<PAGE>   1


                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

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

   For the quarterly period ended                             June 30, 1998
                                                              -------------

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

   For the transition period from ______________ to _____________

   Commission file number                                     1-12527
                                                              -------

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

                      DELAWARE                                   02-0488443
          (State or other jurisdiction of                     (I.R.S. 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)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (603) 742-3388


         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 whether the registrant has filed all documents
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.

Yes  X     No
   -----     -----

                 Class                             Outstanding at August 7, 1998
---------------------------------------            -----------------------------
Common Stock, $0.01 Par Value per Share                     8,262,748


<PAGE>   2

                             BAYCORP HOLDINGS, LTD.

                                      INDEX

PART I - FINANCIAL INFORMATION:

         Item 1 - Financial Statements:

         Consolidated Statements of Income and Comprehensive Income
         - Three and Six Months Ended June 30, 1998 and 1997...................3

         Consolidated Balance Sheets at June 30, 1998
           and December 31, 1997.............................................4-5

         Consolidated Statements of Cash Flows - Six
           Months Ended June 30, 1998 and 1997.................................6

         Notes to Financial Statements......................................7-12

         Item 2 -Management's Discussion and Analysis of Financial 
           Condition and Results of Operations.............................12-16

PART II - OTHER INFORMATION:

         Item 1 - Legal Proceedings...........................................16

         Item 4 - Submission of Matters to a Vote of Security Holders.........16

         Item 5 - Other Information...........................................17

         Item 6 - Exhibits and Reports on Form 8-K............................17

         Signature............................................................18

         Exhibit Index........................................................19






                                       2


<PAGE>   3

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                             BAYCORP HOLDINGS, LTD.
           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                   (UNAUDITED)
            (DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                       Three Months                     Six Months
                                                      Ended June 30,                   Ended June 30,
                                                  1998            1997             1998             1997
                                               --------------------------       --------------------------

<S>                                            <C>             <C>              <C>             <C>       
Operating Revenues                             $    7,438      $    3,555       $   14,881      $   11,992

Operating Expenses:
  Production                                        5,252           5,063           10,150           9,457
  Transmission                                        214             218              427             438
  Administrative & General                          3,732           1,436            5,513           3,369
  Depreciation & Amortization                         877             863            1,755           1,726
  Taxes other than Income                           1,037           1,127            2,097           2,289
                                               --------------------------       --------------------------
      Total Operating Expenses                     11,112           8,707           19,942          17,279
                                               --------------------------       --------------------------

Operating Loss                                     (3,674)         (5,152)          (5,061)         (5,287)

Other (Income) Deductions:
  Interest and Dividend Income                       (140)           (237)            (491)           (638)
  Decommissioning Cost Accretion                      720             666            1,433           1,331
  Decommissioning Trust Fund Income                  (140)           (100)            (249)           (211)
  Unit 2 Sales and Other Deductions                    60               3               86               3
                                               --------------------------       --------------------------
      Total Other Deductions                          500             332              779             485
                                               --------------------------       --------------------------

Loss Before Income Taxes                           (4,174)         (5,484)          (5,840)         (5,772)

Income Taxes                                            0               0                0               0
                                               --------------------------       --------------------------

Net Loss                                       $   (4,174)     $   (5,484)      $   (5,840)     $   (5,772)

Other Comprehensive Income, Net of Tax
  Unrealized Gains (Losses) on Securities             267             (35)             330             (26)
                                               --------------------------       --------------------------
Comprehensive Income (Loss)                    $   (3,907)     $   (5,519)      $   (5,510)     $   (5,798)
                                               ==========================       ==========================

Weighted Average Shares Outstanding             8,262,748       8,294,803        8,262,466       8,307,764
Basic and Diluted Loss Per Share               $    (0.51)     $    (0.66)      $    (0.71)     $    (0.69)
</TABLE>




 (The accompanying notes are an integral part of these consolidated statements.)

