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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K

      [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                       OR

   [  ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 1-12527

                             BAYCORP HOLDINGS, LTD.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                  DELAWARE                                      02-0488443
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                       Identification No.)
</TABLE>

<TABLE>
<S>                                            <C>
      20 INTERNATIONAL DRIVE, SUITE 301
          PORTSMOUTH, NEW HAMPSHIRE                             03801-6809
  (Address of principal executive offices)                      (Zip Code)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 431-6600
                            ------------------------

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                          COMMON STOCK, $.01 PAR VALUE
                                (Title of Class)

                            AMERICAN STOCK EXCHANGE
                  (Name of each exchange on which registered)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X      No____

     Indicate by check mark if disclosure of delinquent filers to Item 405 of
Regulations S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of March 27, 2000, the approximate aggregate market value of the voting
stock held by non-affiliates of the registrant was $62,457,156 based on the last
reported sale price of the registrant's Common Stock on the American Stock
Exchange as of the close of business on March 27, 2000. There were 8,272,000
shares of Common Stock outstanding as of March 27, 2000.

                      DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                                                             PART OF FORM 10-K
                  DOCUMENT                                INTO WHICH INCORPORATED
                  --------                                -----------------------
<S>                                            <C>
Portions of the Registrant's Proxy Statement               Items 10, 11, 12 & 13
for the 2000 Annual Meeting of Shareholders                     of Part III
</TABLE>

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                                     PART I

ITEM 1.  BUSINESS.

INTRODUCTION

     BayCorp Holdings, Ltd. ("BayCorp" or the "Company") is a holding company
incorporated in Delaware in 1996. Through its subsidiaries, BayCorp operates in
two business segments -- an Internet-based energy trading and information
business and a wholesale electricity generation and trading business.

     The Company's majority-owned subsidiary, HoustonStreet Exchange, Inc.
("HoustonStreet"), developed and operates HoustonStreet.com, an Internet-based
trading platform and information portal for wholesale energy traders. Currently,
HoustonStreet offers an online trading exchange that allows utilities,
independent power producers and power marketers to trade electricity over the
Internet. HoustonStreet plans to develop and launch trading platforms for crude
oil and refined products, natural gas and other energy-related commodities.
HoustonStreet is also exploring opportunities to license its trading platform
for use in other non-energy business-to-business markets.

     The Company's two other subsidiaries, Great Bay Power Corporation ("Great
Bay") and Little Bay Power Corporation ("Little Bay"), are electric generating
and trading companies. BayCorp wholly owns Great Bay and Little Bay, which in
turn own a combined 15% joint ownership interest in the Seabrook Nuclear Power
Project in Seabrook, New Hampshire (the "Seabrook Project"). This ownership
interest entitles the companies to approximately 174 megawatts of the Seabrook
Project's power output. Great Bay and Little Bay are exempt wholesale generators
("EWGs") under the Public Utility Holding Company Act of 1935 ("PUHCA"). Unlike
regulated public utilities, Great Bay and Little Bay have no franchise area or
captive customers. The companies sell their power in the competitive wholesale
power markets, including through HoustonStreet.com.

     Great Bay was incorporated in New Hampshire in 1986 and was formerly known
as EUA Power Corporation. Little Bay was incorporated in New Hampshire in 1998.
Great Bay sells its power, including its share of the electricity output of the
Seabrook Project in the wholesale electricity market, primarily in the Northeast
United States. Little Bay sells its power solely to Great Bay under an
intercompany agreement. Neither BayCorp nor its subsidiaries has operational
responsibilities for the Seabrook Project. Great Bay currently sells all but
approximately 10 MW of its share of the Seabrook Project capacity in the
wholesale short-term market. In addition to selling its owned generation, Great
Bay purchases power on the open market for resale to third parties.

     Great Bay became a wholly-owned subsidiary of BayCorp in a corporate
reorganization that involved a merger of a newly formed wholly-owned subsidiary
of BayCorp with and into Great Bay on January 24, 1997. The consolidated assets
and liabilities of Great Bay and its subsidiaries immediately before the
reorganization were the same as the consolidated assets and liabilities of
BayCorp and its subsidiaries immediately after the reorganization. This
corporate structure enables BayCorp, either directly or through subsidiaries
other than Great Bay and Little Bay, to engage in businesses that these
subsidiaries would be prohibited from pursuing due to their status as EWG's
under the PUHCA. BayCorp may in the future enter into new businesses or acquire
existing businesses, both in energy related fields and possibly in unrelated
fields.

RECENT DEVELOPMENTS

  Wholesale Electricity Generation and Trading Business

     In November 1999, Little Bay purchased its 2.9% joint ownership interest in
the Seabrook Project from Montaup Electric Company, a subsidiary of Eastern
Utilities Associates, for a purchase price of $3.2 million, plus approximately
$1.7 million for certain prepaid items, primarily nuclear fuel and capital
expenditures. In addition, Montaup prefunded the decommissioning liability
associated with Little Bay's 2.9% joint ownership interest in the Seabrook
Project by transferring approximately $12.4 million into Little Bay's
decommissioning account, an irrevocable trust earmarked for Little Bay's share
of Seabrook Project decommissioning expenses.
<PAGE>   3

  Internet-based Energy Trading and Information Business

     In July 1999, HoustonStreet initially launched its Internet-based wholesale
electricity trading exchange in the Northeast United States. In September 1999,
HoustonStreet launched electricity trading throughout the United States. As of
March 27, 2000, over 85% of the power trading companies in the United States and
approximately 440 individual traders have registered on HoustonStreet. Nine of
the top ten trading companies have registered on the site.

     In February 2000, HoustonStreet sold $6.0 million of its common stock and
Series A preferred stock to Equiva Trading Company ("Equiva"). Equiva is a
hydrocarbon supply and trading partnership jointly-owned by Equilon Enterprises
LLC ("Equilon") and Motiva Enterprises LLC ("Motiva"). Equilon is owned by Shell
Oil Company and Texaco Inc. Motiva is owned by Shell Oil Company, Texaco Inc.
and Saudi Refining Inc., an affiliate of Saudi Aramco.

     Also in February 2000, HoustonStreet announced plans to launch one of the
first Web exchanges for wholesale crude oil and refined products trading. At
that time, HoustonStreet entered into agreements with Equiva under which Equiva
will share its knowledge of the oil trading industry with HoustonStreet and will
pay HoustonStreet at least $1.5 million over the next two years as minimum
trading commissions generated through Equiva's use of HoustonStreet's crude and
refined oil products trading exchange, once it is created and operated.

     In addition to sales of its capital stock to Equiva, HoustonStreet sold
$10.6 million of its capital stock in February and March 2000 to other investors
including Williams Energy Marketing & Trading Company, Omega Advisors, Inc.,
Elliott Associates, L.P., Thomas H. Lee Company and Sapient Corporation. In
total, HoustonStreet raised $16.6 million in gross proceeds through these stock
sales. As a result, BayCorp owns approximately 53% of HoustonStreet's capital
stock (on an as converted to common stock basis) as of March 27, 2000.

WHOLESALE ELECTRICITY GENERATION AND TRADING BUSINESS

     BayCorp's principal wholesale electricity generation and trading assets are
its 100% equity interests in Great Bay and Little Bay. The business of Great Bay
and Little Bay consists of managing their joint ownership interests in the
Seabrook Project and the sale in the wholesale power market of their share of
electricity produced by the Seabrook Project. Neither Great Bay nor Little Bay
has operational responsibility for the Seabrook Project. Great Bay is a party to
one long-term power contract for approximately 10 MW of Great Bay's share of the
Seabrook Project capacity. Great Bay has also entered into a one-year contract,
as of November 19, 1999, with Little Bay to purchase all of the output from the
portion of Seabrook owned by Little Bay. See "-- Purchased Power Agreements."
Great Bay's business strategy is to utilize unit contingent and firm forward
sales contracts to maximize the value of its 174 MW power supply from the
Seabrook Project.

     Traditionally, Great Bay sold most of its share of the Seabrook Project
electricity output under unit contingent contracts. Under unit contingent
contracts, Great Bay is obligated to provide the buyer with power only when the
Seabrook Project is operating. In late 1998, Great Bay began to sell some of its
electricity as firm power, which entitles the buyer to electricity whether or
not the Seabrook Project is operating. Buyers pay a premium for firm power over
unit contingent power because they can rely on uninterrupted electricity. In
order to supply firm power during Seabrook Project unscheduled outages, Great
Bay purchases power from the spot market during these outages and resells that
power to its firm power customers. Spot market sales are subject to price
fluctuations based on the relative supply and demand of electricity. As a result
of spot market power price fluctuations, Great Bay may have to purchase power at
prices exceeding prices paid by Great Bay's firm power customers during outages.
Although Great Bay bears the primary risk of these price fluctuations, Great Bay
maintains insurance to protect Great Bay during periods of extreme price
volatility, subject to certain deductibles and coverage limits. This insurance,
provided by CIGNA and others, provides coverage through May 2002. In addition to
selling its owned generation, Great Bay purchases power on the open market for
resale to third parties in back-to-back transactions.

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  The Seabrook Project

     The Seabrook Project is located on an 896-acre site in Seabrook, New
Hampshire. It is owned by Great Bay, Little Bay and nine other utility
companies, consisting of North Atlantic Energy Company, Connecticut Light and
Power, The United Illuminating Company, Canal Electric Company, Massachusetts
Municipal Wholesale Electric Company, New England Power Company, New Hampshire
Electric Cooperative, Inc., Taunton Municipal Lighting Plant and Hudson Light &
Power Department (together with Great Bay and Little Bay, the "Participants").

     Seabrook Unit 1 is a 1,150-MW nuclear-fueled steam electricity generating
station. It employs a four loop, pressurized water reactor and support auxiliary
systems designed by the Westinghouse Electric Company. The reactor is housed in
a steel-lined reinforced concrete containment structure and a concrete
containment enclosure structure. Reactor cooling water is obtained from the
Atlantic Ocean through a 17,000-foot-long intake tunnel and returned through a
16,500-foot-long discharge tunnel. The station has a remaining license life of
26 years. Seabrook Unit 1 delivers its generated power to the New England 345
kilovolt transmission grid, a major network of interconnecting lines covering
New England, through three separate transmission lines emanating from the
station. On March 15, 1990, the Participants received from the Nuclear
Regulatory Commission ("NRC") a full power operating license that authorizes
operation of Seabrook Unit 1 until October 2026. Commercial operation of
Seabrook Unit 1 commenced on August 19, 1990. Management believes that Seabrook
Unit 1 is in good condition.

     Since the Seabrook Project was originally designed to consist of two
generating units, Great Bay and Little Bay also own a combined 15% joint
ownership interest in Seabrook Unit 2. Great Bay and Little Bay assigned no
value to Seabrook Unit 2 because on November 6, 1986, the joint owners of the
Seabrook Project voted to dispose of Unit 2. Thereafter, Great Bay wrote off its
investment in Unit 2. Little Bay has no investment in Unit 2. Certain assets of
Seabrook Unit 2 have been and are being sold from time to time to third parties.
However, there have been no material sales of Unit 2 assets since July 1996.

     The Participants are considering additional plans regarding disposition of
Seabrook Unit 2, but such plans have not yet been finalized and approved. Great
Bay and Little Bay are unable to estimate the costs for which they will be
responsible in connection with the disposition of Seabrook Unit 2. Because
Seabrook Unit 2 was never completed or operated, costs associated with its
disposition will not include any amounts for decommissioning. Great Bay and
Little Bay currently pay their share of monthly expenses required to preserve
and protect the value of the Seabrook Unit 2 components.

  Joint Ownership of Seabrook

     Great Bay, Little Bay and the other Participants are parties to the
Agreement for Joint Ownership, Construction and Operation of New Hampshire
Nuclear Units (the "JOA"), which establishes the respective ownership interests
of the Participants in the Seabrook Project and defines their responsibilities
with respect to the ongoing operation, maintenance and decommissioning of the
Seabrook Project. In general, all ongoing costs of the Seabrook Project are
divided proportionately among the Participants in accordance with their
ownership interests in the Seabrook Project. Ownership interests in the Seabrook
Project are several and not joint, and each Participant is only liable for its
share of the Seabrook Project's costs and not liable for any other Participant's
share. Great Bay and Little Bay's combined joint ownership interest of 15% is
the third largest interest among the Participants, exceeded only by the
approximately 40% interest held by Northeast Utilities and its affiliates and
the 17.5% interest held by The United Illuminating Company.

     A Participant may sell any portion of its ownership interest to any entity
that is engaged in the electric utility business in New England. Before such
sale, however, such selling Participant must give certain other Participants the
right of first refusal to purchase the interest on the same terms. Any
Participant may transfer, free from the foregoing right of first refusal, any
portion of its interest (a) to a wholly-owned subsidiary, (b) to another company
in the same holding company system or a construction trust for the benefit of
the transferor or another company in the same holding company system, or (c) in
connection with a merger, consolidation or acquisition of substantially all of
the properties or all of the generating facilities of a Participant.

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<PAGE>   5

     The failure to make monthly payments under the JOA by owners of the
Seabrook Project other than Great Bay and Little Bay may have a material effect
on Great Bay and Little Bay if either should choose to pay a greater proportion
of the Seabrook Unit 1 and Seabrook Unit 2 expenses in order to preserve the
value of its share of the Seabrook Project. In the past, certain of the owners
of the Seabrook Project other than Great Bay and Little Bay have not made their
full respective payments. At the current time, the electric utility industry is
undergoing significant changes as competition and deregulation are introduced
into the marketplace. Some utilities, including certain Participants, have
indicated in state regulatory proceedings that they may be forced to seek
bankruptcy protection if regulators, as part of the industry restructuring, do
not allow for full recovery of stranded costs. If a Participant other than Great
Bay or Little Bay filed for bankruptcy, and that Participant was unable to pay
its share of Seabrook Project expenses, Great Bay and/or Little Bay might choose
to pay a greater portion of Seabrook Project expenses. In the past, the filing
of bankruptcy by a Participant has not resulted in a failure to pay Seabrook
Project expenses or an increase in the percentage of expenses paid by other
Participants.

     The JOA provides for a Managing Agent to carry out the daily operational
and management responsibilities of the Seabrook Project. The current Managing
Agent, appointed by certain of the Participants on June 29, 1992, is North
Atlantic Energy Service Corporation ("NAESCO"), a wholly-owned subsidiary of
Northeast Utilities. Northeast Utilities, in conjunction with certain of its
affiliates, holds the largest joint ownership interest in the Seabrook Project,
as described above. Certain material decisions regarding the Seabrook Project
are made by an Executive Committee consisting of the chief executive officers of
certain of the Participants or their designees. There are currently five members
of the Executive Committee. The Executive Committee acts by a majority vote of
its members, although any action of the Executive Committee may be modified by
vote of 51% of the ownership interests. Frank W. Getman Jr., the Company's
President and Chief Executive Officer, is currently a member of the Executive
Committee and of the Audit Committee and is Chairperson of the Budget
Subcommittee. Under the JOA, the managing agent of the Seabrook Project may be
removed and a new managing agent appointed by a 51% interest of the
Participants.

  Marketing and Customers

     Great Bay currently sells most of its power in the Northeast United States
in the short-term wholesale power market. Great Bay is currently not dependent
on any single customer because many utilities and marketers are willing to buy
Great Bay's share of electricity from the Seabrook Project at substantially the
same price. Prices in the short-term market are typically higher during the
summer and winter because the demand for electrical power is higher during these
periods in the Northeast United States. The Company utilizes unit contingent and
firm forward sale contracts to maximize the value of the uncommitted portion of
its 174 megawatt power supply from the Seabrook Project.

     During 1999, sales by Great Bay to Connecticut Municipal Electric Energy
Cooperative and Select Energy accounted for 29% and 24%, respectively, of total
operating revenues. Sales by Little Bay to Great Bay represent 100% of its
operating revenues. See Note 1I of Notes to the Financial Statements.

  Purchased Power Agreements

     Great Bay is party to a purchased power agreement, dated as of April 1,
1993 (the "UNITIL Purchased Power Agreement"), with UNITIL Power Corporation
that provides for Great Bay to sell to UNITIL Power approximately 10 MW of
power. The UNITIL Purchased Power Agreement commenced on May 1, 1993 and runs
through October 31, 2010. The current price of power under the UNITIL Purchased
Power Agreement is 5.38 cents per kilowatt-hour ("kWh"). The price is subject to
increase in accordance with a formula that provides for adjustments at less than
the actual rate of inflation. UNITIL Power has an option to extend the UNITIL
Purchased Power Agreement for an additional 12 years until 2022.

     The UNITIL Purchased Power Agreement is front-end loaded whereby UNITIL
Power pays higher prices, on an inflation-adjusted basis, in the early years of
the Agreement and lower prices in later years. The amount of the excess paid by
UNITIL Power in the early years of the UNITIL Purchased Power Agreement is
quantified in a "Balance Account" which increased annually to a total of $4.1
million in July 1998, and now

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decreases annually, reaching zero in July 2001. If the UNITIL Purchased Power
Agreement terminates prior to its scheduled termination, and if at that time
there is a positive amount in the Balance Account, Great Bay is obligated to
refund that amount to UNITIL Power.

     To secure the obligations of Great Bay under the UNITIL Purchased Power
Agreement, including the obligation to repay UNITIL Power the amount in the
Balance Account, the UNITIL Purchased Power Agreement grants UNITIL Power a
mortgage on Great Bay's interest in the Seabrook Project. This mortgage may be
subordinated to first mortgage financing of up to a maximum amount of
$80,000,000. The UNITIL Purchased Power Agreement further provides that UNITIL
Power's mortgage will rank pari passu with other mortgages that may hereafter be
granted by Great Bay to other purchasers of power from Great Bay to secure
similar obligations, provided that (i) the maximum amount of indebtedness
secured by the first mortgage on the Seabrook Interest may not exceed
$80,000,000, and (ii) the combined total of all second mortgages on the Seabrook
Interest may not exceed the sum of (a) $80,000,000 less the total amount of
Great Bay's debt then outstanding which is secured by a first mortgage plus (b)
$57,000,000.

     Great Bay entered into a power sales agreement, dated as of November 19,
1999, with Little Bay. Under the terms of the agreement, Little Bay sells, and
Great Bay purchases, all of the output of the portion of Seabrook owned by
Little Bay. This agreement is a unit power sale agreement. Accordingly, when all
or part of Little Bay's interest in Seabrook is not producing, the obligation of
Little Bay to sell (and of Great Bay to purchase) is proportionately eliminated.
The initial term of this agreement is for one year. Great Bay and Little Bay
expect to continue this agreement after the initial period. The agreement can be
terminated at any time by mutual consent of the parties, after any notice
required by law.

  Competition

     Great Bay sells its share of Seabrook electricity into the wholesale
electricity market in the Northeast United States. There are a large number of
suppliers to this market and a surplus of capacity, resulting in intense
competition. A primary source of competition comes from traditional utilities,
many of which presently have excess capacity. In addition, non-utility wholesale
generators of electricity, such as independent power producers ("IPPs"),
Qualifying Facilities ("QFs") and EWGs, as well as power marketers and brokers,
actively sell electricity in this market.

     Great Bay may face increased competition, primarily based on price, from
all the foregoing sources in the future. Great Bay believes that it will be able
to compete effectively in the wholesale electricity market because of the
current low cost of electricity generated by the Seabrook Project in comparison
with existing alternative sources.

  NEPOOL

     Great Bay is a member of the New England Power Pool ("NEPOOL") and is a
party to the New England Power Pool Agreement (the "NEPOOL Agreement"). NEPOOL
is a voluntary association of companies engaged in the electricity business in
New England and its membership is open to all investor-owned, municipal and
cooperative electric utilities in New England and other companies that transact
business in the region's bulk power market. Certain end users of electricity may
also become NEPOOL members. The NEPOOL Agreement imposes on its participants
obligations concerning generating capacity reserves and the right to use major
transmission lines.

     On December 31, 1996, NEPOOL filed a restructuring plan with the Federal
Energy Regulatory Commission ("FERC"), including proposed amendments to the
NEPOOL Agreement and an open access transmission tariff. The filing was intended
not only to comply with the FERC's open access for tight pools as set forth in
FERC Order No. 888, but also to (1) transfer the region's transmission grid and
generation operation to an independent system operator, (2) provide for a
competitive generation market through a combination of bilateral trading and the
formation of a regional power exchange and (3) qualify NEPOOL as a regional
transmission group. Among other things, NEPOOL's restructuring is designed to
function efficiently in a changing electric power industry and to permit
regional transmission at rates that do not vary with distance. These changes are
being implemented in stages that began in mid-1997.

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     The region's independent system operator, ISO New England, Inc. ("ISO-NE"),
was established in July 1997 and is responsible for maintaining the safety and
reliability of the transmission grid and bulk power market within the NEPOOL
region. ISO-NE performs these functions under a services contract with NEPOOL.
Since May 1, 1999 ISO-NE has administered a new bid-based wholesale market
system in New England that is designed to provide a competitive and efficient
generation market through an hourly clearing price mechanism.

  Nuclear Power, Energy and Utility Regulation

     The Seabrook Project and Great Bay and Little Bay, as part owners of a
licensed nuclear facility, are subject to the broad jurisdiction of the NRC,
which is empowered to authorize the siting, construction and operation of
nuclear reactors after consideration of public health and safety, environmental
and antitrust matters. Great Bay and Little Bay have been, and will be, affected
to the extent of their proportionate share by the cost of any such requirements
made applicable to the Seabrook Project.

     Great Bay and Little Bay are also subject to the jurisdiction of the FERC
under Parts II and III of the Federal Power Act and, as a result, are required
to file with FERC all contracts for the sale of electricity. FERC has the
authority to suspend the rates at which Great Bay and Little Bay propose to sell
power, to allow such rates to go into effect subject to refund and to modify a
proposed or existing rate if FERC determines that such rate is not "just and
reasonable." FERC's jurisdiction also includes, among other things, the sale,
lease, merger, consolidation or other disposition of facilities, interconnection
of certain facilities, accounts, service and property records.

