<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                  March 31, 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 May 7, 1998
--------------------------------                     --------------------------
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 Months Ended March 31, 1998 and 1997..................     3

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

     Consolidated Statements of Cash Flows - Three
       Months Ended March 31, 1998 and 1997...............................     6

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

     Item 2 - Management's Discussion and Analysis of Financial 
       Condition and Results of Operations:............................... 12-15


PART II - OTHER INFORMATION:

     Item 1 - Legal Proceedings...........................................    15

     Item 6 - Exhibits and Reports on Form 8-K............................    16

     Signature............................................................    17

     Exhibit Index........................................................    18




<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     Three Months
                                               Ended           Ended
                                          March 31, 1998   March 31, 1997
                                          --------------   -------------- 
<S>                                         <C>              <C>       

Operating Revenues                          $    7,443       $    8,437

Operating Expenses:
  Production                                     4,899            4,394
  Transmission                                     213              220
  Administrative & General                       1,781            1,933
  Depreciation & Amortization                      877              863
  Taxes other than Income                        1,060            1,162
                                            ----------       ---------- 
      Total Operating Expenses                   8,830            8,572
                                            ----------       ---------- 

Operating Loss                                  (1,387)            (135)

Other (Income) Deductions:
  Interest and Dividend Income                    (352)            (402)
  Decommissioning Cost Accretion                   713              666
  Decommissioning Trust Fund Income               (109)            (111)
  Unit 2 Sales and Other Deductions                 26                0
                                            ----------       ---------- 
      Total Other Deductions                       278              153
                                            ----------       ---------- 

Loss Before Income Taxes                        (1,665)            (288)

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

Net Loss                                    $   (1,665)      $     (288)

Other Comprehensive Income, Net of Tax
  Unrealized Gains on Securities                    63                9
Comprehensive Income (Loss)                 $   (1,602)      $     (279)
                                            ==========       ========== 

Weighted Average Shares Outstanding          8,264,192        8,320,869

Basic and Diluted Loss Per Share            $    (0.20)      $    (0.03)



</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>

                                           March 31,     December 31,
                                             1998           1997
                                           ---------     ------------
<S>                                        <C>            <C>    
ASSETS:
Current Assets:
  Cash & Cash equivalents                  $  4,351       $  3,270
  Short-term Investments, at market           9,613         15,822
  Accounts Receivable                         5,573            465
  Materials & Supplies, net                   4,289          3,816
  Prepayments & Other Assets                  2,662          1,570
                                           --------       --------
      Total Current Assets                   26,488         24,943
                                           --------       --------

Property, Plant, & Equipment:
  Utility Plant                             110,433        108,584
  Less: Accumulated Depreciation            (10,585)        (9,758)
                                           --------       --------
  Net Utility Plant                          99,848         98,826

  Nuclear Fuel                               15,108         15,076
  Less: Accumulated Amortization             (7,743)        (6,717)
                                           --------       --------
  Net Nuclear Fuel                            7,365          8,359

      Net Property, Plant & Equipment       107,213        107,185

Other Assets:
  Decommissioning Trust Fund                  8,541          8,025
  Deferred Debits & Other                        14              5
                                           --------       --------
      Total Other Assets                      8,555          8,030
                                           --------       --------

TOTAL ASSETS                               $142,256       $140,158
                                           ========       ========

</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>

                                                            March 31,    December 31,
                                                              1998           1997
                                                            ---------    ------------
<S>                                                         <C>            <C>     

LIABILITIES AND STOCKHOLDERS' EQUITY:

Current Liabilities:
  Accounts Payable and Accrued Expenses                     $    250       $    270
  Taxes Accrued                                                  903              0
  Miscellaneous Current Liabilities                            1,910          1,594
                                                            --------       --------
          Total Current Liabilities                            3,063          1,864

Operating Reserves:
  Decommissioning Liability                                   58,056         55,846
  Miscellaneous Other                                            564            564
                                                            --------       --------
          Total Operating Reserves                            58,620         56,410

Other Liabilities & Deferred Credits                           4,108          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                                      (1,240)        (1,168)
   Additional paid-in capital                                 92,100         92,100
   Accumulated Other Comprehensive Income                        178            115
   Accumulated Deficit                                       (14,657)       (12,992)
                                                            --------       --------
          Total Stockholders' Equity                          76,465         78,139
                                                            --------       --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                  $142,256       $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>

