0CAN048405, Annual Financial Rept 1983

Annual Financial Rept 1983

ML20087Q049
Person / Time
Site:	Arkansas Nuclear
Issue date:	12/31/1983
From:	John Marshall, Maulden J ARKANSAS POWER & LIGHT CO.
To:	Harold Denton Office of Nuclear Reactor Regulation
References
0CAN048405, CAN48405, NUDOCS 8404100248
Download: ML20087Q049 (39)

Text

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Arkansas Power & Light Company Honored As 1983 Arkansas Corporate Humanitarian of the Year The more than 5,000 people .;+q

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of Arkansas Power & Light were gjc.A,y;;g.m;;I./i'

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honored last fall when the .

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Company was presented the 1 fy..; . .

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7.M.;.. . .. 4 .. : .;. ; Ni Arkansas Corporate Humanitarian ':.%: .

of the Year Award by the O f.<.' f . : ,J' ,.. J . w  ;

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Governor's Office of Volunteerism ~S a p: 2. ' W. -- . = .,. i, ^ :P '^ :  : L .. .

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...- . e this prestigious recognition. .* s. c . . . *' '

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Presented annually in tele- ,D., g.3MS .. m ..

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vised ceremonies from Little Rock's Robinson Center, the $ !.?. %p, JD Xa'%

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Award Pa>'s tribute to out- . .- : . /.:ce..{..;, y : ;-.. : 3 , . .. ._ . ? -M

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standing corporate citizenship j:p :j:4.g .),; .:.;; g. .y p ..

by leading Arkansas businesses. j4 3.GY p. Pj' p l;:,.::f...; W 0Sk j p. .- . .y 7 ,,, M 1:. ' - y H.1 h F r .F '

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The Company's contributions 7 in the areas of economic and M.&4 (M k'h ! 7

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community development, .' .2

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charitable support and involve- ?b !.~  % ? J'.1 ? 'cA ment with youth Pro & rams were W: U. . Ml. - N.S O, '/ l' ,** M+r; J'? 'M.M?*::U..

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highlighted at the 1983 ceremony. ,,

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Particular emphasm was placed 1;Q.f.-364f y..

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F on AP&L's Helping Hand y[ y -

Programs through Project le"v l. MauM n. AP&L pnutent and shtei enecutwc ottwer. (nght) accepts the 1981 Arkansa~ Corprate llu mamtanan Deserve and I roject Conserve. or the Year Award for the Company from Dand lones prc~ndent at KARK IV at last n tober\ Commumty %me These efforts to an.d the elderly Am,,s, n,,ne, n,c Ama,s was ,,,,.se,,esto Ap31 m,th,he m ,3 % ,u <a, and r.eedy are the largest such utility-sponsored programs in the nation. The achievements of thousands of AP&L employee /

volunteers over the past 70 years were another area of special recognition.

At AP&L we are grateful for this Award and pledge to continue to be actively involved in advancing the area we serve through a broad spectrum of public service activities.

i

Pcrformance Highlights ,

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I 1983 1982 Increase Revenues from operations (000) $1,206,145 $1,046,143 15 Operation and maintenance expenses (000) $ 770,603 $ 669,497 15

,, A!!owance for funds used during construction (000) $ 27,780 $ 23,208 20 Net income (000) $ 126,896 $ 107,372 18 TOMORROW Cagitaiizatien-end of yea,(000)

(investm- t required to provide service) $2,179,864 $2,058,542 6 Construction expenditures (000) $ 247,449 $ 208,248 19 l h Total utility plant investment-E end of year (000) $3,241,847 $3,004,440 8 i

g Customers:

Electric (end of year) 545,309 535,381 2 C Gas (end of year) 65,710 65,824 -

ICIL DIVIR5fflCATION CO%tstCNfTY siRVICE 9 Energy sales to retail customers:

l E Electric (millions of kilowatt hours) 14,755 14,121 4 Natural gas (millions of cubic feet) 10,960 11,505 (5)

^

Employees (end of year) 5,285 5,165 2 Peak demand (megawatts) 3,748 3,541 6 Average use per customer (kilowatt hours):

Residential 9,867 9,814 1 Commercial 51,445 50,442 2

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8404100248 831231

. PDR ADOCK 05000313

a. I PDR i

President's Perspective industry. It will literally save our Office on Volunteerism and KARK-TV, customers billions of dollars over the Little Rock.

life of our coal units, and it's a savings

• We entered into a " fair share" r that accrues 100% to our customers. agreement with the NAACP that we e Our financial performance con- intend to make a model for the industry.

tinues to reflect our corporate commit-

• We have vastly increased our ment to sound business practices. Our work with communities in the area of return on average common equity was economic development and jobs creation, the number one need for our 14.8%, up from 13.1% last year.

Coverage ratios were considerably state.

improved,3.14 times for the mortgage

• Education is a vital area of coverage and 1.73 for the charter. Cash activity, and we are funding several 4 flowimproved markedly. We were able education programs aimed at raising

~

to fund 63% of ourconstruction program the level of educational performance for N (excluding nuclear fuel) this year students and teachers.

through internally-generated funds. These are just some of the examples Net income was up 18% and revenue of how we are returning the Company from operations increased 15% from to its traditional role of" Helping Build

$1,046,143 to $1,206,145. It is also Arkansas & Southeast Missouri."

important to note that our construction AP&L is also returning to marketing.

and operating expenditures were under it will not be "old wine in new bottles"

- budget, reflecting tight management either. Like most utilities in the seventies supervision and effective cost control, and eighties, we relegated marketing It's hard to believe that ten years ooth of which will continue in the future. efforts to a minor role. Not anymore. j have passed since the shock waves of e Our public image improved We are going to seek out innovative the Arab Oil Embargo began buffeting considerably. We still have advance- approaches to " sell" off-peak capacity the electric utility industry with un- ments to make, but customer surveys in a carefully planned fashion that will precedented change. Coping with this very clearly demonstrate a substantial aid customers and investors. That drastically different and complex improvement in public perceptions of " selling" might take the form of operating environment-brought on our Company. innovative pricing, or marketing of load by this decade of energy crisis-has I am keenly aware that numbers for control devices or other means.

been the greatest management challenge a single year, financial or otherwise, The program will be built on a i

( ever faced by our industry. are not a complete or accurate yardstick solid base of extensive customer l research. We are also examining non-At Arkansas Power & Light Company, by which to evaluate a company's l we've met that challenge head-on performance. But as you review this traditional areas, and we expect our j through corporate strategies anchored annual report-including key sections new Middle South Utilities subsidiary, ,

to foresight, innovation and economy. from our senior company management Electec Inc., to be a great asset in l Consequently, we believe our future is -I believe you will see why we do developing new non-regulated ,

l well-charted because of our success indeed believe we are " Prepared for marketing strategies. We've already '

! in achieving goals and objectives in Today and Positioned for Tomorrow." had considerable success with our year- l l important areas, such as fuel diversi- Our commitment to corporate citizen- old All-Season Heat Pump program. A fication, financial integrity and customer ship remains as a key Company priority, greater share of both the replacement services. For example: Meeting that responsibility has meant and new construction heating / cooling 6 We have virtually eliminated oil market has been achieved with an I aggressive action across a broad spec-from our generation mix. In 1977 we trum of public service activities. For aggressive distributor-dealer co-burned over 11 million barrels of oil. example: operative advertising program.

This year oil usage will be minimal. o Our Helping Hand program is In the regulatory area, this past year By early next year our final coal-fired entering its third year and has won wide- saw stipulated rate increases for unit will be complete, giving us spread support and acclaim from all customers in both Arkansas and an enviable energy diversification of sections of our service area. Missouri.

coal and nuclear power. Further, we e AP&L became the first utility The Arkansas Public Service were able to negotiate what industry in the state ever to receive the Arkansas Commission (APSC) granted an analysts have called the best coal Corporate Humanitarian of the Year increase of $39.8 million, plus a modi-delivery contract in the history of the Award presented by the Governor's fication of our" nuclear incentive clause,"

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i which lessens the negative financial ye -

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yyp yT impact we have experienced with th,s i .s ,y provision in the past.

• 1 'F. s i We also received a $3.2 million '

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increase for our Missouri retail  %. .. /

l customers. Wholesale increases for Arkansas and Missouri customers Q s l amounted to $2.5 million. ,

It's important to note that-in spite - * '

I

• of these rate increases-AP&L's -

rates remain highly-competitive with [

other states. In fact, a University of Arkansas at Little Rock study has found l

that

• electric rates in Arkansas are among the lowest in the nation."

s i Without question, the greatest

'  !"l &""Ser M crms *"d stafI u'orted round-the-clock in responding to the emergency situation created challenges facing our Company are the currently pending issues before the @"" "I d' "'*' d'"'"#"X '" 8'""'"" '" ^ d d' O"'P""Y Federal Energy Regulatory Commission Light Company, Mississippi Power & The 36% allocation of Grand Gulf (FERC). One involves the allocation of Light Company, and New Orleans forced us to act immediately to preserve the capacity and energy from the G rand Public Service). His proposal was the Company's financial viability. Our Gulf nuclear plant in Mississippi and supported by the l_ouisiana PSC, which current APSC rate filing includes a rider

the other a proposed pooling of also proposed the pooling of all energy that recognizes the need to collect capacity and energy costs for all Middle and capacity costs on the Middle South increased revenues to cover that con-South Utilities System operating System. After the hearings concluded tingency. The provision proposes a companies. A final decision against on this proceeding, I.ouisiana Power & phase-in deferral that would AP&L in either case would force sub- Light, Mississippi Power & Light and moderate the impact of Grand Gulf

stantial rate increases for the Company. New Orleans Public Service expressed costs on our customers if our appeal is An administrative law judge has their support for the pooling of all unsuccessful. Of course, we hope our ruled that AP&L should be allocated energy and capacity costs on the appeal will be successful since that will 36% of Grand Gulf Unit 1despite an System. allow us to withdraw the Grand Gulf agreement among the operating If the administrative law judge portion of the rate request.

l companies of Middle South Utilities accepts this proposal and it is upheld in closing, I encourage you to read

that AP&L not receive any allocation. by the FERC, the result would be a loss about the progress of our wholly-l Incidentally, our position was supported by AP&L of most of its cheap coal and owned subsidiary, Associated Natural l by the FERC staff. This unexpected nuclear energy to Mississippi and Gas Company, as presented on page 31 decision came in February,1984 Iouisiana. It would be replaced with of this Report. Mr. Thurl McSpadden, and is being appealed to the full more expensive energy from those two ANG president, and his staff are Commission. If allowed to stand it states. If the energy pooling concept providing excellent service with would force us to increase rates by were to be approved,it would have the profitable performance.

approximately 27%. effect of making the Grand Gulf alloca- The challenges ahead are obviously Also pending before a FERC tion issue moot. Therefore, in the event formidable, but so was the energy crisis administrative law judge is a new of adverse FERC rulings on both issues, of ten years ago. We are convinced Middle South " System Agreement," the maximum rateincreasein Arkansas that the abilities and spirit that brought which sets forth system operating would be approximately 35%. us successfully through that period procedures and cost allocation. During The AP&L Board of Directors has will do so again today and tomorrow.

! these proceedings, a FERC staff member voted to vigorously oppose both issues.