     Because they both are EWG's, Great Bay and Little Bay are not subject to
the jurisdiction of the Securities and Exchange Commission ("SEC") under PUHCA.
In order to maintain their EWG status, Great Bay and Little Bay must continue to
engage exclusively in the business of owning and/or operating all or part of one
or more "eligible facilities" and to sell electricity only at wholesale (i.e.
not to end users) and activities incidental thereto. An "eligible facility" is a
facility used for the generation of electric energy exclusively at wholesale or
used for the generation of electric energy and leased to one or more public
utility companies. The term "facility" may include a portion of a facility. In
the case of Great Bay and Little Bay, their combined 15% joint ownership
interest in the Seabrook Project comprises an "eligible facility."

     The NHPUC and the regulatory authorities with jurisdiction over utilities
in New Hampshire and state legislatures of several other states in which Great
Bay sells electricity are considering or are implementing initiatives relating
to the deregulation of the electric utility industry. Simultaneously with the
deregulation initiatives occurring in each of the New England states, NEPOOL
restructured to create and maintain open, non-discriminatory, competitive,
unbundled markets for energy, capacity, and ancillary services. These markets
commenced operation in May 1999. All of the deregulation initiatives open
electricity markets to competition in the affected states. While Great Bay and
Little Bay believe they are low-cost producers of electricity and will benefit
from the deregulation of the electric industry, it is not possible to predict
the impact of these various initiatives on the companies.

  Nuclear Power Issues

     Nuclear units in the United States have been subject to widespread
criticism and opposition, which has led to construction delays, cost overruns,
licensing delays and other difficulties. Various groups have sought to prohibit
the completion and operation of nuclear units and the disposal of nuclear waste
by litigation, legislation and participation in administrative proceedings. The
Seabrook Project was the subject of significant public controversy during its
construction and licensing and remains controversial. An increase in public
concerns regarding the Seabrook Project or nuclear power in general could
adversely affect the operating license of Seabrook Unit 1. While the Company
cannot predict the ultimate effect of such controversy, it is possible that it
could result in a premature shutdown of the unit.

     In the event of a permanent shutdown of any unit, NRC regulations require
that the unit be completely decontaminated of any residual radioactivity. While
the owners of the Seabrook Project are accumulating

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monies in a trust fund to pay decommissioning costs, if these costs exceed the
amount of the trust fund, the owners, including Great Bay and Little Bay, will
be liable for the excess.

  Nuclear Related Insurance

     In accordance with the Price Anderson Act, the limit of liability for a
nuclear-related accident is approximately $9 billion, effective November 18,
1994. The primary layer of insurance for this liability is $200 million of
coverage provided by the commercial insurance market. The secondary coverage is
approximately $9 billion, based on the approximately 106 currently licensed
reactors in the United States. The secondary layer is based on a retrospective
premium assessment of $83.9 million per nuclear accident per licensed reactor,
payable at a rate not exceeding $10 million per year per reactor. In addition,
the retrospective premium is subject to inflation based indexing at five-year
intervals and, if the sum of all public liability claims and legal costs arising
from any nuclear accident exceeds the maximum amount of financial protection
available, then each licensee can be assessed an additional 5% ($4.2 million) of
the maximum retrospective assessment. With respect to the Seabrook Project,
Great Bay and Little Bay would be obligated to pay their ownership share of any
assessment resulting from a nuclear incident at any United States nuclear
generating facility. Great Bay and Little Bay estimate their total maximum
liability per nuclear accident currently would be an aggregate amount of
approximately $12.6 million per accident, with a maximum annual assessment of
about $1.5 million per incident, per year.

     In addition to the insurance required by the Price Anderson Act, the NRC
regulations require licensees, including the Seabrook Project, to carry all risk
nuclear property damage insurance in the amount of at least $1.06 billion, which
amount must be dedicated, in the event of an accident at the reactor, to the
stabilization and decontamination of the reactor to prevent significant risk to
the public health and safety.

     Great Bay and Little Bay also independently purchase business interruption
insurance from Nuclear Electric Insurance Limited ("NEIL"). The current policy
is in effect from September 15, 1999 until April 1, 2000 and a renewal policy
has been signed which will be in effect from April 1, 2000 until April 1, 2001.
The policy provides for the payment of a fixed weekly loss amount of $670,000 in
the event of an outage at the Seabrook Project of more than 23 weeks resulting
from the property damage occurring from a "sudden fortuitous event, which
happens by chance, is unexpected and unforeseeable." The maximum amount payable
to Great Bay and Little Bay is a total of $90.6 million. Under the terms of the
policy, Great Bay and Little Bay are subject to a potential retrospective
premium adjustment of up to approximately $469,000 should NEIL's board of
directors deem that additional funds are necessary to preserve the financial
integrity of NEIL. Since NEIL was founded in 1980, there has been no
retrospective premium adjustment; however, there can be no assurance that NEIL
will not make retrospective adjustments in the future. The liability for this
retrospective premium adjustment ceases six years after the end of the policy
unless prior demand has been made.

  Nuclear Fuel

     The Seabrook Project's managing agent has made, or expects to make, various
arrangements for the acquisition of uranium concentrate, the conversion,
enrichment, fabrication and utilization of nuclear fuel and the disposition of
that fuel after use. Many of these arrangements are pursuant to multi-year
contracts with concentrate and service providers. Based on the Seabrook
Project's existing contractual arrangements, Great Bay and Little Bay believe
that the Seabrook Project has available, or under supply contracts, sufficient
nuclear fuel for operations through approximately 2003. Uranium concentrate and
conversion, enrichment and fabrication services currently are available from a
variety of sources. The cost of such concentrate and such services varies based
upon market forces.

  Nuclear Waste Disposal

     Costs associated with nuclear plant operations include amounts for nuclear
waste disposal, including spent fuel, as well as for the ultimate
decommissioning of the plants. The Nuclear Waste Policy Act of 1982 (the "NWPA")
requires the United States Department of Energy (the "DOE"), subject to various

                                        7
<PAGE>   9

contingencies, to design, license, construct and operate a permanent repository
for high level radioactive waste and spent nuclear fuel, which are collectively
referred to as "high level waste."

     The joint owners of the Seabrook Project, through their managing agent
NAESCO, entered into contracts with the DOE for high level waste disposal in
accordance with the NWPA. Under these contracts and the NWPA, the DOE was
required to take title to and dispose of the Seabrook Project's high level waste
beginning no later than January 31, 1998. However, the DOE has announced that
its first high level waste repository will not be in operation until 2010 at the
earliest.

     As a result of this delay, many states and nuclear plant operators,
including NAESCO, sued the DOE for injunctive relief and monetary damages. Two
U.S. Courts of Appeals ordered the DOE to proceed with its high level waste
disposal obligations and ruled that plant operators are entitled to money
damages from DOE. However, there can be no assurance that the Seabrook Project
will collect damages from the DOE because, among other things, NAESCO's case
against the DOE is still pending.

     In February 1999, the DOE proposed to Congress an alternative interim plan
for high level waste management. The DOE proposed to take legal title and
responsibility for the waste (on-site at nuclear plants such as Seabrook) until
a permanent repository becomes available. Ultimately, Congress rejected that
proposal, and on March 22, 2000, Congress passed amendments to the NWPA that
would require the DOE to begin accepting nuclear waste shipments at a Nevada
site in 2007. However, President Clinton stated that he would veto this
legislation and Congress is not expected to override Mr. Clinton's veto.
Regardless of whether this legislation becomes law or alternative solutions are
identified, nuclear plants such as Seabrook must retain high level waste on-site
or make other storage provisions until the DOE begins receiving nuclear waste
materials in accordance with the NWPA and its contracts.

     The Seabrook Project increased its on-site storage capacity for low level
waste ("LLW") in 1996 and that capacity is expected to be sufficient to meet the
Project's storage requirements through 2006. In addition, the managing agent of
the Seabrook Project has advised Great Bay that the Seabrook Project has
adequate on-site storage capacity for high level waste until approximately 2010.

     The Low-Level Radioactive Waste Policy Act of 1980 requires each state to
provide disposal facilities for LLW generated within the state, either by
constructing and operating facilities or by joining regional compacts with other
states to jointly fulfill their responsibilities. However, the Low-Level
Radioactive Waste Policy Amendments Act of 1985 permits each state in which a
currently operating disposal facility is located (South Carolina, Nevada and
Washington) to impose volume limits and a surcharge on shipments of LLW from
states that are not members of their regional compact.

     In April 1995, a privately owned facility in Utah was approved as a
disposal facility for certain types of LLW. The Seabrook Project began shipping
certain LLW to the Utah facility in December 1995. In 1999, the Seabrook Project
also began shipping some LLW to a privately owned facility in Tennessee. All LLW
generated by the Seabrook Project that exceeds the maximum radioactivity level
of LLW accepted by these facilities is currently stored on-site at the Seabrook
facility.

  Decommissioning

     NRC licensing requirements and restrictions are also applicable to the
decommissioning of nuclear generating units at the end of their service lives,
and the NRC has adopted comprehensive regulations concerning decommissioning
planning, timing, funding and environmental review. Any changes in NRC
requirements or technology can increase estimated decommissioning costs.

     Great Bay and Little Bay are responsible for their pro rata share of the
decommissioning and cancellation costs for Seabrook. Great Bay pays its share of
decommissioning funding on a monthly basis. Little Bay's share of
decommissioning costs was prefunded by Montaup Electric Company, the owner of
the 2.9% interest in the Seabrook Project that Little Bay acquired in November
1999. As part of that acquisition, Montaup Electric Company transferred
approximately $12.4 million into Little Bay's decommissioning account, an
irrevocable trust earmarked for Little Bay's share of Seabrook Plant
decommissioning expenses.

                                        8
<PAGE>   10

     The Seabrook decommissioning funding schedule is determined by the New
Hampshire Nuclear Decommissioning Financing Committee (the "NDFC"). The NDFC
reviews the decommissioning funding schedule for the Seabrook Project at least
annually and, for good cause, may increase or decrease the amount of the funds
or alter the funding schedule.

     In June 1999, the NDFC issued a Final Report and Order relating to
proceeding NDFC 98-1, the comprehensive update of Seabrook Unit 1
Decommissioning Fund. For funding purposes, this Order reflects decommissioning
beginning in 2015, shortening the funding period, which commenced in 1990, from
36 to 25 years. Great Bay began funding at an accelerated rate in 1998 in
response to New Hampshire legislation, and as such, the accelerated funding
required by this Order is not expected to have a material impact on Great Bay.
Great Bay's 1999 decommissioning payments totaled approximately $1.7 million.
Little Bay's decommissioning funding was not affected by the June 1999 NDFC
Order.

     Funds collected by Seabrook for decommissioning are deposited in an
external irrevocable trust pending their ultimate use. The earnings on the
external trusts also accumulate in the fund balance. The trust funds are
restricted for use in paying the decommissioning of Unit 1. The investments in
the trust are available for sale. Great Bay and Little Bay have therefore
reported their investment in trust fund assets at market value and any
unrealized gains and losses are reflected in equity. There was an unrealized
holding loss of approximately $45,000 as of December 31, 1999.

     Although the owners of the Seabrook Project are accumulating funds in an
external trust to defray decommissioning costs, these costs could substantially
exceed the value of the trust fund, and the owners, including Great Bay and
Little Bay, would remain liable for the excess.

     In January 1997 and July 1997, the NRC staff ruled that Great Bay did not
satisfy the NRC definition of "electric utility." In January 1998, Great Bay
filed a petition with the NRC seeking NRC approval of Great Bay's proposal to
fund decommissioning obligations. Great Bay's petition also sought, in the
alternative, an NRC permanent exemption from the obligation of Great Bay to
comply with the NRC regulations applicable to non "electric utility" owners of
interests in nuclear power plants. In June 1998, the New Hampshire State
legislature enacted legislation that provides that in the event of a default by
Great Bay on its payments to the decommissioning fund, the other Seabrook joint
owners would be obligated to pay their proportional share of such default. As a
result of the enactment of this legislation, the NRC staff found that Great Bay
complies with the decommissioning funding assurance requirements. In July 1998,
the staff of the NRC notified Great Bay of the staff's determination that Great
Bay complies with the decommissioning funding assurance requirements under NRC
regulations.

     In response to the New Hampshire legislation, Great Bay agreed to make
accelerated payments to the Seabrook decommissioning fund such that Great Bay
will have contributed sufficient funds by the year 2015 to allow sufficient
monies to accumulate, with no further payments by Great Bay to the fund, to the
full estimated amount of Great Bay's decommissioning obligation by the time the
current Seabrook operating license expires in 2026. Based on the currently
approved funding schedule and Great Bay's accelerated funding schedule, Great
Bay's decommissioning payments will be approximately $1.8 million in 2000 and
escalate at 4% each year thereafter through 2015.

     The current estimated cost to decommission the Seabrook Project, based on a
study performed in 1996 for the lead owner of the Seabrook Project, is
approximately $565 million in 2000 dollars and $2.2 billion in 2026 dollars,
assuming a remaining 26-year life for the facility and a future cost escalation
rate of 5.0%. Based on this estimate, the present value of Great Bay and Little
Bay's share of this liability as of December 31, 1999 was approximately $79
million.

     On November 15, 1992, Great Bay's former parent, EUA, and certain other
parties entered into a settlement agreement. Under the settlement agreement, EUA
guaranteed an amount not to exceed $10 million of Great Bay's future
decommissioning costs of Seabrook Unit 1 in the event that Great Bay is unable
to pay its share of such decommissioning costs.

                                        9
<PAGE>   11

  Environmental Regulation

     The Seabrook Project, like other electric generating stations, is subject
to standards administered by federal, state and local authorities with respect
to the siting of facilities and associated environmental factors. The United
States Environmental Protection Agency (the "EPA"), and certain state and local
authorities, have jurisdiction over releases of pollutants, contaminants and
hazardous substances into the environment and have broad authority in connection
therewith, including the ability to require installation of pollution control
devices and remedial actions. The NRC has promulgated a variety of standards to
protect the public from radiological pollution caused by the normal operation of
nuclear generating facilities.

     The EPA issued a National Pollutant Discharge Elimination System ("NPDES")
permit, valid for a period of five years, to NAESCO on October 30, 1993
authorizing discharges from Seabrook Station into the Atlantic Ocean and the
Browns River in accordance with limitations, monitoring requirements and
conditions specified in the permit. A renewal application was filed in April
1998 and supplemented in August, September of 1998 and in September 1999. NAESCO
has advised Great Bay that the Seabrook Station's initial five-year NPDES permit
will remain effective during the renewal process.

     On August 31, 1994, the New Hampshire Department of Environmental Services
issued to NAESCO permits to operate two auxiliary boilers and two emergency
diesel generators in accordance with New Hampshire Revised Statutes Annotated
Chapter 125-C. These permits, which were effective until August 31, 1997,
prescribe limits for the emission of air pollutants into the ambient air as well
as record keeping and other reporting criteria. NAESCO filed an application on
July 16, 1996 for permits under Title V of the Clean Air Act. Upon the
expiration of the State of New Hampshire permits, the conditions authorized by
those permits remain in effect until the Title V permits are granted. NAESCO can
not estimate when the Title V permits will be granted. Because the liabilities
of the Participants under the JOA are several and not joint, in the event that
NAESCO violates the emissions limits contained in its permits, if at all, Great
Bay and Little Bay will be liable for their pro rata share of any costs and
liabilities assessed for the emissions violations.

     In some environmental areas, the NRC and the EPA have overlapping
jurisdiction. Thus, NRC regulations are subject to all conditions imposed by the
EPA and a variety of federal environmental statutes, including obtaining permits
for the discharge of pollutants (including heat, which is discharged by the
Seabrook Project) into the nation's navigable waters. In addition, the EPA has
established standards, and is in the process of reviewing existing standards,
for certain toxic air pollutants, including radionuclides, under the United
States Clean Air Act which apply to NRC-licensed facilities. The effective date
for the new EPA radionuclide standard has been stayed as applied to nuclear
generating units. Environmental regulation of the Seabrook Project may result in
material increases in capital and operating costs, delays or cancellation of
construction of planned improvements, or modification or termination of
operation of existing facilities. Management believes that Great Bay and Little
Bay are in compliance in all material respects with applicable EPA, NRC and
other regulations relating to pollution caused by nuclear generating facilities.

INTERNET-BASED ENERGY TRADING AND INFORMATION BUSINESS

     BayCorp's subsidiary, HoustonStreet, developed and operates
HoustonStreet.com, an Internet-based trading platform and information portal for
wholesale energy traders. Currently, HoustonStreet offers an online trading
exchange that allows utilities, independent power producers and power marketers
to trade electricity over the Internet. HoustonStreet plans to develop and
launch trading platforms for crude and refined oil products, natural gas and
other energy-related commodities.

  Industry Background

     Today, almost all electricity and approximately half of all natural gas
trading is conducted by telephone. As online exchanges develop and provide more
accurate and comprehensive real-time information and faster execution of trades,
HoustonStreet's management believes that energy traders will increasingly adopt
the online trading method. In addition, management believes that trading
companies facing increased competition and lower profit margins will utilize
online trading technology to realize cost savings and efficiencies. Moreover,
HoustonStreet's management believes that virtually all wholesale energy traders
use the Internet

                                       10
<PAGE>   12

for certain aspects of their business, including scheduling power transmission
and interfacing with various regulatory bodies and power pools, such as ISO New
England, PJM ISO and CalPX. Since traders already use the Internet for other
business activities, HoustonStreet's management believes that traders will also
use the Internet for trading.

  State of Wholesale Electricity Market

     The electricity market in the United States can be divided into two
categories based on the electricity producing entity. The first type of
producer, the vertically integrated utility, generates power and sells it
directly to its end users. The second type of producer, the independent power
producer, generates electricity and sells it on a wholesale basis. Utilities and
independent power producers trade wholesale electricity. Wholesale electricity
can be traded multiple times, as traders routinely buy and sell power to
accommodate varying delivery point and delivery time requirements.

     In addition to utilities and independent power producers, electricity is
traded by power marketers. Power marketers are independent middlemen that buy
and sell wholesale electricity at market prices. Although power marketers
traditionally do not own electrical generation, transmission or distribution
assets, they are in some instances affiliated with enterprises that own such
assets. Wholesale trading of electricity in the United States totaled
approximately $70 billion in 1998, representing over 3 billion megawatt hours.
According to Power Markets Week, power marketer sales alone reached 2.3 billion
megawatt hours in 1998.

  Electricity Trading and Deregulation

     With the onset of electric utility deregulation in the United States, the
wholesale power trading market has grown and changed significantly.
Historically, electric utilities traded power among themselves primarily on a
"real time" (electric power for the next hour) and "day ahead" (power for
tomorrow) basis. Forward transactions (beyond the next day) were less common.
With vertically integrated utilities, the need for wholesale trading is mainly
driven by plant outages and maintenance. Traditional regulated utilities priced
transactions based on cost and rate of return rather than market dynamics.

     There are two primary factors driving the change and growth of the
wholesale power trading market in the United States -- the breakup of the
vertically integrated model and the introduction of non-rate of return regulated
participants. The break up of vertically integrated organizations has increased
the need for the resulting organizations to engage in wholesale transactions.
When utilities were vertically integrated, captive generation was used to serve
captive load and transactions were used to fill in mismatches between the two.
Unaffiliated load-serving and generation entities must purchase and sell power
to conduct their ongoing businesses.

     Three states, California, Pennsylvania and Massachusetts, have completed
electric utility deregulation to date. These states represent approximately 13%
of the United States' electricity consumption. In addition, 18 other states have
enacted restructuring legislation to date. These states represent an additional
approximately 35% of the United States' electricity consumption. HoustonStreet's
management believes that the ongoing deregulation process will continue and
thereby generate a substantially larger market for trading on HoustonStreet.com.

  The HoustonStreet Solution

     HoustonStreet.com is a comprehensive Internet-based trading platform and
information portal for wholesale energy traders. Currently, HoustonStreet offers
an easy to use, fully Internet-based trading exchange that allows utilities,
independent power producers and power marketers to trade electricity over the
Internet. HoustonStreet provides traders with the information and flexibility
they need to post offers, make bids, counter and re-counter and close the
transaction. HoustonStreet plans to develop and launch trading platforms for
crude and refined oil products, natural gas and other energy-related
commodities.

     HoustonStreet offers flexibility and choice to traders and accommodates
their needs by permitting transactions for any quantity, time period and
delivery point. HoustonStreet also serves as an information

                                       11
<PAGE>   13

portal, providing traders with important information that could impact their
trading strategy, such as weather forecasts, energy and general news headlines
and links to regional power pool market clearing prices and plant outage
information. Moreover, HoustonStreet can serve as the base from which users can
begin their Internet activity, with additional links to stock prices, sports
news and other sites of interest to traders.

  Sources of Revenue

     HoustonStreet receives a fee for every trade completed on its Web site. The
transaction fees charged by HoustonStreet are at or below the commissions
charged by telephone brokers. Commissions on energy trades typically range from
0.01% to 0.05% of the value of the energy traded online.

  Services

     PowerPit.  Many power traders buy and sell electricity based on a need to
deliver or receive power at a specific point, at a specific time and for a
specific quantity. Accordingly, commonly traded standardized products used by
other traders may not meet the needs of these traders. The standard products,
also known as hub products, cover a limited set of delivery points for specific
peak time periods in blocks of 50 megawatts. HoustonStreet's PowerPit trading
platform allows traders to post bids and offers ranging from one megawatt for
one hour to large blocks for multiple years at any delivery point.

     SpeedWay.  Other power traders trade hub products and do not need the
flexibility of PowerPit. Their greatest needs are speed, ease of use and
sophisticated trading functionality. HoustonStreet's SpeedWay platform supports
trading of standard hub products only. By limiting the product range, SpeedWay
reduces the time and effort required to post bids and offers. SpeedWay allows
traders to trade in both location spreads (simultaneously buying and selling
power for the same time period for two different geographic points) and calendar
spreads (buying and selling for the same point at two different time periods.)

