<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                      September 30, 1997
                                                         -----------------------

                                       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 November 7, 1997
---------------------------------------         -------------------------------
Common Stock, $0.01 Par Value per Share                     8,277,748
                     
<PAGE>   2

                             BAYCORP HOLDINGS, LTD.


                                      INDEX


PART I - FINANCIAL INFORMATION:

        Item 1 - Financial Statements:

        Consolidated Statements of Income and Loss - Three and Nine
          Months Ended September 30, 1997 and 1996....................... 3

        Consolidated Balance Sheets at September 30, 1997
          and December 31, 1996.......................................... 4-5

        Consolidated Statements of Cash Flows - Nine
          Months Ended September 30, 1997 and 1996....................... 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 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
                                   (UNAUDITED)
            (DOLLARS IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                              Three Months                Nine Months
                                           Ended September 30,        Ended September 30,
                                            1997         1996         1997         1996
                                         ---------    ---------     ---------    ---------

<S>                                      <C>          <C>           <C>          <C>      
Operating Revenues                       $   8,508    $   8,102     $  20,500    $  22,298

Operating Expenses:
  Production                                 5,290        4,081        14,747       11,524
  Transmission                                 221          172           659          660
  Administrative & General                   2,030        1,864         5,399        5,088
  Depreciation & Amortization                  862          874         2,588        2,622
  Taxes other than Income                    1,065          997         3,354        3,075
                                         ---------    ---------     ---------    ---------
      Total Operating Expenses               9,468        7,988        26,747       22,969
                                         ---------    ---------     ---------    ---------
Operating  Loss                               (960)         114        (6,247)        (671)

Other (Income) Deductions:
  Interest and Dividend Income                (303)        (363)         (941)        (833)
  Decommissioning Cost Accretion               666          565         1,997        1,696
  Decommissioning Trust Fund Income           (116)         (56)         (327)        (218)
  Unit 2 Sales and Other (Income)                0       (7,051)            3       (7,048)
                                         ---------    ---------     ---------    ---------
      Total Other Deductions                   247       (6,905)          732       (6,403)
                                         ---------    ---------     ---------    ---------
Income (Loss) Before Income Taxes           (1,207)       7,019        (6,979)       5,732

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

Net Income (Loss)                        $  (1,207)   $   7,019     $  (6,979)   $   5,732
                                         =========    =========     =========    =========

Weighted Average Number of
  Shares Outstanding                     8,277,748    7,965,146     8,297,571    7,987,971
Earnings (Loss) Per Share                $   (0.15)   $    0.88     $   (0.84)   $    0.72
</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)


<TABLE>
<CAPTION>
                                         September 30,    December 31,
                                              1997            1996
                                         -------------    -----------
<S>                                        <C>             <C>      
ASSETS:
Current Assets:
  Cash & Cash equivalents                  $  3,752        $ 16,412
  Short-term Investments, at market          17,163          12,363
  Accounts Receivable                         2,476           2,927
  Materials & Supplies, net                   4,200           4,121
  Prepayments & Other Assets                  3,454             434
                                           --------        --------
      Total Current Assets                   31,045          36,257
                                           --------        --------
                                                           
Property, Plant, & Equipment:                              
  Utility Plant                             108,676         106,656
  Less: Accumulated Depreciation             (9,341)         (7,152)
                                           --------        --------
  Net Utility Plant                          99,335          99,504
                                                           
  Nuclear Fuel                               14,900          20,091
  Less: Accumulated Amortization             (6,295)         (9,692)
                                           --------        --------
  Net Nuclear Fuel                            8,605          10,399
                                                           
      Net Property, Plant & Equipment       107,940         109,903
                                                           
Other Assets:                                              
  Decommissioning Trust Fund                  7,463           6,234
  Deferred Debits & Other                        42              24
                                           --------        --------
      Total Other Assets                      7,505           6,258
                                           --------        --------
                                                           
TOTAL ASSETS                               $146,490        $152,418
                                           ========        ========
</TABLE>                                                  

(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>
                                                        September 30,    December 31,
                                                            1997            1996
                                                        -------------    ------------

