<PAGE>   1
 
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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, 1996
 
                                       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)
 
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            <S>                                     <C>
                     DELAWARE                           02-0488443
            (STATE OR OTHER JURISDICTION             (I.R.S. OF EMPLOYER
            INCORPORATION OR ORGANIZATION)          IDENTIFICATION  NO.)




COCHECO FALLS MILLWORKS, 100 MAIN STREET, SUITE 201
              DOVER, NEW HAMPSHIRE                      03820-3835 
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)            (ZIP CODE)



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       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 742-3388
 
                            ------------------------
 
          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. [  ]
 
     As of March 14, 1997, the approximate aggregate market value of the voting
stock held by non-affiliates of the registrant was $29,234,132 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 14, 1997. There were 8,298,855
shares of Common Stock outstanding as of March 14, 1997.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
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                                                                           PART OF FORM 10-K
                                                                               INTO WHICH
                          DOCUMENT                                            INCORPORATED
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<S>                                                                      <C>
Portions of the Registrant's Proxy Statement                             Items 10, 11, 12 & 13
for the 1997 Annual Meeting of Shareholders                              of Part III
</TABLE>
 
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<PAGE>   2
 
                                     PART I
 
ITEM 1.  BUSINESS.
 
INTRODUCTION
 
     BayCorp Holdings, Ltd. ("BayCorp" or the "Company") serves as a holding
company for Great Bay Power Corporation ("Great Bay"). Great Bay is a public
utility whose principal asset is a 12.1% joint ownership interest in the
Seabrook Nuclear Power Project in Seabrook, New Hampshire (the "Seabrook
Project"). Great Bay is an exempt wholesale generator ("EWG") under the Public
Utility Holding Company Act of 1935 ("PUHCA").
 
     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. Currently,
Great Bay is the sole subsidiary of BayCorp. BayCorp's principal asset is its
100% equity interest in Great Bay. The new corporate structure enables BayCorp,
either directly or through subsidiaries other than Great Bay, to engage in
businesses that Great Bay would be prohibited from pursuing due to its status as
an exempt wholesale generator 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.
 
     BayCorp was incorporated in Delaware in March, 1996. Great Bay was
incorporated in New Hampshire in 1986 and was formerly known as EUA Power
Corporation. Great Bay sells its share of the electricity output of the Seabrook
Project in the wholesale electricity market, primarily in the Northeast United
States. Neither BayCorp nor Great Bay has operational responsibilities for the
Seabrook Project. Great Bay's share of the Seabrook Project capacity is
approximately 140 megawatts ("MW"). Great Bay currently sells all but 10 MW of
its share of the Seabrook Project capacity in the short-term market.
 
     Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code in the United States Bankruptcy Court for the
District of New Hampshire on February 28, 1991. It conducted its business as a
Debtor in Possession until November 23, 1994, at which time it emerged from
Chapter 11.
 
THE SEABROOK PROJECT
 
     The Seabrook Project is located on an 896-acre site in Seabrook, New
Hampshire. It is owned by Great Bay and ten 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, Montaup Electric Company, New England Power Company, New
Hampshire Electric Cooperative, Inc., Taunton Municipal Lighting Plant and
Hudson Light & Power Department (together with Great 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 expected service
life of 29 years. Seabrook Unit 1 transmits 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 (the "NRC") a full power operating license which
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 also owns a 12.1% joint ownership interest in
Seabrook Unit 2, to which it has assigned no value. On November 6,
<PAGE>   3
 
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.
On July 22, 1996, the Participants completed the sale of four unused steam
generators from Seabrook Unit 2. Great Bay received $7,036,792 in cash from the
proceeds of this sale on July 19, 1996. Great Bay had previously written off its
investment in Unit 2 and recognized a gain from this sale in the third quarter
of 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 is unable to estimate the costs for which it 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 currently pays its share of
monthly expenses required to preserve and protect the value of the Seabrook Unit
2 components.
 
JOINT OWNERSHIP OF SEABROOK
 
     Great Bay and the other Participants are parties to the Joint Owners
Agreement (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 other
than taxes 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. Great Bay's joint ownership interest of 12.1% 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.
 
     In addition, the failure to make monthly payments under the JOA by owners
of the Seabrook Project other than Great Bay may have a material effect on Great
Bay by requiring Great Bay 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 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. On February 28, 1997, the New Hampshire Public Utilities
Commission ("NHPUC") issued an order requiring stranded cost recovery to be
based on the average market price of electricity in New England, rather than
alternative regulatory accounting methods that are more favorable to certain
Participants. On March 3, 1997, one of the Participants, Northeast Utilities
(along with three of its subsidiaries) commenced litigation against the NHPUC
involving the order. If a Participant other than Great Bay were to file for
bankruptcy, and such Participant was unable to pay its share of Seabrook Project
expenses, Great Bay might be required 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
 
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<PAGE>   4
 
Northeast Utilities. Northeast Utilities, in conjunction with certain of its
affiliates, holds the largest joint ownership interest, 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. Great Bay does not have a representative on
the Executive Committee, but does have a representative on the Audit Committee,
Budget Committee and Non-Operating Participants Committee related to the
Seabrook Project. John A. Tillinghast, the Company's President and Chief
Executive Officer, is Chairman-elect of the Non-Operating Participants
Committee. 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.
 
RECENT DEVELOPMENTS
 
     On January 24, 1997, Great Bay completed the formation of a holding company
structure for Great Bay. As a result of the restructuring, Great Bay became a
wholly-owned subsidiary of BayCorp. Shareholders of Great Bay received one share
of BayCorp common stock for each share of Great Bay common stock which they
owned. In connection with the restructuring, Great Bay common stock ceased to be
quoted on the Nasdaq National Market and the new BayCorp common stock was listed
for trading on the American Stock Exchange under the symbol "MWH" on January 28,
1997.
 
     On January 27, 1997, the NRC issued Great Bay a temporary six month
exemption related to Great Bay's status as an "electric utility" as defined in
the NRC's regulations. In the exemption, the NRC staff stated that it believes
that Great Bay does not currently satisfy the NRC definition of "electric
utility." If Great Bay is an "electric utility," then the NRC decommissioning
requirements (see "Business -- Decommissioning" below) are satisfied by Great
Bay making monthly payments into a decommissioning trust fund. Great Bay
currently makes such monthly payments to a decommissioning trust fund. If Great
Bay is not an "electric utility," the NRC can require that Great Bay provide a
surety bond or other allowable decommissioning funding mechanism. Although the
Company cannot predict the outcome of this matter at this time, Great Bay
believes that it falls within the NRC's definition of an "electric utility" and
intends to vigorously pursue this matter with the NRC. If the NRC concludes that
Great Bay does not meet the NRC's definition of an "electric utility," Great Bay
may face substantially increased costs because of decommissioning funding
requirements that are significantly more stringent than its current funding
mechanism.
 
BANKRUPTCY PROCEEDINGS AND REORGANIZATION
 
     Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of New Hampshire (the "Bankruptcy Court") on
February 28, 1991. It conducted its business as a Debtor in Possession until
November 23, 1994, at which time Great Bay's Amended Bankruptcy Plan became
effective and Great Bay emerged from Chapter 11. Financing for the Amended
Bankruptcy Plan was provided by affiliates of Omega Advisors, Inc. and by Elliot
Associates, L.P. (collectively, the "Investors"). At the time Great Bay emerged
from Chapter 11, the Investors purchased 4,800,000 shares of Great Bay's Common
Stock for $35,000,000.
 
CURRENT BUSINESS
 
     BayCorp's principal asset is its 100% equity interest in Great Bay. The
business of Great Bay consists of the management of its joint ownership interest
in the Seabrook Project and the sale in the wholesale power market of its share
of electricity produced by the Seabrook Project. Great Bay does not have
operational responsibility for the Seabrook Project. To date, Great Bay has
entered into one long-term power contract for approximately 10 MW of Great Bay's
share of the Seabrook Project capacity. Great Bay's business strategy is to seek
purchasers, either in the short-term market or pursuant to medium or long-term
contracts, for its share of the Seabrook Project electricity output at prices in
excess of the prices currently available in the short-term market because sales
at current short-term prices result in revenues that are less than Great Bay's
cash requirements for operations, maintenance and capital expenditures.
 
                                        3
<PAGE>   5
 
     As a result of Great Bay's reorganization into a holding company structure
on January 24, 1997, BayCorp may engage in business activities, either directly
or through subsidiaries other than Great Bay, that Great Bay would be prohibited
from pursuing due to its status as an exempt wholesale generator under PUHCA.
BayCorp may in the future enter into new businesses or acquire existing
businesses, both in energy related fields and possibly in unrelated fields.
 
MARKETING
 
     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.
Proceeds from the sale of Great Bay's electricity together with reservation fees
payable by PECO to Great Bay are shared between Great Bay and PECO in accordance
with formulas set forth in the PECO Services Agreement. In addition, PECO has
committed, under certain circumstances, to provide back-up power during periods
in which power is partially or totally unavailable from the Seabrook Project.
The PECO Services Agreement became effective on December 31, 1995 and had
initially provided for a term of two years.
 
     At the time that Great Bay entered into the PECO Services Agreement, Great
Bay entered into a Warrant Purchase Agreement (the "PECO Warrant Purchase
Agreement") pursuant to which, on February 15, 1996, PECO purchased a warrant
from Great Bay for $1,000,000. The PECO Warrant entitled PECO to purchase 4.99%
of the total shares outstanding of the Company's Common Stock for approximately
$4.1 million.
 
     On September 30, 1996, PECO exercised its warrant and purchased 417,800
shares, or 4.99%, of Great Bay's Common Stock at a price of $9.75 per share. As
a result of the exercise of the warrant by PECO, the marketing agreement between
PECO and Great Bay was automatically extended through December 31, 1998. In
addition, the parties agreed to extend the marketing agreement for an additional
year through December 31, 1999. Under the terms of the warrant, the $1,000,000
received for the purchase of the warrant was credited towards the purchase price
for the newly issued shares. Thus, Great Bay received an additional $3.1 million
as a result of PECO's exercise of the warrant.
 
     From November 23, 1994 to December 31, 1995, UNITIL Resources, Inc.
("URI"), a wholly-owned subsidiary of UNITIL Company ("UNITIL") marketed Great
Bay's energy. Great Bay paid URI commissions for sales of power plus
reimbursement for URI's time. The amount of the commission varied based on the
length of the power sale contracts and prices obtained. The marketing agreement
with URI terminated as of December 31, 1995.
 
     Great Bay currently sells most of its power to utility companies located 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. Sales of
power to UNITIL Power Corporation ("UNITIL Power"), a wholly-owned subsidiary of
UNITIL, Northeast Utilities and Connecticut Municipal Electric Energy Corp. each
accounted for more than 10% of Great Bay's revenues during 1996. See "Power
Purchase Agreements."
 
POWER PURCHASE AGREEMENTS
 
     Great Bay is party to a power agreement, dated as of April 1, 1993 (the
"UNITIL Power Purchase Agreement"), with UNITIL Power which provides for Great
Bay to sell to UNITIL Power approximately 10 MW of power. The UNITIL Power
Purchase Agreement commenced on May 1, 1993 and runs through October 31, 2010.
During the first year of this term, the price of power under the UNITIL Power
Purchase Agreement was 5.0 cents per kilowatt-hour ("kWh"). Thereafter, the
price is subject to increase in accordance with a formula which provides for
adjustments at less than the actual rate of inflation. UNITIL Power has an
option to extend the UNITIL Power Purchase Agreement for an additional 12 years
until 2022.
 
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<PAGE>   6
 
     The UNITIL Power Purchase 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 Power Purchase Agreement is
quantified in a "Balance Account" which increases annually to $4.1 million in
1998, then decreases annually, reaching zero in 2001. If the UNITIL Power
Purchase 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 Power Purchase
Agreement, including the obligation to repay UNITIL Power the amount in the
Balance Account, the UNITIL Power Purchase 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 Power Purchase 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.
 
     In addition to the UNITIL Power Purchase Agreement, Great Bay also entered
into an option agreement with UNITIL Power (the "Power Purchase Option
Agreement") under which Great Bay granted UNITIL Power the option to purchase,
during the period form November 1, 1998 through October 31, 2018, approximately
15 MW of electricity at a price equal to 6.5 cents per kwh, subject to
adjustment in accordance with a formula. UNITIL Power was required to exercise
its option under the Power Purchase Option Agreement on or before October 31,
1996. UNITIL Power did not exercise this option and the option has expired.
 
     Great Bay is also party to a Purchased Power Agreement, dated November 9,
1995 (the "Bangor Purchased Power Agreement"), with Bangor Hydro-Electric
Company ("Bangor Hydro") pursuant to which Bangor Hydro agreed to purchase from
Great Bay, subject to increase or reduction under certain circumstances, 10 MW
of electricity during the months of January through March 1996 and for the
months of November 1996 through March 1997 and November 1997 through March 1998.
Pursuant to the Bangor Purchased Power Agreement, Great Bay also granted to
Bangor Hydro an option to purchase from Great Bay, subject to increase or
reduction under certain circumstances, up to 10 MW of electricity for the months
of November 1998 through March 1999 and November 1999 through March 2000.
 
     During the year ended December 31, 1996, sales by Great Bay to Northeast
Utilities, UNITIL Power and Connecticut Municipal Electric Energy Corp.
accounted for 26%, 15% and 13%, respectively, of total operating revenues. See
Note 1J of Notes to the Financial Statements.
 