I proposed a pooling of all coal and We have also received excellent support

• /' [ ///

nuclear energy and capacity costs on in both Arkansas and Missouri. Public the Middle South System and an officials, the Public Service allocation of these costs spread evenly Commissions and other various state Jerry L Maulden

! among all four of the Middle South agencies and customers in both states President & Chief Executive Officer operating companies (Arkansas Power have worked aggressively to support

& Light Company, louisiana Power & the AP&L position.

3 t

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t Fu21 Diversification I l

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From the day Arkansas Power were announced. This was a secand bring Arkansas Power & Ught l & Ught began electric generation with major strategic decision to complement Company's total nuclear and coal I

steam until 1967, natural gas was the the earlier decisions to build nuclear generation to six units and over 3,100 logical fuel to provide a majority of generation. Throughout 1973 and 1974, megawatts.

l Arkansas Power & Ught Companys our new construction team was working The opening of the 1980's saw the l generation capability. It was available hard to complete that first nuclear unit fruition of our diversification decisions.  ;

and cheap. By 1967, however, it became on time. When Unit 1 of ANO Arkansas Nuclear One Unit 2 and 1 apparent that nuclear-based generation went commercialin December, White Bluff Unit 1 botn began initial l

would offer significant long-term 1974, it provided some welcomed operation in 1980. This was closely l economic advantages to Arkansas relief to the.high oil prices caused by followed by White Bluff Unit 2 in 1981 and Independence Unit 1 in early 1983.

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]j With the operation of Independence 4'

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Unit 2 by or before January,1985, j y .yy 3 / Arkansas Power & Ught Company will j

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j have accomplished a major realignment of fuel sources only 18 years after 1 gy q ;g <

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.Ef l Arkansas Nuclear One Unit I was y Eg yJ 4 g. .  ?) announced. The average cost of this 9 .' g x?J' . ,.

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- . construction has been approximately

.E. $470 per kilowatt. To build those same

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'a% units today would probably cost $1,500 Hy' .-

to $2,500 per kilowatt.

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Bccause of our fuel diversification 63.

. program, the Company has reduced oil

' ,pr consumption from a high of over 11

%" . million barrels in 1977 to less than 165,000 barrels in 1983. (Most of the 1983 usage was for unit start-up purposes.) Natural gas consumption has been similarly reduced-from over 100 million cubic feet in 1970 to less i Senior Vice President William L. Cavanaugh, lil at the White Bluff Steam Electric Station. than 35 million in 1983. Today,82 percent of Arkansas Power & Ught Power & Ught Companys customers. the 1973 Arab oil embargo and the lack Companys generating capacity is In March of that year, the Company of natural gas. supplied by nuclear and coal-fueled took its first major step toward fuel In 1977, our construction program plants. Across the United States, approx-diversification with the decision to for fuel diversification took its last major imately 6 percent of electric generation build Arkansas Nuclear One (ANO), step to date.-we announced construction is by oil-fired plants. For Arkansas the Southwest's first nuclear-fueled of two coal-fired units in Independence Power & Ught Company, the compar-generating station. A second unit at County. These two units, identical to able figure for 1983 was .2 percent.

ANO was announced in early 1970. the two units at White Bluff, would Because of the wisdom of Arkansas Naturalgascontinued to be the domi- Power & Ught Companys fuel diversi-nant fuel until long-term gas supply fication decision, Arkansas' energy contracts were cancelled in 1971. future looks brighter than ever. The Supply curtailments and subsequent bulk of our generating capability is now government regulations limiting the v fueled by nuclear and coal-resources use of natural gas as a boiler fuel further that are abundant, domestically available, complicated the problem. All this environmentally compatible and ,

served to reinforce the wisdom of the  ; economically sound.

Companys decision to proceed with / ,

fuel diversification on the Arkansas y.  %. hg .ru Power & Ught system. ME '

W liiam Cavanaugh, III The construction program continued .

j Senior Vice President in 1973 as the White Bluff coal units

• Energy Supply Wnth completion of Independence linit 2, AP&L will have four coal-fired units on line. l 4

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[ Financial Integrity 1

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l l

l *Ihe financial strength and integrity Beginning in the early 1970's, we This was particularly troublesome l

of a utility is important to its shareholders were faced with dramatically increasing becauseof theincreased"consumeristic"

,, and customers alike. Only from a strong, fuel costs, wages and materials-all attitude of government and regulators.

l solid financ al base can flexibility be results of oil embargoes, double digit Presently, we are near completion exercised to permit timely investment inflation and spiraling intere> ' rates. of our fuel diversification program with I

in new, lower fuel cost facilities. With Our need for greater amounts of con- only one unit yet to be completed.

such flexibility, Arkansas Power & Light struction capital intensified our The winding down of long-term con-Company is not forced to sell securities problems. struction projects and subsequent l in adverse financial markets, therefore, Several financial and environmental inclusion of their costs in the rate base, giving us the financial strength and factors and the regulatory lag in granting and an easing of the general inflation I flexibility to minimize the final cost needed rate increases to offset the rate coupled with continued improve- ,

! of power. higher cost of doing business created ments in budgeting methods, have over

g the last three years led us back to a

, position of relative financial strength.

l .,

The visible signs include a steadily l .r '

increasing rate of return on l

1.

i common equity, improved bond ,

interest coverage, an increase in '

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funds generated from normal operations that can be used for construction purposes and a decrease in short-term j m e . - -

debt outstanding.

• What does this mean?

l , For now, the Company has some

- 1 - *-

breathing room. But we don't "have it l ,

---

made." We merely are positioned to t.,i step back from some of our previously pressing problems and plan and imple-

, e, ment strategies that will further T ay enhance our financial integrity.

as

• What does the future hold?

Our current position is that of renewed financial strength. Planned Senior Vice President Michael B. Bemis in the data Power plant construction is nearly cessin nier at Arst's corporate headquarters severe fiscal problems more than once during the 1970's and the early 80's. complete. Experience and knowledge Through the 70's, we experienced a gamed by solving past problems will Net Income steadily worsening rate of return. Other allow AP&I,given equitable and timely WWONS OF DOtWS key indicators declined.The financial rate increases, to continue to provide 238 rating agencies showed their concern for the needs of current customers.

120 . by lowering our credit ratings. Energy needed at competitive rates to Persistence, determination and attract new business ventures to the los severe cost reduction helped maintain state and encourage expansion of l

'O the Company as a solvent business existing business will also be available.

75 entity during this period. Many innova. This expansion will increase the

f. - -

tive transactions were consummated. economic base of Arkansas and improve

' 'O the job market and living standards for Greater emphasis was placed on cash l

45 management, budgeting and cost its citizens.

l e Company's computerized econo-15 metric corporate model was further Michael B. Bemis I

o refined and used extensivelyin analysis Senior Vice President 19n vs 16 77 vs 79 so si 's21983 of alternative actions designed to over- Finance, Regulation i

I come or minimize the effects of financial and Legal Services AP6t's yc r-end 1983 net inume rcas up 18% over i

problems. In addition, the Company

- afh <r i ncreSd$in n ia 3r ,"[h." "" "" was forced to become more aggressive in rate increase requests and legal areas.

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.- . . , . - - - - - - . , , . , . , , , . . . - . - , ,,.,,n,, , - , , - - - - - - - - - , - - - - . - - - - - - - - - , - - - . - , - _ _ , - - - - - - - - - . _ _ . - - - - - -

Marketing g  :

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-increased rates or increased sales.

B... -) , [g We feel we are in a position to recover

.'. a large share of increased costs utilizing reased sales rather than increased 3  ; ,

j .' ! ; A healthy economy requiresa healthy

. [ .3',I , ,

and economical energy source. The Arkansas economy is a major concern g; i to AP&L. Jobs and the creation of jobs I

_. e I require a good supply of fairly priced 1Qydun 1 7  ! energy.

p m g.n Our primary focus over the past few w="*""*" ~C years has been in constructing M, Et

", generating facilities to meet current and projected customer demand. While we

)

gg_# 1 have been implementing innovative load management programs at AP&l, ilhri M __

vuocShsgG controlling the demand side of the equation has been a secondary priority.

Semor Vuce Pressdent lack L King at AP&L's main Little Rock office.

Arkansas Power & Light has worked siderably below the average kilowatt- situation and are emphasizing both diligently to complete its fuel diversifi. hour cost. So, increased kilowatt-hour supply and demand initiatives. This cation program and with completion of sales will allow the fixed charges of the success will mean that we can more Independence Uait 2 by early 1985, will generating units already on line to be fully control our financial performance have no major generating units under spread over a larger number of kilowatt- and reduce our reliance on rate cases active construction. hours. Spreading a fixed number of for increased revenues. In addition, Thanks to this diversification effort, dollars over a larger number of kilowatt- on-peak conservation and peak load our customers are benefitting from hours will reduce the average reduction activities can free electrical economical rates that could not be cost per kilowatt-hour to the customer. energy sources to be used to create possible otherwise. This advantage has The Company would benefit because jobs and improve the economy.

been verified by University of Arkansas presently its costs are rising more rapidly To accomplish these goals, AP&L l at Little Rock studies that conclude that than kilowatt-hour sales. When this must accelerate its capture of market

" electric power rates in Arkansas are happens, increased costs necessitated share so the customer can be offered among the lowest in the nation." by inflationary pressures for labor, options and make the choice on the Because electric demand varies from materials and all other costs have to be appropriate energy source. For that season to season and from time period recovered through one of two methods reason, we will be expanding our to time period, we are striving to utilize market and product knowledge, our this capacity in the most efficient manner, '

research capabilities and our knowledge thereby lowering the per unit cost to My pay MenP.s of the in-use service our customer our customers. makes of kilowatt-hours he purchases The Arkansas energy market is  % from us. (

changing. Electricity is capturing a -

There's no question that an effective, larger share of the total market. Natural - -

carefully-planned marketing effort at gas and other fuels are losing market share. Electricity is becoming a more h AP&L will provide short- and long-h Wan pay fot, term benefits to both our customers competitwe and suitable substitute for - one that'H pay yoit back? and m, vestors.

additional applications previously _ _

reserved for other energy sources. rgsgi9 Our customers will benefit by EME*5 AP& L making more effective utilization of existing generating units through Ms:

g.gqWyff

.n=

Jack L King effective marketing. With these units ~,,';L.m_ Senior Vice President on line, the marginal cost of producing g,j;gg

" ' - ~

Energy Delivery & Services an additional kilowatt-hour is approxi-mately equal to the fuel cost and con-In 1983 AP&L launched a systemwide advertising armpaign to promote the All-Scason Heat Pump.

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Community Service l

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and its Arkansas Farm Family of the Year

{ g  :.4 program.

.i Youth programs challenged young

people in Arkansas and hiissouri j ,. W q through a variety of seminars and activi-f- 4 A ties, including leadership development,

! recognition and achievement in science, and training of young journalists and e j agriculture specialists. For example,

over 1,500 4-H and FFA members have been recognized in the 31 years AP&L 4

l has sponsored the Purple Circle Club for showing G rand Champion animals at the l ,

annual State Fair and Livestock Expo-

h sition. Approximately 110,000 FFA l members have attended summer leader-

{, ship training seminars, workshops and g recreational activities at the Camp l -; Couchdale facility, an approximately l Senior Vice President Charles L Steel at the Pula>Li County Chapter headquarters of the American Red Cross.

