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<SEC-DOCUMENT>0000898080-03-000181.txt : 20030410
<SEC-HEADER>0000898080-03-000181.hdr.sgml : 20030410
<ACCEPTANCE-DATETIME>20030410103235
ACCESSION NUMBER:		0000898080-03-000181
CONFORMED SUBMISSION TYPE:	POS AMC
PUBLIC DOCUMENT COUNT:		3
FILED AS OF DATE:		20030410

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			EMERA INC
		CENTRAL INDEX KEY:			0001127248
		IRS NUMBER:				868143132
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		POS AMC
		SEC ACT:		1935 Act
		SEC FILE NUMBER:	070-09787
		FILM NUMBER:		03644838

	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>POS AMC
<SEQUENCE>1
<FILENAME>formposamc.txt
<DESCRIPTION>POST-EFFECTIVE AD. NO. 2
<TEXT>
                                                                File No. 70-9787
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                ------------------------------------------------
                         POST-EFFECTIVE AMENDMENT NO. 2
                                       TO
                                    FORM U-1
                             APPLICATION-DECLARATION
                                      UNDER
                 THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935

                ------------------------------------------------
                               Emera Incorporated
                                  P.O. Box 910
                              Halifax, Nova Scotia
                                     Canada
                                     B3J 2W5

                             Emera US Holdings Inc.
                                BHE Holdings Inc.
                               566 Washington Road
                            Rye, New Hampshire 03870
                ------------------------------------------------
                               Emera Incorporated
                (Name of top registered holding company parent of
                          each applicant or declarant)
                ------------------------------------------------
                                Richard J. Smith
                     Corporate Secretary and General Counsel
                                   Emera Inc.
                                  P.O. Box 910
                              Halifax, Nova Scotia
                                     Canada
                                     B3J 2W5
                 -----------------------------------------------
                     (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
                     LeBoeuf, Lamb, Greene & MacRae, L.L.P.
                          1875 Connecticut Avenue, N.W.
                                   Suite 1200
                           Washington, D.C. 20009-5728
                              Phone (202) 986-8000
                               Fax (202) 986-8102


                                       2

<PAGE>


     This Post-Effective Amendment No. 2 revises the Form U-1
Application/Declaration in this proceeding, originally filed in File No. 70-9787
on November 6, 2000 and as last amended and restated by Amendment No. 4, filed
October 3, 2001. On March 2, 2002, Emera Inc. filed Post-Effective Amendment No.
1 in File No. 70-9787. That amendment described the proposed arrangements for
the provision of services among the Emera system companies and sought certain
relief under Section 13 of the Public Utility Holding Company Act of 1935 and
Rule 83 thereunder. The subject of Post-Effective Amendment No. 1 is separate
and distinct from the relief requested in this Post-Effective Amendment No. 2.

ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION

Introduction

     By order dated October 1, 2001, the Commission granted the
application/declaration of Emera Incorporated ("Emera") to acquire the
outstanding common stock of Bangor Hydro-Electric Company ("BHE") and its
public-utility subsidiary companies (the "Merger") under the Public Utility
Holding Company Act of 1935 (the "1935 Act" or "Act"). Emera Inc., Holding Co.
Act Release No. 27445 (October 1, 2001) ("Merger Order"). In the Merger Order,
the Commission also granted Emera financing, affiliate transaction and other
authorizations necessary to operate a registered holding company system in
accordance with the Act. Following issuance of the Merger Order, Emera's
indirect wholly-owned Delaware subsidiary, BHE Holdings Inc. ("BHE Holdings"),
acquired the common stock of BHE. BHE Holdings is a wholly-owned subsidiary of
Emera US Holdings Inc. ("Emera US"), which is wholly-owned by Emera. On October
11, 2001, Emera, Emera US and BHE Holdings registered as holding companies under
the Act.

The Proposed Tax Allocation Agreement

     In the Merger Order, the Commission reserved jurisdiction over a proposed
Tax Allocation Agreement ("TAA"), provided as Exhibit M-1 to the Application and
restated in this amendment, pending completion of the record. Emera, Emera US
and BHE Holdings (collectively, the "Applicants") are filing this post-effective
amendment to supplement the record with regard to the proposed TAA and to
request that the Commission release jurisdiction over


                                       3

<PAGE>

this matter and authorize the proposed TAA. The agreement and the statutory
basis for its authorization are discussed in detail in Item 3, below.

Rule 54 Analysis

     The proposed transaction is also subject to Rule 54, which refers to Rule
53. Under Rule 53, a registered holding company may not issue any security
(including any guarantee) for the purpose of financing the acquisition of the
securities of or other interest in an exempt wholesale generator ("EWG") unless
certain conditions are satisfied. Rule 54 provides that the Commission shall not
consider the effect of the capitalization or earnings of any subsidiaries of a
registered holding company that are EWGs or foreign utility companies ("FUCOs")
in determining whether to approve other transactions if Rule 53(a), (b) and (c)
are satisfied. These standards are met.

     Rule 53(a)(1): Emera's "aggregate investment" in EWGs and FUCOs was
approximately CDN $1,053.6 million (US $667.8 million), or approximately 318.5%
of Emera's "consolidated retained earnings" (as defined in Rule 53(a)) at
December 31, 2002 (CDN $328.9 million, US $209.7 million).

     Rule 53(a)(2): Emera maintains books and records enabling it to identify
investments in and earnings from each EWG and FUCO in which it directly or
indirectly acquires and holds an interest. Emera will cause each US-organized
EWG in which it acquires and holds an interest to maintain its books and records
and prepare its financial statements in conformity with U.S. generally accepted
accounting principles ("GAAP"). Emera will cause each foreign-organized EWG and
FUCO that is a majority-owned subsidiary to maintain its financial statements in
accordance with US GAAP or Canadian GAAP and will reconcile Canadian GAAP
statements to US GAAP in the same manner as required by Form 20-F if these
statements are provided to the Commission. All of such books and records and
financial statements will be made available to the Commission, in English, upon
request.

     Rule 53(a)(3): No more than 2% of the employees of the BHE will, at any one
time, directly or indirectly, render services to EWGs and FUCOs.


                                       4

<PAGE>

     Rule 53(a)(4): Emera will submit copies of the applicable filings made with
the Commission to the Maine Public Service Commission, the state regulatory
commission having jurisdiction over the retail rates of BHE.

     In addition, Emera states that none of the adverse conditions specified in
Rule 53(b) exists. Emera provided a detailed explanation of its compliance with
Rule 53(c) in its application in SEC File No. 70-9787, Pre-effective Amendment
No. 3 (filed August 31, 2001) which is hereby incorporated by reference. Rule
53(c) is therefore satisfied.

ITEM 2. FEES, COMMISSIONS, AND EXPENSES

     The incremental fees, commissions and expenses incurred or to be incurred
in connection with this Amendment are estimated at not more than $15,000.