                                        3


<PAGE>   4


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


                                                   June 30,        December 31,
                                                     1998              1997
                                                   --------        ------------
ASSETS:

Current Assets:
  Cash & Cash equivalents                          $  7,391          $  3,270
  Short-term Investments, at market                   9,294            15,822
  Accounts Receivable                                 1,176               465
  Materials & Supplies, net                           3,841             3,816
  Prepayments & Other Assets                          3,110             1,570
                                                   --------          --------
      Total Current Assets                           24,812            24,943
                                                   --------          --------

Property, Plant, & Equipment:
  Utility Plant                                     110,903           108,584
  Less: Accumulated Depreciation                    (11,417)           (9,758)
                                                   --------          --------
  Net Utility Plant                                  99,486            98,826

  Nuclear Fuel                                       15,569            15,076
  Less: Accumulated Amortization                     (8,769)           (6,717)
                                                   --------          --------
  Net Nuclear Fuel                                    6,800             8,359

      Net Property, Plant & Equipment               106,286           107,185

Other Assets:
  Decommissioning Trust Fund                          9,102             8,025
  Deferred Debits & Other                                 6                 5
                                                   --------          --------
      Total Other Assets                              9,108             8,030
                                                   --------          --------

TOTAL ASSETS                                       $140,206          $140,158
                                                   ========          ========





 (The accompanying notes are an integral part of these consolidated statements.)

                                        4
<PAGE>   5

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

<TABLE>
<CAPTION>
                                                                                June 30,      December 31,
                                                                                  1998            1997
                                                                                --------      ------------

<S>                                                                             <C>             <C>     
LIABILITIES AND STOCKHOLDERS' EQUITY:

Current Liabilities:
  Accounts Payable and Accrued Expenses                                         $     85        $    270
  Taxes Accrued                                                                    1,350               0
  Miscellaneous Current Liabilities                                                2,807           1,594
                                                                                --------        --------
          Total Current Liabilities                                                4,242           1,864

Operating Reserves:
  Decommissioning Liability                                                       58,795          55,846
  Miscellaneous Other                                                                564             564
                                                                                --------        --------
          Total Operating Reserves                                                59,359          56,410

Other Liabilities & Deferred Credits                                               4,047           3,745

Commitments & Contingencies

Stockholders' Equity:
  Common stock, $.01 par value,
      Authorized - 20,000,000 shares,
      Issued and Outstanding - 8,417,800                                              84              84
   Less: Treasury Stock - 155,052 and 145,000 shares, respectively, at cost       (1,239)         (1,168)
   Additional paid-in capital                                                     92,100          92,100
   Accumulated Other Comprehensive Income                                            445             115
   Accumulated Deficit                                                           (18,832)        (12,992)
                                                                                --------        --------
          Total Stockholders' Equity                                              72,558          78,139
                                                                                --------        --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $140,206        $140,158
                                                                                ========        ========
</TABLE>




 (The accompanying notes are an integral part of these consolidated statements.)

                                        5

<PAGE>   6

                             BAYCORP HOLDINGS, LTD.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       Six Months          Six Months
                                                                         Ended                Ended
                                                                     June 30, 1998        June 30, 1997
                                                                     -------------        -------------
<S>                                                                     <C>                 <C>      
Net cash flow from operating activities:
    Net Loss                                                            $(5,840)            $ (5,772)
    Adjustments to reconcile net loss to net
    cash provided by (used in) operating activities:
         Depreciation & Amortization                                      1,755                1,726
         Amortization of nuclear fuel                                     2,052                2,156
         Decommissioning trust accretion                                  1,433                1,331
         Decommissioning trust interest                                    (249)                (211)
         (Increase) decrease in accounts receivable                        (711)               2,507
         Increase in materials & supplies                                  (114)                 (55)
         Increase in prepaids and other assets                           (1,540)              (2,735)
         Increase (decrease) in accounts payable                           (185)                  21
         Increase in taxes accrued                                        1,350                1,470
         Other Increase (decrease)                                        1,560               (3,219)
                                                                        -------             --------
Net cash used in operating activities                                      (489)              (2,781)
                                                                        -------             --------

Net cash flows provided by (used in) investing activities:
  Utility plant additions                                                  (833)              (1,756)
  Nuclear fuel additions                                                   (493)              (1,723)
  Payments to decommissioning fund                                         (579)                (553)
  Short term investments, net                                             6,586               (4,646)
                                                                        -------             --------
Net cash provided by (used in) investing activities                       4,681               (8,678)
                                                                        -------             --------

Net cash used in financing activities:
  Reacquired Capital Stock                                                  (71)                (500)
                                                                        -------             --------
Net cash used in financing activities                                       (71)                (500)
                                                                        -------             --------

Net increase (decrease) in cash and cash equivalents                      4,121              (11,959)

Cash and cash equivalents, beginning of period                            3,270               16,412
                                                                        -------             --------
Cash and cash equivalents, end of period                                $ 7,391             $  4,453
                                                                        =======             ========
</TABLE>




 (The accompanying notes are an integral part of these consolidated statements.)

