Sebois Dam Company improved the navigation of certain of the Sebois
waters entering the Piscataquis River. The Sebois Dam Company is wholly owned by
BHE and is also inactive.

     5. The Pleasant River Gulf Improvement Company was engaged in water
improvement. It is wholly owned by BHE and is inactive.

     6. Bangor Fiber Company, Inc. owns and leases fiber optic communications
cable. It is wholly owned by BHE.

     7. Bangor Line Company constructs and maintains transmission and
distribution lines and provides engineering services. It is wholly owned by BHE.

          BHE also holds 7% of the outstanding common stock of Maine Yankee
Atomic Power Company ("Maine Yankee"), a company that owns and, prior to its
permanent closure in 1997, operated an 880 MW nuclear generating plant in
Wiscasset, Maine. Maine Yankee is being decommissioned. Applicants request
authorization to retain BHE's interests in the nonutility businesses described
above

          BHE is obligated to negotiate in good faith to acquire a 50% interest
in a joint venture to develop a second 345 kv transmission line to New
Brunswick, Canada, pursuant to a Memorandum of Understanding with Penobscot
Hydro, LLC, dated January 5, 1999. The transmission line would connect with
BHE's existing transmission facilities. BHE's investment in the joint venture
has not been determined at this time but could be approximately $25 million.
Applicants request that the Commission reserve jurisdiction over the acquisition
of an interest in the joint venture until the record is complete with respect to
this matter.

     C.   The Proposed Transaction

          Pursuant to an Agreement and Plan of Merger entered into on June 29,
2000, between Emera and BHE ("Merger Agreement"),/6 Emera will acquire all of
BHE's common shares for $26.50 per share in cash. The total value of
consideration that BHE shareholders will receive in the Merger, based on the
number of shares of BHE common stock outstanding on September 15, 2000
(7,363,424), is approximately $195 million. BHE will retain its name and
continue to serve its customers pursuant to the terms of its existing contracts
and state and federal requirements. Neither BHE nor Emera will modify or
terminate any existing customer contracts as a result of this transaction.

          The Merger offers substantial benefits to both parties' shareholders
and customers. The Merger will allow BHE to become part of a larger organization
with greater resources, yet retain its name and identity, continue its historic
record of community involvement and support, and continue to promote economic
development in the regions it serves. The price to be paid by Emera for each
share of BHE's common stock represents a substantial premium above the value of
the stock at the time the Merger was announced./7 Thus, the proposed transaction
will benefit BHE's shareholders, customers, and employees, as well as the
communities in which they work and live.

- --------
6 The Merger Agreement is incorporated by reference as Exhibit B-1 to this
application. In this agreement, Emera is identified by its old name, NS Power
Holdings Incorporated.

7 The closing price of BHE's common stock on June 29, 2000, the day prior to the
Merger announcement, was $15.13 per share.
- --------


          With respect to Emera, this transaction will allow it to continue its
strategy of expanding its operations beyond its Nova Scotia base while
capitalizing on its experience and expertise in operating electric utility
companies.

          Pursuant to the terms of the Merger Agreement, Merger Sub, a
to-be-formed Emera subsidiary incorporated in the U.S., will merge with and into
BHE, with BHE surviving (the "Surviving Corporation"). The Merger has been
approved by BHE's shareholders and Board of Directors, by the MPUC and by the
Federal Energy Regulatory Commission ("FERC"). The Merger is expected to occur
as soon as all of the remaining conditions to the consummation of the Merger
(principally the authorization sought herein) are met or waived. The Merger
Parties plan to consummate the Merger in the spring of 2001.

          Under the terms of the Merger Agreement, (i) each outstanding share of
common stock of Merger Sub will be converted into one share of common stock of
the Surviving Corporation, (ii) each outstanding share of preferred stock of BHE
(the "BHE Preferred Stock") will remain outstanding as one share of preferred
stock of the Surviving Corporation, and (iii) each outstanding share of common
stock of BHE (the "BHE Common Stock") other than Dissenting Shares (as defined
in the Merger Agreement) or shares owned by BHE as treasury shares, or by Emera,
if any, will be converted into the right to receive $26.50 in cash (the "Per
Share Amount"), as such amount may be adjusted in accordance with the Merger
Agreement (the "Merger Consideration"). Holders of BHE's warrants outstanding at
the effective time of the Merger will thereafter be entitled to receive, upon
exercise of each warrant, the Merger Consideration less the exercise price. If
the closing of the Merger does not occur on or prior to June 29, 2001, and all
conditions to closing have been satisfied or are capable of being satisfied
except for the receipt by Emera of (A) the necessary authorizations from the
Commission under the 1935 Act, or (B) any other necessary governmental approvals
to be obtained by Emera, then the Per Share Amount shall be increased by an
amount equal to $0.003 for each day after such date up to and including the day
which is one day prior to the closing of the Merger.

     D.   Utility Regulation

          The State of Maine has been a leader in electric industry
restructuring. As described below, restructuring has required BHE to exit the
former utility function of the provision of power supply for retail consumption.
The restructuring law has required BHE to divest, to the extent practicable, its
generation and power supply assets. Thus, under retail choice, which was
implemented on March 1, 2000, BHE has largely exited the power supply
business./8

          1.   Divestiture of Generation Assets

          In 1997, legislation was enacted to restructure Maine's electric
industry./9 The Maine Restructuring Act states that "[b]eginning on March 1,
2000, all consumers of electricity have the right to purchase generation
services directly from competitive electric providers."/10 The Maine
Restructuring Act required each investor-owned electric utility in Maine to
divest all generation assets and generation-related businesses activities on or
before March 1, 2000, other than any:

- --------
8 As a transitional measure, however, pursuant to MPUC orders, BHE has provided
standard offer supply service since March 1, 2000, and will continue to do so at
least until February 28, 2002.

9 "An Act to Restructure the State's Electric Industry," Pub. Law, ch. 316, 35-A
M.R.S.A.ss.ss. 3201, et seq. (May 29, 1997) ("Maine Restructuring Act").

10 35-A M.R.S.A.ss. 3202(1).
- --------


          A. Contract with a qualifying facility, contract with a party other
          than a qualifying facility or affiliated interest entered into solely
          for the purpose of restructuring a contract with a qualifying facility
          or contract with a demand-side management or conservation provider,
          broker or host;/11

          B. Ownership interest in a nuclear power plant;/12

          C. Ownership interest in a facility located outside the United
          States;/13 or

          D. Ownership interest in a generation asset that the commission
          determines is necessary for the utility to perform its obligations as
          a transmission and distribution utility in an efficient manner./14

- --------
11 The "qualifying facility" exemption recognizes that Maine's utilities have
ongoing contracts with nonutility generators entered into under the requirements
of the Public Utility Regulatory Policies Act of 1978 and Maine's Small Power
Production Act, 35-A M.R.S.A. ss. 3301 et seq. (1999) (repealed effective March
1, 2000), which are not intended to be affected by the Maine Restructuring Act.
The utilities are instead required to periodically auction the power supply
entitlement under the contracts.

12 This exemption recognizes the difficulties associated with divesting nuclear
power plant interests. BHE's only interest in a nuclear power plant is its 7%
ownership interest in Maine Yankee Atomic Power Company's nuclear plant in
Wiscasset, Maine, which has permanently ceased operations and is being
decommissioned.

13 BHE has no facilities located outside the U.S.

14 As discussed infra, BHE has retained ownership of certain diesel-fired
generators under this exception. 35-A M.R.S.Ass. 3204(1).
- --------


          The MPUC required each investor-owned electric utility to submit a
plan to accomplish the required divestiture, which the MPUC reviewed for
consistency with the Maine Restructuring Act and issued an order approving or
modifying the plan./15 Each investor-owned electric utility was then required to
divest its generation assets in accordance with the MPUC's order and was
prohibited from owning or having a financial interest in or otherwise
controlling generation or generation-related assets, except as otherwise
permitted by the Maine Restructuring Act, on or after March 1, 2000./16

          Consistent with this requirement, BHE submitted a plan for divesting
its generation assets to the MPUC on February 9, 1998. On June 17, 1998, the
MPUC approved the plan./17 Following its approved divestiture plan, BHE engaged
in an open bidding process to select a purchaser of its generation assets. BHE
selected PP&L Global, Inc. ("PP&L Global"), which purchased the majority of
BHE's generating assets. Specifically, BHE sold to PP&L Global: (1) BHE's
wholly-owned hydro units/18 and the expansion rights to those assets; (2) BHE's
subsidiary's (Penobscot Hydro Company, Inc.'s ("PHC")) ownership interest in the
partnership known as Bangor-Pacific Hydro Associates, which owns the West
Enfield Project; (3) BHE's ownership interest in Wyman Unit No. 4 (8.33% or 51.7
MW); (4) BHE's right, title and interest, subject to a memorandum of
understanding, in the work in progress relating to the potential development of
a new 345-kV tie-line to New Brunswick; (5) BHE's rights in the Hydro-Quebec
Agreements and Transmission Support Agreements; and (6) BHE's Basin Mills
development rights. As part of the sale, BHE also reassigned its 100 MW firm
transmission reservation over MEPCO to PP&L Global./19 By August 27, 1999, the
various asset sales to PP&L Global were complete.

- --------
15 Id.

16 Id.; 35-A M.R.S.A.ss. 3204(5).

17 Re Bangor Hydro-Elec. Co., No. 98-114 (Me. P.U.C. June 17, 1998).

18 Ellsworth Hydro Project, Howland Hydro Project, Medway Hydro Project.,
Milford Hydro Project, Orono Hydro Project, Stillwater Hydro Project, and Veazie
Hydro Project.

19 On March 15, 1999, the Federal Energy Regulatory Commission ("FERC") approved
the transfer to PP&L Global of FERC jurisdictional facilities. Bangor Hydro
Elec. Co., 86 FERC P. 61,281, clarified, 87 FERCP. 61,057 (1999).
- --------


          After the asset sale, BHE retained 21 MW of diesel-fired internal
combustion units. These facilities consist of 11 units located at BHE's Bar
Harbor, Eastport, and Medway plants. BHE was not required to divest its
ownership in its units at Bar Harbor and Eastport pursuant to 35-A M.R.S.A. ss.
3204(1) of the Maine Restructuring Act. The MPUC found that "BHE's ownership of
its diesel-fired generating units in Bar Harbor and Eastport are necessary for
BHE to perform its obligations as a transmission and distribution utility in an
efficient manner." The Bar Harbor and Eastport units involve 12 MW in total./20
The MPUC extended the deadline for divestiture of BHE's diesel-fired generating
units in Medway until March 1, 2003. The MPUC found that "extending the
divestiture deadline for those units for three years is likely to improve their
sale value."/21

          2.   Divestiture of Rights to Capacity and Energy

          The Maine Restructuring Act directed the MPUC to develop rules
requiring each investor-owned electric utility after February 28, 2000 to sell
rights to capacity and energy from all generation assets and generation-related
businesses, including purchased power contracts that are not divested pursuant
to the general divestiture requirement./22 An investor-owned electric utility
may keep those rights to capacity and energy that the MPUC determines are
necessary for the efficient performance of utility transmission and distribution
obligations./23 The MPUC established rules requiring the sale of remaining
capacity and energy from generation assets and generation-related business./24

- --------
20 Re Bangor Hydro-Elec. Co., No. 98-820 (Me. P.U.C. Feb. 3, 1999).

21 Id.

22 35-A M.R.S.A.ss. 3204(4).

23 Id.

24 Code Me. R. 65-407, Chapter 307.
- --------


          On July 16, 1999, the MPUC approved BHE's proposal to sell 38 MW of
its entitlements to generating capacity and associated energy, under existing
power purchase contracts between BHE and six individual qualifying
facilities./25 The six contracts reflect all of BHE's rights to capacity and
energy remaining at the commencement of retail choice, except for: (1) the
output of BHE's 12 MW of diesel-fired units,/26 and (2) 6 MW of capacity and
associated energy from the Penobscot Energy Recovery Company ("PERC") that is
committed to be sold under a pre-existing agreement to UNITIL Power Corporation
("UNITIL")./27

          After evaluating the bids received, BHE selected, and the MPUC
approved, Morgan Stanley Capital Group, Inc. ("Morgan Stanley") as the winning
bidder. On December 3, 1999, the MPUC approved BHE's selection of Morgan
Stanley./28 Pursuant to the contract approved by the MPUC, Morgan Stanley has
purchased the 38 MW of entitlements from BHE for a two-year period starting
March 1, 2000. Subsequent auctions will take place to establish purchasers after
this initial period.

- --------
25 Re Bangor Hydro-Elec. Co., No. 99-284 (Me. P.U.C. July 16, 1999). The
entitlements sold include 16 MW from BHE's contract with PERC, the entire output
of the 19.1 MW entitlement in the West Enfield hydro-electric facility, and
BHE's entitlement to the output of four small, less than 1 MW hydro-electric
projects (Green Lake Hydro, Sebec Hydro, Milo Hydro, and Pumpkin Hill Hydro).

26 The MPUC's finding that the Bar Harbor and Eastport diesels were necessary
for transmission and distribution efficiency exempts the output from these units
from the Chapter 307 bid process. Re Bangor Hydro-Elec. Co., No. 99-602 (Me.
P.U.C. Dec. 1, 1999). The MPUC authorized BHE to exclude the output of the
Medway diesels from the Chapter 307 bid process. Id.

27 The MPUC authorized BHE to retain the UNITIL contract concluding that
allowing BHE to retain the contract to continue to meet its contractual
obligation and to receive the associated revenues will likely provide a greater
stranded cost reduction than if BHE divested the contract.

28 Re Bangor Hydro-Elec. Co., No. 99-284 (Me. P.U.C. Dec. 3, 1999).
- --------


          3.   Standard Offer Service

          Under the Maine Restructuring Act, all consumers of electricity
acquired the ability to purchase generation services directly from competitive
electricity providers beginning March 1, 2000./29 Because not all consumers
would want or be able to obtain generation services from the competitive market,
the Maine Restructuring Act required that "when retail access begins, the
Commission shall ensure that standard-offer service is available to all
consumers of electricity."/30 Accordingly, the MPUC has established the terms
and conditions for standard offer service as well as the bid process used by the
MPUC to select standard offer service providers./31

          In the event that the MPUC determines that the bids it receives for
standard offer service are inadequate or unacceptable, it may require a
transmission and distribution utility to provide standard offer service. In
doing so, the MPUC must, with full reconciliation, ensure recovery by the
utility of all costs of providing standard offer service, including the costs of
the supply arrangements, any incremental administrative costs of procuring and
managing the purchases and all applicable carrying costs./32

- --------
29 35-A.M.R.S.A.ss.3202(1).

30 35-A.M.R.S.A.ss.3212.

31 35-A.M.R.S.A.ss.3212(2). Code Me. R. 65-407, Chapter 301.

32 35-A.M.R.S.A.ss.3212(2). Code Me. R. 65-407, Chapter 301,ss.8(D)(3).
- --------


          On August 2, 1999, the MPUC commenced the bidding for the provision of
standard offer service and received proposals in response to its Request for
Bids ("RFB"). However, the MPUC rejected the bids received for BHE's service
territory because they were not in conformance with the MPUC's rules for
standard offer service and the RFB or they were unreasonably high./33

          The MPUC initiated a second round of bids for standard offer service
for BHE's service territory and again rejected all bids submitted in response to
the solicitation./34 The MPUC then directed BHE to provide standard offer
service "through wholesale arrangements with suppliers or from the spot market
until the Commission acts in the future to designate standard offer
providers./35

- --------
33 Re Bangor Hydro-Elec. Co., NO. 99-111 (Me. P.U.C. Oct. 25, 1999).

34 Re Bangor Hydro-Elec. Co., No. 99-111 (Me. P.U.C. Dec. 3, 1999).

35 Id.
- --------

          The MPUC set the standard offer service price and required BHE to
procure wholesale power to provide standard offer service until March 1,
2001./36 On February 29, 2000, the MPUC authorized BHE to enter into a one-year
wholesale power supply contract with a supplier BHE chose through an offer of
solicitation./37 This contract with NB Power provided approximately 60 percent
of BHE's standard offer load requirements. The remainder was obtained through
short-term purchases from the NEPOOL market.

          On October 2, 2000, the MPUC issued a Request for Bids to provide
standard offer service in BHE's service territory commencing March 1, 2001. Once
again, the MPUC rejected all the bids received and terminated the bid
process./38 While continuing to entertain price proposals from qualified
bidders, the MPUC directed BHE to explore wholesale power supply arrangements as
sources for providing standard offer service beginning March 1, 2001.

          By Orders of February 2/39, 15/40, 20/41, 27/42 and March 1, 2001,/43
the MPUC designated BHE as the standard offer service provider in its service
territory beginning March 1, 2001 and directed BHE to enter into three wholesale
power supply contracts in order to serve a portion of that load. To the extent
that wholesale contract amounts vary from the amount needed to serve the actual
standard offer load, differences are expected to be traded in the NEPOOL spot
market. The MPUC also established standard offer prices for the year beginning
March 1, 2001.

          The MPUC requires BHE, as the standard service provider, to submit
monthly reports of its standard offer costs and collections. Throughout the
year, the MPUC reviews BHE's purchases for standard offer service and, where
appropriate, it increases or decreases the standard offer service prices for
customers in BHE's service territory to cover projected shortfalls or eliminate
surpluses./44

- --------
36 Id.

37 Re Bangor Hydro-Elec. Co., No. 99-111 (Me. P.U.C. Feb. 29, 2000).

38 Re Public Utils. Comm., No. 2000-808 (Me. P.U.C. Oct. 2, 2000).

39 Id. (Me. P.U.C. Feb. 2, 2001).

40 Id. (Me. P.U.C. Feb. 15, 2001).

41 Id. (Me. P.U.C. Feb. 20, 2001).

42 Id. (Me. P.U.C. Feb. 27, 2001).

43 Id. (Me. P.U.C. Mar. 1, 2001).

44 Re Bangor Hydro-Elec. Co., No. 99-111 (Me. P.U.C. Feb 29, 2000); Re Bangor
Hydro-Elec. Co., No. 99-111 (Me. P.U.C. June 15, 2000); Re Bangor Hydro-Elec.
Co., No. 99-111 (Me. P.U.C. June 23, 2000); Re Bangor Hydro-Elec. Co., No.
99-111 (Me P.U.C. July 20, 2000); Re Bangor Hydro-Elec. Co., No. 99-111 (Me.
P.U.C. Aug. 17, 2000); Re Bangor Hydro-Elec. Co., No. 99-111 (Me. P.U.C. Sept.
21, 2000).
- --------


          4.   BHE's Ongoing Electric Utility Function

          Following the divestiture activities described above, BHE now
continues in its historic function of the provision of all of the attributes of
electric utility service other than power supply as a regulated monopoly in the
area it serves. Its rates are regulated by the FERC and the MPUC. BHE may be
required by the MPUC from time to time to acquire power to fulfill the MPUC's
obligation to provide standard offer power supply service. When it does so, the
MPUC sets the price for standard offer service at a level sufficient to cover
the cost of such power supply, and provides for a reconciliation after the fact
for under or over recoveries.

          5.   Intermediate Holding Companies

          To effect the Merger, Emera will hold its ownership interest in BHE
through one or more intermediate holding companies./45 The intermediate holding
companies allow Emera to structure its BHE ownership interest efficiently from a
tax perspective and will not be used to make Emera's capital structure more
complex. The intermediate holding companies will be wholly-owned, directly, or
indirectly, by Emera and will have no public or private institutional equity or
debt holders. The intermediate holding companies will be capitalized with equity
and/or debt, all of which will be held either by Emera or an intermediate
holding company. The only utility holdings of the intermediate holding companies
will be direct or indirect interests in BHE and its utility subsidiaries.

          Because tax laws and regulations and accounting rules could change in
a manner that would require Emera to act quickly to change the intermediate
holding company structure to maintain its efficiency, Applicants request that
the Commission authorize Emera to reorganize the intermediate holding company
structure without seeking prior Commission approval subject to the following
conditions: (a) the companies in the intermediate structure would be wholly
owned directly or indirectly by Emera; (b) the companies in the intermediate
structure would not issue debt or equity to any company outside the Emera group
and would not borrow from BHE or its subsidiaries; (c) the changes will not have
a material impact on the financial condition or operations of BHE or its
subsidiaries or a material adverse effect on Emera, and; (d) the companies in
the intermediate structure would be organized in the U.S., Canada, or a country
in Europe./46

- --------
45 The names of the intermediate holding companies have not been determined at
this time. They will be provided by amendment.

46 See National Grid Group plc, Holding Co. Act Release No. 27154 (March 15,
2000) (authorizing National Grid to reorganize intermediate holding company
structure to respond to tax law and accounting changes as necessary to maintain
an efficient structure).
- --------


          6.   Financing the Merger

          Emera expects to enter into a credit facility with one or more banks
in the amount of $225 million to fund the Merger consideration. The credit
facility would have a non-revolving term of 364 days and an interest of, at the
borrower's option, (1) the greater of (i) the Agent's Base Rate Canada, and (ii)
the Federal Funds Effective Rate for overnight funds (as published by the
Federal Reserve in the U.S.) plus 50 basis points per annum, or (2) the London
Interbank Offered Rate ("LIBOR") plus 75 to 90 basis points. Emera expects that
this credit facility will be replaced or refinanced with longer-term debt,
equity or preferred securities in the future. Applicants' request for financing
authorization included infra at Item 1.E., incorporates the debt that will be
issued to fund and refinance the Merger.

          The Merger will be accounted for under the purchase method. The excess
of the purchase price and assumed liabilities over the value of BHE's assets
will be recorded on the books of BHE as goodwill. BHE will amortize the goodwill
on its books over a period of twenty years.

          7.   Management and Operations of BHE Following the Merger

          Following the Merger, BHE will be operated as a subsidiary of Emera.
Although Emera has not yet determined the leadership of BHE and the exact
composition of BHE's board of directors, it is expected that the President and
CEO of BHE will be a resident of Maine and a member of BHE's board. Moreover,
the Merger Agreement requires that when the Merger is consummated the Board of
BHE post-merger have at least nine members, with at least four of those being
carry-overs from the prior BHE Board of Directors. The Merger Agreement provides
that BHE's corporate headquarters will be located in Maine for not less than 10
years following the Merger. BHE will also retain local facilities for customer
service, maintenance and field work operations.

     E.   Financing the Emera Registered Holding Company System

          Applicants seek Commission authorization of the financing activities
of the Emera System for the period beginning with the effective date of an order
issued pursuant to this filing and continuing through June 31, 2004
("Authorization Period").

          1.   Summary of Authorization Requested

          Applicants seek the following Commission authorizations:

a)   Emera requests authorization to issue and sell through the Authorization
     Period up to $3 billion of securities at any time outstanding and to issue
     guarantees and other forms of credit support in an aggregate amount of $500
     million at any time outstanding;

b)   Emera requests authority to enter into hedging transactions, including
     anticipatory hedges, with respect to its indebtedness in order to manage
     and minimize interest rate costs and to lock-in current interest rates;

c)   Emera requests authorization to finance its nonutility subsidiaries at a
     mark up to Emera's cost of funds.

d)   The Intermediate Holding Companies request authorization to issue and sell
     securities to Emera and one another, and to acquire the securities of BHE
     and other Intermediate Holding Companies.

e)   Emera, on behalf of the Subsidiaries, requests authorization to change the
     terms of any wholly-owned Subsidiary's authorized capital stock
     capitalization;

f)   BHE requests authorization to pay dividends out of capital or unearned
     surplus;

g)   Emera and the Subsidiaries request authorization to acquire the equity
     securities of one or more special purpose subsidiaries ("Financing
     Subsidiaries") organized solely to facilitate a financing transaction and
     to guarantee the securities issued by Financing Subsidiaries.

h)   Applicants request that the Commission approve the form of agreement for
     the allocation of consolidated tax among the associate companies in the
     U.S. tax filing group;

i)   Emera requests that the Commission approve the issuance of up to 5 million
     shares of common stock under dividend reinvestment and stock-based
     management incentive and employee benefit plans;

j)   BHE requests authorization to issue and sell short-term debt;

k)   Emera requests authorization to invest up to 15% of its consolidated
     capitalization in companies defined as "energy-related" or "gas-related"
     under Rule 58, except that companies that derive revenues from Canada shall
     not be excluded from such definition ("Rule 58-type Subsidiaries") and
     provided further that Emera's investment in its Subsidiaries at the time of
     its registration under the Act shall also be excluded from the investment
     limit. As of December 31, 2000, 15% of Emera's consolidated capitalization
     was $281.45 million.

l)   Emera requests authorization to issue and sell securities in an aggregate
     amount of up to $1.5 billion, such amount to be included within the $3
     billion overall limit proposed above, for the purpose of financing the
     acquisition of exempt wholesale generators ("EWGs") and FUCOs.

          2.   Parameters for Financing Authorization

          To assure the continued sound financial structure of the Emera System
and because the specific terms and conditions of the financing authorizations
requested in this Application are not established at this time, Applicants
propose that the following general terms and conditions would apply, where
appropriate, to the requested financing authorizations:

a)   Investment Grade Credit Rating - Emera commits that all long-term debt
     issued by Emera to unaffiliated parties under the authority requested in
     this Application will, when issued, be rated investment grade by a
     nationally recognized statistical rating organization.

b)   Minimum Capitalization Ratio - Emera, on a consolidated basis, and BHE,
     individually, will maintain common stock equity as a percentage of total
     capitalization of at least 30%.

c)   Effective Cost of Money on Borrowings - The effective cost of money on debt
     financings by Emera under the authorizations requested in this Application
     will not exceed the competitive market rates available at the time of
     issuance to companies with comparable credit ratings with respect to debt
     having similar maturities. The effective cost of money on BHE's short-term
     debt will not at the time of issuance exceed 300 basis points over the
     comparable term LIBOR.

d)   Maturity of Debt - The maturity of debt will not exceed 50 years.

e)   Effective Cost of Preferred Stock - The dividend rate on preferred stock or
     other types of preferred or equity-linked securities will not exceed at the
     time of issuance the rate generally obtainable for preferred securities
     having the same or reasonably similar terms and conditions issued by
     utility holding companies of reasonably comparable credit quality, as
     determined by competitive capital markets.

f)   Issuance Expenses - The underwriting fees, commissions and other similar
     remuneration paid in connection with the non-competitive issue, sale or
     distribution of a security pursuant to this Application would not exceed an
     amount or percentage of the principal or total amount of the security being
     issued that would be charged to or paid by other companies with a similar
     credit rating and credit profile in a comparable arm's-length credit or
     financing transaction with an unaffiliated person.

g)   EWG and FUCO Investments - Emera's "aggregate investment" in EWGs and
     FUCOs, as defined in Rule 53 under the Act, will not exceed $3.0 billion.

          3.   Use of Proceeds

          The proceeds from the financings authorized by the Commission under
this Application will be used for general corporate purposes, including (i)
refinancing the Merger-related debt, (ii) financing, in part, investments by and
capital expenditures of Emera and its Subsidiaries, (iii) funding future
investments in EWGs, FUCOs and Rule 58 Subsidiaries and Rule 58-type
Subsidiaries, (iv) repaying, redeeming, refunding or purchasing any securities
issued by Emera or any Subsidiary, and (v) financing the working capital
requirements of Emera and its Subsidiaries.

          Applicants represent that no financing proceeds will be used to
acquire the equity securities of any company unless such acquisition has been
approved by the Commission in this proceeding or in a separate proceeding or in
accordance with an available exemption under the Act or rules thereunder,
including Sections 32 and 33 and Rule 58. The proceeds of financing and
guarantees used to fund investments in Rule 58 Subsidiaries will be subject to
the limitations of that rule.

          4.   Description of Emera's Existing Capital Structure

          As of December 31, 2000, Emera had 87.35 million common shares issued
and outstanding. Emera also has a non-controlling minority interest attributable
to preferred shares in NSPI that are convertible into Emera common stock. NSPI
has issued and outstanding 4.4 million shares of Series C First Preferred Shares
("Series C") that at the option of NSPI may be redeemed on or after April 1,
2009 for a number of shares of Emera common stock determined by dividing $25.00
plus an amount equal to all accrued but undeclared dividends per Series C share
up to but excluding the exchange date by the greater of $2.00 and 95% of the
weighted average trading price of the Emera shares on the Toronto Stock Exchange
for the 20 trading days ending on the last trading day on or before the fourth
trading day immediately prior to the time of the exchange ("Market Price"). On
or after notice prior to July 1, 2009 or prior to each dividend payment date
thereafter the Series C shares will be exchangeable, at the option of the
holder, into the number of shares of Emera common stock determined by dividing
$25.00 by the greater of $2.00 and the Market Price of the Emera shares at such
time, subject to the right of NSPI on not less than 40 days notice prior to the
exchange date to redeem such shares for cash or to find substitute purchasers
for such shares.

          NSPI has issued and outstanding 5.4 million shares of Series D First
Preferred Shares ("Series D") that at the option of NSPI may be redeemed on or
after October 15, 2015 for a number of shares of Emera common stock determined
by dividing $25.00 plus an amount equal to all accrued but undeclared dividends
per Series D share up to but excluding the exchange date by the greater of $2.00
and 95% of the weighted average trading price of the Emera shares on the Toronto
Stock Exchange for the 20 trading days ending on the last trading day on or
before the fourth trading day immediately prior to the time of the exchange
("Market Price"). On or after notice prior to January 15, 2016 or prior to each
dividend payment date thereafter the Series D shares will be exchangeable, at
the option of the holder, into the number of shares of Emera common stock
determined by dividing $25.00 by the greater of $2.00 and the Market Price of
the Emera shares at such time, subject to the right of NSPI on not less than 40
days notice prior to the exchange date to redeem such shares for cash or to find
substitute purchasers for such shares.

          Emera has long-term debt composed of debentures and notes payable. All
long-term debt instruments are issued under trust indentures at fixed interest
rates, and are unsecured. As of December 31, 2000, Emera had an aggregate amount
outstanding of CDN $1.276 billion with a weighted average coupon rate of 7.59%.
Emera also has short-term debt outstanding consisting of commercial paper,
bankers' acceptances and LIBOR loans issued against lines of credit. As of
December 31, 2000, Emera had an aggregate amount of short-term debt outstanding
of CDN $281.7 million.

          5.   Description of Proposed Financing Program

               a.   Emera's External Financing

          Emera proposes to issue long-term equity and debt securities
aggregating not more than $3 billion at any one time outstanding during the
Authorization Period./47 Such securities could include, but would not
necessarily be limited to, common stock, preferred stock, options, warrants,
long- and short-term debt (including commercial paper), convertible securities,
subordinated debt, bank borrowings and securities with call or put options.
Emera may also issue guarantees and enter into interest rate swaps and hedges as
described below.

- --------
47 The overall limit of $3 billion includes the Merger-related financing.
- --------


               b.   Common Stock

          Emera requests authorization, during the Authorization Period, to
issue and sell from time to time common stock, either: (1) through underwritten
public offerings, (2) in private placements, (3) under its dividend
reinvestment, stock-based management incentive and employee benefit plans, (4)
in exchange for securities or assets being acquired from other companies, and
(5) in connection with redemptions of the Series C and Series D shares. Emera
also proposes to issue and sell common stock or options, warrants, or other
stock purchase rights. Emera may also buy back shares of common stock during the
Authorization Period in accordance with Rule 42 under the Act.

          Emera may perform common stock financings pursuant to underwriting
agreements of a type generally standard in the industry. Public distributions
may be made by private negotiation with underwriters, dealers or agents as
discussed below or through competitive bidding among underwriters. In addition,
sales may be made through private placements or other non-public offerings to
one or more persons. All such common stock sales will be at rates or prices and
under conditions negotiated or based upon, or otherwise determined by,
competitive capital markets.

          Emera issues and sells common stock pursuant to its Common Shareholder
Dividend Reinvestment Plan and its Employee Common Share Purchase Plan, which
provide an opportunity for shareholders and company employees to reinvest
dividends and make cash contributions for the purpose of purchasing common
shares. Emera also has a stock option plan that grants options to the executive
officers of Emera for a maximum term of 10 years. The option price for these
shares is the market price of the shares on the day the option is granted. Emera
may also buy back shares of such stock or such options during the Authorization
Period.

          Emera may seek to acquire securities of companies engaged in
energy-related businesses as described in Rule 58 and Rule 58-type Subsidiaries,
exempt telecommunications companies ("ETCs"), EWGs and FUCOs. These acquisitions
may involve the exchange of Emera stock for securities of the company being
acquired in order to provide the seller with certain tax advantages. These
transactions would be individually negotiated. The Emera common stock to be
exchanged may be purchased on the open market under Rule 42, or may be original
issue. Original issue stock may be registered or qualified under applicable
securities laws or unregistered and subject to resale restrictions. Emera does
not intend to engage in any transaction where original issue stock is not
registered or qualified while a public offering is being made, other than a
public offering pursuant to a compensation, dividend or stock purchase plan, or
a public offering of debt.

          The ability to offer stock as consideration may make a transaction
more economical for Emera as well as for the seller of the business. For
purposes of calculating compliance with the $3 billion external financing limit,
Emera's common stock would be valued at market value based upon the closing
price on the day before closing of the sale or based upon average high and low
prices for a period of 20 days prior to the closing of the sale.

               c.   Preferred Stock

          Emera may issue preferred stock from time to time during the
Authorization Period. Preferred stock or other types of preferred or
equity-linked securities may be issued in one or more series with such rights,
preferences, and priorities as may be designated in the instrument creating each
such series, as determined by Emera's board of directors. All such securities
will be redeemed no later than 50 years after the issuance thereof. The dividend
rate on any series of preferred stock or other preferred securities will not
exceed at the time of issuance the rate generally obtainable for preferred
securities having the same or reasonably similar terms and conditions issued by
utility holding companies of reasonably comparable credit quality, as determined
by competitive capital markets. Dividends or distributions on preferred stock or
other preferred securities will be made periodically and to the extent funds are
legally available for such purpose, but may be made subject to terms that allow
the issuer to defer dividend payments for specified periods. Preferred stock or
other preferred securities may be convertible or exchangeable into shares of
common stock.

               d.   Long-Term Debt

          Emera proposes to issue long-term debt in accordance with the
conditions described in Item 1.E.2 above. Any long-term debt security would have
the maturity, interest rate(s) or methods of determining the same, terms of
payment of interest, redemption provisions, sinking fund terms and other terms
and conditions as Emera may determine at the time of issuance. The request for
authorization for Emera to issue long-term debt securities is consistent with
authorization that the Commission has granted to other registered holding
companies. See Southern Co., Holding Co. Act Release No. 27134 (February 9,
2000) ; Columbia Energy Group, Holding Co. Act Release No. 27035 (June 8, 1999).

          Emera believes that a restriction against parent-level debt would be a
unreasonable financial burden that is not necessary or appropriate in the public
interest or for the protection of investors or consumers because it may
interfere with Emera's ability to implement an optimal capital structure for its
business. Prior to issuing debt, preferred securities or equity, Emera will
evaluate the relevant financial implications of the issuance, including without
limit, the cost of capital, and select the security that provides the most
efficient capital structure consistent with sound financial practices and the
capital markets.

               e.   Short-Term Debt

          Emera requests authorization to issue short-term debt including, but
not limited to, institutional borrowings, commercial paper and bid notes.
Issuance of short-term debt will be in accordance with the conditions described
in Item 1.E.2 above. Proceeds of any short-term debt issuance may be used to
refund pre-Merger short-term debt and Merger-related debt, and to provide
financing for general corporate purposes, working capital requirements and
Subsidiary capital expenditures until long-term financing can be obtained.

          Emera may sell commercial paper, from time to time, in established
domestic U.S. or European commercial paper markets. Such commercial paper would
be sold to dealers at the discount rate or the coupon rate per annum prevailing
at the date of issuance for commercial paper of comparable quality and
maturities sold to commercial paper dealers generally. It is expected that the
dealers acquiring commercial paper from Emera will reoffer such paper at a
discount to corporate, institutional and, with respect to European commercial
paper, individual investors. Institutional investors are expected to include
commercial banks, insurance companies, pension funds, investment trusts,
foundations, colleges and universities and finance companies.

          Emera also proposes to establish bank lines of credit, directly or
indirectly through one or more financing subsidiaries. Loans under these lines
will have maturities of less than one year from the date of each borrowing.
Emera may engage in other types of short-term financing generally available to
borrowers with comparable credit ratings as it may deem appropriate in light of
its needs and market conditions at the time of issuance.

               f.   Hedges and Interest Rate Risk Management

          Emera requests authority to enter into, perform, purchase and sell
financial instruments intended to manage the volatility of interest rates,
including but not limited to interest rate swaps, caps, floors, collars and
forward agreements or any other similar agreements ("Hedging Instruments").
Emera would employ Hedging Instruments as a means of prudently managing the risk
associated with any of its outstanding debt issued under the authority requested
in this application or an applicable exemption by, in effect, synthetically (i)
converting variable rate debt to fixed rate debt, (ii) converting fixed rate
debt to variable rate debt, (iii) limiting the impact of changes in interest
rates resulting from variable rate debt and (iv) providing an option to enter
into interest rate swap transactions in future periods for planned issuances of
debt securities. In no case will the notional principal amount of any Hedging
Instrument exceed that of the underlying debt instrument and related interest
rate exposure. Thus, Emera will not engage in "leveraged" or "speculative"
transactions. The underlying interest rate indices of such Hedging Instrument
will closely correspond to the underlying interest rate indices of Emera's debt
to which such Hedging Instrument relates. Off-exchange Hedging Instruments would
be entered into only with counterparties whose senior debt ratings are
investment grade ("Approved Counterparties").

          In addition, Emera requests authorization to enter into Hedging
Instruments with respect to anticipated debt offerings ("Anticipatory Hedges"),
subject to certain limitations and restrictions. Anticipatory Hedges would only
be entered into with Approved Counterparties, and would be used to fix and/or
limit the interest rate risk associated with any new issuance through (i) a
forward sale of exchange-traded U.S. or Canadian Treasury futures contracts,
U.S. or Canadian Treasury obligations and/or a forward swap (each a "Forward
Sale"), (ii) the purchase of put options on U.S. or Canadian Treasury
obligations (a "Put Options Purchase"), (iii) a Put Options Purchase in
combination with the sale of call options on U.S. or Canadian Treasury
obligations (a "Zero Cost Collar"), (iv) transactions involving the purchase or
sale, including short sales, of U.S. or Canadian Treasury obligations, or (v)
some combination of a Forward Sale, Put Options Purchase, Zero Cost Collar
and/or other derivative or cash transactions, including, but not limited to
structured notes, caps and collars, appropriate for the Anticipatory Hedges.

          Hedging Instruments may be executed on-exchange ("On-Exchange Trades")
with brokers through the opening of futures and/or options positions traded on
the Chicago Board of Trade, the opening of over-the-counter positions with one
or more counterparties ("Off-Exchange Trades"), or a combination of On-Exchange
Trades and Off-Exchange Trades. Emera will determine the optimal structure of
each Hedging Instrument transaction at the time of execution.

          Emera will endeavor to comply with SFAS 80 ("Accounting for Futures
Contracts") and SFAS 133 ("Accounting for Derivatives Instruments and Hedging
Activities") when it is implemented or such other standards relating to
accounting for derivative transactions as are adopted and implemented by the
Financial Accounting Standards Board ("FASB"). In addition, Emera will endeavor
to qualify these financial instruments for hedge accounting treatment under FASB
rules. In the event transactions in financial instruments or products are
qualified for hedge accounting treatment under Canadian GAAP, but not under US
GAAP, Emera's financial statements filed with the Commission will contain a
reconciliation of the difference between the two methods of accounting
treatment. No gain or loss on a hedging transaction entered into by Emera or its
subsidiaries (except BHE and its subsidiaries) will be allocated to BHE or its
subsidiaries, regardless of the accounting treatment accorded to the
transaction.

          To the extent such securities are not exempt under Rule 52(a), BHE
requests authorization to enter into the transactions described in this Item
1.E.2.f on the same terms applicable to Emera.

               g.   Guarantees

          Emera requests authorization to enter into guarantees, obtain letters
of credit, enter into expense agreements or otherwise provide credit support
("Guarantees") with respect to the obligations of its Subsidiaries as may be
appropriate or necessary to enable such Subsidiaries to carry on in the ordinary
course of their respective businesses in an aggregate principal amount not to
exceed $500 million outstanding at any one time (not taking into account
obligations exempt under Rule 45). All debt guaranteed will comply with the
conditions in Item 1.E.2. Included in this amount are Guarantees entered into by
Emera that were previously issued in favor of its Subsidiaries. The limit on
Guarantees is separate from the limit on Emera's external financing. Emera
proposes to charge each Subsidiary a fee for each guarantee provided on its
behalf that is not greater than the cost, if any, of obtaining the liquidity
necessary to perform the guarantee. As of December 31, 2000, Emera had no
outstanding Guarantees on behalf of Subsidiaries.

               h.   Subsidiary Financing

          Emera requests authorization to lend funds to its nonutility
subsidiaries at a mark up to Emera's cost of funds at any time during the
Authorization Period without prior Commission authorization. The authorization
requested would not apply to BHE or any of its subsidiaries or to NSPI. Emera
requests such authority so that it can match the cost of funds charged to each
subsidiary with each company's unique investment risk profile. This is desirable
as a risk management measure and because it avoids the cross subsidization of
higher risk subsidiaries from lower risk subsidiaries./48

          The nonutility subsidiaries that would be financed in this manner
would not pass any increased costs on to BHE or its subsidiaries because they
would not sell goods or services or lend funds to BHE or its subsidiaries. Emera
intends to finance BHE's capital needs at the lowest practical cost. BHE will
either finance its capital needs through short, medium and long-term borrowings
authorized by the MPUC and exempt under Rule 52(a) or through borrowings from
Emera, directly or indirectly through the intermediate holding companies. BHE
may also borrow funds from NSPI if NSPI has surplus funds and the interest rate
on the loan would result in a lower cost of borrowing for BHE. All borrowings by
BHE from an associate company would be at the lower of Emera's effective cost of
capital, NSPI's effective cost of capital (if NSPI is the lender) or BHE's
effective cost of capital incurred in a direct borrowing at that time from
nonassociates for a comparable term loan./49

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48 See, e.g., Energy East Corp., Holding Co. Act Release No. 27228 (September
12, 2000); Entergy Corp., Holding Co. Act Release No. 27039 (June 22, 1999) (a
requirement that the lender charge only its effective cost of capital for
nonutility loans when market rates are greater would result in a subsidy to the
nonutility borrower).

49 BHE's nonutility subsidiaries will finance their capital needs through the
issuance of securities under Rule 52(b). 50 Emera intends to integrate any BHE
stock-based benefit plans into the plans administered by Emera subsequent to the
Merger.
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          The MPUC exercises jurisdiction over the securities issued by BHE with
maturities of one year or longer. BHE requests Commission authorization to issue
and sell securities with maturities of less than one year. Such short-term debt
will not exceed an aggregate amount of $60 million outstanding at any time
during the Authorization Period. BHE also requests authorization to guarantee
the obligations of its subsidiaries in an aggregate amount not to exceed $30
million. BHE may charge each subsidiary a fee for each guarantee provided on its
behalf that is not greater than the cost, if any, of obtaining the liquidity
necessary to perform the guarantee.

          Because Emera is structurally subordinated to NSPI with respect to the
majority of assets in the Emera group, NSPI generally may borrow funds at a
lower cost of funds than Emera. Consequently, NSPI generally finances its
capital needs independently of Emera. As a FUCO, NSPI's financing would be
exempt under Section 33 of the Act unless guaranteed or otherwise supported by
the credit of Emera.

          Each of the Intermediate Holding Companies also requests authorization
to issue and sell securities to the other Intermediate Holding Companies and
Emera, and to acquire securities from their respective subsidiary companies.
Each of the Intermediate Companies also seeks authority to issue guarantees and
other forms of credit support to direct and indirect subsidiaries. In no case
would the Intermediate Holding Companies borrow, or receive any extension of
credit or indemnity from any of their respective direct or indirect subsidiary
companies. For reasons of economic efficiency, the terms and conditions of any
such financings will be on an arm's length basis, except as noted above for
financings by BHE.

               i.   Changes in Capital Stock of Wholly-Owned Subsidiaries

          The portion of an individual Subsidiary's aggregate financing to be
effected through the sale of stock to Emera or other immediate parent company
during the Authorization Period pursuant to Rule 52 and/or an order issued in
this file is unknown at this time. The proposed sale of capital securities
(i.e., common stock or preferred stock) may in some cases exceed the then
authorized capital stock of such Subsidiary. In addition, the Subsidiary may
choose to use capital stock with no par value. As needed to accommodate such
proposed transactions and to provide for future issues, Applicants request
authority to change the terms of any wholly-owned Subsidiary's authorized
capital stock capitalization by an amount deemed appropriate by Emera or other
intermediate parent company.

          The requested authorization is limited to Emera's wholly-owned
Subsidiaries and will not affect the aggregate limits or other conditions
contained herein. A Subsidiary would be able to change the par value, or change
between par value and no-par stock, without additional Commission approval. Any
such action by BHE or any other public utility company would be subject to and
would only be taken upon the receipt of any necessary approvals by the MPUC or
other public utility commission with jurisdiction over the transaction. As noted
previously, BHE will maintain, during the Authorization Period, a common equity
capitalization of at least 30%. See New Century Energies, Inc., Holding Co. Act
Release No. 26750 (Aug. 1, 1997); Conectiv, Inc., Holding Co. Act Release No.
26833 (Feb. 26, 1998); Dominion Resources, Inc., Holding Co. Act Release No.
27112 (Dec. 15, 1999).

               j.   Payment of Dividends Out of Capital or Unearned Surplus

          As a result of the application of the purchase method of accounting to
the Merger, the current retained earnings of BHE will be eliminated. In
addition, the Merger will give rise to a substantial level of goodwill, the
difference between the aggregate values allocated to all identifiable tangible
and intangible (non-goodwill) assets on the one hand, and the total
consideration to be paid for BHE and the fair value of the liabilities assumed,
on the other. In accordance with the Commission's Staff Accounting Bulletin No.
54, Topic 5J, the goodwill will be "pushed down" to BHE and reflected as
additional paid-in-capital in its financial statements. The effect of these
accounting practices would be to leave BHE without retained earnings, the
traditional source of dividend payment, but, nevertheless, a strong balance
sheet showing a significant equity level. To allow BHE to pay dividends after
the Merger, BHE requests authorization to pay dividends out of additional
paid-in-capital up to the amount of its retained earnings immediately prior to
the Merger and out of earnings before the amortization of goodwill thereafter.
BHE also requests authorization to redeem its common stock held by its associate
company parent in lieu of the payment of dividends to the extent permitted by
state law, provided that BHE maintains the required minimum 30% common equity
capitalization.

          The application of "push down" accounting represents a change in the
manner of accounting. For FERC and state commission reporting purposes, goodwill
will be recorded in BHE's books, however, the original historical basis of BHE's
books will not be disturbed.

          The push down of the net assets at fair market value would also have
an impact on the net income of BHE. The net assets include an acquisition
adjustment that will be amortized over 20 years. BHE's net income will be
reduced by the amount of the amortization. For example if the Merger had
occurred on January 1, 2000, net income of $11.5 million for the year ended
December 31, 2000 would have been reduced by a goodwill amortization of $3.6
million. The resulting net income after amortization would be $7.9 million.

          In determining whether to permit a registered holding company or
subsidiary to pay dividends out of capital surplus, the Commission considers
various factors, including: (i) the asset value of the company in relation to
its capitalization, (ii) the company's prior earnings, (iii) the company's
current earnings in relation to the proposed dividend, and (iv) the company's
projected cash position after payment of a dividend. See Eastern Utilities
Associates, Holding Co. Act Release No. 25330 (June 13, 1991) ("EUA"), and The
National Grid Group plc, Holding Co. Act Release No. 27154 (Mar. 15, 2000).
Further, the payment of the dividend must be "appropriate in the public
interest." Id., citing Commonwealth & Southern Corporation, 13 S.E.C. 489, 492
(1943).

          In support of its request, BHE asserts that each of the standards of
Section 12(c) of the 1935 Act enunciated in the EUA case are satisfied:

          (i) After the Merger, and giving effect to the push down of goodwill,
          BHE's common equity as a percentage of total capitalization will be at
          or above 30%; consistent with industry norms.

          (ii) BHE has a favorable history of prior earnings.

          (iii) Applicants anticipate that BHE's cash flow from operations after
          the Merger will remain stable. In the years following the Merger, cash
          flow is expected to improve and earnings before the amortization of
          goodwill ("Gross Earnings") should be adequate to support the
          requested dividend authorization. Dividends paid out of future
          earnings will not exceed 100% of BHE's Gross Earnings.

          (iv) The projected cash position of BHE after the Merger will be
          adequate to meet its operating needs. As of December 31, 2000, BHE had
          balances of $12.5 million in cash and cash equivalents. The
          amortization of goodwill is a non-cash expense that will not affect
          the cash flow of BHE. BHE is forecast to have sufficient cash to pay
          dividends in the amounts contemplated.

          (v) The proposed dividend payments are in the public interest. BHE is
          in sound financial condition. In addition, the dividend payments are
          consistent with investor interests because they allow the capital
          structure of BHE to be adjusted to more appropriate levels of debt and
          equity.

          Lastly, it is important to note that in no case would dividends be
paid if BHE's common stock equity as a percentage of its total capitalization
was below 30%. This restriction protects the interests of investors, consumers
and the general public in soundly capitalized public utility companies.

               k.   Financing Entities

          Emera and the Subsidiaries seek authorization to organize new
corporations, trusts, partnerships or other entities that will facilitate
financings by issuing income preferred securities or other securities to third
parties. To the extent not exempt under Rule 52, the financing entities also
request authorization to issue such securities to third parties. In connection
with this method of financing, Emera and the Subsidiaries may: (i) issue
debentures or other evidences of indebtedness to a financing entity in return
for the proceeds of the financing; (ii) acquire voting interests or equity
securities issued by the financing entity to establish ownership of the
financing entity (the equity portion of the entity generally being created
through a capital contribution or the purchase of equity securities, ranging
from one to three percent of the capitalization of the financing entity), and;
(iii) guarantee a financing entity's obligations in connection with a financing
transaction. Emera and the Subsidiaries also request authorization to enter into
expense agreements with financing entities to pay the expenses of any such
entity. Any amounts issued by a financing entity to a third party under this
authorization will be included in the overall external financing limitation
authorized herein for the immediate parent of such financing entity. However,
the underlying intra-system mirror debt and parent guarantee shall not be so
included. The authorization sought herein with respect to financing entities is
substantially the same as that granted in New Century Energies, Inc., Holding
Co. Act Release No. 26750 (Aug. 1, 1997); Conectiv, Holding Co. Act Release No.
26833 (Feb. 26, 1998) and Dominion Resources, Inc., Holding Co. Act Release No.
27112 (Dec. 15, 1999).

               l.   Tax Allocation Agreement

          Applicants ask the Commission to approve the agreement among certain
Emera System companies to file a consolidated tax return ("Tax Allocation
Agreement"). Approval is necessary because the Tax Allocation Agreement provides
for the retention by [identify intermediate holding company that will be parent
of the US tax filing group] ("US Group Parent"), of certain payments for tax
losses that it has incurred, rather than the allocation of such losses to the
Subsidiaries in the U.S. tax filing group without payment as would otherwise be
required by Rule 45(c)(5).

          In this matter, US Group Parent is seeking to retain the benefit of
tax losses that have been generated by it in connection with Merger-related debt
only. As a result of the Merger, US Group Parent will be creating tax benefits
from the interest expense on Merger-related debt that is non-recourse to BHE and
its subsidiaries and unrelated to the financing of subsidiary operations.
Because the debt incurred is necessary to finance US Group Parent's investment
in BHE, US Group Parent should properly retain the related tax benefits. In
addition, the Tax Allocation Agreement will not give rise to the types of
problems (e.g., upstream loans) that the Act was intended to address. Compare
Section 12(a) of the Act.

          The Commission has approved a substantially similar tax allocation
agreement in The National Grid Group plc, Holding Co. Act Release No. 27154
(Mar. 15, 2000). Applicants have attached the form of the proposed Tax
Allocation Agreement among US Group Parent and the Subsidiaries as Exhibit M-1.

               m.   Direct Stock Purchase and Dividend Reinvestment Plan,
                    Incentive Compensation Plans and other Employee Benefit
                    Plans

          Emera proposes, from time to time during the Authorization Period to
issue and/or acquire in open market transactions or by some other method that
complies with applicable law and Commission interpretations then in effect up to
5 million shares of Emera common stock under Emera's dividend reinvestment plan,
certain incentive compensation plans and certain other employee benefit plans
currently existing or that may be adopted in the future.50 For example, Emera
currently maintains the following stock-based benefit plans for employees: 1)
Emera Senior Management Stock Option Plan, which currently has 1,706,109
treasury shares reserved; 2) Emera Common Share Purchase Plan, which currently
has 2,000,000 treasury shares reserved; and 3) Emera Dividend Reinvestment Plan.
The plans will remain in effect following consummation of the Merger. The plans
are described in greater detail in Exhibit J-1 to the Application.

     F.   Intra-System Service Transactions

          1.   Emera Services

          Emera requests authorization to form a service company, Emera
Services, to provide a variety of services to the companies in the Emera System.
As a general rule, the individual system companies will continue to
independently perform certain functions that are most efficiently and
effectively provided internally by each company. In contrast, Emera Services
will offer system-wide coordination and strategy services, oversight services
and other services where economies can be captured by centralization of
personnel, equipment, practice and procedures in one organization. Emera
Services will also ensure adequate oversight and realize economies of scale by
consolidating certain administrative and service functions for the Emera System.

          In particular, Applicants anticipate that the following services may
be offered by Emera Services to system companies:

a.   Rates and Regulatory.
     Emera Services may assist the Emera System companies in the analysis of
     their rate structures and in the formulation of rate policies and advise
     and assist the Emera System companies in proceedings before regulatory
     bodies involving the rates and operations of Emera System companies and of
     other competitors where such rates and operations directly or indirectly
     affect the Emera System companies.

b.   Internal Auditing.
     Emera Services may conduct periodic audits of administration and accounting
     processes. Audits would include examinations of service agreements,
     accounting systems, source documents, allocation methods and billings to
     assure proper authorization and accounting for services.

c.   Strategic Planning.
     Emera Services may advise and assist system companies with the preparation
     of strategic business plans and corporate strategies.

d.   External Relations.
     Emera Services may maintain relationships with government policy makers,
     conduct lobbying activities and provide community relations support.

e.   Transmission and Distribution System Management.
     Emera Services may assist BHE in coordinating the management of its
     transmission and distribution system to ensure the most efficient provision
     of services and to capture economies of scale as a larger purchaser in the
     market. BHE may, however, remain as the contract party under any agreement.

f.   Legal Services, Corporate Secretary, and Risk Management.
     Emera Services may provide various legal services and general legal
     oversight, as well as corporate secretarial functions for the benefit of
     Emera System companies. In addition, Emera Services may provide insurance,
     claims, security, environmental and safety related services.

g.   Marketing.
     Emera Services may assist Emera System companies to develop marketing
     strategies for product and brand name promotion. Individual Emera System
     companies may maintain independent marketing personnel to handle the
     day-to-day details of marketing campaigns.

h.   Financial Services.
     Emera Services may provide various services including corporate tax,
     treasury, corporate accounting and reporting, general ledger maintenance
     and all accounting recordkeeping, processing certain accounts such as
     accounts payable, cash management, and others as may be deemed necessary,
     hedging policy and oversight, financial planning and rates (for Utility
     Subsidiaries and other Subsidiaries that interact with regulators or
     regulated companies). Each Subsidiary may also maintain its own corporate
     and accounting group and engage Emera Services to provide advice and
     assistance on accounting matters, including the development of accounting
     practices, procedures and controls, the preparation and analysis of
     financial reports and the filing of financial reports with regulatory
     bodies, on a system-wide basis.

i.   Information Systems and Technology.
     Emera Services may provide the Emera System companies with electronic data
     processing and telecommunication network services.

j.   Executive.
     Using Emera's executive staff working through Emera Services, Emera
     Services may assist the Emera System companies in formulating and executing
     general plans and policies, including operations, issuances of securities,
     appointment of executive personnel, budgets and financing plans, expansion
     of services, acquisitions and dispositions of property, public
     relationships and other related matters.

k.   Investor Relations.
     Emera Services may maintain relationships with the financial community and
     provide certain shareholder services.

l.   Customer Services.
     Emera Services may provide billing, mailing, remittance processing, call
     center and customer communication services for customers.

m.   Employee Services.
     Emera Services may offer to assist system companies to develop employee
     relations policies and programs and to train personnel in a coordinated
     manner across the Emera System. Each Emera System company may maintain a
     human resources group to handle the individualized application of policies
     and programs. Emera Services may also provide payroll services, management
     of the employee benefit plans, employee communications and mail services.

n.   Engineering.
     Emera Services may provide engineering services for the Emera System
     companies. These services could include infrastructure expansion and
     improvements, right-of-way maintenance and acquisition, surveys, mapping,
     laboratory, and environmental services.

o.   Business Support.

     i.   Power Procurement
     Emera Services may coordinate and procure power supplies on behalf of NSPI
     and BHE.

     ii.  Purchasing.
     Emera Services may provide procurement services to Emera System companies.

     iii. Facilities Management.
     Emera Services may provide facilities management services for offices owned
     by Emera System companies.

p.   Other Services.
     Emera Services may provide other services, such as business development, as
     identified in the services agreement or requested by the Subsidiaries.

          In accordance with the services agreement, services provided by Emera
Services will be directly assigned if possible or allocated as necessary by
activity, project, program, work order or other appropriate basis. To accomplish
this, employees of Emera Services will record transactions using data capture
and accounting systems currently in place at Emera as well as new systems to be
installed for future use. Costs of Emera Services will be accumulated in
accounts and directly assigned if possible or allocated as necessary to the
appropriate system company in accordance with the guidelines set forth in the
services agreement (included as Exhibit I-1 to the Application). It is
anticipated that Emera Services will be staffed primarily by transferring
personnel from Emera and, to a certain extent, with personnel transferred from
NSPI and BHE. Emera Services' accounting and cost allocation methods and
procedures would be structured to comply with the Commission's standards for
service companies in registered holding company systems. Emera Services' billing
system will use the "Uniform System of Accounts for Mutual Service Companies"
established by the Commission for holding-company systems, as may be adjusted to
use the FERC uniform system of accounts. Exhibit I-3 discusses the systems and
procedures to be implemented by Emera Services. As necessary, Emera Services may
organize a U.S. subsidiary to provide services within the U.S. Such subsidiary
will also maintain the systems and procedures necessary to comply with the
Commission's standards for service companies in registered holding company
systems. The operations of Emera Services and any such U.S. subsidiary will be
coordinated and managed with the objective of maximizing the economical and
efficient performance of services for all associate companies in the Emera
System.

          As compensation for services, the services agreement will provide for
client companies to "pay to Emera Services the cost of such services, computed
in accordance with the applicable rules and regulations (including, but not
limited to Rules 90 and 91) under the Act and appropriate accounting standards."
Where more than one company is involved in or has received benefits from a
service performed, the services agreement will provide that client companies
will pay their fairly allocated pro rata share in accordance with the methods
set out in a schedule to the services agreement. Thus, charges for all services
provided by Emera Services to affiliated utility companies, non-utility
companies and the holding company will be on an "at cost" basis as determined
under Rules 90 and 91 of the Act.

          No change in the organization of Emera Services, the type and
character of the companies to be serviced, the methods of allocating cost to
associate companies, or in the scope or character of the services to be rendered
subject to Section 13 of the Act, or any rule, regulation or order thereunder,
shall be made unless and until Emera Services shall first have given the
Commission written notice of the proposed change not less than 60 days prior to
the proposed effectiveness of any such change. If, upon the receipt of any such
notice, the Commission shall notify Emera Services within the 60-day period that
a question exists as to whether the proposed change is consistent with the
provisions of Section 13 of the Act, or of any rule, regulation or order
thereunder, then the proposed change shall not become effective unless and until
Emera Services shall have filed with the Commission an appropriate declaration
regarding such proposed change and the Commission shall have permitted such
declaration to become effective.

          Emera will structure the services agreement so as to comply with
Section 13 of the Act and the Commission's rules and regulations thereunder.
Rule 88 (b) provides that "(a) finding by the commission that a subsidiary
company of a registered holding company . . . is so organized and conducted, or
is to be so conducted, as to meet the requirements of Section 13(b) of the Act
with respect to reasonable assurance of efficient and economical performance of
services or construction or sale of goods for the benefit of associate
companies, at cost fairly and equitably allocated among them (or as permitted by
Rule 90), will be made only pursuant to a declaration filed with the Commission
on Form U-13-1, as specified in the instructions for that form, by such company
or the persons proposing to organize it." Notwithstanding the foregoing
language, the Commission has on at least two recent occasions made findings
under Section 13(b) based on information set forth in an application on Form
U-1, without requiring the formal filing on a Form U-13-1. See Unitil Corp., 51
SEC Docket 562 (Apr. 24, 1992); CINergy Corp., 57 SEC Docket 2353 (Oct. 21,
1994). In this Application, Emera Resources has submitted substantially the same
application information as would have been submitted in a Form U-13-1.

          Accordingly, it is appropriate for the Commission to find that Emera
Services will be so organized and shall be so conducted as to meet the
requirements of Section 13(b), and that the filing of a Form U-13-1 is
unnecessary, or, alternatively, that this Application should be deemed to
constitute a filing on Form U-13-1 for purposes of Rule 88.

          Emera proposes that, for a limited period of time ending on March 31,
2002 ("Transition Period"), Emera will continue to provide services and sell
goods to Emera System companies. Emera will comply with the provisions of Rule
90 with respect to the performance of services or construction for associate
companies on the basis of cost and with the provisions of Rule 92 with respect
to the sale of goods produced by the seller./51 The Transition Period will allow
the Emera System to practically and efficiently implement the transition to
Emera Services as the principal provider of services to the Emera System. In
particular, because the Emera Services will need to be organized, implement
appropriate accounting and cost tracking systems, test the systems and train
employees prior to commencing operations, the Transition Period will allow Emera
Services adequate time to perform these tasks. The Transition Period will also
allow for the orderly transfer of Emera's personnel to Emera Services for the
purpose of staffing its service operations.

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51 A form of transition services agreement is attached as Exhibit K-3.
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          The relief requested here is similar to the relief granted in AGL
Resources, Inc., Holding Co. Act Release No. 27243 (October 5, 2000) (AGL
Resources authorized to provide services to system companies during a transition
period intended to allow for a practical and efficient transition to a
centralized and unified service company organization). The proposed Transition
Period is a reasonable extension of the 30-day transition period provided in
Rule 82(a) and its is justified under Section 13(a) of the Act as a special or
unusual circumstance not in the ordinary course of business. In particular,
Emera had traditionally performed the service company function for the Emera
System but, as a registered holding company, it must now transfer all of these
services to a new entity which must acquire and install appropriate systems and
recruit personnel. This is a one-time-only event, not in the ordinary course of
business. Further, the Transition Period is necessary and appropriate in the
public interest and in the interest of investors and consumers because it allows
time to acquire new software and to fully modify existing software systems for
the most efficient transition to a centralized service company structure without
wasteful expenditures on intermediate, temporary software modifications.

          Consumers of the Emera's utility subsidiaries will not be
detrimentally affected by the services provided during the Transition Period
since all transactions will comply with the applicable provisions under the Act,
including the provisions of Rule 90 thereunder requiring the performance of
services on the basis of cost. In no event will Emera provide services to Emera
System companies after the Transition Period, except in accordance with Rule 85
under the Act.

     G.   Nonutility Reorganizations

          Applicants propose to restructure Emera's nonutility holdings from
time to time as may be necessary or appropriate in the furtherance of the Emera
System's authorized nonutility activities. To that end, Emera requests
authorization to acquire, directly or indirectly, the equity securities of one
or more intermediate subsidiaries ("Intermediate Subsidiaries") organized
exclusively for the purpose of acquiring, financing, and holding the securities
of one or more existing or future nonutility subsidiaries. Intermediate
Subsidiaries may also provide management, administrative, project development,
and operating services to such entities.

          Restructuring could involve the acquisition of one or more new
special-purpose subsidiaries to acquire and hold direct or indirect interests in
any or all of the Emera System's existing or future authorized nonutility
businesses. Restructuring could also involve the transfer of existing
subsidiaries, or portions of existing businesses, among the Emera associates
and/or the reincorporation of existing subsidiaries in a different jurisdiction.
This would enable the Emera System to consolidate similar businesses and to
participate effectively in authorized nonutility activities, without the need to
apply for or receive additional Commission approval.

          These direct or indirect subsidiaries might be corporations,
partnerships, limited liability companies or other entities in which Emera ,
directly or indirectly, might have a 100% interest, a majority equity or debt
position, or a minority debt or equity position. These subsidiaries would engage
only in businesses to the extent the Emera System is authorized, whether by
statute, rule, regulation or order, to engage in those businesses. Emera does
not seek authorization to acquire an interest in any nonassociate company as
part of the authority requested in this application and states that the
reorganization will not result in the entry by the Emera System into a new,
unauthorized line of business.

          The Intermediate Subsidiaries would be organized for the purpose of
acquiring, holding and/or financing the acquisition of the securities of or
other interest in one or more EWGs, FUCOs, Rule 58 Subsidiaries, Rule 58-type
Subsidiaries, ETCs or other non-exempt nonutility subsidiaries. Intermediate
Subsidiaries may also engage in development activities ("Development
Activities") and administrative activities ("Administrative Activities")
relating to the permitted businesses of the nonutility subsidiaries.

          Development Activities will be limited to due diligence and design
review; market studies; preliminary engineering; site inspection; preparation of
bid proposals, including, in connection therewith, posting of bid bonds;
application for required permits and/or regulatory approvals; acquisition of
site options and options on other necessary rights; negotiation and execution of
contractual commitments with owners of existing facilities, equipment vendors,
construction firms, power purchasers, thermal "hosts," fuel suppliers and other
project contractors; negotiation of financing commitments with lenders and other
third-party investors; and such other preliminary activities as may be required
in connection with the purchase, acquisition, financing or construction of
facilities or the acquisition of securities of or interests in new businesses.
Administrative Activities will include ongoing personnel, accounting,
engineering, legal, financial, and other support activities necessary to manage
Emera's investments in nonutility subsidiaries.

          An Intermediate Subsidiary may be organized, among other things, (1)
in order to facilitate the making of bids or proposals to develop or acquire an
interest in any EWG, FUCO, Rule 58 Subsidiary, Rule 58-type Subsidiary, ETC or
other non-exempt nonutility subsidiary; (2) after the award of such a bid
proposal, in order to facilitate closing on the purchase or financing of such
acquired company; (3) at any time subsequent to the consummation of an
acquisition of an interest in any such company in order, among other things, to
effect an adjustment in the respective ownership interests in such business held
by Emera and non-affiliated investors; (4) to facilitate the sale of ownership
interests in one or more acquired nonutility companies; (5) to comply with
applicable laws of foreign jurisdictions limiting or otherwise relating to the
ownership of domestic companies by foreign nationals; (6) as a part of tax
planning in order to limit Emera's exposure to Canadian, U.S. and foreign taxes;
(7) to further insulate Emera and its utility subsidiaries from operational or
other business risks that may be associated with investments in non-utility
companies; or (8) for other lawful business purposes.

          Development Activities will be funded in accordance with Rules 45(b)
and 52(b). To the extent that Emera provides funds or guarantees directly or
indirectly to an Intermediate Subsidiary that are used for the purpose of making
an investment in any EWG or FUCO, Rule 58 Subsidiary or Rule 58-type Subsidiary,
the amount of such funds or guarantees will be included in Emera's "aggregate
investment" in such entities, as calculated in accordance with Rule 53 or Rule
58, as applicable.

     H.   Rule 58-type Subsidiaries

          Emera conducts various businesses in Canada that, but for their source
of revenues would qualify as "energy-related" or "gas-related" under Rule 58.
For example, Strait Energy Inc. ("Strait Energy") is a wholly owned subsidiary
of Emera that sells steam power. The sale of thermal energy is the type of
business that is retainable under Rule 58(b)(vi), but because Strait Energy
derives substantially all its revenues from Canadian sources, as a technical
matter the exemption under the rule is unavailable. The Commission has, however,
found that certain energy-related activities that would otherwise constitute
energy-related companies under Rule 58 but for their operations outside the U.S.
could be conducted in Canada or internationally by registered holding company
systems. EUA Cogenex Corp., Holding Co. Act Release No. 26741 (July 15, 1997)
(authorizing EUA Cogenex Corporation and EUA Cogenex-Canada, Inc., both
subsidiaries of the U.S. public utility holding company Eastern Utilities
Associates, to organize a Canadian subsidiary engaged in a range of energy
conservation-related business activities); Energy East Corp., Holding Co. Act
Release No. 27224 (August 31, 2000) (authorizing retention of Xenergy Canada,
Inc., a company providing utility related software services); Cinergy Corp,
Holding Co. Act Release No. 26662 (February 7, 1997) (authorizing Cinergy
Solutions to market energy-related services on a domestic and international
basis).

          Accordingly, Emera requests authorization to invest up to 15% of its
consolidated capitalization in companies defined as "energy-related" or
"gas-related" under Rule 58, except that companies that derive revenues from
Canada shall not be excluded from such definition ("Rule 58-type Subsidiaries")
and provided further that Emera's investment it its Subsidiaries at the time of
its registration under the Act shall also be excluded from the investment limit.
As of December 31, 2000, 15% of Emera's consolidated capitalization was $281.45
million.

     I.   EWG and FUCO Investments

          Emera may use the proceeds of the financings proposed in this
Application, in part, for investments in EWGs and FUCOs. Under Rule 53, in
determining whether to approve the issue or sale of a security by Emera to
finance an EWG or FUCO investment, the Commission must consider the
circumstances surrounding the proposed issuance. In particular, in connection
with the financing of the acquisition of an EWG, or the guarantee of a security
of an EWG by Emera, the Commission may not find that the securities issuance is
not reasonably adapted to the earning power of Emera or to the security
structure of Emera or companies in the Emera System, or that the circumstances
are such that a guarantee by Emera of the security of an EWG would create an
improper risk for Emera, if the conditions of Rule 53(a) are met and none of the
provisions of Rule 53(b) are applicable.

          Emera does not satisfy the conditions of Rule 53(a) because its FUCO
investment exceeds 50% of its consolidated retained earnings. As of December 31,
2000, Emera had consolidated retained earnings of $200.4 million and an
investment of $1,563.48 million in NSPI. Because the conditions of Rule 53(a)
are not satisfied, Emera must demonstrate that the proposed issuance of
securities is consistent with the standards of Rule 53(c)./52

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52 Emera also does not meet the GAAP books and records requirement in Rule
53(a), but it will comply with the other provisions of Rule 53(a), in
particular, the reporting requirements, and the limitation on the use of public
utility subsidiary employees in the provision of services to EWGs and FUCOs.
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          In addition, none of the provisions of Rule 53(b) are applicable to
Emera. Neither Emera nor any subsidiary having assets with a book value
exceeding 10% or more of consolidated retained earnings has been the subject of
a bankruptcy or similar proceeding. The average consolidated retained earnings
of Emera for the four most recent quarterly periods has not decreased by 10%
from the average for the previous four quarterly periods. Lastly, Emera has not
reported operating losses attributable to investments in EWGs or FUCOs.

          Emera requests authorization to issue and sell securities in an
aggregate amount of up to $2.0 billion, such amount to be included within the $3
billion overall financing limit proposed in Item 1.E.1 above, for the purpose of
financing the acquisition of EWGs and FUCOs. As of December 31, 2000, Emera's
investment in NSPI was $1,563.48 million. Consequently, the additional
authorization requested and Emera's current investment in EWGs and FUCOs could
result in an aggregate investment of approximately $3.6 billion.

          The proposed issuance and sale of securities meets the standards of
Rule 53(c) and should be authorized. The securities issuance will not have a
substantial adverse impact upon the financial integrity of the registered
holding company system and it will not have an adverse impact on any utility
subsidiary of Emera or on the ability of the MPUC to protect the customers of
such subsidiaries. The general financing commitments proposed in this
Application assure that Emera will remain financially sound, in particular the
30% minimum capitalization standard and the investment grade debt rating
standard assure that any securities issued for purposes of financing an EWG or
FUCO investment would be consistent with an appropriate capital structure. In
addition, the MPUC has full authority to monitor BHE and its relationship with
Emera and to take corrective action should it find that the affiliation has an
adverse impact on BHE or its customers. The full extent of the MPUC's authority
is discussed infra. See Item 3.B.6.

          Emera practices a disciplined investment review process to assure that
it identifies and minimizes or appropriately mitigates the risks associated with
FUCO activities. Before any project investment would be made, the project would
be analyzed in detail, including country risk, political risk, currency risk,
regulatory risk and project specific risks. The review process would be
conducted both at the subsidiary level where the project would be developed and
at the Emera level. All projects must be consistent with Emera's broader
strategic goals and consistent with Emera's skills and expertise. Individual
project plans would be created to evaluate the project "fit" and the potential
hurdles or obstacles to success as well as the opportunities presented. All
projects must be justified on business, technical and economic grounds.

          Once past the initial review stages the project will be subject to
additional review by senior Emera management. If the project passes this review,
briefing materials for the Emera board of directors will be prepared outlining
the key risks and opportunities, as well as the strategic rationale for the
proposed investment. The board's review serves as an additional check on the
internal evaluation process.

          Because many projects will also be debt financed, in some cases on a
non-recourse basis, lenders that provide project finance also play a role in
critically appraising the financial soundness of a project and its risk profile.

          Emera is financially sound and experienced in the energy industry in
Canada. Customers of BHE will not be adversely affected by Emera's EWG or FUCO
investments because of Emera's commitment to maintain a minimum 30% common
equity percentage and investment grade debt ratings. Moreover, the MPUC has
certified that it has adequate authority to protect BHE's ratepayers from any
adverse effects that may be associated with Emera's ownership of BHE. Lastly,
Emera commits not to seek recovery in retail rates for any failed investment in,
or inadequate returns from, an EWG or FUCO investment.

     J.   Reporting

          Applicants request an exemption from Rule 26(a)(1) under the Act,
regarding the maintenance of financial statements in conformance with Regulation
S-X. The exemption would apply only to Emera and its subsidiaries that are
organized outside the U.S. Any exempted company would maintain its financial
statements in accordance with Canadian GAAP and, if it is a material subsidiary,
reconcile such statements to U.S. GAAP in the same manner as required by Form
20-F when such statements are provided to the Commission in Emera's filings on
Form U5S and in the Rule 24 certificates proposed below.

          Emera proposes to file certificates under Rule 24 on a semi-annual
basis within 60 days of the end of Emera's fiscal year and fiscal second
quarter. The Rule 24 certificates will contain the following information:

     a. If sales of common stock by Emera are reported, the purchase price per
     share and the market price per share at the date of the agreement of sale;

     b. The total number of shares of Emera common stock issued or issuable
     pursuant to options granted during the reporting period under employee
     benefit plans and dividend reinvestment plans including any employee
     benefit plans or dividend reinvestment plans hereafter adopted;

     c. If Emera common stock has been transferred to a seller of securities of
     a company being acquired, the number of shares so issued, the value per
     share and whether the shares are restricted in the hands of the acquirer;

     d. If a guarantee is issued during the reporting period, the name of the
     guarantor, the name of the beneficiary of the guarantee and the amount,
     terms and purpose of the guarantee;

     e. The amount and terms of any financings consummated by any Subsidiary
     utility company that are not exempt under Rule 52;

     f. A list of U-6B-2 forms filed with the Commission during the reporting
     period, including the name of the filing entity and the date of filing;

     g. Consolidated balance sheets as of the end of the reporting period and
     separate balance sheets as of the end of the reporting period for each
     company, including Emera, that has engaged in jurisdictional financing
     transactions during the reporting period;

     h. A table showing, as of the end of the reporting period, the dollar and
     percentage components of the capital structure of Emera on a consolidated
     basis, and each public utility subsidiary.

     i. A retained earnings analysis of Emera on a consolidated basis and for
     each public utility subsidiary detailing gross earnings, goodwill
     amortization, dividends paid out of capital surplus, and the resulting
     capital account balances at the end of the reporting period.

ITEM 2. FEES, COMMISSIONS AND EXPENSES.

          The fees, commissions and expenses to be paid or incurred by Emera,
directly or indirectly, in connection with the Merger are estimated to be
approximately $4.72 million.

ITEM 3. APPLICABLE STATUTORY PROVISIONS.

     A.   Applicable Provisions

          The acquisition by Emera of the voting securities of BHE and the BHE
public-utility subsidiary companies is subject to Sections 9 and 10 of the Act.
The retention of the Subsidiaries is subject to Section 11 of the Act. The
proposed financing transactions are subject to Sections 6, 7, and 12 of the Act
and the proposed establishment of a Emera Services is subject to Section 13 of
the Act.

     B.   Legal Analysis

          Section 9(a)(2) makes it unlawful, without approval of the Commission
under Section 10, "for any person to acquire directly or indirectly any security
of any public utility company if such person is an affiliate ... of such company
and of any other public utility or holding company, or will by virtue of such
acquisition become such an affiliate." As a result of the Merger, Emera would
become an affiliate of three public utility companies: BHE, MEPCO and Chester
SVC. NSPI would not be deemed a utility affiliate under the Act.

          As part of its obligations under the Merger Agreement, Emera has
committed that NSPI will claim exempt FUCO status. Specifically, Section 7.02(c)
of the Merger Agreement provides:

          Parent agrees that . . . each of its non-U.S. public-utility company
          subsidiaries (and such non-utility subsidiaries or businesses, if any,
          as Parent determines to place under or within any of such non-U.S.
          public utility company subsidiaries) shall claim the status of a
          "foreign utility company" under Section 33 of the 1935 Act.

Emera has made this commitment understanding that NSPI must continue to comply
with the requirements of Section 33 of the Act. Emera is, therefore, firmly
committed that NSPI's business will be conducted to assure NSPI's eligibility
for FUCO status.

          To qualify as a FUCO under Section 33 of the Act:

          (1) NSPI must own or operate facilities that are not located in any
          state and that are used for the generation, transmission, or
          distribution of electric energy for sale or the distribution at retail
          of natural or manufactured gas for heat, light, or power;

          (2) NSPI may not derive any part of its income, directly or
          indirectly, from the generation, transmission, or distribution of
          electric energy for sale or the distribution at retail of natural or
          manufactured gas for heat, light, or power, within the U.S.;

          (3) Neither NSPI nor any of its subsidiaries may be a public utility
          company operating in the U.S.; and,

          (4) NSPI must provide notice to the Commission on Form U-57 that it is
          a FUCO and, to obtain the exemptions provided under the Act, the MPUC
          must certify to the Commission that it has the authority and resources
          to protect the ratepayers subject to its jurisdiction and that it
          intends to exercise its authority. Sections 33(a)(2) and 33(a)(3).

Ownership of Utility Facilities

          NSPI is a vertically integrated utility serving approximately 440,000
customers in Nova Scotia with assets of $1,913.3 million. Its utility assets
include 2,183 MW of electric generating capacity, approximately 5,200 km of
transmission lines, 24,000 km of distribution lines, associated substations and
other facilities. NSPI has no retail gas distribution facilities. NSPI neither
owns nor operates utility facilities located in the U.S. and derives none of its
income from the generation, transmission or distribution of electricity for
sale, or retail gas distribution, within the U.S. NSPI has no utility
subsidiaries.

Source of Income

          NSPI's income comes from its utility activities in Nova Scotia. NSPI
does not derive any part of its income, directly or indirectly, from the
generation, transmission, or distribution of electric energy for sale or the
distribution at retail of natural or manufactured gas for heat, light, or power,
within the U.S. In 1999, NSPI sold 75 GWh of electric energy within Canada or at
the Canada/U.S. border to purchasers who exported that energy to the U.S. These
sales used the lines of New Brunswick Power which is interconnected with the
transmission facilities of MEPCO, a 14.2% owned BHE subsidiary. At present, NSPI
is not authorized to transmit power and energy within the U.S., and accordingly,
all purchasers would take title to any energy sold within Canada or at the
international border for transmission via ISO-New England facilities.

          The sale by NSPI of power at the Canadian border does not cause NSPI
to fail to qualify for FUCO status. Sales by NSPI at the Canadian border should
be treated as Canadian sales consistent with Commission precedent. As Canadian
sales, these transactions should not be deemed to involve income from the
generation, transmission or distribution of electric energy for sale in the U.S.
that would cause NSPI to fail to qualify for exempt FUCO status, so long as the
purchaser is not a direct or indirect subsidiary of NSPI.

          That NSPI's sales at the Canadian border are Canadian in character is
consistent with Commission precedent concerning the treatment of sales at a
state border in cases under Section 3(a)(1). See, e.g., Consolidated Edison,
Inc., Holding Co. Act Release No. 27021 (May 13, 1999) ("Con Edison makes only a
small number of wholesale sales, and the majority of those sales are in New York
or at the New York border, and thus are intrastate in character."); NIPSCO
Industries, Inc., Holding Co. Act Release No. 26975 (Feb. 10, 1999) ("Although
Northern Indiana sells electricity at wholesale to non-Indiana customers, almost
all of those sales take place in Indiana or at the Indiana border, and therefore
do not constitute utility operations outside of Indiana.") (emphasis added). To
establish that the applicants were entitled to an exemption under Section
3(a)(1) of the Act, the Commission in these cases found that the holding company
and its material utility subsidiaries were "predominantly intrastate in
character" and that they did "carry on their business substantially in a single
state." By finding that the sales of electricity took place at the border, the
Commission determined that applicants' operations met that standard. Similarly,
given that NSPI is not authorized to transmit power and energy within the U.S.
and that transactions are structured so that all purchasers take title to any
energy sold at the international border, it is appropriate to find that these
sales are fundamentally Canadian.

          Because the sales by NSPI have taken place in Canada, they cannot be
deemed to generate income directly from the generation, transmission or
distribution of electric energy for sale in the U.S. To assure the Commission
that NSPI will continue not to derive income directly from the generation,
transmission or distribution of electric energy for sale in the U.S., NSPI
commits that all future sales of electricity will take place at the border or
within Canada. In addition, to fully protect U.S. retail customers from utility
service that is not regulated in the U.S., NSPI will not sell electricity or
transmission or distribution services directly to retail customers within the
U.S.

          With regard to whether NSPI's sales at the border provide it with
indirect income from the generation, transmission or distribution of electric
energy for sale in the U.S., we note that all sales in the past were made to
unaffiliated purchasers. Consequently, NSPI did not receive any income
indirectly from these purchasers' subsequent resale of power in the U.S. To
assure the Commission that NSPI will continue not to derive income indirectly
from the generation, transmission or distribution of electric energy for sale in
the U.S., NSPI commits that no direct or indirect subsidiary of NSPI will engage
in the generation, transmission or distribution of electric energy for sale in
the U.S.

          In other contexts, the Division has concurred in the view that a FUCO
can own a U.S. exempt wholesale generator ("EWG") without being deemed to derive
a portion of its income from the generation, transmission, or distribution of
electric energy for sale within the United States for purposes of Section 33.
Central and South West Corporation, SEC No-Action Letter (Sept. 13, 1995),
involved the proposed acquisition by Central and South West Corporation ("CSW")
of a UK regional electric company (the "REC"). Although the REC was engaged
primarily in the distribution of electric energy in the United Kingdom, it also
owned two U.S. qualifying cogeneration facilities through a U.S. EWG. CSW
argued, among other things, that the Commission should reject a reading that
would elevate form over status, in contravention of the purposes of the Act. So,
too, in this matter, the Commission should reject a reading of Section 33 that
could have the unintended effect of discouraging sales from Canada into New
England at a time the region is facing skyrocketing energy costs and potential
power outages, in contravention of the Act's policy against uneconomic
operations./53

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53 Accord, The National Grid Group plc, Holding Co. Act Release No. 27154 (Mar.
15, 2000) at 23 (granting FUCO status to a subsidiary of a foreign holding
company to facilitate a U.S. utility acquisition where the FUCO status was
"consistent with the fundamental purpose of the Act to protect consumers and
investors").
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          To summarize, sales by NSPI at the Canadian border to an entity that
is not a direct or indirect subsidiary of NSPI should not be deemed to involve
income from the generation, transmission or distribution of electric energy for
sale in the U.S. that would cause NSPI to fail to qualify for exempt FUCO
status. To assure that NSPI will continue to qualify as a FUCO, Emera commits
that: (1) NSPI will not sell directly to retail customers within the U.S.; (2)
sales will only take place at the Canadian border or within Canada, and; (3) no
direct or indirect subsidiary of NSPI will engage in the generation,
transmission or distribution of electric energy for sale in the U.S.

Utility Operations in the U.S.

          NSPI does not, directly or through subsidiaries, own or operate
utility assets, as defined under the Act, located in the U.S.

Notice on Form U-57 and MPUC Certification

          Prior to the closing of the Merger, Emera will file Form U-57 with the
Commission, claiming FUCO status for NSPI. Because BHE will become NSPI's
affiliate after the Merger, Applicants also must satisfy Section 33(a)(2) of the
Act to obtain the exemption from the Act available to FUCOs. Applicants have
obtained certification from the MPUC under Section 33(a)(2), that it has the
authority and resources to protect the ratepayers subject to its jurisdiction
and that it intends to exercise its authority. The MPUC certification is
included in this Application as Exhibit D-3.

          Under Section 33(a)(1) of the Act, a FUCO is generally exempt from all
the provisions of the Act and is not considered a public utility company under
the Act. Accordingly, NSPI will not be a public utility subsidiary of Emera for
purposes of Sections 9 and 10 of the Act.

          The statutory standards to be considered by the Commission in
evaluating the Merger are set forth in Section 10 of the Act. As explained more
fully below, the Merger complies with all of the applicable provisions of
Section 10 and should be approved. Upon completion of the Merger, Emera will
register as a holding company under Section 5 of the Act.

          1.   Section 10(b)(1)

          Section 10(b)(1) precludes approval of an acquisition that "will tend
towards interlocking relations or the concentration of control of public utility
companies, of a kind or to an extent detrimental to the public interest or the
interests of investors or consumers."

               a.   Interlocking Relationships.

          By its nature, any acquisition results in new links between
theretofore unrelated companies./54 Interlocking boards are typical of
wholly-owned subsidiaries and necessary to integrate the BHE companies into the
Emera system. The interlocks, therefore, will be in the public interest and the
interests of investors and consumers, and thus not prohibited by Section
10(b)(1).

               b.   Concentration of Control.

          Section 10(b)(1) is intended to avoid "an excess of concentration and
bigness" while preserving the "opportunities for economies of scale, the
elimination of duplicate facilities and activities, the sharing of production
capacity and reserves and generally more efficient operations" afforded by the
coordination of local utilities into an integrated system./55 In applying
Section 10(b)(1) to utility acquisitions, the Commission must determine whether
the acquisition will create "the type of structures and combinations at which
the Act was specifically directed."/56

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54 Cf. Northeast Utilities, Holding Co. Act Release No. 25221 (Dec. 21, 1990),
as modified, Holding Co. Act Release No. 25273 (March 15, 1991), aff'd sub nom.
City of Holyoke v. SEC, 972 F.2d 358 (D.C. Cir. 1992) (stating that interlocking
relationships are necessary to integrate two merging entities).

55 American Electric Power Co., 46 S.E.C. 1299, 1309 (1978).

56 Vermont Yankee Nuclear Corp., 43 S.E.C. 693, 700 (1968).
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          As explained more fully in the application of BHE to the FERC under
Section 203 of the Federal Power Act, the proposed Merger will not have any
adverse effect on competition, rates or the effectiveness of federal or state
regulation./57 Specifically, the proposed Merger cannot and will not harm
competition in wholesale power markets because:

          o    NSPI and BHE do not sell into common markets.

          o    NSPI does not own or control any generation in the NEPOOL, the
               only market in which BHE sells power.

          o    All of NSPI's generation is located in Nova Scotia and there is
               virtually no available transfer capability ("ATC") between Nova
               Scotia and BHE.

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57 The order of the FERC approving the Merger is attached hereto as Exhibit D-5.
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          BHE also possesses no market power over transmission as in 1997 it
transferred operational control of its higher voltage transmission facilities to
ISO New England, Inc. ("ISO-NE") and offers service over its lower voltage
facilities pursuant to a FERC accepted open access transmission tariff.

          Other regulators have considered the competitive effect of the
proposed Merger./58 The FERC considered competitive issues when it approved the
Merger under Section 203 of the Federal Power Act, and notification and report
forms were filed with the Antitrust Division of the Department of Justice and
the Federal Trade Commission pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, 15 U.S.C. ss.1311 et seq. The Federal Trade Commission
granted Emera early termination of the notice period on February 28, 2001,
thereby permitting consummation of the transaction as of that date.

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58 See, e.g., Northeast Utilities, Holding Co. Act Release No. 25221 (Dec. 21,
1990) (finding that "antitrust ramifications of an acquisition must be
considered in light of the fact that public utilities are regulated monopolies
and that federal and state administrative agencies regulate the rates charged
consumers").
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          For these reasons, the Merger will not "tend toward interlocking
relations or the concentration of control" of public utility companies, of a
kind or to the extent detrimental to the public interest or the interests of
investors or customers within the meaning of Section 10(b)(1).

          2.   Section 10(b)(2)

          Section 10(b)(2) requires the Commission to determine whether the
consideration Emera is giving for BHE is reasonable and whether it bears a fair
relation to investment in and earning capacity of the utility assets being
acquired. A competitive bidding process conducted by an investment banking firm
determined who would acquire BHE. The firm contacted numerous parties to
determine interest, and conducted due diligence with companies that had
submitted indications of interest. BHE's board then accepted definitive
proposals from two remaining companies at the conclusion of the due diligence
process. The resulting price and terms and conditions for the acquisition are
the product of arms'-length negotiations between the buyer and seller. In light
of this evidence, Emera believes that the consideration for the acquisition
bears a fair relationship to the sums invested in and the earning capacity of
the BHE utility assets.

          Further, Emera believes that the estimated fees and expenses in this
matter bear a fair relation to the value of BHE and the strategic benefits to be
achieved by the Merger and, further, that the fees and expenses are fair and
reasonable./59

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59 See Northeast Utilities, Holding Co. Act Release No. 25548 (June 3, 1992),
modified on other grounds, Holding Co. Act Release No. 25550 (June 4, 1992)
(noting that fees and expenses must bear a fair relation to the value of the
company to be acquired and the benefits to be achieved in connection with the
acquisition). The total estimated fees and expenses of $4.72 million represent
2.4% of the value of the consideration Emera will pay for BHE, and are
consistent with percentages previously approved by the Commission. See, e.g.,
Entergy Corp., Holding Co. Act Release No. 25952 (Dec. 17, 1993) (fees and
expenses represented approximately 1.7% of the value of the consideration paid
to the shareholders of Gulf States Utilities); Northeast Utilities, Holding Co.
Act Release No. 25548 (June 3, 1992) (approximately 2% of the value of the
assets to be acquired).
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          3.   Section 10(b)(3)

          Section 10(b)(3) requires the Commission to determine whether a
proposed acquisition will unduly complicate the acquirer's capital structure or
will be detrimental to the public interest or the interest of investors or
consumers or the proper functioning of the resulting system.

          The proposed Merger will not unduly complicate the capital structure
of Emera or its public-utility subsidiaries. The proposed Merger does not
involve the creation of any minority interests nor will the existing senior debt
and senior equity securities of Emera be affected by the Merger.

          Section 10(b)(3) also directs the Commission to consider whether an
acquisition will be detrimental to the public interest or the interest of
investors or consumers, or the proper functioning of the resulting holding
company system. The acquisition of BHE will not be detrimental to the protected
interests or to the proper functioning of the resulting holding company system.
The BHE board of directors determined that BHE's small size, and the possibility
of further shrinkage of its revenue base as additional aspects of its business
become subject to competition, would make it increasingly difficult to maintain
regulated rates at reasonable levels and attract capital on reasonable terms.
BHE's board of directors believes that Emera and its principal subsidiary, NSPI,
represent a good fit for BHE. NSPI serves a geographical area like BHE's, and
its management has experience operating a utility with challenges similar to
those faced by BHE. In turn, BHE's management and employees have experience
doing business with Canadian utility companies. The BHE board of directors also
believes that the Merger will provide future benefits to BHE's customers and
employees as the best practices of both firms are shared and implemented.
Perhaps more importantly, the MPUC, the agency that is most directly responsible
for the protection of Maine utility consumers, has approved the Merger./60

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60 See Exhibit D-2, Order of the MPUC dated January 5, 2001 and infra Item
3.B.7.e.
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          4.   Section 10(c)(1)

          Under this section, the Commission cannot approve "an acquisition of
securities, or of any other interest, which is unlawful under the provisions of
Section 8 or is detrimental to the carrying out of the provisions of Section
11." Section 8, which governs the combination of electric and gas operations,
does not apply to the instant transaction. Section 11 requires that a registered
holding company should be generally limited to a single integrated
public-utility system. In connection with its previous order, the Commission
concluded that BHE's existing utility operations constitute a single, integrated
electric-utility system within the meaning of the Act./61 The proposed Merger
will impose a new holding company structure over the existing BHE system; it
will not affect the integration of that system./62

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61 Bangor Hydro-Electric Company, Holding Co. Act Release No. 2704 (Oct. 25,
1999).

62 Supra at 12.
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          Section 11 also requires that a registered holding company system
should be limited to "such other businesses as are reasonably incidental, or
economically necessary or appropriate to the operations of such integrated
public utility system." As set forth below, all of Emera's active non-utility
businesses are retainable.

     1. NS Power Services Ltd., a wholly owned subsidiary of Emera, was in the
business of providing energy services. NS Power Services Ltd. is currently
inactive.

          1.1. NSP Trigen Inc., is 50% owned by NS Power Services Ltd., and the
remainder is owned by a nonaffiliate. NSP Trigen Inc. is currently inactive.

     2. Enercom Inc., a wholly owned subsidiary of Emera, is a holding company
for Emera's diversified activities within the energy industry. Emercom Inc. is
retainable as an intermediate holding company under New Century Energies, Inc.,
Holding Co. Act Release No. 27000 (April 7, 1999) (authorizing organization and
capitalization of one or more "intermediate" nonutility subsidiaries to act as
holding companies over other nonutility subsidiaries).

          2.1 Cablecom Ltd., is a wholly owned subsidiary of Enercom Inc. The
company is engaged in the design and engineering, project management,
construction, structured cabling, maintenance and installation of fiber optic
and wireless communications applications. Cablecom Ltd. will qualify as an
exempt telecommunications company under Section 34(a) of the Act and therefore
is retainable.

               2.1.1 Fibretek Inc., is a wholly owned subsidiary of Cablecom
Ltd. that engages in the same activities as its parent. Accordingly, Fibretek
Inc. will qualify as an exempt telecommunications company under Section 34(a) of
the Act and therefore is retainable.

          2.2 Emera Fuels Inc. is a wholly owned subsidiary of Enercom Inc. that
is engaged in the supply of furnace and fuel oil, lubricants, diesel and
gasoline products. Emera Fuels is retainable as because it is an energy supply
and marketing company. This is a similar business to the business permitted
under Rule 58(b)(1)(v), the "brokering and marketing of energy commodities,
including but not limited to electricity, natural or manufactured gas and other
combustible fuels." The Commission has also approved the retention of the
following businesses that supply energy products other than electricity and
natural gas: Whiting Petroleum Corp., a subsidiary of Alliant, "purchases,
develops, and produces crude oil and natural gas," WPL Holdings, Inc., Holding
Co. Act Release No. 26856 (April 14, 1998); Harbor Coal Company, an indirect
subsidiary of NiSource, Inc., pulverizes coal and delivers it to a manufacturing
facility for use as blast furnace fuel, NiSource, Inc., Holding Co. Act Release
No. 27265 (November 1, 2000); SCANA Energy Marketing Inc., markets electricity,
natural gas and other light hydrocarbons, SCANA Corp., Holding Co. Act Release
No. 27133 (February 9, 2000); Energy East Solutions, LLC, sells natural gas,
fuel oil and other services and markets a full range of energy-related planning,
financial, operational and maintenance services to commercial, industrial and
municipal customers, Energy East Corp., Holding Co. Act Release No. 27224
(August 31, 2000).

     3. Stellarton Basin Coal Gas Inc. is a wholly owned subsidiary of Emera
that was formed to participate in a joint venture to explore and develop methane
gas reserves in Nova Scotia. This type of business is retainable under American
Electric Power Company, Inc., Holding Co. Act Release No. 26933 (November 2,
1998) (authorizing AEP to acquire energy assets including, without limitation,
natural gas production, gathering, processing, storage and transportation
facilities and equipment, liquid oil reserves and storage facilities, and
associated facilities) (the "AEP Energy Assets Order").

     4. Strait Energy Inc. is a wholly owned subsidiary of Emera that sells
steam energy. The sale of thermal energy is a retainable business under Rule
58(b)(1)(vi).

     5. 510845 N.B. Inc. is a wholly owned subsidiary of Emera engaged in the
provision of utility services, in particular, the supply and maintenance of
electric transformers. This type of business is retainable under Rule
58(b)(1)(vii).

     6. NSP Pipeline Management Ltd. is a wholly owned subsidiary of Emera that
owns a 12.5% interest in Maritimes and Northeast Pipeline Management Ltd. NSP
Pipeline Management Ltd. is retainable under the AEP Energy Assets Order.

          6.1 Maritimes and Northeast Pipeline Management Ltd. is 12.5% owned by
NSP Pipeline Management Ltd. and the remainder is owned by nonaffiliates.
Maritimes and Northeast Pipeline Management Ltd. is the general partner of, and
owns a 1.25% interest in, Maritimes and Northeast Pipeline Limited Partnership.
Maritimes and Northeast Pipeline Management Ltd. operates and manages the
Canadian portion of the Maritimes and Northeast Pipeline, a natural gas pipeline
with its origin in Nova Scotia and its terminus near Boston. Maritimes and
Northeast Pipeline Management Ltd. is retainable under the AEP Energy Assets
Order.

     7. NSP Pipeline Inc. is a wholly owned subsidiary of Emera that owns a
12.375% interest in the Maritimes and Northeast Pipeline Limited Partnership.
NSP Pipeline Inc. is retainable under the AEP Energy Assets Order.

          7.1 Maritimes and Northeast Pipeline Limited Partnership is 12.375%
owned by NSP Pipeline Inc. and the remainder is owned by nonaffiliates.
Maritimes and Northeast Pipeline Limited Partnership owns the Canadian portion
of the Maritimes and Northeast Pipeline. Maritimes and Northeast Pipeline
Limited Partnership is retainable under the AEP Energy Assets Order.

     8. NSP US Holdings Inc. is a wholly owned subsidiary of Emera that
indirectly owns a 12.5% interest in Maritimes and Northeast Pipeline L.L.C.
through the holding companies identified below. NSP US Holdings Inc. is
retainable under the AEP Energy Assets Order.

          8.1 Scotia Holdings Inc. is a wholly owned holding company subsidiary
of NSP US Holdings Inc. Scotia Holdings Inc. is retainable under the AEP Energy
Assets Order.

               8.1.1 Nova Power Holdings Inc. is a wholly owned holding company
subsidiary of Scotia Holdings Inc. Nova Power Holdings Inc. is retainable under
the AEP Energy Assets Order.

                    8.1.1.1 Scotia Power U.S. Ltd. is a wholly owned holding
company subsidiary of Nova Power Holdings Inc.. Scotia Power U.S. Ltd. is
retainable under the AEP Energy Assets Order.

                         8.1.1.1.1 Maritimes and Northeast Pipeline, L.L.C. is
12.5% owned by Scotia Power U.S. Ltd. and the remainder is owned by
nonaffiliates. Maritimes and Northeast Pipeline L.L.C. owns the U.S. portion of
the Maritimes and Northeast Pipeline. Maritimes and Northeast Pipeline, L.L.C.
is retainable under the AEP Energy Assets Order.

          As set forth below, all of BHE's active non-utility businesses also
are retainable:

     1. Bangor Energy Resale, Inc., a wholly owned subsidiary of BHE, permits
BHE to use a power sales agreement as collateral for a bank loan. Bangor Energy
Resale, Inc. is retainable as a special-purpose financing entity under The
Southern Company, Holding Co. Act Release No. 27134 (Feb. 9, 2000); New Century
Energies, Inc., Holding Co. Act Release No. 27000 (April 7, 1999) (SEC approved
a special-purpose subsidiary of trust that was formed for the purpose of
facilitating a financing transaction); and Exelon Corporation, Holding Co. Act
Release No. 27256 (Oct. 19, 2000) (authorizing retention of several existing
special-purpose financing entities).

     2. CareTaker, Inc., a wholly owned subsidiary of BHE provides security
alarm services. CareTaker, Inc., will qualify as an exempt telecommunications
company under Section 34(a) of the Act and therefore is retainable.

     3. Bangor Fiber Company, Inc. owns and leases fiber optic communications
cable. It will qualify as an exempt telecommunications company under Section
34(a) of the Act and therefore is retainable.

     4. Bangor Line Company constructs and maintains transmission and
distribution lines and provides engineering services. It is retainable under
Rule 58(b)(1)(vii).

          The remaining BHE nonutility subsidiaries presented below own or
manage interests in water rights or real-estate that were acquired and used in
connection with BHE's utility business. These subsidiaries are all presently
inactive and are retainable under Energy East Corp., Holding Co. Act Release No.
27224 (August 31, 2000) (a corporation formed to hold property used in
connection with public utility operations is retainable, but corporation commits
to divest holdings of agricultural lands without utility purpose); Conectiv,
Inc., Holding Co. Act Release No. 26832 (February 25, 1998) (corporation that
manages real estate that was acquired for an intended utility purpose that has
ceased to exist is retainable as a vehicle for the development and sale of such
properties); and Central Maine Power Co., Holding Co. Act Release No. 7985
(February 24, 1948) (corporation owning land around dams and flowage rights is
retainable because it allows control of riparian rights needed to assure the
maximum flow of water to certain hydro-electric dams).

          The following subsidiaries fall into this category:

     3. East Branch Improvement Company ("EBIC") formerly provided water storage
services for hydroelectric facilities. BHE owns 60% of the common stock of EBIC.

          3.1 Godfrey's Falls Dam Company holds rights that would permit future
water storage development in the basin of the East Branch of the Penobscot
River. Godfrey's Falls Dam Company is wholly owned by EBIC.

          3.2 The Sawtelle Brook Dam & Improvement Company controls certain
water rights in the basin of the East Branch of the Penobscot River. The
Sawtelle Brook Dam & Improvement Company is wholly owned by EBIC.

     4. The Sebois Dam Company improved the navigation of certain of the Sebois
waters entering the Piscataquis River. The Sebois Dam Company is wholly owned by
BHE.

     5. The Pleasant River Gulf Improvement Company was engaged in water
improvement. It is wholly owned by BHE.

          BHE also holds 7% of the outstanding common stock of Maine Yankee, a
company that owns and, prior to its permanent closure in 1997, operated an 880
MW nuclear generating plant in Wiscasset, Maine. Maine Yankee is being
decommissioned and should be retainable until that process is complete and the
facility can be sold.

          Applicants also request that the Commission authorize the acquisition
of certain projects that Emera and BHE have in development. Emera has offered to
purchase 8.4% of the Sable Offshore Energy Project ("SOEP") infrastructure
assets for CDN $90.0 million. The SOEP infrastructure assets comprise a gas
processing plant at Goldboro, Nova Scotia; a natural gas liquids fractionation
plant at Point Tupper, Nova Scotia; a natural gas liquids line connecting the
Goldboro and Point Tupper operations; and offshore production platforms and
sub-sea gathering pipelines. The AEP Energy Assets Order supports the
acquisition of SOEP. Applicants request Commission authorization to acquire the
SOEP assets, if they have not been acquired prior to Emera's registration under
the Act, and to retain the SOEP assets if they have already been acquired when
Emera registers.