50-acre site made available to them by i

AP&L In addition the Company l Arkansas Power & Light Company is Project Conserve has helped over 946 sponsored its annual Energy Tomorrow much more than transmission lines and elderly and needy persons weatherize science competition in 1983, which power plants. Building on a 70-year their homes. Stockholders fund the awards college scholarships to the tradition of community service, the AP& L program, which has made $200,000 winners.

corporate philosophy involves a multi- available to volunteer groups willing to During December,when the worstice j

faceted program of community and undertake weatherization projects. storm of the century hit Arkansas, the l economic development. Our Company has spearheaded an Company donated $10,000 to the Our Company has divided ourinvolve- aggressive program of hiring the handi- American Red Cross, S10,000 to the mentintofw' emajorareas-theHelping capped, and currently employs persons Salvation Army and $2,500 to the Union Hand Programs, Employment of the who are deaf, visually-impaired, have Rescue hiission for relief efforts.

I Handicapped, Community and Economic lost limbs or su ffer from polio or epilepsy. Our commitment to the advancement j Development, Youth Programs and Community and economic develop- of our service area has brought honor to i Contributions. ment have been a part of the Company's AP&L in various ways. For example,in The Helping Hand Programs marshall activity since the late 1940's. In a 32-year 1983 AP&L received the statewide the financial resources of stockholders, period ending in 1983, such develop- Corporate Humanitarian of the Year l

employees and customers to meet indi- ment efforts have been directly or Award from the Governor's Office of vidual short-term, energy-related emer- indirectly responsible for much of the Volunteerism and KARK-TV for its l

gencies and to weatherize the homes of $6.7 billion in plant investment in 2,069 community service work and the elderly and less fortunate. new plants and 423,713 new jobs. Air. hfaulden was recognized as Arkansas Two of the most successful parts of the The Company continues to be well- Volunteer Industrial Developer of the program are Project Deserve and Project recognized through its Arkansas Com- Year by the Arkansas Chapter of the j Conserve. munity Development Awards program 17-state Southern Industrial Develop-Through Project Deserve, over 5,100 ment Council.

needy families have receive <1 financial W look forward to continued service l assistance with shmt-term energy-related as we prove every day that we truly are problems. Administered by the American " Helping Build Arkansas and Southeast Red Cross with money contributed by hiissouri.

i stockholders, employees and customers, ,

l over $237,205 has been distributed since - 0 0 1982. People helped include a mother of b4d (A five who was disabled by a stroke and Charles L Steel was looking for work, an elderly widow Semor Vice Pres,i dent with diabetes faced with mounting , "

hospital bills and a young woman Recrens nx Stewart led efforts in College statmn to cnppled with arthritis. weatherce aimost 25o homes m that com,riu mty, using resources provided by AP&L's Project Conwrve.

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BOARD OF DIRECTORS - I f

John A. Cooper, Jr. Cathy Cunningham Richard P. Herget, Jr. Kaneaster Hodges, Jr. Hal E. Ilunter, Jr. $

President Real tstate Dewtoper President Attorney Attorney l

Cooper Communities, Inc. Helena, Arkansas Atkins insurance Corporation & Former LLS. Senator Nero Aladrid, hiissouri ErntentWie, Arkansas Uttle Rack, Arkansas Newport, Arkansas h ,

.y l Y t 8 .

g . .4 ,

n- 1 Floyd W. Irwis Jerry L Maulden Raymond P. Miller, Sr, M.D. Roy L Murphy William C. Nolan, Jr. I Oatrman of the &wrd Pressdent & Chief Execurit< Uttle Rock Internal President Attorney l

& President Officer <f the Company hiedtdne Onic Atid-South Engineering D Dorado, Arkansas l Afidae South Utahties, Inc. httle Rxk, Arkansas Uttle Axk, Arkansas Company New Orlains, Louisiana Hot Synngs, Arkansas l,

}m; - i l )

.f . ,

ih '

q( )

Robert D. Pugh h

Oairman of the Kurd George K Reeves Attorney Carutherstulle, Afissouri Reeves E. Ritchie Retired Ocurman of the &urd of the Comparty Gus B. Walton, Jr.

Partner Poe Tratvl President N

Michael E. Wilson tre Wilson and Company of Direttors .

1%rtland Gin Company Uttle Rak, Arlansas Uttle Rxk, Arkansas Wii.um. Arkansas Ibrtland, Arkansas ADVISORY DIRECTORS l

All Past Directors of the Company L'wrence Blackwell Richard C. Butler LC. Carter l

\ Attorney Past Chatrman of the Kurd Past President l lhne Bluff Arkansas of Commercial National Bank R.celand Fomis Retired and Peoples Sat'ings & loan Asswration Stuttgart, Arkansas .

bttle Rxk, Arkansas  ;

l Dr. Marshall T. Steel R E,L Wilson Past President of Chairman of the hurd & l Hendrsx Collqv. Retired Chief Execurity Offurr Pune Bluff. Arkansas ice Wulsam and Gmtpany I Wdson, Arkansas l l

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition bonds in June, and the retirement of

$2 million of first mortgage bonds through The steady trend of improvement in the mandatory cash s,nking i funds. Th,is is financial condition of the Company, which c nsiderably less than the net long-term be8anin 1981, continued throu8h 1983. This

. . debt increases of $124 million in 1982 and improvement is evidenced by an increase in $95 million in 1981. The Company also the amount, as well as the quality, of net retired in 1983, through mandatory cash income, an increase in the rate of return on sinking funds, $7 million of preferred stock.

common equity, and an improvement in the The increase in cash earnings which has mortgage and charter coverage ratios. It is

, been experienced in the last three years has also encouraging to note that the Company also resulted in improved mortgage and was able to fund its 1983 construction program charter coverage ratios.The earnings ratio for which totaled $248 milhon, mcluding allow- first mortgage bonds, which must be a mini-ance for funds used during construction

, mum of 2.0 times the annual mortgage interest (AFDC) of $28 million, with net external

, requirement for issuance of additional financing of only $85 million and end the bonds, was 3.14 at December 31,1983 year free of short-term debt. compared to ratios of 2.65 at December 31, <

. . 1982 and 2.90 at December 31,1981. This Liquidity and Capital Resources ratio has increased despite net increases in The Company's liquidity and access to first mortgage bonds of $23 million in 1983 capital markets continued to improve in and $138 million in 1982. The earnings ratio 1983. This improvement resulted principally for preferred stock, which must tm a minimum from an increase in cash earnings (AFDC as a of 1.5 times the Company's annual interest percent of net income continued at a low charges and preferred stock dividend require-level) and a decrease in the Company's ments to allow the issuance of preferred need for external financing. stock, has increased to 1.73 at December 31, Construction expenditures, excluding 1983 compared to ratios of1.54 at December AFDC, amounted to $220 million in 1983, 31,1982 and 1.51 at December 31,1981.

$185 million in 1982 and $349 million in 1981. Construction expenditures are projected Internally generated funds as a percentage of to be $259 million in 1984,$219 million in construction expenditures, excluding nuclear 1985 and $201 million in 1986. These fuel, for 1983,1982 and 1981 were 63% amounts include AFDC of $25 million, I

58% and 28% respectively. This improve- $10 million and $8 million, respectively.

ment is due to the increase in cash earnings Additionally, the Company has debt and the stabilizing of the level of construction maturing and cash sinking fund requirements expenditures as a percent of capitalization. of $121 million during the next three years.

New security issues in 1983 of long-term The Company plans to rely on internally debt and common stock were much less generated funds and relatively modest s than those issued during 1982 and 1981. amounts of outside conventional financing The Company sold only $65 million of to fund these requirements. Based on the common stock in 1983 compared to Company's mortgage and charter ratios at

$80 million and $84 million in 1982 and 1981, December 31,1983, as indicated above, the respectively. The Company's net long-term Company could sell an additional $478 mil-debt for 1983, exclusive of its Department lion of first mortgage bonds or $174 million of Energy contract for disposal of its spent of preferred stock at an interest or dividend nuclear fuel, increased by only $28 million: a rate of 13% The Company presently has sale of $25 million of first mortgage bonds in SEC authorization through May 31,1984 to February, the retirement of $40 million and sell $100 million of first mortgage bonds.

the sale of $45 million of pollution control The Company had temporary investments of 10

$31 million at December 31,1983 and unused and (3) three rate increases approved by the short-term borrowing authority of $125 mil- Company's principal regulator during the lion. The Company also has the ability, with past four years. These three rate cases SEC approval, to increase this short-terin resulted in the granting of $171 million in borrowing authority to a total of $213 mil' ion. additional annual revenues placed in effect between October 1980 and August 1983.

Al ng with these three rate increases, the Results of Operations Company also filed companion rate apph,ca-Net income increased to $127 million in tions and received increases in rates to 1983 from its 1982 and 1981 levels of wholesale and other retail customers. (See

$107 million and $96 million, respectively. Note 2 to the Financial Statements " Rate Net income, excluding AFDC, increased to Matters.")

$99 million from its 1982 and 1981 levels of

$84 million and $73 million, respectively. Effects of Inflation Revenues for 1983,1982 and 1981 were . .

$1.2 billion, $1.1 billion and $1.0 billion, Desp.tei the reduced level of inflation in respectively. The increase in 1983 revenues, 1983,its impact on the Company's operations which amounted to $160 million or 15%, in recent years has been significant. (See was due to an increase in KWH sales, rate Note 13 to the Financial Statements " Effects increases and increased fuel costs. Operation f Infl tion 01 Operations.")

and maintenance expenses also increased 15% in 1983 to $771 million from the Overview

$669 million level in 1982 primarily due to The Company's overall financial position increases in fuel and purchased power related has improved greatly during the past three costs. The 1985 usults include an years as compared to prior periods.

$8 million or it, to increase in depreciation Maintaining and/or continuing such expense, a $30 million or 43% increase in improvement is largely contingent on the income taxes charged to operations, a Company's ability to charge adequate rates

( $7 million or 6% increase in interest expense to recover costs and allow for a fair rate of and a $5 million or 20% increase in AFDC. return on its owner's investment. The Depreciation expense increased due to the Company's costs could increase substantially commercial operation in January 1983 of the if a ruling by an Administrative Law Judge first unit of the jointly-owned, coal-fueled for the Federr.1 Energy Regulatory Commis-Independence Steam Electric Station. sion (FERC) is upheld concerning the Income taxes charged to operations increased allocation of power to the Ce npany from the due to an increase in taxable income and Grand Gulf Nuclear Station located in the additional normalization required by Mississippi which is owned by Middle South current tax laws. Interest expense increased Energy, Inc., a wholly-owned subsidiary due to the sale of new debt. of Middle South Utilities, Inc., or if, The continued improvement of the in a second unrelated case, a proposal not Company's financial position is attributable supported by the Company for the allocation l primarily to the following three factors: of production costs among the Middle South (1) the reduction in the amount of the System operating companies is accepted by Company's construction work in progress, the FERC. Neither the allocation nor the (2) continuation of effective cost controls proposal is supported by the Company. (See Note 4 to the Financial Statements-

" Commitments and Contingencies.")

11

REPORT OF MANAGEMENT The management of Arkansas Power & Light Company has prepared and is responsible for the financial statements and related financialinformation included in this annual report.

The financial statements are based on generally accepted accounting principles, consistently applied. Financial information included elsewhere in this report is consistent with the financial statements.

To meet its responsibilities with respect to financialinformation, management maintains and enforces a system of internal accounting controls which provides reasonable assurance, on a cost effective basis, as to the integrity, objectivity and reliability of the financial records and as to the protection of assets. This system includes communication through written policies and procedures, an organizational structure that provides for appropriate division of responsibility, the selection and training of qualified personnel, a performance account-ability program a,d a comprehensive internal audit program.