                                        6

<PAGE>   7


                             BAYCORP HOLDINGS, LTD.



                         NOTES TO FINANCIAL STATEMENTS


NOTE 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 an electric
generating company 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"). Unlike regulated public
utilities, Great Bay has no franchise area or captive customers. Great Bay sells
its power in the competitive wholesale power markets.

         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 EWG 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 1996. Great Bay was
incorporated in New Hampshire in 1986 and was formerly known as EUA Power
Corporation (the "Predecessor"). 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.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The unaudited financial statements included herein have been prepared
on behalf of the Company, without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC") and include, in the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of interim period results. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted or
condensed pursuant to such rules and regulations. The Company believes, however,
its disclosures herein, when read in conjunction with the Company's audited
financial statements for the year ended December 31, 1997, are adequate to make
the information presented not misleading. The results for the interim periods
are not necessarily indicative of the results to be expected for the full fiscal
year.



                                       7


<PAGE>   8
                             BAYCORP HOLDINGS, LTD.


         The Company adopted SFAS No. 130, Reporting Comprehensive Income,
effective January 1, 1998. Accumulated Other Comprehensive Income and the
current three and six month period charges are as follows:

<TABLE>
<CAPTION>
                                       Three Month         Six Month
                                    Unrealized Gains    Unrealized Gains      Accumulated Other
                                      on Securities       on Securities     Comprehensive Income

         <S>                             <C>                <C>                   <C>     
         Beginning Balance               $178,000           $115,000              $115,000
         Period Charge                    267,000            330,000               330,000
                                         --------           --------              --------
         Ending Balance                  $445,000           $445,000              $445,000
                                         ========           ========              ========
</TABLE>

NOTE C - COMMITMENTS AND CONTINGENCIES

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 Nuclear Regulatory
Commission ("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 NRC requirements
applicable to Seabrook Unit I.

         Great Bay is also subject to the jurisdiction of the Federal Energy
Regulatory Commission ("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 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" 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."

UTILITY DEREGULATION; PUBLIC CONTROVERSY CONCERNING NUCLEAR POWER PLANTS

         Several states in which Great Bay sells electricity are considering or
have implemented initiatives relating to the deregulation of the utility
industry. Simultaneously with the deregulation initiatives occurring in each of
the New England states, the New England Power Pool ("NEPOOL") is restructuring
to create and maintain open, non-discriminatory, competitive, unbundled markets
for energy, capacity, and ancillary services. NEPOOL's restructuring is designed
to function efficiently in a changing electric power industry and to permit
regional transmission at rates that do not vary with 


                                       8


<PAGE>   9
                             BAYCORP HOLDINGS, LTD.


distance. In conjunction with NEPOOL's restructuring, a new entity, ISO New
England, Inc., has been formed to insure system reliability and to oversee the
newly formed deregulated generation markets. All of the deregulation initiatives
open electricity markets to competition in the affected states. While Great Bay
believes it is a low-cost producer of electricity and will benefit from the
deregulation of the electric industry, it is not possible to predict the impact
of these various initiatives on Great Bay.

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

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

DECOMMISSIONING LIABILITY

         Based on the Financial Accounting Standards Board's ("FASB") tentative
conclusions, Great Bay 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 Seabrook Project,
is approximately $473 million in 1997 dollars and $2.2 billion in 2026 dollars,
assuming a remaining 28 year life for the facility and a future escalation rate
of 5%. Based on this estimate, the present value of Great Bay's share of this
liability as of June 30, 1998 is approximately $58.8 million.

          During the first quarter of 1996, Great Bay began to accrete its share
of the Seabrook Project's decommissioning liability. 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. As a result of this accretion, Great Bay's share of the
estimated decommissioning cost increased from $50.2 million as of December 31,
1995 to $58.8 million as of June 30, 1998.

         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 based on factors such as labor and material costs, technology,
inflation and timing of decommissioning could cause these estimates to change,
possibly materially, in the near term.