          5.   Section 10(c)(2)

          The standards of Section 10(c)(2) are satisfied because the Merger
will tend toward the economical and efficient development of an integrated
public utility system, thereby serving the public interest, as required by that
section of the Act.

          The Commission has previously found that a transaction such as the
instant one, involving the imposition of a new holding company over an existing
integrated system, results in financial and organizational benefits for the
utility system./63

- --------
63 WPL Holdings, Inc., Holding Co. Act Release No. 25377 (Sept. 18, 1991); see
also Chevron Corp., Holding Co. Act Release No. 27122 (Dec. 27, 1999); Roanoke
Gas Co., Holding Co. Act Release No. 26996 (April 1, 1999); BEC Energy, Holding
Co. Act Release No. 26874 (May 15, 1998); Western Resources, Inc., Holding Co.
Act Release No. 26783 (Nov. 24, 1997).
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          The Merger will result in significant financial benefits for
shareholders, rate payers and the community in general. As a result of the
Merger, BHE will be in a position to achieve synergies typically associated with
a merger of two similar businesses. For example, cost of capital and risks will
be reduced as a result of BHE's affiliation with a larger and more diversified
company. In terms of future rates, Emera has committed to freeze BHE's total PUC
jurisdictional revenue requirement until MPUC consideration and approval of an
alternative rate plan.

          Emera plays a vital role in the economy of Nova Scotia as does BHE in
Maine. Both companies serve a very similar customer base, including substantial
service to the pulp and paper industry. Emera understands the importance of this
industry to the economy of the region as a whole and is committed to providing
reliable power at fair rates that allow the industry to continue to operate on a
competitive basis with other pulp and paper producers around the world. Emera
and BHE also serve other common customer groups and Emera will continue its
commitment to these customers in its operation of the combined entity after the
Merger.

          In addition, the Merger will help ensure continuity of high quality
customer service. The Merger will permit BHE access to management resources
available from Emera, a company with historic success in the delivery of
services. Emera and BHE will share best practices learned from their extensive
experience in operating their respective utility systems.

          The Merger will provide substantial benefits to the communities within
and outside of BHE's service area. After the Merger, BHE will maintain its
community involvement and charitable contributions at the pre-Merger level.
Seventy-seven Maine municipalities, approximately 15% of the communities in the
State, will benefit as a result of the 825,000 outstanding warrants held by
those municipalities through the Municipal Review Committee, Inc., in
conjunction with BHE's involvement with PERC. The increased value in market
price of the warrants will result in an incremental value of approximately $9.1
million, a substantial profit for the municipalities.

          On October 24, 2000, BHE shareholders approved the Merger, which will
result in a cash payment to shareholders of $26.50 per share. The closing price
of BHE on June 29, 2000, the day before the Merger announcement, was $15.13 per
share. Because BHE shareholders are protected by the purchase of their shares at
a premium and their voting rights, it is clear that the Merger will be
beneficial to shareholders.

          Although some of the anticipated benefits are strategic and will be
fully realizable only in the longer term, they are properly considered in
determining whether the standards of Section 10(c)(2) are met./64 The Commission
has recognized that potential benefits are entitled to be considered, regardless
of whether they can be precisely estimated: "[S]pecific dollar forecasts of
future savings are not necessarily required; a demonstrated potential for
economies will suffice even where these are not precisely quantifiable."/65

- --------
64 National Grid Group plc, supra; see American Electric Power Co., 46 S.E.C.
1299, 1320-1321 (1978).

65 Centerior Energy Corp., Holding Co. Act Release No. 24073 (April 29, 1986)
(citation omitted). See also Energy East Corporation, Holding Co. Act Release
No. 26976 (Feb. 12, 1999) (authorizing acquisition based on strategic benefits
and potential, but unquantifiable, savings).
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          6.   Section 10(f)

          Section 10(f) provides that:

          The Commission shall not approve any acquisition as to which an
          application is made under this section unless it appears to the
          satisfaction of the Commission that such State laws as may apply in
          respect to such acquisition have been complied with, except where the
          Commission finds that compliance with such State laws would be
          detrimental to carrying out the provisions of section 11.

The MPUC is the sole state regulator with jurisdiction over the Merger. As
explained above, the MPUC has approved the Merger.

          By order dated January 5, 2001, the MPUC approved a stipulation
entered into among the Public Advocate, the Municipal Review Committee, the
Industrial Energy Consumers Group, Emera, BHE, MEPCO and Chester SVC (the
"Stipulation") and incorporated the Stipulation by reference into its order./66
The approval of the Stipulation resolved all issues in the proceeding before the
MPUC and permits the Merger to proceed./67

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66 The MPUC order and the Stipulation is included in Exhibit D-2 to this
Application.

67 The Stipulation at 3 notes that "[t]he parties agree that the Commission
issue an order which approves and adopts this Stipulation and finds that,
subject to the provisions herein, the proposed reorganizations are consistent
with the interests of the ratepayers and investors of the Maine public utility
Applicants and approves the proposed reorganizations under 35-A MRSA ss.708 and
such other provisions in Title 35-A as might be applicable.
- --------


          The Stipulation subjects Emera and BHE to several conditions intended
to preserve MPUC authority and to assure BHE's service quality. In particular,
the Stipulation provides that:

o    Applicants (i.e., Emera, BHE, MEPCO and Chester SVC) will comply with Maine
     statutes and MPUC regulations regarding reorganizations and affiliated
     transactions of BHE. To the extent that the activities of Emera and any of
     its affiliates relate to or in any way impact the operations, costs or
     revenues of BHE in Maine, Emera and its affiliates will be subject to MPUC
     jurisdiction for discovery purposes and participate as a party in any
     proceeding when deemed necessary by the MPUC.

o    All contracts or transactions between BHE and its affiliated interests that
     constitute affiliated transactions which require approval of the MPUC under
     Maine law must explicitly provide that no charges made or incurred, and
     that no costs incurred or revenues earned under the contracts, will be
     reflected in BHE's rates except as permitted by the MPUC in accordance with
     Maine law, except where compliance with both state and federal requirements
     is impossible or where compliance with state law would cause BHE or an
     affiliate to violate federal law. Further, to the extent that the SEC must
     approve such contracts, Applicants agree to petition the SEC for an
     explicit finding that the terms in the contract required by this provision
     are not inconsistent with "SEC law or regulation."

o    Applicants agree to waive the defense that the MPUC's jurisdiction to
     approve a reorganization or affiliate transaction of BHE or to set the
     rates of BHE with regard to a transaction between BHE and an affiliate is
     preempted by the existence or exercise of SEC jurisdiction over
     reorganizations or affiliate transactions of BHE, except where compliance
     with both state and federal requirements is impossible or where compliance
     with state law would cause BHE or an affiliate to violate federal law.

o    Emera will make available to the MPUC upon request, and at a location in
     the State of Maine convenient to the MPUC, such books and records of Emera
     and its affiliates as the MPUC may require Emera to produce. Emera is
     entitled to notice and opportunity to be heard on the production requests
     and may be accorded confidential treatment where appropriate.

o    The parties agree that BHE's service quality not deteriorate as a
     consequence of the Merger. To maintain service quality, performance
     consistent with certain service quality benchmarks and related reports were
     required. The remedy for failure to maintain service quality could include
     a prohibition on the payment of dividends.

o    BHE is required to file various capital budget and expenditure information
     and, in the event its actual capital expenditures fall materially below its
     budgeted capital expenditures, or if the MPUC should otherwise become
     concerned about BHE's capital budget or expenditures, the MPUC may open an
     investigation to inquire into such capital budget issues and into what
     remedy, if any, would be appropriate.

o    The MPUC may order the divestiture of BHE by Emera upon a determination by
     the Commission after notice and opportunity to be heard that no other
     available remedy is adequate to reasonably address the harm./68

The parties to the Stipulation agreed and recommended that the MPUC's acceptance
of the Stipulation constitutes a finding that the MPUC has the authority and
resources to protect ratepayers subject to its jurisdiction and that it intends
to exercise its authority./69 The extensive powers of the MPUC over Emera and
BHE demonstrate that the proposed acquisition would not be detrimental to the
public interest or the interest of investors or consumers. The judgment of the
MPUC is entitled to considerable deference in this matter.

- --------
68 Stipulation at 5-10.

69 Stipulation at 10.
- --------


          The acquisition of BHE by Emera will not give rise to any of the evils
that the Act was intended to address. Emera is a publicly held company subject
to continuous reporting requirements under the Canadian securities laws. A
transaction that links companies in a narrowly defined geographic area does not
create a problem of "scatteration" for purposes of the Act.

          The Commission may also draw comfort from the findings of the order of
the Federal Energy Regulatory Commission ("FERC") approving the Merger. The FERC
found that the Merger was consistent with the public interest, that the Merger
did not pose competitive concerns, that there would be no adverse rate effects
and the Merger would not adversely effect either federal or state regulation./70

          There is a further consideration that argues for Commission
authorization on the facts of this matter. The proposed transaction will unite
Canadian and U.S. utilities. As the Commission in Gaz Metropolitain noted, the
U.S. and Canada enjoy a unique relationship. Both countries have a long history
of friendship and cooperation evidenced by, among other things, the North
American Free Trade Agreement ("NAFTA") and the NAFTA Implementation Act (Pub.
L. 103-182, 107 Stat. 2057-2225 (1993)), which were "designed to remove barriers
to trade and enhance investment opportunities between the United States and
Canada."/71

          In a letter to the Commission in support of the Merger, the Governor
of Maine, Angus King, Jr., states that Maine and New England have long fostered
a close relationship with Canada, particularly the eastern Canadian provinces.
For example, a conference of New England Governors and Eastern Canadian Premiers
has worked for the past 26 years to promote the common economic, cultural and
political interests of the region which is viewed by many as an interdependent
market. Governor King called the Merger a "good fit" and stated that he viewed
it as "being entirely consistent with the economic development aims of Maine and
with the goal of strengthening the ties between New England and Eastern
Canada."/72

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70 The order of the FERC approving the Merger is included in Exhibit D-5 to this
Application.

71 Gaz Metropolitain at 15. In Gaz Metropolitain, the Commission found that the
combination of the Canadian and Vermont gas operations resulted in a single
integrated gas utility system. While Emera could acquire a firm contract path to
interconnect the Canadian and U.S. electric operations, it is not necessary to
do so because NSPI intends to conduct its affairs so as to qualify for exemption
as a FUCO. Thus, although the transaction will require prior approval under
Sections 9 and 10, the question of integration will be confined to the BHE
utility operations, which the Commission has previously found to be an
integrated electric utility system. Section 10(c)(2) of the Act is satisfied
because BHE is currently an integrated electric utility system and will remain
so after the Merger. Because here, as in Gaz Metropolitain, the transaction will
result in a single, integrated public-utility system, the Emera-BHE Merger falls
comfortably within the Gaz Metropolitain precedent.

72 Letter from Angus S. King, Jr., Governor of Maine to Jonathan G. Katz,
Secretary of the Securities and Exchange Commission, (dated February 22, 2001).
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          The Stipulation requires the Applicants to petition this Commission to
make an explicit finding in its order approving the Merger "that its approval of
the merger transaction does not preempt MPUC exercise of its jurisdiction under
Maine law with respect to reorganizations, affiliate transactions of BHE or
ratemaking for BHE regarding the costs associated with its affiliate
transactions, and that it is the SEC's intention that its approval of the merger
transaction does not affect the MPUC's right to review and disallow BHE's costs
for services rendered between BHE and its affiliated interests that might
otherwise be subject to recovery in rates."/73 Applicants request that the
Commission make the above findings explicitly in its order approving this
Application.

          7.   Intermediate Holding Companies

          Following the Merger, Emera will hold a subsidiary interest in three
U.S. utility companies, BHE, MEPCO and Chester SVC. As illustrated by the
post-Merger organization chart in Exhibit E-1, Emera will hold BHE through
several intermediate holding companies. It is common practice for foreign-based
corporations to hold an interest in a corporation that is outside of the home
country through one or more intermediary companies. This ownership structure is
used to minimize taxes on the repatriation of foreign subsidiary profits./74
Each of the intermediate holding companies will be organized in the State of
Delaware and will have no utility affiliates, other than BHE and its utility
subsidiaries, except as authorized by the Commission. The intermediate holding
companies will be wholly-owned, directly or indirectly, by Emera and will have
no third-party public or private institutional equity or debt holders. The
intermediate holding companies will be capitalized with equity and/or debt, all
of which will be held either by Emera or an intermediate holding company.

- --------
73 See Stipulation at 5.

74 See The National Grid Group plc, Holding Co. Act Release No. 27154 (March 15,
2000) at 42-43 (employing intermediate holding companies to maximize tax relief
in the U.K. and noting further that U.S. holding companies use similar
structures in connection with their foreign investments).
- --------


          BHE, in turn, will hold a minority (14.2%) interest in MEPCO directly,
and a 50% interest in Chester SVC through its ownership of Bangor Var. Each of
the intermediate holding companies, BHE and Bangor Var will be a holding company
within the meaning of Section 2(a)(7) of the Act. As such each would be required
to register with the Commission, and comply with the various requirements for
registered holding companies, unless able to qualify for exemption.

          Section 3 of the Act provides that the Commission upon application
"shall" by order exempt any person from the provisions of the Act if such person
meets the requirements for any exemption contained in Sections 3(a) and if the
exemption is not detrimental to the public interest or the interest of investors
or consumers. Of interest here, Section 3(a)(1) of the Act provides an exemption
where a

          holding company, and every subsidiary company thereof which is a
          public utility company from which such holding company derives,
          directly or indirectly, any material part of its income, are
          predominantly intrastate in character and carry on their business
          substantially in a single state in which such holding company and
          every such subsidiary company thereof are organized.

Because they do not qualify for exemption, the intermediate holding companies
will register under the Act. However, for the reasons that follow, BHE and
Bangor Var request and are entitled to an order under Section 3(a)(1) of the Act
exempting them as holding companies from the Act. BHE and Bangor Var will
continue to be direct or indirect subsidiaries of Emera and therefore subject to
the Act's provisions relating to subsidiaries. In addition, BHE and Bangor Var
commit not to engage in any transactions such as upstream loans or certain
service transactions that would otherwise be prohibited for registered holding
companies.

          In the first instance, the inquiry regarding exemption concerns
material utility subsidiaries. Chester SVC is an immaterial utility subsidiary
because it provides no income or revenue to Bangor Var. MEPCO is also
immaterial. BHE's 14.2% investment in MEPCO is accounted for on the equity
method. For the twelve months ended December 31, 2000, BHE's proportional
interest in MEPCO's income was approximately $224, 000. This income is accounted
for under the equity method and is applied to offset BHE's expenses and,
consequently, benefits BHE's ratepayers. BHE is the sole material utility
subsidiary in the Emera system.

          In the second part of the Section 3(a)(1) evaluation, both the holding
company and every material utility subsidiary must be predominantly intrastate
in character and carry on its business substantially in a single state in which
both the holding company and subsidiary are organized. BHE and Bangor Var are
predominantly Maine companies. All of BHE's utility operating revenues are
derived from utility operations conducted in Maine./75 Bangor Var holds only an
interest in Chester SVC, whose sole utility assets are located in Maine. BHE and
Bangor Var are also organized in Maine.

- --------
75 See Sierra Pacific Resources, Holding Co. Act Release No. 24566 (Jan. 28,
1988), aff'd sub nom. Environmental Action, Inc. v. SEC, 895 F.2d 1255 (9th Cir.
1990) (exemption granted where out-of-state operations represented approximately
9.9% of the holding company's utility revenues.
- --------


          Because BHE and Bangor Var will be regulated as subsidiaries of a
registered holding company, a grant of an exemption under Section 3(a)(1) with
respect to their holding company status would not be detrimental to the public
interest or the interest of investors or consumers. For these reasons, the
Commission should grant the requested exemptions.

          8.   Financing the Emera System

          Emera's capital structure as of December 31, 2000, and adjusted to
show the effect of the Merger, is shown in the following table:

<TABLE>
<CAPTION>
                                          Emera Capital Structure
- -------------------------------------------------------------------------------------------------------------
                        Emera Pre-Merger         BHE Pre-Merger
- -------------------- ------------------------- ---------------------- --------- ------------- ---------------
                     $           % of Total    $          % of Total  Adjust-   Pro Forma       % of Total
                     millions   Capitaliza-    millions   Capitaliz-  ments     Capitaliza-     Pro Forma
                                tion                      ation                 tion          Capitalization
- -------------------- ---------- -------------- ---------- ----------- --------- ------------- ---------------
<S>                      <C>             <C>       <C>          <C>                    <C>              <C>
Common                   660.5           35.1      143.2        42.9       13.4        790.3            34.6
stockholders'
equity.
- -------------------- ---------- -------------- ---------- ----------- --------- ------------- ---------------
Preferred stock              0              0
- -------------------- ---------- -------------- ---------- ----------- --------- ------------- ---------------
Minority interests       168.3            8.9        4.7         1.4       -7.4        180.4             7.9
- -------------------- ---------- -------------- ---------- ----------- --------- ------------- ---------------
Long-term debt           861.8           45.8      185.7        55.7      12.20      1,035.3            45.4
(including current
portion)
- -------------------- ---------- -------------- ---------- ----------- --------- ------------- ---------------
Short-term debt          190.3           10.1                             -85.2        275.5            12.1
- -------------------- ---------- -------------- ---------- ----------- --------- ------------- ---------------
Total                  1,880.9            100      333.6         100      -67.0      2,281.5             100
capitalization
- -------------------- ---------- -------------- ---------- ----------- --------- ------------- ---------------
</TABLE>

          The financing authorizations requested in the Application are
substantially similar to financing authorizations granted to other newly-formed
registered holding company systems. See National Grid Group plc, Holding Co. Act
Release No. 27154 (March 15, 2000); NiSource, Inc., Holding Co. Act Release No.
27265 (November 1, 2000); Exelon Corp., Holding Co. Act Release No. 27266
(November 2, 2000). Emera proposes to abide by the same basic parameters applied
to the financing authorizations previously authorized by the Commission, in
particular, the minimum 30% common equity standard and the commitment not to
issue debt unless it is rated investment grade. The pro forma capitalization of
the combined system presented above also illustrates that Emera will be
financially sound upon consummation of the merger. For these reasons, the
Commission should find the proposed financing transactions to be in accordance
with the Act and generally in the interest of investors, consumers and the
public interest.

ITEM 4. REGULATORY APPROVALS.

          Set forth below is a summary of the regulatory approvals that will be
obtained in connection with the acquisition.

          1.   Antitrust

          The acquisition is subject to the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and
regulations thereunder, which provide that certain acquisition transactions may
not be consummated until certain information has been furnished to the Antitrust
Division of the Department of Justice and the Federal Trade Commission, and
until certain waiting periods have been terminated or have expired. The Federal
Trade Commission granted Emera early termination of the notice period on
February 28, 2001, thereby permitting consummation of the transaction as of that
date.

          2.   Federal Energy Regulatory Commission

          Under Section 203 of the Federal Power Act, the FERC has jurisdiction
when a public utility sells or otherwise disposes of facilities that are subject
to its jurisdiction. A disposition is deemed made when there is a change in
control of the public utility that owns the facilities. By order dated January
24, 2001, the FERC approved the Merger. See Exhibit D-5.

          3.   Committee on Foreign Investment in the United States

          Section 721 of the Defense Production Act of 1950 authorizes the
Committee on Foreign Investment in the United States ("CFIUS") to suspend or
prohibit any merger, acquisition or takeover, by or with a foreign person, of a
person engaged in interstate commerce in the United States when, in the
Committee's view, the foreign interest exercising control over that person might
take action that threatens to impair the national security. Applicants expect to
file an application with the CFIUS shortly.

          4.   State Regulatory Approval

          Under Maine law, the approval of the MPUC is required for the indirect
transfer of control of BHE resulting from the Merger, under a standard that
requires a finding that the Merger is consistent with the interests of BHE's
customers and investors. In addition, in rendering a decision, the MPUC must
find that it can continue to adequately regulate the reorganized utility. Under
Maine law, once an application for approval is filed, the MPUC must act
definitively within 180 days of the date of filing. Emera and BHE filed a joint
petition with the MPUC on August 4, 2000.

          By order dated January 5, 2001, the MPUC made all required findings
and approved the Merger. See Exhibit D-2.

ITEM 5. PROCEDURE.

          The Commission is respectfully requested to issue and publish not
later than May 18, 2001 the requisite notice under Rule 23 with respect to the
filing of this Application, such notice to specify a date not later than June
12, 2001 by which comments may be entered. The Commission is requested to issue
its order granting and permitting this Application to become effective not later
than June 15, 2001.

          Emera believes that a recommended decision by a hearing or other
responsible officer of the Commission is not needed for approval of the Merger.
The Division of Investment Management may assist in the preparation of the
Commission's decision. There should be no waiting period between the issuance of
the Commission's order and the date on which it is to become effective.


ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.

Exhibits

A-1  Memorandum of Association of Emera.

A-2  Articles of Association of Emera.

A-3  Certificate of Organization of BHE.

A-4  By-Laws of BHE.

A-5  Articles of Incorporation of Bangor Var.

A-6  By-laws of Bangor Var.

A-7  Partnership Agreement Creating Chester SVC Partnership.

B-1  Agreement and Plan of Merger (incorporated by reference to SEC File No.
     001-10922, filed September 18, 2000).

C-1  Definitive Proxy Statement relating to the special meeting of shareholders
     of BHE to approve the Merger with Emera (incorporated by reference to SEC
     File No. 001-10922, filed September 18, 2000).

D-1  Petition to the Maine Public Utilities Commission, filed on August 4, 2000,
     together with testimony and exhibits (to be filed by amendment).

D-2  Order of the Maine Public Utilities Commission, dated January 5, 2001.

D-3  Certification of the Maine Public Utilities Commission under Section
     33(a)(2) of the Act.

D-4  Application to FERC together with testimony and exhibits (to be filed by
     amendment).

D-5  FERC Order dated January 24, 2001.

E-1  Organizational Chart of the combined Emera/BHE system post-Merger (to be
     filed in paper under cover of Form SE).

E-2  Maps of BHE and NSPI service territories (to be filed in paper under cover
     of Form SE).

F-1  Opinion of counsel of Emera (to be filed by amendment).

F-2  Opinion of counsel of BHE (to be filed by amendment).

F-3  Past tense opinion of counsel (to be filed by amendment).

G-1  Emera's 1999 Annual Report.

G-2  BHE's Annual Report on Form 10-K for the fiscal year ended December 31,
     1999 (incorporated by reference to SEC File No. 001-10922, filed March 30,
     2000, and amended April 28, 2000).

H-1  Proposed form of notice (previously filed).

I-1  Form of Services Agreement (to be filed by amendment).

I-2  Form of Master Transition Services Agreement (to be filed by amendment).

I-3  Services Company Policies and Procedure Manual (to be filed by amendment).

J-1  Stock-based employee benefits plans (to be filed by amendment).

K-1  Emera Inc. Group of Companies

L-1  Appointment of Agent for Service of Process (to be filed by amendment).

M-1  Form of Federal and State Income Tax Allocation Agreement (to be filed by
     amendment).

Financial Statements

FS-1 Balance sheet and income statement of Emera consolidated for the year ended
     December 31, 1999 (incorporated by reference to Exhibit G-1).

FS-2 Balance sheet and income statement of BHE consolidated for the year ended
     December 31, 1999 and for the quarters ended March 31, 2000 and June 30,
     2000 (incorporated by reference to SEC File No. 001-10922, on Form 10-K for
     the year-end report filed March 30, 2000 and amended April 28, 2000, and on
     Forms 10-Q for the quarterly statements filed May 12, 2000 and August 10,
     2000, respectively).

FS-3 Balance sheet and income statement of BHE consolidated for the years ended
     December 31, 1998 and December 31, 1997 (incorporated by reference to SEC
     File No. 001-10922, on Form 10-K for the year end reports filed March 30,
     1999 and March 27, 1998, respectively).

FS-4 Pro-forma financial statements (to be filed by amendment).

FS-5 Financial projections (confidential treatment requested under Rule 104).


ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.

          The Merger neither involves a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. No federal agency is preparing an environmental impact
statement with respect to this matter.


<PAGE>


                                   SIGNATURES

          Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this Application to be signed
on its behalf by the undersigned thereunto duly authorized. The signature of the
applicants, through the undersigned, is restricted to the information contained
in this Application which is pertinent to the instant Application.

Date:  May  ___, 2001            Emera Incorporated
                                 By: /s/ Richard J. Smith
                                 Name:  Richard J. Smith
                                 Title:  Corporate Secretary and General Counsel

Date:  May  ___, 2001            Bangor Hydro-Electric Company
                                 By: /s/ Frederick S. Samp
                                 Name:  Frederick S. Samp
                                 Title:  Vice President - Finance and Law

Date:  May  ___, 2001            Bangor Var Co., Inc.
                                 By: /s/ Carroll Lee
                                 Name:  Carroll Lee
                                 Title:  President




<PAGE>


                                  Exhibit Index

A-1  Memorandum of Association of Emera.

A-2  Articles of Association of Emera.

A-3  Articles of Incorporation of BHE.

A-4  By-Laws of BHE.

A-5  Articles of Incorporation of Bangor Var.

A-6  Bylaws of Bangor Var.

A-7  Partnership Agreement Creating Chester SVC Partnership.

D-2  Order of the Maine Public Utilities Commission, dated January 5, 2001.

D-3  Certification of the Maine Public Utilities Commission under Section
     33(a)(2) of the Act.

D-5  FERC Order dated January 24, 2001.

G-1  Emera's 1999 Annual Report.

K-1  Emera Inc. Group of Companies


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>file002.txt
<DESCRIPTION>EX A-1 MEMORANDUM OF ASSOCIATION OF EMERA
<TEXT>

Exhibit A-1

                                     AMENDED

                            MEMORANDUM OF ASSOCIATION

                                       OF

                         NS POWER HOLDINGS INCORPORATED

1. The name of the Company in all its language forms is:

                         NS POWER HOLDINGS INCORPORATED

2 The Company shall have all the powers,  capacity,  rights and  privileges of a
natural person  including the capacity,  without the confirmation of the Supreme
Court of Nova Scotia, or a Judge thereof, to:

     (a) sell or dispose of its undertaking, or a substantial part thereof;

     (b) distribute any of its property in specie among its members; or

     (c) amalgamate with any company or other body of persons.

3. The liability of the members is limited.

4. The capital of the company shall consist of:

     (a) an unlimited number of common shares without nominal or par value; and

     (b) an unlimited number of preference shares in two classes,  each of which
     shall have and be  subject to such  rights,  privileges,  restrictions  and
     conditions  and be issued in such  series as the  Directors  of the Company
     may,  from time to time,  by  resolution  filed with the Registrar of Joint
     Stock Companies,  determine  provided  however that such preference  shares
     shall have the  material  attributes  set forth in Sections 5 and 6 of this
     Memorandum of Association.

5. The first class of preference  shares (the "First  Preferred  Shares")  shall
have the following material attributes:

     (a) Issuable in Series:

     The First  Preferred  Shares may be issued from time to time in one or more
     series in such  numbers  and with such  designations,  rights,  privileges,
     restrictions  and  conditions as the Directors of the Company  determine by
     resolution.

     (b) Voting Rights:

     Subject to the provisions of the Companies Act (Nova Scotia),  as from time
     to time  amended,  supplemented  or  replaced,  the  holders  of the  First
     Preferred  Shares of each  series  shall not be entitled as such to receive
     notice of or to attend any  meeting of  shareholders  of the  Company or to
     vote at any such meeting unless the Company from time to time fails to pay,
     in the  aggregate,  eight  quarterly  dividends  on any series of the First
     Preferred Shares on the dates on which the same should be paid according to
     the terms thereof whether or not consecutive, whether or not such dividends
     have been  declared  and whether or not there are any monies of the Company
     properly  applicable to the payment of dividends.  Thereafter,  but only so
     long as any such  dividends  remain in  arrears,  the  holders of the First
     Preferred  Shares of each  series  upon which  dividends  are in arrears as
     aforesaid shall be entitled to receive notice of and to attend all meetings
     of  shareholders of the Company at which directors are to be elected and to
     vote for the election of two directors out of the total number of directors
     elected  at such  meeting.  Such  entitlement  to vote  shall be  exercised
     together with holders of shares of:

          (i) all other series of First Preferred Shares;

          (ii)  all  series  of the  Second  Preferred  Shares  (as  hereinafter
          defined), and

          (iii) all other classes or series of classes of shares of the Company,
          whether presently authorized or authorized in the future,

     having the right to vote in similar  circumstances.  In any instance  where
     the holders of the First  Preferred  Shares are entitled to vote, each such
     holder  shall have one vote for each First  Preferred  Share held.  Nothing
     contained in the First Preferred Share  provisions shall be deemed to limit
     the right of the Company  from time to time to  increase  or  decrease  the
     number of its directors in accordance with the procedures prescribed by the
     Articles of Association of the Company.

     (c) Ranking and Priority of First Preferred Shares:

     The First  Preferred  Shares of each series rank on a parity with the First
     Preferred  Shares of every other  series and are  entitled to a  preference
     over the Second  Preferred  Shares,  the Common Shares and any other shares
     ranking junior to the First Preferred Shares whether  presently  authorized
     or  authorized  in the future with respect to the payment of dividends  and
     the distribution of the remaining  property and assets or return of capital
     of the Company in the event of the  liquidation,  dissolution or winding-up
     of the Company, whether voluntary or involuntary, or any other distribution
     of the  property  or assets or return of capital of the  Company  among its
     shareholders for the purpose of winding-up its affairs.

     (d) Amendments:

     Notwithstanding  the  Articles of  Association  of the  Company,  the class
     provisions attaching to the First Preferred Shares may be deleted,  varied,
     modified  or amended  with the prior  approval  of the holders of the First
     Preferred  Shares as a class  given in writing by all  holders of the First
     Preferred Shares outstanding or by at least two-thirds of the votes cast at
     a meeting or  adjourned  meeting of the  holders of such shares duly called
     for that purpose and at which a quorum is present, in addition to any other
     approval required by the Companies Act (Nova Scotia),  as from time to time
     amended, supplemented or replaced.

6. The second class of preference shares (the "Second  Preferred  Shares") shall
have the following material attributes:

     (a) Issuable in Series:

     The Second  Preferred Shares may be issued from time to time in one or more
     series in such  numbers  and with such  designations,  rights,  privileges,
     restrictions  and  conditions as the Directors of the Company  determine by
     resolution.

     (b) Voting Rights:

     Subject to the provisions of the Companies Act (Nova Scotia),  as from time
     to time  amended,  supplemented  or  replaced,  the  holders  of the Second
     Preferred  Shares of each  series  shall not be entitled as such to receive
     notice of or to attend any  meeting of  shareholders  of the  Company or to
     vote at any such meeting unless the Company from time to time fails to pay,
     in the  aggregate,  eight  quarterly  dividends on any series of the Second
     Preferred Shares on the dates on which the same should be paid according to
     the terms thereof whether or not consecutive, whether or not such dividends
     have been  declared  and whether or not there are any monies of the Company
     properly  applicable to the payment of dividends.  Thereafter,  but only so
     long as any such  dividends  remain in  arrears,  the holders of the Second
     Preferred  Shares of each  series  upon which  dividends  are in arrears as
     aforesaid shall be entitled to receive notice of and to attend all meetings
     of  shareholders of the Company at which directors are to be elected and to
     vote for the election of two directors out of the total number of directors
     elected  at such  meeting.  Such  entitlement  to vote  shall be  exercised
     together with holders of shares of:

          (i) all series of the First Preferred Shares;

          (ii) all other series of the Second Preferred Shares, and

          (iii) all other classes or series of classes of shares of the Company,
          whether presently authorized or authorized in the future,

     having the right to vote in similar  circumstances.  In any instance  where
     the holders of Second  Preferred  Shares are  entitled  to vote,  each such
     holder shall have one vote for each Second  Preferred  Share held.  Nothing
     contained in the Second Preferred Share provisions shall be deemed to limit
     the right of the Company  from time to time to  increase  or  decrease  the
     number of its directors in accordance with the procedures prescribed by the
     Articles of Association of the Company.

     (c) Ranking and Priority of Second Preferred Shares:

     The Second Preferred Shares of each series rank on a parity with the Second
     Preferred  Shares of every other  series and are  entitled to a  preference
     over the Common  Shares and any other shares  ranking  junior to the Second
     Preferred Shares whether  presently  authorized or authorized in the future
     with  respect  to the  payment of  dividends  and the  distribution  of the
     remaining  property  and assets or return of capital of the  Company in the
     event of the liquidation, dissolution or winding-up of the Company, whether
     voluntary or  involuntary,  or any other  distribution  of the property and
     assets or return of capital of the Company among its  shareholders  for the
     purpose of winding up its affairs.

     (d) Amendments:

     Notwithstanding  the  Articles of  Association  of the  Company,  the class
     provisions attaching to the Second Preferred Shares may be deleted, varied,
     modified  or amended  with the prior  approval of the holders of the Second
     Preferred  Shares as a class  given in writing by all holders of the Second
     Preferred Shares outstanding or by at least two thirds of the votes cast at
     a meeting or  adjourned  meeting of the  holders of such shares duly called
     for that purpose and at which a quorum is present, in addition to any other
     approval required by the Companies Act (Nova Scotia),  as from time to time
     amended, supplemented or replaced.

7.  The  Company  and its  shareholders  and  directors  shall  not  amend  this
Memorandum of  Association  or the Articles of  Association  of the Company in a
manner  inconsistent with the Nova Scotia Power  Reorganization  (1998) Act (the
"Reorganization  Act") or the provisions  that must be included in the Company's
amended Memorandum or Articles of Association under the Reorganization Act.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>3
<FILENAME>file003.txt
<DESCRIPTION>EX A-2 ARTICLES OF ASSOCIATION OF EMERA
<TEXT>

Exhibit A-2

                         AMENDED ARTICLES OF ASSOCIATION

                                       OF

                         NS POWER HOLDINGS INCORPORATED

                                     PART A

                                 INTERPRETATION

1. In these  Articles,  unless  there be  something  in the  subject  or context
inconsistent therewith:

     (a)  "the  Act"  means  the  Companies  Act,  R.S.N.S.  1989,  c.81 and all
     amendments thereto;

     (b) "affiliate" for purposes of these Articles shall mean:

          (i)  one body  corporate is affiliated  with another body corporate if
               one  of  them  is  the  subsidiary  of  the  other  or  both  are
               subsidiaries  of the  same  body  corporate  or  each  of them is
               controlled by the same person; and

          (ii) if two  bodies  corporate  are  affiliated  with  the  same  body
               corporate at the same time, they are deemed to be affiliated with
               each other.

     (c) the Company" means NS Power Holdings Incorporated;

     (d) "the  Office"  means the  registered  office  for the time being of the
     Company;

     (e) "the  Register"  means the register of members kept pursuant to Section
     42 of the Act;

     (f) "the Registrar" means the Registrar of Joint Stock Companies  appointed
     under the Act and includes the Deputy Registrar or any person authorized by
     the  Governor  in  Council to perform  the duties of the  Registrar  in the
     absence of the Registrar;

     (g) "month" means calendar month;

     (h) "in writing" and "written"  includes  printing,  lithography  and other
     modes of representing or reproducing words in visible form;

     (i) "these  Articles"  and  "these  presents"  include  these  Articles  of
     Association and all amendments thereto;

     (j) "reporting  company" and "reporting  issuer" shall have the meanings as
     set out in Section 2 of the Act;

     (k) "Secretary"  includes any person appointed to perform the duties of the
     Secretary temporarily;

     (l) "special resolution" means, in relation to the Company, notwithstanding
     the  provisions  of the Act, a resolution  passed by a majority of not less
     that three  fourths of such members of the Company  entitled to vote as are
     present in person or by proxy at a general  meeting of the Company of which
     notice  specifying  the  intention to propose the  resolution  as a special
     resolution has been duly given;

     (m)  "subsidiary"  for  purposes of these  Articles a body  corporate  is a
     subsidiary of another body corporate if:

          (I)  it is controlled by

               (i)  that other body corporate;

               (ii) that other body  corporate and one or more bodies  corporate
                    each of which is controlled by that other body corporate, or

               (iii)two or more bodies  corporate each of which is controlled by
                    that other body corporate; or

          (II) it is a subsidiary  of a body  corporate  that is a subsidiary of
               that other body corporate.

     (n) "proxyholder" includes an alternate proxyholder;

     (o)  "Privatization  Act" means the Nova Scotia  Power  Privatization  Act,
     S.N.S., 1992, c.8 - and all amendments thereto;

     (p) "Reorganization Act" means the Nova Scotia Power Reorganization  (1998)
     Act, S.N.S., 1998, c.19 - and all amendments thereto;

     (q) words  importing the singular number only include the plural number and
     vice versa;

     (r) words importing the masculine gender only include the feminine gender;

     (s) words importing persons include corporations.

2. The  regulations  appearing in Table A in the First Schedule to the Act shall
not apply to the Company.

3. The  Directors  may enter into and carry into  effect or adopt and carry into
effect any agreement or agreements made in connection with the reorganization of
the  Company  pursuant  to the  Reorganization  Act on behalf of the Company and
shall  have  full  power to agree to any  modification  in the terms of any such
agreement or agreements, either before or after their execution.

4. The  Directors  may,  out of any  moneys  of the  Company,  pay all  expenses
incurred for the formation and reorganization of the Company.

5. The business of the Company may be commenced as soon as the  Directors  think
fit.

6. The head office,  registered  office and principal  executive  offices of the
Company shall be situated in the Province of Nova Scotia.

                                     SHARES

7. The  Directors  shall  control the shares and,  subject to the  provisions of
these  Articles and the  Reorganization  Act, may allot or otherwise  dispose of
them to such  persons  at such  times,  on such terms and  conditions,  for such
consideration and either at a premium or at par as they think fit.

8. The Directors may pay on behalf of the Company a reasonable commission to any
person in  consideration  of that person  subscribing  or agreeing to  subscribe
(whether  absolutely  or  conditionally)  for  any  shares  in the  Company,  or
procuring or agreeing to procure subscriptions (whether absolute or conditional)
for any shares in the Company.  The  commission may be paid or satisfied in cash
or in shares, debentures or debenture stock of the Company.

9. On the issue of shares the  Company may  arrange  among the  holders  thereof
differences in the calls to be paid and in the times for their payment.

10.  If the  whole or part of the  allotment  price  of any  shares  is,  by the
conditions of their  allotment,  payable in  instalments,  every such instalment
shall, when due, be payable to the Company by the person who is at such time the
registered holder of the shares.

11. Shares may be  registered in the names of joint holders not exceeding  three
in number.

12. The joint  holders of a share shall be severally  as well as jointly  liable
for the payment of all  instalments  and calls due in respect of such share.  On
the death of one or more joint  holders of shares the  survivor or  survivors of
them shall alone be recognized by the Company as having title to the shares.

13. Save as herein  otherwise  provided,  the Company shall be entitled to treat
the registered holder of any share as the absolute owner thereof and accordingly
shall not, except as ordered by a court of competent jurisdiction or required by
statute,  be bound to recognize  any  equitable or other claim to or interest in
such share on the part of any other person.

                                  CERTIFICATES

14.  Certificates  of title to shares shall be in such form as the Directors may
from time to time approve.

15.  Certificates  of title to shares  shall be signed (i) by the  President,  a
Vice-President or a Director, and (ii) by the Secretary,  an Assistant Secretary
or such other persons as the Directors may authorize  and, if the Directors have
appointed a transfer  agent for the Company,  (iii) by an authorized  officer of
such transfer agent. The signature of the President or Vice-President  and, if a
transfer agent has been appointed,  of the Secretary or Assistant  Secretary may
be engraved, lithographed or printed upon the certificates or any one or more of
them and all such  certificates,  when  signed by the  Secretary,  an  Assistant
Secretary, such other person as the Directors authorize, or, if a transfer agent
has been appointed, an authorized officer of such transfer agent, shall be valid
and binding upon the Company. If the Company has appointed only one Director and
officer,  share  certificates  shall be  signed by that  Director  alone as sole
Director.

16.  Subject  to any  regulations  made  at any  time  by  the  Directors,  each
shareholder may have title to the shares  registered in the  shareholder's  name
evidenced by any number of  certificates  so long as the aggregate of the shares
stipulated  in  such  certificates  equals  the  aggregate   registered  in  the
shareholder's name.

17. Where shares are registered in the names of two or more persons, the Company
shall  not  be  bound  to  issue  more  than  one  certificate  or  one  set  of
certificates,  and such certificate or set of certificates shall be delivered to
the person first named on the register.

18. Any  certificate  that has become  worn,  damaged or defaced  may,  upon its
surrender to the Directors, be cancelled and replaced by a new certificate.  Any
certificate  that has become  lost or  destroyed  may also be  replaced by a new
certificate  upon proof of such loss or destruction to the  satisfaction  of the
Directors and the furnishing to the Company of such undertakings of indemnity as
the Directors deem adequate.

19. The sum of one dollar or such other sum as the  Directors  from time to time
determine  shall be paid to the  Company  for every  certificate  other than the
first certificate issued to any holder in respect of any share or shares.

20. The Directors  may cause one or more branch  registers of members to be kept
in any place or places, whether inside or outside of Nova Scotia.

                                      CALLS

21. The  Directors  may from time to time make such calls as they think fit upon
the  shareholders  in respect of all  monies  unpaid on the shares  held by them
respectively and not made payable at fixed times by the conditions on which such
shares were allotted and each shareholder  shall pay the amount of every call so
made on him or her to the persons and at the times and places  appointed  by the
Directors. A call may be made payable by instalments.

22. A call shall be deemed to have been made at the time when the  resolution of
the Directors authorizing such call was passed.

23. At least fourteen  days' notice of any call shall be given,  and such notice
shall specify the time and place at which and the person to whom such call shall
be paid.

24. If the sum  payable in respect of any call or  instalment  is not paid on or
before the day appointed for the payment thereof,  the holder for the time being
of the share in respect of which the call has been made or the instalment is due
shall pay interest on such call or  instalment at the rate of fifteen per centum
per annum  from the day  appointed  for the  payment  thereof  up to the time of
actual payment.

25. At the trial or hearing of any action for the  recovery of any money due for
any call, it shall be sufficient to prove that the name of the shareholder  sued
is entered on the  register  as the holder or one of the holders of the share or
shares in respect of which such debt  accrued,  that the  resolution  making the
call is duly  recorded  in the minute book and that notice of such call was duly
given to the shareholder  sued in pursuance of these  Articles.  It shall not be
necessary to prove the  appointment  of the  Directors who made such call or any
other  matters  whatsoever  and the  proof of the  matters  stipulated  shall be
conclusive evidence of the debt.

26. The Directors may, if they think fit,  receive from any shareholder  willing
to  advance  it all or any  part  of the  monies  due  upon  shares  held by the
shareholder  beyond the sums actually called for; and upon the monies so paid or
satisfied  in advance or so much thereof as from time to time exceeds the amount
of the calls then made upon the shares in respect of which such advance has been
made the Company may pay interest at such rate, not exceeding fifteen per centum
per annum, as the shareholder paying such sum in advance and the Directors agree
upon, or the Directors may agree with such  shareholder that the shareholder may
participate in profits upon the amount so paid or satisfied in advance.

                              FORFEITURE OF SHARES

27. If any shareholder  fails to pay any call or instalment on or before the day
appointed for payment,  the Directors may at any time thereafter  while the call
or instalment  remains unpaid serve a notice on such  shareholder  requiring the
shareholder  to pay the call or  instalment  together with any interest that may
have  accrued  and all  expenses  that may have been  incurred by the Company by
reason of such non-payment.

28. The notice  shall  name a day (not being less than  fourteen  days after the
date  of the  notice)  and a  place  or  places  on and at  which  such  call or
instalment  and such interest and expenses are to be paid. The notice shall also
state that, in the event of non-payment on or before the day and at the place or
one of the places so named,  the shares in respect of which the call was made or
instalment is payable will be liable to be forfeited.

29. If the  requirements of any such notice are not complied with, any shares in
respect of which such notice has been given may at any time  thereafter,  before
payment  of all calls or  instalments,  interest  and  expenses  due in  respect
thereof,  be  forfeited by a resolution  of the  Directors to that effect.  Such
forfeiture  shall  include all  dividends  declared in respect of the  forfeited
shares and not actually paid before the forfeiture.

30.  When any share has been so  forfeited,  notice of the  resolution  shall be
given  to the  shareholder  in  whose  name it  stood  immediately  prior to the
forfeiture and an entry of the forfeiture shall be made in the register.

31. Any share so  forfeited  shall be deemed the property of the Company and the
Directors may sell,  re-allot or otherwise  dispose of it in such manner as they
think fit.

32.  Directors  may at any time  before  any share so  forfeited  has been sold,
re-allotted  or otherwise  disposed of, annul the  forfeiture  thereof upon such
conditions as they think fit.

33. Any  shareholder  whose shares have been  forfeited  shall  nevertheless  be
liable to pay and shall  forthwith  pay to the Company  all calls,  instalments,
interest and expenses owing upon or in respect of such shares at the time of the
forfeiture  together with  interest  thereon at the rate of fifteen per cent per
annum from the time of forfeiture until payment.  The Directors may enforce such
payment if they think fit, but are under no obligation to do so.

34. A  certificate  in writing  under the hand of the  Secretary  stating that a
share has been duly forfeited on a specified date in pursuance of these Articles
and the time when it was  forfeited  shall be  conclusive  evidence of the facts
therein  stated as against all persons who would have been entitled to the share
but for such forfeiture.

                                 LIEN ON SHARES

35. The Company  shall have a first and  paramount  lien upon all shares  (other
than fully paid up shares)  registered in the name of each shareholder  (whether
solely or jointly with  others) and upon the proceeds  from the sale thereof for
the debts,  liabilities  and other  engagements  of the  shareholder,  solely or
jointly with any other person, to or with the Company, whether or not the period
for the payment,  fulfilment or discharge thereof has actually arrived, and such
lien shall extend to all dividends from time to time declared in respect of such
shares.  Unless otherwise agreed, the registration of a transfer of shares shall
operate as a waiver of any lien of the Company on such shares.

36. For the purpose of  enforcing  such lien the  Directors  may sell the shares
subject to the lien in such manner as they think fit;  but no sale shall be made
until the  period  for the  payment,  fulfilment  or  discharge  of such  debts,
liabilities or other engagements has arrived, and until notice in writing of the
intention to sell has been given to such  shareholder,  or to the  shareholder's
executors or administrators  and default has been made by the shareholder or the
executors or administrators  in such payment,  fulfilment or discharge for seven
days after such notice.

37. The net  proceeds  of any such sale after the  payment of all costs shall be
applied in or towards the satisfaction of such debts, liabilities or engagements
and  the  residue,  if  any,  paid  to  such  shareholder  or the  shareholder's
executors, administrators or assigns.

                                VALIDITY OF SALES

38.  Upon any sale after  forfeiture  or the  enforcing  of a lien in  purported
exercise  of the powers  given by these  Articles  the  Directors  may cause the
purchaser's  name to be entered in the  register in respect of the shares  sold,
and the purchaser shall not be bound to see to the regularity of the proceedings
or to the application of the purchase money,  and after the purchaser's name has
been  entered in the register in respect of such shares the validity of the sale
shall not be impeached  by any person and the remedy of any person  aggrieved by
the sale shall be in damages only and against the Company exclusively.

                               TRANSFER OF SHARES

39. The  instrument  of transfer of any share in the Company  shall be signed by
the  transferor.  The  transferor  shall be deemed to remain  the holder of such
share  until the name of the  transferee  is entered in the  register in respect
thereof and shall be entitled to receive any dividend  declared  thereon  before
the registration of the transfer.

40. The instrument of transfer of any share shall be in writing in the following
form or as near thereto as circumstances will permit:

     For value received I (we) assign and transfer unto

     --------------------------------------------------
     Please insert social  insurance  number or other tax identifying  number of
     assignee

     --------------------------------------------------

     --------------------------------------------------
     Please print name and address including postal code of assignee
     __________ shares of the Company represented by this certificate.

     Date ________________________
                                     Signature _________________________________

     SIGNATURE  GUARANTEE:  The signature  must be  guaranteed by a bank,  trust
     company or a member of a  recognized  stock  exchange  whose  signature  is
     acceptable to the Transfer Agent.

41.  The  Directors  may,  without  assigning  any reason  therefor,  decline to
register  any transfer of shares not fully paid up or upon which the Company has
a lien.

42. Every  instrument of transfer  shall be left at the office of the Company or
its  transfer  agent  where the  principal  or a branch  register  of members is
maintained for  registration  together with the  certificate of the shares to be
transferred  and such other  evidence  as the  Company  may require to prove the
title of the transferor or the right of the transferor to transfer the shares.

43. A fee not  exceeding  Five Dollars  ($5.00) may be charged for each transfer
and shall, if required by the Directors, be paid before its registration.

44. Every instrument of transfer shall,  after its  registration,  remain in the
custody of the Company.

45. Any  instrument of transfer that the  Directors  decline to register  shall,
except in case of fraud, be returned to the person who deposited it.

                             TRANSMISSION OF SHARES

46. The  executors  or  administrators  of a deceased  member  (not being one of
several joint  holders)  shall be the only persons  recognized by the Company as
having any title to the shares  registered  in the name of such  member.  When a
share is registered in the names of two or more joint  holders,  the survivor or
survivors or the executors or administrators of the deceased survivor,  shall be
the only persons  recognized  by the Company as having any title to, or interest
in, such share.

47.  Notwithstanding  anything  in these  Articles,  if the Company has only one
member,  not being one of several  joint  holders,  and that  member  dies,  the
executors  or  administrators  of such  deceased  member  shall be  entitled  to
register  themselves  in the register of members as the holders of such deceased
member's share  whereupon they shall have all the rights given by these Articles
and law to members.

48.  Any  person  becoming  entitled  to shares in  consequence  of the death or
bankruptcy  of any member or in any way other than by allotment or transfer upon
producing such evidence of being  entitled to act in the capacity  claimed or of
such person's title to the shares as the Directors think  sufficient,  may, with
the consent of the  Directors,  (which they shall not be under any obligation to
give) be registered as a member in respect of such shares, or may, without being
registered,  transfer such shares  subject to the  provisions of these  Articles
respecting the transfer of shares.

49.  The  Directors  shall  have the same  right to refuse to  register a person
entitled by  transmission  to any shares,  or that person's  nominee,  as if the
person  were  the  transferee  named  in  an  ordinary  transfer  presented  for
registration.

                             STATED CAPITAL ACCOUNTS

50. Notwithstanding anything contained in the Act:

     (a) The Company shall maintain a separate  stated capital  account for each
     class and series of shares it issues;

     (b) The Company shall add to the  appropriate  stated  capital  account the
     full amount of any consideration it receives for any shares it issues;

     (c)  Notwithstanding  paragraph  (b) of this  Article 50, where the Company
     issues shares in exchange for

          (i) property of a person who  immediately  before the exchange did not
          deal with the Company at arm's length  within the meaning of that term
          in the Income Tax Act (Canada), or

          (ii) shares of a body corporate that  immediately  before the exchange
          or that,  because of the  exchange,  did not deal with the  Company at
          arm's  length  within  the  meaning of that term in the Income Tax Act
          (Canada),

     the Company may,  subject to  paragraph  (d) of this Article 50, add to the
     stated capital accounts  maintained for the shares of the classes or series
     issued the whole or any part of the amount of the consideration it received
     in the exchange;

     (d) On the issue of a share the Company  shall not add to a stated  capital
     account in respect of the share it issues an amount greater than the amount
     of the consideration it received for the share.

                                  RECORD DATES

51. Notwithstanding anything contained in the Act:

     (a) For the purpose of determining shareholders:

          (i) entitled to receive payment of a dividend;

          (ii) entitled to participate in a liquidation distribution; or

          (iii) for any other purpose  except the right to receive  notice of or
          to vote at a meeting,

          the  Directors  may fix in advance a date as the record  date for such
          determination of shareholders,  but such record date shall not precede
          by more than fifty days the particular action to be taken;

          (b) For the purpose of  determining  shareholders  entitled to receive
          notice of a meeting of shareholders,  the Directors may fix in advance
          a date as the record date for such determination of shareholders,  but
          such  record date shall not precede by more than fifty days or by less
          than twenty-one days the date on which the meeting is to be held;

          (c) If no record date is fixed,

               (i)  the  record  date  for  the  determination  of  shareholders
               entitled to receive notice of a meeting of shareholders shall be

                    (A)  at  the  close  of  business  on  the  day  immediately
                    preceding the day on which the notice is given; or

                    (B) if no notice is given,  the day on which the  meeting is
                    held; and

               (ii) the record date for the  determination  of shareholders  for
               any  purpose  other than to  establish a  shareholder's  right to
               receive  notice of a meeting  or to vote shall be at the close of
               business on the day on which the  Directors  pass the  resolution
               relating thereto;

          (d) If a record  date is fixed,  unless  notice of the record  date is
          waived in  writing  by every  holder of a share of the class or series
          affected  whose  name  is set  out in the  Register  at the  close  of
          business on the day the directors fix the record date,  notice thereof
          shall, not less than seven days before the date so fixed, be given

               (i) by advertisement  in a newspaper  published or distributed in
               the place where the corporation has its registered  office and in
               each  place in Canada  where it has a  transfer  agent or where a
               transfer of its shares may be recorded; and

               (ii) by written  notice to each stock exchange in Canada on which
               the shares of the Company are listed for trading.

                              REDUCTION OF CAPITAL

52.  Subject to the  rights,  if any,  of the  holders of shares of any class or
series of shares to vote  separately as a class or series  thereon,  the Company
may, from time to time, by special  resolution  reduce its share capital and any
capital  redemption  reserve  fund in any  way,  and  having  done so  shall  in
accordance with the Act seek an order of the Court confirming such reduction.

                              REDEMPTION OF SHARES

53. Subject to the provisions of the Act from time to time in force, the Company
may redeem, purchase or otherwise acquire shares issued by it. The Directors may
determine the manner and terms for redeeming,  purchasing or otherwise acquiring
such  shares and may from time to time  provide a sinking  fund on such terms as
they think fit for the  redemption,  purchase  or  acquisition  of such  shares.
Preference  shares which by their provisions may be redeemed or purchased by the
Company shall be redeemed subject to such provisions.

                     MODIFICATION OF RIGHTS OF SHAREHOLDERS

54. The rights,  privileges,  restrictions and conditions attached to a class or
series  of  shares  may be added  to,  changed  or  removed  only with the prior
approval  of the holders of the issued  shares of that class or series  given as
specified herein, in addition to any vote or authorization  required by law. Any
approval of the holders of the shares with  respect to the  modification  of the
rights,  privileges,  restrictions and conditions  attached to the shares may be
given in such  manner  as may then be  required  by law,  subject  to a  minimum
requirement  that such approval be given either (i) by resolution  signed by all
the holders of the issued and outstanding shares of the class or series, or (ii)
passed by the affirmative  vote of at least  two-thirds of the votes cast by the
holders of the shares  who voted in respect of that  resolution  at a meeting of
the holders of the shares  duly called for that  purpose at which the holders of
at least fifty percent (50%) of the  outstanding  shares of that class or series
are present in person or represented by proxy, or, if such quorum is not present
at such  meeting,  at an  adjournment  thereof at which the holders of shares of
that  class or series  then  present  in person or  represented  by proxy  shall
constitute  a quorum for all  purposes.  The  formalities  to be  observed  with
respect to proxies,  the giving of notice,  voting,  and the conduct of any such
meeting or any adjourned  meeting shall be those from time to time prescribed by
these  articles  or  otherwise  prescribed  by law with  respect to  meetings of
shareholders. Notwithstanding the foregoing, the holders of shares of a class or
of a series are not entitled to vote separately as a class or series and are not
entitled to dissent, upon a proposal to amend the articles to,

     (a) increase or decrease any maximum  number of  authorized  shares of such
     class or series,  or increase any maximum number of authorized  shares of a
     class or series having rights or privileges equal or superior to the shares
     of such class or series;

     (b) effect an exchange,  reclassification or cancellation of all or part of
     the shares of such class or series; or

     (c) create a new class or series of shares  equal or superior to the shares
     of such class or series.

     This  Article  shall not be deemed by  implication  to limit,  restrict  or
curtail the power of  modification  which the Company would have if this Article
were omitted.

                               SURRENDER OF SHARES

55. The  Directors may accept the surrender of any share by way of compromise of
any question as to the holder being properly registered in respect thereof.  Any
share so surrendered may be disposed of in the same manner as a forfeited share.

                     BORROWING POWERS AND POWER OF GUARANTEE

56.  The  Directors  on  behalf  of the  Company  may from time to time in their
discretion:

     (a) raise or borrow money for the purposes of the Company or any of them;

     (b)  secure,  subject  to  compliance  with  Section  102 of the  Act,  the
     repayment  of moneys so raised or  borrowed  in such  manner  and upon such
     terms and  conditions  in all respects as they think fit, and in particular
     by the  execution  and  delivery  of  mortgages  of the  Company's  real or
     personal property, or by the issue of bonds,  debentures or debenture stock
     of the Company  secured by mortgage or other charge upon all or any part of
     the  property  of the  Company,  both  present and  future,  including  its
     uncalled capital for the time being;

     (c) sign or endorse bills,  notes,  acceptances,  cheques,  contracts,  and
     other  evidence of or securities  for money  borrowed or to be borrowed for
     the purposes aforesaid;

     (d) pledge debentures as security for loans.

57. Bonds, debentures and other securities may be made assignable, free from any
equities between the Company and the person to whom such securities were issued.

58. Any bonds,  debentures  and other  securities  may be issued at a  discount,
premium or otherwise and with special  privileges as to  redemption,  surrender,
drawings,  allotment of shares,  attending and voting at general meetings of the
Company, appointment of Directors and other matters.

59. The Directors may, from time to time and in their discretion:

     (a)  guarantee  on behalf of the Company the  performance  of  liabilities,
     contracts  and  loans of any kind  whatsoever,  and give any  postponements
     required in connection with such a guarantee; and

     (b) delegate authority to such officers and Directors of the Company and on
     such  terms and  conditions  as they,  in their sole  discretion  determine
     appropriate,  to provide  guarantees on behalf of the Company as set out in
     the preceding sub-paragraph including to give any postponements required in
     connection with such guarantees.

                                    MEETINGS

60. Ordinary general meetings shall be held at least once in every calendar year
at such time and place as may be  determined by the Directors and not later than
fifteen months after the preceding ordinary general meeting.  All other meetings
of the Company shall be called special general meetings.

61. The Directors may whenever they think fit, convene a special general meeting
and they shall,  upon the requisition of members of the Company holding not less
than five  percent of the total voting  rights of all the members  having at the
date of the deposit of the  requisition  a right to vote at general  meetings of
the Company and in respect of whose shares all calls or other sums then due have
been  paid,  forthwith  proceed  to  convene a special  general  meeting  of the
Company, to be held at such time and place as the Directors determine.

62. The requisition shall state the objects of the meeting requested,  be signed
by the members making it and deposited at the registered  office of the Company.
It may consist of several  documents  in like form each signed by one or more of
the requisitionists.

63.  If the  Directors  do not  proceed  to cause a  meeting  to be held  within
twenty-one  days (21) days from the date that the  requisition  is so deposited,
the  requisitionists,  or a majority of them in value, may themselves  convene a
meeting,  provided  it is held  within  three (3)  months  after the date of the
deposit of the requisition.

64. At least twenty-one (21) days' notice of every general  meeting,  specifying
the place,  day and hour of the  meeting  and,  when  special  business is to be
considered,  the general nature of such business,  shall be given to the members
entitled to be present at such  meeting by notice given in  accordance  with the
provisions of these Articles.  Subject to any exemption  authorized  pursuant to
the Act, when the Company is a reporting issuer, it shall,  concurrently with or
prior to  sending  notice of a meeting of the  Company,  send a form of proxy to
each member who is entitled to receive  notice of the meeting.  With the consent
in writing of all the members entitled to vote at such meeting, a meeting may be
convened  by a shorter  notice and in any manner  they think fit,  or if all the
members  are  present at a meeting  either in person or by proxy,  notice of the
time, place and purpose of the meeting may be waived.

65. The accidental omission to give any such notice to any of the members or the
failure of any  shareholder  to receive  such notice  shall not  invalidate  any
resolution passed at any such meeting.

                         PROCEEDINGS AT GENERAL MEETINGS

66. The  business  of any  ordinary  general  meeting  shall be to  receive  and
consider the financial  statements of the Company,  the reports of the Directors
and Auditors,  to elect Directors in the place of those retiring and to transact
any other  business  which under these  Articles  ought to be  transacted  at an
ordinary general meeting.

67. No business  shall be  transacted at any general  meeting  unless the quorum
requisite is present at the commencement of the business.  A corporation that is
a member  of the  Company  and has a duly  authorized  agent  or  representative
present at any such  meeting  shall for the purpose of this Article be deemed to
be personally present at such meeting.

68. Three members, where there are more than two members, personally present and
entitled  to vote  shall be a quorum for a general  meeting  for the choice of a
chair and the adjournment of the meeting.  For all other purposes the quorum for
a general meeting shall be three members personally present and entitled to vote
and holding or  representing  by proxy not less than one-tenth in number of such
of the issued shares of the Company as confer upon the holders thereof the right
to vote at such meeting.

69. The Chair of the Board shall be entitled to take the chair at every  general
meeting  or, if there be no Chair of the Board,  or if the Chair of the Board is
not present  within  fifteen  minutes  after the time  appointed for holding the
meeting,  the President shall be entitled to take the chair. If the Chair or the
President is not present  within  fifteen  minutes after the time  appointed for
holding the meeting,  the members present  entitled to vote at the meeting shall
choose  another  Director  as Chair and, if no Director is present or if all the
Directors  present decline to take the chair,  then the members present entitled
to vote shall choose one of their number to be Chair.

70. If within half an hour from the time  appointed  for the meeting a quorum is
not present,  the meeting,  if it was convened  pursuant to a  requisition  made
pursuant to these Articles  shall be dissolved;  if it was convened in any other
way, it shall  stand  adjourned  to the same day, in the next week,  at the same
time and place.  If at such  adjourned  meeting a quorum is not  present,  those
members  entitled to vote who are present shall be a quorum and may transact the
business for which the meeting was called.

71. At any general  meeting a resolution  put to the meeting may be decided by a
show of hands if the vote is unanimous otherwise the resolution shall be decided
by a poll of the members  present in person or by proxy and  entitled to vote at
such meeting.

72. A poll  shall be taken at the  meeting  in such  manner  as the chair of the
meeting directs, and either at once or after an interval. The result of the poll
shall be deemed to be the resolution of the meeting at which the poll was taken.
When any dispute  occurs over the  admission or rejection of a vote, it shall be
resolved by the chair and such  determination  made in good faith shall be final
and conclusive.

73. When on any motion there is an equality of votes, the motion shall fail.

74. The chair of a general  meeting  may,  with the consent of a majority of the
members present,  adjourn the meeting from time to time and from place to place,
but no business  shall be  transacted  at any  adjourned  meeting other than the
business left unfinished at the meeting that was adjourned.

                                VOTES OF MEMBERS

75.  Subject  to  the  Reorganization  Act  and  Part  B of  these  Articles  of
Association and the provisions  applicable to any shares issued under conditions
limiting  or  excluding  the  rights of the  holders  thereof to vote at general
meetings,  every  member  present in person or by proxy  shall have one vote for
every share held by such member.  In computing the majority on a poll  reference
shall be had to the number of votes to which each  member is  entitled  by these
Articles.

76. Any person  entitled under Article 46 to transfer any shares may vote at any
general meeting in respect thereof in the same manner as if such person were the
registered  holder of such  shares so long as the person,  at least  forty-eight
hours before the time of holding the meeting or  adjourned  meeting at which the
person proposes to vote,  satisfies the Directors that such person has the right
to transfer such shares.

77.  Where  there are joint  registered  holders of any  share,  any one of such
persons may vote such share at any meeting, either personally or by proxy, as if
such person were solely  entitled to it. If more than one of such joint  holders
is present at any  meeting,  personally  or by proxy,  the one whose name stands
first on the  register  in respect of such share shall alone be entitled to vote
it. Several  executors or  administrators of a deceased member in whose name any
share  stands  shall for the  purpose of this  Article be deemed  joint  holders
thereof.

78.  Votes  may be cast  either  personally  or by  proxy  or,  in the case of a
corporation, by a representative duly authorized under the Act.

79. A member of  unsound  mind in  respect of whom an order has been made by any
court having  jurisdiction may vote by such member's guardian or other person in
the nature of a guardian  appointed by that court and any such guardian or other
person may vote by proxy.

80.  Subject to the Act, no member shall be entitled to be present or to vote on
any question,  either  personally or by proxy or as proxy for another member, at
any meeting or be  recognized  for the  purposes  of a quorum  while any call or
other sum is due and  payable to the  Company in respect of any of the shares of
such member.

                                     PROXIES

81. The provisions of the Act relating to proxies shall apply to the Company.

82. No  instrument  appointing  a proxy shall be valid after the  expiration  of
twelve months from the date of its execution.

83. A vote given in accordance with the terms of an instrument of proxy shall be
valid notwithstanding the previous death of the principal, the revocation of the
proxy,  or the  transfer  of the  share in  respect  of which the vote is given,
provided  no  intimation  in writing of the death,  revocation  or  transfer  is
received at the office of the Company  before the meeting or by the chair of the
meeting before the vote is given.

84. Every  instrument  of proxy,  whether for a specified  meeting or otherwise,
shall be in such form as the  Directors  may from time to time  determine and as
required by law.

                             RESOLUTIONS IN WRITING

85. A resolution, including a special resolution, in writing and signed by every
shareholder  who would be entitled to vote on the  resolution at a meeting is as
valid as if it were passed by such  shareholders  at a meeting and satisfied all
the  requirements  of  the  Act  and  these  Articles   respecting  meetings  of
shareholders.  A Resolution  so passed shall be deemed to constitute a waiver of
all notices  required to have been given for that  meeting.  The  signature of a
member who is a body corporate shall be evidenced by the signature of an Officer
or Officers, Director or Directors, or other person or persons authorized by the
body corporate.

                                    DIRECTORS

86.  Unless  otherwise  determined by general  meeting,  the number of Directors
shall be determined by the Board of Directors but shall not be less than ten nor
shall they be more than fifteen  provided however that the number of the members
of the Board of Directors of the Company who are  employees of the Company or of
a subsidiary or affiliate of the Company shall not exceed two.

87. The Directors  shall have power at any time from time to time to appoint any
other person as a Director so long as the total number of Directors  does not at
any time exceed the  maximum  number  permitted.  No such  appointment  shall be
effective unless two-thirds of the Directors concur in it.

88. The Directors  shall be paid out of the funds of the Company as remuneration
for  their  service  such  sums,  if any,  as the  Board  may from  time to time
determine and such remuneration  shall be divided among them in such proportions
and in such manner as the Directors determine.  Any remuneration so payable to a
Director  who is also an officer or employee of the Company or who is counsel or
solicitor to the Company or otherwise  serves it in a professional  capacity may
be in addition to the Director's  salary as an officer or  professional  fees as
the case may be. In  addition,  the Board  may by  resolution  from time to time
award special  remuneration  out of the funds of the Company to any Director who
performs or  undertakes  any special  work or service  for, or on behalf of, the
Company  outside the work or services  ordinarily  required of a Director of the
Company. The Directors shall also be reimbursed for their out of pocket expenses
incurred in attending Board, Committee or Shareholders' meetings or otherwise in
respect of the performance by them of their duties as the Board may from time to
time determine.  Notwithstanding Article 92, the Directors shall not be required
to declare their  interest in nor shall the Directors be prohibited  from voting
in respect of the  determination  of their  remuneration in accordance with this
Article.

89. The continuing  Directors may act notwithstanding any vacancy in their body,
but if the number of  Directors  fall below the  minimum  permitted  under these
Articles,  the Directors  shall not, except in emergencies or for the purpose of
filling up  vacancies,  act so long as the number is below the  minimum.  If the
number of Directors  falls below the quorum  requirement  under these  Articles,
nominees shall be proposed by the Nominating Committee for election at a meeting
of shareholders of the Company and called pursuant to the Companies Act.

90. A Director  may, in  conjunction  with the office of  Director,  and on such
terms as to  remuneration  and otherwise as the Directors  arrange or determine,
hold any other office or position in the Company or in any company in which this
Company is a shareholder or is otherwise interested.

91. The office of a Director shall ipso facto be vacated:

     (a) if such Director makes an assignment or is petitioned in Bankruptcy; or

     (b) if such  Director is found by a court of competent  jurisdiction  to be
     mentally incompetent or of unsound mind; or

     (c) if by notice in writing to the Company such Director resigns the office
     of Director; or

     (d) if such Director is removed by special resolution of the Company.

                        DIRECTORS' INTEREST IN CONTRACTS

92. No Director shall be disqualified from contracting with the Company,  either
as vendor, purchaser, or otherwise, nor shall any such contract, or any contract
or  arrangement  entered  into or proposed to be entered into by or on behalf of
the Company in which any Director is in any way  interested,  either directly or
indirectly,  be  avoided,  nor shall any  Director  so  contracting  or being so
interested  be liable to account to the Company  for any profit  realized by any
such contract or arrangement by reason only of such Director holding office as a
Director  of the  Company  or of the  fiduciary  relation  thereby  established.
However, the existence and nature of the Director's interest must be declared by
such Director at a meeting of the Directors of the Company  unless the contract,
arrangement or transaction is one involving the fixing of  remuneration  payable
to the  Directors  in their  capacity  as  Directors  (herein  referred to as an
"Excluded  Transaction").  In the case of a proposed  contract  or  transaction,
other  than an  Excluded  Transaction,  any  Director  with an  interest  in the
contract  or  transaction  shall  declare the  interest of such  Director at the
meeting of Directors at which the matter is first taken into  consideration,  or
if the  Director  was not then  interested,  at the next  meeting held after the
Director  became so  interested.  A general  notice given to the  Directors by a
Director that the Director is a member, shareholder or director of any specified
firm or company  and is to be  regarded  as  interested  in any  transaction  or
contract  with  such  firm  or  company  shall  be  deemed  to  be a  sufficient
declaration under this Article and no further or other notice shall be required.
No Director  shall as a Director vote in respect of any contract or  arrangement
in which the Director is so  interested,  and if the Director does so vote,  the
vote  shall  not be  counted.  This  prohibition  may at any  time or  times  be
suspended  or relaxed to any extent by a general  meeting and shall not apply to
any  contract  or  arrangement  by or on  behalf of the  Company  to give to the
Directors or any of them any remuneration  payable to the Directors as such, any
security for advances or by way of indemnity.

                              ELECTION OF DIRECTORS

93. Subject to the next following  Article,  at the  dissolution of every annual
ordinary  general  meeting  all the  Directors  shall  retire from office and be
succeeded by the Directors elected at such meeting.  Retiring Directors shall be
eligible for re-election at such meeting.

94. If at any ordinary  general  meeting at which an election of Directors ought
to take place no such election takes place, or if no ordinary general meeting is
held in any year or period of years,  the retiring  Directors  shall continue in
office until their successors are elected and a general meeting for that purpose
may on notice be held at any time.

95. The Company in general  meeting may from time to time increase or reduce the
number of Directors and may determine or alter their qualification.

96. The  Company  may, by special  resolution,  remove any  Director  before the
expiration  of the period of office and appoint  another  person in their stead.
The person so appointed  shall hold office during such time only as the Director
in whose place the person is  appointed  would have held office if the  Director
had not been removed.

97. If at any  time,  a  vacancy  occurs on the Board as a result of a  Director
ceasing to be a Director,  the Board of Directors shall fill such vacancy, after
receiving a recommendation from the nominating committee,  by the appointment as
a Director of an individual who meets the requirements of Article 123.

                               CHAIR OF THE BOARD

98. At the first meeting of the Directors of the Company  following each general
election of Directors by the Shareholders of the Company at an annual meeting of
Shareholders, the Directors shall appoint a Chair of the Board from their number
who is not an employee of the Company or of any  subsidiary  or affiliate of the
Company.  The Chair of the Board shall  perform  such  duties and  receive  such
special remuneration as the Board may from time to time provide.

                          PRESIDENT AND VICE-PRESIDENT

99.  (a) The  Directors  shall  elect from their  number  the  President  of the
     Company and may determine the period for which he or she is to hold office.
     The President shall be the Chief Executive Officer of the Company and shall
     have general  supervision  of the business of the Company and shall perform
     such  duties  as may be  assigned  to him or her  from  time to time by the
     Board.

     (b) The Directors may also appoint Vice-Presidents and determine the period
     for which they are to hold office. A Vice-President  need not be a Director
     and any Vice-President  shall, at the request of the President or the Board
     and  subject  to the  directions  of the Board,  perform  the duties of the
     President during the absence, illness or incapacity of the President.

                             PROCEEDING OF DIRECTORS

100. The Directors  may meet together for the dispatch of business,  adjourn and
otherwise  regulate their meetings and  proceedings as they think fit,  provided
that no business  shall be transacted  unless there is a quorum.  A quorum for a
meeting of the Board of Directors shall be a majority of the Directors.

101.  Meetings of Directors may be held either within or without the Province of
Nova Scotia and the Directors may from time to time make  arrangements  relating
to the time and place of holding  Directors'  meetings,  the notices to be given
for such meetings and what meetings may be held without notice. Unless otherwise
provided by such arrangements:

     (1) A  meeting  of  Directors  may be held at the  close of every  ordinary
     general meeting of the Company without notice.

     (2)  Notice  of  every  other  Directors'  meeting  may be in  writing  and
     delivered  by personal  delivery,  telex or  facsimile  or mailed or may be
     given by  telephone to each  Director  before the meeting is to take place.
     Such  notice  shall be  delivered,  mailed or given by  telephone  at least
     forty-eight hours before the time fixed for the meeting.

     (3) A meeting of  Directors  may be held without  formal  notice if all the
     Directors  are present or if those  absent have  signified  their assent to
     such meeting or their consent to the business transacted at such meeting.

     (4) The accidental omission to give any such notice to any of the Directors
     or the failure of any director to receive such notice shall not  invalidate
     any resolution passed at any such meeting.

102. A Director  may  participate  in meetings of the Board and in meetings of a
Committee  of the  Board  by  means of such  telephone  or other  communications
facilities  as permit all persons  participating  in such a meeting to hear each
other and a  Director  participating  by such  means  will be  considered  to be
present at the meeting.

103. The  President or any other  Director may at any time,  and the  Secretary,
upon the request of the President or any other Director,  shall summon a meeting
of the Directors to be held at the Registered  Office of the Company.  The Chair
of the Board or a majority  of the Board may at any time  summon a meeting to be
held elsewhere.

104.  Questions  arising  at any  meeting  of  Directors  shall be  decided by a
majority of votes and when, on any motion before the Board, there is an equality
of votes, the motion shall fail.

105. If no Chair of the Board is elected,  or if at any meeting of Directors the
Chair is not present within fifteen minutes after the time appointed for holding
the meeting, the President shall preside. If neither the Chair nor the President
is present at such time,  the  Directors  present shall choose some one of their
number to chair the meeting.

106. A meeting of the  Directors at which a quorum is present shall be competent
to exercise all or any of the  authorities,  powers and discretions for the time
being vested in or exercisable by the Directors generally.

107. The Directors may delegate any of their powers to committees  consisting of
such number of members of their body as they think fit. Any  committee so formed
shall in the exercise of the powers so delegated conform to any regulations that
may be  imposed  on them by the  Directors  or by  these  Articles.  At  least a
majority of members of any  committee of Directors  appointed by the Board shall
be  Directors  who are not  employees  of the  Company or of any  subsidiary  or
affiliate of the Company.

108. The meetings and  proceedings  of any such  committee  consisting of two or
more members shall be governed by the provisions contained in these Articles for
regulating  the meetings and  proceedings  of the Directors  insofar as they are
applicable and are not superseded by any regulations made by the Directors.

109.  All  acts  done at any  meeting  of the  Directors  or of a  committee  of
Directors or by any person acting as a Director shall,  notwithstanding  that it
is afterwards  discovered  that there was some defect in the  appointment of the
Directors or persons so acting,  or that they or any of them were  disqualified,
be as valid as if every such person had been duly appointed and was qualified to
be a Director.

110. A resolution in writing  signed by all the Directors  shall be as valid and
effectual as if it had been passed at a meeting of the Directors duly called and
constituted.  A Resolution so effected shall be deemed to constitute a waiver of
any notice  required under these Articles or the Act to have been given for such
a meeting.

                               EXECUTIVE COMMITTEE

111.  The Board  may  establish  an  Executive  Committee  of not less than five
Directors made up as follows:

     (a) The chief  executive  officer of the Company,  or, if no officer of the
     Company is designated as chief executive officer, the most senior executive
     officer of the Company as determined by the Directors; and

     (b) The balance being  Directors who are not employees of the Company or of
     a subsidiary or affiliate of the Company.

The Executive  Committee shall  generally  perform such duties and exercise such
powers as may be directed or delegated to such committee by the Board.

112. At least three members of the Executive  Committee  shall be present at all
meetings to constitute a quorum for the transaction of business.

113.  Any member of the  Executive  Committee  may be removed or replaced at any
time by the Board and  shall at any time  cease to be a member of the  Executive
Committee upon ceasing to be a Director.  Subject to the foregoing,  each member
of the  Executive  Committee  shall hold  office as such  until the next  annual
meeting of shareholders after the member's appointment to the committee.

114. The Executive Committee shall choose one of its own members to be its Chair
and the  Secretary  of the  Company  shall  be the  Secretary  of the  Executive
Committee.

115. The times of and places where meetings of the Executive  Committee shall be
held and the calling of and procedure at such meetings, shall be determined from
time to time by the Executive Committee.

116.  The  Directors  may  from  time to time  entrust  to and  confer  upon the
Executive  Committee  such  powers  exercisable  under  these  Articles  by  the
Directors as they think fit, and may confer such powers for such time, and to be
exercised for such objects and purposes and upon such terms and conditions,  and
with such restrictions as they think expedient;  and they may confer such powers
either  collaterally  with, or to the exclusion of, and in substitution for, all
or any of the powers of the Directors in that behalf;  and may from time to time
revoke, withdraw, alter or vary all or any of such powers.

117. The Executive  Committee  shall keep regular minutes of its proceedings and
report to the Board as required.

                                 AUDIT COMMITTEE

118. (a) The Board shall appoint  annually from among its members a committee to
     be known as the Audit  Committee  to be  composed  of not less  than  three
     directors,  none  of whom  shall  be  employees  of the  Company  or of any
     subsidiary or affiliate of the Company.  Two members of the audit committee
     shall constitute a quorum.

     (b) Any member of the Audit  Committee  may be removed or  replaced  at any
     time by the Board  and shall at any time  cease to be a member of the Audit
     Committee  upon ceasing to be a director.  Subject to the  foregoing,  each
     member of the Audit  Committee  shall  hold  office as such  until the next
     annual  meeting  of  shareholders  after the  member's  appointment  to the
     Committee.

119. The Audit Committee shall:

     (a) review the  financial  statements  of the Company  before the financial
     statements are approved by the Directors;

     (b) ensure that appropriate internal control procedures are in place;

     (c) review such  investments and  transactions  that could adversely affect
     the  well-being of the Company as the auditor or any officer of the Company
     may bring to the attention of the committee;

     (d)  meet  with  the  auditor  to  discuss  the  financial  statements  and
     transactions referred to in this Article;

     (e) meet with the chief internal auditor of the Company,  or the officer or
     employee of the Company acting in a similar  capacity,  and with management
     of the  Company,  to discuss  the  effectiveness  of the  internal  control
     procedures established for the Company; and

     (f) generally  perform such other duties and exercise such powers as may be
     directed or delegated to such committee by the Board.

120. The members of the Audit  Committee shall have the right for the purpose of
performing  their duties of inspecting  all the books and records of the Company
and its affiliates  and of discussing  such accounts and records and any matters
relating to the financial position of the Company with the officers and auditors
of the Company and its affiliates.

121. The Audit Committee shall choose one of its own members to be its Chair and
the Secretary of the Company shall be the Secretary of the Audit Committee.

122. (a) The times of and places where meetings of the Audit  Committee shall be
     held and the calling of and procedure at such meetings  shall be determined
     from time to time by the Audit Committee.  The auditor of the Company shall
     be given  notice  of every  meeting  of the  Audit  Committee  and shall be
     permitted to attend and be heard at the meeting on matters  relating to the
     auditor's duties as auditor.

     (b) The Audit  Committee  shall keep regular minutes of its proceedings and
     report to the Board as required.

                              NOMINATING COMMITTEE

123. (a) The Board shall appoint  annually from among its members,  a Nominating
     Committee  consisting of three  Directors and each member of the Nominating
     Committee  shall be neither an employee of the Company or of any subsidiary
     or affiliate of the Company nor the Chair of the Board.

     (b) Not later than sixty days prior to each annual meeting of  shareholders
     of the Company,  the  Nominating  Committee will provide the Company with a
     list of nominees for election as Directors to be included in the  Company's
     management proxy circular for that meeting.

     (c) The nominating committee will include in its list of nominees:

          (i) The chief  executive  officer of the  Company  and may include one
          other senior  executive of the Company as determined by the Nominating
          Committee; and

          (ii)  Individuals  who in the  reasonable  opinion  of the  Nominating
          Committee:

               (A)  other  than  as  expressly   authorized   by  the  preceding
               subparagraph  (i),  are not  employees  of the  Company or of any
               subsidiary or affiliate of the Company; and

               (B) have not reached seventy (70) years of age.

     (d) A majority of the members of the Nominating  Committee shall constitute
     a quorum.

     (e) All of the nominees to be included in the Nominating  Committee's  list
     of nominees  referred to in Article 123(c) shall be individuals who, in the
     reasonable opinion of the Nominating  Committee,  shall have the ability to
     contribute to the broad range of issues with which the Directors  must deal
     and who are able to devote the time  necessary  to  prepare  for and attend
     meetings  of the Board  and  committees  of the Board to which  they may be
     appointed.

                 MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE

124. (a) The Board shall  appoint  annually  from among its members a Management
     Resources  and  Compensation  Committee  composed  of not less  than  three
     Directors  to make  recommendations  from  time to  time  to the  Board  of
     Directors  with respect to the  remuneration  of senior  management  of the
     Company,  any other matter with respect to senior  management the Committee
     deems  appropriate and such other matters as the Directors may decide.  The
     Management Resources and Compensation  Committee shall consist of Directors
     selected  by the  Board  who are not  employees  of the  Company  or of any
     subsidiary or affiliate of the Company nor the Chair of the Board.

     (b) A majority of the members of the Management  Resources and Compensation
     Committee shall constitute a quorum.

                                    REGISTERS

125. The Directors shall cause to be kept a register of the  shareholders of the
Company,  a register  of  holders of bonds,  debentures  and  securities  of the
Company  and a  register  of its  Directors  and may  cause  to be  kept  branch
registers of the  shareholders  and holders of bonds,  debentures and securities
either  within or without Nova  Scotia.  The  Directors  may appoint one or more
transfer  agents to  maintain  the  central  register  and branch  registers  of
shareholders  and holders of bonds,  debentures and securities of the Company at
any place within Canada.

126. The Directors shall:

     (a) ensure that all registers required by these Articles to be prepared and
     maintained are in a bound or loose-leaf form or in a photographic film form
     or entered or  recorded  by any system of  mechanical  or  electronic  data
     processing  or  other  information   storage  device  that  is  capable  of
     reproducing in Nova Scotia any required information in intelligible written
     form within a reasonable time; and

     (b) cause the Company or its transfer agent to maintain  within Nova Scotia
     an office  or other  facility  at which  the  transfer  of  shares,  bonds,
     debentures and securities of the Company may be effected.

                                     MINUTES

127. The Directors shall cause minutes to be entered in books designated for the
purpose:

     (a) of all appointments of officers;

     (b) of the names of the Directors  present at each meeting of Directors and
     of any committees of Directors;

     (c) of all orders made by the Directors and committees of Directors;

     (d) of all resolutions and proceedings of meetings of the  Shareholders and
     of the Directors.

128. Any such minutes of any meeting of the Directors or of any committee of the
Directors or of the  Company,  if  purporting  to be signed by the chair of such
meeting or by the chair of the next succeeding  meeting,  shall be receivable as
prima facie evidence of the matters stated in such minutes.

129. Any resolution of the  Shareholders,  the Directors,  or a committee of the
Directors,  passed  pursuant  to the  provisions  of Articles 85 or 110 of these
Articles,  shall be  receivable  as prima facie  evidence of the matters  stated
therein.

                               POWER OF DIRECTORS

130.  The  management  of the  business  of the  Company  shall be vested in the
Directors  who, in addition to the powers and  authorities  by these Articles or
otherwise expressly conferred upon them, may exercise all such powers and do all
such acts and  things as may be  exercised  or done by the  Company  and are not
hereby or by statute  expressly  directed or required to be exercised or done by
the Company in general  meeting,  but subject  nevertheless to the provisions of
the statutes in that behalf and of these  Articles and to any  regulations  from
time to time made by the Company in general meeting; provided that no regulation
so made shall  invalidate  any prior act of the  Directors  that would have been
valid if such regulation had not been made.

131.  Without  restricting  the  generality  of the terms of the last  preceding
Article and without  prejudice to the powers  conferred  thereby,  and the other
powers conferred by these Articles, the Directors shall have power:

     (1) To take such  steps as they  think fit to carry  out any  agreement  or
     contract made by or on behalf of the Company;

     (2) To pay the costs,  charges and expenses  preliminary  and incidental to
     the promotion, formation, establishment, and registration of the Company;

     (3) To purchase or otherwise  acquire for the Company any property,  rights
     or privileges,  stocks, bonds,  debentures,  or other securities (including
     shares in the  capital  stock of any other  company)  that the  Company  is
     authorized  to acquire,  and at such price and  generally on such terms and
     conditions as they think fit;

     (4) At their  discretion to pay for any property,  rights,  or  privileges,
     stocks,  bonds,  debentures,  or other securities  (including shares in the
     capital stock of any other  company)  acquired by, or services  rendered to
     the  Company  either  wholly  or  partially  in cash or in  shares,  bonds,
     debentures or other  securities of the Company,  and any such shares may be
     issued  either as fully paid up, or with such  amount  credited  as paid up
     thereon as may be agreed upon;

     (5) To secure the fulfilment of any contracts or  engagements  entered into
     by the Company by  mortgaging or charging all or any of the property of the
     Company and its unpaid capital for the time being,  or in such other manner
     as they think fit;

     (6) To  appoint,  remove  or  suspend  at their  discretion  such  experts,
     managers,  secretaries,  treasurers,  officers, clerks, agents and servants
     for  permanent,  temporary or special  services,  as they from time to time
     think fit, and to determine their powers and duties, and fix their salaries
     or emoluments and to require security in such instances and to such amounts
     as they think fit;

     (7) To accept from any member  insofar as the law permits and on such terms
     and  conditions as may be agreed upon a surrender of the member's  share or
     any part thereof;

     (8) To  appoint  any  person or persons  (whether  incorporated  or not) to
     accept and hold in trust for the  Company  any  property  belonging  to the
     Company, or in which it is interested, to execute and do all such deeds and
     things as may be  requisite  in relation to any such trust,  and to provide
     for the remuneration of any such trustee or trustees;

     (9)  To  institute,   conduct,   defend,  compound  or  abandon  any  legal
     proceedings  by and  against  the  Company  or its  officers  or  otherwise
     concerning the affairs of the Company,  and also to compound and allow time
     for payment or  satisfaction  of any debts due and of any claims or demands
     by or against the Company;

     (10)  To  refer  any  claims  or  demands  by or  against  the  Company  to
     arbitration and observe and perform the awards;

     (11) To make and give  receipts,  releases and other  discharges  for money
     payable to the Company and for claims and demands of the Company;

     (12) To determine who shall be entitled to exercise the borrowing powers of
     the Company and sign on the  Company's  behalf  bonds,  debentures or other
     securities, bills, notes, receipts,  acceptances,  assignments,  transfers,
     hypothecations,   pledges,   endorsements,   cheques,   drafts,   releases,
     contracts, agreements and all other instruments and documents;

     (13) To provide from time to time for the  management of the affairs of the
     Company  abroad in such  manner as they think  fit,  and in  particular  to
     appoint any persons to be the  attorneys or agents of the Company with such
     powers  (including  power to  sub-delegate)  and upon such  terms as may be
     thought fit;

     (14)  To  invest  and  deal  with  any of the  moneys  of the  Company  not
     immediately  required for the purposes  thereof in such  securities  and in
     such  manner as they  think  fit;  and from time to time to vary or realize
     such investments;

     (15) To execute  in the name and on behalf of the  Company in favour of any
     Director  or other  person who may incur or be about to incur any  personal
     liability  for the benefit of the Company such  mortgages of the  Company's
     property, present and future, as they think fit, and any such mortgages may
     contain a power of sale and such other powers,  covenants and provisions as
     are agreed on;

     (16) To give  any  officer  or  other  person  employed  by the  Company  a
     commission on the profits of any  particular  business or  transaction or a
     share in the general  profits of the Company,  and such commission or share
     of profits shall be treated as part of the working expenses of the Company;

     (17) To set aside out of the profits of the Company  before  declaring  any
     dividend  such  sums  as  they  think  proper  as a  reserve  fund  to meet
     contingencies or provide for dividends, depreciation,  repairing, improving
     and  maintaining any of the property of the Company and such other purposes
     as the Directors may in their absolute  discretion  think  conducive to the
     interests of the Company;  and to invest the several sums set aside in such
     investments,  other than shares of the Company,  as they may think fit, and
     from time to time to deal with and vary such investments, and to dispose of
     all or any part of them for the benefit of the  Company,  and to divide the
     reserve fund into such special  funds as they think fit, with full power to
     employ the assets  constituting  the  reserve  fund in the  business of the
     Company without being bound to keep them separate from the other assets;

     (18) From time to time to make, vary and repeal rules for the regulation of
     the business of the Company, its officers and servants,  the members of the
     Company or any section or class of them;

     (19) To enter into all such  negotiations  and contracts,  rescind and vary
     all such contracts,  and execute and do all such acts, deeds, and things in
     the name and on behalf of the Company as they may consider expedient for or
     in relation to any of the matters  aforesaid or otherwise  for the purposes
     of the Company;

     (20) From time to time to provide for the  management of the affairs of the
     Company in such manner as they shall think fit;

     (21) Subject to the Act and the  Company's  Memorandum of  Association,  to
     sell,  lease  or  otherwise  dispose  of any  property,  real or  personal,
     undertaking,  franchises,  business, assets, interests or effects which the
     Company is  authorized  to sell,  lease or  otherwise  dispose of, for such
     price or  consideration  and generally and on such terms and  conditions as
     the directors may think fit, and in  particular  for shares,  debentures or
     securities of any company having  objects  altogether or in part similar to
     those of this Company;

     (22) To delegate  any of the duties of the board to any standing or special
     committee,  or to any manager or any other officer,  attorney or agent, and
     to appoint any person to be the attorney or agent of the Company, with such
     powers,  including  the power to  sub-delegate  and upon such terms as they
     think fit.

                                   SOLICITORS

132.  The  Company  may  employ or retain a  solicitor  or  solicitors  and such
solicitor  may, at the request of the Board of Directors or on  instructions  of
the Chair of the Board,  or the President,  attend  meetings of the Directors or
Shareholders,  whether or not the  solicitor  is a member or a  Director  of the
Company.  If such solicitor is also a Director,  the solicitor may  nevertheless
charge for services rendered to the Company as a solicitor.

                                    SECRETARY

133. The Directors  shall appoint a Secretary of the Company to keep the minutes
of the  shareholders'  and Directors'  meetings and perform such other duties as
may be assigned to the Secretary by the Board.  The Directors may also appoint a
temporary  substitute  for the  Secretary  who shall,  for the purposes of these
Articles, be deemed to be the Secretary.

                                    THE SEAL

134. The Common Seal may be affixed to any instrument (i) in the presence of and
contemporaneously  with the attesting signatures of two persons who are officers
and/or   directors   of  the   Company,   or  (ii)  in  the   presence   of  and
contemporaneously  with the attesting  signature of any one person designated by
and under the  authority  of a  resolution  of the  Board of  Directors  or of a
committee  thereof.  If the Company has only one Director and Officer the common
seal may be affixed in the presence of and contemporaneously  with the attesting
signature of that Director and Officer.  For the purpose of certifying documents
or  proceedings  of the Company the Common Seal may be affixed by any one of the
President, Vice-President, Secretary or a Director.

135. (a) The  Company may have  facsimiles  of the Common Seal which may be used
     interchangeably with the Common Seal.

     (b) The Company may have for use at any place  outside Nova Scotia to which
     the  corporate  existence  and capacity of the Company  extends an official
     seal  that is a  facsimile  of the  Common  Seal of the  Company  with  the
     addition on its face of the name of the place  where it is to be used;  and
     the Company may by writing under the seal of its Common Seal  authorize any
     person to affix such  official  seal to any document at such place to which
     the Company is a party,  and may  prescribe and limit the type of documents
     to which the official seal may be affixed by such person.

                                    DIVIDENDS

136. The  Directors  may from time to time  declare  such  dividend as they deem
proper upon the shares of the Company according to the rights of the members and
the  respective  classes  thereof,  and may  determine  the date upon which such
dividend  will be payable and that it will be payable to the persons  registered
as the  holders of such  shares at the close of  business  upon the record  date
determined  in  accordance  with  Article 51. No transfer of such shares made or
registered  after  the  record  date so  specified  shall  pass any right to the
dividend so declared.

137.  The  Company  may declare or pay a dividend  unless  there are  reasonable
grounds for believing that:

     (a) The  Company  is, or would  after  the  payment  be,  unable to pay its
     liabilities as they become due; or

     (b) The realizable value of the Company's assets would thereby be less than
     the aggregate of its liabilities and stated capital of all classes.

138.  The  Directors  may from  time to time  pay to the  members  such  interim
dividends as in their judgment the position of the Company justifies.

139. The Directors may deduct from the dividends  payable to any member all such
sums of money as may be due and  payable by the member to the Company on account
of  calls,  instalments  or  otherwise,  and may  apply  the same in or  towards
satisfaction of such sums of money so due and payable.

140. The Directors may retain any dividends on which the Company has a lien, and
may apply the same in or  towards  satisfaction  of the  debts,  liabilities  or
engagements in respect of which the lien exists.

141. The Directors  may retain the  dividends  payable upon shares in respect of
which any person is under  Article 46 entitled to become a member,  or which any
person under that clause is entitled to transfer, until such person has become a
member in respect of or has duly transferred such shares.

142.  Any meeting  declaring a dividend  may make a call on the members for such
amount as the  meeting  fixes so long as the call on each member does not exceed
the  dividend  payable to him or her. The call shall be made payable at the same
time as the dividend and the  dividend  may, if so arranged  between the Company
and the member,  be set off  against  the call.  The making of a call under this
Article shall be deemed to be and be business of a meeting which declares such a
dividend.

143. Any meeting  declaring a dividend  may resolve  that such  dividend be paid
wholly  or in part by the  distribution  of  specific  assets,  paid up  shares,
debentures,  bonds  or  debenture  stock  of the  Company  or  paid  up  shares,
debentures,  bonds,  or debenture  stock of any other Company,  or in any one or
more of such ways.

144.  Any meeting  may resolve  that any  moneys,  investments  or other  assets
forming part of the undivided  profits of the Company  standing to the credit of
the reserve fund or in the hands of the Company and  available  for dividends or
representing premiums received on the issue of shares and standing to the credit
of share premium account, be capitalized and distributed to the shareholders who
would be entitled to receive them if  distributed  by way of dividend and in the
same  proportions,  that all or any part or such  capitalized fund be applied on
behalf  of such  shareholders  in  paying  up in full,  either at par or at such
premium as the  resolution  may provide,  any unissued  shares or  debentures or
debenture stock of the Company (which shall be distributed accordingly) or in or
towards payment of the uncalled  liability on any issued shares or debentures or
debenture stock, and that such distribution or payment shall be accepted by such
shareholders in full satisfaction of their interest in such capitalized sum.

145.  For the  purpose  of giving  effect to any  resolution  under the two last
preceding  Articles,  the Directors may settle any difficulty  that may arise in
regard to the distribution as they think expedient,  and in particular may issue
fractional  certificates,  may fix the value for  distribution  of any  specific
assets,  may  determine  that cash payments will be made to any members upon the
footing of the value so fixed or that  fractions of less value than $5.00 may be
disregarded in order to adjust the rights of all parties,  and may vest any such
cash or specific assets in trustees upon such trusts for the persons entitled to
the dividend or capitalized fund as may seem expedient to the Directors.

146.  A transfer  of shares  shall not pass the right to any  dividend  declared
thereon after such transfer and before the registration of the transfer.

147. Anyone of several  persons  registered as the joint holder of any share may
give  effectual  receipts for all dividends and payments on account of dividends
in respect of such share.

148. Unless otherwise determined by the Directors, any dividend may be paid by a
cheque  or  warrant  delivered  to or sent  through  the post to the  registered
address  of the  member  entitled,  or,  when  there are joint  holders,  to the
registered  address of the one whose name stands  first on the  register for the
shares jointly held.  Every cheque or warrant so delivered or sent shall be made
payable to the order of the person to whom it is delivered or sent.

149.  Notice of the  declaration of any dividend,  whether interim or otherwise,
shall be given to the  holders of  registered  shares in the manner  hereinafter
provided.

150. All dividends  unclaimed  one year after having been  declared  may,  until
claimed,  be invested or otherwise  made use of by the Directors for the benefit
of the Company.

                                    ACCOUNTS

151.  The  Directors  shall  cause  proper  books of  account  to be kept of the
business of the Company.

152. The Directors shall from time to time determine  whether and to what extent
and at what  times and  places  and under what  conditions  or  regulations  the
accounts and books of the Company or any of them shall be open to  inspection of
the  members,  and no member shall have any right of  inspecting  any account or
book or document of the Company  except as conferred by statute or authorized by
the Directors or a resolution of the Company in general meeting.

153.  At the  ordinary  general  meeting in every year the  Directors  shall lay
before the Company the financial  statements  required by the Act, the report to
the members of the auditor,  if any, and, if the Company is a reporting  issuer,
the report of the Directors required by subsection 121(1) of the Act.

154. The financial  statements  shall be approved by the Board and such approval
shall be evidenced by the signatures on the balance sheet of two Directors or by
the Director if there is only one.

155. The Directors  shall, not less than twenty-one (21) days before the date of
the ordinary general meeting,  send copies of the financial  statements together
with copies of the auditor's report, if any, and the report of the Directors, if
any, to all members holding voting  securities or otherwise  entitled to receive
notices of general meetings of the Company.

                               AUDITORS AND AUDIT

156.  Unless in  respect of a  financial  year the  Company  is exempt  from the
requirements of the Act regarding the  appointment and duties of an auditor,  an
auditor shall be appointed and the auditor's duties regulated in accordance with
the Act.

157.  Every  account of the  directors,  when  audited and approved by a general
meeting  shall be  conclusive,  except as  regards an error  discovered  therein
within three months next after the approval thereof.  Whenever any such error is
discovered  within the period,  the account shall  forthwith be  corrected,  and
thenceforth shall be conclusive.

                                     NOTICES

158. A notice may be served by the Company upon members personally or by sending
it through the post in a prepaid envelope or wrapper addressed to such member at
the member's registered place of address.

159.  Members who have no  registered  place of address shall not be entitled to
receive any notice.

160.  The  holder of a share  warrant  shall  not,  unless  otherwise  expressed
therein,  be entitled in respect thereof to notice of any general meeting of the
Company.

161. Any notice  required to be given by the Company to the  members,  or any of
them, and not expressly  provided for by these  Articles,  shall be sufficiently
given if given by advertisement.

162.  Any notice given by  advertisement  shall be  advertised  twice in a paper
published in the place where the head office of the Company is  situated,  or if
no paper is published  there,  then in any  newspapers  published in the City of
Halifax, Nova Scotia.

163. All notices shall,  with respect to any registered  shares to which persons
are jointly  entitled,  be given to  whichever of such persons is named first in
the register for such shares,  and notice so given shall be sufficient notice to
all the holders of such shares.

164.  Any notice sent by post shall be deemed to be served on the day  following
that upon which the letter,  envelope or wrapper containing it is posted, and in
proving such service it shall be sufficient  to prove that the letter,  envelope
or wrapper  containing  the notice was properly  addressed and put into the post
office with the postage prepaid thereon.  A certificate in writing signed by any
manager, secretary or other official of the Company that the letter, envelope or
wrapper  containing  the notice was so addressed  and posted shall be conclusive
evidence thereof.  The foregoing  provisions of this clause shall not apply to a
notice of a meeting of the Directors.

165.  Every person who by operation of law,  transfer or other means  whatsoever
becomes  entitled to any share shall be bound by every notice in respect of such
share that prior to such person's name and address being entered on the register
was duly served in the manner  hereinbefore  provided  upon the person from whom
the person derived title to such share.

166.  Any notice or  document  so  advertised  or sent by post to or left at the
registered  address  of  any  member  in  pursuance  of  the  Articles,   shall,
notwithstanding  that such  member is then  deceased  and that the  Company  has
notice of such death, be deemed to have been served in respect of any registered
shares,  whether  held by such  deceased  member  solely or  jointly  with other
persons,  until some other person is registered in stead of such deceased member
as the holder or joint holder  thereof,  and such service shall for all purposes
of these  Articles be deemed a sufficient  service of such notice or document on
the deceased  member's heirs,  executors or administrators  and all persons,  if
any, jointly interested with the deceased member in any such share.

167. The signature to any notice given by the Company may be written or printed.

168.  When a given  number of days'  notice or notice  extending  over any other
period is required  to be given,  the day of service and the day upon which such
notice expires shall not,  unless it is otherwise  provided,  be counted in such
number of days or other period.

                                    INDEMNITY

169.  Every  Director,  Manager,  Secretary  and other officer or servant of the
Company shall be indemnified by the Company against, and it shall be the duty of
the  Directors  out of the funds of the  Company to pay,  all costs,  losses and
expenses that any such Director,  Manager, Secretary or other officer or servant
may incur or become liable to pay by reason of any contract entered into, or act
or thing  done by such  person as such  officer  or servant or in any way in the
discharge of such person's duties including travelling expenses;  and the amount
for which such  indemnity  is proved shall  immediately  attach as a lien on the
property of the Company and have  priority as against the members over all other
claims.

170. No Director or other  officer of the Company  shall,  in the absence of any
dishonesty  on the  part of such  person,  be  liable  for the  acts,  receipts,
neglects  or defaults  of any other  Director or officer,  or for joining in any
receipt or other act for conformity, or for any loss or expense happening to the
Company  through  the  insufficiency  or  deficiency  of title  to any  property
acquired by order of the Directors  for or on behalf of the Company,  or through
the  insufficiency  or  deficiency  of any  security in or upon which any of the
moneys of the Company are invested,  or for any loss or damage  arising from the
bankruptcy,  insolvency  or  tortious  act of any person  with whom any  moneys,
securities  or effects are  deposited,  or for any loss  occasioned  by error of
judgment or oversight on the part of such person,  or for any other loss, damage
or  misfortune  whatsoever  which happens in the execution of the duties of such
person's office or in relation thereto.