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 and the reduction of Great Bay's capital costs
resulting from the implementation of the Chapter 11 reorganization plan. In
addition, Great Bay believes that the commitment by PECO to provide back-up
power under the PECO Services Agreement, as well as PECO's marketing
capabilities, should favorably affect Great Bay's competitive position.
 
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<PAGE>   7
 
NEPOOL
 
     Great Bay is a party to the New England Power Pool ("NEPOOL") Agreement
(the "NEPOOL Agreement") and is a member of NEPOOL. NEPOOL is open to all
investor-owned, municipal and cooperative electric utilities in New England that
are connected to the New England power grid. Effective November 13, 1995, the
NEPOOL Agreement was amended to permit broader membership and participation in
NEPOOL by power marketers and other non-utilities that transact business in the
bulk power market in New England. The NEPOOL Agreement provides for coordinated
planning of future facilitates as well as the operation of nearly 100% of
existing generating capacity in New England and of related transmission
facilities as if they were one system. The NEPOOL Agreement imposes on its
participants obligations concerning generating capacity reserves and the right
to use major transmission lines. On occasions when one or more transmission
lines are out of service, the quantity of power being produced by then operating
generation plants may exceed the quantity of power that can be carried safely by
the transmission system. In such instances, one or more generation plants may be
taken off-line by NEPOOL. To date, the Seabrook Project has not been taken
off-line in these instances. Great Bay believes that it is unlikely that the
Seabrook Project would be taken off-line in such instances because NEPOOL
prefers to take off-line non-nuclear plants which are less complex and less
difficult to schedule than nuclear units.
 
     The NEPOOL Agreement also provides for central dispatch of the generating
capacity of NEPOOL members with the objective of achieving economical use of the
region's facilities. Pursuant to the NEPOOL Agreement, interchange sales
(purchases from or sales to the pool by a NEPOOL member) are made at prices
approximately equal to the fuel cost for generation without contribution to the
support of fixed charges, if NEPOOL has the right to schedule delivery of the
power. On rare occasions, unscheduled power is delivered, or "dumped," to the
pool, for which no payment is made by NEPOOL. Great Bay does not expect to
"dump" power to NEPOOL. NEPOOL members also jointly schedule generation plant
maintenance to avoid capacity shortages in the NEPOOL area. The number of
generation plants undergoing maintenance at any time affects the cost of
replacement power in the market. Thus, Great Bay's operating revenues and costs
are affected to some extent by the operations of other members.
 
     On December 31, 1996, NEPOOL filed a restructuring plan with the Federal
Energy Regulatory Commission ("FERC"), including 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. These changes are scheduled to be implemented in stages by
no later than January 1, 1998.
 
NUCLEAR POWER, ENERGY AND UTILITY REGULATION
 
     The Seabrook Project and Great Bay, as part owner 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 has been, and will be, affected to the extent of its proportionate
share by the cost of any such requirements made applicable to Seabrook Unit 1.
 
     Great Bay is also subject to the jurisdiction of the FERC under Parts II
and III of the Federal Power Act and, as a result, is required to file with FERC
all contracts for the sale of electricity. FERC has the authority to suspend the
rates at which Great Bay proposes 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 it is an EWG, Great Bay is not subject to the jurisdiction of the
Securities and Exchange Commission ("SEC") under PUHCA. In order to maintain its
EWG status, Great Bay must continue to engage exclusively in the business of
owning and/or operating all or part of one or more "eligible facilities"
 
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<PAGE>   8
 
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, its
12.1% joint ownership interest in the Seabrook Project comprises an "eligible
facility."
 
     Great Bay is subject to regulation by the NHPUC in many respects including
the issuance of securities, the issuance of debt, contracts with affiliates,
forms of accounts, transfers of utility properties, mortgaging of utility
property and other matters. The NHPUC does not regulate rates charged for sales
of electricity at wholesale.
 
     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 a range of proposals relating to the
deregulation of the utility industry. It is not possible to predict what steps
will be taken by these authorities and legislatures or their impact on Great
Bay.
 
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 Great Bay
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 a trust fund to pay
decommissioning costs, if these costs exceed the amount of the trust fund, the
owners, including Great 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 $8.9 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 $8.3 billion, based on the approximately 110 currently licensed
reactors in the United States. The secondary layer is based on a retrospective
premium assessment of $75.5 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% ($3.965 million)
of the maximum retrospective assessment. With respect to the Seabrook Project,
Great 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 estimates its maximum liability per nuclear accident
currently would be an aggregate amount of approximately $9.59 million per
accident, with a maximum annual assessment of about $1.21 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 also independently purchases business interruption insurance from
Nuclear Electric Insurance Limited ("NEIL"). The current policy is in effect
from September 15, 1996 until September 15, 1997 and
 
                                        7
<PAGE>   9
 
provides for the payment of a fixed weekly loss amount of $520,000 in the event
of an outage at the Seabrook Project of more than 21 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 is $70.3 million. Under the terms of the policy, Great Bay is subject to a
potential retrospective premium adjustment of up to approximately $640,000
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 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. 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 believes that the
Seabrook Project has available, or under supply contracts, sufficient nuclear
fuel for operations through approximately 2001. The Seabrook plant management
has scheduled the next refueling outage for May 1997. Uranium concentrate and
conversion, enrichment and fabrication services currently are available form 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 disposal
of nuclear wastes, including spent fuel, as well as for the ultimate
decommissioning of the plants. Under the Nuclear Waste Policy Act of 1982 (the
"NWPA"), the United States Department of Energy (the "DOE") is required (subject
to various contingencies) to design, license, construct and operate a permanent
repository for high level radioactive wastes and spent nuclear fuel and
establish prescribed fees for the disposal of such waste and fuel. The NWPA
specifies that the DOE provide for the disposal of such waste and spent nuclear
fuel starting in 1998.
 
     NAESCO, as agent for the owners of the Seabrook Project, has entered into
contracts with the DOE for disposal of spent nuclear fuel in accordance with the
NWPA. In return for payment of the prescribed fees, the federal government is to
take title to and dispose of the Seabrook Project's high level wastes and spent
nuclear fuel beginning no later than January of 1998. However, the DOE has
announced that its first high level waste repository will not be in operation
earlier than 2010, notwithstanding the DOE's statutory and contractual
responsibility to begin disposal of high-level radioactive waste and spent fuel,
beginning not later than January 31, 1998.
 
     Until the federal government begins receiving such materials in accordance
with the NWPA, operating nuclear generating units such as the Seabrook Project
will need to retain high level wastes and spent fuel on-site or make other
provisions for their storage. The Seabrook Project increased its on-site storage
capacity for Low Level Waste ("LLW") in 1996 and such capacity is expected to be
sufficient 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 wastes until approximately 2010.
 
     Disposal costs for LLWs that result from normal operation of nuclear
generating units have increased significantly in recent years and are expected
to continue to rise. The cost increases are functions of increased packaging and
transportation costs and higher fees and surcharges charged by the disposal
facilities. Pursuant to the Low-Level Radioactive Waste Policy Act of 1980, each
state was responsible for providing disposal facilities for LLW generated within
the state and was authorized to join with other states into regional compacts to
jointly fulfill their responsibilities. However, pursuant to the Low-Level
Radioactive Waste Policy Amendments Act of 1985, each state in which a currently
operating disposal facility is located (South Carolina, Nevada and Washington)
is allowed to impose volume limits and a surcharge on shipments of LLW from
states that are not members of the compact in the region in which the facility
is located. On June 19,
 
                                        8
<PAGE>   10
 
1992, the United States Supreme Court issued a decision upholding certain parts
of the Low-Level Radioactive Waste Policy Amendments Act of 1985, but
invalidating a key provision of that law requiring each state to take title to
LLW generated within that state if the state fails to meet federally mandated
deadlines for siting LLW disposal facilities. The decision has resulted in
uncertainty about states' continuing roles in siting LLW disposal facilities and
may result in increased LLW disposal costs and the need for longer interim LLW
storage before a permanent solution is developed. Based on information provided
by NAESCO, management believes that the on-site storage capacity for LLW
generated by the Seabrook Project is adequate until at least 2006.
 
     In April 1995, a privately owned facility in Utah was approved as a
disposal facility for certain types of LLW. Additionally, the Barnwell, South
Carolina disposal facility was reopened in July 1995 to all states except North
Carolina as a result of legislation passed by the South Carolina legislature.
The Seabrook Project began shipping certain LLW to the Utah facility in December
1995. All LLW generated by the Seabrook Project which exceeds the maximum
radioactivity level of LLW accepted by the Utah facility is 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.
 
     Along with the other Participants, Great Bay is responsible for its pro
rata share of the decommissioning and cancellation costs for Seabrook. Great Bay
pays its share of decommissioning costs on a monthly basis. The 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. The
review of the current estimate and funding schedule by the NDFC is scheduled to
commence in April 1997. Although the owners of the Seabrook Project, including
Great Bay, 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, would remain liable for the excess. Great Bay
may be required to change the mechanism by which it funds its share of the
Seabrook Project decommissioning costs due to the recent NRC review of Great
Bay's status as an electric utility (see "Business -- Recent Developments").
 
     The current estimated cost to decommission the Seabrook Project, based on a
study performed in 1996 for the lead owner of the Plant, is approximately $439
million in 1996 dollars and $2.3 billion in 2026 dollars, assuming a 36-year
life for the facility and a future escalation rate of 5.0%. Based on this
estimate, the current value of Great Bay's share of this liability in 1996
dollars is approximately $53.2 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.
 
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.
 
                                        9
<PAGE>   11
 
     The EPA issued a National Pollutant Discharge Elimination System 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. 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 are 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 will remain in effect until the Title V permits are
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 is liable for its 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 standards 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 is in
compliance in all material respects with applicable EPA, NRC and other
regulations relating to pollution caused by nuclear generating facilities.
 
ENERGY POLICY ACT
 
     The Energy Act addresses many aspects of national energy policy and
includes important changes for electric utilities and registered holding
companies. For example, the Energy Act grants FERC new authority to mandate
transmission access for QFs, EWGs and traditional utilities. It is not possible
to predict the impact which the Energy Act and the rules and regulations which
will be promulgated by various regulatory agencies pursuant to the Energy Act
will have on Great Bay. It is also not possible to predict the timing or content
of future energy policy legislation and the significance of such legislation to
Great Bay. Various issues not addressed by the Energy Act, including regional
planning and transmission arrangements, could be addressed in future
legislation.
 
EMPLOYEES AND MANAGEMENT
 
     During 1996, Great Bay had six employees. A Management and Administrative
Services Agreement was in effect during 1995 between Great Bay and URI which
provided for URI to provide a full range of services to Great Bay including
management, accounting and bookkeeping, budgeting and regulatory compliance.
Great Bay terminated this agreement effective January 2, 1996 and assumed
control of these functions in 1996.
 
     As a result of the corporate restructuring of Great Bay and BayCorp
completed on January 27, 1997, BayCorp has five employees, including its
President and Chief Executive Officer, John A. Tillinghast, and its Chief
Operating Officer, Frank W. Getman Jr. See "Executive Officers." BayCorp's
wholly-owned subsidiary, Great Bay, has one employee.
 
     On January 24, 1997, a Management and Administrative Services Agreement
(the "Services Agreement") was signed between BayCorp and Great Bay, pursuant to
which BayCorp provides Great Bay a full range of management services, including
general management and administration, accounting and bookkeeping, budgeting and
regulatory compliance. Under the Service Agreement, Great Bay pays BayCorp a
monthly fee of $156,000 for such services. The Services Agreement has a one-year
term and provides for automatic one-year renewals.
 
                                       10
<PAGE>   12
 
ITEM 2.  PROPERTIES.
 
     BayCorp's sole asset is its equity interest in Great Bay. Great Bay's
principal asset is its 12.1% 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."
 
ITEM 3.  LEGAL PROCEEDINGS.
 
     For each of the tax years 1994, 1995 and 1996, Great Bay has filed property
tax abatement applications with the Towns of Seabrook, Hampton and Hampton
Falls, New Hampshire (collectively, the "Towns"). Great Bay's abatement
applications for 1996 are currently pending before each of the Towns. The Towns
have previously denied Great Bay's abatement applications for tax years 1994 and
1995 and Great Bay appealed those denials to the New Hampshire Board of Land and
Tax Appeals (the "BTLA"). Those appeals are currently pending before the BTLA
and Great Bay is unable to express an opinion as to the likely outcome of this
matter. Great Bay believes that a decision by the BTLA against Great Bay would
not have a material adverse effect on Great Bay's financial position or results
of operations because Great Bay paid its 1994 and 1995 property taxes to the
Towns.
 
     Great Bay paid the first half of its 1996 property taxes to the Towns and
withheld payment of the second half of its 1996 property taxes to the Towns,
based on the Company's position that the portion of 1996 property taxes paid to
the Towns exceeds the amount of the total 1996 property taxes appropriately
payable by Great Bay to the Towns. The full assessed amount of 1996 property
taxes has been expensed by Great Bay on its 1996 income statement. As a result
of Great Bay's withholding of its property tax payment for the second half of
1996, the Towns have the right to place a lien on the Seabrook Project on May 1,
1997. Great Bay is unable to express an opinion as to the likely outcome of this
matter.
 
