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<SEC-DOCUMENT>0000898080-04-000668.txt : 20041222
<SEC-HEADER>0000898080-04-000668.hdr.sgml : 20041222
<ACCEPTANCE-DATETIME>20041222162515
ACCESSION NUMBER:		0000898080-04-000668
CONFORMED SUBMISSION TYPE:	POS AMC
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20041222
DATE AS OF CHANGE:		20041222

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:		041221159

	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 AMEND 4 TO APPLIC-DECL ON FORM U-1
<TEXT>
                                                                File No. 70-9787
                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                ________________________________________________
                         POST-EFFECTIVE AMENDMENT NO. 4
                                       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.
                               1209 Orange Street
                        New Castle, Wilmington, DE 19801

                          Bangor Hydro-Electric Company
                               Bangor Var Co. Inc.
                            Bangor Energy Resale Inc.
                              Bangor Fiber Co. Inc.
                                 Bangor Line Co.
                                 CareTaker, Inc.
                     The Pleasant River Gulf Improvement Co.
                               The Sebois Dam Co.
                           East Branch Improvement Co.
                             Godfrey's Falls Dam Co.
                    The Sawtelle Brook & Dam Improvement Co.
                                 33 State Street
                               Bangor, Maine 04401
                ________________________________________________
                               Emera Incorporated
                (Name of top registered holding company parent of
                          each applicant or declarant)
                ________________________________________________


<PAGE>

                                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)

      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. 4 restates Post-Effective Amendment Nos.
3 and 2, filed on May 11, 2004 and April 10, 2003, respectively. The Form U-1
Application/Declaration in this proceeding was originally filed in File No.
70-9787 on November 6, 2000 and was amended and restated by Pre-effective
Amendment No. 4, filed October 3, 2001. On March 4, 2002, Emera Inc. filed
Post-Effective Amendment No. 1 in File No. 70-9787. Post-Effective Amendment No.
1 describes the proposed arrangements for the provision of services among the
Emera system companies and seek 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 Post-Effective Amendment Nos. 2, 3 and 4.

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,
BHE Holdings and the other applicants identified below (collectively, the
"Applicants") are filing this post-effective


                                       3
<PAGE>

amendment to supplement the record with regard to the proposed TAA and to
request that the Commission release jurisdiction over this matter and authorize
the proposed TAA. The agreement and the statutory basis for its authorization
are discussed in detail in Item 3, below.

     In the Merger Order the Commission also reserved jurisdiction, pending
completion of the record, over (1) the proposal to form an Emera service company
subsidiary, (2) the proposed acquisition by BHE of a 50% interest in a joint
venture that will develop a second 345 kilovolt transmission line to New
Brunswick, Canada, and (3) the retention of the gasoline products business of
Emera Fuels Inc. Emera requests that the Commission continue to reserve
jurisdiction over these items, pending completion of the record.

The Applicants

     The Applicants are the companies in the Emera system organized in the U.S.
All the Applicants are wholly owned directly or indirectly by Emera, unless
otherwise noted. The Applicants include Emera US and BHE Holdings, registered
holding company subsidiaries, BHE, an electric public utility company
subsidiary, Bangor Var Co., an exempt electric utility holding company, and
several non-utility subsidiaries. The non-utility subsidiary applicants are
identified below: (1) Bangor Energy Resale Inc., a subsidiary of BHE, permits
BHE to use a power sales agreement as collateral for a bank loan; (2) Bangor
Fiber Company, Inc., a subsidiary of BHE, owns and leases fiber optic
communications cable; (3) Bangor Line Company, a subsidiary of BHE, constructs
and maintains transmission and distribution lines and provides engineering
services; (4) CareTaker, Inc. a subsidiary of BHE, formerly provided security
alarm services and is now inactive; (5) The Pleasant River Gulf Improvement
Company, an inactive subsidiary of BHE, was engaged in water improvement; (6)
The Sebois Dam Company, an inactive subsidiary of BHE, improved the navigation
of certain of the Sebois waters entering the Piscataquis River; (7) East Branch
Improvement Company ("EBIC"), a 60% owned inactive subsidiary of BHE, formerly
provided water storage services for hydroelectric facilities; (8) Godfrey's
Falls Dam Company, an inactive wholly-owned subsidiary of EBIC, holds rights
that would permit future water storage development in the basin of the East
Branch of the Penobscot River; and (9) The Sawtelle Brook Dam & Improvement
Company, an inactive