  Features and Benefits

     HoustonStreet serves as a portal to other sites providing content valuable
for individuals involved in the power market. The information available on
HoustonStreet, such as weather forecasts, energy news and regional power pool
market clearing prices, helps make the site "sticky" by providing traders with
the information they need to obtain price discovery, analyze opportunities and
execute trades. In addition, HoustonStreet provides other information of
interest to traders, including real-time stocks and sports information.

  Equiva Relationship

     In February 2000, HoustonStreet sold $6.0 million of its common stock and
Series A preferred stock to Equiva Trading Company ("Equiva"). Equiva is a
hydrocarbon supply and trading partnership jointly-owned by Equilon Enterprises
LLC ("Equilon") and Motiva Enterprises LLC ("Motiva"). Equilon is owned by Shell
Oil Company and Texaco Inc. Motiva is owned by Shell Oil Company, Texaco Inc.
and Saudi Refining Inc., an affiliate of Saudi Aramco.

     Also in February 2000, HoustonStreet entered into agreements with Equiva
under which Equiva will share its knowledge of the oil trading industry with
HoustonStreet and will pay HoustonStreet at least $1.5 million over the next two
years as minimum trading commissions generated through Equiva's use of
HoustonStreet's crude and refined oil products trading exchange, once it is
created and operated.

     Pursuant to additional agreements, Equiva committed to make markets and
promote liquidity for all of the primary products traded on HoustonStreet's
crude and refined oil products trading exchange. HoustonStreet's management
believes that Equiva's reputation as a leader in the energy trading markets,
coupled with Equiva's commitment to make markets on HoustonStreet, increases the
probability of success for HoustonStreet's crude and refined oil products
exchange.

                                       12
<PAGE>   14

     Notwithstanding HoustonStreet's relationship with Equiva or any other
strategic partner or financial investor, HoustonStreet provides a neutral,
secure and anonymous trading platform. HoustonStreet does not take title to any
products traded on HoustonStreet.com nor compete with any users of the system.

  Competition

     HoustonStreet's electricity trading exchange competes with brokers who
arrange for electricity trades by telephone and to a lesser extent, electronic
brokerage services. Moving traders from the telephone to the Internet is perhaps
the largest competitive challenge facing HoustonStreet. Currently, most
transactions are conducted on the telephone either directly between two traders
or through a telephone broker. The broker does not act as a principal in the
transaction. The purchasing and selling entities are disclosed to each other
upon completion of every transaction. This process can be inefficient and time
consuming. In addition, the human element in the telephone broker market
introduces a risk of error or omission in the dissemination of market
information. The level of price transparency is low.

     Independent Electronic Brokerages.  HoustonStreet is aware of several
electronic brokerages currently in operation that to a varying extent compete
with HoustonStreet. Bloomberg PowerMatch is operated by Bloomberg Financial
Services, a major provider of financial market information and analytical
services through a proprietary system. Bloomberg's proprietary system is
required to use its PowerMatch service. Altra Energy Technologies, Inc. has
recently released a partially Web enabled trading platform, Altrade. This
platform uses the Internet to communicate but requires proprietary software that
must reside on the users' desktop. Open Access Technologies Incorporated (OATI)
offers an Internet-based system for real time traders in the Mid-Continent Area
Power Pool (MAPP) region of the country. HoustonStreet's management believes
that none of these providers has a fully Web enabled comprehensive platform
comparable to HoustonStreet.

     Single Participant Web Sites.  In addition, HoustonStreet is aware of
several energy companies that have announced Internet-based systems that are
designed to give users the ability to trade energy-related commodities with only
that company. These Web sites are not independent exchanges, but rather
Internet-based distribution systems for company-specific products and services.
HoustonStreet is uncertain whether competitors of these energy companies will
want to transact business on a single-company site, possibly providing
competitors with information about positions they are taking in the market.

  Customers

     As of March 27, 2000, traders from approximately 20 companies have traded
electricity on HoustonStreet.com. Approximately 440 individual traders and over
85% of power trading companies in the United States have registered to use
HoustonStreet, including nine of the top ten power trading companies as ranked
by Power Markets Week based on sales.

  Marketing

     HoustonStreet's management believes that there are approximately 1,000
electricity traders in the United States who potentially could trade power on
HoustonStreet.com. This limited number of traders provides HoustonStreet with
the opportunity to do a highly focused direct marketing campaign. This includes
direct mail, direct e-mail and personal face-to-face visits from HoustonStreet's
sales force.

     As HoustonStreet implements its plans to expand into additional energy
markets, it will need to expand its marketing campaign. In addition to direct
marketing efforts, HoustonStreet intends to utilize its relationship with Equiva
to promote HoustonStreet's planned crude and refined oil products trading
exchange. HoustonStreet expects to enter into similar strategic relationships to
facilitate planned expansion into natural gas and other markets.

                                       13
<PAGE>   15

EMPLOYEES AND MANAGEMENT

     As of March 17, 2000, BayCorp and its subsidiaries had 35 employees,
including 26 at HoustonStreet, seven at BayCorp and two employees at Great Bay.
Little Bay has no employees.

     BayCorp has entered into Management and Administrative Services Agreements
(the "Services Agreements"), with its subsidiaries, Great Bay and HoustonStreet,
pursuant to which BayCorp provides Great Bay and HoustonStreet a full range of
management services, including general management and administration, accounting
and bookkeeping, budgeting and regulatory compliance. Under the Services
Agreements, Great Bay paid BayCorp $2,021,760 and HoustonStreet paid BayCorp
$427,600 for such services in 1999. Each Services Agreement has a one-year term
and provides for automatic one-year renewals. Although BayCorp and Little Bay do
not currently have a services agreement in place, the companies expect to enter
into a services agreement in 2000.

ITEM 2.  PROPERTIES.

     BayCorp's principal assets include its 100% equity interests in Great Bay
and Little Bay and approximately 53% equity interest in HoustonStreet as of
March 27, 2000. In turn, Great Bay and Little Bay's principal asset is a
combined 15% joint ownership interest in the Seabrook Project. The Seabrook
Project is a nuclear-fueled, steam electricity, generating plant located in
Seabrook, New Hampshire, which was planned to have two Westinghouse pressurized
water reactors, Seabrook Unit 1 and Seabrook Unit 2 (each with a rated capacity
of 1,150 megawatts), utilizing ocean water for condenser coiling purposes.
Seabrook Unit 1 entered commercial service on August 19, 1990. Seabrook Unit 2
has been canceled. See "Business -- The Seabrook Project."

     BayCorp's corporate headquarters is located in Portsmouth, New Hampshire
where it occupies approximately 3,960 square feet of office space under a lease
that expires in July 2003. BayCorp's management believes that the corporate
headquarters in Portsmouth, New Hampshire meets its current requirements and
that additional space can be obtained to meet requirements for the foreseeable
future.

     HoustonStreet's corporate headquarters is also located in Portsmouth, New
Hampshire where it occupies approximately 2,300 square feet of office space
under a lease that expires in November 2000. HoustonStreet also occupies
approximately 2,100 square feet of office space in Houston, Texas.
HoustonStreet's management believes that the corporate headquarters in
Portsmouth, New Hampshire and its office space in Houston, Texas meet its
current requirements and that additional space can be obtained to meet
requirements for the foreseeable future.

ITEM 3.  LEGAL PROCEEDINGS.

     For each of the tax years 1994, 1995, 1996, 1997 and 1998, Great Bay filed
property tax abatement applications with the towns of Hampton and Hampton Falls.
The abatement requests were denied. Great Bay filed appeals for each of those
years with the New Hampshire Board of Tax and Land Appeals (the "BTLA"). On
November 11, 1999, Great Bay reached agreements settling the property tax
litigation. As a result of the settlement agreement, Great Bay received $146,450
from the Town of Hampton and $21,967 from the Town of Hampton Falls. With regard
to Hampton Falls, the settlement established an assessed valuation of $7,000,000
for 1999 and $2,500,000 for 2000. With regard to the Town of Hampton, the
settlement established an assessed valuation of $20,000,000 for 1999 and
$15,000,000 for 2000.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     Not Applicable.

                                       14
<PAGE>   16

  Executive Officers of the Registrant

     The executive officers of BayCorp are:

<TABLE>
<CAPTION>
                 NAME                    AGE                          POSITION
                 ----                    ---                          --------
<S>                                      <C>   <C>
Frank W. Getman Jr.....................  36    Chief Executive Officer, President and Secretary
John A. Tillinghast....................  72    Chief Engineer, Chairman of the Board of Directors
</TABLE>

     Frank W. Getman Jr. has served as Chief Executive Officer, President, and
Secretary of the Company since May 1998. Mr. Getman served as Chief Operating
Officer of the Company since September 1996 and Vice President, Secretary and
General Counsel of Great Bay since August 1995. From September 1991 to August
1995, Mr. Getman was an attorney with the law firm of Hale and Dorr LLP, Boston,
Massachusetts. Mr. Getman holds J.D. and M.B.A. degrees from Boston College and
a B.A. in Political Science from Tufts University.

     John A. Tillinghast has served as the Company's Chief Engineer since May
1998 and the Chairman of the Board of Directors of the Company and its
predecessor since November 1994. From April 1995 until May 1998, Mr. Tillinghast
was the Company's Chief Executive Officer. Since 1987, Mr. Tillinghast has
served as President and the sole stockholder of Tillinghast Technology
Interests, Inc., a private consulting firm. From 1986 to 1993, Mr. Tillinghast
served as Chairman of the Energy Engineering Board of the National Academy of
Sciences. He holds an M.S. in Mechanical Engineering from Columbia University.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Following are the reported high and low sales prices of BayCorp Common
Stock ("MWH") on the American Stock Exchange ("ASE") as reported in the Wall
Street Journal daily as traded, for each quarter during 1999 and 1998 that
BayCorp Common Stock traded on the ASE:

<TABLE>
<CAPTION>
                                                               HIGH        LOW
                                                               ----        ---
<S>                                                            <C>         <C>
1998
  First Quarter............................................    6 9/16      6 3/8
  Second Quarter...........................................    7 1/4        7
  Third Quarter............................................    6 11/16     5 1/4
  Fourth Quarter...........................................    4 3/4       3 1/2
</TABLE>

<TABLE>
<CAPTION>
                                                               HIGH        LOW
                                                               ----        ---
<S>                                                            <C>         <C>
1999
  First Quarter............................................    4 7/16      3 1/2
  Second Quarter...........................................      6         3 3/8
  Third Quarter............................................    7 5/16       6
  Fourth Quarter...........................................    9 11/16     6 1/4
</TABLE>

     As of March 17, 2000, the Company had 27 holders of record of its Common
Stock. The Company believes that as of March 17, 2000, the Company had
approximately 884 beneficial holders of its Common Stock. The number of
beneficial owners substantially exceeds the number of record holders because
many of the Company's stockholders hold their shares in street name.

     BayCorp has never paid cash dividends on its common stock and currently
expects that it will retain all of its future earnings and does not anticipate
paying a dividend in the foreseeable future.

                                       15
<PAGE>   17

ITEM 6.  SELECTED FINANCIAL DATA.

SELECTED FINANCIAL DATA

     The following table sets forth selected financial data and other operating
information of BayCorp, as successor to Great Bay.

     The following data presents selected financial data of the Company as of
and for the years ended December 31, 1999, December 31, 1998, December 31, 1997,
December 31, 1996 and December 31, 1995. The information below should be read in
conjunction with the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's financial statements,
including the notes thereto, contained elsewhere in this Report.

                            SELECTED FINANCIAL DATA
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                         FOR THE YEARS ENDED DECEMBER 31,
                                               ----------------------------------------------------
                                                 1999       1998       1997       1996       1995
                                               --------   --------   --------   --------   --------
<S>                                            <C>        <C>        <C>        <C>        <C>
INCOME STATEMENT DATA:
  Operating Revenues.........................  $ 45,761   $ 32,034   $ 26,642   $ 30,324   $ 24,524
  Operating Expenses.........................    48,520     37,310     36,880     32,563     32,381
  Net Income (Loss)..........................    (4,740)    (6,769)   (11,215)     4,100     (6,059)

BALANCE SHEET DATA:
  Cash, Cash Equivalents & Short Term
     Investments.............................     6,064     12,055     19,092     28,775     16,469
  Working Capital............................    11,678     17,761     23,079     30,552     20,516
  Total Assets...............................   159,184    140,358    140,158    152,418    138,771
  Decommissioning Liability..................    79,443     60,274     55,846     53,215     50,899
  Capitalization:
  Common Equity..............................    66,246     71,359     78,139     89,625     82,233
  Total Capitalization.......................    66,246     71,359     78,139     89,625     82,233
</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

OVERVIEW

     Currently, BayCorp derives substantially all of its revenue through its
energy trading activities and its 100% equity interest in Great Bay and Little
Bay. Great Bay and Little Bay are electric generating companies whose principal
asset is a combined 15% joint ownership interest in the Seabrook Nuclear Power
Project in Seabrook, New Hampshire. The Company anticipates that it will derive
additional revenues from Houston Street. HoustonStreet began charging
commissions in September 1999 on wholesale power trades made on
HoustonStreet.com.

     BayCorp reported net losses for the years ended December 31, 1999, 1998 and
1997. The 1999 net loss was primarily due to costs associated with the refueling
outage that began on March 27, 1999, with the Plant resuming full operating
capacity on May 21, 1999, and to expenses associated with the start up of
HoustonStreet. The 1998 net loss was primarily due to unscheduled outages at the
Seabrook Project that occurred during the year and to the charge related to the
termination of a power marketing agreement between Great Bay and PECO. The 1997
net loss was primarily due to scheduled and unscheduled outages at the Seabrook
Project that occurred during that year.

     The Seabrook Project from time to time experiences both scheduled and
unscheduled outages. BayCorp incurs losses during outage periods due to the loss
of all revenues from the sale of generation and additional costs associated with
the outages as well as continuing operating and maintenance expenses and
depreciation.
                                       16
<PAGE>   18

Unscheduled outages or operation of the unit at reduced capacity can occur due
to the automatic operation of safety systems following the detection of a
malfunction. In addition, it is possible for the unit to be shut down or
operated at reduced capacity based on the results of scheduled and unscheduled
inspections and routine surveillance by Seabrook Project personnel. It is not
possible for BayCorp to predict the frequency or duration of any future
unscheduled outages, however, it is likely that such unscheduled outages will
occur. The Seabrook Project conducted a refueling outage in 1999. Refueling
outages are generally scheduled every 18 months depending upon the Seabrook
Project capacity factor and the rate at which the nuclear fuel is consumed.

     The following discussion focuses solely on operating revenues and operating
expenses that are presented in a substantially consistent manner for all of the
periods presented.

RESULTS OF OPERATIONS

  Operating Revenues

     BayCorp's operating revenues for 1999 increased by approximately $13.7
million, or 42.9%, to $45,761,000 as compared with $32,034,000 for 1998. This
increase was primarily due to an increase in sales by Great Bay of power
purchased in the open market in 1999. The 1999 capacity factor at the Seabrook
Project was 85.6% of the rated capacity as compared to a capacity factor of
83.3% for 1998. Operating revenues and the capacity factor were adversely
impacted in 1999 by the scheduled refueling outage at the Seabrook Project that
began on March 27. The Plant resumed full operating capacity on May 21 and
operated at full capacity through December 31, 1999. In contrast, while there
was no refueling outage in 1998, the Seabrook Project had approximately 64
unscheduled outage days in 1998. Substantially all of the Company's operating
revenues in 1999 were generated by its wholesale electricity generation and
trading business. HoustonStreet revenues in 1999 were nominal.

     Sales of electricity increased by approximately 38.2% to 1,457,110,270
kilowatt-hours ("kWhs") in 1999 as compared to 1,054,203,800 kWhs in 1998.
During 1999, the sales price per kWh (determined by dividing total sales revenue
by the total number of kWhs sold in the applicable period) increased 3% to 3.13
cents per kWh as compared with 3.04 cents per kWh in 1998. Great Bay's cost of
power (determined by dividing total operating expenses by kilowatt-hours sold
during the applicable period) decreased 5.9% to 3.33 cents per kWh in 1999 as
compared to 3.54 cents per kWh in 1998. This decrease was primarily the result
of the higher capacity factor at the Seabrook Project during 1999 as compared to
1998. Scheduled and unscheduled outage time increases Great Bay's cost of power
because Seabrook Project costs are spread over fewer kWhs.

     BayCorp's operating revenues for 1998 increased by approximately $5.4
million, or 20.1%, to $32,034,000 as compared with $26,642,000 for 1997. This
increase was primarily due to less scheduled and unscheduled outage time at the
Seabrook Project during 1998. During 1998, the capacity factor at the Seabrook
Project was 83.3% of the rated capacity as compared to a capacity factor of
78.3% for 1997. Operating revenues and capacity factor were adversely impacted
in 1997 by the scheduled refueling outage at the Seabrook Project that began on
May 10, 1997, lasting 50 days, and by the unscheduled outage that began on
December 5, 1997, lasting 41 days. In contrast, there was no refueling outage in
1998; however, the Seabrook Project had approximately 64 unscheduled outage days
in 1998.

     Sales of electricity increased by approximately 9.4% to 1,054,203,800
kilowatt-hours in 1998 as compared to 964,038,400 kilowatt-hours in 1997.
Operating revenues were favorably affected in 1998 by an increase in the sales
price per kWh. During 1998, the sales price per kWh (determined by dividing
total sales revenue by the total number of kWhs sold in the applicable period)
increased 10.1% to 3.04 cents per kWh as compared with 2.76 cents per kWh in
1997. Great Bay's cost of power (determined by dividing total operating expenses
by kilowatt-hours sold during the applicable period) decreased 7.6% to 3.54
cents per kWh in 1998 as compared to 3.83 cents per kWh in 1997. This decrease
was primarily the result of the higher capacity factor at the Seabrook Project
during 1998 as compared to 1997.

                                       17
<PAGE>   19

  Expenses

     BayCorp's total operating expenses for 1999 increased $11.2 million, or
30%, in comparison with 1998. This increase was primarily the result of
purchased power expenses in 1999. Purchased power expenses increased
approximately $11,186,000, from $1,046,000 in 1998 to $12,232,000 in 1999.
Purchased power expenses have increased primarily because Great Bay purchased
power in 1999 in the open market to resell to third parties and to cover firm
sales during outages at the Seabrook Project in 1999. As Great Bay enters into
more sales transaction agreements to supply firm power, Great Bay's expenses to
purchase power to cover firm power obligations during scheduled and unscheduled
outages may increase. Production costs decreased approximately $2.6 million, or
12.5%, from $20.8 million in 1998 to $18.2 million in 1999. This decrease was
primarily the result of fewer unscheduled outage days in 1999 compared to 1998.
Administrative and general expenses increased approximately $1.3 million, or
16.3%, from $8 million in 1998 to $9.3 million in 1999. Depreciation and
amortization increased approximately $454,000, or 12.4%, from $3.7 million in
1998 to $4.1 million in 1999. The increase in administration and general
expenses and depreciation expense was primarily due to expenses relating to the
startup, commercial launch and expansion of HoustonStreet.

     In 1999, the Company recognized $806,000 in unrealized losses on firm
energy trading contracts. There was no comparable charge in 1998. In December
1998, the Emerging Issues Task Force reached consensus on Issue No. 98-10,
Accounting for Contracts Involved in Energy Trading and Risk Management
Activities ("EITF 98-10"). EITF 98-10 is effective for fiscal years beginning
after December 15, 1998. EITF 98-10 requires energy trading contracts to be
recorded at fair value on the balance sheet, with the changes in fair value
included in earnings. The effects of initial application of EITF 98-10 have been
reported as a cumulative effect of a change in accounting principle. Financial
statements for periods prior to initial adoption of EITF 98-10 have not been
restated. The cumulative effect of this accounting change as of January 1, 1999
was an increase in net income of approximately $159,000 to recognize gains on
net open physical purchase and sales commitments considered to be trading
activity.

     Other Deductions increased $646,000, or 43.3%, in 1999 as compared to 1998.
This increase was primarily attributable to interest income, which decreased
$387,000, or 41.3%, in 1999 as compared to 1998. This decrease was attributable
to the lower cash balances in 1999 as compared to 1998. Decommissioning cost
accretion increased $447,000, or 15.6%, to $3.3 million in 1999 as compared to
$2.9 million in 1998. This accretion is a non-cash charge that reflects Great
Bay's liability related to the closure and decommissioning of the Seabrook
Project in current year dollars over the licensing period during which the
Seabrook Project is licensed to operate. Decommissioning trust fund income
increased $142,000, or 23.2%, to $755,000 in 1999 as compared to $613,000 in
1998. The increase in interest earned on the decommissioning trust fund
reflected the higher 1999 fund balance as Great Bay continues to make
contributions to the decommissioning trust fund.

     BayCorp's total operating expenses (excluding depreciation and taxes) for
1998 increased $1.4 million, or 5.1%, in comparison with 1997. This increase was
primarily the result of the costs associated with the unscheduled outages in
1998, including Great Bay's purchased power expenses of approximately $1.0
million that covered firm sales of approximately $1.2 million during unscheduled
outages in 1998.

     Operating expenses were also adversely impacted by payments to PECO of
approximately $3.1 million in 1998, which included the charge related to the
termination of the power marketing agreement with PECO for approximately $2.5
million in June 1998. Charges for PECO's marketing service in 1997 were
approximately $1.8 million. In addition, depreciation and amortization increased
$148,000, or 4.2%. Taxes other than income decreased $1.2 million, or 29.2%, in
1998 as compared to 1997 due to the Seabrook Project property tax settlement
that resulted in a property tax refund to Great Bay in December 1998 of
approximately $1.3 million.

     Other Deductions increased $516,000, or 52.8%, in 1998 as compared to 1997.
This increase was primarily attributable to interest income, which decreased
$314,000, or 25.1%, in 1998 as compared to 1997. This decrease was attributable
to the lower cash balances in 1998 as compared to 1997. Decommissioning cost
accretion increased $210,000, or 7.9%, to $2.9 million in 1998 as compared to
$2.7 million in 1997. Decommissioning trust fund income increased $143,000, or
30.4%, to $613,000 in 1998 as compared to $470,000 in 1997.
                                       18
<PAGE>   20

  Net Operating Losses

     For federal income tax purposes, as of December 31, 1999, the Company had
net operating loss carry forwards ("NOLs") of approximately $225 million, which
are scheduled to expire between 2005 and 2019. Because the Company has
experienced one or more ownership changes, within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, an annual limitation is imposed
on the ability of the Company to use $136 million of these carryforwards. The
Company's best estimate at this time is that the annual limitation on the use of
$136 million of the Company's NOLs is approximately $5.5 million per year. Any
unused portion of the $5.5 million annual limitation applicable to the Company's
restricted NOL's is available for use in future years until such NOL's are
scheduled to expire. The Company's other $89 million of NOLs are not currently
subject to such limitations.