ITEM 3. APPLICABLE STATUTORY PROVISIONS

Introduction

     Emera financed the cash consideration paid to BHE shareholders by issuing
CDN $314 million (US $200 million) of bank debt. The proceeds of the bank debt
were loaned by Emera through to Emera US and on-loaned to BHE Holdings in
exchange for preferred shares.\1 BHE Holdings used the proceeds of the financing
to acquire the common stock equity of BHE from its shareholders. Applicants
expect that the annual interest expense incurred by Emera US and BHE Holdings in
connection with the debt incurred to finance the BHE acquisition will be
approximately CDN $14 million (US $9 million) per year.

     The companies in Emera's US group; Emera US, BHE Holdings, BHE, and BHE's
direct and indirect subsidiary companies (but not including Maine Electric Power
Co.) (the "Group"), will file a consolidated income tax return. The interest
expense on the debt incurred by Emera


- ------------------------
1/ The notional amount of the preferred shares is effectively treated as debt
for tax purposes.


                                       5
<PAGE>

US and BHE Holdings to fund the acquisition of BHE ("Acquisition
Indebtedness")\2 will offset part of the Group's consolidated taxable income
and, consequently, reduce the overall tax liability of the Group. It is
estimated that financing cost deductions related to the Acquisition Indebtedness
would reduce the Group's consolidated tax liability by US $3.6 million in each
of the years 2002, 2003 and 2004, assuming a 40% tax rate on the estimated
consolidated taxable income of the Group.

     The TAA to be entered into among the Group companies describes the manner
of allocating the benefits and burdens associated with the filing of
consolidated income tax returns. It would apply to consolidated income tax
returns filed by the Group for periods subsequent to the consummation of the
Merger. Because the TAA is an agreement for the allocation of US federal and
state tax liabilities, Emera and its Canadian-organized subsidiaries would not
be parties to the TAA.

     The TAA allocates the benefits and burdens associated with the filing of
consolidated income tax returns by the Group to the members ("Members"). The
allocation method under the TAA is designed to comply with US Treasury
Regulations under the Internal Revenue Code of 1986 as amended (the "Code"), and
with Rule 45(c) under the Act. The one exception with respect to Rule 45(c),
however, is that Emera US is permitted under the TAA to be reimbursed for the
tax benefit associated with the financing cost deductions on Acquisition
Indebtedness. Because the TAA differs from the requirements of Rule 45(c) in
that limited respect, specific authorization for the TAA was sought in Emera's
initial application for authorization to acquire BHE and is now being sought in
this post-effective amendment.

The Allocation Methodology of Emera US ' Proposed Tax Allocation Agreement

         The TAA specifies the methodology to be followed in allocating tax
liability payments and payments for the use of tax benefits among the Members.
The TAA apportions the federal consolidated tax liability of the Group among the
Members under the method described in


- ------------------------
2/ As defined in Section 1.1 of the proposed tax allocation agreement, the term
Acquisition Indebtedness also includes debt incurred by Emera for the purpose of
refinancing the indebtedness related to the acquisition and financing and
refinancing-related costs.


                                       6
<PAGE>

Sections 1.1502-33(d)(3) and 1.1552-1(a)(1) of the Code. The general effect of
this method is that the consolidated tax liability of the Group is apportioned
among the members of the Group according to the ratio that each Members
separately computed taxable income, for companies that have a taxable income,
bears to the Group's taxable income. Then the method allocates an additional
amount (the "Tax Benefit Amount") to each Member up to, but not greater than,
the excess, if any, of its separate return tax liability over the amount
allocated to such Member in the first step. The total of the Tax Benefit Amounts
allocated to Members is paid to the Members that had items of deduction, loss or
credits to which such Tax Benefit Amount is attributable.

     A registered holding company will generally have significant expenses from
managing the businesses that it holds (even disregarding acquisition debt
interest expenses) and little offsetting income since it is not directly engaged
in businesses.\3 Emera US's expenses create tax benefits that reduce the Tax
Benefit Amount paid by its subsidiaries. For this reason, for all subsidiaries
with separate taxable incomes, the Tax Benefit Amount plus the Member's portion
of the consolidated Group tax liability will generally be less than the Member's
separate tax liability. To make sure that a Member does not pay more than its
separate tax liability as a result of participating in the filing of a
consolidated tax return, the TAA provides that the Tax Benefit Amount allocated
to any Member should be up to, but not greater than, the excess, if any, of the
Member's separate return liability less that Member's share of the consolidated
tax liability.

     Under the TAA, Emera US is entitled to receive payment for tax benefits
attributable to the Acquisition Indebtedness. It is this aspect of the TAA that
differs from the allocation method specified by Rule 45(c). Under Rule 45(c)(5),
all associate companies with taxable income, and hence a positive allocation of
tax liability, are required to pay the amount allocated, but only the subsidiary
companies with tax benefits, and hence a negative allocation, are entitled to
receive current payment for their tax benefits. The term "associate company"
includes a holding company and all of its subsidiaries, whereas the term
"subsidiary company" is generally


- ------------------------
3/ In the event that Emera US had net taxable income rather than the typical
case where it would be expected to have a net loss, Emera US also would pay its
tax liability in the manner computed for all other Members.


                                       7
<PAGE>

understood to exclude holding companies. Because, as a technical matter, the TAA
does not comply with Rule 45(c), its authorization by Commission order is
necessary.

     Emera US will have responsibility for the preparation of consolidated tax
returns and managing payments made under the TAA. Tax Benefit Amount payments
made to Members contributing tax benefits to the consolidated return will be
made at approximately the same time the related payments of consolidated group
tax are made to the appropriate taxing authorities.

Statutory Basis for the Regulation of Tax Allocation Agreements

     Applicants request that the Commission authorize the TAA under Sections
12(b) and 12(f) of the Act. Section 12(b) of the Act states that a registered
holding company or subsidiary company thereof may not "lend or in any manner
extend its credit to or indemnify any company in the same holding company system
in contravention of such rules and regulations or orders as the Commission deems
necessary or appropriate in the public interest or for the protection of
investors or consumers or to prevent the circumvention of the provisions of this
title or the rules, regulations, or orders thereunder."

     Section 12(f) of the Act states that a registered holding company or
subsidiary company thereof may not "negotiate, enter into or take any step in
the performance of any transaction not otherwise unlawful under this title, with
any company in the same holding company system or with any affiliate of a
company in such holding company system in contravention of such rules,
regulations or orders regarding reports, accounts, costs, maintenance of
competitive conditions, disclosure of interest, duration of contracts, and
similar matters as the Commission deems necessary or appropriate in the public
interest or for the protection of investors or consumers or to prevent the
circumvention of the provisions of this title or the rules and regulations
thereunder."

     Rule 45(c) under the Act was adopted under Section 12 to regulate tax
allocation agreements because they could involve implicit loans, extensions of
credit or indemnities\4 and


- ------------------------
4/ Adoption of Amendment to Rule Governing Allocation of Consolidated Income
Taxes Among Member Companies of Registered Holding Company Systems, Rule
U-45(b)(6), Holding Co. Act Release No. 12776 (January 12, 1955).