<PAGE>



                                     PART B

                        OWNERSHIP AND VOTING RESTRICTIONS

                                 INTERPRETATION

171. (a) In this Part "B",  all terms  that are not  defined  have the  meanings
     attributed to those terms in the Privatization Act and:

     "directors'  determination"  and similar  expressions means a determination
     made by the directors of the Company in accordance with Article 182;

     "excess  voting  shares"  means voting shares held,  beneficially  owned or
     controlled  in  contravention  of the  individual  share  constraint or the
     non-resident share constraint, as the case may be;

     "individual share constraint" has the meaning set forth in Article 172(a);

     "non-resident  share  constraint"  has the  meaning  set  forth in  Article
     173(a);

     "non-resident voting constraint" has the meaning set forth in Article 174;

     "principal stock exchange" means, at any time, the stock exchange in Canada
     on which the highest  volume of voting  shares is generally  traded at that
     time, as determined by the directors of the Company;

     "sell-down notice" has the meaning set forth in Article 175(a);

     "shareholder default" has the meaning set forth in Article 175(a)(iv);

     "shareholder's  declaration"  means a declaration  made in accordance  with
     Article 183; and

     "suspension"  has the  meaning  set forth in Article  176(a) and  "suspend,
     "suspended" and similar expressions have corresponding meanings.

     (b) The provisions of subsections 8(3) and (8) of the Privatization Act are
     deemed to be incorporated in this Part "B", with references  therein to the
     "Company"  deemed to be  references  to the Company.  Any provision of this
     Part  "B"  that  may be read in a  manner  that is  inconsistent  with  the
     Privatization Act shall be read so as to be consistent therewith.

     (c) For greater certainty,  no person is presumed to be an associate of any
     other  person for purposes of paragraph  8(5)(g) of the  Privatization  Act
     solely by reason  that one of them has given the other the power to vote or
     direct the voting of voting shares of a class of voting shares at a meeting
     of the holders of that class pursuant to a revocable  proxy where the proxy
     is solicited solely by means of an information  circular issued in a public
     solicitation  of proxies  that is made in  respect of all voting  shares of
     that class and in accordance with applicable law.

     (d) For the purposes of this Part "B";

          (i) where voting shares of the Company are held, beneficially owned or
          controlled by two or more persons jointly, the number of voting shares
          held,  beneficially  owned or  controlled  by each such  person  shall
          include  the  number  of voting  shares  held,  beneficially  owned or
          controlled jointly with such other persons;

          (ii)  where one or more  joint  holders  of,  beneficial  owners of or
          persons controlling voting shares is a non-resident, the voting shares
          are deemed to be held,  beneficially owned or controlled,  as the case
          may be, by such non-resident;

          (iii) where a person who was not a non-resident becomes a non-resident
          on any day, the day of acquisition or  registration  in respect of the
          acquisition  of  the  voting  shares  held,   beneficially   owned  or
          controlled  by such  person  shall be  deemed  to be the day that such
          person became a non-resident; and

          (iv)   references  to  shares  "of"  a  person  are  to  shares  held,
          beneficially  owned or controlled,  directly or indirectly,  otherwise
          than by way of security only, by that person.

     (e) In this Part "B",  except where the context  requires to the  contrary,
     words  importing  the singular  shall include the plural and vice versa and
     words  importing  gender  shall  include  masculine,  feminine  and  neuter
     genders.

                           INDIVIDUAL SHARE CONSTRAINT

172. (a) No person,  together with the  associates  of that person,  shall hold,
     beneficially own or control, directly or indirectly,  otherwise than by way
     of security only, in the aggregate voting shares to which are attached more
     than  15 per  cent of the  votes  that  may  ordinarily  be  cast to  elect
     directors of the Company. (The foregoing prohibition is referred to in this
     Part "B" as the "individual share constraint".)

     (b) In the event  that it  appears  from the  register  of  members  of the
     Company that any person, together with the associates of that person, is in
     contravention of the individual share constraint:

          (i) the Company  shall not accept any  subscription  for voting shares
          from that person or any associate of that person;

          (ii) the Company  shall not issue any voting  shares to that person or
          any associate of that person; and

          (iii) the  Company  shall not  register  or  otherwise  recognize  the
          transfer of any voting  shares to that person or any associate of that
          person.

     (c) In the event of a directors'  determination  that any person,  together
     with the associates of that person,  is in  contravention of the individual
     share constraint:

          (i) the Company  shall not accept any  subscription  for voting shares
          from that person or any associate of that person;

          (ii) the Company  shall not issue any voting  shares to that person or
          any associate of that person;

          (iii) the  Company  shall not  register  or  otherwise  recognize  the
          transfer of any voting  shares to that person or any associate of that
          person;

          (iv) no person may, in person or by proxy,  exercise the right to vote
          any of the voting  shares of that person or of any  associate  of that
          person;

          (v) subject to Article  181(a),  the Company  shall not declare or pay
          any dividend, and or make any other distribution:

               (A) on any of the excess  voting  shares of that person or of any
               associate of that person; or

               (B)  if  the  directors  of  the  Company   determine   that  the
               contravention   of  the  individual   ownership   constraint  was
               intentional and that it would not be inequitable to do so, on all
               of the voting shares of that person and of each associate of that
               person;

          and any  entitlement to such dividend or other  distribution  shall be
          forfeited; and

          (vi) the  Company  shall  send a  sell-down  notice to the  registered
          holder of the voting  shares of that person and of each  associate  of
          that person.

     (d) In the event  that it  appears  from the  register  of  members  of the
     Company  that,  or in the event of a  directors'  determination  that,  any
     person,  together with the  associates  of that person,  after any proposed
     subscription, issue or transfer of voting shares, would be in contravention
     of the individual share constraint, the Company shall not:

          (i) accept the proposed subscription for voting shares from;

          (ii) issue the proposed voting shares to; or

          (iii)  register or otherwise  recognize  the proposed  transfer of any
          voting shares to;

          that person or any associate of that person.

     (e) In the event of a directors'  determination  that during any period any
     person,  together with the associates of that person,  was in contravention
     of the individual share  constraint,  the directors of the Company may also
     determine that:

          (i) any votes  cast,  in person or by  proxy,  during  that  period in
          respect of the voting  shares of that  person or of any  associate  of
          that person  shall be  disqualified  and deemed not to have been cast;
          and

          (ii) subject to Article 181(a), each of that person and the associates
          of that  person is liable to the Company to restore to the Company the
          amount of any  dividend  paid or  distribution  received  during  that
          period on:

               (A) the excess voting shares of that person and of each associate
               of that person; or

               (B)  if  the  directors  of  the  Company   determine   that  the
               contravention   of  the  individual   ownership   constraint  was
               intentional and that it would not be inequitable to do so, on all
               of the voting shares of that person and of each associate of that
               person.

                          NON-RESIDENT SHARE CONSTRAINT

173. (a) Non-residents shall not hold, beneficially own or control,  directly or
     indirectly, otherwise than by way of security only, in the aggregate voting
     shares to which are  attached  more than 25 per cent of the votes  that may
     ordinarily  be cast to  elect  directors  of the  Company.  (The  foregoing
     prohibition  is  referred  to in this Part "B" as the  "non-resident  share
     constraint".)

     (b) In the event  that it  appears  from the  register  of  members  of the
     Company that, or in the event of a directors'  determination that, there is
     a contravention of the non-resident share constraint:

          (i) the  Company  shall make a public  announcement,  whether by press
          release, newspaper advertisements or otherwise, reasonably expected to
          inform  the  markets  in  which  voting   shares  are  traded  of  the
          contravention; and

          (ii) the Company shall not:

               (A)  accept  any   subscription   for  voting   shares  from  any
               non-resident;

               (B) issue any voting shares to any non-resident; or

               (C)  register or otherwise  recognize  the transfer of any voting
               shares from any resident to any non-resident.

     (c)  In  the  event  of  a  directors'   determination   that  there  is  a
     contravention of the non-resident  share constraint and that to do so would
     be  practicable  and would not be  unfairly  prejudicial  to, and would not
     unfairly disregard the interests of, persons holding,  beneficially  owning
     or controlling voting shares who are non-resident, the Company shall send a
     sell-down  notice to the registered  holders of such of those voting shares
     as  shall  be  chosen  on the  basis  of  inverse  order  to the  order  of
     acquisition or registration of all  non-residents,  by lot or by such other
     method that is authorized by a directors' determination.

     (d) In the event  that it  appears  from the  register  of  members  of the
     Company that, or in the event of a directors' determination that, after any
     proposed   subscription,   issue  or  transfer   of  voting   shares  to  a
     non-resident,  there would be a  contravention  of the  non-resident  share
     constraint, the Company shall not:

          (i) accept the proposed subscription for voting shares;

          (ii) issue the proposed voting shares; or

          (iii) register or otherwise recognize the proposed transfer.

                         NON-RESIDENT VOTING CONSTRAINT

174. In the event of a directors'  determination  that on any motion made at any
meeting of  shareholders of the Company more than 25 per cent of the votes cast,
in person or by proxy, have been cast in respect of voting shares that are held,
beneficially owned or controlled, directly or indirectly, by non-residents,  all
votes  cast,  in person or by proxy,  in respect of such  voting  shares on that
motion  shall  be  proportionally   adjusted  so  that  such  votes  cast  equal
twenty-five percent of all votes cast. (The foregoing  adjustment is referred to
in this Part "B" as the "non-resident voting constraint".)

                                SELL-DOWN NOTICE

175. (a) Any notice (a "sell-down  notice")  required to be sent to a registered
     holder of voting shares pursuant to Article 172(c)(vi) or Article 173(c):

          (i) shall specify in reasonable detail the nature of the contravention
          of  the  individual  share   constraint  or  the  non-resident   share
          constraint, as the case may be, the number of voting shares determined
          to be excess voting shares and the  consequences of the  contravention
          specified in Article 172 or 173, as the case may be;

          (ii) shall request an initial or further shareholder's declaration;

          (iii) shall specify a date,  which shall be not less than, in the case
          of a contravention of the individual share constraint, 45 days, or, in
          the case of a contravention of the non-resident  share constraint,  60
          days,  after the date of the  sell-down  notice,  by which the  excess
          voting shares are to be sold or disposed of; and

          (iv) shall state that unless the registered holder either:

               (A) sells or otherwise  disposes of the excess  voting  shares by
               the date  specified in the sell-down  notice on a basis that does
               not  result  in  any   contravention   of  the  individual  share
               constraint or the  non-resident  share constraint and provides to
               the  Company,  in  addition  to  the  shareholder's   declaration
               requested  pursuant  to  Article  175(a)(ii),   written  evidence
               satisfactory to the Company of such sale or other disposition; or

               (B)  provides to the  Company,  in addition to the  shareholder's
               declaration requested pursuant to the Article 175(a)(ii), written
               evidence  satisfactory  to the Company that no such sale or other
               disposition of excess voting shares is required;

               such  default  (a  "shareholder  default")  shall  result  in the
               consequence of suspension  pursuant to Article 176 and may result
               in the  consequence  of sale in  accordance  with  Article 177 or
               redemption in  accordance  with Article 178, in each case without
               further  notice to the  registered  holder,  and shall specify in
               reasonable detail the nature and timing of those consequences.

     (b) In the event that, following the sending of a sell-down notice, written
     evidence is submitted to the Company for purposes of Article 175(a)(iv)(B),
     the Company shall assess the evidence as soon as is reasonably  practicable
     and in any event shall give a second  notice to the person  submitting  the
     evidence not later than 10 days after the receipt  thereof  stating whether
     the  evidence  has or has not  satisfied  the Company that no sale or other
     disposition  of excess  voting  shares is required.  If the evidence has so
     satisfied the Company,  such  sell-down  notice shall be cancelled and such
     second  notice shall so state.  If the  evidence  has not so satisfied  the
     Company,  such second notice shall reiterate the statements  required to be
     made in such sell-down notice pursuant to Articles 175(a)(iii) and (iv). In
     either case, the 45 day or 60 day period,  as the case may be,  referred to
     in Article 175(a)(iii) shall be automatically extended to the end of the 10
     day  period  referred  to in this  Articles  175(b)  if such 10 day  period
     extends beyond such 45 day or 60 day period.

                                   SUSPENSION

176. (a) In the event of a  shareholder  default in  respect  of any  registered
     holder of voting  shares,  then,  without  further notice to the registered
     holder:

          (i) all of the voting shares of the registered  holder shall be deemed
          to be struck from the register of members of the Company;

          (ii) no person may, in person or by proxy,  exercise the right to vote
          any of such voting shares;

          (iii) subject to Article 181(a),  the Company shall not declare or pay
          any dividend,  or make any other  distribution,  on any of such voting
          shares and any  entitlement  to such  dividend  or other  distribution
          shall be forfeited;

          (iv)  the  Company  shall  not send  any  form of  proxy,  information
          circular  or  financial   statements  of  the  Company  or  any  other
          communication from the Company to any person in respect of such voting
          shares; and

          (v) no person may  exercise  any other right or  privilege  ordinarily
          attached to such voting shares.

          (All  of the  foregoing  consequences  of a  shareholder  default  are
          referred to in this Part "B" as a "suspension".)  Notwithstanding  the
          foregoing,  a registered  holder of suspended voting shares shall have
          the right to transfer such voting shares on any securities register of
          the  Company on a basis that does not result in  contravention  of the
          individual share constraint or the non-resident share constraint.

     (b) The  Directors  of the Company  shall cancel any  suspension  of voting
     shares of a registered  holder and reinstate the  registered  holder to the
     register of members of the Company for all purposes if they determine that,
     following the  cancellation and  reinstatement,  none of such voting shares
     will be held,  beneficially  owned or  controlled in  contravention  of the
     individual  share  constraint or the  non-resident  share  constraint.  For
     greater certainty,  any such reinstatement shall permit, from and after the
     reinstatement,  the exercise of all rights and  privileges  attached to the
     voting shares so reinstated but,  subject to Article 181(a),  shall have no
     retroactive effect.

                                      SALE

177. (a) In the event of a  shareholder  default in  respect  of any  registered
     holder of voting shares, the Company may elect by directors'  determination
     to sell,  on behalf of the  registered  holder,  the excess  voting  shares
     thereof,  without  further notice  thereto,  on the terms set forth in this
     Article 177 and Article 179.

     (b) The Company may sell any excess voting  shares in accordance  with this
     Article 177:

          (i) on the principal stock exchange; or

          (ii) if there is no  principal  stock  exchange,  on such other  stock
          exchange  or  organized  market on which the  voting  shares  are then
          listed or traded as the directors of the Company shall determine; or

          (iii) if the voting  shares are not then listed on any stock  exchange
          or  traded  on any  organized  market,  in such  other  manner  as the
          directors of the Company shall determine.

     (c) The net  proceeds of sale of excess  voting  shares sold in  accordance
     with this  Article 177 shall be the net  proceeds  after  deduction  of any
     commission, tax or other cost of sale.

     (d) For all purposes of a sale of excess voting  shares in accordance  with
     this  section,  the  Company  is  the  agent  and  lawful  attorney  of the
     registered holder and the beneficial owner of the excess voting shares.

                                   REDEMPTION

178. (a)  For  the  purposes  of  enforcing  the  ownership   restrictions   and
     constraints   imposed   pursuant  to  the   foregoing   articles   and  the
     Reorganization Act, in the event of a shareholder default in respect of any
     registered  holder of voting  shares and in the event that the Directors of
     the Company  determine either that the Company has used reasonable  efforts
     to sell excess voting  shares in accordance  with Article 177 but that such
     sale is  impracticable  or that it is  likely  that such  sale  would  have
     material  adverse  consequences  to the  Company  or the  holders of voting
     shares, the Company may,  notwithstanding  section 51 of the Companies Act,
     elect by  directors'  determination,  to redeem  the excess  voting  shares
     thereof,  without  further notice  thereto,  on the terms set forth in this
     Article 178 and Article 179.

     (b) The  redemption  price paid the  Company  to redeem  any excess  voting
     shares in accordance with this Article 178 shall be:

          (i) the average of the closing  prices per share of the voting  shares
          on the principal  stock  exchange (or, if there is no principal  stock
          exchange or if the requisite trading of voting shares has not occurred
          on the principal  stock  exchange,  such other stock  exchange or such
          other organized market on which such requisite trading has occurred as
          the directors of the Company shall determine) over the last 10 trading
          days on which at least one board lot of voting  shares  has  traded on
          the  principal  stock  exchange (or such other stock  exchange or such
          other  organized  market)  in the  period  ending on the  trading  day
          immediately preceding the redemption date; or

          (ii) if the requisite trading of voting shares has not occurred on any
          stock  exchange  or  other  organized  market,  on such  basis  as the
          Directors of the Company shall determine.

                   PROCEDURES RELATING TO SALE AND REDEMPTION

179. (a) In the  event of any sale or  redemption  of  excess  voting  shares in
     accordance with Article 177 or Article 178, respectively, the Company shall
     deposit an amount  equal to the amount of the net  proceeds  of sale or the
     redemption price,  respectively,  in a special account in any bank or trust
     company  in Canada  selected  by it. The  amount of the  deposit,  less the
     reasonable costs of administration of the special account, shall be payable
     to the  registered  holder of the excess  voting shares sold or redeemed on
     presentation  and surrender by the registered  holder to that bank or trust
     company of the certificate or certificates  representing  the excess voting
     shares.  Any interest earned on any amount so deposited shall accrue to the
     benefit of the Company.

     (b) From and after  any  deposit  made  pursuant  to  Article  179(a),  the
     registered holder shall not be entitled to any of the remaining rights of a
     registered  holder in respect of the excess voting shares sold or redeemed,
     other than the right to receive the funds so deposited on presentation  and
     surrender of the certificate or certificates representing the excess voting
     shares sold or redeemed.

     (c) If a part only of the voting shares  represented by any  certificate is
     sold or redeemed in accordance with Articles 177 or 178, respectively,  the
     Company shall, on presentation and surrender of such certificate and at the
     expense of the registered holder, issue a new certificate  representing the
     balance of the voting shares.

     (d) So soon as is  reasonably  practicable  after,  and, in any event,  not
     later than 30 days after,  a deposit made pursuant to Article  179(a),  the
     Company shall send a notice to the  registered  holder of the excess voting
     shares sold or redeemed and the notice shall state:

          (i)  that a  specified  number  of  voting  shares  has  been  sold or
          redeemed, as the case may be;

          (ii) the amount of the net proceeds of sale or the  redemption  price,
          respectively;

          (iii) the name and  address of the bank or trust  company at which the
          Company  has  made  the  deposit  of the net  proceeds  of sale or the
          redemption price, respectively; and

          (iv)  all  other  relevant  particular  of  the  sale  or  redemption,
          respectively.

     (e) For greater  certainty,  the Company may sell or redeem  excess  voting
     shares in accordance  with Articles 177 or 178,  respectively,  despite the
     fact that the  Company  does not possess the  certificate  or  certificates
     representing  the  excess  voting  shares  at  the  time  of  the  sale  or
     redemption.  If, in  accordance  with Article 177, the Company sells excess
     voting  shares  without  possession  of  the  certificate  or  certificates
     representing  the excess  voting  shares,  the  Company  shall issue to the
     purchaser of such excess voting shares or its nominee a new  certificate or
     certificates  representing the excess voting shares sold. If, in accordance
     with Articles 177 or 178, the Company sells or redeems excess voting shares
     without  possession of the  certificate or  certificates  representing  the
     excess  voting  shares  and,  after  the  sale  or  redemption,   a  person
     establishes  that it is a bona fide  purchaser of the excess  voting shares
     sold or redeemed, then, subject to applicable law:

          (i) the excess  voting shares held or  beneficially  owned by the bona
          fide  purchaser  are  deemed  to be,  from  the  date  of the  sale or
          redemption  by the  Company,  as the case may be,  validly  issued and
          outstanding voting shares in addition to the excess voting shares sold
          or redeemed; and

          (ii)  notwithstanding  Article 179(b),  the Company is entitled to the
          deposit made pursuant to Article  179(a) and, in the case of a sale in
          accordance  with Article  177,  shall add the amount of the deposit to
          the stated capital account for the class of voting shares issued.

                                   EXCEPTIONS

180. (a)  Notwithstanding  Article  172 or 173,  neither  the  individual  share
     constraint  nor the  non-resident  share  constraint  applies in respect of
     voting shares of the Company that are held:

          (i) by one or more underwriters solely for the purpose of distributing
          the voting shares to the public; or

          (ii)  by any  person  who  provides  centralized  facilities  for  the
          clearing of trades in  securities  and is acting in relation to trades
          in the voting shares solely as an intermediary in the payment of funds
          or the delivery of securities, or both.

     (b) A person  referred to in Article  180(a)(ii)  shall not exercise voting
     rights attached to the voting shares so held by that person.

                                SAVING PROVISIONS

181. (a) Notwithstanding any other provision of this Part "B";

          (i) the Directors of the Company may determine to pay a dividend or to
          make any other  distribution  on voting shares that would otherwise be
          prohibited  by  any  other  provision  of  this  Part  "B"  where  the
          contravention  of the individual  share constraint or the non-resident
          share  constraint that gave rise to the prohibition was inadvertent or
          of a technical  nature or it would otherwise be inequitable not to pay
          the dividend or make the distribution; and

          (ii) where a dividend has not been paid or any other  distribution has
          not  been  made  on  voting   shares  as  a  result  of  a  directors'
          determination of a contravention of the individual share constraint or
          the non-resident  share constraint,  or where the amount of a dividend
          or any other distribution has been restored to the Company pursuant to
          Article  172(e)(ii)  as a result of a  directors'  determination  of a
          contravention of the individual share constraint, the Directors of the
          Company shall declare and pay the dividend, make the distribution,  or
          refund  the  restored  amount,  respectively,   if  they  subsequently
          determine that no such contravention occurred.

     (b) In the event that the  Company  suspends  or redeems  voting  shares in
     accordance  with Article 176 or 178,  respectively,  or otherwise  redeems,
     purchases for  cancellation or otherwise  acquires  voting shares,  and the
     result of such action is that any person and the  associates of that person
     who,  prior to such action,  were not in  contravention  of the  individual
     share  constraint  are,  after  such  action,   in   contravention,   then,
     notwithstanding  any other provision of this Part "B", the sole consequence
     of such action to that person and the associates of that person, in respect
     of the voting  shares of that person and of the  associates  of that person
     held, beneficially owned or controlled at the time of such action, shall be
     that the number of votes  attached to those voting  shares shall be reduced
     to a number that is the largest  whole number of votes that may be attached
     to the voting  shares which that person and the  associates  of that person
     could hold,  beneficially  own or control  from time to time in  compliance
     with the individual share constraint.

     (c)  Notwithstanding  any other provision of this Part "B", a contravention
     of the individual  share  constraint or the  non-resident  share constraint
     shall have no consequences  except those that are expressly provided for in
     this Part "B". For greater certainty but without limiting the generality of
     the foregoing:

          (i) no  transfer,  issue or  ownership  of,  and no title  to,  voting
          shares;

          (ii) no  resolution  of  shareholders  [except to the extent  that the
          result  thereof is affected as a result of a directors'  determination
          under Article 172(e)(i)]; and

          (iii) no act of the Company,  including any transfer of property to or
          by the Company;

     shall  be  invalid  or  otherwise  affected  by  any  contravention  of the
     individual  share  constraint or the  non-resident  share constraint or the
     failure to make the adjustment required pursuant to the non-resident voting
     constraint.

                            DIRECTORS' DETERMINATIONS

182. (a) The Directors of the Company shall have the sole right and authority to
     administer  the  provisions of this Part "B" and to make any  determination
     required or  contemplated  hereunder.  In so acting,  the  Directors of the
     Company shall enjoy,  in addition to the powers set forth in this Part "B",
     all of the powers  necessary or desirable,  in their opinion,  to carry out
     the intent and purpose of this Part "B". The Directors of the Company shall
     make on a timely basis all determinations  necessary for the administration
     of the provisions of this Part "B" and,  without limiting the generality of
     the  foregoing,  if the  Directors of the Company  consider  that there are
     reasonable  grounds for believing  that a  contravention  of the individual
     ownership constraint or the non-resident  ownership constraint has occurred
     or will occur, the Directors shall make a determination with respect to the
     matter.  Any directors'  determination  that is not  inconsistent  with the
     Reorganization Act, the Privatization Act and other applicable law shall be
     conclusive,  final  and  binding  except  to  the  extent  modified  by any
     subsequent directors' determination.

     (b) The  Directors of the Company shall make any  directors'  determination
     contemplated by Article 172 or 173:

          (i) after the relevant  shareholder's  declaration have been requested
          and received by the Company, only:

               (A) on a basis consistent with those shareholder's  declarations;
               or

               (B) if the  Directors  of the Company are of the opinion that the
               shareholder's  declarations  do not contain  adequate or accurate
               information  and they  believe  and have  reasonable  grounds for
               believing  that  they  will not be  provided  with  shareholder's
               declarations  that do contain adequate and accurate  information;
               or

          (ii) whether or not any  shareholder's  declaration has been requested
          or  received  by the  Company,  only if the  Directors  of the Company
          believe  and have  reasonable  grounds  for  believing  that they have
          sufficient information to make the directors' determination,  that the
          consequences of the directors'  determination would not be inequitable
          to those  affected by it and that it would be  impractical,  under all
          the  circumstances,  to  request  or  to  await  the  receipt  of  any
          shareholder's declaration.

     (c) In administering  the provisions of this Part "B",  including,  without
     limitation,  in making any  directors'  determination  in  accordance  with
     Article  182(b) or otherwise,  the Directors of the Company may rely on any
     information  on which the  Directors  consider it reasonable to rely in the
     circumstances.  Without  limiting  the  generality  of the  foregoing,  the
     Directors of the Company may rely upon any shareholder's  declaration,  the
     register of members of the Company, the knowledge of any Director,  officer
     or employee of the Company or any advisor to the Company and the opinion of
     counsel to the Company.

     (d) In administering  the provisions of this Part "B",  including,  without
     limitation, in making any directors' determination, the Directors shall act
     honestly and in good faith.  Provided  that the Directors of the Company so
     act,  they  shall not be liable to the  Company  and  neither  they nor the
     Company shall be liable to any holder or beneficial  owner of voting shares
     or any other  person for,  nor with  respect to any matter  arising from or
     related to, any act or omission to act in relation to this Part "B".

     (e) Any directors'  determination required or contemplated by this Part "B"
     shall be expressed and conclusively evidenced by a resolution duly adopted.

     (f) The  Directors  may  delegate any of their powers and duties under this
     Article 182 to any standing or special committee consisting of such members
     of the Board as the Directors may determine.

                           SHAREHOLDERS' DECLARATIONS

183. (a) For purposes of  monitoring  the  compliance  with and of enforcing the
     provisions  of this Part "B", the Directors of the Company may require that
     any registered  holder or beneficial  owner, or any other person of whom it
     is, in the  circumstances,  reasonable or make such request,  file with the
     Company or its  registrar  and  transfer  agent a  completed  shareholder's
     declaration. The Directors of the Company shall determine from time to time
     written  guidelines  with  respect  to  the  nature  of  the  shareholder's
     declaration to be requested, the times at which shareholder's  declarations
     are  to  be  requested  and  any  other   relevant   matters   relating  to
     shareholder's declarations.

     (b) A  shareholder's  declaration  shall be in the form  from  time to time
     determined by the directors of the Company  pursuant to Article 183(a) and,
     without  limiting the  generality of the foregoing may be required to be in
     the form of a simple  declaration  in  writing or a  statutory  declaration
     under the Canada  Evidence  Act.  Without  limiting the  generality  of its
     contents,  any  shareholder's   declaration  may  be  required  to  contain
     information with respect to:

          (i) the name,  address and residency of the  shareholder  ("Registered
          Shareholder")  and if  the  shareholder  is an  individual  and  not a
          Canadian citizen, such shareholder's citizenship;

          (ii) the name,  address and  residency of any person who  beneficially
          owns or controls,  directly or  indirectly,  otherwise  than by way of
          security  only,  the  Registered   Shareholder's  shares  ("Beneficial
          Shareholder")  and if such person is an individual  and not a Canadian
          citizen, such person's citizenship;

          (iii)  the  name,  address  and  residency  of  any  person  who is an
          associate of the Registered  Shareholder or any Beneficial Shareholder
          ("Associate"),  and if such person is an individual and not a Canadian
          citizen, such person's citizenship;

          (iv) the number of shares  held by the  Registered  Shareholder,  each
          Beneficial  Shareholder and each  Associate,  including the dates such
          shares were acquired or proposed to be acquired; and

          (v) if the Registered  Shareholder,  any Beneficial Shareholder or any
          Associate  is a  corporation,  trust,  partnership  or  unincorporated
          organization  the name,  address and residency of each person who is a
          controlling   shareholder,   trustee,   partner   or   member  of  the
          corporation, trust, partnership or unincorporated organization, as the
          case may be, and if such  person is an  individual  and not a Canadian
          citizen, such person's citizenship.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>4
<FILENAME>file004.txt
<DESCRIPTION>EX A-3 ARTICLES OF ORGANIZATION OF BHE
<TEXT>

Exhibit A-3

                                 STATE OF MAINE

                               CHANGE OF CLERK or
                            REGISTERED OFFICE or BOTH



                  Pursuant to 13-A MRSA ss.304 the undersigned
               corporation advises you of the following change(s):


FIRST: The name and  registered  office of the clerk  appearing on the record in
       Secretary of State's office

                                FREDERICK S. SAMP

                        33 STATE STREET, BANGOR ME 04401
                       (street, city, state and zip code)


SECOND: The name and physical location of the registered office of the successor
        (new) clerk, who must be a Maine resident, are:

                                  ANDREW LANDRY
                                     (name)

         33 STATE STREET, BANGOR ME 04401 (street address (not PO Box),
                            city, state and zip code)

                (mailing address if different from above)


THIRD: Upon a change in clerk this must be completed:

                  (X)      Such change was  authorized  by the directors and the
                           power to make  such  change  is not  reserved  to the
                           shareholders by the articles or the bylaws.

                  ( )      Such change was authorized by the shareholders.
                          (Complete the following)

                    I certify  that I have  custody of the  minutes  showing the
                    above action by the shareholders.

                                      (signature of new clerk, secretary or
                                       assistant secretary)


Dated:  OCTOBER 13, 1995               BANGOR HYDRO-ELECTRIC COMPANY
                                           (Name of Corporation)


<PAGE>

                                       By
                                                (signature)



                                          ANDREW LANDRY, CLERK
                                   (type or print name and capacity)



                                       By
                                                (signature)
                                   (type or print name and capacity)




This  document  MUST be  signed  by (1) the  Clerk  or (2)  the  President  or a
vice-president  AND the Secretary,  an assistant  secretary or other officer the
bylaws  designate as second  certifying  officer OR (3) if no such  officers,  a
majority  of the  directors  or  such  directors  designated  by a  majority  of
directors  then in office OR (4) if no directors,  the holders,  or such of them
designated  by the holders,  of record of a majority of all  outstanding  shares
entitled to vote thereon OR (5) the holders of all outstanding shares.

FORM NO. MBCA-3 Rev. 90
SUBMIT COMPLETED FORMS TO:  Secretary of State, Station 101,
                            Augusta, Maine  04333

<PAGE>

                                 STATE OF MAINE

                  CERTIFICATE OF ORGANIZATION OF A CORPORATION

                              UNDER THE GENERAL LAW

     The undersigned,  officers of a corporation organized at Bangor, Maine at a
meeting of the signers of the  articles of agreement  therefor,  duly called and
held at the office of the Bangor Railway and Electric Company,  Bangor, Maine on
Monday the ninth day of June A.D. 1924 hereby certify as follows:

The name of said corporation is BANGOR HYDRO-ELECTRIC COMPANY.

The purposes of said corporation are:

     (a) The acquisition with the consent of the Public Utilities  Commission of
the State of Maine and the operation of the properties,  rights,  privileges and
franchises  now or  heretofore  owned and  operated  by the Bangor  Railway  and
Electric Company, Bar Harbor and Union River Power Company, Bangor Power Company
and Lincoln  Light and Power  Company,  including the  distribution  systems and
other properties acquired or about to be acquired by the Lincoln Light and Power
Company  from  Montague-Howland  Electric  Company,  Penobscot  Light  and Power
Company, Edward M. Graham, doing business as the Eastern Development Company and
Edward M. Graham, and extensions, enlargements and additions to said properties,
rights, privileges and franchises to be hereafter purchased or acquired.

     (b)  The  construction,   purchase  acquisition,   ownership,  improvement,
maintenance,  use  or  operation  of  plants  and  properties  for  the  making,
generating,  selling,  distribution or supplying gas or electricity or both, for
lighting, heating, manufacturing or mechanical purposes in the Cities of Bangor,
Brewer,  and Old Town and the  Towns of  Milford,  Charleston,  Corinth,  Orono,
Bradley,  Eddington,  Veazie, Lincoln, Winn,  Mattawamkeag,  Glenburn,  Enfield,
Howland, Passadumkeag, Orrington, Hermon and Hampden in the County of Penobscot,
the  City of  Ellsworth  and the  Towns of Bar  Harbor,  Blue  Hill,  Brookline,
Bucksport,  Dedham, Mount Desert, Segdwick,  Southwest Harbor, Surry and Trenton
in the County of Hancock, and the Towns of Machias, East Machias and Machiasport
in the County of  Washington  and any other Cities or Towns of said  Counties of
Penobscot, Hancock and Washington, in the State of Maine.

     (c) In  connection  with the  foregoing the company shall have and exercise
all of the rights,  privileges and franchises of the  corporation  whose rights,
privileges  and  franchises it acquires and all powers  conferred by the Laws of
the  State of Maine on  public  utility  corporations  of the  character  of the
corporations whose properties are acquired.


<PAGE>


     (d) The buying or  otherwise  obtaining  and selling or leasing real estate
and the  manufacturing,  buying or  otherwise  obtaining  and selling or leasing
personal  property  necessary or convenient in the  prosecution of the foregoing
purposes and  generally the doing of all things  necessary or convenient  for or
incident to said purposes,  including the carrying on of any Mercantile Business
in connection  with any of said  purposes and the taking,  holding and owning by
purchase,  contract or otherwise of stocks,  bonds, script or other corporations
of other  corporations  and  disposing  of the same in any manner,  such taking,
holding, owning and disposing to be with all the incidents of ownership.

The amount of capital stock is ten million dollars ($10,000,000).

The amount of common stock is five million dollars ($5,000,000).

The amount of preferred stock is five million dollars ($5,000,000).

The amount of capital stock already paid in is Nothing.

The par value of the shares is one hundred dollars ($100).

The names and residences of the owners of said shares are as follows:

- --------------------------------------------------------------
                                                 NO. OF SHARES
NAMES                       REFERENCES       COMMON       PREFERRED
- --------------------------------------------------------------
Edward M. Graham           Bangor, Maine     1 share

Albert E. Bass                  "            1 "

Charles D. Stanford             "            1 "

J. Norman Towle                 "            1 "

A. Langdon Freese               "            1 "

Howard Corning                  "            1 "

Frank Silliman, 3rd             "            1 "
                                      --------------
                                             7 shares

Total number of shares remaining
           in Treasury                  99,993
                                      ---------------

         Total number of shares        100,000 shares
                                      ===============


<PAGE>



Said corporation is located at Bangor, in the County of Penobscot.

The number of Directors is seven and their names are:

Edward M. Graham,  Albert E. Bass,  Charles D.  Stanford,  J. Norman  Towle,  A.
Langdon Freese, Howard Corning and Frank Silliman, 3rd.

The name of the Clerk is Howard Corning and his residence is Bangor.

The undersigned,  Edward M. Graham is President;  the undersigned Howard Corning
is Treasurer;  and the undersigned Edward M. Graham,  Albert E. Bass, Charles D.
Stanford, J. Norman Towle, A. Langdon Freese, Howard Corning and Frank Silliman,
3rd are a majority of the Directors of said corporation.

         Witness our hands this ninth day of June A.D. 1924.

                           Edward M. Graham,     President

                           Howard Corning,       Treasurer

                           Edward M. Graham,     Director
                           J. Norman Towle,      Director
                           Howard Corning,       Director
                           Albert E. Bass,       Director
                           Charles D. Stanford,  Director
                           A. Langdon Freese,    Director
                           Frank Silliman 3rd,   Director

PENOBSCOT          ss.          June 9, A.D. 1924

Then personally appeared Edward M. Graham,  Albert E. Bass, Charles D. Stanford,
J. Norman Towle, A. Langdon Freese,  Howard Corning and Frank Silliman,  3rd and
severally made oath to the foregoing certificate, that the same is true.

                  Before me,
                                      E.C. Ryder        Justice of the Peace
                                 --------------------

                                 STATE OF MAINE

     I hereby  certify that I have  examined the foregoing  certificate  and the
same is property drawn and signed,  and is conformable to the  constitution  and
laws of the State.

                                    Clement F. Robinson, Deputy Attorney General


<PAGE>



                                      COPY

(Name of Corporation.)

                          BANGOR HYDRO-ELECTRIC COMPANY

                                  Penobscot ss.

                                                              Registry of Deeds.

                       Received June 11, 1924 at 9:15 a.m.
                           Recorded in Vol: 4 Page 424

         ATTEST:  \ss\ Warren E. Craig, Registrar.

A true copy of record.

         ATTEST:  \ss\ Warren E. Craig, Registrar.

                                 STATE OF MAINE

                        Office of the Secretary of State

                             Augusta, August 1, 1924

Received and filed this day.

         ATTEST:  \ss\ DEPUTY, Secretary of State

Recorded in Vol. 103  Page 240.


<PAGE>



TO FRANK W. BALL, SECRETARY OF THE STATE OF MAINE:

         I hereby certify that at a special  meeting of the  stockholders of the
Bangor  Hydro-Electric  Company, a corporation  organized and existing under the
laws of the State of Maine,  held at the offices of said Company,  in Bangor, in
the County of Penobscot and State of Maine,  on the fifteenth day of June,  A.D.
1926, pursuant to a notice duly given, it was voted, unanimously,  by a majority
of the  entire  stock of said  Company to  increase  the  capital  stock of said
Company from ten million  (10,000,000)  dollars to eleven  million  (11,000,000)
dollars by the  issuance  of ten  thousand  (10,000)  shares of six (6) per cent
cumulative  preferred  stock,  so that the capital  stock of said Company at the
present time consists of fifty thousand  (50,0000)  shares of seven (7) per cent
preferred  stock,  ten  thousand  (10,000)  shares of six (6) percent  preferred
stock, and fifty thousand  (50,000) shares of common stock, all of the par value
of one hundred  (100)  dollars each and the  aggregate  value of eleven  million
(11,000,000) dollars.

     Witness my hand and the seal of said  Company this  fifteenth  day of June,
A.D. 1926.


                                                 \ss\ Eugene M. Dole

                                                 Clerk of Bangor Hydro-
                                                 Electric Company


<PAGE>






                          Bangor Hydro-Electric Company

                               Increase of Capital

                                     103-240

                                 STATE OF MAINE

                          Office of Secretary of State

                         Augusta, June 14, 1926 Received
                           and filed this day.

                           ATTEST:

                                       \ss\ DEPUTY, Secretary of State

                          Recorded in Vol. 17 Page 320.


<PAGE>



                                 STATE OF MAINE
                           PUBLIC UTILITIES COMMISSION
                    Certificate of increase of capital stock
                        of Bangor Hydro-Electric Company.
                                   -----------

     For  reasons  set forth in our  decree of July 14,  1926,  entitled  Bangor
Hydro-Electric  Company: Re application for approval of issue of securities,  U.
865, it is

     CERTIFIED that the Bangor Hydro-Electric  Company has been authorized under
Section 39 of Chapter 55 of the Revised  Statutes,  as amended,  to increase its
capital stock by the amount of one million dollars ($1,000,0000) of 6% preferred
capital stock, so that the capitalization of said company is -

                              No.                           Aggregate
Kind of Stock              of shares      Par value          Amount
- ---------------------------------------------------------------------
Common stock                50,000          $100             $5,000,000
Preferred stock 7%          50,000          $100             $5,000,000
Preferred stock 6%          10,000          $100             $1,000,000
                                                             -----------
                                               Total        $11,000,000
                                                             ===========
It is further

     CERTIFIED  that the Bangor  Hydro-Electric  Company has  complied  with the
requirements of Section 42 of Chapter 51 of the Revised Statutes,  as amended by
Chapter 196 of the Public Laws of 1925, by payment of the prescribed fees to the
State of Maine, and it is further

     CERTIFIED  that said  increase of stock was duly  authorized by vote of the
stockholders at a meeting  properly called and held for said purpose,  and it is
further

     CERTIFIED   that  within   fifteen  (15)  days  after  said  vote  of  said
stockholders, notice of the proposed increase was filed with this Commission.

     Given the hand and seal of the Public Utilities Commission at Augusta, this
14th day of July, A.D. 1926.

                  Charles E. Gurney         PUBLIC UTILITIES
                  Herbert W. Trafton        COMMISSION
                  Albert Greenlaw           OF MAINE

                  A true copy.

                  ATTEST:  \ss\



<PAGE>





                          Bangor Hydro-Electric Company

                               Increase of Capital

                                 STATE OF MAINE

                          Office of Secretary of State

                         Augusta, July 17, 1926 Received
                           and filed this day.

                           ATTEST:

                                       \ss\ DEPUTY, Secretary of State

                           Recorded in Vol. 6  Page 266.


<PAGE>



                                 STATE OF MAINE
                           PUBLIC UTILITIES COMMISSION
                    Certificate of increase of capital stock
                      of the Bangor Hydro-Electric Company.
                                   ----------

     For  reasons  set  forth  in our  decree  of even  date,  entitled  "Bangor
Hydro-Electric  Company,  re: application for increase of capital stock, U #968"
it is

     CERTIFIED that the Bangor Hydro-Electric  Company has been authorized under
Section 39 of Chapter 55 of the Revised  Statutes,  as amended,  to increase its
capital stock from Eleven  Million  Dollars  ($11,000,000)  to Thirteen  Million
Dollars  ($13,000,000),  said  increase to consist of twenty  thousand  (20,000)
shares  of Six Per  Cent  Cumulative  Preferred  Stock  of the par  value of One
Hundred Dollars ($100) each. It is further

     CERTIFIED  that the Bangor  Hydro-Electric  Company has  complied  with the
requirements of Section 42 of Chapter 51 of the Revised Statutes, as amended, by
payment of the prescribed fees to the State of Maine; and it is further

     CERTIFIED  that the said  increase of stock was duly  authorized by vote of
the stockholders at a meeting properly called and held for said purposes; and it
is further

     CERTIFIED  that within  fifteen days after said vote of said  stockholders,
notice of the proposed increase was filed with this Commission.

     Given  under  the hand  and  seal of the  Public  Utilities  Commission  at
Augusta, this 19th day of November, A.D. 1927.


                                    Charles E. Gurney         PUBLIC UTILITIES
                                    Herbert W. Trafton        COMMISSION
                                    Albert Greenlaw           OF MAINE
                                    A true copy,
                                            ATTEST:  \ss\ Clerk


<PAGE>



                          Bangor Hydro-Electric Company

                                     103-240

                                 STATE OF MAINE

                          Office of Secretary of State

                       Augusta, December 3, 1927 Received
                           and filed this day.

                           ATTEST:

                                     \ss\ Secretary of State

                           Recorded in Vol. 6  Page 321.


<PAGE>



TO THE STOCKHOLDERS OF THE BANGOR HYDRO-ELECTRIC COMPANY

     Notice is hereby given that a Special  Meeting of the  Stockholders  of the
Bangor  Hydro-Electric  Company  will  be held at the  principal  office  of the
Company,  No. 84 Harlow  Street,  in the City of Bangor,  Maine on Tuesday,  the
eighth day of  November,  A.D.  1927,  at ten o'clock  A.M.,  for the purpose of
considering and voting on the following matters:

          1.   The increase of the capital stock of the Company from $11,000,000
               to $13,000,000, by the issuance of 20,000 shares of 6% cumulative
               preferred stock.

          2.   The  approval  and  ratification  of the  votes  of the  Board of
               Directors authorizing such issue.

          3.   The transaction of such other business as may be presented to the
               meeting.

     If you cannot attend the meeting, please sign the enclosed proxy, have your
signature witnessed and return the same in the enclosed stamped envelope.

         By order of the Board of Directors.

                              Eugene M. Dole, Clerk

October 21st, 1927.

                                 State of Maine

County of Penobscot, s.s.                   October 21st, 1927.

     I have this day deposited  notices whereof the above is a true copy, signed
by me as Clerk of the Bangor  Hydro-Electric  Company,  and  addressed,  postage
paid, to the several  stockholders at their respective last known addresses,  as
the same appear on the stock books of the Company, in the Post Office at Bangor,
said County and State.

                              Eugene M. Dole, Clerk

     A true copy of the  original  notice  and of the  certificate  of return of
service thereof.

                              Eugene M. Dole, Clerk

     In  accordance  with the By-Laws of the Bangor  Hydro-Electric  Company and
with notice  duly  issued as above  recorded,  the  stockholders  of said Bangor
Hydro-Electric  Company met in special  meeting at the principal  office of said
Company,  No. 84 Harlow Street,  Bangor,  Maine,  on Tuesday,  the eighth day of
November, 1927, at ten o'clock in the forenoon.

<PAGE>


     The President called the meeting to order and presided throughout.

     The notice of the meeting and the  certificate of return of service thereof
were read by Eugene M. Dole, Clerk of this Company.

     On motion duly made and seconded, it was

     VOTED,  unanimously,  that the capital  stock of the Bangor  Hydro-Electric
Company be increased from $11,000,000 to $13,000,000,  by the issuance of 20,000
shares of 6% cumulative  preferred stock to be sold from time to time to pay for
extensions  and  improvements  of the  property  of the  Company  and for  other
corporate  purposes which may arise from time to time, as the necessities of the
Company and the increase of business require, at a price not less than the price
fixed by the Public Utilities Commission.

     VOTED  FURTHER,  that the vote of the  Board of  Directors  of the  Company
passed  at a  meeting  of the  Board  held on the  13th  day of  October,  1927,
authorizing such issue be and it is hereby approved, ratified and confirmed.

     VOTED FURTHER,  that the Clerk of the Company be and he is hereby  directed
to file with the Public Utilities  Commission of the State of Maine, as provided
by law within fifteen days from the date of this meeting, a certificate verified
by  his  affidavit  that a vote  increasing  the  capital  stock  of the  Bangor
Hydro-Electric  Company from  $11,000,000 to  $13,000,000  was on the 8th day of
November,  1927, duly passed by the Stockholders of that Company  representing a
majority of the stock  issued,  voting at a meeting duly called and held for the
purpose of such increase,---

     I,  Eugene M. Dole,  Clerk of the  Bangor  Hydro-Electric  Company,  hereby
certify  that the  foregoing  is a true copy of a portion  of the  minutes  of a
special meting of the stockholders, held at the principal office of the Company,
No. 84 Harlow Street,  Bangor, Maine, on Tuesday,  November 1927, at ten o'clock
in the forenoon.

                           \ss\ Eugene M. Dole, Clerk


<PAGE>




                          Bangor Hydro-Electric Company

                                     103-240

                                 STATE OF MAINE

                          Office of Secretary of State

                       Augusta, December 3, 1927 Received
                           and filed this day.

                           ATTEST:

                             \ss\ Secretary of State

                       Recorded in Vol. 18 Pages 188 &189.


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                    AMENDMENT TO CERTIFICATE OF ORGANIZATION

     I, EUGENE M. DOLE, Clerk of Bangor Hydro-Electric  Company,  hereby certify
that at a  meeting  of the  stockholders  of said  Company  duly  and  regularly
convened and held  according to the By-Laws of the Company and according to law,
at the principal office of the Company, No. 33 State Street,  Bangor,  Maine, on
the twelfth day of February, 1929, at 10 o'clock A.m., the following Resolutions
were duly  adopted by the  affirmative  vote of the holders of a majority of the
Capital Stock issued and outstanding of the Company:

               On motion, duly made and seconded, the following resolutions were
          adopted  by the  unanimous  vote of all of the  stockholders  present,
          constituting more than a majority of all of the stock issued:

               "VOTED,  that the par value of the shares of the Common  Stock of
          this Company be and the same hereby is changed from $100. per share to
          $25.  per  share,  and that the  number  of  shares to be issued to be
          correspondingly increased from 50,000 to 200,000 shares; and

               VOTED  FURTHER,  that  four  shares of the  Common  Stock of this
          Company of the par value of $25.  each shall be issued in exchange for
          each outstanding share of Common Stock of the par value of $100.

               VOTED,  that the capital  stock of the Company be increased  from
          $13,000,000 to $15,500,000 by the  authorization  of 100,000 shares of
          its Common Capital Stock of the par value of $25. each, the said stock
          to be used for the  corporate  purposes of the Company which may arise
          from time to time, the stock to be issued at a price not less than the
          price  fixed by the  Public  Utilities  Commission;  so that after the
          increase the  authorized  Capital  Stock of this  Company  shall be as
          follows:

                  7% Preferred Stock, par value
                       $100. per share                     $5,000,000.
                  6% Preferred Stock, par value
                       $100. per share                      3,000,000.
                  Common Stock, par value
                       $25. per share                       7,500,000.
                                                          ------------
                  Total Authorized Capital                $15,500,000.
                                                          ============

     VOTED, that the President or Clerk of this Company, either of whom may act,
be and they  hereby  are  requested  and  directed  to file in the office of the
Secretary  of State a  certificate  setting  forth the changes in the Charter or
Certificate  of  Organization  of this  Company  provided  for by the  foregoing
resolutions."

<PAGE>


         WITNESS my hand and seal the 12th day of February,  one  thousand  none
hundred and twenty-nine.

                                                   \ss\ Eugene M. Dole
{SEAL}
                                                   Clerk of Bangor Hydro-
                                                   Electric Company


                                 STATE OF MAINE

Penobscot, ss.                                              February 12th, 1929.

         Then  personally  appeared the above named EUGENE M. DOLE and made oath
that the above statement by him subscribed is true.

                                        \ss\ Sherman N. Shumway
                                                 Notary Public    {SEAL}


<PAGE>



                          Bangor Hydro-Electric Company

                              Decrease in Par Value

                                     103-240








                                 STATE OF MAINE

                          Office of Secretary of State

                       Augusta, February 11, 1929 Received
                               and filed this day.

                           ATTEST:

                                      \ss\ Secretary of State

                           Recorded in Vol. 18  Page 522.


<PAGE>



                                 STATE OF MAINE

                           PUBLIC UTILITIES COMMISSION

Bangor  Hydro-Electric  Company,  Re:  Application  for  approval of increase of
capital stock.
                                     U.#1071

STEARNS, Chairman; TRAFTON and GREENLAW, Commissioners;

APPEARANCES:  Sherman N. Shumway, Esq., for Petitioner.

     The  Bangor  Hydro-Electric  Company,  a  public  utility,  filed  with the
Commission an application  seeking  authority to increase its capital stock from
Thirteen Million Dollars ($13,000,000) to Fifteen Million, Five Hundred Thousand
Dollars ($15,500,000).

     The  petitioner  at a meeting of its  stockholders  held February 12, 1929,
attended  by a quorum of the  capital  stock  issued and  outstanding,  voted to
increase  its capital  stock from  Thirteen  Million  Dollars  ($13,000,000)  to
Fifteen   Million,   Five  Hundred   Thousand   Dollars   ($15,500,000)  by  the
authorization of one hundred  thousand  (100,000) shares of common capital stock
of the par value of Twenty-five Dollars ($25) each.

     Within  fifteen  days  after  the vote of its  stockholders  aftersaid  the
petitioner  filed  notice  of  said  increase  of its  capital  stock  with  the
Commission.

     The fees  prescribed  by statute  having  been paid a  certificate  will be
issued certifying our approval of the increase. The Clerk of this Commission is

                                    DIRECTED

to cause to be filed a  certificate  in the  office  of the  Secretary  of State
certifying to such increase. It is accordingly

                          ORDERED, ADJUDGED AND DECREED

     1. That the Commission  approve the increase of capital stock of the Bangor
Hydro-Electric  Company from Thirteen  Million Dollars  ($13,000,000) to Fifteen
Million, Five Hundred Thousand Dollars ($15,500,000) said increase to consist of
one hundred  thousand  (100,000) shares of common capital stock of the par value
of Twenty-five  Dollars ($25) each,  aggregating Two Million,  Two Hundred Fifty
Thousand  Dollars  ($2,250,000)  and the fees  prescribed by statute having been
paid, certificate of this Commission will be issued approving said increase.

     The Clerk of this Commission is hereby

                                    DIRECTED


<PAGE>


to cause  to be filed in the  office  of the  Secretary  of State a  certificate
attested  by him,  certifying  to such  increase.  The Clerk  will also make his
return, evidencing his compliance with this order.

     Given  under  the hand  and seal of the  Public  Utilities  Commission,  at
Augusta, this nineteenth day of February, A.D., 1929.


                                    Albert J. Stearns         PUBLIC UTILITIES
                                    Herbert W. Trafton        COMMISSION
                                    Albert Greenlaw           OF MAINE

                                    A true copy,

                                            ATTEST:
                                                     \ss\ Clerk


<PAGE>



                                 STATE OF MAINE

                           PUBLIC UTILITIES COMMISSION

                       Certificate of increase of capital
                   stock of the Bangor Hydro-Electric Company

     For  reasons  set  forth  in our  decree  of even  date,  entitled  "Bangor
Hydro-Electric  Company,  Re:  Application  for  increase of capital  stock,  U.
#1071", it is

     CERTIFIED that the Bangor Hydro-Electric  Company has been authorized under
Section 39 of Chapter 55 of the Revised  Statutes,  as amended,  to increase its
capital stock from Thirteen  Million Dollars  ($13,000,000)  to Fifteen Million,
Five Hundred  Thousand  Dollars  ($15,500,000)  said  increase to consist of one
hundred  thousand  (100,000)  shares of common capital stock of the par value of
Twenty-five Dollars ($25) each. It is further

     CERTIFIED  that the Bangor  Hydro-Electric  Company has  complied  with the
requirements of Section 42 of Chapter 51 of the Revised Statutes, as amended, by
payment of the prescribed fees to the State of Maine; and it is further

     CERTIFIED  that said  increase of stock was duly  authorized by vote of the
stockholders at a meeting properly called and held for said purposes;  and it is
further

     CERTIFIED  that within  fifteen days after said vote of said  stockholders,
notice of the proposed increase was filed with this Commission.

     Given  under  the hand  and seal of the  Public  Utilities  Commission,  at
Augusta, this 19th day of February, A.D., 1929.


                                    ALBERT J. STEARNS         PUBLIC UTILITIES
                                    HERBERT W. TRAFTON        COMMISSION
                                    ALBERT GREENLAW           OF MAINE

                                    ATTEST:

                                            A true copy,
                                                      \ss\ Clerk


<PAGE>



                          Bangor Hydro-Electric Company

                               Increase of Capital

                                     103-240






                                 STATE OF MAINE

                          Office of Secretary of State

                       Augusta, February 22, 1929 Received
                               and filed this day.

                           ATTEST:

                                            \ss\ DEPUTY, Secretary of State

                           Recorded in Vol. 6  Pages 361 & 362.


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                    CERTIFICATE OF INCREASE OF CAPITAL STOCK

     I, EUGENE M. DOLE, Clerk of Bangor Hydro-Electric  Company,  hereby certify
that at a  meeting  of the  stockholders  of said  Company  duly  and  regularly
convened and held  according to the By-Laws of the Company and according to law,
at the principal office of the Company,  No. 33 State Street,  Bangor,  Maine of
the  twelfth  day  of  February,  1929,  at  ten  o'clock  A.M.,  the  following
Resolutions,  among  others,  were duly adopted by the  affirmative  vote of the
holders  of a majority  of the  Capital  Stock  issued  and  outstanding  of the
Company:

               VOTED,  that the capital  stock of the Company be increased  from
          $13,000,000 to $15,500,000 by the  authorization  of 100,000 shares of
          its Common Capital Stock of the par value of $25. each, the said stock
          to be used for the  corporate  purposes of the Company which may arise
          from time to time, the stock to be issued at a price not less than the
          price  fixed by the  Public  Utilities  Commission;  so that after the
          increase the  authorized  Capital  Stock of this  Company  shall be as
          follows:

                  7% Preferred Stock, par value
                        $100. per share                     $5,000,000.
                  6% Preferred Stock, par value
                        $100 per share                       3,000,000.
                  Common Stock, par value
                        $25. per share                       7,500,000.
                                                           -----------
                  Total Authorized Capital                 $15,500,000.
                                                           ===========
                               *******************

     VOTED FURTHER,  that the officers and Directors of this Company be and they
hereby  are  authorized,  empowered  and  directed  to take such steps as may be
necessary and proper to secure the consent of the Public Utilities Commission to
the  increase  of the  Common  Capital  Stock,  ********  and they  are  further
authorized to do all such other acts, matters and things as may be necessary and
proper to carry the foregoing resolutions into effect.

     WITNESS my hand and seal this eighteenth day of February, one thousand nine
hundred and twenty-nine.

                                                      \ss\ Eugene M. Dole

                                                      Clerk of Bangor Hydro-
                                                      Electric Company


<PAGE>



                                 STATE OF MAINE

Penobscot, ss.                                              February 18th, 1929.

     Then personally  appeared the above named EUGENE M. DOLE and made oath that
the above statement by him subscribed is true.

                                          \ss\ Sherman N. Shumway
                                                   Notary Public    {SEAL}


<PAGE>



                          Bangor Hydro-Electric Company

                               Increase in Capital

                                     103-240






                                 STATE OF MAINE

                          Office of Secretary of State

                           Augusta, February 22, 1929
                          Received and filed this day.

                           ATTEST:

                                  \ss\ DEPUTY, Secretary of State

                          Recorded in Vol. 18 Page 532.


<PAGE>



     I, Eugene M. Dole, Clerk of Bangor Hydro-Electric  Company,  hereby certify
that each of the following  resolutions  were adopted by  stockholders of record
representing a majority of the voting power  (including a majority of the voting
power of the Common Stock) of the Company's  authorized and issued capital stock
on each of said  resolutions at the Annual Meeting of the  stockholders  of said
Company  which was duly and regularly  convened and held in accordance  with the
By-Laws of the Company and according to the law at the  principal  office of the
Company at No. 33 State Street, Bangor, Maine on February 8, 1944 at ten o'clock
in the forenoon.

     I further  certify that notice of the proposed  reduction of the  Company's
capital stock was given in the call for said meeting.

               RESOLVED,  that the  authorized  capital stock of this Company be
          changed from  $15,500,000 now consisting of $5,000,000 in 7% Preferred
          Stock  divided  into  50,000  shares  of the par  value of $100  each,
          $3,000,000 in 6% Preferred Stock divided into 30,000 shares of the par
          value of $100  each,  and  $7,500,000  in Common  Stock  divided  into
          300,000  shares  of the par  value  of  $25.00  each,  to  $12,500,000
          consisting of $8,000,000 in Preferred Stock  represented by the shares
          now authorized and $4,500,000  represented by 300,000 shares of Common
          Stock of the par value of $15.00 each, without change, however, in the
          existing  preferences,  priories and voting  rights of the  respective
          classes of stock.

               FURTHER RESOLVED, that the Clerk file a certificate of the action
          of this meeting  with the  Secretary of State upon receipt of a decree
          from the Public Utilities  Commission  granting consent to the changes
          aforesaid  and  obtain a  certificate  from  such  Secretary  of State
          showing said changes.

     IN  WITNESS  WHEREOF,  I have  hereunto  set my hand  as  Clerk  of  Bangor
Hydro-Electric Company this 8th day of February, 1944.

                                          \ss\  Eugene M. Dole
                                 Clerk of Bangor Hydro-Electric Company
                                    ---------



<PAGE>



                                 STATE OF MAINE

Penobscot, ss:                                                  February 8, 1944

     Personally  appeared the above-named  Eugene M. Dole and made oath that the
statement by him subscribed is true. Before me,

                                                     \ss\  Albert C. Blanchard
                                                              Notary Public


<PAGE>



                            CERTIFICATE OF REDUCTION

                                OF CAPITAL STOCK

                          BANGOR HYDRO-ELECTRIC COMPANY



                                February 8, 1944



                               FROM THE OFFICE OF

                               ALBERT C. BLANCHARD

                                 45 STATE STREET

                                  BANGOR, MAINE


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                            Decrease in Capital Stock

                                     103-240






                                 STATE OF MAINE

                          Office of Secretary of State

                            Augusta, February 8, 1944

                           Received and Filed this day.

                             \ss\ SECRETARY OF STATE

                           Recorded: Vol. 26, Page 2.


<PAGE>



            CERTIFICATE RELATING TO RECLASSIFICATION OF CAPITAL STOCK
                        OF BANGOR HYDRO-ELECTRIC COMPANY

     Bangor  Hydro-Electric  Company, a corporation organized and existing under
the laws of the State of Maine,  and having its  principal  place of business at
Bangor, County of Penobscot, State of Maine, does hereby certify:

     (1) That a duly  called  and  legally  convened  meeting  of the  Company's
stockholders  was held at the Company's  offices at Bangor,  Maine,  on June 11,
1946, at which meeting the holders of a majority of the Company's  capital stock
entitled to vote, to-wit, holders of 55,746-1/4 votes, out of a total of 101,103
authorized votes, were present in person or represented by proxy.

     (2) That at said meeting the Company's  stockholders,  present in person or
represented by proxy, unanimously voted as follows:

               "VOTED to reduce the  authorized  7% Preferred  Stock from 50,000
          shares to 25,000  shares and to reduce  the  authorized  6%  Preferred
          Stock from 30,000 shares to 21,799 shares  leaving a balance of 33,201
          authorize shares of Preferred Stock unclassified pending action by the
          stockholders  or by the  Board of  Directors  acting  under  authority
          conferred by the stockholders.

               "VOTED  FURTHER to  authorize  the issue of not more than  21,799
          shares of 4% Preferred Stock, Series A, carrying dividends at the rate
          of 4% per annum on the par value thereof in exchange for shares of the
          6%  Preferred  Stock,  at the option of the holders  thereof  prior to
          redemption, on a share for share basis.

               "VOTED  FURTHER  to  authorize  the  Board  of  Directors  in its
          discretion to issue and sell shares of 4% Preferred  Stock,  Series B,
          not  exceeding in number the shares of the 6% Preferred  Stock retired
          by redemption.

               "VOTED  FURTHER  that the  holders  of the  capital  stock of the
          Company of all classes  hereby waive their right to subscribe  for any
          part of not  exceeding  21,799  shares  of  Preferred  Stock  carrying
          dividends  of not more than $4.00 per share per year,  to be issued in
          exchange  for  shares of the 6%  Preferred  Stock at the option of the
          holders  thereof,  and to reimburse the treasury of the Company in the
          discretion  of the Board of Directors for all or any part of the funds
          used for the  redemption  of the 6%  Preferred  Stock in an amount not
          exceeding the par value of the shares retired by redemption.

               "VOTED  FURTHER  to  authorize  the  Board  of  Directors  in its
          discretion from time to time to issue shares of Preferred Stock in one

<PAGE>

          or more series with such  provisions  for dividends and  redemption as
          they may determine, subject to the right of the holders of the capital
          stock of the Company to subscribe  therefor and provided that not more
          than 80,000 shares of Preferred  Stock of all classes and series shall
          be outstanding at any time."


<PAGE>



                   CERTIFICATE RELATING TO RECLASSIFICATION OF
                 CAPITAL STOCK OF BANGOR HYDRO-ELECTRIC COMPANY

     Bangor  Hydro-Electric  Company, a corporation organized and existing under
the laws of the State of Maine,  and having its  principal  place of business at
Bangor, County of Penobscot, State of Maine, does hereby certify:

     (1) That a duly  called  and  legally  convened  meeting  of the  Company's
stockholders  was held at the  Company's  offices at  Bangor,  Maine on June 11,
1946, at which meeting the holders of a majority of the Company's  capital stock
entitled to vote, to-wit, holders of 55,746-1/4 votes, out of a total of 101,103
authorized votes, were present in person or represented by proxy.

     (2) That at said meeting the Company's  stockholders,  present in person or
represented by proxy, unanimously voted as follows:

               "VOTED to reduce the  authorized  7% Preferred  Stock from 50,000
          shares to 25,000  shares and to reduce  the  authorized  6%  Preferred
          Stock from 30,000 shares to 21,799 shares  leaving a balance of 33,201
          authorized  shares of Preferred Stock  unclassified  pending action by
          the  stockholders or by the Board of Directors  acting under authority
          conferred by the stockholders.

               "VOTED  FURTHER to  authorize  the issue of not more than  21,799
          shares of 4% Preferred Stock, Series A, carrying dividends at the rate
          of 4% per annum on the par value thereof in exchange for shares of the
          6%  Preferred  Stock,  at the option of the holders  thereof  prior to
          redemption, on a share for share basis.

               "VOTED  FURTHER  to  authorize  the  Board  of  Directors  in its
          discretion to issue and sell shares of 4% Preferred  Stock,  Series B,
          not  exceeding in number the shares of the 6% Preferred  Stock retired
          by redemption.

               "VOTED  FURTHER  that the  holders  of the  capital  stock of the
          Company of all classes  hereby waive their right to subscribe  for any
          part of not  exceeding  21,799  shares  of  Preferred  Stock  carrying
          dividends  of not more than $4.00 per share per year,  to be issued in
          exchange  for  shares of the 6%  Preferred  Stock at the option of the
          holders  thereof,  and to reimburse the treasury of the Company in the
          discretion  of the Board of Directors for all or any part of the funds
          used for the  redemption  of the 6%  Preferred  Stock in an amount not
          exceeding the par value of the shares retired by redemption.

               "VOTED  FURTHER  to  authorize  the  Board  of  Directors  in its
          discretion from time to time to issue shares of Preferred Stock in one
          or more series with such  provisions  for dividends and  redemption as

<PAGE>

          they may determine, subject to the right of the holders of the capital
          stock of the Company to subscribe  therefor and provided that not more
          than 80,000 shares of Preferred  Stock of all classes and series shall
          be outstanding at any time."

     (3) That the authorized capital stock of said Bangor Hydro-Electric Company
is  neither  increased  nor  decreased  by the  aforesaid  votes  adopted by the
Company's stockholders in the manner hereinbefore set forth.

     IN  WITNESS  WHEREOF  said  Bangor  Hydro-Electric  Company  has caused its
corporate  seal to be hereunto  affixed and this  certificate  to be executed by
Edward M. Graham, its President, duly authorized hereunto this 17th day of June,
1946.

                                            BANGOR HYDRO-ELECTRIC COMPANY



                                            By \ss\ Edward M. Graham
                                                      President


                                 STATE OF MAINE

Penobscot, ss.                                                     June 17, 1946

     I, Eugene M. Dole, Clerk of Bangor Hydro-Electric  Company,  hereby certify
that the  statements  contained  in the  foregoing  certificate  of said Company
executed by Edward M. Graham, its President, are true.

                                              \ss\ Eugene M. Dole, Clerk {SEAL}


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                        Reclassification of capital stock

                                    103--240






                                 STATE OF MAINE

                          Office of Secretary of State

                             Augusta, June 20, 1946

                          Received and filed this day.

                           ATTEST:

                               SECRETARY OF STATE

                        Recorded Vol. 27, Pages 101 & 102


<PAGE>



     I,  EUGENE  M.  DOLE,  Clerk  of  Bangor  Hydro-Electric  Company,  a Maine
corporation  having its  principal  place of business at Bangor,  Maine,  hereby
certify  that the Annual  Meeting of the  Stockholders  of said Company was duly
called,  legally  convened  and held on February  14, 1950 at ten o'clock in the
forenoon,  at the  principal  offices of said  Company  at No. 33 State  Street,
Bangor,  Maine, in accordance with said Company's By-Laws and in accordance with
the laws of the State of Maine;  that at said meeting,  by a vote representing a
majority of the voting power of said Company's outstanding capital stock, it was
among other  matters,  voted to increase the  authorized  capital  stock of said
Company by  $5,000,000,  such  increase to be  represented  by 20,000  shares of
Preferred  Stock of the par value of $100  each,  and  200,000  shares of Common
Stock of the par value of $15  each,  so that the  total  amount  of  authorized
capital stock of said Company will be $17,500,000, represented by 100,000 shares
of  Preferred  Stock of the par value of $100 each and 500,000  shares of Common
Stock  of the  par  value  of $15  each;  that  at  said  meeting  and by a vote
representing  a  majority  of the  voting  power of said  Company's  outstanding
Capital Stock, it was further voted that subject to  reclassification  hereafter
upon retirement by redemption or otherwise,  the Company's "4% Preferred  Stock,
Series A," shall  presently  consist  of 17,500  such  shares,  being the number
thereof now outstanding,  and that the "4% Preferred Stock, Series B," be and it
is hereby eliminated as a class of authorized but unissued Preferred Stock.

     I further  certify  that notice of the proposed  increase in the  Company's
authorized  capital stock and changes in capital structure was duly given in the
call  for  said  meeting;  that  the  text of the  resolutions  relating  to the
aforesaid  increase and changes in capital structure,  affirmatively  acted upon
and adopted at said meeting by stockholders' on record,  representing a majority
of the voting power of the Company's outstanding capital stock is as follows:

               RESOLVED,   that  the  Company's   authorized  capital  stock  be
          increased by  $5,000,000,  such increase to be  represented  by 20,000
          shares of  Preferred  Stock of the par value of $100 each and  200,000
          shares of Common Stock of the par value of $15 each, so that the total
          amount of authorized capital stock of this Company will be $17,500,000
          represented by 100,000  shares of Preferred  Stock of the par value of
          $100 each and 500,000  shares of Common  Stock of the par value of $15
          each.

               RESOLVED,   that  subject  to  reclassification   hereafter  upon
          retirement  by  redemption  or  otherwise,  the Company's 4% Preferred
          Stock, Series A, shall presently consist of 17,500 such shares,  being
          the number thereof now outstanding,  and that the "4% Preferred Stock,
          Series B," be and it is hereby eliminated as a class of authorized but
          unissued preferred stock.

<PAGE>

               RESOLVED,  that the officers of this Company,  or any one or more
          of them, be and they hereby are authorized and directed to make, sign,
          verify  and  acknowledge  in behalf  of this  Company,  a  certificate
          setting  forth the  foregoing  changes with respect to the increase of
          the  authorized  capital  stock  of  this  Company  and to  file  such
          certificate  within the time and in the manner required by statute and
          to do all other acts and  things  that may be  necessary  or proper to
          carry  into  effect  the  foregoing  resolutions,  or any of them,  in
          compliance with the laws of the State of Maine.

     IN WITNESS WHEREOF,  I have hereunto executed the foregoing  certificate in
my capacity as Clerk of Bangor Hydro-Electric  Company, this twenty-first day of
February, 1950.

                               \ss\ Eugene M. Dole
                               Clerk of Bangor Hydro-Electric Company



                                 STATE OF MAINE

Penobscot, ss.                                                February 21, 1950.

     Personally  appeared the above named Eugene M. Dole, and made oath that the
statements contained in the above certificate by him subscribed are true.

         Before me,
                                 \ss\ Albert C. Blanchard  {SEAL}
                                                   Notary Public


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                            Increase in Capital Stock

                                     103-240







                                 STATE OF MAINE

                          Office of Secretary of State

                           Augusta, February 28, 1950

                          Received and Filed this day.

                                      \ss\
                               SECRETARY OF STATE

                       Recorded: Vol. 29, Pages 349 & 350.


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

               Certificate of decrease in par value of authorized  Common Stock,
               increase  in  authorized  number of shares of Common  Stock,  and
               By-Law amendments relating thereto and to preemptive rights.

     I, Albert C. Blanchard,  Clerk of Bangor  Hydro-Electric  Company,  a Maine
corporation  duly  organized  and  existing  according  to law  and  having  its
principal  place of business  at Bangor,  County of  Penobscot,  State of Maine,
hereby certify as follows:

     1. That the Annual Meeting of the Stockholders of said Company was duly and
regularly  convened and held in accordance  with the By-Laws of said Company and
according  to law at the  principal  office of said  Company at 31 Main  Street,
Bangor,  Maine of May 9, 1961 at ten o'clock in the forenoon,  Eastern  Daylight
Time, at which meeting stockholders  representing a majority of the voting power
of the Company's capital stock entitled to be voted thereat,  to wit, holders of
117,462 1/4 votes, out of a total of 139,732 1/2 authorized  votes, were present
in person or represented by proxy.

     2. That at said  meeting  117,391  votes,  representing  a majority  of the
voting power of said Company's authorized and issued capital stock, were cast in
favor of the adoption of the  following  resolution by  stockholders  present in
person or represented by proxy, viz:

         RESOLVED:

               (a) That the  authorized  Common  Stock of Bangor  Hydro-Electric
          Company,  now  consisting of 500,000 shares of the par value of $15.00
          each,  be  increased  to  1,500,000  shares of Common Stock of the par
          value of $5.00 each.

               (b) That the 369,570 shares of the Company's  Common Stock of the
          par value of $15.00 each, presently issued and outstanding, be changed
          into 1,108,710  shares of Common Stock of the par value of $5.00 each,
          on the basis of the issuance of two additional  shares of Common Stock
          of the par  value  of $5.00  each in  respect  of each of the  369,570
          shares of Common Stock presently issued and outstanding.

               (c) That  Section 1 of Article XI of the  Company's  By-Laws,  as
          amended, be and the same is hereby further amended to read as follows:

               Section 1. The  authorized  capital stock of the Company shall be
          $17,500,000  represented by 100,000  shares of Preferred  Stock of the
          par value of $100.00 each and 1,500,000  shares of Common Stock of the
          par value of $5.00 each.

<PAGE>


               (d) That Section 5 of Article III of the  Company's  By-Laws,  as
          amended, be and the same is hereby further amended to read as follows:

               Section  5.  Stockholders  entitled  to  vote at any  meeting  of
          stockholders  may vote  either in person or by proxy  granted not more
          than sixty days before the  meeting,  the date of which shall be named
          therein, and said proxies shall not be valid after a final adjournment
          thereof.  Stockholders  may also be  represented by a general power of
          attorney produced at the meeting and valid until it is revoked. At any
          meeting of stockholders,  each holder of Common Stock entitled to vote
          thereat shall be entitled to cast one-twelfth of a vote for each share
          of Common Stock held,  and each holder of Preferred  Stock entitled to
          vote thereat shall be entitled to cast one vote for each share of such
          Preferred  Stock held.  Except as the Board of Directors may otherwise
          fix and  determine  in the By-Laws with respect to any class or series
          of Preferred  Stock having special  voting  powers,  a majority of the
          total votes cast at any meeting of  stockholders  shall be  sufficient
          for the  adoption  or  rejection  of any  question  presented,  unless
          otherwise provided by law.

     3. That the authorized  capital stock of Bangor  Hydro-Electric  Company is
neither increased nor decreased by the adoption of the foregoing resolution.

     4. That notice of the proposed  action upon and with respect to each of the
matters  set forth in the  foregoing  resolution  was duly given in the call for
said meeting.

     5. That at said meeting the  following  resolution  relating to  preemptive
rights was adopted by  stockholders  having a right to vote  thereat,  by a vote
representing 99.9% of the shares present of represented at the meeting,  to wit,
by 117,338 1/4 votes, out of 117,462 1/2 votes authorized to be cast:

          RESOLVED:

               That  Section  7 of  Article  XI of  the  Company's  By-Laws,  as
          amended, be and the same is hereby repealed, and the following enacted
          in place thereof:

               Section 7. The Board of Directors, by resolution adopted prior to
          the issue of any stock having voting rights,  shall determine  whether
          the  holders of any of the  classes or series of the  Preferred  Stock
          and/or the  holders  of the Common  Stock may have or may not have the
          preemptive  right to subscribe for and take shares of such stock so to
          be  issued.  Such  resolution  shall  be  set  forth  in  full  in the
          Prospectus  relating to such issue, and, except to the extent that the
          Board of  Directors  shall  determine as above  provided,  no right to

<PAGE>


          subscribe for or to take any stock,  whether  Preferred or Common,  at
          any time issued by the Company shall  appertain to any of the stock of
          this Company.

     6. That notice of the proposed action  relating to said  preemptive  rights
was duly given in the call for said meeting.

     7. That at said  meeting,  upon motion duly made and seconded it was VOTED,
that the Clerk of this  Company or any one or more of its  officers  be and they
hereby are  authorized  and directed to make,  sign and verify in behalf of this
Company,  a certificate  setting forth the action taken by the  stockholders  of
Bangor  Hydro-Electric  Company upon and with respect to each of the matters set
forth in the foregoing resolutions and to file such certificate in the office of
the Secretary of State within the time and in the manner required by statute and
to do all other acts and things  that may be  necessary  or proper to carry into
effect the foregoing  resolutions or either of them, in compliance with the laws
of the State of Maine.

     IN WITNESS WHEREOF,  I have hereunto executed the foregoing  certificate in
my capacity as Clerk of Bangor  Hydro-Electric  Company and in its behalf,  this
ninth day of May, 1961.

                                         \ss\ Albert C. Blanchard
                                Clerk of Bangor Hydro-Electric Company



                                 STATE OF MAINE

Penobscot, ss.                                                       May 9, 1961

     Personally  appeared the above named Albert C.  Blanchard,  Clerk of Bangor
Hydro-Electric Company, and made oath that the statements contained in the above
certificate by him subscribed in my presence are true.

                                    Before me,

                                                     \ss\ Earle R. Webster
                                                     Justice of the Peace


<PAGE>





                          BANGOR HYDRO-ELECTRIC COMPANY

                             Change in Capital Stock

                                     103-240






                                 STATE OF MAINE

                          Office of Secretary of State

                              Augusta, May 28, 1961

                           Received and Filed this day.

            \ss\
            SECRETARY OF STATE

                          Recorded: Vol. 43, Pages 1-4.


<PAGE>



                  CERTIFICATE RELATING TO CHANGE OF PURPOSES OF

                          BANGOR HYDRO-ELECTRIC COMPANY

                                    ---------

     Bangor  Hydro-Electric  Company, a corporation organized and existing under
the laws of the State of Maine,  and having its  principal  place of business at
Bangor, County of Penobscot, State of Maine, does hereby certify:

     (1) That a duly  called  and  legally  convened  meeting  of the  Company's
stockholders  was held at the  Company's  offices at Bangor,  Maine,  on May 11,
1971, at which meeting the holders of a majority of the company's  capital stock
entitled to vote, to wit,  holders of 110,903  votes,  out of a total of 139,732
6/12ths, authorized votes, were present in person or represented by proxy.

     (2) That at said meeting the  Company's  stockholders  present in person or
represented by proxy unanimously voted as follows:

     "VOTED,  That  the  following  words  be  added  to  Paragraph  (b)  of the
     Certificate  of  Organization,  'and at such other location or locations as
     are from time to time authorized under the Laws of the State of Maine',  so
     that said Paragraph will read as follows:

     '(b)  The  construction,  purchase,  acquisition,  ownership,  improvement,
     maintenance,  use or  operation  of plants and  properties  for the making,
     generating,  selling, distribution or supplying gas or electricity or both,
     for lighting,  heating,  manufacturing or mechanical purposes in the Cities
     of  Bangor,  Brewer  and Old Town and the  Towns  of  Milford,  Charleston,
     Corinth, Orono, Bradley,  Eddington,  Veazie, Lincoln, Winn,  Mattawamkeag,
     Glenburn, Enfield, Howland, Passadumkeag,  Orrington, Hermon and Hampden in
     the County of Penobscot, the City of Ellsworth and the Towns of Bar Harbor,
     Blue Hill, Brooklin,  Bucksport,  Dedham, Mount Desert, Sedgwick, Southwest
     Harbor,  Surry  and  Trenton  in the  County of  Hancock,  and the Towns of
     Machias,  East Machias and  Machiasport in the County of Washington and any
     other  Cities  or  Towns  in  said  Counties  of  Penobscot,  Hancock,  and
     Washington,  in the State of Maine, and at such other location or locations
     as from time to time authorized under the Laws of the State of Maine..."

     "Further  VOTED,  That the  present  paragraph  (c) of the  Certificate  of
     Organization which reads as follows:

     '(c) In  connection  with the foregoing the Company shall have and exercise
     all of the rights,  privileges  and  franchises  of the  corporation  whose
     rights,  privileges and franchises it acquires and all powers  conferred by
     the  Laws of the  State  of Maine on  public  utility  corporations  of the
     character of the corporations whose properties are acquired.'

<PAGE>


     Be repealed and the following paragraph be substituted therefor:

     '(c) In addition to the foregoing,  the Company shall have and exercise all
     of the rights,  privileges and  franchises it has  heretofore  acquired and
     shall hereafter acquire and all powers and authority conferred upon gas/and
     or electric public utility corporations by the Laws of the State of Maine."

     IN WITNESS  WHEREOF,  said  Bangor  Hydro-Electric  Company  has caused its
corporate  seal to be hereunto  affixed and this  Certificate  to be executed by
R.N.  Haskell,  its President,  duly  authorized  hereunto this 18th day of May,
1971.

                                        BANGOR HYDRO-ELECTRIC COMPANY

                                        By \ss\ R.N. Haskell, President




                                 STATE OF MAINE

Penobscot, ss:                                                     May 18, 1971.

     I, Albert Chick Blanchard,  Clerk of Bangor Hydro-Electric  Company, hereby
certify that the  statements  contained  in the  foregoing  Certificate  of said
Company executed by R.N. Haskell, its President, are true.

                                             \ss\ Albert Chick Blanchard, Clerk

                                 STATE OF MAINE

Attorney General's Office                                          May 21, 1971

     I hereby certify that I have examined the foregoing  certificate,  the same
is properly drawn and signed, and is conformable to the constitution and laws of
the State,  and I am satisfied  that such changes are made in good faith and not
for the purpose of avoiding payment of fees or taxes to the State.

                                      \ss\
                                       Deputy Attorney General


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                               Change of Purposes

                                     103-240





                                 STATE OF MAINE

                          Office of Secretary of State

                              Augusta, May 28, 1971

                          Received and Filed this day.

         \ss\
          DEPUTY, SECRETARY OF STATE

                        Recorded: Vol. 68, Pages 104-106.


<PAGE>



For use by the
Secretary of State

                       STATE OF MAINE                           MAINE
File No. 103-240      CHANGE OF CLERK or                 SECRETARY OF STATE
Fee Paid $5.00        REGISTERED OFFICE                         FILED
C.B.     76C18           OR BOTH OF                          July 3, 1975
Date:    7-7-75  BANGOR HYDRO-ELECTRIC COMPANY           Doris Hayes, Agent


     Pursuant to 13-A MRSA 304 the  undersigned  corporation  advises you of the
following change(s):

     FIRST:  The name and business address of its present Clerk are Albert Chick
Blanchard, Esq., 27 State Street, Bangor, Maine 04401.

     SECOND: The name and business address of its successor Clerk* are Robert S.
Briggs, Esq., One Merchants Plaza, Bangor, Maine 04401.

     THIRD: Upon a change in Clerk this must be completed:

         (X)      Such change was  authorized by the Board of Directors
                  and the power to make such change is not  reserved to
                  the shareholders by the articles or the bylaws.

         ( )      Such change was authorized by the shareholders.
                 (Complete the following)

                        I certify that I have custody of the minutes
                        showing    the    above    action   by   the
                        shareholders.

                             ---------------------------------------
                             Clerk, secretary or assistant secretary


<PAGE>



Dated:  July 1, 1975

         Legibly print or       Bangor Hydro-Electric Company
         type name and
         capacity of all        By \ss\ Robert S. Briggs
         signers                     *Robert S. Briggs, Clerk
         13-A MRSA 104          (type or print name and capacity)
- ---------------------------------
         *The  Clerk of a  domestic  corporation  must be a person  resident  in
Maine.  The  business  address of the Clerk and the  registered  office  must be
identical.

    **The name of the  corporation  should be typed,  and the  document  must be
signed by (1) the Clerk or (2) by the  President  or  vice-president  and by the
Secretary  or an  assistant  secretary  or such other  officer as the bylaws may
designate as a second  certifying  officer of (3) if there are no such officers,
then by a majority of the Directors or by such Directors as may be designated by
a majority  of  Directors  then in office or (4) if there are no such  Directors
then by the holders,  or such of them as may be  designated  by the holders,  of
record of a majority of all  outstanding  shares entitled to vote thereon or (5)
by the holders of all of the outstanding shares of the corporation.

FORM NO. MBCA-3


<PAGE>



For use by the
Secretary of State

                              STATE OF MAINE                   MAINE
File No. 103-240               STATEMENT OF              SECRETARY OF STATE
Fee Paid $5.00           RESOLUTION ESTABLISHING               FILED
C.B.     442               SERIES OF SHARES OF             January 8, 1976
Date:   1-12-76      BANGOR HYDRO-ELECTRIC COMPANY        Doris Hayes, Agent

Pursuant to 13-A MRSA 503, the undersigned corporation submits the following for
the purpose of  establishing  and  designating a series of shares and fixing and
determining the relative rights and preferences thereof:

     FIRST: The attached resolution  establishing and designating the series and
fixing and  determining  the relative  rights and  preferences  thereof was duly
adopted by the Board of Directors on December 15, 1975.

     SECOND: The By-Laws expressly grant to the Board of Directors the authority
to make such a  resolution.  This  provision of the By-Laws was in effect on and
prior to December 31, 1971,  has not been  amended or  repealed,  and  therefore
continues to be effective pursuant to 13-A MRSA 103 (7).

     THIRD: The address of the registered office of the corporation is:

                     1 Merchants Plaza, Bangor, Maine 04401

Dated:  January 6, 1976

         Legibly print or         BANGOR HYDRO-ELECTRIC COMPANY
         type name and
         capacity of all          By \ss\ Robert S. Briggs
         signers                       Robert S. Briggs, Esq.
         13-A MRSA 104                        Clerk

- ---------------------------------
* The name of the corporation  should be typed,  and the document must be signed
by  (1)  the  Clerk  or  (2) by the  President  or a  vice-president  and by the
Secretary  or an  assistant  secretary  or such other  officer as the bylaws may
designate as a second  certifying  officer or (3) if there are no such officers,
then by a  majority  of  Directors  then in  office  or (4) if there are no such
Directors,  then by the  holders,  or such of them as may be  designated  by the
holders,  of record of a majority  of all  outstanding  shares  entitled to vote
thereon  or  (5) by  the  holders  of  all  of  the  outstanding  shares  of the
corporation.

FORM NO. MBCA-7


<PAGE>



     Upon motion duly made and seconded, the following preambles and resolutions
were unanimously adopted:

     WHEREAS  the  Company  desires to secure  additional  funds for its general
corporate purposes; and

     WHEREAS 52,660 of the 100,000 shares of the Company's  authorized Preferred
Stock, $100 Par Value, are presently unissued,  and may be issued in one or more
classes or series  with such  dividends,  designations,  terms,  conditions  and
restrictions  as  may be  determined  in  their  discretion  by  this  Board  of
Directors, and

     WHEREAS in the  judgement  of this Board of  Directors  it is  advisable to
secure such  additional  funds by authorizing  the issue of 10,000 shares of the
Company's authorized but unissued shares of Preferred Stock, $100 Par Value, and

     WHEREAS the officers of the Company have consulted with Smith, Barney & Co.
Incorporated of New York  concerning the most desirable  method of offering such
additional  Preferred  Stock,  and have  determined  that it  should  be sold at
private sale to a limited number of institutional investors;

     NOW THEREFORE BE IT RESOLVED that the Company  hereby  creates a new series
of Preferred Stock to be designated as the 10 1/2% Preferred  Stock,  consisting
of 10,000 shares of the authorized but unissued Preferred Stock, $100 Par Value,
of the Company; and

     FURTHER  RESOLVED that the 10 1/2% Preferred Stock be sold at not less than
par value, plus accrued dividends if any, at private sale to a limited number of
institutional investors, the exact number and the more particular identification
of such  investors to be determined  by the President or the Vice  President and
Treasurer of the Company, or either of them, and

     FURTHER RESOLVED that pursuant to Article XI of the By-Laws of the Company,
said By-Laws be amended in order to set forth the dividend,  designation, terms,
conditions and restrictions relative to the 10 1/2% Preferred Stock, as follows:

     (a) The first  paragraph of Article XI, Section 2 is hereby amended to read
     as follows:

          The  100,000  shares  of  Preferred   Stock  shall  be  available  for
          classification  and  reclassification  in different  classes or series
          from time to time.  Subject to  reclassification  upon  retirement  by
          redemption  or otherwise,  25,000 shares shall be 7% Preferred  Stock,
          17,500  shares  shall be 4%  Preferred  Stock,  Series A, 4,840 shares
          shall be 4 1/4%  Preferred  Stock and 10,000  shares  shall be 10 1/2%
          Preferred Stock.

     (b) The first line of the second paragraph of Article XI,

<PAGE>

     Section 2, is hereby amended to read as follows:

          The remaining shares, 42,660 in number, plus additional shares....

     (c)  Article  XI,  Section 5, is hereby  amended by  deleting  the same and
     substituting therefore the following:

          Section 5. In case of liquidation  or dissolution of the Company,  the
          assets,  irrespective  of whether they shall consist of capital assets
          or accumulated earnings,  shall be distributed as follows: All holders
          of  Preferred  Stock shall be entitled to be paid in full both the par
          amount of their  shares and an amount  equal to the  unpaid  dividends
          accumulated  and accrued thereon and, in case of the 10 1/2% Preferred
          Stock,  if such  liquidation or  dissolution  is voluntary,  an amount
          equal to the  premium  specified  in Section  6(a),  before any amount
          shall be paid to the  holders  of the  Common  Stock,  and in case the
          assets  shall not be  sufficient  to pay in full all of the  Preferred
          Stock  and  dividends   accumulated  and  accrued  thereon,  then  the
          principal  thereof shall first be paid and a pro rata  distribution of
          any  excess  shall be made on account  of the  accumulated  dividends,
          based on the total amount of unpaid dividends  accumulated and accrued
          thereon, but after such payment to the holders of the Preferred Stock,
          the  remaining  assets and funds  shall be paid to the  holders of the
          Common Stock, according to their respective shares.

     (d)  Article  XI,  Section 4, is hereby  amended by  deleting  the same and
     substituting therefor the following:

          Section 4(a). If any dividend is declared on the Preferred  Stock at a
          rate less than  sufficient to pay the full dividend  called for by all
          the Preferred  Stock  outstanding,  the  distribution of the dividends
          shall be pro  rata,  so that all  holders  of  Preferred  Stock  shall
          receive the same  proportion of the full dividend  called for by their
          stock.

               (b) If at any time dividends payable on the Preferred Stock shall
          be in  default  in an  amount  equal to or  exceeding  four  quarterly
          dividend  payments,  then, until all dividends so in default have been
          paid or declared and set apart for  payment,  the holders of shares of
          Preferred Stock of each and every class or series,  voting as a single
          class, shall be entitled, at any annual meeting during which dividends
          are so in default, to elect two Directors.

     (e)  Article  XI.  Section  6  is  hereby  amended  by  deleting  same  and
     substituting therefor the following:

<PAGE>


          Section 6. (a) The 7% Preferred Stock shall bear dividends at the rate
          of 7% per annum and shall not be redeemable.  The 4% Preferred  Stock,
          Series A, shall bear  dividends  at the rate of 4% per annum and shall
          be  redeemable  at 112% if called on or prior to October  1, 1950;  at
          111% thereafter  through October 1, 1951; and after October 1, 1951 at
          110%, plus accrued dividends in every case. The 4 1/4% Preferred Stock
          shall  bear  dividends  at the rate of 4 1/4% per  annum  and shall be
          redeemable  at 102% if  called on or prior to April 1,  1954;  at 101%
          thereafter  through  April 1, 1959;  and after  April 1, 1959 at 100%,
          plus accrued  dividends  in every case.  The 10 1/2%  Preferred  Stock
          shall bear dividends at the rate of 10 1/2% Preferred Stock shall bear
          dividends at the rate of 10 1/2% per annum and shall be  redeemable at
          the option of the Company as follows:

                At 110.5% if called on or prior to
                December  31,  1976;  at  109.8%  thereafter  through
                December  31,  1977;  at  109.1%  thereafter  through
                December  31,  1978;  at  108.4%  thereafter  through
                December  31,  1979;  at  107.7%  thereafter  through
                December  31,  1980;  at  107.0%  thereafter  through
                December  31,  1981;  at  106.3%  thereafter  through
                December  31,  1982;  at  105.6%  thereafter  through
                December  31,  1983;  at  104.9%  thereafter  through
                December  31,  1984;  at  104.2%  thereafter  through
                December  31,  1985;  at  103.5%  thereafter  through
                December  31,  1986;  at  102.8%  thereafter  through
                December  31,  1987;  at  102.1%  thereafter  through
                December  31,  1988;  at  101.4%  thereafter  through
                December  31,  1989;  at  100.7%  thereafter  through
                December  31,  1990;  and after  December 31, 1990 at
                100%, plus accrued dividends in every case;

          provided, however, that except as provided in Section 6 (b) below, the
          Company  may not redeem any of the 10 1/2%  Preferred  Stock  prior to
          December 31, 1985, as a part of, or in anticipation  of, any refunding
          operation involving the application,  directly or indirectly, of money
          borrowed  by the  Company  having  an  interest  cost  (calculated  in
          accordance with generally accepted financial practice), or through the
          issuance of preferred  stock  ranking  equally with or prior to the 10
          1/2% Preferred Stock having a dividend cost  (calculated as aforesaid)
          of less than 10 1/2% per annum.  Preferred Stock, which is the subject
          of  redemption,  may be called  in whole or in part upon any  dividend
          date by  appropriate  resolution  adopted by the Board of Directors at
          any  regular or  special  meeting  upon 60 days'  notice to the owners
          thereof  of record  to be given by  mailing  copies  of the  notice of

<PAGE>


          redemption,  postage  prepaid,  addressed  to  such  owners  at  their
          addresses  as shown on the books of the  Company.  If less than all of
          the outstanding shares of any class or series of Preferred Stock shall
          be  redeemed  at any  time,  the  stock  to be so  redeemed  shall  be
          determined  by lot,  in such  manner  as the  Board of  Directors  may
          determine  and  prescribe,  except  that  the  shares  of the 10  1/2%
          Preferred Stock to be redeemed may be determined by lot or pro rata or
          in such  other  manner as the Board of  Directors  may  determine  and
          prescribe.

               (b)  The 10  1/2%  Preferred  Stock  shall  also  be  subject  to
          redemption  through the operation of a sinking fund (herein called the
          Sinking  Fund) at the  redemption  price (the Sinking Fund  Redemption
          Price) of $100 per share plus an amount equal to the dividends accrued
          and unpaid  thereon to the redemption  date,  whether or not earned or
          declared.  For the purposes of the Sinking Fund, out of any net assets
          of  the  Company  legally  available  therefor  remaining  after  full
          cumulative  dividends upon all Preferred Stock then outstanding to the
          end of the current  dividend  period  therefor shall have been paid or
          declared and set apart for payment the Company shall set aside in cash
          annually on  December 31 in each year  commencing  with  December  31,
          1981, an amount  sufficient  to redeem at the Sinking Fund  Redemption
          Price,  500 shares of the 10 1/2%  Preferred  Stock.  The Sinking Fund
          shall be  cumulative so that if on any such December 31 the net assets
          of the Company  legally  available  therefor shall be  insufficient to
          permit  any such  amount to be set aside in full,  or if for any other
          reason such amount  shall not have been set aside in full,  the amount
          of the deficiency shall be set aside, but without interest, before any
          dividend shall be paid or declared,  or any distribution  made, on any
          junior  shares or any junior  shares shall be  purchased,  redeemed or
          otherwise  acquired by the Company,  or any monies shall be paid to or
          set aside or made  available  for a sinking  fund for the  purchase or
          redemption of any junior shares.  Notwithstanding  the foregoing,  the
          Company  may at any time (1) pay  dividends  in  junior  shares or (2)
          purchase,  redeem or otherwise  acquire junior shares in exchange for,
          or out of the net cash  proceeds  from the  concurrent  sale of, other
          junior  shares.  As used herein,  the term "junior  shares" shall mean
          Common  Stock  or any  other  shares  ranking  junior  to the 10  1/2%
          Preferred   Stock  either  as  to   dividends  or  upon   liquidation,
          dissolution or winding up. Monies in the Sinking Fund shall be applied
          on  such  December  31 to the  redemption  of  shares  of the 10  1/2%
          Preferred  Stock.  The Company shall,  prior to each such Sinking Fund
          redemption,  give notice of redemption of such number of shares of the
          10 1/2%  Preferred  Stock as may be  required  to satisfy  the Sinking
          Fund.

<PAGE>

               (c) In addition, the Company shall have the right, at its option,
          to redeem at the Sinking  Fund  Redemption  Price on December 31, 1981
          and on any December 31 thereafter  an  additional  number of shares of
          the 10 1/2% Preferred  Stock up to but not exceeding 500 shares.  This
          right  shall not be  cumulative  and shall be lost to the  extent  not
          exercised on any such December 31. Any  redemption of shares of the 10
          1/2% Preferred  Stock pursuant to this Section 6 (c) shall not operate
          to reduce  the number of shares  which the  Company  is  obligated  to
          redeem pursuant to Section 6 (b).

A true copy.

         Attest:  \ss\ Robert S. Briggs
                  Robert S. Briggs, Clerk

EXHIBIT A


<PAGE>



For use by the
Secretary of State

                           STATE OF MAINE                    MAINE
File No. 103-240            STATEMENT OF               SECRETARY OF STATE
Fee Paid $5.00         RESOLUTION REVOKING THE               FILED
C.B.     619      ESTABLISHMENT OF SERIES OF             March 31, 1976
Date:   X-X-76               SERIES OF                 Doris Hayes, Agent
                  BANGOR HYDRO-ELECTRIC COMPANY

Pursuant to 13-A MRSA 503, the undersigned corporation submits the following for
the purpose of revoking the establishment and designation of a series of shares.

     FIRST: The attached  resolution  revoking the establishment and designation
of the Bangor Hydro-Electric Company 10 1/2% Preferred Stock was duly adopted by
the Board of Directors on February 2, 1976.

     SECOND:  Authority  is  vested  in the  Board of  Directors  to make such a
resolution  by virtue of their  authority to establish  and designate the series
from the authorized but unissued  preferred stock of the Company,  and by virtue
of the fact that said 10 1/2% preferred stock has not and will not be issued.

     THIRD:  the  address  of the  registered  office  of the  Company  is:

                    One Merchants Plaza, Bangor, Maine 04401

Dated:  March 24, 1976

         Legibly print or              Bangor Hydro-Electric Company
         type name and
         capacity of all               By \ss\ Robert S. Briggs
         signers                            *Robert S. Briggs, Clerk
         13-A MRSA 104
- ---------------------------------
* The name of the corporation  should be typed,  and the document must be signed
by  (1)  the  Clerk  or  (2) by the  President  of a  vice-president  and by the
Secretary  or an assistant  secretary  or such other  officer as the by-laws may
designate as a second  certifying  officer or (3) if there are no such officers,
then by a  majority  of  Directors  then in  office  or (4) if there are no such
Directors,  then by the  holders,  or such of them as may be  designated  by the
holders,  of record of a majority  of all  outstanding  shares  entitled to vote
thereon  or  (5) by  the  holders  of  all  of  the  outstanding  shares  of the
corporation.

FORM NO. MBCA-7


<PAGE>



     Upon motion duly made and seconded, the following preambles and resolutions
were unanimously adopted:

     WHEREAS the Board of  Directors  by its actions on November 17 and December
15,  1975,   adopted   resolutions  and  took  other  actions  relevant  to  the
establishment  of a new series of Preferred Stock from the Company's  authorized
but unissued shares, which series is known as the 10 1/2% Preferred Stock, and

     WHEREAS  said  shares  of the 10 1/2%  Preferred  Stock  were to be sold at
private sale to a limited number of institutional investors, and

     WHEREAS the Company  had taken all steps  necessary  in order to effect the
issuance of said shares,  including  the  obtaining  of approval  from the Maine
Public Utilities  Commission by its Order dated January 15, 1976, and the filing
with the Secretary of State of Maine of a Statement of  Resolution  Establishing
Series of Shares, on January 8, 1976, and

     WHEREAS  a  final   agreement   between  the   Company  and  the   proposed
institutional  purchasers was not reached and therefore no shares of the 10 1/2%
Preferred Stock were issued, and

     WHEREAS the Company has accordingly  withdrawn its offer to sell the shares
of the 10 1/2%  Preferred  Stock to any party,  and has received  from the Maine
Public  Utilities  Commission its  Supplemental  Decree revoking its prior order
approving the issuance of shares of the 10 1/2% Preferred Stock, and

     WHEREAS  the  Company  desires  to  return  said  shares  to the  status of
undesignated authorized by unissued shares of Preferred Stock of the Company;

     NOW THEREFORE BE IT RESOLVED that the Company hereby revokes,  rescinds and
declares  of no effect so much of those  resolutions  adopted  by this  Board of
Directors at its meetings  held on November 17 and December 15, 1975 as respects
the  creation  of a new  series of  Preferred  Stock  designated  as the 10 1/2%
Preferred Stock, and the  establishment of the terms,  conditions,  restrictions
and dividends relative to said 10 1/2% Preferred Stock; and

     FURTHER  RESOLVED  that the  officers  of the Company  are  authorized  and
instructed  to execute all  documents  and reports and take such other action as
may be necessary to rescind the  establishment  of said 10 1/2% Preferred Stock,
with the same effect and to the same extent as if said 10 1/2%  Preferred  Stock
and never been established.

         A true copy.

                  Attest:  \ss\ Robert S. Briggs, Clerk


<PAGE>



For use by the
Secretary of State

                         STATE OF MAINE                       MAINE
File No. 103-240          STATEMENT OF                 SECRETARY OF STATE
Fee Paid $5.00             RESOLUTION                         FILED
C.B.     717           ESTABLISHING SERIES                 May 12, 1976
Date:   X-X-76            OF SHARES OF                  Doris Hayes, Agent
                  BANGOR HYDRO-ELECTRIC COMPANY

Pursuant to 13-A MRSA 503, the undersigned corporation submits the following for
the purpose of  establishing  and  designating a series of shares and fixing and
determining the relative rights and preferences thereof:

     FIRST: The attached resolution  establishing and designating the series and
fixing and  determining  the relative  rights and  preferences  thereof was duly
adopted by the Board of Directors on May 11, 1976.

     SECOND: The By-Laws expressly grant to the Board of Directors the authority
to make such a  resolution.  This  provision of the By-Laws was in effect on and
prior to December 31, 1971,  has not been  amended or  repealed,  and  therefore
continues to be effective pursuant to 13-A MRSA 103 (7).

     THIRD: The address of the registered office of the corporation is:

                     1 Merchants Plaza, Bangor, Maine 04401

Dated:  May 11, 1976

         Legibly print or  Bangor Hydro-Electric Company
         type name and
         capacity of all   By \ss\ Robert S. Briggs
         signers                Robert S. Briggs, Clerk
         13-A MRSA 104
- ---------------------------------
* The name of the corporation  should be typed,  and the document must be signed
by  (1)  the  Clerk  or  (2) by the  President  of a  vice-president  and by the
Secretary  or an assistant  secretary  or such other  officer as the by-laws may
designate as a second  certifying  officer or (3) if there are no such officers,
then by a  majority  of  Directors  then in  office  or (4) if there are no such
Directors,  then by the  holders,  or such of them as may be  designated  by the
holders,  of record of a majority  of all  outstanding  shares  entitled to vote
thereon  or  (5) by  the  holders  of  all  of  the  outstanding  shares  of the
corporation.