         The Staff of the 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 





                                       9


<PAGE>   10
                             BAYCORP HOLDINGS, LTD.



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." The FASB continues to work on this project. Either a revised exposure
draft or a final statement may be issued in 1998. Great Bay'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, Great Bay's decommissioning liability and
annual provision for decommissioning could change relative to amounts reflected
in the financial statements. The Company is unable to predict the impact, if
any, changes in the current accounting will have on the Company's financial
statements.

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

         Although the owners of Seabrook are accumulating funds in an external
trust to defray decommissioning costs, these costs could substantially exceed
the value of the trust fund, and the owners, including Great Bay, would remain
liable for the excess. The amount 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. Based on the currently approved funding
schedule Great Bay's decommissioning payments for 1998 would be approximately
$1.2 million.

         In January 1997 and July 1997, the NRC staff ruled that Great Bay did
not satisfy the NRC definition of "electric utility." In January 1998, Great Bay
filed a petition with the NRC seeking NRC approval of Great Bay's proposal to
fund decommissioning obligations. Great Bay's petition also sought, in the
alternative, an NRC permanent exemption from the obligation of Great Bay to
comply with the NRC regulations applicable to non "electric utility" owners of
interests in nuclear power plants.

         On July 23, 1998, the staff of the NRC notified Great Bay of the
staff's determination that Great Bay complies with the decommissioning funding
assurance requirements under NRC regulations. The New Hampshire State
legislature recently enacted legislation that provides that in the event of a
default by Great Bay on its payments to the decommissioning fund, the other
Seabrook joint owners would be obligated to pay their proportional share of such
default. As a result of the enactment of this legislation, the NRC staff found
that Great Bay complies with the decommissioning funding assurance requirements
in 10 CFR 50.75. In response to the New Hampshire legislation, Great Bay has
agreed to make accelerated payments to the Seabrook decommissioning fund such
that Great Bay will have contributed sufficient funds by the year 2015 to allow
sufficient monies to accumulate, with no further payments by Great Bay to the
fund, to the full estimated amount of Great Bay's decommissioning obligation by
the time the current Seabrook operating license expires in 2026. Based on the
currently approved funding schedule and Great Bay's accelerated funding
schedule, Great Bay's decommissioning payments will be approximately $1.3
million in 1998 and escalate at 4% each year thereafter through 2015.

LIQUIDITY AND CAPITAL EXPENDITURES


                                       10
<PAGE>   11
                             BAYCORP HOLDINGS, LTD.



         BayCorp anticipates that Great Bay's share of the Seabrook Project's
capital expenditures for the 1998 fiscal year will total approximately $7.5
million, primarily for nuclear fuel and various capital projects. This estimate
is based on the latest projections provided by the managing agent of the
Seabrook Project.

         The Seabrook Project from time to time experiences both scheduled and
unscheduled outages. An unscheduled outage began on December 5, 1997 and lasted
until January 15, 1998. A second unscheduled outage began on June 11, 1998 and
lasted until July 12, 1998. The Company 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.

         For each of the tax years 1994, 1995, 1996 and 1997, Great Bay filed
property tax abatement applications with the town of Seabrook and two other New
Hampshire towns in which the Seabrook Project is located. The abatement request
for tax years 1994, 1995 and 1996 were denied. Great Bay filed appeals for each
of those years with the New Hampshire Board of Tax and Land Appeals (the
"BTLA"). The appeals are currently pending before the BTLA. The Company has paid
all of its property tax obligations to date under protest. A successful outcome
of the Company's appeals with respect to property tax assessments would
favorably affect the Company's liquidity and obligation for property tax
payments in the future.

         As a result of the NRC's review of Great Bay's status as an "electric
utility" and in connection with recently enacted New Hampshire legislation,
Great Bay has agreed to make accelerated payments to the Seabrook
decommissioning fund such that Great Bay will have contributed sufficient funds
by the year 2015 to allow sufficient monies to accumulate, with no further
payments by Great Bay to the fund after 2015. These accelerated payments are
designed to fund the full estimated amount of Great Bay's decommissioning
obligation by the time the current Seabrook operating license expires in 2026.
See "Decommissioning Liability."