     On December 17, 1996, eight of the Joint Owners of the Seabrook Project
(the "Demanding Joint Owners") served a demand on Great Bay for arbitration of a
dispute between Great Bay and the Demanding Joint Owners concerning the
allocation among the joint owners of real property taxes assessed by the Towns
against the Seabrook Project. Great Bay takes the position that the JOA does not
provide for allocation of real estate tax liabilities in proportion to each
Joint Owner's ownership interest in the Seabrook Project. The Demanding Joint
Owners claim that real estate taxes should be allocated in accordance with
ownership shares. Arbitration proceedings have not yet commenced. Great Bay is
unable to express an opinion as to the likely outcome of this matter.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
 
     Not Applicable.
 
  Executive Officers of the Registrant
 
     On January 27, 1997, Great Bay became a wholly-owned subsidiary of BayCorp
Holdings, Ltd. The persons who were officers and directors of Great Bay
immediately prior to that date became the officers and directors of BayCorp,
without change, until such time as their successors have been duly elected or
appointed and qualified.
 
     The executive officers of BayCorp and Great Bay are as follows:
 
<TABLE>
<CAPTION>
                     NAME                        AGE                      POSITION
                     ----                        ---                      --------
<S>                                              <C>   <C>
John A. Tillinghast............................  69    Chief Executive Officer, President, Treasurer
                                                       and Chairman of the Board of Directors
Frank W. Getman Jr.............................  33    Chief Operating Officer and Secretary
</TABLE>
 
                                       11
<PAGE>   13
 
     Set forth below is information concerning the executive officers of BayCorp
and Great Bay:
 
     John A. Tillinghast has served as President, Treasurer and the Chairman of
the Board of Directors of the Company since November 1994 and Chief Executive
Officer since April 1995. 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 form Columbia University.
 
     Frank W. Getman Jr. has served as Chief Operating Officer of BayCorp since
September 17, 1996 and Vice President, Secretary and General Counsel of Great
Bay since August 1, 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.
 
                                       12
<PAGE>   14
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
 
     From January 27, 1995 to April 17, 1995, Great Bay Common Stock traded on
the Nasdaq over-the-counter market and was quoted on the Nasdaq OTC Bulletin
Board. Transfers occurred infrequently and at a low volume level. During this
period, the low and high prices at which transactions in Great Bay Common Stock
occurred on the Nasdaq OTC Bulletin Board were $7.12 and $9.00 per share,
respectively. These prices may have reflected inter-dealer prices, without
retail markups, mark-downs or commissions, and may not have necessarily
represented actual transactions.
 
     Great Bay Common Stock commenced trading on the Nasdaq National Market
("NNM") on April 18, 1995 under the symbol "GBPW." Following are the reported
high and low sales prices of Great Bay Common Stock on the NNM as reported daily
in the Wall Street Journal for each quarter during 1995 and 1996 that the Great
Bay Common Stock traded on the NNM:
 
<TABLE>
<CAPTION>
                                                                         HIGH     LOW
                                                                         ----     ---
        <S>                                                              <C>      <C>
        1995
        -----
          Second Quarter (beginning April 18, 1995)....................   9 3/4   7
          Third Quarter................................................   9       7 3/4
          Fourth Quarter...............................................   9 1/4   6 3/4
        1996
        -----
          First Quarter................................................   8 3/4   6 3/4
          Second Quarter...............................................   8 3/4   6 1/8
          Third Quarter................................................  10 3/8   6 7/8
          Fourth Quarter...............................................  10       7 1/4
</TABLE>
 
     As of December 31, 1996, the Company had 20 holders of record of its Common
Stock.
 
     On January 24, 1997, Great Bay completed the formation of a holding company
structure for Great Bay. As a result of the restructuring, Great Bay became a
wholly-owned subsidiary of BayCorp. Shareholders of Great Bay received one share
of BayCorp common stock for each share of Great Bay common stock which they
owned. In connection with the restructuring, Great Bay Common Stock ceased to be
quoted on the Nasdaq National Market and the new BayCorp Common Stock was listed
for trading on the American Stock Exchange under the symbol "MWH" on January 28,
1997.
 
     Great Bay has never paid cash dividends on Great Bay Common Stock. BayCorp
currently expects that it will retain all of its future earnings and does not
anticipate paying a dividend in the foreseeable future.
 
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 selected financial data
presented below for periods subsequent to November 23, 1994 give effect to the
consummation of Great Bay's Fifth Amended Plan of Reorganization dated February
11, 1994, as amended by a First Amendment dated September 9, 1994 (the "Amended
Bankruptcy Plan") of the predecessor of Great Bay and to the adoption of fresh
start reporting by Great Bay as of that date in accordance with the American
Institute of Certified Public Accountants' Statement of Position 90-7 Financial
Reporting by Entities in Reorganization under the Bankruptcy Code. Accordingly,
periods prior to November 23, 1994 have been designated "Predecessor Company" or
the "Predecessor" and periods subsequent to November 23, 1994 have been
designated "Reorganized Company" or the "Company." Selected balance sheet and
statement of income (loss) data of the Predecessor Company periods are not
comparable to those of the Reorganized Company periods and a line has been drawn
in the tables to separate the Predecessor financial data from the Company
financial data.
 
                                       13
<PAGE>   15
 
     The following data presents (i) selected financial data of the Reorganized
Company as of and for the years ended December 31, 1996 and December 31, 1995,
as of December 31, 1994 and for the period from November 24, 1994 to December
31, 1994 and (ii) selected financial data of the Predecessor company for the
period from January 1, 1994 to November 23, 1994, as of December 31, 1993 and
December 31, 1992 and for each of the two years in the period ended December 31,
1993. 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>
                                     REORGANIZED COMPANY                    PREDECESSOR COMPANY
                             ------------------------------------   ------------------------------------
                             FOR THE YEAR ENDED    NOVEMBER 24 TO   JANUARY 1 TO    FOR THE YEAR ENDED
                                DECEMBER 31,        DECEMBER 31,    NOVEMBER 23,       DECEMBER 31,
                             -------------------   --------------   ------------   ---------------------
                               1996       1995          1994            1994         1993        1992
                             --------   --------   --------------   ------------   ---------   ---------
<S>                          <C>        <C>            <C>            <C>          <C>         <C>
INCOME STATEMENT DATA:
  Operating Revenues.......  $ 30,324   $ 24,524      $  3,129        $ 13,989     $  24,620   $  23,027
  Fuel, Operation &
     Maintenance...........    24,885     24,899         2,409          21,762        22,991      26,823
  Net Income (Loss)........     4,100     (6,059)          182         131,385        (9,433)    (47,468)(2)
</TABLE>
 
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                             ---------------------------------------------------------------------------
                               1996       1995          1994                         1993        1992
                             --------   --------   --------------                  ---------   ---------
<S>                           <C>        <C>           <C>                           <C>        <C> 
BALANCE SHEET DATA:
  Cash & Cash
     Equivalents...........    28,775     16,469        22,217                           138       4,817
  Working Capital(1).......    30,552     20,516        27,169                      (289,585)   (284,819)
  Total Assets.............   152,418    138,771       145,666                       324,590     333,758
  Decommissioning
     Liability.............    53,215     50,899        48,530                            --          --
  Capitalization:
     Long-Term Debt
       (excluding current
       maturities)(1)......         0          0             0                             0           0
     Common Equity.........    89,625     82,233        88,292                      (139,783)   (130,350)
     Cumulative Convertible
       Preferred Stock.....        --         --            --                        63,090      63,090
  Total Capitalization.....    89,625     82,233        88,292                       (76,693)    (67,260)
</TABLE>
 
---------------
(1) As a result of Predecessor's bankruptcy filing, the Predecessor was in
    default under the indenture pursuant to which the secured notes were issued.
    Long-Term Debt of the Predecessor was thereafter classified as a current
    liability subject to compromise.
 
(2) In 1992, the Predecessor Company reversed all accumulated tax benefits
    related to carryforwards of net operating losses and alternative minimum tax
    credits to reflect the anticipated imposition of certain tax law limitations
    and the impact of certain settlement agreements between the Predecessor
    Company and Eastern Utilities Associates ("EUA").
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.
 
EMERGENCE FROM CHAPTER 11
 
     On February 28, 1991, Great Bay filed a voluntary petition for
reorganization under Chapter 11 of the Bankruptcy Code. On November 23, 1994
(the "Confirmation Date"), a formal confirmation order by the Bankruptcy Court
with respect to Great Bay's Amended Bankruptcy Plan became effective. At that
time, Great Bay emerged from bankruptcy. As a result of the Chapter 11
proceeding and in accordance with the provisions of the Amended Bankruptcy Plan,
the capital structure of Great Bay was completely changed. In
 
                                       14
<PAGE>   16
 
particular, as part of its Chapter 11 proceeding, Great Bay discharged all of
its pre-petition debt, which consisted primarily of the approximately $280
million principal amount of outstanding Notes and unpaid accrued interest on the
Notes of approximately $14 million, and raised gross proceeds of $35 million in
the Amended Bankruptcy Plan. See "Business -- Bankruptcy Proceeding and
Reorganization." Thus, as a result, Great Bay's net worth increased
significantly and Great Bay was relieved of the obligation to make principal and
interest payments on the Notes.
 
     The following discussion focuses solely on operating revenues and operating
expenses which are presented in a substantially consistent manner for all of the
periods presented. As a result of the Chapter 11 proceeding and subsequent
effectiveness of the amended Bankruptcy Plan on November 23, 1994, the 1994
Statement of Income represents separately the results of operations of the
predecessor company prior to November 23, 1994 from the results of operations of
Great Bay after that date.
 
     On the Confirmation Date, Great Bay adopted a "Fresh Start" Balance Sheet.
This Balance Sheet reflects the assets and liabilities of Great Bay at their
estimated fair values as of the Confirmation Date, including the net proceeds of
the equity financing for the Amended Bankruptcy Plan, and eliminating
liabilities discharged under the Amended Bankruptcy Plan.
 
OVERVIEW
 
     Great Bay reported income before extraordinary item for the year ended
December 31, 1996 and reported a loss before extraordinary item for the year
ended December 31, 1995 and the combined twelve-month period ended December 31,
1994. The 1996 income was primarily due to a gain of $7,036,792 from the sale of
unused steam generators from Seabrook Unit 2. The losses in 1995 and 1994 were
primarily due to sales of Great Bay's share of electricity from the Seabrook
Project in the short-term market at prices resulting in revenues substantially
below actual expenses.
 
     The Seabrook Project from time to time experiences both scheduled and
unscheduled outages. Great Bay incurs losses during outage periods due to the
loss of all operating revenues and additional costs associated with the outages
as well as continuing operating and maintenance expenses and depreciation.
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 Great Bay to predict the frequency or duration of any future
unscheduled outages; however, it is likely that such unscheduled outages will
occur. The Managing Agent of the Seabrook Project has scheduled the next
refueling outage for May 1997. Refueling outages are scheduled generally every
18 to 24 months depending upon the Seabrook Project capacity factor and the rate
at which the nuclear fuel is consumed.
 
RESULTS OF OPERATIONS
 
  Operating Revenues
 
     Great Bay's operating revenues for 1996 increased by approximately $5.8
million, or 23.7%, to $30,324,000 as compared with $24,524,000 for 1995. This
increase was primarily due to higher availability and production at the Seabrook
Project due to fewer unscheduled and scheduled outages in 1996 compared to 1995.
During 1996, the capacity factor at the Seabrook Project was 96.5% of the rated
capacity versus a capacity factor of 83.2% for 1995. Operating revenue and
capacity factor were negatively affected in 1995 by the scheduled refueling
outage at the Seabrook Project which occurred during parts of both November and
December 1995. In contrast, there was only a brief unscheduled outage in January
and February of 1996.
 
     Sales of electricity increased by approximately 17.5% to 1,194,391,000
kilowatt hours in 1996 as compared to 1,016,727,000 kilowatt hours in 1995.
Operating revenues were also favorably affected in 1996 by an increase in the
sales price per kWh. During 1996 the sales price per kWh (determined by dividing
total sales revenue by the total number of kWhs sold in the applicable period)
increased 5% to 2.53 cents per kWh as compared with 2.41 cents per kWh in 1995.
Great Bay's cost of power (determined by dividing total
 
                                       15
<PAGE>   17
 
operating expenses by Great Bay's 12.1% share of the power produced by the
Seabrook Project during the applicable period) decreased 14.5% to 2.72 cents per
kWh in 1996 as compared to 3.18 cents per kWh in 1995. This decrease was
primarily the result of the higher capacity factor at the Seabrook Project in
1996 as compared to 1995. Scheduled and unscheduled outage time increases Great
Bay's cost of power because Seabrook costs are spread over fewer kWhs.
 
     Great Bay's operating revenues for 1995 increased by approximately $7.4
million, or 43%, as compared with the combined twelve months ended 1994. The
increase was primarily due to reduced scheduled and unscheduled outage time
during 1995, with a capacity factor of 83.2% in 1995 as compared with 61.6% in
the combined twelve months ended 1994. Operating revenues were also favorably
affected in 1995 by an increase in the sales price per kWh to 2.41 cents per kWh
as compared with 2.27 cents per kWh in the combined twelve months ended 1994.
Great Bay's cost of power decreased 34.7% to 3.18 cents per kWh in 1995 as
compared with 4.88 cents per kWh in the combined twelve months ended 1994,
primarily a result of reduced depreciation and amortization expenses in 1995
resulting from the write down to fair value of all of Great Bay's assets
following its emergence from bankruptcy in November 1994.
 