                                       8
<PAGE>

because they had been used by holding companies to exploit utility companies
through the misallocation of consolidated tax return benefits.\5 Rule 45(c)
prescribes a method of allocating tax liability and sharing consolidated tax
return savings that is designed to prevent misallocations that would be
detrimental to utility subsidiaries and consumers. As a safe harbor rule, Rule
45(c) does not address all possible situations or allocation methods. It merely
provides an accepted method that the Commission has found to be consistent with
the Act.

     The TAA complies with Rule 45(c) in all respects except that it provides
that the tax benefits related to Acquisition Indebtedness may be retained by
Emera US. The Acquisition Indebtedness is non-recourse to BHE or the other Group
members. Because Emera US is legally obligated for the payment of the interest
expense, Emera US should properly retain the related tax benefits. Accordingly,
Emera US seeks an order of the Commission releasing jurisdiction and authorizing
the TAA.

The Commission Should Authorize the Proposed Agreement Under Section 12 of the
Act

     The Commission may authorize a tax allocation agreement by order under
Section 12 of the Act if it finds that the agreement is necessary or appropriate
in the public interest or for the protection of investors or consumers and does
not circumvent the provisions of the Act and the rules thereunder. The TAA
complies with the fundamental principle followed by the Commission in the
regulation of such agreements. In particular, the TAA satisfies the separate
return limitation; that no Member pay more under the agreement than such
Member's separate return tax liability.

     The separate return limitation has been the bedrock of the Commission's
policy in this area for 60 years. In 1941, the Commission adopted an amendment
to Rule U-45 to exempt a loan, extension of credit or an agreement of indemnity
arising out of a joint tax return filed by a holding company and its
subsidiaries.\6 Rule U-45(b)(6) conditioned the exemption upon the assumption by
the top company in the group of the primary responsibility for the payment of
any


- ------------------------
5/ Allocation of Consolidated Federal Income Tax Liability By Registered Holding
Companies and their Subsidiaries, Holding Co. Act Release No. 21767 (October 29,
1980) ("Rule 45(c) Proposing Release").

6/ Holding Company Act Release No. 2902 (July 23, 1941).


                                       9
<PAGE>

tax liability involved, subject to the right to contribution of the several
members of the group in an amount not exceeding as to any company that
percentage of the total tax which the individual tax of such company (if paid
under a separate return) would bear to the total amount of individual taxes for
all members of the group, for the particular tax period. At its inception
therefore, Rule U-45(b)(6) established the fundamental principle of the separate
return limitation and did not restrict holding companies from retaining the
benefit of any tax losses that they may have generated.

     In 1955, in response to the Commission's directive to make further study of
the subject of tax allocation, the SEC staff proposed, and the Commission
adopted, further amendments to Rule 45(b)(6).\7 The amendments required a tax
agreement to allocate the consolidated tax liability by either of two methods
prescribed in the Internal Revenue Code. One method allocated the consolidated
tax based on the proportion of taxable income attributable to each member and
the other method allocated the consolidated tax based on the proportion of each
member's separate return tax to the aggregate separate return tax of all the
group members. The amendment also reaffirmed the principle that the allocations
could not violate the separate return limit and, if excess tax would have been
allocated to a subsidiary company but for the separate return limit, that the
excess liability would be allocated among the other members of the group,
including the holding company, in direct proportion to the tax savings of each
member.

     In 1981, Rule 45(b)(6) was revised for the last time and redesignated Rule
45(c).\8 This revision was meant to eliminate the numerous declarations and
Commission orders which had been necessary because Rule 45(b)(6) did not
adequately address the case in which one or more operating companies in the
system suffers a loss. The allocation methods in Rule 45(b)(6) had been
interpreted to require sharing of tax liabilities and savings exclusively among
group companies with actual separate return tax liabilities or positive income.
Consequently, loss companies had been excluded from receiving the benefit of
their losses.


- ------------------------
7/ Holding Company Act Release No. 12776 (Jan. 12, 1955).

8/ Holding Company Act Release No. 21968 (Mar. 18, 1981) ("Rule 45(c) Adopting
Release").


                                       10
<PAGE>

     The Rule 45(c) Proposing Release observed that oil and gas exploration
subsidiaries often produced substantial losses, especially in the early years of
operation, because large up-front development expenses were immediately
deductible, while the income producing oil and gas production occurs
significantly later. The Commission considered it unfair to give the benefit of
losses generated by one company to another company in the group without payment.

     The Commission declined to extend this logic to losses generated by holding
companies because it considered a reimbursement of holding company expenses by a
subsidiary to be inconsistent with Section 13(a) of the Act.

          The corporate relationships required by the Act assure that the
          deductible corporate expenses of the holding company itself will
          always create a consolidated tax saving, since Section 13(a) of the
          Act precludes such expenses being passed on to the subsidiaries,
          through service charge or contract, so as to transform them into
          corporate deductions of the subsidiaries. In light of the legislative
          history referred to, an expense reimbursement of the holding company,
          in the guise of a tax allocation, would seem inconsistent with Section
          13(a). The exclusion in our earlier rule of the holding company from
          sharing in consolidated return savings was intentional and will
          continue. These considerations do not apply to other companies in the
          group that incur losses.\9

     The Commission's statement that Section 13(a) prohibits the recovery of all
holding company expenses from subsidiaries in the context of a tax allocation is
overbroad because it is clear that with regard to intrasystem loans it is
appropriate for a holding company to recover financing expenses incurred
consistent with Sections 6, 7, 9, 10 and 12 of the Act from subsidiaries.\10
These divergent positions can be reconciled by understanding the "matching"
principle of Rule 45(c).


- ------------------------
9/ Rule 45(c) Proposing Release at 6.

10/ Section 13 is concerned with fairness of allocation in charges for goods and
service contracts and the economical and efficient performance of such
contracts. Section 13 does not address financing transactions among companies in
a registered holding company system. Sections 6, 7, 9, 10 and 12 of the Act
cover intrasystem financing transactions and provide standards to assure that
such transactions are entered into on terms that are consistent with the public
interest and the interest of investors and consumers. Those provisions of the
Act do not prevent a holding company from charging reasonable and fair interest
on a loan to a subsidiary in connection with financing the subsidiary's
business.


                                       11
<PAGE>

     In addition to the separate return limitation, Rule 45(c) also embodies a
"matching" principle. "The rule specifies the amount to be allocated, that is,
the difference between the consolidated return and separate return results, and
establishes the principle of allocating to the individual members of the group
the material effects of any particular features of the tax law applicable to
them."\11 The example given above involving the oil exploration subsidiary that
does not benefit from its production expenses illustrates the unfairness that
results from violating the matching principle.