The board of dhectors pursues its responsibility for reported financial information through its audit committee, composed of outside directors. The audit committee meets periodically with management, the internal auditors and the independent certified public accountants to discuss auditing, internal control and financial reporting matters, and reports thereon to the board of directors. The independent certified public accountants have full and free access to meet with the audit committee at any time without members of Company management being present.

The independent certified public accountants provide an objective assessment of the degree to which management meets its responsibility for fairness of financial reporting.

They regularly evaluate the system ofinternal accounting control and perform such tests and other procedures they deem necessary to reach and express an opinion of the fairness of the financial statements.

We believe that these policies and procedures provide reasonable assurance that our operations are carried out with a high standard of business conduct.

y'l l$/

Jerry L Maulden President & Chief Executive Officer 12

Deloitte Haskins+ Sells 39th Floor One Shell Square New Orleans. Louisiana 70139 (504) 581-2727 Cable DEHANDS AUDITORS' OPINION Arkansas Power & Light Company:

We have examined the consolidated balance sheets of Arkansas Power & Light Company and its subsidiary as of December 31, 1983 and 1982 and the related consolidated statements of income and retained earnings and of changes in financial position for each of the three years in the period ended December 31, 1983.

Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the above-mentioned consolidated financial statements present fairly the financial position of the Company and its subsidiary at December 31, 1983 and 1982 and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31, 1983, in conformity with generally accepted accounting principles applied on a consistent basis.

NUk b5 l February 20, 1984 k

l

Arkansas Power & Light Company and Subsidiary CONSOLIDATED BALANCE SHEETS l

December 31, l

ASSETS 1983 1982 (in thousands) l Utility Plant (Notes 4 and 5): l Electric plant. . . . .. ... . ..... . .. . .... ... . . . . . $2,871,858 $2,585,957 Gas plant. . . . . . . . . ........... ... ........ ... 38,612 37,362 Construction work in progress. . . . . . . . . . . . . . . . . . . 306,398 364,252 Nuclear fu el . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. 24,979 16,869 Total . . . . . . . . . . . . . ... ... . ... ...... 3,241,847 3,004,440 Less-accumulated depreciation and amortization . . . . . . . . . . . . . .. .. ... . .... . 679,232 605,404 Utility plant-net. . .... . .. .. .. . ... 2,562,615 2,399,036 l

Other Property and Investments:

Investments in associated companies, at equity (Note 4). . .. . . .. .. .. ..... ....... . . 36,165 40,064 l Other, at cost (less accumulated depreciation) . . . . . 664 512 To tal . . . . . . . . . . . . . . . . . . ........ .. ... ..... 36,829 40,576 Current Assets:

Cash and special deposits . . ... ... .. . .... .. ...... 7,831 8,302 Temporary investments, at cost which approximates market:

Associated companies (Note 7) . . . . . . .... . . . 29,000 21,600 Other . . . . . . . .. .. . . . . ... .. .. ... . .. 2,060 945 Notes receivable-net . ... .. .......... .. . . 1,622 1,195 Accounts receivable:

Associated companies . . . . . . . . . . . . . . .. . .. 23,555 14,737 Customer (less allowance for doubtful accounts

-$2,179,000 in 1983 and $1,538,000 in 1982) ... 71,007 44,051 Other.... ..... . ...... .. . .. ....... .. 17,918 3,252 Deferred fuel cost. .. .. . .. .. ... . . 5,717 21,951 Fuel inventory, at averaee cost. ... . .. . .... . 44,610 57,821 Materials and supplies, at average cost. . . . . .. .. .. . . 33,711 32,950 Prepayments and other . .. ....... ... . . .. 10,750 9,030 i Total. .. . . . ... . .. . . .... . . .. 247,781 215,834 Deferred Debits. . .. .. . .. .. . ... . 12,292 13,971 Total . . . . . . . . . . . .. .. .. .. .. . . . . $2,859,517 $2,669,417 See Notes to Consolidated Financial Statements.

14

1 December 31, LIABILITIES 1983 1982 (in thousands)

Capitalization:

Common stock, $12.50 par value: authorized 325,000,000 shares; issued and outstanding, 54,980,196 shares in 1983 and 49,780,196 shares in 1982 (Note 9) . . . . ...... .. . .. . . .. . $ 687,252 $ 622,252 Paid-in capital ... . . . ..... ..... . . . . .. 6,045 5,457 Retained earnings (Note 8). . . . . . ... .... . . . 28,158 33,365 Total common shareholder's equity . ... . .. .. . 721,455 661,074 Preferred stock and premium, without sinking fund (Note 9). . . . .. . . ... .... . . . . ...... .. 126,890 126,890 Preferred stock and premium, with sinking fund (Note 9). . ........ ..... ..... ... . ... ...... . 133,931 141,138 Long-term debt (Note 10) . . . . ... . ... .... 1,197,588 1,129,440 Total . . . . . . . . . . ... .. . . ... 2,179,864 2,058,542 Current Liabilities:

Currently maturing long-term debt (Note 10) . . .. .. ... 9,865 2,297 Notes payable (Note 7) . . .. ... . .. .... ..... -

750 Accounts payable:

Associated companies . . . . . . . . ..... .. ...... . 6,896 4,286 Other . . . .... .. . . . ...... .. . . . 87,007 87,236 Customer deposits . ... . .. .. ........... 6,723 5,977 Taxes accrued. . . . . .... . .. . .. 35,784 33,696 Accumulated deferred income taxes (Note 3) . . . . . . . . . . . . 2,798 10,792 Interest accrued. .... .. .. . .. ...... .. ..... ... 43,975 37,919 Dividends declared. . . . .. . ...... .. .. ...... .. 26,254 24,630 l Nuclear refueling reserve . . . . . . . . . .. ... .... 12,651 12,304 Other . . ....... ... .... .... ... .... .... .. ... 41,960 43,548 l Total . . . . . . . . .. . ... .... . .... 273,913 263,435 Deferred Credits and Other Liabilities:

Accumulated deferred income taxes (Note 3) . ..... .. 246,640 208,960 Accumulated deferred investment tax credits (Note 3) . 129,252 80,348 Reserve for spent nuclear fuel disposal (Note 4). . . ... .

36,019 Other . . . . . . . .. . .. ...... .... ... . . 20,660 14,962 Total. . . .. . .. .. . ....... .. .. ... ... 396,552 340,289 i

Reserves. .. . . .. .. .... . . .. . . . 9,188 7,151 Commitments and Contingencies (Notes 2,4 and 5)

Total. . . .. . .. . . . . . . . . $2,859,517 $2,669,417 S e Notes to Consolidated Financial Statements.

Is

Arkansas Power & Light Compgny and Subsidiary CONSOLIDATED STATEMENTS'OF INCOME AND RETAINED EARNINGS Years ended December 31, 1983 1982 1981 (in thousands)

Statements of Income Operating Revenues (Notes 2 and 11):

Electric . .. .. . . $1,148,891 $ 994,124 $ 974,734 Natural gas. . .. . .. 57,254 52,019 40,827 Total . . . . . 1,206,145 1,046,143 1,015,561 Operating Expenses:

Operation:

Fuel.. . . . 322,658 262,604 307,213 Purchased power . . 166,126 178,841 141,316 Gas purchased for resale. . . 44,150 40,986 30,637 Other. . .. . .. 178,610 141,824 157,084 Maintenance. . . .. 59,059 45,242 43,675 Depreciation. . . . . 92,621 84,194 77,923 Taxes other than income taxes. 32,813 31,861 28,129 Income taxes (Note 3) . . . . 98,831 69,285 62,401 Total . . . 994,868 854,837 848,378 Operating Income. . . 211,277 191,306 167,183 Other Income and Deductions:

Allowance for equity funds used during construction . 18,095 12,722 11,541 Miscellaneous-net. , 6,372 7,062 20,292 Income taxes (Note 3) . . 8,085 5,625 (2,795)

Total . . . . 32,552 25,409 29,038 Interest Charges:

Interest on long-term debt . ..... . 119,466 108,557 90,755 i

Other interest-net of debt premium. . . 7,152 11,272 21,038 Allowance for borrowed funds used during construction . ... .. (9,685) (10,486) (11,712)

Total . ... . . . . 116,933 109,343 100,081 Net Income . . . $ 126,896 $ 107,372 $ 96,140 Statements of Retained Earnings Retained Earnings-January 1. . . . .. .$ 33,365 $ 43,134 $ 54,699 Add-Net Income ..... . . . 126,896 107,372 96,140 Total . . .... . . 160,261 150,506 150,839 Deduct-Cash Dividends:

Preferred stock . . . . 24,715 25,274 25,586

• Common stock . . .. . . . . 107,388 91,867 82,119 Total . . . . . 132,103 117,141 107,705 Retained Earnings-December 31(Note 8) . . .$ 28,158 $ 33,365 $ 43,134 See Notes to Consolidated Financial Statements.

16

Arkansas Power & Light Company am] Subsidiary CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION Years ended December 31, 1983 1982 1981 (in thousands)

Funds Provided By:

Operations:

Net income. . . $126,896 $107,372 $ 96,140 Depreciation. .... ... 92,621 84,194 77,923 Deferred income taxes and investment tax credit adjustments-net. ..... 78,127 56,696 56,473 Allowance for funds used during construction. (27,780) (23,208) (23,253)

Total funds provided by operations. 269,864 225,054 207,283 Other:

Allowance for funds used during construction. 27,780 23,208 23,253 Decrease in working capita!!... ..

17,080 Reserve for spent nuclear fuel disposal .

- 12,341 15,221 Miscellaneous-net . 12,943 2,987 2,630 Totalfunds provided excluding financing transactions . 310,587 263,590 265,467 Financing transactions:

Common stock2 . . . . . . 65,000 80,000 84,292 First mortgage bonds 3 25,000 155,000 103,382 Installment purchase transactions . . 44,900 8,325 37,735 Long-term bank loans. . . .... . .. ...

- 6,000 23,052 long-term obligation-Department of Energy (Note 4) 49,400 - -

Sale and leaseback transactions-net. - -

22,136 Book value of utility plant sold. 291 10,302 85,632 Short-term securities-net. - -

17,676 Total funds provided by financing. 184,591 259,627 373,905 Total funds provided $495,178 $523,217 $639,372 Funds Applied To:

Utility plant additions:

$247,449 $208,248 $372,694 Construction ejpenditures for utility plant . 80,559 Plant additions . ... ...... - -

Expenditures for nuclear fuel . . 8,110 6,655 3,063 Other-net . . 932 (837) 3,045 Total gross additions (includes allowance for funds used during construction) . . 256,491 214,066 459,361 Other.

Dividends declared on preferred stock. 24,715 25,274 25,586 Dividends declared on common stock . 107,388 91,867 82,119 Increase in working capital l .... ........... 11,778 67,389 -

Reserve for spent nuclear fuel disposal (Note 4) . 36,019 - -

Total other funds applied. 179,900 184,530 107,705 Financing transactions:

Redemption of preferred stock. . . . 7,175 2,979 2,943 Retirement of first mortgage bonds. 2,297 16,719 69,363 Repayment of installment purchase transactions 40,050 - -

Repayment of long-term bank loans . . .