  Expenses
 
     Increases in depreciation and amortization (3.3%), taxes (2%), and
administrative and general expenses (5.1%) contributed to a small overall
increase in expenses of $183,000 (.6%) from $32,381,000 in 1995 to $32,563,000
in 1996.
 
     Other Income increased 263%, or $4.6 million, reflecting a $7.0 million
gain on sale of assets in July of 1996, when Great Bay received approximately
$7.0 million from the proceeds of the sale by the joint owners of the Seabrook
Project of four unused steam generators from Seabrook Unit 2. Great Bay had
previously written off its investment of Seabrook Unit 2 and recognized a gain
on this sale. This increase in other income was offset in part by Great Bay's
recognition in 1996 of its share of the Seabrook Project's decommissioning
liability. During 1996, Great Bay began to accrete it share of the Seabrook
Project's decommissioning liability in 1996 dollars rather than 1995 dollars. In
1995 there was no expense for Great Bay's share of the Seabrook Project's
decommissioning liability because the entire amount of Great Bay's share of the
Seabrook Project's decommissioning liability was reflected as a liability on
Great Bay's balance sheet under fresh start accounting principles. This
accretion is a non-cash charge and recognizes Great Bay's liability related to
the closure and decommissioning of its nuclear plant in current year dollars
over the licensing period of the plant.
 
     Great Bay's total operating expenses (excluding depreciation and all taxes)
for 1995 increased $0.7 million, or 3.0%, in comparison with the combined twelve
months ended 1994, primarily a result of increased administrative and general
expenses. This increase was partially offset by lower maintenance costs during
the Seabrook Project's 1995 scheduled outage. Depreciation and amortization
expenses decreased by 59.6% to $3.3 million during 1995 as compared with $8.3
million in the combined twelve months ended 1994. The decrease was the result of
a reduction in the depreciable value of Great Bay's investment in the Seabrook
Project due to the write down to fair value of all of Great Bay's assets
following its emergence from bankruptcy in November 1994. In the combined twelve
months ended 1994, as part of its emergence from bankruptcy, Great Bay wrote off
$137.9 million in assets and liabilities. Interest income increased in 1995 to
$1.5 million as a result of Great Bay's significantly higher cash and investment
balances.
 
  Net Operating Losses
 
     For federal income tax purposes, as of December 31, 1996, the Company had
net operating loss carry forwards ("NOLs") of approximately $174 million, which
are scheduled to expire between 2005 and 2010. 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. The
Company's other $38 million of NOLs are not currently subject to such
limitations.
 
                                       16
<PAGE>   18
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Great Bay is required under the JOA to pay its 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.
Seabrook Project expenses to preserve and protect Unit 2 assets approximate
$500,000 per year, of which Great Bay's share is approximately $62,000 per year.
Great Bay currently is selling most of its power in the Northeast United States
short-term wholesale power market. The cash generated from electricity sales by
Great Bay is and has been less than Great Bay's ongoing cash requirements. Great
Bay expects that it will continue to incur cash deficits until the prices at
which it is able to sell its share of the Seabrook Project electricity increase,
which may be a number of years, if ever. Great Bay intends to cover such
deficits with its cash and short-term investments which totaled approximately
$28.8 million at December 31, 1996. However, 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, Great
Bay would be required to raise additional capital, either through a debt
financing or an equity financing, to meet its ongoing cash requirements.
 
     Great Bay's principal asset available to serve as collateral for borrowings
is its 12.1% joint interest in the Seabrook Project. Pursuant to a power
purchase 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 to up to $80 million of senior
secured financing.
 
     Great Bay's cash and short-term investments increased approximately $12.3
million during 1996. Principal factors affecting liquidity during 1996 included
the operating income discussed above and the receipt of $4.1 million dollars
from PECO Energy in connection with PECO's purchase and subsequent exercise of
its warrant to purchase 4.99% of the Company's common stock. Non-cash charges to
income included $3.4 million for depreciation, $4.4 million for nuclear fuel
amortization, decommissioning trust fund accretion of $2.3 million and an
increase in miscellaneous current liabilities of $2.6 million attributable to
the 1996 accrual for 1997 outage related expenses and the year end accrual for
Seabrook pensions. Partially offsetting the items listed above were cash charges
of $6.6 million for capital expenditures for plant and nuclear fuel and an
increase in accounts receivable of $1.4 million due to the resumption of power
sales in 1996 following reduced sales in December 1995 as a result of the
scheduled outage during that month. Also in 1996, Great Bay purchased 78,045
shares of the Company's Common Stock for $633,000.
 
     Great Bay's 1996 decommissioning payments totaled approximately $1.0
million. The decommissioning funding schedule is determined by the NDFC, which
reviews such schedule for the Seabrook Project at least annually. Great Bay's
decommissioning payments for fiscal 1997 will depend on the outcome of pending
proceedings before the NDFC. Great Bay expects to use revenues from the sale of
power to make these decommissioning payments. The current review by the NRC
could substantially increase Great Bay's costs of decommissioning funding if
Great Bay does not meet the NRC's definition of an electric utility (see
"Business -- Recent Developments").
 
     Great Bay anticipates that its share of the Seabrook Project's capital
expenditures for the 1997 fiscal year will total approximately $4.6 million for
nuclear fuel and various capital projects.
 
     For each of the tax years 1994, 1995 and 1996, Great Bay has filed property
tax abatement applications with the three New Hampshire towns in which the
Seabrook Project is located. Great Bay paid the first half of its 1996 property
taxes to the Towns and withheld payment of the second half of its 1996 property
taxes to the Towns, based on the Company's position that the portion of 1996
property taxes paid to the Towns exceeds the amount of the total 1996 property
taxes appropriately payable by Great Bay to the Towns. The full amount of Great
Bay's 1996 property tax expense is reflected in the Company's 1996 financial
statements. The outcome of the Company's appeals with respect to property tax
assessments will affect the Company's liquidity and obligation for property tax
payments in the future. See "Business -- Legal Proceedings."
 
                                       17
<PAGE>   19
 
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," "excepts,"
"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 Great Bay 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.
 
     Ownership of a Single Asset.  BayCorp's sole asset is it equity interest in
Great Bay. Great Bay owns a single principal asset, a 12.1% joint interest in
the Seabrook Nuclear Power Project in Seabrook, New Hampshire. Accordingly,
Great Bay's results of operations are completely dependent upon the successful
and continued operation of the Seabrook Project. In particular, if the Seabrook
Project experiences unscheduled outages of significant duration, Great Bay's
results of operations will be materially adversely affected.
 
     History of Losses; Implementation of Business Strategy.  Great Bay has
never reported an operating profit for any year since its incorporation. Great
Bay's business strategy is to seek purchasers for its share of the Seabrook
Project electricity output at prices, either in the short-term market or
pursuant to medium or long-term contracts, significantly in excess of the prices
currently available in the short-term wholesale electricity market since sales
at current short-term rates do not result in sufficient revenue to enable Great
Bay to meet its cash requirements for operations, maintenance and capital
related costs. Great Bay's ability to obtain such higher prices will depend on
regional, national and worldwide energy supply and demand factors which are
beyond the control of Great Bay. There can be no assurance that Great Bay ever
will be able to sell power at prices that will enable it to meet its cash
requirements.
 
     Liquidity Needs.  As of December 31, 1996, Great Bay had approximately
$28.8 million in cash and cash equivalents and short-term investments. The
Company believes that such cash, together with the anticipated proceeds from the
sale of electricity by Great Bay, will be sufficient to enable the Company to
meet its cash requirements until the prices at which Great Bay can sell its
electricity increase sufficiently to enable the Company to cover its annual cash
requirements. However, if 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 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, Great Bay or
the Company would be required to raise additional capital, either through a debt
financing or an equity financing, to meet its ongoing cash requirements. There
is no assurance that Great Bay or the Company 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.
 
     Changes in Power Sale Contract Terms Available in Wholesale Power
Market.  In the past, wholesale sellers of electric power, which typically were
regulated electric utilities, frequently entered into medium or long-term power
sale contracts providing for prices in excess of the prices available in the
short-term market, which includes contracts of one year or less in duration. In
recent years, increased competition in the wholesale electric power market,
reduced growth in the demand for electricity, low prices in the short-term
market and the uncertainty associated with deregulation of the industry have
reduced the willingness of wholesale power purchasers to enter into medium or
long-term contracts and have reduced the prices obtainable from such contracts.
 
     Risks in Connection with Joint Ownership of Seabrook Project.  Great Bay is
required under the Agreement for Joint Ownership, Construction and Operation of
New Hampshire Nuclear Units dated May 1, 1973, as amended, by and among Great
Bay and the other 10 utility companies who are owners of the Seabrook Project
(the "JOA"), to pay its 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
 
                                       18
<PAGE>   20
 
Great Bay to make its monthly payments under the JOA entitles certain other
joint owners of the Seabrook Project to purchase Great 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 may have a material adverse effect
on Great Bay by requiring Great Bay 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 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. On
February 28, 1997, the NHPUC issued an order requiring stranded cost recovery to
be based on the average market price of electricity in New England, rather than
alternative regulatory accounting methods that are more favorable to the
Participants. On March 3, 1997, one of the Participants, Northeast Utilities
(along with three of its subsidiaries) commenced litigation against the NHPUC
involving the issue of proper accounting for stranded cost recovery. If a
Participant other than Great Bay were to file for bankruptcy, and such
Participant was unable to pay its share of Seabrook Project expenses, Great Bay
might be required 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 Seabrook Project is owned by Great Bay and the other owners thereof as
tenants in common, with the various owners holding varying ownership shares.
This means that Great Bay, which owns only a 12.1% interest, does not have
control of the management of the Seabrook Project. As a result, decisions may be
made affecting the Seabrook Project notwithstanding Great 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 BayCorp's
or Great Bay's control. 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
Great 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 as part owner 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 is also
subject to the jurisdiction of the FERC and, as a result, is required to file
with FERC all contracts for the sale of electricity. FERC has the authority to
suspend the rates at which Great Bay proposes 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. Compliance with the various requirements
of the NRC and FERC is expensive. 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 that pursuant to which the Seabrook project
operates, at any time that conditions warrant. 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.
 
     Great Bay is also subject to the New Hampshire public utility law and
regulations of the NHPUC which affect, among other things, the issuance of
securities, transfer of utility property and contacts with affiliates as
 
                                       19
<PAGE>   21
 
well as the sale, lease, merger, consolidation or other disposition of
facilities. The NHPUC does not regulate wholesale electricity rates.
 
     Risk of Nuclear Accident.  Nuclear reactors have been used to generate
electric power for more than 30 years and there are currently more than 100
nuclear reactors used for electric power generation in the United States.
Although the safety record of such 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 Great Bay 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. See "Business -- Nuclear Waste
Disposal." In April 1995, a privately owned facility in Utah was approved as a
disposal facility for certain types of LLW. Additionally, the Barnwell, South
Carolina disposal facility was reopened in July 1995 to all states except North
Carolina as a result of legislation passed by the South Carolina legislature.
The Seabrook Project began shipping certain LLW to the Utah facility in December
1995. All LLW generated by the Seabrook Project which exceeds the maximum
radioactivity level of LLW accepted by the Utah facility is stored on-site at
the Seabrook facility. Based on information provided by NAESCO, management
believes that the on-site storage capacity for LLW generated by the Seabrook
Project is adequate until at least 2006.
 
     As to decommissioning, the 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
include a requirement to set aside during operation sufficient funds to defray
decommissioning costs. While the owners of the Seabrook Project are accumulating
a trust fund to defray decommissioning costs, these costs could substantially
exceed the value of the trust fund, and the owners (including Great Bay) would
remain liable for the excess. Moreover, the 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.
 
     In January 1997, the NRC issued a temporary exemption related to Great
Bay's status as an "electric utility" as defined in the NRC's regulations. In
the exemption, the NRC staff stated that it believes that Great Bay currently
does not satisfy the NRC definition of "electric utility." If Great Bay is an
"electric utility," then the NRC decommissioning requirements are satisfied by
Great Bay making monthly payments into the decommissioning trust fund. If Great
Bay is not an "electric utility," the NRC can require that Great Bay provide a
surety bond or other allowable decommissioning funding mechanisms. A review of
Great Bay's status as an "electric utility" by the NRC is currently in process,
which may materially and adversely affect Great Bay's liquidity.
 
     Intense Competition.  Great Bay sells its 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.
 
                                       20
<PAGE>   22
 
     Risk Related to Holding Company.  In contrast with Great Bay, the
activities of BayCorp will not be subject to the extensive government regulation
related to public utilities and licensed nuclear facilities. Thus, BayCorp will
not receive the benefit of the scrutiny by federal and state agencies that Great
Bay receives. In addition, BayCorp may pursue activities with a greater business
risk than those associated with a regulated entity such as Great Bay. Depending
on the success of any new activities that BayCorp determines to pursue, it is
possible that BayCorp's earnings per share and dividends, if any, might be lower
than if BayCorp did not pursue such activities.
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
     The response to this item is submitted in the response found under Item 14
(a) (i) in this report.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
 
     Not Applicable.
 
                                    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 April 29, 1997.
 
     (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
April 29, 1997.
 
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 April 29, 1997.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
     The information required under this item is incorporated herein by
reference to the sections entitled "Election of Directors -- Employment
Agreements" and "-- Certain Transactions" in the Company's Proxy Statement with
respect to the Annual Meeting of Stockholders to be held on April 29, 1997.
 