         On February 12, 1998, Great Bay sent a letter to PECO Energy Company
("PECO") informing PECO that Great Bay intended to terminate PECO as Great Bay's
exclusive marketing agent. On February 24, 1998, Great Bay filed suit against
PECO in the United States District Court for the District of New Hampshire
seeking a declaratory judgment that Great Bay properly terminated the PECO
Services Agreement and seeking damages arising out of PECO's breach of the PECO
Services Agreement. As of March 1, 1998, Great Bay assumed all marketing
responsibilities for its power.

         On June 2, 1998, Great Bay announced that it withdrew its lawsuit
against PECO. At that time, Great Bay and PECO terminated the power marketing
agreement between the companies and Great Bay paid to PECO approximately $2.5
million. During the quarter ended June 30, 1998, Great Bay made an approximate
$2.5 million charge to income for this expense. This amount is reflected in
Administrative and General Expenses in the accompanying Statement of Income.

NOTE D - EQUITY

         On October 9, 1997, the Board of Directors of BayCorp adopted a
resolution authorizing BayCorp to repurchase up to an additional aggregate of
100,000 shares of BayCorp common stock on the 



                                       11
<PAGE>   12
                             BAYCORP HOLDINGS, LTD.



open market or in negotiated transactions. The shareholder groups controlled by
Omega Advisors, Inc. and Elliot Associates, L.P., the owners of approximately
57% of the Company's shares outstanding in aggregate, have advised the Company
that they do not intend to sell shares in the open market or in negotiated
transactions which would be subject to repurchase by the Company under this
repurchase program. As of June 30, 1998, the Company had repurchased 10,000
shares at a cost of approximately $71,253, or approximately $7.125 per share, as
part of this repurchase program.

         Neither the Company nor Great Bay has ever paid cash dividends on its
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 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview

         As a result of the corporate restructuring that occurred in January
1997, BayCorp's principal asset is its 100% equity interest in 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.
Unless the context requires otherwise, references to BayCorp for events and time
periods before January 1997 reflect treatment of BayCorp as successor to Great
Bay.

         An unscheduled outage at the Seabrook Project began on June 11, 1998
and lasted until July 12, 1998. For the three months ended June 30, 1998, the
Company has reported a net loss of approximately $4,174,400 due to decreased
revenues and increased operating costs associated with this unscheduled outage
and costs associated with terminating Great Bay's power marketing agreement with
PECO. See "Liquidity and Capital Expenditures."

RESULTS OF OPERATIONS: SECOND QUARTER OF FISCAL 1998 COMPARED TO THE SECOND
QUARTER OF FISCAL 1997

Operating Revenues

         Operating Revenues increased by approximately $3,882,900, or 109.2%, to
$7,437,700 in the second quarter of 1998 as compared to $3,554,800 in the second
quarter of 1997. This increase in revenues was primarily the result of the
scheduled refueling outage that occurred in the second quarter of 1997 and
lasted 50 days. During the second quarter of 1998 there were 19 unscheduled
outage days. For the second quarter of 1998, the capacity factor at the Seabrook
plant was 78.2% versus a capacity factor of 43.3% for the second quarter of
1997. The capacity factor for the second quarter of 1998 and the second quarter
of 1997 were adversely affected by the scheduled and unscheduled outages
referred to above. Sales of electricity increased by approximately 81% to
239,951,500 kilowatt-hours ("kWhs") in the second quarter of 1998 as compared to
132,710,000 kWhs in the second quarter of 1997. During the second quarter of
1998 the average sales price per kWh (determined by dividing total sales revenue
by the total number of kWhs sold in the applicable period) increased 16.1% to
3.10 cents per kWh as compared with 2.67 cents per kWh in the second quarter of
1997.


                                       12
<PAGE>   13

                             BAYCORP HOLDINGS, LTD.



          BayCorp's cost of power (determined by dividing total operating
expenses by BayCorp's 12.1% share of the power produced by the Seabrook Project
during the applicable period) decreased 29.4% to 4.63 cents per kWh in the
second quarter of 1998 as compared to 6.56 cents per kWh in the second quarter
of 1997. This decrease was primarily the result of an increase in availability
and an increase in the capacity factor at the Seabrook Project during the second
quarter of 1998 as compared to the second quarter of 1997. Scheduled and
unscheduled outage time increases BayCorp's cost of power because Seabrook costs
are spread over fewer kWhs.