FORM NO. MBCA-7


<PAGE>



     WHEREAS  the  Company  desires to secure  additional  funds for its general
corporate purposes, including, among other things, capital expenditures, and

     WHEREAS 52,660 of the 100,000 shares of the Company's  authorized Preferred
Stock $100 par value, are presently  unissued,  and may be issued in one or more
classes or series  with such  dividends,  designations,  terms,  conditions  and
restrictions  as  may be  determined  in  their  discretion  by  this  Board  of
Directors, and

     WHEREAS in the  judgment  of this Board of  Directors  it is  advisable  to
secure such  additional  funds by authorizing  the issue of 20,000 shares of the
Company's authorized but unissued shares of Preferred Stock, $100 par value, and

     WHEREAS the  officers  of the Company  have  consulted  with Smith  Barney,
Harris Upham & Co. Incorporated of New York concerning the most desirable method
of offering such additional  Preferred Stock, and have determined that it should
be sold at private sale to a limited number of institutional investors;

     NOW THEREFORE BE IT RESOLVED that the Company  hereby  creates a new series
of Preferred Stock to be designated as the 9 1/4% Preferred Stock, consisting of
20,000 shares of the authorized but unissued Preferred Stock, $100 par value, of
the Company; and

     FURTHER  RESOLVED that the 9 1/4% Preferred  Stock be sold at not less than
par value, plus accrued dividends if any, at private sale to a limited number of
institutional investors, the exact number and the more particular identification
of such  investors  to be  determined  by the  Chairman  of the  Board and Chief
Executive officer or the President of the Company, or either of them,

     FURTHER  RESOLVED  that the  pursuant  to Article XI of the  By-Laws of the
Company,   said  By-Laws  be  amended  in  order  to  set  forth  the  dividend,
designation, terms, conditions and restrictions relative to the 9 1/4% Preferred
Stock, as follows:

     (a) The first  paragraph of Article XI, Section 2 is hereby amended to read
     as follows:

               Section  2.  The  100,000  shares  of  Preferred  Stock  shall be
          available for classification and reclassification in different classes
          or  series  from  time  to  time.  Subject  to  reclassification  upon
          retirement  by  redemption  or  otherwise,  25,000  shares shall be 7%
          Preferred Stock,  17,500 shares shall be 4% Preferred Stock, Series A,
          4,840 shares shall be 4 1/4%  Preferred  Stock and 20,000 shares shall
          be 9 1/4% Preferred Stock.

     (b) The first line of the second  paragraph  of Article  XI,  Section 2, is
     hereby amended to read as follows:


<PAGE>

               The  remaining   shares,   32,660  in  number,   plus  additional
          shares....

     (c)  Article  XI,  Section 4 is hereby  amended  by  deleting  the same and
     substituting therefor the following:

               Section 4. (a) If any dividend is declared on the Preferred Stock
          at a rate less than  sufficient to pay the full dividend called for by
          all the Preferred Stock outstanding,  the distribution of the dividend
          shall be pro  rata,  so that all  holders  of  Preferred  Stock  shall
          receive the same  proportion of the full dividend  called for by their
          stock.

               (b) If at any time dividends payable on the Preferred Stock shall
          be in  default  in an  amount  equal to or  exceeding  four  quarterly
          dividend  payments,  or if the Company shall fail to make any required
          sinking fund payment on the Preferred Stock, then, until all dividends
          or sinking fund  payments so in default have been paid or declared and
          set apart for  payment,  the holders of shares of  Preferred  Stock of
          each and every  class or series,  voting as a single  class,  shall be
          entitled,  at any annual  meeting  during  which  dividends  are so in
          default, to elect two Directors.

               (c) Notwithstanding the provisions of Section 5 of Article III of
          these By-Laws,  except as provided in paragraph (b) of this Section 4,
          the  holders of the 9 1/4%  Preferred  Stock  shall not be entitled to
          vote at any meeting of stockholders.

               (d) Article XI,  Section 5 is hereby amended by deleting the same
          and substituting therefore the following:

               Section 5. In case of  liquidation or dissolution of the Company,
          the  assets,  irrespective  of whether  they shall  consist of capital
          assets or accumulated  earnings,  shall be distributed as follows: All
          holders of Preferred  Stock shall be entitled to paid in full both the
          par amount of their shares and an amount equal to the unpaid dividends
          accumulated  and  accrued  thereon  and,  in  the  case  of the 9 1/4%
          Preferred stock, if such  liquidation or dissolution is voluntary,  an
          amount equal to the premium specified in Section 6(a) below before any
          amount shall be paid to the holders of the Common  Stock,  and in case
          the assets shall not be sufficient to pay in full all of the Preferred
          Stock  and  dividends   accumulated  and  accrued  thereon,  then  the
          principal  thereof shall first be paid and a pro rata  distribution of
          any  excess  shall be made on account  of the  accumulated  dividends,
          based on the total amount of unpaid dividends  accumulated and accrued
          thereon, but after such payment to the holders of the Preferred Stock,
          the  remaining  assets and funds  shall be paid to the  holders of the
          Common Stock, according to their respective shares.


<PAGE>

               (e) Article XI,  Section 6 is hereby amended by deleting the same
          and substituting therefor the following:

               Section 6. (a) The 7% Preferred Stock shall bear dividends at the
          rate of 7% per annum and shall  not be  redeemable.  The 4%  Preferred
          Stock,  Series A, shall bear dividends at the rate of 4% per annum and
          shall be  redeemable at 112% if called on or prior to October 1, 1950;
          at 111% thereafter  through October 1, 1951; and after October 1, 1951
          at 110%,  plus accrued  dividends in every case.  The 4 1/4% Preferred
          Stock shall bear  dividends  at the rate of 4 1/4% per annum and shall
          be  redeemable at 102% if called on or prior to April 1, 1954; at 101%
          thereafter  through  April 1, 1959;  and after  April 1, 1959 at 100%,
          plus accrued dividends in every case. The 9 1/4% Preferred Stock shall
          bear dividends at the rate of 9 1/4% per annum and shall be redeemable
          at the option of the Company as follows:

               At 109.25% if called on or prior to December 1, 1976;
               at 108.63% thereafter through December 1, 1977;
               at 108.01% thereafter through December 1, 1978;
               at 107.39% thereafter through December 1, 1979;
               at 106.77% thereafter through December 1, 1980;
               at 106.15% thereafter through December 1, 1981;
               at 105.53% thereafter through December 1, 1982;
               at 104.91% thereafter through December 1, 1983;
               at 104.29% thereafter through December 1, 1984;
               at 103.67% thereafter through December 1, 1985;
               at 103.05% thereafter through December 1, 1986;
               at 102.43% thereafter through December 1, 1987;
               at  101.81%  thereafter  through  December  1,  1988;
               at 101.19% thereafter through December 1, 1989;
               at 100.57% thereafter through December 1, 1990;
               and after  December  1, 1990 at 100% plus  accrued  dividends  in
               every case;

          provided,  however, that except as provided in Section 6(b) below, the
          Company  may not redeem  any of the 9 1/4%  Preferred  Stock  prior to
          December 1, 1986, as a part of, or in  anticipation  of, any refunding
          operation involving the application,  directly or indirectly, of money
          borrowed  by the  Company  having  an  interest  cost  (calculated  in
          accordance with generally accepted financial practice), or through the
          issuance of  preferred  stock  ranking  equally with or prior to the 9
          1/4% Preferred Stock having a dividend cost  (calculated as aforesaid)
          of less than 9 1/4% per annum.  Preferred Stock,  which is the subject
          of  redemption,  may be called  in whole or in part upon any  dividend
          date by  appropriate  resolution  adopted by the Board of Directors at
          any  regular or  special  meeting  upon 60 days'  notice to the owners
          thereof  of record  to be given by  mailing  copies  of the  notice of

<PAGE>


          redemption,  postage  prepaid,  addressed  to  such  owners  at  their
          addresses  as shown on the books of the  Company.  If less than all of
          the outstanding shares of any class or series of Preferred Stock shall
          be  redeemed  at any  time,  the  stock  to be so  redeemed  shall  be
          determined  by lot,  in such  manner  as the  Board of  Directors  may
          determine  and  prescribe,  except  that  the  shares  of  the 9  1/4%
          Preferred Stock to be redeemed may be determined by lot or pro rata or
          in such  other  manner as the Board of  Directors  may  determine  and
          prescribe.

     (b) The 9 1/4% Preferred Stock shall also be subject to redemption  through
the  operation  of a  sinking  fund  (herein  called  the  Sinking  Fund) at the
redemption  price (the Sinking Fund Redemption  Price) of $100 per share plus an
amount equal to the dividends accrued and unpaid thereon to the redemption date,
whether or not earned or declared.  For the purposes of the Sinking Fund, out of
any net assets of the Company legally  available  therefor  remaining after full
cumulative dividends upon all Preferred Stock then outstanding to the end of the
current  dividend period therefor shall have been paid or declared and set apart
for payment the Company  shall set aside in cash  annually on December 1 in each
year  commencing with December 1, 1982, an amount  sufficient to redeem,  at the
Sinking Fund Redemption  Price,  1,000 shares of the 9 1/4% Preferred Stock. The
Sinking  Fund  shall be  cumulative  so that if on any such  December  1 the net
assets of the Company legally available therefor shall be insufficient to permit
any such amount to be set aside in full,  or if for any other reason such amount
shall not have been set aside in full,  the  amount of  deficiency  shall be set
aside, but without interest,  before any dividend shall be paid or declared,  or
any  distribution  made,  on any  junior  shares or any junior  shares  shall be
purchased,  redeemed,  or otherwise acquired by the Company, or any monies shall
be paid to or set aside or made available for a sinking fund for the purchase or
redemption of any junior shares.  Notwithstanding the foregoing, the Company may
at any time (1) pay  dividends  in  junior  shares  or (2)  purchase,  redeem or
otherwise acquire junior shares in exchange for, or out of the net cash proceeds
from the  concurrent  sale of, other  junior  shares.  As used herein,  the term
"junior  shares" shall mean Common Stock or any other shares  ranking  junior to
the  9  1/4%  Preferred  Stock  either  as to  dividends  or  upon  liquidation,
dissolution  or winding up.  Monies in the Sinking Fund shall be applied on such
December  1 to the  redemption  of shares  of the 9 1/4%  Preferred  Stock.  The
Company  shall,  prior to each such  Sinking  Fund  redemption,  give  notice of
redemption  of such  number of shares  of the 9 1/4%  Preferred  Stock as may be
required to satisfy the Sinking Fund.

     (c) In addition, the Company shall have the right, at its option, to redeem
at the Sinking Fund  Redemption  Price on December 1, 1982 and on any December 1
thereafter an additional  number of shares of the 9 1/4%  Preferred  Stock up to
but not exceeding 1,000 shares.  This right shall not be cumulative and shall be

<PAGE>


lost to the extent not  exercised  on any such  December  1. Any  redemption  of
shares of the 9 1/4%  Preferred  Stock  pursuant to this  Section 6(c) shall not
operate to reduce the number of shares  which the Company is obligated to redeem
pursuant to Section 6(b).

         A true copy.

                  Attest: \ss\ Robert S. Briggs

                             Robert S. Briggs, Esq.
                                   Clerk


<PAGE>



For use by the
Secretary of State

                          STATE OF MAINE                 MAINE
File No. 103-240      ARTICLES OF AMENDMENT        SECRETARY OF STATE
Fee Paid $3750 - 10.  (Amendment by Share-               FILED
C.B.     664           holders Voting as              May 12, 1977
Date:    5-18-77       Separate Class) OF          Doris Hayes, Agent
                         BANGOR HYDRO-
                        ELECTRIC COMPANY
                    a Quasi-Public Corporation

Pursuant to 13-A MRSA 805 and 807,  the  undersigned  corporation  adopts  these
Articles of Amendment.

     FIRST:  As set out in detail in "THIRD",  one or more  classes of shares of
the corporation  were entitled to vote on the following  amendment as a separate
class.

     SECOND:  The amendment to the Articles of  Incorporation of the corporation
set out in Exhibit A attached hereto was adopted by the shareholders  thereof at
a meeting legally called and held on April 26, 1977.

     THIRD:  On said date,  the number of shares of each class  outstanding  and
entitled  to  vote on  such  amendment  (whether  or not  entitled  to vote as a
separate  class),  the  manner in which  each such  class was  entitled  to vote
(whether  or not as a separate  class),  and the number of shares  voted for and
against said amendment, respectively, were as follows:

Designation of       Manner        No. of Shares
Each Class           In Which      Outstanding
However Entitled     Entitled      And Entitled        Voted       Voted
   to vote           To Vote       To Vote             For         Against
- -----------------    ---------     -------------       ------      --------
Common              as a separate   1,233,710          920,772     35,608
                         class

Preferred                N/A           47,340           34,436      1,003
                                    ---------          -------    -------
         Total of All Classes       1,281,050          955,208     36,611
                                    =========         ========    =======

     FOURTH:  If such  amendment  provides  for  exchange,  reclassification  or
cancellation  of issued shares the manner in which the same shall be effected is
contained in Exhibit B attached hereto,  if it is not set forth in the amendment
itself.

     *FIFTH:  If such amendment  effects a change in the number or par values of
authorized shares the number of shares which the


<PAGE>



corporation  has authority to issue after giving effect to such  amendment is as
follows:

                   Series            Number                   Par Value
Class             (If any)          of Shares                  (If any)
- -----             --------          ---------                 ---------

Common              N/A             2,500,000                    $  5

Preferred                             100,000                     100


         The  aggregate par value of all such shares (of all classes and series)
having par value is $22,500,000.

         The total number of all such shares (of all classes and series) without
par value is N/A shares.

     SIXTH: The address of the registered office of the corporation in the State
of Maine is One Merchants Plaza, Bangor, Maine 04401.

         Dated:  April 28, 1977


         Legibly print or          Bangor Hydro-Electric Company
         type name and                (name of corporation)
         capacity of all          By \ss\ Robert S. Briggs
         signers                       Robert S. Briggs, Clerk


I certify  that I have  custody of the minutes  showing the above  action by the
shareholders.

\ss\ Robert S. Briggs
Robert S. Briggs, Clerk

EXHIBIT A.

         RESOLVED that the Certificate of Organization of the Company as amended
         to date,  be further  amended too  increase  the  Company's  authorized
         capital  stock  by  $5,000,000,  such  increase  to be  represented  by
         1,000,000  shares of Common Stock of the par value of $5 each,  so that
         the total amount of  authorized  capital  stock of this Company will be
         $22,500,000 represented by 100,000 shares of Preferred Stock of the par
         value of $100 each and  2,500,000  shares  of  Common  Stock of the par
         value of $5 each.


<PAGE>



NOTE:     Shares  may be  entitled  to vote as a  separate  class for any of the
          reasons  stated in 806, or if so provided  in the  Articles.  For vote
          necessary for adoption, see 805.

- ------------------------------------

*    To  be  completed  only  if  Exhibit  A or  B do  not  give  this  required
     information.

**   The name of the  corporation  should be  typed,  and the  document  must be
     signed by (1) Clerk or (2) by the President of a vice-president  and by the
     Secretary or an assistant secretary or such other officer as the bylaws may
     designate  as a  second  certifying  officer  or (3) if  there  are no such
     officers,  then by a majority of the Directors or by such  Directors as may
     be designated  by majority of Directors  then in office or (4) if there are
     not  such  Directors,  then  by the  holders,  or  such  of  them as may be
     designated  by the  holders,  of record of a  majority  of all  outstanding
     shares  entitled  to  vote  thereon  or (5) by  the  holders  of all of the
     outstanding shares of the corporation.

FORM NO. MBCA-9A


<PAGE>



For use by the
Secretary of State

                           STATE OF MAINE                 MAINE
File No. 103-240       NOTIFICATION BY CLERK       SECRETARY OF STATE
Fee Paid $5.00             OF CHANGE IN                   FILED
C.B.     80C176          REGISTERED OFFICE           August 14, 1979
Date:    8-16-79                                          Agent

Pursuant to 13-A MRSA 304(6),  the  undersigned  Clerk for one or more  domestic
corporations  give notice of the following  change of business  address which is
the registered office of each corporation listed:

          FIRST:  Name of Clerk*   Robert S. Briggs, Esq.

         SECOND:  Address of former registered office:

                  One Merchants Plaza
                  Bangor, Maine 04401

          THIRD:  Address of new registered office:

                  33 State Street; PO Box 932
                  Bangor, Maine 04401

     FOURTH:  Notice of the above change in  registered  office has been sent to
each of the following corporations by the undersigned as Clerk of each:

                  Bangor Hydro-Electric Company
                  East Branch Improvement Company

                    Sawtelle Brook Dam and Improvement Company
                  Godfrey's Falls Dam Company
                  Sebois Dam Company
                  Pleasant River Gulf Improvement Company

         Dated: August 13, 1979                      \ss\ Robert S. Briggs
                                                          Robert S. Briggs
                                                         (type or print name)

- --------------------------------
*The Clerk of a domestic  corporation  must be a person  resident in Maine.  The
business address of the Clerk and the registered office must be identical.

FORM NO. MBCA-3B


<PAGE>



For use by the
Secretary of State

                             STATE OF MAINE               MAINE
File No. 103-240        STATEMENT OF RESOLUTION    SECRETARY OF STATE
Fee Paid $5.00           ESTABLISHING SERIES OF           FILED
C.B.     115             SHARES OF BANGOR HYDRO-    August 23, 1979
Date:    8-23-79             ELECTRIC COMPANY             Agent
                        (9 1/2% Preferred Stock)

Pursuant to 13-A MRSA 503, the undersigned corporation submits the following for
the purpose of  establishing  and  designating a series of shares and fixing and
determining the relative rights and preferences thereof:

     FIRST: The attached resolutions establishing and designating the series and
fixing and determining  the relative  rights and  preferences  thereof were duly
adopted by the Board of Directors on July 24, 1979 and August 14, 1979.

     SECOND: The By-Laws expressly grant to the Board of Directors the authority
to make such  resolutions.  This  provision  of the By-Laws was in effect on and
prior to December 31, 1971,  has not been  amended or  repealed,  and  therefore
continues to be effective pursuant to 13-A MRSA 103(7).

     THIRD: The address of the registered office of the corporation is: 33 State
Street, PO Box 932, Bangor, Maine 04401

         Dated:  August 20, 1979

         Legibly print or          Bangor Hydro-Electric Company
         type name and                (name of corporation)
         capacity of all           By \ss\ Robert S. Briggs
         signers                        Robert S. Briggs, Clerk
- -------------------------------
*The name of the corporation should be typed, and the document must be signed by
(1) the Clerk or (2) by the President or a  vice-president  and by the Secretary
or an assistant  secretary of such other officer as the by-laws may designate as
a second  certifying  officer  or (3) if there are no such  officers,  then by a
majority  of  Directors  then in office or (4) if there are not such  Directors,
then by the holders,  or such of them as may be  designated  by the holders,  of
record of a majority of all  outstanding  shares entitled to vote thereon or (5)
by the holders of all of the outstanding shares of the corporation.

FORM NO. MBCA-7


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                  RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS

                                  JULY 24, 1979

     WHEREAS  the  Company  desires to secure  additional  funds for its general
corporate purposes, including, among other things, capital expenditures; and

     WHEREAS 32,660 of the 100,000 shares of the Company's  authorized Preferred
Stock $100 par value, are presently  unissued,  and may be issued in one or more
classes or series  with such  dividends,  designations,  terms,  conditions  and
restrictions  as  may be  determined  in  their  discretion  by  this  Board  of
Directors; and

     WHEREAS in the  judgment  of this Board of  Directors  it is  advisable  to
secure a portion of such  additional  funds by  authorizing  the issue of 30,000
shares of the Company's  authorized but unissued shares of Preferred Stock, $100
par value; and

     WHEREAS the  officers  of the Company  have  consulted  with Smith  Barney,
Harris  Upham & Co.,  Incorporated  of New York  concerning  the most  desirable
method of offering such additional  Preferred Stock, and have determined that it
should be sold at private sale to a limited number of institutional investors;

     NOW THEREFORE BE IT RESOLVED that the Company  hereby  creates a new series
of Preferred Stock to be designated as the 9 1/2% Preferred Stock, consisting of
30,000 shares of the  authorized  but unissued  Preferred  Stock,  consisting of
30,000 shares of the authorized but unissued  Preferred Stock, $100 par value of
the Company; and

     FURTHER  RESOLVED that the 9 1/2% Preferred  Stock be sold at not less than
par value at private  sale to limited  number of  institutional  investors,  the
exact  number and the more  particular  identification  of such  investors to be
determined  by the Chairman of the Board or the  President  of the  Company,  or
either of them; and

     FURTHER  RESOLVED  that none of the holders of any of the classes or series
of the  Preferred  Stock,  and none of the holders of the Common  Stock,  of the
Company shall have the preemptive  right to subscribe for and take shares of the
9 1/2% Preferred Stock; and

     FURTHER  RESOLVED that the Company does hereby appoint and designate  Smith
Barney,  Harris Upham & Co.  Incorporated of New York as its  representative  in
this sale of the 9 1/2% Preferred  Stock,  and does hereby  authorize said Smith
Barney,  Harris  Upham & Co.  Incorporated  to dispose of said 9 1/2%  Preferred
Stock at private sale at par value plus accrued dividends, if any; and

<PAGE>


     FURTHER RESOLVED that the appropriate  officers of the Company be, and they
hereby are  authorized  and  directed  to file with the Maine  Public  Utilities
Commission an  application  for approval of the issuance of the 9 1/2% Preferred
Stock,  including  any and all  amendments  thereto,  and to do all  other  acts
necessary  or  desirable  in order to secure the  approval of said Maine  Public
Utilities Commission; and

     FURTHER  RESOLVED  that  upon  receipt  of the Order of said  Maine  Public
Utilities  Commission  relative to the issuance and sale of the 9 1/2% Preferred
Stock,  said Order to be recorded  upon the books of the Company by its Clerk or
Assistant Clerk; and

     FURTHER  RESOLVED that the appropriate  officers of the Company and each of
them be and they hereby are  authorized  and  directed to make,  sign,  execute,
verify,  acknowledge  and  deliver,  or  cause  to be  made,  signed,  executed,
verified,  acknowledged and delivered, any and all of such orders, certificates,
directions,  requests and other appropriate  instruments and to do all such acts
and things as may be  reasonably  required  from time to time  hereafter to give
effect to the  foregoing  votes,  or any of them,  or to  otherwise  effect  the
issuance and sale of the 9 1/2% Preferred Stock.

         A true copy.

                  Attest: \ss\ Robert S. Briggs, Clerk


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                  RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS

                                 AUGUST 14, 1979

     RESOLVED  that  pursuant to Article XI of the By-Laws of the Company,  said
By-Laws  be  amended  in order to set forth the  dividend,  designation,  terms,
conditions and restrictions relative to the 9 1/2% Preferred Stock, as follows:

     (a) The first  paragraph of Article XI, Section 2 is hereby amended to read
     as follows:

               "Section  2. The  100,000  shares  of  Preferred  Stock  shall be
               available for  classification and  reclassification  in different
               classes or series from time to time. Subject to  reclassification
               upon  retirement by redemption or otherwise,  25,000 shares shall
               be 7% Preferred Stock, 17,500 shares shall be 4% Preferred Stock,
               Series A, 4,840 shares shall be 4 1/4%  Preferred  Stock,  20,000
               shares shall be 9 1/4% Preferred Stock and 30,000 shares shall be
               9 1/2% Preferred Stock."

     (b) The first line of the second  paragraph  of Article  XI,  Section 2, is
     hereby amended to read as follows:

               "The  remaining   shares,   2,660  in  number,   plus  additional
               shares...."

     (c) The first sentence of the third  paragraph of Article XI, Section 2, is
     hereby amended to read as follows:

               "In fixing and determining the special voting powers of any class
               or  series  of  Preferred   Stock,  the  Board  of  Directors  is
               specifically  authorized to provide that if at any time dividends
               or required  sinking fund payments payable on the Preferred Stock
               shall be in default in any amount to be specified in the By-Laws,
               then, until all dividends or required sinking fund payments so in
               default  shall  have  been  paid or  declared  and set  apart for
               payment,  the  holders of shares of  Preferred  Stock of each and
               every class or series,  voting as single class, shall be entitled
               to elect in such manner as the Board of  Directors  may  provide,
               the  smallest  number of  Directors  necessary  to  constitute  a
               majority  of the full  Board of  Directors,  the  balance  of the
               Directors to be elected by the holders of shares  having  general
               voting powers."

     (d) The third and fourth  sentences  of Article  XI,  Section 3, are hereby
     amended to read as follows:

               "Except as provided in paragraph (b) of Section 6, the Board

<PAGE>


               of  Directors  may  declare  dividends  upon  the  Common  Stock,
               provided  the  dividends  upon  the  Preferred  Stock,  with  all
               accumulations, including accrued dividends to the date of payment
               of the Common Stock dividends, shall have been paid in full, or a
               sum sufficient for the payment  thereof shall have been set apart
               for the  purpose,  but  not  otherwise.  Except  as  provided  in
               paragraph  (b) of Section 6, the holders of the Common  Stock are
               entitled to receive all  additional  surplus or net profits which
               the  Directors  may order  distributed  in  dividends,  after the
               dividends above provided for shall have been paid or set apart."

     (e) Article XI, Section 4,  subparagraphs (b) and (c) are hereby amended by
     deleting the same and substituting therefor the following:

               "(b) If at any time  dividends  payable  on the  Preferred  Stock
               shall be in  default  in an  amount  equal to or  exceeding  four
               quarterly dividend payments, or if the Company shall fail to make
               any required sinking fund payment on the Preferred  Stock,  then,
               until all  dividends or sinking fund  payments so in default have
               been paid or declared and set apart for  payment,  the holders of
               shares  of  Preferred  Stock of each and every  class or  series,
               voting  as a single  class,  shall  be  entitled,  at any  annual
               meeting during which dividends or sinking fund payments are so in
               default, to elect two Directors.

               "(c)  Notwithstanding  the provisions of Section 5 of Article III
               of these  By-Laws,  except as provided in  paragraph  (b) of this
               Section 4, the  holders of the 9 1/4%  Preferred  Stock and the 9
               1/2% Preferred Stock shall not be entitled to vote at any meeting
               of stockholders."

     (f)  Article  XI,  Section 5 is hereby  amended  by  deleting  the same and
     substituting therefor the following:

               "Section 5. In case of liquidation or dissolution of the Company,
               the assets, irrespective of whether they shall consist of capital
               assets or accumulated earnings,  shall be distributed as follows:
               All  holders of  Preferred  Stock shall be entitled to be paid in
               full both the par amount of their  shares and an amount  equal to
               the unpaid dividends  accumulated and accrued thereon and, in the
               case  of the 9 1/4%  Preferred  Stock  and  the 9 1/2%  Preferred
               Stock, if such liquidation or dissolution is voluntary, an amount
               equal to the premium specified in Section 6(a) below,  before any
               amount shall be paid to the holders of the Common  Stock,  and in
               case the assets shall not be sufficient to pay in full all of the
               Preferred Stock and dividends  accumulated  and accrued  thereon,

<PAGE>

               and applicable premium, then the principal thereof shall first be
               paid,  thereafter a pro rata  distribution of any excess shall be
               made on account of the accumulated dividends,  based on the total
               amount of unpaid dividends  accumulated and accrued thereon,  and
               thereafter a pro rata distribution of any excess shall be made on
               account  of  applicable  premium,  based on the  total  amount of
               applicable premium,  but after such payment to the holders of the
               Preferred  Stock, the remaining assets and funds shall be paid to
               the holders of the Common  Stock,  according to their  respective
               shares."

     (g)  Article  XI,  Section 6 is hereby  amended  by  deleting  the same and
     substituting therefor the following:

               "Section 6. (a) The 7%  Preferred  Stock shall bear  dividends at
               the rate of 7% per  annum and  shall  not be  redeemable.  The 4%
               Preferred Stock, Series A, shall bear dividends at the rate of 4%
               per annum and shall be  redeemable  at 112% if called on or prior
               to October 1, 1950; at 111%  thereafter  through October 1, 1951;
               and after  October 1, 1951 at 110%,  plus  accrued  dividends  in
               every case.  The 4 1/4%  Preferred  Stock shall bear dividends at
               the rate of 4 1/4% per annum and shall be  redeemable  at 102% if
               called on or prior to April 1, 1954; at 101%  thereafter  through
               April 1,  1959;  and after  April 1, 1959 at 100%,  plus  accrued
               dividends in every case.  The 9 1/4%  Preferred  Stock shall bear
               dividends at the rate of 9 1/4% per annum and shall be redeemable
               at the option of the Company as follows:

               At 109.25% if called on or prior to December 1, 1976;
               at 108.63% thereafter through December 1, 1977;
               at  108.01%  thereafter  through  December  1,  1978;
               at 107.39% thereafter through December 1, 1979;
               at 106.77% thereafter through December 1, 1980;
               at 106.15% thereafter through December 1, 1981;
               at  105.53%  thereafter  through  December  1,  1982;
               at 104.91% thereafter through December 1, 1983;
               at 104.29% thereafter through December 1, 1984;
               at  103.67%  thereafter  through  December  1,  1985;
               at 103.05% thereafter through December 1, 1986;
               at 102.43% thereafter through December 1, 1987;
               at 101.81% thereafter through December 1, 1988;
               at 101.19% thereafter through December 1, 1989;
               at 100.57% thereafter through December 1, 1990;
               and after December 1, 1990 at 100%
               plus accrued dividends in every case;

               provided, however, that except as provided in Section 6(b) below,
               the  Company  may not  redeem any of the 9 1/4%  Preferred  Stock
               prior to December 1, 1986, as a part of, or in  anticipation  of,
               any refunding  operation  involving the application,  directly or

<PAGE>

               indirectly,  of money  borrowed by the Company having an interest
               cost (calculated in accordance with generally  accepted financial
               practice),  or through the  issuance of Preferred  Stock  ranking
               equally  with or prior  to the 9 1/4%  Preferred  Stock  having a
               dividend cost  (calculated  as aforesaid) of less than 9 1/4% per
               annum.  The 9 1/2%  Preferred  Stock shall bear  dividends at the
               rate of 9 1/2% per annum and shall be redeemable at the option of
               the Company as follows:

               At 109.5% if called on or prior to August 1, 1980;
               at 109.0% if called on or prior to August 1, 1981;
               at 108.5% if called on or prior to August 1, 1982;
               at 108.0% if called on or prior to August 1, 1983;
               at 107.5% if called on or prior to August 1, 1984;
               at 107.0% if called on or prior to August 1, 1985;
               at 106.5% if called on or prior to August 1, 1986;
               at 106.0% if called on or prior to August 1, 1987;
               at 105.5% if called on or prior to August 1, 1988;
               at 105.0% if called on or prior to August 1, 1989;
               at 104.5% if called on or prior to August 1, 1990;
               at 104.0% if called on or prior to August 1, 1991;
               at 103.5% if called on or prior to August 1, 1992;
               at 103.0% if called on or prior to August 1, 1993;
               at 102.5% if called on or prior to August 1, 1994;
               at 102.0% if called on or prior to August 1, 1995;
               at 101.5% if called on or prior to August 1, 1996;
               at 101.0% if called on or prior to August 1, 1997;
               at 100.5% if called on or prior to August 1, 1998;
               and after August 1, 1998 at 100%
               plus accrued dividends in every case;

               provided,  however,  that,  except as  provided  in Section  6(b)
               below,  the  Company  may not redeem any of the 9 1/2%  Preferred
               Stock prior to August 1, 1989,  as a part of, or in  anticipation
               of, any refunding operation  involving the application,  directly
               or  indirectly,  of  money  borrowed  by the  Company  having  an
               interest cost  (calculated in accordance with generally  accepted
               financial  practice),  or through the issuance of Preferred Stock
               having a dividend cost  (calculated  as aforesaid) of less than 9
               1/2%  per  annum.  Preferred  Stock,  which  is  the  subject  of
               redemption,  may be called in whole or in part upon any  dividend
               date by appropriate  resolution adopted by the Board of Directors
               at any  regular or special  meeting  upon 60 days'  notice to the
               owners thereof  redemption,  postage  prepaid,  addressed to such
               owners at their  addresses  as shown on the books of the Company.
               If less than all of the outstanding shares of any class or series
               of Preferred Stock shall be redeemed at any time, the stock to be
               so  redeemed  shall be  determined  by lot, in such manner as the

<PAGE>


               Board of Directors may determine and  prescribe,  except that the
               shares of the 9 1/4%  Preferred  Stock  and the 9 1/2%  Preferred
               Stock to be redeemed may be  determined  by lot or pro rata or in
               such other manner as the Board of  Directors  may  determine  and
               prescribe.

                    "(b) The 9 1/4%  Preferred  Stock  and the 9 1/2%  Preferred
               Stock shall also be subject to  redemption  through the operation
               of sinking  funds (herein  collectively  called the Sinking Funds
               and  individually  called the 9 1/4% Preferred Stock Sinking Fund
               or the 9 1/2%  Preferred  Stock Sinking  Fund) at the  redemption
               price (the Sinking Fund Redemption  Price) of $100 per share plus
               an amount equal to the  dividends  accrued and unpaid  thereon to
               the redemption date,  whether or not earned or declared.  For the
               purposes  of the  Sinking  Funds,  out of any net  assets  of the
               Company   legally   available   therefor   remaining  after  full
               cumulative dividends upon all Preferred Stock then outstanding to
               the end of the current  dividend  period therefor shall have been
               paid or declared and set apart for payment, the Company shall set
               aside in cash annually (1) on December 1 in each year  commencing
               with  December 1, 1982, an amount  sufficient  to redeem,  at the
               Sinking  Fund  Redemption  Price,  1000  shares  of  the  9  1/4%
               Preferred Stock, and (2) on August 1 in each year commencing with
               August 1, 1985, an amount  sufficient  to redeem,  at the sinking
               Fund Redemption Price, 2000 shares of the 9 1/2% Preferred Stock.
               The  Sinking  Funds  shall be  cumulative  so that if on any such
               December 1 and/or August 1, the net assets of the Company legally
               available  therefor  shall be  insufficient  to  permit  any such
               amount to be set aside in full,  or if for any other  reason such
               amount  shall not have been set aside in full,  the amount of the
               deficiency shall be set aside, but without  interest,  before any
               dividend shall be paid or declared,  or any distribution made, on
               any  junior  shares  or any  junior  shares  shall be  purchased,
               redeemed,  or  otherwise  acquired by the  Company,  or any money
               shall be paid to or set  aside or made  available  for a  sinking
               fund  for  the  purchase  or  redemption  of any  junior  shares.
               Notwithstanding  the  foregoing,  the Company may at any time (1)
               pay  dividends  in  junior  shares  or (2)  purchase,  redeem  or
               otherwise  acquire  junior  shares in exchange for, or out of the
               net cash  proceeds  from the  concurrent  sale of,  other  junior
               shares.  As used  herein,  the term  "junior  shares"  shall mean
               Common  Stock or any other  shares  ranking  junior to the 9 1/4%
               Preferred  Stock  or  the 9 1/2%  Preferred  Stock  either  as to
               dividends or upon liquidation,  dissolution or winding up. Monies
               in the Sinking  Funds shall be applied  (and  disbursed)  on such

<PAGE>


               December 1 and August 1 to the redemption of shares of the 9 1/4%
               Preferred Stock and the 9 1/2% Preferred Stock, respectively. The
               Company shall,  prior to each such Sinking Fund redemption,  give
               notice  of  redemption  of such  number  of  shares of the 9 1/4%
               Preferred Stock and the 9 1/2% Preferred Stock as may be required
               to satisfy the Sinking Funds.

                    "(c) In addition,  the Company shall have the right,  at its
               option,  to redeem at the Sinking  Fund  Redemption  Price (1) on
               December 1, 1982 and on any December 1 thereafter  an  additional
               number  of  shares  of the 9 1/4%  Preferred  Stock up to but not
               exceeding  1,000  shares,  and (2) on August 1, 1985,  and on any
               August 1 thereafter an additional  number of shares of the 9 1/2%
               Preferred Stock up to but not exceeding  2,000 shares;  provided,
               however,  that  the  aggregate  number  of  shares  of the 9 1/2%
               Preferred  Stock which may be redeemed  pursuant to this  Section
               6(c)(2)  may not exceed  9000  shares.  This  right  shall not be
               cumulative  and shall be lost to the  extent not  exercised.  Any
               redemption of shares of the 9 1/4% Preferred  Stock or the 9 1/2%
               Preferred  Stock  pursuant to this Section 6(c) shall not operate
               to reduce the number of shares  which the Company is obligated to
               redeem pursuant to this Section 6(b)."

               and

     FURTHER  RESOLVED that any and all requirements of prior notice of proposed
amendments or  alterations  of the By-Laws,  including  the notice  requirements
contained in Article XII, Section 2 of the By-Laws,  are hereby waived, and that
the  foregoing  amendments  to the By-Laws are adopted  effective as of the date
hereof without further action of the Board of Directors; and

     FURTHER RESOLVED that the form of proposed agreement presented this date to
the  Board for the sale of the 9 1/2%  Preferred  Stock to the  purchaser  named
therein is hereby approved;  that the Chairman of the Board,  the President,  or
any Vice  President  of the Company or any of them be and each of them is hereby
authorized to execute the same in substantially  the form presented as aforesaid
with such changes as the officer executing the same may approve acting under the
advice of counsel for this Company,  and that the execution and delivery of said
agreement shall be conclusive evidence of such approval.

                           A true copy.

                           Attest: \ss\  Robert S. Briggs, Clerk


<PAGE>



For use by the
Secretary of State

                                  STATE OF MAINE              MAINE
File No. 103-240               ARTICLES OF AMENDMENT     SECRETARY OF STATE
Fee Paid $20,625 & 10.00                                      FILED
C.B.     746                (Amendment by Shareholders     April 29, 1980
Date:  4-29-80                Voting as Separate Class)       Agent
                                          OF
                             BANGOR HYDRO-ELECTRIC COMPANY

                           a Quasi-Public Corporation

Pursuant to 13-A MRSA 805 and 807,  the  undersigned  corporation  adopts  these
Articles of Amendment.

     FIRST:  As set out in detail in "THIRD",  one or more  classes of shares of
the corporation were entitled to vote on the following  amendments as a separate
class.

     SECOND:  The amendments to the Articles of Incorporation of the corporation
set out in Exhibit A attached hereto were adopted by the shareholders thereof at
a meeting legally called and held on April 22, 1980.

     THIRD:  On said date,  the number of shares of each class  outstanding  and
entitled  to vote on  such  amendments  (whether  or not  entitled  to vote as a
separate class), the manner in which


<PAGE>



each such class was entitled to vote (whether or not as a separate  class),  and
the number of shares voted for and against such amendments,  respectively,  were
as follows:

              Designation of       Manner        No. of Shares
              Each Class           in which      Outstanding
              However Entitled     Entitled      And Entitled   Voted   Voted
Proposal      To Vote              To Vote       To Vote        For     Against
- -------------------------------------------------------------------------------
To increase  Common stock          as a class      1,816,933   997,599  65,482
Authorized   $5 par value
Preferred
Stock
$100 par
value      Preferred Stock         as a class         97,340*   80,044     859
                                                   ---------   -------   -----
                                          TOTALS   1,914,273 1,085,643  66,341
                                                   ========= =========  ======

To increase  Common Stock          as a class      1,816,933 1,000,607  60,147
Authorized    $5 par value
Common Stock
$5 par      Preferred Stock          general          47,340    26,635   1,074
value        $100 par value                        --------- ---------  ------
                                           TOTALS  1,864,273 1,027,242  61,221
                                                   ========= =========  ======

To Authorize   Common Stock  general               1,816,933 1,023,208  48,866
Directors To   $5 par value
Divide Unissued
Preferred Stk. Preferred Stk. as a class              97,340*   88,202     607
                                                  ---------- ---------  ------
                                            TOTALS 1,914,273 1,111,410  49,473
                                                   ========= =========  ======

*Includes 50,000 shares which do not have general voting powers.

     FOURTH:  If such  amendments  provide  for  exchange,  reclassification  or
cancellation  of issued shares the manner in which the same shall be effected is
contained in Exhibit B attached hereto,  if it is not set forth in the amendment
itself.

     Not applicable.



<PAGE>


     FIFTH:  If such  amendments  effect a change in the number or par values of
authorized  shares,  the number of shares which the corporation has authority to
issue after giving effect to such amendments is as follows:

Class                 Series       Number of Shares     Par Value
- ---------------    ------------    ----------------     ---------
Common Stock,           N/A            5,000,000          $  5
$5 par value

Preferred Stock,  As determined by       250,000          $100
$100 par value    Board of Directors

     The aggregate  par value of such shares (of all classes and series)  having
par value is $50,000,000.

     The total number of all such shares (of all classes and series) without par
value is -0- shares.

     SIXTH: The address of the registered office of the corporation in the State
of Maine is 33 State Street, PO Box 932, Bangor, Maine 04401.

Dated:  April 25, 1980

         Legibly print or           Bangor Hydro-Electric Company
         type name and                (name of corporation)
         capacity of all            By \ss\ Robert S. Briggs
         signers                            Robert S. Briggs, Clerk
                                            (type or print name & capacity)

I certify  that I have  custody of the minutes  showing the above  action by the
shareholders.

\ss\ Robert S. Briggs
        Clerk

FORM NO. MBCA-9A


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

             EXHIBIT A TO ARTICLES OF AMENDMENT DATED APRIL 25, 1980


                  RESOLVED that the Articles of Incorporation of the Company, as
                  amended to date, be further  amended to increase the Company's
                  authorized  capital stock by $27,500,000,  such increase to be
                  represented  by 150,000  shares of Preferred  Stock of the par
                  value of $100 each and 2,500,000 shares of Common Stock of the
                  par value of $5 each,  so that the total amount of  authorized
                  capital stock of the Company will be  $50,000,000  represented
                  by 250,000 shares of Preferred  Stock of the par value of $100
                  each and 5,000,000  shares of Common Stock of the par value of
                  $5 each.

                  RESOLVED that the Articles of Incorporation of the Company, as
                  amended to date,  be further  amended by adding the  following
                  provision:

                           The shares of any  preferred or special  class of the
                           Company's  capital  stock  may be  divided  into  and
                           issued  in  series.  The  Board of  Directors  of the
                           Company shall have  authority to divide any or all of
                           the shares of any  preferred or special  class of the
                           Company's  capital  stock into  series and to fix and
                           determine the relative  rights and preferences of the
                           shares of any series so established.


<PAGE>



For use by the
Secretary of State

                           STATE OF MAINE                 MAINE
File No. 103-240       STATEMENT OF RESOLUTION      SECRETARY OF STATE
Fee Paid $5.00          ESTABLISHING SERIES OF            FILED
C.B.     520           SHARES OF BANGOR HYDRO-       January 13, 1983
Date:    1-14-83          ELECTRIC COMPANY                Agent
                        (13% Preferred Stock)

Pursuant to 13-A MRSA 503, the undersigned corporation submits the following for
the purpose of  establishing  and  designating a series of shares and fixing and
determining the relative rights and preferences thereof:

     FIRST: The attached resolution  establishing and designating the series and
fixing and  determining  the relative  rights and  preferences  thereof was duly
adopted by the Board of Directors on January 10, 1983.

     SECOND:  The  Articles  expressly  grant  to the  Board  of  Directors  the
authority to make such a resolution.

     THIRD: The address of the registered office of the corporation is: 33 State
Street, PO Box 932, Bangor, Maine 04401.

         Dated:  January 12, 1983


         Legibly print or  Bangor Hydro-Electric Company
         type name and                (name of corporation)
         capacity of all   By \ss\ Robert S. Briggs
         signers                Robert S. Briggs, Clerk
                                (type or print name & capacity)

- ---------------------------------
*        The name of the corporation  should be typed,  and the document must be
         signed by (1) the Clerk or (2) by the President or a vice-president and
         by the Secretary or an assistant secretary or such other officer as the
         bylaws may designate as a second certifying officer or (3) if there are
         no  such  officers,  then by a  majority  of the  Directors  or by such
         Directors  as may be  designated  by a majority  of  Directors  then in
         office or (4) if there are no such Directors,  then by the holders,  or
         such  of them as may be  designated  by the  holders,  of  record  of a
         majority of all  outstanding  shares entitled to vote thereon or (5) by
         the holders of all the outstanding shares of the corporation.

FORM NO. MBCA-7


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

                       RESOLUTIONS ADOPTED BY THE BOARD OF
                     DIRECTORS BY UNANIMOUS CONSENT WITHOUT
                        A MEETING AS OF JANUARY 10, 1983

     WHEREAS  the  Company  desires to secure  additional  funds for its general
corporate purposes, including, among other things, capital expenditures; and

     WHEREAS 153,660 of the 250,000 shares of the Company's authorized Preferred
Stock, $100 par value, are presently unissued,  and may be issued in one or more
classes or series with such  dividends,  designations,  terms,  conditions,  and
restrictions  as  may be  determined  in  their  discretion  by  this  Board  of
Directors; and

         WHEREAS in the  judgment of this Board of  Directors it is advisable to
secure a portion of such  additional  funds by  authorizing  the issue of 50,000
shares of the Company's  authorized but unissued shares of Preferred Stock, $100
par value; and

     WHEREAS the  officers  of the Company  have  consulted  with Smith  Barney,
Harris  Upham & Co.,  Incorporated  of New York  concerning  the most  desirable
method of offering such additional  Preferred Stock, and have determined that it
should be sold at private sale to a limited number of institutional investors;

     NOW  THEREFORE BE IT RESOLVED  that the Company  hereby  establishes  a new
series  of  Preferred  Stock  to be  designated  as  the  13%  Preferred  Stock,
consisting of 50,000 shares of the authorized but unissued Preferred Stock, $100
par value of the Company; and

     FURTHER  RESOLVED that the 13% Preferred Stock be sold at not less than the
par value at a private sale to a limited number of institutional investors; and

     FURTHER  RESOLVED  that none of the holders of any of the classes or series
of the  Preferred  Stock,  and none of the holders of the Common  Stock,  of the
Company shall have the preemptive  right to subscribe for and take shares of the
13% Preferred Stock; and

     FURTHER  RESOLVED that the Company does hereby appoint and designate  Smith
Barney,  Harris Upham & Co.  Incorporated of New York as its  representative  in
this sale of the 13%  Preferred  Stock,  and does  hereby  authorize  said Smith
Barney,  Harris Upham & Co.  Incorporated to dispose of said 13% Preferred Stock
at private sale at par value plus accrued dividends, if any; and

<PAGE>


     FURTHER  RESOLVED that the appropriate  officers of the Company be and they
hereby are  authorized  and  directed  to file with the Maine  Public  Utilities
Commission  an  application  for approval of the  issuance of the 13%  Preferred
Stock,  including  any and all  amendments  thereto,  and to do all  other  acts
necessary  or  desirable  in order to secure the  approval of said Maine  Public
Utilities Commission; and

     FURTHER  RESOLVED  that  upon  receipt  of the Order of said  Maine  Public
Utilities  Commission  relative to the  issuance  and sale of the 13%  Preferred
Stock,  said Order is to be recorded  upon the books of the Company by its Clerk
or Assistant Clerk; and

     FURTHER RESOLVED that pursuant to Article XI of the By-Laws of the Company,
said By-Laws be amended in order to set forth the dividend,  designation, terms,
conditions and restrictions relative to the 13% Preferred Stock, as follows:

     (a) The first  paragraph of Article XI, Section 2 is hereby amended to read
as follows:

         "Section 2. The 250,000  shares of  Preferred  Stock shall be available
         for classification and  reclassification in different classes or series
         from time to time.  Subject  to  reclassification  upon  retirement  by
         redemption  or otherwise,  25,000  shares shall be 7% Preferred  Stock,
         17,500 shares shall be 4% Preferred Stock, Series A, 4,840 shares shall
         be 4 1/4%  Preferred  Stock,  20,000  shares shall be 9 1/4%  Preferred
         Stock, 30,000 shares shall be 9 1/2% Preferred Stock, and 50,000 shares
         shall be 13% Preferred Stock."

     (b) The first line of the second  paragraph  of Article  XI,  Section 2, is
hereby amended to read as follows:

         "The remaining shares, 102,660 in number, plus additional shares...."

     (c) the third  sentence of the first  paragraph of Article XI, Section 3 is
hereby amended to read as follows:

          "Except as provided in paragraph (b) of Section 6 and paragraph (e) of
          Section 7,..."

     (d) Article XI, Section 4,  subparagraph  (c) is hereby amended by deleting
the same and substituting therefor the following:

         "(c)  Notwithstanding  the  provisions  of Section 5 of Article  III of
         these  By-Laws,  except as provided in paragraph (b) of this Section 4,
         the holders of the 9 1/4% Preferred  Stock, the 9 1/2% Preferred Stock,
         and  the 13%  Preferred  Stock  shall  not be  entitled  to vote at any
         meeting of stockholders."

<PAGE>


     (e)  Article  XI,  Section 5 is hereby  amended  by  deleting  the same and
substituting therefor the following:

         "Section 5. In case of liquidation  or dissolution of the Company,  the
         assets, irrespective of whether they shall consist of capital assets or
         accumulated  earnings,  shall be distributed as follows: All holders of
         Preferred  Stock  shall  be  entitled  to be paid in full  both the par
         amount of their  shares  and an amount  equal to the  unpaid  dividends
         accumulated  and  accrued  thereon  and,  in  the  case  of  the 9 1/4%
         Preferred  Stock,  the 9 1/2%  Preferred  Stock  and the 13%  Preferred
         Stock, if such liquidation or dissolution is voluntary, an amount equal
         to the premium specified in Section 6(a) below, before any amount shall
         be paid to the  holders  of the  Common  Stock,  and in case the assets
         shall not be sufficient  to pay in full all of the Preferred  Stock and
         dividends accumulated and accrued thereon, and applicable premium, then
         the principal  thereof  shall first be paid pro rata,  thereafter a pro
         rata  distribution  of any  excess  shall  be  made on  account  of the
         accumulated  dividends,  based on the total amount of unpaid  dividends
         accumulated and accrued thereon, and thereafter a pro rata distribution
         of any excess shall be made on account of applicable premium,  based on
         the total amount of applicable  premium,  but after such payment to the
         holders of the Preferred Stock, the remaining assets and funds shall be
         paid to the holders of the Common Stock,  according to their respective
         shares."

     (f)  Article  XI,  Section 6 is hereby  amended  by  deleting  the same and
substituting therefor the following:

         "Section 6. (a) The 7% Preferred Stock shall bear dividends at the rate
         of 7% per annum and shall not be  redeemable.  The 4% Preferred  Stock,
         Series A, shall bear dividends at the rate of 4% per annum and shall be
         redeemable  at 112% if called on or prior to October  1, 1950;  at 111%
         thereafter  through October 1, 1951; and after October 1, 1951 at 110%,
         plus accrued  dividends in every case. The 4 1/4% Preferred Stock shall
         bear  dividends at the rate of 4 1/4% per annum and shall be redeemable
         at 102% if  called  on or prior to April 1,  1954;  at 101%  thereafter
         through  April 1, 1959;  and after April 1, 1959 at 100%,  plus accrued
         dividends  in  every  case.  The 9  1/4%  Preferred  Stock  shall  bear
         dividends  at the rate of 9 1/4% per annum and shall be  redeemable  at
         the option of the Company as follows:

               At 109.25% if called on or prior to December 1, 1976;
               at 108.63% thereafter through December 1, 1977;
               at 108.01% thereafter through December 1, 1978;
               at 107.39% thereafter through December 1, 1979;
               at 106.77% thereafter through December 1, 1980;
               at 106.15% thereafter through December 1, 1981;
               at 105.53% thereafter through December 1, 1982;
               at 104.91% thereafter through December 1, 1983;

<PAGE>


               at 104.29% thereafter through December 1, 1984;
               at 103.67% thereafter through December 1, 1985;
               at 103.05% thereafter through December 1, 1986;
               at 102.43% thereafter through December 1, 1987;
               at 101.81% thereafter through December 1, 1988;
               at 101.19% thereafter through December 1, 1989;
               at 100.57% thereafter through December 1, 1990;
               and after December 1, 1990 at 100% plus
               accrued dividends in every case;

         provided  however,  that except as provided in Section 6(b) below,  the
         Company  may not  redeem  any of the 9 1/4%  Preferred  Stock  prior to
         December 1, 1986,  as a part of, or in  anticipation  of, any refunding
         operation involving the application,  directly or indirectly,  of money
         borrowed  by  the  Company  having  an  interest  cost  (calculated  in
         accordance with generally accepted financial practice),  or through the
         issuance of Preferred Stock ranking equally with or prior to the 9 1/4%

<PAGE>

         Preferred  Stock having a dividend  cost  (calculated  as aforesaid) of
         less than 9 1/4% per  annum.  The 9 1/2%  Preferred  Stock  shall  bear
         dividends  at the rate of 9 1/2% per annum and shall be  redeemable  at
         the option of the Company as follows:

               At 109.5% if called on or prior to August 1, 1980;
               at 109.0% if called on or prior to August 1, 1981;
               at 108.5% if called on or prior to August 1, 1982;
               at 108.0% if called on or prior to August 1, 1983;
               at 107.5% if called on or prior to August 1, 1984;
               at 107.0% if called on or prior to August 1, 1985;
               at 106.5% if called on or prior to August 1, 1986;
               at 106.0% if called on or prior to August 1, 1987;
               at 105.5% if called on or prior to August 1, 1888;
               at 105.0% if called on or prior to August 1, 1989;
               at 104.5% if called on or prior to August 1, 1990;
               at 104.0% if called on or prior to August 1, 1991;
               at 103.5% if called on or prior to August 1, 1992;
               at 103.0% if called on or prior to August 1, 1993;
               at 102.5% if called on or prior to August 1, 1994;
               at 102.0% if called on or prior to August 1, 1995;
               at 101.5% if called on or prior to August 1, 1996;
               at 101.0% if called on or prior to August 1, 1997;
               at 100.5% if called on or prior to August 1, 1998;
               and after  August 1, 1988 at 100%,
               plus accrued dividends in every case;

         provided,  however,  that except as provided in Section 6(b) below, the
         Company  may not  redeem  any of the 9 1/2%  Preferred  Stock  prior to
         August 1, 1989;  as a part of, or in  anticipation  of,  any  refunding
         operation involving the application,  directly or indirectly,  of money
         borrowed  by  the  Company  having  an  interest  cost  (calculated  in
         accordance with generally accepted financial practice),  or through the
         issuance of  Preferred  Stock  having a dividend  cost  (calculated  as

<PAGE>

         aforesaid) of less than 9 1/2% per annum. The 13% Preferred Stock shall
         bear  dividends at the rate of 13% per annum and shall be redeemable at
         the option of the Company as follows:

               At 113.00% if called on or prior to January 31, 1984;
               at 112.46% if called on or prior to January 31, 1985;
               at 111.92% if called on or prior to January 31, 1986;
               at 111.38% if called on or prior to January 31, 1987;
               at 110.83% if called on or prior to January 31, 1988;
               at 110.29% if called on or prior to January 31, 1989;
               at 109.75% if called on or prior to January 31, 1990;
               at 109.21% if called on or prior to January 31, 1991;
               at 108.67% if called on or prior to January 31, 1992;
               at 108.13% if called on or prior to January 31, 1993;
               at 107.58% if called on or prior to January 31, 1994;
               at 107.04% if called on or prior to January 31, 1995;
               at 106.50% if called on or prior to January 31, 1996;
               at 105.96% if called on or prior to January 31, 1997;
               at 105.42% if called on or prior to January 31, 1998;
               at 104.88% if called on or prior to January 31, 1999;
               at 104.33% if called on or prior to January 31, 2000;
               at 103.79% if called on or prior to January 31, 2001;
               at 103.25% if called on or prior to January 31, 2002;
               at 102.71% if called on or prior to January 31, 2003;
               at 102.17% if called on or prior to January 31, 2004;
               at 101.63% if called on or prior to January 31, 2005;
               at 101.08% if called on or prior to January 31, 2006;
               at 100.54% if called on or prior to January 31, 2007;
               and after January 31, 2007 at 100%,
               plus accrued dividends in every case;

         provided,  however,  that except as provided in Section 6(b) below, the
         Company may not redeem any of the 13% Preferred  Stock prior to January
         31, 1993, as a part of, or in anticipation of, any refunding  operation
         involving the application, directly or indirectly, of money borrowed by
         the Company  having an interest cost  (calculated  in  accordance  with
         generally  accepted  financial  practice),  or through the  issuance of
         Preferred  Stock having a dividend  cost  (calculated  as aforesaid) of
         less than 13% per  annum.  Preferred  Stock,  which is the  subject  of
         redemption, may be called in whole or in part upon any dividend date by
         appropriate resolution adopted by the Board of Directors at any regular
         or special  meeting upon 60 days' notice to owners thereof of record to
         be given  by  mailing  copies  of the  notice  of  redemption,  postage
         prepaid,  addressed  to such owners at their  addresses as shown on the
         books of the Company. If less than all of the outstanding shares of any
         class or series of Preferred  Stock shall be redeemed at any time,  the
         stock to be so redeemed  shall be  determined by lot, in such manner as
         the Board of Directors  may determine  and  prescribe,  except that the
         shares of the 9 1/4% Preferred  Stock,  the 9 1/2% Preferred  Stock and


<PAGE>

         the 13% Preferred  Stock to be redeemed may be determined by lot or pro
         rata or in such other  manner as the Board of Directors  may  determine
         and prescribe.

         "(b) The 9 1/4% Preferred Stock, the 9 1/2% Preferred Stock and the 13%
         Preferred  Stock  shall  also be  subject  to  redemption  through  the
         operation  of sinking  funds  (herein  collectively  called the Sinking
         Funds and individually  called the 9 1/4% Preferred Stock Sinking Fund,
         the 9 1/2%  Preferred  Stock  Sinking Fund or the 13%  Preferred  Stock
         Sinking  Fund) at the  redemption  price (the Sinking  Fund  Redemption
         Price) of $100 per share plus an amount equal to the dividends  accrued
         and unpaid  thereon to the  redemption  date,  whether or not earned or
         declared.  For the purposes of the Sinking Funds, out of any net assets
         of  the  Company  legally  available   therefor  remaining  after  full
         cumulative  dividends upon all Preferred Stock then  outstanding to the
         end of the current  dividend  period  therefor  shall have been paid or
         declared and set apart for payment, the Company shall set aside in cash
         annually  (1) on December 1 in each year  commending  with  December 1,
         1982, an amount  sufficient to redeem,  at the Sinking Fund  Redemption
         Price,  1000 shares of the 9 1/4% Preferred  Stock,  (2) on August 1 in
         each year  commencing  with  August 1, 1985,  an amount  sufficient  to
         redeem, at the Sinking Fund Redemption Price, 2000 shares of the 9 1/2%
         Preferred  Stock,  and (3) on January 31 in each year  commencing  with
         January 31, 1989, an amount  sufficient to redeem,  at the Sinking Fund
         Redemption  Price,  2500 shares of the 13% Preferred Stock. The Sinking
         Funds shall be  cumulative  so that if on any such December 1, August 1
         or  January  31,  as the case may be,  the net  assets  of the  Company
         legally  available  therefor shall be  insufficient  to permit any such
         amount to be set aside in full,  or if for any other reason such amount
         shall  not have been set aside in full,  the  amount of the  deficiency
         shall be set aside, but without interest,  before any dividend shall be
         paid or declared, or any distribution made, on any junior shares or any
         junior shares shall be purchased,  redeemed,  or otherwise  acquired by
         the  Company,  or any  monies  shall  be paid to or set  aside  or made
         available  for a sinking  fund for the  purchase or  redemption  of any
         junior shares.  Notwithstanding  the  foregoing,  except as provided in
         paragraph  (c) of  Section  7,  the  Company  may at any  time  (1) pay
         dividends in junior shares or (2) purchase, redeem or otherwise acquire
         junior shares in exchange for, or out of the net cash proceeds from the
         concurrent  sale of,  other  junior  shares.  As used  herein  the term
         "junior  shares"  shall mean Common Stock or any other  shares  ranking
         junior to the 9 1/4% Preferred Stock, the 9 1/2% Preferred Stock or the
         13% Preferred Stock, as the case may be, either as to dividends or upon
         liquidation,  dissolution  or winding up.  Monies in the Sinking  Funds
         shall be applied  (and  disbursed)  on such  December  1,  August 1 and
         January 31, to the redemption of shares of the 9 1/4% Preferred  Stock,


<PAGE>

         the 9 1/2% Preferred Stock and the 13% Preferred  Stock,  respectively.
         The Company  shall,  prior to each such Sinking Fund  redemption,  give
         notice of redemption  of such number of shares of the 9 1/4%  Preferred
         Stock, the 9 1/2% Preferred Stock and the 13% Preferred Stock as may be
         required to satisfy the Sinking Funds.

         "(c) In addition,  the Company shall have the right, at its option,  to
         redeem at the Sinking Fund Redemption Price (1) on December 1, 1982 and
         on any December 1 thereafter  an  additional  number of shares of the 9
         1/4% Preferred  Stock up to but not exceeding  1000 shares,  and (2) on
         August 1, 1985, and on any August 1 thereafter an additional  number of
         shares  of the 9 1/2%  Preferred  Stock  up to but not  exceeding  2000
         shares, provided, however, that the aggregate number of shares of the 9
         1/2%  Preferred  Stock which may be redeemed  pursuant to this  Section
         6(c)(2)  may  not  exceed  9000  shares.  These  rights  shall  not  be
         cumulative  and  shall  be  lost  to  the  extent  not  exercised.  Any
         redemption  of  shares  of the 9  1/4%  Preferred  Stock  or the 9 1/2%
         Preferred  Stock  pursuant  to this  Section  6(c) shall not operate to
         reduce the number of shares  which the Company is  obligated  to redeem
         pursuant to Section 6(b).

         "(d)  Furthermore  (1) the Company shall have the right, at its option,
         to redeem at the Sinking Fund Redemption Price on January 31, 1989, and
         on each January 31  thereafter,  an additional  number of shares of the
         13% Preferred Stock up to but not exceeding 2500 shares,  such right to
         be  non-cumulative  so that if in any year such right is not exercised,
         it shall be  forfeited,  and (2) the  purchasers  of the 13%  Preferred
         Stock  named in the  Purchase  Agreement  dated as of January  20, 1983
         between the Company and such purchasers  shall have the right, at their
         option,  to cause the Company to redeem at the Sinking Fund  Redemption
         Price  on  January  31,  1989  and  on any  January  31  thereafter  an
         additional  number of shares of the 13%  Preferred  Stock up to but not
         exceeding 2500 shares,  in aggregate  amount from all such  purchasers,
         per year, such right to be  non-cumulative  so that if in any year such
         right is not exercised, it shall be forfeited.  Requests for redemption
         pursuant  to this  Section  6(d)(2)  shall be filed with the Company no
         later  than 15 days prior to the  applicable  redemption  date.  In the
         event such requests  aggregate more than 2500 shares, the Company shall
         allocate the amount so those  requesting such  redemption  shall agree.
         Any  redemption of shares of the 13% Preferred  Stock  pursuant to this
         Section 6(d) shall not operate to reduce the number of shares which the
         Company is obligated to redeem pursuant to Section 6(b)."

     (g)  Sections  7, 8,  9,  10 and 11 of  Article  XI are  hereby  renumbered
Sections 8, 9, 10, 11 and 12, and a new Section 7 is hereby adopted as follows:

<PAGE>

         "Section 7.  Notwithstanding  any provision to the contrary herein,  so
         long as there remain outstanding any shares of the 13% Preferred Stock,
         the following provisions shall apply:

                  (a)  Without  the prior  written  consent of the  holders of a
                  majority of the shares of the 13% Preferred Stock ("Consent"),
                  the Board of Directors will not authorize and the Company will
                  not issue any shares of  preferred  stock  (either of the same
                  class  or  series  or of a  different  class or  series)  with
                  preferences  or rights  superior or prior to the 13% Preferred
                  Stock in the payment of dividends,  the distribution of assets
                  in  liquidation,  or the  application  of funds  available for
                  mandatory sinking fund payments.

                  (b) Without  Consent,  the  Company  shall not, at any time at
                  which it is  delinquent  (1) in the full  payment of dividends
                  due and payable on the 13% Preferred Stock, (2) in the payment
                  in full of any sinking  fund  installment  with respect to the
                  13%  Preferred  Stock,  or (3) in the making of any  mandatory
                  redemption or repurchase of the 13% Preferred Stock, issue any
                  shares of Preferred Stock of the Company.

                  (c) Without  Consent,  the Company  shall not declare or pay a
                  dividend  on or  voluntarily  redeem or  repurchase  shares of
                  Common  Stock of the Company or any class or series of capital
                  stock  of the  Company  that is  junior  to the 13%  Preferred
                  Stock, either as to dividends or upon liquidation, dissolution
                  or winding  up,  unless and until the  Company has (1) paid in
                  full the  dividends  accrued on and sinking fund payments with
                  respect  to  the  13%  Preferred   Stock,  and  (2)  made  all
                  redemptions  which it is  required  to have made  through  the
                  applicable dates.

                  (d) The  Company  shall not  voluntarily  redeem,  including a
                  voluntary redemption of shares under the provisions of Section
                  6(c) hereto, or repurchase any shares of outstanding preferred
                  stock of the Company, unless and until the Company has paid in
                  full the dividends  accrued and sinking fund payments due with
                  respect to the 13% Preferred Stock.

                  (e) The Board of  Directors  may  declare  dividends  upon the
                  Common  Stock  only if the  dividends  upon the 13%  Preferred
                  Stock, with all accumulations, shall have been paid in full."

     FURTHER  RESOLVED that any and all requirements of prior notice of proposed
amendments or  alterations  of the By-Laws,  including  the notice  requirements
contained in Article XII, Section 2 of the By-Laws,  are hereby waived, and that

<PAGE>

the  foregoing  amendments  to the By-Laws are adopted  effective as of the date
hereof without further action of the Board of Directors; and

     FURTHER  RESOLVED that the appropriate  officers of the Company and each of
them be and they hereby are authorized and directed to prepare, execute and file
with the  Secretary of State of the State of Maine,  a Statement  of  Resolution
Establishing Series of Shares in accordance with 13-A M.R.S.A. 503 incorporating
the relative  rights and  preferences  of the 13%  Preferred  Stock set forth in
Article XI if the By-Laws of the Company as  hereinbefore  amended and including
such other information as may be required by applicable law, rule or regulation;
and

     FURTHER  RESOLVED that the form of proposed  agreement (draft of January 5,
1983)  presented  to the Board of  Directors  for the sale of the 13%  Preferred
Stock to the purchasers named therein is hereby  approved;  that the Chairman of
the Board, the President, or any Vice President of the Company or any of them be
and each of them is hereby  authorized to execute the same in substantially  the
form presented as aforesaid with such changes as the officer  executing the same
may approve  acting  under the advice of counsel for the  Company,  and that the
execution and delivery of said  agreement  shall be conclusive  evidence of such
approval; and

     FURTHER  RESOLVED that all the powers and duties of Northeast  Bank & Trust
Co., as Transfer  Agent for the shares of  Preferred  Stock of the Company  (the
"Transfer  Agent"),  and all the powers and duties of The Merrill Trust Company,
as Registrar of the shares of Preferred Stock of the Company, (the "Registrar"),
are hereby extended upon the same terms and conditions to cover the transfer and
registration,  respectively,  of the 13%  Preferred  Stock;  and that the proper
officers of the Company be, and each of them hereby is,  authorized and directed
to give the Transfer Agent and Registrar,  as the case may be, such instructions
as may be  appropriate  to effect  the  issuance  and sale of the 13%  Preferred
Stock; and

     FURTHER  RESOLVED that the Chairman of the Board, the President or any Vice
President of the Company or any of them be and each of them hereby is authorized
in the name of and on behalf of the  Company  to pay to the  Transfer  Agent and
Registrar all proper fees and charges  arising out of or in connection  with the
performance  by the same of  their  respective  duties  in  connection  with the
Shares,  and to pay any and all expenses and fees arising in connection with the
issuance and sale of the 13% Preferred Stock; and

     FURTHER  RESOLVED that the appropriate  officers of the Company and each of
them be and they hereby are  authorized  and  directed to make,  sign,  execute,
verify, acknowledge and deliver, or cause to be made, signed, execute, verified,
acknowledged  and  delivered,   any  and  all  of  such  orders,   certificates,

<PAGE>

directions,  requests and other appropriate  instruments and to do all such acts
and things as may be  reasonably  required  from time to time  hereafter to give
effect to the  foregoing  votes,  or any of them,  or to  otherwise  effect  the
issuance and sale of the 13% Preferred Stock.

                                              A true copy.

                                              Attest:  \ss\ Robert S. Briggs


<PAGE>



                                 STATE OF MAINE


File No. 240001D         ARTICLES OF AMENDMENT                MAINE
Fee Paid $9,375. &$10   (Amendment by Shareholders          SECRETARY
C.B.     929              Voting as Separate Class           OF STATE
Date:    5-2-83                   of                          FILED
                       Bangor Hydro-Electric Company        May 2, 1983
                         a Quasi-Public Corporation           Agent

Pursuant to 13-A MRSA 805 and 807,  the  undersigned  corporation  adopts  these
Articles of Amendment.

FIRST:  As set out in detail in  "THIRD",  one or more  classes of shares of the
corporation  were  entitled  to vote on the  following  amendment  as a separate
class.

SECOND:  The amendment to the Articles of  Incorporation  of the corporation set
out in Exhibit A attached  hereto was adopted by the  shareholders  thereof at a
meeting legally called and held on April 26, 1983.

THIRD: On said date, the number of shares of each class outstanding and entitled
to vote on such amendment (whether or not entitled to vote as a separate class),
the manner in which each such class was  entitled  to vote  (whether or not as a
separate  class) and the number of shares voted for and against said  amendment,
respectively, were as follows:

Designation of         Manner         No. of Shares
Each Class             in Which       Outstanding
However Entitled       Entitled       and Entitled       Voted      Voted
to Vote                to Vote        to Vote            For        Against
- --------------------------------------------------------------------------------

Common Stock           as a separate    3,441,101      2,028,290    98,603
   $5 par value        class

Preferred Stock        general              47,340        26,749     1,038
                                         ---------     ---------    ------
    Totals of all Classes                3,488,441     2,055,039    99,641
                                         =========     =========    ======

FOURTH:   If  such  amendment   provides  for  exchange,   reclassification   or
cancellation  of issued shares the manner in which the same shall be effected is
contained in Exhibit B attached hereto,  if it is not set forth in the amendment
itself.


<PAGE>



*FIFTH:  If such  amendment  effects  a change in the  number  or par  values of
authorized  shares the number of shares which the  corporation  has authority to
issue after giving effect to such amendment, is as follows:

                    Series           Number             Par Value
   Class           (If Any)          of Shares          (if any)
- --------------------------------------------------------------------------------
Common Stock        N/A              7,500,000           $5

Preferred Stock   As determined by     250,000           $100
  $00 par value    Board of Directors

The  aggregate  par value of all such shares (of all classes and series ) having
par value is $62,500,000.

The total  number of all such shares (of all  classes  and  series)  without par
value is -0- shares.

SIXTH:  The address of the registered  office of the corporation in the State of
Maine is 33 State Street, PO Box 932, Bangor, Maine 04401.

         Dated:  April 29, 1983

         Legibly print or          Bangor Hydro-Electric Company
         type name and                (name of corporation)
         capacity of all           By \ss\ Robert S. Briggs
         signers                        Robert S. Briggs, Clerk

I certify  that I have  custody of the minutes  showing the above  action by the
shareholders.

\ss\ Robert S. Briggs
Robert S. Briggs, Clerk

EXHIBIT A.

RESOLVED that the Articles of Incorporation of the Company,  as amended to date,
be  further  amended to  increase  the  Company's  authorized  capital  stock by
$12,500,000, such increase to be represented by 2,500,000 shares of Common Stock
of the par value of $5 each,  so that the total  amount  of  authorized  capital
stock of the  Company  will be  $62,500,000  represented  by  250,000  shares of
Preferred  Stock of the par  value of $100 each and  7,500,000  shares of Common
Stock of the par value of $5 each.


<PAGE>



NOTE:     Shares  may be  entitled  to vote as a  separate  class for any of the
          reasons  stated in 806, or if so provided  in the  Articles.  For vote
          necessary for adoption, see 805.

- ------------------------------------
   *      To be  completed  only if  Exhibit  A or B do not give  this  required
          information.

  **      The name of the corporation should be typed, and the
          document must be signed by (1) Clerk or (2) by the
          President of a vice-president and by the Secretary or an
          assistant secretary or such other officer as the bylaws may
          designate as a second certifying officer or (3) if there
          are no such officers, then by a majority of the Directors
          or by such Directors as may be designated by majority of
          directors then in office or (4) if there are not such
          Directors, then by the holders, or such of them as may be
          designated by the holders, of record of a majority of all
          outstanding shares entitled to vote thereon or (5) by the
          holders of all of the outstanding shares of the
          corporation.







FORM NO. MBCA-9A


<PAGE>



For use by the
Secretary of State

                         STATE OF MAINE               MAINE
File No. 240001D       CHANGE OF CLERK of        SECRETARY OF STATE
Fee Paid $5.00      REGISTERED OFFICE or BOTH         FILED
C.B.     ---                    OF                July 19, 1985
Date:   8-6-85    BANGOR HYDRO-ELECTRIC COMPANY       Agent

Pursuant  to 13-A MRSA  304,  the  undersigned  corporation  advises  you of the
following change(s):

     FIRST: The name and registered  office of the Clerk appearing on the record
in Secretary of State's office:  Robert S. Briggs, Esq., 33 State Street, PO Box
932, Bangor, Maine 04401.

     SECOND:  The name and  registered  office of its successor (new Clerk)* are
Frederick S. Samp, Esq., 33 State Street, PO Box 932, Bangor, Maine 04401.

     THIRD: Upon a change in Clerk this must be completed:

                  (X)      Such change was  authorized by the Board of Directors
                           and the power to make such change is not  reserved to
                           the shareholders by the articles or the bylaws.

                  ( )      Such change was authorized by the shareholders.

Dated:  July 17, 1985

         Legibly print or        Bangor Hydro-Electric Company
         type name and
         capacity of all         By \ss\ Frederick S. Samp
         signers                       Frederick S. Samp, Clerk
         13-A MRSA 104
- ---------------------------------
 *       The Clerk of a domestic corporation must be a person resident in Maine.

**       The name of the corporation  should be typed,  and the document must be
         signed by (1) the Clerk or (2) by the President of a vice-president and
         by the Secretary or an assistant secretary or such other officer as the
         by-laws may  designate as a second  certifying  officer or (3) if there
         are no such officers, then by a majority of Directors then in office or
         (4) if there are no such  Directors,  then by the  holders,  or such of
         them as may be  designated  by the holders,  of record of a majority of
         all  outstanding  shares entitled to vote thereon or (5) by the holders
         of all of the outstanding shares of the corporation.

FORM NO. MBCA-7 - Rev. 77


<PAGE>



For use by the
Secretary of State

                          STATE OF MAINE                 MAINE
File No. 240001D       ARTICLES OF AMENDMENT       SECRETARY OF STATE
Fee Paid $10.00        (Amendment by Share-              FILED
C.B.     -----           holders Voting as            May 23, 1986
Date:    6-6-86             One Class)                   Agent
                         OF BANGOR HYDRO-
                         ELECTRIC COMPANY
                     a Quasi-Public Corporation
              which is engaged in selling of Electricity

Pursuant to 13-A MRSA 805 and 807,  the  undersigned  corporation  adopts  these
Articles of Amendment.

     FIRST:  All outstanding  shares of the corporation were entitled to vote on
the following amendment as one class.

     SECOND:  The amendment to the Articles of  Incorporation of the corporation
set out in Exhibit A attached hereto was adopted by the shareholders  thereof at
a meeting legally called and held on May 21, 1986.

     THIRD: On said date, the number of shares  outstanding and entitled to vote
on such  amendment,  and the  number  of  shares  voted  for  and  against  said
amendment, respectively, were as follows:

Number of Shares Outstanding           Voted               Voted
and Entitled to Vote                   For                 Against
- ----------------------------        -------------          ---------
Common Stock    4,450,684            2,711,364              849,024
$5 par value

Preferred Stock    47,340               35,635                  553
              -----------            ---------              -------
      Totals    4,498,024            2,746,999              839,577
               ==========           ==========            =========

     FOURTH:  If such  amendment  provides  for  exchange,  reclassification  or
cancellation of issued shares, the manner in which the same shall be effected is
contained in Exhibit B attached hereto,  if it is not set forth in the amendment
itself.



<PAGE>



     *FIFTH:  If such amendment  effects a change in the number or par values of
authorized  shares the number of shares which the  corporation  has authority to
issue after giving effect to such amendment is as follows:

                  Series             Number                   Par Value
Class             (If any)          of Shares                  (If any)
- -----             --------          ---------                 ---------

 N/A

     The  aggregate  par value of all such  shares (of all  classes  and series)
having par value is N/A.

     The total number of all such shares (of all classes and series) without par
value is N/A shares.

     SIXTH: The address of the registered office of the corporation in the State
of Maine is 33 State Street, PO Box 932, Bangor, Maine 04401.

         Dated:  May 22, 1986

         Legibly print or              Bangor  Hydro-Electric  Company
         type name and                   (name of corporation)
         capacity  of  all             By  \ss\  Frederick  S.  Samp
         signers                             Frederick S. Samp, Clerk
         13-A MRSA 104.

I certify  that I have  custody of the minutes  showing the above  action by the
shareholders.

\ss\ Frederick S. Samp
Frederick S. Samp, Clerk

NOTE:     This form  should not be used if any class of shares  entitled to vote
          as a separate  class for any of the reasons set out in 806, or because
          the articles so provide. For vote necessary for adoption see 805.

- ------------------------------------
 *       To be completed only if Exhibit A or B do not give this required
         information.

**       The name of the corporation  should be typed,  and the document must be
         signed by (1) Clerk or (2) by the President of a vice-president  and by
         the  Secretary or an assistant  secretary or such other  officer as the
         bylaws may designate as a second certifying officer or (3) if there are
         no  such  officers,  then by a  majority  of the  Directors  or by such
         Directors as may be designated by majority of Directors  then in office
         or (4) if there are not such Directors, then by the holders, or such of
         them as may be  designated  by the holders,  of record of a majority of
         all  outstanding  shares entitled to vote thereon or (5) by the holders
         of all of the outstanding shares of the corporation.

FORM NO. MBCA-9A


<PAGE>

                                                                       EXHIBIT A

                          BANGOR HYDRO-ELECTRIC COMPANY

                     AMENDMENTS TO ARTICLES OF INCORPORATION

                  ADOPTED AT THE ANNUAL MEETING OF STOCKHOLDERS

                                 ON MAY 21, 1986

                                   ARTICLE I.

                               BOARD OF DIRECTORS

     A. The business  and affairs of the Company  shall be managed by a Board of
Directors  consisting of not less than nine nor more than fifteen  persons.  The
exact  number of Directors  within the  limitations  specified in the  preceding
sentence shall be fixed from time to time by the Board of Directors  pursuant to
a  resolution  adopted by a majority of the  Continuing  Directors  (hereinafter
defined).  Until  otherwise  fixed by the  Board of  Directors  pursuant  to the
preceding  sentence,  the number of Directors  shall be nine. The Directors need
not be elected by ballot unless required by the By-Laws of the Company.

     The Board of Directors  shall be divided into three classes as nearly equal
in number as may be. The  initial  term of office of each  Director in the first
class shall expire at the annual  meeting of  shareholders  in 1987; the initial
term of office of each  Director in the second  class shall expire at the annual
meeting of shareholders in 1988; and the initial term of office of each Director
in the third class shall expire at the annual meeting of  shareholders  in 1989.
At each annual  election  commencing at the annual  meeting of  shareholders  in
1987, the  successors to the class of Directors  whose term expires at that time
shall be elected to hold office for a term of three years to succeed those whose
term expires, so that the term of one class of Directors shall expire each year.
Each  Director  shall  hold  office  for the term for  which  he is  elected  or
appointed  and until his  successor  shall be elected and qualified or until his
death, or until he shall resign or be removed.

     In the  event of any  increase  or  decrease  in the  authorized  number of
Directors, (i) each Director then serving as such shall nevertheless continue as
a  director  of the class of which he is a member  until the  expiration  of his
current term, or his earlier resignation, removal from office or death, and (ii)
the newly created or eliminated  directorships  resulting  from such increase or
decrease shall be apportioned by the Board of Directors  among the three classes
of Directors so as to maintain such classes as nearly equal in number as may be.

     B.  Newly  created  directorships   resulting  from  any  increase  in  the
authorized  number of  Directors  or any  vacancies  on the  Board of  Directors
resulting from death, resignation,  retirement,  disqualification,  removal from

<PAGE>

office  or other  cause  shall be filled by a  majority  vote of the  Continuing
Directors  then in office,  or a sole remaining  Director,  although less than a
quorum,  and  Directors so chosen  shall hold office for a term  expiring at the
annual meeting of shareholders at which the term of the class to which they have
been  elected  expires.  If one or more  Directors  shall  resign from the Board
effective  as of a future  date,  such  vacancy  or  vacancies  shall be  filled
pursuant to the provisions  hereof,  and such new  directorship(s)  shall become
effective when such resignation or resignations shall become effective, and each
Director so chosen shall hold office as herein  provided in the filling of other
vacancies.

     C. Any Director or the entire Board of Directors  may be removed;  however,
unless such  removal is for cause and is approved as set forth in this  Section,
the  affirmative  vote of not less than 80% of the  voting  power of the  shares
entitled to vote thereon shall be required to effect such removal. Except as may
otherwise be provided by law, cause for removal shall be construed to exist only
if:

          1. the Director whose removal is proposed has been convicted, or where
     a  Director  was  granted  immunity  to  testify  where  another  has  been
     convicted,  of a  felony  by a court  of  competent  jurisdiction  and such
     conviction is no longer subject to direct appeal;

          2. such Director has been grossly  negligent in the performance of his
     duties to the Company; or

          3.  such  Director  has  been  adjudicated  by a  court  of  competent
     jurisdiction to be mentally incompetent, which mental incompetency directly
     affects his ability as a Director of the Company,  and such adjudication is
     no longer subject to direct appeal.

     Removal for cause, as cause is defined above,  must be approved by at least
a two-thirds vote of the voting power of the shares of the Company then entitled
to be voted at an election for that Director, and the action for removal must be
brought within three months of such conviction or adjudication.

     Notwithstanding the foregoing,  and except as otherwise provided by law, in
the event that  Preferred  Stock of the Company is issued and holders of any one
or more series of such  Preferred  Stock are  entitled,  voting  separately as a
class,  to elect one or more Directors of the Company to serve for such terms as
set forth in the Articles of Incorporation, the provisions of this Section shall
also apply,  in respect to the removal of the  Director or Directors so elected,
to the vote of the  holders of the  outstanding  shares of that class and not to
the vote of the outstanding shares as a whole.

     D. Notwithstanding the foregoing,  and except as otherwise provided by law,
in the event  that the  holders  (the  "Preferred  Stock  Class") of one or more

<PAGE>

series of the  Preferred  Stock of the Company shall be entitled to elect one or
more Directors of the Company  ("Preferred  Stock  Directors") to serve for such
terms as set forth in the Articles of  Incorporation,  the manner of election of
the  Board of  Directors  shall  be  unaffected,  except  to the  extent  herein
provided.  For each Preferred Stock Director which shall be elected the Board of
Directors  shall select from its members one Director (a  "Displaced  Director")
who shall,  for so long as the Preferred Stock Director shall remain a Preferred
Stock  Director,  be deemed to have  temporarily  vacated his or her office as a
Director of the Company.  The  Continuing  Directors,  by majority  vote,  shall
designate the member or members who shall be Displaced Directors. Such Displaced
Directors  shall  be  designated  initially  from  those  Directors  who are not
Continuing  Directors,  and  subsequently,  if  there  shall  not  have  been  a
sufficient number of Directors who are not Continuing Directors,  the balance of
the  Displaced  Directors  shall  be  selected  from  those  Directors  who  are
Continuing Directors.

                                   ARTICLE II

                MERGERS AND CERTAIN OTHER BUSINESS COMBINATIONS.

     A. Unless the Business Combination (as hereinafter defined) shall have been
approved by a majority vote of the Continuing Directors (as hereinafter defined)
(whether  such approval is made prior to or  subsequent  to the  acquisition  of
beneficial  ownership  of the Voting  Stock that caused the  Related  Person (as
hereinafter  defined)  to become a Related  Person,  then,  in  addition  to any
affirmative vote required by law or the Articles of Incorporation or the By-Laws
of the Company, a Business Combination shall require the affirmative vote of not
less than eighty  percent (80%) of the votes  entitled to be cast by the holders
of all of the then outstanding shares of Voting Stock (as hereinafter  defined),
voting  together  as a single  class.  Such  affirmative  vote shall be required
notwithstanding  the  fact  that  no vote  may be  required,  or  that a  lesser
percentage or separate  class vote may be specified,  by law or in any agreement
with any national securities exchange or otherwise.

     B. In  addition to the voting  requirements  set forth in Section A of this
Article  II,  unless the  Business  Combination  shall have been  approved  by a
majority of the Continuing Directors,  a Business Combination shall require that
all of the following  conditions be met with respect to every class or series of
outstanding Capital Stock (as hereinafter  defined),  whether or not the Related
Person  has  previously  acquired  beneficial  ownership  of  any  shares  of  a
particular class or series of Capital Stock:

     1. The aggregate  amount of cash and the Fair Market Value (as  hereinafter
defined),  as of the date of the  consummation of the Business  Combination,  of
consideration  other than cash to be received per share by the holders of Common

<PAGE>

Stock in such Business Combination shall be at least equal to the highest amount
determined under clauses (a), (b), (c) and (d) below:

          (a) (if  applicable)  the  highest  per  share  price  (including  any
     brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
     or on  behalf  of the  Related  Person  for any  share of  Common  Stock in
     connection  with  the  acquisition  by the  Related  Person  of  beneficial
     ownership  of any of its  holdings of Common  Stock,  as  adjusted  for any
     subsequent  stock split,  stock dividend,  subdivision or  reclassification
     with respect to Common Stock;

          (b) the Fair Market Value per share of Common Stock on the date of the
     first  public  announcement  of  the  proposed  Business  Combination  (the
     "Announcement  Date") or on the date on which the Related  Person  became a
     Related Person (the "Determination Date"), whichever is higher, as adjusted
     for  any   subsequent   stock  split,   stock   dividend,   subdivision  or
     reclassification with respect to Common Stock;

          (c) (if applicable) the price per share equal to the Fair Market Value
     per share of Common Stock determined pursuant to the immediately  preceding
     clause  (b),  multiplied  by the ratio of (x) the  highest  per share price
     (including  any  brokerage  commissions,   transfer  taxes  and  soliciting
     dealers'  fees) paid by or on behalf of the Related Person for any share of
     Common Stock in connection  with the  acquisition  by the Related Person of
     beneficial  ownership of any of its holdings of Common  Stock,  as adjusted
     for  any   subsequent   stock  split,   stock   dividend,   subdivision  or
     reclassification  with respect to Common Stock to (y) the Fair Market Value
     per share of Common Stock immediately  prior to the initial  acquisition of
     any  share of Common  Stock by such  Related  Person  (as  determined  by a
     majority of the Continuing Directors), as adjusted for any subsequent stock
     split, subdivision or reclassification with respect to Common Stock; and

          (d) the  Company's  net income per share of Common  Stock for the four
     full  consecutive  fiscal quarters  immediately  preceding the Announcement
     Date, multiplied by the higher of the then price/earnings multiple (if any)
     of such  Related  Person  or the  highest  price/earnings  multiple  of the
     Company within the two-year period  immediately  preceding the Announcement
     Date  (such  price/earnings   multiples  being  determined  as  customarily
     computed and reported in the financial community).

     2. The aggregate  amount of cash and Fair Market  Value,  as of the date of
the date of the consummation of the Business Combination, of consideration other
than cash to be  received  per share by holders of shares of any class or series

<PAGE>

of  outstanding  Capital  Stock,  shall be at least equal to the highest  amount
determined under clauses (a), (b), (c) and (d) below:

          (a) (if  applicable)  the  highest  per  share  price  (including  any
     brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
     or on behalf  of the  Related  Person  for any  share of  Capital  Stock in
     connection  with  the  acquisition  by the  Related  Person  of  beneficial
     ownership  of any of its  holdings  of such  class  of  Capital  Stock,  as
     adjusted for any subsequent  stock split,  stock  dividend,  subdivision or
     reclassification with respect to such class or series of Capital Stock;

          (b) the Fair Market Value per share of such class or series of Capital
     Stock on the Announcement Date or on the Determination  Date,  whichever is
     higher,  as  adjusted  for any  subsequent  stock  split,  stock  dividend,
     subdivision  or  reclassification  with  respect to such class or series of
     Capital Stock;

          (c) (if applicable) the price per share equal to the Fair Market Value
     per share of such class or series of Capital Stock  determined  pursuant to
     the immediately  preceding  clause (b),  multiplied by the ratio of (x) the
     highest per share price  (including  any  brokerage  commissions,  transfer
     taxes and  soliciting  dealers'  fees) paid by or on behalf of the  Related
     Person for any share of such class or series of Capital Stock in connection
     with the  acquisition by the Related Person of beneficial  ownership of any
     of its holdings of such class or series of Capital  Stock,  as adjusted for
     any subsequent stock split, stock dividend, subdivision or reclassification
     with  respect  to such  class or  series of  Capital  Stock to (y) the Fair
     Market Value per share of such class or series of Capital Stock immediately
     prior to the  initial  acquisition  of any share of such class or series of
     Capital Stock (as determined by a majority of the Continuing Directors), as
     adjusted for any subsequent  stock split,  stock  dividend,  subdivision or
     reclassification with respect to such class or series of Capital Stock; and

          (d) (if applicable) the highest preferential amount per share to which
     the  holders of shares of such class or series of  Capital  Stock  would be
     entitled  in  the  event  of  any  voluntary  or  involuntary  liquidation,
     dissolution  or winding  up of the  affairs of the  Company  regardless  of
     whether the Business  Combination  to be  consummated  constitutes  such an
     event.

     3. The consideration to be received by the holders of each particular class
or series of outstanding Capital Stock of the Company in a Business  Combination
shall be (a) in cash or (b) if the shares of any  particular  class or series of
the Capital Stock of the Company  beneficially owned by the Related Person shall

<PAGE>

have been  acquired for a  consideration  in a form other than cash, in the same
form and of the same  kind as the  consideration  used to  acquire  the  largest
number of shares of such class or series  previously  acquired and  beneficially
owned by he Related Person.

     4.  After  the  Determination  Date and prior to the  consummation  of such
Business Combination:

          (a) except as  approved  by a majority  of the  Continuing  Directors,
     there  shall have been no failure to declare  and pay at the  regular  date
     therefor any full quarterly  dividends (whether or not cumulative)  payable
     in accordance with the terms of any outstanding Capital Stock;

          (b) there shall have been no reduction in the annual rate of dividends
     paid on the Common  Stock  (except as necessary to reflect any stock split,
     stock dividend or subdivision of the Common Stock), except as approved by a
     majority of the continuing Directors;

          (c) there shall have been an increase in the annual rate of  dividends
     paid on the  Common  Stock as  necessary  to reflect  any  reclassification
     (including any reverse stock split),  recapitalization,  reorganization  or
     any  similar  transaction  that has the  effect of  reducing  the number of
     outstanding shares of Common Stock,  unless the failure so to increase such
     annual rate is approved by a majority of the Continuing Directors:

          (d) such Related Person shall not have become the beneficial  owner of
     any  additional  shares of Capital Stock except as part of the  transaction
     that results in such Related Person becoming a Related Person and except in
     a transaction that would not result in any increase in the Related Person's
     percentage of any class or series of Capital Stock; and

          (e) the  Related  Person  shall  have taken  steps to ensure  that the
     Company's  Board of  Directors  included  at all  times  representation  by
     Continuing  Directors  proportionate  to the ratio that the  Capital  Stock
     which from time to time are owned by persons other than the Related  Person
     bear to all Capital  Stock  outstanding  at such  respective  times (with a
     Continuing Director to occupy any resulting fractional Board position).

     5. A proxy or information  statement complying with the requirements of the
Securities  Exchange  Act of  934,  as  amended  (the  "Exchange  Act"),  or any
successor thereto,  shall have been mailed to all shareholders of the Company at
least 45 days prior to the consummation of the Business  Combination (whether or
not such proxy or information statement is required to be mailed pursuant to the
Exchange  Act or  subsequent  provisions)  unless such  requirement  for a proxy

<PAGE>

statement  is waived by a vote of a majority of the  Continuing  Directors.  The
proxy statement shall contain:

          (a) at the front thereof,  in a prominent place any recommendations as
     to the advisability (or  inadvisability) of the Business  Combination which
     the  Continuing  Directors,  or any of them, may have furnished in writing;
     and

          (b) if deemed advisable by a majority of the Continuing Directors,  an
     opinion of a reputable  investment banking firm as to the fairness (or lack
     of fairness) of the terms of such Business  Combination,  from the point of
     view of the holders of the  Company's  Capital Stock other than any Related
     Person  (such  investment  banking firm to be selected by a majority of the
     Continuing Directors, to be a firm which has not previously been associated
     with or rendered  services to or acted as manager of an  underwriting or as
     an agent for a Related  Person,  to be furnished  with all  information  it
     reasonably requests and to be paid a reasonable fee for its services by the
     Company upon receipt by the Company of such opinion).

     6. After such Related Person has acquired ownership of not less than 10% of
the  outstanding  shares of any class or series of Capital  Stock of the Company
and prior to the consummation of such Business Combination,  such Related Person
shall not have:

          (a)   received   the   benefit,   directly   or   indirectly   (except
     proportionately  as a  shareholder)  of any  loans,  advances,  guarantees,
     pledges  or  other  financial  assistance,  or tax  credits  or  other  tax
     advantages provided by the Company,

          (b) made any  material  changes in the  Company's  business  or equity
     capital   structure  or  entered   into  any   contract,   arrangement   or
     understanding with the Company except any change, contract,  arrangement or
     understanding  as may have been  approved by a majority  of the  Continuing
     Directors, or

          (c) used any  asset of the  Company  as  collateral,  or  compensating
     balances,  directly  or  indirectly,  for any  obligation  of such  related
     Person.

C. As used in this Article II, the following definitions shall apply:

     1. The terms "Affiliate" and "Associate" shall have the respective meanings
ascribed  to such terms in Rule 12b-2 under the Act as in effect on May 21, 1986
(the "Effective Date") (the term "registrant" in said Rule 12b-2 meaning in this
case the Company).

     2. A person shall be a  "beneficial  owner" of any Capital  Stock (a) which
such person or any of its Affiliates or Associates  beneficially owns,  directly

<PAGE>

or indirectly (b) which such person or any of its Affiliates or Associates  has,
directly  or  indirectly,  (i) the  right  to  acquire  (whether  such  right is
exercisable immediately or subject only to the passage of time), pursuant to any
agreement,  arrangement  or  understanding  or upon the  exercise of  conversion
rights,  exchange rights, warrants or option, or otherwise, or (ii) the right to
vote pursuant to any agreement,  arrangement or understanding;  or (c) which are
beneficially owned, directly or indirectly,  by any other person with which such
person or any of its Affiliates or Associates has any agreement,  arrangement or
understanding for the purpose of acquiring,  holding, voting or disposing of any
shares of Capital Stock.  For the purposes of determining  whether a person is a
Related  Person  pursuant to Paragraph 8 of this Section C, the number of shares
of  Capital  Stock  deemed  to  be  outstanding   shall  include  shares  deemed
beneficially  owned by such person  through  application  of this Paragraph 2 of
Section C, but shall not include any other  shares of Capital  Stock that may be
issuable  pursuant  to any  agreement,  arrangement  or  understanding  or  upon
exercise of conversion rights, warrant or options, or otherwise.

     3. The term "Business Combination" shall mean:

          (a) any merger or  consolidation  or share  exchange of the Company or
     any Subsidiary (as hereinafter defined) with (i) any Related Person or (ii)
     any other  company  (whether  or not itself a Related  Person)  which is or
     after such merger or  consolidation  would be an Affiliate (as such term is
     hereinafter  defined) or Associate (as such term is hereinafter defined) of
     a Related Person, in each case irrespective of which corporation or company
     is the surviving entity; or

          (b) any sale, lease,  exchange,  mortgage,  pledge,  transfer or other
     disposition or security arrangement,  investment loan, advance,  guarantee,
     agreement to purchase, agreement to pay, extension of credit, joint venture
     participation  or other  arrangement  (in one  transaction  or a series  of
     transactions)  with,  to or for the  benefit of any  Related  Person or any
     Affiliate  or  Associate  of  any  Related  Person  involving  any  assets,
     securities or  commitments  of the Company,  any  Subsidiary or any Related
     Person or any  Affiliate  or  Associate  of any  Related  Person  having an
     Aggregate  Fair Market  Value and/or  involving  aggregate  commitments  of
     $5,000,000 or more or constituting more than five percent of the book value
     of the  total  assets  (in the case of  transactions  involving  assets  or
     commitments  other than Capital Stock) or five percent of the shareholders'
     equity  (in the case of  transactions  in  Capital  Stock) of the entity in
     question (the  "Substantial  Part"), as reflected in the most recent fiscal
     year-end consolidated balance sheet of such entity existing at the time the
     shareholders  of the Company  would be required to approve or authorize the
     Business  Combination  involving the assets,  securities and/or commitments
     constituting any Substantial Part; or


<PAGE>

          (c) the issuance or transfer by the Company or any  Subsidiary (in one
     transaction or a series of related  transactions)  of any securities of the
     Company  or any  Subsidiary  to any  Related  Person  or any  Affiliate  or
     Associate  thereof (other than an issuance or transfer of securities  which
     is effected on a pro rata basis to all shareholders of the Company); or

          (d) the  adoption  of any  plan or  proposal  for the  liquidation  or
     dissolution  of the  Company  proposed  by or on behalf of, or voted for or
     consented to by, a Related Person or Affiliate or Associate thereof; or

          (e) any  reclassification  of securities  (including any reverse stock
     split) or  recapitalization or reorganization of the Company, or any merger
     or  consolidation  of the Company with any of its Subsidiaries or any other
     transaction  (whether  or not with a  Related  Person or any  Affiliate  or
     Associate  thereof)  that  has  the  effect,  directly  or  indirectly,  of
     increasing the proportionate  share of any class or series of Capital Stock
     or of any securities of a Subsidiary,  or any securities  convertible  into
     Capital  Stock  or  into  equity  securities  of any  Subsidiary,  that  is
     beneficially  owned by any Related  Person or any Affiliate or Associate of
     any Related Person; or

          (f) any other transaction or series of transactions that is similar in
     purpose  or effect  to, or any  agreement,  contract  or other  arrangement
     providing  for any one or more of, the actions  specified in the  foregoing
     clauses (a) through (e).

     4. The term  "Capital  Stock"  shall mean all capital  stock of the Company
authorized to be issued from time to time under the Articles of Incorporation of
the Company, as such may be amended from time to time.

     5.  The  term  "Continuing  Director"  means  any  member  of the  Board of
Directors,  while such person is a member of the Board of Directors,  who is not
an  Affiliate or Associate  or  representative  of the Related  Person and was a
member  of the Board of  Directors  prior to the time  that the  Related  Person
became a Related Person, and any successor of a Continuing Director,  while such
successor  is a member of the Board of  Directors,  who is not an  Affiliate  or
Associate or  representative of the Related Person and is recommended or elected
to succeed the Continuing Director by a majority of Continuing Directors then in
office.

     6. The term "Fair Market  Value" means (a) in the case of cash,  the amount
of such cash;  (b) in the case of stock,  the highest  closing sale price during
the 30-day period immediately  preceding the date in question of a share of such
stock on the Composite Tape for New York Stock  Exchange-Listed  Stocks,  or, if

<PAGE>

such stock is not quoted on the Composite  Tape, on the New York Stock Exchange,
or, if such stock is not listed on such Exchange, on the principal United States
securities  exchange  registered under the Act on which such stock is listed, or
if such  stock is not  listed on any such  exchange,  the  highest  closing  bid
quotation  with  respect  to a share of such  stock  during  the  30-day  period
preceding  the  date in  question  on the  National  Association  of  Securities
Dealers,  Inc. Automated Quotations System or any similar system then in use, or
if no such  quotations  are  available,  the  fair  market  value on the date in
question of a share of such stock as determined by a majority of the  Continuing
Directors  in good  faith;  and (c) in the case of  property  other than cash or
stock,  the fair  market  value of such  property  on the  date in  question  as
determined in good faith by a majority of the Continuing Directors.

     7. The term  "person"  shall mean any  individual,  firm,  company or other
entity and shall include any group  comprised of any person and any other person
with whom such  person or any  Affiliate  or  Associate  of such  person has any
agreement, arrangement or understanding, directly or indirectly, for the purpose
of acquiring, holding voting or disposing of Capital Stock.

     8. The term  "Related  Person"  shall  mean any  person,  or  Associate  or
Affiliate  thereof  (other than the Company or any Subsidiary and other than and
profit-sharing,  employee stock ownership or other employee  benefit plan of the
Company or any  Subsidiary  or any trustee of or  fiduciary  with respect to any
such plan when acting in such capacity) who (a) is the  beneficial  owner of (i)
ten percent (10%) or more of the then outstanding  shares of any class of Voting
Stock or (ii) Voting Stock  representing  ten percent (10%) or more of the votes
entitled to be cast by the holders of all the then outstanding  shares of Voting
Stock (any such ten percent (10%)  ownership to be hereinafter  referred to as a
"Ten Percent Interest");  or (b) is an Affiliate or Associate of the Company and
at any  time  within  the  five  year  period  immediately  prior to the date in
question  was the  beneficial  owner  of a Ten  Percent  Interest;  or (c) is an
assignee of or has otherwise succeeded to any shares of Capital Stock which were
at any time within five years prior to the date in question  beneficially  owned
by any Related Person,  and such assignment or succession shall have occurred in
the course of a  transaction  or series of  transactions  not involving a public
offering within the meaning of the Securities Act of 1933.

     9. The term  "Subsidiary"  means any corporation of which a majority of any
class of equity  security  (as defined in Rule 3a11-1 under the Act as in effect
on the Effective Date) is beneficially owned by the Company; provided,  however,
that for the purposes of the definition of Related Person set forth in Paragraph
8 of this  Section C, the term  "Subsidiary"  shall mean only a  corporation  of
which a majority of each class of equity security is  beneficially  owned by the
Company.

<PAGE>

     10. The term "Voting  Stock" shall mean all Capital Stock which by its term
may be voted on all matters submitted to shareholders of the Company generally.

     11. In the event of any Business Combination in which the Company survives,
the phrase  "consideration other than cash to be received" as used in Paragraphs
1 and 2 of Section B of this Article II shall include the shares of Common Stock
and/or the shares of any other class or series of Capital Stock  retained by the
holders of such shares.

     D. A majority of the Continuing  Directors shall have the power and duty to
determine for the purposes of this Article II, on the basis of information known
to them after reasonable inquiry,  (a) whether a person is a Related Person, (b)
the number of shares of Capital Stock or other securities  beneficially owned by
any person,  (c) whether a person is an Affiliate  or Associate of another,  (d)
whether the assets that are the subject of any Business Combination have, or the
consideration  to be received for the issuance or transfer of  securities by the
Company or any  Subsidiary in any Business  Combination  has, an aggregate  Fair
Market Value of  $5,000,000 or more,  (e) whether the assets or securities  that
are the subject of any Business  Combination  constitute a Substantial part, (f)
whether a person has an agreement,  arrangement or understanding with another as
to the matters  referred to in  Paragraph 6 of Section C of this Article II, and
(g) any other matters with respect to which a  determination  is required  under
this Article II. Any such  determination made in good faith shall be binding and
conclusive on all parties.

     E.  Nothing  contained in this Article II shall be construed to relieve any
Related Person from any fiduciary obligation imposed by law.