     The matching principle is particularly important when utility subsidiaries
are involved. The Act "deals principally with utility companies, whose rates are
separately regulated under procedures which assign material weight to taxes as
part of the cost of service. Uncompensated use of tax benefits intended for one
utility company, to reduce the costs of another utility company, permanently
assigns those benefits to an entirely different group of consumers, based solely
on the fortuity of the common ownership of the utility companies and the
relative timing of their respective periods of prosperity or distress."\12

     To illustrate, if a utility subsidiary earns investment tax credits from
building a plant, its tax liability should reflect the benefit of the credits
and its rates should also reflect the tax savings from the credits. Similarly,
if the holding company incurs legal expenses from a corporate reorganization
that may not properly be passed through to the subsidiary companies, the holding
company should retain the tax benefit produced by the expenses. The Rule 45(c)
Proposing Release observed: "The investment tax credit, an important addition to
the tax law subsequent to the adoption of [Rule 45(b)(6)], is similar in
significant respects to the tax loss. It is clearly identifiable to a particular
member of the group, its incidence has no necessary relationship to current
income, and its use in the consolidated return precludes a carryover by the
company entitled to it." When a holding company tax benefit can be identified as
clearly


- ------------------------
11/ Rule 45(c) Adopting Release at 2-3.

12/ Rule 45(c) Proposing Release at 10.


                                       12
<PAGE>

generated by or belonging to the holding company, it too should be permitted to
be retained by the holding company.

     The Acquisition Indebtedness that generated the tax benefits that Emera US
seeks to receive payment for under the TAA is "clearly identifiable to" Emera
US. The Acquisition Indebtedness is clearly an obligation of Emera US. It is not
backed by the credit of the other Members. BHE has not pledged its assets as
collateral to secure the Acquisition Indebtedness, it has not guaranteed the
debt, nor is it obligated to pay interest or principal payments to service the
Acquisition Indebtedness. The Acquisition Indebtedness was used to acquire the
equity securities of BHE. The interest expense incurred by Emera US continues to
accrue whether or not BHE has net income or a net loss. Lastly, if net operating
losses incurred by Emera US as a result of the Acquisition Indebtedness are used
in the consolidated return, Emera US would be precluded from carrying over the
loss to future periods.

     This view of the Acquisition Indebtedness is consistent with the position
taken by the Commission's accounting staff under Staff Accounting Bulletin 54,
Question 3. In that bulletin, the staff was asked how to present subsidiary B's
financial statements where holding company A had borrowed funds to acquire
substantially all of subsidiary B's common stock. Subsidiary B had subsequently
filed a registration statement to issue equity or debt and the question
presented was whether subsidiary B's new basis ("push down") financial
statements should include holding company A's debt related to its purchase of
subsidiary B. The staff responded:

          The staff believes that Company A's debt, related interest expense,
          and allocable debt issue costs should be reflected in Company B's
          financial statements included in the public offering (or an initial
          registration under the Exchange Act) if: (1) Company B is to assume
          the debt of Company A, either presently or in a planned transaction in
          the future; (2) the proceeds of a debt or equity offering of Company B
          will be used to retire all or part of Company A's debt; or (3) Company
          B guarantees or pledges its assets as collateral for Company A's debt.

          Other relationships may exist between Company A and Company B, such as
          the pledge of Company B's stock as collateral for Company A's debt.
          While in this latter situation, it may be clear that Company B's cash
          flows will service all or part of Company A's debt, the staff does not
          insist that the debt be reflected in Company B's financial statements
          providing that


                                       13
<PAGE>

          there is full and prominent disclosure of the relationship between
          Companies A and B and the actual or potential cash flow commitment...

     Under these standards, the Acquisition Indebtedness is clearly an
obligation of Emera US and not an obligation of the other Members. Consequently,
the tax benefit related thereto should be permitted to be retained by Emera US.
The Commission reached the same conclusion in its order authorizing the parent
holding company of National Grid's US corporate group to retain the tax benefits
related to acquisition debt incurred in the merger with New England Electric
System ("NEES").\13 "In addition, because the NEES Group has no obligation with
respect to the Merger-Related Debt and the debt does not affect the NEES Group's
financial position or credit, it is not inappropriate to exclude these companies
from the benefits of the tax consequences arising out of the debt. Accordingly,
we approve the use of the Tax Allocation Agreement."\14

     The proposed tax allocation agreement is substantially similar to the tax
allocation agreement authorized by the Commission in the National Grid order
referenced above, and re-authorized in the Commission's order authorizing
National Grid's merger with Niagara Mohawk Holdings, Inc.\15 Recently, the
Commission staff also issued a similar order by delegated authority permitting
Progress Energy, Inc. to retain the tax benefit of acquisition debt incurred in
connection with the financing of Progress Energy's acquisition of Florida
Progress Corp.\16 The extensive record of precedent in this area strongly
supports a determination by the Commission to release jurisdiction over, and
authorize, the proposed TAA.

     To keep the Commission informed of the effect of the TAA on the Group,
Emera was required in the Commission's order authorizing the Merger to provide
the following supplemental information in its Annual Report on Form U5S:

     a.   The amount of any income tax credit and/or income tax liability
          incurred during the previous fiscal year by Emera (or one of the
          Intermediate Holding


- ------------------------
13/ National Grid Group plc, Holding Co. Act Release No. 27154 (March 15, 2000).

14/ Id. at 71.

15/ National Grid Group plc, Holding Co. Act Release No. 27490 (January 16,
2002).

16/ Progress Energy, Inc., Holding Co. Act Release No. 27522 (April 18, 2002).


                                       14
<PAGE>

          Companies): (i) as a result of any Merger-related debt, and (ii) as a
          result of any other income source or expense;

     b.   A description of how the income tax credit and/or income tax liability
          was calculated and allocated to all companies included in the
          consolidated tax return, including BHE and its domestic nonutilities,
          showing all of Emera's interest costs and any assumptions used in the
          calculation;

     c.   A description of how any Merger-related debt flows through all
          Intermediate Holding Companies;

     d.   A description of the amount and character of any payments made by each
          Intermediate Holding Company to any other Emera System company during
          the reporting period; and

     e.   A statement that the allocation of tax credits and liabilities was
          conducted in accordance with the Tax Allocation Agreement in effect
          and filed as an exhibit to the Form U5S.

Conclusion

     The proposed TAA is substantially the same in all material respects as the
tax allocation agreements previously authorized by the Commission cited above.
It is consistent with Rule 45(c), except to the limited extent that it allows
Emera US to retain the tax benefit associated with the Acquisition Indebtedness.
The TAA is also consistent with Section 12 of the Act, the general investor,
consumer and public interest standards of the Act, and with the policy reasons
underlying the Commission's adoption of Rule 45(c), in particular, the separate
return limit and the matching principle. The proposed TAA presents no novel
issues under the Act and the Commission staff may release jurisdiction and
authorize the TAA by delegated authority.

     For all these reasons, the Commission should authorize Applicants' proposed
tax allocation agreement.

ITEM 4.  REGULATORY APPROVAL

     No state commission and no federal commission, other than this Commission,
has jurisdiction over the proposed transaction.