LIQUIDITY AND CAPITAL RESOURCES

     In 1999, cash generated from electricity sales by Great Bay and Little Bay
was sufficient to cover the ongoing cash requirements of Great Bay, Little Bay
and BayCorp. If the Seabrook Project operates at a capacity factor below
historical levels, or if expenses associated with the ownership or operation of
the Seabrook Project, including without limitation decommissioning costs, are
materially higher than anticipated, or if the prices at which Great Bay is able
to sell its share of the Seabrook Project electricity do not increase at the
rates and within the time expected by Great Bay, BayCorp or Great Bay would be
required to raise additional capital, either through a debt financing or an
equity financing, to meet their ongoing cash requirements. There can be no
assurance that BayCorp or Great Bay will be able to raise additional capital on
acceptable terms or at all.

     The Company's principal asset available to serve as collateral for
borrowings is Great Bay's and Little Bay's combined 15% interest in the Seabrook
Project. Pursuant to a purchased power agreement, dated as of April 1, 1993,
between Great Bay and UNITIL Power Corp., Great Bay's interest in the Seabrook
Project is encumbered by a mortgage. This mortgage may be subordinated by up to
$80 million of senior secured financing. See "Business -- Wholesale Electricity
Generation and Trading Business -- Purchased Power Agreements."

     HoustonStreet began charging commissions for its services in September
1999. Commission revenues earned by HoustonStreet have been significantly less
than HoustonStreet's ongoing cash requirements, including cash needed for
development and expansion. HoustonStreet expects to continue to incur cash
deficits. HoustonStreet expects to cover its cash deficits with the proceeds
from sales of its capital stock. As of March 27, 2000, HoustonStreet raised
$16.6 million in cash from sales of its capital stock and had cash on hand of
$5.0 million. HoustonStreet will need to raise additional capital in the second
quarter of 2000 or shortly thereafter to meet its ongoing cash needs. There can
be no assurance that HoustonStreet will be able to raise additional capital on
acceptable terms or at all.

     Excluding cash held by HoustonStreet, the Company had cash and cash
equivalents, restricted cash and short-term investments of approximately $6.1
million at December 31, 1999. In addition, BayCorp held a promissory note
payable by HoustonStreet at December 31, 1999 for approximately $4.1 million.
This note was repaid to BayCorp in February 2000.

     BayCorp's total cash and short-term investments decreased approximately
$6.0 million during 1999. The principal factors affecting liquidity during 1999
were cash used in connection with Little Bay's acquisition of its 2.9% joint
ownership interest in the Seabrook Project and cash used in connection with
forming, developing and expanding HoustonStreet. Non-cash charges to income
included $4.1 million for depreciation, $4.0 million for nuclear fuel
amortization, unrealized loss on firm energy trading contracts of $647,000 and
$3.3 million for decommissioning trust fund accretion. There was an increase in
accounts payable and other miscellaneous current liabilities of approximately
$2.1 million primarily due to HoustonStreet payables for Web site development
costs. Offsetting these non-cash charges to income were cash charges including a
$1.6 million increase in December 1999 accounts receivable and other current
assets as compared to December 1998. 1999 year end receivables reflected an
increase in the amount of power sold, primarily due to the sale of Little Bay's
power. Other cash charges included charges of $4.9 million for capital
expenditures and $2.0 million for nuclear fuel.

                                       19
<PAGE>   21

     Also in 1999, Little Bay purchased a 2.9% interest in the Seabrook Project
from Montaup Electric Company, a subsidiary of Eastern Utilities Associates, for
a purchase price of $3.2 million, plus approximately $1.7 million for certain
prepaid items, primarily nuclear fuel and capital expenditures.

     Great Bay's 1999 decommissioning payments totaled approximately $1.7
million. The decommissioning funding schedule is determined by the NDFC, which
reviews the schedule for the Seabrook Project at least annually. Great Bay
expects to use revenues from the sale of power to make these decommissioning
payments. See "Business -- Wholesale Electricity Generation and Trading
Business -- Decommissioning."

     The Company anticipates that capital expenditures for HoustonStreet for the
fiscal year 2000 will total approximately $20.0, million primarily for software
development. Great Bay and Little Bay anticipates that their share of the
Seabrook Project's capital expenditures for the 2000 fiscal year will total
approximately $8.4 million for nuclear fuel and various capital projects. In
addition, Great Bay and Little Bay are required under the JOA to pay their share
of Seabrook Unit 1 and Seabrook Unit 2 expenses, including, without limitation,
operation and maintenance expenses, construction and nuclear fuel expenditures
and decommissioning costs, regardless of the level of Seabrook Unit 1's
operations.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

     This Annual Report on Form 10-K contains forward-looking statements. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects,"
"intends" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause the results
of BayCorp and/or its subsidiaries to differ materially from those indicated by
such forward-looking statements. These factors include, without limitation,
those set forth below and elsewhere in this Annual Report.

  History of Losses

     BayCorp has never reported an operating profit for any year since its
incorporation. Historically, electricity sales at short-term rates have not
resulted in sufficient revenue to enable BayCorp to meet its cash requirements
for operations, maintenance and capital related costs. In addition,
HoustonStreet has incurred substantial operating expenses and capital
expenditures, totaling approximately $6.2 million from formation to December 31,
1999, with continuing losses in 2000. These expenses and capital expenditures
greatly exceeded HoustonStreet's revenue of $59,200 for the same period.
HoustonStreet expects to continue to incur substantial operating losses for the
foreseeable future. Moreover, there can be no assurance that Great Bay or Little
Bay will be able to sell power at prices that will enable them to meet their
cash requirements.

  Liquidity Needs

     As of December 31, 1999, BayCorp had approximately $6.1 million in cash and
cash equivalents, restricted cash and short-term investments. The Company
believes that such cash, together with the anticipated proceeds from the sale of
electricity by Great Bay and Little Bay and additional external financing that
HoustonStreet is currently seeking, will be sufficient to enable the Company and
its subsidiaries to meet their cash requirements in 2000. However, if in 2000 or
thereafter, the Seabrook Project operated at a capacity factor below historical
levels, or if expenses associated with the ownership or operation of the
Seabrook Project, including without limitation decommissioning costs, are
materially higher than anticipated, or if the prices at which Great Bay and
Little Bay are able to sell their share of the Seabrook Project electricity do
not increase at the rates and within the time expected by Great Bay and Little
Bay, or if HoustonStreet expenses materially exceed budgeted expenses, the
Company or its subsidiaries would be required to raise additional capital,
either through a debt financing or an equity financing, to meet ongoing cash
requirements. In any event, in 2000 or shortly thereafter, the Company and its
subsidiaries will likely need to raise additional capital from outside sources.
There is no assurance that the Company or its subsidiaries would be able to
raise such capital or that the terms on which any additional capital is
available would be acceptable. If additional funds are raised by issuing equity
securities, dilution to then existing stockholders will result.

                                       20
<PAGE>   22

  Factors Related to Great Bay and Little Bay

     Primary Reliance on a Single Asset.  BayCorp's principal source of revenue
is its wholesale electricity generation and trading business, which depends in
large part on Great Bay and Little Bay's 15% combined joint interest in the
Seabrook Nuclear Power Project in Seabrook, New Hampshire. Accordingly,
BayCorp's results of operations significantly depend on the successful and
continued operation of the Seabrook Project. In particular, if the Seabrook
Project experiences unscheduled outages of significant duration, BayCorp's
results of operations will be materially adversely affected.

     Changes in the New England Wholesale Power Market.  During recent years in
New England, the combination of (1) increased competition in the wholesale power
market, (2) small increases in the demand for electricity and (3) electric
industry deregulation has resulted in increased uncertainty regarding the price
of electricity in the wholesale power market. Although Great Bay's average
selling price per kWh (determined by dividing total sales revenue by the total
number of kWhs sold in the applicable period) increased from 2.76 cents in 1997
to 3.04 cents in 1998 and 3.13 cents in 1999, there can be no assurance that
Great Bay or Little Bay will be able to sell their power at these prices or
higher prices in the future.

     Risks in Connection with Joint Ownership of Seabrook Project.  Great Bay
and Little Bay are required under the JOA to pay their share of Seabrook Unit 1
and Seabrook Unit 2 expenses, including without limitation operations and
maintenance expenses, construction and nuclear fuel expenditures and
decommissioning costs, regardless of Seabrook Unit 1's operations. Under certain
circumstances, a failure by Great Bay or Little Bay to make their monthly
payments under the JOA entitles certain other joint owners of the Seabrook
Project to purchase Great Bay or Little Bay's interest in the Seabrook Project
for 75% of the then fair market value thereof.

     In addition, the failure to make monthly payments under the JOA by owners
of the Seabrook Project other than Great Bay and Little Bay may have a material
adverse effect on the Company. For example, Great Bay or Little Bay could opt to
pay a greater proportion of the Seabrook Project expenses in order to preserve
the value of their share of the Seabrook Project. In the past, certain of the
owners of the Seabrook Project other than Great Bay and Little Bay have not made
their full respective payments. The electric utility industry is undergoing
significant changes as competition and deregulation are introduced into the
marketplace. Some utilities, including certain Participants, have indicated in
state regulatory proceedings that they may be forced to seek bankruptcy
protection if regulators, as part of the industry restructuring, do not allow
for full recovery of stranded costs. If a Participant other than Great Bay or
Little Bay filed for bankruptcy and that Participant was unable to pay its share
of Seabrook Project expenses, Great Bay or Little Bay might opt to pay a greater
portion of Seabrook Project expenses in order to preserve the value of their
share of the Seabrook Project. In the past, the filing of bankruptcy by a
Participant has not resulted in a failure to pay Seabrook Project expenses or an
increase in the percentage of expenses paid by other Participants.

     The Seabrook Project is owned by Great Bay, Little Bay and the other owners
thereof as tenants in common, with the various owners holding varying ownership
shares. This means that Great Bay and Little Bay, which together own only a 15%
interest, do not have control of the management of the Seabrook Project. As a
result, decisions may be made affecting the Seabrook Project notwithstanding
Great Bay and/or Little Bay's opposition.

     Certain costs and expenses of operating the Seabrook Project or owning an
interest therein, such as certain insurance and decommissioning costs, are
subject to increase or retroactive adjustment based on factors beyond the
control of BayCorp or its subsidiaries. The cost of disposing of Unit 2 of the
Seabrook Project is not known at this time. These various costs and expenses may
adversely affect BayCorp, Great Bay and Little Bay, possibly materially.

     Extensive Government Regulation.  The Seabrook Project is subject to
extensive regulation by federal and state agencies. In particular, the Seabrook
Project, and Great Bay and Little Bay as part owners of a licensed nuclear
facility, are subject to the broad jurisdiction of the NRC, which is empowered
to authorize the siting, construction and operation of nuclear reactors after
consideration of public health and safety, environmental and antitrust matters.
Great Bay and Little Bay are also subject to the jurisdiction of the FERC

                                       21
<PAGE>   23

and, as a result, are required to file with FERC all contracts for the sale of
electricity. FERC's jurisdiction also includes, among other things, the sale,
lease, merger, consolidation or other disposition of facilities, interconnection
of certain facilities, accounts, service and property records. Noncompliance
with NRC requirements may result, among other things, in a shutdown of the
Seabrook Project.

     The NRC has promulgated a broad range of regulations affecting all aspects
of the design, construction and operation of a nuclear facility, such as the
Seabrook Project, including performance of nuclear safety systems, fire
protection, emergency response planning and notification systems, insurance and
quality assurance. The NRC retains authority to modify, suspend or withdraw
operating licenses, such as the license pursuant to which the Seabrook project
operates, at any time that conditions warrant. For example, the NRC might order
Seabrook Unit 1 shut down (i) if flaws were discovered in the construction or
operation of Seabrook Unit 1, (ii) if problems developed with respect to other
nuclear generating plants of a design and construction similar to Unit 1, or
(iii) if accidents at other nuclear facilities suggested that nuclear generating
plants generally were less safe than previously believed.

     Risk of Nuclear Accident.  Nuclear reactors have been used to generate
electric power for more than 35 years and there are currently more than 100
nuclear reactors used for electric power generation in the United States.
Although the safety record of these nuclear reactors in the United States
generally has been very good, accidents and other unforeseen problems have
occurred both in the United States and elsewhere, including the well-publicized
incidents at Three Mile Island in Pennsylvania and Chernobyl in the former
Soviet Union. The consequences of such an accident can be severe, including loss
of life and property damage, and the available insurance coverage may not be
sufficient to pay all the damages incurred.

     Public Controversy Concerning Nuclear Power Plants.  Substantial
controversy has existed for some time concerning nuclear generating plants and
over the years such opposition has led to construction delays, cost overruns,
licensing delays, demonstrations and other difficulties. The Seabrook Project
was the subject of significant public controversy during its construction and
licensing and remains controversial. An increase in public concerns regarding
the Seabrook Project or nuclear power in general could adversely affect the
operating license of Seabrook Unit 1. While the Company cannot predict the
ultimate effect of such controversy, it is possible that it could result in a
premature shutdown of the unit.

     Waste Disposal; Decommissioning Cost.  There has been considerable public
concern and regulatory attention focused upon the disposal of low- and
high-level nuclear wastes produced at nuclear facilities and the ultimate
decommissioning of such facilities. As to waste disposal concerns, both the
federal government and the State of New Hampshire are currently delinquent in
the performance of their statutory obligations.

     The joint owners of the Seabrook Project, through their managing agent
NAESCO, entered into contracts with the DOE for high level waste disposal in
accordance with the NWPA. Under these contracts and the NWPA, the DOE was
required to take title to and dispose of the Seabrook Project's high level waste
beginning no later than January 31, 1998. However, the DOE has announced that
its first high level waste repository will not be in operation until 2010 at the
earliest.

     The Seabrook Project increased its on-site storage capacity for low level
waste ("LLW") in 1996 and that capacity is expected to be sufficient to meet the
Project's storage requirements through 2006. In addition, the managing agent of
the Seabrook Project has advised the Joint Owners that the Seabrook Project has
adequate on-site storage capacity for high level waste until approximately 2010.
If the Seabrook Project were unable to store nuclear waste on site or make other
disposal provisions, the Company's business, results of operations and financial
condition would be materially and adversely affected. See "Business -- Wholesale
Electricity Generation and Trading Business -- Nuclear Waste Disposal."

     As to decommissioning, NRC regulations require that upon permanent shutdown
of a nuclear facility, appropriate arrangements for full decontamination and
decommissioning of the facility be made. These regulations require that during
the operation of a facility, the owners of the facility must set aside
sufficient funds to defray decommissioning costs. While the owners of the
Seabrook Project are accumulating monies in a trust fund to defray
decommissioning costs, these costs could substantially exceed the value of the
trust fund, and the owners (including Great Bay and Little Bay) would remain
liable for the excess. Moreover, the

                                       22
<PAGE>   24

amount that is required to be deposited in the trust fund is subject to periodic
review and adjustment by an independent commission of the State of New
Hampshire, which could result in material increases in such amounts.

     Intense Competition.  Great Bay sells its share (and Little Bay's share) of
Seabrook Project electricity primarily into the Northeast United States
wholesale electricity market. There are a large number of suppliers to this
market and competition is intense. A primary source of competition comes from
traditional utilities, many of which presently have excess capacity. In
addition, non-utility wholesale generators of electricity, such as IPPs, QFs and
EWGs, as well as power marketers and brokers, actively sell electricity in this
market. Great Bay may face increased competition, primarily based on price, from
all sources in the future.

  Factors Related to HoustonStreet

     Limited Operating History.  HoustonStreet was incorporated in Delaware on
April 27, 1999. HoustonStreet.com was launched initially in the Northeast on
July 8, 1999 and nationwide on September 13, 1999. HoustonStreet has only a
limited operating history upon which to evaluate its performance.

     Significant Future Losses Expected.  HoustonStreet's business is subject to
the risks and uncertainties encountered by companies in early stages of
development, particularly enterprises in new and rapidly evolving markets, such
as electronic trading of energy products over the Internet. HoustonStreet's
substantial operating expenses and capital expenditures from formation to date
have greatly exceeded its revenues over the same period. HoustonStreet expects
to continue to incur substantial operating losses for the foreseeable future.
Moreover, there is no assurance that HoustonStreet will be able to achieve or
sustain profitability.

     Internet-based Wholesale Energy Trading is a New and Evolving
Market.  Wholesale trading of energy products over the Internet is a new and
rapidly evolving market. HoustonStreet cannot be certain that a viable market
will emerge or be sustainable. If the market for Internet-based wholesale energy
trading fails to develop, if it develops more slowly than expected, if it
becomes saturated with competitors or if it does not achieve widespread market
acceptance, HoustonStreet would be materially adversely affected.

     Dependence on Internet-based Wholesale Energy Trading.  Substantially all
of HoustonStreet's revenues depend on the continued and expanded use of
Internet-based wholesale energy trading platforms. HoustonStreet currently
depends on its wholesale electricity trading platform for all revenues.
HoustonStreet will likely depend on other energy trading platforms, including
platforms for oil and natural gas trading, if planned expansion is successful.

     Businesses have only recently begun significant use of the Internet for
electronic commerce. Although Internet usage has grown dramatically,
HoustonStreet cannot assure you that usage will continue to increase for
commerce or trading wholesale energy products. A decrease in the use of the
Internet or a reduction in the currently anticipated growth in the use of the
Internet would have a material adverse effect on HoustonStreet. Businesses may
reject the Internet as a viable commercial medium for a number of reasons,
including potentially inadequate network infrastructure, slow development of
enabling technologies, insufficient commercial support or privacy concerns. The
Internet's infrastructure may be unable to support the demands placed on it by
increased usage. In addition, delays in developing or adopting new standards and
protocols required to handle increased levels of Internet activity, or increased
government regulation, could cause the Internet to lose its viability as a
commercial medium.

     Dependence on Trading Liquidity.  HoustonStreet will need to achieve
trading liquidity on its Internet-based wholesale energy trading exchange in
order to increase and sustain revenues. If the volume and level of trades on the
exchange do not increase, HoustonStreet will not achieve profitability.

     Dependence on Increased Business from Unaffiliated Customers.  If
HoustonStreet fails to grow its customer base or generate repeat and expanded
business from customers that are not affiliated with BayCorp, HoustonStreet will
be unable to achieve or sustain profitability. For the period beginning July 8,
1999 through December 31, 1999, Great Bay, a subsidiary of BayCorp, was a party
to 77% of all trades on HoustonStreet. HoustonStreet earns standard commissions
from all trades on HoustonStreet, including trades by Great Bay

                                       23
<PAGE>   25

and its counterparties. To date, a substantial majority of HoustonStreet's
revenue has been derived from commissions from trades involving Great Bay and
its counterparties.

     HoustonStreet's management expects that commissions from trades involving
Great Bay and its counterparties will be a less significant portion of revenue
in the future as the number of registered traders and the volume of trades
increases. If trading volume does not increase as anticipated, HoustonStreet's
revenue will not increase and HoustonStreet's business and financial results
will be materially adversely affected.

     Need for Expanded Sales and Marketing Operations.  Expanded sales and
marketing operations will be necessary to attract traders to HoustonStreet's
trading exchange, to lengthen the time and frequency of service use, and to
build the HoustonStreet community of users. If HoustonStreet's sales and
marketing operations fail to register additional users and generate increased
traffic on its Web site, the number of trades completed on the exchange may not
increase. If the number, size and frequency of transactions do not increase,
HoustonStreet will be unable to increase its revenues and HoustonStreet's
business will not achieve profitability.

     Need for Additional Financing.  Based on current levels of operations and
planned growth, HoustonStreet's management anticipates that the net proceeds of
its stock sales in February and March 2000 and cash generated from operations
will be sufficient to meet HoustonStreet's needs through approximately October
2000. If HoustonStreet requires additional funding or determines that it is
appropriate to raise additional funding, HoustonStreet may be unable to raise
additional funds. Further, any such funding may result in significant dilution
to existing HoustonStreet stockholders, including BayCorp. The inability to
obtain sufficient funds from operations and external sources when needed would
have a material adverse effect on HoustonStreet's business, results of
operations and financial condition.

     Ability to Implement Business Strategy.  The growth and expansion of
HoustonStreet's business are expected to place significant demands on
HoustonStreet's management, operational and financial resources. Successful
implementation of HoustonStreet's business strategy will depend on a number of
factors, including its ability to:

        - offer an efficient and effective wholesale energy trading platform
          that meets industry needs,

        - increase awareness of the HoustonStreet brand,

        - continue to develop and upgrade the HoustonStreet Web site and related
          technology, operating software and capacity,

        - attract more wholesale energy traders to the HoustonStreet Web Site,
          lengthen the time and frequency of service use, and build the
          HoustonStreet community of registered users, and

        - attract, hire, integrate, retain and motivate qualified personnel.

There can be no assurance that HoustonStreet will be successful in the
implementation of its business strategy.

     Reliance on Strategic Relationships.  HoustonStreet may be unable to
implement its strategic growth plans without successfully identifying, forming,
maintaining and enhancing strategic relationships, such as its strategic
relationship with Equiva. HoustonStreet's ability to achieve significant future
revenue growth will depend in part on adding new strategic partners. If
HoustonStreet is unable to form or successfully develop additional strategic
relationships, HoustonStreet may be unable to grow its revenues and
HoustonStreet could be materially adversely affected.

     International Expansion.  If HoustonStreet cannot expand internationally,
HoustonStreet may be unable to take advantage of the potential revenue
associated with energy trading on a global level. While HoustonStreet's
management believes that HoustonStreet can become profitable if its services are
widely adopted by power traders in the United States, the global energy market
represents a much larger source of revenue.