                                       4
<PAGE>

wholly-owned subsidiary of EBIC, controls certain water rights in the basin of
the East Branch of the Penobscot River.

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 Rules 53(a), (b) and (c)
are satisfied. These standards are met.

     Rule 53(a)(1): Emera's "aggregate investment" in Nova Scotia Power Inc.
("NSPI"), its FUCO subsidiary, was CDN $830.6 million (US $657.2 million), or
257.1% of Emera's "consolidated retained earnings" (as defined in Rule 53(a)) at
September 30, 2004 (CDN $392.9 million, US $255.6 million). Emera has no other
FUCO or EWG investments.

     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 BHE will, at any one
time, directly or indirectly, render services to EWGs and FUCOs.


                                       5
<PAGE>

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

     In addition, as explained below, 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. 70-10227, Pre-effective
Amendment No. 2 (filed June 30, 2004) which is hereby incorporated by reference.
The application was authorized by Commission order dated June 30, 2004, Holding
Co. Act Release No. 27865 ("June Order").

     The June Order authorized Emera to invest up to $2 billion in EWGs and
FUCOs through October 30, 2004, in addition to its pre-existing investment in
NSPI./1 Emera has not made any investment in EWGs and FUCOs since the issuance
of the June Order. In addition, Emera's financial condition has remained stable.
Accordingly, there should be no adverse conclusions drawn from Emera's current
level of EWG and FUCO investment.

     Any EWG and FUCO investments would not have a substantial adverse impact
upon the financial integrity of Emera and will not have an adverse impact on any
utility subsidiary of Emera or on the ability of the Maine Public Utilities
Commission ("MPUC") to protect the customers of such subsidiaries. The general
financing commitments incorporated into the June Order 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, BHE has also committed to maintain a
minimum 30% equity capitalization ratio. Further, 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.

______________
1 The June Order reserved jurisdiction over various financing transactions
proposed by the Emera group from October 30, 2004 through June 30, 2007, pending
completion of the record. By order dated October 29, 2004, Holding Co. Act
Release No. 27906, the Commission released jurisdiction over the financing
transactions described in the June Order; permitting them through June 30, 2007.


                                       6
<PAGE>

     Various financial indicators demonstrate Emera's financial strength.
Emera's financial condition is largely attributable to the performance of its
single largest asset, the stock of NSPI. Emera and NSPI's long-term debt are
rated investment grade, BBB+ and BBB+, by Standard & Poor's, respectively.
Emera's capital structure as of September 30, 2004 included 40.2% equity, 7.4%
non-controlling interest (reflecting the consolidated preferred stock of NSPI
and BHE), 48.9% long-term debt and 3.5% short-term debt. BHE's capital structure
as of September 30, 2004 included 54.5% equity, 0.2% preferred stock, 40.4%
long-term debt and 4.9% short-term debt.

     The table below compares the net income of Emera and NSPI over the last 3
years.