                                       15
<PAGE>

ITEM 5.  PROCEDURE

     The Commission is respectfully requested to issue the authorization
requested herein forthwith. The requisite notice under Rule 23 with respect to
this transaction was published on May 29, 2001 (Holding Co. Act Release No.
27409).

ITEM 6.  EXHIBITS AND FINANCIAL STATEMENTS

     A.   Exhibits

F-4      Opinion of Counsel

M-1      Form of Tax Allocation Agreement

     B.   Financial Statements

Not applicable

ITEM 7.  INFORMATION AS TO ENVIRONMENTAL EFFECTS

     The proposed transaction 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.


                                       16
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned companies have duly caused this post-effective amendment
to their Application to be signed on their behalf by the undersigned thereunto
duly authorized.

- --------------------------------------------------------------------------------
Date:  April 10, 2003                |   Emera Incorporated
                                     |
                                     |   By: //s//
                                     |       ------------------
                                     |   Name:  Richard J. Smith
                                     |   Title: Corporate Secretary and General
                                     |   Counsel
                                     |
- --------------------------------------------------------------------------------
Date:  April 10, 2003                |   Emera US Holdings Inc.
                                     |   BHE Holdings Inc.
                                     |
                                     |
                                     |   By: //s//
                                     |       -----------------------
                                     |   Name: A. Michael Burnell
                                     |         -------------------------
                                     |   Title: President and Secretary
                                     |          --------------------------
- --------------------------------------------------------------------------------


                                       17
<PAGE>

                                  Exhibit Index

F-4  Opinion of Counsel

M-1  Form of Tax Allocation Agreement


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>3
<FILENAME>ex991.txt
<DESCRIPTION>EXHIBIT F-4
<TEXT>
                                                                     EXHIBIT F-4

                                 April 10, 2003





Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Application on Form U-1 of Emera Inc. (File No. 70-9787)

Ladies and Gentlemen:

I am familiar with the application on Form U-1, as amended, referred to above
relating to the proposal by Emera Inc. ("Emera") and its registered holding
company subsidiaries Emera US Holdings Inc. ("EUSH") and BHE Holdings Inc.
("BHEH") to request that the Commission authorize a proposed tax allocation
agreement.

I am of the opinion that Emera is validly organized and duly existing as a
corporation under the laws of the Province of Nova Scotia and that EUSH and BHEH
are validly organized and duly existing as corporations under the laws of the
State of Delaware. In the event that the proposed tax allocation agreement is
entered into in accordance with the application and the order of the Commission:

(a) all state laws applicable to the proposed transaction will have been
complied with; and

(b) the proposed transaction will not violate the legal rights of the holders of
any securities issued by Emera or its subsidiaries.

I hereby consent to the use of this opinion in connection with the
above-referenced application.

                                        Very truly yours,

                                        //s//


                                        Richard J. Smith
                                        Corporate Secretary and General Counsel
                                        Emera Inc.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>4
<FILENAME>ex992.txt
<DESCRIPTION>EXHIBIT M-1
<TEXT>
EXHIBIT M-1

                         CONSOLIDATED FEDERAL INCOME TAX
                    ALLOCATION AGREEMENT AMONG MEMBERS OF THE
                     EMERA US HOLDINGS INC. AFFILIATED GROUP


          WHEREAS, Emera US Holdings Inc., a corporation organized under the
laws of the State of Delaware ("EUSH") and a registered holding company under
the Public Utility Holding Company Act of 1935 ("Act"), together with its
subsidiary companies, direct and indirect, listed in Appendix A, comprise the
members of the EUSH consolidated group which will join annually in the filing of
a consolidated Federal income tax return, and it is now the intention of EUSH
and its subsidiaries, direct and indirect, (hereinafter collectively referred to
as the "Group"), to enter into an agreement for the allocation of federal income
taxes; and

          WHEREAS, certain members of the Group will join annually in the filing
of certain consolidated state income tax returns (to the extent permitted or
required under applicable state income tax laws), and it is now the intention of
the Group to enter into an agreement for the allocation of state income taxes;
and

          WHEREAS, by order dated [______________], 2003, the Securities and
Exchange Commission has authorized EUSH and its subsidiaries to enter into this
agreement as of October 1, 2001 and to allocate consolidated income taxes in the
manner herein provided; and

          NOW, THEREFORE, each member ("Member") of the Group does hereby
covenant and agree with one another that the current consolidated income tax
liabilities of the Group shall be allocated as follows:

                                   ARTICLE I.

                         Definitions and Interpretation

Section 1.1 Definitions.

For all purposes of this Agreement, except as otherwise expressly provided, the
following terms shall have the following respective meanings:

"Acquisition Indebtedness" means indebtedness incurred by Emera Inc. ("Emera")
to finance the acquisition (including related costs) by BHE Holdings Inc.,
through EUSH, of all of the issued and outstanding stock of Bangor
Hydro-Electric Company ("BHE") and any renewals or extensions thereof.
Acquisition Indebtedness also includes indebtedness incurred by Emera for the
purpose of refinancing the indebtedness relating to the acquisition (including
related costs) of all of the issued and outstanding stock of BHE.

"Code" means the Internal Revenue Code of 1986, as amended.


<PAGE>

"Consolidated Group" means EUSH and all of its subsidiaries which, from time to
time, may be included in any (i) federal income tax return filed by EUSH in
accordance with sections 1501 and 1502 of the Code or (ii) Other Return.

"Consolidated Return" means any consolidated federal income tax return or Other
Return filed by EUSH whether before or after the date hereof, which includes one
or more Members of the Group in a consolidated, combined or unitary group of
which EUSH is the common parent.

"Consolidated Return Year" means any period during which EUSH files a
consolidated federal income tax return or Other Return that includes one or more
Members of the Group in a consolidated, combined or unitary group of which EUSH
is a common parent.

"Consolidated Taxable Income" is the taxable income of the Group as computed for
federal or state income tax purposes.

"Consolidated Tax Liability" means, with reference to any taxable period, the
consolidated, combined or unitary tax liability (including any interest,
additions to tax and penalties) of the Consolidated Group for such taxable
period (including the consolidated federal income tax liability and other
consolidated, combined or unitary liability for Other Taxes).

"Corporate Taxable Income" means the income or loss of an associate company for
a tax year computed as though such company had filed a separate return on the
same basis as used in the Consolidated Return, except that dividend income from
associate companies shall be disregarded, and other intercompany transactions
eliminated in the Consolidated Return shall be given appropriate effect.

"Designated Official" means A. Michael Burnell, President of EUSH or such other
official assigned such responsibilities.

"Other Return" means any consolidated, combined or unitary return of Other Taxes
filed by EUSH or another Member of the Group, whether before or after the date
hereof, which covers the operations of one or more Members of the Group.

"Other Taxes" means any taxes (including any interest and penalties) payable by
EUSH or another Member of the Group to the government of any state, municipal or
other political subdivision, including all agencies and instrumentalities of
such government.