                                    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.
 
          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:
 
        None.
 
                                       21
<PAGE>   23
 
                         INDEX TO FINANCIAL STATEMENTS
 
                             BAYCORP HOLDINGS, LTD.
 
<TABLE>
<CAPTION>
                                                                                                                PAGE
                                                                                                                ----
<S>                                                                                                              <C>
Report of Independent Public Accountants......................................................................   F-1

Balance Sheets as of December 31, 1996 and 1995...............................................................   F-2

Consolidated Statements of Income -- 
  Year Ended December 31, 1996 December 31, 1995 and Period from November 24 to December 31, 1994.............   F-3

Consolidated Statements of Changes in Stockholders' Equity, 
  Year Ended December 31, 1996, December 31, 1995 and Period from November 24 to December 31, 1994............   F-4

Consolidated Statements of Cash Flows -- 
  Year Ended December 31, 1996, December 31, 1995 and Period from November 24 to December 31, 1994............   F-5

Notes to Financial Statements.................................................................................   F-6
</TABLE>
 
                          GREAT BAY POWER CORPORATION
               (f.k.a. EUA Power Corporation)("The Predecessor")
 
<TABLE>
<S>                                                                                                              <C>
Statement of Income -- Period from January 1 to November 23, 1994.............................................   F-3

Statement of Changes in Stockholders' Equity -- Period from January 1 to November 23, 1994....................   F-4

Statement of Cash Flows -- Period from January 1 to November 23, 1994.........................................   F-5
</TABLE>
<PAGE>   24
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Board of Directors of
BayCorp Holdings, Ltd. and
 
To the Director of
Great Bay Power Corporation (formerly EUA Power Corporation)
 
     We have audited the accompanying consolidated balance sheets of BayCorp
Holdings, Ltd. (a Delaware corporation) and its wholly-owned subsidiary, Great
Bay Power Corporation, as of December 31, 1996 and 1995 and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for the year ended December 31, 1996, 1995 and the period from November
24, 1994 to December 31, 1994. We have also audited the accompanying statements
of income, changes in stockholders' equity and cash flows of Great Bay Power
Corporation (formerly EUA Power Corporation, the "Predecessor") for the period
from January 1, 1994 to November 23, 1994. 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 generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the financial position of BayCorp Holdings, Ltd. as of
December 31, 1996 and 1995, and the results of the operations and cash flows of
BayCorp Holdings, Ltd. and Great Bay Power Corporation (formerly EUA Power
Corporation, the "Predecessor") for the year ended December 31, 1996, 1995, and
the periods from November 24, 1994 to December 31, 1994 and January 1, 1994 to
November 23, 1994, respectively, in conformity with generally accepted
accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
Boston, Massachusetts
January 24, 1997
 
                                       F-1
<PAGE>   25
 
                             BAYCORP HOLDINGS, LTD.
 
                          CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,     DECEMBER 31,
                                                                        1996            1995
                                                                    ------------     ------------
<S>                                                                   <C>              <C>
                            ASSETS:
CURRENT ASSETS:
  Cash & Cash equivalents.........................................    $ 16,412         $  8,874
  Short-term Investments, at market...............................      12,363            7,595
  Accounts Receivable.............................................       2,927            1,535
  Materials & Supplies, net.......................................       4,121            4,230
  Prepayments & Other Assets......................................         434            1,249
                                                                      --------         --------
     Total Current Assets.........................................      36,257           23,483
                                                                      --------         --------
Property, Plant, & Equipment:
  Utility Plant...................................................     106,656          104,696
  Less: Accumulated Depreciation..................................      (7,152)          (4,165)
                                                                      --------         --------
  Net Utility Plant...............................................      99,504          100,531
  Nuclear Fuel....................................................      20,091           14,947
  Less: Accumulated Amortization..................................      (9,692)          (5,326)
                                                                      --------         --------
  Net Nuclear Fuel................................................      10,399            9,621
     Net Property, Plant & Equipment..............................     109,903          110,152
Other Assets:
  Decommissioning Trust Fund......................................       6,234            5,108
  Deferred Debits & Other.........................................          24               28
                                                                      --------         --------
     Total Other Assets...........................................       6,258            5,136
                                                                      --------         --------
          TOTAL ASSETS............................................    $152,418         $138,771
                                                                      ========         ========
                              LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
  Accounts Payable and Accrued Expenses...........................    $    129         $    237
  Taxes Accrued...................................................       1,504            1,293
  Miscellaneous Current Liabilities...............................       4,072            1,437
                                                                      --------         --------
     Total Current Liabilities....................................       5,705            2,967

Operating Reserves:
  Decommissioning Liability.......................................      53,215           50,228
  Miscellaneous Other.............................................         621              671
                                                                      --------         --------
     Total Operating Reserves.....................................      53,836           50,899
Other Liabilities & Deferred Credits..............................       3,252            2,672
Commitments & Contingencies

Stockholders' Equity:
  Common stock, $.01 par value
     Authorized -- 20,000,000 shares; issued and outstanding --
     8,417,800 at December 31, 1996 and 8,000,000 shares at
     December 31, 1995............................................          84               80
  Less: Treasury Stock -- 78,045 shares at cost...................        (633)               0
  Additional paid-in capital......................................      92,100           88,030
  Holding Loss on Investments.....................................        (149)               0
  Accumulated Deficit.............................................      (1,777)          (5,877)
                                                                      --------         --------
     Total Stockholders' Equity...................................      89,625           82,233
                                                                      --------         --------
          TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..............    $152,418         $138,771
                                                                      ========         ========
</TABLE>
 
(The accompanying notes are an integral part of these consolidated statements.)
 
                                       F-2
<PAGE>   26
 
                       CONSOLIDATED STATEMENTS OF INCOME
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   GREAT BAY POWER
                                              BAYCORP HOLDINGS, LTD.                 CORPORATION
                                                    SUCCESSOR                        PREDECESSOR
                                   --------------------------------------------    ---------------
                                   JANUARY 1 TO   JANUARY 1 TO   NOVEMBER 24 TO     JANUARY 1 TO
                                   DECEMBER 31,   DECEMBER 31,    DECEMBER 31,      NOVEMBER 23,
                                       1996           1995            1994              1994
                                   ------------   ------------   --------------    ---------------
<S>                                  <C>            <C>             <C>               <C>
Operating Revenues...............    $  30,324      $  24,524       $   3,129         $  13,989
Operating Expenses:
  Production.....................       17,141         17,433           1,836            16,891
  Transmission...................          880            934              70               834
  Administrative & General.......        6,864          6,532             503             4,037
  Depreciation & Amortization....        3,451          3,339             240             8,027
  Taxes other than Income........        4,227          4,143             346             3,934
                                     ---------      ---------       ---------         ---------
     Total Operating Expenses....       32,563         32,381           2,995            33,723
                                     ---------      ---------       ---------         ---------
Operating Income (Loss)..........       (2,239)        (7,857)            134           (19,734)
                                     ---------      ---------       ---------         ---------
Other (Income) Deductions:
  Write-down of Assets &
     Liabilities.................           --             --              --           137,908
  Reorganization Expenses........           --             --              --             4,038
  Interest and Dividend (Income)
     Expense.....................       (1,267)        (1,546)           (143)              760
  Decommissioning Cost
     Accretion...................        2,261             --              --                --
  Decommissioning Trust Fund
     Income......................         (328)            --              --                --
  Unit 2 Sales and Other
     (Income)....................       (7,005)          (198)              1              (102)
                                     ---------      ---------       ---------         ---------
     Total Other (Income)
       Deductions................       (6,339)        (1,744)           (142)          142,604
                                     ---------      ---------       ---------         ---------
Earnings (Loss) Before Income
  Taxes..........................        4,100         (6,113)            276          (162,338)
                                     ---------      ---------       ---------         ---------
Provision for Income Taxes.......            0            (54)             94                 0
Income (Loss) Before
  Extraordinary Item.............        4,100         (6,059)            182          (162,338)
Extraordinary Income (Loss)
  Foregiveness of Long-term
     Debt and Accrued Interest...            0              0               0           293,723
                                     ---------      ---------       ---------         ---------
Net Income (Loss)................    $   4,100      $  (6,059)      $     182         $ 131,385
                                     =========      =========       =========         =========
Weighted Average Shares
  Outstanding....................    8,083,576      7,999,998       7,999,998
Earnings Per Share...............   $     0.51     $    (0.76)     $     0.03
</TABLE>
 
(The accompanying notes are an integral part of these consolidated statements.)
 
                                       F-3
<PAGE>   27
 
                             BAYCORP HOLDINGS, LTD.
                                       &
    GREAT BAY POWER CORPORATION (F.K.A. EUA POWER CORP.) (THE "PREDECESSOR")
 
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
                                              COMMON                                                          COMMON
                                          STOCK, $.01 PAR                                                STOCK, $.01 PAR
                                               VALUE                                                          VALUE
                                          ---------------                                                ----------------
                                            ISSUED AND           LESS:                          TOTAL       ISSUED AND
                                            OUTSTANDING     TREASURY STOCK,   PAID-IN CAPITAL   COMMON     OUTSTANDING
                                           10,000 SHARES     10,000 SHARES    TREASURY STOCK    STOCK    8,000,000 SHARES
                                          ---------------   ---------------   ---------------   ------   ----------------
<S>                                             <C>              <C>                <C>          <C>           <C>
PREDECESSOR
Balance at
 December 31, 1993.......................       $10              ($ 10)             $10          $ 10          $ --
 Financial Results,
 January 1 to
 November 23, 1994.......................        --                 --               --                          --
Equity Infusion
 and Fresh-Start Adj's...................       (10)                10              (10)          (10)           80
-------------------------------------------------------------------------------------------------------------------------
SUCCESSOR
Balance at
 November 23, 1994.......................        --                 --               --                          80
 Financial Results,
   November 24 to
   December 31, 1994.....................        --                 --               --                          --
Balance at
 December 31, 1994.......................        --                 --               --                          80
 Financial Results,
   January 1 to
   December 31, 1995.....................        --                 --               --                          --
Balance at
 December 31, 1995.......................        --                 --               --                          80
 Treasury Stock, at cost.................        --                 --               --                          --
 Sale of Common Stock....................        --                 --               --                           4
 Net Change in Unrealized
   Holding Loss..........................        --                 --               --                          --
 Financial Results,
   January 1 to
   December 31, 1996.....................        --                 --               --                          --
Balance at
 December 31, 1996.......................        --                 --               --                        $ 84
 
<CAPTION>
 
                                               LESS:
                                              TREASURY      ADDITIONAL   HOLDING   REDEEMABLE                  TOTAL
                                               STOCK,        PAID-IN      GAIN/    PREFERRED    RETAINED    STOCKHOLDERS'
                                           78,045 SHARES     CAPITAL     (LOSS)      STOCK      EARNINGS       EQUITY
                                           --------------   ----------   -------   ----------   ---------   ------------
<S>                                            <C>           <C>          <C>       <C>         <C>           <C>
PREDECESSOR
Balance at
 December 31, 1993.......................      $   --        $     --     $  --     $ 63,090    ($139,793)    ($76,093)
 Financial Results,
 January 1 to
 November 23, 1994.......................          --              --        --           --      127,789      127,789
Equity Infusion
 and Fresh-Start Adj's...................          --          88,030        --      (63,090)      12,004       37,014
-------------------------------------------------------------------------------------------------------------------------
 
SUCCESSOR
Balance at
 November 23, 1994.......................          --          88,030        --           --           --       88,110
 Financial Results,
   November 24 to
   December 31, 1994.....................          --              --        --           --          182          182
Balance at
 December 31, 1994.......................          --          88,030        --           --          182       88,292
 Financial Results,
   January 1 to
   December 31, 1995.....................          --              --        --           --       (6,059)      (6,059)
Balance at
 December 31, 1995.......................          --          88,030        --           --       (5,877)      82,233
 Treasury Stock, at cost.................        (633)             --        --           --           --         (633)
 Sale of Common Stock....................          --           4,069        --           --           --        4,073
 Net Change in Unrealized
   Holding Loss..........................          --              --      (148)          --           --         (148)
 Financial Results,
   January 1 to
   December 31, 1996.....................          --              --        --           --        4,100        4,100
Balance at
 December 31, 1996.......................      ($ 633)       $ 92,099     ($148)          --      ($1,777)      89,625
</TABLE>
 
(The accompanying notes are an integral part of these consolidated statements.)
 