- --------  ----------------------  ----------------------  ----------------------
                  Emera                    NSPI
                 ($CDN mm)               ($CDN mm)          NSPI as % of Emera
- --------  ----------------------  ----------------------  ----------------------
As of
Dec. 31    2001    2002    2003    2001    2002    2003    2001    2002    2003
- --------  ------  ------  ------  ------  ------  ------  ------  ------  ------
Net
Income     114.2    83.6   129.2   105.1    86.1   112.1   92.0%  103.0%   86.8%
- --------  ------  ------  ------  ------  ------  ------  ------  ------  ------

The table illustrates that NSPI has a history of stable earnings and that, as
Emera's principal subsidiary, NSPI has contributed significantly to the
financial soundness of the Emera group./2 Further, none of the conditions in
Rule 53(b) exist. Neither Emera nor any of its subsidiaries with assets having a
book value exceeding an amount equal to 10% or more of Emera's consolidated
retained earnings, has been the subject of a bankruptcy or similar proceeding.
The average consolidated retained earnings for the four most recent quarterly
periods has not decreased by 10% from the average for the previous four
quarterly periods. And lastly, in the previous fiscal year, Emera has not
reported operating losses, exceeding 5% of Emera's consolidated retained
earnings, attributable to its direct or indirect investments in EWGs and FUCOs.

______________
2 Emera's consolidated net earnings for the nine months ended September 30, 2004
were CDN $98.4 million, of which CDN $82.3 million or 83.6% were attributable to
NSPI.


                                       7
<PAGE>

     The market data provided below demonstrates that the securities markets
share the view that Emera is financially sound.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
                                                         Emera's Market to Book Value
- ---------------------------- -------------------------------------------------------------------------------------
At:                            September 30, 2004      December 31, 2003    December 31, 2002   December 31, 2001
- ---------------------------- ---------------------- ----------------------- ------------------ -------------------
                                    $CDN mm                 $CDN mm              $CDN mm            $CDN mm
- ---------------------------- ---------------------- ----------------------- ------------------ -------------------
<S>                                        <C>                     <C>                <C>                 <C>
Market value of equity                     1,935.8                 1,932.4            1,730.2             1,629.7
- ---------------------------- ---------------------- ----------------------- ------------------ -------------------
Book value of equity                       1,341.0                 1,312.6            1,332.0             1,181.4
- ---------------------------- ---------------------- ----------------------- ------------------ -------------------
Ratio of market to book
value (times)                                 1.44                    1.47               1.30                1.38
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
                                                         Emera's Price/Earnings Ratio
- ---------------------------- -------------------------------------------------------------------------------------
At:                            September 30, 2004      December 31, 2003    December 31, 2002   December 31, 2001
- ---------------------------- ---------------------- ----------------------- ------------------ -------------------
                                     $CDN                    $CDN                 $CDN                $CDN
- ---------------------------- ---------------------- ----------------------- ------------------ -------------------
<S>                                          <C>                      <C>                <C>                 <C>
Basic earnings per share                     0.91*                    1.20               0.85                1.20
- ---------------------------- ---------------------- ----------------------- ------------------ -------------------
Ratio of price to earnings                   19.56                   14.88              18.88               13.86
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

* For the year through September 30, 2004.

For all the foregoing reasons, 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. Emera used the proceeds of the
bank debt to acquire US $78 million of Emera US common stock and US $122 million
of Emera US debt. These funds


                                       8
<PAGE>

were on-loaned to BHE Holdings in exchange for preferred shares./3 BHE Holdings
used the proceeds of the financing to acquire the common stock equity of BHE
from its shareholders. As of December 31, 2003, the aggregate outstanding
principal balance of debt incurred by Emera US to finance the BHE acquisition
was US $122.5 million. In the future, the capitalization of the intermediate
holding companies holding BHE (i.e., presently Emera US and BHE Holdings) may be
refinanced or restructured, but the relief requested in this application is
limited to the initial principal amount of the debt incurred by Emera to acquire
BHE (i.e., US $200 million) plus any related refinancing costs. 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 expense,
principally interest costs, of the debt incurred by Emera US and BHE Holdings to
fund the acquisition of BHE ("Acquisition Indebtedness")/4 will offset part of
the Group's consolidated taxable income and, consequently, reduce the overall
tax liability of the Group. The financing cost deductions related to the
Acquisition Indebtedness should reduce the Group's consolidated tax liability by
approximately 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.