- 29,052 -

Repayment of and investment in short-term securities-net . 9,265 75,871 -

Total funds applied to financing. 58,787 124,621 72,306 Total funds applied . $495,178 $523,217 $639,372 1 Workung caputalesslaJes dtort term suunties, current matuntues and deferred taxes umluded m t urrent asvts and current luuhlutses. The 198 3 mcreau un uvra rng c aputal ss due rn manly to mcreavs m aaou nts recentwMe whde offset hy deaeaws m deferredfuelcost andfuel tnventory a nd sm reaus tn accou nts pay-aNr. Iases narued and snterest accrued. The 1982 sm reaw un uvra urug capstal as due pnmanly to um reaws m Jefaredfuelcosts, fuel smvntory. materials and supphes amia darease un aaou nts payaMe whuleoffwt by a darease m spn neldepossts andim reews m interest aaruedand mtwellaneous otherhebdutues.11re 1931 Jes rease m avrimg taputal es due pnmanly to em reaws m accounts payaMe. mtern; aarued and omtract aJtwnces. partsally offset by inaeaws m ac-wunts ,ecenwble front aswaatrJ compames and matenals and supphes.

2. The ycar 1981 sm ludes $29.292.000 0fwmmon ss k inued m amnes tum wnth the Arkansas-hisswun Power Company (Ark-h14 consohdatum. Thss anwunt does not umlude a premsunu of $3.820.0tW assocsated wuth the issue.

3. Tine year i981 mcludes $21.160.000 of hrst mortgage kmds ens hanged for Ark -h10 fnest mortgay hmds and $ 7.222.UtM of fsrst mortgay hmds of Aswcsated Natural Gas Companv 4 Plant equered wsth the wnwhdaturm of Arn-Sta See Notes to Consolidated Financial Statements.

17

i i

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.

SUMMARY

OF SIGNIFICANT investment and percent ownership in these ACCOUNTING POLICIES stations are as follows:

A. Principles of Consolidation Investment at Percent Dec. 31,1983 Ownership The accompanying consolidated financial state- Generating Stations ments include the accounts of Arkansas Power & White Bluff i Light Company and its wholly-owned subsidiary, Steam Electric Station $389,881,000 57.0 %  ;

Associated Natural Gas Company Independence ,

Steam Electric Station $271,490,000 31.5 % l B. System of Accounts i The accounts of the Company are maintained The investment in the Independence Station in accordance with the sptem of accounts includes $100,760,000 of investment in the prescribed by the Federal Energy Regulatory Station's second unit which is still under i Commission (FERC). construction. l C. Revenues and Fuel Costs F. Pension Plan The Company records revenues as billed to its The Company has a pension plan covering sub-customers on a cycle billing basis. Revenue is not stantially all of its employees. The policy of the accrued for energy delivered but not billed at the Company is to fund pension costs accrued.

end of the fiscal period. l Substantially all of the rate schedules of the G. Income Taxes, , ,

Company include adjustment clauses under The Company joms its parent in filing a consoh,-

which fuel costs above or below the levels dated, Federal income tax return. Income taxes i allowed in the various rate schedules are re al.ocated to the Company in proportion to permitted to be billed or required to be credited its contribution to consolidated taxable income.

to customers. The Company has adopted a Deferred income taxes are provided for differ-deferral method of accountmg for those fuel costs ences between book and taxable income to the recoverable under fuel adjustment clauses. extent ermitted by the regulatory bodies for Under this method, such costs are deferred to the ratema mg purposes. Investment tax credits month in which the related revenues are billed. 11 cat,ed to the Company are deferred and

'l he fuel adjustment factor contains an amount mortized over the average useful life of the for a nuclear reserve, estimated to cover yelated property, begmnmg with the year allowed the cost of replacement energy when the nuclear in the consolidated tax return.

plant is down for scheduled maintenance and H. Allowance for Funds Used refueling. The reserve bears interest and is used to During Construction reduce fuel expense for fuel adjustment To the extent that the Company is not per-purposes during the shutdown period. mitted by its regulatory bodies to recover in D. Utility Plant and Depreciation current rates the carrymg cost of funds used for Utility plant is stated at original cost. The cost c nstruction, the Company capitalizes, as an of additi< ns to utility plant includes contracted appropnate cost of utihty p ant, an allowance for work, direct labor and materials, allocable over_ funds used during construction (AFDC) which is heads and an allowance for the composite cost of calculated and recorded as provided by the funds used during construction. The costs of yegulatory sys}em of accounts. Under this utility units of property retired are removed from utility mdust practice, con,struction work m progress plant and such costs, plus removal costs, less n the alance sheet is charged and the mcome statement is credited for the approximate

salvage, Maintenance are charked an repair toof accumulated depreciation. C mPosite mterest cost of borrowed funds and pro ertyand replace-ment of items determined to he less than units f r a reasonable return on the equity funds used of property are charged to operating expenses. f r c nstruction. This procedure is mtended to Depreciation is computed on the straight-line rem ve fr m the mcome statement the effect of basis at rates based on the estimated service lives the cost of financing the construction program of the various classes of property. Depreciation and results m treatm, g the AFDC char es in the on average depreciable property in 1983,1982 same manner as construction labor an matenal and 1981 amounted to approximately 3.3% each c sts. As non-cash items, these credits to the (

inc me statement have no effect on current cash year.

subject Principally, to the lien all thefirst of its Company's mortgage utilitbondplantis er ngs. After the property is placed in service, indenture. the AFDC charged to construction costs is, recoverable from customers through depreciation E. Jointly-Owned Generating Stations provisions included in rates charged for utility The Company jointly owns two coal-fueled service. The effective composite AFDC rate for generating stations, both having two units. the Company was 8.8%,9.1% and 9.4% for 1983, One of these units is still under construction. 1982 and 1981, respectively.

The Company is the agent for the respective The Companfs policy is to capitalize AFDC co-owners and operates the stations. It records on projects dunng penods of interrupted con-its investment and expenses associated with these struction when such interruption is temporary stations to the extent of its ownership interests and the continuation can be justified as being in the generating stations. The Company's reasonable under the circumstances.

18

I. Reserves It is the policy of the Company to provide damages through charges to operating expense reserves for uninsured property risks, for certain on an accrual basis. Accruals for these reserves employee benefits, and for claims for injuries and have been allowed for ratemaking purposes.

p 2. RATE MATTERS bear the cost of the replacement energy for the On May 1,1981, the Company filed an appli- first 30 days of each outage excluding refueling.

cation with the Arkansas Public Service Commis- The agreement also provided for a 2%% null sion (APSC) to increase its Arkansas retail rates zone on either side of a monthly target capacity approximately $101.4 million. On March 1,1982, factor designated for each nuclear unit before the the APSC issued an order authorizing an annual Company realizes any loss or gain. On August 19, increase in retail rates of $26.2 million. The order 1983, the APSC approved the agreement and the also directed the Company to refund approxi- $39.8 million increase in rates became effective matel $19.3 million related to collections that on August 22,1983.

the A SC states resulted from the Company's On December 15,1982, the Company filed past practice of tax normalization. Following a with the Public Service Commission of Missouri l rehearing, which was requested by the Company, (PSCM) a rate application requesting a i the APSC approved on September 8,1982, an 59.9 million annual increase in Missouri retail additional annualincrease of $2.8 million, which rates. On September 26,1983, the PSCM a proved increased the approved amount to $29 million. a settlement agreement entered into b the The Com any filed an appeal with the Circuit Company and all parties involved providing for a Court of I ulaski County, Arkansas, placing before $3.2 million annual increase which became effec-it the issues related to differences between the tive on October 1,1983.

$101.4 million sought and the $29.0 million On December 16,1983, the APSC held a

) granted, subject to certain adjustments, and that hearing for the Company to show cause why the part of the order that directed the Company to Compan s rates to customers other than refund approximately $19.3 million. The matter Reynold Metals Company (Reynolds) should is pending before the court. not be adjusted downward to take into consider-On November 19,1982, the Company filed an ation revenues greater than rate case test year applicationivith the APSC requesting an annual levels which may be collected from Reynolds increase in Arkansas retail rates of approximately through higher demand charges. The APSC

$126 million above the level of the rates then in staff, which sponsored the request to show effect. On April 18,1983, the Company and the cause, alleges that the windfall to the Company i Staff of the APSC filed with the APSC an agree- will be approximately $12 million. The matter ment which in effect amounted to a $39.8 million is pending.

increase in Arkansas retail rates and a more On March 9,1984, the Company filed an equitable fuel clause. The agreement provided application with the APSC requestmg an annual that the Compa$ny flow-through, pay, with no tl e full increased fuelfuel costadjustment of $70.8 increase million in Arkansas above retail test year rateslevels.

revenue of approximately The replacement energy during an outage of either application also includes a pr,oposed rate rider of its two nuclear units for reasons other than to be effective if the Company is required to make refueling for no more than 30 days during payments to Middle South Energy, Inc. for costs any consecutive 12 month period, and thereafter associated with Grand Gulf. (See Note 4-allows the Company to recover 90% of the fuel " Commitments and Contingencies.") The costs above the base fuel costs included in rates. Company's filing also included an alternate Previously, the Company was required to phase-in plan.

3. INCOME TAXES -

Income tax expense (credit) consists of the following:

1983 1982 1981 (in thousands)

Current:

Federal. $ 6,396 $ 3,713 $ 7,036 State . . 6,223 3,251 1,687 Total . 12,619 6,964 8,723 Deferred-net:

Iiberalized depreciation. 24,776 30,744 19,118 Deferred fuel cost . (7,994) 10,748 (6,065)

Restoration due to tax loss carryforward - -

15,188 Nuclear fuel disposal costs 17,729 (6,074) (7,491)

Expenses associated with co-owner advances to construct coal plants. (94) (44) 4,924 Differences between book and tax gains and losses on sales of property. . (203) (997) 7,000 Other . . (4,527) (3,310) 2,393 Total . 29,687 31,067 35,067 Investment tax credit adjustments-net. 48,440 25,629 21,406 Recorded income tax expense. $90,746 $63,660 $65,196 Charged to operations. $98,831 $69,285 $62,401 Charged (credited) to other income. (8,085) (5,625) 2,795 Recorded income tax expense . 90,746 63,660 65,196 Income taxes applied against the debt component of AFDC. 9,190 7,669 9,848 i Total income taxes. $99,936 $_71,329 $75,044 Total income taxes differ from the amounts computed by applying the statutory Federal income tax rate to income before taxes. The reasons for the differences are as follows:

1983 1982 1981

% of  % of  % of Pre-Tax Pre-Tax Pre-Tax Amount Income Amount income Amount income Computed at statutory rate. $100,115 46.0 $78,675 46.0 $74,214 46.0 Increases (reductions) in tax resulting from:

Allowance for funds used during construction . (12,686) (5.8) (9,492) (5.6) (9,985) (6.2)

State income taxes net of Federalincome tax effect .. 6,086 2.8 4,406 2.6 4,546 2.8 Other-net. (2,769) (1.3) (9,929) (5.8) (3,579) (2.2)

Recorded income tax expense . 90,746 41.7 63,660 37.2 65,196 40.4 Income taxes applied against debt component of AFDC. 9,190 2.4 7,669 2.7 9,848 3.4 Total in< ome taxes . $ 99,936 44.1 $71.329 39.9 $75,044 43.8 Unused investment tax credits at December nuclear plant and disposal costs of nuclear fuel, 31,1983 amounted to $47.9 million, which if and provides for continued normalization of not used will expire in 1992 through 1998. timing differences for which normalization is Pursuant to an order of the APSC dated required by the Internal Revenue Code or State March 1,1982, the Company ceased providing law. During 1983, as a result of the nuclear fuel deferred taxes on certain timing differences which disposal contract with the DOE, disposal costs were previously normalized. However, the order for spent nuclear fuel became deductible for tax requires the Company to continue providing purposes, thus normahzation is no longer deferred taxes on decommissioning costs of applicable.