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

Current Liabilities:
  Accounts Payable and Accrued Expenses                   $    120        $    129
  Taxes Accrued                                              3,633           1,504
  Miscellaneous Current Liabilities                          1,037           4,072
                                                          --------        --------
          Total Current Liabilities                          4,790           5,705

Operating Reserves:
  Decommissioning Liability                                 55,187          53,215
  Miscellaneous Other                                          621             621
                                                          --------        --------
          Total Operating Reserves                          55,808          53,836

Other Liabilities & Deferred Credits                         3,580           3,252


Commitments & Contingencies                                      0               0


Stockholders' Equity:
  Common stock, $.01 par value,
  Authorized - 20,000,000 shares, Issued - 8,417,748            84              84
   Less: Treasury Stock - 140,000 and 78,045 shares,
    respectively, at cost                                   (1,133)           (633)
   Additional paid-in capital                               92,100          92,100
   Holding Gain (Loss) on Investments                           18            (149)
   Accumulated Deficit                                      (8,757)         (1,777)
                                                          --------        --------
          Total Stockholders' Equity                        82,312          89,625
                                                          --------        --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $146,490        $152,418
                                                          ========        ========
</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>
                                                         Nine Months       Nine Months
                                                            Ended             Ended
                                                     September 30, 1997  September 30, 1996
                                                     ------------------  ------------------
<S>                                                       <C>                <C>    
Net cash flow from operating activities:
  Net Income (Loss)                                       $ (6,979)          $ 5,732
  Adjustments to reconcile net income (loss) to net                     
  cash provided by (used in) operating activities:                      
    Depreciation                                             2,588             2,619
    Amortization of nuclear fuel                             3,083             3,022
    Decommissioning trust accretion                          1,997             1,696
    Decommissioning trust interest                            (327)             (247)
    Gain on Transfer of Assets                                   0            (7,050)
    (Increase) decrease in accounts receivable                 452            (1,158)
    Increase in materials & supplies                          (215)              (54)
    Increase in prepaids and other assets                   (3,038)           (1,208)
    Decrease in accounts payable                                (9)             (103)
    Increase (decrease) in taxes accrued                     2,129              (833)
    Other                                                   (2,708)              857
                                                          --------           -------
Net cash (used in) provided by operating activities         (3,027)            3,273
                                                          --------           -------
                                                                        
Net cash flows used in investing activities:                            
  Utlility plant additions                                  (2,191)             (730)
  Nuclear fuel additions                                    (1,289)           (1,280)
  Payments to decommissioning fund                            (829)             (723)
  Proceeds from Sale of Fixed Assets                             0             7,050
  Holding Gain (Loss)                                          (11)                0
  Short term investments, net                               (4,813)           (6,145)
                                                          --------           -------
Net cash used in investing activities                       (9,133)           (1,828)
                                                          --------           -------
                                                                        
Net cash provided by (used in) financing activities:                    
  Warrants Exercise                                              0             4,074      
  Reaquired Capital Stock                                     (500)             (335)
                                                          --------           -------
Net cash provided by (used in) financing activities           (500)            3,739
                                                          --------           -------
                                                                        
Net increase (decrease) in cash and cash equivalents       (12,660)            5,184
Cash and cash equivalents, beginning of period              16,412             8,874
                                                          --------           -------
Cash and cash equivalents, end of period                  $  3,752           $14,058
                                                          ========           =======
</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 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 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 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.

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, 1996, 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.

     In March 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share. SFAS No. 128 establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock. This statement is effective for fiscal years ending after December 15,
1997 and early adoption is not permitted. The Company will adopt this statement
for its 


                                       7
<PAGE>   8

                             BAYCORP HOLDINGS, LTD.

fiscal year ending December 31, 1997 and does not believe that the effect of the
adoption of this standard would be materially different from the amounts
presented in the accompanying statements of income.

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 the Seabrook Project.

     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."

     Great Bay is subject to regulation by the New Hampshire Public Utilities
Commission ("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.

UTILITY DEREGULATION; PUBLIC CONTROVERSY CONCERNING NUCLEAR POWER PLANTS

     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 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

                                        8

<PAGE>   9

                             BAYCORP HOLDINGS, LTD.