Expenses

         Production expenses for the second quarter of 1998 increased
approximately $187,000, or 3.7%, as compared to the second quarter of 1997. This
increase was primarily the result of unscheduled outage related costs incurred
in the second quarter of 1998. There were no unscheduled outage costs during the
second quarter of 1997.

         Administrative and general expenses increased $2,296,400, to $3,732,200
in the second quarter of 1998 as compared to $1,435,800 in the second quarter of
1997. This increase was primarily attributable to Great Bay's buy-out of its
power marketing agreement with PECO for approximately $2.5 million during the
second quarter of 1998. See "Liquidity and Capital Expenditures." There was an
overall decrease of approximately $75,100, or 3.8%, in depreciation and
amortization and taxes other than income expenses, from $1,989,600 in the second
quarter of 1997 to $1,914,500 in the second quarter of 1998.

Other (Income) Deductions

         Decommissioning Cost Accretion increased $54,000, to $720,000 during
the second quarter of 1998 as compared to $666,000 during the second quarter of
1997. This accretion is a non-cash charge and recognizes Great Bay's liability
related to the closure and decommissioning of the Seabrook Project in current
year dollars over the period during which the Seabrook Project is licensed to
operate.

         During the second quarter of 1998, the Company realized $280,000 in
interest income on the Company's cash and decommissioning trust fund accounts as
compared to $337,000 during the second quarter of 1997. The decrease of $57,000,
or 17.1%, primarily reflects reduced interest earnings on the lower cash
balances during the second quarter of 1998 as compared to the second quarter of
1997. Miscellaneous expenses increased $56,500, to $59,700 in the second quarter
of 1998 as compared to $3,100 in the second quarter of 1997 and was primarily
attributable to State of Delaware corporate franchise taxes for BayCorp.


Net Loss

         As a result of the above factors, during the second quarter ended June
30, 1998, the Company recorded a net loss of $4,174,400, or approximately $.51
per basic and diluted share, as compared to a net loss of $5,484,400, or
approximately $.66 per basic and diluted share, during the second quarter ended
June 30, 1997.


                                       13
<PAGE>   14
                             BAYCORP HOLDINGS, LTD.



RESULTS OF OPERATIONS: FIRST SIX MONTHS OF FISCAL 1998 COMPARED TO THE FIRST SIX
MONTHS OF FISCAL 1997

Operating Revenues

         Operating Revenues increased by approximately $2,888,800, or 24.1%, to
$14,880,900 in the first six months of 1998 as compared to $11,992,100 in the
first six months of 1997. This increase in revenues was primarily due to an
increase in availability and production at the Seabrook Project during the first
six months of 1998 as compared to the first six months of 1997. For the first
six months of 1998, the capacity factor at the Seabrook plant was 79.7% versus a
capacity factor of 71.6% for the first six months of 1997. The capacity factor
for the first six months of 1998 was adversely affected by the unscheduled
outages that lasted a total of 35 days during January and June. The capacity
factor for the first six months of 1997 was adversely affected by the refueling
outage that lasted 50 days in May and June of 1997. Sales of electricity
increased by approximately 11.3% to 486,445,600 kWhs in the first six months of
1998 as compared to 437,185,500 kWhs in the first six months of 1997. During the
first six months of 1998 the average sales price per kWh increased 11.7% to 3.06
cents per kWh as compared with 2.74 cents per kWh in the first six months of
1997.

          BayCorp's cost of power increased 3.8% to 4.10 cents per kWh in the
first six months of 1998 as compared to 3.95 cents per kWh in the first six
months of 1997. This increase was primarily the result of increased
Administrative and General Expenses in the first six months of 1998 as compared
to the first six months of 1997.

Expenses

         Production and Transmission expenses for the first six months of 1998
increased approximately $681,500, or 6.9%, as compared to the first six months
of 1997. This increase was primarily the result of unscheduled outage related
costs incurred in the first six months of 1998. There were no unscheduled
outages during the first six months of 1997.

         Administrative and general expenses increased $2,143,700, or 63.6%, to
$5,512,900 in the first six months of 1998 as compared to $3,369,200 in the
first six months of 1997. This increase was primarily attributable to the charge
related to Great Bay's buy-out of its power marketing agreement with PECO for
approximately $2,500,000 during the first six months of 1998. There was an
overall decrease of approximately $162,800, or 4.1%, in depreciation and
amortization and taxes other than income expenses, from $4,014,600 in the first
six months of 1997 to $3,851,800 in the first six months of 1998.