     F. The fact that any Business  Combination  complies with the provisions of
Section B of this  Article II shall not be  construed  to impose  any  fiduciary
duty,  obligation or  responsibility  on the Board of  Directors,  or any member
thereof,  to approve such Business  Combination  or to recommend its adoption or
approval to the  shareholders of the Company,  nor shall such compliance  limit,
prohibit  or  otherwise  restrict in any manner the Board of  Directors,  or any
member thereof,  with respect to evaluations or actions and responses taken with
respect to such Business Combination.

                                   ARTICLE III

                   FACTORS TO BE CONSIDERED IN CONNECTION WITH
          PROPOSALS FOR MERGERS AND CERTAIN OTHER BUSINESS COMBINATIONS

     The Board of Directors,  in evaluating any proposal by another party to (a)
make a tender or exchange  offer for any  securities of the Company,  (b) effect

<PAGE>

Business  Combination  (as  defined  in  Article  II),  or (c)  effect any other
transaction  having an effect upon the properties,  operations or control of the
Company  similar to a tender or exchange offer or Business  Combination,  as the
case  may be,  whether  by a  Related  Person  (as  defined  in  Article  II) or
otherwise, may, in connection with the exercise of its judgment as to what is in
the best interests of the Company and its  shareholders,  give due consideration
to the following:

          A. the consideration to be received by the Company or its shareholders
     in  connection  with  such  transaction  in  relation  not only to the then
     current  market  price for the  outstanding  Capital  Stock (as  defined in
     Article II) of the  Company,  but also to the market  price for the Capital
     Stock of the Company over a period of years, the estimated price that might
     be  achieved  in a  negotiated  sale of the  Company  as a whole or in part
     through  orderly  liquidation,  the  premiums  over  market  price  for the
     securities  of  other   corporations  in  similar   transactions,   current
     political,  economic and other factors bearing on securities prices and the
     Company's  financial  condition,  future  prospects  and future value as an
     independent corporation;

          B. the character, integrity and business philosophy of the other party
     or parties to the transaction and the management of such party or parties;

          C. the business and financial conditions and earnings prospects of the
     other party or parties to the transaction,  including,  but not limited to,
     debt service and other  existing or likely  financial  obligations  of such
     party or  parties,  the  intention  of the other  party or  parties  to the
     transaction  regarding  the use of the assets of the Company to finance the
     acquisition,  and the possible  effect of such  conditions upon the Company
     and its subsidiaries and the other elements of the communities in which the
     Company and its subsidiaries operate or are located;

          D. the projected  social,  legal and economic  effects of the proposed
     action or transaction upon the Company or its subsidiaries,  its employees,
     suppliers,  customers  and others  having  similar  relationships  with the
     Company,  and the communities in which the Company and its  subsidiaries do
     business;

          E. the general  desirability  of the  continuance of the Company as an
     independent entity; and

          F. such  other  factors as the  Continuing  Directors  (as  defined in
     Article II) may deem relevant.


<PAGE>



                                   ARTICLE IV.

                                   AMENDMENTS.

     Notwithstanding  any other  provisions of the Articles of  Incorporation or
the  By-Laws  of the  Company  (and  notwithstanding  the  fact  that  a  lesser
percentage  or separate  class vote may be  specified  by law,  the  Articles of
Incorporation  or the  By-Laws  of the  Company),  the  affirmative  vote of the
holders of not less than eighty  percent (80%) of the votes  entitled to be cast
by the  holders  of all the then  outstanding  shares  of Voting  Stock,  voting
together as a single  class shall be  required  to amend,  change or repeal,  or
adopt  any  provisions   inconsistent  with,  or  which  modify  or  permit  the
circumvention of, these Articles I, II, III and IV; provided, however, that this
Article IV shall not apply to, and such eighty  percent  (80%) vote shall not be
required  for,  any  amendment,  change,  repeal or  adoption  recommended  by a
majority of the Continuing Directors.


<PAGE>



For use by the
Secretary of State

                            STATE OF MAINE             MAINE
File No. 19240001D
         19260012D     ARTICLES OF MERGER OF     SECRETARY OF STATE
Fee Paid $25.00        STONINGTON & DEER ISLE          FILED
C.B.     -----             POWER COMPANY          November 23, 1987
Date:    2-8-88        (A MAINE CORPORATION)           Agent
                                INTO
                    BANGOR HYDRO-ELECTRIC COMPANY
                        (A MAINE CORPORATION)

Pursuant  to 13-A  MRSA  903,  the  Board  of  Directors  of each  participating
corporation  approve  and the  undersigned  corporations,  adopt  the  following
Articles of Merger:

     FIRST:  The plan of merger is set forth in  Exhibit A  attached  hereto and
made a part thereof.

     SECOND:  As to each  corporation,  the  shareholders of which voted on such
plan of  merger,  the  number of  shares  outstanding  and the  number of shares
entitled  to vote on such  plan,  and the  number of such  shares  voted for and
against the plan as follows:

 Name of       No. of Shares    No. of Shares        Voted     Voted
Corporation       Outstanding   Entitled to Vote     For       Against
- ------------      ------------  -----------------    -----     --------
Stonington &               40                 40        40           0
 Deer Isle
 Power Company

     THIRD:  If the shares of any class were  entitled  to vote as a class,  the
designation  and number of the  outstanding  shares of each such class,  and the
number of  shares of each such  class  voted for and  against  the plan,  are as
follows:

 Name of          No. of Shares      No. of Shares       Voted     Voted
Corporation       Outstanding        Entitled to Vote    For       Against
- ------------      ------------      ----------------     -----     --------
  N/A

               (Include the following paragraph if the merger was
             authorized without the vote of the shareholders of the
                 surviving corporation. Omit if not applicable.)

     FOURTH:  The plan of merger was  adopted by the  participating  corporation
which is to become the surviving  corporation  in the merger without any vote of
its shareholders, pursuant to section 902, subsection 5. The number of shares of
each class  outstanding  immediately  prior to the effective date of the merger,
and the  number of shares of each  class  outstanding  immediately  prior to the
effective  date of the  merger,  and the  number of  shares of each  class to be
issued or delivered pursuant to the plan or merger of the surviving  corporation
are set forth as follows:
<PAGE>


                              Number of Shares      Number of Shares
                                Outstanding          to be Issued
                              Immediately Prior      or Delivered
Designation                     to Effective          Pursuant to
 of Class                      Date of Merger         the Merger
- ----------------          ----------------------    ---------------
Common                           4,450,684                  0

7% Preferred                        25,000                  0

4 1/4 % Preferred                    4,840                  0

4% Preferred                        17,500                  0

     FIFTH:  The address of the registered  office in Maine of Stonington & Deer
Isle Power Company, herein designated as the merged corporation, is Main Street,
Sunset, Maine 04683.

     The  address  of the  registered  office in Maine of Bangor  Hydro-Electric
Company, herein designated as the surviving corporation,  is 33 State Street, PO
Box 932, Bangor, Maine 04041.

     SIXTH:  Effective  date of the  merger  (if  other  than  date of filing of
Articles) is . (Cannot exceed 60 days subsequent to filing date of articles, see
905, sub-1.)

         Dated:  November 23, 1987

                           Bangor Hydro-Electric Company
                              (name of corporation)
                           By \ss\ Frederick S. Samp
                                Frederick S. Samp, Clerk
                           Stonington & Deer Isle Power Company
                                 (name of corporation)
                           By \ss\ Robert L. Platt
                                Robert L. Platt, Clerk


<PAGE>



I certify  that I have  custody of the minutes  showing the above  action by the
shareholders of Stonington & Deer Isle Power Company.

\ss\  Robert L. Platt
   Robert L. Platt, Clerk

- ------------------------------------
 *       The name of the corporation  should be typed,  and the document must be
         signed by (1) Clerk or (2) by the President of a vice-president  and by
         the  Secretary or an assistant  secretary or such other  officer as the
         bylaws may designate as a second certifying officer or (3) if there are
         no  such  officers,  then by a  majority  of the  Directors  or by such
         Directors as may be designated by majority of directors  then in office
         or (4) if there are not such directors, then by the holders, or such of
         them as may be  designated  by the holders,  of record of a majority of
         all  outstanding  shares entitled to vote thereon or (5) by the holders
         of all of the outstanding shares of the corporation.

FORM NO. MBCA-10


<PAGE>



                                                                       EXHIBIT A

                          AGREEMENT AND PLAN OF MERGER

         AGREEMENT  AND  PLAN  OF  MERGER,   dated  as  of  May  12,  1987  (the
"Agreement")  between  BANGOR   HYDRO-ELECTRIC   COMPANY,  a  Maine  corporation
("Bangor"),  and  STONINGTON  & DEER ISLE  POWER  COMPANY,  a Maine  corporation
("Stonington").

         WHEREAS,  the Boards of  Directors of Bangor and  Stonington  have each
determined that it is in the best interests of their respective stockholders for
Stonington  to merge with and into  Bangor  (the  "Merger"),  upon the terms and
subject to the conditions set forth herein;

NOW, THEREFORE, the parties hereto agree as follows:

                                    ARTICLE I

                                   THE MERGER

     Section  1.1.  The  Merger.  On the  Effective  Date (as defined in Section
1.2.),  Stonington  shall be merged with and into Bangor in accordance  with the
applicable  provisions  of the  law of the  State  of  Maine  and  the  separate
existence of Stonington shall cease. Bangor, as the surviving corporation in the
Merger,  shall continue its corporate  existence under its present name pursuant
to the laws of the State of Maine.

     Section  1.2.   Effective  Date.  As  promptly  as  practicable  after  the
satisfaction  or waiver of the  conditions  set forth in Article V, the  parties
hereto  shall cause the Merger to be  consummated  by filing  Articles of Merger
with the Secretary of State of the State of Maine,  in such form as required by,
and executed in accordance  with the relevant  provisions of Maine law (the date
of such filing being the "Effective Date").

     Section 1.3. Subsequent Actions.  If, at any time after the Effective Date,
Bangor shall consider or be advised that any deeds, bills of sale,  assignments,
assurances  or any other  actions or things are  necessary or desirable to vest,
perfect or confirm of record or otherwise in Bangor its right, title or interest
in, to or under any of the rights,  properties or assets of Stonington  acquired
or to be acquired by Bangor as a result of, or in connection with, the Merger or
otherwise to carry out this  Agreement,  the  officers  and  directors of Bangor
shall be  authorized  to  execute  and  deliver,  in the name and on  behalf  of
Stonington,  all such deeds,  bills of sale,  assignments  and assurances and to
take and do, in the name and on behalf of Stonington, all such other actions and
things as may be necessary or desirable to vest,  perfect or confirm any and all
right, title and interest in, to and under such rights,  properties or assets in
Bangor or otherwise to carry out this Agreement.


<PAGE>

     Section 1.4.  Articles of  Incorporation.  The Articles of Incorporation of
Bangor as in effect on the Effective  Date shall  continue to be the Articles of
Incorporation of Bangor.

     Section 1.5.  By-Laws.  The By-Laws Of Bangor as in effect on the Effective
Date shall continue to be the By-Laws of Bangor.

     Section 1.6.  Directors and Officers.  The directors and officers of Bangor
as of the  Effective  Date shall  continue to serve as directors and officers in
accordance with the By-Laws of Bangor.

     Section 1.7.  Conversion of Shares.  As of the Effective Date, by virtue of
the  Merger and  without  any action on the part of the  holders  thereof,  each
outstanding share of common stock of Stonington (other than Dissenting Shares as
defined  in Section  1.8) shall be  cancelled  and  converted  into the right to
receive from Bangor a sum in cash to be computed as follows: 1) a fraction,  the
numerator of which is the total common  equity of  Stonington as of the last day
of the month next preceding the month in which the Effective Date falls, and the
denominator  of which is the  number of  outstanding  shares of common  stock of
Stonington as of the Effective  Date;  plus 2) S40,000  divided by the number of
outstanding shares of common stock of Stonington as of the Effective Date. Total
common  equity shall be determined  from the books of Stonington  subject to the
right of Bangor to confirm the amount by an independent audit.

     Section  1.8.  Dissenting  Shares.  Notwithstanding  any  provision of this
Agreement to the  contrary,  any share of common stock of  Stonington  held by a
holder who has  demanded  payment  of the fair value of his share in  accordance
with Maine law and as of the Effective  Date has neither  effectively  withdrawn
nor lost his  right to make  such  demand  ("Dissenting  Shares"),  shall not be
converted into or represent a right to receive cash pursuant to Section 1.7, but
the holder thereof shall only be entitled to such rights as are granted by Maine
law.

     Section  1.9.  Surrender  of  Shares.  Each  holder  of  a  certificate  or
certificates  representing  any shares  cancelled  upon the Merger  pursuant  to
Section 1.7. may on or after the Effective Date  surrender  such  certificate or
certificates  to the Assistant  Treasurer of Bangor or his designee for a period
of one  year  after  the  Effective  Date.  At the time of such  surrender,  the
Assistant  Treasurer  of  Bangor or his  designee  shall  make the cash  payment
specified in Section 1.7. Stonington agrees that it shall cause the distribution
to holders of record of common  stock as of the  Effective  Date of  appropriate
materials to facilitate such surrender.


<PAGE>



                                   ARTICLE II

                  REPRESENTATIONS AND WARRANTIES OF STONINGTON

     Stonington represents and warrants to Bangor as follows:

     Section 2.1.  Corporate  Organization.  Stonington  is a  corporation  duly
organized,  validly existing and in good standing under the laws of the State of
Maine and has the  requisite  corporate  power and  authority  and any necessary
governmental  authority to own, operate or lease the properties that it purports
to own,  operate  or  lease  and to  carry on its  business  as it is now  being
conducted.

     Section  2.2.  Authority  Relative to this  Agreement.  The  execution  and
delivery of this Agreement by Stonington and the  consummation  by Stonington of
the transactions  contemplated hereby have been duly authorized by all necessary
corporate  action  on the part of  Stonington  and,  subject  to  obtaining  any
necessary  stockholder  approval of the Merger, no other corporate proceeding is
necessary for the execution and delivery of this  Agreement by  Stonington,  the
performance by Stonington of its obligations  hereunder and the  consummation by
Stonington of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Stonington and constitutes a legal,  valid and binding
obligation of Stonington,  enforceable  against it in accordance  with its terms
subject  to  laws  affecting  the  enforcement  of  creditors'  rights  and  the
availability of equitable remedies.

     Section 2.3. No Conflict.  The execution and delivery of this  Agreement by
Stonington do not, and the performance of this Agreement by Stonington will not,
(a)  conflict  with or violate any law,  regulation,  court  order,  judgment or
decree  applicable  to  Stonington  by which any of their  property  is bound or
affected,  (b) violate or conflict with either the Articles of  Incorporation or
By-Laws of  Stonington,  or (c) result in any breach of or  constitute a default
(or an event which with notice or lapse of time or both would  become a default)
under, or give to others any rights of termination or cancellation of, or result
in the  creation of a lien or  encumbrance  of any of the  property or assets of
Stonington pursuant to, any contract,  instrument,  permit, license or franchise
to which  Stonington is a party or by which Stonington or any of its property is
bound or affected.

     Section 2.4. Required Filings and Consents.  Except for filings or consents
listed as conditions  precedent to the  obligations  of Stonington in Article V,
and except for  filing  and  recordation  of  appropriate  merger  documents  as
required by Maine Law,  Stonington is not required to submit any notice,  report
or other  filing  with any  governmental  authority,  domestic  or  foreign,  in
connection with the execution,  delivery or performance of this Agreement or the
consummation of the transactions  contemplated  hereby, and no waiver,  consent,

<PAGE>

approval or authorization of any governmental or regulatory authority,  domestic
or foreign,  is required to be obtained or made by Stonington in connection with
its execution, delivery or performance of this Agreement.

     Section 2.5. Common Stock of Stonington.  As of the date hereof, Stonington
has issued  and  outstanding  40 shares of common  stock,  $100 par  value.  All
outstanding shares of common stock of Stonington are duly and validly authorized
and  issued,  fully  paid and  nonassessable,  and none of such  shares has been
issued  in  violation  of  any  preemptive  rights  of  any  present  or  former
shareholders.  Stonington  has no  outstanding  securities  convertible  into or
exercisable  for its common stock and is not a party to any other  agreements of
any nature  whereby it may be  obligated  to issue  additional  shares of common
stock.

     Section 2.6. Liabilities, Debts, or Obligations. Stonington has no material
liabilities,  debts or obligations,  whether  accrued,  absolute,  contingent or
otherwise,  and  whether  due or to become  due,  which  have not been fully and
adequately disclosed to Bangor.

     Section  2.7.  Actions.  Suits or  Proceedings.  To the best  knowledge  of
management of  Stonington,  other than matters  pending  before the Maine Public
Utilities  Commission,  there are no actions,  suits or  proceedings  pending or
threatened  against or affecting  Stonington or any of its properties before any
court, arbitrator,  or governmental body which would, if determined adversely to
Stonington, have a material adverse effect on the financial condition,  business
or  operations  of  Stonington  or the  ability of  Stonington  to  perform  its
obligations under this Agreement.

     Section 2.8. Title to Properties.  Stonington has as of the date hereof and
as of the  Effective  Date  will have  good and  marketable  title to all of its
properties and assets,  free and clear of all restrictions,  conditions,  liens,
mortgages and encumbrances and similar claims, except as disclosed in writing to
Bangor.

     Section 2.9.  Brokers' or Finders'  Fees.  Stonington  has not incurred and
will not incur any brokers' or finders' fees in connection with the merger.

     Section 2.10. Tax Liabilities.  Stonington has filed all Federal, State and
local tax  returns  required  to be filed by it,  except  those for which  valid
extensions of time have been granted, and paid all taxes, assessments,  fees and
other  governmental  charges  imposed  upon  Stonington,  or  upon  any  of  its
properties,  income or franchises which are due and payable,  except such taxes,
if any, as are being  contested in good faith and as to which adequate  reserves
have been  provided.  Except as to taxes which may result from the  transactions
contemplated  by this  Agreement,  and taxes  related  to  contributed  property

<PAGE>

contributed  since January 1, 1987 for which no reserve has been  established or
exists  (although  such taxes will be reflected on the financial  statements for
the month next  preceding the month in which the Effective Date falls) all known
tax liabilities of Stonington are adequately provided for.

     Section 2.11. Employment or Similar Contracts. Stonington does not have any
employment,  bonus, pension or similar type contracts,  plans or agreements with
any persons.

     Section  2.12.  Books and  Records.  The books of  account  and  records of
Stonington   accurately  reflect  the  amount  and  nature  of  its  assets  and
liabilities and the transactions represented by such books of account and record
as of the date hereof and as of the  Effective  Date.  Such books of account and
records  constitute an accurate  basis upon which to determine the investment in
property  dedicated  to public  utility  service and to support the  appropriate
calculations for rate-making and Federal and State income tax purposes.

                                   ARTICLE III

                    REPRESENTATIONS AND WARRANTIES OF BANGOR

     Bangor represents and warrants to Stonington as follows:

     Section  3.1.  Corporate   Organization.   Bangor  is  a  corporation  duly
organized,  validly existing and in good standing under the laws of the State Of
Maine and has the  requisite  corporate  power and  authority  and any necessary
governmental  authority to own, operate or lease the properties that it purports
to own,  operate  or  lease  and to  carry on its  business  as it is now  being
conducted.

     Section  3.2.  Authority  Relative to this  Agreement.  The  execution  and
delivery  of this  Agreement  by Bangor  and the  consummation  by Bangor of the
transactions  contemplated  hereby have been duly  authorized  by all  necessary
corporate  action on the part of Bangor  and no other  corporate  proceeding  is
necessary  for the  execution  and  delivery of this  Agreement  by Bangor,  the
performance  by Bangor of the  obligations  hereunder  and the  consummation  by
Bangor of the  transactions  contemplated  hereby.  This Agreement has been duly
executed and  delivered  by Bangor and  constitutes  a legal,  valid and binding
obligation  of  Bangor,  enforceable  against it in  accordance  with its terms,
subject  to  laws  affecting  the  enforcement  of  creditors'  rights  and  the
availability of equitable remedies.

     Section 3.3. No Conflict.  The execution and delivery of this  Agreement by
Bangor do not,  and the  performance  of this  Agreement by Bangor will not, (a)
violate or conflict  with either the  Articles  of  Incorporation  or By-Laws of
Bangor,  or (b) result in any breach of or  constitute a default (or an event of
which with  notice or lapse of time or both would  become a default)  under,  or

<PAGE>

give to others any rights of  termination or  cancellation  of, or result in the
creation  of a lien or  encumbrance  on any of the  property or assets of Bangor
pursuant to, any  contract,  instrument,  permit,  license or franchise to which
Bangor  is a party  or by  which  Bangor  or any of its  property  is  bound  or
affected.

     Section 3.4. Required Filings and Consents.  Except for filings or consents
listed as conditions  precedent to the  obligations  of Bangor in Article V, and
except for filing and recordation of appropriate merger documents as required by
Maine Law,  Bangor is not required to submit any notice,  report or other filing
with any  governmental  authority,  domestic or foreign,  in connection with the
execution,  delivery or performance of this Agreement or the consummation of the
transactions   contemplated  hereby,  and  no  waiver,   consent,   approval  or
authorization of any governmental or regulatory authority,  domestic or foreign,
is required to be obtained or made by Bangor in connection  with its  execution,
delivery or performance of this Agreement

     Section 3.5.  Actions,  Suits or Proceedings.  To the best knowledge of the
management  of Bangor,  there are no actions,  suits or  proceedings  pending or
threatened  against  or  affecting  Bangor or any of its  properties  before any
court, arbitrator,  or governmental body which would, if determined adversely to
Bangor, have a material adverse effect on the financial  condition,  business or
operations of Bangor or the ability of Bangor to perform its  obligations  under
this Agreement.

                                   ARTICLE IV

                     CONDUCT OF BUSINESS PENDING THE MERGER

     Section  4.1.   Acquisition   Proposals.   Stonington  will  notify  Bangor
immediately  if any inquiries or proposals are received by, any  information  is
requested from, or any negotiations or discussions are sought to be initiated or
continued  with  Stonington,  in each case in connection  with any  acquisition,
business combination or purchase of all or any significant portion of the assets
of, or any equity interest in Stonington.

     Section  4.2.  Conduct  of  Business  of  Stonington  Pending  the  Merger.
Stonington  covenants and agrees that between the date of this Agreement and the
Effective Date, unless Bangor shall otherwise  consent in writing,  the business
of  Stonington  shall be conducted  only in, and  Stonington  shall not take any
action  except in, the ordinary  course of business  and in a manner  consistent
with  past  practice;  and  Stonington  will use its best  efforts  to  preserve
substantially intact the business organization of Stonington,  to keep available
the services of the present  officers,  employees and  consultants of Stonington
and  to  preserve  the  present  relationships  of  Stonington  with  customers,
suppliers  and other  persons with which  Stonington  has  significant  business
relations.

<PAGE>

         Section 4.3.  Provision of Records and  Information.  Stonington  shall
permit  representatives of Bangor to make such independent audit and examination
of its books,  contracts,  tax returns,  orders and other records and properties
and  shall  furnish  Bangor  with such  additional  information  as  Bangor  may
reasonably  request.  If for any reason this Merger is not  consummated,  Bangor
will not use  confidential  information  obtained from  Stonington in any manner
detrimental to Stonington  and will promptly  return to Stonington all materials
obtained during the course of any investigation.

     Section 4.4. Dividends. Stonington will not declare or pay any dividends on
any  outstanding   shares  or  purchase  any  such  shares  or  make  any  other
distribution on such shares prior to the Effective Date.

                                    ARTICLE V

             CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PARTIES

     The  obligations  of Bangor and  Stonington  pursuant to this Agreement are
subject to the fulfillment and  satisfaction at, or prior to the Effective Date,
of each of the following conditions:

     Section 5.1 Stockholder Approval.  The Merger and this Agreement shall have
been approved and adopted by the stockholders of Stonington.

     Section 5.2.  Approval by Boards of Directors.  All actions required by law
to have  been  taken by the  Board  of  Directors  of  Bangor  and the  Board of
Directors of Stonington in order to effect the Merger and perform this Agreement
shall have been duly and validly taken.

     Section  5.3.  Representations  and  Warranties.  The  representations  and
warranties  of Bangor and  Stonington  set forth in Articles II and III shall be
true and correct in all  material  respects on the date hereof and shall also be
true and correct in all material respects on and as of the Effective Date.

     Section 5.4. Approval by the Maine Public Utilities Commission.  Bangor and
Stonington  shall have obtained all approvals  required under Maine Law from the
Maine Public Utilities Commission in order to effect the Merger and perform this
Agreement.

     Section 5.5. Approval by the Federal Energy Regulatory  Commission.  Bangor
and Stonington shall have obtained all approvals required under Federal Law from
the  Federal  Energy  Regulatory  Commission  in order to effect  the Merger and
perform this Agreement.

<PAGE>

     Section  5.6.  Other  Required  Filings,  Consents,  Approvals,   Licenses,
Exemptions  or  Registrations.  Other than the filing of Articles of Merger with
the Secretary of State of the State of Maine, all other required filings and all
other consents, approvals,  licenses, exemptions or registrations required to be
obtained from any court or governmental department,  commission,  board, bureau,
agency or  instrumentality  necessary  in order to effect the Merger and perform
this Agreement shall have been obtained.

                                   ARTICLE VI

                           TERMINATION AND ABANDONMENT

     This Agreement may be terminated and the Merger abandoned at any time prior
to the Effective Date:

     Section  6.1.  Mutual  Agreement.  By  mutual  agreement  of the  Boards of
Directors of Bangor and Stonington;

     Section 6.2. By Bangor.  By the Board of Directors of Bangor if at any time
before the Effective Date, any of the representations or warranties contained in
Article II shall be incorrect or if  Stonington  is otherwise in default of this
Agreement;

     Section 6.3. By  Stonington.  By the Board of Directors of Stonington if at
any time before the Effective  Date,  any of the  representations  or warranties
contained in Article III shall be incorrect or if Bangor is otherwise in default
of this Agreement.

     Section 6.4. By Passage of Time. By either party upon two (2) days' written
notice if the Effective Date shall not have occurred by February 29, 1988.

                                   ARTICLE VII

                              AMENDMENT AND WAIVER

     Section 7.1. Amendment. This Agreement may be amended by the parties hereto
at any time prior to the Effective Date. Any amendment shall be by an instrument
in writing signed by the parties hereto.

     Section 7.2. Waiver.  At any time prior to the Effective Date, either party
hereto may (a) waive any  inaccuracies  in the  representations  and  warranties
contained  herein or in any  document  delivered  pursuant  hereto and (b) waive
compliance  with any of the  agreements  or  conditions  contained  herein.  Any
agreement  on the part of a party  hereto to any such waiver shall be valid only
as against such party and only if set forth in an instrument  in writing  signed
by such party.


<PAGE>



                                  ARTICLE VIII

                               GENERAL PROVISIONS

     Section 8.1. Notices.  All notices and other  communications  given or made
pursuant hereto shall be in writing and delivered  personally or sent by mail to
the parties as follows:

                  (a)      If to Bangor, to:

                           Robert S. Briggs, Esq.
                           Bangor Hydro-Electric Company
                           33 State Street
                           P. O. Box 932
                           Bangor, ME 04401

                  (B)      if to Stonington, to:

                           Robert Platt

                           Stonington & Deer Isle Power Company
                           Sunset, ME  04683

     Section 8.2.  Headings.  The headings  contained in this  Agreement are for
reference  purposes  only  and  shall  not  affect  in any  way the  meaning  or
interpretation of this Agreement.

     Section  8.3.  Entire  Agreement.  This  Agreement  constitutes  the entire
agreement of the parties and supersedes  any and all other prior  agreements and
undertakings,  both written and oral, with respect to the subject matter hereof,
and except as otherwise  expressly  provided  herein,  is not intended to confer
upon any other person any rights or remedies hereunder.

     Section 8.4.  Assignment.  This Agreement is not assignable by either party
in any respect without the prior written consent of the other.

     Section  8.5.  Governing  Law.  This  Agreement  shall be  governed  by and
construed in accordance with the laws of the State of Maine.

     Section 8.6.  Counterparts.  This  Agreement may be executed in one or more
counterparts,  each of which shall be deemed to be an original  but all of which
shall together constitute one and the same Agreement.

     Section  8.7.  Expenses.  Both parties to this  Agreement  shall bear their
respective  expenses  incurred  in  connection  herewith  whether  or  not  this
Agreement  is  consummated,  including  without  limitation  the  fees of  their
respective counsel.


<PAGE>



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed as of the date first stated above by their duly authorized officers.

WITNESSES:                          BANGOR HYDRO-ELECTRIC COMPANY

\ss\ Robert S. Briggs                    By:  \ss\ T.A. Greenquist
                                         Its: President

\ss\ ...                            STONINGTON & DEER ISLE POWER COMPANY
                                         By: \ss\
                                         Its: Chairman of the Board


<PAGE>



For use by the
Secretary of State

                                 STATE OF MAINE                   MAINE
File No. 19240001D                                          SECRETARY OF STATE
Fee Paid $20.00                   STATEMENT OF                  FILED
C.B.     -----              RESOLUTION ESTABLISHING         December 21, 1989
 Date:  12-21-89              SERIES OF SHARES OF                Agent
                         BANGOR HYDRO-ELECTRIC COMPANY
                             (8.76% Preferred Stock)

     Pursuant  to  13-A  MRSA  503,  the  undersigned  corporation  submits  the
following for the purpose of establishing and designating a series of shares and
fixing and determining the relative rights and preferences thereof:

     FIRST: The attached resolution  establishing and designating the series and
fixing and  determining  the relative  rights and  preferences  thereof was duly
adopted by the Board of Directors on December 20, 1989.

     SECOND:  The  Articles  expressly  grant  to the  Board  of  Directors  the
authority to make such a resolution.

     THIRD: The address of the registered office of the corporation is: 33 State
Street, PO Box 932, Bangor ME 04401.

         Dated:  December 20, 1989

         Legibly print or            Bangor  Hydro-Electric  Company
         type name and                 (name of corporation)
         capacity  of  all           By  \ss\  Frederick  S.  Samp
         signers                           Frederick S. Samp, Clerk
         13-A MRSA 104.

- ------------------------------------
 *       The name of the corporation  should be typed,  and the document must be
         signed by (1) Clerk or (2) by the President of a vice-president  and by
         the  Secretary or an assistant  secretary or such other  officer as the
         bylaws may designate as a second certifying officer or (3) if there are
         no  such  officers,  then by a  majority  of the  directors  or by such
         directors as may be designated by majority of directors  then in office
         or (4) if there are not such directors, then by the holders, or such of
         them as may be  designated  by the holders,  of record of a majority of
         all  outstanding  shares entitled to vote thereon or (5) by the holders
         of all of the outstanding shares of the corporation.

FORM NO. MBCA-7


<PAGE>



     FURTHER  RESOLVED  that none of the holders of any of the classes or series
of the  Preferred  Stock,  and none of the holders of the Common  Stock,  of the
Company shall have the preemptive  right to subscribe for and take shares of the
8.76% Preferred Stock; and

     FURTHER  RESOLVED that the Company does hereby appoint and designate  Smith
Barney,  Harris Upham & Co.  Incorporated of New York as its  representative  in
this sale of the 8.76%  Preferred  Stock,  and does hereby  authorize said Smith
Barney, Harris Upham & Co. Incorporated to dispose of said 8.76% Preferred Stock
at private sale at part value; and

     FURTHER  RESOLVED that the appropriate  officers of the Company be and they
hereby are  authorized  and  directed  to file with the Maine  Public  Utilities
Commission an  application  for approval of the issuance of the 8.76%  Preferred
Stock,  including  any and all  amendments  thereto,  and to do all  other  acts
necessary  or  desirable  in order to secure the  approval of said Maine  Public
Utilities Commission; and

     FURTHER  RESOLVED  that  upon  receipt  of the Order of said  Maine  Public
Utilities  Commission  relative to the issuance and sale of the 8.76%  Preferred
Stock,  said Order is to be recorded  upon the books of the Company by its Clerk
or Assistant Clerk; and

         FURTHER  RESOLVED  that  pursuant  to Article XII of the By-Laws of the
Company,   said  By-Laws  be  amended  in  order  to  set  forth  the  dividend,
designation,  terms, conditions and restrictions relative to the 8.76% Preferred
Stock, as follows:

     (a) The first paragraph of Article XI, Section 2, is hereby amended to read
as follows:

         "Section 2. The 250,000  shares of  Preferred  Stock shall be available
         for classification and  reclassification in different classes or series
         from time to time.  Subject  to  reclassification  upon  retirement  by
         redemption  or otherwise,  25,000  shares shall be 7% Preferred  Stock,
         17,500 shares shall be 4% Preferred Stock, Series A, 4,840 shares shall
         be 4 1/4% Preferred  Stock, and 150,000 shares shall be 8.76% Preferred
         Stock."

     (b) The first line of the second  paragraph  of Article  XI,  Section 2, is
hereby amended to read as follows:

         "The remaining shares, 52,660 in number, plus additional shares...

     (c) The fourth  sentence  of  Article  XI,  Section 3 is hereby  amended by
deleting the words "and  paragraph (e) of Section 7" so that the sentence  reads
as follows:

         "Except as provided in  paragraph  (b) of Section 6, the holders of the
         Common  Stock are  entitled  to receive all  additional  surplus or net

<PAGE>

         profits which the Directors may order  distributed in dividends,  after
         the dividends above provided for shall have been paid or set apart."

         (d)      Article XI, Section 4(b) is hereby amended to read as follows:

         "(b) If at any time dividends  payable on the Preferred  Stock shall be
         in default in an amount equal to or exceeding four  quarterly  dividend
         payments,  or if the Company  shall fail to make any  required  sinking
         fund  payment on the  Preferred  Stock,  then,  until all  dividends or
         sinking fund  payments so in default have been paid or declared and set
         apart for payment, the holders of shares of Preferred Stock of each and
         every class or series,  voting as a single class, shall be entitled, at
         any annual meeting during which  dividends or sinking fund payments are
         so in default,  to elect the smallest number of Directors  necessary to
         constitute  a majority of the full Board of  Directors,  the balance of
         the  directors  to be elected by the holders of shares  having  general
         voting powers."

     (e) Article XI,  Section 4 is hereby  amended by adding a subsection (c) to
read as follows:

         "(c)  Notwithstanding  the  provisions  of Section 5 of Article  III of
         these  By-Laws,  except as provided in paragraph (b) of this Section 4,
         the holders of the 8.76%  Preferred Stock shall not be entitled to vote
         at any meeting of stockholders."

     (f) Article XI, Section 5 is hereby amended to read as follows:

         Section 5. In case of liquidation  or  dissolution of the Company,  the
         assets, irrespective of whether they shall consist of capital assets or
         accumulated  earnings,  shall be distributed as follows: All holders of
         Preferred  Stock  shall  be  entitled  to be paid in full  both the par
         amount of their  shares  and an amount  equal to the  unpaid  dividends
         accumulated and accrued thereon and, in the case of the 8.76% Preferred
         Stock, if such  liquidation or dissolution is voluntary an amount equal
         to the premium specified in Section 6(a) below, before any amount shall
         be paid to the  holders  of the  Common  Stock,  and in case the assets
         shall not be sufficient  to pay in full all of the Preferred  Stock and
         dividends accumulated and accrued thereon, and applicable premium, then
         the principal  thereof  shall first be paid pro rata,  thereafter a pro
         rata  distribution  of any  excess  shall  be  made on  account  of the
         accumulated  dividends,  based on the total amount of unpaid  dividends

<PAGE>

         accumulated and accrued thereon, and thereafter a pro rata distribution
         of any excess shall be made on account of applicable premium,  based on
         the total amount of applicable  premium,  but after such payment to the
         holders of the Preferred Stock, the remaining assets and funds shall be
         paid to the holders of the Common Stock,  according to their respective
         shares."

     (g) Article XI, Section 6 is hereby redesignated as Article XI Section 6(a)
and is hereby amended to read as follows:

         "Section 6. (a) The 7% Preferred Stock shall bear dividends at the rate
         of 7% per annum and shall not be  redeemable.  The 4% Preferred  Stock,
         Series A, shall bear dividends at the rate of 4% per annum and shall be
         redeemable  at 112% if called on or prior to October  1, 1950;  at 111%
         thereafter  through October 1, 1951; and after October 1, 1951 at 110%,
         plus accrued  dividends in every case. The 4 1/4% Preferred Stock shall
         bear  dividends at the rate of 4 1/4% per annum and shall be redeemable
         at 102% is  called  on or prior to April 1,  1954;  at 101%  thereafter
         through April 1, 1959;  and after April 1, 1959 at 100%;  plus occurred
         dividends  in every case.  Except as provided in Sections  6(d) through
         6(o),  the 8.76%  Preferred  Stock shall bear  dividends at the rate of
         8.76% per annum and shall not be redeemable prior to December 27, 1994.
         Dividends on the 8.76%  Preferred  Stock shall be  cumulative  and paid
         quarterly no later than the first  business day following  each January
         19, April 19, July 19, and October 19. The 8.76%  Preferred Stock shall
         be redeemable at the option of the Company as follows:

          At 105.63% if called on or prior to December 27, 1995;
          At 105.01% if called on or prior to December 27, 1996;
          At 104.38% if called on or prior to December 27, 1997;
          At 103.75% if called on or prior to December 27, 1998;
          At 103.13% if called on or prior to December 27, 1999;
          At 102.50% if called on or prior to December 27, 2000;
          At 101.88% if called on or prior to December 27, 2001;
          At 101.25% if called on or prior to December 27, 2002;
          At 100.63% if called on or prior to December 27, 2003;
          and after December 27, 2003 at 100%;
          plus accrued dividends in every case.

Preferred Stock,  which is the subject of redemption,  may be called in whole or
in part upon any dividend payment date by appropriate  resolution adopted by the
Board of  Directors  at any  regular or special  meeting  upon 60 days'  written
notice to the  owners  thereof  of record to be given by  mailing  copies of the
notice  of  redemption,  postage  prepaid,  addressed  to such  owners  at their
addresses  as  shown  on the  books of the  Company.  In the  case of the  8.76%
Preferred  Stock,  notice of redemption to the owners thereof of record shall be
by certified mail,  postage  prepaid,  or by a nationally  recognized  overnight
delivery  service.  If less than all of the  outstanding  shares of any class or
series of  Preferred  Stock shall be  redeemed  at any time,  the stock to be so

<PAGE>

redeemed  shall be  determined  by lot, in such manner as the Board of Directors
may determine and prescribe, except that the shares of the 8.76% Preferred Stock
shall be redeemed pro rata."

     (h) Article XI,  Section 6 is hereby  amended by adding a subsection (b) to
read as follows:

         "(b) The 8.76%  Preferred  Stock  shall also be  subject to  redemption
         through the operation of a sinking fund (hereinafter called the Sinking
         Fund) at the redemption price of $100 per share plus an amount equal to
         the  dividends  accrued  and  unpaid  thereon to the  redemption  date,
         whether or not earned or declared (the Sinking Fund Redemption  Price).
         For the  purposes  of the  Sinking  Fund,  out of any net assets of the
         Company  legally  available  therefor  remaining  after full cumulative
         dividends upon all Preferred  Stock then  outstanding to the end of the
         current  dividend  period therefor shall have been paid or declared and
         set apart for payment,  the Company shall set aside in cash annually on
         December 27 in each year  commencing  with December 27, 1995, an amount
         sufficient  to redeem at the  Sinking  Fund  Redemption  Price,  15,000
         shares  of the  8.76%  Preferred  Stock.  The  Sinking  Fund  shall  be
         cumulative  so that if on any such  December  27 the net  assets of the
         Company legally available  therefor shall be insufficient to permit any
         such  amount to be set aside in full,  or if for any other  reason such
         amount  shall  not have  been set  aside in  full,  the  amount  of the
         deficiency shall be set aside but without interest, before any dividend
         shall  be paid or  declared,  or any  distribution  made on any  junior
         shares or any junior shares shall be purchased,  redeemed, or otherwise
         acquired by the  Company,  or any monies  shall be paid to or set aside
         for by the Company,  or any monies shall be paid to or set side for the
         purchase  or  redemption  of any  junior  shares.  Notwithstanding  the
         foregoing,  the  Company  may at any time (1) pay  dividends  in junior
         shares or (2) purchase,  redeem or otherwise  acquire  junior shares in
         exchange  for, or out of the  proceeds  from the current sale of, other
         junior  shares.  As used  herein the term  "junior  shares"  shall mean
         Common Stock or any other shares ranking junior to the 8.76%  Preferred
         Stock either as to dividends upon  liquidation,  dissolution or winding
         up. Monies in the Sinking Fund shall be applied (and disbursed) on such
         December 27 to redemption of the shares of the 8.76%  Preferred  Stock.
         The Company  shall,  prior to each such Sinking Fund  redemption,  give
         notice of redemption, as specified in subsection (a) of this Section 6,
         of such  number  of  shares  of the  8.76%  Preferred  Stock  as may be
         required to satisfy the Sinking Fund."

     (i) Article XI,  Section 6 is hereby  amended by adding a subsection (c) to
read as follows:

<PAGE>

         "(c) In addition,  the Company shall have the right, at its option,  to
         redeem at the Sinking Fund Redemption Price on December 27, 1995 and on
         any December 27 thereafter an additional  number of shares of the 8.76%
         Preferred  Stock  up to but  not  exceeding  15,000  shares,  provided,
         however,  that the  aggregate  number of shares of the 8.76%  Preferred
         Stock  which may be  redeemed  pursuant  to this  Section  6(c) may not
         exceed  30,000  shares.  Notice  of any  such  redemption  shall  be as
         specified in  subsection  (a) of this Section 6. These rights shall not
         be  cumulative  and  shall be lost to the  extent  not  exercised.  Any
         redemption  of shares of the 8.76%  Preferred  Stock  pursuant  to this
         Section 6(c) shall not operate to reduce the number of shares which the
         Company is obligated to redeem pursuant to Section 6(b)."

     (j) Article XI,  Section 6 is hereby  amended by adding a subsection (d) to
read as follows:

         "(d) At all  times  that  dividends  on the 8.76%  Preferred  Stock are
         payable  pursuant to these  By-Laws,  the Company  will treat the 8.76%
         Preferred  Stock as stock and not as  indebtedness  and will  treat the
         dividends paid with respect to the 8.76%  Preferred  Stock as dividends
         (within the meaning of Section 316 of the Internal Revenue Code of 1986
         as amended  (the  "Code")) to the maximum  extent  permitted  under the
         Code."

     (k) Article XI,  Section 6 is hereby  amended by adding a subsection (e) to
read as follows:

         "(e) At all  times  that  dividends  on the 8.76%  Preferred  Stock are
         payable pursuant to these By-laws, the Company will not:

                  "(1) take any action which would require or permit the Company
         to treat the dividends paid with respect to the 8.76%  Preferred  Stock
         as interest  for any purpose or to treat the 8.76%  Preferred  Stock as
         indebtedness for any purpose;

                  "(2)  exercise any option or election  that may at any time be
         available  under the Code or  otherwise  to  deduct  all or part of the
         dividends  paid with respect to the 8.76%  Preferred  Stock if so doing
         would  reduce  the  after-Federal  income  tax  yield per annum on such
         dividends to any corporate holder of the 8.76% Preferred Stock;

                  "(3)  change  its  place  of   incorporation,   by  merger  or
         otherwise, to a jurisdiction other than the District of Columbia or one
         of the 50 states of the United States; or

                  "4)   otherwise   take  any  action   which  would  cause  the
         Dividend-Received  Deduction  contained  in Section  243 of the Code to
         cease to be available with regard to dividends paid with respect to the

<PAGE>

         8.76%  Preferred  Stock to a corporate  holder of 8.76% Preferred Stock
         otherwise eligible to claim the Dividend-Received Deduction."

     (l) Article XI,  Section 6 is hereby  amended by adding a subsection (f) to
read as follows:

         "(f) In the  event  that the  Company  shall  fail to take  the  action
         required in subsection  (d) of this Section 6, or shall take any of the
         actions  referred  to in  subsection  (e) of this  Section  6, then the
         Company will pay to each corporate  holder of 8.76% Preferred Stock, in
         addition to all  dividends  required to be paid on the 8.76%  Preferred
         Stock, such amount as is necessary so that the after-Federal income tax
         yield per annum from  dividends  and such  additional  payments  on the
         8.76% Preferred Stock is 7.8665% (or 7.5538% in the case of a corporate
         holder subject to Section 832(b) of the Code) to such corporate  holder
         at a Federal  income tax rate equal to 34%.  Payments  pursuant  to the
         preceding  sentence shall be made to the extent  necessary with respect
         to any and all  dividends on the 8.76%  Preferred  Stock  (whether such
         dividends  are paid before,  at the same time as or after the action or
         failure  to act);  provided,  that no such  payments  pursuant  to this
         subsection (f) shall be made to any particular  corporate  holder until
         such  corporate  holder has provided the Company with a written  notice
         specifying  (1) that such holder  requires  indemnification  under this
         subsection  (f),  (2) the  amount  to be paid  by the  Company  to such
         holder,  and (3) supporting  calculations  and that in the event that a
         corporate holder makes a written demand for indemnification pursuant to
         this  subsection  (f),  the  Company  shall  thereafter,  on each  date
         subsequent  to the date of the action or failure to act giving  rise to
         such demand on which dividends are paid on the 8.76%  Preferred  Stock,
         in addition to such dividends,  pay to such holder the amount set forth
         in the demand for indemnification  previously  furnished to the Company
         until such time as such  holder  furnishes  written  notice,  including
         supporting  calculations,   to  the  Company  that  indemnification  is
         required,  whether  pursuant  to  this  subsection,  subsection  (h) or
         otherwise, at a greater or lesser rate."

     (m) Article XI,  Section 6 is hereby  amended by adding a subsection (g) to
read as follows:

         "(g) If the  Company  shall  pay a  dividend  in  respect  of the 8.76%
         Preferred  Stock which  constitutes,  in whole or in part,  a return of
         capital  for  Federal   income  tax   purposes  not  eligible  for  the
         Dividend-Received   Deduction,  then  the  Company  will  pay  to  each
         corporate holder of 8.76% Preferred Stock, in addition to all dividends
         required  to be paid on the  8.76%  Preferred  Stock,  an  amount  (the
         "Indemnity  Amount") as is necessary so that the  after-Federal  income
         tax  yield  per  annum  from  such  non-qualifying  dividends  and such

<PAGE>

         additional payments on the 8.76% Preferred Stock is 7.8665% (or 7.5538%
         in the case of a  corporate  holder  subject to  Section  832(b) of the
         Code).  For the purposes of calculating the Indemnity Amount it will be
         assumed  that each  corporate  holder is subject to, and pays,  Federal
         income  tax at the  highest  marginal  rate in the  case  of  "ordinary
         income" and the highest marginal rate in the case of long-term "capital
         gains," in the year in which the  Indemnity  Amount is paid;  provided,
         that no such Indemnity Amount shall be paid to any particular corporate
         holder  until  the  earlier  of (1) the time of the sale,  exchange  or
         redemption  (including a sinking fund  purchase or  redemption)  of the
         8.76% Preferred Stock, or (2) the time additional Federal income taxes,
         including  estimated taxes,  resulting from the payment of dividends on
         the 8.76%  Preferred  Stock in any calendar year which  constitute,  in
         whole or in part,  a return of capital for Federal  income tax purposes
         not eligible  for the  Dividend-Received  Deduction,  are paid or would
         have been paid if the corporate  holder were liable for Federal  income
         tax; provided,  further,  that in the case of a sale or exchange of the
         8.76% Preferred Stock, such Indemnity Amount shall be paid at the later
         of 1) fourteen (14) days after notice of such sale or exchange is given
         to the Company by such corporate  holder, or (2) the occurrence of such
         sale or exchange; and provided,  further, that if such Indemnity Amount
         cannot be  determined  at the time of the sale,  exchange or redemption
         (i.e.,  the sale,  exchange or redemption of the 8.76%  Preferred Stock
         are, in whole or in part, a return of capital)  then the Company  shall
         pay such Indemnity  Amount at the earlier of (1)  forty-five  (45) days
         after the end of the calendar  year, or (2) the time when the Indemnity
         Amount can be determined."

     (n) Article XI,  Section 6 is hereby  amended by adding a subsection (h) to
read as follows:

         "(h) In the event that, after December 27, 1989, Federal legislation is
         enacted  (whether in the form of an amendment of the Code or otherwise)
         which  (whether by the terms of such  legislation  or by U.S.  Treasury
         regulations  promulgated  thereunder  or  a  ruling  published  by  the
         Internal  Revenue  Service) (1) causes or makes any corporate holder of
         8.76%  Preferred  Stock  ineligible  to  claim  the   Dividend-Received
         Deduction in  connection  with  dividends  paid on the 8.76%  Preferred
         Stock or (2) reduces the effective rate,  either directly or indirectly
         (such as by taking  into  account  any  proration  required  by Section
         832(b)  of the  Code),  of the  Dividend-Received  Deduction  which any
         corporate  holder of 8.76% Preferred Stock may claim in connection with
         dividends paid on the 8.76%  Preferred  Stock,  the Company will pay to
         each such corporate holder, in addition to all dividends required to be
         paid on the 8.76% Preferred Stock,  such amount as is necessary so that
         the  after-Federal  income tax yield per annum from  dividends and such

<PAGE>

         additional payments on the 8.76% Preferred Stock is 7.8665% (or 7.5538%
         in the case of a  corporate  holder  subject to  Section  832(b) of the
         Code) to such corporate  holder based on an assumed  Federal income tax
         rate of 34%. Payments pursuant to the preceding  sentence shall be made
         to the extent  necessary  with respect to any and all  dividends on the
         8.76% Preferred  Stock (whether such dividends are paid before,  at the
         same time as or after the enactment of such legislation or the issuance
         of such regulations or ruling);  provided,  that no such payments shall
         be made to any  particular  corporate  holder  until  such  holder  has
         provided the Company with a written  notice,  at any time subsequent to
         the effective date of such  legislation,  regulations or ruling, as the
         case may be,  specifying (i) that such holder requires  indemnification
         from the Company  for the amount of loss  incurred by the holder due to
         such  legislation,  regulations or ruling, as the case may be, (ii) the
         amount  to  be  paid  by  the  Company  to  such  holder  so  that  the
         after-Federal  income  tax  yield  per annum  from  dividends  and such
         additional payments on the 8.76% Preferred Stock is 7.8665% (or 7.5538%
         in the case of a  corporate  holder  subject to  Section  832(b) of the
         Code) to such corporate  holder based on an assumed  Federal income tax
         rate of 34% and (iii)  supporting  calculations.  In the  event  that a
         corporate  holder makes a written demand for  indemnification  pursuant
         hereto,  the Company shall  thereafter,  on each date subsequent to the
         effective date of such legislation,  regulations or ruling, as the case
         may be, on which  dividends are paid on the 8.76%  Preferred  Stock, in
         addition to such dividends,  pay to such holder the amount set forth in
         the demand for  indemnification  previously  furnished  to the  Company
         until such time as such  holder  furnishes  written  notice,  including
         supporting  calculations,   to  the  Company  that  indemnification  is
         required,  whether  pursuant to this subsection (h),  subsection (f) or
         otherwise,  at a greater  or lesser  rate.  In the event  that  further
         legislation,  U.S.  Treasury  regulations  or rulings  published by the
         Internal  Revenue  Service,  if any,  further limit the  eligibility to
         claim the Dividend-Received Deduction in connection with dividends paid
         with  respect  to the 8.76%  Preferred  Stock by any  corporate  holder
         thereof or further reduce the effective  rate of the  Dividend-Received
         Deduction which any corporate holder of 8.76% Preferred Stock may claim
         in connection  with dividends paid on the 8.76% Preferred  Stock,  then
         any such corporate  holder may deliver  another notice pursuant to this
         subsection (h) requesting a new payment amount."

     (o) Article XI,  Section 6 is hereby  amended by adding a subsection (i) to
read as follows:

         "(i) In the event that the Company  shall  become  obligated  to make a
         payment to any holder of 8.76%  Preferred  Stock pursuant to subsection
         (h) of this  Section  6, then the  Company  shall have the right at its
         option within 30 days after  receipt of notice from any holder  seeking

<PAGE>

         indemnification   pursuant  to  subsection  (h)  (but  not  at  a  time
         thereafter  that the  Company  is no  longer  obligated  to make such a
         payment),  to purchase  all or a portion of the 8.76%  Preferred  Stock
         held by such  holder at $100 per share plus  accrued  dividends  to the
         date of purchase;  provided, that, the Company shall have no obligation
         to make a payment pursuant to subsection (h) and shall have no right to
         purchase  the  8.76%  Preferred  Stock  of a  holder  pursuant  to this
         subsection  (i) if such holder waives the Company's  obligation to make
         payment  pursuant to subsection (h) within 60 days after receipt of the
         Company's notice exercising its right to purchase 8.76% Preferred Stock
         pursuant to this  subsection  (i); and provided,  further,  that if the
         Company becomes  obligated (and such obligation has not been waived) to
         make payments pursuant to such subsection (h) to holders of 50% or more
         of then  outstanding  8.76%  Preferred  Stock,  the  Company  shall  be
         entitled  to so purchase  all,  but not part,  of the then  outstanding
         8.76% Preferred  Stock; and provided,  further,  that in no event shall
         the Company be relieved of its obligation to make any payment  required
         under  subsection (h) with respect to any dividends  payable,  prior to
         the actual date of purchase by the Company of 8.76% Preferred Stock, to
         any corporate  holder whose 8.76%  Preferred  Stock is purchased by the
         Company pursuant to this Section 6."

     (p) Article XI,  Section 6 is hereby  amended by adding a subsection (j) to
read as follows:

         "(j) In calculating the payments to be made to a corporate holder under
         subsections  (f),  (g) or (h),  such holder shall take into account any
         and all payments (including,  without limitation,  taxes,  interest and
         penalties)  that  such  holder is  required  to make as a result of the
         event  or  events  that  resulted  in the  demand  for  indemnification
         pursuant to such  subsections.  All amounts  payable under  subsections
         (f), (g) and (h) of this Section 6 shall be considered  contract claims
         taxable as  ordinary  income  not  eligible  for the  Dividend-Received
         Deduction."

     (q) Article XI,  section 6 is hereby  amended by adding a subsection (k) to
read as follows:

         "(k) In  computing  "after-Federal  income tax yield" to any  corporate
         holder of 8.76%  Preferred  Stock in any  particular  taxable year from
         dividends paid with respect to the 8.76%  Preferred  Stock for purposes
         of this Section 6, (1) only Federal  income taxes shall be  considered,
         (2) the effective rate of the Dividend-Received  Deduction available to
         a corporate  holder of 8.76% Preferred Stock in any particular  taxable
         year  shall  be  determined  by  taking  into  account  any  applicable
         provision of the Code (including,  without limitation,  section 832(b))

<PAGE>

         that reduces or enlarges the amount of any other  deduction,  exclusion
         or adjustment that would otherwise be available to such holder for such
         taxable year, if such  reduction or  enlargement is required to be made
         because   such   holder   is   entitled   to   the   benefits   of  the
         Dividend-Received Deduction and by taking into account any reduction or
         enlargement  in the effective rate of the  Dividend-Received  Deduction
         required to be made  because  such holder or any income or loss of such
         holder is subject to any  applicable  provision  of the Code other than
         Section  234  (a)(1),  (3) except to the extent  provided in clause (2)
         above, the Dividend-Received  Deduction of the 1990 calendar year shall
         be deemed to be 70%, (4) for the purposes of subsection (j) the maximum
         marginal rate  applicable to dividends  received by corporations in the
         first full  taxable year in which the 8.76%  Preferred  Stock is issued
         and  outstanding  shall be deemed to be 34%,  (5)  except to the extent
         required by the provisions of clause (2) above, the dividends paid with
         respect to the 8.76% Preferred  Stock to a corporate  holder thereof in
         such  particular  taxable  year  shall be deemed to be the only item of
         income  for  such  particular  taxable  year  of such  holder,  (6) the
         Dividend-Received  Deduction,  if actually available  (disregarding any
         disallowance  pursuant  to Code  Section  246A) to such holder for such
         particular  taxable year, and only to the extent actually  available to
         such holder for such particular taxable year, as detailed in clause (2)
         above, shall be deemed to be the only deduction or exclusion  available
         to such holder,  except as otherwise  provided in clause (2) above, and
         (7) for the purposes of subsection  (j) the rate of Federal  income tax
         imposed with respect to the receipt of ordinary income (i.e.,  contract
         claims) shall be deemed to be the maximum  marginal rate  applicable to
         ordinary income  received by  corporations  in such particular  taxable
         year. In the case of a holder of 8.76%  Preferred Stock who did not own
         any 8.76%  Preferred  Stock for the 1990 calendar year, the computation
         shall be made as though such holder has owned 8.76%  Preferred Stock in
         such taxable year."

     (r) Article XI,  Section 6 is hereby  amended by adding a subsection (1) to
read as follows:

         "(1) Any  references  to the  after-Federal  income tax yield per annum
         referred  to in this  Section 6 shall be adjusted  in  accordance  with
         subsection (o) of this Section 6."

     (s) Article XI,  Section 6 is hereby  amended by adding a subsection (m) to
read as follows:

         "(m) As referred  to in Note 5 to the  Company's  financial  statements
         included in its  Quarterly  Report on Form 10-Q for the  quarter  ended
         September 30, 1989,  an adjustment in the Federal  income tax liability
         of the Company has been proposed by the Internal Revenue Service.  Such
         proposed  adjustment  relates  to  the  Company's  Federal  income  tax

<PAGE>

         treatment of certain issues which relate to the Company's ownership and
         subsequent  sale  of its  interest  in the  Seabrook  project  and  the
         Company's abandonment of Seabrook Unit 2."

     (t) Article XI,  Section 6 is hereby  amended by adding a subsection (n) to
read as follows:

         "(n) In the event that, as a result of the proposed adjustment asserted
         in the Internal  Revenue  Service  Audit  described in  subsection  (m)
         above,

          "(1) the Company  shall  reduce or be required by  generally  accepted
               accounting  principles,  the Federal Energy Regulatory Commission
               or the Maine Public  Utilities  Commission to reduce its Retained
               Earnings  in the  cumulative  amount,  including  tax  liability,
               interest and penalties, of $15 million or more; and

          "(2) during the  twelve-month  period  subsequent  to the reduction or
               required reduction in Retained Earnings referred to in subsection
               (n)(1) above,  the holders of the 8.76% Preferred Stock shall not
               have received written  notification,  addressed to them and dated
               after the date of the reduction or required reduction in Retained
               Earnings  referred to in  subsection  (n)(1)  above,  from either
               Moody's  Investors  Service,  Inc.  ("Moody's")  or Standard  and
               Poor's  Corporation  ("S&P") that the 8.76% Preferred Stock has a
               rating of at least "baa3" from Moody's or "BBB-" from S&P; and

          "(3) any holder provides written notice to the Company, within 30 days
               after the beginning of each of the fifth through twelfth quarters
               following the reduction in Retained  Earnings or  requirement  to
               reduce Retained  Earnings referred to in subsection (n)(1) above,
               that it elects to receive an increased dividend rate on the 8.76%
               Preferred Stock held by it pursuant to this subsection (n);

         then  commencing at the beginning of the first quarter during which the
         notice referred to in subsection (n)(3) above is provided, the dividend
         rate  payable on such 8.76%  Preferred  Stock for that quarter and each
         subsequent  quarter shall  increase by 50 basis points per quarter to a
         maximum  increase  of 300 basis  points  (an 11.76%  dividend  rate per
         annum);  provided,  that so long as the Company is  obligated to pay an
         increased  dividend rate pursuant to this  subsection  (n), the Company
         shall have the right at its option to purchase,  upon 30 days'  written
         notice  to each  holder  of 8.76%  Preferred  Stock as to which  notice
         referred to in  subsection  (n)(3)  above has been given,  all, but not

<PAGE>

         part,  of such 8.76%  Preferred  Stock held by such  holder at $100 per
         share  plus  accrued  dividends  to the  date  of  purchase;  provided,
         further,  that under no circumstances  shall the Company be relieved of
         its obligation to pay an increased dividend pursuant to this subsection
         (n) prior to the actual  date of  purchase  by the Company of the 8.76%
         Preferred  Stock;  and  provided,  further,  that if  subsequent to the
         receipt of the notice  referred  to in  subsection  (n)(3)  above,  the
         Company shall receive  notification  from Moody's or S&P that the 8.76%
         Preferred  Stock has a rating of at least "baa3" from Moody's or "BBB-"
         from S&P,  then (i) the  Company  shall give  notice to each  holder of
         8.76% Preferred  Stock entitled to an increased  dividend rate pursuant
         to this  subsection  (n) that,  commencing  with the  beginning  of the
         quarter following the mailing of such  notification,  the dividend rate
         payable on such  8.76%  Preferred  Stock  shall be reduced to 8.76% per
         annum, and (ii) the Company shall have no further right to purchase the
         8.76% Preferred Stock pursuant to this subsection (n)."

     (u) Article XI,  Section 6 is hereby  amended by adding a subsection (o) to
read as follows:

         "(o) So long as the  Company  is  required  to pay any  holder of 8.76%
         Preferred Stock an increased  dividend rate pursuant to subsection (n),
         the  after-Federal  income tax yield  applicable  to any payments to be
         made pursuant to  subsections  (f), (g) and (h) of this Section 6 shall
         be increased as follows:

                                             After-Federal
          Increase in      After-Federal    Income Tax Yield
         Dividend Rate     Income Tax       to Holder Subject
         (Basis Points)       Yield         to Section 832(b)
         ---------------   -------------    -----------------

               50             8.3155             7.9849
              100             8.7645             8.4161
              150             9.2135             8.8472
              200             9.6625             9.2784
              250            10.1115             9.7095
              300            10.5605            10.1407"

     FURTHER  RESOLVED that any and all requirements of prior notice of proposed
amendments or  alterations  of the By-Laws,  including  the notice  requirements
contained in Article XII, Section 2 of the By-Laws,  are hereby waived, and that
the  foregoing  amendments  to the By-Laws are adopted  effective as of the date
hereof without further action of the Board of Directors; and

     FURTHER  RESOLVED that the appropriate  officers of the Company and each of
them be and they are hereby are authorized and directed to prepare,  execute and
file  with the  Secretary  of  State  of the  State of  Maine,  a  Statement  of

<PAGE>

Resolution  Establishing  Series of Shares in accordance with 13-A M.R.S.A.  503
incorporating  the relative  rights and preferences of the 8.76% Preferred Stock
set forth in Article XI of the  By-Laws of the Company as  hereinbefore  amended
and including such other  information as may be required by applicable law, rule
or regulation; and

     FURTHER RESOLVED that the form of proposed agreement (draft of December 14,
1989)  presented to the Board of Directors  for the sale of the 8.76%  Preferred
Stock to the purchaser  named therein is hereby  approved;  that the Chairman of
the  Board  and Chief  Executive  Officer,  the  President  and Chief  Operating
Officer,  the Treasurer,  or any Vice President of the Company or any of them be
and each of them is hereby  authorized to execute the same in substantially  the
form presented as aforesaid with such changes as the officer  executing the same
may approve  acting  under the advice of counsel for the  Company,  and that the
execution and delivery of said  agreement  shall be conclusive  evidence of such
approval; and

     FURTHER RESOLVED that the form of certificate for the 8.76% Preferred Stock
as presented to the Board of Directors is hereby approved;  that the Chairman of
the  Board  and Chief  Executive  Officer,  the  President  and Chief  Operating
Officer,  the Treasurer,  or any Vice President of the Company or any of them be
and each of them is hereby  authorized to issue a certificate or certificates in
substantially the form presented as aforesaid; and

     FURTHER  RESOLVED that all the powers and duties of Fleet Bank of Maine, as
Transfer  Agent and Registrar  for the shares of Preferred  Stock of the Company
(the "Transfer Agent and Registrar") are hereby extended upon the same terms and
conditions to cover the transfer and  registration of the 8.76% Preferred Stock;
and that the proper  officers  of the  Company  be, and each of them  hereby is,
authorized   and  directed  to  give  the  Transfer  Agent  and  Registrar  such
instructions  as may be appropriate to effect the issuance and sale of the 8.76%
Preferred Stock; and

     FURTHER  RESOLVED  that the  Chairman  of the  Board  and  Chief  Executive
Officer, the President and Chief Operating Officer,  the Treasurer,  or any Vice
President of the Company or any of them be and each of them is hereby authorized
in the name of and on behalf of the  Company  to pay to the  Transfer  Agent and
Registrar all proper fees and charges  arising out of or in connection  with the
performance  by it of its duties in connection  with the Shares,  and to pay any
and all expenses and fees  arising in  connection  with the issuance and sale of
the 8.76% Preferred Stock; and

     FURTHER  RESOLVED that the appropriate  officers of the Company and each of
them be and they hereby are  authorized  and  directed to make,  sign,  execute,
verify,  acknowledge  and  deliver,  or  cause  to be  made,  signed,  executed,

<PAGE>

verified,  acknowledged  and delivered,  any and all such orders,  certificates,
directions,  requests and other appropriate  instruments and to do all such acts
and things as may be reasonably be required from time to time  hereafter to give
effect to the  foregoing  votes,  or any of them,  or to  otherwise  effect  the
issuance and sale of the 8.76% Preferred Stock.


<PAGE>



For use by the
Secretary of State

                               STATE OF MAINE               MAINE
File No. 19240001D         ARTICLES OF AMENDMENT     SECRETARY OF STATE
Fee Paid $11,250-$35       (Amendment by Share-              FILED
C.B.     -------             holders Voting as            June 5, 1992
Date:    6-9-92             Separate Class) OF               Agent
                               BANGOR HYDRO-
                             ELECTRIC COMPANY
                       a Quasi-Public Corporation

Pursuant to 13-A MRSA 805 and 807,  the  undersigned  corporation  adopts  these
Articles of Amendment.

     FIRST:  As set out in detail in "THIRD",  one or more  classes of shares of
the corporation  were entitled to vote on the following  amendment as a separate
class.

     SECOND:  The amendment to the Articles of  Incorporation of the corporation
set out in Exhibit A attached hereto was adopted by the shareholders  thereof at
a meeting legally called and held on May 20, 1992.

     THIRD:  On said date,  the number of shares of each class  outstanding  and
entitled  to  vote on  such  amendment  (whether  or not  entitled  to vote as a
separate  class),  the  manner in which  each such  class was  entitled  to vote
(whether  or not as a separate  class),  and the number of shares  voted for and
against said amendment, respectively, were as follows:

Designation of       Manner        No. of Shares
Each Class           In Which      Outstanding
However Entitled     Entitled      And Entitled        Voted       Voted
   to vote           To Vote       To Vote             For         Against
- -----------------    ---------     -------------       ------      --------
Common               As a Class       5,370,684       3,110,728     545,539
$5 par value

Preferred Stock,     As a Class          197,340*        173,031         374
    $100 par value                   -----------       ---------   ---------

         Total of All Classes          5,568,024       3,283,759     545,913
                                       =========       =========   =========

     FOURTH:  If such  amendment  provides  for  exchange,  reclassification  or
cancellation  of issued shares the manner in which the same shall be effected is
contained in Exhibit B attached hereto,  if it is not set forth in the amendment
itself.



<PAGE>



     *FIFTH:  If such amendment  effects a change in the number or par values of
authorized  shares the number of shares which the  corporation  has authority to
issue after giving effect to such amendment is as follows:

                   Series           Number           Par Value
Class             (If any)          of Shares        (If any)
- -----             --------          ---------        ---------

Common              N/A             7,500,000          $  5

Preferred                             400,000           100


     The  aggregate  par value of all such  shares (of all  classes  and series)
having par value is $77,500,000.

     The total number of all such shares (of all classes and series) without par
value is -0- shares.

     SIXTH: The address of the registered office of the corporation in the State
of Maine is 33 State Street, PO Box 932, Bangor, Maine 04401.

Dated: June 3, 1992


Legibly print or           Bangor Hydro-Electric Company
type name and                 (name of corporation)
capacity of all            By \ss\ Frederick S. Samp
signers                         Frederick S. Samp, Clerk


I certify  that I have  custody of the minutes  showing the above  action by the
shareholders.

\ss\ Frederick S. Samp
Frederick S. Samp, Clerk

NOTE:     Shares  may be  entitled  to vote as a  separate  class for any of the
          reasons  stated in 806, or if so provided  in the  Articles.  For vote
          necessary for adoption, see 805.

- ------------------------------------
 *       To be completed only if Exhibit A or B do not give this required
         information.

**       The name of the corporation  should be typed,  and the document must be
         signed by (1) Clerk or (2) by the President of a vice-president  and by
         the  Secretary or an assistant  secretary or such other  officer as the
         bylaws may designate as a second certifying officer or (3) if there are
         no  such  officers,  then by a  majority  of the  Directors  or by such
         Directors as may be designated by majority of Directors  then in office

<PAGE>

         or (4) if there are not such Directors, then by the holders, or such of
         them as may be  designated  by the holders,  of record of a majority of
         all  outstanding  shares entitled to vote thereon or (5) by the holders
         of all of the outstanding shares of the corporation.

FORM NO. MBCA-9A


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

             EXHIBIT A TO ARTICLES OF AMENDMENT DATED JUNE 3, 1992


         RESOLVED that the Articles of Incorporation of the Company,  as amended
         to date,  be  further  amended to  increase  the  Company's  authorized
         capital  stock by  $15,000,000,  such  increase  to be  represented  by
         150,000  shares of  Preferred  Stock of the par value of $100 each,  so
         that the total amount of  authorized  capital stock of the Company will
         be $77,500,000  represented by 400,000 shares of Preferred Stock of the
         par value of $100 each and 7,500,000  shares of Common Stock of the par
         value of $5 each.


<PAGE>



Filing Fee (See Sec. 1-01)                This Space for Use By
For Use by The                              Secretary of State
Secretary of State

                           STATE OF MAINE
File No. _______         ARTICLES OF AMENDMENT
Fee Paid _______          (Amendment by Share-
C.B.     _______            holders Voting as
Date:    _______          Separate Class) OF
                            BANGOR HYDRO-
                         ELECTRIC COMPANY
                       a Quasi-Public Corporation

Pursuant to 13-A MRSA Section 805 and 807, the  undersigned  corporation  adopts
these Articles of Amendment.

     FIRST:  As set out in detail in "THIRD",  one or more  classes of shares of
the corporation  were entitled to vote on the following  amendment as a separate
class.

     SECOND:  The amendment to the Articles of  Incorporation of the corporation
set out in Exhibit A attached hereto was adopted by the shareholders  thereof at
a meeting legally called and held on May 18 and June 16, 1994.

     THIRD:  On said date,  the number of shares of each class  outstanding  and
entitled  to  vote on  such  amendment  (whether  or not  entitled  to vote as a
separate  class),  the  manner in which  each such  class was  entitled  to vote
(whether  or not as a separate  class),  and the number of shares  voted for and
against said amendment, respectively, were as follows:

Designation of       Manner        No. of Shares
Each Class           In Which      Outstanding
However Entitled     Entitled      And Entitled        Voted       Voted
   to vote           To Vote       To Vote             For         Against
- -----------------    ---------     -------------       ------      --------
ON COMMON STOCK
Common Stock

$5 par value         As a Class      6,245,174       4,459,161     474,723
Preferred stock
$100 par value       As a Class         47,340          34,193       2,608
                                     ---------       ---------     -------
Total of all                         6,292,514       4,493,354     477,331

ON PREFERRED STOCK
Common Stock

$5 par value         As a Class      6,245,174       3,409,615     651,515
Preferred Stock
$100 par value                         197,340*        163,962       9,688
                                    ----------       ---------   ---------
         Total of All Classes        6,442,514       3,573,577     661,203

* Includes 150,000 shares with no general voting power.



<PAGE>

     FOURTH:  If such  amendment  provides  for  exchange,  reclassification  or
cancellation  of issued shares the manner in which the same shall be effected is
contained in Exhibit B attached hereto,  if it is not set forth in the amendment
itself.

     *FIFTH:  If such amendment  effects a change in the number or par values of
authorized  shares the number of shares which the  corporation  has authority to
issue after giving effect to such amendment, is as follows:

                    Series           Number           Par Value
Class             (If any)          of Shares          (If any)
- -----             --------          ---------         ---------

Common Stock

$5 par value        N/A             10,000,000          $  5

Preferred Stock

$100 par value      As determined      600,000          $100
                    by Board of
                    Directors

     The  aggregate  par value of all such  shares (of all  classes  and series)
having par value is $10,000,000.

     The total number of all such shares (of all classes and series) without par
value is -0- shares.

     SIXTH: The address of the registered office of the corporation in the State
of Maine is 33 State Street, PO Box 932, Bangor, Maine 04402-0932.

Dated:  August 11, 1994


Legibly print or           Bangor Hydro-Electric Company
type name and                   (name of corporation)
capacity of all            By \ss\ Frederick S. Samp
signers                         Frederick S. Samp, Clerk
13-A MRSA Section 104.     By --------------------------


I certify  that I have  custody of the minutes  showing the above  action by the
shareholders.

\ss\ Frederick S. Samp

NOTE:     Shares  may be  entitled  to vote as a  separate  class for any of the
          reasons stated in Section 806, or if so provided in the Articles.  For
          vote necessary for adoption, see Section 805.

<PAGE>


 *       To be completed only if Exhibit A or B do not give this required
         information.

**       The name of the corporation  should be typed,  and the document must be
         signed by (1) Clerk or (2) by the President or a vice-president  and by
         the  Secretary or an assistant  secretary or such other  officer as the
         bylaws may designate as a second certifying officer or (3) if there are
         no  such  officers,  then by a  majority  of the  directors  or by such
         directors as may be designated by majority of directors  then in office
         or (4) if there are no such directors,  then by the holders, or such of
         them as may be  designated  by the holders,  of record of a majority of
         all  outstanding  shares entitled to vote thereon or (5) by the holders
         of all of the outstanding shares of the corporation.

FORM NO. MBCA-9A


<PAGE>



                          BANGOR HYDRO-ELECTRIC COMPANY

             EXHIBIT A TO ARTICLES OF AMENDMENT DATED JULY 1, 1994


         RESOLVED that the Articles of Incorporation of the Company,  as amended
         to date,  be  further  amended to  increase  the  Company's  authorized
         capital  stock by  $32,500,000,  such  increase  to be  represented  by
         200,000  shares of Preferred  Stock of the par value of $100 each,  and
         2,500,000  shares of common stock of the par value of $5 each,  so that
         the total  amount of  authorized  capital  stock of the Company will be
         $110,000,000  represented by 600,000  shares of Preferred  Stock of the
         par value of $100 each and 10,000,000 shares of Common Stock of the par
         value of $5 each.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>5
<FILENAME>file005.txt
<DESCRIPTION>EX A-4 BY-LAWS OF BHE
<TEXT>

Exhibit A-4

                                     BY-LAWS
                                       OF

                          BANGOR HYDRO-ELECTRIC COMPANY





































                                        As amended through June 16, 1994



<PAGE>





                                     BY-LAWS

                                       OF

                          BANGOR HYDRO-ELECTRIC COMPANY


                         ARTICLE I. Location of Offices

     The principal office of this corporation  shall be at such place within the
State of Maine as the Board of Directors  may from time to time  designate,  and
the Company shall have and maintain such other offices as the Board of Directors
may deem expedient.

                           ARTICLE II. Corporate Seal

     The corporation shall have a seal with the name of the Company in a circle,
and the word  "Seal" or such  suitable  device as the Board of  Directors  shall
determine, in the center of the space thus enclosed. The seal of the corporation
upon a certificate of stock,  corporate bond or other corporate  obligations for
the  payment  of  money  may be  facsimile,  engraved  or  printed,  where  such
certificate  is signed by a Transfer Agent or Transfer Clerk and by a Registrar,
and where such bond or obligation is certified by a Trustee.

                                       1

<PAGE>


                      ARTICLE III. Meetings of Stockholders

     Section 1. The  Annual  Meeting  of the  Stockholders  shall be held on the
fourth Tuesday in April of each year, or within sixty days thereafter, upon such
date as the Board of  Directors  of the  Company may  designate,  in the City of
Bangor,  Maine,  or at such  other  place  within  the  State of Maine as may be
designated by the Board of Directors of the Company, for the election of a Board
of Directors and for the  transaction  of any other business that may be brought
before such  meeting.  In case of the failure for any cause to hold such meeting
and election on said fourth Tuesday in April or within sixty days  thereafter as
above  provided,  said  election  may be  held  at any  special  meeting  of the
Stockholders called for the purpose.

     Section 2. Unless  waived in the manner  prescribed  by the Maine  Business
Corporation  Act, written notice of the Annual Meeting or any special meeting of
Stockholders  stating  the place,  day and hour  thereof,  shall be given in the
manner prescribed by the Maine Business Corporation Act.

     Section 3. Special  meetings of the  Stockholders may be called at any time
by order of the Board of Directors or by written  direction of a majority of the
Board of Directors,  or of Stockholders  representing not less than one-fifth of
the capital stock of the Company issued and outstanding.  Such meetings shall be
in Bangor,  Maine,  or at such other  place  within the State of Maine as may be
designated by the Board of Directors of the Company.

                                       2

<PAGE>

     Section 4. The holders of one third of the stock of the Company  issued and
outstanding  shall  constitute a quorum for the  transaction  of business at any
meeting, but a less number may convene any meeting and may adjourn the same from
time to time until a quorum shall be present,  and no notice of such adjournment
shall be  necessary.  If  Stockholders  are to consider the number of authorized
shares of common  stock at any meeting,  50% of the stock of the Company  issued
and outstanding shall constitute a quorum for the transaction of such business.

     Section 5. Stockholders entitled to vote at any meeting of Stockholders may
vote  either in person or by proxy  granted  not more than sixty days before the
meeting, the date of which shall be named therein, and said proxies shall not be
valid after a final adjournment thereof. Stockholders may also be represented by
a general  power of  attorney  produced  at the  meeting  and valid  until it is
revoked. At any meeting of Stockholders, each holder of Common Stock entitled to
vote thereat shall be entitled to cast  one-twelfth  of a vote for each share of
Common Stock held,  and each holder of Preferred  Stock entitled to vote thereat
shall be entitled to cast one vote for each share of such Preferred  Stock held.
Except as may  otherwise be required by law or by the Articles of  Incorporation

                                       3

<PAGE>


and except as the Board of  Directors  may  otherwise  fix and  determine in the
By-Laws with respect to any class or series of  Preferred  Stock having  special
voting powers, a majority of the total votes cast at any meeting of Stockholders
shall be sufficient for the adoption or rejection of any question presented.

     Section 6. The stock  transfer  books of the  Company  may be closed by the
order of the Board of  Directors  for such  period,  not to exceed  sixty  days,
previous to any meeting of the  Stockholders,  or previous to the payment of any
dividend upon the stock of the Company,  or for any other purpose,  as the Board
may  determine,  during  which  time no  transfer  of stock on the  books of the
Company  shall be made;  and said books shall be re-opened the day following the
date fixed for such  meeting  or for the  payment  of such  dividend  or for the
accomplishment of such purpose.

     The Board of Directors may from time to time determine the date as of which
Stockholders  shall be  entitled  to  notice  of and to vote at any  regular  or
special meeting of the Stockholders,  but such date shall not be more than sixty
days nor less than ten days prior to the date upon  which such  meeting is to be
held. The date so determined shall be specified in the notice of the meeting.

                                       4
<PAGE>



                        ARTICLE IV. Election of Directors

     Section  1.  Directors  shall be  elected  in the  manner  set forth in the
Articles of Incorporation. Directors must be and remain Stockholders.

                        ARTICLE V. Meetings of Directors

     Section 1. Regular meetings of the Board of Directors shall be held at such
times and places as may from time to time be fixed by  resolution  of the Board.
No notice shall be required for regular meetings,  the times and places of which
have been fixed by resolution. Special meetings of the Board of Directors may be
held at any time or place upon the call of the Clerk or  Assistant  Clerk  under
the direction of the Chairman of the Board, the President,  or any two Directors
then in office,  of which  meetings  reasonable  notice in writing or  otherwise
shall be  given to each  director  or sent to his or her  residence  or place of
business,  the time and place for holding the  meeting to be  designated  in the
notice.

     Unless otherwise  indicated in the notice calling the meeting,  any and all
business may be transacted at any such special meeting.

     Section 2. A meeting of the Board of Directors for organization may be held
without notice  immediately  after the meeting of the Stockholders at which such

                                       5

<PAGE>



Board of Directors is elected,  at which meeting  officers of the Company may be
chosen,  but no other business shall be transacted,  unless every director shall
be present.

     Section 3. At the  meetings  of the Board of  Directors,  a majority  shall
constitute a quorum,  but a less number may convene and adjourn any such meeting
from time to time until a quorum is present, of which adjournment no notice need
be given.  All  questions  coming before any meeting of a Board of Directors for
action  shall be  decided by a majority  vote of the  Directors  present at such
meeting, unless otherwise provided in these By-Laws.

                              ARTICLE VI. Officers

     Section  1.  Directors  shall  elect  from  their own number a Chair of the
Board;  shall appoint a President,  a Treasurer and a Clerk; and may appoint one
or more Vice  Presidents  and such  other  officers  as the  Directors  may deem
necessary or  desirable in order to conduct the business of the Company.  If the
offices  of the  Chair of the  Board  and the  President  are not  vested in one
person, the Directors shall designate one of them as the chief executive officer
of  the  Company.  In the  absence  of a  valid  designation  of  the  foregoing

                                       6

<PAGE>


functions,  the President shall be the chief executive  officer.  If the offices
and functions of the Chair of the Board,  the President and the chief  executive
officer are vested in one person, then in the event of accident or disability or
other  circumstances  that render such person incapable of performing his or her
duties,  the Chair of the Executive  Committee of the Board of Directors (or, if
there be no such Chair,  the  Director  of the longest  tenure of service on the
Board  who is not an  employee  of the  Company)  shall  assume  the  duties  as
temporary,  acting  Chair of the Board,  and he or she shall  promptly  appoint,
subject  to  ratification  by the full  Board at its  earliest  convenience,  an
officer of the Company to be the temporary,  acting chief executive officer. The
services  of these  temporary  officers  shall  continue  until the Chair of the
Board,  President and chief executive  officer has resumed his or her duties, or
until the Directors shall otherwise determine.

     If the offices and  functions of the Chair of the Board,  the President and
the chief executive  officer are not vested in one person,  then in the event of
accident,  disability  or other  circumstances  that render the chief  executive
officer  incapable of  performing  his or her duties (1) if the chief  executive
officer  is the Chair of the Board,  the  President  shall  assume the duties as
temporary,  acting  chief  executive  officer  and the  Chair  of the  Executive
Committee  of the Board (or,  if there be no such  Chair,  the  Director  of the
longest  tenure of service on the Board who in not an employee  of the  Company)

                                       7

<PAGE>


shall assume the duties of temporary,  acting Chair of the Board,  or (2) if the
chief  executive  officer is the President,  the Chair of the Board shall assume
the duties as temporary,  acting chief  executive  officer,  and he or she shall
promptly  appoint,  subject to  ratification  by the full Board at its  earliest
convenience,  an officer of the Company to be the temporary,  acting  President.
The services of these temporary,  acting officers shall continue until the chief
executive  officer has resumed his or her duties,  or until the Directors  shall
otherwise determine.

        In the event of accident,  disability or other circumstances that render
the Chair of the Board  incapable of performing  his or her duties and the Chair
of the  Board is not the chief  executive  officer,  the Chair of the  Executive
Committee of the Board of Directors (or, if there be no such Chair, the Director
of the  longest  tenure of  service on the Board who in not an  employee  of the
Company) shall assume the duties as temporary,  acting Chair of the Board, until
the Chair of the  Board has  resumed  his or her  duties or until the  Directors
shall otherwise determine.

     Notwithstanding  the  foregoing,  the Directors  may by  resolution  make a
different  provision in any year for the assumption of  responsibilities  of the
Chair of the Board,  the chief executive  officer and the President in the event
of their inability to serve as aforesaid,  which  resolution  shall be effective
until the next meeting at which officers are appointed.

     A majority vote of the whole Board of Directors  shall be necessary for the
election of officers. All such officers shall hold office for one year and until
their successors are chosen and duly qualified,  provided however that the Board

                                       8

<PAGE>


of  Directors  shall  have power at any time to remove  from  office any of such
officers as well as any other agent or employee of the Company,  with or without
cause.

            ARTICLE VII. Powers and Duties of Directors and Officers


     Section 1. The Board of  Directors  shall have and  exercise all the powers
and authority granted by law in order to carry out its  responsibility to manage
and control the  business,  property  and affairs of the  Company.  The Board of
Directors  shall be vested with all the powers and authority of the  corporation
itself,  except in such matters as may be especially excepted by the Articles of
Incorporation  or By-Laws  of the  Company or by the laws of the State of Maine.
Subject to any contrary  provisions  of law, the  Articles of  Incorporation  or
these By-Laws,  the Board of Directors shall have power to delegate from time to
time such  authority as it may deem  necessary to any one or more members of the
Board  acting as a  committee,  in order that the business of the Company may be
transacted with promptness and dispatch.

     Section 2. The Board of Directors by a resolution  adopted by a majority of
the full Board of Directors  then in office may designate from among its members
an Executive Committee consisting of two or more Directors,  and may delegate to
such  Executive  Committee  all the  authority  of the Board of Directors in the
management of the corporation's  business and affairs,  except as limited by law

                                       9

<PAGE>


(including  without  limitation  the Maine  Business  Corporation  Act),  or the
resolution  establishing  the Executive  Committee or any resolution  thereafter
adopted by the Board of Directors.  Vacancies in the membership of the Executive
Committee shall be filled by resolution  adopted by a majority of the full Board
of Directors then in office. The Executive  Committee shall keep regular minutes
of its proceedings and report the same to the Board of Directors. Members of the
Executive  Committee  may be removed  from  office,  with or without  cause,  by
resolution  adopted by a majority of the full Board of Directors then in office.
So far as practicable,  the provisions of these By-Laws relating to the calling,
noticing  and  conduct of meetings of the Board of  Directors  shall  govern the
calling, noticing and conduct of meetings of the Executive Committee.

     The Board of  Directors,  by a  resolution  adopted  by a  majority  of the
Directors  who are not  employees  of the  Company,  shall  establish  an  Audit
Committee and a  Compensation  Committee,  the membership of each of which shall
consist of Directors who are not employees of the Company.  The Audit  Committee
shall review the adequacy of the  Company's  financial  reporting  processes and
internal  controls and conduct such other  business as may be delegated to it by
the Board of Directors. The Compensation Committee shall review and recommend to
the Board of  Directors  the  compensation  and  benefits of the  Directors  and
officers of the Company and the  Company's  overall  compensation  and  benefits

                                       10

<PAGE>


policies and conduct such other  business as may be delegated to it by the Board
of Directors.

     The  Board  of  Directors,  by  resolution  adopted  by a  majority  of the
Directors,  may  establish  such  other  committees  as it  deems  necessary  or
desirable  in order to conduct the  business  and  affairs of the  Company  with
dispatch, and, to the extent permitted by law, empower such committees with such
authority as the Board of Directors deems appropriate.

     Except as otherwise  provided by law, the Articles of Incorporation,  these
By-Laws  or a  majority  of the Board of  Directors,  the Chair of the Board may
appoint members and chairs of committees of the Board, and shall ex officio be a
member of all committees.

     Section 3. The Chair of the Board of Directors shall be responsible for the
conduct of the business and functions of the Board of  Directors,  except to the
extent that specific functions may be otherwise governed by law, the Articles of
Incorporation,  these By-Laws or resolution of the Board of Directors. He or she
shall  establish  the schedule and agendas for and shall  preside at meetings of
the  Stockholders  and the Board of  Directors,  and shall  attend to such other
business as the Board of Directors may from time to time direct.

     Section 4. The President, in the capacity of chief executive officer of the
Company,  shall  implement  the overall  direction  and policies of the Board of

                                       11

<PAGE>

Directors,  and supervise  and direct  generally the business and affairs of the
Company. The President may sign any deeds, mortgages, bonds, contracts, or other
instruments  that the Board of Directors has authorized  for  execution,  except
when the signing and execution thereof has been expressly delegated by the Board
of Directors or these  By-Laws to some other  officer or agent of the Company or
is required by law to be otherwise signed or executed.  The President shall also
make  reports  to the Board of  Directors  and the  shareholders  and  generally
perform all duties  incident to the office of President and such other duties as
may be prescribed by the Board of Directors.

     In the  event  the  President  is not the chief  executive  officer  of the
Company,  unless the Board of Directors shall otherwise  specify,  the foregoing
powers  and duties  shall  appertain  to the chief  executive  officer,  and the
President  shall have such  powers and  duties as the Board of  Directors  shall
determine.

     Section 5. Vice Presidents shall have such  responsibilities  and duties as
may  be  prescribed  by  the  President,  and in  the  absence  of any  specific
delegation   of   responsibilities   shall   have  such   powers,   duties   and
responsibilities  as may  reasonably  be implied by their titles as necessary to
the routine  operation of the  functions for which they are  responsible  in the
normal course of the business of the Company.

                                       12

<PAGE>

     Section 6. The  Treasurer  or his or her  designate  shall  receive  and be
responsible for all cash, notes and securities of the Company, and is authorized
to give  receipts  for all moneys due and payable to the Company  from  whatever
source, and to endorse checks, drafts and warrants in the name of the Company in
banks and  other  financial  institutions.  All  funds of the  Company  shall be
deposited to the credit of the Company. They may be invested, and if so, must be
invested  pursuant  to  guidelines  issued  from  time to time by the  Board  of
Directors.  He or she shall affix the seal of the Company to such instruments as
it is necessary and proper to execute under seal and attest the same,  and he or
she shall  discharge  such other duties as pertain to this office,  or as may be
assigned to him from time to time by the Board of Directors or by the President.

     Section 7. The Clerk shall be a resident  of the State of Maine,  and shall
be sworn to a faithful discharge of his duties. He or she shall keep a record of
all votes of the  Stockholders  and  Directors and record all the minutes of the
meetings  of the  Stockholders  and  Directors  in a book  to be kept  for  that
purpose.  He or she shall keep a book containing a true and complete list of all
Stockholders,  their residences, and the amount of stock held by each, and shall
keep such other  books and  perform  such other  duties as pertain to his or her
office  or as may be  assigned  to him or her from  time to time by the Board of

                                       13

<PAGE>

Directors or by the  President.  In the absence or  disability  of the Clerk and
Assistant Clerk, the President may appoint a Clerk pro tempore.

        Section  8. The  compensation  and  benefits  of the  officers  shall be
established by the Board of Directors. The compensation and benefits of officers
who are Directors  shall be  established by a majority vote of Directors who are
not employees of the Company.

     The   compensation  and  benefits  of  the  Board  of  Directors  shall  be
established by a majority vote of the full Board of Directors. Directors who are
employees of the Company  shall  receive no  compensation  for their  service as
Directors.

     Section  9. The  Treasurer  shall  give,  and other  officers,  agents  and
employees of the Company may be required to give, at the expense of the Company,
bonds in such amount and form with such  sureties as the Board of Directors  may
require  and  approve,  for  the  faithful  discharge  of the  duties  of  their
respective offices and positions.

     Section 10. Any current or former Director,  officer or employee who was or
is a party or is  threatened  to be made a party to any  threatened,  pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative,  by  reason  of the  fact  that  he or she is or was a  Director,
officer or employee of the  Company,  or is or was serving at the request of the
Company as a Director, officer, trustee, partner,  fiduciary,  employee or agent


                                       14

<PAGE>

of another  corporation,  partnership,  joint venture,  trust,  pension or other
employee benefit plan or other  enterprise,  shall be indemnified by the Company
against expenses,  including attorney's fees, judgments,  fines and amounts paid
in settlement  actually and reasonably incurred by him or her in connection with
such action, suit or proceeding to the full extent permitted by Maine law.

     Expenses  incurred  in  defending  a  civil,  criminal,  administrative  or
investigative  action,  suit or proceeding  shall in all cases be authorized and
paid by the Company in advance of the final disposition of such action,  suit or
proceeding upon receipt by the Company of:

         (1) A written  undertaking by or on behalf of the officer,  director or
         employee to repay that amount if he or she is finally adjudicated:

               (A) Not to have acted honestly or in the  reasonable  belief that
               his or her action was in or not opposed to the best  interests of
               the  Company  or its  shareholders  or,  in the  case of a person
               serving as a fiduciary of an employee  benefit plan or trust,  in
               or not opposed to the best interests of such plan or trust or its
               participants or beneficiaries;


                                       15

<PAGE>


               (B) With respect to any criminal  action or  proceeding,  to have
               had  reasonable  cause to  believe  that his or her  conduct  was
               unlawful; or

               (C) With  respect to any claim,  issue or matter  asserted in any
               action,  suit or  proceeding  brought  by or in the  right of the
               Company,  to be liable to the Company,  unless the court in which
               that   action,   suit   or   proceeding   was   brought   permits
               indemnification   in  accordance  with  subsection  (2)  of  13-A
               M.R.S.A. ss.719; and

         (2) A written affirmation by the officer,  Director or employee that he
         or she has met the standard of conduct necessary for indemnification by
         the Company as authorized by this section.

     The undertaking  required by subparagraph (1) shall be an unlimited general
obligation of the person seeking the advance, but need not be secured and may be
accepted without reference to financial ability to make the repayment.

             ARTICLE VIII. Checks, Drafts and Negotiable Instruments

     All checks,  drafts,  or other orders for the payment of money,  notes,  or
other evidences of indebtedness  issued in the name of the corporation  shall be

                                       16

<PAGE>

signed by such officer or officers,  agent or agents of the  corporation  and in
such manner as shall from time to time be  determined by resolution of the Board
of Directors.

                             ARTICLE IX. Fiscal Year

     The fiscal year of the Company  shall  commence on the first day of January
and end on the last day of December in each year.

                                ARTICLE X. Stock

     Section  1.  The   authorized   capital  stock  of  the  Company  shall  be
$110,000,000  represented by 600,000 shares of Preferred  Stock of the par value
of $100 each, and 10,000,000 shares of Common Stock of the par value of $5 each.

        Section 2. The 600,000 shares of Preferred  Stock shall be available for
classification and  reclassification in different classes or series from time to
time.  Subject to  reclassification  upon retirement by redemption or otherwise,
25,000 shares shall be 7% Preferred  Stock,  17,500 shares shall be 4% Preferred
Stock,  Series A, 4,840  shares  shall be 4 1/4%  Preferred  Stock,  and 150,000
shares shall be 8.76% Preferred Stock.

     The remaining  shares,  402,660 in number,  plus additional shares equal in
number to any shares now outstanding or hereafter issued which may be retired by

                                       17

<PAGE>

redemption  or  otherwise  may be  issued as  additional  shares of any class or
series heretofore or hereafter  authorized,  or may be issued in one or more new
classes or series  which  (subject  to the  provisions  hereof)  shall have such
designations,  preferences and voting powers,  or restrictions or qualifications
thereof  as shall be fixed  and  determined  by the  Board of  Directors  in the
By-Laws,   including  provisions  (among  others)  with  respect  to  dividends;
redemption,  conversion  rights,  if any; sinking fund, if any;  restrictions or
limitations,  if any, upon the payment of dividends,  issuance of capital stock,
incurring of  indebtedness  and such other matters as the Board of Directors may
determine; and voting powers, if any, which voting powers, if any, may be either
general voting powers or special voting powers, or both.

     In fixing and  determining the special voting powers of any class or series
of Preferred Stock, the Board of Directors is specifically authorized to provide
that if at any time dividends or required  sinking fund payments  payable on the
Preferred  Stock  shall be in  default  in any  amount  to be  specified  in the
By-Laws,  then,  until all  dividends or required  sinking  fund  payments so in
default shall have been paid or declared and set apart for payment,  the holders
of shares of  Preferred  Stock of each and every  class or  series,  voting as a
single  class,  shall  be  entitled  to  elect in such  manner  as the  Board of
Directors may provide,  the smallest number of Directors necessary to constitute

                                       18

<PAGE>


a majority of the full Board of  Directors,  the balance of the  Directors to be
elected by the holders of shares  having  general  voting  powers.  The Board of
Directors is further  specifically  authorized so to provide with respect to any
class or series of  Preferred  Stock  hereafter  authorized  that the holders of
shares of such class or series,  either  separately or together with the holders
of all other classes and series of Preferred Stock, shall have the right to vote
with  respect to or to  consent or object to such other  matters as may be fixed
and determined by the Board of Directors in the By-Laws.

     Except as  hereinabove  provided,  each class or series of Preferred  Stock
shall be  identical  with each other class or series of  Preferred  Stock.  Each
share of Preferred Stock of any particular class or series shall be identical in
all  respects  with every  other share of  Preferred  Stock of the same class or
series.

     Section 3. The holders of the Preferred  Stock,  of each and every class or
series, are entitled to receive, when and as declared, out of the surplus or net
profits of the Company,  dividends at the rate  applicable  to their  respective
shares,  payable as the Board of Directors may  determine,  before any dividends
shall be set apart for or paid upon the Common Stock or before the Company shall
purchase any of its Common Stock.  The dividends upon the Preferred  Stock shall
be cumulative and accumulations of dividends shall not bear interest.  Except as

                                       19

<PAGE>

provided  in  paragraph  (b) of Section 6, the Board of  Directors  may  declare
dividends  upon the Common  Stock,  provided the  dividends  upon the  Preferred
Stock,  with  all  accumulations,  including  accrued  dividends  to the date of
payment of the Common Stock  dividends,  shall have been paid in full,  or a sum
sufficient  for the payment  thereof shall have been set apart for that purpose,
but not otherwise. Except as provided in paragraph (b) of Section 6, the holders
of the Common  Stock are  entitled  to  receive  all  additional  surplus or net
profits  which the  Directors  may order  distributed  in  dividends,  after the
dividends above provided for shall have been paid or set apart.

     Section 4. (a) If any dividend is declared on the Preferred Stock at a rate
less than  sufficient to pay the full  dividend  called for by all the Preferred
Stock  outstanding,  the distribution of the dividend shall be pro rata, so that
all holders of Preferred  Stock shall  receive the same  proportion  of the full
dividend called for by their stock.

     (b) If at any time  dividends  payable on the  Preferred  Stock shall be in
default in an amount equal to or exceeding four quarterly dividend payments,  or
if the  Company  shall fail to make any  required  sinking  fund  payment on the
Preferred  Stock,  then,  until all  dividends  or sinking  fund  payments so in
default  have been paid or declared  and set apart for  payment,  the holders of
shares of Preferred Stock of each and every class or series,  voting as a single

                                       20

<PAGE>

class,  shall be  entitled,  at any annual  meeting  during  which  dividends or
sinking  fund  payments  are so in  default,  to elect  the  smallest  number of
Directors necessary to constitute a majority of the full Board of Directors, the
balance of the Directors to be elected by the holders of shares  having  general
voting powers.

     (c)  Notwithstanding  the  provisions  of Section 5 of Article III of these
By-Laws,  except as provided in paragraph  (b) of this Section 4, the holders of
the 8.76%  Preferred  Stock  shall not be  entitled  to vote at any  meeting  of
Stockholders.

     Section  5. In case of  liquidation  or  dissolution  of the  Company,  the
assets,  irrespective  of  whether  they  shall  consist  of  capital  assets or
accumulated earnings,  shall be distributed as follows: All holders of Preferred
Stock shall be  entitled to be paid in full both the par amount of their  shares
and an amount equal to the unpaid dividends accumulated and accrued thereon and,
in the case of the 8.76% Preferred  Stock, if such liquidation or dissolution is
voluntary,  an amount  equal to the  premium  specified  in Section  6(a) below,
before any amount shall be paid to the holders of the Common Stock,  and in case
the assets shall not be sufficient to pay in full all of the Preferred Stock and
dividends  accumulated and accrued  thereon,  and applicable  premium,  then the
principal  thereof  shall  first  be  paid  pro  rata,  thereafter  a  pro  rata
distribution  of any  excess  shall  be  made  on  account  of  the  accumulated

                                       21

<PAGE>

dividends, based on the total amount of unpaid dividends accumulated and accrued
thereon,  and thereafter a pro rata  distribution of any excess shall be made on
account of applicable premium,  based on the total amount of applicable premium,
but after such  payment to the holders of the  Preferred  Stock,  the  remaining
assets and funds shall be paid to the holders of the Common Stock,  according to
their respective shares.

     Section 6. (a) The 7% Preferred  Stock shall bear  dividends at the rate of
7% per annum and shall not be  redeemable.  The 4%  Preferred  Stock,  Series A,
shall bear dividends at the rate of 4% per annum and shall be redeemable at 112%
if called on or prior to October 1, 1950; at 111% thereafter  through October 1,
1951; and after October 1, 1951 at 110%,  plus accrued  dividends in every case.
The 4 1/4% Preferred  Stock shall bear dividends at the rate of 4 1/4% per annum
and shall be  redeemable at 102% if called on or prior to April 1, 1954; at 101%
thereafter  through April 1, 1959; and after April 1, 1959 at 100%; plus accrued
dividends in every case.  Except as provided in Section 6(d) through  6(o),  the
8.76%  Preferred  Stock shall bear  dividends at the rate of 8.76% per annum and
shall not be  redeemable  prior to December  27,  1994.  Dividends  on the 8.76%
Preferred  Stock shall be cumulative  and paid quarterly no later than the first
business day  following  each January 19, April 19, July 19, and October 19. The
8.76%  Preferred  Stock  shall be  redeemable  at the  option of the  Company as
follows:

                                       22

<PAGE>
               At 105.63% if called on or prior to December 27, 1995;

               At 105.01% if called on or prior to December 27, 1996;

               At 104.38% if called on or prior to December 27, 1997;

               At 103.75% if called on or prior to December 27, 1998;

               At 103.13% if called on or prior to December 27, 1999;

               At 102.50% if called on or prior to December 27, 2000;

               At 101.88% if called on or prior to December 27, 2001;

               At 101.25% if called on or prior to December 27, 2002;

               At 100.63% if called on or prior to December 27, 2003;

               and after December 27, 2003 at 100%;

               plus accrued dividends in every case.

Preferred Stock,  which is the subject of redemption,  may be called in whole or
in part upon any dividend payment date by appropriate  resolution adopted by the
Board of  Directors  at any  regular or special  meeting  upon 60 days'  written
notice to the  owners  thereof  of record to be given by  mailing  copies of the
notice  of  redemption,  postage  prepaid,  addressed  to such  owners  at their
addresses  as  shown  on the  books of the  Company.  In the  case of the  8.76%
Preferred  Stock,  notice of redemption to the owners thereof of record shall be
by certified mail,  postage  prepaid,  or by a nationally  recognized  overnight
delivery  service.  If less than all of the  outstanding  shares of any class or
series of  Preferred  Stock shall be  redeemed  at any time,  the stock to be so
redeemed  shall be  determined  by lot, in such manner as the Board of Directors
may determine and prescribe, except that the shares of the 8.76% Preferred Stock
shall be redeemed pro rata.

                                       23

<PAGE>


     (b) The 8.76% Preferred  Stock shall also be subject to redemption  through
the  operation of a sinking fund  (hereinafter  called the Sinking  Fund) at the
redemption price of $100 per share plus an amount equal to the dividends accrued
and unpaid  thereon to the  redemption  date,  whether or not earned or declared
(the Sinking Fund Redemption  Price).  For the purposes of the Sinking Fund, out
of any net assets of the Company legally available therefor remaining after full
cumulative dividends upon all Preferred Stock then outstanding to the end of the
current  dividend period therefor shall have been paid or declared and set apart
for payment, the Company shall set aside in cash annually on December 27 in each
year  commencing  with December 27, 1995, an amount  sufficient to redeem at the
Sinking Fund Redemption  Price,  15,000 shares of the 8.76% Preferred Stock. The
Sinking  Fund shall be  cumulative  so that if on any such  December  27 the net
assets of the Company legally available therefor shall be insufficient to permit
any such amount to be set aside in full,  or if for any other reason such amount
shall not have been set aside in full, the amount of the deficiency shall be set
aside, but without interest,  before any dividend shall be paid or declared,  or
any  distribution  made,  on any  junior  shares or any junior  shares  shall be
purchased,  redeemed,  or otherwise acquired by the Company, or any moneys shall
be paid to or set aside for the  purchase or  redemption  of any junior  shares.