                                       F-4
<PAGE>   28
 
                             BAYCORP HOLDINGS, LTD.
                                       &
          GREAT BAY POWER CORPORATION (F.K.A. EUA)(THE "PREDECESSOR")
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                                      PREDECESSOR
                                                                                                      -----------
                                                                    SUCCESSOR                          JANUARY 1
                                                 ------------------------------------------------         TO
                                                 JANUARY 1 TO     JANUARY 1 TO     NOVEMBER 24 TO      NOVEMBER
                                                 DECEMBER 31,     DECEMBER 31,      DECEMBER 31,          23,
                                                     1996             1995              1994             1994
                                                 ------------     ------------     --------------     -----------
<S>                                                <C>              <C>               <C>              <C>
Net cash flow from operating activities:
  Net Income (Loss)............................     $ 4,100         ($ 6,059)          $   182         $ 131,385
  Adjustments to reconcile net earnings to net
     cash provided by (used in) operating
     activities:
     Depreciation..............................       3,451            3,339               240             4,456
     Decommissioning expense...................           0                0                 0               636
     Amortization of nuclear fuel..............       4,366            4,520               533             3,571
     Decommissioning trust accretion...........       2,261                0                 0                 0
     Decommissioning trust interest............        (357)               0                 0                 0
     Deferred income taxes.....................           0              (94)               94                 0
     Writedown of assets, net..................           0              758                 0           137,908
     Gain on forgiveness of debt...............           0                0                 0          (293,723)
     Gain on sale of assets....................      (7,061)            (193)                0                 0
     Provision for reorganization expenses.....           0                0                 0             4,038
     Payment of reorganization expenses........           0           (2,653)           (1,518)                0
     (Increase) decrease in accounts
       receivable..............................      (1,393)           1,021              (635)              507
     (Increase) decrease in materials &
       supplies................................         (70)             113                39               201
     (Increase) decrease in prepaids and other
       asset...................................         818            1,718              (520)            1,631
     Increase (decrease) in accounts payable...        (107)             (66)              293               (81)
     Increase in taxes accrued.................         211              126               273               312
     Increase in misc. current liabilities.....       2,635                0               400               946
     Other.....................................         530              183               261               717
                                                    -------         --------           -------         ---------
          Net cash provided by (used in)
            operating activities...............       9,384            2,713              (358)           (7,496)
                                                    -------         --------           -------         ---------
Net cash flows (used in) investing activities:
  Utlility plant additions.....................      (1,486)          (1,770)             (260)           (1,774)
  Nuclear fuel additions.......................      (5,144)          (5,703)                0              (361)
  Payments to decommissioning fund.............        (994)            (988)              (98)             (830)
  Proceeds from sale of Unit 2 assets..........       7,061                0                 0                 0
  Short term investments, net..................      (4,724)          (3,911)           (3,684)                0
                                                    -------         --------           -------         ---------
          Net cash used in investing
            activities.........................      (5,287)         (12,372)           (4,042)           (2,965)
Net cash provided by financing activities:
  Sale of common stock.........................       4,074                0                 0            35,000
  Reaquired Capital Stock......................        (633)               0                 0                 0
  Borrowings under DIP financing...............           0                0                 0             8,823
  Repayment of DIP financing...................           0                0                 0           (10,567)
                                                    -------         --------           -------         ---------
          Net cash provided by financing
            activities:........................       3,441                0                 0            33,256
                                                    -------         --------           -------         ---------
Net increase (decrease) in cash and cash
  equivalents..................................       7,538           (9,659)           (4,400)           22,795
Cash and cash equivalents, beginning of
  period.......................................       8,874           18,533            22,933               138
                                                    -------         --------           -------         ---------
Cash and cash equivalents, end of period.......     $16,412         $  8,874           $18,533         $  22,933
                                                    =======         ========           =======         =========
</TABLE>
 
(The accompanying notes are an integral part of these consolidated statements.)
 
                                       F-5
<PAGE>   29
 
                             BAYCORP HOLDINGS, LTD.
 
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1996
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
A.  THE COMPANY
 
     BayCorp Holdings, Ltd. ("BayCorp" or the "Company") serves as a holding
company for Great Bay Power Corporation ("Great Bay"). Great Bay is a public
utility whose principal asset is a 12.1% joint ownership interest in the
Seabrook Nuclear Power Project in Seabrook, New Hampshire (the "Seabrook
Project"). Great Bay is an exempt wholesale generator under the Public Utility
Holding Company Act of 1935 ("PUHCA").
 
     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. Currently,
Great Bay is the sole subsidiary of BayCorp. BayCorp's principal asset is its
100% equity interest in Great Bay. The new corporate structure enables BayCorp,
either directly or through subsidiaries other than Great Bay, to engage in
businesses that Great Bay would be prohibited from pursuing due to its status as
an exempt wholesale generator 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.
 
     BayCorp was incorporated in Delaware in March, 1996. Great Bay was
incorporated in New Hampshire in 1986 and was formerly known as EUA Power
Corporation. Great Bay sells its share of the electricity output of the Seabrook
Project in the wholesale electricity market, primarily in the Northeast United
States. Neither BayCorp nor Great Bay has operational responsibilities for the
Seabrook Project. Great Bay's share of the Seabrook Project capacity is
approximately 140 megawatts ("MW"). Great Bay currently sells all but 10 MW of
its share of the Seabrook Project capacity in the short-term market.
 
     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
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.
 
     Great Bay and the other Participants are parties to the Joint Owners
Agreement (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 other
than taxes 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. Great Bay's joint ownership interest of 12.1% 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.
 
     The Predecessor never reported an operating profit since its incorporation
and filed for bankruptcy in 1991. See Footnote 1B for further discussion. The
Company's current business strategy is to seek purchasers for its share of the
Seabrook Project electricity output at prices, either in the short term market
or pursuant to medium or long term contracts, in excess of the prices currently
available in the short term wholesale electricity market since sales at current
short term rates do not result in sufficient revenue to enable the Company to
meet its long term cash requirements for operations, maintenance and capital
related costs. The
 
                                       F-6
<PAGE>   30
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
Company's ability to obtain such higher prices will depend on regional, national
and worldwide energy supply and demand factors.
 
     During 1996, Great Bay had six employees. As a result of the corporate
restructuring of Great Bay and BayCorp completed on January 27, 1997, BayCorp
has five employees, including its President and Chief Executive Officer, John A.
Tillinghast, and its Chief Operating Officer, Frank W. Getman Jr. BayCorp's
wholly-owned subsidiary, Great Bay, has one employee.
 
B.  BANKRUPTCY PROCEEDING AND REORGANIZATION
 
     Great Bay filed a voluntary petition for reorganization under Chapter 11 of
the United States Bankruptcy Code (the "Bankruptcy Code") in the United States
Bankruptcy Court for the District of New Hampshire (the "Bankruptcy Court") on
February 28, 1991. It conducted its business as a Debtor in Possession until
November 23, 1994, at which time Great Bay's Amended Bankruptcy Plan became
effective and Great Bay emerged from Chapter 11. Financing for the Amended
Bankruptcy Plan was provided by affiliates of Omega Advisors, Inc. and by Elliot
Associates, L.P. (collectively, the "Investors"). At the time Great Bay emerged
from Chapter 11, the Investors purchased 4,800,000 shares of Great Bay's Common
Stock for $35,000,000.
 
     In accordance with Statement of Position 90-7, "Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code," the historical amounts of
individual assets and liabilities have been adjusted to fair values and
Liabilities Subject to Compromise of $293,864,000 have been discharged as a
result of the Reorganization Plan. The amount of prior retained deficit
eliminated as a result of the reorganization was $159,659,000. The
reorganizational value has been determined based on the fair value of the
Company (See Note 1D). The adjustments to individual assets and liabilities were
as follows:
 
<TABLE>
<CAPTION>
                                                                      ADJUSTMENTS
                                                                     --------------
                                                                     (IN THOUSANDS)
            <S>                                                         <C>
            Writedown of Net Utility Plant and Nuclear Fuel........     $ 193,635
            
            Writedown of Deferred Debits...........................        27,470

            Recognition of Decommissioning Liability, net..........        45,193

            Writedown of Deferred Taxes and ITC....................       (73,927)

            Writedown of Deferred Gains and Credits................       (47,375)

            Other, net.............................................        (7,088)
                                                                        ---------
                 Net Writedown of Assets...........................       137,908
            Forgiveness of Liabilities Subject to Compromise.......      (293,864)

            Recognition of Reorganization Expenses.................         4,038
                                                                        ---------
            Net adjustment to assets and liabilities...............     $(151,918)
                                                                        =========
</TABLE>
 
                                       F-7
<PAGE>   31
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following unaudited proforma condensed statement of income (loss) is
presented to illustrate the estimated effect of the reorganization as if such
transaction had occurred as of January 1, 1994.
 
<TABLE>
<CAPTION>
                                                                                         PROFORMA YEAR
                                                         YEAR ENDED                          ENDED
                                                        DECEMBER 31,      PROFORMA       DECEMBER 31,
                                                            1994         ADJUSTMENTS         1994
                                                        ------------     -----------     -------------
<S>                                                     <C>              <C>             <C>
Operating Revenues....................................   $   17,118                        $  17,118
Operating Expenses:
  Production & Transmission...........................       19,631       $  (2,380)(f)       16,801
  Administrative & General............................        4,540             700(e)         5,240
  Depreciation & Amortization.........................        8,267          (5,461)(d)        2,806
  Taxes Other than Income.............................        4,280                            4,280
                                                          ---------                         --------
     Total Operating Expenses.........................       36,718                           29,127
Operating Income......................................      (19,600)                         (12,009)
  Write down of Assets, net...........................      137,908        (137,908)(a)            0
  Reorganization Expenses.............................        4,038          (4,038)(b)            0
  Other Income........................................         (101)                            (101)
  Interest Charges, net...............................          617            (706)(c)          (89)
                                                          ---------                         --------
     Net Loss Before Taxes............................     (162,062)                         (11,819)
     Income Taxes.....................................           94          (4,096)(g)       (4,002)
     Net Loss before Extraordinary Item...............     (162,156)                          (7,817)
     Forgiveness of Debt..............................      293,723        (293,723)(c)            0
                                                          ---------                         --------
          Net Income (Loss)...........................   $  131,567                        $  (7,817)
                                                          =========                         ========
</TABLE>
 
---------------
(a) Elimination of Writedown of Assets, Net
 
(b) Elimination of Reorganization Expenses
 
(c) Elimination of Forgiveness of Debt and related interest
 
(d) Depreciation expense adjusted to reflect asset writedown
 
(e) Additional expenses associated with UNITIL and Tillinghast agreements
 
(f) Recognition of new outage accrual policy
 
(g) Tax impact of above entries assuming ability to fully benefit loss
 
  C.  REGULATION
 
     Great Bay is subject to the regulatory authority of the Federal Energy
Regulatory Commission ("FERC"), the Nuclear Regulatory Commission ("NRC") and
the New Hampshire Public Utilities Commission ("NHPUC") and other federal and
state agencies as to rates, operations and other matters. Great Bay's cost of
service is not regulated. As such, Great 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."
 
  D.  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 liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the
 
                                       F-8
<PAGE>   32
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
 
E.  UTILITY PLANT
 
     Utility plant at November 23, 1994 was revalued to its estimated fair value
based on the fair value of Great Bay. The reorganization value of Great Bay at
November 23, 1994 was determined based on discounted cash flow valuation. The
cost of additions to utility plant subsequent to November 23, 1994 are recorded
at original cost. During the period from January 1, 1994 to November 23, 1994,
the Predecessor capitalized $121,000 of interest related to plant additions.
 
F.  DEPRECIATION AND MAINTENANCE
 
     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 Plant's remaining NRC license life, which extends to 2026.
 
     Capital projects constituting retirement units are charged to electric
plant. Minor repairs are charged to maintenance expense. When properties are
retired, the original cost, plus cost of removal, less salvage, are charged to
the accumulated provision for depreciation.
 
G.  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 also
provides 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 NAESCO, as agent for the joint owners of the Seabrook Project, and the
DOE.
 
     Great Bay amortizes to expense on a straight-line basis the estimated cost
of the final unspent nuclear fuel core, which is expected to be in place at the
expiration of the Plant's NRC operating license, in conformity with rates
authorized by the FERC.
 
H.  AMORTIZATION OF MATERIALS AND SUPPLIES
 
     Great Bay amortizes 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.
 
I.  DECOMMISSIONING
 
     Based on the Financial Accounting Standards Board's ("FASB") tentative
conclusions, the Company has recognized as a liability its proportionate share
of the estimated Seabrook Project decommissioning. The initial recognition of
this liability was capitalized as part of the Fair Value of the Utility Plant at
November 23, 1994. The current estimated cost to decommission the Seabrook
Project, based on a study performed for the lead owner of the Plant, is
approximately $439 million in 1996 dollars and $2.3 billion in 2026 dollars,
assuming a 36-year life for the facility and a future escalation rate of 5%.
Based on this estimate, the Company's share in 1996 dollars is approximately
$53.2 million, which has been recorded as a liability in the December 31, 1996
balance sheet.
 
     During the first quarter of 1996, the Company began to accrete its share of
the Seabrook Project's Decommissioning Liability. This accretion is a non-cash
charge and recognizes the Company's liability related to the closure and
decommissioning of its nuclear plant in current year dollars over the licensing
period of the plant. As a result of this accretion, the Company's share of the
estimated decommissioning cost increased from $50.2 million as of December 31,
1995 to $53.2 million as of December 31, 1996.
 
                                       F-9
<PAGE>   33
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     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 in
the near term.
 
     The Staff of the 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 has agreed to review the accounting for
nuclear decommissioning costs. In 1996, the FASB issued an Exposure Draft
entitled "Accounting for Certain Liabilities Related to Closure and Removal of
Long-Lived Assets." Either a revised exposure draft or a final statement is
scheduled for 1997. The Company's accounting for decommissioning was based on
the FASB's original tentative conclusions. If the current exposure draft is
adopted or accounting practices for nuclear power plant decommissioning are
changed, the Company's decommissioning liability and annual provision for
decommissioning could change relative to 1996. The Company is uncertain as to
the impact, if any, changes in the current accounting will have on the Company's
financial statements.
 