                                       24
<PAGE>   26

     To be successful, HoustonStreet's management believes that HoustonStreet
must expand its operations into international markets. International operations
will subject HoustonStreet to a number of risks that may increase
HoustonStreet's costs and require significant management attention. These risks
include:

        - difficulties and increased expenses associated with staffing and
          managing foreign operations,

        - differing technology standards that may impede HoustonStreet's ability
          to integrate its trading platforms across international borders,

        - reluctance or inability of energy traders abroad to accept
          Internet-based wholesale energy trading as a method of conducting
          business,

        - changes in regulatory requirements,

        - currency exchange rate fluctuations, and

        - potentially adverse tax consequences, including restrictions on the
          repatriation of earnings.

     Regulatory Risks and Privacy Concerns.  As use of the Internet evolves,
federal, state and foreign agencies could adopt regulations covering issues such
as user privacy, content and taxation of products and services. If enacted,
government regulations could limit the market for HoustonStreet's services.

     In order to use HoustonStreet's trading exchange, traders must first
register with HoustonStreet. The registration process requires that users
provide certain information about themselves and the companies for which they
trade. Although HoustonStreet collects this data only with the consent of a
visitor, privacy concerns may cause visitors to resist registering to use the
exchange. In addition, legislative or regulatory requirements may heighten
privacy concerns. Other countries and political entities, such as the European
Economic Community, have adopted legislation or regulatory requirements relating
to privacy. The United States may adopt similar legislation or regulatory
requirements. If privacy legislation is enacted or privacy concerns are not
adequately addressed, HoustonStreet's business could be materially adversely
affected.

     Unpredictability of Future Revenues; Potential Fluctuation in Quarterly
Operating Results.  As a result of HoustonStreet's limited operating history and
the emerging nature of the market for Internet-based trading of wholesale energy
products, HoustonStreet is unable to forecast its revenues accurately.
HoustonStreet expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside HoustonStreet's control. These factors include the demand for
HoustonStreet's trading services, the introduction and market acceptance of new
services in the industry, reductions in trading commissions or changes in how
services are priced, and the amount and timing of operating costs and capital
expenditures related to expanding HoustonStreet's business, operations and
infrastructure. Quarterly results also can be affected by changes in the use of
the Internet and electronic commerce, changes in governmental regulations, and
changes in general economic conditions and economic conditions specifically
related to the Internet and energy trading markets.

     In addition, trading volumes can fluctuate due to the seasonal nature of
the wholesale electricity trading market. Typically, there are substantial
declines in the volume of wholesale electricity trading during the fourth
quarter of the calendar year. Based on statistics published by the FERC, the
amount of electricity traded in the United States in the fourth quarter of 1998
was approximately 50% less than amount traded in the third quarter of 1998.
HoustonStreet's management believes that fourth quarter trading can be adversely
affected by seasonal trading patterns, the inclination of some utilities,
independent power producers and power marketers to maintain existing trading
positions near year-end and other factors.

     It is difficult to forecast the effect such factors, or the combination of
any of these factors, would have on HoustonStreet's results of operations for
any given fiscal quarter. HoustonStreet's management believes that
HoustonStreet's quarterly revenues, expenses and operating results could vary
significantly in the future and that period-to-period comparisons should not be
relied on as indications of future performance.

     System Maintenance and Protection.  Unanticipated problems at the
third-party facility that houses substantially all of HoustonStreet's computer
and communications hardware systems could cause interruptions or delays in
HoustonStreet's business, loss of data or render HoustonStreet unable to process
wholesale

                                       25
<PAGE>   27

energy trades. Any such interruptions or delays at the facility would harm
HoustonStreet's revenue and results of operations. In addition, these
third-party systems and operations are vulnerable to damage or interruption from
intentional malicious acts, fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events. HoustonStreet does not have a formal
disaster recovery plan and does not carry business interruption insurance. In
addition, the failure by the third-party facility to provide the data
communications capacity required by HoustonStreet, as a result of human error,
natural disaster or other operational disruptions, could result in interruptions
in HoustonStreet's service. The occurrence of any or all of these events could
harm HoustonStreet's reputation and brand and business.

     Traders on the HoustonStreet.com may also be harmed by any system or
equipment failures experienced by HoustonStreet. In that event, HoustonStreet's
relationship with these traders may be adversely affected, HoustonStreet may
lose traders, HoustonStreet's ability to attract new users may be adversely
affected and HoustonStreet could be exposed to liability.

     If users of HoustonStreet's trading platform suffer similar interruptions
in their operations, for any of the reasons discussed above or for other
reasons, HoustonStreet's business could also be adversely affected. In addition,
if traders' computer systems suffer interruptions, the link to HoustonStreet's
Web site could be severed and the traders' wholesale energy trades could be
delayed or stopped.

     Rapid Technological Change.  To remain competitive, HoustonStreet must
continue to enhance and improve its services. The Internet is characterized by
rapid technological change, changes in user and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies and the emergence of new industry standards and practices.
HoustonStreet's success will depend, in part, on its ability to:

        - develop leading Internet-based technologies useful for wholesale
          energy trading,

        - enhance its existing services,

        - develop new services and technology that address the increasingly
          sophisticated and varied needs of wholesale energy traders, and

        - respond to technological advances and emerging industry standards and
          practices on a cost-effective and timely basis.

     HoustonStreet would be materially adversely affected if it is unable, for
technical, legal, financial or other reasons, to adapt in a timely manner to
changing market conditions or customer requirements.

     Intense Competition.  Wholesale energy trading markets are dynamic and
intensely competitive. Competition is likely to increase in the future as new
companies enter the market and current competitors expand their products and
services. See "Business -- Internet-based Energy Trading and Information
Business -- Competition." Many of these potential competitors are likely to
enjoy substantial competitive advantages, including:

        - larger technical, production and marketing staffs,

        - a more established presence in the wholesale energy trading community,

        - greater brand recognition, and

        - substantially greater financial, marketing, technical and other
          resources.

     If HoustonStreet does not compete effectively or if it experiences pricing
pressures, reduced margins or loss of market share resulting from increased
competition, HoustonStreet's business would be materially adversely affected.

     Dependence on Management and Need for New Personnel.  HoustonStreet is, and
for the foreseeable future will be, dependent upon the services of its
directors, executive officers and key management personnel. HoustonStreet's
future success depends on its ability to identify, attract, hire, train, retain
and motivate highly skilled technical, managerial, marketing, sales and customer
service personnel. The loss of the services of

                                       26
<PAGE>   28

current key personnel and the failure to hire new personnel could have a
material adverse effect upon HoustonStreet's results of operations, product
development efforts and ability to grow.

     In particular, HoustonStreet plans to recruit and hire a new Chief
Financial Officer and new Vice President of Technology in 2000. Competition for
such personnel is intense and there can be no assurance that HoustonStreet can
attract, assimilate or retain sufficiently qualified personnel. The failure to
hire and retain a new Chief Financial Officer, Vice President of Technology and
other necessary technical, managerial, marketing, sales and customer service
personnel, would materially adversely affect HoustonStreet.

     HoustonStreet does not currently have employment agreements in place and
does not currently carry key man life insurance. Although HoustonStreet intends
to purchase key man term life insurance on the life of Frank W. Getman Jr., its
President and Chief Executive Officer, that insurance is not currently in place.
HoustonStreet does not plan to purchase life insurance on the lives of any of
its other key personnel.

     Management of Growth.  HoustonStreet expects to experience significant
growth in its business operations. This growth will place a substantial strain
on HoustonStreet's resources. HoustonStreet's need to manage its growth
successfully will require it to implement appropriate operational, financial,
accounting and management information systems and controls. HoustonStreet's
failure to manage its growth effectively would have a material adverse effect on
HoustonStreet.

     Protection of Proprietary Rights.  HoustonStreet's ability to compete
depends significantly on the proprietary nature of its Web site technology as
well as its patent applications. HoustonStreet has filed two patent applications
to date. HoustonStreet seeks to protect its proprietary rights through a
combination of patent, copyright and trade secret law and confidentiality
agreements. However, there can be no assurance that a third party will not
misappropriate or otherwise obtain access to HoustonStreet's proprietary
technology or develop similar technology independently. Competitors may also be
able to circumvent any patents that HoustonStreet obtains.

     In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. HoustonStreet could
incur substantial costs to prosecute or defend any intellectual property
litigation. If HoustonStreet litigated to enforce its rights, it would be
expensive, would divert management resources and may not be adequate to prevent
the use of its intellectual property by third parties.

     Potential Intellectual Property Infringement.  While HoustonStreet
currently is not aware that it infringes any other patents, it is possible that
HoustonStreet's technology infringes patents held by third parties. If
HoustonStreet were to be found infringing, the owner of the patent could sue
HoustonStreet for damages, prevent HoustonStreet from making, selling or using
the owner's patented technology or could impose substantial royalty fees for
those privileges.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     The Company does not believe that there is any material market risk
exposure with respect to derivative or financial instruments that would require
disclosure under this item.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The response to this item is submitted in the response found under Item
14(a)(1) in this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES.

     Not Applicable.

                                       27
<PAGE>   29

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     (a) Directors. The information with respect to directors required under
this item is incorporated herein by reference to the section captioned "Election
of Directors" in the Company's Proxy Statement with respect to the Annual
Meeting of Stockholders to be held on May 25, 2000.

     (b) Executive Officers. The information with respect to executive officers
required under this item is incorporated by reference to Part I of the Report.

ITEM 11.  EXECUTIVE COMPENSATION.

     The information required under this item is incorporated herein by
reference to the sections entitled "Election of Directors -- Compensation for
Directors," "-- Executive Compensation," "-- Employment Agreements," "-- Report
of the Compensation Committee" and "-- Stock Performance Graph" in the Company's
Proxy Statement with respect to the Annual Meeting of Stockholders to be held on
May 25, 2000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information required under this item is incorporated herein by
reference to the section entitled "Security Ownership of Certain Beneficial
Owners and Management" in the Company's Proxy Statement with respect to the
Annual Meeting of Stockholders to be held on May 25, 2000.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required under this item is incorporated herein by
reference to the section entitled "Certain Relationships and Related
Transactions" in the Company's Proxy Statement with respect to the Annual
Meeting of Stockholders to be held on May 25, 2000.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) Documents filed as a part of this Form 10-K:

     1.  Financial Statements.  The Consolidated Financial Statements listed in
the Index to Consolidated Financial Statements and Financial Statement Schedules
are filed as part of this Annual Report on Form 10-K.

     2.  Financial Statement Schedules.  The Financial Statement Schedules
listed in the Index to Consolidated Financial Statements and Financial Statement
Schedules are filed as part of this Annual Report on Form 10-K -- not
applicable.

     3.  Exhibits.  The Exhibits listed in the Exhibit Index immediately
preceding such Exhibits are filed as part of this Annual Report on Form 10-K.

     (b) Reports on Form 8-K:

     On December 3, 1999, the Company filed a Current Report on Form 8-K dated
November 19, 1999 pursuant to which the Company reported that its subsidiary,
Little Bay Power Corporation, completed its previously announced acquisition of
Montaup Electric Company's 2.9% interest in the Seabrook Nuclear Power Project
in Seabrook, New Hampshire.

                                       28
<PAGE>   30

                         INDEX TO FINANCIAL STATEMENTS

                             BAYCORP HOLDINGS, LTD.

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Public Accountants....................  F-1
Consolidated Balance Sheets as of December 31, 1999 and
  1998......................................................  F-2
Consolidated Statements of Income and Comprehensive Income
  -- Years Ended December 31, 1999, December 31, 1998 and
  December 31, 1997.........................................  F-3
Consolidated Statements of Changes in Stockholders' Equity
  -- Years Ended December 31, 1999, December 31, 1998 and
  December 31, 1997.........................................  F-4
Consolidated Statements of Cash Flows --
  Years Ended December 31, 1999, December 31, 1998 and
  December 31, 1997.........................................  F-5
Notes to Consolidated Financial Statements..................  F-6
</TABLE>
<PAGE>   31

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of
BayCorp Holdings, Ltd.

     We have audited the accompanying consolidated balance sheets of BayCorp
Holdings, Ltd. (a Delaware corporation) and its wholly-owned subsidiaries, as of
December 31, 1999 and 1998, and the related consolidated statements of income
and comprehensive income, changes in stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BayCorp
Holdings, Ltd. and its wholly-owned subsidiaries as of December 31, 1999 and
1998, and the results of their operations and cash flows for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.

                                          ARTHUR ANDERSEN LLP

Boston, Massachusetts
February 4, 2000
(except for the matters
discussed in Note 13,
as to which the date is
March 27, 2000)

                                       F-1
<PAGE>   32

                             BAYCORP HOLDINGS, LTD.
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  1999           1998
                                                              ------------   ------------
<S>                                                           <C>            <C>
                                         ASSETS:
Current Assets:
  Cash & Cash Equivalents...................................    $  3,180       $  2,559
  Restricted Cash -- Escrow.................................       2,503              0
  Short-term Investments, at market.........................         381          9,496
  Accounts Receivable.......................................       4,564          3,051
  Materials & Supplies, net.................................       4,611          3,633
  Prepayments & Other Assets................................       3,162          3,177
                                                                --------       --------
          Total Current Assets..............................      18,401         21,916
Property, Plant, & Equipment and Fuel:
  Utility Plant Assets......................................     121,043        112,325
  Non-Utility Plant Assets..................................       3,203              0
                                                                --------       --------
          Total Property, Plant & Equipment.................     124,246        112,325
  Less: Accumulated Depreciation............................     (16,331)       (12,785)
                                                                --------       --------
       Net Property, Plant & Equipment......................     107,915         99,540
  Nuclear Fuel..............................................      20,243         19,390
  Less: Accumulated Amortization............................     (11,863)       (10,821)
                                                                --------       --------
  Net Nuclear Fuel..........................................       8,380          8,569
       Net Property, Plant & Equipment and Fuel.............     116,295        108,109
Other Assets:
  Decommissioning Trust Fund................................      24,483         10,329
  Deferred Debits & Other...................................           5              4
                                                                --------       --------
       Total Other Assets...................................      24,488         10,333
          TOTAL ASSETS......................................    $159,184       $140,358
                                                                ========       ========

                          LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
  Accounts Payable and Accrued Expenses.....................    $  3,060       $    394
  Miscellaneous Current Liabilities.........................       3,663          3,761
                                                                --------       --------
     Total Current Liabilities..............................       6,723          4,155
Operating Reserves:
  Decommissioning Liability.................................      79,443         60,274
  Miscellaneous Other.......................................         545            502
                                                                --------       --------
     Total Operating Reserves...............................      79,988         60,776
Other Liabilities & Deferred Credits........................       6,227          4,068
Commitments & Contingencies
Stockholders' Equity:
  Common stock, $.01 par value
     Authorized -- 20,000,000 shares; issued and
     outstanding -- 8,457,800 at December 31, 1999 and
     8,417,800 at December 31, 1998.........................          84             84
  Less: Treasury Stock -- 225,800 shares, at cost...........      (1,629)        (1,629)
  Additional paid-in capital................................      92,295         92,100
  Accumulated Other Comprehensive Income....................          (3)           565
  Accumulated Deficit.......................................     (24,501)       (19,761)
                                                                --------       --------
       Total Stockholders' Equity...........................      66,246         71,359
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........    $159,184       $140,358
                                                                ========       ========
</TABLE>

(The accompanying notes are an integral part of these consolidated statements.)
                                       F-2
<PAGE>   33

                             BAYCORP HOLDINGS, LTD.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                            YEARS ENDED DECEMBER 31,
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             1999          1998          1997
                                                          ----------    ----------    ----------
<S>                                                       <C>           <C>           <C>
Operating Revenues......................................  $   45,761    $   32,034    $   26,642
Operating Expenses:
  Production............................................      18,220        20,775        20,805
  Transmission..........................................         872           880           857
  Purchased Power.......................................      12,232         1,046             0
  Unrealized Loss on Firm Energy Trading Contracts......         806             0             0
  Administrative & General..............................       9,291         7,988         7,525
  Depreciation & Amortization...........................       4,110         3,656         3,508
  Taxes other than Income...............................       2,989         2,965         4,185
                                                          ----------    ----------    ----------
     Total Operating Expenses...........................      48,520        37,310        36,880
Operating Loss..........................................      (2,759)       (5,276)      (10,238)
Other (Income) Deductions:
  Interest and Dividend Income..........................        (551)         (938)       (1,252)
  Decommissioning Cost Accretion........................       3,320         2,873         2,663
  Decommissioning Trust Fund Income.....................        (755)         (613)         (470)
  Other Deductions......................................         126           171            36
                                                          ----------    ----------    ----------
     Total Other Deductions.............................       2,140         1,493           977
Loss Before Income Taxes and Accounting Change..........      (4,899)       (6,769)      (11,215)
Provision for Income Taxes..............................           0             0             0
                                                          ----------    ----------    ----------
Loss Before Change in Accounting Principle..............      (4,899)       (6,769)      (11,215)
Cumulative Effect of Change in Accounting Principle, net
  of tax................................................         159             0             0
                                                          ----------    ----------    ----------
Net Loss................................................      (4,740)       (6,769)      (11,215)
Other Comprehensive Income (Expense), net of tax........        (568)          449           264
                                                          ----------    ----------    ----------
Comprehensive Loss......................................  $   (5,308)   $   (6,320)   $  (10,951)
                                                          ==========    ==========    ==========
Weighted Average Shares Outstanding.....................   8,207,866     8,242,858     8,292,534
Basic and Diluted Net Loss Per Share....................  $    (0.58)   $    (0.82)   $    (1.35)
</TABLE>

(The accompanying notes are an integral part of these consolidated statements.)
                                       F-3
<PAGE>   34

                             BAYCORP HOLDINGS, LTD.

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                       COMMON
                                   STOCK, $.01 PAR
                                        VALUE
                              -------------------------         LESS:
                                                              TREASURY                      ACCUMULATED
                              ISSUED AND    ISSUED AND          STOCK         ADDITIONAL       OTHER
                              OUTSTANDING   OUTSTANDING   -----------------    PAID-IN     COMPREHENSIVE   ACCUMULATED
                                SHARES        AMOUNT      SHARES    AMOUNT     CAPITAL        INCOME         DEFICIT
                              -----------   -----------   -------   -------   ----------   -------------   -----------
<S>                           <C>           <C>           <C>       <C>       <C>          <C>             <C>
Balance at December 31,
  1996......................   8,417,800        $84        78,045   $  (633)   $92,100         $(148)       $ (1,777)
  Treasury Stock -- 66,955
    shares, at cost.........          --         --        66,955      (535)        --            --              --
  Net Change in Unrealized
    Holding Gain............          --         --            --        --         --           264              --
  Financial Results, January
    1 to December 31,
    1997....................          --         --            --        --         --            --         (11,215)
                               ---------        ---       -------   -------    -------         -----        --------
Balance at December 31,
  1997......................   8,417,800         84       145,000    (1,168)    92,100           116         (12,992)
  Treasury Stock -- 80,800
    shares, at cost.........          --         --        80,800      (461)        --            --              --
  Net Change in Unrealized
    Holding Gain............          --         --            --        --         --           449              --
  Financial Results, January
    1 to December 31,
    1998....................          --         --            --        --         --            --          (6,769)
                               ---------        ---       -------   -------    -------         -----        --------
Balance at December 31,
  1998......................   8,417,800         84       225,800    (1,629)    92,100           565         (19,761)
  Stock Options Exercised...      40,000         --            --        --        195            --              --
  Net Change in Unrealized
    Holding Gain (Loss).....          --         --            --        --         --          (568)             --
  Financial Results, January
    1 to December 31,
    1999....................          --         --            --        --         --            --          (4,740)
                               ---------        ---       -------   -------    -------         -----        --------
Balance at December 31,
  1999......................   8,457,800        $84       225,800   $(1,629)   $92,295         $  (3)       $(24,501)
                               =========        ===       =======   =======    =======         =====        ========

<CAPTION>

                                  TOTAL
                              STOCKHOLDERS'
                                 EQUITY
                              -------------
<S>                           <C>
Balance at December 31,
  1996......................     $89,626
  Treasury Stock -- 66,955
    shares, at cost.........        (535)
  Net Change in Unrealized
    Holding Gain............         264
  Financial Results, January
    1 to December 31,
    1997....................     (11,215)
                                 -------
Balance at December 31,
  1997......................      78,140
  Treasury Stock -- 80,800
    shares, at cost.........        (461)
  Net Change in Unrealized
    Holding Gain............         449
  Financial Results, January
    1 to December 31,
    1998....................      (6,769)
                                 -------
Balance at December 31,
  1998......................      71,359
  Stock Options Exercised...         195
  Net Change in Unrealized
    Holding Gain (Loss).....        (568)
  Financial Results, January
    1 to December 31,
    1999....................      (4,740)
                                 -------
Balance at December 31,
  1999......................     $66,246
                                 =======
</TABLE>

(The accompanying notes are an integral part of these consolidated statements.)
                                       F-4
<PAGE>   35

                             BAYCORP HOLDINGS, LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            YEARS ENDED DECEMBER 31,
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               1999       1998        1997
                                                              -------    -------    --------
<S>                                                           <C>        <C>        <C>
Net cash flow from operating activities:
  Net Loss..................................................  $(4,740)   $(6,769)   $(11,215)
  Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities:
     Depreciation...........................................    4,110      3,656       3,508
     Amortization of nuclear fuel...........................    4,032      4,104       4,010
     Unrealized Loss on Energy Contracts....................      647          0           0
     Decommissioning trust accretion........................    3,320      2,873       2,663
     Decommissioning trust interest.........................     (755)      (617)       (470)
     (Increase) decrease in accounts receivable.............   (1,512)    (2,586)      2,463
     (Increase) decrease in materials & supplies............     (160)         4         124
     (Increase) decrease in prepaids and other assets.......       31     (1,607)     (1,117)
     Increase in accounts payable...........................    2,123        124         140
     Increase (decrease) in taxes accrued...................        0          0      (1,504)
     Increase (decrease) in misc. current liabilities.......      226      2,167      (2,477)
     Other..................................................       48        374         435
                                                              -------    -------    --------
Net cash provided by (used in) operating activities.........    7,370      1,723      (3,440)
Net cash flows (used in) investing activities:
  Capital additions.........................................   (4,896)    (2,700)     (2,555)
  Nuclear fuel additions....................................   (1,999)    (4,314)     (1,970)
  Purchase of additional Seabrook Project interest..........   (4,913)         0           0
  Payments to decommissioning fund..........................   (1,696)    (1,343)     (1,106)
  Short term investments, net...............................    9,063      6,384      (3,535)
                                                              -------    -------    --------
Net cash used in investing activities.......................   (4,441)    (1,973)     (9,166)
Net cash provided by financing activities:
  Stock Option Exercise.....................................      195          0           0
  Reacquired capital stock..................................        0       (461)       (535)
                                                              -------    -------    --------
Net cash (used in) provided by financing activities.........      195       (461)       (535)
Net increase (decrease) in cash and cash equivalents........    3,124       (711)    (13,141)
Cash and cash equivalents, beginning of period..............    2,559      3,270      16,411
                                                              -------    -------    --------
Cash and cash equivalents, end of period....................  $ 5,683    $ 2,559    $  3,270
                                                              =======    =======    ========
</TABLE>

(The accompanying notes are an integral part of these consolidated statements.)
                                       F-5
<PAGE>   36

                             BAYCORP HOLDINGS, LTD.