"Person" means any individual, partnership, form, corporation, limited liability
company, joint stock company, unincorporated association, joint venture, trust
or other entity or enterprise, or any government or political subdivision or
agency, department or instrumentality thereof.

"Regulations" means the Treasury Regulations promulgated under the Code.

"Separate Return Tax" means the tax on the Corporate Taxable Income of a
corporation which is a Member computed for purposes of this Agreement as though
such company were not a Member of a consolidated group.


<PAGE>

Section 1.2 References, Etc.

          The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined herein in
the singular shall have the same meanings in the plural and vice versa. All
References herein to any Person includes such Person's successors and assigns.
All references herein to Articles and Sections shall, unless the context
requires a different construction, be deemed to be references to the Articles
and Sections of this Agreement. In this Agreement, unless a clear contrary
intention appears the word "including" (and with correlative meaning "include")
means "including but not limited to".

                                   ARTICLE II.

           Preparation and Filing of Tax Returns; Allocation of Taxes

Section 2.1 Federal Returns.

(a) A U.S. consolidated federal income tax return shall be prepared and filed by
EUSH for each taxable year in respect of which this Agreement is in effect and
for which the Consolidated Group is required or permitted to file a consolidated
federal income tax return. EUSH and all its subsidiaries shall execute and file
such consents, elections and other documents that may be required or appropriate
for the proper filing of such returns.

(b) (i) The Consolidated Group will elect, on a timely basis, in accordance with
Code Section 1552(a)(i) and Section 1.1552-1(c)(2) of the Regulations to
allocate its consolidated tax liability (other than alternative minimum tax
("AMT") and its related credits) among its Members under the method described in
Sections 1.1502-33(d)(3) and 1.1552-1(a)(1) commencing with the consolidated
taxable year ended December 31, 2001. The fixed percentage to be used for
purposes of Regulations Section 1.1502-33(d)(3)(i) is 100%. The general effect
of such method is that the Consolidated Tax Liability (other than AMT and its
related credits) of the Consolidated Group shall be apportioned among the
members of the Consolidated Group with the ratio that each Members separately
computed taxable income under 1.1552-1(a)(1), for companies that have a taxable
income, bears to the Consolidated Group's taxable income. Then such method
allocates an additional amount (the "Tax Benefit Amount") to each Member up to,
but not greater than, the excess, if any, of its Separate Return Tax liability
(other than AMT and its related credits) over the amount allocated to such
Member in the previous sentence. The total of the Tax Benefit Amounts allocated
to Members shall result in payments to, and an increase in the earnings and
profits of, the Members who had items of deduction, loss or credits to which
such Tax Benefit Amount is attributable. This election is intended to comply
with Rule 45(c)(5) under the Act, as modified by Section 2(d) below. (ii) The
allocation of the alternative minimum tax liability incurred by the Group and
the resulting minimum tax credit shall be allocated in the manner set forth in
Proposed and Temporary Treasury Regulation Sections 1.1502-55. This method
generally allocates (i) any AMT paid by the Group based on the relative separate
adjusted AMT of each Member and (ii) the minimum tax credit ("AMTC") on the
basis of the AMT previously assigned to such Member and assuming that AMTC is
utilized on a "first in/first out" methodology, and that to the extent that AMTC
arising in one year is not fully


<PAGE>

utilized, such AMTC is utilized proportionately by the Members previously
assigned AMT for that year.

(c) Each Member's allocable share of the consolidated income tax liability as
determined in Section 2.1(b) hereby shall be used in both (i) the determination
of each Member's earnings and profits and (ii) determining the amounts to be
paid (as provided in Section 3.4 of this Agreement) by Members to EUSH with
respect to each Member's share of the Consolidated Group's Tax liability and
payments from EUSH to Members with respect to the use of a Member's tax
attributes.

(d) (i) The aggregate of all amounts paid by Members of the Consolidated Group
(the "Paying Members") as a result of the excess of each Members' Separate
Return Tax liability (as determined under Section 1.1552-1(a)(2)(ii) of the
Regulations) over the amount allocated to such Member as its share of the
Consolidated Tax Liability under Code Section 1552 (i.e., the Tax Benefit
Amount) shall be paid by EUSH to the other Members (the "Loss Members") which
had tax deductions, losses and credits to which such payments by the Paying
Members are attributable. The apportionment of such payments among Loss Members
shall be in a manner that reflects the Consolidated Group's absorption of such
tax attributes in the manner described in Section 2.1(e) below. The payments to
the Loss Members for their tax attributes shall be pursuant to a consistent
method which reasonably reflects such items of loss or credit (such consistency
and reasonableness to be determined by the Designated Official).

(ii) Notwithstanding the provisions of section 2.1(d)(i), the Tax Benefit Amount
allocated to EUSH and paid to EUSH as a result of its being a Loss Member shall
be limited to the lesser of the tax benefit of it's financing cost deduction
attributable to Acquisition Indebtedness or the tax benefit of it's separate tax
loss. The portion of EUSH' tax benefits which cannot be allocated and paid to
EUSH due to the operation of this Section shall be reallocated to Paying Members
of the Consolidated Group other than EUSH in accordance with the principles
contained in section 2.1(b)(i).

(e) In apportioning the payments to Loss Members for the Tax Benefit Amount
pursuant to Section 2.1(d) hereof:

(i) any consolidated net operating loss ("NOL") shall be allocated among the
group Members pursuant to Regulations Section 1.1502-21(b). To the extent the
consolidated NOL is carried back, any Member's individually allocable NOL shall
be deemed carried back and utilized in proportion to the amount that the
Member's NOL bears to the consolidated NOL. Analogous principles shall apply in
the case of NOL carryforwards;

(ii) with respect to each type of credit used to offset all or a portion of the
Consolidated Tax Liability otherwise payable, such credit shall be allocated
among the Members by crediting to each Member an amount of credit which that
Member would have available to utilize on a separate return basis in a manner
consistent with the method set forth in Section 2.1(e)(i) above.

(iii) the cost of any credit recapture which results in the payment of tax shall
be specifically allocated to the Member whose credit is recaptured determined in
a manner consistent with the provisions of Section 2.1(e)(i) above.


<PAGE>

(f) The allocation of tax shall be subject to further adjustment from time to
time on account of the payment of additional tax or the receipt of a refund
attributable to either the filing of an amended return or on account of the
results of an audit conducted by the Internal Revenue Service or other relevant
taxing authority.

Section 2.2 Other Taxes.

(a) EUSH will prepare and file (or cause to be prepared and filed) all returns
of Other Taxes which are required to be filed with respect to the operations of
EUSH and its subsidiaries. In the event any taxing authority requires or permits
that a combined, consolidated or unitary return be filed for Other Taxes, which
return includes both EUSH and a subsidiary, EUSH may elect to file such return
and shall have the right to require any Member to be included in such return.
EUSH will advise each of its subsidiaries included in each Other Return and each
governmental office in which any Other Return is filed. Other Taxes shall be
allocated among the Group in a manner that is consistent with the method set
forth in Article 2 hereof. Furthermore, amounts due to or from EUSH with respect
to Other Taxes, shall be determined in a manner consistent with Sections 2.1(b)
and 2.1(d).