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.

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 Seabrook 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 $451 million in 1997 dollars and $2.3 billion in future year
dollars in years in which decommissioning will occur, assuming a 36-year life
for the facility and a future escalation rate of 5%. 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 which recognizes
Great Bay's liability related to the closure and decommissioning of its nuclear
plant in current year dollars over the period through 2026, during which the
Seabrook Project is licensed by the NRC to operate. As a result of this
accretion and based on the current estimate, Great Bay's share in 1997 dollars
is approximately $55.2 million, which has been recorded as a liability on the
September 30, 1997 balance sheet.

     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 in
the future.

     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." No specific date has been set for the issuance of either a
redrafted proposal or a final standard by the FASB. 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 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.


                                        9

<PAGE>   10

                             BAYCORP HOLDINGS, LTD.

     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 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. Under a November 1992 settlement
agreement with Eastern Utilities Associates ("EUA"), a former parent of Great
Bay, EUA reaffirmed its guarantee of up to $10 million of Great Bay's future
decommissioning costs of Seabrook Unit 1.

     On January 22, 1997, the NRC issued a temporary exemption to Great Bay in
which the NRC staff stated that it believed that Great Bay did not then satisfy
the NRC definition of "electric utility." The temporary exemption granted Great
Bay six months to establish itself as an "electric utility" as defined in the
NRC's regulations or obtain a surety bond or other allowable decommissioning
funding mechanism. In February 1997, Great Bay requested that the NRC reconsider
the staff's finding that Great Bay does not meet the NRC definition of "electric
utility." Great Bay also requested that the NRC consider granting an extension
to the temporary exemption as an alternative to making a final determination as
to whether Great Bay is an electric utility under the NRC definition. On July
23, 1997, the NRC staff reaffirmed its finding that Great Bay is not an
"electric utility."

     On July 23, 1997, the NRC issued a one-year exemption to Great Bay from the
obligation of Great Bay to comply with the NRC's regulations applicable to an
owner of an interest in a nuclear power plant that is not an "electric utility"
under the NRC's regulations. The exemption gives Great Bay until the earlier of
July 23, 1998 or 90 days following the effective date of any revisions to the
NRC's definition of "electric utility" to obtain a surety bond or other
allowable decommissioning funding assurance mechanism for Great Bay's
decommissioning liability related to its ownership in Seabrook. On September 10,
1997, the NRC published in the Federal Register proposed amendments to its
regulations regarding the definition of "electric utility." Under this revised
definition, it is unlikely that Great Bay would be considered an "electric
utility" under NRC regulations. The proposed rule also suggests that
accelerating funding of decommissioning over fewer years may be an acceptable
method of funding assurance. The NRC is seeking comments on the proposed rule by
November 24, 1997. The Company cannot predict when, or if, the proposed rule
might become final or what form it might take. A decision by the NRC to impose a
requirement that Great Bay obtain a surety bond or other allowable
decommissioning funding mechanism may adversely affect Great Bay's liquidity,
possibly materially. Great Bay is investigating acceptable methods of
decommissioning funding assurance in an attempt to minimize any adverse affects
to the Company's liquidity.

LIQUIDITY AND CAPITAL EXPENDITURES

     BayCorp anticipates that its share of the Seabrook Project's capital
expenditures for the 1997 fiscal year will total approximately $4.3 million,
primarily for nuclear fuel and various capital projects. This estimated amount
is based on the latest projections provided by the Managing Agent of the
Seabrook Project.


                                        10

<PAGE>   11

                             BAYCORP HOLDINGS, LTD.

     A scheduled refueling outage for the Seabrook Project began May 10, 1997
and lasted approximately fifty days. The Seabrook plant resumed operations on
June 28, 1997 and reached 100% power on July 3, 1997. An increased scope of work
was performed during this refueling following Seabrook's record 463 continuous
days on-line. In addition to refueling the reactor, this refueling outage
included major plant maintenance.