                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1999

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.  THE COMPANY

     BayCorp Holdings, Ltd. ("BayCorp" or the "Company") is a holding company
incorporated in Delaware in 1996. BayCorp owns three subsidiaries: HoustonStreet
Exchange, Inc. ("HoustonStreet"), Great Bay Power Corporation ("Great Bay") and
Little Bay Power Corporation ("Little Bay"), each of which is wholly-owned as of
December 31, 1999.

     HoustonStreet developed and operates HoustonStreet.com, an Internet-based
trading platform and information portal for wholesale energy traders. Currently,
HoustonStreet offers an online trading exchange that allows utilities,
independent power producers and power marketers to trade electricity over the
Internet. HoustonStreet plans to develop and launch trading platforms for crude
and refined products, natural gas and other energy-related commodities.
HoustonStreet is also exploring opportunities to license its trading platform
for use in other non-energy business-to-business markets.

     HoustonStreet initially launched its Internet-based wholesale electricity
trading exchange in the Northeast in July 1999. In September 1999, HoustonStreet
launched electricity trading throughout the United States.

     Great Bay and Little Bay are electric generating companies. Their principal
asset is a combined 15% joint ownership interest in the Seabrook Nuclear Power
Project in Seabrook, New Hampshire (the "Seabrook Project"). This ownership
interest entitles the companies to approximately 174 megawatts of the Seabrook
Project's power output. Great Bay and Little Bay are exempt wholesale generators
("EWGs") under the Public Utility Holding Company Act of 1935 ("PUHCA"). Unlike
regulated public utilities, Great Bay and Little Bay have no franchise area or
captive customers. The companies sell their power in the competitive wholesale
power markets, including through HoustonStreet.com.

     Great Bay was incorporated in New Hampshire in 1986 and was formerly known
as EUA Power Corporation. Little Bay was incorporated in New Hampshire in 1998.
Great Bay sells its share of the electricity output of the Seabrook Project in
the wholesale electricity market, primarily in the Northeast United States.
Little Bay sells its power solely to Great Bay under an intercompany agreement.
Intercompany revenues are eliminated in consolidation. Neither BayCorp nor its
subsidiaries have operational responsibilities for the Seabrook Project. Great
Bay currently sells all but approximately 10 MW of its share of the Seabrook
Project capacity in the wholesale short-term market. In addition to selling its
owned generation, Great Bay purchases power on the open market for resale to
third parties.

     Great Bay became a wholly-owned subsidiary of BayCorp in a corporate
reorganization that involved a merger of a newly formed wholly-owned subsidiary
of BayCorp with and into Great Bay on January 24, 1997. The consolidated assets
and liabilities of Great Bay and its subsidiaries immediately before the
reorganization were the same as the consolidated assets and liabilities of
BayCorp and its subsidiaries immediately after the reorganization. The new
corporate structure enables BayCorp, either directly or through subsidiaries
other than Great Bay and Little Bay, to engage in businesses that these
subsidiaries would be prohibited from pursuing due to their status as EWG's
under the PUHCA. BayCorp may in the future enter into new businesses or acquire
existing businesses, both in energy related fields and possibly in unrelated
fields.

     On November 19, 1999, Little Bay purchased an additional 2.9% interest in
the Seabrook Project from Montaup Electric Company for a purchase price of $3.2
million, plus approximately $1.7 million of certain prepaid items. See Footnote
1N.

     The Seabrook Project is a nuclear-fueled, steam electricity, generating
plant located in Seabrook, New Hampshire, which was originally planned to have
two Westinghouse pressurized water reactors, Seabrook Unit 1 and Seabrook Unit 2
(each with a rated capacity of 1,150 megawatts), utilizing ocean water for

                                       F-6
<PAGE>   37
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

condenser cooling purposes. Seabrook Unit 1 entered commercial service on August
19, 1990. Seabrook Unit 2 has been canceled. Great Bay became a wholesale
generating company when Seabrook Unit 1 commenced commercial operation on August
19, 1990. In 1993, the Company became an Exempt Wholesale Generator ("EWG")
under the Energy Policy Act of 1992.

     The Seabrook Project is owned by Great Bay, Little Bay and nine other
utility companies, consisting of North Atlantic Energy Company, Connecticut
Light and Power, The United Illuminating Company, Canal Electric Company,
Massachusetts Municipal Wholesale Electric Company, New England Power Company,
New Hampshire Electric Cooperative, Inc., Taunton Municipal Lighting Plant and
Hudson Light & Power Department (together with Great Bay and Little Bay, the
"Participants"). Great Bay, Little Bay and the other Participants are parties to
the Agreement for Joint Ownership, Construction and Operation of New Hampshire
Nuclear Units (the "JOA") which establishes the respective ownership interests
of the Participants in the Seabrook Project and defines their responsibilities
with respect to the ongoing operation, maintenance and decommissioning of the
Seabrook Project. In general, all ongoing costs of the Seabrook Project are
divided proportionately among the Participants in accordance with their
ownership interests in the Seabrook Project. Each Participant is only liable for
its share of the Seabrook Project's costs and not liable for any other
Participant's share as ownership interests in the Seabrook Project are several
and not joint. Great Bay's and Little Bay's combined joint ownership interest of
15% is the third largest interest among the Participants, exceeded only by the
approximately 40% interest held by Northeast Utilities and its affiliates and
the 17.5% interest held by The United Illuminating Company.

     Great Bay's business strategy is to utilize unit contingent and firm
forward sales contracts to maximize the value of its and Little Bay's 174 MW
power supply from the Seabrook Project. Traditionally, Great Bay sold most of
its share of the Seabrook Project electricity output under unit contingent
contracts. Under unit contingent contracts, Great Bay is obligated to provide
the buyer with power only when the Seabrook Project is operating. In late 1998,
Great Bay began to sell some of its electricity as firm power, which entitles
the buyer to electricity whether or not the Seabrook Project is operating.
Buyers pay a premium for firm power over unit contingent power because they can
rely on uninterrupted electricity. In order to supply firm power during Seabrook
unscheduled outages, Great Bay purchases power from the spot market during these
outages and resells that power to its firm power customers. Spot market sales
are subject to price fluctuations based on the relative supply and demand of
electricity. As a result of spot market power price fluctuations, Great Bay has,
and may in the future, have to purchase power at prices exceeding prices paid by
Great Bay's firm power customers during outages. Although Great Bay bears the
primary risk of these price fluctuations, Great Bay maintains insurance to
protect Great Bay during periods of extreme price volatility, subject to certain
deductibles and coverage limits. This insurance, provided by CIGNA and others,
provides up to $30 million of coverage through May 2002.

     As of March 17, 2000, BayCorp and its subsidiaries had 35 employees,
including 26 at HoustonStreet, seven at BayCorp and two employees at Great Bay.
Little Bay has no employees.

B.  REGULATION

     Great Bay and Little Bay are subject to the regulatory authority of the
Federal Energy Regulatory Commission ("FERC"), the Nuclear Regulatory Commission
("NRC"), the New Hampshire Public Utilities Commission ("NHPUC") and other
federal and state agencies as to rates, operations and other matters. Great
Bay's and Little Bay's cost of service, however, is not regulated. As such,
Great Bay's and Little Bay's accounting policies are not subject to the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation."

C.  USE OF MANAGEMENT ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and

                                       F-7
<PAGE>   38
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

D.  UTILITY PLANT AND NON-UTILITY PLANT ASSETS

     The costs of additions to utility plant and non-utility plant are recorded
at original cost.

E.  DEPRECIATION

  (i) Utility Plant

     Utility plant is depreciated on the straight-line method at rates designed
to fully depreciate all depreciable properties over the lesser of estimated
useful lives or the Seabrook Project's remaining NRC license life, which expires
in 2026.

     Capital projects constituting retirement units are charged to electric
plant. Minor repairs are charged to maintenance expense. When properties are
retired, the original costs, plus costs of removal, less salvage, are charged to
the accumulated provision for depreciation.

  (ii) Non-Utility Plant Assets

     Non-Utility plant assets are stated at cost less accumulated depreciation.
Expenditures that significantly improve or extend the life of an asset are
capitalized. The Company's subsidiary, HoustonStreet, capitalizes external
software application development costs and costs for upgrades and enhancements
to its systems that result in additional functionality in accordance with the
American Institute of Certified Public Accountants Statement of Position 98-10,
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. Maintenance and repairs are charged to expense when incurred. Depreciation
is calculated on the straight-line basis over an estimated useful live of three
years.

F.  AMORTIZATION OF NUCLEAR FUEL

     The cost of nuclear fuel is amortized to expense based on the rate of
burn-up of the individual assemblies comprising the total core. Great Bay and
Little Bay also provide for the cost of disposing of spent nuclear fuel at rates
specified by the United States Department of Energy ("DOE") under a contract for
disposal between Great Bay and Little Bay, through their managing agent North
Atlantic Energy Service Corporation ("NAESCO"), and the DOE.

     Great Bay recorded the estimated cost of the final unspent nuclear fuel
core, which is expected to be in place at the expiration of the Seabrook
Project's NRC operating license, as part of Great Bay's original "Fresh Start"
balance sheet.

G.  AMORTIZATION OF MATERIALS AND SUPPLIES

     Great Bay and Little Bay amortize to expense an amount designed to fully
amortize the cost of the material and supplies inventory that is expected to be
on hand at the expiration of the Plant's NRC operating license.

H.  DECOMMISSIONING

     Based on the Financial Accounting Standards Board's ("FASB") tentative
conclusions, Great Bay and Little Bay have recognized as a liability their
proportionate share of the present value of the estimated cost of Seabrook
Project decommissioning. For Great Bay, the initial recognition of this
liability was capitalized as part of the Fair Value of the Utility Plant at
November 23, 1994. For Little Bay, the amount was provided for

                                       F-8
<PAGE>   39
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

in the purchase price allocation. New Hampshire enacted a law in 1981 requiring
the creation of a state-managed fund to finance decommissioning of any units in
the state. During April 1999, the Nuclear Decommissioning Finance Committee
("NDFC") issued an order that adjusted the decommissioning collection period and
funding levels based on the NDFC's opinion that Seabrook's anticipated energy
producing life was twenty-five years from the time it went into commercial
operation. This is eleven years earlier than the service life established by
Seabrook's NRC operating license. The order also updated Seabrook's
decommissioning estimate to $565 million (in 2000 dollars.) Based on this
estimate, the present value of Great Bay's and Little Bay's share of liability
as of December 31, 1999 was approximately $79 million.

     Great Bay and Little Bay accrete their share of the Seabrook Project's
decommissioning liability. This accretion is a non-cash charge and recognizes
their liability related to the closure and decommissioning of their nuclear
plant in current year dollars over the licensing period of the plant. As a
result of this accretion, Great Bay's share of the estimated decommissioning
cost increased from $55.8 million as of December 31, 1997 to $60.3 million as of
December 31, 1998 to $79.4 million as of December 31, 1999. The December 31,
1999 balance includes Little Bay's decommissioning liability of approximately
$13 million based on an accretion schedule over the original license life of the
plant and not the NDFC's life.

     The Seabrook Project's decommissioning estimate and funding schedule is
subject to review each year by the New Hampshire Nuclear Decommissioning Finance
Committee ("NDFC"). This estimate is based on a number of assumptions. Changes
in assumptions for such things as labor and material costs, technology,
inflation and timing of decommissioning could cause these estimates to change,
possibly materially, in the near term.

     The Staff of the Securities and Exchange Commission ("SEC") has questioned
certain of the current accounting practices of the electric utility industry
regarding the recognition, measurement and classification of decommissioning
costs for nuclear generating stations and joint owners in the financial
statements of these entities. In response to these questions, the FASB agreed to
review the accounting for nuclear decommissioning costs. On February 7, 1996,
the FASB issued an Exposure Draft entitled "Accounting for Certain Liabilities
Related to Closure and Removal of Long-Lived Assets." On February 17, 2000, the
FASB issued a "Revision of Exposure Draft issued February 7, 1996, Proposed
Statement of Financial Accounting Standards: Accounting for Obligations
Associated with the Retirement of Long-Lived Assets." Great Bay and Little Bay's
accounting for decommissioning is based on the FASB's original tentative
conclusions. The proposed statement requires that an obligation associated with
the retirement of a tangible long-lived asset be recognized as a liability when
incurred, and that the amount of the liability resulting from (a) the passage of
time and (b) revisions to either the timing or amount of estimated cash flows
should also be recognized. The proposed statement also requires that, upon
initial recognition of a liability for an asset retirement obligation, an entity
capitalize that cost by recognizing an increase in the carrying amount of the
related long-lived asset. Upon adoption, the proposed statement would be
effective for financial statements issued for fiscal years beginning after June
15, 2001.

     Great Bay and Little Bay, based on the initial exposure draft, have been
recognizing a liability based on the present value of the estimated future cash
outflows required to satisfy their obligations using a risk free rate. The
proposed Statement requires the initial measurement of the liability to be based
on fair value, where the fair value is the amount that an entity would be
required to pay in an active market to settle the asset retirement obligation in
a current transaction in circumstances other than a forced liquidation or
settlement. Because in most circumstances, a market for settling asset
retirement obligations does not exist, the FASB described an expected present
value technique for estimating fair value. If the proposed Statement is adopted,
Great Bay's and Little Bay's decommissioning liability and annual provision for
decommissioning accretion could change relative to 1999. Great Bay and Little
Bay have not quantified the impact, if any, that the revised exposure draft will
have on their financial statements.

                                       F-9
<PAGE>   40
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

     Funds collected by Seabrook for decommissioning are deposited in an
external irrevocable trust pending their ultimate use. The earnings on the
external trusts also accumulate in the fund balance. The trust funds are
restricted for use in paying the decommissioning of Unit 1. The investments in
the trust are available for sale. Great Bay and Little Bay have therefore
reported their investment in trust fund assets at market value and any
unrealized gains and losses are reflected in equity. There was an unrealized
holding gain of $42,000 and $540,000 as of December 31, 1999 and 1998.

     Although the owners of Seabrook are accumulating funds in an external trust
to defray decommissioning costs, these costs could substantially exceed the
value of the trust fund, and the owners, including Great Bay and Little Bay,
would remain liable for the excess.

     In January 1997 and July 1997, the NRC staff ruled that Great Bay did not
satisfy the NRC definition of "electric utility." In January 1998, Great Bay
filed a petition with the NRC seeking NRC approval of Great Bay's proposal to
fund decommissioning obligations. Great Bay's petition also sought, in the
alternative, an NRC permanent exemption from the obligation of Great Bay to
comply with the NRC regulations applicable to non "electric utility" owners of
interests in nuclear power plants. In June 1998, the New Hampshire State
legislature enacted legislation that provides that in the event of a default by
Great Bay on its payments to the decommissioning fund, the other Seabrook joint
owners would be obligated to pay their proportional share of such default. As a
result of the enactment of this legislation, the NRC staff found that Great Bay
complies with the decommissioning funding assurance requirements. In July 1998,
the staff of the NRC notified Great Bay of the staff's determination that Great
Bay complies with the decommissioning funding assurance requirements under NRC
regulations.

     In response to the New Hampshire legislation, Great Bay agreed to make
accelerated payments to the Seabrook decommissioning fund such that Great Bay
will have contributed sufficient funds by the year 2015 to allow sufficient
monies to accumulate, with no further payments by Great Bay to the fund, to the
full estimated amount of Great Bay's decommissioning obligation by the time the
current Seabrook operating license expires in 2026. Based on the currently
approved funding schedule and Great Bay's accelerated funding schedule, Great
Bay's decommissioning payments will be approximately $1.8 million in 2000 and
escalate at 4% each year thereafter through 2015. Little Bay's share of
decommissioning costs was prefunded by Montaup Electric Company, the owner of
the 2.9% interest in the Seabrook Project that Little Bay acquired in November
1999. As part of that acquisition, Montaup Electric Company transferred
approximately $12.4 million into Little Bay's decommissioning account, an
irrevocable trust earmarked for Little Bay's share of Seabrook Plant
decommissioning expenses.

     On November 15, 1992, Great Bay, the Bondholder's Committee and the
Predecessor's former parent, Eastern Utilities ("EUA") entered into a settlement
agreement that resolved certain proceedings against EUA brought by the
Bondholder's Committee. Under the settlement agreement EUA reaffirmed its
guarantee of up to $10 million of Great Bay's future decommissioning costs of
Seabrook Unit 1.

I.  OPERATING REVENUES

  (i) Energy Revenues

     Revenues are recorded on an accrual basis based on billing rates provided
for in contracts and approved by FERC. During the year ended December 31, 1999,
two customers accounted for 29% and 24% of total operating revenues. For the
year ended December 31, 1998, three customers accounted for 28%, 17% and 12% of
total operating revenues. For the year ended December 31, 1997, three customers
accounted for 50%, 13% and 11% of total operating revenues.

  (ii) Internet Revenues

     HoustonStreet revenue consists of commissions for megawatt hours traded on
HoustonStreet.com and is recognized once the trade has been agreed upon by both
parties to the trade.

                                      F-10
<PAGE>   41
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

J.  TAXES ON INCOME

     The Company accounts for taxes on income under the liability method
required by Statement of Financial Accounting Standards No. 109.

K.  CASH EQUIVALENTS AND SHORT TERM INVESTMENTS

     For purposes of the Statements of Cash Flows, the Company considers all
highly liquid short-term investments with an original maturity of three months
or less to be cash equivalents. The carrying amounts approximate fair value
because of the short-term maturity of the investments.

     All other short-term investments with a maturity of greater than three
months are classified as available for sale and reflected as a current asset at
market value. Changes in the market value of such securities are reflected in
equity. The unrealized holding loss on short-term investments was $44,000 as of
December 31, 1999 and the unrealized holding gain on short-term investments was
$24,000 as of December 31, 1998.

L.  SEABROOK UNIT 2

     Since the Seabrook Project was originally designed to consist of two
generating units, Great Bay and Little Bay also own a 15% joint ownership
interest in Seabrook Unit 2. Great Bay and Little Bay assign no value to
Seabrook Unit 2 because on November 6, 1986, the joint owners of the Seabrook
Project, recognizing that Seabrook Unit 2 had been canceled in 1984, voted to
dispose of Unit 2. Certain assets of Seabrook Unit 2 have been and are being
sold from time to time to third parties. There were no material sales of Unit 2
assets in 1998 or 1999.

     The Participants are considering plans regarding disposition of Seabrook
Unit 2, but such plans have not yet been finalized and approved. Great Bay and
Little Bay are unable to estimate the costs for which they will be responsible
in connection with the disposition of Seabrook Unit 2. Because Seabrook Unit 2
was never completed or operated, costs associated with its disposition will not
include any amounts for decommissioning. Great Bay and Little Bay currently pay
their share of monthly expenses required to preserve and protect the value of
the Seabrook Unit 2 components. Any sales of Unit 2 property or inventory are
reflected in other income as gains on the sale or transfer of assets. Transfers
of Unit 2 items to Unit 1 were done at the historical basis of Unit 2 property
or components.

M.  SEABROOK OUTAGE COSTS

     The Company's and Great Bay's and Little Bay's operating results and the
comparability of these results on an interim and annual basis are directly
impacted by the operations of the Seabrook Project, including the cyclical
refueling outages (generally 18 months apart) as well as unscheduled outages.
During outage periods at the Seabrook Project, Great Bay and Little Bay have no
electricity for resale from the Seabrook Plant and consequently no related
revenues. Therefore the impact of outages on the Company's and Great Bay's and
Little Bay's results of operations and financial position are materially
adverse.

     Great Bay and Little Bay accrue for the incremental costs of the Seabrook
Project's scheduled outages over the periods between those outages. However,
Great Bay and Little Bay continue to expense the normal Seabrook operating and
maintenance expenses as incurred. Therefore, the Company will incur losses
during scheduled outage periods as a result of the combination of the lack of
revenue and the recognition of normal recurring operation and maintenance costs
as well as the continuing depreciation of the utility plant. At the Seabrook
Project, a scheduled refueling outage began on March 27, 1999. Seabrook resumed
full operating capacity on May 21, 1999. Great Bay's share of the incremental
operations and maintenance costs was approximately $3.7 million.