Other (Income) Deductions

         Decommissioning Cost Accretion increased $101,600, to $1,433,000 during
the first six months of 1998 as compared to $1,331,400 during the first six
months of 1997. This accretion is a non-cash charge and recognizes Great Bay's
liability related to the closure and decommissioning of the Seabrook Project in
current year dollars over the period during which the Seabrook Project is
licensed to operate.


                                       14
<PAGE>   15

                             BAYCORP HOLDINGS, LTD.



         During the first six months of 1998, the Company realized $739,300 in
interest income on the Company's cash and decommissioning trust fund accounts as
compared to $849,900 during the first six months of 1997. The decrease of
$110,600, or 13%, primarily reflects reduced interest earnings on the lower cash
balances during the first six months of 1998 as compared to the first six months
of 1997. Miscellaneous expenses increased $82,500 to $85,600 in the first six
months of 1998 as compared to $3,100 in the first six months of 1997 and was
primarily attributable to State of Delaware corporate franchise taxes for
BayCorp.

Net Loss

         As a result of the above factors, during the first six months ended
June 30, 1998, the Company recorded a net loss of $5,839,900, or approximately
$.71 per basic and diluted share, as compared to a net loss of $5,771,600, or
approximately $.69 per basic and diluted share, during the first six months
ended June 30, 1997.

Net Operating Losses

         For federal income tax purposes, as of December 31, 1997, the Company
had net operating loss carry forwards ("NOLs") of approximately $196 million,
which are scheduled to expire between 2005 and 2012. Because the Company has
experienced one or more ownership changes, within the meaning of Section 382 of
the Internal Revenue Code of 1986, as amended, an annual limitation is imposed
on the ability of the Company to use $136 million of these carryforwards. The
Company's best estimate at this time is that the annual limitation on the use of
$136 million of the Company's NOLs is approximately $5.5 million per year. Any
unused portion of the $5.5 million annual limitation applicable to the Company's
restricted NOL's is available for use in future years until such NOL's are
scheduled to expire. The Company's other $60 million of NOLs are not currently
subject to such limitations.

Liquidity

         BayCorp's cash and short-term investments decreased approximately
$2,407,000 during the first six months of 1998. Principal factors affecting
liquidity during the six months ended June 30, 1998 included the net loss of
$5,839,900 discussed above and cash expenditures of approximately $833,000 for
capital plant additions, $493,000 for nuclear fuel purchases and $579,000 for
decommissioning trust fund payments. The increase in accounts receivable of
approximately $711,000 is primarily due to the low 1997 year end receivables
balance resulting from the unscheduled outage in December 1997 that reduced
December sales. The increase in prepaids and other assets of approximately
$1,540,000 includes prepaid 1998 nuclear station taxes of $455,000. This
increase also includes an increase in the Seabrook prepaid funding account of
approximately $1,149,000 following a low year end 1997 balance due to the
unscheduled outage in December and its associated costs.

         Offsetting these cash charges were non-cash charges to income which
included $1,755,000 for depreciation, $2,052,000 for nuclear fuel amortization
and $1,433,000 for decommissioning trust fund accretion and an increase in Taxes
Accrued of $1,350,000. During the first six months of 1998, miscellaneous other
liabilities increased approximately $1,560,000, and was primarily attributable
to the monthly outage accrual for a refueling outage scheduled to begin in April
1999.



                                       15

<PAGE>   16
                             BAYCORP HOLDINGS, LTD.



         This Quarterly Report on Form 10-Q contains forward-looking statements
that involve a number of risks and uncertainties. Any statements contained
herein (including without limitation statements to the effect that the Company,
Great Bay or their management "believes", "expects", "anticipates", "plans" and
similar expressions) that are not statements of historical fact should be
considered forward-looking statements. Among the important factors that could
cause actual results to differ materially from those indicated by such
forward-looking statements are the factors set forth in the Company's Annual
Report on Form 10-K under the caption Management's Discussion and Analysis of
Financial Condition and Results of Operation - Certain Factors That May Affect
Future Results, which are incorporated by reference herein.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         For each of the tax years 1994, 1995, 1996 and 1997, Great Bay filed
property tax abatement applications with the town of Seabrook and two other New
Hampshire towns in which the Seabrook Project is located. The abatement request
for tax years 1994, 1995 and 1996 were denied. Great Bay filed appeals for each
of those years with the New Hampshire Board of Tax and Land Appeals (the
"BTLA"). The appeals are currently pending before the BTLA. The Company has paid
all of its property tax obligations to date under protest. A successful outcome
of the Company's appeals with respect to property tax assessments would
favorably affect the Company's liquidity and obligation for property tax
payments in the future.