     During outage periods at the Seabrook Project, BayCorp has no electricity
for sale and consequently no revenues. 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 incurs losses
during scheduled outage periods as a result of the combination of the lack of
revenue, the recognition of normal recurring operation and maintenance costs,
and the continuing depreciation of the Seabrook plant. The impact of refueling
and other outages on the Company's results of operations and financial position
is materially adverse. The Seabrook Project's 1997 refueling outage cost
approximately $35 million. Great Bay's share of these outage related expenses
was approximately $4.3 million.

     For each of the tax years 1994, 1995 and 1996, Great Bay filed property tax
abatement applications with the three New Hampshire towns in which the Seabrook
Project is located. Great Bay paid its 1994, 1995 and the first half of its 1996
property taxes billed by the Towns of Seabrook, Hampton and Hampton Falls, New
Hampshire (collectively, the "Towns") and withheld payment of the second half of
its 1996 property taxes 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. Great Bay also withheld
the first half of its 1997 property taxes to the Towns. Under New Hampshire law,
Great Bay is required to pay an interest penalty computed at an annual rate of
18% (or 12% for periods until a Town placed a lien on the Seabrook Project) on
all unpaid taxes if it is unsuccessful in its tax abatement proceedings against
the Towns. The full amount of property taxes was accrued and reflected by Great
Bay in its 1997 and 1996 income statements. As a result of Great Bay's
withholding of its property tax payment for the second half of 1996, two of the
three Towns exercised their right to place a lien on the Seabrook Project. The
Town of Seabrook placed a lien on the Seabrook Project on April 18, 1997 and the
Town of Hampton Falls placed a lien on the Seabrook Project on April 21, 1997.
Under New Hampshire law, Seabrook and Hampton Falls could not take any action
pursuant to their liens until two years after the execution of the liens.

     On October 8, 1997 and October 9, 1997, as a result of the decision in the
arbitration proceeding among Great Bay and certain of the other Joint Owners, as
discussed in more detail in PART II, ITEM 1 LEGAL PROCEEDINGS, Great Bay paid
under protest $3,168,903 in property taxes and accrued interest to the Towns.
The Towns have advised the Company that they are removing the tax liens placed
on the Seabrook Project.

     Proposed NRC regulations and a review of Great Bay's status as an "electric
utility" by the NRC are currently in process and may adversely effect BayCorp's
and Great Bay's liquidity, possibly materially. See DECOMMISSIONING LIABILITY.


                                        11

<PAGE>   12

                             BAYCORP HOLDINGS, LTD.

NOTE D - EQUITY

     On January 27, 1997 Great Bay 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. Shareholders of Great Bay common stock
received one share of BayCorp common stock for each share of Great Bay common
stock which they owned. The new BayCorp common stock began public trading on the
American Stock Exchange under the symbol "MWH" on January 28, 1997.

     On October 9, 1997, the Board of Directors of BayCorp adopted a resolution
authorizing BayCorp to repurchase up to an aggregate of 100,000 shares of
BayCorp common stock on the open market or in negotiated transactions.
Separately, BayCorp completed a repurchase of 140,000 shares in June 1997 at a
total cost of $1,133,223, or an average price of approximately $8.09 per share.
BayCorp has approximately 8.3 million shares of common stock outstanding. 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.

     The Company has never declared or paid cash dividends on its common stock
and currently 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 a 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 the successor to Great Bay.

     A scheduled refueling outage for the Seabrook Project began on May 10, 1997
and lasted approximately fifty days. The Seabrook plant resumed operations on
June 28, 1997 and reached 100% power on July 3, 1997. In addition to refueling
the reactor, this refueling outage included major plant maintenance. For the
nine months ended September 30, 1997, the Company has reported a loss of
approximately $6,979,000 due to decreased revenues and higher than budgeted
outage costs resulting from the 1997 refueling outage coupled with continuing
operating and maintenance expenses and depreciation, as discussed above. See
"Liquidity and Capital Expenditures."


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<PAGE>   13

                             BAYCORP HOLDINGS, LTD.