(b) Each Member of the Group that does not file an Other Return together with
any other Member of the Group shall be solely responsible and obligated to pay
the tax liability with respect to such return from its own funds. Such returns
shall be prepared and filed by EUSH or the Member filing the Other Return.

(c) If any Member of the Group is required to file a combined, consolidated or
unitary return for Other Taxes with another Member of the EUSH Group, but not
with EUSH (an "Other Taxes Subgroup"), then EUSH shall have the rights, powers
and obligations to file such tax returns and apportion among and, collect and
remit from, the applicable Members such Other Taxes as the rights, powers and
obligations given to EUSH under this Agreement with respect to the Consolidated
Tax Liability. Such returns shall be prepared and filed by EUSH. If the right to
file a combined, consolidated or unitary return for Other Taxes is optional,
then EUSH shall decide which of its subsidiaries should, to the extent permitted
by law, join in the filing of such return.

Section 2.3 Member Tax Information.

          The Members of the Consolidated Group shall submit the tax information
requested by the Designated Official of EUSH in the manner and by the date
requested, in order to enable the Designated Official to calculate the amounts
payable by the Members pursuant to Article 3 hereof.

                                  ARTICLE III.

                  Responsibility For Tax; Intercompany Payments

Section 3.1 Responsibility.

          Assuming the Members of the Consolidated Group have fulfilled their
obligations pursuant to this Article III, then EUSH will be solely responsible
for, and will indemnify and


<PAGE>

hold each Member of the Consolidated Group harmless with respect to, the payment
of: (a) the Consolidated Tax Liability for each taxable period for which, as
determined under Section 2.1 hereof, EUSH filed or should have filed a
Consolidated Return; and (b) any and all Other Taxes due or payable with respect
to any Other Return which is or should have been filed by EUSH.

Section 3.2 Federal Tax Payments.

(a) With respect to each Consolidated Return Year, the Designated Official shall
estimate and assess or pay to Members of the Consolidated Group their share of
estimated tax payments to be made on a projected consolidated federal income tax
return for each year. In making this determination, EUSH shall elect a method
for determining estimated tax and each Member shall follow that method. Such
Members will pay, to EUSH or be paid by EUSH, such estimates not later than the
15th day of the 4th, 6th, 9th and 12th months of such Consolidated Return Year.
With respect to any extension payment, the Designated Official shall estimate
and assess or pay to Members of the Consolidated Group their share of such
extension payment. The difference between (1) a Member's estimated tax payments
used for computation of the quarterly estimated payments plus their extension
payments and (2) such Member's actual Tax Liability for any Consolidated Return
Year as determined under Section 2.1(b) hereof, shall be paid to EUSH or by EUSH
within sixty (60) days after the filing of the consolidated federal income tax
return.

(b) EUSH shall have sole authority, to the exclusion of all other Members of the
Consolidated Group, to agree to any adjustment proposed by the Internal Revenue
Service or any other taxing authority with respect to items of income,
deductions or credits, as well as interest or penalties, attributable to any
Member of the Consolidated Group during any Consolidated Return Year in which
such Member was a Member of the Consolidated Group notwithstanding that such
adjustment may increase the amounts payable by Members of the Consolidated Group
under this Section 3.2 or Section 3.3 hereof. In the event of any adjustment to
the Consolidated Tax Liability relating to items of income, deductions or
credit, as well as interest or penalties, attributable to any Member of the
Consolidated Group by reason of an amended return, claim for refund or audit by
the Internal Revenue Service or any other taxing authority, the liability of all
other Members of the Consolidated Group under paragraphs (a) of this Section 3.2
or Section 3.3 hereof shall be redetermined to give effect to such adjustment as
if such adjustment had been made as a part of the original computation of such
liability, and payment from a Member to EUSH or by EUSH to a Member, as the case
may be, shall be promptly made after any payments are made to the Internal
Revenue Service or any other taxing authority, refunds received or final
determination of the matter in the case of contested proceedings. In such event,
any payments between the parties shall bear interest at the then prevailing rate
or rates on deficiencies assessed by the Internal Revenue Service or any other
relevant taxing authority, during the period from the due date of the
Consolidated Return (determined without regard to extensions of time for the
filing thereof) for the Consolidated Return Year to which the adjustments were
made to the date of payment.

Section 3.3 Other Tax Payments.

          Payments by a Member with respect to Other Taxes and required
estimates thereof for which any other Member has joint and several liability
shall be calculated and made by or to such Member in the same manner as that
provided in Section 3.2. The principles set


<PAGE>

forth in Section 3.2 governing the determination and adjustment of payments as
well as the method of payment to or from such Member with respect to federal
income taxes shall be equally applicable in determining and adjusting the amount
of and due date of payments to be made to or from such subsidiary with respect
to Other Taxes and estimates thereof. Each Member shall pay, directly to the
appropriate taxing authority, all taxes for which such Member is liable and for
which no other Member has joint or several liability.

Section 3.4 Payment Mechanics.

(a) Any payments to be made by a subsidiary of EUSH pursuant to Section 2.1,
2.2, 3.2 or 3.3 hereof shall be made by such subsidiary to EUSH by either
promptly crediting as an offset against amounts owed to such Member by EUSH or
to the extent no amounts are owed to such Member by EUSH, by cash payments to
EUSH. To the extent any payments are to be made to a subsidiary with respect to
the use of such subsidiary's tax attributes by the Consolidated Group pursuant
to Section 2.1, 2.2, 3.2 or 3.3 hereof, EUSH shall make such payment to such
subsidiary by either promptly crediting as an offset against amounts owed by
such Member to EUSH, or to the extent no amounts are owed to EUSH by such
Member, by cash payments to the Member.

(b) Tax payments by EUSH with respect to any Consolidated Tax Liability shall be
paid by EUSH and shall be debited to the Member of the Consolidated Group for
their respective shares of such Consolidated Tax Liability as determined
pursuant to Article II hereof. Tax refunds received by EUSH with respect to any
Consolidated Tax Liability, shall be paid by EUSH to the Member of the
Consolidated Group entitled to such tax refund, as determined under Article II.

(c) EUSH shall be responsible for maintaining the books and records with respect
to the inter-company accounts reflecting the amounts owned, collected and paid
with respect to taxes pursuant to this Agreement.

(d) EUSH may delegate to other Members of the Consolidated Group
responsibilities for the collection and disbursement of monies as required under
this Agreement as well as responsibilities for maintaining books and records as
required under this Agreement.

Section 3.5 Administration.

          The provisions of this Agreement shall be administered by the
Designated Official. The interpretations of this Agreement by the Designated
Official shall be conclusive.

                                   ARTICLE IV.