                                       24

<PAGE>


Notwithstanding the foregoing,  the Company may at any time (1) pay dividends in
junior  shares or (2)  purchase,  redeem or otherwise  acquire  junior shares in
exchange for, or out of the proceeds from the  concurrent  sale of, other junior
shares.  As used herein the term "junior  shares" shall mean Common Stock or any
other shares ranking junior to the 8.76%  Preferred Stock either as to dividends
upon liquidation, dissolution or winding up. Moneys in the Sinking Fund shall be
applied (and  disbursed)  on such December 27 to redemption of the shares of the
8.76%  Preferred  Stock.  The Company  shall,  prior to each such  Sinking  Fund
redemption,  give notice of  redemption,  as specified in subsection (a) of this
Section  6, of such  number of shares  of the  8.76%  Preferred  Stock as may be
required to satisfy the Sinking Funds.

        (c) In addition,  the Company  shall have the right,  at its option,  to
redeem at the Sinking  Fund  Redemption  Price on  December  27, 1995 and on any
December 27  thereafter an  additional  number of shares of the 8.76%  Preferred
Stock  up to but not  exceeding  15,000  shares,  provided,  however,  that  the
aggregate  number of shares of the 8.76%  Preferred  Stock which may be redeemed
pursuant to this Section 6(c) may not exceed 30,000  shares.  Notice of any such
redemption  shall be as  specified  in  subsection  (a) of this Section 6. These
rights shall not be  cumulative  and shall be lost to the extent not  exercised.
Any redemption of shares of the 8.76%  Preferred  Stock pursuant to this Section
6(c)  shall not  operate to reduce  the  number of shares  which the  Company is
obligated to redeem pursuant to Section 6(b).

                                       25

<PAGE>


     (d) At all times that  dividends on the 8.76%  Preferred  Stock are payable
pursuant to these By-laws,  the Company will treat the 8.76%  Preferred Stock as
stock and not as indebtedness  and will treat the dividends paid with respect to
the 8.76% Preferred Stock as dividends (within the meaning of Section 316 of the
Internal  Revenue Code of 1986, as amended (the  "Code")) to the maximum  extent
permitted under the Code.

     (e) At all times that  dividends on the 8.76%  Preferred  Stock are payable
pursuant to these By-laws, the Company will not:

              (1) take any action  which would  require or permit the Company to
         treat the dividends paid with respect to the 8.76%  Preferred  Stock as
         interest  for any  purpose  or to treat  the 8.76%  Preferred  Stock as
         indebtedness for any purpose;

              (2)  exercise  any  option  or  election  that  may at any time be
         available  under the Code or  otherwise  to  deduct  all or part of the
         dividends  paid with respect to the 8.76%  Preferred  Stock if so doing
         would  reduce  the  after-Federal  income  tax  yield per annum on such
         dividends to any corporate holder of the 8.76% Preferred Stock;

              (3) change its place of incorporation,  by merger or otherwise, to
         a  jurisdiction  other than the  District  of Columbia or one of the 50
         states of the United States; or

              (4)   otherwise   take  any   action   which   would   cause   the
         Dividend-Received  Deduction  contained  in Section  243 of the Code to

                                       26

<PAGE>

         cease to be available with regard to dividends paid with respect to the
         8.76%  Preferred  Stock to a corporate  holder of 8.76% Preferred Stock
         otherwise eligible to claim the Dividend-Received Deduction.

     (f) In the event that the Company shall fail to take the action required in
subsection  (d) of this Section 6, or shall take any of the actions  referred to
in subsection (e) of this Section 6, then the Company will pay to each corporate
holder of 8.76%  Preferred  Stock,  in addition to all dividends  required to be
paid on the 8.76%  Preferred  Stock,  such  amount as is  necessary  so that the
after-Federal  income tax yield per annum  from  dividends  and such  additional
payments  on the 8.76%  Preferred  Stock is 7.8665% (or 7.5538% in the case of a
corporate holder subject to Section 832(b) of the Code) to such corporate holder
at a Federal  income tax rate equal to 34%.  Payments  pursuant to the preceding
sentence  shall be made to the  extent  necessary  with  respect  to any and all
dividends on the 8.76%  Preferred Stock (whether such dividends are paid before,
at the same time as or after the action or failure  to act);  provided,  that no
such payments  pursuant to this  subsection  (f) shall be made to any particular
corporate  holder  until such  corporate  holder has provided the Company with a
written notice  specifying (1) that such holder requires  indemnification  under
this  subsection  (f),  (2) the amount to be paid by the Company to such holder,
and (3) supporting  calculations  and that in the event that a corporate  holder
makes a written demand for indemnification  pursuant to this subsection (f), the

                                       27

<PAGE>

Company shall  thereafter,  on each date subsequent to the date of the action or
failure to act giving  rise to such  demand on which  dividends  are paid on the
8.76% Preferred  Stock,  in addition to such  dividends,  pay to such holder the
amount set forth in the demand for indemnification  previously  furnished to the
Company  until such time as such  holder  furnishes  written  notice,  including
supporting  calculations,  to the  Company  that  indemnification  is  required,
whether pursuant to this subsection,  subsection (h) or otherwise,  at a greater
or lesser rate.

     (g) If the Company  shall pay a dividend in respect of the 8.76%  Preferred
Stock which  constitutes,  in whole or in part,  a return of capital for Federal
income tax purposes not eligible for the Dividend-Received  Deduction,  then the
Company will pay to each corporate  holder of 8.76% Preferred Stock, in addition
to all dividends  required to be paid on the 8.76%  Preferred  Stock,  an amount
(the "Indemnity  Amount") as is necessary so that the  after-Federal  income tax
yield per annum from such non-qualifying  dividends and such additional payments
on the 8.76%  Preferred  Stock is 7.8665% (or 7.5538% in the case of a corporate
holder subject to Section  832(b) of the Code).  For the purposes of calculating
the Indemnity  Amount it will be assumed that each  corporate  holder is subject
to, and pays,  Federal  income tax at the highest  marginal  rate in the case of
"ordinary  income"  and  the  highest  marginal  rate in the  case of  long-term

                                       28

<PAGE>

"capital  gains," in the year in which the Indemnity  Amount is paid;  provided,
that no such Indemnity  Amount shall be paid to any particular  corporate holder
until the earlier of (1) the time of the sale, exchange or redemption (including
a sinking fund purchase or redemption) of the 8.76% Preferred  Stock, or (2) the
time additional Federal income taxes,  including estimated taxes, resulting from
the payment of dividends on the 8.76% Preferred Stock in any calendar year which
constitute,  in whole or in part,  a return of capital  for  Federal  income tax
purposes  not eligible for the  Dividend-Received  Deduction,  are paid or would
have been paid if the  corporate  holder  were  liable for  Federal  income tax;
provided, further, that in the case of a sale or exchange of the 8.76% Preferred
Stock,  such  Indemnity  Amount shall be paid at the later of (1) fourteen  (14)
days  after  notice of such sale or  exchange  is given to the  Company  by such
corporate holder, or (2) the occurrence of such sale or exchange;  and provided,
further,  that if such Indemnity  Amount cannot be determined at the time of the
sale,  exchange or  redemption  (i.e.,  the sale,  exchange or redemption of the
8.76% Preferred Stock occurs in a year in which the  distributions  on the 8.76%
Preferred  Stock are, in whole or in part, a return of capital) then the Company
shall pay such Indemnity Amount at the earlier of (1) forty-five (45) days after
the end of the calendar  year, or (2) the time when the Indemnity  Amount can be
determined.

                                       29

<PAGE>

     (h) In the event that,  after  December 27, 1989,  Federal  legislation  is
enacted  (whether in the form of an  amendment of the Code or  otherwise)  which
(whether  by the  terms  of such  legislation  or by U.S.  Treasury  regulations
promulgated  thereunder or a ruling  published by the Internal  Revenue Service)
(1) causes or makes any corporate  holder of 8.76% Preferred Stock ineligible to
claim the  Dividend-Received  Deduction in connection with dividends paid on the
8.76%  Preferred  Stock or (2) reduces the effective  rate,  either  directly or
indirectly  (such as by taking into  account any  proration  required by Section
832(b) of the Code),  of the  Dividend-Received  Deduction  which any  corporate
holder of 8.76%  Preferred  Stock may claim in connection with dividends paid on
the 8.76% Preferred Stock,  the Company will pay to each such corporate  holder,
in addition to all dividends  required to be paid on the 8.76% Preferred  Stock,
such amount as is necessary so that the after-Federal income tax yield per annum
from  dividends and such  additional  payments on the 8.76%  Preferred  Stock is
7.8665% (or 7.5538% in the case of a corporate  holder subject to Section 832(b)
of the Code) to such  corporate  holder based on an assumed  Federal  income tax
rate of 34%.  Payments  pursuant to the preceding  sentence shall be made to the
extent  necessary  with respect to any and all dividends on the 8.76%  Preferred
Stock (whether such dividends are paid before,  at the same time as or after the
enactment of such  legislation  or the issuance of such  regulations or ruling);
provided, that no such payments shall be made to any particular corporate holder
until such holder has provided the Company  with a written  notice,  at any time

                                       30

<PAGE>

subsequent to the effective date of such legislation,  regulations or ruling, as
the case may be, specifying (i) that such holder requires  indemnification  from
the  Company  for  the  amount  of  loss  incurred  by the  holder  due to  such
legislation,  regulations  or ruling,  as the case may be, (ii) the amount to be
paid by the  Company to such holder so that the  after-Federal  income tax yield
per annum from  dividends and such  additional  payments on the 8.76%  Preferred
Stock is  7.8665%  (or  7.5538%  in the case of a  corporate  holder  subject to
Section 832(b) of the Code) to such corporate holder based on an assumed Federal
income tax rate of 34% and (iii)  supporting  calculations.  In the event that a
corporate holder makes a written demand for indemnification pursuant hereto, the
Company shall thereafter,  on each date subsequent to the effective date of such
legislation,  regulations or ruling,  as the case may be, on which dividends are
paid on the 8.76% Preferred  Stock,  in addition to such dividends,  pay to such
holder  the  amount  set  forth in the  demand  for  indemnification  previously
furnished  to the  Company  until  such time as such  holder  furnishes  written
notice, including supporting  calculations,  to the Company that indemnification
is  required,  whether  pursuant  to  this  subsection  (h),  subsection  (f) or
otherwise,  at a greater or lesser rate. In the event that further  legislation,
U.S. Treasury  regulations or rulings published by the Internal Revenue Service,
if any, further limit the eligibility to claim the  Dividend-Received  Deduction
in connection  with dividends paid with respect to the 8.76%  Preferred Stock by
any  corporate  holder  thereof or  further  reduce  the  effective  rate of the

                                       31

<PAGE>

Dividend-Received  Deduction which any corporate holder of 8.76% Preferred Stock
may claim in connection with dividends paid on the 8.76% Preferred  Stock,  then
any such corporate holder may deliver another notice pursuant to this subsection
(h) requesting a new payment amount.

     (i) In the event that the Company shall become  obligated to make a payment
to any  holder of 8.76%  Preferred  Stock  pursuant  to  subsection  (h) of this
Section 6, then the  Company  shall have the right at its option  within 30 days
after  receipt of notice  from any holder  seeking  indemnification  pursuant to
subsection  (h) (but not at a time  thereafter  that the  Company  is no  longer
obligated  to make such a payment),  to  purchase  all or a portion of the 8.76%
Preferred Stock held by such holder at $100 per share plus accrued  dividends to
the date of purchase;  provided,  that,  the Company shall have no obligation to
make a payment  pursuant to  subsection  (h) and shall have no right to purchase
the 8.76%  Preferred  Stock of a holder  pursuant to this subsection (i) if such
holder  waives the Company's  obligation to make payment  pursuant to subsection
(h) within 60 days after receipt of the Company's notice exercising its right to
purchase 8.76%  Preferred  Stock pursuant to this  subsection (i); and provided,
further, that if the Company becomes obligated (and such obligation has not been
waived) to make payments  pursuant to such  subsection  (h) to holders of 50% or

                                       32

<PAGE>

more of the  then  outstanding  8.76%  Preferred  Stock,  the  Company  shall be
entitled  to so  purchase  all,  but not  part,  of the then  outstanding  8.76%
Preferred  Stock; and provided,  further,  that in no event shall the Company be
relieved of its  obligation to make any payment  required  under  subsection (h)
with respect to any dividends  payable,  prior to the actual date of purchase by
the  Company of 8.76%  Preferred  Stock,  to any  corporate  holder  whose 8.76%
Preferred Stock is purchased by the Company pursuant to this Section 6.

     (j) In  calculating  the  payments to be made to a corporate  holder  under
subsections  (f),  (g) or (h),  such holder  shall take into account any and all
payments  (including,  without limitation,  taxes,  interest and penalties) that
such holder is required to make as a result of the event or events that resulted
in the demand for  indemnification  pursuant  to such  subsections.  All amounts
payable under subsections (f), (g) and (h) of this Section 6 shall be considered
contract   claims   taxable   as   ordinary   income   not   eligible   for  the
Dividend-Received Deduction.

     (k) In computing  "after-Federal  income tax yield" to any corporate holder
of 8.76% Preferred Stock in any particular taxable year from dividends paid with
respect to the 8.76%  Preferred  Stock for  purposes of this Section 6, (1) only
Federal  income  taxes  shall  be  considered,  (2)  the  effective  rate of the
Dividend-Received  Deduction  available to a corporate holder of 8.76% Preferred
Stock in any particular  taxable year shall be determined by taking into account

                                       33

<PAGE>

any applicable  provision of the Code (including,  without  limitation,  Section
832(b)) that reduces or enlarges the amount of any other deduction, exclusion or
adjustment  that would  otherwise  be  available to such holder for such taxable
year,  if such  reduction  or  enlargement  is required to be made  because such
holder is entitled to the  benefits of the  Dividend-Received  Deduction  and by
taking into account any reduction or  enlargement  in the effective  rate of the
Dividend-Received  Deduction  required  to be made  because  such  holder or any
income or loss of such holder is subject to any applicable provision of the Code
other than Section  243(a)(1),  (3) except to the extent  provided in clause (2)
above,  the  Dividend-Received  Deduction  for the 1990  calendar  year shall be
deemed to be 70%, (4) for the purposes of subsection  (j), the maximum  marginal
rate applicable to dividends  received by corporations in the first full taxable
year in which  the 8.76%  Preferred  Stock is issued  and  outstanding  shall be
deemed to be 34%, (5) except to the extent  required by the provisions of clause
(2) above,  the dividends  paid with respect to the 8.76%  Preferred  Stock to a
corporate  holder thereof in such particular  taxable year shall be deemed to be
the only item of income for such particular taxable year of such holder, (6) the
Dividend-Received   Deduction,   if   actually   available   (disregarding   any
disallowance  pursuant to Code Section 246A) to such holder for such  particular
taxable year, and only to the extent actually  available to such holder for such
particular  taxable year, as detailed in clause (2) above, shall be deemed to be
the only  deduction or exclusion  available to such holder,  except as otherwise

                                       34

<PAGE>

provided in clause (2) above,  and (7) for the purposes of  subsection  (j), the
rate of Federal  income tax  imposed  with  respect to the  receipt of  ordinary
income (i.e.,  contract  claims) shall be deemed to be the maximum marginal rate
applicable  to ordinary  income  received  by  corporations  in such  particular
taxable year. In the case of a holder of 8.76%  Preferred  Stock who did not own
any 8.76% Preferred  Stock for the 1990 calendar year, the computation  shall be
made as though such holder has owned 8.76% Preferred Stock in such taxable year.

     (l) Any references to the after-Federal income tax yield per annum referred
to in this Section 6 shall be adjusted in accordance with subsection (o) of this
Section 6.

     (m) As referred to in Note 5 to the Company's financial statements included
in its Quarterly  Report on Form 10-Q for the quarter ended  September 30, 1989,
an  adjustment  in the  Federal  income tax  liability  of the  Company has been
proposed by the Internal Revenue Service.  Such proposed  adjustment  relates to
the Company's Federal income tax treatment of certain issues which relate to the
Company's  ownership and subsequent sale of its interest in the Seabrook project
and the Company's abandonment of Seabrook Unit 2.

                                       35

<PAGE>


        (n) In the event that, as a result of the proposed  adjustment  asserted
in the Internal Revenue Service Audit described in subsection (m) above,

          (1)  the Company  shall  reduce or be required by  generally  accepted
               accounting  principles,  the Federal Energy Regulatory Commission
               or the Maine Public  Utilities  Commission to reduce its Retained
               Earnings  in the  cumulative  amount,  including  tax  liability,
               interest and penalties, of $15 million or more; and

          (2)  during the  twelve-month  period  subsequent  to the reduction or
               required reduction in Retained Earnings referred to in subsection
               (n)(1) above,  the holders of the 8.76% Preferred Stock shall not
               have received written  notification,  addressed to them and dated
               after the date of the reduction or required reduction in Retained
               Earnings  referred to in  subsection  (n)(1)  above,  from either
               Moody's  Investors  Service,  Inc.  ("Moody's")  or Standard  and
               Poor's  Corporation  ("S&P") that the 8.76% Preferred Stock has a
               rating of at least "baa3" from Moody's or "BBB-" from S&P; and

          (3)  any holder provides written notice to the Company, within 30 days
               after the beginning of each of the fifth through twelfth quarters
               following the reduction in Retained  Earnings or  requirement  to

                                       36

<PAGE>

               reduce Retained  Earnings referred to in subsection (n)(1) above,
               that it elects to receive an increased dividend rate on the 8.76%
               Preferred Stock held by it pursuant to this subsection (n);

then  commencing at the  beginning of the first quarter  during which the notice
referred to in subsection (n)(3) above is provided, the dividend rate payable on
such 8.76% Preferred  Stock for that quarter and each  subsequent  quarter shall
increase  by 50 basis  points  per  quarter to a maximum  increase  of 300 basis
points  (an  11.76%  dividend  rate per  annum);  provided,  that so long as the
Company  is  obligated  to pay an  increased  dividend  rate  pursuant  to  this
subsection (n), the Company shall have the right at its option to purchase, upon
30 days'  written  notice to each  holder of 8.76%  Preferred  Stock as to which
notice referred to in subsection (n)(3) above has been given, all, but not part,
of such 8.76% Preferred Stock held by such holder at $100 per share plus accrued
dividends  to  the  date  of  purchase;   provided,   further,   that  under  no
circumstances  shall  the  Company  be  relieved  of  its  obligation  to pay an
increased  dividend  pursuant to this subsection (n) prior to the actual date of
purchase by the Company of the 8.76%  Preferred  Stock;  and provided,  further,
that if subsequent to the receipt of the notice referred to in subsection (n)(3)
above, the Company shall receive notification from Moody's or S&P that the 8.76%
Preferred Stock has a rating of at least "baa3" from Moody's or "BBB-" from S&P,
then (i) the Company shall give notice to each holder of 8.76%  Preferred  Stock

                                       37

<PAGE>

entitled to an increased  dividend  rate pursuant to this  subsection  (n) that,
commencing  with the  beginning  of the  quarter  following  the mailing of such
notification,  the dividend rate payable on such 8.76%  Preferred Stock shall be
reduced to 8.76% per annum,  and (ii) the Company shall have no further right to
purchase the 8.76% Preferred Stock pursuant to this subsection (n).

     (o) So long as the Company is required to pay any holder of 8.76% Preferred
Stock an increased  dividend rate pursuant to subsection (n), the  after-Federal
income tax yield  applicable to any payments to be made pursuant to  subsections
(f), (g) and (h) of this Section 6 shall be increased as follows:


                                              After-Federal
         Increase in        After-Federal     Income Tax Yield
         Dividend Rate      Income Tax        to Holder Subject
         (Basis Points)     Yield             to Section 832(b)

               50               8.3155             7.9849
              100               8.7645             8.4161
              150               9.2135             8.8472
              200               9.6625             9.2784
              250              10.1115             9.7095
              300              10.5605            10.1407



                                       38

<PAGE>

     Section 7. The Board of Directors, by resolution adopted prior to the issue
of any stock having voting rights, shall determine whether the holders of any of
the classes or series of the  Preferred  Stock  and/or the holders of the Common
Stock may have or may not have the  preemptive  right to subscribe  for and take
shares of such  stock so to be issued.  Except to the  extent  that the Board of
Directors  shall  determine as above  provided,  no right to subscribe for or to
take any stock,  whether  Preferred or Common, at any time issued by the Company
shall appertain to any of the stock of this Company.

     Section  8. All  certificates  of stock  shall be  signed  by,  or bear the
facsimile  signatures  of, the President or any Vice President and the Treasurer
or Assistant  Treasurer,  and shall have affixed  thereto the corporate  seal or
bear a facsimile thereof.

     Section  9. The Board of  Directors  shall  provide  for the  transfer  and
registration of the shares of the Company's capital stock in such city or cities
as it from time to time deems  necessary or  advisable.  Said Board of Directors
shall  appoint  such  transfer  agents,   co-transfer  agents,   registrars  and
co-registrars  as are  required for the  foregoing  purpose.  All capital  stock
certificates  shall be countersigned by a transfer agent or co-transfer agent so
appointed, and by a registrar or co-registrar so appointed.

                                       39

<PAGE>

        Section 10. Shares of stock of the Company shall be transferable only on
the books of the  Company  by the holder  thereof  in  person,  or by his or her
attorney  duly  authorized  thereto  in  writing,  and  upon the  surrender  and
cancellation of the certificate therefor duly endorsed.

                             ARTICLE XI. Amendments

     Section 1. These By-Laws may be amended,  altered or repealed at any annual
meeting of the  Stockholders  of the Company by a vote of a majority in interest
of the  Stockholders  present.  These  By-Laws may also be  amended,  altered or
repealed at any special  meeting of the  Stockholders  by a like vote,  provided
notice of the proposed amendment,  alteration or repeal shall have been given in
the notice of the meeting.

     Section 2. These  By-Laws may also be  amended,  altered or repealed by the
Board of Directors  by a vote of a majority of all the  Directors of the Company
given at any  regular  or  special  meeting,  provided  notice of such  proposed
amendment or alteration shall have been given by resolution adopted at a meeting
of the Board of Directors  held not less than two weeks  previous  thereto and a
copy of such  resolutions  shall have been sent to each  member of the Board not
less than one week prior to the meeting at which such amendment or alteration is
acted upon. Any amendment to these By-Laws  adopted by the Board of Directors as
herein  provided shall be reported to the  Stockholders at the annual meeting of
the Company.

                                       40

<PAGE>


    I, Andrew  Landry,  hereby  certify that I am the duly elected and qualified
Clerk of Bangor Hydro-Electric Company, and that the foregoing is a true copy of
the _________???

                                       41
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.5
<SEQUENCE>6
<FILENAME>file006.txt
<DESCRIPTION>EX A-5 ARTICLES OF BANGOR VAR
<TEXT>

Exhibit A-5


          BUSINESS CORPORATION

             STATE OF MAINE                  -----------------------------------
                                             |Fee Paid $20                     |
           PROOF OF RESOLUTION               |OCN      1981941600002  RESO     |
       ALLOWING USE OF SIMILAR NAME          |----FILED------------------------|
                                             |  10-JUL-98                      |
                                             |                                 |
                                             |      /s/ Nancy B. Kelleher      |
                                             |---------------------------------|
                                             |    Deputy Secretary of State    |
       BANGOR HYDR0-ELECTRIC COMPANY         |---------------------------------|
- -------------------------------------------  |                                 |
      (Name of Corporation Allowing          |   A True Copy When Attested     |
               Similar Name)                 |          by Signature           |
                                             |                                 |
                                             |                                 |
                                             |---------------------------------|
                                             |     Deputy Secretary of State   |
                                             -----------------------------------
Pursuant to 13-A MRSA ss. 301.1.B.,  the  undersigned  corporation  executes and
delivers for filing this proof of resolution:

FIRST:    The above-named  corporation by such resolution  hereby grants the use
          of the following similar name

                       LITE-LIFE
          ----------------------------------------------------------------------
          to           BONNIE L. TOBEY
             -------------------------------------------------------------------
                               (requestor of similar name)

SECOND:   ("X" one box only)  The resolution was authorized by

             |X|  the board of directors   OR  |_| the shareholders, there being
                                                   no board of directors

THIRD:    The address of the registered office of the corporation  allowing such
          similar name in the State of Maine is

                           33 STATE STREET, BANGOR, ME 04401
          ----------------------------------------------------------------------
                           (street, city, state and zip code)


DATED     7/2/98                        *By   /s/ Andrew Landry
      --------------                        ------------------------------------
- ---------------------------------------                  (signature)
|     MUST BE COMPLETED FOR VOTE      |
|           OF SHAREHOLDERS           |        ANDREW LANDRY, CLERK
|                                     |     ------------------------------------
|-------------------------------------|       (type or print name and capacity)
|    I certify that I have custody    |
|  of the minutes showing the above   | *By ------------------------------------
|     action by the shareholders.     |                  (signature)
|                                     |
|                                     |     ------------------------------------
|                                     |       (type or print name and capacity)
| ------------------------------------|
|   (signature of clerk, secretary    |
|        or asst. secretary)          |
- ---------------------------------------

- --------------------------------------------------------------------------------
*This  document  MUST be  signed  by (1) the  Clerk  OR (2) the  President  or a
vice-president  and the  Secretary  or an  assistant  secretary,  or such  other
officer as the bylaws may designate as a 2nd certifying  officer OR (3) if there
are no such officers,  then a majority of the Directors or such directors as may
be designated  by a majority of directors  then in office OR (4) if there are no
such  directors,  then the Holders,  or such of them as may be designated by the
holders,  of record of a majority  of all  outstanding  shares  entitled to vote
thereon OR (5) the Holders of all of the outstanding shares of the corporation.

    SUBMIT COMPLETED FORMS TO:  CORPORATE EXAMINING SECTION, SECRETARY OF STATE,
                                 101 STATE HOUSE STATION, AUGUSTA, ME 04333-0101
FORM NO. MBCA-15   Rev. 96                                  TEL.  (207) 287-4195


<PAGE>


Filing Fee $50.00 plus fee
based on authorized capital stock
- --------------------------------------------------------------------------------
|    For Use By The     |      STATE OF MAINE       |      For Use By The      |
|  Secretary of State   |                           |    Secretary of State    |
|                       |  ARTICLES OF INCORPORATION|           FILED          |
| File No.  19910415D   |                           |                          |
|         --------------|                           |   September 18,    1990  |
| Fee Paid  $2625 - $75 |                           | ------------------   --  |
|         --------------|                           |      /s/ Gary Cooper     |
|                       |                           | -------------------------|
| C.B. -----------------|                           | Deputy Secretary of State|
|                       |                           |                          |
| Date    Sep 21 1990   |                           | -------------------------|
|      -----------------|                           | A True Copy When Attested|
|                      3|                           |        By Signature      |
|                       |                           |                          |
|                       |                           |                          |
|                       |                           | -------------------------|
|                       |                           | Deputy Secretary of State|
- --------------------------------------------------------------------------------

     Pursuant to 13A MRSA ss. 403, the undersigned, acting as incorporator(s) of
a corporation, adopt(s) the following Articles of Incorporation:

     FIRST:   The name of the corporation is    Bangor Var Co., Inc.
                                             -----------------------------------
              and it is located in Maine, at    Bangor
                                             -----------------------------------
     SECOND:  The  name of its  Clerk,  who must be a Maine  resident,  and the
              address of its registered office shall be

              Name                Frederick S. Samp
                  --------------------------------------------------------------
              Street & Number            33 State Street
                             ---------------------------------------------------
              City               Bangor                     Maine    04401
                   ---------------------------------------,       --------------
                                                                   (zip code)

     THIRD:   ("X" one box only)

     |X| a.   The  number  of  directors  constituting  the  initial  board  of
              directors of the corporation is 3  (See ss. 703, 1.A.)
                                             ---
         b.   If the  initial  directors  have  been  selected,  the  names and
              addresses of the persons who are to serve as directors  until the
              first  annual  meeting  of  the   shareholders   or  until  their
              successors are elected and shall qualify are:

           NAME                                        ADDRESS

  Thomas A. Greenquist                      33 State Street
- ------------------------------------    ----------------------------------------
                                            Bangor ME  04401
- ------------------------------------    ----------------------------------------
  Carroll R. Lee                            33 State Street
- ------------------------------------    ----------------------------------------
                                            Bangor ME  04401
- ------------------------------------    ----------------------------------------
  John P. O'Sullivan                        33 State Street
- ------------------------------------    ----------------------------------------
                                            Bangor ME  04401
                                        ----------------------------------------

|_|  There shall be no directors  initially;  the shares of the corporation will
     not be  sold  to  more  than  twenty  (20)  persons;  the  business  of the
     corporation will be managed by the shareholders. (See ss. 703, 1.B.)

     FOURTH:  ("X" one box only)

              The board of directors is |X| is not |_| authorized to increase or
              decrease the number of directors.

              If the board is so authorized, the  minimum  number, if any, shall
              be 1 directors. (See ss. 703.1.A.) and the maximum number, if any,
                --- shall be 9 directors.
                            ---


<PAGE>


     FIFTH:   ("X" one box only)

     |X|      There shall be only one class of shares, viz,  common stock.
                                                           ---------------------
                                                              (title of class)

                     Par value of each share (if none, so state)   $100.00.
                                                                ----------------

                     Number of shares authorized    35,000.
                                                  ------------------------------

     |_|      There shall be two or more classes of shares.

              The information  required  by ss. 403  concerning  each such class
              is set out in Exhibit _____ attached hereto and made a part hereof

                                     SUMMARY

              The aggregate par value of all authorized shares (of all classes)
              having a par value is $3,500,000.00.
              ------------------     ------------

              The total number of authorized shares (of all classes)
              without par value is   0 shares.
              -----------------     ---

     SIXTH:   ("X" one box only)

              Meetings  of the  shareholders may |X| may not |_| be held outside
              the State of Maine.

     SEVENTH: ("X" if applicable)  There are no preemptive rights.  |_|

     EIGHTH:  Other provisions of  these articles,  if any, including provisions
              for the  regulation of  the internal  affairs of the  corporation,
              are set out in Exhibit A  attached  hereto and made a part hereof.
                                    ---

================================================================================

  9/17/90

          INCORPORATORS                          RESIDENCE ADDRESSES

  /s/ Frederick S. Samp               Street   210 Main Road North
- -------------------------------------        -----------------------------------
           (signature)

      Frederick S. Samp                        Hampden ME  04444
- ------------------------------------- ------------------------------------------
       (type or print name)                  (city, state and zip code)

                                      Street
- -------------------------------------        -----------------------------------
           (signature)


- ------------------------------------- ------------------------------------------
        (type or print name)                 (city, state and zip code)

                                      Street
- -------------------------------------       ------------------------------------
           (signature)

- ------------------------------------- ------------------------------------------
  (type or print name and capacity)          (city, state and zip code)

Corporate Incorporators

                                      Street
- -------------------------------------       ------------------------------------


- ------------------------------------- ------------------------------------------
           (signature)                       (city, state and zip code)

- ------------------------------------- ------------------------------------------
        (type or print name)


Articles are to be executed as follows:  By Incorporator

     If a corporation is an incorporator  (ss. 402), the name of the corporation
     should be typed and signed on its behalf by an officer of the  corporation.
     The  address  of the  principal  place  of  business  of  the  incorporator
     corporation  should  be  given.  The  articles  of  incorporation  must  be
     accompanied by a certificate of an appropriate  officer of the  corporation
     certifying  that  the  person  executing  the  articles  on  behalf  of the
     corporation was duly authorized to do so.


<PAGE>


                                    EXHIBIT A

Bangor Var Co., Inc., is a quasi-public  corporation authorized by law to engage
in business as an electric company.


<PAGE>

Filing Fee $20.00
- --------------------------------------------------------------------------------
|    For Use By The    |      STATE OF MAINE       |File No. 19910414 D Pages 1|
|  Secretary of State  |                           |Fee Paid  $    20.00       |
|                      |                           |DCN    1952091500039 CLERK |
| File No.             |     CHANGE OF CLERK or    |-----------FILED-----------|
|         -------------| REGISTERED OFFICE or BOTH |       10/16/1995          |
| Fee Paid             |                           | --------------------------|
|         -------------|                           |                           |
|                      |                           |      /s/ Gary Cooper      |
| C.B. ----------------|                           | --------------------------|
|                      |                           | Deputy Secretary of State |
| Date                 |                           |                           |
|      ----------------|  Pursuant to 13-A MRSA    | --------------------------|
|                      |  ss. 304, the undersigned | A True Copy When Attested |
|                      |  corporation advises you  |        By Signature       |
|                      |  of the following         |                           |
|                      |  change(s):               |                           |
|                      |                           |      /s/ Gary Cooper      |
|                      |                           | ------------------------- |
|                      |                           | Deputy Secretary of State |
- --------------------------------------------------------------------------------

     FIRST:   The name  and  registered  office  of the clerk appearing  on the
              record in Secretary of State's office

              FREDERICK S. SAMP
              ------------------------------------------------------------------
              33 STATE STREET, BANGOR  ME  04401
              ------------------------------------------------------------------
                              (street, city, state and zip code)

     SECOND:  The name and physical  location of the  registered  office of the
              successor (new) clerk, who must be a Maine resident, are:

                 ANDREW LANDRY
              ------------------------------------------------------------------
                                          (name)

                 33 STATE STREET, BANGOR ME 04401
              ------------------------------------------------------------------
                    (street address (not PO Box), city, state and zip code)

              ------------------------------------------------------------------
                           (mailing address if different from above)

     THIRD:   Upon a change in clerk this must be completed:

              (X)  Such change was authorized by the board of directors and the
                   power  to  make  such   change  is  not   reserved   to  the
                   shareholders by the articles or the bylaws.

              ( )  Such change was authorized by the shareholders.  (Complete
                   the following)

              I certify  that I have  custody of the minutes  showing the above
              action by the shareholders.

Dated: OCTOBER 13, 1995
      ------------------
                            /s/ Andrew Landry
                            ----------------------------------------------------
                              (signature of new clerk, secretary or assistant
                               secretary)

                                   BANGOR VAR CO., INC.
                               -------------------------------------------------
                                            (Name of Corporation)

                            By  /s/ Andrew Landry
                               -------------------------------------------------
                                                 (signature)

                                  ANDREW LANDRY, CLERK
                               -------------------------------------------------
                                      (type or print name and capacity)

                            By
                               -------------------------------------------------
                                                (signature)

                               -------------------------------------------------
                                      (type or print name and capacity)



- --------------------------------------------------------------------------------
This  document  MUST be  signed  by (1) the  Clerk  OR (2)  the  President  or a
vice-president  AND the  Secretary,  or an assistant secretary  or other officer
the bylaws designate as second certifying officer OR (3) if no such officers,  a
majority  of the  directors  or  such  directors  designated  by a  majority  of
directors then in office OR (4) if no such  directors,  the holders,  or such of
them  designated  by the  holders,  of record of a majority  of all  outstanding
shares  entitled to vote  thereon OR (5) the  holders of all of the  outstanding
shares.

FORM NO. MBCA-3   Rev. 90    SUBMIT COMPLETED FORMS TO:  Secretary of State,
                                                         Station 101,
                                                         Augusta, Maine 04333


<PAGE>

FLEET BANK
       CORPORATE RESOLUTIONS FOR OPENING AND MAINTAINING A DEPOSIT ACCOUNT

FLEET BANK OF MAIN                               ACCOUNT NUMBER   0008 435 448
                                                                 --------------

Exchange Street        Office
- ---------------------
Bangor,                Maine
- ---------------------

HEREBY CERTIFY that the following is a true copy of  resolutions  adopted by the
Board of Directors of                  BANGOR VAR Co Inc.
                       ---------------------------------------------------------
         Maine           corporation, at a meeting of a Board legally called and
- ------------------------
held  on  October  9,  1990, 19   at which a  quorum  was  present  and  voting
          -----------------  --
throughout,  that the same are in conformity  with the provisions of the charter
and  by-laws of the  Corporation  and that each  hereof is now in full force and
effect.

RESOLVED,  that this  Corporation  open a deposit account or accounts with FLEET
BANK OF MAINE such account(s) to be named

                     (Insert in lines below names of as many
                         accounts as are to be opened.)

                              BANGOR VAR Co Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
and subject to the discretion of the officers  specified in the next  succeeding
Resolution  acting singly or jointly as therein  provided,  additional  checking
account(s)  whenever  necessary which  account(s) shall be named as the Bank and
such officers agree and that the Bank is  hereby  designated  as a depository of
this  Corporation  with  authority  to accept at any time for the credit of said
account(s) deposits by whomsoever made of funds in whatever form and in whatever
manner endorsed.

RESOLVED,  that until duly  notified in writing of a Resolution to the contrary,
FLEET  BANK OF  MAINE is  authorized  and  directed  to pay,  certify,  apply or
otherwise  honor and charge to the  account(s)  authorized by the next preceding
Resolution,  without  inquiry  and  without  regard  to the  application  of the
proceeds  thereof,  checks,  drafts,  notes,  bills  of  exchange,  acceptances,
undertakings  and other  instruments  or orders  for the  payment,  transfer  or
withdrawal of money for whatever  purpose and to whomsoever  payable,  including
those drawn to the individual  order of a signer,  and to recognize as valid all
waivers of demand, protest and notice of protest or dishonor of any check, note,
bill,  draft or other  instrument  made,  drawn or  endorsed in the name of this
Corporation, when signed, accepted or endorsed by:

      Name                         Title                Specimen Signature

John P. O'Sullivan           Treasurer                /s/ John P. O'Sullivan
- ------------------------   ------------------------   -------------------------
Carroll Lee                  President                /s/ Carroll Lee
- ------------------------   ------------------------   -------------------------
Carroll A. Brochu            Auth. Signer             /s/ Carroll A. Brochu
- ------------------------   ------------------------   -------------------------
Robert C. Weider             Auth. Signer             /s/ Robert C. Weider
- ------------------------   ------------------------   -------------------------
            (Specify the manner in which they are to sign as singly,
                        jointly, any two, or otherwise.)

RESOLVED,  that until duly  notified in writing of a Resolution to the contrary,
FLEET BANK OF MAINE is authorized to accept and act upon the  certificate of the
Secretary  or any  other  officer  of this  Corporation  as to the  names of the
present  and future  officers of this  Corporation  and to act and rely upon any
specimens of signatures of officers,  or other  persons,  if any,  authorized to
sign and act for  this  Corporation,  which  are  furnished  to the Bank by such
Secretary or any other officer.

Witness my hand and the official seal of this Corporation this   9th
                                                               -----------------

day of October     19 90                /s/ Frederick S. Samp
       -----------    --               -----------------------------------------

                                               Clerk
                                       -----------------------------------------
                                               Title of Presiding Officer

                                       Confirmed
                                                --------------------------------
                                                                   Other Officer

This certificate  should be signed by the secretary or other recording  officer.
If such  secretary  or other  officer  is  authorized  to act alone by the above
resolution this certificate must also be signed by another officer.


<PAGE>


                                       Minimum Fee $35 (See ss. 1401 sub-ss. 15)
                                      ------------------------------------------
             DOMESTIC                 |File No. 19910415 D Pages 3             |
       BUSINESS CORPORATION           |Fee Paid $     35.00                    |
                                      |OCN  1971781600028  STCK                |
          STATE OF MAINE              |                                        |
                                      |   -------------- FILED--------------   |
       ARTICLES OF AMENDMENT          |                06/26/1997              |
                                      |                                        |
  (Shareholders Voting as One Class)  |                                        |
                                      |        /s/ Nancy B. Kelleher           |
                                      |----------------------------------------|
                                      |       Deputy Secretary of State        |
   Bangor Var Co., Inc.               |----------------------------------------|
- --------------------------------------|                                        |
       (Name of Corporation)          | A True Copy When Attested by Signature |
                                      |                                        |
                                      |        /s/ Nancy B. Kelleher           |
                                      |----------------------------------------|
                                      |       Deputy Secretary of State        |
                                      ------------------------------------------

Pursuant to 13-A MRSA ss.ss.  805 and 807, the  undersigned  corporation  adopts
these Articles of Amendment:

FIRST:   All  outstanding  shares  were  entitled  to  vote  on  the  following
         amendment as one class.
                      ---

SECOND:  The  amendment  set out in  Exhibit  A  attached  was  adopted  by the
         shareholders  on (date)  June 23,  1997  ("X" one box only)
                                  --------------

          |X| at a meeting legally called  OR  |_|  by unanimous written consent
              and held                     --

THIRD:   Shares  outstanding  and  entitled  to vote and  shares  voted for and
         against said amendment were:

           Number of Shares Outstanding       NUMBER                 NUMBER
              and Entitled to Vote           Voted For           Voted Against
         -------------------------------     ---------           -------------
                     5,000                    5,000                     0

FOURTH:  If  such  amendment   provides  for  exchange,   reclassification   or
         cancellation  of issued  shares,  the  manner in which  this  shall be
         effected is  contained in Exhibit B attached if it is not set forth in
         the amendment itself.

FIFTH:   If the  amendment  changes  the  number or par  values  of  authorized
         shares,  the number of shares the  corporation  has authority to issue
         thereafter, is as follows:

         Class         Series (If Any)  Number of Shares    Par Value (If Any)
         -----         ---------------  ----------------    ------------------
         Common Stock                   35,000              $35,000.00

         The aggregate par value of all such shares (of all classes and series)
         having par value is $ 35,000.00
         ----------------     -----------

         The total  number  of all such  shares  (of all  classes  and  series)
         without par value is 0 shares
         -----------------   ---


<PAGE>


SIXTH:   The address of the registered office of the corporation in the State of
         Maine is 33 State Street, Bangor, Maine  04401
                  --------------------------------------------------------------
                             (street, city, state and zip code)


DATED   June 23, 1997                  *By  /s/ Andrew Landry
      -------------------                 --------------------------------------
                                                       (signature)
- ---------------------------------------
|    MUST BE COMPLETED FOR VOTE       |     ANDREW LANDRY, CLERK
|          OF SHAREHOLDERS            |   --------------------------------------
|                                     |     (type or print name and capacity)
|-------------------------------------|
|    I certify that I have custody    |*By
|  of the minutes showing the above   |   --------------------------------------
|     action by the shareholders.     |               (signature)
|                                     |
|                                     |   --------------------------------------
| /s/ Andrew Landry                   |      (type or print name and capacity)
| ----------------------------------- |
|   (signature of clerk, secretary    |
|         or asst. secretary)         |
- ---------------------------------------

































NOTE: This form should not be used if any class of shares is entitled to vote as
      a separate class for any of the reasons set out in ss. 806, or because the
      articles so provide. For vote necessary for adoption see ss. 805.

- --------------------------------------------------------------------------------
*This  document  MUST be  signed  by (1) the  Clerk  OR (2) the  President  or a
vice-president  and the  Secretary  or an  assistant  secretary,  or such  other
officer as the bylaws may designate as a 2nd certifying  officer OR (3) if there
are no such officers,  then a majority of the Directors or such directors as may
be designated  by a majority of directors  then in office OR (4) if there are no
such  directors,  then the Holders,  or such of them as may be designated by the
holders,  of record of a majority  of all  outstanding  shares  entitled to vote
thereon OR (5) the Holders of all of the outstanding shares of the corporation.

    SUBMIT COMPLETED FORMS TO:  CORPORATE EXAMINING SECTION, SECRETARY OF STATE,
                                 101 STATE HOUSE STATION, AUGUSTA, ME 04333-0101
FORM NO. MBCA-9   Rev. 96                        TEL.  (207) 287-4195


<PAGE>


                               CLERK'S CERTIFICATE

     I, Andrew Landry,  duly elected  Corporate Clerk of Bangor Var Co., Inc., a
corporation  duly  organized  and existing  under the laws of the State of Maine
(the "Company"),  certify that the following  resolutions and recitals were duly
and  validly  adopted  at a legally  called  special  meeting  of the  Company's
shareholders  held on June 23, 1997 and such  resolutions  are in full force and
effect on the date hereof:

          VOTED to amend the Articles of  Incorporation  of Bangor Var Co., Inc.
     to reduce the par value of its common stock from $100.00 per share to $1.00
     per share.

          IN WITNESS WHEREOF,  I have hereunto set my name as of the 23rd day of
     June, 1997.

                                                     /s/ Andrew Landry
                                                --------------------------------
                                                Andrew Landry
                                                Corporate Clerk


<PAGE>


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.6
<SEQUENCE>7
<FILENAME>file007.txt
<DESCRIPTION>EX A-6 BYLAWS OF BANGOR VAR
<TEXT>

EXHIBIT A-6

                                     BY-LAWS
                                       OF
                              BANGOR VAR CO., INC.




                                   ARTICLE ONE

                                     OFFICES

     The principal  office of this  corporation  shall be in the City of Bangor,
Maine,  at such place as the Board of Directors may from time to time designate,
and the  Company  shall have and  maintain  such  other  offices as the Board of
Directors may deem expedient.

                                   ARTICLE TWO
                                  STOCKHOLDERS

     Section 1. The  Annual  Meeting  of the  Stockholders  shall be held on the
fourth Tuesday in April of each year, or within sixty days thereafter, upon such
date as the Board of  Directors or the  President of the Company may  designate,
for the election of a Board of Directors  and for the  transaction  of any other
business that may be brought before such meeting. In case of the failure for any
cause to hold such  meeting  and  election  on said  fourth  Tuesday in April or
within sixty days thereafter as above provided, said election may be held at any
special meeting of the stockholders called for the purpose.


<PAGE>




     Section 2. Written or printed  notice  stating the place,  day, and hour of
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten days before the date
of the meeting,  either  personally  or by mail,  by or at the  direction of the
president,  or the clerk, or the officer or persons calling the meeting, to each
shareholder of record entitled to vote at such meeting.  If mailed,  such notice
shall be deemed to be  delivered  when  deposited  in the  United  States  mail,
addressed to the  shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid.

     Section 3. For the purposes of determining  stockholders entitled to notice
of, or to vote at, any meeting of stockholders or any  adjournment  thereof,  or
stockholders  entitled  to  receive  payment  of  any  dividend,  or to  make  a
determination  of  shareholders  for any  other  proper  purpose,  the  board of
directors of the  corporation may provide that the stock transfer books shall be
closed for a stated period, but not to exceed sixty days. In lieu of closing the
stock  transfer  books,  the board of directors may fix in advance a date as the
record date for any such  determination of stockholders,  such date in any event
to be not more than sixty  days,  and in case of a meeting of  stockholders  not
less than 24 days  prior to the date on which the  particular  action  requiring
such determination of stockholders is to be taken.


<PAGE>



     If the stock  transfer books are not closed and no record date is fixed for
the  determination  of  stockholders  entitled  to  notice  of, or to vote at, a
meeting of  stockholders,  or of  stockholders  entitled to receive payment of a
dividend, the date that notice of the meeting is mailed or the date on which the
resolution of the board of directors  declaring such dividend is adopted, as the
case may be, shall be the record date for such  determination  of  stockholders.
When a  determination  of  stockholders  entitled  to  vote  at any  meeting  of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment  thereof except where the  determination  has been made
through the closing of the stock transfer books and the stated period of closing
has expired.

     Section 4. A majority of the outstanding shares of the corporation entitled
to vote,  represented  in  person or by proxy,  shall  constitute  a quorum at a
meeting of stockholders.  If less than a majority of such outstanding shares are
represented at a meeting,  a majority of the shares so  represented  may adjourn
the meeting from time to time without further notice.  At such adjourned meeting
at which a quorum is present or represented, any business may be transacted that
might  have  been  transacted  at  the  meeting  as  originally  notified.   The
stockholders  present at a duly  organized  meeting  may  continue  to  transact
business   until   adjournment,   notwithstanding   the   withdrawal  of  enough
stockholders to leave less than a quorum.

     Section 5. At all meetings of stockholders, a stockholder may vote by proxy
executed in writing by the  stockholder  or by his duly  authorized  attorney in
fact. Such proxy shall be filed with the clerk of the  corporation  before or at
the time of the meeting.

     Section  6.  Subject  to  the  provisions  of  any  applicable   law,  each
outstanding  share entitled to vote shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders.

                                  ARTICLE THREE
                               BOARD OF DIRECTORS

     Section 1. The business and affairs of the corporation  shall be managed by
its board of directors.


<PAGE>



     Section  2. The  number of  directors  of the  corporation  shall be three.
Directors shall be elected at the annual meeting of  stockholders,  and the term
of  office  of  each  director  shall  be  until  the  next  annual  meeting  of
stockholders and the election and qualification of his successor. Directors need
not be  residents  of the  State of Maine  and need not be  stockholders  of the
corporation.

     Section  3. A  regular  meeting  of the  board of  directors  shall be held
without notice other than this bylaw  immediately after and at the same place as
the annual  meeting of  stockholders.  The board of directors  may  provide,  by
resolution,  the time and place for holding  additional regular meetings without
other notice than such resolution.  Additional regular meetings shall be held at
the principal office of the corporation in the absence of any designation in the
resolution.

     Section 4. Special  meetings of the board of directors  may be called by or
at the request of the president or any two  directors,  and shall be held at the
principal  office of the corporation or at such other place as the directors may
determine.

     Section 5. Notice of any special  meeting  shall be given at least 48 hours
before the time fixed for the meeting, by written notice delivered personally or
mailed to each director at his business address, or by telegram. If mailed, such
notice shall be deemed to be delivered  when deposited in the United States mail
so addressed,  with postage thereon  prepaid,  not less than three days prior to
the  commencement  of the  above-stated  notice  period.  If  notice is given by
telegram,  such  notice  shall be deemed to be  delivered  when the  telegram is
delivered  to the  telegraph  company.  Any  director  may  waive  notice of any
meeting.  The attendance of a director at a meeting shall constitute a waiver of
notice of such  meeting,  except  where a  director  attends  a meeting  for the
express  purpose of objecting  to the  transaction  of any business  because the
meeting  is  not  lawfully  called  or  convened.  Neither  the  business  to be
transacted at, nor the purpose,  of any regular or special  meeting of the board
of  directors  need be  specified  in the  notice  or  waiver  of notice of such
meeting.


<PAGE>



     Section 6. A  majority  of the number of  directors  fixed by these  bylaws
shall  constitute a quorum for the transaction of business at any meeting of the
board of directors,  but if less than such  majority is present at a meeting,  a
majority of the  directors  present  may  adjourn the meeting  from time to time
without further notice.

     Section 7. The act of the majority of the directors present at a meeting at
which a quorum is present shall be the act of the board of directors.

     Section 8. Any vacancy occurring in the board of directors may be filled by
the affirmative vote of a majority of the remaining directors though less than a
quorum of the board of directors.  A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office. Any directorship to
be filled by reason of an increase in the number of directors shall be filled by
election at an annual meeting or at a special meeting of stockholders called for
that purpose.

     Section 9. By resolution  of the board of  directors,  the directors may be
paid their  expenses,  if any,  of  attendance  at each  meeting of the board of
directors,  and may be paid a fixed sum for  attendance  at each  meeting of the
board of  directors  or a stated  salary  as  director.  No such  payment  shall
preclude any director  from serving the  corporation  in any other  capacity and
receiving compensation therefor.

     Section  10. A director of the  corporation  who is present at a meeting of
the board of directors at which action on any corporate matter is taken shall be
presumed  to have  assented  to the action  taken  unless his  dissent  shall be
entered  in the  minutes  of the  meeting  or unless he shall  file his  written
dissent to such action with the person acting as the clerk of the meeting before
the adjournment  thereof or shall forward such dissent by registered mail to the
clerk of the corporation  immediately after the adjournment of the meeting. Such
right to  dissent  shall  not  apply to a  director  who  voted in favor of such
action.


<PAGE>



                                  ARTICLE FOUR
                                    OFFICERS

     Section l. The officers of the  corporation  shall be a  president,  one or
more  vice-presidents  (the  number  thereof  to be  determined  by the board of
directors), a clerk and a treasurer,  each of whom shall be elected by the board
of  directors.  Such other  officers  and  assistant  officers  as may be deemed
necessary may be elected or appointed by the board of directors. Any two or more
offices may be held by the same person.

     Section 2. The  officers of the  corporation  to be elected by the board of
directors  shall be  elected  annually  at the  first  meeting  of the  board of
directors held after each annual meeting of the stockholders. If the election of
officers  is not  held at such  meeting,  such  election  shall  be held as soon
thereafter as is convenient.  Each officer shall hold office until his successor
has been duly elected and qualifies or until his death or until he resigns or is
removed in the manner hereinafter provided.

     Section  3. Any  officer  or agent  elected  or  appointed  by the board of
directors may be removed by the board of directors  whenever in its judgment the
best  interests of the  corporation  would be served  thereby,  but such removal
shall be without  prejudice  to the  contract  rights,  if any, of the person so
removed.

     Section 4. A vacancy in any office because of death, resignation,  removal,
disqualification  or otherwise,  may be filled by the board of directors for the
unexpired portion of the term.

     Section  5. The  powers  and  duties of the  several  officers  shall be as
provided  from time to time by  resolution  or other  directive  of the board of
directors. In the absence of such provisions, the respective officers shall have
the powers and shall  discharge  the duties  customarily  and  usually  held and
performed by like officers of corporations  similar in organization and business
purposes to this corporation.


<PAGE>



     Section 6. The salaries of the officers shall be fixed from time to time by
the board of directors,  and no officer shall be prevented  from  receiving such
salary by reason of the fact that he is also a director of the corporation.

                                  ARTICLE FIVE
                     CONTRACTS, LOANS, CHECKS, AND DEPOSITS

     Section 1. The board of directors  may  authorize  any officer or officers,
agent or  agents,  to  enter  into any  contract  or  execute  and  deliver  any
instrument in the name and on behalf of the corporation,  and such authority may
be general or confined to specific instances.

     Section 2. No loans shall be contracted on behalf of the corporation and no
evidences of  indebtedness  shall be issued in its name unless  authorized  by a
resolution of the board of directors.  Such authority may be general or confined
to specific instances.

     Section 3. All checks,  drafts,  or other  orders for the payment of money,
notes, or other evidences of indebtedness  issued in the name of the corporation
shall be signed by such officer or officers,  agent or agents of the corporation
and in such manner as shall from time to time be determined by resolution of the
board of directors.

     Section 4. All funds of the  corporation  not otherwise  employed  shall be
deposited  from time to time to the  credit of the  corporation  in such  banks,
trust companies, or other depositaries as the board of directors may select.


<PAGE>




                                   ARTICLE SIX
                                    DIVIDENDS

     The board of directors may from time to time declare,  and the  corporation
may pay,  dividends on its outstanding shares in the manner and on the terms and
conditions provided by law.

                                  ARTICLE SEVEN
                                WAIVER OF NOTICE

     Whenever any notice is required to be given to any  stockholder or director
of the corporation  under the provisions of these bylaws or under the provisions
of the  articles  of  incorporation  or under the  provisions  of law,  a waiver
thereof in writing,  signed by the person or persons  entitled  to such  notice,
whether before or after the time stated therein,  shall be deemed  equivalent to
the giving of such notice.

                                  ARTICLE EIGHT
                                   AMENDMENTS

     These  bylaws may be altered,  amended,  or repealed  and new bylaws may be
adopted by the board of  directors  at any  regular  or  special  meeting of the
board; provided, however, that the number of directors shall not be increased or
decreased nor shall the provisions of Article Two,  concerning the stockholders,
be  substantially  altered  without the prior approval of the  stockholders at a
regular or special meeting of the stockholders, or by written consent.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.7
<SEQUENCE>8
<FILENAME>file008.txt
<DESCRIPTION>EX A-7 PARTNERSHIP AGREEMENT
<TEXT>

Exhibit A-7

                              PARTNERSHIP AGREEMENT

                            Dated as of July 1, 1990

                                    NORVARCO

                                (General Partner)

                              BANGOR VAR CO., INC.

                                (General Partner)

                                    Creating

                             CHESTER SVC PARTNERSHIP

                          (a Maine General Partnership)


<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

section 1.  Formation and Name.................................................3
section 2.  Definitions........................................................3
section 3.  Conditions to Effectiveness........................................6
section 4.  The Partnership; Purposes; Approval of
            Principal Agreements; Best Efforts.................................6
   4.1   Formation of the Partnership..........................................6
   4.2   Purposes..............................................................6
   4.3   Approval of Principal Agreements......................................6
   4.4   Best Efforts..........................................................7
section 5.  The SVC Facility, SVC Project and
            Construction Budget and Schedule...................................7
   5.1   Description...........................................................7
   5.2   Construction Budget and Schedule......................................8
   5.3   Purchase of SVC Work in Progress......................................8
section 6.  Currency of Payment................................................9
section 7.  Books and Inspection...............................................9
section 8.  Management of the Partnership; Owners' Committee..................11
   8.1   Owners' Committee....................................................11
   8.2   Meetings of Owners' Committee........................................11
   8.3   Delegation of Administrative Authority...............................12
section 9.  Initial Resolution of the Owners' Committee.......................12
section 10. Actions Requiring Unanimous Approval of Owners' Committee.........13
section 11. Reimbursement for Services Provided
            by a Partner, Parent or Affiliate.................................14
section 12. Capital Accounts, Etc.............................................15
   12.1     Capital Accounts..................................................15
   12.2     Definition of Profits and Losses..................................16
section 13. Allocations.......................................................16
section 14. Distributions.....................................................16
section 15. Transfer of Partnership Interests.................................17
   15.1     No Transfer.......................................................17
   15.2     Reorganizations...................................................17
   15.3     Right of First Refusal............................................17
   15.4     Further Requirements..............................................19
   15.5     Distributions and Allocations in Respect to Transferred Interests.20
section 16. Term of Partnership; Dissolution..................................21
   16.1     Term..............................................................21
   16.2     Dissolution.......................................................22
   16.3     Remedies Upon Default.............................................25
section 17. Winding Up of Partnership.........................................26
section 18. Nature of Relationship............................................27
section 19. Insurance and Indemnification ....................................27
section 20. Arbitration.......................................................29
   20.1     General...........................................................29
   20.2     Procedure.........................................................29
   20.3     Costs.............................................................30
   20.4     Enforcement.......................................................30
section 21. Governing Law.....................................................30
section 22. Communications....................................................30
section 23. Benefits; Assignment..............................................31
section 24. All Prior Agreements Superseded...................................32
section 25. Section Headings Not to Affect Meaning............................32
section 26. Severability of Provisions........................................32
section 27. Counterparts......................................................32
section 28. Amendments........................................................32
section 29. Proprietary Information...........................................33

Exhibit A  Construction Budget - Chester Facilities of Partnership
Exhibit B  Unanimous Resolution of Owners' Committee
Exhibit C  Description of Off-Site Facilities
Exhibit D  Cost of SVC Facilities, Transmission Work and Off-Site Facilities

<PAGE>



                              PARTNERSHIP AGREEMENT

     PARTNERSHIP AGREEMENT,  dated as of July 1, 1990, between NORVARCO, a Maine
corporation  ("NORVARCO"),  and  BANGOR  VAR  CO.,  INC.,  a  Maine  corporation
("Bangor").


                              W I T N E S S E T H:

     WHEREAS,  NORVARCO  and Bangor  desire to form a general  partnership  (the
"Partnership")  under  the  laws of the  State  of  Maine  to  design,  license,
construct,  finance,  manage, maintain, own and operate a static var compensator
facility  (as more fully  described  in Section  5.1,  the "SVC  Facility"),  to
provide  the  necessary   transmission  system  reinforcements  to  support  the
Hydro-Quebec HVDC Phase II ("Phase II")  transmission  line expansion  currently
under construction for New England Hydro-Transmission  Corporation ("New England
Hydro"); and

     WHEREAS,  the SVC Facility is to be constructed,  among other reasons,  for
the  purpose of allowing  the Phase II  facilities  to operate at their  maximum
capability  while Maine  Electric  Power Company,  Inc.  ("MEPCo")  continues to
maintain  its  full  operating  capability  on the  MEPCo  345 kv line  from New
Brunswick, Canada; and

     WHEREAS,  pursuant  to the "Phase II Maine  Electric  Power SVC  Facilities
Support  Agreement,"  which became  effective on October 1, 1988,  as amended by
Amendment No. 1 dated as of January 1, 1990 (the "SVC Support Agreement"), MEPCo
has agreed to design,  construct,  operate and maintain the SVC Facility for New
England  Hydro,  acting in its  capacity  as  constructor  of the New  Hampshire
portion of the Phase II facilities; and

     WHEREAS,  MEPCo has agreed,  pursuant to and to the extent set forth in the
Assignment  and  Purchase  and  Sale  Agreement  dated as of July 1,  1990  (the
"Assignment  Agreement"),  to assign  and  delegate  to the  Partnership  all of
MEPCo's rights and obligations  under the SVC Support  Agreement and to transfer
the SVC Facility to the Partnership; and

     WHEREAS,  the  corporate  Parents  of  the  Partners  are  also  two of the
principal shareholders of MEPCo; and

     WHEREAS,  New  England  Hydro  has  agreed to pay,  via a  monthly  support
payment, the total supported costs of services related to the SVC Facility (such
support  payments  being  designed  to equal the  monthly  fixed  costs plus the
monthly operating costs of the SVC Facility); and

     WHEREAS,   pursuant  to  the  Principal   Agreements   (as  defined  below)
substantially all foreseeable  business  decisions  relating to the operation of
the SVC Facility and the business of the Partnership have been established; and

     WHEREAS,  the parties believe that a partnership is the most desirable form
of entity to carry out the SVC Project (as defined below); and

     WHEREAS, this Agreement and the transactions  contemplated hereby have been
approved by the Boards of Directors of NORVARCO and Bangor; and

     WHEREAS,  the Partners  intend to develop a financing  plan,  in connection
with structuring and obtaining financing for the SVC Facility; and

     WHEREAS, the parties believe that the formation of the Partnership pursuant
to  this  Agreement  is in  their  respective  best  interests  and in the  best
interests of carrying out the SVC Project;

     NOW, THEREFORE, the parties hereto,  acknowledging mutual consideration and
intending  to be legally  bound  hereby,  do hereby  agree as  follows:

     SECTION 1. Formation and Name.

     NORVARCO and Bangor hereby form and establish a general  partnership  under
the Maine Uniform  Partnership Act (Title  31,ss.5281-323) to be conducted under
the terms and provisions set forth in this Agreement,  provided that Section 298
of said Act shall be superseded in its entirety by this  Agreement.  The name of
the Partnership  shall be "Chester SVC  Partnership".  NORVARCO and Bangor shall
promptly  prepare and file such  certificates,  notices and other  documents and
shall take all such other action as may be required under Maine law to establish
and/or register such Partnership and the name thereof.

     SECTION 2. Definitions.

     For the purposes of this Agreement,  unless  otherwise  expressly  provided
herein or unless the context otherwise requires,  the following terms shall have
the following respective meanings:

     "ABB" shall mean ABB Power Transmission, Inc., a Delaware corporation.

     "Affiliate"  of  any  Person  shall  mean  any  other  Person  controlling,
controlled by, or under common control with,  such Person.  For purposes of this
definition,  the term "control" (including the correlative meanings of the terms
"controlled  by" and "under common control  with"),  as used with respect to any
Person,  shall mean the  possession,  directly  or  indirectly,  of the power to
direct or cause the direction of the management policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.  Because
neither Partner controls the affairs of the Partnership,  the Partnership is not
an Affiliate of either Partner, nor of the Affiliates of the Partners.

     "Assignment of Construction Contract" shall mean the Assignment,  Amendment
and Consent to Assignment of that name dated as of November 22, 1989, as amended
by Amendment  to  Assignment  dated as of March 15, 1990 among the  Partnership,
MEPCo, New England Hydro and ABB Power Transmission, Inc.

     "Basic Operating  Agreement" shall mean the agreement of that name dated as
of July 1, 1990 between the Partnership and MEPCo.

     "Business  Day" shall mean any date other than (a) a Saturday or Sunday and
(b) a day on which state or national  banking  institutions  are  authorized  or
obligated by law or executive order to remain closed in the State of Maine.

     "Construction  Contract" shall mean that certain  Agreement between ABB and
MEPCo, dated as of November 21, 1988, as amended.

     "Ground  Lease"  shall mean the  agreement of that name dated as of July 1,
1990 between the Partnership and MEPCo.

     "Parent"  shall  mean,  with  respect  to a Partner,  an entity  that owns,
directly or indirectly,  either more than 50% of the outstanding voting stock of
a Partner or more than 50% of the value of the outstanding  stock of all classes
of such Partner.

     "Partners" shall mean each of NORVARCO and [B-H Sub].

     "Person"  shall  mean  any  individual,  partnership,  corporation,  trust,
unincorporated  association or joint venture,  a government or any department or
agency thereof, or any other entity.

     "Principal  Agreements"  shall mean this Agreement,  the Ground Lease,  the
Basic  Operating  Agreement,  the  SVC  Support  Agreement,  the  Assignment  of
Construction Contract and the Assignment Agreement.

     "Prudent  Utility  Practice"  shall at any particular  time mean any of the
practices,  methods and acts which,  in the exercise of  reasonable  judgment in
light of the facts  known at the time the  decision  was made,  could  have been
expected to accomplish the desired result at a reasonable  cost  consistent with
licensing  and  regulatory   considerations,   applicable   law,   environmental
considerations,   reliability,  safety  and  expeditiousness.  "Prudent  Utility
Practice" is not intended to be limited to the optimum practice,  method or act,
to the exclusion of all others, but rather is a spectrum of possible  practices,
methods and acts which could have been expected to accomplish the desired result
at a reasonable cost  consistent  with licensing and regulatory  considerations,
applicable   law,   environmental   considerations,   reliability,   safety  and
expeditiousness.

     "SVC' shall mean static var compensator.

     "SVC Project" shall have the meaning set forth in Section 5.1.

     References  in this  Agreement to sections,  paragraphs  and clauses are to
sections, paragraphs and clauses in this Agreement unless otherwise indicated.

     SECTION 3. Conditions to  Effectiveness.  This Agreement shall be effective
(the "Effective Date") upon execution hereof by the Partners; provided, that, on
such date the SVC Support Agreement is in full force and effect.

     SECTION 4. The  Partnership;  Purposes;  Approval of Principal  Agreements;
Best Efforts.

     4.1  Formation  of the  Partnership.  NORVARCO  and Bangor  have formed and
established the Partnership  under the laws of the State of Maine.  All real and
personal property owned by the Partnership shall be held in its name, and not in
the names of the Partners, and no Partner shall have any individual ownership in
such  property  except  for its  rights as a  Partner  in the  Partnership.  The
principal place of business of the Partnership  shall be Edison Drive,  Augusta,
Maine.

     4.2 Purposes. The purpose of the Partnership is limited to the SVC Project.

     4.3 Approval of Principal  Agreements.  The Principal Agreements are hereby
acknowledged  by the  Partners  to be fair to the  Partnership,  and are  hereby
approved by the Partnership and by the Partners.

     4.4 Best  Efforts.  Each of the  Partners  agrees  to take  all  reasonably
necessary and desirable actions, and to exercise its reasonable best efforts, to
accomplish the SVC Project.

     SECTION  5. The SVC  Facility,  SVC  Project  and  Construction  Budget and
Schedule.

     5.1 Description. The SVC Facility shall consist of the following:

          (a) a  substation  which  shall  house  equipment  such as 345 kv line
     disconnect  switches,  a  345  kv  circuit  breaker,   345/18  kv  stepdown
     transformers, a microwave tower, antenna, capacitor banks, cooling systems,
     metal  control house and other  equipment  all as further  described in the
     Construction Contract; and

          (b) all property (real,  personal and mixed,  tangible and intangible)
     related to the SVC Facility,  acquired or created by the  Partnership.

     The SVC Project  shall mean the  activities  contemplated  by the terms and
conditions of this Agreement,  the SVC Support Agreement and the Basic Operating
Agreement in connection  with  designing,  licensing,  constructing,  financing,
managing, maintaining, owning and operating the SVC Facility, including, but not
limited  to, the  following:

          (a) the  selection  and  training  of the  staff  to  operate  the SVC
     Facility:

          (b) the  selection  and  procurement  of all  materials  and  supplies
     necessary  to  construct  the SVC  Facility  and to commence  and  maintain
     commercial operation thereof;

          (c) the operation and maintenance of the SVC Facility;

          (d) all matters  incidental to the foregoing  which,  consistent  with
     Prudent  Utility  Practice,  should be done to prepare and maintain the SVC
     Facility for commercial operation on a continuous basis; and

          (e) any activities ancillary and reasonably related to the foregoing.

     5.2  Construction  Budget and  Schedule.  The  Partners  have agreed to the
Construction  Budget and  Schedule  for the SVC  Facility  attached as Exhibit A
hereto.

     5.3  Purchase  of SVC Work in  Progress.  ABB has  substantially  completed
construction  of the SVC  Facility  pursuant to the  Construction  Contract.  In
addition,  MEPCo has substantially completed certain transmission facilities and
interconnection  facilities  in MEPCo's 345 kv right of way  adjacent to the SVC
Facility, consisting of two new transmission towers and lines connecting the 345
kv line to the SVC (the  "Transmission  Work").  MEPCo owns the work in progress
under  the  Construction  Contract,  the  Transmission  Work and  certain  other
off-site  facilities  being  constructed  by  MEPCo  relating  to  SVC  Facility
microwave communication and control and other off site facilities,  as described
in Exhibit C attached  hereto (the "Off Site  Facilities").  The Partners hereby
agree  that the  Partnership  shall  purchase  such work in  progress  under the
Construction   Contract  and  the  Transmission  Work,  but  not  the  Off  Site
Facilities,  from MEPCo in consideration of assumption of MEPCo's obligations to
reimburse New England Hydro under the SVC Support Agreement for costs of the SVC
Facility,  and the Transmission  Work, all as more fully set forth in Exhibit D.
In consideration of the Partnership's  assumption of the obligation to reimburse
New England Hydro for costs of the Off Site Facilities, MEPCO shall, pursuant to
the Basic  Operating  Agreement,  assume  and agree to pay the  Partnership  any
amounts  that the  Partnership  must pay to New  England  Hydro with  respect to
advances  to  fund   construction   of  the  Off  Site   Facilities.   All  such
reimbursements  (MEPCO to the  Partnership  and the  Partnership  to New England
Hydro) shall be  simultaneous  at closing of financing  for the SVC  Facilities.

     SECTION  6.  Currency  of  Payment.  All  amounts  required  to be  paid or
contributed to the  Partnership  under this  Agreement  shall be payable in U.S.
dollars. Such payments or contributions shall be made by wire transfer to a bank
account designated by the Owners' Committee of the Partnership, or in such other
manner as is satisfactory to the Owners' Committee of the Partnership.

     SECTION 7. Books and  Inspection.  The  Partnership  shall  maintain at its
principal  place of business  accurate  and complete  books and records,  on the
accrual basis,  in accordance  with  generally  accepted  accounting  principles
consistently applied, showing all costs,  expenditures,  sales, receipts, assets
and  liabilities,  and  profits  and losses,  and all other  records  necessary,
convenient or incidental to recording the Partnership's business and affairs.

     Each  Partner  or its  designated  representatives  shall have the right of
inspection and verification  of, and, for such purpose,  shall at all reasonable
times have free access to, the books, accounts, records and all other supporting
records and documents of the  Partnership  for any year,  or shorter  accounting
period in such year,  at any time  within  the  twenty-four  (24)  month  period
following the end of such year;  provided,  however,  that the Partnership shall
not be required to make any  adjustments,  as to any Partner,  unless and to the
extent that such Partner  took  written  exception to the books and accounts and
made a claim upon the Partnership for any discrepancies  disclosed by said audit
within  such  twenty-four  (24) month  period.  The  expenses of all such audits
conducted  at the  request  of a Partner  shall be borne  solely by the  Partner
requesting the audit.

     The books,  records and other documents of the Partnership shall be audited
at  least  annually  by a  nationally  recognized  firm  of  independent  public
accountants selected by the Partners.

     7.1 Records.  As promptly as practicable and not later than one hundred and
twenty  (120) days after the end of each  fiscal  year of the  Partnership,  the
Partnership  shall  furnish to each of the Partners an annual report which shall
include the Partnership's audited comparative statements of income, statement of
cash flows,  balance sheets and statements of partnership  equity for, and as of
the end of, the fiscal year then ended and any additional financial  information
that any Partner may reasonably require. The Partnership shall make available to
each  Partner,  as they become  available,  regular  reports and other  relevant
information  with  respect  to the  cost of the SVC  Project,  the  progress  of
construction and all items affecting payments or contributions to be made by the
Partners or which such Partner may reasonably require.

     Promptly  after the end of each quarter of the  Partnership's  fiscal year,
the  Partnership  shall  cause  to be  prepared  a  balance  sheet  showing  the
Partnership's  assets  and  liabilities  as of the close of such  quarter  and a
statement  of income and a  statement  of cash flows  showing the results of its
operations for such quarter.

     SECTION 8. Management of the Partnership; Owners' Committee.

     8.1 Owners' Committee.  The business of the Partnership shall be managed by
the Partners.  The Partners shall act through an Owners' Committee consisting of
one (1) representative of each Partner,  designated,  from time to time, by each
Partner by  resolutions  of its  respective  board of  directors.  A Partner may
designate, from time to time, one or more alternates to serve as a member of the
Owners'  Committee in the event of the absence or  unavailability of the initial
designee of a Partner. Any member of the Owners' Committee may call a meeting of
said Committee.

     8.2  Meetings  of  Owners'  Committee.  Regular  meetings  of  the  Owners'
Committee shall be held at least  semi-annually,  at such time and at such place
as the Owners'  Committee  shall  determine,  upon at least  fourteen (14) days'
telephonic  notice to all  members.  Special  meetings of the Owners'  Committee
shall be held on the call of any  member at such  time and at such  place as the
Owners'  Committee  shall  determine,  upon at least seven (7) days'  telephonic
notice to all  members.  Members  may vote in person  or by proxy.  The  Owners'
Committee may act without a meeting if the action taken is unanimously  approved
in  writing.  The  Owners'  Committee  may meet by  telephone.  The  presence or
telephonic attendance of members of the Owners' Committee representing interests
in  excess  of 50% of the  outstanding  interests  in the  Partnership  shall be
required  to  constitute  a quorum,  and,  unless  otherwise  specified  in this
Agreement, all actions of the Owners' Committee shall be taken by majority vote.

     8.3 Delegation of Administrative  Authority.  The Owners' Committee may, by
majority  vote,  delegate to one of the Partners  authority to carry out certain
administrative  functions of the business of the  Partnership  for a time period
specified in a resolution of the Owners'  Committee,  and such resolution  shall
remain in full force and effect for the time  period  specified  therein  unless
earlier revoked by a majority vote of the Owners' Committee.

     SECTION 9. Initial Resolution of the Owners' Committee.

     The Partners agree that they shall cause the Owners' Committee to adopt the
Initial  Resolution  attached  hereto as Exhibit B on the Effective Date of this
Agreement.

     SECTION 10. Actions Requiring Unanimous Approval of Owners' Committee. Each
of the following  actions  shall  require the unanimous  approval of the Owners'
Committee:

          (a)  Authorizing  the  borrowing  of money,  including  obtaining  the
     initial long-term financing for the SVC Facility;

          (b)  Authorizing  the Partnership to engage in any business other than
     that referred to in Section 4.2 hereof;

          (c)   Authorizing  the  sale  or  disposition  of  any  asset  of  the
     Partnership  that would  materially  impair or change the  business  of the
     Partnership as contemplated by this Agreement;

          (d) Authorizing contracts and transactions between the Partnership and
     any  Partners,   Parents  and  Affiliates  of  Partners,   (other  than  as
     contemplated in the Principal  Agreements)  including renewals of the Basic
     Operating Agreement;

          (e) Authorizing any amendments to the Principal Agreements;

          (f) Authorizing the Partnership to make or incur capital  expenditures
     in any fiscal year in excess of $100,000;

          (g) Authorizing  the  Partnership to guaranty the  indebtedness of any
     Person;

          (h) Authorizing  the Partnership to enter into any security  agreement
     or mortgage encumbering assets of the Partnership;

          (i) Approving an annual budget for the Partnership;

          (j) Selecting or varying depreciation or accounting methods, or making
     other decisions with respect to the treatment of various  transactions  for
     state and/or federal income tax purposes,  or other financial  purposes not
     otherwise  specifically provided for herein, except with respect to matters
     that  under  state  and/or  federal  tax  law are to be  determined  by the
     election of partners  rather than  determined  uniformly at the partnership
     level for all partners; and

          (k)  Releasing  any news  release,  interview  or other  publicity  or
     written  document to any newspaper,  radio,  television,  magazine or other
     segment of the media,  except as may be required of any Partner in order to
     comply with state or federal  securities  laws or  regulations or the rules
     and  regulations of any securities  exchanges or other markets with respect
     to any publicly traded securities of any Partner or Affiliate of a Partner.
     If a Partner  determines that such a release or public  disclosure does not
     require  unanimous  approval  of the  Owners'  Committee  by reason of this
     subsection,  such Partner  shall inform the other Partner of the nature and
     content of such  release or public  disclosure  three (3)  working  days in
     advance of such release or public disclosure.

     SECTION 11.  Reimbursement  for Services  Provided by a Partner,  Parent or
Affiliate.  Except as otherwise provided in the Basic Operating  Agreement,  any
employee  of a Partner or any  employee  of its Parent or  Affiliate  who at the
request of the Owners'  Committee,  or its delegate under Section 8.3,  provides
services to the Partnership shall be paid by the Partner, Parent or Affiliate by
which such employee is employed.  The Partnership  shall reimburse such Partner,
Parent or  Affiliate  for the cost of such  employee's  services  (inclusive  of
direct and indirect  costs,  properly  allocable  overhead,  and the cost of any
equipment or supplies).

     SECTION 12. Capital Accounts, Etc.

     12.1  Capital  Accounts.  There  shall be  established  for each  Partner a
Capital  Account.   The  Partners  Capital  Accounts  shall  be  determined  and
maintained in accordance with the capital account  maintenance rules of Treasury
Regulation ss.1.704-1(b)(2)(iv), which are incorporated herein by reference, and
in general  shall be  increased by (i) the amount of money  contributed  by such
Partner, (ii) the fair market value of property contributed by such Partner (net
of  liabilities  secured by such  contributed  property that the  Partnership is
considered to assume or take subject to), (iii) the amount of Profits  allocated
to such Partner,  and (iv) the amount of any Partnership  liabilities assumed by
such  Partner,  and in  general  shall be  decreased  by (i) the amount of money
distributed to such Partner,  (ii) the fair market value of property distributed
to such Partner (net of liabilities  secured by such  distributed  property that
such Partner is  considered  to assume or take subject to),  (iii) the amount of
Losses allocated to such Partner, and (iv) the amount of any liabilities of such
Partner assumed by the Partnership.

     12.2  Definition of Profits and Losses For purposes of  allocating  Profits
and Losses to Capital  Accounts,  "Profits" and "Losses"  mean,  for each fiscal
year or other period,  an amount equal to the  Partnership's  taxable  income or
loss for such year or period for federal income tax purposes, as modified by the
capital account maintenance rules of Treasury Regulation ss.1.704-1(b)(2)(iv).

     This Section 12.2 and the other  provisions of this  Agreement  relating to
the  maintenance  of Capital  Accounts  are  intended  to comply  with  Treasury
Regulation  ss.1.704-1(b)  and  shall be  interpreted  and  applied  in a manner
consistent with such Treasury Regulation.  section 13. Allocations. For purposes
of  maintaining  Capital  Accounts,  Profits and Losses  shall be  allocated  as
follows:

                           NORVARCO                  50%
                           Bangor                    50%

For federal income tax purposes,  all items of income, gain, loss, deduction and
credit shall be allocated as follows:

                           NORVARCO                  50%
                           Bangor                    50%

     SECTION 13.  Allocations.  For purposes of  maintaining  Capital  Accounts,
Profits and Losses shall be allocated as follows:

                           NORVARCO                  50%
                           Bangor                    50%

For federal income tax purposes, all items of income, gain, loss, deduction and
credit shall be allocated as follows:

                           NORVARCO                  50%
                           Bangor                    50%

     SECTION 14. Distributions. The amount of cash available for distribution to
the Partners  shall be determined  at the end of each year by the Partners.  All
amounts distributed to the Partners shall be distributed 50% to NORVARCO and 50%
to Bangor.  The Partners  agree that to the extent  available,  the  Partnership
shall at least make  equitable  and  timely  quarterly  distributions,  in equal
amounts to each Partner,  to allow each Partner to pay such Partner's  estimated
income tax liability (federal and state) resulting from such Partner's allocable
share of Partnership income.

     SECTION 15. Transfer of Partnership Interests.

     15.1 No Transfer. Except as authorized in this Section 15, no Partner shall
sell,   transfer,   assign  or  otherwise  dispose  of,  or  mortgage,   pledge,
hypothecate,  create a security interest in, or otherwise encumber, or permit or
suffer any encumbrance of (collectively,  a "Transfer"),  all or any part of its
Interest  in  the  Partnership   (hereinafter  referred  to  as  a  "Partnership
Interest"),  unless approved in writing by the other Partner, and any attempt to
do so without such approval shall be void.

     15.2 Reorganizations.  For the purposes of this Section 15, a transfer by a
Partner of its entire  Partnership  Interest to an Affiliate of a Partner  shall
not be deemed a Transfer;  provided, however, that: (a) the transferring Partner
(together with its Affiliate transferee) shall remain liable for its obligations
as a  Partner  under  this  Agreement,  and  (b)  all  of  the  requirements  of
subsections  15.4(b)  through 15.4(g) shall be satisfied in connection with such
transfer.

     15.3 Right of First Refusal.

          (a) Except as otherwise  provided in Section 15.1 and 15.2 hereof,  no
     partner shall Transfer all or any part of its Partnership Interest,  except
     pursuant to a bona fide written  offer for cash from a party that is ready,
     willing and able to acquire the  Partnership  Interest after the expiration
     of the periods for giving notices  specified in clauses (c) and (d) of this
     Section  15.3,  and  then  only if an  offer to  Transfer  the  Partnership
     Interest to the other Partner upon identical  terms has first been made and
     has not been accepted, as hereinafter provided.

          (b) At least 6 months  prior to its  intended  date of  Transfer,  and
     after its receipt of a bona fide  written  offer of the type  described  in
     clause (a) of this  Section  15.3,  the Partner  desiring  to Transfer  its
     Partnership Interest shall give written notice of its intention to do so to
     the other  Partner,  which  notice  shall  contain the name of the proposed
     purchaser, the approximate date of the proposed Transfer, and the terms and
     conditions of the bona fide written offer.

          (c) The other  Partner  shall  signify  its  intention  to acquire the
     entire Partnership  Interest, or not acquire all thereof, by giving written
     notice of its intention to the transferring  Partner.  Failure of a Partner
     to serve such notice  within 90 days after the date of the giving of notice
     pursuant to clause (b) of this Section 15.3 shall be deemed conclusively to
     be notice of its intention not to acquire the Partnership Interest.

          (d) Any  Transfer of the  Partnership  Interest  to the other  Partner
     shall be fully  consummated  within 12 months following the date upon which
     the last of the notices  required to be given under this  Section  15.3 has
     been  duly  served,   unless  the  Partner  is  then  diligently   pursuing
     applications   to   appropriate   regulatory   authorities   for   required
     authorizations to consummate the Transfer,  in which case the time for such
     consummation shall be extended until 30 days after the proceedings for such
     authorizations are completed and such authorizations have been obtained and
     have  become  final  (i.e.,  the time for appeal  therefrom  has expired or
     appeals therefrom have been completed).

          (e) If the other  Partner does not  indicate,  within the time periods
     specified  in this  Section  15.3,  an  intention  to  acquire  the  entire
     Partnership  Interest,  the Partner desiring to Transfer shall,  subject to
     the  provisions  of this  Section 15, be free to Transfer  all but not less
     than all of the  Partnership  Interest to the party that made the bona fide
     written offer upon the terms and conditions set forth in such offer.

     15.4  Further  Requirements.  No  Transfer  of a part  of  the  Partnership
Interest  of  a  Partner  shall  be  permitted,  effective  or  binding  on  the
Partnership  or  the  non-transferring  Partner.  No  Transfer  of  all  of  the
Partnership  Interest of a Partner shall be  permitted,  effective or binding on
the Partnership or the non-transferring  Partner unless (a) the admission of the
transferee  as a new  Partner  shall  have been  consented  to in writing by the
non-transferring  Partner, which consent shall not be unreasonably withheld, (b)
the  transferee  shall  execute  and  acknowledge  an  instrument,  in form  and
substance reasonably  satisfactory to the non-transferring  Partner,  whereby it
agrees to assume and be bound by all the covenants, terms and conditions of this
Agreement as the same may have been amended,  including, but not limited to, the
financial and other  obligations  of its transferor  hereunder,  (c) a duplicate
original of each such instrument of Transfer and  assumption,  duly executed and
acknowledged in each case, is delivered to the non-transferring Partner, (d) the
transferor  shall  provide  an  opinion of  counsel,  satisfactory  to the other
Partner,  that the  proposed  Transfer  would not cause the  termination  of the
Partnership  for  federal  income  tax  purpose,  unless the  remaining  Partner
consents to such a  termination,  (e) the  transferee  shall pay all  reasonable
expenses  in  connection  with its  admission  as a  Partner,  (f) all  required
consents  of  mortgagees  or other  Persons  to such  transfer  shall  have been
obtained in writing and delivered to the  non-transferring  Partner, and (g) all
required  consents  thereto or approvals  thereof,  if any, of all  governmental
authorities  having  jurisdiction shall have been obtained and have become final
and written notice thereof delivered to the non-transferring Partner.

     15.5 Distributions and Allocations in Respect to Transferred Interests.  If
any  Partnership  Interest in the  Partnership is sold,  assigned or transferred
during any accounting  period in compliance  with the provisions of this Section
15,  Profits,  Losses  and  all  other  items  attributable  to the  transferred
Partnership  Interest for such period shall be divided and allocated between the
transferor  and the  transferee by taking into account  their varying  interests
during the period in accordance with Code Section 706(d),  using any conventions
permitted  by law.  Solely  for the  purposes  of making  such  allocations  and
distributions,  the Partnership shall recognize such transfer not later than the
end of the calendar month during which it is given notice that such transfer has
been made,  provided that if the Partnership does not receive notice stating the
date such interest in the Partnership was transferred and such other information
as the Owners' Committee may reasonably  require within 30 days after the end of
the accounting  period during which the transfer occurs,  then all of such items
shall be  allocated,  and all  distributions  shall be made,  to the person who,
according  to the books and records of the  Partnership,  on the last day of the
accounting  period  during  which  the  transfer  occurs,  was the  owner of the
interest.  Neither the Partnership nor the Administrative  Agent shall incur any
liability  for making  allocations  and  distributions  in  accordance  with the
provisions  of this  Section  15,  whether or not the Owners'  Committee  or the
Partnership has knowledge of any transfer of ownership of any interest.

     SECTION 16. Term of Partnership; Dissolution.

     16.1  Term.  The  term of the  Partnership  shall  commence  on the date of
effectiveness of this Agreement as provided in Section 3 hereof.  Subject to the
provisions  hereof  regarding  dissolution,  the term of the  Partnership  shall
continue until the earliest of: (a) sale or other disposition of the SVC Project
by the Partnership,  (b) 55 years after the date hereof, or (c) five years after
termination of the SVC Support Agreement, and payment in full of all amounts due
from New England Hydro to the Partnership  unless the Partners  otherwise agree.
Neither  Partner shall have the right  voluntarily  to dissolve or terminate the
Partnership at any time,  including without limitation any rights under the laws
of the State of Maine to apply for judicial dissolution, and the only right of a
Partner unilaterally to withdraw from the Partnership shall be through a sale of
its  entire  interest  in the  Partnership  in  accordance  with the  provisions
contained in Section 15.

     16.2  Dissolution.  The  Partnership  may be  dissolved as provided in this
Section 16 upon the  occurrence  of an Event of Default.  Each of the  following
shall constitute an Event of Default:

          (a)  The  withdrawal  of  either  Partner  in   contravention  of  the
     provisions of this Agreement;

          (b) The entry of a decree or order by a court having  jurisdiction  in
     the premises adjudging a Partner or its Parent a bankrupt or insolvent,  or
     approving as properly filed an involuntary petition seeking reorganization,
     arrangement, adjustment or composition of or in respect of a Partner or its
     Parent under any  bankruptcy,  insolvency,  or other similar law,  state or
     federal,  or  appointing  a  receiver,   liquidator,   assignee,   trustee,
     sequestrator (or other similar official) of the Partner or its Parent or of
     any  substantial  part of the property of a Partner or its Parent under any
     such law, or ordering  the  winding up or  liquidation  of the affairs of a
     Partner or its Parent,  and the  continuance of any such decree or order is
     unstayed and in effect for a period of 90 consecutive days; or

          (c)  the  institution  by  a  Partner  or  its  Parent  of  bankruptcy
     proceedings  or  other   proceedings  to  be  adjudicated  as  bankrupt  or
     insolvent,  or the consent by a Partner or its Parent to the institution of
     bankruptcy or insolvency  proceedings  against a Partner or its Parent,  or
     the  filing of a  petition  or answer or consent by a Partner or its Parent
     seeking reorganization or relief under any bankruptcy, insolvency, or other
     similar law, state or federal, or the consent by a Partner or its Parent to
     the  filing  of  such  petition  or  to  the  appointment  of  a  receiver,
     liquidator,  assignee,  trustee,  sequestrator (or similar official) of the
     Partner  or its  Parent or of any  substantial  part of the  property  of a
     Partner or its Parent under any such law, or the making by a Partner or its
     Parent of an assignment for the benefit of creditors, or the admission by a
     Partner  or its  Parent  in  writing  of its  inability  to pay  its  debts
     generally  as they  become  due,  or the  taking of  corporate  action by a
     Partner or its Parent in furtherance of any such action; or

          (d) any part of the  Partnership  Interest of a Partner is seized by a
     creditor of such  Partner,  and the same is not  released  from  seizure or
     bonded out within 60 days from the date of notice of seizure; or

          (e) a Partner violates Section 15 hereof.

Upon the  occurrence  of an Event of Default  with  respect  to a Partner,  such
Partner  shall be deemed to be in default  hereunder and shall be referred to as
the  "Defaulting  Partner",  and the other  Partner  shall be referred to as the
"Non-Defaulting Partner".

     Upon the  occurrence  of any of the events  specified  in  subsections  (a)
through (e) of this Section  16.2,  the  Defaulting  Partner  shall  provide the
Non-Defaulting  Partner with prompt  written  notice of the  occurrence  of such
default;  provided,  however, that notwithstanding any failure of the Defaulting
Partner to provide such written  notice,  upon the occurrence and continuance of
any of the events  specified  in  subsections  (b),  (c), or (d) of this Section
16.2, the Non-Defaulting Partner shall immediately, and without the necessity of
taking any further action,  have the right to exercise the remedies set forth in
Section 16.3 hereof.  Upon the occurrence  and  continuance of any of the events
specified in  subsection  (a) or (e) of this Section  16.2,  the  Non-Defaulting
Partner  shall  have the  right to give the  Defaulting  Partner  a  "Notice  of
Default",  which shall be in writing,  shall set forth the obligations which the
Defaulting  Partner has not  performed,  or is in breach of, and shall set forth
the date by which such  default  must be cured,  which date shall be at least 10
days after receipt of the Notice of Default if payment of money is required,  or
at least 30 days after receipt of the Notice of Default for defaults  other than
payments of money,  or such shorter period as may be necessary in the good faith
judgment of such Non-Defaulting Partner to prevent a default under any agreement
for borrowed money to which the Partnership is a party or to avoid  jeopardizing
their respective investments in the Partnership. If, within the period specified
in the Notice of Default,  the Defaulting Partner cures such default, the Notice
of Default shall be inoperative and the Defaulting  Partner shall lose no rights
hereunder.  If, within such specified  period,  the Defaulting  Partner does not
cure such default, any Non-Defaulting Partner, at the expiration of such period,
shall have the rights hereinafter specified.

     16.3  Remedies  Upon  Default.  If a Partner  becomes a Defaulting  Partner
pursuant to the  provisions  of Section 16.2 hereof and the default is not cured
within the specified,  if any, period,  then, in such event, the  Non-Defaulting
Partner shall have the right, at its option, to proceed to either:

          (a) dissolve the Partnership; or

          (b) cure the default and the cost of such curing shall be  recoverable
     from the Defaulting Partner;  provided that neither action under clause (a)
     or clause (b) shall  relieve the  Defaulting  Partner  from  liability  for
     damages sustained by the Partnership or by the Non-Defaulting Partner

     SECTION 17. Winding Up of Partnership. Except as otherwise provided in this
Agreement,  upon  termination of the  Partnership as provided in Section 16.1 or
dissolution of the Partnership as provided in Section 16.2-3,  the assets of the
Partnership,  after payment of  liabilities,  shall be distributed in accordance
with the respective capital accounts of the Partners, as adjusted for unrealized
gain or loss, in the following manner:

          (a) All  Partnership  liabilities  shall  be paid and  discharged,  or
     adequate funds set aside for the payment and discharge thereof,  all out of
     the Partnership's  cash; if the amount thereof is not sufficient to provide
     for such  discharge of  obligations,  tangible  personal  property and real
     property and other property (in that order to the extent feasible) shall be
     sold in order to realize additional cash (with either Partner, other than a
     Defaulting Partner,  having the right of first refusal, for a period of not
     more than 30 days from the receipt of a third party offer to  purchase,  to
     purchase such assets at the same price and an the same terms and conditions
     as such third party offer). If the Partnership  retains reserves reasonably
     required  to provide  for  liabilities  (contingent  or  otherwise)  of the
     Partnership or retains  installment  obligations  owed to the  Partnership,
     liquidating  distributions  shall  be made in the  ratio  of the  Partners'
     positive Capital  Accounts,  and such retained amounts shall be distributed
     as soon as practicable and in the ratios of the Partners'  positive Capital
     Account  balances.  In the event that the  liabilities  of the  Partnership
     cannot be fully  satisfied  and  discharged  after the sale or sales of all
     assets,  the Partners  shall assume and pay the excess in  accordance  with
     their  respective  applicable  allocation  percentage  for loss;  provided,
     however,  that if the capital  account of one or both of the  Partners,  as
     adjusted  for such sale or sales of all  assets,  shall be  negative,  such
     Partner shall first  contribute to the  Partnership  an amount equal to the
     negative balance of its Capital Account.  Any such payment will be credited
     to such Partner's capital account.  Notwithstanding  anything herein to the
     contrary,  the  provisions of this  Subsection  (a) are meant to define the
     respective  rights and duties of the  Partners and shall not give any third
     parties any rights against the Partners.

          (b) The  Partnership  shall  terminate  when all property owned by the
     Partnership shall have been disposed of and the net proceeds, after payment
     or  satisfaction of liabilities to Partnership  creditors,  shall have been
     distributed to the Partners.

     SECTION 18. Nature of  Relationship.  Nothing  herein shall be construed to
constitute  either Partner the agent or general partner of the other,  except as
provided herein.

     SECTION 19. Insurance and Indemnification.

     19.1 The Partnership  shall procure and maintain,  at Partnership  expense,
programs of  insurance  coverage,  including  but not  limited to  comprehensive
public liability, property damage, product liability, fidelity, theft, burglary,
workmen's compensation, and business interruption insurance, with such companies
and such terms, limits and deductibles as the Owners' Committee, or its delegate
under Section 8.3, from time to time shall  determine.  Both the Partnership and
the Partners shall be named insureds thereunder.

     19.2 All claims,  demands,  actions,  and rights of action of third parties
with respect to the business of the Partnership,  and costs and fees incident to
the  investigation,   defense  and  settlement  of  the  same,  are  hereinafter
collectively  referred to as "loss." All loss sustained by the Partnership  with
respect to which the Partnership is uninsured shall be borne by the Partnership.
In the event a loss on account of Partnership  activities is sustained by either
Partner,  it shall be entitled  to  reimbursement  thereof  and/or to being held
harmless  by the  Partnership;  provided  that such loss is not due to the gross
negligence, willful act or willful omission of such Partner or its employees, or
an act which is  outside  of the  authority  of such  Partner  pursuant  to this
Agreement or which contravenes any of the provisions of this Agreement.

     19.3 Each  Partner  shall  notify the other  promptly of the  existence  or
probable  existence  of any claim or demand  or right of action  against  it and
shall  give  the  other  or  the  Partnership,   as  appropriate,  a  reasonable
opportunity to participate in the defense thereof,  provided the failure to give
such notice shall not affect the right to such recovery  except to the extent of
actual prejudice resulting therefrom.

     SECTION 20. Arbitration.

     20.1 General. All disputes, claims and other matters in question between or
among the  Partners,  shall be  decided  by  arbitration  as  described  in this
section. Unless the parties agree otherwise, the arbitration proceeding shall be
conducted before a three person arbitration panel. The arbitrators,  all of whom
shall be neutral  arbitrators,  shall be appointed  by the American  Arbitration
Association ("AAA") upon application by any one of the Partners. All arbitrators
appointed  shall be individuals  experienced in the electric  utility  industry,
with particular  reference to the matter in question to the extent possible.  No
arbitrator shall be challenged  except for cause. No more than one member of the
arbitration  panel  may be an  attorney.  The AAA may  consult  with the  Edison
Electric Institute when selecting arbitrators.

     20.2 Procedure. Notice of Demand for Arbitration shall be sent to the other
Partners  by  certified  mail  and a copy  sent  to  the  AAA.  The  arbitration
proceeding  shall be conducted in  accordance  with the  Commercial  Arbitration
Rules of the  American  Arbitration  Association  as amended  from time to time,
consistent with this Section 20.

     During the course of the  arbitration,  the parties  shall he  permitted to
demand and receive  from one another the  documents  one would be  permitted  to
obtain in a civil  action in  Superior  Court.  The parties  shall also  furnish
detailed  reports of any  outside  expert  witnesses  whom they intend to call a
reasonable time in advance of the arbitration  hearings.  The arbitrators  shall
enforce the provisions of this section as part of the agreement to arbitrate and
shall  further have the  authority to permit and require  depositions  of expert
witnesses.  No dispute may be submitted to arbitration more than two years after
it arises,  except by mutual agreement of the parties.  The arbitration shall be
held in Augusta, Maine, unless otherwise agreed.

     20.3 Costs.  The  Partners  shall share  equally the costs and fees of such
arbitration and further agree that said costs shall include  compensation to the
arbitrators for their time spent in arriving at their determination.

     20.4 Enforcement.  The award rendered by the arbitrators shall be final and
binding and judgment may be entered upon the award in accordance with applicable
law in any court of competent  jurisdiction.  This agreement to arbitrate  shall
survive termination of this Partnership Agreement.

     SECTION 21. Governing Law.

     This  Agreement  shall be governed by and construed in accordance  with the
laws of the State of Maine.

     SECTION 22. Communications.

     Except as otherwise  provided herein or as the parties may otherwise agree,
any notice,  request or other communication from one party to another,  relating
to this  Agreement  or the rights,  obligations  or  performance  of the parties
hereunder, shall be in writing and shall be effective upon delivery to the other
party.  Any  such  communication  shall be  considered  as duly  delivered  when
delivered in person, when received by telex, telecopy or other wire transmission
or upon the lapse of 48 hours after  mailing by  registered  or certified  mail,
postage prepaid, to the address of the other party set forth below:

                   If to NORVARCO:

                   NORVARCO
                   c/o Central Maine Power Company
                   Edison Drive
                   Augusta, Maine  04336
                   Attn:  Donald Kelly
                          Senior Vice President

                   If to Bangor:

                   Bangor Var Co., Inc.
                   c/o Bangor Hydro-Electric Company
                   33 State Street
                   P.O. Box 932
                   Bangor, Maine  04401
                   Attn:  Carroll R. Lee

     Any Partner may at any time by written  notice to the other Partner  change
the address to which notices or communications shall be sent.

     SECTION 23. Benefits; Assignment.

     The rights and  obligations  provided by this  Agreement are for the mutual
benefit of the Partnership  and the Partners,  and shall not be deemed to be for
the benefit of, and may not be enforced  by, any other  Person.  This  Agreement
shall be binding  upon and shall inure to the  benefit of, and may be  performed
by, the successors  and assigns of the parties,  except that no Transfer of this
Agreement or any right or obligation hereunder by any parties shall be effective
except as provided in Section 15.

     SECTION 24. All Prior Agreements Superseded.

     Upon the Effective  Date,  this Agreement  represents the entire  agreement
between the Partners  relating to the subject  matter  hereof,  and all previous
agreements, discussions,  communications and correspondence between or among the
Partners with respect to the subject matter hereof are hereby superseded and are
of no further force and effect.

     SECTION 25. Section Headings Not to Affect Meaning.

     The  descriptive  headings of the various  sections of this  Agreement have
been inserted for  convenience  of reference  only and shall in no way modify or
restrict any of the terms or provisions hereof.

     SECTION 26. Severability of Provisions.

     If any word, phrase, clause,  article, or other provision of this Agreement
is or is deemed or adjudicated  or otherwise  found to be against public policy,
void or otherwise  unenforceable,  then said word,  phrase,  clause,  article or
other provision shall be deleted or modified, in keeping with the express intent
of the parties hereto, as necessary to render all the remainder of the Agreement
valid and enforceable.

     SECTION 27. Counterparts.

     This Agreement may be executed  simultaneously in two or more counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.

     SECTION 28. Amendments.

     Any  amendments  to this  Agreement  shall be in writing  and signed by all
Persons who are Partners of the Partnership at the time of the amendment

     SECTION 29. Proprietary Information.

     All  information  relating  to the  methods of  operation,  trade  secrets,
technology  or  other   matters   proprietary   to  any  Partner   ("Proprietary
Information"),   whether  in  the  form  of  drawings,  specifications,   patent
applications,  other documents or disclosed  orally,  which becomes known to the
other Partner in connection with the Partnership, shall be held in confidence by
such other Partner,  and such Partner shall treat such information with the same
degree of care it accords its own secret,  proprietary information.  Information
shall not be deemed to be Proprietary  Information  where:  (i) it is or becomes
public information or otherwise generally available to the public through no act
of the recipient; (ii) it is, prior to disclosure hereunder,  already rightfully
in the possession of the recipient or its Affiliates and was not received by the
recipient  directly or indirectly from the disclosing Partner or its Affiliates;
(iii) it is hereafter  rightfully  received by the recipient from a third person
who did not receive the same directly or indirectly from the disclosing  Partner
or  its  Affiliates;  or  (iv)  it is at any  time  independently  developed  by
employees  or  consultants  of the  Partner or its  Affiliates  who have not had
access to the  Proprietary  Information  in the possession of the Partner or its
Affiliates.  The  recipient  has the burden of proving  that such  employees  or
consultants  have  not  had  access  to the  Proprietary  Information.  Specific
information shall not be deemed to be within the exceptions of subparts (i)-(iv)
merely  because  it  is  embraced  by  more  general   information  within  such
exceptions,  nor shall a  combination  of  features  be deemed to be within such
exceptions  merely because the individual  features are within such  exceptions.
The  provisions  of this section shall not apply to any Partner to the extent it
receives  Proprietary  Information  from  another  Partner that is governed by a
separate Confidentiality Agreement between two or more Partners.