RESULTS OF OPERATIONS: THIRD QUARTER OF FISCAL 1997 COMPARED TO THE THIRD
QUARTER OF FISCAL 1996

Operating Revenues

     Operating Revenues increased by approximately $406,000, or 5%, to
$8,508,000 in the third quarter of 1997 as compared to $8,102,000 in the third
quarter of 1996. This increase in revenues was primarily due to higher average
sales prices in the third quarter of 1997 as compared to the third quarter of
1996. Higher average sales prices were primarily due to increases in the spot
market price of electricity in New England. During the third quarter of 1997 the
average sales price per kilowatt hours ("kWhs") (determined by dividing total
sales revenue by the total number of kWhs sold in the applicable period)
increased 6.9% to 2.78 cents per kWh as compared with 2.60 cents per kWh in the
third quarter of 1996. For the third quarter of 1997, the capacity factor at the
Seabrook plant was 98.5% versus a capacity factor of 100% for the third quarter
of 1996. The capacity factor for the third quarter of 1997 was affected by the
1997 refueling outage, with the plant resuming operation on June 28, 1997 and
reaching 100% power on July 3, 1997. There was no scheduled refueling outage
during 1996. Sales of electricity decreased by approximately 1.9% to 305,447,700
kWh in the third quarter of 1997 as compared to 311,424,130 kWhs in the third
quarter of 1996.

     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) increased 21.1% to 3.10 cents per kWh in the third quarter of
1997 as compared to 2.56 cents per kWh in the third quarter of 1996. This
increase was the result of the scheduled refueling outage and its associated
costs that were incurred in the third quarter of 1997 and the lower capacity
factor at the Seabrook Project during the third quarter of 1997 as compared to
the third quarter of 1996. Scheduled and unscheduled outage time increases
BayCorp's cost of power because Seabrook costs are spread over fewer kWhs.

Expenses

     Production and Transmission expenses for the third quarter of 1997
increased approximately $1,258,000, or 29.6%, as compared to the third quarter
of 1996. This increase was primarily the result of actual outage related costs
incurred in the third quarter of 1997. There was no scheduled refueling outage
during 1996.

     During the third quarter of 1997, there was an overall increase of
approximately $222,000, or 5.9%, in depreciation and amortization, taxes, and
administrative and general expenses, from $3,735,000 in the third quarter of
1996 to $3,957,000 in the third quarter of 1997. This increase was primarily
attributable to an increase in general and administrative expenses due to the
refueling outage.

Other (Income) Deductions

     Decommissioning Cost Accretion increased $100,500, to $665,700 during the
third quarter of 1997 as compared to $565,200 during the third quarter of 1996.
This increase is primarily due to the revised decommissioning funding schedule
for the Seabrook Project approved by the New Hampshire Nuclear Decommissioning
Financing Committee on October 30, 1996. The new study increased the present
value of total decommissioning costs as of January 1, 1997 and increased the
cost escalation rate from 4.25% to 5%. This accretion is a non-cash charge and
recognizes Great Bay's liability related to 

                                        13

<PAGE>   14

                             BAYCORP HOLDINGS, LTD.

the closure and decommissioning of its nuclear plant in current year dollars
over the over the period during which the Seabrook Project is licensed by the
NRC to operate.

     During the third quarter of 1996, the Company reported $7,051,000 in
miscellaneous other income as compared to no miscellaneous other income reported
for the third quarter of 1997. Other income in 1996 was primarily due to the
receipt by the Company of $7,036,792 from the proceeds of the sale by the joint
owners of the Seabrook Project of four unused steam generators from Seabrook
Unit 2.

Net Loss

     As a result of the above factors, during the third quarter ended September
30, 1997, the Company recorded a net loss of $1,207,000, or approximately $.15
per share, as compared to net income of $7,019,000, or approximately $.88 per
share, during the third quarter ended September 30, 1996.