         On February 12, 1998, Great Bay sent a letter to PECO Energy Company
("PECO") informing PECO that Great Bay intended to terminate PECO as Great Bay's
exclusive marketing agent. On February 24, 1998, Great Bay filed suit against
PECO in the United States District Court for the District of New Hampshire
seeking a declaratory judgment that Great Bay properly terminated the PECO
Services Agreement and seeking damages arising out of PECO's breach of the PECO
Services Agreement. As of March 1, 1998, Great Bay assumed all marketing
responsibilities for its power.

         On June 2, 1998, Great Bay announced that it withdrew its lawsuit
against PECO. At that time, Great Bay and PECO terminated the power marketing
agreement between the companies and Great Bay paid to PECO approximately $2.5
million. During the quarter ended June 30, 1998, Great Bay made an approximate
$2.5 million charge to income for this expense. This amount is reflected in
Administrative and General Expenses in the accompanying Statement of Income.

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

The Company held its Annual Meeting of Stockholders on May 5, 1998. Proxies for
the meeting were solicited pursuant to Regulation 14A, and there were no
solicitations in opposition to management's nominees for Directors. All such
nominees were elected. At the Annual Meeting, the stockholders of the Company:

         (1) elected a Board of Directors to serve until the next Annual Meeting
             of Stockholders of the Company and until their successors are duly
             elected and qualified (by a vote of 6,641,696 in favor of the
             proposal and 5,123 votes against the proposal, as to all
             Directors),



                                       16


<PAGE>   17
                             BAYCORP HOLDINGS, LTD.



         (2) ratified the selection by the Board of Directors of Arthur Andersen
             LLP as the Company's independent public accountants for the current
             fiscal year (6,639,440 votes in favor of the proposal, 7,129 votes
             against the proposal and 110 votes abstained.)

ITEM 5. OTHER INFORMATION

         Great Bay signed a definitive purchase agreement, dated as of June 24,
1998, with Montaup Electric Company ("Montaup"), a subsidiary of Eastern
Utilities Associates ("EUA"), to purchase Montaup's approximately 3% ownership
interest in the Seabrook Project. Montaup's 3% interest in Seabrook represents
approximately 34 megawatts of capacity. Under the terms of the agreement, Great
Bay will pay Montaup approximately $3.2 million and Montaup has agreed to
prefund the decommissioning liability associated with its interest in Seabrook.
Great Bay has also agreed to supply a share of EUA's standard offer obligation
to serve EUA's existing customers in Massachusetts and Rhode Island who do not
choose an alternative supplier. The transaction is subject to state and federal
regulatory approvals. The parties are working to obtain such approvals and close
the transaction before the end of 1998.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) See Exhibit Index

         (b) There were no reports on Form 8-K submitted for the three months
             ended June 30, 1998.



                                       17
<PAGE>   18

                             BAYCORP HOLDINGS, LTD.



         Pursuant to the requirements 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.


August 13, 1998                     By: /s/ Frank W. Getman Jr.
                                        ---------------------------------------
                                        Frank W. Getman Jr.
                                        President and Chief Executive Officer












                                       18
<PAGE>   19
                             BAYCORP HOLDINGS, LTD.



                                  EXHIBIT INDEX


Exhibit No.                Description
-----------                -----------


2.1                        Asset Purchase Agreement by and between Montaup
                           Electric Company and Great Bay Power Corporation
                           dated as of June 24, 1998 (1)

27.1                       Financial Data Schedule

99.1                       Certain Factors That May Affect Future Results, set
                           out on pages 18-22 of the Company's Annual Report on
                           Form 10-K for the period ended December 31, 1997.
                           Such Form 10-K shall not be deemed to be filed except
                           to the extent that portions thereof are expressly
                           incorporated by reference herein.



(1) The Registrant agrees to furnish supplementally to the Commission upon its
request a copy of the omitted schedules and exhibits referenced in the
agreement.






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