______________
3 The notional amount of the preferred shares is effectively treated as debt for
tax purposes.

4 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 of BHE and
refinancing-related costs.


                                       9
<PAGE>

     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. Notably, 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 may be deemed not to comply with
the requirements of Rule 45(c)(5) 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. BHE Holdings is a subsidiary of Emera US and is treated as such under
Rule 45(c)(5) and under the TAA. Like other subsidiaries in the US group, the
TAA provides that BHE Holdings may retain the benefit, and must bear the burden
of, its tax attributes, such as its income, losses, deductions and credits.

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 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 Member's 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


                                       10
<PAGE>

offsetting income since it is not directly engaged in businesses./5 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.

     The TAA provides that Emera US would receive payment for tax benefits
attributable to the Acquisition Indebtedness. It is this aspect of the TAA may
be considered to differ 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.
In addition, subsidiary companies with tax benefits, and hence a negative
allocation, must receive current payment of their corporate tax credits. The
term "associate company" includes a holding company and all of its subsidiaries,
whereas the term "subsidiary company" is generally understood to exclude holding
companies./6 Applicants seek an order authorizing the TAA to avoid any question
about whether it complies with Rule 45(c).

     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

______________
5 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, except that it wound not
be able to recoup previous net operating losses.

6 As noted above, although BHE Holdings is an intermediate holding company, it
is a subsidiary of Emera US and it would be treated as a subsidiary company
under Rule 45(c)(5) and the TAA.


                                       11
<PAGE>

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 indemnities7 and because they had been used by holding companies to
exploit utility companies through the misallocation of consolidated tax return
benefits.8 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 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

______________
7 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 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").


                                       12
<PAGE>

members. Because Emera US is legally obligated for the payment of the interest
expense, Emera US should properly retain the related tax benefits. Accordingly,
Applicants seek 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./9 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 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.

     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)./10 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

______________
9 Holding Company Act Release No. 2902 (July 23, 1941).

10 Holding Company Act Release No. 12776 (Jan. 12, 1955).


                                       13
<PAGE>

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)./11 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.

     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 Acquisition Indebtedness that generated the tax benefits that Emera US
seeks to receive payment for under the TAA is clearly identifiable to, and
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

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


                                       14
<PAGE>

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 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")./12 "In addition, because the NEES Group has no obligation with
respect to the

______________
12 National Grid Group plc, Holding Co. Act Release No. 27154 (March 15, 2000).


                                       15
<PAGE>

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."/13

     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./14 The Commission
staff also issued similar orders by delegated authority permitting Progress
Energy, Inc. (and other registered holding companies) to retain the tax benefit
of acquisition debt incurred in connection with the financing of Progress
Energy's acquisition of Florida Progress Corp./15 The extensive 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 (and the
June Order authorizing the Emera group's financing program) 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 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;

______________
13 Id. at 71.

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

15 Progress Energy, Inc., Holding Co. Act Release No. 27522 (April 18, 2002).
See also, AGL Resources Inc., Holding Co. Act Release No. 27781 (Dec. 23, 2003);
Energy East Corp., Holding Co. Act Release No. 27643 (Jan. 28, 2003); and Pepco
Holding Inc., Holding Co. Act Release No. 27553 (July 24, 2002).


                                       16
<PAGE>

     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.

The foregoing reporting requirement will be eliminated and in its place the
following reporting requirement would be substituted. Emera will include in its
certificate under Rule 24 in SEC File No. 70-10227, for the reporting period
that includes the filing of the consolidated tax return:

(1) A detailed analysis provided in tabular form that describes the Acquisition
Indebtedness by issue, amount and maturity date (for example, as applicable, the
table would show the issuer, interest rate, type/name of security, CUSIP, issue
date, maturity, and principal amount of each component of the Acquisition
Indebtedness) and describes any repayment or refinancing of Acquisition
Indebtedness, and

(2) Detailed tax work sheets showing the allocation of the consolidated tax
group's Federal income tax liability among the Emera US consolidated group.