20

i

4. COMMITMENTS AND CONTINGENCIES be responsible for36% of the capacityand power

+

from MSE's ownership of the first umt at the plant The construction program contemplates but deferred any recommendation on the second.

Company construction expenditures of approxi- The estimated cost of the first unit is $2.7 billion.

mately $259 million in 1984,$219 million in The ruling now goes to the five member commis-1985 and $201 million in 1986. sion for a decision.

The Federal income tax returns for the years On April 30,1982, Middle South Services, Inc.

1971 through 1976 have been examined by the (MSS), on behalf of the Company and the other Internal Revenue Service (IRS) and adjustments Middle South System operating companies, filed have been proposed. Formal written protests have for approval with the FERC a new agreement pro-been filed and conferences have been held with viding for the coordinated planning and operation AppealsOfficersof theIRS. Allissues,otherthan of its generation and transmission facilities. Rates an issue involving the taxability of customer under the new agreement became effective deposits, have been settled with the Appeals January 1,1983, subject to refund. Various parties Officers and adequate provisions have been have intervened in these proceedings. Some recorded. Such settlement is subject to review parties are contesting the method by which and final approval is expected to be received in the agreement equalizes capacity and energy 1984. Any final liability which may result from among the System operating companies and the resolution of the customer deposit issue certain proposals could cause the Company would not have a material effect on net income. to incur material additional costs. On February The Company, together with the other Middle 2,1984, MSS notified the presiding ALJ, South System operating companies, is obligated designated by the FERC to hear this proceeding, under agreements (MSE Agreements) to that the other MSU operating companies Middle South Energy, Inc. (MSE) in accordance will support an alternate cost allocation method with stated percentages specified therein to make designed to bring about a form of equalization of payments or subordinated advances adequate to production costs among the operating companies cover all of the operating expenses and certain of and that the Company will continue to support the capital costs of MSE. The Company's stated the original proposal. Subsequently, each of percentage responsibility under the MSE Agree- the operating companies filed a separate state-ments is 17.1% Through 1983, $3.3 billion had ment of position pursuant to the notice filed by been expended by MSE on the Grand Gulf Plant's MSS. Testimony was concluded in December two units, the first unit of which is scheduled 1983. The matter is still pending before the ALJ.

for commercial operation in the third quarter of The Company owns 35% of System Fucts,Inc.

1984. The Company is required under the MSE (SF1), a jointly owned subsidiary of the four Agreements to make its share of the $12.5 million principal operating subsidiaries of Middle South per month advance power purchase payments Utilities, Inc. SF1 operates on a non-profit basis commencing January 2,1984 and continuing for the purpose of planning and implementing until the earlier of the date the first unit of the programs for the procurement of fuel supplies Grand Gulf Plant is placed in commercial for all of the operating companies; its costs are operation or December 31,1984. However, primarily recovered through charges for fuel effective November 1981, the Company, delivered.

together with the other Middle South System The parent companies of SH have agreed to I operating companies, entered into a reallocation make loans to SFI to finance its fuel supply busi-agreement related to the Grand Gulf Plant which ness under a loan agreement dated January 3, provides that the other System operating 1984, which provides for SFI to borrow up to companies have agreed to assume and hold the $125 million from its parent companies through Company harmless from all of the responsibilities December 31,1984. The Company's share of the and obligations of the Company with respect to loan commitment is $40 million. Notes under the MSE Agreements, and in consideration this agreement mature December 31,2009.

thereof, the Company has relinquished it rights In addition, the Company had loaned SF1 in the Grand Gulf Plant. The Company remains $36 million under previous loan agreements.

primarily liable to MSE and its assignees for Notes mature in 2002 and 2008 under provisions payments under the MSE Agreements in of the previous loan agreements.

accordance with its original stated percentage, In connection with certain of SFI's borrowing but would be required to make its share of the arrangements, SFI's parent companies, including payments or advances thereunder only if the the Company, have covenanted and agreed other System operating companies were unable severally in accordance with their respective to meet their contractual obligations. shares of ownership of SFI's common stock, On February 3,1984, an Administrative law that they will take any and all action necessary Judge (ALJ) for the Federal Energy Regulatory to keep SFI in a sound financial condition and to Commission (FERC) ruled on a unit power sales place SFl in a position to discharge, and to cause agreement pursuant to which MSE had proposed SFI to discharge its obligations under these to sell its power from its Grand Gulf Plant to arrangements. At December 31,1983, the total three of the Company's sister companies. The loan commitment under these arrangements ruling recommended that the Company should amounted to $295 million of which $176.5 million 21

was outstanding at that date. Also, SFI's parent 33 million tons, over a 30-year period. The companies, including the Company, have made contract, including the guaranty, is conditional similar covenants and agreements in connection upon receipt of the regulatory approvals for the with long-term leases by SFI of oil storage and construction of the plant.

handling facilities and coal hopper cars. At The Company has agreernents for the purchase December 31,1983, the aggregate discounted and fabrication of fuel assemblies for its nuclear value of these lease arrangements was plant, Arkansas Nuclear One. The Company

$76.1 million. has agreed to purchase from Kerr-McGee Nuclear The Company has agreed to purchase over a Corporation 1,108,000 kg of uranium over the 20-year period,100 million tons of coal, with an next six years. The Company also has agreements option to purchase over a further 10-year period with the Babcock & Wilcox Company and the an additional 50 million tons, for use at the Combustion Engineering Company for the fabri-White Bluff Steam Electric Station presently cation of fuel assemblies used at the plant.

in commercial operation. SFI has entered into a Under the terms of the Company's nuclear contract with a joint venture for a supply of coal fuel leases, the Company is responsible for the from a mine in Wyoming, which is expected to disposal of spent nuclear fuel. The Company provide up to 185 million tons over a period of considers all costs incurred or te be incurred in 26 to 42 years primarily for the Independence the use and disposal of nuclear fuel to be proper Steam Electric Station. SFI's parent companies, components of nuclear fuel expense and pro-including the Company, each acting in accordance visions to recover such costs have been and will with their respective shares of ownership of SFI's be made in applications to regulatory com-common stock, joined in, ratified, confirmed missions. SFI, on behalf of the Company, has and adopted the contract and obligations of SFI contracted with the Department of Energy (DOE) thereunder. Under the contract, investment in whereby the DOE will furnish disposal service the mine for leases, plant and equipment is the for the Company's spent nuclear fuel at a cost of responsibility of the joint venture. In order to one mill per kilowatt-hour of gross generation on limit the joint venture's investment rights and, or after April 7,1983 and a one-time fee of hence, the amount to be paid to it as a component $49.4 million for generation prior to April 7,1983.

of the price of coal, the contract provided that The Company has three options for payment of SFI invest any funds for plant and equipment in the one-time fee and is presently studying these excess of a specified amount. The Company, options, the selection of which is not required until MP&L and Arkansas Electric Cooperative June 1985. The Company, through rates and a Company (AECC), as co-owners in part of the settlement of a past disposal contract, has recorded Independence Station, have agreed to make the the amount necessary for the one-time payment to investments rather than SFI and, accordingly, the DOE. In addition to the recovery of costs have reimbursed SFI for investments previously associated with the disposal of spent nuclear fuel, made by it. Mine construction is nearing the Company is recovering a total of approximately completion and first contract deliveries were $160 million for decommissioning costs for its two made in December 1983. Through December 31, nuclear units. Based upon a study performed by 1983, the Company had invested $26 million in the Company, nuclear plant decommissioning mine facilities and costs incurred by SFI. In costs are projected to be in excess of this amount.

addition to this amount, SFI anticipates that The Company is requesting and will request approximately $28 million in current dollars, recovery of estimated increased costs in applica-including $7 million in 1984, will be required tions to its regulatory commissions.

over the life of the contract.The Company's share The Company is a member of Nuclear Electric of the additional requirements would be Insurance Limited (NEIL), a mutualinsurer

$11.2 million, including $2.8 million in 1984. which provides its members with insurance SFI executed a contract, as amended in coverage for certain costs of replacement power November 1982, for the purchase oflignite to be incurred due to prolonged outages of nuclear used at a future lignite-fueled power plant in units and for $425 million of coverage for property Arkansas. AECC has agreed to become an owner damage sustained in excess of $500 million caused of 50% of the proposed plant and assume 50% by radioactive contamination or other specified l of SFI's obligation to purchase lignite. Delivery of damage. Members pay annual premiums and are lignite is tied to the commercial operation of the subject to assessments if losses exceed the plant, which may be delayed at the owner's accumulated funds available to the insurer. The option until July 1995. The Company and AECC Company's present maximum assessment for have undertaken to expand the size of the plant if incidents occurring during a policy year is additional co-owners are available or under approximately $21 million.

certain circumstances to meet an increased need The Price-Anderson Act limits the public of the System operating companies or AECC for liability of a licensee of a nuclear power plant to power. The Company has guaranteed SFI's $580 million for a single nuclear incident. 1 performance and agreed to purchase SFI's share Insurance for this exposure is provided by private '

of the lignite, which assuming half ownership insurance and an indemnity agreement with the i and no expansion of the plant is approximately Nuclear Regulatory Commission. Every licensee )

l 22

of a nuci tr pow:r plant is obligated, in th e evznt per incident for e ch licensed reictor operated of a nuclear incident involving any commercial by it or up to a maximum per reactor owned of nuclear facility in the United States that results $10 million in any calendar year. At December 31, in damages in excess of the private insurance, to 1983, the Company had two licensed reactors.

pay retrospective assessments of up to $5 million l

5. LEASES the revenues utilized to recover the lease costs.

The Company accounts for leases on the Application of criteria used to define a capital same basis as that used by its regulatory authority lease would permit recording the following in the ratemaking process which determines assets and liabilities on the balance sheet:

1983 1982 1981 (in thousands)

Assets:

Utility plant. . . .. . ...... . . . $115,549 $113,6",2 $110,473 Accumulated amortization. . .. . 16,742 14,505 14,287 Net leased property. . . . . . . . . . . . . . $ 98,807 $ 99,127 $ 96,186 Liabilities:

Noncurrent obligations under capital leases . .... . .. .. .. . $ 94,882 $ 95,605 $ 93,342 Current obligations under capital leases:

Principal. . .... . .. .. . .. $ 3,925 $ 3,522 $ 2,844 Interest accrued . . .. . .. 4,419 3,566 2,177 Total. ... . ... ...... .. . .$ 8,344 $ 7,088 $ 5,021 Recording of such leases would not affect together allow it to lease nuclear fuel up to a the amounts reported as net income. maximum of $150 million. Lease payments, At December 31,1983, there were noncan- which are not included in the tabulations above, cellable leases with minimum rental commit- are based on nuclear fuel use. Both leases, unless ments as follows: sooner terminated by one of the parties, will (in thousands) continue until 2018. The unrecovered cost 1984... . ,. . .. . $ 19,038 base of the leases at December 31,1983,1982 and 1985. . . . .... .. 18,819 1981 was $138,708,000, $145,531,000 and 1986. . .. . 17,944 $122,976,000, respectively. Nuclear fuel expense 1987. . . 16,873 of $49,687,000 in 1983, $40,091,000 in 1982 1988. . .. 17,216 and $51,455,000 in 1981 was charged to For years thereafter . . 177.990 operations.