                                                              Three Months      Three Months
                                                                 Ended             Ended
                                                             March 31, 1998     March 31, 1997
                                                             --------------     --------------
<S>                                                             <C>               <C>         

Net cash flow from operating activities:

    Net (Loss)                                                  $(1,665)          $   (288)   
    Adjustments to reconcile net loss to net                                                  
    cash provided by (used in) operating activities:                                          
         Depreciation                                               877                863    
         Amortization of nuclear fuel                             1,026              1,078    
         Decommissioning trust accretion                            713                666    
         Decommissioning trust interest                            (109)              (111)   
         (Increase) decrease in accounts receivable              (5,107)               243    
         Increase in materials & supplies                          (518)              (209)   
         Increase in prepaids and other assets                   (1,101)            (2,844)   
         Decrease in accounts payable                               (20)               (16)   
         Increase in taxes accrued                                  902                962    
         Other                                                      696             (1,519)   
                                                                -------           --------    
Net cash used in operating activities                            (4,306)            (1,175)   
                                                                -------           --------    
                                                                                              
Net cash flows provided by (used in) investing activities:                                    
  Utlility plant additions                                         (363)              (476)   
  Nuclear fuel additions                                            (32)            (1,387)   
  Payments to decommissioning fund                                 (289)              (277)   
  Short term investments, net                                     6,142              1,199    
                                                                -------           --------    
Net cash provided by (used in) investing activities               5,458               (941)   
                                                                -------           --------    
                                                                                              
Net cash used in financing activities:                                                        
  Reacquired Capital Stock                                          (71)              (336)   
                                                                -------           --------    
Net cash used in financing activities                               (71)              (336)   
                                                                -------           --------    
                                                                                              
Net increase (decrease) in cash and cash equivalents              1,081             (2,452)   
Cash and cash equivalents, beginning of period                    3,270             16,412    
                                                                -------           --------    
Cash and cash equivalents, end of period                        $ 4,351           $ 13,960    
                                                                =======           ========    
                                                                                  
</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 period charge are as follows:

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

<S>                                     <C>                      <C>     
Beginning Balance                       $115,000                 $115,000
Current Period Charge                     63,000                   63,000
                                        --------                 --------
Ending Balance                          $178,000                 $178,000
                                        ========                 ========
</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."

         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 or have




                                       8
<PAGE>   9

                             BAYCORP HOLDINGS, LTD.




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 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 March 31, 1998 is approximately $58.1 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 December 31, 1995
to $58.1 million as of March 31, 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



                                       9
<PAGE>   10

                             BAYCORP HOLDINGS, LTD.





and material costs, technology, inflation and timing of decommissioning could
cause these estimates to change, possibly materially, in the near term.

         The Staff of the Securities and Exchange Commission (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." 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.

         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 will be approximately$1.2 million
in 1998 and escalate at 4% each year thereafter through 2026.

         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.

         In January 1997 and July 1997, the NRC staff ruled that Great Bay did
not satisfy the NRC definition of "electric utility." If the NRC does not
reverse its ruling, Great Bay would have to comply with the NRC regulations
applicable to non "electric utility" owners of interests in nuclear power
plants, including less favorable decommissioning funding requirements.

         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.

         The Company cannot predict whether Great Bay's funding proposal will be
acceptable to the NRC or whether the NRC will grant a permanent exemption to
Great Bay. Failure to obtain relief may have a material adverse effect on Great
Bay's business, financial condition, liquidity or results of operation.



                                       10
<PAGE>   11

                             BAYCORP HOLDINGS, LTD.




LIQUIDITY AND CAPITAL EXPENDITURES

         BayCorp anticipates that its share of the Seabrook Project's capital
expenditures for the 1998 fiscal year will total approximately $7.4 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.

         An unscheduled outage began on December 5, 1997 and lasted until
January 15, 1998. The Seabrook Project from time to time experiences both
scheduled and unscheduled outages. 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. Great Bay paid the
1994, 1995 and half of the 1996 property taxes billed by the Towns of Seabrook,
Hampton and Hampton Falls, New Hampshire (collectively, the "Towns") but
withheld payment of the second half of the 1996 property taxes billed by the
Towns, based on Great Bay's position that the portion of 1996 property taxes
paid to the Towns exceeded 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. 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 appeals
are currently pending and a hearing on the first phase of these appeals is
scheduled for May 12, 1998.

         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."