RESULTS OF OPERATIONS: FIRST NINE MONTHS OF FISCAL 1997 COMPARED TO THE FIRST
NINE MONTHS OF FISCAL 1996

Operating Revenues

     Operating Revenues decreased by approximately $1,798,000, or 8.1%, to
$20,500,000 for the nine month period ending September 30, 1997 as compared with
$22,298,000 for the nine month period ended September 30, 1996. This decrease in
revenues was primarily due to the 1997 refueling outage. The refueling outage
lasted from May 10, 1997 though June 28, 1997, with the plant returning to full
power on July 3, 1997. Refueling outages take place approximately every eighteen
to twenty months. There was no scheduled refueling outage during the comparable
period in 1996. During outage periods at the Seabrook plant, the Company has no
electricity for sale and consequently no revenues. For the first nine months of
1997, the capacity factor at the Seabrook plant was 80.7% as compared to 95.6%
for the first nine months of 1996.

     Sales of electricity decreased by approximately 16% to 742,633,200 kWhs
during the first nine months of 1997 as compared to 883,652,600 kWhs during the
first nine months of 1996. During the first nine months of 1997 the average
sales price per kWh (determined by dividing total sales revenue by the total
number of kWhs sold in the applicable period) increased 9.5% to 2.76 cents per
kWh as compared with 2.52 cents per kWh during the first nine months of 1996.
Higher average sales prices were primarily due to increases in the spot market
price of electricity in New England. 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) increased 38.5% to 3.60
cents per kWh during the first nine months of 1997 as compared to 2.60 cents per
kWh during the first nine months of 1996. This increase was the result of the
1997 scheduled refueling outage and its associated costs and the resultant lower
capacity factor at the Seabrook Project during the first nine months of 1997 as
compared to the first nine months of 1996. Scheduled and unscheduled outage time
increases BayCorp's cost of power because Seabrook costs are spread over fewer
kWhs.


                                        14

<PAGE>   15

                             BAYCORP HOLDINGS, LTD.



Expenses

     Production and Transmission expenses for the first nine months of 1997
increased approximately $3,222,000, or 26.4%, as compared to the first nine
months of 1996. This increase was primarily the result of an increase in the
actual outage related costs reported for the first nine months of 1997 as
compared to the budgeted costs for this outage which were accrued for during the
first nine months of 1996. The increase in outage related expenses was due to
the increased scope of work performed during the 1997 scheduled refueling
outage.

During the first nine months of 1997, there was an overall increase of
approximately $556,000, or 5.2%, in depreciation and amortization,
administrative and general expenses and taxes other than income from $10,785,000
during the first nine months of 1996 to $11,341,000 during the first nine months
of 1997.

Other (Income) Deductions

     Decommissioning Cost Accretion increased $301,000, to $1,997,000 during the
first nine months of 1997 as compared to $1,696,000 during the first nine months
of 1996. This increase is primarily due to the revised decommissioning funding
schedule for the Seabrook Project approved by the New Hampshire Nuclear
Decommissioning Financing Committee on October 30, 1996. The new study increased
the present value of total decommissioning costs as of January 1, 1997 and
increased the cost escalation rate from 4.25% to 5%. 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 period
during which the Seabrook Project is licensed by the NRC to operate.

     Interest (Income) Expense and Decommissioning Trust Fund Income increased
20.6%, or $217,000, during the first nine months of 1997 as compared to the
first nine months of 1996. This increase in interest income primarily reflects
the Company's higher average cash and investment balances during the first nine
months of 1997 as compared to the first nine months of 1996. During the first
nine months of 1996, the Company reported $7,048,000 in miscellaneous other
income as compared to $3,000 in miscellaneous other expense reported for the
first nine months of 1997. Other Income in 1996 was primarily due to the receipt
by the Company in the third quarter of 1996 of $7,036,792 from the proceeds of
the sale by the joint owners of the Seabrook Project of four unused steam
generators from Seabrook Unit 2.

Net Loss

     As a result of the above factors, during the nine months ended September
30, 1997, the Company recorded a net loss of $6,979,000, or approximately $.84
per share, as compared to net income of $5,732,000, or approximately $.72 per
share, during the nine months ended September 30, 1996.

Net Operating Losses

     For federal income tax purposes, as of December 31, 1996, the Company had
net operating loss carry forwards ("NOLs") of approximately $184 million, which
are scheduled to expire between 2003 and 2011. 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 

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<PAGE>   16

                             BAYCORP HOLDINGS, LTD.

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 $48 million of NOLs are not currently
subject to such limitations.