     IN WITNESS  WHEREOF,  the parties  have  executed  this  Agreement by their
respective  officers  thereunto  duly  authorized  as of the  date  first  above
written.

                                    NORVARCO

                                    By:  Donald F. Kelly (signed)
                                         ____________________________
                                         Name:
                                         Title:  President


                                    BANGOR VAR CO., INC.

                                    By:  Carroll R. Lee (signed)
                                         ____________________________
                                         Name:
                                         Title:  President


<PAGE>


                       EXHIBIT A TO PARTNERSHIP AGREEMENT

             CONSTRUCTION BUDGET - CHESTER FACILITIES OF PARTNERSHIP
                               CHESTER SVC PROJECT
                                    $ X 1000

W.O. #                  Description                       Current Cost Estimate

145                     SVC Installation                           27,420*

146                     Microwave (Chester)                           151

138/149                 Power Line Carrier                             32

147                     T-Line Tap                                    674

153                     Aux. Pwr. Line                                 20


                                 S. Total Project                  28,297

                                 Contingency                        2,175

                                 Total Before Bonus                30,472

                                 Bonus Contingency                  3,250

                                 Total Before Interest             33,722**


     *    Excludes performance bonuses that may be earned after completion.

     **   Interest  accrues at FRB monthly  average one month  commercial  paper
          rate on all costs advanced by NE Hydro (support Agreement ss.7)


<PAGE>


                       EXHIBIT B TO PARTNERSHIP AGREEMENT

                    Unanimous Resolution of Owners' Committee

                             Chester SVC Partnership

Pursuant  to  Sections 8 and 9 of that  certain  Partnership  Agreement  between
NORVARCO and [BH Sub], dated as of July 1, 1990,  ("Partnership  Agreement") the
undersigned  duly  authorized  members of the Owners'  Committee  of Chester SVC
Partnership hereby adopt the following resolutions:

     RESOLVED:  Subject to the terms of the Partnership  Agreement and the terms
     of  the  Basic  Operating  Agreement,  NORVARCO  is  hereby  designated  to
     administer  the  day-to-day  business and  operations  of the  Partnership.
     Subject to the foregoing, NORVARCO shall:

     (1) Operate the business of the Partnership in the ordinary course,  in the
     best  interests of the Partners and in the exercise of reasonable  business
     judgment,  and in compliance with all applicable Federal,  state, local and
     foreign laws, regulations, ordinances, rules and orders;
     (2) Supervise the SVC Project;
     (3) Employ,  train  supervise  and,  when deemed  appropriate  by NORVARCO,
     discharge  any or  all  employees  of  the  Partnership  and  maintain  all
     personnel records relating thereto;
     (4) Execute any and all  documents,  agreements or  instruments of any kind
     which NORVARCO may deem  appropriate in conducting the day-to-day  business
     of the Partnership;
     (5) Prosecute,  defend,  settle and compromise in such a manner as NORVARCO
     may deem  expedient  any actions at law or in equity  brought by or against
     the Partnership  (other than any action or proceeding  brought by a Partner
     to enforce NORVARCO'S obligations);
     (6) Employ and pay for such  professional  or other  assistance as NORVARCO
     may deem desirable in the discharge of its duties;
     (7)  Prepare  and  file tax  returns  and deal  with  the  auditors  of the
     Partnership in all respects;
     (8) Establish  Partnership bank accounts and authorize  appropriate persons
     to draw thereon; and
     (9) Render  invoices  to New  England  Hydro-Transmission  Corporation  for
     payments due the  Partnership  and make  payments to Maine  Electric  Power
     Company, Inc. under the Basic Operating Agreement.

     Provided,  however,  that the  authority  of  NORVARCO  shall not extend to
     matters within the  responsibility  of Maine  Electric Power Company.  Inc.
     under  the  Basic  Operating  Agreement  dated as of July 1,  1990,  nor to
     matters reserved to the unanimous action of this Committee under Section 10
     of the Partnership Agreement; and further

     RESOLVED:  That this resolution shall remain in full force and effect for a
     period of five  years  from the date  hereof,  unless  earlier  revoked  or
     modified by a majority vote of this Committee.

This  resolution  shall be filed with the minutes of the meetings of the Owners'
Committee.

Date:  ______________, 19__             ________________________________________

                                        ________________________________________



<PAGE>


                       EXHIBIT C TO PARTNERSHIP AGREEMENT

                       Description of Off-Site Facilities

1.0       Certain microwave communication improvements located at the following:
          1. 1    Augusta
          1. 2    Bagley Mountain
          1. 3    Blackcap Mountain
          1. 4    Blinn Hill
          1. 5    Coggan's Hill
          1. 6    Mt. Agamenticus
          1. 7    Orrington
          1. 8    Park Street (Bangor)
          1. 9    Wytopitlock (Drew Plantation)
          1.10    Skiff Lake, New Brunswick, Canada

2.0       Certain  protective  relaying   improvements,   located  at  Orrington
          Substation, necessitated by the addition of the Chester SVC Facility.



<PAGE>


                       EXHIBIT D TO PARTNERSHIP AGREEMENT

        Costs of SVC Facility, Transmission Work and Off-Site Facilities

                             Cost of SVC Facility:*

                                          Amount Paid           Accruals
            Description                  as of 8/31/90        as of 8/31/90


ABB Construction Contract                  $25,187,544           $1,081,051**

Microwave Towers and Equip.                    204,891                2,810

12.5kv Aux. Power Line                          19,744

Organizational Costs                           178,897               13,508

Power Line Carrier                              77,341                4,895

Interest Accrued                                                  1,469,709

Interest Earned                               (106,363)


     Total                                 $25,562,054           $2,571,973
                                            ==========            =========

_________________________________

     * Chester assumes and agrees to pay the actual costs paid and accrued, plus
all pending invoices (i.e.,  work completed but not yet billed,  or work not yet
completed),  together  with  all  interest  thereon  at  the  average  rate  for
commercial paper as published each month in the Federal Reserve Bulletin,  as of
the  effective  date of the transfer of the assets from MEPCO to Chester.  These
amounts shall be  determined by and from the financial  records of MEPCO as soon
as reasonably possible after the close of the period ending October 31, 1990. In
addition,  Chester  assumes  and agrees to pay,  when and to the extent the same
become due and payable, any completion or performance bonuses provided under the
Construction Contract.

     ** This amount includes $750,000 of disputed noise compliance holdback.



<PAGE>



                           Cost of Transmission Work:*

                                          Amount Paid             Accruals
            Description                  as of 8/31/90          as of 8/31/90


345kv Transmission Line                       $767,251                    $57

Interest Accrued                                                       43,894

Interest Earned                                 (3,177)
                                           ------------           -----------

     Total                                    $764,074                $43,951
                                               =======                 ======


_________________________________

     * Chester assumes and agrees to pay the actual costs paid and accrued, plus
all pending invoices (i.e.,  work completed but not yet billed,  or work not yet
completed),  together  with  all  interest  thereon  at  the  average  rate  for
commercial paper as published each mouth in the Federal Reserve Bulletin,  as of
the  effective  date of the transfer of the assets from MEPCO to Chester.  These
amounts shall be  determined by and from the financial  records of MEPCO as soon
as reasonably possible after the close of the period ending October 31, 1990.



<PAGE>



                          Cost of Off-Site Facilities:*

                                          Amount Paid            Accruals
            Description                  as of 8/31/90          as of 8/31/90


Microwave Towers & Equip.                     $830,102                   $703

Microwave Buildings                            117,532

Relaying Equip. at Orrington                   170,686                  5,497

Interest Accrued                                                       65,699

Interest Earned                                 (4,755)
                                           ------------           -----------

     Total                                  $1,113,565                $71,899
                                             =========                 ======


_________________________________

     * Chester assumes and agrees to pay the actual costs paid and accrued, plus
all pending invoices (i.e.,  work completed but not yet billed,  or work not yet
completed),  together  with  all  interest  thereon  at  the  average  rate  for
commercial paper as published each month in the Federal Reserve Bulletin,  as of
the  effective  date of the transfer of the assets from MEPCO to Chester.  These
amounts shall be  determined by and from the financial  records of MEPCO as soon
as reasonably possible after the close of the period ending October 31, 1990.

     Chester also  assumes the  obligation  of MEPCO to  reimburse  NEH for cash
provided  by NEH to, and held,  as of the time of said  transfer  of assets,  by
MEPCO as an advance  against  expenses,  together with  interest  thereon at the
average rate for commercial paper as published each mouth in the Federal Reserve
Bulletin;  provided,  however,  that MEPCO shall retain,  and shall be liable to
NEH, pursuant to the Basic Operating Agreement, with respect to, so much of said
cash as MEPCO shall use to pay  expenses  associated  with the  construction  of
certain  Off-Site  facilities  located at Skiff Lake.  The balance of such cash,
together with all interest  income from the  investment  of said amount,  as the
same shall be determined  by and from the financial  records of MEPCO as soon as
reasonably possible after the close of the period ending October 31, 1990, shall
be  transferred  to Chester by MEPCO as soon as reasonably  possible  after said
amount is so determined.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.8
<SEQUENCE>9
<FILENAME>file010.txt
<DESCRIPTION>EX D-2 ORDER OF MAINE PUBLIC UTILITIES COMMISSION
<TEXT>

EXHIBIT D-2

STATE OF MAINE
PUBLIC UTILITIES COMMISSION                               Docket No. 2000-663

                                                          January 5, 2001

BANGOR HYDRO-ELECTRIC COMPANY;                            ORDER REJECTING
MAINE ELECTRIC POWER COMPANY, INC.;                       REVISED STIPULATION
CHESTER SVC PARTNERSHIP; AND                              AND APPROVING
EMERA INC.                                                ORIGINAL STIPULATION
Request for Approval of Reorganization
(Joint Petition)

- --------------------------------------------------------------------------------

I. SUMMARY

     Through  this Order,  we reject the revised  stipulation  submitted in this
matter on December 5, 2000.  Consistent  with the  procedures  suggested  by the
parties,  we consider and approve the  original  stipulation  filed  December 1,
2000.

II. BACKGROUND

     On August 14, 2000,  Bangor  Hydro-Electric  Company (BHE),  Maine Electric
Power Company,  Chester SVC Partnership and Emera,  Inc.  (Emera)  (collectively
Petitioners),  filed a joint petition for approvals of reorganizations  pursuant
to 35-A  M.R.S.A.  ss. 708.  Specifically,  the  Petitioners  seek approval of a
merger that would result in BHE's becoming a  wholly-owned  subsidiary of Emera.
Emera is an energy and services  company  headquartered  in Nova  Scotia,  whose
principal subsidiary is Nova Scotia Power./1/

     The Hearing Examiner granted intervenor status to the Public Advocate,  the
Municipal Review  Committee (MRC), the Industrial  Energy Consumer Group (IECG),
Alternative  Energy,  Inc. (AEI),  and Central Maine Power Company (CMP).  Emera
appealed the Examiner's  order granting CMP intervenor  status.  On November 22,
2000, Ralph Coffman and the Independent Co-op of Maine filed a late petition for
intervention. BHE and Emera objected to the late-filed petition.

     The  Petitioners,  Public  Advocate,  MRC,  and IECG have  been the  active
parties throughout this proceeding. AEI and CMP have not taken a position on any
issue.

     On December 1, 2000,  the  Commission  received a stipulation  entered into
among the Petitioners, the Public Advocate and the MRC. On December 5, 2000, the
Commission  received  a  revised  stipulation  entered  into by the IECG and the
parties

- -------------------

     /1/ A more  detailed  procedural  history  is  contained  in  the  attached
stipulation.

                                       -1-


<PAGE>


that  executed  the original  stipulation.  The cover  letter  accompanying  the
revised stipulation states:

          Although the parties to the Original  Stipulation  continue to believe
          that the Original Stipulation contains a reasonable resolution of this
          case,  they also believe that the Revised  Stipulation,  which has the
          unanimous  support of the  parties,  contains a preferred  resolution,
          given the  circumstances  of this case,  and should be approved by the
          Commission.  However,  if the Commission  does not approve the Revised
          Stipulation,  the parties to the Original Stipulation request that the
          Commission then consider and approve the Original Stipulation.

We will  follow the  approach  suggested  by the parties and address the revised
stipulation first. It is only if we reject the revised  stipulation that we need
consider the original stipulation.

III. DISCUSSION AND CONCLUSIONS

     A. Revised Stipulation

     The  parties  to the  revised  stipulation  recommend  that the  Commission
approve the proposed merger between BHE and Emera with certain conditions.  Most
of the  conditions  proposed in the  revised  stipulation  generally  follow the
guidelines and holdings set forth by the Commission in CMP Group,  Inc., et al.,
Request for Approval of Reorganization  and of Affiliated  Transactions,  Order,
Docket No.  99-411 (Jan.  4, 2000),  (CMP Merger  Order),  and we thus find them
reasonable and in the public  interest.  The revised  stipulation  also contains
three  conditions  on  matters  not  discussed  in the CMP Merger  Order.  These
conditions relate to: 1) PERC warrants;  2) revenue  requirement  freeze; and 2)
rate  design.  For the reasons  discussed  below,  we find the PERC  warrant and
revenue  requirement  freeze  provisions  to be  reasonable  and in  the  public
interest,  but conclude that the rate design provision is contrary to the public
interest and must be rejected.  Each of the conditions  contained in the revised
stipulation is discussed below.

          1. Acquisition Premium

     The revised  stipulation  states that issues  involving the recovery of the
acquisition  premium will be treated as described in the CMP Merger Order.  That
Order contains a detailed  discussion of the future treatment of the acquisition
premium and specified conditions.  An agreement to abide by the Commission's CMP
Merger Order is an appropriate resolution of the issue in this case.

                                       -2-


<PAGE>


          2. Service Quality

     The  revised  stipulation  commits  the  Petitioners  to  file  a  proposed
alternative  rate plan (ARP)  with the  Commission  within two months  after the
completion  of the merger or June 30,  2001,  whichever  is earlier.  To protect
against the  deterioration of service quality until an ARP can be considered and
approved,  BHE agrees to file monthly reports on four service quality indicators
and  quarterly  reports on two  customer  satisfaction  indicators.  The revised
stipulation  establishes  a benchmark in each of these areas and provides  that,
should BHE's  performance  for any 12-month  period fail to meet the established
benchmarks, BHE must submit an explanation of the decline and the Commission may
open an  investigation to inquire into service quality issues and determine what
penalty would be appropriate./2/

     The revised  stipulation  also  recognizes the connection  between  current
capital  expenditures  and  future  service  quality  by  requiring  BHE to file
periodic reports comparing its actual capital expenditures to its budget. To the
extent there is a material variance, the Commission may open an investigation to
assure that the merger is not resulting in a reduction of capital  investment at
the  expense of service  quality.  To allow us to track  capital  spending  more
easily,  we ask that the report also identify any  significant  changes from the
most recent prior budget.

     We find that these  provisions,  along with our general authority to ensure
reasonable  utility  service,  are  adequate  to  protect  ratepayers  against a
reduction in service quality that might occur as a result of the merger.

          3. Commission Jurisdiction and Authority

     The revised  stipulation  provides that the Commission  will have access to
the  books  and  records  of  Emera  and its  affiliates,  and  will  also  have
jurisdiction over Emera and its affiliates for discovery purposes and to require
these  entities  to  participate  in  Commission   proceedings  when  necessary.
Moreover,  the stipulation states that BHE will obtain Commission  approval,  to
the  extent  required  by Maine law or  regulation,  for any  reorganization  or
affiliated  transaction;  that BHE  will  petition  the SEC to make an  explicit
finding in its approval of the merger that the Maine Commission is not preempted
from   exercising   its   jurisdiction   under   Maine  law  with   respect   to
reorganizations,  affiliate transactions or ratemaking;  and that BHE will waive
preemption defenses except where simultaneous  compliance with state and federal
law is  impossible  or where  compliance  would result in a violation of federal
law.

- -------------------

     /2/  Attachment  A to the  stipulation  has a Note  defining a "major storm
event" as a storm which results in more than "30,000 customer outage." We assume
this  should  read  "customer  outage-hours."  The parties are asked to submit a
replacement Attachment A.

                                       -3-


<PAGE>


     We conclude  that these  provisions  will allow us to  maintain  reasonable
scrutiny over BHE reorganizations  and affiliate  relationships and preserve our
authority  to  establish  just and  reasonable  rates with  respect to affiliate
transactions.

          4. Divestiture

     Consistent with the CMP Merger Order, the revised stipulation provides that
the  Commission  may order  Emera to divest  BHE if there is no other  available
remedy to reasonably address the harm.

          5. PERC Warrants

     A  significant  issue  unique  to  the  proposed  BHE/Emera  merger  is the
potential  impact on  ratepayers  from an increase in the value of the  warrants
issued or to be issued under the terms of BHE's  restructuring  of its purchased
power  agreement with the Penobscot  Energy Recovery  Company (PERC).  Under the
terms of the PERC contract restructuring,  BHE agreed to issue two million stock
warrants:  one  million to the owners of PERC and one  million to the  Municipal
Review  Committee  (MRC)./3/  Each  warrant  entitles its holder to purchase one
share of BHE stock at $7 per share. Warrants were to be issued from 1999 through
2002 and could be exercised up to ten years after  issuance.  At the time of the
PERC  contract  restructuring,  BHE's  stock had a book  value of  approximately
$15.00 per share but was  trading at about $5.50 per share.  To cap  ratepayers'
exposure  in the event  BHE's  stock  price  greatly  increased  in  value,  the
Commission specified that ratepayers' exposure regarding the PERC warrants would
be capped at the difference  between the exercise price and the higher of $15.00
per share or book value at the time of  exercise./4/  Petition  for  Approval of
Electric Rate Stabilization Agreement, Docket No. 97-451 at 6 (Sept. 29, 1997).

     Immediately  prior to the  announcement  of the  merger,  BHE's  stock  was
trading at $15.13  per share and its book value was $18.30 per share.  The price
per  share   offered  by  Emera  under  the  terms  of  the  merger  is  $26.50.
Consequently, after the merger announcement, BHE's stock price increased and has
been  trading  significantly  above  book  value.  Under the terms of the merger
agreement, payments to the warrant holders are due at closing.


- -------------------

      /3/ The  MRC  is  an  organization  that  represents  municipalities  with
long-term waste disposal contracts with PERC.

      /4/ The  restructuring  of the PERC purchased power agreement  occurred to
benefit ratepayers.  As such, the costs of the restructuring are generally borne
by the ratepayers.  35-A M.R.S.A.  ss. 3156.  However,  because the costs of the
warrants  were  unknown  and  potentially  substantial,  the  Commission  capped
ratepayer exposure as described above.

                                       -4-


<PAGE>


     These circumstances raise the question of whether, by virtue of the merger,
ratepayers would be harmed as a result of the exercise of the remaining warrants
at a price above  book.  The concern is that,  absent the merger,  the  warrants
would have been  exercised  over a longer time period  and/or at a lower  price,
resulting in lower  ratepayer  costs.  The revised  stipulation  addresses  this
concern by  estimating  and  simulating  the  ratepayer  impact  that would have
occurred  absent  the  merger  by  fixing  the  ratepayer  cap for the  warrants
exercised by December 31, 2002 at $17.50 per share (an amount below book value),
and for warrants exercised after that date at $18.50 per share.  Thus,  pursuant
to the  stipulation,  ratepayers are liable only for $10.50 per share (i.e., the
difference  between  $17.50  and $7.00 per  share)  for  warrants  exercised  by
December 31, 2002,  and for $11.50 per share  ($18.50  minus $7.00) for warrants
exercised after that date.

     For ratemaking  purposes,  the warrants owned by the MRC will be treated as
if exercised in equal amounts over a 7-year period, and will be included in rate
base as of the date of  constructive  (rather  than  actual)  exercise.  BHE has
entered into an  agreement  with the MRC to allow the deferral of payment on the
warrants exercisable at closing and provide for equal annualized payments over a
7-year term,  subject to BHE's payment of interest on the deferred  amount of 5%
per annum.  These  interest  payments  will  neither be  recovered  in rates nor
reflected in the determination of BHE's cost of capital.

     We find that the fixing of the  ratepayer cap at a level which is currently
below  BHE's book value and the delay in  including  the  warrants  in rate base
through the agreement with the MRC reasonably  protect BHE's ratepayers from the
impact of the merger on the exercise of the PERC warrants.

          6. Revenue Requirement Freeze

     The revised stipulation  incorporates a provision for a revenue requirement
freeze  similar to that proposed by Emera in the joint  petition.  The provision
freezes  revenue  requirements,  not rates,  and is subject  to  adjustment  for
"mandated  costs." The freeze lasts until  approval of an ARP or March 31, 2002,
whichever is earlier.  Although the  provision  does not provide for an absolute
freeze  on  rates,  we find  that its  inclusion  in the  stipulation  is in the
ratepayers' interest;  the limited freeze included in the stipulation provides a
degree of rate  predictability and stability which, while short of what might be
available in a fully  developed  price cap plan,  is at least as  beneficial  to
ratepayers as traditional ratemaking.

          7. Rate Design Provision

     The  revised  stipulation  contains  a  provision  regarding  rate  design.
Specifically,  as part of its  initial  ARP  filing,  BHE agrees to address  the
following "propositions":

               a.   The elimination of all demand ratchets from retail rates.

                                       -5-


<PAGE>


               b.   The  institution  of a back-up rate for customers with self-
                    generation facilities or cogeneration  facilities behind-the
                    meter.

               c.   The  adoption  of a rate  similar to "Rate O" in the Central
                    Maine Power  Company  territory for Fort James and BHE's two
                    International Paper customers at Costigan and Passadumkeag.

               d.   The adoption of the principle that customers may negotiate a
                    transmission  rate(s) lower than the  applicable  OATT(s) if
                    such a rate will result in an increase in electricity  usage
                    by  the  customer  over  BHE  transmission  or  distribution
                    facilities  than would likely exist in the absence of such a
                    lower rate(s) and would cause no adverse rate impact to core
                    customers.

               The revised stipulation further provides that:

               BHE agrees to cooperate  with the IECG in the  development of the
               filing and to negotiate with the IECG in good faith regarding any
               differences   between   BHE  and  IECG  on  the   merits  of  the
               propositions.  Such  negotiations and the filings by BHE and IECG
               shall be guided by the following principles:

               (i) Revenue changes resulting from rate design changes related to
               items a through d, above,  should be  confined to the  applicable
               rate class in a manner consistent with PUC practice;

               (ii) Rate design  related to item b, above,  should be similar to
               rate design in effect for CMP at the time of the  effective  date
               of this Stipulation;

               (iii) Core  customer  rate  impacts  from the above  rate  design
               changes should be minimized;

               (iv) Rate  design  changes  should not impact  shareholders  to a
               greater extent than they would otherwise be impacted without such
               changes.

In the event BHE agrees  with the IECG on these  rate  design  matters  prior to
filing,  it is obligated  by the revised  stipulation  to support the  positions
until a specified point in time.

                                       -6-


<PAGE>


     For the reasons set forth below, we conclude that the rate design provision
of the  revised  stipulation  is  contrary  to the  public  interest  and  sound
Commission practice. We therefore reject the revised stipulation.

     As the initial concern,  the matters presented in the rate design agreement
have no relationship to the issues in this  proceeding.  Rate design issues were
not raised in the  testimony of any party,  nor are they  relevant to the issues
presented by this merger. Although there is precedent for Commission approval of
stipulations  that include  agreements  on issues in other  ongoing  proceedings
(which allows interested  persons notice and an opportunity to participate),  in
this case the rate design issues are not part of another pending  proceeding and
do not have a clear or direct connection to the issues in this case.

     Our primary reason for rejecting the revised stipulation,  however, is that
the operation of the  provision  itself is  inappropriate  and not in the public
interest./5/  In essence,  the provision  commits BHE to cooperate and negotiate
with a particular  party (the IECG) in the preparation of its rate design filing
with  respect  to  several  substantial  and likely  controversial  rate  design
matters. The negotiations occur prior to the filing of the case and are "guided"
by  specific  "principles."  BHE is then  obligated  to advocate in favor of any
position that results from the negotiations.

     The  provision,  therefore,  could  operate to place BHE in the position of
continuing to advocate for rate design  positions that it no longer  believes to
be correct or in its own interests.  This is not an academic concern.  Positions
of  parties  in rate  design  cases  often  evolve and  develop  throughout  the
proceeding. Thus, BHE might be in the awkward position of being obligated by the
revised  stipulation in this case to advocate  before this Commission in another
case views that it does not actually  support.  Such advocacy  could deprive the
Commission  of the honest  input of a utility in rate  design  matters,  an area
where the utility  has unique  perspectives  and  substantial  expertise.  As an
example,  BHE may be restricted from providing its own unfettered  assessment of
alternative  rate  designs  that  may  be  presented  in  the  case.  Commission
proceedings are premised on parties  advocating on behalf of their own interests
and we expect that, when utilities take positions before us, they do so based on
sound principles consistent with their own interests.  The rate design provision
could thus result in unnecessary  questions of credibility with respect to BHE's
positions.

- -------------------

     /5/ In its exceptions, the IECG suggested that rejection of the rate design
provision would  constitute a prior restraint of speech and improper  impairment
of BHE's right to free speech. Our rejection of the revised stipulation does not
implicate any  constitutional  right of BHE. BHE may speak to or negotiate  with
anyone it wishes. The rejection of the revised  stipulation  represents only our
decision  not to give  any form of  regulatory  "blessing"  to the  rate  design
provision  that might be implied or inferred  from our allowing the provision to
remain in a Commission-approved  stipulation.  The First Amendment allows BHE to
speak; it does not require the Commission,  or anyone else, to adopt, approve or
publish that speech.

                                       -7-



<PAGE>


     The  revised  stipulation  could  also  result in  difficult  disputes.  By
adopting  the revised  stipulation,  we would  incorporate  it into our approval
order.  Thus,  the  Commission  might be placed in the position of enforcing its
terms. We might be asked to resolve  disputes  regarding  whether BHE cooperated
and  negotiated  with the IECG in good  faith  prior to filing,  or whether  BHE
maintained its commitment to continue to support certain positions after filing.
For example,  a dispute could exist as to whether  statements or positions taken
by BHE in response to Commission (or other party) inquiries  violate the revised
stipulation6  and  should not be  allowed  in the  record or  considered  in the
current proceeding.7

     The negotiation process in a future rate design proceeding could be impeded
by the revised stipulation.  BHE may be constrained from presenting  compromises
or offering concessions that would violate the stipulation. This could frustrate
the negotiations and reduce the likelihood of a successfully negotiated outcome.
Further,  to the extent that the provision could be read not only to require BHE
to negotiate with IECG on these issues but also to refrain from negotiating with
others,  the provision is inconsistent  with our general practice and the spirit
of our rules that all parties be given a meaningful  opportunity  to participate
in settlement discussions. See, e.g., Ch. 110, section 741.

     Finally, the situation presented by the rate design provision is similar in
some respects to that faced by the  Commission  in Central Maine Power  Company,
Divestiture  of  Generation  Assets - Request for Approval of Sale of Generation
Assets,  Docket No. 98-058,  Corrected  Order - Part 11 (Dec. 17, 1998). In that
case, as part of its generation asset sale to FPL-ME, CMP entered into a "Letter
Agreement" with FPL-ME whereby CMP agreed to support  specific  positions and to
make certain efforts  regarding  transmission  policy related to new generation.
The Letter Agreement  resulted in extreme  controversy  regarding our review and
approval of CMP's generation asset sale. That  circumstance was more problematic
than the current  case  because CMP  committed  (or  appeared to commit) to take
positions  against its  interests  as a T&D utility in FERC  regulated  matters.
Although of less concern,  the rate design provision in the revised  stipulation
has a similar potential for unnecessary controversy.

     Our   disapproval  of  the  rate  design   provision  is  not  based  on  a
consideration of the specified "propositions" or "principles." Accordingly,  the
decision in

- -------------------

     /6/ Indeed, if we adopt the revised stipulation, we could find ourselves in
the  awkward  position  in a  subsequent  case of  asking  BHE for its  views on
alternative  rate designs and then being  requested by the IECG, on the basis of
our order adopting the revised stipulation, to forbid BHE from responding to our
own inquiry.

     /7/ Moreover,  the extent to which BHE agreed with the IECG prior to filing
and the exact nature of the agreements that resulted from the negotiations could
become  the  subject  of  substantial  discovery  disputes  in the  rate  design
proceeding.

                                       -8-


<PAGE>


this case  should not be viewed as a comment  on the  merits of any rate  design
issue or a departure from any prior rate design precedent.  Moreover, nothing in
our opinion should be read to discourage  discussions and agreements between BHE
and the  IECG  (or any  other  party)  on  matters  that  may  come  before  the
Commission.

     To conclude,  we recognize that the revised stipulation is supported by all
the active parties in this proceeding.  Nevertheless,  for the reasons discussed
above,   we  cannot  approve  the  rate  design  and  must  reject  the  revised
stipulation.

     B. Original Stipulation

     Consistent  with the  review  procedure  described  above,  because we have
rejected the revised stipulation, we now consider the original stipulation. This
stipulation  is supported by all the active  parties  other than the IECG. It is
identical to the revised  stipulation except for the rate design provision.  The
original stipulation has alternative rate design language which states:

          BHE further agrees that its initial filing in the ARP proceeding  will
          address the following:

               a. The elimination of demand ratchets.

               b.  The   institution  of  a  back-up  rate  for  customers  with
               self-generation  facilities or cogeneration facilities behind the
               meter.

               c. The  adoption  of a rate  similar  to "Rate O" in the  Central
               Maine Power territory for Fort James and BHE's two Champion Paper
               customers.

     Although we have the same concern  about the  relevance of the provision to
this  proceeding,  the  language  in  the  original  stipulation  is  much  less
problematic  than  the more  detailed  and  elaborate  language  in the  revised
stipulation.  The original stipulation only requires BHE's rate design filing to
address  the  specified  items.  It does not  require  BHE to  cooperate  and to
negotiate with any particular party prior to its filing,  nor does it commit BHE
take any position before the Commission.  While the provision  requires  certain
limited rate design issues to be included in an ARP filing,  notwithstanding our
general  practice of addressing  major rate design  decisions in a comprehensive
rate design case, the stipulation  acknowledges  that the rate design  provision
does not limit the  Commission's  authority to order that the rate design issues
be addressed in another proceeding. On balance,  therefore, we conclude that the
rate design  provision in the original  stipulation  is not an impediment to our
approval.

     When considering stipulations,  we consider whether: 1) the parties joining
the  stipulation  represent a sufficiently  broad spectrum of interests that the
Commission   can  be  sure  that   there  is  no   appearance   or   reality  of
disenfranchisement; 2) the

                                       -9-


<PAGE>


process  that  led to the  stipulation  was  fair  to  all  parties;  and 3) the
stipulated  result is reasonable,  in the public  interest,  and not contrary to
legislative  mandates.  The  stipulation  is supported by the  Petitioners,  the
Public Advocate, who represents the interests of the general body of ratepayers,
and the  MRC,  which  represents  a large  number  of  municipalities  in  BHE's
territory.  In this  case,  we also note that our  advisory  staff was an active
participant  in  the  settlement  discussions  and  recommends  approval  of the
original  stipulation.  We thus conclude that the  stipulation is supported by a
broad spectrum of interests.  We also conclude that the stipulation  process was
fair,  in that  all  active  parties  participated  in the  settlement  process.
Finally,  we find that the  stipulated  result is reasonable and not contrary to
legislative  mandates. As discussed above, all of the provisions in the original
stipulation,  taken as a whole,  allow us to find  that the  proposed  merger is
consistent  with the interests of  ratepayers  and investors as required by 35-A
M.R.S.A. ss. 708.

     C. Intervention Matters

          1. Ralph Coffman/Independent Electric Co-op

     We deny the  late-filed  petition  to  intervene  of Ralph  Coffman and the
Independent  Co-op.  We agree with Emera and BHE that the petition was filed too
late in this proceeding to warrant our permitting intervention.  Although we are
generally  flexible  with  late-filed  intervention  petitions,  as  long as the
petitioner  takes the case as he finds it, the Coffman petition was filed almost
four months into a 6-month proceeding.8

     At the time the  petition  was filed,  the  parties  were in the process of
finalizing  agreements  that would resolve all issues in the  proceeding.  Thus,
allowing a new party into the process would prejudice the existing  parties that
have participated actively from the beginning of the case. Moreover, Mr. Coffman
testified  at the  October 5, 2000  public  witness  hearing  in this case.  Mr.
Coffman was thus aware of this proceeding;  his petition provides no explanation
for why it was filed so late.

     Under  these  circumstances,  we  conclude  that the  Coffman  late-  filed
petition to intervene should be denied.

          2. CMP Intervention

     We deny Emera's appeal (filed on October 29, 2000) of the Examiner's  order
allowing CMP discretionary intervention to participate in this case on a limited
basis.  Pro.  Orders  (Oct.  5, 2000,  and Sept.  5,  2000).  CMP was allowed to
participate  in this case on the same  limited  basis  accorded  to BHE in CMP's
recent

- -------------------

     /8/ The deadline for petitions to intervene in this  proceeding  was August
17, 2000. The Coffman petition was filed on November 22, 2000.

                                      -10-


<PAGE>


merger  proceeding./9/  Like  BHE  in  the  CMP  proceeding,  CMP  chose  not to
participate in any manner in this proceeding,  and CMP did not take any position
on either  stipulation.  Under  such  circumstances,  we find no reason to share
Emera's  concern  that CMP might appeal to the Law Court or that the granting of
intervenor  status on such an extremely  limited basis would provide the vehicle
to do so.

     Because we find no reason to overturn the  Examiner's  intervention  order,
the Emera appeal is denied.

     Accordingly, it is

                                     ORDERED

     1. That the original  stipulation filed on December 1, 2000 and attached to
this Order is, hereby, approved and incorporated by reference into this Order;

     2. That the revised stipulation filed on December 5, 2000 is rejected;

     3. That the  late-filed  petition  to  intervene  of Ralph  Coffman and the
Independent Co-op filed on November 22, 2000 is denied; and

     4. That the Emera  appeal of the  Examiner's  intervention  order  filed on
October 29, 2000 is denied.



             Dated at Augusta, Maine, this 5th day of January, 2001.

                           BY ORDER OF THE COMMISSION


                          -----------------------------
                                Dennis L. Keschl
                             Administrative Director



COMMISSIONERS VOTING FOR:    Welch
                             Nugent
                             Diamond

- -------------------

     /9/ CMP's participation was limited to receiving filings and discovery, and
the filing of briefs.

                                      -11-


<PAGE>


                      NOTICE OF RIGHTS TO REVIEW OR APPEAL

     5 M.R.S.A.  ss. 9061 requires the Public Utilities  Commission to give each
party to an  adjudicatory  proceeding  written  notice of the party's  rights to
review or appeal of its  decision  made at the  conclusion  of the  adjudicatory
proceeding.  The methods of review or appeal of PUC decisions at the  conclusion
of an adjudicatory proceeding are as follows:

     1. Reconsideration of the Commission's Order may be requested under Section
     1004 of the  Commission's  Rules of Practice and Procedure  (65-407  C.M.R.
     110) within 20 days of the date of the Order by filing a petition  with the
     Commission stating the grounds upon which reconsideration is sought.

     2. Appeal of a final  decision of  the  Commission  may be taken to the Law
     Court by  filing,  within  30 days of the date of the  Order,  a Notice  of
     Appeal with the Administrative Director of the Commission, pursuant to 35-A
     M.R.S.A.  ss. 1320(l)-(4) and the Maine Rules of Civil Procedure,  Rule 73,
     et seq.

     3. Additional court review of constitutional issues or issues involving the
     justness or  reasonableness  of rates may be had by the filing of an appeal
     with the Law Court, pursuant to 35-A M.R.S.A.ss.1320(5).

Note: The  attachment of  this  Notice  to a  document  does  not  indicate  the
      Commission's view that the particular document may be subject to review or
      appeal.  Similarly, the failure of the Commission to attach a copy of this
      Notice to a  document does not  indicate  the  Commission's  view that the
      document is not subject to review or appeal.

                                      -12-


<PAGE>


STATE OF MAINE
PUBLIC UTILITIES COMMISSION                           Docket No. 2000-847

                                                      January 5, 2001

BANGOR GAS COMPANY LLC,                               ORDER
Proposed Rate Change (Annual
Rate Cap Adjustment)

               WELCH, Chairman; NUGENT and DIAMOND, Commissioners


I.   SUMMARY

     We  approve  Bangor Gas  Company  LLC's  (Bangor  Gas)  proposed  Price Cap
Adjustment and related Rate Element changes for effect on January 1, 2000.

II.  BACKGROUND

     In Docket No. 97-795,  the  Commission  approved a rate plan for Bangor Gas
under which the Company is allowed to file a proposed Price Cap Rate  Adjustment
each October 1, starting in 2000.  The Price Cap Rate  Adjustment  allows Bangor
Gas to change its Price Cap Rates each year to account for  inflation  according
to an approved  formula.  The formula  calculates  the Price Index  change using
three years' data (the forecast  year,  the current year, and the previous year)
from the Gross  Domestic  Product - Price Index  (GDP-PI).  The current  Average
Price Cap Rate is increased by the Price Index change to set a new Average Price
Cap Rate. The Average Price Cap Rate  establishes  the maximum amount Bangor Gas
is allowed to adjust its average rates for each customer  class.  See Bangor Gas
tariff at Original Sheets 5-7. Pursuant to the Rate Design Flexibility provision
of its tariff  (Original  Sheet 9), Bangor Gas then may adjust its rate elements
for each class, subject to the following constraints:

                    a) No rate element shall be allowed to increase by more than
                    10% or by the  percentage  increase in the overall Price Cap
                    Rate, whichever is greater; and

                    b) Increases  greater than the Price Cap Rate  increase in a
                    rate element for one customer  class may not be  compensated
                    for by  lower-than-average  increases  applicable to another
                    customer class (interclass subsidization).

     We must review  Bangor Gas's filing to determine  whether it has  correctly
applied  both the Price  Index  change to  Average  Price Cap Rates and the Rate
Flexibility provisions of its tariff.



<PAGE>


Order                                  2                     Docket No. 2000-947
- --------------------------------------------------------------------------------


IV.  PROCEDURAL HISTORY

     On October 11, 2000,  Bangor Gas filed its first proposed  annual Price Cap
Rate  Adjustment and provided a copy to the Office of the Public Advocate (OPA).
The  filing  contained  information  supporting  Bangor  Gas's  calculation  and
proposed revised tariffs,  Original Sheet Nos. 48 and 49, proposed for effect on
January  1, 2001.  The  Commission  assigned  Staff to review  this  matter as a
non-adjudicatory proceeding.1

     On  December  5, 2000,  Bangor Gas filed an amended  annual  Price Cap Rate
Adjustment  proposal,  correcting  the GDP-PI data to reflect the September 2000
forecast for 2000 and 2001. The Company  explained  that it had mistakenly  used
the wrong years' values in its initial  filing.  This  correction  resulted in a
modest change in the overall escalation  factor,  from 2.268% to 2.269%, but did
not affect the proposed rate cap values.

     After reviewing Bangor Gas's proposed rate adjustment to determine  whether
it complied with the  Company's  approved  tariffs,  our Staff issued a Proposed
Order on December 15, 2000  recommending  that we approve  Bangor Gas's proposed
Price Cap Rates and related Rate Elements.

V.   ANALYSIS

     A.   Price Index and Average Price Cap Rate Changes

     Bangor Gas's calculations  produce a Price Index change of 2.269% that will
be used to adjust the  current  Average  Price Cap Rate for each class using the
formula  contained in the tariff.  The formula makes two adjustments.  First, it
adjusts  the Price  Index based upon  forecasted  inflation  for the current and
upcoming  year.  Second,  it makes an adjustment to correct for any  differences
between  actual  inflation in the prior year and the inflation  forecast used to
determine the prior year's adjustment to the Price Cap Rate.

     Because this is the initial  filing,  Bangor Gas proposes to use a slightly
modified  formula  to  calculate  the Price  Index.  In this  first  year of the
formula's  application,  Bangor Gas  proposes  to use only  GDP-PI  data for the
forecasted year and the current year. After the initial year, starting with the

- --------
     1 No notice was provided to customers  because  Bangor Gas is not currently
providing  tariffed  service.  Our Order in Docket No. 97-795 at 20  established
that we would  determine the nature and timing of necessary  notice to customers
of rate changes under Bangor Gas's rate plan in a future compliance  proceeding.
We require Bangor Gas to submit proposed notice provisions for review in advance
of its next rate adjustment.



<PAGE>


Order                                  3                     Docket No. 2000-947
- --------------------------------------------------------------------------------


October  2001 annual rate cap  adjustment,  Bangor Gas proposes to return to the
formula that appears in the tariff,  to include the previous  year's GDP-PI data
as well as current and future forecasts.

     The Staff  concluded that the Company's  October 2000 Annual Price Cap Rate
Adjustment is  conceptually  consistent  with our Order in Docket No. 97-795 and
the Company's tariff.

     We also find Bangor Gas's proposal,  including the  modification  described
above,  acceptable.  Bangor Gas  proposes to use only the portion of the formula
that  increases the escalation  factor for forecasted  inflation for the current
and  subsequent  years,  but not the portion  that  corrects  any error from the
previous  year.  While Bangor Gas's proposal does not strictly in conform to the
tariff,  we find,  because  there was no inflation  adjustment  last year, it is
reasonable under the  circumstances  and consistent with the intent,  if not the
letter,  of the rate cap plan we approved in Docket No.  97-795.  Therefore,  we
approve this Price Index change and the Company's proposed corresponding Average
Price Cap Rates for each class.

     B.   Rate Element Changes

     Bangor Gas  proposes to increase  the rate  elements for all classes by the
full amount of the price index change.

     The  current  rates were set in Docket  No.  97-795.  They were  derived by
forecasting  a  bundled  rate  that  would be  competitive  with  the  customers
alternative fuel price,  then subtracting an estimated energy charge,  to arrive
at the Average Price Cap Rates for each rate class.  The Average Price Cap Rates
were  divided  into two  components:  the  customer  charge2 and the  volumetric
charge.3  Under  its rate  plan,  Bangor  Gas may  change  the  individual  rate
elements,  i.e. its customer  charge and usage  charges,  for a class so long as
these  changes do not result in an average per therm rate in excess of the class
Average Price Cap Rate.

- --------
     2 The  customer  charge  which  is the  estimated  average  cost to serve a
customer includes the service line, meter and regulator,  meter reading, billing
and collections.

     3 These rates were  initially set  residually  with the average  volumetric
delivery rates  calculated  based on an annualized  customer  charge and average
usage rates of 140 decatherms (Dth) for residential customers, 350 Dth for small
CI, and 21,000 Dth for large CI. We will use these same levels to determine  the
class average rates in the future.



<PAGE>


Order                                  4                     Docket No. 2000-947
- --------------------------------------------------------------------------------


     Bangor Gas proposes to apply the maximum Price Index change  equally to all
of the  individual  rate  elements in each class.  Under the approved rate plan,
Bangor Gas could have varied its application of the escalation factor to various
rate elements within the approved  constraints  noted above.  The tariff formula
provides  that class  average  rates may not exceed the class  average Price Cap
Rates. Because applying the escalation factor to each element equally creates an
average  rate per class that is  consistent  with this  requirement,  we approve
these rates.

     C.   Head Room Factor Correction

     Finally,  Bangor Gas's filing also corrects an error in its current  tariff
in the Price Cap Rate for Large C/I  customers.4  Because it makes the Price Cap
Rate consistent with the Order in Docket No. 97-795, we approve this correction.

     Dated at Augusta, Maine, this 5th day of January, 2001.

                                           BY ORDER OF THE COMMISSION


                                           ______________________________
                                           Dennis L. Keschl
                                           Administrative Director

COMMISSIONERS VOTING FOR:                  Welch
                                           Nugent
                                           Diamond

- --------
     4 No customers have taken service under the incorrect price.




<PAGE>


Order                                  5                     Docket No. 2000-947
- --------------------------------------------------------------------------------


                      NOTICE OF RIGHTS TO REVIEW OR APPEAL

     5 M.R.S.A.  ss. 9061 requires the Public Utilities  Commission to give each
party to an  adjudicatory  proceeding  written  notice of the party's  rights to
review or appeal of its  decision  made at the  conclusion  of the  adjudicatory
proceeding.  The methods of review or appeal of PUC decisions at the  conclusion
of an adjudicatory proceeding are as follows:

     1. Reconsideration of the Commission's Order may be requested under Section
     1004 of the  Commission's  Rules of Practice and Procedure  (65-407  C.M.R.
     110) within 20 days of the date of the Order by filing a petition  with the
     Commission stating the grounds upon which reconsideration is sought.

     2.  Appeal of a final  decision of the  Commission  may be taken to the Law
     Court by  filing,  within  30 days of the date of the  Order,  a Notice  of
     Appeal with the Administrative Director of the Commission, pursuant to 35-A
     M.R.S.A.  ss. 1320(l)-(4) and the Maine Rules of Civil Procedure,  Rule 73,
     et seq.

     3. Additional court review of constitutional issues or issues involving the
     justness or  reasonableness  of rates may be had by the filing of an appeal
     with the Law Court, pursuant to 35-A M.R.S.A.ss.1320(5).

Note: The attachment  of  this  Notice  to a  document  does  not  indicate  the
      Commission's view that the particular document may be subject to review or
      appeal. Similarly,  the failure of the Commission to attach a copy of this
      Notice to a  document does not  indicate  the  Commission's  view that the
      document is not subject to review or appeal.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.9
<SEQUENCE>10
<FILENAME>file011.txt
<DESCRIPTION>EX D-3 MPUC CERTIFICATION
<TEXT>

EXHIBIT D-3

                                 STATE OF MAINE
                          PUBLIC UTILITIES COMMISSION
                                242 STATE STREET
                             18 STATE HOUSE STATION
                                 AUGUSTA, MAINE
                                   04333-0018                WILLIAM M. NUGENT
THOMAS L. WELCH                                              STEPHEN L. DIAMOND

   CHAIRMAN                                                     COMMISSIONERS

                                February 5, 2001





Secretary Jonathan G. Katz
Office of the Secretary
Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C.  20549

        Re:  Bangor Hydro-Electric Company

Dear Secretary Katz:

        In connection with the proposed acquisition of Bangor Hydro-Electric
Company (BHE) by Emera, Inc., the Maine Public Utilities Commission hereby
certifies to the Securities Exchange Commission pursuant to 15 U.S.C. ss.
79z-5b(a)(2) that the PUC has the authority and resources to protect BHE
ratepayers subject to its jurisdiction and intends to exercise its authority.

                                        Sincerely,



                                        Dennis L. Keschl
                                        Administrative Director

DLK/llp

cc:  Bill Harwood
Phone:  (207) 287-3831 (voice)
TTY:  1-800-437-1220
Fax:  (207) 281-10__

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.10
<SEQUENCE>11
<FILENAME>file013.txt
<DESCRIPTION>EX D-5 FERC ORDER
<TEXT>

EXHIBIT D-5

                    UNITED STATES OF AMERICA 94 FERCP. 61,049
                      FEDERAL ENERGY REGULATORY COMMISSION


Before Commissioners:  Curt Hebert, Jr., Chairman;
                       William L. Massey, and Linda Breathitt.


Bangor Hydro-Electric Company and                         Docket No. EC01-13-000
Emera Incorporated


                            ORDER AUTHORIZING MERGER

                            (Issued January 24, 2001)

     On October 31, 2000, Bangor Hydro-Electric Company (Bangor Hydro) and Emera
Incorporated  (Emera)  (collectively,  Applicants)  filed an  application  under
section 203 of the Federal  Power Act  (FPA)/1/  seeking  authorization  for the
merger of Bangor  Hydro with  Emera.  Bangor  Hydro will  become a  wholly-owned
subsidiary  of Emera upon  consummation  of the merger,  and will continue to do
business under its present name./2/

     The  Commission  has reviewed the  proposed  merger under the  Commission's
Merger  Policy  Statement/3/  and, as discussed  below,  we will  authorize  the
proposed transaction as consistent with the public interest.

I. Background

     A. Description of the Parties to the Merger

- ---------------------

     /1/ 16 U.S.C.ss.824b (1994).
     /2/ Application at 20.
     /3/ Inquiry  Concerning  the  Commission's  Merger Policy Under the Federal
Power Act: Policy  Statement,  Order No. 592, 61 Fed. Reg.  68,595 (1996),  FERC
Statutes and  RegulationsP.  31,044 (1996),  reconsideration  denied,  Order No.
592-A,  62 Fed. Reg.  33,341  (1997),  79 FERCP.  61,321 (1997)  (Merger  Policy
Statement).


<PAGE>


                                       -2-

     Bangor Hydro is a public utility engaged in the transmission, distribution,
generation,  purchase,  and sale of  electricity  in eastern and coastal  Maine.
Bangor Hydro owns  approximately 600 miles of transmission lines and 4,000 miles
of distribution lines. Bangor Hydro's peak load for 1999 was 293 MW.

     Bangor Hydro owns several energy  subsidiaries.  These subsidiaries include
Bangor  Energy,  a public  utility  engaged  in power  marketing  subject to the
Commission's jurisdiction, which is a special-purpose vehicle created in 1997 to
permit  Bangor Hydro to utilize a 24.27 MW power sales  agreement as  collateral
for a loan; and Bangor Var Company, which holds a 50 percent interest in Chester
SVC  Partnership,  the owner of static var compensator  electrical  equipment in
Chester,  Maine.  Bangor Hydro also owns 7 percent of Maine Yankee  Atomic Power
Company,  whose sole power  generating  facility has been closed since 1997, and
14.2 percent of Maine Electric Power Company (MEPCO), a public utility that owns
a  345  kV  transmission   line  and  provides  service  under  an  open  access
transmission tariff.

     Under Maine's restructuring legislation, over the past several years Bangor
Hydro has been  divesting its generating  capacity and generation  entitlements.
Bangor Hydro is to remain a retail standard-offer  provider through February 28,
2001,  and is prohibited  from bidding to remain a retail  provider.  Therefore,
Bangor Hydro  expects to exit that market  shortly.  Additionally,  Bangor Hydro
will be prohibited  by Maine law from selling  electricity  at retail,  and will
likewise   be   forbidden   from   owning   or    controlling    generation   or
generation-related assets.

     According to the application, Bangor Hydro directly owns and operates 21 MW
of electric  generating  capacity.  However, it has divested itself of all other
generation-related  resources but for Bangor  Energy's  power sale agreement and
certain generation  capacity it uses to provide  standard-offer  retail service.
Bangor-Hydro is a net purchaser of electricity.

     Emera  is  a  Canadian  business   corporation  whose  principal  operating
subsidiary  is Nova Scotia Power Inc.  (Nova  Scotia),  which sells  electricity
primarily to customers in Nova Scotia,  Canada.  Nova Scotia owns  approximately
2,200 MW of  generating  capacity,  all of which is located  within Nova Scotia,
Canada. According to the application,  Nova Scotia neither owns nor controls any
generating resources in the United States, and has no contracts for the purchase
of power  from any source  located  within the  United  States.  Nova  Scotia is
interconnected to only one other utility,  New Brunswick Power (NB Power), which
is owned by the Province of New Brunswick, Canada.


<PAGE>


                                       -3-

     Emera also has a 12.5 percent  ownership  interest in Maritimes & Northeast
Pipeline, L.L.C. (Maritimes) via its subsidiary Scotia Power U.S. Ltd. Maritimes
is a natural gas pipeline  that  originates  in Nova Scotia and  terminates at a
point of  interconnection  with  the  United  States  pipeline  grid at  Dracut,
Massachusetts.  Maritimes'  United States  markets are located  primarily in New
England.  Maritimes  provides natural gas  transportation  service pursuant to a
Commission-approved open access transportation tariff.

     B. Description of Proposed Merger

     The proposed  merger is governed by an Agreement and Plan of Merger (Merger
Agreement)  dated June 29, 2000. The Merger  Agreement  provides that Emera will
directly or  indirectly  acquire all of Bangor  Hydro's  shares of common stock,
making Bangor Hydro a wholly-owned  subsidiary of Emera.  Pursuant to the Merger
Agreement,  a to-be-formed  United States Emera  subsidiary  will merge with and
ultimately  into Bangor  Hydro,  with Bangor Hydro to be the  surviving  entity.
Following  consummation  of the  transaction,  Bangor Hydro will  continue to do
business  under its  current  name and will  continue  service to all  customers
pursuant to existing contracts and Federal and state requirements.

II.  Notice of Filing and Responsive Pleadings

     Notice of Applicants' filing was published in the Federal Register, 65 Fed.
Reg. 69,760 (2000), with comments,  interventions, and protests due on or before
December 29, 2000. On November 21, 2000, the Maine Public  Utilities  Commission
(Maine Commission) filed a notice of intervention raising no substantive issues.

III.  Discussion

     A. Procedural Issues

     Pursuant  to Rule  214(a)(2)  of the  Commission's  Rules of  Practice  and
Procedure,/4/ the Maine Commission's  notice of intervention makes it a party to
this proceeding.

     B. The Merger

- ---------------------

     /4/ 18 C.F.R. ss. 385.214(a)(2) (2000).


<PAGE>


                                       -4-

          1. Standard of Review

     Section 203(a) of the FPA/5/  provides that the  Commission  must approve a
proposed  merger if it finds that the merger "will be consistent with the public
interest." The Commission's Merger Policy Statement provides that the Commission
will generally take account of three factors in analyzing proposed mergers:  (a)
the  effect on  competition;  (b) the  effect on  rates;  and (c) the  effect on
regulation.

          2. Effect on Competition

     Applicants' Analysis

     Applicants  analyze the  competitive  effects of the  proposed  transaction
relating to the consolidation of generation (i.e.,  horizontal  effects) and the
consolidation  of  generation,  delivered  gas and  transmission  assets  (i.e.,
vertical effects).

     Applicants  argue that it is unnecessary to perform the analysis  described
in Appendix A of the Merger Policy Statement to evaluate the horizontal  effects
of the proposed merger,  for two major reasons.  First,  Applicants explain that
Bangor Hydro  currently owns only 21 MWs of relatively  high cost,  diesel-fired
internal  combustion units, which could have been used for, at most, 1.4 percent
of the hours from August 1999 through July 2000./6/ Applicants state that Bangor
Hydro's  diesel  units  comprise  less  than 0.1  percent  of  NEPOOL's  current
installed  generating  capacity and that, most of the time, the variable cost of
Bangor  Hydro's  diesel  units  exceeds  the  market  price of  energy.  Second,
Applicants explain that Bangor Hydro and Nova Scotia Power do not sell to common
wholesale  customers  based on 1998 and 1999 trading  data.  Additionally,  they
state that OASIS  postings  currently  show that only 2 MWs of firm or  non-firm
capacity will be available for export on New Brunswick  Power's  system to Maine
Electric Power Company (MEPCO) through September  2001./7/  Notwithstanding  the
foregoing,

- ---------------------
     /5/ 16 U.S.C.ss.824b(a) (1994).

     /6/ Applicants additionally explain that environmental concerns limit these
diesel- fired units to a total operating time of 500 hours per year.  Fox-Penner
Affidavit, p. 11.

     /7/ Applicants  state  there  are plans for a new  transmission  line to be
constructed  by  Pennsylvania  Power & Light  Energy Plus that would  provide an
additional  300 MWs of  transmission  capability  from New  Brunswick to NEPOOL.
However,  development of this line has temporarily ceased, pending approval from
Maine environmental and land use agencies.


<PAGE>


                                       -5-

Applicants perform an analysis of installed capacity in NEPOOL and conclude that
the market is unconcentrated in winter and summer,  with de minimis increases in
the Herfindahl-Hirschman indices attributable to the proposed merger./8/

     Applicants  assert  that  the  proposed   transaction  raises  no  vertical
competitive  concerns associated with consolidating  generation and transmission
because Independent System Operator,  New England, Inc. (ISO-NE) has operational
control over  transmission  assets owned by Bangor  Hydro.  They also state that
although Emera has a minority  ownership  interest in Maritimes  (which delivers
natural gas in Bangor Hydro's service area), the proposed  transaction raises no
vertical competitive concerns related to consolidating  generation and delivered
gas because there is limited  overlap  between the electricity and delivered gas
markets in which Applicants compete.  They also note that because Bangor Hydro's
only generation is diesel-fired and used infrequently,  the merged company would
have little  incentive to withhold  delivered  gas to foreclose  competitors  or
raise their costs.

     Commission Determination

     With regard to horizontal competitive issues raised by the proposed merger,
we note that based on the information  provided by Applicants,  Bangor Hydro and
Nova Scotia do not, and likely will not, compete in the same relevant markets in
the United States (our analysis  focused on only United States  markets)  within
the time frame relevant for our merger review.  Limited ATC on the  transmission
path from New Brunswick to MEPCO effectively  prevents Applicants from competing
in common


     /8/ Applicants  state  that this  analysis employs conservative assumptions
regarding capacity controlled by Applicants. Currently, Applicants have purchase
agreements  for 100 MWs of peak and 50 MWs of off-peak  power to serve  standard
offer service  customers in their service  area. In performing  their  installed
capacity  analysis,  they assume that they retain full control over the dispatch
of these MWs, and they find little competitive impact.  Further, these contracts
are due to expire on February 28, 2001,  and  Applicants  do not intend to renew
them.


<PAGE>


                                       -6-

relevant  markets in the United  States./9/ Even if ATC were to increase so that
Bangor Hydro and Nova Scotia could compete in common relevant  markets (e.g., if
a new  transmission  line is built),  the small amount of generation that Bangor
Hydro does control,  which is economic  only a short time of the year,  would be
unlikely to have a material effect on market  concentration  in relevant markets
when combined with generation controlled by Nova Scotia.

     With regard to vertical issues  associated  with  electricity and delivered
gas, we note that there is currently no overlap  between the  delivered  gas and
electricity  markets  in  which  Applicants  compete.  Moreover,  if  ATC on the
transmission  path from New Brunswick to MEPCO were to increase,  it is unlikely
that the merged  company would have the  incentive to foreclose  rivals or raise
their delivered gas costs,  thereby adversely  affecting  electricity  prices or
output.  Therefore, we find that the proposed merger does not pose horizontal or
vertical competitive  concerns.  We note that no intervenor raises any arguments
to the contrary.

          3. Effect on Rates

     According  to  Applicants,  the proposed  transaction  will have no adverse
impact on rates.  Currently,  Bangor Hydro has only three wholesale requirements
customers  representing  a combined peak load of only 0.9 MW.  Applicants  state
that all three of these  customers are now, and will remain,  eligible to choose
different  suppliers.  Bangor Hydro commits to a hold harmless  provision  under
which "its wholesale  requirements customers and transmission customers [will be
held] harmless from costs related to the merger for five years."

          Commission Determination

     Based on these  considerations,  the  Commission  finds  that the  proposed
transaction  will not cause any adverse rate effects.  We note that no commenter
argues otherwise.

          4. Effect on Regulation

- ---------------------

     /9/ ATC from MEPCO to New Brunswick  would be required  for Bangor Hydro to
reach  Maine  Public  Service  (MPS),  a market in the  United  States  possibly
affected by the proposed merger.  However,  since MPS is several systems removed
from NEPOOL, it is unlikely to be a relevant market.


<PAGE>


                                       -7-

     As explained  in the Merger  Policy  Statement,  the  Commission's  primary
concern with the effect on regulation  of a proposed  merger  involves  possible
changes in the Commission's  jurisdiction  when a registered  holding company is
formed, thus invoking the jurisdiction of the Securities and Exchange Commission
(SEC). We are also concerned with the effect on state  regulation  where a state
does not have authority to act on a merger and raises  concerns about the effect
on state regulation./10/

     With  respect to Federal  regulation,  Applicants  expect  that,  following
consummation  of the  transaction,  Emera will become an exempt holding  company
under the Public Utility  Holding Company Act of 1935./11/ If Applicants are not
successful in receiving a PUHCA exemption and instead must register under PUHCA,
Applicants  commit  to  comply  with  this  Commission's   policies   concerning
intra-system  transactions.  Therefore,  the proposed merger will not create any
issues regarding the overlap of jurisdiction by this Commission and the SEC.

     With  respect  to  state  regulation,   Applicants  state  that  the  Maine
Commission  has  jurisdiction  to review their proposed  merger,  and that after
consummation  Bangor Hydro will continue to be regulated by the Maine Commission
with respect to retail rates, services and facilities.

          Commission Determination

     Based on these  considerations,  the  Commission  finds  that the  proposed
merger will not adversely  effect either  Federal or state  regulation.  We note
that no commenter argues otherwise.

          5. Accounting Matters

     The application is unclear as to how Applicants  propose to account for the
merger (i.e.,  using the purchase or pooling of interests  method) or the effect
of the transaction on Bangor Hydro's account balances.  In addition,  the filing
does not provide proposed  accounting for amounts paid in excess of the original
cost  net  book  value  (i.e.,  the  acquisition   premium),   if  any,  or  the
merger-related  costs to be  recorded  by  Bangor  Hydro.  Therefore,  we cannot
determine to what extent the merger will affect the books and

- ---------------------

     /10/ Merger Policy Statement at 30,124-25.

     /11/ 15 U.S.C.ss. 79a, et seq. (1994) (PUHCA).


<PAGE>


                                       -8-

records of Bangor Hydro and whether the accounting complies in all respects with
the Commission's  Uniform System of Accounts  requirements.  However, the Merger
Policy Statement states that proper accounting treatment is a requirement of all
mergers./12/ Therefore, we direct Bangor Hydro to submit its proposed accounting
within six months  following the  consummation  of the merger in accordance with
the  Uniform  System of  Accounts./13/  The filing  should  include  all amounts
recorded on Bangor Hydro's books as well as narrative explanations regarding the
journal  entries,  the method of accounting  used to record the merger,  and the
proposed accounting treatment for merger-related costs.

The Commission orders:

     (A) Applicants'  proposed merger is hereby authorized,  as discussed in the
body of this order.

     (B) Applicants  shall advise the Commission  within 10 days of the date the
merger is consummated.

     (C) The foregoing  authorization  is without  prejudice to the authority of
the  Commission or any other  regulatory  body with respect to rates,  services,
accounts,  valuation,  estimates, or determinations of cost, or any other matter
whatsoever now pending or that may come before the Commission.

     (D) Nothing in this order shall be construed to imply  acquiescence  in any
estimate  or  determination  of cost or any  valuation  of  property  claimed or
asserted.

     (E) The Commission  retains  authority under sections 203(b) and 309 of the
FPA to issue supplemental orders as appropriate.

     (F) Within six months of consummating the merger, Bangor Hydro shall submit
its proposed accounting, as directed in the body of this order.

By the Commission.

- ---------------------

     /12/ Merger Policy Statement at 30,126.

     /13/ Electric Plant  Instruction No. 5, Electrical Plant Purchased or Sold,
and Account 102, Electric Plant Purchased or Sold, 18 C.F.R. Part 101 (2000).


<PAGE>


                                       -9-
( S E A L )



                                                              David P. Boergers,
                                                                    Secretary.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.11
<SEQUENCE>12
<FILENAME>file016.txt
<DESCRIPTION>EX G-1 EMERA'S ANNUAL REPORT
<TEXT>

EXHIBIT G-1



                                    [PICTURE OMITTED]


<PAGE>





NS Power  Holdings  Inc. is a  diversified  energy and  services  company,  with
440,000 customers, and $2.8 billion in assets. Our primary operating subsidiary,
Nova Scotia  Power,  is the dominant  electricity  supplier in Nova Scotia.  Our
energy  product line also includes  bunker oil, and diesel fuel,  and we deliver
100 million  litres of light fuel oil annually.  We have a 12.5% interest in the
Maritimes & Northeast  Pipeline.  At NS Power  Holdings,  we are  realizing  our
vision to be the customers' choice in energy and services.


<PAGE>


Earnings
(in millions)


94.8    90.0    92.7    85.4    100.4

                                 ||
 ||                              ||
 ||              ||              ||
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 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
- -------------------------------------
 95      96      97      98      99




Dividends
($)


0.78    0.80    0.81    0.82    0.83

                                 ||
                         ||      ||
                 ||      ||      ||
         ||      ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
- -------------------------------------
 95      96      97      98      99



Dividend Yield

* Average Canadian 10-Year Bond Yield
* NSH

8.50______________________________________


7.00______________________________________


5.50______________________________________


4.00______________________________________
        95      96      97      98      99



Cash from Operations
(in millions)


197.1   194.0   304.7   228.0   223.7

                 ||
                 ||
                 ||
                 ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
 ||      ||      ||      ||      ||
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- -------------------------------------
 95      96      97      98      99



<PAGE>

- ---------- ---------------------------------------------------------------------
   1999    Corporate Highlights

- ---------- ---------------------------------------------------------------------

           Earnings of $100.4 million, an 18% increase over 1998

- ---------- ---------------------------------------------------------------------

           Earnings per share of $1.16

- ---------- ---------------------------------------------------------------------

           Record electrical energy sales of $790.2 million (10,365 GWh)

- ---------- ---------------------------------------------------------------------

           Third consecutive year without an electricity price increase

- ---------- ---------------------------------------------------------------------

           10.8% return on equity in electric utility, near the top of allowed
           range

- ---------- ---------------------------------------------------------------------

           Maritimes & Northeast Pipeline makes first Sable Gas deliveries

- ---------- ---------------------------------------------------------------------

           Home heating and light fuel oil sales of more than 100 million litres

- ---------- ---------------------------------------------------------------------

           Dividend increase in 1999 and 2000

- ---------- ---------------------------------------------------------------------

           Natural gas development driving strong regional economy

- ---------- ---------------------------------------------------------------------


                                    [PICTURE OMITTED]




<PAGE>









2        Letter to Shareholders
6        Progress Report

         8        Customer Advantage
         10       Operations Efficiency
         12       Business Development
         14       Community Investment

16       Management Discussion and Analysis
30       Management Report
31       Auditors' Report
32       Financial Statements
46       Corporate Governance
IBC      Executives and Directors




                                    [PICTURE OMITTED]



<PAGE>

fellow shareholders

- ----------------------------------------------------------------------

                    In 1999 our company delivered more energy,
                    in more forms, to more  customers, than
                    ever before.  The Nova Scotia economy surged,
                    and that meant record numbers of residential,
                    commercial and industrial customers, and
                    record sales.

02   We can  capture the  essence of  everything  that went on in our company in
     1999 with eight simple,  but powerful words - we  accomplished  what we set
     out to do. We faced challenges, we seized opportunities,  we made progress,
     and we positioned ourselves for continued growth.

     We said we would  restore  earnings  success,  and we did. In 1999 earnings
     were  $100.4  million,  an 18%  increase  from $85.4  million in 1998.  The
     majority  of these  earnings  flowed  from the  strength  of our  regulated
     electric  utility,  which achieved a satisfying  return on common equity of
     10.8%,  compared to 9.5% last year,  despite  continued  warmer-than-normal
     temperatures.  Industrial  sales drove revenue growth,  increasing 12% over
     1998,  due  largely  to  expanded  operations  at  our  largest  industrial
     customer, Stora Enso, Port Hawkesbury.

     We said we would  capitalize  on  Sable  Gas,  and we did.  One of the most
     exciting  devel-opments  in 1999  was the  completion  of the  Maritimes  &
     Northeast Pipeline (M&NP),  which delivered Sable Island natural gas to its
     first  customers just before  year-end.  Our 12.5% interest in the pipeline
     gives us a unique vantage point on Sable gas development and its promise of
     other potential  investment  opportunities for our company.  More than half
     the  pipeline  is in the  northeastern  United  States,  marking  NS  Power
     Holdings'  first  investment  in operating  interests  outside Nova Scotia.
     Management  will  continue to  carefully  assess  investment  opportunities
     beyond our provincial  borders,  where we con-tribute  unique strengths and
     can achieve significant gains for our shareholders.

     We said we would become more than an  electricity  company,  and we did. In
     less than a year,  we have built our home heating  business to deliver over
     100 million litres annually. We


<PAGE>




                                    [PICTURE OMITTED]

                        Derek Oland Chairman of the Board
                David Mann President and Chief Executive Officer


also  expanded  our heavy fuel oil  business in 1999,  and added  diesel oil and
industrial  lubricants to our product mix. Providing these complementary  energy
products  builds  revenues and grows  earnings,  as  operational  synergies  are
achieved in areas such as customer service, billing systems and buying power.

We  said  we  would  build  success  through  our  customers,  and we  did.  Our
competitive   growth   opportunity  is  grounded  in  the  value  of  our  solid
relationship with our existing  customers.  That relationship is built on trust,
created  by  reliably  and safely  delivering  the  energy,  and  providing  the
services,  that are  essential  to their  comfort,  success and well  being.  We
strengthened  that  customer   connection  in  1999,  by  making  it  our  third
consecu-tive  year  without  an  electricity  price  increase.  Strong  customer
confidence in our core electric business  accelerates customer acceptance of the
new products and services we introduce.

We said we would stay focused on cost management, and we did. It is essential to
our  profitability  today,  and  to  our  competitiveness   tomorrow.  Fuel  for
generation  comprises over one-third of our total costs. We use more coal in our
power generation than any other fuel source.  We cannot overstate the importance
of a reliable, high quality and competitively priced source of this staple input
to our business.  In 1999, close attention to fuel pricing and plant efficiency,
and effective fuel switching  strategies kept fuel cost increases to 4% in spite
of a 6% increase in  production.  Operating,  maintenance  and general  expenses
increased  as our  customer  base grew,  and demand  for  electricity  and other
services rose,  but efficiency  gains across the  organization  mitigated  these
volume-related  increases. As we move into 2000 and beyond,  increasing capacity
utilization  will be critical to managing  our costs  downward.  By  encouraging
customers  to move some of their  demand to off-peak  hours,  we will be able to
defer investment in additional generation assets.


<PAGE>


Our advance into competitive energy businesses

has important implications for our regulated electric

business. The sales, marketing and customer service

skills, and entrepreneurial mindset necessary for

success in these businesses become more critical

to our electric business every day.


04   We said we would  enhance  earnings  quality,  and we did. 1998 reminded us
     that while the  shareholders'  opportunity  for reward  from the  regulated
     utility is limited,  their  opportunity  for risk is not.  During 1999,  we
     implemented  a  progressive  Enterprise  Risk  Management  system to ensure
     dynamic management of commodity prices and fuel sources,  foreign exchange,
     interest rates,  and even the effects of weather  variance on our revenues.
     Our strategy enjoyed  considerable  success, not the least of which was the
     realization  of $2.7 million of net proceeds  from  weather-risk  contracts
     that substantially offset the effects of warmer temperatures this year.

     We said we would prepare for increased competition, and we did. The arrival
     of  natural  gas  in  Nova  Scotia  will  present  challenges  as  well  as
     opportunities.  Our  exposure  is  limited by the fact that only 20% of our
     residential  electric  demand comes from space heating.  As well,  costs to
     convert to gas from both  electricity and oil are high. Our ongoing success
     in maintaining  stable prices, and in giving customers options for managing
     their energy costs positions us to manage natural gas  competition  when it
     arrives. We are also working  proactively with our industrial  customers to
     implement  a new,  favourable,  "load  retention"  rate,  which  would make
     electricity pricing competitive with self-generation using alternative fuel
     sources.

     Our advance into competitive  energy businesses has important  implications
     for our  regulated  electric  business.  The sales,  marketing and customer
     service skills, and entrepreneurial  mindset necessary for success in these
     businesses  become more  critical to our  electric  business  every day. In
     diversifying  our  company,  we  provide  an  opportunity  for  all  of our
     employees to benefit from the knowledge and  experience in these areas that
     staff members


<PAGE>



from our new  ventures  bring  to the  company.  The  transfer  of those  skills
strengthens the customer focus in our core electric business.  By operating with
the customer  interest at the forefront of every  decision and every action,  we
will be ready for deregulation whenever it arrives.

     We said we would live up to our environmental responsibilities, and we did.
As a consumer of primary energy  sources,  we must utilize those resources in an
efficient manner,  minimizing and managing the impact we have on the environment
where we, and our  customers,  work and live.  In 1999 we made good  progress in
achieving our environmental  goals. In 2000, the completion of the conversion of
our Tufts Cove  generator to burn natural gas as well as oil will further reduce
our emissions.

     Our employees made this year the success that it was. They continue to rise
to  the   chal-lenges   of  increased   competitiveness,   and  to  embrace  our
customer-focused  strategy.  Their commitment  strengthened our organization and
turned our goals into reality. In addition to their contribution to our company,
many helped  extend our  commitment  to improving  the quality of life,  and the
environment,  in our  communities.  On  behalf  of  management  and the Board of
Directors, we express sincere thanks for a job well done.

     Operational  expertise in our core  electric  utility,  increased  customer
focus,  disciplined growth in complementary lines of business, and sophisticated
risk management,  work together to increase the quality of earnings.  This gives
the Board of Directors confidence to once again increase the dividend payable to
all common shareholders.

     In closing,  we would like to acknowledge the expert  guidance  provided by
the  Board of  Directors  of the  company  and  offer  our  thanks  to them.  In
particular,  we acknowledge the outstanding  contribution  made by Mr. Thomas R.
Hall, a director since 1992, who will be retiring in May of 2000.

     We entered 1999 with the strategy to be our customers' choice in energy and
services. We accomplished much in the year. We enter 2000 with the foundation of
people, performance, growth opportunities, and customer focus to declare that we
are indeed on course.

Derek Oland Chairman of the Board (signed)
David Mann President and Chief Executive Officer (signed)



<PAGE>


[PICTURE]


At NS Power Holdings  Inc., our vision is to be the customers'  choice in energy
and services. We live that vision every day, through accomplishments in four key
areas.

o    Customer Advantage - acknowledging our customers as our greatest asset, and
     treating them accordingly;

o    Operations   Efficiency  -  maintaining  high   reliability,   and  service
     excellence, while keeping costs down for our customers;

o    Business  Development - offering our customers a full  complement of energy
     products and services; and

o    Community Investment - investing in the communities where our customers and
     employees work and live.

     We have set a focused and disciplined course for success and growth. We are
achieving  results  through the  execution of our own unique plan.  The progress
report in the following pages proves that we are on course.

Above,  Left to right > Trudy Cromwell,  Customer  Representative,  Call Centre;
Point  Tupper  Generating   Station;   Maritimes  &  Northeast   Pipeline  under
construction;  Erin C. MacNeil,  Centennial  Scholarship  Winner,  Sydney,  Nova
Scotia Opposite > Katherine Barss,  residential customer,  Hammonds Plains, Nova
Scotia



<PAGE>



our greatest asset

- ---------------------------------------------

                       Our company has 440,000 customers, and every
                       one of them relies on us to provide a
                       service that is integral to their
                       well-being, success and comfort. We do it,
                       reliably and efficiently. Their trust, and
                       our ability to deliver, is the foun-dation
                       for a relationship with our customers that
                       is, quite simply, our single greatest asset,
                       and the one on which we will build our
                       success in the 21st century.

08   Maintaining  customers'  confidence,  and  developing our  relationship  to
     provide other products and services,  depends on our ability to provide the
     best service at the best price.  We're proud of the fact that our customers
     have not faced an  electricity  price  increase in three years.  We have no
     plans to interrupt that trend in 2000.

     We are going further,  helping customers to reduce energy costs by offering
lower rates for electricity purchased outside of peak periods.  Electric thermal
storage units, part of our product mix, make this possible, enabling residential
and  commercial  customers to bank energy at night and use it during the day. In
addition,  we are seeking regulatory approval to offer new,  competitive,  "load
retention" rates to major industrial customers,  to ensure they continue to look
to us for their electricity needs.  Keeping industrial users on the system helps
keep prices  stable for all of our  customers,  because it ensures the  system's
fixed costs continue to be shared over a wide customer base.

     Standards  for  service  have  never  been  higher  than they are now.  Our
customers'  expec-tations  of us are not only  driven by what we do, but also by
every other service  provider they encounter.  Nothing less than excellence will
suffice.  Accordingly,  in 1999 No va Scotia  Power  created a  "Customer  Needs
Team", in which  operations  staff,  field personnel and customer  service staff
work  together  to  fundamentally  change  the way we serve  customers.  We also
installed High Volume Call  Answering  technology,  to increase the  information
flow during times when weather or other  difficulties  disrupt power supply.  We
enhanced our Interactive  Voice Response  telephone system to make it easier for
customers to communicate  with us every day, and, toward the end of the year, we
introduced  the  convenience  of Internet  billing  ("e-bill")  for  residential
customers.


<PAGE>

                                      440
                                      000
                                customers strong


     Our  customers  are  responding  to our  efforts.  Each  year we  conduct a
customer  survey,  and the 1999 results  show overall  opinion of us is high and
continuing to increase. The importance of this result cannot be overstated.  Our
customers'  impressions  of Nova  Scotia  Power  as  knowledgeable,  dependable,
responsive,  friendly and  trustworthy  will one day influence their decision to
continue to do business with us when competition for electricity arrives. And it
will also persuade them to purchase  other products and services that are key to
our growth.

     We entered the year with a strategy to be our customers'  choice for energy
and  related  services.  We're on  course,  with a greater  portfolio  of energy
products and related services, an improved ability to deliver them, and a larger
and more loyal customer base choosing to buy from NS Power.


A DIVERSIFIED CUSTOMER BASE



37% Industrial         34% Residential       25% Commercial         4% Other




<PAGE>


2 > O P E R AT I O N S E F F I C I E N C Y
essential service

- ---------------------------------------------------------------------

                       Electricity generation, transmission and distribution
                       have comprised the core of our business for more than
                       75 years. In 1999, we achieved record volumes,
                       delivering essential energy services to a broad base
                       of residential, commercial, and industrial customers.
                       essential services

Competitive  benchmarking  in our power  generation  business places Nova Scotia
Power in the top third of North American  utilities for  reliability and cost of
service.  Our  success  in  generation  is  evidenced  by the high  reliability,
low-cost  production,  and fuel efficiency  that we achieved during 1999.  While
sales volumes increased,  plant operating and fuel costs were closely controlled
by managing the increased volumes through improved asset  utilization,  shifting
demand to off-peak times,  and managing our fuel mix to increase  efficiency.  A
number of employee-driven  production  improvements  during the year, as well as
enhanced  staffing   flexibility,   also  helped  increase  overall   operations
efficiency.

     Fuel accounts for over one-third of our power  generation  expense,  so not
surprisingly,  the company places  particular  focus on managing these costs. In
1999, the Cape Breton Development Corporation was unable to deliver a portion of
the coal they supply to the company under a long-term  contract,  which led Nova
Scotia  Power  to  increase  its use of  lower-priced,  imported  coal.  We also
utilized fuel-switching  strategies to reduce our oil consumption;  particularly
important  in light of the  increase in the price of this  commodity  during the
year.

     We're  expanding  our fuel  sources to  further  increase  fuel  management
opportunities.  The Tufts Cove generating  station is in the final stages of the
conversion  that will enable it to operate  with either  natural gas or oil. The
Point  Aconi  plant,  with its  advanced  emissions-control  equipment,  has the
capacity to burn a significant  amount of petroleum coke,  which is considerably
lower in cost than coal.


<PAGE>




                                    [PICTURE]

     Our progressive Enterprise Risk Management program will greatly enhance our
control over our fuel costs in 2000, and beyond. Dynamic management of commodity
price and foreign exchange,  with a comprehensive portfolio of fixed price, swap
and option  contracts,  has eliminated  substantially  all of the variability in
fuel prices for 2000.

     Emphasis  on meeting  customers'  needs while  controlling  costs drove the
creative  initiative that will allow us to deliver the increased electric energy
needs of one growing Nova Scotia community without making a significant  capital
investment.  By re-routing  services and making only minor  upgrades to existing
infrastructure and distribution networks, we will eliminate the need for a major
new distribution  system.  Strategic and creative thinking will turn a potential
$10 million expenditure into a $1 million expenditure!

     Our efficiency gains never come at the expense of safety. In 1999, the Nova
Scotia Construction Safety Association recognized Nova Scotia Power workers with
one of the highest  scores ever awarded in a safety audit.  Extending our safety
commitment to overall  health,  we implemented a program that offers health risk
assessment to all employees.  Our power  production unit broadened the company's
safety initiative,  piloting a home safety awareness program that makes safety a
24-hour a day focus.

Above, Left > Ken Francis, System Operator,  Ragged Lake Control Centre Centre >
Ken Wentzell,  Maintenance  Services  Supervisor,  Tufts Cove Generating Station
Right > Top: Wayne Joudrey, Leading Power Line Technician, Metro Region; Bottom:
Phil Stevens, Leading Power Line Technician, Metro Region


<PAGE>


 3 > B U S I N E S S D E V E L O P M E N T
energy solutions for customers
- ------------------------------

                       "Knowledgeable", "trustworthy", "friendly" and
                       "reliable".  These words are frequently used by
                       customers to describe our core electric utility, Nova
                       Scotia Power.  Building on the strength of this
                       existing relationship with customers, we are becoming
                       their clear choice for a new array of energy products
                       and services.

Through our  growth-oriented  subsidiary,  Enercom, we have expanded our product
line to provide more choices in energy,  including home heating fuel, industrial
lubricants,  bunker oil and diesel  fuel.  Nova Scotia  Power is also  providing
customers with new and value-added  services like "Log One", an automated system
that  uses  motion  sensors  to  determine  when   residential   apartments  are
unoccupied,  and then  slowly  lowers the room  temperature,  enabling  building
managers to control costs on an apartment-by-apartment basis. On a recent pilot,
Log One  proved it could  reduce  winter  energy  costs by as much as 33%.  Many
customers have embraced our broader product and service offerings. For example:

o Maritime  Life,  a  prominent  Canadian  insurance  company  headquartered  in
Halifax,  worked with us to better  understand  their energy use, and contracted
for furnace oil and other services.

o A commercial  customer,  Urchin  Property  Management,  with 18 apartment  and
business  complexes  under  management,  purchases  furnace oil, uses our energy
management  services,  and  installed  Electric  Thermal  Storage units to lower
energy costs.

o Eastlink Cable,  which serves 190,000  customers across the province relies on
us for fibre optic design engineering and construction services.

We're  not only  expanding  our  product  and  service  line - we are  expanding
geographically too. Our 12.5% interest in the Maritimes & Northeast Pipeline has
enabled us to diversify our energy  platform,  and stretched our boundaries into
the  northeastern  United States.  The pipeline is now  delivering  Sable Island
natural gas to its first customers in Maine and Massachusetts.

The success and strength of our core  electric  business  positions us now, more
than any  other  time in our  history,  to grow  with the  energy  and  services
opportunities  available to us in Nova Scotia,  throughout  the  Maritimes,  and
beyond.

Opposite,  Inset > Diesel Cardlock System Top > Bill Camp,  Manager  Development
and Systems, ABT Canada Left > Raw material prior to processing Right > Exterior
hardboard siding awaiting shipment to customers


<PAGE>


                                    [PICTURE]


ABT Canada Limited,  a Louisiana  Pacific Company operates a 240,000 square foot
facility in East River,  Nova  Scotia.  The plant  produces  exterior  hardboard
siding,  door  facings,  industrial  hardboard  products and wall  panelling for
customers in 25 countries around the world.

NS Power Holdings  supplies Bunker C oil, light fuel oil and electricity for ABT
Canada's  operations and installed  structured  wiring for their  communications
systems.

NS Power Holdings also operates a  state-of-the-art  cardlock system at the site
for convenient, high speed dispensing of diesel oil for trucks.



<PAGE>


C O M M U N I T Y I N V E S T M E N T
doing well by doing good
- -------------------------------------------------------------------------

                       Together with our employees, NS Power Holdings
                       commits more than three quarters of a million
                       dollars, and countless hours each year supporting our
                       com-munity.  Helping young people has long been a
                       focus of these contributions. In addition, we
                       concentrate our efforts on safety and the
                       environment; two areas where we have particular
                       interest and expertise.

We made a  significant  investment  in the young  people of Nova Scotia in 1999,
funding 80 university  scholarships.  We also  contributed  to Regional  Science
Fairs,  the Junior  Achievement  Economics  of Staying  in School  program,  and
sponsored  children to attend Sunship Earth, a five-day  summer camp,  where fun
and environmental awareness go hand-in-hand.

Our focus on youth extends to their safety. We partner with the IWK Grace Health
Centre in funding the Nova Scotia  Child Safety and Injury  Prevention  Program,
which focuses on reducing the incidence and severity of childhood injuries.  Our
safety projects expanded in 1999, when we responded to a pressing community need
by sponsoring a  province-wide  Crosswalk  Safety  Program in  partnership  with
several other leading Nova Scotia companies.

Environmental  considerations  play  an  important  part  in  all  our  business
decisions. We contribute directly to improving our environment through a variety
of  community-run  programs.  Our  Waterwork  program,  which  began  in 1992 in
partnership with the Nova Scotia Department of the Environment,  has funded over
140 projects  improving and protecting Nova Scotia waterways.  In 1999, the Nova
Scotia  Nature Trust was one of several  environmental  enhancement  programs we
supported.  Clean Nova Scotia honoured us as their "Sponsor of the Year" for our
support of their environmental focus efforts.

Our  employees  are at the heart of our giving - their  dedication is inspiring.
Spreading the "Good Neighbour" philosophy,  NS Power staff have raised funds for
numerous  charities,  volunteered with the IWK Grace Children's  Miracle Network
Telethon,  donated money, food, and toys to families in need, and provided their
time, their skills,  and their hard work, for all types of worthwhile  community
endeavours.

At NS Power Holdings, we sincerely believe that supporting our communities is an
investment in our employees, our customers, and our future.


<PAGE>







                                    [PICTURE]


<PAGE>




M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

1 9 9 9  NS P o w e r H o l d i n g s I n c .

The  Management  Discussion  and  Analysis  (MD&A)  provides  a  review  of  the
significant  developments  that affected NS Power  Holdings  Inc.'s  performance
during 1999 relative to 1998, and its current financial  position.  Factors that
could  impact  future  operations  are also  discussed.  Such  comments  will be
affected by, and may involve,  known and unknown risks and  uncertainties  which
may cause the actual  results of the  company to be  materially  different  from
those  expressed or implied.  To enhance  shareholders'  understanding,  certain
multi-year  historical  financial  and  statistical  information  is  presented.
Throughout this discussion, "NS Power Holdings Inc." and "NSH" refer to NS Power
Holdings Inc. and all of its consolidated subsidiaries and affiliates.

F i n a n c i a l H i g h l i g h t s

NS Power Holdings  Inc.'s success in  implementing  its strategic  objectives is
reflected in the following financial performance indicators:

Revenues - Despite continued warmer-than-normal temperatures,  electric revenues
increased  5%, to $790.2  million in 1999,  from $750.8  million in 1998.  Other
revenues  increased  54%,  from $22.3  million in 1998 to $34.4 million in 1999,
reflecting growth in new lines of business.

Earnings - Net earnings  applicable to common shares increased to $100.4 million
or $1.16 per share in 1999 from $85.4 million or $0.99 per share in 1998.

Dividends - NSH  maintained its  commitment to dividend  growth,  increasing the
common  share  dividend  by  $0.01,  to $0.83 in 1999.  A further  $0.01  annual
increase  commenced  in January  2000.  Higher  earnings in 1999  resulted in an
improvement in the dividend payout ratio, from 83% to 72%.

Cash  from   Operations  -  Net  cash  provided  by  operating   activities  was
significant,  at $223.7 million,  comparable to the $228.0 million  generated in
1998.

I n t ro d u c t i o n

NS Power Holdings Inc. (NSH) is a diversified energy and services company, which
incorporates three primary operating units:

o NSH's primary  subsidiary is Nova Scotia Power Inc.  (NSPI),  a  wholly-owned,
fully-integrated  electric  utility,  with $2.8  billion of assets,  that serves
440,000 customers in Nova Scotia.  NSPI is the primary  electricity  supplier in
Nova Scotia,  providing the vast majority of the  generation,  transmission  and
distribution of electricity in the province.

o NSH's  vehicle  for growth and  diversification  outside of its core  electric
business is its Enercom Inc.  subsidiary.  Enercom's mandate is to lever assets,
including  strong customer  relationships  and operational  expertise,  into new
lines  of  business,   complementary  to  NSH's  existing  energy  and  services
portfolio.  Accordingly,  Enercom has  expanded  NSH's  energy  product  line to
include distribution of a wide range of fuel oil products,  and related products
and services.

o NSH has a 12.5%  equity  investment  in the  Maritimes  &  Northeast  Pipeline
(M&NP),  which transports Sable Island natural gas to markets in Maritime Canada
and the northeastern United States.

In addition to these operating units,  certain  functions are carried out in the
NS Power Holdings Inc.  corporation,  including  strategic planning and business
development  activities.  The  individual  corporation  is referred to herein as
Holdings Corporate, to distinguish it from the NSH consolidated entity.

ORGANIZATION STRUCTURE

                                        NSH
       ------------------------------------------------------------------
       |                                 |                               |
       NSPI (100%)                  ENERCOM (100%)           M&NP (12.5%)



<PAGE>



This Management  Discussion and Analysis presents information by operating unit,
beginning with an overview of each business;  followed by discussion of its 1999
operating results and liquidity and capital resource  details;  then the outlook
for 2000.  The MD&A concludes with a discussion of business risks and enterprise
risk management on a consolidated basis.

Enercom and M&NP are of strategic  importance to NSH, and are expected to have a
significant financial impact over time. Accordingly, detailed commentary on each
of these operations is provided in this report

1999 Financial Highlights                                        Earnings before
                                                                        Interest

- ----------------------------------------- ------- ------ -------- -------------

NSPI                                                                   $ 242.9
Enercom                                                                    1.3
M&NP                                                                       7.4
Holdings Corporate                                                       (3.4)
- ----------------------------------------- ------- ------ -------- -------------
Total                                                                  $ 248.2

Less:

Interest                                                                 136.5
Preferred shares                                                          11.3
- ----------------------------------------- ------- ------ -------- -------------
Consolidated net earnings                                              $ 100.4
- ----------------------------------------- ------- ------ -------- -------------
                                           1999    1998    1997
Cash provided by                           223.7  228.0   304.7
  Operating activities (millions of $)
Dividends per common share                $ 0.83  $ 0.82  $ 0.81
Earnings per common share                 $ 1.16  $ 0.99  $ 1.07



N o v a S c o t i a P o w e r I n c .

Overview

- -----------------------------------------------------------------------

The core business of NSH is electricity.  The sustained  success of its electric
utility,  NSPI, is integral to the creation of  shareholder  value,  providing a
quality  earnings  stream and cash flow to support  growth and  diversification.

NSPI  is the  primary  electricity  supplier  in  Nova  Scotia  with  97% of the
generation, 99% of the transmission and 95% of the distribution in the province.
Approximately  70% of the company's  generation is  coal-fired,  with  oil-fired
generation and hydro production offering generation management options. In 2000,
the  conversion of NSPI's Tufts Cove  generating  station to burn natural gas as
well as oil  will be  complete,  providing  the  company  with  additional  fuel
switching capabilities, and improved environmental emissions performance.

1999 was a record year for NSPI,  despite the fact that Nova Scotia  experienced
its second  consecutive  year of  warmer-than-normal  temperatures.  The company
utilized   weather   contracts  to  mitigate  the  impact  of  warm  weather  on
space-heating  revenue;  successfully  managed  coal  supply  issues  created by
ongoing  production  difficulties  at its primary  coal  supplier by  increasing
consumption  of import coal;  and utilized fuel  switching  strategies to manage
generation costs in the face of increasing oil prices.

     NSPI's  commitment to being the customers' choice in energy and services is
stronger than ever. The rational customer chooses the supplier that provides the
best quality  service at the best value,  and NSPI is  determined  to deliver on
both counts.  The company has successfully  executed a cost-management  strategy
that resulted in 1999 being the third consecutive year without price increases.

     1999 also saw an increased  focus on the quality  service  component of the
customer value equation.  NSPI created a "Customer Needs Team", where operations
staff, field personnel and customer service staff work together to fundamentally
change  the way we serve our  customers.  We also  installed  High  Volume  Call
Answering  technology,  and enhanced our  Interactive  Voice Response  system to
increase our capacity to answer customer calls and improve service.


<PAGE>


MANAGEMENT DISCUSSION AND ANALYSIS

     We are also  coordinating  customers'  desire for stable  pricing  with our
objective  of moving  electrical  load off peak.  This will enhance our capacity
utilization,  and  enable  NSPI  to  delay  or  avoid  investment  in  increased
generation,  while  maintaining  highly  reliable  service,  and keeping overall
costs, and prices, as low as possible.

     The regional  economy is strong,  largely due to the  development  of Sable
Island natural gas reserves.  Provincial  economic growth was 3% in 1999, and is
expected to maintain  that level in 2000.  Employment  grew 3% in the past year,
and retail sales were 4% higher in 1999.

Review of 1999

- -----------------------------------------------------------------------

1999 was NSPI's  most  successful  year ever.  The  electric    ----------------
utility's   contribution   to   consolidated   net  earnings    | Net Earnings |
increased to $100.1  million from $85.5 million in 1998. The    | Increase     |
contribution  is net of $3.1  million  gain  on the  sale of    |              |
Enercom shares to NSH, which is eliminated on consolidation.    | GRAPH        |
NSPI  earned  a return  on  common  equity  of 10.8% in 1999    |              |
compared  to 9.5% in 1998.  The  utility  is pleased to have    |              |
pro-vided  a  return  near the top of its  allowed  range of    |              |
10.5% - 11%.                                                    ----------------

<TABLE>
<CAPTION>
REVENUE                 1999             Sales      % Change      1998          Sales      % Change    1997           Sales Mix %
Electric Sales Volume                     Mix %     1998-1999                   Mix %      1997-1998
(GWh)
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
<S>                     <C>              <C>        <C>           <C>           <C>        <C>         <C>            <C>
Residential             3,494.6          33.7       3.5           3,377.9       34.6       (3.5)       3,498.9        36.8
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Commercial              2,582.8          24.9       3.9           2,485.9       25.4       (0.8)       2,506.7        26.3
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Industrial              3,834.8          37.0       12.0          3,423.7       35.0       20.4        2,842.6        29.9
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Other                   453.2            4.4        (6.4)         484.4         5.0        (27.5)      667.7          7.0
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
                        10,365.4         100.0      6.1           9,771.9       100.0      2.7         9,515.9        100.0
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------

- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Electric Sales Revenue  1999             Sales      % Change      1998          Sales      % Change    1997           Sales Mix %
(millions of $)                          Mix %      1998-1999                   Mix %      1997-1998
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Residential             340.6            43.1       2.7           331.5         44.2       (2.2)       339.0          45.7
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Commercial              221.3            28.0       2.9           215.1         28.6       0.2         214.6          29.0
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Industrial              193.7            24.5       11.7          173.4         23.1       17.2        147.9          19.9
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
Other                   34.6             4.4        12.3          30.8          4.1        (22.8)      39.9           5.4
- ----------------------- ---------------- ---------- ------------- ------------- ---------- ----------- -------------- --------------
                        790.2            100.0      5.2           750.8         100.0      1.3         741.4          100.0
</TABLE>



Residential Revenue - Residential revenue increased 3% to $340.6 million in 1999
from $331.5  million in 1998,  largely due to the relative  strength of the Nova
Scotia economy.  NSPI's residential load generally comprises appliance usage and
lighting (60%);  space heating (20%); and water heating (20%). A 31% increase in
housing starts in 1999 led to three thousand new  residential  customers,  and a
positive impact on revenues.

During the first and fourth quarters,  continued warmer temperatures  negatively
affected residential demand from space heating needs. The warm weather continued
through the summer,  but only resulted in a slight  revenue  increase since less
than 5% of NSPI's residential  customers utilize air conditioning.  Weather risk
management  contracts  mitigated  the  negative  impact  of   warmer-than-normal
temperatures on the residential load. These simple option contracts  protected a
significant  portion  of  the  lost  space  heating  margin  from  unanticipated
variations  caused  by  warmer-than-normal  winter  temperatures.  Weather  risk
management  contracts are fully  described in the Business  Risks and Enterprise
Risk Management  section.  Proceeds from weather risk  management  contracts are
included in Other Electric Revenue.


<PAGE>


Commercial Revenue - Commercial revenue increased 3% from $215.1 million in 1998
to $221.3 million in 1999. NSPI's commercial  customer base includes  everything
from small retail operations,  to large office and commercial complexes, and the
province's  universities  and hospitals.  The strong Nova Scotian  economy had a
positive impact on the commercial  sector,  and unlike the  residential  sector,
warmer summer  temperatures  increased the commercial cooling load. Weather risk
management   contracts   mitigated  the  negative  impact  of  warm  weather  on
electricity consumption for space heating needs during the winter months.

Industrial  Revenue - Industrial  revenue  increased 12%, from $173.4 million in
1998 to $193.7  million in 1999.  Much of this increase was driven by the growth
of NSPI's largest industrial customer, Stora Enso Port Hawkesbury.  In addition,
growth in the provincial economy,  including development of Sable Island natural
gas and  construction  of the Maritimes & Northeast  Pipeline,  resulted in a 6%
increase in the small and medium industrial categories.

Revenue / MWh - Revenue / MWh  decreased  slightly  from $77 to $76,  due to the
increased  weighting of industrial  sales in the sales mix. The regulated  rates
established by the Utility and Review Board for industrial  sales are lower than
for  residential  and  commercial  sales,  in  recognition  of the lower cost of
service for industrial customers.

Other Electric Revenue

Other  electric  revenue/1  increased $3.8 million from $30.8 million in 1998 to
$34.6  million in 1999.  This  increase  is  primarily  due to $2.7  million net
proceeds  realized from weather risk  management  contracts  (referred to in the
discussion of residential/commercial  revenue), which were in place in the first
and fourth quarters.

FUEL FOR GENERATION AND POWER PURCHASED
Capacity - Management of capacity is a critical element of operating efficiency.
The provision of sufficient  generating  capacity to meet peak demand inevitably
results in excess capacity in non-peak periods.  NSPI's daily load is highest in
the early  evening;  its  seasonal  load is highest  through the winter  months.
Summer cooling load is not a significant factor.

     To ensure  reliability  of service,  NSPI  maintains a generating  capacity
greater  than  firm  peak  demand.  Generating  capacity  is  composed  of 2,183
megawatts of thermal and  hydroelectric  plant and 25 megawatts  contracted with
independent  power  producers.  This  capacity  maintains  a planned  generation
reserve  margin  of at  least  20%,  which  can  be  expanded  further  with  an
interruptible load of 16%.

     Over time, NSPI's capacity management strategy is to encourage customers to
consume electricity in non-peak periods, to enhance overall plant utilization to
meet higher demand, and to defer investment in additional generation capacity.

- --------
1.  In October 1998,  NSPI purchased  Kentville  Electric  Commission and is now
serving its 3,600 Residential and Commercial customers. Prior to this date, NSPI
sold electricity to the municipality who then resold it to Kentville  customers.
For comparative  purposes,  Kentville  Electric  Commission revenue for 1998 has
been reclassified from "Other" revenue to the appropriate NSPI customer classes.


<TABLE>
<CAPTION>
Production Volume (GWh)      1999         Mix %        % Change        1998          Mix %     % Change     1997         Mix %
                                                       1998-1999                               1997-1998
- ---------------------------  ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------
<S>                          <C>          <C>          <C>             <C>           <C>       <C>          <C>          <C>
Coal                         7,816.0      70.5         11.4            7,015.0       66.8      (14.9)       8,246.5      80.0
Oil                          1,870.9      16.9         (20.7)          2,358.3       22.4      202.0        781.4        7.6
Hydro                        980.7        8.9          10.1            890.9         8.5       (4.7)        934.9        9.1
Purchased Power              411.3        3.7          70.0            242.0         2.3       (28.9)       340.2        3.3
- ---------------------------- ------------ ---------                    ------------- ---------              ------------ ---------
Total                        11,078.9     100.0        5.5             10,506.2      100.0     2.0          10,303.0     100.0
- ---------------------------- ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------

Average Unit Fuel
Costs                                     % Change                     % Change
($ per MWh)                  1999         1998-1999    1998            1997-1998     1997
- ---------------------------- ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------
                             $24.15       (1.4)        $24.49          2.3           $23.92
- ---------------------------- ------------ -----------  --------------- ------------- --------- ------------ ------------ ---------
</TABLE>



<PAGE>


M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

Fuel Expense - Total cost of fuel for generation and power  purchased  increased
by 4.0% over 1998,  from  $257.3  million  to $267.5  million,  reflecting  a 6%
increase in production to meet higher sales volumes.

     Coal,  the  utility's  dominant  fuel source,  has the lowest per unit fuel
cost, after hydro production, which of course has no fuel cost component. Oil is
more expensive, and purchased power can be 2.5 to 3 times as costly as coal. The
average fuel cost per MWh of power  produced  was reduced  slightly to $24.15 in
1999,  from $24.49 in 1998,  the result of a combination of fuel mix and pricing
factors, including:

o decreased  oil-fired  generation in 1999 compared to the prior year, when coal
supply  interruptions  with  the  Cape  Breton  Development  Corporation  (CBDC)
necessitated a greater reliance on oil;

o  increased  hydro   production,   which  approached   normal  levels  after  a
particularly dry year in 1998;

o increased consumption of lower-priced import coal;

o an  increase  in the  cost  of  CBDC  coal,  primarily  due to  volume-related
discounts imbedded in the 1998 pricing structure,  as well as small inflationary
increases pursuant to the contract; and

o an  increase  in  purchased  power,  as the  Point  Aconi  generating  station
underwent  maintenance and  modifications to enable it to burn petroleum coke, a
low-cost fuel.

     CBDC, historically the company's primary coal supplier,  permanently closed
its Phalen mine in 1999, due to ongoing geological difficulties. Output from the
other CBDC colliery,  Prince,  was less than  anticipated.  As a result, in 1999
NSPI purchased  significant  amounts of its coal from  international  suppliers.
While  international coal spot prices were approximately 25% lower than the CBDC
contracted amounts, the higher cost of arranging for transportation of shipments
on short notice eroded much of the fuel price benefit in 1999.

     The company  manages  exposure to commodity  price risk through fixed price
contracts,  as well as swap  and  option  contracts;  foreign  exchange  risk is
managed through forward and option  contracts.  Further details on the company's
fuel cost risk  management  strategies  are included in the  Business  Risks and
Enterprise Risk Management section.

OPERATING, MAINTENANCE AND GENERAL EXPENSES
NSPI's  continued  emphasis on cost management  kept operating,  maintenance and
general  expense (OM&G)  increases at less than 3% over 1998,  despite growth in
the company's  customer base, and the ensuing increase in demand for electricity
and related services. OM&G costs in 1999 were $144.0 million, compared to $140.1
million in the prior year.  Efficiency gains and costs savings across the entire
company  mitigated  the impact of higher  payroll costs  associated  with the 6%
increase in electricity production and higher amortization costs associated with
the 1997 Early Retirement Incentive Program.

GRANTS IN LIEU OF PROPERT Y TAXES
NSPI  pays  annual  grants  to  municipalities  in Nova  Scotia,  in lieu of all
municipal  taxation  other than deed transfer tax.  Since 1998, it has also been
required to make a grant to the  Province  of Nova  Scotia,  commencing  with $2
million in the first year,  and increasing by $2 million each year, to an annual
maximum of $10 million.  In 1999 these expenses totaled $8.9 million compared to
$5.5 million in 1998.

DEPRECIATION
Depreciation  expense  increased  slightly in 1999 to $94.2  million  from $91.1
million in 1998 as a result of a higher level of  in-service  assets  throughout
1999.  Depreciation expense will increase marginally in 2000 largely as a result
of capital investment in the gas conversion project at the Tufts Cove generating
station.