                                      F-11
<PAGE>   42
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

N.  ACQUISITIONS

     On November 19, 1999, BayCorp's wholly-owned subsidiary, Little Bay Power
Corporation, purchased an additional 2.9% interest in the Seabrook Nuclear Power
Project from Montaup Electric Company, a subsidiary of Eastern Utilities
Associates. The purchase price was $3.2 million plus approximately $1.9 million
for certain prepaid items, primarily nuclear fuel and capital expenditures. The
purchase price was funded with existing cash. Little Bay allocated the purchase
price based on the estimated fair value of the assets acquired and liabilities
assumed. A summary of the components of the purchase price and the preliminary
allocation is as follows:

<TABLE>
<CAPTION>
                                                              (000'S)
<S>                                                           <C>
PRELIMINARY ALLOCATION OF PURCHASE PRICE:
Current assets..............................................  $ 1,005
Utility plant...............................................    3,890
Nuclear fuel................................................    1,845
Liabilities assumed and other...............................   (1,827)
                                                              -------
                                                              $ 4,913
                                                              =======
</TABLE>

     In addition, Montaup prefunded the decommissioning liability associated
with Little Bay's 2.9% share of Seabrook by transfering approximately $12.4
million into Little Bay's decommissioning account, an irrevocable trust
earmarked for Little Bay's share of the Seabrook Plant decommissioning expenses.
Little Bay recorded an asset, Decommissioning Trust Fund, for $12.4 million and
a corresponding liability for the same amount. The purchase agreement required
that a restricted cash-escrow account be established for $2.5 million to cover
Little Bay's share of budgeted cash requirements for a six month period. This
fund is to be used to pay Little Bay's share of Seabrook costs of operations and
capital expenditures during periods of Seabrook shutdowns.

     Little Bay sells its power solely to Great Bay under an intercompany
agreement. Great Bay then sells the power purchased from Little Bay in the
wholesale electricity market. The accompanying consolidated financial statements
include the results of the acquisition since November 19, 1999. Intercompany
amounts between Little Bay and Great Bay have been eliminated in consolidation.

O.  SEGMENT INFORMATION

     The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" ("SFAS No.
131"), in 1999 when HoustonStreet began operations. This statement establishes
standards for the reporting of information about operating segments in annual
and interim financial statements and requires restatement of prior year
information. Operating segments are defined as components of an enterprise for
which separate financial information is available that is evaluated regularly by
the chief operating decision maker(s) in deciding how to allocate resources and
in assessing performance. SFAS No. 131 also requires disclosures about products
and services, geographic areas and major customers.

P.  EARNINGS PER SHARE

     Basic earnings (loss) per share is computed by dividing net earnings by the
weighted number of common shares outstanding for all periods presented. Diluted
earnings (loss) per share reflects the dilutive effect of shares under option
plans, warrants and preferred stock. Potentially dilutive shares outstanding
during the period have been excluded from dilutive earnings (loss) per share
because their effect would be antidilutive.

                                      F-12
<PAGE>   43
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

     Based on an average market price of common stock of $5.58 per share, for
the year ended December 31, 1999, the following table reconciles the weighted
average common shares outstanding to the shares used in the computation of the
basic and diluted earnings per share outstanding.

<TABLE>
<CAPTION>
                                                              DECEMBER 31, 1999
                                                              -----------------
<S>                                                           <C>
Weighted average number of common shares outstanding and
  used in basic and diluted EPS calculation.................      8,207,866
Shares under option plans, excluded in computation of
  diluted EPS due to antidilutive effects...................          3,341
</TABLE>

     There were no potentially dilutive shares outstanding during 1998 and 1997.

Q.  ACCUMULATED OTHER COMPREHENSIVE INCOME

     Effective January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income" which requires the Company to report the changes in
shareholders' equity from all sources during the period other than those
resulting from investments by shareholders (i.e., issuance or repurchase of
common shares and dividends.) Although adoption of this standard has not
resulted in any change to the historic basis of determination of earnings or
shareholders' equity, the other comprehensive income components recorded under
generally accepted accounting principles and previously included under the
category "retained earnings" are displayed as "accumulated other comprehensive
income" within the balance sheet. The composition of other comprehensive income
is as follows:

<TABLE>
<CAPTION>
                                                UNREALIZED GAINS (LOSSES)    ACCUMULATED OTHER
                                                      ON SECURITIES         COMPREHENSIVE INCOME
                                                -------------------------   --------------------
<S>                                             <C>                         <C>
Twelve Months Ending 12/31/98
  Beginning Balance...........................          $116,000                  $116,000
  1998 Change.................................           449,000                   449,000
                                                        --------                  --------
December 31, 1998.............................           565,000                   565,000
  1999 Change.................................          (568,000)                 (568,000)
                                                        --------                  --------
December 31, 1999.............................          $ (3,000)                 $ (3,000)
                                                        ========                  ========
</TABLE>

R.  RECLASSIFICATIONS

     Certain reclassifications have been made in prior years' financial
statements to conform to classifications and presentation used in the current
year.

S.  PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of all
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

2.  NUCLEAR ISSUES

     Like other nuclear generating facilities, the Seabrook Project is subject
to extensive regulation by the NRC. The NRC is empowered to authorize the
siting, construction and operation of nuclear reactors after consideration of
public health, safety, environmental and anti-trust matters.

     The NRC has promulgated numerous requirements affecting safety systems,
fire protection, emergency response planning and notification systems, and other
aspects of nuclear plant construction, equipment and operation. Great Bay and
Little Bay have been, and may be, affected to the extent of their proportionate
shares by the cost of any such modifications to Seabrook Unit 1.

                                      F-13
<PAGE>   44
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

     Nuclear units in the United States have been subject to widespread
criticism and opposition. Some nuclear projects have been canceled following
substantial construction delays and cost overruns as the result of licensing
problems, unanticipated construction defects and other difficulties. Various
groups have by litigation, legislation and participation in administrative
proceedings sought to prohibit the completion and operation of nuclear units and
the disposal of nuclear waste. In the event of a shutdown of any unit, NRC
regulations require that it be completely decontaminated of any residual
radioactivity. The cost of such decommissioning, depending on the circumstances,
could substantially exceed the owners' investment at the time of cancellation.

     Public controversy concerning nuclear power could adversely affect the
operating license of Seabrook Unit 1. While the Company cannot predict the
ultimate effect of such controversy, it is possible that it could result in a
premature shutdown of the unit.

A.  NUCLEAR FUEL

     The Seabrook Project's joint owners have made, or expect to make, various
arrangements for the acquisition of uranium concentrate, the conversion,
enrichment, fabrication and utilization of nuclear fuel and the disposition of
that fuel after use. The Nuclear Waste Policy Act of 1982 (the "NWPA") requires
the United States Department of Energy (the "DOE"), subject to various
contingencies, to design, license, construct and operate a permanent repository
for high level radioactive waste and spent nuclear fuel, which are collectively
referred to as "high level waste."

     The joint owners of the Seabrook Project, through their managing agent
NAESCO, entered into contracts with the DOE for high level waste disposal in
accordance with the NWPA. Under these contracts and the NWPA, the DOE was
required to take title to and dispose of the Seabrook Project's high level waste
beginning no later than January 31, 1998. However, the DOE has announced that
its first high level waste repository will not be in operation until 2010 at the
earliest.

     As a result of this delay, many states and nuclear plant operators,
including NAESCO, sued the DOE for injunctive relief and monetary damages. Two
U.S. Courts of Appeals ordered the DOE to proceed with its high level waste
disposal obligations and ruled that plant operators are entitled to money
damages from DOE. However, there can be no assurance that the Seabrook Project
will collect damages from the DOE because, among other things, NAESCO's case
against the DOE is still pending.

     In February 1999, the DOE proposed to Congress an alternative interim plan
for high level waste management. The DOE proposed to take legal title and
responsibility for the waste (on-site at nuclear plants such as Seabrook) until
a permanent repository becomes available. Ultimately, Congress rejected that
proposal, and on March 22, 2000, Congress passed amendments to the NWPA that
would require the DOE to begin accepting nuclear waste shipments at a Nevada
site in 2007. However, President Clinton stated he would veto this legislation
and Congress is not expected to override Mr. Clinton's veto. Regardless of
whether this legislation becomes law or alternative solutions are identified,
nuclear plants such as Seabrook must retain high level waste on-site or make
other storage provisions until the DOE begins receiving nuclear waste materials
in accordance with the NWPA and its contracts.

     The Seabrook Project increased its on-site storage capacity for low level
waste ("LLW") in 1996 and that capacity is expected to be sufficient to meet the
Project's storage requirements through 2006. In addition, the managing agent of
the Seabrook Project has advised Great Bay that the Seabrook Project has
adequate on-site storage capacity for high level waste until approximately 2010.

     The Low-Level Radioactive Waste Policy Act of 1980 requires each state to
provide disposal facilities for LLW generated within the state, either by
constructing and operating facilities or by joining regional compacts with other
states to jointly fulfill their responsibilities. However, the Low-Level
Radioactive Waste Policy Amendments Act of 1985 permits each state in which a
currently operating disposal facility is located (South

                                      F-14
<PAGE>   45
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

Carolina, Nevada and Washington) to impose volume limits and a surcharge on
shipments of LLW from states that are not members of their regional compact.

     In April 1995, a privately owned facility in Utah was approved as a
disposal facility for certain types of LLW. The Seabrook Project began shipping
certain LLW to the Utah facility in December 1995. In 1999, the Seabrook Project
also began shipping some LLW to a privately owned facility in Tennessee. All LLW
generated by the Seabrook Project that exceeds the maximum radioactivity level
of LLW accepted by these facilities is currently stored on-site at the Seabrook
facility.

B.  FEDERAL DEPARTMENT OF ENERGY DECONTAMINATION AND DECOMMISSIONING ASSESSMENT

     Title XI of the Energy Policy Act of 1992 (the "Policy Act") provides for
decontaminating and decommissioning of the Federal Department of Energy's
("DOE's") enrichment facilities to be partially funded by a special assessment
against domestic utilities. Each utility's share of the assessment is to be
based on its cumulative consumption of DOE enrichment services. As of December
31, 1999, the Company had accrued its pro rata estimated obligation of $636,000
related to the project's prior years' usage to be paid over the 15-year period
beginning October 1, 1992.

C.  PRICE ANDERSON ACT

     In accordance with the Price Anderson Act, the limit of liability for a
nuclear-related accident is approximately $9 billion, effective November 18,
1994. The primary layer of insurance for this liability is $200 million of
coverage provided by the commercial insurance market. The secondary coverage is
approximately $9 billion, based on the approximately 106 currently licensed
reactors in the United States. The secondary layer is based on a retrospective
premium assessment of $83.9 million per nuclear accident per licensed reactor,
payable at a rate not exceeding $10 million per year per reactor. In addition,
the retrospective premium is subject to inflation based indexing at five year
intervals and, if the sum of all public liability claims and legal costs arising
from any nuclear accident exceeds the maximum amount of financial protection
available, then each licensee can be assessed an additional 5% ($4.2 million) of
the maximum retrospective assessment. With respect to the Seabrook Project,
Great Bay and Little Bay would be obligated to pay its ownership share of any
assessment resulting from a nuclear incident at any United States nuclear
generating facility. Great Bay and Little Bay estimate their maximum liability
per incident currently would be an aggregate amount of approximately $12.6
million per accident, with a maximum annual assessment of about $1.5 million per
incident, per year.

     In addition to the insurance required by the Price Anderson Act, the NRC
regulations require licensees, including the Seabrook Project, to carry all risk
nuclear property damage insurance in the amount of at least $1.06 billion, which
amount must be dedicated, in the event of an accident at the reactor, to the
stabilization and decontamination of the reactor to prevent significant risk to
the public health and safety.

D.  NUCLEAR INSURANCE

     Insurance has been purchased by the Seabrook Project from Nuclear Electric
Insurance Limited ("NEIL") to cover the costs of property damage,
decontamination or premature decommissioning resulting from a nuclear incident
and American Nuclear Insurance/Mutual Atomic Energy Liability Underwriters
("ANI") to cover workers' claims. All companies insured with NEIL and ANI are
subject to retroactive assessments, if losses exceed the accumulated funds
available to NEIL and ANI, respectively. The maximum potential assessment
against the Seabrook Project with respect to losses arising during the current
policy years are $26.4 million. The Company's liability for the retrospective
premium adjustment for any policy year ceases six years after the end of that
policy year unless prior demand has been made.

                                      F-15
<PAGE>   46
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

     Great Bay and Little Bay also independently purchase business interruption
insurance from Nuclear Electric Insurance Limited ("NEIL"). The current policy
is in effect from April 1, 1999 until April 1, 2000 and a renewal policy has
been signed which will be in effect from April 1, 2000 until April 1, 2001. The
policy provides for the payment of a fixed weekly loss amount of $670,000 in the
event of an outage at the Seabrook Project of more than 23 weeks resulting from
the property damage occurring from a "sudden fortuitous event, which happens by
chance, is unexpected and unforeseeable." The maximum amount payable to Great
Bay and Little Bay is $90.6 million. Under the terms of the policy, Great Bay
and Little Bay are subject to a potential retrospective premium adjustment of up
to approximately $469,000 should NEIL's board of directors deem that additional
funds are necessary to preserve the financial integrity of NEIL. Since NEIL was
founded in 1980, there has been no retrospective premium adjustment; however,
there can be no assurance that NEIL will not make retrospective adjustments in
the future. The liability for this retrospective premium adjustment ceases six
years after the end of the policy unless prior demand has been made.

3.  TAXES ON INCOME

     The following is a summary of the (benefit) provision for income taxes for
the years ended December 31, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                        DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                            1999            1998            1997
                                                        ------------    ------------    ------------
                                                                          (000'S)
<S>                                                     <C>             <C>             <C>
Federal
  Current.............................................    $(3,426)        $(6,192)        $(8,081)
  Deferred............................................      3,426           6,192           8,081
                                                          -------         -------         -------
                                                                0               0               0
                                                          -------         -------         -------
State
  Current.............................................       (817)         (1,476)         (1,927)
  Deferred............................................        817           1,476           1,927
                                                          -------         -------         -------
                                                                0               0               0
                                                          -------         -------         -------
Total (benefit) provision.............................    $     0         $     0         $     0
                                                          =======         =======         =======
</TABLE>

     Accumulated deferred income taxes consisted of the following at December
31, 1999 and 1998:

<TABLE>
<CAPTION>
                                                                1999        1998
                                                              --------    --------
                                                                    (000'S)
<S>                                                           <C>         <C>
Assets
  Net operating loss carryforwards..........................  $ 87,875    $ 81,794
  Decommissioning expense...................................     5,279       3,985
  Unfunded pension expense..................................     1,311         685
  Accrued outage expense....................................       105       1,076
  Inventory.................................................       477         407
  Other, net................................................       827         576
Liabilities
  Utility plant.............................................   (30,298)    (24,457)
                                                              --------    --------
Accumulated deferred income tax asset.......................    65,576      64,066
Valuation allowance.........................................   (65,576)    (64,066)
                                                              --------    --------
Accumulated deferred income tax asset, net..................  $      0    $      0
                                                              ========    ========
</TABLE>

                                      F-16
<PAGE>   47
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

     The total income tax provision set forth above represents 0% in the years
ended December 31, 1999, 1998 and 1997. The following table reconciles the
statutory federal income tax rate to those percentages:

<TABLE>
<CAPTION>
                                                           DECEMBER 31,    DECEMBER 31,   DECEMBER 31,
                                                               1999            1998           1997
                                                           ------------    ------------   ------------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                        <C>             <C>            <C>
Loss before taxes........................................    $(4,739)        $(6,769)       $(11,215)
Federal statutory rate...................................         34%             34%             34%
Federal income tax benefit at statutory levels...........     (1,611)         (2,301)         (3,813)
Increase (Decrease) from statutory levels
  State tax net of federal tax benefit...................       (217)           (345)           (513)
  Valuation allowance....................................      1,917           2,721           4,442
  Other..................................................        (89)             75            (116)
                                                             -------         -------        --------
Effective federal income tax expense.....................    $     0         $     0        $      0
                                                             =======         =======        ========
</TABLE>

     Valuation allowances have been provided against any deferred tax assets,
net due to the limitations on the use of carryforwards, discussed below, and the
uncertainty associated with future taxable income. The valuation allowance of
$56,086,000 as of December 31, 1994, if subsequently recognized will be
allocated directly to paid in capital.

     For federal income tax purposes, as of December 31, 1999, the Company had
net operating loss carry forwards ("NOLs") of approximately $225 million, which
are scheduled to expire between 2005 and 2019. Because the Company has
experienced one or more ownership changes, within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, an annual limitation is imposed
on the ability of the Company to use $136 million of these carryforwards. The
Company's best estimate at this time is that the annual limitation on the use of
$136 million of the Company's NOLs is approximately $5.5 million per year. Any
unused portion of the $5.5 million annual limitation applicable to the Company's
restricted NOLs is available for use in future years until such NOLs are
scheduled to expire. The Company's other $89 million of NOLs are not currently
subject to such limitations.

4.  CAPITAL EXPENDITURES

     The Company's cash capital expenditures, including nuclear fuel, are
estimated to be approximately $29 million in 2000 and to aggregate approximately
$25 million for the years 2001 through 2002.

5.  ENERGY MARKETING

     The Company utilizes unit contingent and firm forward sales contracts to
maximize the value of its 174 MW power supply from the Seabrook Project. As of
December 31, 1999, the Company had forward sales commitments that extend to the
end of 2000. As of December 31, 1998, the unrealized gain on these open
positions was $159,000. The value of open positions was determined using
exchange settlement prices or, if applicable, over the counter prices. The
unrealized gain at December 31, 1998 was deferred.

     Effective January 1, 1999, Great Bay adopted Emerging Issues Task Force
Issue No. 98-10, Accounting for Contracts Involved in Energy Trading and Risk
Management Activities ("EITF 98-10"). EITF 98-10 requires energy trading
contracts to be recorded at fair value on the balance sheet, with the changes in
fair value included in earnings. The cumulative effect of the accounting change
as of January 1, 1999 was to decrease net loss by $159,000, or $0.02 per
weighted average common share and to recognize gains on net open firm purchase
and sales commitments considered to be trading activity.

     As of December 31, 1999, the Company had a net unrealized loss of
approximately $647,000 recorded in accrued expenses. The net change in
unrealized loss on trading activities as of December 31, 1999 was $806,000 and
is included in the accompanying consolidated statement of income for 1999.

                                      F-17
<PAGE>   48
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

6.  PURCHASED POWER AGREEMENTS

     Great Bay is party to a purchased power agreement, dated as of April 1,
1993 (the "UNITIL Purchased Power Agreement"), with UNITIL Power ("UNITIL") that
provides for Great Bay to sell to UNITIL approximately 10 MW of power. The
UNITIL Purchased Power Agreement commenced on May 1, 1993 and runs through
October 31, 2010. The current price of power under the UNITIL Purchased Power
Agreement is 5.24 cents per kilowatt-hour ("kWh"). The price is subject to
increase in accordance with a formula that provides for adjustments at less than
the actual rate of inflation. UNITIL has an option to extend the UNITIL
Purchased Power Agreement for an additional 12 years until 2022.

     The UNITIL Purchased Power Agreement is front-end loaded whereby UNITIL
pays higher prices, on an inflation adjusted basis, in the early years of the
Agreement and lower prices in later years. The average price per kWh and the
contract formula rate in the contract are fixed over the life of the contract,
so that any excess cash received in the beginning of the contract will be
returned by the end of the contract, provided the contract does not terminate
early. The difference between revenue billed under each rate is recorded in a
"Balance Account" which increased annually to $4.1 million in July 1998, and now
decreases annually, reaching zero in July 2001. Therefore, contract revenue is
recorded under Generally Accepted Accounting Principles and Emerging Issues Task
Force Ruling 91-6 based on the contract rates and no liability for the "Balance
Account" is recognized provided that it is not probable that the contract will
terminate early. If the UNITIL Purchased Power Agreement terminates prior to its
scheduled termination, and if at that time there is a positive amount in the
Balance Account, Great Bay is obligated to refund that amount to UNITIL.
Management believes it is not probable that either party will terminate this
contract prior to the end of its initial term.

     To secure the obligations of Great Bay under the UNITIL Purchased Power
Agreement, including the obligation to repay UNITIL the amount in the Balance
Account, the UNITIL Purchased Power Agreement grants UNITIL a mortgage on Great
Bay's interest in the Seabrook Project. This mortgage may be subordinated to
first mortgage financing of up to a maximum amount of $80,000,000. The UNITIL
Power Purchase Agreement further provides that UNITIL's mortgage will rank pari
passu with other mortgages that may hereafter be granted by Great Bay to other
purchasers of power from Great Bay to secure similar obligations, provided that
(i) the maximum amount of indebtedness secured by the first mortgage on the
Seabrook Interest may not exceed $80,000,000, and (ii) the combined total of all
second mortgages on the Seabrook Interest may not exceed the sum of (a)
$80,000,000 less the total amount of Great Bay's debt then outstanding which is
secured by a first mortgage plus (b) $57,000,000.

7.  PECO SERVICES AGREEMENT AND WARRANT AGREEMENT

     Great Bay and PECO Energy Company ("PECO") entered into a Services
Agreement as of November 3, 1995 (the "PECO Services Agreement"), pursuant to
which PECO was appointed as Great Bay's exclusive agent to market and sell Great
Bay's uncommitted portion of electricity generated by the Seabrook Project. In
June 1998, Great Bay and PECO terminated the power marketing agreement between
the companies and Great Bay paid PECO approximately $2.5 million. During the
quarter ended June 30, 1998, Great Bay made an approximate $2.5 million charge
to income for this expense. This expense is reflected in Administrative and
General expenses in the accompanying Consolidated Statement of Income.

8.  STOCK OPTION PLAN

     On April 24, 1995, the Board of Directors of the Company established the
1995 Stock Option Plan (the "Plan"), which received shareholder approval at the
Company's annual meeting on April 16, 1996. The purpose of the Plan is to secure
for the Company and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company who are expected to contribute to the Company's future growth
and success. Options granted pursuant to the Plan may
                                      F-18
<PAGE>   49
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

be either incentive stock options meeting the requirements of Section 422 of the
Internal Revenue Code or non-statutory options which are not intended to meet
the requirements of Section 422. The maximum number of shares of Common Stock
that may be issued and sold under the Plan is 600,000 shares. The Plan will be
administered by the Board of Directors of the Company and may be modified or
amended by the Board in any respect, subject to shareholder approval in certain
instances.

     The Company accounts for the plan under APB Opinion No. 25, under which no
compensation cost has been recognized as the options are granted at Fair Market
Value.