Liquidity

     BayCorp's cash and short-term investments decreased approximately
$7,860,000 during the first nine months of 1997. Principal factors affecting
liquidity during the first nine months ended September 30, 1997 included the
operating loss of $6,979,000 discussed above and cash expenditures of
approximately $2,191,000 for capital plant additions, $1,289,000 for nuclear
fuel purchases and $829,000 for decommissioning trust fund payments. An increase
in prepaids and other assets of approximately $3,038,000 and a decrease in other
working capital items of $2,708,000 primarily reflect payments to the Seabrook
Project. These payments were for nuclear fuel of $4,600,000 and for 1996
accruals for Seabrook personnel employee benefits of approximately $680,000. The
Company's liquidity was also impacted by BayCorp's prepayment in 1997 of a three
year Directors and Officers liability insurance policy and the purchase of
61,955 shares of BayCorp common stock for $500,400. Offsetting these cash
charges were non-cash charges to income which included $2,588,000 for
depreciation, $3,083,000 for nuclear fuel amortization and decommissioning trust
fund accretion of $1,997,000, an increase in Taxes Accrued of $2,129,000 and a
decrease in accounts receivable of $452,000.

     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 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 its 1994, 1995 and half of the 1996
property taxes billed by the Towns of Seabrook, Hampton and Hampton Falls, New
Hampshire (collectively, the "Towns") and withheld payment of the second half of
its 1996 property taxes to the Towns, based on Great Bay'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. Great Bay
also withheld the first half of its 1997 property taxes to the Towns. Under New
Hampshire law, Great Bay is required to pay an interest penalty computed at an
annual rate of 18% (or 12% for periods until a Town placed a lien on the
Seabrook Project) on all unpaid taxes if it is

                                        16

<PAGE>   17

                             BAYCORP HOLDINGS, LTD.

unsuccessful in its tax abatement proceedings against the Towns. The full amount
of property taxes has been accrued and reflected by Great Bay on its 1997 and
1996 income statements. As a result of Great Bay's withholding of its property
tax payment for the second half of 1996, two of the three Towns exercised their
right to place a lien on the Seabrook Project. The Town of Seabrook placed a
lien on the Seabrook Project on April 18, 1997 and the Town of Hampton Falls
placed a lien on the Seabrook Project on April 21, 1997. Under New Hampshire
law, Seabrook and Hampton Falls cannot take any action pursuant to their liens
until two years after the execution of the liens. 

     In December 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 claimed that the Joint Owners Agreement
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 claimed that real estate taxes should be allocated in accordance
with ownership shares.

     In September 1997, the arbitrator issued a decision requiring Great Bay to
pay its share of all property taxes assessed upon the Seabrook Project in a
single tax bill in accordance with Great Bay's percentage ownership in the
Seabrook Project. Accordingly, on October 8, 1997 and October 9, 1997, Great Bay
paid under protest $3,168,903 in property taxes and accrued interest to the
Towns. The Towns have advised the Company that they are removing the tax liens
placed on the Seabrook Project.

     The arbitrator's decision does not affect the tax abatement litigation
pending against the Towns for tax years 1994 through 1996, nor does it affect
Great Bay's ability to assert that it is entitled to a separate tax bill and
assessment from the Towns. In addition, on February 28, 1997, North Atlantic
Energy Service Company, the current managing agent for the Seabrook Project,
filed a tax abatement application on behalf of all the Joint Owners for the 1996
tax year.

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
          September 30, 1997.



                                        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.




November 13, 1997                      By:  /s/ John A. Tillinghast
                                          --------------------------------- 
                                                John A. Tillinghast
                                           President, Treasurer and Chief 
                                                 Executive Officer
                                            (Principal Accounting Officer)




                                        18

<PAGE>   19

                             BAYCORP HOLDINGS, LTD.


                                  EXHIBIT INDEX


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

27.1                Financial Data Schedule

99.1                Pages 18-21 of the Company's Annual Report on Form 10-K for
                    the period ended December 31, 1996. Such Form 10-K shall not
                    be deemed to be filed except to the extent that portions
                    thereof are expressly incorporated by reference herein.


                                       19