INTEREST
Interest  expense was $131.5 million in 1999 compared to $132.3 million in 1998,
a decrease of 1%. The $88.1 million  reduction in total debt  outstanding led to
interest  savings of $2.6  million;  debt  refinancings  at lower rates  reduced
interest  expense by  another  $2.9  million.  Interest  on loans to  affiliated
companies  contributed $0.5 million in earnings.  These savings were offset by a
$5.2 million  reduction in defeasance  gains.  During 1998 NSPI  capitalized  on
downturns in the stock market,  which  increased the spread between  Federal and
Provincial  bonds,  by selling  certain  defeasance  investments  and  acquiring
replacement qualifying investments for a net gain of $7.0 million.

     The company manages exposure to interest rate risk through a combination of
fixed and floating borrowing, and hedging. Interest rate swaps are the principal
instrument  used to hedge interest rate risk.  Further  details on the company's
interest rate risk management  strategies are included in the Business Risks and
Enterprise Risk Management section.

<PAGE>


AMORTIZATION OF POINT ACONI EXPENSES
The  regulator-approved  plan for  deferral  and  amortization  of  Point  Aconi
expenses was  completed in 1999.  The final year's  amortization  of Point Aconi
expense was $23.1 million, an increase of $6.4 million from 1998.

ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
NSPI  provides  for the  borrowing  costs of  construction  work-in-progress  by
capitalizing  an  allowance  for funds used  during  construction  (AFUDC) as an
addition  to the  cost of  property  constructed.  This  amount  is  charged  to
operations through depreciation over the service life of the related assets, and
recovered through future revenues.  The  capitalization  rate for 1999 was 8.71%
(1998 - 8.89%), resulting in $4.8 million in AFUDC (1998 - $3.8 million).

TAXES
NSPI is subject to  provincial  capital  tax  (0.25%),  large  corporations  tax
(0.225%),  corporate income tax (45.12%) and Part VI.1 tax relating to preferred
dividends (40%).

NSPI  used  sufficient  capital  cost  allowance,  cumulative  eligible  capital
deductions and loss  carry-forwards  to eliminate  corporate income tax in 1998,
and 1999, and expects to do the same in 2000.

Therefore,  in 1999  income  tax costs  consisted  only of Part VI.1 tax on NSPI
preferred  dividends  of $5.3  million.  In 1998,  income  tax  costs  were $6.8
million,   which  included  $1.9  million  representing  the  final  portion  of
amortization of an  uncollectible  rebate under the Public  Utilities Income Tax
Transfer Act (PUITTA).  For financial reporting purposes, the Part VI.1 tax must
be allocated between income tax expense,  and preferred dividends as illustrated
in the following table:


<PAGE>


(In millions of dollars)                        1999             1998
- ----------------------------------------------- ---------------- -------------
Income Tax expense                              $ 7.3            $7.6
Preferred dividends                             ($2.0)           ($0.8)
- ----------------------------------------------- ---------------- -------------
Total tax cost                                  $5.3             $6.8

The  company  has filed  amended  income tax  returns  for  previous  years that
increase the tax depreciation  (capital cost allowance) available to be deducted
against the company's  future taxable  income.  Those returns were reassessed by
Revenue Canada to disallow the deductions  claimed.  The reassessments have been
objected to and the issue is expected to be litigated.

Liquidity and Capital Resources

- -------------------------------------------------------------------------

CASH FLOW HIGHLIGHTS
NSPI's operations  consistently generate substantial cash resources,  sufficient
to fund the utility's capital expenditure requirements, and still provide for an
increasing dividend.

During 1999,  NSPI's  operations  generated  $264.7 million,  compared to $198.1
million in 1998. This $66.6 million increase included $17.8 million of increased
earnings, and $6.4 million from increased Point Aconi amortization.  The balance
is primarily due to changes in working capital.

Net  capital  expenditures  were $118.9  million in 1999,  as compared to $131.2
million  in 1998.  Included  in the total is $13.6  million  related  to the gas
conversion  project at the Tufts Cove  generating  station;  $14.2  million  for
thermal plant reliability  enhancements;  $13.3 million in hydro projects;  Year
2000 com-pliance testing and upgrades of $2.5 million;  and routine distribution
system capital  replacement of  approximately  $33.0 million.  In the year, NSPI
also issued $180.0 million in mid-term notes, and raised $31.3 million through a
preferred  share  and  purchase  warrant  offering.  The  proceeds  were used to
refinance $158.4 million of maturing debt.

PREFERRED SHARES
In order to  capitalize  on favorable  interest  rates,  and reduce  refinancing
exposure on the  redemption  in September,  2000 of $200  million,  6%, Series A
Preferred Shares , new preferred  equity shares were issued in March,  1999. The
First  Preferred Share Units were issued at $6.25 each, and comprised one Series
B share,  and one Series C Purchase  Warrant.  Beginning in October,  2000, unit
holders can acquire one Series C share in exchange  for one Series B share,  one
purchase  warrant  and  $18.75.  Series C will have a dividend  rate of 4.9% and
matures October,  2009. $31.3 million was raised from the March issue, which was
applied

<PAGE>


M A N A G E M E N T  D I S C U S S I O N  A N D  A N A LY S I S

to reduce debt until the funds are required to finance the Series A  redemption.
If all warrants are exercised,  an additional  $93.7 million in preferred equity
will be raised, bringing the total from this issue to $125 million. Full details
of  the  First  Preferred  Shares  are  provided  in  Note  9 to  the  financial
statements.

COMMON EQUITY
The Utility and Review Board regulates NSPI's capital structure, limiting common
equity   (common  share   capital  and  retained   earnings)  to  35%  of  total
capitalization.  In 1999, NSPI reached that common equity limit.  The limit will
not  increase  unless there are  additions  to the asset base,  and since NSPI's
strategy is to service additional demand through enhanced capacity  utilization,
the company is not  anticipating  significant  new  investment in generating and
other assets.  This means that common equity,  which would  otherwise grow every
year with the addition of earnings  less  dividends,  must be  maintained at its
year-end  1999  level by paying out  earnings  in their  entirety  to the parent
company, NS Power Holdings Inc.

DEBT                                             Long-Term Debt Levels
                                                 ($ millions)
     Success in operations, and the resulting
cash flows enabled NSPI to reduce its debt by     ||      ||
5% in 1999, to $1,507.7 million from $1,595.8     ||  ||  ||  ||
million in 1998.                                  ||  ||  ||  ||  ||  ||  ||
                                                  ||  ||  ||  ||  ||  ||  ||
     The weighted-average coupon rate on          ||  ||  ||  ||  ||  ||  ||
NSPI's long-term debt outstanding at             ____________________________
December 31, 1999, was 7.58% (1998 - 7.99%).      93  94  95  96  97  98  99
This debt matures over the next 97 years as
shown in Note 10 to the financial statements.    1993 $1,710.1   1994 $1,553.0
The quoted market-weighted-average interest      1995  1,713.3   1996  1,468.2
rates for the same or similar issues of the      1997  1,308.1   1998  1,247.2
same remaining maturities was 7.16% as of        1999  1,268.6
December 31, 1999 (1998 - 6.27%).

     In 1999,  NSPI issued $180.0  million of medium-term  notes,  with interest
rates ranging from 5.20% to 5.65%,  maturing over seven to 10 years. These notes
were  issued  primarily  to replace  maturing  long-term  obligations  of $158.4
million, with a weighted-average interest rate of 8.44%.

    NSPI has  established the following  short-term  credit  facilities:
o $350  million  commercial  paper  program  secured  with a 100% backup line of
credit; and
o $150 million operating line of credit.

     The company has a shelf  prospectus  for the issue of $500  million of debt
securities  to the  public.  The  securities  may be  either  long-term  debt or
medium-term  notes, and are available as funds are required until the prospectus
expires in August 2001. These funds will be used to refinance  maturing debt and
to provide  financing for investment  opportunities.  At December 31, 1999, $450
million of the shelf prospectus remains available.

     Based on our available  credit and credit  ratings,  and past experience in
public  financing  since  privatization,  NSPI expects to have access to capital
when needed.

Accounts Receivable  Securitization - NSPI signed an agreement with the Canadian
Imperial  Bank  of  Commerce  in  March,  1997,  whereby  it can  sell  accounts
receivable and unbilled revenue to the bank on a revolving basis. As of December
31, 1999, the company had sold $81.4 million of accounts receivable and unbilled
revenue,  net of a $7.4  million  holdback  (1998  - $82.5  million  net of $7.5
million  holdback).  The net proceeds from the sale were used to repay a portion
of the company's debt,  thereby reducing net interest costs. The agreement is in
place until 2002.

Outlook

- --------------------------------------------------------------------------------

ELECTRIC SALES

Volume - Electric sales volume in 2000 is expected to increase  approximately 2%
over 1999 levels.

Residential  and  commercial  sales are  expected to  increase  with an expected
return to normal weather and continued  economic growth in Nova Scotia.  Weather
risk management  contracts have been purchased for the first and fourth quarters
of 2000  which  protect  approximately  90% of the  profit  margin  at risk from
unanticipated weather-related variations in residential and commercial demand.


<PAGE>


Industrial  sales are  expected  to increase  slightly in 2000,  with Stora Enso
maintaining  its  demand,  and  planned  expansions  by other  large  industrial
customers.  Other electric  revenue is projected to show a 4% increase over 1999
due to continued strong demand in export markets.

Pricing - As part of its  strategy to retain  industrial  market  share with the
arrival of natural gas to Nova Scotia,  NSPI is seeking  regulatory  approval to
implement  favourable "load retention" rates for certain  qualifying  industrial
customers.  If  approved,  the  company  anticipates  that this will result in a
marginal  reduction in  industrial  revenue in 2000,  while  maintaining a broad
customer base for system cost recovery.

In addition, NSPI has applied to the UARB to implement an enhanced "time-of-use"
rate structure, which, if applied, would provide the company's customers with an
additional   tool  for  energy  cost   management,   and  improve  our  capacity
utilization.

The combined effect of the proposed load retention and time-of-use  rate changes
is estimated to reduce annual revenues by approximately 2%.

FUEL

Fuel and purchased power costs in 2000 are expected to increase  marginally over
1999, to support increased  generation to meet anticipated higher sales volumes.
This  increase  in  generation-related  fuel costs will be largely  offset by an
anticipated  reduction in coal prices.  Coal is expected to make up the majority
of 2000 generation, at 80%, with oil/gas comprising 11% and hydro at 9%.

In  2000,  the  majority  of  NSPI's  fuel  supply  is  expected  to  come  from
international  suppliers, and is subject to commodity price and foreign exchange
risk. As part of its  Enterprise  Risk  Management  (ERM)  program,  the company
manages commodity pricing risk through fixed price contracts and swap and option
contracts; forward contracts are used to manage the exposure to fluctuating U.S.
dollar exchange rates.  Additional  details on the company's ERM are included in
the Business Risks and Enterprise Risk Management section.

CBDC's  Prince  Colliery  in Cape  Breton  is  expected  to  supply  much of the
company's remaining coal requirements for 2000. The company's long-term contract
with CBDC provides for  renegotiation  of both prices and minimum  quantities at
periodic intervals.  NSPI is now negotiating price and quantity details to cover
the time period until the Government of Canada completes the sale of CBDC.

In the fall of 2000,  NSPI  will  complete  the  conversion  of its  Tufts  Cove
generating  station to allow that plant to burn natural gas in addition to heavy
fuel oil. The  completion  coincides  with the expected  in-service  date of the
Halifax lateral of the Maritimes & Northeast Pipeline, which will deliver gas to
the plant. The company has entered into a long-term  contract for gas supply for
the plant, which fixes the price for a substantial portion of the gas volumes.

OPERATING, MAINTENANCE AND GENERAL EXPENSES

Operating, maintenance and general expenses are expected to increase in 2000 due
primarily  to  increased  pension  expense  due  to  earlier  expense  recording
following adoption of new accounting standards as outlined below:

o Liability  for pension  benefits  payable upon  retirement  must be accrued as
earned over the service lives of the  employees.  Effective in 2000,  there is a
new  requirement  to  include  non-pension  post-retirement  benefits,  (such as
retirement  awards  and health  benefits  payable to  retirees)  in the  accrual
instead of accounting for the benefits on a pay-as-you-go basis. This difference
in accounting treatment will increase the company's current benefit expense.

o In 1999,  the discount rate used to calculate the liability  accrual was based
on management's  best estimate of the pension plan's long-term rate of return on
its pension fund assets.  Beginning in 2000, the company must use a market-based
discount rate which will be based on high quality bond yields.  The market-based
discount rate is lower than  management's  best  estimate of the pension  fund's
long-term  rate of  return.  The  use of a lower  discount  rate  results  in an
increase in the present value of the pension  liabilities and an increase in the
company's current annual pension expense.

o There is a one-time  transitional  liability of  approximately  $50.0 million,
which is intended to reflect  what the deferred  pension  amount would have been
had the new rules always been in effect. The transitional  amount is required to
be written off over the expected  average  service  life of the employee  group.
However,  in a regulated entity, it is important that past costs not be borne by
future ratepayers.  Accordingly,  NSPI has applied to the UARB for permission to
accelerate the write-off of the transitional amount.


<PAGE>


M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

Partially  offsetting this increase will be reduced  amortization costs of early
retirement incentive programs, and the cessation of Year 2000 remediation costs.

GRANTS IN LIEU OF PROPERTY TAXES
In accordance with the annual escalation in provincial grants, grants in lieu is
expected to increase by  approximately  $2.0 million,  in 2000, to approximately
$11.0 million.

INTEREST

Interest  expense in 2000 is  anticipated  to be  consistent  with 1999  levels,
reflecting the company's mature capital structure.

NET EARNINGS

The cessation of Point Aconi amortization, and the anticipated reduction in unit
fuel costs  achieved  through  increased use of imported coal have a significant
positive impact on net earnings beginning in 2000. NSPI is working with the UARB
to implement a strategy that would share this benefit with customers  through an
enhanced   "time-of-use"  price.  The  balance  will  be  preserved  through  an
accelerated  write-off  of  the  transitional  pension  costs.  In  addition  to
providing  effective rate reduction through time-of-use  pricing,  this strategy
would support continued price stability, further enhancing customer value.

CAPITAL EXPENDITURES

NSPI expects capital  expenditures to be  approximately  $113.0 million in 2000,
including  $10.0 million to complete the Tufts Cove gas  conversion.  Other 2000
capital program spending will be directed at maintaining the electric generation
infrastructure,  hydro  safety and  information  technology  to  support  system
reliability and enhance customer service.  Expenditures will be financed by cash
flow from the company's operations.

Regulation

Nova Scotia  Power Inc. is a public  utility as defined in the Public  Utilities
Act (Nova Scotia) and is subject to regulation  under the Act by the Utility and
Review  Board  (UARB).  The Act gives the UARB  supervisory  powers  over NSPI's
operations  and  expenditures.  Electricity  rates for NSPI  customers  are also
subject to UARB  approval.  The UARB also regulates  NSPI's  capital  structure,
limiting  common equity  (common share capital and retained  earnings) to 35% of
total  capitalization.  The  company is not  subjected  to an annual rate review
process,  but rather participates in hearings from time-to-time at the company's
or the regulator's request.

Enercom Inc.

Overview

     Enercom Inc. is the NSH  subsidiary  leading the  corporation's  pursuit of
growth and  diversification  outside  of the core  electric  utility.  Enercom's
growth strategy focuses on leveraging  corporate assets,  including  operational
expertise  and  solid  customer  relationships,   into  complementary  lines  of
business,  and bundled  product  offerings.  Enercom intends to build success in
local markets, which can then be replicated elsewhere.

     Enercom has expanded  NSH's energy  product  line  through  acquisition  of
independent fuel distribution businesses, which accounted for 59% of its revenue
in 1999.  Industrial cabling operations  comprised another 27% of revenue,  with
the  remaining  14% derived from an array of smaller  product and service  lines
that have since been discontinued in keeping with the company's refined focus.

     Building on the corporation's superior operational expertise gained in Nova
Scotia,  Enercom is  investigating  opportunities  for  electrical  distribution
outside the province, in recently restructured marketplaces.

     Fundamental  to the  successful  execution  of  Enercom's  strategy  is the
company's  ability to  leverage  customer  relationships  to expand its share of
customer  spending,  and to  realize  operational  synergies  in  areas  such as
service, call centers,  billing systems, and buying power, to enhance both gross
and net margins.

     Expansion  into  non-regulated  businesses  increases  the overall NSH risk
profile modestly.  Accordingly,  additional investments are expected to generate
returns higher than those of the regulated entity.

Review of 1999

     Revenues  increased  70%, to $29.0  million in 1999,  from $17.1 million in
1998. This growth was largely driven by the  acquisition of several  independent
fuel distribution  businesses in Nova Scotia. As a result,  Enercom will deliver
approximately 100 million litres of fuel annually to 11,000 customers throughout
the province.  Furnace fuel  comprises  the majority of sales.  The product line
also  includes  heavy fuel oil,  diesel,  lubricants  and related  products  and
services such as furnaces and  maintenance.  1999 earnings  before  interest and
taxes of $1.0 million  reflect the fact that the fuel  businesses  were acquired
after the  winter-heating  season, as well as significant  business  development
spending appropriate for a company in the early stages of a growth mandate.

     In  1999,   Enercom   invested  $11.5  million  in  its   business-building
activities.  These investments were substantially  financed with a $10.3 million
debenture from NSH,  bearing  interest at prime plus 0.5%.  Cash from operations
was affected by increased  investments in accounts receivable and inventories as
a result of the company's entry into the fuel distribution  business.  In total,
Enercom's operating, financing and investing activities absorbed $1.3 million in
cash in 1999.

Outlook

     Enercom  anticipates  building  its energy  business  in Nova  Scotia,  and
beyond,   through  acquisition  over  the  next  three  years.   Continuing  its
disciplined  approach to growth,  Enercom will  concentrate on  opportunities of
sufficient scale, that provide appropriate  returns.  Further investment will be
funded with free cash flow from the parent  company,  NSH. In addition,  Enercom
will focus on  realizing  operational  synergies in its  complementary  lines of
business.

M a r i t i m e s & N o r t h e a s t P i p e l i n e

Overview

     NS  Power  Holdings  Inc.  owns a  12.5%  interest  in the  1000  kilometre
Maritimes & Northeast  Pipeline (M&NP),  which  transports  natural gas from the
Sable Offshore Energy Project,  to markets in Nova Scotia, New Brunswick and the
Northeastern United States. The investment provides an excellent  opportunity to
pursue growth and  diversification in the energy industry,  while maintaining an
appropriate  risk profile.  The other owners of M&NP are Duke Energy,  Westcoast
Energy and Exxon Mobil.

     The M&NP has an estimated in-service cost of $2.0 billion, including $215.0
million  for the  Halifax,  Point  Tupper and Saint John  laterals.  NSH's total
equity investment to date is $54.7 million.  The M&NP, which is regulated by the
National  Energy  Board  (NEB)  in  Canada  and the  Federal  Energy  Regulatory
Commission  (FERC)  in the  U.S.,  has an  overall  allowed  rate of  return  of
approximately 13.5%. The investment is accounted for on the equity basis.

Review of 1999
M&NP came into service at the end of 1999, with the successful completion of the
mainline  from Nova  Scotia to  Massachusetts.  The Point  Tupper,  Nova  Scotia
lateral was also completed.

     Due to the regulated  nature of the pipeline,  M&NP is entitled to a return
on its  investment  as  funds  are  advanced  during  the  construction  period.
Accordingly, in 1999, M&NP contributed $6.3 million of equity earnings to NSH.

M A N A G E M E N T D I S C U S S I O N A N D A N A LY S I S

     In 1999, $24.2 million was invested as an additional  equity  contribution.
The investment in the pipeline is currently  being financed  through an NSH line
of credit bearing interest at prime plus 0.5%.

Outlook
Laterals to Halifax, Nova Scotia and Saint John, New Brunswick are planned to be
in service by late 2000. Projected levels of demand indicate that M&NP will earn
an annual return toward the top of its allowed range of approximately 13.5%.

H o l d i n g s C o r p o r a t e

Overview and Review of 1999

The  unconsolidated  NSH entity,  referred to herein as Holdings,  serves as the
financing  vehicle  for  the  corporation's  business  outside  of the  electric
utility.  In  addition,  certain  corporate  functions  are  carried  out within
Holdings,  including strategic planning, and investigation of potential business
opportunities  beyond the scope of Enercom.  These costs, and interest  expenses
related to its financing  activities  noted above, had a combined impact of $2.2
million on consolidated net earnings.  In addition,  in 1999,  Holdings expensed
$2.9 million of deferred  costs  related to one of two  geographically  distinct
coal  bed  methane  projects,   because  of  concerns   regarding  the  economic
feasibility  of  developing  a market for  production  from this site.  Holdings
revenue   consists  of   intercorporate   interest,   which  is   eliminated  on
consolidation,  and therefore has no impact on net earnings.  Holdings cash flow
is sustained by its earnings from NSPI and M&NP.

DEBT MANAGEMENT

NSH increased its debt by $76.0 million in 1999, to finance its own  activities,
and those of its subsidiaries and investments.  $51.0 million is invested in the
Maritimes & Northeast Pipeline, and $15.0 million provided to Enercom.

     NSH has established a $150 million operating line of credit.

DIVIDEND POLICY AND PAYOUT RATIOS

For 1999, NS Power Holdings'  common dividend rate increased to $0.83 per common
share.  Higher  earnings  improved the payout ratio to 72%, from 83% in 1998. In
January  2000,  the Board of  Directors  declared  an increase in the 2000 first
quarter common share dividend from $0.2075 to $0.21 per share.  Earnings  growth
is anticipated to exceed  dividend  growth over the next several years resulting
in a continuing improvement in the dividend payout ratio.

Business Risks and Enterprise Risk Management

Risk Management at NS Power Holdings Inc.

NS Power  Holdings Inc.  understands  the risks  inherent in its business and is
taking a disciplined and comprehensive approach to risk management.  NSH defines
risk  broadly,  as  anything  which  could  impact its  ability  to achieve  its
strategic objectives.  The company's  sophisticated  approach to risk management
ensures  the  consolidated  risk  portfolio  is  dynamically  managed  and  that
management decisions are optimized within a predefined level of risk tolerance.

   All  significant  risk  management  activities  for NSH are  monitored by the
Executive Risk Management  Committee to ensure the resulting  exposure is within
predefined  tolerance  levels.  The Board of Directors  will  receive  quarterly
reports from the Committee  and must approve the strategic  direction and annual
risk management program parameters prior to implementation.

Financial Risks

NSH's risk management objective is to ensure predictable and stable earnings and
cash flow from the  company's  core  electric  business.  Achieving  the maximum
allowable  return on equity in NSPI will  provide  cash flow for  investment  in
growth  opportunities,  support price stability for customers,  and solidify the
dividend to shareholders.  Accordingly, the company's risk management activities
have been focussed on those areas which most significantly  impact profitability
and quality of earnings.  These risks include,  but are not limited to, exposure
to commodity  prices,  foreign  exchange,  interest  rates and weather,  and are
discussed below.

Commodity Prices

In the past,  NSH's  exposure to  commodity  price risk has been  limited,  with
approximately  85% of fuel  requirements  supplied by CBDC and other  indigenous
coal  suppliers  under  long-term,  fixed-price  contracts.  With the closure of
CBDC's Phalen Colliery and addition of natural gas as a fuel source, exposure to
commodity price risk has increased.  Approximately  60% of the company's  annual
fuel requirement for 2000 is subject to fluctuations in commodity market prices.

COAL
With the restructuring of the coal industry in Cape Breton,  the majority of the
company's  coal  supply will come from  international  suppliers  at  prevailing
market prices. To ensure  reliability of both fuel supply and price, the company
has  entered  into  fixed-price  contractual   arrangements  with  several  coal
suppliers.  Approximately 70% of anticipated  import  requirements for 2000 have
been fixed. Physical contracts are used to hedge coal price risk due to the lack
of liquidity in the financial markets for coal.

HEAVY FUEL OIL
Heavy  fuel  oil  will  meet  approximately  10%  of  the  company's  2000  fuel
requirements.  NSH manages exposure to changes in the market price of heavy fuel
oil through the use of swap and option  contracts.  As of December 31, 1999, the
price for approximately 88% of the anticipated heavy fuel oil purchases for 2000
was set at an average of $US12.56 per barrel.

NATURAL GAS
Beginning  in late 2000,  NSH  expects to consume  natural gas at its Tufts Cove
Generating Station. The company has entered into a ten-year contract to purchase
62 million  cubic feet of natural  gas per day from Shell  Canada  Limited.  The
contract  fixes the price for a  substantial  portion  of the gas  volumes;  the
balance is  exposed  to market  price  fluctuations,  and will be managed  using
financial instruments.

FUEL MIX
The risk inherent in the Canadian dollar cost of fuel is measured and managed on
a portfolio  basis.  The ability to fuel switch provides a dynamic,  operational
and very  effective  option in  managing  commodity  price and  supply  risk and
capitalizing on opportunities for revenue growth.

Foreign Exchange

In 2000, the company expects  approximately 60% of its anticipated fuel costs to
be  denominated in US dollars.  Forward and option  contracts are used to manage
the exposure to fluctuating $US exchange rates.  Foreign exchange  contracts are
in place for all of 2000's  anticipated  $US fuel  costs.  $US income from NSH's
12.5%  interest in the  Maritimes & Northeast  Pipeline  will  provide a natural
hedge against a portion of $US denominated fuel costs.

Weather

Warm winters can have a negative  impact on earnings.  Electricity  and fuel oil
sales to  residential  and  commercial  customers for space  heating  during the
winter months  contribute  significantly to the company's  annual  earnings.  In
1999, the company piloted the use of financial  instruments to protect  earnings
in the event of warmer-than-normal winter temperatures. As a result, the company
realized  proceeds of $2.7  million,  which  mitigated the effect of 1999's warm
weather on earnings.  A similar  instrument  has been  purchased for 2000.  This
simple   option   contract  will   protect,   after  a  reasonable   deductible,
approximately 90% of the lost space heating margin from unanticipated variations
caused by warmer-than-normal winter temperatures.

Interest Rates

NSH manages  interest  rate risk  through a  combination  of fixed and  floating
borrowing and a hedging  program.  Floating-rate  debt is estimated to represent
approximately  16% of total debt in 2000.  Interest rate caps are used to insure
against extreme movements in interest rates on floating debt. In 2000,  interest
on approximately 67% of the company's anticipated floating debt is limited to an
average rate of 6.6%.

    Interest  rate  collars  are used to hedge  reinvestment  risk on  long-term
fixed-rate  debt.  Fixed-rate  debt  maturities  are limited in any one year and
continually monitored to reduce rollover exposure.

Counterparty Risk

NSH reduces its exposure to financial  counterparty default by dealing only with
counterparties  who  have a  credit  rating  of A or  better  and by  allocating
derivative positions to several counterparties.

Strategic Risks

NSH's  comprehensive  risk  management  program  also  includes  risks  having a
long-term  impact  on the  company's  competitiveness.  These  risks  have  been
identified, assessed and are being managed through the design and implementation
of the company's strategic plan.

Deregulation of the Electricity Industry

    Deregulation of the electric industry in Nova Scotia is not on the immediate
horizon,  but in all likelihood will eventually occur. When electric competition
arrives,  the province's  geographic  location,  the limits of  intra-provincial
transmission  links, and the diversity of the company's  customer base will help
to reduce the impact on NSPI. In addition, the company is committed to enhancing
its strong competitive and financial position by:

o maintaining rate stability;
o working with  customers to help them reduce  energy costs  further,  including
providing them with greater access to time-of-use pricing;
o continuously improving customer service;
o  managing  costs  through  enhanced  capacity  management,  reduced  fuel  and
operating costs and efficient capital investment; and
o ensuring that employees are prepared and committed to carry out its strategy.

   The  ability to lever  existing  customer  relationships  into  complementary
energy  and  services  businesses,  and to invest  cash flow in  quality  growth
opportunities is integral to the company's  strategy and its future success in a
competitive marketplace.

Introduction of Natural Gas

   Natural gas will be available in Nova Scotia in 2000. Provincial distribution
rights have been awarded,  and the  completion of the Halifax  lateral,  late in
2000, will provide  customers in the most densely populated area of the province
with the option of using natural gas for heating and other uses.

   In 1998, after much consideration,  the company elected not to pursue natural
gas distribution rights.  A clear benefit gained  from the  research  associated
with  the project was  an enhanced understanding of the  impact natural gas will
have in the province.

   The major  residential  use  expected  for natural gas is for space  heating,
which  makes up less  than 20% of NSPI's  total  electrical  load.  The costs to
convert from electric heat are  significant.  Accordingly,  natural gas may have
little  appeal for  existing  homes,  but be more  popular in new  construction.
NSPI's ongoing success in maintaining rate stability, and its efforts to provide
customers  with options for managing  their  energy  needs,  with such things as
electric  thermal  storage  units  which  allow  customers  to store heat during
non-peak hours, will position the company to manage natural gas competition when
it arrives.

   The  relative  price of natural gas versus  furnace oil is a critical  factor
customers  will consider when choosing  between these two fuel sources.  Current
and forward prices for both commodities suggest the costs to convert from oil to
natural gas may outweigh  price savings for many years,  reducing the likelihood
that existing  customers will make the switch.  Enercom's customer service staff
are working  with our fuel oil  customers to help them  understand  their energy
needs and how best to manage them, to ensure that furnace oil continues to be an
attractive fuel source.

    NSPI has applied to its  regulator  for  permission to introduce a favorable
"load retention" rate - aimed at those industrial  customers who are considering
self generation using  alternative fuel sources.  NSPI is of the opinion that if
this rate is  approved,  electrical  pricing  to  industrial  customers  will be
competitive with alternative fuel sources.

Environmental Considerations

NS Power  Holdings is committed to conducting  its business in a manner which is
respectful  and  protective  of  the   environment,   and  which  complies  with
environmental laws and regulations.  Environmental  management systems have been
established  to  maintain  and  enhance  environmental  performance  and  verify
compliance with all significant  aspects of current  environmental  regulations.
Details of the company's  environmental  programs can be found on its website at
www.nspower.ca.

ISO 14001

By the  end  of  1999,  the  company  had  processes  and  procedures  in  place
substantially  equivalent to the ISO 14001  standard.  This  voluntary  standard
provides a framework for the  implementation  and  maintenance of  environmental
policy throughout the company.

GREENHOUSE GAS EMISSIONS

In 1995,  Canada  established a National  Action Program on Climate  Change.  In
1998,  Canada  signed  the Kyoto  Protocol,  which  commits  to a  reduction  in
greenhouse gas (GHG) emissions.  The Protocol, which awaits ratification by most
countries,  including Canada,  requires Canada to reduce its GHG emissions by 6%
from 1990 levels during the period 2008 - 2012. While the specific  requirements
associated with, and potential impact of these initiatives will not be known for
some time,  they will influence the company's  choice of fuel and the technology
that will replace or improve generating facilities as they age.

   This is an important issue for NSH as 90% of the company's  generation  comes
from CO2-emitting fossil fuels. Throughout 1999, NSH has been a full participant
in both the federal and provincial  processes  aimed at developing  Canada's and
Nova Scotia's  strategies for reducing  emissions of greenhouse  gases. One such
program is the  Voluntary  Challenge  and Registry  program.  NSH supports  this
program and has offered a number of  initiatives  to reduce  emissions  of GHGs.
With success of these  initiatives,  the emission  rate of GHG per unit of power
sold is projected to decrease from 0.791 kg/kWh in 1990 to 0.66 kg/kWh in 2008.

SULPHUR DIOXIDE

The Air Quality  Regulations  under the Nova Scotia  Environment  Act  currently
limit  NSPI's  emission  of sulphur  dioxide to a maximum of 145,000  tonnes per
year. Further reductions from this limit are expected as a result of two ongoing
initiatives:  The Canadian Post-2000 Acid Rain Strategy and the Acid Rain Action
Plan of the Conference of New England  Governors and Eastern Canadian  Premiers.
The company continues to reduce sulphur dioxide emissions.  The plan has, as its
cornerstone,  the circulating  fluidized bed combustion  technology at the Point
Aconi  generating  station.  Compared to a conventional  pulverized  coal plant,
Point Aconi is designed to achieve a 90% reduction in sulphur dioxide  emissions
as well as a 65% to 75% reduction in nitrogen  oxide  emissions.  In addition to
reductions  achieved at Point Aconi, lower sulphur coal is an increasing part of
the fuel mix throughout the system.  Finally, as part of the company's long-term
strategy to reduce sulphur dioxide emissions, the Tufts Cove generating station,
which now burns oil, will be converted by Fall 2000 to enable it to burn cleaner
natural gas as well. In 1999,  sulphur dioxide  emissions were 141,644 tonnes, a
decrease from 143,546 tonnes in 1998.

<PAGE>


F I N A N C I A L I N F O R M A T I O N

Management Report

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The  accompanying  consolidated  financial  statements of NS Power Holdings Inc.
(NSH) and the  information  in this  annual  report  are the  responsibility  of
management and have been approved by the Board of Directors (Board).

The  consolidated  financial  statements  have been  prepared by  management  in
accordance  with generally  accepted  accounting  principles.  When  alternative
accounting methods exist,  management has chosen those it deems most appropriate
in the  circumstances.  Nova Scotia Power Inc. (NSPI),  NS Power Holdings Inc.'s
electric  utility and  principal  subsidiary,  is  regulated  by the Nova Scotia
Utility and Review  Board,  which also examines and approves  NSPI's  accounting
policies and  practices.  In  preparation  of these  statements,  estimates  are
sometimes  necessary when transactions  affecting the current  accounting period
cannot be finalized with certainty  until future  periods.  Management  believes
that such  estimates,  which have been  properly  reflected in the  accompanying
consolidated  financial  statements,  are based on  careful  judgements  and are
within reasonable limits of materiality.  Management has determined such amounts
on a  reasonable  basis in  order to  ensure  that  the  consolidated  financial
statements  are  presented  fairly  in all  material  respects.  Management  has
prepared the financial  information presented elsewhere in the annual report and
has  ensured  that it is  consistent  with  that in the  consolidated  financial
statements.

NSH maintains systems of internal accounting and administrative controls of high
quality,  consistent with reasonable  cost. Such systems are designed to provide
reasonable  assurance that the financial  information is relevant,  reliable and
accurate and that NSH's assets are  appropriately  accounted for and  adequately
safeguarded.

The  Board  is   responsible   for  ensuring   that   management   fulfills  its
responsibilities  for  financial  reporting and is  ultimately  responsible  for
reviewing and approving the consolidated financial statements. The Board carries
out this responsibility principally through its Audit Committee.

The Audit Committee is appointed by the Board, and its members are directors who
are not  officers or  employees of NS Power  Holdings  Inc. The Audit  Committee
meets  periodically  with management,  as well as with the internal auditors and
with the external  auditors,  to discuss  internal  controls  over the financial
reporting process,  auditing matters and financial  reporting issues, to satisfy
itself  that each party is properly  discharging  its  responsibilities,  and to
review the annual report, the consolidated financial statements and the external
auditors'  report.  The Audit  Committee  reports its  findings to the Board for
consideration when approving the consolidated  financial statements for issuance
to the shareholders. The Audit Committee also considers, for review by the Board
and approval by the shareholders,  the appointment of the external auditors. The
consolidated  financial  statements  have been audited by Ernst & Young LLP, the
external  auditors,  in accordance with generally accepted auditing standards on
behalf of the  shareholders.  Ernst & Young LLP has full and free  access to the
Audit Committee.

February 1, 2000

David Mann President and Chief Executive Officer (signed)
Jay Forbes, CA Senior Vice President and Chief Financial Officer (signed)

<PAGE>


A u d i t o r s ' R e p o r t

TO  THE  SHAREHOLDERS  OF  NS  POWER  HOLDINGS  INC.

We have audited the consolidated  balance sheets of NS Power Holdings Inc. as at
December  31,  1999 and  1998,  and the  consolidated  statements  of  earnings,
retained  earnings and changes in cash position for the years then ended.  These
financial  statements are the  responsibility of the company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

   We conducted  our audits in  accordance  with  auditing  standards  generally
accepted in Canada. Those standards require that we plan and perform an audit to
obtain  reasonable  assurance  whether  the  financial  statements  are  free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.

    In our opinion,  these consolidated  financial statements present fairly, in
all material respects,  the financial position of the company as at December 31,
1999 and 1998 and the  results  of its  operations  and the  changes in its cash
flows  for the  years  then  ended  in  accordance  with  accounting  principles
generally accepted in Canada.

Halifax, Canada
February 1, 2000

Ernst & Young LLP Chartered Accountants (signed)






<PAGE>


<TABLE>
<CAPTION>
Consolidated statement of earnings
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31 (millions of dollars, except earnings per common share)                         1999            1998
- ------------------------------------------------------------------------------------------------------ --------------- -------------
<S>                                                                                                    <C>            <C>
Revenue
    Electric (note 1c)                                                                                         $790.2         $750.8
    Other                                                                                                        34.4           22.3
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                824.6          773.1

- ------------------------------------------------------------------------------------------------------ --------------- -------------
Cost of operations
  Fuel for generation and power purchased                                                                       267.5          257.3
  Cost of goods sold                                                                                             23.3           14.0
  Operating, maintenance and general                                                                            155.5          142.5
  Grants in lieu of property taxes                                                                                8.9            5.5
  Provincial capital tax (note 4)                                                                                 7.0            6.7
  Depreciation                                                                                                   94.8           91.3
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                557.0          517.3

- ------------------------------------------------------------------------------------------------------ --------------- -------------
Earnings from operations                                                                                        267.6          255.8
Equity earnings in Maritimes & Northeast Pipeline                                                                 6.3              -
Amortization of Point Aconi expenses (notes 1d and 7)                                                          (23.1)         (16.7)
Allowance for funds used during construction (note 1e)                                                            4.8            3.8
- ------------------------------------------------------------------------------------------------------ --------------- -------------

Earnings before interest and taxes                                                                              255.6          242.9
Interest (note 3)                                                                                               136.5          132.7
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Earnings before taxes                                                                                           119.1          110.2
Large corporations tax (note 4)                                                                                   6.1            5.9
Income tax - current (note 4)                                                                                     7.5            7.7
Income tax - deferred (note 4)                                                                                  (6.2)              -
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Net earnings before minority interest                                                                           111.7           96.6
Minority interest (notes 1a and 4)                                                                               11.3           11.2
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Net earnings applicable to common shares                                                                       $100.4          $85.4

- ------------------------------------------------------------------------------------------------------ --------------- -------------
Earnings per common share                                                                                       $1.16           $.99
- ------------------------------------------------------------------------------------------------------ --------------- -------------

See accompanying notes to the financial statements.

- ------------------------------------------------------------------------------------------------------ --------------- -------------
consolidated statement of retained earnings

- ------------------------------------------------------------------------------------------------------ --------------- -------------
Year Ended December 31 (millions of dollars)                                                           1999            1998
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Retained earnings at beginning of year                                                                         $238.7         $224.4
Reorganization costs (note 1a)                                                                                  (1.1)              -
Net earnings applicable to common shares                                                                        100.4           85.4
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                338.0          309.8
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Dividends

Common                                                                                                           72.2           71.1
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Retained earnings at end of year                                                                               $265.8         $238.7
- ------------------------------------------------------------------------------------------------------ --------------- -------------
</TABLE>
See accompanying notes to the financial statements.


<PAGE>

<TABLE>
<CAPTION>

Consolidated balance sheet
- ------------------------------------------------------------------------------------------------------ --------------- -------------
As at December 31 (millions of dollars)                                                                          1999           1998
- ------------------------------------------------------------------------------------------------------ --------------- -------------
<S>                                                                                                   <C>             <C>
Assets
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Property, plant and equipment (notes 1f and 5)                                                               $2,315.0       $2,298.4
Construction work in progress                                                                                    47.3           30.5
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                              2,362.3        2,333.9
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Investment in Maritimes & Northeast Pipeline (note 1n)                                                           54.7           30.5
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Other assets
    Deferred charges (note 7)                                                                                   319.5          361.4
    Deferred income tax (note 4)                                                                                  6.2              -
    Goodwill (note 1o)                                                                                            6.8              -
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                332.5          361.4
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Current assets
    Cash                                                                                                          2.7            0.1
    Accounts receivable (note 6)                                                                                 35.6           24.0
    Unbilled revenue (notes 1c and 6)                                                                            30.4           25.6
    Inventory (note 1h)                                                                                          82.4           58.6
    Income taxes recoverable (note 4)                                                                             0.6              -
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                151.7          108.3
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                             $2,901.2       $2,834.1

- ------------------------------------------------------------------------------------------------------ --------------- -------------
Shareholders' Equity and Liabilities                                                                             1999           1998
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Shareholders' equity
     Common
         Shares (note 8)                                                                                       $676.5         $672.5
         Retained earnings                                                                                      265.8          238.7
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Minority interest (note 9)                                                                                      942.3          911.2
                                                                                                                231.3          200.0
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                              1,173.6        1,111.2
- ------------------------------------------------------------------------------------------------------ --------------- -------------

Long-term debt (note 10)                                                                                      1,260.7        1,083.7
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Deferred credits                                                                                                  2.2            2.2
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Current liabilities

- ------------------------------------------------------------------------------------------------------ --------------- -------------
    Debt due within one year (note 11)                                                                          328.3          517.4
    Accounts payable and accrued charges                                                                        105.8           87.3
    Dividends payable                                                                                             3.4            3.0
    Income taxes payable (note 1g)                                                                                  -            1.0
    Accrued interest on long-term debt                                                                           27.2           28.3
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                                464.7          637.0
- ------------------------------------------------------------------------------------------------------ --------------- -------------
                                                                                                              2,901.2        2,834.1
- ------------------------------------------------------------------------------------------------------ --------------- -------------
</TABLE>

Commitments and contingencies (note 14)
See accompanying notes to the financial statements


APPROVED ON  BEHALF OF THE BOARD OF DIRECTORS

(signed)                   (signed)
Derek Oland                 David Mann
Chairman                   President and Chief Executive Officer


<TABLE>
<CAPTION>
Consolidated statement of changes in cash position
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Year Ended December 31 (millions of dollars)                                                                   1999           1998
- ------------------------------------------------------------------------------------------------------ --------------- -------------
<S>                                                                                                   <C>             <C>
Operating activities
Net earnings before minority interest                                                                          $111.7          $96.6
Non-cash items:
   Depreciation                                                                                                  94.8           91.3
   Amortization of deferred charges                                                                              24.0           25.6
   Amortization of Point Aconi expenses                                                                          23.1           16.7
   Equity earnings in Maritimes & Northeast Pipeline (note 1n)                                                  (6.3)              -
Change in operating working capital                                                                            (23.6)          (2.2)
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Net cash provided by operating activities                                                                       223.7          228.0
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Financing activities

(Repayment of) increase in short-term debt                                                                     (33.6)           28.1
Proceeds from issue of common shares, net                                                                         4.0            4.9
Increase in minority interest                                                                                    31.3              -
Proceeds from long-term debt, net                                                                               180.0          140.0
Repayment of long-term debt                                                                                   (158.4)        (200.9)
Net changes in matching notes receivable (sinking funds)                                                            -           47.7
Other financing activities, net                                                                                (30.5)         (14.7)
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Net cash (used in) provided by financing activities                                                             (7.2)            5.1
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Investing activities:
Property, plant and equipment, net                                                                            (112.0)        (114.2)
Construction work in progress, net                                                                             (11.8)         (17.9)
Investment in Maritimes & Northeast Pipeline                                                                   (17.9)         (30.5)
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Net cash used in investing activities                                                                         (141.7)        (162.6)
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Dividends:
Common shares                                                                                                  (72.2)         (71.1)
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Increase (decrease) in cash position                                                                              2.6          (0.6)
Cash position at beginning of year                                                                               $0.1           $0.7
- ------------------------------------------------------------------------------------------------------ --------------- -------------
Cash position at end of year                                                                                     $2.7           $0.1
- ------------------------------------------------------------------------------------------------------ --------------- -------------
</TABLE>

See accompanying notes to the financial statements.


<PAGE>


Notes to the Consolidated Financial Statements

December 31, 1999

NS Power Holdings (NSH or the company),  through its principal subsidiary,  Nova
Scotia  Power Inc.  (NSPI),  is engaged in the  production  and sale of electric
energy,  which is regulated by the Nova Scotia  Utility and Review Board (UARB).
NSH follows generally accepted accounting  principles (GAAP).  NSPI's accounting
policies are in accordance with GAAP and are subject to examination and approval
by the UARB  and are  similar  to those  being  used by other  companies  in the
electric utility industry.

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.  Reorganization  Effective  January 1, 1999, the common  shareholders of NSPI
exchanged  their common shares for common shares of NS Power  Holdings Inc. on a
one-for-one  basis.  NSPI became a subsidiary of NSH. The NSH common shares have
substantially  the same rights,  privileges,  restrictions and conditions as the
NSPI common shares.  NSPI's existing  preferred  shares are recorded as minority
interest in NSH.  Reorganization  costs of $1.1 million were charged to retained
earnings.

b. Consolidation The consolidated  financial  statements include the accounts of
the company and its wholly-owned  subsidiaries  NSPI, Enercom Inc., NSP Pipeline
Inc.,  NSP U.S.  Holdings  Inc.,  Strait Energy Inc., NS Power Services Inc. and
Stellarton Basin Coal Gas Inc. (SBCGI).

c. Revenue  Recognition  Revenues are  recognized  on the accrual  basis,  which
includes an estimate of the value of  electricity  consumed by  customers in the
year but billed subsequent to year-end.

d.  Amortization  of Point Aconi  Expenses  The Point Aconi  generating  station
became  operational in March 1994. To enhance rate stability,  the UARB approved
NSPI's  request  to defer a portion of the  depreciation  and  interest  expense
pertaining to Point Aconi, together with an imputed cost-of-capital charge, at a
rate of 50% in 1994 and 33 1/3% in 1995.  An amount  representing  the  interest
cost of carrying  the  previously  deferred  balance was  deferred in 1996.  The
deferred  amount was  amortized to earnings  annually  from 1997  through  1999.
Amortization is now complete.

e.  Allowance  for Funds Used During  Construction  For the  regulated  electric
business  carried on by NSPI,  the company  provides  for the cost of  financing
construction  work in progress by including  an allowance  for funds used during
construction  as an  addition  to the  cost  of  property  constructed,  using a
weighted average  cost-of-capital.  This allowance will be charged to operations
through  depreciation  over the service life of the related assets and recovered
through future revenues.

f. Property,  Plant and Equipment Property,  plant and equipment are recorded at
original cost net of  contributions  in aid of  construction.  Expenditures  for
additions,   replacements  and  improvements,   which  comprise  direct  labour,
material,  engineering,  and related  overhead costs,  are  capitalized  whereas
repairs and  maintenance  are charged to operations.  When  property,  plant and
equipment  are  replaced or retired,  the original  cost plus any removal  costs
incurred, (net of salvage), are charged to accumulated depreciation.

     Depreciation  is  determined  by the  straight-line  method,  based  on the
estimated  remaining service lives of the depreciable assets in a category.  The
estimated  average  service lives and average  depreciation  rates for the major
categories of plant in service are summarized as follows:

<TABLE>
<CAPTION>
Functions                                         Average Service Life in Years          Average Depreciation Rate
- ------------------------------------------------- -------------------------------------- -----------------------------------
<S>                                              <C>                                     <C>
Generation:  Thermal                                                               43.3                               2.33%
                     Gas Turbine                                                   33.9                               2.04%
                     Hydroelectric                                                 77.4                               1.18%
- ------------------------------------------------- -------------------------------------- -----------------------------------
Transmission                                                                       45.4                               2.71%
Distribution                                                                       31.2                               3.82%
General Plant                                                                      15.4                               5.28%
- ------------------------------------------------- -------------------------------------- -----------------------------------
</TABLE>

N o t e s  t o  t h e  C o n s o l i d a t e d  F i n a n c i a l
S t a t e m e n t s

     The  estimated  service  lives of  depreciable  assets and the  significant
assumptions  underlying  the  estimates of removal costs for NSPI are subject to
periodic review by the UARB.  Provisions for future removal and site restoration
costs are charged to  depreciation  expense over the life of the related assets.
As at December 31, 1999,  the company had  recorded an estimated  liability  for
future  removal  and  site  restoration  costs of  $16.6  million  (1998 - $15.4
million).

     In  accordance  with  regulatory  authority,  assets of NSPI  which are not
currently  being  used,  but will be  useful  in  providing  future  service  to
customers,  are not  depreciated.  Financing  costs  associated  with assets not
currently being used are deferred as incurred.  Depreciation will occur when the
asset goes into  service.  Significant  costs in removing the asset from service
may be deferred and  amortized to earnings over a five-year  period,  subject to
regulatory approval.  Significant costs to return the asset to service are added
to the capital cost of the asset.

g. Income Taxes NSH and its  subsidiaries,  except for NSPI, follow the deferral
method of income tax  allocation  for  providing  for income  taxes.  NSPI, as a
rate-regulated  utility,  uses the taxes-payable method as there is a reasonable
expectation  that all taxes payable in future years will be included in approved
rates and recoverable from customers of NSPI at that time.

h.  Inventory  Inventories of materials and supplies are valued at average cost.
Coal and oil inventory is valued at cost using the first-in, first-out method.

i. Deferred Severance Costs In order to achieve rate stability,  the UARB allows
NSPI to defer the cost of large early  retirement  and severance  programs,  and
amortize  the  resulting  deferred  charges  on a  straight-line  basis  over  a
three-year period, commencing in the period in which the program is initiated.

j. Pension Plans and  Post-Retirement  Benefits  Pension  costs are  actuarially
determined  using the  projected  unit credit  method  prorated on services  and
management's   best  estimate   assumptions.   Adjustments   arising  from  plan
amendments,  experience gains and losses,  and changes in actuarial  assumptions
are  amortized on a  straight-line  basis over the estimated  average  remaining
service life of employees. Pension fund asset values are calculated using market
values at year-end.  The difference  between pension expense and pension funding
is recorded as a deferred asset or credit.

NSPI provides medical care and life insurance  benefits to eligible retirees and
their dependents. Post-retirement benefit costs are expensed as paid.

k. Foreign Currency Translation  Monetary assets and liabilities  denominated in
foreign  currencies  are  converted  to  Canadian  dollars at rates of  exchange
prevailing at the balance  sheet date.  The  resulting  differences  between the
translation  at the  original  transaction  date and the balance  sheet date are
charged to operations as they arise.

     Non-monetary  items  are  translated  to  Canadian  dollars  at  historical
exchange rates.

     Revenue and  expenses  are  converted at rates of exchange in effect at the
date of the transaction.

l. Debt Financing and Defeasance Costs Financing costs pertaining to debt issues
are  amortized  over the life of the  related  debt.  The  excess of the cost of
defeasance  investments  over the face value of the related debt is deferred and
amortized over the life of the defeased debt.

m. Hedging Instruments The company is party to derivative  financial  instrument
contracts,  mainly interest rate contracts,  forward foreign exchange contracts,
oil swap and  weather  temperature  agreements,  all of which  are used to hedge
existing  exposures.  Premiums paid are deferred and recognized over the life of
the agreements.

n.  Investment  in  Maritimes & Northeast  Pipeline The  company's  12.5% equity
investment  in Maritimes & Northeast  Pipeline is accounted for using the equity
method  whereby  the  amount of the  investment  is  adjusted  annually  for the
company's pro-rata share of the income or loss of Maritimes & Northeast Pipeline
and reduced by the amount of any dividends received.

o. Goodwill  Goodwill is stated at cost and is amortized using the straight-line
method over 20 years.

p. Stock Based  Compensation Plan No compensation  expense is recognized for the
plan when stock  options are issued to  executives.  Any  consideration  paid by
participants  in the plan on  exercise  of stock  options is  credited  to share
capital.

NOTE 2. SEGMENT INFORMATION

The company has three reportable segments:  Nova Scotia Power Inc., Enercom Inc.
and Maritimes & Northeast Pipeline.

a. Measurement of segment income (loss) and segment assets The company evaluates
performance based on earnings before interest and taxes. The accounting policies
of the  reportable  segments  are the same as those  described in the summary of
significant accounting policies.

b. Factors  management  uses to identify the  enterprise's  reportable  segments
Reportable  segments are  determined  based on NSH's  operating  activities  and
regulation. NSPI is engaged in the production and sale of electric energy, which
is regulated by the Nova Scotia  Utility and Review  Board  (UARB).  Maritimes &
Northeast  Pipeline companies (NSP Pipeline Inc. and NSP U.S. Holdings Inc.) own
a 12.5% equity investment in Maritimes & Northeast Pipeline,  which is regulated
by the National  Energy Board (NEB) in Canada and the Federal Energy  Regulatory
Commission  (FERC) in the U.S.  Enercom Inc. is an unregulated  subsidiary which
has expanded NSH's energy product line to include  distribution  of a full range
of fuel oil products.

c. Segment information

<TABLE>
<CAPTION>
Years ended December 31, 1999 and 1998 (millions of dollars)

                              Nova Scotia              Enercom           Maritimes &            Other                 Total
                               Power Inc.                Inc.             Northeast
                                                                           Pipeline
- ------------------------ ----------- ----------- --------- ---------- --------- -------- --------- --------- ----------- -----------
                         1999        1998            1999  1998       1999      1998     1999      1998      1999        1998
- ------------------------ ----------- ----------- --------- ---------- --------- -------- --------- --------- ----------- -----------
<S>                      <C>        <C>         <C>       <C>        <C>       <C>      <C>        <C>       <C>         <C>
Revenues from

  External customers         $798.9      $756.1     $29.0      $17.1         -        -    ($3.3)    ($0.1)      $824.6      $773.1
Depreciation expense           94.2        91.1       0.6        0.2         -        -         -         -        94.8        91.3
Operating expenses            521.4       500.7      33.9       16.5       0.5      0.1       1.2         -       557.0       517.3
Net intersegment
   Revenues/expenses            4.3         5.3     (4.3)      (5.3)         -        -         -         -           -           -

Equity earnings                   -           -         -          -       6.3        -         -         -         6.3           -
Earnings before
    Interest and taxes        259.2       242.5       1.0        0.6         -        -     (4.6)     (0.2)       255.6       242.9
Segment assets              2,811.2     2,828.3      26.4        8.6      56.5     30.5       7.1    (33.3)     2,901.2     2,834.1
Capital expenditures          117.6       129.4      11.5        1.4      17.9     30.5         -         -       147.0       161.3

- ------------------------ ----------- ----------- --------- ---------- --------- -------- --------- --------- ----------- -----------
1. Other  consists of items  related to SBCGI,  corporate  activities  and other
affiliates.

- ------------------------------------------------------------------------------------------------------------------------------------
NOTE 3. INTEREST
- ------------------------------------------------------------------------------------------------------------------------------------
Millions of dollars                                                                                           1999        1998
- ------------------------------------------------------------------------------------------------------------- ----------- ----------
Interest on long-term debt                                                                                         $98.2      $103.7
- ------------------------------------------------------------------------------------------------------------- ----------- ----------
Amortization of debtfinancing and defeasance costs                                                                 20.8        21.4
- ------------------------------------------------------------------------------------------------------------- ----------- ----------
Interest on short-term debt                                                                                         18.6        13.9
- ------------------------------------------------------------------------------------------------------------- ----------- ----------
Foreign exchange costs                                                                                               0.7         0.8
- ------------------------------------------------------------------------------------------------------------- ----------- ----------
                                                                                                                   138.3       139.8
- ------------------------------------------------------------------------------------------------------------- ----------- ----------

Less:
   Defeasance earnings and other interest income                                                                     1.8         7.1
- ------------------------------------------------------------------------------------------------------------- ----------- ----------
                                                                                                                  $136.5      $132.7
- ------------------------------------------------------------------------------------------------------------- ----------- ----------
</TABLE>


<PAGE>


NOTE 4. TAXES

PROVINCIAL CAPITAL TAX
Effective April 1, 1997, the company became subject to a provincial  capital tax
at a rate  of  0.25%  of  taxable  capital.  This  provincial  capital  tax is a
temporary tax, in effect for five years.

LARGE CORPORATIONS TAX
NSH is subject to federal large corporations tax (LCT) at a rate of 0.225%. As a
percent of income, the LCT is 5.1% (1998 - 5.3%).

INCOME TAX
With the exception of the Part VI.1 tax on NSPI preferred dividends, the company
has claimed  sufficient  capital cost  allowance,  cumulative  eligible  capital
deductions and loss  carry-forwards  to eliminate all income tax payable in 1999
and 1998.

<TABLE>
<CAPTION>
- --------------------------------------------------------- -------------------------- ------------------------
                                                                               1999                     1998
                                                                  Percent of Income        Percent of Income
- --------------------------------------------------------- -------------------------- ------------------------
<S>                                                       <C>                        <C>
Statutory income tax                                                          41.1%                    45.1%
Public Utilities Income Tax Transfer Act,
  Net of clawback                                                                 -                      1.7
Excess deductions for tax purposes                                           (38.8)                   (39.8)
Tax losses                                                                    (5.2)                        -
- --------------------------------------------------------- -------------------------- ------------------------
Effective income tax rate                                                      1.1%                     7.0%
- --------------------------------------------------------- -------------------------- ------------------------
</TABLE>


NSPI has filed amended  income tax returns for previous  years that increase the
tax depreciation  (capital cost allowance)  available to be deducted against the
company's future taxable income. Those returns were reassessed by Revenue Canada
to disallow the deductions claimed.  The reassessments have been objected to and
the issue is expected to be  litigated.  Without the benefit of this  additional
deduction,  it is estimated  that the company's tax liability in 1999 would have
been  approximately $39 million.  If the company is unsuccessful in this matter,
it would be entitled to recover these costs through the regulatory process.

     At December 31, 1999,  providing for the effect of the amended returns, the
tax  value of the  company's  assets  exceeded  the  related  carrying  value by
approximately  $1.0  billion  (1998  -  $1.1  billion).  The  company  also  has
non-capital  loss carry forwards of  approximately  $156 million:  $36.2 million
expiring in 2001,  $80.5 million  expiring in 2002,  $30.3  million  expiring in
2003, and $9.0 million  expiring in 2004. These losses are attributable to NSPI.
In accordance with the taxes payable accounting  method,  which is used by NSPI,
the potential tax benefits  related to these amounts have not been  reflected in
these  financial  statements.  Such  potential  benefits  will be  recognized as
realized for income tax purposes.

MINORITY INTEREST
Minority Interest relates to NSPI preferred dividends and includes Part VI.1 tax
of $5.3 million (1998 - $4.8  million),  net of a recovery of Part I tax of $7.3
million (1998 - $5.6 million)  resulting  from using Part VI.1 tax deductions to
reduce income tax payable in the current year.

<TABLE>
<CAPTION>
- -------------------------------------------------------- -------------------------- ------------------------
Millions of dollars                                                           1999                     1998
- -------------------------------------------------------- -------------------------- ------------------------
<S>                                                                          <C>                      <C>
Preferred share dividend                                                     $13.3                    $12.0
Part VI.1 (recovery)                                                         (2.0)                    (0.8)
- -------------------------------------------------------- -------------------------- ------------------------
                                                                             $11.3                    $11.2
- -------------------------------------------------------- -------------------------- ------------------------
</TABLE>



<PAGE>


<TABLE>
<CAPTION>
NOTE 5 PROPERTY, PLANT AND EQUIPMENT
- ------------------------------------------------- -------------------------- -------------------------- --------------------
Millions of dollars                                         Property, Plant                       1999                  Net
                                                              and Equipment   Accumulated Depreciation           Book Value
- ------------------------------------------------- -------------------------- -------------------------- --------------------
<S>                                              <C>                        <C>                        <C>
Generation:
  Thermal                                                          $1,498.7                     $475.6             $1,023.1
  Gas turbine                                                          27.4                       20.0                  7.4
  Hydroelectric                                                       325.6                      103.6                222.0
Transmission                                                          543.9                      294.2                339.7
Distribution                                                          854.1                      321.7                532.4
Other plant, land and equipment                                       232.2                       41.8                190.4
- ------------------------------------------------- -------------------------- -------------------------- --------------------
                                                                   $3,481.9                   $1,166.9             $2,315.0
- ------------------------------------------------- -------------------------- -------------------------- --------------------

- ------------------------------------------------- -------------------------- -------------------------- --------------------
Millions of dollars                                         Property, Plant                       1999                  Net
                                                              and Equipment   Accumulated Depreciation           Book Value
- ------------------------------------------------- -------------------------- -------------------------- --------------------
Generation:
  Thermal                                                          $1,471.9                     $450.4             $1,021.5
  Gas turbine                                                          27.1                       19.3                  7.8
  Hydroelectric                                                       316.0                      100.5                215.5
Transmission                                                          539.2                      190.7                348.5
Distribution                                                          823.4                      295.8                527.6
Other plant, land and equipment                                       214.5                       37.0                177.5
- ------------------------------------------------- -------------------------- -------------------------- --------------------
                                                                   $3,392.1                   $1,093.7             $2,298.4
- ------------------------------------------------- -------------------------- -------------------------- --------------------
</TABLE>

Thermal Generation includes the Glace Bay generating station at a net book value
of $32.3  million  (1998 - $29.3  million).  The plant has not been  depreciated
since it was removed from service in 1995 (note 1f).

NOTE 6. ACCOUNTS RECEIVABLE SECURITIZATION
On March 5, 1997, NSPI entered into an agreement with a financial institution to
sell up to $88 million of trade  receivables and unbilled revenue on a revolving
basis.  At December  31,  1999,  trade  receivables  and  unbilled  revenue sold
amounted  to $74  million  compared to $75  million in 1998.  The  agreement  is
scheduled to expire in 2002.

<TABLE>
<CAPTION>
NOTE 7. DEFERRED CHARGES
- ------------------------------------------------------------------------------------ ------------------- -----------------
Millions of dollars                                                                                1999              1998
- ------------------------------------------------------------------------------------ ------------------- -----------------
<S>                                                                                 <C>                 <C>
Unamortized debt financing and defeasance costs                                                 $ 272.4           $ 287.6
Unamortized Point Aconi expenses                                                                      -              23.1
Deferred pension assets and retiree benefits                                                       14.8               9.2
Unamortized severance costs (note 1i)                                                               9.0              13.3
Holdback on accounts receivable securitization                                                      7.4               7.5
Deferred coal bed methane exploration costs (SBCGI)                                                 5.5               7.2
Other                                                                                              10.4              13.5
- ------------------------------------------------------------------------------------ ------------------- -----------------
                                                                                                 $319.5            $361.4
- ------------------------------------------------------------------------------------ ------------------- -----------------
</TABLE>


<PAGE>


N o t e s t o t h e C o n s o l i d a t e d F i n a n c i a l
S t a t e m e n t s


NOTE 8. COMMON SHARES
Authorized:
Unlimited number of non-par value Common Shares.

Issued and outstanding:
<TABLE>
<CAPTION>
                                                                                   Millions of Shares     Common Share Capital
- ------------------------------------------------------------------------------ ----------------------- ------------------------
<S>                                                                            <C>                    <C>
December 31, 1997                                                                               86.50                   $667.6
Issued for cash under the Dividend Reinvestment Plan in 1998                                     0.20                      3.9
Issued under the Employee Common Share Purchase Plan                                             0.05                      0.8
Options exercised                                                                                0.05                      0.2
- ------------------------------------------------------------------------------ ----------------------- ------------------------
December 31, 1998                                                                               86.80                   $672.5
- ------------------------------------------------------------------------------ ----------------------- ------------------------

January 1, 1999
Issued in exchange for all issued and outstanding common                                        86.80                   $672.5
  Shares of NSPI under the reorganization described in note 1a
Issued for cash under the Dividend Reinvestment Plan in 1999 Issued under                        0.20                      3.2
the Employee Common Share Purchase Plan                                                          0.05                      0.8
Options exercised                                                                                   -                        -
- ------------------------------------------------------------------------------ ----------------------- ------------------------
December 31, 1999                                                                               87.05                   $676.5
- ------------------------------------------------------------------------------ ----------------------- ------------------------
</TABLE>

DIVIDEND REINVESTMENT AND EMPLOYEE COMMON SHARE PURCHASE PLANS
The company has a Common Shareholder Dividend  Reinvestment Plan and an Employee
Common Share Purchase Plan,  which provide an opportunity for  shareholders  and
company  employees to reinvest  dividends and make cash  contributions,  for the
purpose of purchasing common shares.

STOCK-BASED COMPENSATION PLAN

a.  Description  The company has a stock  option  plan which  grants  options to
Executive  Officers of NSH for a maximum term of ten years. The option price for
the shares that are the subject of any option is the market  price of the shares
on the day the option is granted.

     All options granted to date are exercisable on a graduated basis with up to
25 percent of options  exercisable on the first  anniversary date and in further
25 percent increments on each of the second,  third and fourth  anniversaries of
the grant.  If an option is not exercised  within ten years,  it expires and the
optionee loses all rights thereunder.  The holder of the option has no rights as
a  shareholder  until the option is exercised  and shares have been issued.  The
maximum  number of such shares  optioned  to any one  Executive  Officer  cannot
exceed one percent of the issued and  outstanding  common shares on the date the
option is granted.


<PAGE>

b.  Status of Plan

<TABLE>
<CAPTION>
- ------------------------------------------------ ---------------- ---------------- ------------------- --------------------
                                                 1999             Weighted-average 1998 Shares under   Weighted-average
                                                 Shares under     exercise price   option              exercise price
                                                 option
- ------------------------------------------------ ---------------- ---------------- ------------------- --------------------
<S>                                             <C>               <C>              <C>                 <C>
Outstanding at beginning of year                         308.750           $15.13             193,750               $12.65
Exercisable at end of year                               228,750           $14.46             208,750               $14.22
Granted                                                  122,500           $17.00             115,000               $19.32
Exercised                                                      -                -              17,500               $11.31
Outstanding at end of year                               431,250           $15.66             308,750               $15.13
- ------------------------------------------------ ---------------- ---------------- ------------------- --------------------
</TABLE>



<PAGE>


NOTE 9.  MINORITY INTEREST

The minority interest  represents  preferred shares that are held in Nova Scotia
Power Inc.

Authorized:
Unlimited number of First Preferred Shares, issuable in series.

Unlimited number of Second Preferred Shares, issuable in series.

<TABLE>
<CAPTION>
Issued and outstanding:
- -------------------------------------------------------------------------------- ---------------- --------------------------
Millions  of Dollars                                                             Millions of      Common Share Capital
                                                                                 Shares
- -------------------------------------------------------------------------------- ---------------- --------------------------
<S>                                                                             <C>              <C>
December 31, 1997
6% Cumulative, Redeemable Series A First Preferred Shares                                    8.0                     $200.0
- -------------------------------------------------------------------------------- ---------------- --------------------------
December 31, 1998                                                                            8.0                     $200.0

5.15% Cumulative, Redeemable Series B First Preferred Shares
  with non-detachable Series C Purchase Warrants                                             5.0                      $31.3
- -------------------------------------------------------------------------------- ---------------- --------------------------
December 31, 1999                                                                           13.0                     $231.3
- -------------------------------------------------------------------------------- ---------------- --------------------------
</TABLE>


SERIES A PREFERRED SHARES
The Series A preferred shares are redeemable at $25 per share.

Prior  to the  reorganization,  NSPI  had the  option  to  redeem  the  Series A
preferred shares. Following the reorganization,  NSPI became obligated to redeem
the Series A preferred shares by September 1, 2000.

SERIES B PREFERRED SHARES AND SERIES C PURCHASE WARRANTS
On March 8, 1999, NSPI issued 5,000,000 First Preferred Share Units (Units) with
each Unit consisting of one non-detachable Cumulative Redeemable First Preferred
Share,  Series B (Preferred Share Series B) and one Cumulative  Redeemable First
Preferred  Share,  Series C Purchase  Warrant  (Warrant) at a price of $6.25 per
Unit.  Until  October 1, 2000,  each  Preferred  Share Series B is entitled to a
fixed cumulative preferential cash dividend of 5.15% per share per annum, as and
when declared by the Board of Directors of NSPI (the Board of Directors),  which
accrue  from the date of issue  and are  payable  quarterly  on the first day of
January,  April,  July and September of each year.  After  October 1, 2000,  the
Series B shares will be entitled to a $0.04 per share per annum fixed cumulative
preferential cash dividend as and when declared by the Board of Directors.  Unit
holders  have the right to convert  their units with a cash payment of $18.75 on
October 1, 2000, January 1, 2001 and April 1, 2001, to one Cumulative Redeemable
First Preferred Share, Series C (Preferred Share Series C) of NSPI.

     Each  Preferred  Share  Series C will be entitled to a $1.225 per share per
annum fixed cumulative  preferential dividend, as and when declared by the Board
of Directors,  which will accrue from the date of issue and be payable quarterly
on the first day of January, April, July and September of each year. On or after
April 1, 2009,  NSPI may redeem for cash the Preferred  Share Series C, in whole
at any time or in part from time to time at $25.00  per share plus  accrued  and
unpaid dividends.


<PAGE>


<TABLE>
<CAPTION>
NOTE 10. LONG-TERM DEBT
- -------------------------------------------------------------------------------- ---------------- --------------------------
Millions  of Dollars                                                             1999                                  1998
- -------------------------------------------------------------------------------- ---------------- --------------------------
<S>                                                                             <C>               <C>
Debentures and notes payable                                                           $ 1,268.8                  $ 1,247.2
Less: Current portion                                                                      (8.1)                    (163.5)
- -------------------------------------------------------------------------------- ---------------- --------------------------
                                                                                       $ 1,260.7                   $1,083.7
- -------------------------------------------------------------------------------- ---------------- --------------------------
</TABLE>

All  long-term  debt  instruments  are issued  under trust  indentures  at fixed
interest rates, and are unsecured.


Long-term debt is summarized by year of maturity in the following table:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Millions of dollars              December 31, 1999                                  December 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------
Year of Maturity           Principal            Weighted Average         Principal             Weighted Average Coupon Rate
                           Outstanding          Coupon Rate              Outstanding
- -------------------------- -------------------- ------------------------ --------------------- -----------------------------
                                                                      %                                                   %
- -------------------------- -------------------- ------------------------ --------------------- -----------------------------
<S>                       <C>                  <C>                      <C>                   <C>
1999                                                                                   $163.5
2000                                      $8.1                                            3.2
2001                                     120.7                                          120.5
2002                                     120.0                                          120.0
2003                                     150.0                                          150.0
2004                                      50.0                                              -
- -------------------------- -------------------- ------------------------ --------------------- -----------------------------
Total 1 - 5 Years                        448.8                     7.56                 557.2                          7.83
6 - 10   Years                           380.0                     6.29                 250.0                          7.07
11 - 15 Years                                -                        -                     -                             -
16 - 20 Years                            165.0                     9.18                  70.0                          8.40
21 - 25 Years                                -                        -                  95.0                          9.75
26 - 30 Years                            165.0                     8.77                 165.0                          8.77
31 - 40 Years                             60.0                     8.30                  60.0                          8.30
41 - 100 Years                            50.0                     7.60                  50.0                          7.60
- -------------------------- -------------------- ------------------------ --------------------- -----------------------------
                                      $1,268.8                     7.58              $1,247.2                          7.99
- -------------------------- -------------------- ------------------------ --------------------- -----------------------------
</TABLE>


NOTE 11. DEBT DUE WITHIN ONE YEAR
Debt due within one year is normally  refinanced  from the proceeds of long-term
financing.  Short-term debt consists of commercial paper,  bankers'  acceptances
and libor loans issued  against an operating line of credit.  Commercial  paper,
bankers'  acceptances  and libor loans bear interest at prevailing  market rates
which on December 31, 1999, averaged 5.15%, 5.55% and 6.63% respectively (1998 -
5.13%,  5.55% and nil).  The operating line of credit is due on demand and bears
interest at prime which on December 31, 1999, was 6.50% (1998 - 6.75%).

<TABLE>
<CAPTION>
millions of dollars                                                                                     1999           1998
- -------------------------------------------------------------------------------------------- ---------------- --------------
<S>                                                                                           <C>            <C>
Short-term debt                                                                                       $320.2         $353.9
Current portion of long-term debt (note 10)                                                              8.1          163.5
- -------------------------------------------------------------------------------------------- ---------------- --------------
                                                                                                      $328.3         $517.4
</TABLE>


<PAGE>


NOTE 12. PENSION PLANS
NSPI   maintains   contributory   defined-benefit   pension   plans  that  cover
substantially  all of its employees.  The market value of pension fund assets at
December 31, 1999,  was $402.3  million (1998 - $360.4  million).  The estimated
actuarial  present  value of accrued  pension  benefits  attributed  to services
rendered to December 31, 1999, was $382.9 million (1998 - $358.6 million).

NOTE 13. FINANCIAL INSTRUMENTS

<TABLE>
<CAPTION>
- ------------------------------- --------------------------------------- ---------------------------------------------------
                                           Carrying Amount                                  Fair Value
- ------------------------------- ------------------ -------------------- --------------------------- -----------------------
Millions of dollars                          1999                 1998                        1999                    1998
- ------------------------------- ------------------ -------------------- --------------------------- -----------------------
<S>                            <C>                  <C>                 <C>                         <C>
Long-term debt                        ($ 1,268.8)          ($ 1,247.2)                 ($ 1,326.8)             ($ 1,429.4)
Short-term debt                         ($ 320.2)            ($ 353.9)                   ($ 318.4)               ($ 355.3)
Hedging instruments                       ($ 0.3)              ($ 0.4)                       $ 1.4                 ($ 0.6)
- ------------------------------- ------------------ -------------------- --------------------------- -----------------------
</TABLE>

LONG-TERM DEBT AND SHORT-TERM DEBT
The fair value of NSH's  long-term and short-term debt is estimated based on the
quoted  market  prices for the same or similar  issues,  or on the current rates
offered to NSH, for debt of the same remaining maturities.

HEDGING INSTRUMENTS
The fair value of hedging  instruments  is  estimated  by  obtaining  prevailing
market rates from invest-ment dealers.

     The company  uses  derivative  instruments  to reduce  specific  underlying
interest rate, commodity price, foreign exchange and weather exposure.

     The company periodically enters into interest rate contracts to convert the
interest characteristics of outstanding short-term debt from floating to a fixed
rate basis.

     Interest rate contracts  converting floating interest on average borrowings
of $265.0 million (1998 - $395.0  million) to a weighted  average fixed interest
rate of 6.20% (1998 - 6.66%) were outstanding at December 31, 1999.

     The company enters into oil swap and option  contracts to limit exposure to
fluctuations  in world prices of heavy fuel oil. As at December  31,  1999,  the
company had entered into oil swap contracts that fix 0.9 million  barrels of oil
at an average price of U.S. $12.56 per barrel.

     Oil and part of the company's coal requirements are priced in U.S. dollars.
NSH enters into foreign  exchange forward and option contracts to limit exposure
to currency rate  fluctuations.  Currency  forwards are used to fix the Canadian
dollar cost to acquire  U.S.  dollars,  eliminating  exposure  to currency  rate
fluctuations.  Forward  contracts to buy U.S. $107 million at an average rate of
CAD $1.4706 were out-standing for 2000 and U.S. $4 million at an average rate of
CAD $1.4565 were  outstanding for 2001, at December 31, 1999.  Foreign  exchange
options  to buy  U.S.  $4  million  with an  average  rate of CAD  $1.5400  were
outstanding at December 31, 1999.

     The  company  enters  into  weather  temperature  contracts  that limit its
exposure  to revenue  losses  from  abnormally  warm  weather  during the winter
heating  season.  At December  31, 1999 the  company  limited its  exposure to a
significant  portion of the first and  fourth  quarters  of 2000  space  heating
losses.

     NSH is exposed to  credit-related  losses in the event of nonperformance of
counterparties to financial  instruments.  The company has a policy of accepting
as  counterparties  only those  institutions  meeting the three  highest  rating
categories  as  determined  by  two  recognized  security  rating  institutions.
Accordingly,  it does  not  expect  any  counterparties  to  fail to meet  their
obligations.

NOTE 14. COMMITMENTS AND CONTINGENCIES

NSH had the following significant commitments at December 31, 1999:

o    A  requirement  to purchase the coal output of the Cape Breton  Development
     Corporation's  (CBDC)  Prince  Mine  which is not  expected  to exceed  1.1
     million  tonnes of coal.  Purchases  from CBDC may be reduced to the extent
     that the company  purchases coal from  alternative  sources in the event of
     production problems at CBDC, as was the case in 1999.

o    Annual  requirement  to purchase  approximately  $15 million of electricity
     from independent power producers for each of the next five years.

o    NSH is responsible for managing a portfolio of  approximately  $1.6 billion
     of defeasance  securities  held in trust.  The defeasance  securities  must
     provide the principal and interest  streams of the related  defeased  debt.
     Approximately 68%, or $1.0 billion, of the defeasance portfolio consists of
     investments in the related debt,  eliminating all risk associated with this
     portion of the portfolio.

NOTE 15. COMPARATIVE INFORMATION

The  comparative  financial  statements  have been  presented  as if NSH was the
parent company as of January 1, 1998. (See note 1a.)

     Certain of the comparative  figures have been  reclassified to conform with
the financial statement presentation adopted for 1999.


<PAGE>


<TABLE>
<CAPTION>
Operating Statistics                                                                            7-year summary
Years Ended December 31                         1999         1998          1997         1996         1995         1994         1993
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
<S>                                     <C>          <C>          <C>           <C>           <C>         <C>          <C>
Electric energy sales
   (GWh)
       Residential                           3,494.6      3,377.9       3,498.9      3,471.9      3,380.3      3,445.3      3,400.3
       Commercial                            2,582.8      2,485.9       2,506.7      2,505.7      2,483.9      2,455.4      2,440.1
       Industrial                            3,834.8      3,423.7       2,842.6      2,754.1      2,820.9      2,715.0      2,706.3
       Other                                   453.2        484.4         667.7        413.9        349.7        350.2        347.4
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total electric energy sales                 10,365.4      9,771.9       9,515.9      9,145.6      9,034.8      8,965.9      8,894.1
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Sources of energy
       (GWh)
      Thermal  - coal                        7,816.0      7,015.0       8,246.5      7,850.3      7,053.1      7,159.7      6,345.6
                - oil                        1,870.9      2,358.3         781.4        608.7      1,239.4      1,205.7      2,117.2
Hydro                                          980.7        890.9         934.9      1,111.6        883.2      1,012.0        877.6
Purchases                                      411.3        242.0         340.2        254.6        499.5        216.2        218.9
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total generation
   And purchases                            11,078.9     10,506.2      10,303.0      9,825.2      9,675.2      9,593.6      9,559.3
Losses and internal use                        713.5        734.3         787.1        679.6        640.4        627.7        665.2
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total electric energy sold                  10,365.4      9,771.9       9,515.9      9,145.6      9,034.8      8,965.9      8,894.1
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Customers
       Residential                           397,406      394,012       388,386      384,856      380,055      375,553      371,270
       Commercial                             31,753       31,942        31,727       32,329       32,383       32,342       32,289
       Industrial                              2,118        2,096         1,998        1,686        1,633        1,581        1,537
       Other                                   6,760        6,343         5,917        5,908        5,892        5,731        5,596
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Total customers                              438,037      434,393       428,028      424,779      419.963      415,207      410,692
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Capacity
Generating nameplate
   Capacity (MW)
       Coal Fired                              1,272        1,272         1,272        1,272        1,388        1,388        1,218
       Heavy Fuel Oil-Fired                      350          350           350          350          350          350          350
       Gas Turbine                               180          180           180          180          180          180          180
      Hydroelectric                              381          381           381          381          381          381          381
 Independent power producers                      25           25            25           25            3           --           --
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
                                               2,208        2,208         2,208        2,208        2,302        2,299        2,129
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Number of employees                            1,588        1,634         1,742        1,907        1,935        2,181        2,213
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Km of transmission lines
   (69 kV and over)                            5,250        5,250         5,236        5,213        5,212        5,208        5,339
- ---------------------------------------- ------------ ------------ ------------- ------------ ------------ ------------ ------------
Km of distribution lines
   (25 kV and under)                          24,000       23,711        23,155       23,238       23,226       24,362       24,344
</TABLE>



<PAGE>


<TABLE>
<CAPTION>
Financial Information                                                                            7-year summary
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Years Ended December 31                        1999          1998         1997         1996         1995         1994         1993
(millions of dollars)
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
<S>                                    <C>           <C>          <C>          <C>          <C>          <C>          <C>
Total revenue                                $824.6        $773.1       $748.7       $741.2       $720.6       $715.6       $709.1
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Cost of operations
   Fuel for generation and
    Power purchased                           267.5         257.3        246.4        238.7        244.8        246.6        246.7
Cost of goods sold                             23.3          14.0            -            -            -            -            -
Operating, maintenance
and general                                   155.5         142.5        138.6        157.7        147.7        151.3        150.5
Grants in lieu of property taxes                8.9           5.5          5.3          5.2          5.2          5.1          5.0
Voluntary separation program                      -             -            -            -            -            -         21.7
Provincial capital tax                          7.0           6.7          5.2            -            -            -            -
Depreciation                                   94.8          91.3         87.8         85.0         86.5         83.1         70.6
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
                                              557.0         517.3        483.3        486.6        484.2        486.1        494.5

- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings from operations                      267.6         255.8        265.4        254.6        236.4        229.5        214.6
(Amortization) deferral of
    Point Aconi expenses                     (23.1)        (16.7)       (12.8)          5.1         22.6         24.9            -
Allowance for funds used
    During construction                         4.8           3.8          4.0          4.2          1.3          9.6         46.1
Equity earnings in pipeline                     6.3             -            -            -            -            -            -
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings before interest and
    Income taxes                              255.6         242.9        256.6        263.9        260.3        264.0        260.7
Interest                                      136.5         132.7        140.2        148.9        143.5        152.2        160.5
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings before income taxes                  119.1         110.2        116.4        115.0        116.8        111.8        100.2
Income and large corporations tax               7.4          13.6         14.2         11.4          5.2          1.0          4.8
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Net earnings before
  Minority interest                           111.7          96.6        102.2        103.6        111.6        110.8         95.4
Minority interest                              11.3          11.2          9.5         13.6         16.8         16.8          3.9
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Net earnings applicable
   To common shares                           100.4          85.4         92.7         90.0         94.8         94.0         91.5
Common dividends                               72.2          71.1         69.9         68.7         66.7         64.8         63.9
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Earnings retained for use
     In company                               $28.2         $14.3        $22.8        $21.3        $28.1        $29.2        $27.6
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Property, plant and

  equipment, net                           $2,362.3      $2,333.9     $2,293.1     $2,280.6     $2,277.1     $2,275.6     $2,264.0
Matching notes receivable                         -             -            -         46.1        325.8        368.0        379.5
Other assets                                  332.5         361.4        430.4        435.4        355.5        272.1        180.8
Pipeline investment                            54.7          30.5            -            -            -            -            -
Current assets                                151.7         108.3        157.7        302.6        185.6        212.9        234.2
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Total assets                               $2,901.2      $2,834.1     $2,881.2     $3,064.7     $3,144.0     $3,128.6     $3,058.5

Common shares                                $676.5        $672.5       $667.6       $661.3       $655.9       $653.4       $650.7
Retaained earnings                            265.8         238.7       2224.4        201.6        180.3        152.2        123.0
Minority interest                             231.3         200.0        200.0        200.0        200.0        200.0        200.0
Long-term debt                              1,260.7       1,083.7      1,107.5      1,258.1      1,640.2      1,469.2      1,679.2
Deferred credits                                2.2           2.2         26.9         13.4         14.7         16.0         16.0
Current liabilities                           464.7         637.0        654.8        730.3        452.9        637.8        389.6
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Total equity and liabilities               $2,901.2      $2,834.1     $2,881.2     $3,064.7     $3,144.0     $3,128.6     $3,058.5
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Capital expenditures                         $141.7        $162.6       $100.3        $88.5        $88.0        $94.7       $125.9
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Cost of fuel - coal                          $186.4        $164.8       $189.2       $198.9       $189.5       $204.4       $179.6
              - oil                            56.1          76.2         35.7         22.6         39.0         35.2         60.5
Power purchased                                25.0          16.3         21.5         17.2         16.3          7.0          6.6
- --------------------------------------- ------------ ------------- ------------ ------------ ------------ ------------ ------------
Total cost of fuel and
    Power purchased                          $267.5        $257.3       $246.4       $238.7       $244.8       $246.6       $246.7
</TABLE>



<PAGE>


C O R P O R A T E G O V E R N A N C E

Statement of Corporate Governance Practices

NS Power  Holdings'  framework  for  corporate  governance  enables the Board of
Directors to effectively contribute to the management of the Company.

BOARD MANDATE
The Board of Directors is responsible for management of the business and affairs
of the Company.  The Board has established  three  committees which assist it in
fulfilling its responsibilities. The Board appoints the Company's management and
delegates authority and responsibility to management for all aspects of NS Power
Holdings'  business and affairs.  Management  is expected to achieve  objectives
established  by  the  Board  and  its  performance  is  evaluated  against  such
objectives.

     Management's discussion and analysis of the Company's operating performance
for 1999 is included in this Annual Report.

BOARD COMPOSITION
The  Company's  by-laws  provide  that the size of the  Board be no less than 10
members and no more than 15 members.  To assure the independence of the Board of
Directors,  the  Company's  by-laws also provide that no more than two Directors
may be employees of the Company or of a subsidiary  or affiliate of the Company.
The  Chair  of the  Board  and the  Chief  Executive  Officer  must be  separate
individuals.  Each Board Committee is made up of Directors who are not employees
of the Company or its subsidiaries or affiliates.

     The Board is  satisfied  this  number of  Directors  results  in  effective
decision-making by the Board. One Director, Mr. David Mann, is the President and
Chief  Executive  Officer and is an employee of the Company.  The Board believes
that all of the other current Directors are unrelated  Directors.  Each of those
Directors is independent of management, none has any interest, business or other
relationship that could or could reasonably be perceived to materially interfere
with his or her ability to act in the best interests of the Company. None of the
Directors receive remuneration from the Company other than Directors' retainers,
fees or retainers for service as Chair of the Board or Chair of a Committee.

     The Board has adopted a number of operating  procedures  to address  issues
associated  with  Directors'  performance,  Board  composition,  and conflict of
interest.  These  procedures are intended to enhance the ability of Directors to
carry  out their  duties  and to ensure an  orderly  rotation  of Board  members
without impairing Board operations.

     Upon  reaching age 70, a Director is not eligible  for  re-election  at the
next annual  meeting.  No person may hold the position of Chair of the Board for
three consecutive years without a review by the Board.

     The  Company's  voting  shares  are widely  held and there are  legislative
provisions  which prohibit an individual  shareholder  from holding more than 15
percent of the voting shares of the Company.  There is currently no  shareholder
with the  ability to  exercise a majority  of the votes for the  election of the
Board of Directors.

BOARD COMMUNICATION
A regular flow of information from management to the Board of Directors  ensures
that the Board has  sufficient and timely  information  concerning the Company's
affairs.  This  information is used by the Board to assess both the direction of
the Company's business and the performance of management. The Board of Directors
receives a briefing  package from  management  in advance of all  meetings.  The
Directors also receive  regular  communications  between  meetings which include
information  respecting  any  new  developments  which  might  affect  NS  Power
Holdings'  business  and  that of its  subsidiaries,  in  addition  to  specific
information  provided  to  individual  Directors  to allow them to fulfil  their
duties as members of a Board committee.

     The Directors  are kept  informed of Company  operations at the meetings of
the Board and its  committees  and through  reports  from and  discussions  with
Management. Board and committee meetings are held on a regularly scheduled basis
and  communications  between  the  Directors  and  management  occur  apart from
regularly scheduled Board and committee meetings in the form of oral and written
briefings or specially-called meetings. Management reports on Company operations
and results at such meetings and responds to questions from the Directors.

     An orientation and education  program is provided to all new members of the
Board.  New  members  of the Board  are  given  briefings  on the  Company,  its
strategic plan, and past history of Board operations.

     The Board and its Committees, at their option, regularly meet independently
of management to discuss various issues. While there is no specific provision in
the by-laws, the Board has engaged outside advisors in appropriate circumstances
in the past.

BOARD FUNCTIONS
The Board makes all major  decisions  for the Company,  including  those set out
below.  Many Board  functions  are  carried out by the three  Committees  of the
Board. The Board and its Committees are responsible for these main functions:

o    adopting a strategic planning process and overseeing its implementation;

o    identifying  principal  risks in the business and  implementing  systems to
     manage these risks;

o    ensuring business risks are properly identified and managed,  and approving
     decisions involving significant risks to the Company;

o    monitoring  the  effectiveness  of  the  Company's   corporate   governance
     practices and approving any necessary changes;

o    succession  planning for senior  management and monitoring,  appointing and
     training senior management;

o    setting performance objectives and monitoring results;

o    overseeing   communications   with  shareholders  and  other  stakeholders,
     including reviewing the quarterly financial  statements,  and approving the
     annual financial statements, annual report and annual information form;

o    approving  the  financial  statements  and the  Management  Discussion  and
     Analysis in the Annual Report;

o    ensuring proper  financial  reporting and financial  control systems are in
     place including proper inspection, control and audit systems;

o    approving the issue of securities;

o    the integrity of internal control and management information systems;

o    approving  operating  and capital  budgets and specific  requests for major
     capital expenditures;

o    developing  position  descriptions  for the  Board  and  for the  Executive
     Officers  of the  Company,  including  the  corporate  objectives  for  the
     President and Chief Executive Officer;

o    reviewing and approving  compensation for Directors and Executive  Officers
     and compensation policies for the Company; and

o    establishing general corporate policies.

SHAREHOLDER FEEDBACK
NS Power  Holdings  provides  information  to, and responds to,  inquiries  from
shareholders.  Through  toll-free  lines,  shareholders,  customers  and  others
receive  information  from  the  Company  and  may  also  contact  the  Company.
Shareholders  may contact the Company at the Office of the  Corporate  Secretary
and  General  Counsel  or  through  its  Investor  Services  group.  Shareholder
inquiries or suggestions that are addressed to the Board, a specific  department
or person, are forwarded to the intended recipient.

BOARD COMMITTEES
NS Power  Holdings'  Board of  Directors  has three  Committees  to assist it in
carrying out its duties.  The Company's  by-laws  provide that  Committees  must
consist of Directors who are not employees of the Company or its subsidiaries or
affiliates.  Board  Committees are appointed  annually and the  composition  and
Chair of all Committees is reviewed at least every three years.

     The by-laws of the Company  state that the Board of Directors may establish
an Executive  Committee of the Board of Directors  which may include  members of
management.  The  Directors  have  determined,  however,  that  because  of  the
relatively  small size of the Board,  it is not appropriate to constitute such a
Committee at this time.  This helps to ensure that all Directors are equally and
fully briefed on issues relating to the Company's business and affairs.

AUDIT COMMITTEE
The Audit Committee must consist of at least three Directors.  This Committee is
responsible for ensuring that  appropriate  internal  control  procedures are in
place relating to the internal and external audit of the Company's accounts. The
Audit  Committee  reviews  investment  issues and policies.  It also reviews and
recommends to the Board of Directors for approval,  documents such as the Annual
Report, the Annual Information Form, the Management Discussion and Analysis, the
audited financial  statements and the unaudited interim reports to shareholders.
The Audit  Committee  meets at least  quarterly  with the  internal and external
auditors and management and at each quarterly meeting,  meets independently with
each of these parties to the exclusion of the others.

     This  Committee  also  receives   reports  on  and  reviews  the  financial
performance of Company  pension plans,  including  pension fund and fund manager
performance, and reviews investment guidelines for the pension plans.

    This Committee currently consists of the following Directors:
    Mr. Thomas R. Hall, Committee Chair
    Mr. M. Edward MacNeil
    Mr. Kenneth C. Rowe
    Ms. Rosemary Scanlon

MANAGEMENT RESOURCES AND COMPENSATION COMMITTEE
The  Management  Resources  and  Compensation  Committee  (the "MRC  Committee")
reviews  compensation  policies,  benefits and other matters  relating to senior
management and monitors  succession  planning.  It reviews the annual  incentive
plan for all Executive Officers, makes recommendations to the Board of Directors
in respect of these matters and evaluates the  performance  of the President and
Chief Executive Officer.

     The MRC  Committee  consists of three  Directors and is required to meet at
least annually. The MRC Committee reports regularly to the Board.

     The MRC Committee currently consists of the following directors:
     Mr. Purdy Crawford, Committee Chair
     Mrs. R. Irene d'Entremont
     Dr. E. Parr-Johnston

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate  Governance  Committee consists of three Directors.
It is responsible  for developing and  communicating  the Company's  approach to
corporate  governance  issues.  It also  identifies  nominees  for  election  as
Directors and ensures that such nominees are, in the  reasonable  opinion of the
Committee,  individuals  who have the  ability  to  contribute  and  devote  the
necessary time to the Board of Directors.

     The effectiveness of the Board, individual Directors, and the Committees is
assessed by the Nominating and Corporate Governance Committee which solicits and
reviews Directors'  comments and may propose  modifications to improve the Board
functions,  Committee  functions,   composition,  and  the  Company's  corporate
governance processes.

     The Nominating and Corporate Governance Committee currently consists of the
following Directors:
       Mr. Paul D. Sobey, Committee Chair
       Mr. George A. Caines
       Mr. James K. Gray

CORPORATE GOVERNANCE COMPLIANCE
Corporate  governance is the process and structure used to direct and manage the
business and affairs of the Company with the objective of enhancing  shareholder
value,  which  includes  ensuring the financial  viability of the business.  The
process and structure define the division of power and establish  mechanisms for
achieving  accountability  among  shareholders,   the  Board  of  Directors  and
management.  The direction and  management of NS Power  Holdings'  business also
takes  into  account  the  impact  on  other  stakeholders  such  as  employees,
customers, suppliers and communities.

     The Company's corporate governance practices comply with the guidelines for
corporate governance of The Toronto Stock Exchange.


<PAGE>


EXECUTIVES                                                      ---------------
                                                                |              |
David Mann, President and Chief Executive Officer               |              |
(pictured  on page 3)                                           |   [PICTURE]  |
                                                                |              |
Standing (left to right)                                        |              |
Jay  Forbes,  Senior  Vice  President  and  Chief  Financial    |              |
Officer; Phil Sidebottom,  Vice President, Power Production;    |              |
Liz  MacDonald,  Vice  President,   Human  Resources;  Chris    |              |
Huskilson,  Executive  Vice  President,   Operations:  Wayne    |              |
Crawley, Vice President, Marketing and Growth, President and    |              |
CEO, Enercom.                                                   ---------------

Seated (left to right)
Murray Coolican, Vice President, Public Affairs; Rick Smith, Corporate Secretary
and General Counsel


<PAGE>


BOARD OF DIRECTORS

Derek Oland
(Chairman of the Board)
Chairman and
Chief Executive Officer
Moosehead Breweries Limited
New River Beach, New Brunswick

David McD. Mann, Q.C.
President and
Chief Executive Officer
NS Power Holdings
Incorporated and
Nova Scotia Power Incorporated
Halifax, Nova Scotia

George A. Caines, Q.C.
Nova Scotia Managing Partner
Stewart McKelvey Stirling Scales
Halifax, Nova Scotia

Purdy Crawford, O.C.
Counsel, Osler, Hoskin & Harcourt
Chair, AT&T Canada Corp.
Toronto, Ontario

R. Irene d'Entremont
President
M.I.T. Electronics Inc.
Yarmouth, Nova Scotia

James K. Gray
Chairman
Canadian Hunter
Exploration Ltd.
Calgary, Alberta

Thomas R. Hall (1)
Company Director
Halifax, Nova Scotia

M. Edward MacNeil
Company Director
Sydney, Nova Scotia

Dr. Elizabeth Parr-Johnston
President and Vice-Chancellor
University of New Brunswick
Fredericton, New Brunswick

Kenneth C. Rowe
Chairman and Chief
Executive Officer
IMP Group International Inc.
Halifax, Nova Scotia

Rosemary Scanlon
Economic Consultant
New York City, New York

Paul D. Sobey
President and
Chief Executive Officer
Empire Company Limited
New Glasgow, Nova Scotia

COMMITTEES:

AUDIT COMMITTEE

Thomas R. Hall (Chair)
M. Edward MacNeil
Kenneth C. Rowe
Rosemary Scanlon

MANAGEMENT RESOURCES
AND COMPENSATION
COMMITTEE

Purdy Crawford (Chair)
R. Irene d'Entremont
Dr. Elizabeth Parr-Johnston

NOMINATING AND
CORPORATE GOVERNANCE
Paul D. Sobey (Chair)
George A. Caines
James K. Gray

CREDITS
Design Ove Design & Communications Ltd.
Photography John Sherlock (Excepting Mr.
Oland & Mr. Mann, Page 3: Don Robinson; 1. Retiring May, 2000

Ms. Cromwell,  Page 6: Marvin Moore; Point Tupper,  Page 6: Roger Cormier;  M&NP
Construction,  Page 6: Courtesy of M&NP; Ms. MacNeil,  Page 6: Owen Fitzgerald.)
Printing Atlantic Nova Print Co. Inc.


<PAGE>


<TABLE>
<CAPTION>
Dividend Payments in 2000                                        Head Office
- -------------------------                                        -----------
<S>                                                             <C>
Subject to approval by the Board of Directors, common share
dividends for NS Power Holdings Inc. are payable on or about     Nova Scotia Power Inc.
the 15th of February, May, August and November. A first          P.O. Box 910
quarter dividend of $0.21 has been declared payable February     Halifax, Nova Scotia B3J 2W5
15th, 2000.                                                      T: 902.428.6250

A quarterly dividend of $0.375 is payable on the first day of    Transfer Agent
January, April, July and October for Nova Scotia Power Inc.'s    Montreal Trust
Series A 6% Preferred Shares.                                    P.O. Box 36012, 1465 Brenton Street
                                                                 Halifax, Nova Scotia B3J 3S9
A quarterly dividend of $0.0804687 is payable on the first day   T: 902.420.2211
of January, April, July and October for Nova Scotia Power        F: 902.420.2764
Inc.'s Series B First Preferred Share Units.
                                                                 Investor Services
Dividend Reinvestment and Share Purchase Plan                    T: 902.428.6060 or 1.800.358.1995
NS Power Holdings Inc.'s Dividend Reinvestment and Share         F: 902.428.6181
Purchase Plan is available to shareholders resident in Canada.   E: investors@nspower.ca

The Plan provides shareholders with a convenient and             Financial Analysts, Portfolio Managers
economical means of acquiring additional common shares through   and other Institutional Investors
the reinvestment of dividends. Plan participants may also        T: 902.428.6999
contribute cash payments of up to $5,000 per quarter.            F: 902.428.6181
Participants of the plan pay no commissions,                     E: judy.steele@nspower.ca
service charges or brokerage fees for shares purchased under
the Plan.                                                        Share Listings
                                                                 Toronto Stock Exchange (TSE)
Please contact Investor Services if you have questions or wish   Common shares: NSH
to receive a copy of the plan brochure and enrollment form.      Preferred shares: NSI.PR.A, NSI.UN

Direct Deposit Service                                           Shares Outstanding
Shareholders may have dividends deposited directly into          (as at December 31, 1999)
accounts held at financial institutions which are members of     Common shares: 87 million
the Canadian Payments Association. To arrange this service,
please contact Investor Services.                                Share Trading Summary
                                                                 (TSE, January 1 to December 31, 1999)
Earnings Reporting                                               High $19.30
Quarterly  earnings are expected to be announced                 Low $13.00
on May 3rd, August 10th and November 10th, 2000.                 Close $14.40
Year end results for 2000 will be released in February 2001.     Volume 26.4 million
Annual General Meeting
Wednesday, May 3, 2000; 11:00 A.M.; World Trade                  Dividends Paid in 1999
and Convention                                                   $0.83 per common share
Centre, Halifax, Nova Scotia
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DOC: 186799


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<DOCUMENT>
<TYPE>EX-99.12
<SEQUENCE>13
<FILENAME>file017.txt
<DESCRIPTION>EX K-1 EMERA INC. GROUP OF COMPANIES
<TEXT>

Exhibit K-1

<TABLE>
<CAPTION>
                                                                      EMERA INC.

                                                              Group of Companies
                                                              September 15, 2000

        Company                      Nature of Business                      % Owned                     Date Created
<S>                              <C>                               <C>                                <C>
Emera Inc.                         Diversified energy                Publicly-traded company.           July 23, 1998
                                   services company                  Widely held by
                                                                     shareholders

Nova Scotia Power Inc.             Fully-integrated electric         100% owned by Emera Inc.           July 13, 1984
                                   utility which provides
                                   generation, transmission
                                   and distribution of
                                   electricity in Nova Scotia

NS Power Services Ltd.             Energy services provider          100% owned by Emera Inc.           May 4, 1995
                                   (inactive)

NSP Trigen Inc.                    Currently inactive                50% owned by NS Power              February 14, 1997
                                                                     Services Ltd.

Enercom Inc.                       Emera's vehicle for growth        100% owned by Emera Inc.           May 4, 1995
                                   and diversification outside
                                   the core electric business.
                                   Leverages underutilized
                                   assets of NSPI and to
                                   reduce operating costs

                                   (Note:  the mandate of this
                                   company is currently under
                                   review.  Enercom Inc.'s
                                   prime operating business is
                                   Emera Fuels Inc.)

Cablecom Ltd.                      Design and engineering,           100% owned by Enercom              January 1, 2000
                                   project management,               Inc.                               (Amalgamation of
                                   construction, structured                                             Cablecom Ltd. and
                                   cabling, maintenance and                                             Cablecom N.B. Ltd.)
                                   installation, fibre splicing
                                   and wireless solutions

Fibretek Inc.                      Although Fibretek is a            100% owned by Cablecom             June 19, 1992
                                   separate legal entity of          Inc.
                                   Cablecom Ltd., the
                                   business activities of
                                   Cablecom Ltd. and
                                   Fibretek Inc. are carried on
                                   as though they are a single
                                   entity.

Emera Fuels Inc.                   Various fuel operations           100% owned by Enercom              January 4, 2000
                                                                     Inc.                               (Amalgamation of
                                                                                                        BuyerTran Bunker Inc.,
                                                                                                        BuyerTran Fuels Inc.,
                                                                                                        Laurand Fuels Inc., Nova
                                                                                                        Star Petroleum Inc.)

Stellarton Basin Coal Gas          Participate in joint venture      100% owned by Emera Inc.           January 11, 1993
Inc.                               to explore and develop
                                   methane gas reserves in
                                   Nova Scotia

Strait Energy Inc.                 Sells steam energy from           100% owned by Emera Inc.           June 2, 1998
                                   NSPI's  generating  stations.
                                   Currently only selling from
                                   the Trenton Generating Station.

510845 N.B. Inc.                   Utility services operations       100% owned by Emera Inc.           December 15, 1999
                                   (transformer business)

NSP Pipeline Management            Owns 12.5% of Maritimes           100% owned by Emera Inc.           February 23, 1998
Ltd.                               & Northeast Pipeline
                                   Management Ltd.

NSP Pipeline Inc.                  Owns 12.375% of                   100% owned by Emera Inc.           February 23, 1998
                                   Maritimes & Northeast
                                   Pipeline Limited
                                   Partnership

NSP US Holdings Inc.               Holding company                   100% owned by Emera Inc.           June 2, 1998

Scotia Holdings Inc.               U.S. Holding Co.                  100% owned by NSP US               November 2, 1998
                                                                     Holdings Inc.

Nova Power Holdings Inc.           U.S. Holding Co.                  100% owned by Scotia               December 7, 1998
                                                                     Holdings Inc.

Scotia Power U.S. Ltd.             U.S. Incorporation.  Owns         100% owned by Nova                 December 13, 1996
                                   U.S. portion of pipeline          Power Holdings Inc.
                                   (owns 12.5% interest in
                                   Maritimes & Northeast
                                   Pipeline, L.L.C.)
</TABLE>


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