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), even though 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.


                                       17
<PAGE>

ITEM 4.   REGULATORY APPROVAL

     BHE is subject to the regulation of the MPUC. The MPUC has jurisdiction
over certain agreements among affiliates, primarily involving the exchange of
goods and services. Because this transaction does not involve the exchange of
goods and services, it does not appear to require MPUC approval. A copy of the
application has been provided to the MPUC for informational purposes. Other than
as stated above, no state commission and no federal commission, other than this
Commission, has jurisdiction over the proposed transaction.

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).


                                       18
<PAGE>

ITEM 6.   EXHIBITS AND FINANCIAL STATEMENTS

     A.   Exhibits

F-4  Opinion of Counsel (previously filed).

M-1  Form of Tax Allocation Agreement (revised).

     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.


                                       19
<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:  December 22, 2004             Emera Incorporated

                                     By: /s/ Richard J. Smith
                                         --------------------
                                     Name: Richard J. Smith
                                     Title: Corporate Secretary and General
                                     Counsel

- -----------------------------------  -------------------------------------------
Date:  December 22, 2004             Emera US Holdings Inc.
                                     BHE Holdings Inc.


                                     By: /s/ A. Michael Burnell
                                         ----------------------
                                     Name: A. Michael Burnell
                                     Title: President and Secretary

- -----------------------------------  -------------------------------------------
Date:  December 22, 2004             Bangor Hydro-Electric Company
                                     Bangor Var Co. Inc.
                                     Bangor Energy Resale Inc.
                                     Bangor Fiber Co. Inc.
                                     Bangor Line Co.
                                     CareTaker, Inc.
                                     The Pleasant River Gulf Improvement Co.
                                     The Sebois Dam Co.
                                     East Branch Improvement Co.
                                     Godfrey's Falls Dam Co.
                                     The Sawtelle Brook & Dam Improvement Co.

                                     By: /s/ Richard J. Smith
                                         --------------------
                                     Name: Richard J. Smith
                                     Title: Corporate Secretary

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


                                       20
<PAGE>

                                  Exhibit Index

M-1  Form of Tax Allocation Agreement (revised).

                                       21

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>2
<FILENAME>ex99-1.txt
<DESCRIPTION>EXHIBIT M-1 TO THE POS-AMC
<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 [______________], 2004, 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 financing-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
refinancing-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 Member's 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 tax benefit of it's financing cost deduction attributable to
Acquisition Indebtedness. The portion of EUSH' tax benefits which cannot be
allocated and paid to EUSH due to the operation of this Section shall be
allocated to Paying Members of the Consolidated Group other than EUSH in
accordance with the principles contained in section 2.1(b)(i). In the event that
EUSH has positive Corporate Taxable Income, rather than the typical case where
it would be expected to have a negative Corporate Taxable Income, EUSH also
would pay its tax liability in the manner computed for all other Members, except
that it wound not be able to recoup previous net operating losses. For the
avoidance of doubt, BHE Holdings Inc. shall be treated as a subsidiary Member,
rather than a holding company, for purposes of the allocation methods specified
under this Agreement and Rule 45(c)(5) under the Public Utility Holding Company
Act of 1935.

(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


<PAGE>

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.

(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.


<PAGE>

                                  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 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


<PAGE>

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 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.


<PAGE>

                                   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.

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.


<PAGE>

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.

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.


<PAGE>

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.

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

Bangor Energy Resale Inc.                                        Maine

Bangor Fiber Co. Inc.                                            Maine

Bangor Line Co.                                                  Maine

CareTaker, Inc.                                                  Maine

The Pleasant River Gulf Improvement Co.                          Maine

The Sebois Dam Co.                                               Maine

East Branch Improvement Co.                                      Maine

Godfrey's Falls Dam Co.                                          Maine

The Sawtelle Brook & Dam Improvement Co.                         Maine

</TEXT>
</DOCUMENT>
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