Total * * $267,880 Rental expense (excluding nuclear fuel) amounted to approximately $20,476,000, The Company has two lease agreements, $19,039,000 and $17,643,000 in 1983,1982 not reflected in the schedule above, which and 1981, respectively.

6. PENSION PLANS The companies of the Middle South System of this change on 1982 pension expense was have various pension plans covering substan- not significant. Total pension expense of the tially all of their employees. These plans are Company for 1983,1982 and 1981 was administered by a trustee who is responsible $7,294,000, $8,266,000 and $9,011,000, for pension payments to retirees. Various respectively.

investment managers have responsibility for The comparison of the actuarial present management of the plans' assets. In addition, values of accumulated plan benefits and plan an independent actuary performs the necessary net assets for the Company's defined benefit actuarial valuations for the individual company plans is presented below. This comparison was plans. determined in accordance with the provisions Effective January 1,1982, the Company of Statement of Financial Accounting Standards modified the method of amortizing prior service No. 36 which requires the use of certain costs by changing from a fixed amortization assumptions which are different from those used period of twenty years to varying amortization by the actuary in determining an appropriate periods not to exceed thirty years. The effect level of funding for the Company.

23

I january 1, 1983 1982 (in thousands)

Actuarial present value of accumulated plan benefits:

Vested . $ 71,498 $ 68,691 Nonvested . 4,444 4,921 Total . $ 75,942 $ 73,612 Net assets available for benefits $128,255 $108,593 The assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 9%.

7. LINES OF CREDIT AND subject only to its maximum authorized level SilORT-TERA 1 BORP.OWINGS of short-term borrowings. The Company has At December 31,1983, the Company had received authorization from the Securities and

$70.2 million in lines of credit with Arkansas Exchange Commission under the Public Utility banks and participated with the three other Holding Company Act of 1935 to have out-hiiddle South System operating companies in standing at any one time short-term borrowings 5200 million of consolidated lines of credit with aggregating not more than the lesser of $125 banks outside the Atiddle South System service million or 10% of the Company's capitalization.

area. Compensating balances (approximately The aggregate amounts of the unused lines of 5% of the commitment amount) or equivalent credit with Arkansas banks at the end of 1983 fees are required by certain of the lending banks and 1982 were $70.2 million and $63.3 million, located outside the hiiddle South service area. respectively. The operating companies had avail-Additionally, the Company participates with able at the end of 1983 and 1982, $122.1 million certain other companies of the hiiddle South Sys- and $56 million, respectively, under the con-tem in a money pool arrangement whereby those solidated lines of credit. The short-term borrow-companies with available funds make short-term ings and the applicable interest rates (determined loans to other companies in the System having by dividing applicable interest expense by the short-term borrowing requirements. The average amount borrowed) for the Company Company may borrow from these sources were as follows:

1983 1982 1981 (in thousands) hiaximum borrowing. $31,000 $90,700 $122,400 Year-end borrowing. -

S 750 $ 56,200 Average borrowing:

Bank loans. $ 977 $23,030 $ 73,065 Associated companies. $10,793 $13,122 -

Average interest rate during the period:

Bank loans. . 10.31 % 13.66 % 18.13 %

Associated companies. 9.19 % 10.50 % -

Average interest rate at end of period:

Bank loans. -

11.50 % 14.84 %

Compensating and working balances at end of period. - - $ 6,600

8. RETAINED EARNINGS RESTRICTIONS The indenture relating to the Company's payment in 1983 of a common stock dividend con-long-term debt and provisions of the articles current with the sale of a like amount of the of incorporation relating to the Company's Company's common stock effectively removed preferred stock provide for restrictions on the the current mortgage restriction on the payment payment of cash dividends on common stock. of future dividends on common stock. As of As of Decemb _r 31,1982, $12,024,000 of retained December 31,1983, all retained earnings were carnings were free from such restriction. The free from such restrictions.

24

9. PREFERRED AND COMMON STOCK Preferred stock outstanding at December 31,1983 and 1982 consisted of the following:

Current Shares Shares Outstanding Call Price Cumulative, $100 Par Value Authorized 1983 1982 Per Share Without sinking fund:

4.32% series. 70,000 70,000 70,000 $103.647 4.72% series. . . . 93,500 93,500 93,500 107.00 4.56% series. . 75,000 75,000 75,000 102.83 4.56 % 1965 series . 75,000 75,000 75,000 102.50 6.08% series. . 100,000 100,000 100,000 102.83 7.32% series. . 100,000 100,000 100,000 103.17 7.80% series. 150,000 150,000 150,000 105.20

, 7.40% series. 200,000 200,000 200,000 104.65 7.88% series. 150,000 150,000 150,000 104.97 Total . 1,013,500 1,013,500 1,013,500 With sinking fund l-10.60% series. . 149,967 149,967 165,412 109.39 11.04% series. 304,862 304,862 337,547 109.78 Total . 454,829 454,829 503,009 Unissued . 2,386,500 Total, $100 Par Value 3,854,829 Cumulative. $25 Par Value Without sinking fund:

8.84% series. 400,000 400,000 400,000 27.66 10.40% series. 600,000 600,000 600,000 28.60 Total . 1,000,000' 1,000,000 1,000,000 With sinking fund i-9.92% series. 1,513,299 1,513,299 1,599,640 28.18 13.28% series. 1,992,060 1,992,060 2,000,000 29.88 Total . . 3,505,359 3,505,359 3,599,640 Unissued . 5,400,000 Total, $25 Par Value . . 9,905,339 (in thousands)

Without sinking fund:

Stated at $100 a share. $101,350 $101,350 Stated at $25 a share. 25,000 25,000 Premium . 540 540 Total referred stock and premium, without sin -ing fund . $126,890 $126,890 With sinking fund:

Stated at $100 a share. $ 45,483 $ 50,301 Stated at $25 a share. . 87,634 89,991 Premium . 814 846 Total preferred stock and premium, with sinking fund . $133,931 $141,138 The changes in the number of shares of common and preferred stock outstanding in 1981, 1982 and 1983 were:

Common Stock 2 Preferred Stock Shares Sold Shares Sold (Redeemedl

$100 Par $25 Par 1981. 6,743,423 (29,425) -

1982. . 6,400,000 (29,700) (360) 1983. 5,200,000 (48,180) (94,281)

1. Thne sernn are ts iv retureJ m fullthrough the operatum of sunkmg fu neds. The 10 60% eron anJ the l104% sernes are bemg rrJermed each ycar at the ratr of 10.000 and 20.000 sk n res, re<pa tavlt;. Begmrung fune i. I984. the 9 92% vrses ts to is red,vmedat the rate of 80,000 shares eas b year. liegtnnnng lanuary 1.

1985. the 13 28% seran ss to be redamed at the ratrof 100.000 shares each year In aJJohon. the Company has the rum,cumulattiv oprum to redam an adJutumal hke amount of said shares ensk year commencmg un the forst year of redempt><m m tas k rc<pestats serses.

2. In 1981 a premsunr of S1820,000 u as recernsdon 2.34 t 423 shares ofsommem ston k en hangedfor theawts aoud habslutses of Arkarssavhtnwurt n>uvr Com-pany All other common stm L sales are al par n alue.

25

r

[

10. LONG-TERM DE3T Long-term debt outstanding consisted of the following:

1983 1982

~

s (in thousands)

FIRST MORTGAGE BONDS:

4-1/2% series due 1983. . . . $ -

$ 1,002 3-1/4% series due 1984. .

7,500 7,500 3-3/8% series due 1985. . . . 18,000 18,000 16-1/8% series due 1986. . . 70,000 70,000 5-1/2 /o senes due 1988. . 463 508 17-3/8% series due 1988. 75,000 75,000

1. 1,100 1,200

- 5-5/8% series due 1990 .

4-7/8% series dae 1991. 12,000 12,000 16-1/2% series due 1991. .. 80,000 80,000 4-3/8% series due 1993. ,

1.5,000 15,000 9-3/8% series due 1993.

~

. 5,880 6,230

/ 4-5/8% series due 1995. 25,000 25.000 5-3/4% series due 1996. .

25,000 25,000 6-1/4% series due 1996. 2,960 3,160 5-7/8% series due 1997. . 30,000 30,000 8-3/4% series due 1998. . 8,600 9,000 7-3/8% series due 1998. 15,000 15,000 9-1/4% series due 1999. . 25,000 25,000 9-5/8% series due 2000. 25,000 25,000 9-3/4% series due 2000. . . 4,000 4,200 7-5/8% series due 2001. . . , . 30,000 30,000 8  % series due 2001. .' 30,000 30,000 7-3/4% series due 2002. . . . ... 35,000 35,000 7-1/2% series due 2002. '. ( 15,000 15,000 8  % series due 2003. ~

40,000 40,000 8-1/8% series due 2003. . . 40,000 40,000 10-1/2% series due 2004.. ... , 40,000 40,000

' 40,000 40,000 10-1/8% series due 2005. .

9-1/8% series due 2007. . 75,000 75,000 9-7/8% series due 2008. 75,000 75,000 10-1/4% series due 2009. . .. 60,000 60,000 13-3/8% series due 2012. .

.. 75,000 75,000 13-1/4% series due 2013. . ./ 25,000 -

TOTAL FIRST MORTGAGE BONDS. 1,025,503 1,002,800 INSTALLMENT PURCHASE CO'NTRACTS:

Pope County, Arkansas; due 1936 to 2008 m at rates ranging from 7-1/4% to 10% . 20,800 20,800 Jefferson County, Arkesas; dee 1986 to 2008 at rates ranging from 6-1/8% to 10% . . 71,650 71,700 Independence County, Ark 4nsas; due 1984 at rate of 9-1/4%. .. 1,000 41,000 Independence County, Arkansas; due 2013 at rate of 11-1/8%. . 45,000 -

less: Amount held in construction funds. . 2,618 2,519 TOTAL INSTALLMENT PURCHASE CONTRACTS 135,832 130,981

_LONG-TERM OBLIGATION-Department of Energy (See Note 4) . 49,400 -

UNAMORTIZED PREMIUM AND DISCOUNT ON DEBT-NET. . (3,282) (2,044)

TOTAL,. ... . . 1,207,453 1,131,737 LCSS: CURRENTIN MATURING PORTION. . . 9,865 2,297

^

LONG-TERM DEBT EXCLUDING AMOUNT DUE

$1,129,440 WITH,1N ONE YEAR. $1,197,588

/

/ -

f e

i

At December 31,1983,the sinking fund requirements and maturities for long-term debt for the years 1984 through 1988 are as follows:

Cash Sinking Fund Sinking Fund 1 Maturities (in titousands) 1984 . $1,365 $7,068 $ 8,500 1985 . . 1,365 6,888 18,000 1986 1,365 7,338 70,725 1987 . 1,365 7,688 810 1988 1,320 7,688 76,148

1. Thew annual smisngfund requnrements may be met hy certsfwatum of property addawns at a ratr of 167% of such requurements.