     On December 3, 1998, the Board of Directors of the Company voted to reprice
all of the outstanding options of the Company as the current options were "out
of the money" and they no longer had the desired motivational effect or
compensatory benefit for the employees. The repricing of the options was based
on the current market value of the stock as of December 18, 1998. Simultaneously
with the repricing, 139,583 of existing options were forfeited. In accordance
with APB Opinion 25 (the "Opinion"), a renewal, a change in price, an extension
of the period of exercisability, or any other significant modification of a
stock right establishes a new measurement date as of the date of change in the
same fashion as if a new option were granted.

     Under the current interpretations of APB Opinion 25, as the repricing was
done at fair market value on the new measurement date, no compensation expense
has been recognized.

     The Financial Accounting Standards Board (the "Board") has concluded its
initial review of practice problems associated with the Opinion on accounting
for stock issued to employees. The Board issued an Exposure Draft of a proposed
interpretation of the Opinion in the first quarter of 1999. The proposed
effective date would be the issuance date of the final interpretation, which is
expected to be in 2000. If adopted, the interpretation will be applied
prospectively but will cover events that occurred after December 15, 1998. There
will be no effect on financial statements for the period prior to the effective
date of the final interpretation.

     Had compensation cost for the plan been determined consistent with FASB
Statement No. 123, Accounting for Stock Based Compensation, the Company's net
income and earnings per share would have been reduced to the following pro forma
amounts.

<TABLE>
<CAPTION>
                                                   1999         1998          1997
                                                  -------      -------      --------
                                                        (DOLLARS IN THOUSANDS)
<S>        <C>                                    <C>          <C>          <C>
Net Loss:  As Reported.......................     $(4,740)     $(6,769)     $(11,215)
           Pro Forma.........................      (5,146)      (7,050)      (11,414)
EPS:       As Reported.......................     $ (0.58)     $ (0.82)     $  (1.35)
           Pro Forma.........................       (0.63)       (0.86)        (1.38)
</TABLE>

                                      F-19
<PAGE>   50
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

     Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years. A summary
of the Company's stock option plan at December 31, 1999, 1998 and 1997, and
changes during the years then ended, is presented in the table and narrative
below:

<TABLE>
<CAPTION>
                                           1999                  1998                   1997
                                    ------------------    -------------------    ------------------
                                              WTD AVG                WTD AVG               WTD AVG
                                    SHARES    EX PRICE     SHARES    EX PRICE    SHARES    EX PRICE
                                    -------   --------    --------   --------    -------   --------
<S>                                 <C>       <C>         <C>        <C>         <C>       <C>
Outstanding at beginning of
  year............................  417,417      $4.92     505,000   $   8.05    445,000    $8.15
Granted...........................  323,500       2.88      52,000       4.25     60,000     7.33
                                               to 6.88                to 7.25
Exercised.........................  (40,000)      4.90          --                    --
Forfeited.........................       --               (139,583)      8.65         --
Expired...........................       --                                           --
Outstanding at end of year........  700,917       5.36     417,417       4.92    505,000     8.05
Exercisable at end of year........  476,005       4.92     322,849       4.97    425,000     8.04
Weighted average fair value of
  options granted.................            $   3.66               $   1.29               $3.32
</TABLE>

     The 700,917 options outstanding at December 31, 1999 have exercise prices
between $2.88 and $6.88, with a weighted average exercise price of $5.36, and a
remaining weighted average contractual life of 5.8 years.

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants in 1999, 1998 and 1997 respectively: weighted average risk-free interest
rates of 5.5, 4.7 and 6.7 percent; expected dividend yields of 0 percent;
weighted average expected lives of 7, 6.5 and 7 years; and expected volatility
of 54, 31 and 31 percent, respectively.

     In June 1999, HoustonStreet's Board of Directors approved HoustonStreet's
1999 Stock Incentive Plan, which provides for the grant of incentive and
nonqualified stock options for the purchase of HoustonStreet's common stock by
HoustonStreet's management, employees, consultants, advisors and directors of
HoustonStreet. As of December 31, 1999, options to purchase an aggregate of
840,000 shares of HoustonStreet common stock, at a weighted average option
exercise price of $0.87 per share were outstanding under this plan.
HoustonStreet has elected to account for its stock-based compensation plan under
APB No 25. Had compensation cost related to the HoustonStreet options been
determined, based on the fair value of the options at the grant date consistent
with the provisions of SFAS No. 123, the effect on the 1999 consolidated net
loss would not have been material.

9.  NEW ACCOUNTING PRONOUNCEMENTS

     In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). SFAS 133 establishes accounting
and reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the derivative's fair value be recognized currently
in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting.

     SFAS 133, as amended by SFAS 137, will be effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. A company may also implement
SFAS 133 as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1998 and thereafter.) SFAS 133 cannot be
applied retroactively. SFAS 133 must be applied to (a) derivative instruments
and (b) certain derivative instruments

                                      F-20
<PAGE>   51
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

embedded in hybrid contracts that were issued, acquired, or substantively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998.)

     The Company has not yet quantified the impact of adopting SFAS 133 on its
financial statements and has not determined the timing of or method of adoption
of SFAS 133. However, SFAS 133 could increase volatility in earnings and other
comprehensive income.

10.  PROPERTY TAXES

     For each of the tax years 1994, 1995, 1996, 1997 and 1998, Great Bay filed
property tax abatement applications with the towns of Hampton and Hampton Falls.
The abatement requests were denied. Great Bay filed appeals for each of those
years with the New Hampshire Board of Tax and Land Appeals (the "BTLA"). On
November 11, 1999, Great Bay reached agreements settling the property tax
litigation. As a result of the settlement agreement, Great Bay received $146,450
from the Town of Hampton and $21,967 from the Town of Hampton Falls. With regard
to Hampton Falls, the settlement established an assessed valuation of $7,000,000
for 1999 and $2,500,000 for 2000. With regard to the Town of Hampton, the
settlement established an assessed valuation of $20,000,000 for 1999 and
$15,000,000 for 2000.

11.  SEGMENT INFORMATION

     As mentioned in Note 1, BayCorp is a holding company for Great Bay, Little
Bay and HoustonStreet Exchange. The Company operates primarily in two segments,
each of which is managed separately because each segment sells distinct products
and services. Great Bay and Little Bay constitute the electric generating
companies segment, whose principal asset is a combined 15% joint ownership
interest in the Seabrook Nuclear Power Project and sell their combined power in
the competitive wholesale power markets. HoustonStreet operates a Web portal for
trading wholesale electric power and charges commissions for megawatt hours
traded on its site HoustonStreet.com.

     Management utilizes more than one measurement and multiple views of data to
measure segment performance and to allocate resources to the segments. However,
the dominant measurements are consistent with the company's consolidated
financial statements and, accordingly, are reported on the same basis herein.
Management evaluates the performance of its segments and allocates resources to
them primarily based on cash flows and overall economic returns. Intersegment
sales are generally accounted for at amounts comparable to sales to unaffiliated
customers and are eliminated in consolidation. The accounting policies of the
segments are described in the summary of significant accounting policies, in
Note 1.

                                      F-21
<PAGE>   52
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

<TABLE>
<CAPTION>
        AS OF AND FOR THE YEARS
           ENDED DECEMBER 31              GREAT BAY AND
                (000'S)                    LITTLE BAY     HOUSTONSTREET   CORPORATE   ELIMINATIONS    TOTAL
        -----------------------           -------------   -------------   ---------   ------------   --------
<S>                                       <C>             <C>             <C>         <C>            <C>
1999
Revenues................................    $ 46,381         $    59       $ 2,449      $ (3,128)    $ 45,761
Depreciation & amortization.............       3,744             286            80            --        4,110
Operating Expenses......................      46,378           3,351         1,761        (2,970)      48,520
Interest expense........................          16              97            --            --          113
Segment net income (loss)...............      (2,096)         (3,397)          753            --       (4,740)
Total Assets............................     165,862           2,984         7,592       (17,254)     159,184
Capital expenditures....................       1,797           3,099            --            --        4,896

1998
Revenues................................    $ 32,034              --       $ 1,920      $ (1,920)    $ 32,034
Depreciation & amortization.............       3,633              --            23            --        3,656
Operating Expenses......................      35,447              --         3,783        (1,920)      37,310
Interest expense........................          10              --            --            --           10
Segment net income (loss)...............      (7,489)             --           720            --       (6,769)
Total assets............................     138,086              --        71,442       (69,170)     140,358
Capital expenditures....................       2,700              --            --            --        2,700

1997
Revenues................................    $ 26,642              --       $ 1,756      $ (1,756)    $ 26,642
Depreciation & amortization.............       3,494              --            14            --        3,508
Operating Expenses......................      37,501              --         1,134        (1,755)      36,880
Interest expense........................        (255)             --            --            --         (255)
Segment net income (loss)...............     (11,825)             --           610            --      (11,215)
Total assets............................     138,116              --        78,251       (76,209)     140,158
Capital expenditures....................       2,555              --            --            --        2,555
</TABLE>

12.  COMMITMENTS AND CONTINGENCIES

     BayCorp and its wholly owned subsidiaries currently lease office space
under noncancelable operating leases. Rental expense under operating lease
agreements as of December 31, 1999 was $96,500.

     Future minimum commitments for operating leases as of December 31, 1999 are
as follows:

<TABLE>
<CAPTION>
                        YEAR ENDING                             OPERATING LEASES
                        -----------                             ----------------
<S>                                                             <C>
December 31, 2000...........................................        $170,000
December 31, 2001...........................................          70,000
December 31, 2002...........................................          70,000
December 31, 2003...........................................          35,000
                                                                    --------
Total.......................................................        $345,000
                                                                    ========
</TABLE>

13.  SUBSEQUENT EVENTS

     In January 2000, BayCorp issued 15,800 of its incentive stock options to
its employees and directors at an exercise price of $12.6875 per share. In
January 2000, HoustonStreet issued 474,300 of its incentive stock options to its
employees and directors at an exercise price of $2.75 per share.

                                      F-22
<PAGE>   53
                             BAYCORP HOLDINGS, LTD.

                   NOTES TO FINANCIAL STATEMENTS -- CONTINUED

     In February 2000, HoustonStreet sold $6.0 million of its common stock and
Series A preferred stock to Equiva Trading Company ("Equiva"). Equiva is a
hydrocarbon supply and trading partnership jointly-owned by Equilon Enterprises
LLC ("Equilon") and Motiva Enterprises LLC ("Motiva"). Equilon is owned by Shell
Oil Company and Texaco Inc. Motiva is owned by Shell Oil Company, Texaco Inc.
and Saudi Refining Inc., an affiliate of Saudi Aramco.

     Also in February 2000, HoustonStreet announced plans to launch one of the
first Web exchanges for wholesale crude oil and refined products trading. At
that time, HoustonStreet entered into agreements with Equiva under which Equiva
will share its knowledge of the oil trading industry with HoustonStreet and will
pay HoustonStreet at least $1.5 million over the next two years as minimum
trading commissions generated through Equiva's use of HoustonStreet's crude and
refined oil products trading exchange, once it is created and operated.

     In addition to sales of its capital stock to Equiva, HoustonStreet sold
$10.6 million of its capital stock in February and March 2000 to other investors
including Williams Energy Marketing & Trading Company, Omega Advisors, Inc.,
Elliott Associates, L.P., Thomas H. Lee Company and Sapient Corporation.
Collectively with Equiva and Williams, HoustonStreet raised $16.6 million in
gross proceeds through these stock sales. As a result, BayCorp owns
approximately 53% of HoustonStreet's capital stock (on an as converted to common
stock basis) as of March 27, 2000.

     Sapient Corporation has been assisting HoustonStreet in designing and
building its Internet site since inception. For the period from inception to
December 31, 1999, HoustonStreet has recorded $2.4 million of such costs.

     Omega Advisors, Inc. and its related investment partnerships who
beneficially own approximately 33.2% of BayCorp, purchased HoustonStreet Series
A Preferred Stock and own, directly and indirectly, approximately 21.26% of
HoustonStreet as of March 27, 2000, assuming conversion of the HoustonStreet
Series A preferred stock to HoustonStreet common stock at a conversion rate of
one to one.

     Elliot Associates, L.P. and its related partnerships who beneficially own
approximately 24.3% of BayCorp, purchased HoustonStreet Series A Preferred Stock
and own, directly or indirectly, approximately 16.55% of HoustonStreet, as of
March 27, 2000, assuming conversion of the HoustonStreet Series A preferred
stock to HoustonStreet common stock at a conversion rate of one to one.

                                      F-23
<PAGE>   54

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          BAYCORP HOLDINGS, LTD.

March 28, 2000
                                          By:    /s/ FRANK W. GETMAN JR.
                                            ------------------------------------
                                                    Frank W. Getman Jr.
                                                         President

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                   SIGNATURE                                      TITLE                       DATE
                   ---------                                      -----                       ----
<C>                                               <S>                                    <C>

            /s/ FRANK W. GETMAN JR.               President, Chief Executive Officer     March 28, 2000
------------------------------------------------  and Director (principal executive
              Frank W. Getman Jr.                 officer, principal financial officer
                                                  and principal accounting officer)

            /s/ KENNETH A. BUCKFIRE               Director                               March 28, 2000
------------------------------------------------
              Kenneth A. Buckfire

             /s/ STANLEY I. GARNETT               Director                               March 28, 2000
------------------------------------------------
               Stanley I. Garnett

             /s/ MICHAEL R. LATINA                Director                               March 28, 2000
------------------------------------------------
               Michael R. Latina

            /s/ LAWRENCE M. ROBBINS               Director                               March 28, 2000
------------------------------------------------
              Lawrence M. Robbins

            /s/ JOHN A. TILLINGHAST               Director                               March 28, 2000
------------------------------------------------
              John A. Tillinghast
</TABLE>
<PAGE>   55

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER   DESCRIPTION OF EXHIBIT
-------  ----------------------
<S>      <C>
 3.1     Certificate of Incorporation of BayCorp Holdings, Ltd.(1)
 3.2     By-laws of BayCorp Holdings, Ltd.(1)
10.1     Agreement Between Bangor Hydro-Electric Company, Central
         Maine Power Company, Central Vermont Public Service
         Corporation, Fitchburg Gas and Electric Light Company, Maine
         Public Service Company and EUA Power Corporation relating to
         use of certain transmission facilities, dated October 20,
         1986.(2)
10.2     Limited Guaranty by Eastern Utilities Associates of
         Decommissioning Costs in favor of Joint Owners of the
         Seabrook Project, dated May 5, 1990.(2)
10.3     Composite Agreement for Joint Ownership, Construction and
         Operation of New Hampshire Nuclear Units, as amended, dated
         November 1, 1990.(2)
10.4     Seventh Amendment to and Restated Agreement for Seabrook
         Project Disbursing Agent as amended through and including
         the Second Amendment, by and among North Atlantic Energy
         Service Corporation, Great Bay Power Corporation and other
         Seabrook Project owners, dated November 1, 1990.(2)
10.5     Seabrook Project Managing Agent Operating Agreement by and
         among the North Atlantic Energy Service Corporation, Great
         Bay Power Corporation and parties to the Joint Ownership
         Agreement, dated June 29, 1992.(2)
10.6     Settlement Agreement by and among EUA Power Corporation,
         Eastern Utilities Associates and the Official Bondholders'
         Committee, dated November 18, 1992.(2)
10.7     Purchased Power Agreement between UNITIL Power Corporation
         and Great Bay Power Corporation, dated April 26, 1993.(2)
10.8     Power Purchase Option Agreement between UNITIL Power
         Corporation and Great Bay Power Corporation, dated December
         22, 1993.(2)
10.9     Second Mortgage and Security Agreement between UNITIL Power
         Corporation and Great Bay Power Corporation, dated December
         22, 1993.(2)
10.10    Third Mortgage and Security Agreement between UNITIL Power
         Corporation and Great Bay Power Corporation, dated December
         22, 1993.(2)
10.11    Registration Rights Agreement between Great Bay Power
         Corporation and the Selling Stockholders, dated April 7,
         1994.(2)
10.12    Amendment to Registration Rights Agreement between Great Bay
         Power Corporation and the Selling Stockholders, dated
         November 23, 1994.(2)
10.13    Stock and Subscription Agreement among Great Bay Power
         Corporation and the Selling Stockholders, dated April 7,
         1994.(2)
10.14    Acknowledgement and Amendment to Stock and Subscription
         Agreement, dated November 23, 1994.(2)
10.15    Settlement Agreement by and among Great Bay Power
         Corporation, the Official Bondholders' Committee and the
         Selling Stockholders, dated September 9, 1994.(2)
10.16    Letter Agreement, dated December 20, 1994, between Great Bay
         Power Corporation and the Selling Stockholders amending
         Registration Rights Agreement, as previously amended on
         November 23, 1994.(2)
10.17    Letter Agreement, dated March 29, 1995, between Great Bay
         Power Corporation and the Selling Stockholders amending
         Registration Rights Agreement, as previously amended on
         November 23, 1994 and December 20, 1994.(2)
10.18    1996 Stock Option Plan of BayCorp Holdings, Ltd.(1)(4)
10.19    Employment Agreement between Frank W. Getman Jr. and BayCorp
         Holdings, Ltd., dated May 5, 1998.(4)(5)
10.20    Employment Agreement between John A. Tillinghast and BayCorp
         Holdings, Ltd., dated May 5, 1998.(4)(5)
10.21    Incentive Stock Option Agreement, dated as of August 1,
         1995, by and between Frank W. Getman Jr. and Great Bay Power
         Corporation.(4)(6)
10.22    Incentive Stock Option Agreement, dated as of September 17,
         1996, by and between Frank W. Getman Jr. and Great Bay Power
         Corporation.(4)(7)
</TABLE>
<PAGE>   56

<TABLE>
<CAPTION>
EXHIBIT
NUMBER   DESCRIPTION OF EXHIBIT
-------  ----------------------
<S>      <C>
10.23    Incentive Stock Option Agreement, dated as of April 24,
         1995, by and between John A. Tillinghast and Great Bay Power
         Corporation.(4)(6)
10.24    1999 Stock Incentive Plan of HoustonStreet Exchange,
         Inc.(4)(8)
10.25    Amended and Restated Incentive Stock Option Agreement, dated
         as of July 30, 1999, by and between Frank W. Getman Jr. and
         HoustonStreet Exchange, Inc. (first of two identically
         titled and dated agreements).(4)(8)
10.26    Amended and Restated Incentive Stock Option Agreement, dated
         as of July 30, 1999, by and between Frank W. Getman Jr. and
         HoustonStreet Exchange, Inc. (second of two identically
         titled and dated agreements).(4)(8)
10.27    Asset Purchase Agreement by and between Montaup Electric
         Company and Great Bay Power Corporation, dated as of June
         24, 1998.(9)
10.28    Assignment by and between Great Bay Power Corporation and
         Little Bay Power Corporation dated as of August 28,
         1998.(10)
10.29    Escrow Agreement by and between Little Bay Power Corporation
         and Citizens Bank New Hampshire dated November 10, 1999.(10)
10.30    Series A Convertible Preferred Stock Purchase Agreement
         dated as of February 2, 2000, as amended, by and among
         HoustonStreet Exchange, Inc. and the Purchasers (as defined
         therein).(8)
10.31    Amended and Restated Stockholders' Voting Agreement dated as
         of March 6, 2000 by and among BayCorp Holdings, Ltd. and the
         Purchasers (as defined therein).(8)
10.32    Investor Rights Agreement dated as of February 2, 2000, as
         amended, by and among HoustonStreet Exchange, Inc., BayCorp
         Holdings, Ltd. and the Purchasers (as defined therein).(8)
10.33    Rights of First Refusal and Co-Sale Agreement dated as of
         February 2, 2000, by and among HoustonStreet Exchange, Inc.
         and the Purchasers (as defined therein).(8)
10.34    Form of Omnibus Signature Page dated as of March 6, 2000
         relating to the four preceding exhibits.(8)
10.35    Incentive Stock Option Agreement, dated July 30, 1999, by
         and between Frank W. Getman Jr. and BayCorp Holdings,
         Ltd.(4)(8)
21.1     List of Subsidiaries of BayCorp Holdings, Ltd.(8)
23.1     Consent of Arthur Andersen LLP.(8)
</TABLE>

---------------
 (1) Filed as an exhibit to the Registration Statement on Form S-4 of BayCorp
     Holdings, Ltd. (Registration Statement 333-3362) filed on July 12, 1996 and
     incorporated herein by reference.

 (2) Filed as an exhibit to the Registration Statement on Form S-1 of Great Bay
     Power Corporation (Registration No. 33-88232) declared effective on April
     17, 1995 and incorporated herein by reference.

 (3) Filed as an exhibit to the Quarterly Report on Form 10-Q of BayCorp
     Holdings, Ltd. for the quarter ended July 30, 1998 (File No. 1-12527) on
     August 13, 1998 and incorporated herein by reference.

 (4) Management contract or compensation plan or arrangement required to be
     filed as an exhibit pursuant to Item 14(c) of Form 10-K.

 (5) Filed as an exhibit to the Company's Annual Report on Form 10-K (File No.
     1-12527) on March 31, 1999 and incorporated herein by reference.

 (6) Filed as an exhibit to the Quarterly Report on Form 10-Q of Great Bay Power
     Corporation for the quarter ended March 31, 1995 (File No. 0-25748) on May
     9, 1995 and incorporated herein by reference.

 (7) Filed as an exhibit to the Company's Annual Report on Form 10-K (File No.
     1-12527) on March 26, 1997 and incorporated herein by reference.

 (8) Filed as an exhibit to this Annual Report on Form 10-K.

 (9) Filed as an exhibit to the Quarterly Report on Form 10-Q of BayCorp
     Holdings, Ltd. for the quarter ended June 30, 1998 (File No. 1-12527) on
     August 13, 1998 and incorporated herein by reference.

(10) Filed as an exhibit to the Current Report on Form 8-K of BayCorp Holdings,
     Ltd. (File No. 1-12527) dated November 19, 1999 and filed on December 3,
     1999 and incorporated herein by reference.