     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 I. The investments in
the trust are available for sale. The Company has therefore reported its
investment in trust fund assets at market value and any unrealized gains and
losses are reflected in equity. The change in the unrealized holding loss was
$192,087 for 1996.
 
     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 the Company, would remain
liable for the excess. The amount that is required to be deposited in the trust
fund is subject to periodic review and adjustment by the NDFC, which could
result in material increases in such amounts.
 
     On November 15, 1992, the Company, the Bondholder's Committee and the
Predecessor's former parent, Eastern Utilities ("EUA") entered into a settlement
agreement which 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 the Company's future decommissioning costs of
Seabrook Unit 1.
 
J.  OPERATING 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, 1996,
three customers accounted for 26%, 15% and 13% of total operating revenues. For
the year ended December 31, 1995, four customers accounted for 27%, 21%, 15% and
12% of total operating revenues. For the period from November 24 to December 31,
1994, four customers accounted for 50%, 15%, 12% and 12% of total operating
revenues. For the period from January 1, 1994 to November 23, 1994, four
customers accounted for 28%, 17%, 15% and 12% of total operating revenues.
 
K.  TAXES ON INCOME
 
     The Company accounts for taxes on income under the liability method
required by Statement of Financial Accounting Standards No. 109.
 
L.  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.
 
                                      F-10
<PAGE>   34
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     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 change in the net unrealized holding gain on short-term investments
was $43,378 for the year ended December 31, 1996 and was not material in each of
the other periods presented.
 
M.  SEABROOK UNIT 2
 
     Since the Seabrook Project was originally designed to consist of two
generating units, Great Bay also owns a 12.1% joint ownership interest in
Seabrook Unit 2, to which it has assigned no value. 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. On July 22,
1996, the Participants completed the sale of four unused steam generators from
Seabrook Unit 2. Great Bay received $7,036,792 in cash from the proceeds of this
sale on July 19, 1996. Great Bay had previously written off its investment in
Unit 2 and recognized a gain from this sale in the third quarter of 1996.
 
     The Participants are considering plans regarding disposition of Seabrook
Unit 2, but such plans have not yet been finalized and approved. Great Bay is
unable to estimate the costs for which it 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 currently pays its 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.
 
N.  SEABROOK OUTAGE COSTS
 
     The Company's and Great Bay's operating results and the comparability of
these results on an interim and annual basis are indirectly impacted by the
operations of the Seabrook Project, including the cyclical refueling outages
(generally 18-24 months apart) as well as unscheduled outages. During outage
periods at the Seabrook Project, Great Bay has no electricity for resale and
consequently no revenues. Therefore the impact of outages on the Company's and
Great Bay's results of operations and financial position is materially adverse.
 
     Great Bay accrues for the incremental costs of the Seabrook Project's
scheduled outages over the periods between those outages. However, Great Bay
continues 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. The Seabrook plant management has
scheduled the next refueling outage for May 1997, based on expected fuel
consumption and a request from the New England Power Pool ("NEPOOL"). The
refueling outage has been rescheduled to May of 1997 from the original date of
August 1997 due to reliability concerns by NEPOOL and the potential lack of
generating capacity during the peak summer season. The joint owners of Seabrook
will receive reimbursement from NEPOOL for any additional costs associated with
moving the date of the scheduled refueling outage. The 1997 outage has an
estimated cost of $21 million. The Company's share is approximately $2.5
million. The estimate is based on a number of assumptions. Changes in
assumptions for such things as labor and contractor costs, required repairs and
days to perform the outage and plant operations in the interim, could cause this
estimate to change in the near term.
 
O.  RECLASSIFICATIONS
 
     Certain amounts in prior year financial statements have been reclassified
to conform to the current year presentation.
 
                                      F-11
<PAGE>   35
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
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. The Company has
been, and may be, affected to the extent of its proportionate share by the cost
of any such modifications to Seabrook Unit 1.
 
     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 owners and lead participants of each United States
nuclear unit have entered into contracts with the DOE for disposal of spent
nuclear fuel, in accordance with the NWPA. The NWPA requires (subject to various
contingencies) that the federal government design, license, construct and
operate a permanent repository for high level radioactive wastes and spent
nuclear fuel and establish prescribed fees for the disposal of such wastes and
fuel. The NWPA specifies that the DOE provide for the disposal of such wastes
and spent nuclear fuel starting in 1998.
 
     Objections on environmental and other grounds have been asserted against
proposals for storage as well as disposal of spent fuel. The DOE anticipates
that a permanent disposal site for spent fuel will be ready to accept fuel for
storage on or before the year 2010. However, the NRC, which must license the
site, stated only that a permanent repository will become available by the year
2025. At the Seabrook Project, there is on-site storage capacity which, with
minimal capital expenditures, should be sufficient for twenty years or until the
year 2010. No near-term capital expenditures are anticipated to deal with any
increase in storage requirements after 2010.
 
B.  FEDERAL DEPARTMENT OF ENERGY ("DOE") DECONTAMINATION AND DECOMMISSIONING
    ASSESSMENT
 
     Title XI of the Energy Policy Act of 1992 (the "Policy Act") provides for
decontaminating and decommissioning of the 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, 1996, the Company had accrued its
pro rata estimated obligation of $688,000 related to the project's prior years'
usage to be paid over the 15-year period beginning October 1, 1992.
 
                                      F-12
<PAGE>   36
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
C.  PRICE ANDERSON ACT
 
     In accordance with the Price Anderson Act, the limit of liability for a
nuclear-related accident is approximately $8.9 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 $8.3 billion, based on the approximately 110 currently licensed
reactors in the United States. The secondary layer is based on a retrospective
premium assessment of $75.5 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% ($3.775 million)
of the maximum retrospective assessment. With respect to the Seabrook Project,
the Company would be obligated to pay its ownership share of any assessment
resulting from a nuclear incident at any United States nuclear generating
facility. The Company estimates its maximum liability per incident currently
would be an aggregate amount of approximately $9.59 million per accident, with a
maximum annual assessment of about $1.21 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.
 
     Great Bay also independently purchases business interruption insurance from
Nuclear Electric Insurance Limited ("NEIL"). The current policy is in effect
from September 15, 1996 until September 15, 1997 and provides for the payment of
a fixed weekly loss amount of $520,000 in the event of an outage at the Seabrook
Project of more than 21 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 is $70.3 million. Under
the terms of the policy, Great Bay is subject to a potential retrospective
premium adjustment of up to approximately $640,000 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.
 
                                      F-13
<PAGE>   37
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
3.  TAXES ON INCOME
 
     The following is a summary of the (benefit) provision for income taxes for
the years ended December 31, 1996 and December 31, 1995, the period from
November 24 to December 31, 1994, and the period from January 1 to November 23,
1994:
 
<TABLE>
<CAPTION>
                                                            SUCCESSOR                         PREDECESSOR
                                         ------------------------------------------------     ------------
                                                                           NOVEMBER 24 TO     JANUARY 1 TO
                                         DECEMBER 31,     DECEMBER 31,      DECEMBER 31,      NOVEMBER 23,
                                             1996             1995              1994              1994
                                         ------------     ------------     --------------     ------------
                                                                      (000'S)
<S>                                         <C>              <C>                <C>             <C>
Federal
  Current..............................     $(3,111)         $(8,065)           $(353)          $(11,253)
  Deferred.............................       3,111            8,011              447             11,253
                                            -------          -------            -----           --------
                                                 --              (54)              94                 --
State
  Current..............................        (742)          (1,923)             (84)            (2,684)
  Deferred.............................         742            1,923               84              2,684
                                            -------          -------            -----           --------
                                                 --               --               --                 --
                                            -------          -------            -----           --------
Total (benefit) provision..............     $    --          $   (54)           $  94           $     --
                                            =======          =======            =====           ========
</TABLE>
 
     Accumulated deferred income taxes consisted of the following at December
31, 1996 and 1995:
 
<TABLE>
<CAPTION>
                                                                           1996         1995
                                                                         --------     --------
                                                                                (000'S)
<S>                                                                      <C>          <C>
Assets
  Net operating loss carryforwards.....................................  $ 67,847     $ 64,957
  Decommissioning expense..............................................     1,530          618
  Unfunded pension expense.............................................       395          225
  Accrued outage expense...............................................       727           43
  Inventory............................................................       126          196
  Other, net...........................................................        19           --
Liabilities
  Utility plant........................................................   (13,743)      (7,250)
                                                                         --------     --------
Accumulated deferred income tax asset..................................    56,902       58,789
Valuation allowance....................................................   (56,902)     (58,789)
                                                                         --------     --------
Accumulated deferred income tax asset, net.............................  $     --     $     --
                                                                         ========     ========
</TABLE>
 
     The total income tax provision set forth above represents 0% in the year
ended 1996, 0% in the year ended 1995, 34% in the period from November 24 to
December 31, 1994 and 0% in the period from January 1, 1994
 
                                      F-14
<PAGE>   38
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
to November 23, 1994 of income before such taxes. The following table reconciles
the statutory federal income tax rate to those percentages:
 
<TABLE>
<CAPTION>
                                                            SUCCESSOR                         PREDECESSOR
                                         ------------------------------------------------     ------------
                                                                           NOVEMBER 24 TO     JANUARY 1 TO
                                         DECEMBER 31,     DECEMBER 31,      DECEMBER 31,      NOVEMBER 23,
                                             1996             1995              1994              1994
                                         ------------     ------------     --------------     ------------
                                                              (DOLLARS IN THOUSANDS)
<S>                                         <C>              <C>                <C>             <C>
Income (Loss) before taxes.............     $ 4,100          $(6,113)           $276            $131,385
Federal statutory rate.................          34%              34%             34%                 34%
Federal income tax (benefit) expense at
  statutory levels.....................       1,394           (2,078)             94              44,671
Increase (Decrease) from statutory
  levels
  State tax net of federal tax
     benefit...........................         205           (1,269)            (55)               (913)
  Valuation allowance..................      (1,887)           2,703              49                 858
  Income of decommissioning trust......          --              305               6                  55
  Benefit or reorganization............          --               --              --             (44,671)
  Other................................         288              285              --                  --
                                            -------          -------            ----            --------
Effective federal income tax expense...     $    --          $   (54)           $ 94            $     --
                                            =======          =======            ====            ========
</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.
 
     As of December 31, 1996, the Company has an estimated $174 million in net
operating loss carryforwards ("NOL's") that expire between the years 2005 and
2010. However, 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 (the "Tax Code"), an annual limitation has been 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 is approximately $5.5
million, and therefore the ability to use $136 million in NOL's is restricted.
 
4.  COMMON STOCK RESTRICTIONS
 
     The Company has never paid cash dividends on Great Bay Common Stock.
BayCorp currently expects that it will retain all of its future earnings and
does not anticipate paying a dividend in the foreseeable future.
 
5.  CAPITAL EXPENDITURES
 
     The Company's cash construction expenditures, including nuclear fuel, are
estimated to be approximately $4.6 million in 1997 and to aggregate
approximately $23.3 million for the years 1998 through 2001.
 
6.  POWER PURCHASE AGREEMENT
 
     The Company has entered into an agreement (the "Power Purchase Agreement"),
dated as of April 1, 1993 with UNITIL Power Corporation (UNITIL Power), a wholly
owned subsidiary of UNITIL Corporation (UNITIL), which provides for the Company
to sell to UNITIL Power approximately 10MW of power. The Power Purchase
Agreement commenced on May 1, 1993 and runs through October 31, 2010. During the
first year, the price of power under the Power Purchase Agreement was 5.0 cents
per kilowatt hour ("kWh"). Thereafter, the price is subject to increase in
accordance with a formula which provides for adjustments at less than the actual
rate of inflation. UNITIL Power has the option to extend the Power Purchase
Agreement for an additional twelve years to 2022.
 
                                      F-15
<PAGE>   39
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Power Purchase 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 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 increases annually to $4.1 million in 1998, then
decreases annually, reaching zero in 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. Management believes it is not probable that either party will
terminate this contract prior to the end of its initial term. The balance in the
balance account as of December 31, 1996 is approximately $2.0 million.
 
     To secure the obligation of the Company under the Power Purchase Agreement
and to repay to UNITIL Power the amounts in the balance account, if the contract
terminates early, the Power Purchase Agreement grants UNITIL Power a mortgage on
the Company's Seabrook Interest. This mortgage granted to UNITIL Power is junior
only to the existing mortgage on the Seabrook Interest granted pursuant to the
Third Stipulation and any successor first mortgage financing up to a maximum
amount of $80,000,000. The Power Purchase Agreement further provides that UNITIL
Power's second mortgage will rank pari passu with other mortgages that may
hereafter be granted to other purchasers of power from the Company to secure
similar obligations, provided that the maximum amount of indebtedness secured by
the first mortgage on the Seabrook Interest does not exceed $60,000,000, and
provided that the combined total of all second mortgages on the Seabrook
Interest does not exceed the sum of (a) $80,000,000 less the total amount of the
Company's debt then outstanding which is secured by a first mortgage plus (b)
$57,000,000.
 
7.  PECO SERVICES AGREEMENT AND WARRANT AGREEMENT
 
     The Company 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 the Company's exclusive agent to market and sell the
Company's uncommitted portion of electricity generated by the Seabrook Project.
Proceeds from the sale of the Company's electricity together with reservation
fees payable by PECO to the Company will be shared between the Company and PECO
in accordance with formulas set forth in the PECO Services Agreement. The PECO
Service Agreement became effective on December 31, 1995, and had an initial term
of two years.
 