         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. In its complaint, Great Bay alleges that (i) PECO has
entered into a number of wholesale power agreements in its own name and for its
own benefit without bringing these opportunities to Great Bay's attention or
submitting bids on behalf of Great Bay and (ii) PECO failed to offer Great Bay's
power on a firm basis to customers as required under the PECO Services
Agreement. In February 27, 1998, Great Bay sent a letter to PECO notifying PECO
that the Services Agreement was terminated.

         On March 10, 1998, PECO filed a motion in the United States District
Court for the District of New Hampshire for a preliminary injunction to prevent
Great Bay from terminating the PECO Services Agreement. At that time, PECO also
filed counterclaims seeking damages for an amount in excess of $5,000,000 for
alleged breach of contract, alleged loss of goodwill and alleged harm to PECO's
reputation. PECO's counterclaim contained seven counts: breach of
contract/wrongful termination,



                                       11
<PAGE>   12

                             BAYCORP HOLDINGS, LTD.





breach of exclusivity promise, breach of the covenant of good faith and fair
dealing, unjust enrichment, defamation, unfair trade practices and an action for
declaratory judgment.

          On March 30, 1998, the Court denied PECO's motion for a preliminary
injunction. However, in its decision denying PECO's request for a preliminary
injunction, the Court found that it is likely that PECO will prevail on its
claim that Great Bay wrongfully terminated the PECO Services Agreement. Great
Bay and PECO are currently engaged in settlement negotiations. During the
pendency of these negotiations, the parties have agreed that they will not take
further action in the litigation.

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 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 
March 31, 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 December 5, 1997
and lasted until January 15, 1998. For the three months ended March 31, 1998,
the Company has reported a loss of approximately $1,665,000 due to decreased
revenues and increased operating costs associated with this unscheduled outage.
See "Liquidity and Capital Expenditures."

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

Operating Revenues

         Operating Revenues decreased by approximately $994,100, or 11.8%, to
$7,443,100 in the first quarter of 1998 as compared to $8,437,200 in the first
quarter of 1997. This decrease in revenues was



                                       12

<PAGE>   13

                             BAYCORP HOLDINGS, LTD.





primarily the result of the unscheduled outage that began in December 1997 and
ended on January 15, 1998. For the first quarter of 1998, the capacity factor at
the Seabrook plant was 81.2% versus a capacity factor of 100% for the first
quarter of 1997. The capacity factor for the first quarter of 1998 was adversely
affected by the unscheduled outage referred to above. There were no scheduled or
unscheduled outages during the first quarter of 1997. Sales of electricity
decreased by approximately 19% to 246,494,100 kilowatt-hours ("kWhs") in the
first quarter of 1998 as compared to 304,475,500 kWhs in the first quarter of
1997. During the first 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 9.0% to 3.02 cents per kWh as compared with
2.77 cents per kWh in the first quarter of 1997.

          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 3.58 cents per kWh in the first
quarter of 1998 as compared to 2.82 cents per kWh in the first quarter of 1997.
This increase was primarily the result of the unscheduled outage and its
associated costs that were incurred in the first quarter of 1998 and the lower
capacity factor at the Seabrook Project during the first quarter of 1998 as
compared to the first quarter of 1997. 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 first quarter of 1998
increased approximately $498,000, or 10.8%, as compared to the first quarter of
1997. This increase was primarily the result of unscheduled outage related costs
incurred in the first quarter of 1998. There were no scheduled or unscheduled
outages during the first quarter of 1997.

         During the first quarter of 1998, there was an overall decrease of
approximately $240,000, or 6.1%, in depreciation and amortization, taxes, and
administrative and general expenses, from $3,958,000 in the first quarter of
1997 to $3,718,000 in the first quarter of 1998. This decrease was primarily
attributable to a decrease in general and administrative expenses at Seabrook
during the first quarter of 1998 as compared to the first quarter of 1997.

Other (Income) Deductions

         Decommissioning Cost Accretion increased $47,000, to $713,000 during
the first quarter of 1998 as compared to $666,000 during the first 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 over the period during which the Seabrook Project is
licensed to operate.

         During the first quarter of 1998, the Company realized $435,000 in
miscellaneous other income as compared to $513,000 for the first quarter of
1997. This income primarily reflects interest earned on the Company's cash and
decommissioning trust fund accounts. The decrease of $78,000, or 15.2%,
primarily reflects reduced interest earnings on the lower cash balances during
the first quarter of 1998 as compared to the first quarter of 1997.