                            Miscellaneous Provisions

Section 4.1 Effect.

          The provisions hereof shall fix the rights and obligations of the
parties as to the matters covered hereby whether or not such are followed for
federal income tax or other purposes by the Consolidated Group, including the
computation of earnings and profits for federal income tax purposes.


<PAGE>

Section 4.2 Effective Date and Termination of Affiliation.

          This Agreement shall be effective with respect to all taxable years
ending on or after October 1, 2001, in which any subsidiary of EUSH is a Member
of the Consolidated Group for any portion of the tax year. In the event that a
party to this Agreement ceases to be a Member of the Consolidated Group, the
rights and obligations of such party and each other party to this Agreement
shall survive, but only with respect to taxable years including or ending before
the date such party ceases to be a Member of the Consolidated Group.

Section 4.3 Notices.

          Any and all notices, requests or other communications hereunder shall
be given in writing (a) if to EUSH to Attention:  A. Michael Burnell, Facsimile
Number: ____ and (b) if to any other person, at such other address as shall be
furnished by such person by like notice to the other parties.

Section 4.4 Expenses.

          Each party hereto shall pay its own expenses incident to this
Agreement and the transactions contemplated hereby, including all legal and
accounting fees and disbursements.

Section 4.5 Benefit and Burden.

          This Agreement shall inure to the benefit of, and shall be binding
upon, the parties hereto and their respective successors.

Section 4.6 Amendments and Waiver.

          No amendment, modification, change or cancellation of this Agreement
shall be valid unless the same is in writing and signed by the parties hereto.
No waiver of any provision of this Agreement shall be valid unless in writing
and signed by the person against whom that waiver is sought to be enforced. The
failure of any party at any time to insist upon strict performance of any
condition, promise, agreement or understanding set forth herein shall not be
construed as a waiver or relinquishment of the right to insist upon strict
performance of the same or any other condition, promise, agreement or
understanding at a future time.

Section 4.7 Assignments.

          Neither this Agreement nor any right, interest or obligation hereunder
may be assigned by any party hereto and any attempt to do so shall be null and
void.

Section 4.8 Severability.

          The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement shall
be construed in all respects as if such invalid or unenforceable provision were
omitted.


<PAGE>

Section 4.9 Entire Agreement.

          THIS AGREEMENT SETS FORTH ALL OF THE PROMISES, AGREEMENTS, CONDITIONS,
UNDERSTANDINGS, WARRANTIES AND REPRESENTATIONS AMONG THE PARTIES WITH RESPECT TO
THE TRANSACTIONS CONTEMPLATED HEREBY, AND SUPERSEDES ALL PRIOR AGREEMENTS,
ARRANGEMENTS AND UNDERSTANDINGS BETWEEN THE PARTIES HERETO, WHETHER WRITTEN,
ORAL OR OTHERWISE. THERE ARE NO PROMISES, AGREEMENTS, CONDITIONS,
UNDERSTANDINGS, WARRANTIES OR REPRESENTATIONS, ORAL OR WRITTEN, EXPRESS OR
IMPLIED, AMONG THE PARTIES EXCEPT AS SET FORTH HEREIN.

Section 4.10 Applicable Law.

          THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE.

Section 4.11 Counterparts.

          This Agreement may be executed in one or more counterparts, each of
which shall constitute an original and together which shall constitute one
instrument. The parties hereto specifically recognize that from time to time
other corporations may become Members of the Consolidated Group and hereby agree
that such new Members may become Members to this Agreement by executing a copy
of this Agreement and it will be effective as if all the Members had re-signed.

Section 4.12 Attorneys' Fees.

          If any Member or former Member hereto commences an action against
another party to enforce any of the terms, covenants, conditions or provisions
of this Agreement, or because of a default by a party under this Agreement, the
prevailing party in any such action shall be entitled to recover its costs,
expenses and losses, including attorneys' fees, incurred in connection with the
prosecution or defense of such action from the losing party.

Section 4.13 No Third Party Rights.

          Nothing in this Agreement shall be deemed to create any right in any
creditor or other person or entity not a party hereto and this Agreement shall
not be construed in any respect to be a contract in whole or in part for the
benefit of any third party.

Section 4.14 Further Documents.

          The parties agree to execute any and all documents, and to perform any
and all other acts, reasonably necessary to accomplish the purposes of this
Agreement.


<PAGE>

Section 4.15 Headings and Captions.

          The headings and captions contained in this Agreement are inserted and
included solely for convenience and shall not be considered or given any effect
in construing the provisions hereof if any question of intent should arise.

Section 4.16 Departing Members

(a) In the event that any Member of the Group at any time leaves the Group and,
under any applicable statutory provision or regulation, that Member is assigned
and deemed to take with it all or a portion of any of the tax attributes of the
Group (including but not limited to NOL, credit carry forwards, and AMTC carry
forwards), then to the extent that the amount of tax attributes so assigned
differs from the amount of such attributes previously allocated to such Member
under this agreement, the departing Member shall appropriately settle with the
Group. Such settlement shall consist of payment (1) on a dollar for dollar basis
for all differences in credits, and, (2) in the case of NOL differences (or
other differences related to other deductions), in a dollar amount computed by
reference to the amount of NOL multiplied by the applicable tax rate relating to
such NOL. The settlement payment shall be paid to EUSH within sixty days after
the Member leaves the Group. The settlement amounts shall be allocated among the
remaining Members of the Group in proportion to the relative level of attributes
possessed by each Member and the attributes of each Member shall be adjusted
accordingly.

(b) Upon the departure of any Member from the Group, such Member shall allocate
its items of income, deduction, loss and credit between the period that it was a
Member of the Group and the period thereafter based upon a closing of the books
methodology allowed under Treasury Regulation Section 1.1502-76(b)(2). The
difference between (1) its prior estimated taxes or payments of Tax Benefit and
(2) the amount of taxes due or payments of Tax Benefit due to that Member, shall
be appropriately settled on the day such Member leaves the Group or on an
alternative date mutually agreeable in writing to the Group and the departing
Member.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed, each in its name and on its behalf by one of its officers duly
authorized.

[signatures]

<PAGE>

Appendix A


Members of the EUSH Consolidated Group
- --------------------------------------


          Name of Company                                Incorporation
          ---------------                                -------------

Emera US Holdings Inc.                                     Delaware

BHE Holdings Inc.                                          Delaware

Bangor Hydro-Electric Company                               Maine

Bangor Var Co. Inc. Maine                                   Maine

Bangor Energy Resale Inc.                                   Maine

CareTaker, Inc.                                             Maine

Bangor Fiber Co. Inc.                                       Maine

Bangor Line Co.                                             Maine

The Pleasant River Gulf Improvement Co.                     Maine

The Sebois Dam Co.                                          Maine

East Branch Improvement Co.                                 Maine

Godfrey's Falls Cam Co.                                     Maine

The Sawtelle Brook & Dam Improvement Co.                    Maine


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