     At the time that the Company entered into the PECO Services Agreement, the
Company entered into a Warrant Purchase Agreement (the "PECO Warrant Purchase
Agreement") pursuant to which, on February 15, 1996, PECO purchased a warrant
from Great Bay for $1,000,000. The PECO Warrant entitled PECO to purchase 4.99%
of the total shares outstanding of the Company's Common Stock at an exercise
price of the higher of (1) $9.75 per share, or (2) the highest trading price per
share of Great Bay's Common Stock prior to September 30, 1996.
 
     On September 30, 1996, PECO exercised its warrant and purchased 417,800
shares, or 4.99%, of Great Bay's Common Stock at a price of $9.75 per share. As
a result of the exercise of the warrant by PECO, the marketing agreement between
PECO and the Company was automatically extended through December 31, 1998. In
addition, the parties agreed to extend the marketing agreement for an additional
year through December 31, 1999. Under the terms of the warrant, the $1,000,000
received for the purchase of the warrant was credited towards the purchase price
for the newly issued shares. Thus, Great Bay received an additional $3,100,000
as a result of PECO's exercise of the warrant.
 
                                      F-16
<PAGE>   40
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
8.  TRANSACTIONS WITH RELATED PARTIES
 
     In addition to the transactions with PECO discussed in Footnote 7, the
Company has the following related party transactions.
 
     Under the PECO Services Agreement, PECO acts as the Company's exclusive
agent to market and sell the Company's approximately 130MW of uncommitted
capacity generated by the Company's 12.1% ownership in the Seabrook Nuclear
Power Plant. This Services Agreement commenced on November 3, 1995 and has been
extended through December 31, 1999. PECO pays the Company a reservation fee
based on the hours during which Seabrook generates energy. The Company pays PECO
a service fee based on net revenues and a Seabrook operating capacity factor.
This service from PECO is expected to permit the Company to compete more
effectively for firm, all requirements power contracts. This arrangement also
provides for the Company and PECO to jointly pursue other opportunities which
are intended to maximize the value of the Company's interest in Seabrook. For
the year ended December 31, 1996, the Company expensed $965,226 for PECO's net
marketing fees.
 
     The Company had entered into two other agreements with affiliates of
UNITIL.
 
     A Management and Administrative Services Agreement was in effect during
1995 between the Company and UNITIL Resources, Inc. ("UNITIL Resources"), a
wholly owned subsidiary of UNITIL until December 31, 1995. The Company gave
notice and terminated this agreement on December 31, 1995 and assumed control of
these functions in 1996.
 
     The Company's marketing efforts were provided by UNITIL Resources until
December 31, 1995. This agreement was also terminated as of December 31, 1995.
 
     From November 23, 1994 until April 30, 1996, the Company leased its office
space under an expense sharing agreement with TILTEC, a company owned by the
Company's President. Under the agreement, TILTEC provided the Company with
furnished office space and administrative support services for a total fee of
$7,400 per month. This agreement was terminated as of April 30, 1996.
 
9.  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 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 which 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.
 
     Upon the merger of Great Bay and BayCorp on January 24, 1997, each holder
of Great Bay options under the Great Bay Option Plan was granted substitute
options by BayCorp under the BayCorp Stock Option Plan to purchase an equal
number of shares of BayCorp Common Stock on the same terms and at the same
exercise price per share as presently provided for by the Great Bay Options. The
BayCorp Stock Option Plan is identical to the Great Bay Stock Option Plan. The
Great Bay Stock Option Plan was terminated as of the effective date of the
merger.
 
     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.
 
                                      F-17
<PAGE>   41
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
     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>
                                      (DOLLARS IN THOUSANDS)
                                                                         1995              1996
                                                                        -------           ------
    <S>            <C>                                                  <C>               <C>
    Net Income:    As Reported........................................  $(6,059)          $4,100
                   Pro Forma..........................................   (6,223)           3,475
    EPS:           As Reported........................................  $ (0.76)          $ 0.51
                   Pro Forma..........................................    (0.80)            0.43
</TABLE>
 
     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, 1995 and December 31, 1996,
and changes during the years then ended, is presented in the table and narrative
below:
 
<TABLE>
<CAPTION>
                                                             1995                       1996
                                                     --------------------       --------------------
                                                     WTD AVG                    WTD AVG
                                                     SHARES      EX PRICE       SHARES      EX PRICE
                                                     -------     --------       -------     --------
<S>                                                  <C>         <C>            <C>         <C>
Outstanding at beg. of year........................       --                    335,000       8.17
Granted............................................  335,000       8.17         110,000       8.09
Exercised..........................................       --                         --
Forfeited..........................................       --                         --
Expired............................................       --                         --
Outstanding at end of year.........................  335,000       8.17         445,000       8.15
Exercisable at end of year.........................   60,000       8.33         285,000       8.17
Weighted average fair value of options granted.....     4.41                       4.51
</TABLE>
 
     The 445,000 options outstanding at December 31, 1996 have exercise prices
between $8 and $9, with a weighted average price of $8.15, and a remaining
weighted average contractual life of 6.3 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 1995 and 1996 respectively: weighted average risk-free interest rates
of 6.8 and 6.7 percent; expected dividend yields of 0 percent; weighted average
expected lives of 6 and 9 years; and expected volatility of 39 percent.
 
10.  NEW ACCOUNTING PRONOUNCEMENTS
 
     In March 1995, the FASB issued SFAS No. 121, "Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of," effective for fiscal
years beginning after December 15, 1995. SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets and requires that assets which
are no longer probable of recovery be charged to earnings. The Company adopted
SFAS No. 121 on January 1, 1996, and the adoption did not have a material impact
on the Company's financial position or results of operations.
 
11.  PROPERTY TAXES
 
     For each of the tax years 1994, 1995 and 1996, Great Bay has filed property
tax abatement applications with the three New Hampshire towns in which the
Seabrook Project is located. Great Bay paid the first half of its 1996 property
taxes to the Towns and withheld payment of the second half of its 1996 property
taxes to the Towns, based on the Company's position that the portion of 1996
property taxes paid to the Towns exceeds the amount of the total 1996 property
taxes appropriately payable by Great Bay to the Towns. The full amount of
 
                                      F-18
<PAGE>   42
 
                             BAYCORP HOLDINGS, LTD.
 
                  NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
 
Great Bay's 1996 property tax expense is reflected in the Company's 1996
financial statements. The outcome of the Company's appeals with respect to
property tax assessments will affect the Company's liquidity and obligation for
property tax payments in the future.
 
12.  SUBSEQUENT EVENTS
 
     On January 27, 1997 Great Bay Power Corporation announced that it had
received all necessary shareholder and regulatory approvals for the formation of
a holding company structure for Great Bay. As a result of the restructuring,
Great Bay became a wholly-owned subsidiary of BayCorp Holdings, Ltd.
Shareholders of Great Bay common stock received one share of BayCorp common
stock for each share of Great Bay common stock which they own. The new BayCorp
common stock began public trading on the American Stock Exchange under the
symbol "MWH" on January 28, 1997.
 
     In January 1997, the NRC issued a temporary exemption related to Great
Bay's status as an "electric utility" as defined in the NRC's regulations. In
the exemption, the NRC staff stated that it believes that Great Bay currently
does not satisfy the NRC definition of "electric utility." If Great Bay is an
"electric utility," then the NRC decommissioning requirements are satisfied by
Great Bay making monthly payments into the decommissioning trust fund. If Great
Bay is not an "electric utility," the NRC can require that Great Bay provide a
surety bond or other allowable decommissioning funding mechanisms. A review of
Great Bay's status as an "electric utility" by the NRC is currently in process,
which may adversely effect Great Bay's liquidity, possibly materially.
 
     On February 28, 1997, NHPUC issued an order requiring stranded cost
recovery to be based on the average market price of electricity in New England,
rather than alternative regulatory accounting methods that are more favorable to
certain Participants. On March 3, 1997, one of the Participants, Northeast
Utilities (along with three of its subsidiaries) commenced litigation against
the NHPUC involving the order. If this order were to go forward, there are
questions about the financial viability of Northeast Utilities. This could
ultimately impact the Seabrook Project and the Company as a Participant in the
Seabrook Project.
 
                                      F-19
<PAGE>   43
 
                                   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.
 
                                          By:     /s/ JOHN A. TILLINGHAST
                                            ------------------------------------
                                                    John A. Tillinghast
                                                         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
-------------------------------------  --------------------------------------  ---------------
<S>                                    <C>                                      <C>
 
       /s/ JOHN A. TILLINGHAST         President, Treasurer and Chief           March 26, 1997
-------------------------------------  Executive Officer (principal executive
         John A. Tillinghast           officer, principal financial officer
                                       and principal accounting officer)
 

       /s/ KENNETH A. BUCKFIRE         Director                                 March 26, 1997
-------------------------------------
         Kenneth A. Buckfire
 

         /s/ ANDREW J. KURTZ           Director                                 March 26, 1997
-------------------------------------
           Andrew J. Kurtz
 

      /s/ CHARLES A. LEEDS, JR.        Director                                 March 26, 1997
-------------------------------------
        Charles A. Leeds, Jr.
</TABLE>
<PAGE>   44
 
BOARD OF DIRECTORS
 
JOHN A. TILLINGHAST
Chairman of the Board
President
 
KENNETH A. BUCKFIRE
Director,
Wasserstein Perella & Co.
 
ANDREW J. KURTZ
Portfolio Manager,
Elliot Associates, L.P.
 
CHARLES A. LEEDS, JR.
Portfolio Manager,
Omega Advisors, Inc.
 
OFFICERS
 
JOHN A. TILLINGHAST
Chairman of the Board,
Chief Executive Officer,
President and Treasurer
 
FRANK. W. GETMAN JR.
Chief Operating Officer
and Secretary

CORPORATE COUNSEL
 
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
 
TRANSFER AGENT
 
American Stock Transfer and Trust Company
40 Wall Street
New York, NY 10005
 
INDEPENDENT AUDITORS
 
Arthur Andersen LLP
225 Franklin Street
Boston, Massachusetts 02110
 
CORPORATE OFFICES
 
Cocheco Falls Millworks,
100 Main Street, Suite 201
Dover, New Hampshire 03820-3835
 
ANNUAL MEETING
 
The Annual Meeting of Stockholders
will be held on April 29, 1997
at 10:00 a.m. EST at the offices of the
American Stock Exchange, 86 Trinity Place,
New York, New York.
 
FORM 10-K
 
For a copy of the Form 10-K Annual Report
filed with the Securities and Exchange
Commission, write to the Company's Corporate Offices or call (603) 742-3388.
 
STOCK INFORMATION
 
The Company's stock is listed on
the American Stock Exchange under
the symbol 'MWH'.
<PAGE>   45
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                     DESCRIPTION OF EXHIBIT
------       ----------------------------------------------------------------------------------
<C>     <C>  <S>
  3.1    --  Certificate of Incorporation of the Registrant.(1)
  3.2    --  By-laws of the Registrant.(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 April 26, 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 (the "Registration Rights Agreement").(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   --  Acknowledgment 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)
</TABLE>
 
                                      II-1
<PAGE>   46
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                     DESCRIPTION OF EXHIBIT
------       ----------------------------------------------------------------------------------
<C>     <C>  <S>
 10.18   --  Employment Agreement between John A. Tillinghast and Great Bay Power Corporation,
             dated October 8, 1996.(3)(8)
 10.19   --  Incentive Stock Option Agreement, dated as of April 24, 1995, by and between John
             A. Tillinghast and Great Bay Power Corporation.(4)(8)
 10.20   --  Employment Agreement between Frank W. Getman Jr. and Great Bay Power Corporation,
             dated August 1, 1995.(5)(8)
 10.21   --  Amendment No. 1 to Employment Agreement between Frank W. Getman Jr. and Great Bay
             Power Corporation, dated September 17, 1996.(3)(8)
 10.22   --  Incentive Stock Option Agreement, dated as of August 1, 1995, by and between Frank
             W. Getman Jr. and Great Bay Power Corporation.(4)(8)
 10.23   --  Incentive Stock Option Agreement, dated as of September 17, 1996, by and between
             Frank W. Getman Jr. and Great Bay Power Corporation.(3)(8)
 10.24   --  Services Agreement between PECO Energy Company and Great Bay Power Corporation,
             dated November 3, 1995.(6)(7)
 10.25   --  Warrant Purchase Agreement between PECO Energy Company and Great Bay Power
             Corporation, dated November 3, 1995.(5)
 10.26   --  1996 Stock Option Plan of the Registrant.(1)(8)
 21.1    --  List of Subsidiaries of the Registrant.(3)
 23.1    --  Consent of Arthur Andersen LLP.(3)
</TABLE>
 
---------------
(1) Filed as an exhibit to the Company's Registration Statement on Form S-4
    (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 this Annual Report on Form 10-K.
 
(4) 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.
 
(5) Filed as an exhibit to the Quarterly Report on Form 10-Q of Great Bay Power
    Corporation for the quarter ended June 30, 1995 (File No. 0-25748) on August
    14, 1995 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 September 30, 1995 (File No. 0-25748) on
    November 14, 1995 and incorporated herein by reference.
 
(7) Confidential treatment granted as to certain portions.
 
(8) Management contract or compensation plan or arrangement required to be filed
    as an exhibit pursuant to Item 14(c) of Form 10-K.
 
                                      II-2