                                       13
<PAGE>   14

                             BAYCORP HOLDINGS, LTD.




Net Loss

         As a result of the above factors, during the first quarter ended 
March 31, 1998, the Company recorded a net loss of $1,665,000, or approximately
$.20 per basic and diluted share, as compared to a net loss of $288,000, or
approximately $.03 per basic and diluted share, during the first quarter ended
March 31, 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
$5,128,000 during the first three months of 1998. Principal factors affecting
liquidity during the three months ended March 31, 1998 included the operating
loss of $1,665,000 discussed above and cash expenditures of approximately
$363,000 for capital plant additions and $289,000 for decommissioning trust fund
payments. The increase in accounts receivable of approximately $5,107,000
includes an outstanding receivable of approximately $2,500,000 for February
sales currently due from PECO. PECO is withholding this payment pending the
outcome of the current settlement negotiations between BayCorp and PECO. See
"Liquidity and Capital Expenditures." The remaining increase in accounts
receivable of approximately $2,600,000 is primarily due to the low 1997 year end
receivables balance resulting from the unscheduled outage in December 1997 that
reduced December sales.

         Offsetting these cash charges were non-cash charges to income which
included $877,000 for depreciation, $1,026,000 for nuclear fuel amortization and
decommissioning trust fund accretion of $713,000 and an increase in Taxes
Accrued of $902,000. During the first quarter of 1998, prepaids and other assets
decreased approximately $1,101,000 and other working capital items increased
$696,000, for a net decrease of approximately $405,000 primarily related to
payments to the Seabrook Project for operating expenses.

         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



                                       14
<PAGE>   15

                             BAYCORP HOLDINGS, LTD.



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. Great Bay paid the
1994, 1995 and half of the 1996 property taxes billed by the Towns of Seabrook,
Hampton and Hampton Falls, New Hampshire (collectively, the "Towns") but
withheld payment of the second half of the 1996 property taxes billed by the
Towns, based on Great Bay's position that the portion of 1996 property taxes
paid to the Towns exceeded 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. 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 appeals
are currently pending and a hearing on the first phase of these appeals is
scheduled for May 12, 1998.

         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. In its complaint, Great Bay alleges that (i) PECO has
entered into a number of wholesale power agreements in its own name and for its
own benefit without bringing these opportunities to Great Bay's attention or
submitting bids on behalf of Great Bay and (ii) PECO failed to offer Great Bay's
power on a firm basis to customers as required under the PECO Services
Agreement. In February 27, 1998, Great Bay sent a letter to PECO notifying PECO
that the Services Agreement was terminated.

         On March 10, 1998, PECO filed a motion in the United States District
Court for the District of New Hampshire for a preliminary injunction to prevent
Great Bay from terminating the PECO Services Agreement. At that time, PECO also
filed counterclaims seeking damages for an amount in excess of $5,000,000 for
alleged breach of contract, alleged loss of goodwill and alleged harm to PECO's
reputation. PECO's counterclaim contained seven counts: breach of
contract/wrongful termination, breach of exclusivity promise, breach of the
covenant of good faith and fair dealing, unjust enrichment, defamation, unfair
trade practices and an action for declaratory judgment.

          On March 30, 1998, the Court denied PECO's motion for a preliminary
injunction. However, in its decision denying PECO's request for a preliminary
injunction, the Court found that it is likely that PECO will prevail on its
claim that Great Bay wrongfully terminated the PECO Services Agreement. Great
Bay and PECO are currently engaged in settlement negotiations. During the
pendency of these negotiations, the parties have agreed that they will not take
further action in the litigation.


                                       15
<PAGE>   16

                             BAYCORP HOLDINGS, LTD.




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 March 31, 1998.




                                       16
<PAGE>   17

                             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.


May 12, 1998                        By: /s/ Frank W. Getman Jr.
                                        -------------------------------------
                                        Frank W. Getman Jr.
                                        President and Chief Executive Officer











                                       17
<PAGE>   18
                             BAYCORP HOLDINGS, LTD.


                                  EXHIBIT INDEX


EXHIBIT NO.       DESCRIPTION




10.27             Employment Agreement between Frank W. Getman Jr. and BayCorp
                  Holdings, Ltd., dated May 5, 1998.

10.28             Employment Agreement between John A. Tillinghast and BayCorp
                  Holdings, Ltd., dated May 5, 1998.

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.






                                       18