11. TRANSACTIONS WITH ASSOCIATED COMPANIES The Company buys from and sells electricity Operating revenues include revenues from to the operating subsidiaries of Middle South sales to associated companies amounting to Utilities, Inc., its parent, under rate schedules $305.5 million in 1983, $223.7 million in 1982 filed with the Federal Energy Regulatory and $223.2 million in 1981. Operating expenses Commission. In addition, the Company pur- include charges from affiliates for fuel cost, chases fuel from SFl and receives technical purchased power, and technical and advisory and advisory services from Middle South services totaling $34.8 million in 1983, Services, Inc. $68 million in 1982 and $65.3 million in 1981.

12. CONSOLIDATED QUARTERLY RESULTS (Unaudited)

Operating results for the four quarters of 1983 and 1982 were as follows (in thousands):

Quarter Ended 1983 March June September December Operating Revenue. .. $248,372 $266,508 $391,022 $300,243 Operating Income . 34,517 49,250 81,901 43,609 Net Income. . . . 15,789 28,385 60,530 22,192 1982 Operating Revenue. $253,110 $234,343 $315,953 $242,737 Operating Income . . . 45,762 39,587 75,129 30,829 Net Income. . 24,721 18,749 53,777 10,125 The business of the Company is subject ingly, earnings information for any three-month to seasonal fluctuations with the peck period period should not be considered as a basis occurring during the summer months. Accord- for estimating the results for a full year.

27

13. EFFECTS OF INFLATION ON OPERATIONS (Unaudited)

The following supplementary information ing Standards (SFAS) No. 33, " Financial about the effects of changing prices on the Reporting and Changing Prices." It should be Company !s provided in accordance with the viewed as an estimate of the effect of changing requirements of Statement of Financial Account- prices, rather than a precise measure.

STATEMENT OF INCOME FROM OPERATIONS AND OTHER FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES FOR THE YEAR ENDED DECEMBER 31,1983 (its thousands)

Adjusted For Adju:ted For As Reported In General Changes In The Financial Inflation Specific Prices Statements (Constant Dollars) (Current Costs)

Operating revenues . . . . . . .. l $1,206,145 $1,206,145 $1,206,145 Operating expenses (excluding depreciation)1 ... .... .. 902,247 902,247 902,247 Depreciation . . .. .. ... . 92,621 188,741 _194,767 Total operating expenses. 994,868 1,090,988 1,097,014 Operating income . . . . .. 211,277 115,157 109,131 Other income . l

. .. ... 32,552 32,552 32,552 Interest and other charges! . .

116,933 116,933 116,933 Income from operations (excluding adjustment to net recoverable cost),* $ 126,896 $ 30,776 $ 24,750 Increase in specific prices (current costs) of property, plant and equipment held during the year3. . .. .

$ 214,219 Adjustment to net recoverable cost. . . $ 22,437 (4,123)

Effect of increase in general price level. . . . . . (181,633)

Excess of increase in specific prices, after adjustment to net recoverable cost, over increase in general price level . . .. 28,463 Gains from decline in purchasing power of net amounts owed. .

56,722 56,722 Net . . .. . . . .. $ 79,159 $ 85,185

1. Anumeu' to be en "awrage for Ihr year" d Wars and thus are not restated

2. in iuding the adiustment ta net recoverable cost. the unceme f.on= operstwns on a constant dollar bases would have been $53.213.000 un 1983.

3. At December 31.1*$3, current cost of property. plant and equipment net of accumulated deprecnatwn was $5.007,740.000 whsle hasterscal cost or net cat recowrable through deprenatwn was $2,562.615.000.

FIVE-YEAR COMPARISONS OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CIIANCING PRICES (in thousands of average 1983 dollars)

Years Ended December 31, 1983 1982 1981 1980 1979 g Operating revenues . . . . . . . . . . . . $1,206,145 $1,079,796 $1,112,494 $907,408 $799,682 IIIstorical cost information adjusted for general inflation:

Income from operations (excluding adjustment to net recoverable cost) . . . . . .......... ,. . 30,776 21,276 27,672 18,253 65,664 Net assets at year-end at net recoverable cost . . . . . . .... . 709,332 674,639 625,759 592,722 667,529 Current cost information:

Income from operations (excluding adjustment to net recoverable cost) . .. ......... . 24,750 13,149 13,783 (1,370) 47,575 of increase in Excess specific(deficiency)fter prices, a adjustment to net recoverable cost, overincrease in general price level. . . . 28,463 17,616 (105,855) (184,504) (225,492)

Net assets at year-end at net recoverable cost . . .. ... 709,332 674,639 625,759 592,722 667,529 General information:

Gain from decline in purchasing power of net amounts. . . . . . 56,722 56,522 140,772 198,516 208,599 Average consumer price index. 298.4 289.1 272.4 246.8 217.4 Constant dollar amounts represent historical Accounting Standards No. 33, income taxes costs adjusted for the effects of generalinflation. were not adjusted.

The effects are determined by converting The regulatory commissions to which the these costs into dollars of equal purchasing Company is subject allow only the historical cost power using the Consumer Price Index of plant to be recovered in revenues as depre- -

for all Urban Consumers (CPI-U). ciation. Therefore the excess cost of plant stated Current cost amounts reflect the changes in terms of constant dollars or current cost over in specific prices of property, plant and the historical cost of plant is not presently equipment from the year of acquisition to the recoverable in rates. This excess is reflected as present. The current costs of property, plant a reduction to net recoverable cost. While the and equipment, which represent the estimated rate-making process gives no recognition to the costs of replacing existing plant assets, are current cost of replacing property, plant and determined by applying the Handy-Whitman equipment, the Company believes, based on Index of Public Utility Construction Costs (IIWI) past experiences, that it will be allowed to earn to the cost of the surviving plant by year of on the increased cost ofits net investment when acquisition. Lmd and certain other plant assets replacement of facilities actually occurs.

which are not included in the HWI were To properly reflect the economics of rate converted using the CPI-U. The difference regulation in the Statement of Income from between current cost amounts and constant Operations presented above, the reduction of dollar amounts results from specific prices of net property, plant and equipment to net property, plant and equipment (as measured by recoverable cost is offset by the gain from the the llWI) changing at a rate different than the rate decline in purchasing power of net amounts of general inflation (as measured by the CPI-U). owed. During a period of inflation, holders of The current year's depreciation expense monetary assets suffer a loss of general purchas-on the constant dollar and current cost amounts ing power while holders of monetary liabilities of property, plant and equipment was deter- experience a gain. The gain from the decline mined by applying the Company's depreciation in purchasing power of net amounts owed is rates to the indexed amounts. primarily attributable to the substantial amount The cost of fuel used in generation has of debt which has been used to finance property, not been restated from historical cost. Regulation plant and equipment. Since the depreciation limits the recovery of fuel costs to actual costs on this plant is limited to the recovery of through the operation of adjustment clauses historical costs, the Company does not have or adjustments in basic rate schedules. the opportunity to realize a holding gain on debt.

As prescribed in Statement of Financial 29

COMPANY DIRECTORY Transfer Agents for Preferred Stock-Union National Bank of Uttle Rock 1 Union National Plaza uttle Rock, Arkansas 72203 First Commercial Bank Post Office Box 1471 Utt!c Rock, Arkansas 72203 Registrar of Preferred Stock-First Commercial Bank Post Office Box 1471 Uttle Rock, Arkansas 72203 Certified Public Accountants-Deloitte liaskins & Sells One Shell Square New Orleans, Louisiana 70139 Executive Offices-Arkansas Power & Ught Company First Commercial Building Capitol and Broadway Streets Uttle Rock, Arkansas 72203 (501) 371-4000 Associated Natural Gas Company 401 West Park Street Blytheville, Arkansas 72315 (501) 762-3660 Annual Meeting-Fourth Wednesday of May The Company's 1983 Annual Report to the Securities and Exchange Commission on Form 10-K (including Financial Statements and Financial Statement schedules) is available to any stockholder upon request, without charge.

Persons interested in obtaining a (opy should contact Mr. Steve L Riggs, Vice President, General Counsel and Secretary, at the address below:

ARKANSAS POWER & LIGIIT COMPANY P.O. Bos 551 Little Rock, Arkansas 72203 1

30 I i

President's 1983 Message / Associated Natural Gas Company A Wholly-owned Subsidiary of Arkansas Power & Light Company

=

Changes in the natural gas industry while the first quarter sales losses were were frequent and abrupt in 1983. not fully recovered, favorable trends Competition in the energy market were established, indicating a continu-called for innovation in the areas of ing improvement in 1984.

contract pricing and rate making. Rate relief granted in late 1982, along At the beginning of the year, natural with the Company's cost containment gas costs had reached an all-time high. program and its continued effort to in the first quarter of 1983, a combination improve productivity, were responsible of unusually mild weather, price for a substantial improvement in year-induced conservation and a still end earnings. With an abundant supply depressed economy reduced sales, of natural gas available we can look causing a corresponding impact on forward to mare stable prices in the revenues and earnings. With a decline current year. A continuation of the in the oil prices, there was a keen com- economic recovery should result in an petition for the industrial boiler fuel investment and building program market. leading to a sustained growth in cus-Beginning in the second quarter, the tomers and sales. The Company is in a field price of natural gas reacted to position to take full advantage of these market pressures and began a gradual opportunities.

decline.The economy showed a modest improvement, and with the return of 5 normal weather conditions, sales and revenues returned to normal levels. L Thuri McSpadden This improvement continued through- President & Chief Operating Officer out the second half of the year, and Associated Natural Gas Company Associated Natural Gas Company Officers Jerry L Maulden L Thurl McSpadden Ernest L McKenzie Ralph M. Waller Chairman of the Board President & Voce President. Secretary.

Yke President

& Chief becutwe Officer Chief Operating offucer Treasurer & Chirf Operations financial offscer Associated Natural Gas Company Directors Paul C. Hughes Robert G. Mclianey Guy Newcomb becutwe Vsce President Vice President President

& General Atanager John C. Atcllaney & Sons Commonwealth Savings and Farmers Soybean Corporation Blytheville. Arkansas Ian Associathm ar:J fa$co farm Supply Ernest L McKenzie Oscroid A'A8"585 Blythevs!!r, Arkansas Vsce President, Secretary. Kenneth E. Storey Ital E. Hunter, Jr. Treasurer & Chief Financial President Attorney. Hunter & Ifunter Officer of the Company Food Giant Atanagement New Atadrid. Missouri Blythevulle. Atkansas & Piggly Wiggly Supermarkets Jerry L Maulden L 1 hurl McSpadden Sikeston, Missouri Chairman of the Board & President & Ralph M. Wafler Chief becutwe Offncer Chief Operating Officer Vice President-Operathms of the Cannpany of the Company of the Company little Ronk Arkansas Blythetnlle. Arkansas Blythevnlle, Arkansas 31

Arkansas Power & Light Company TEN YEARS OF PROGRESS / FINANCIAL (Consolidated) 2 d?y * :

1983 "..G Capitalization and Capitalisation Ratios 6 h ~'

uwONS OF DOaARS (in thousands of dollars) Q-l 2400 Selected Financial Data: ,y. , .

Net operating revenues . . . $1,206,145 .g . .' ,

2200 e Net income . . . . . .. ..... 126,896 ', :4 2* *""' s" 2,859,517

@ Total assets . . . . . . . . . ...... , f, '

• C 1800 e long-term debt. . . . . ........... 1,197,588 u ,3 - ,

S

~

ieoo Preferred stock, with sinking fund . . . 133,931 i4ao italization (end of period): (d *.;,

referred stock and premium . .... . $ 260,821 -

12 693,297 Common stock and paid-in capital. . '

@l,J)/ . p 1000 Retained earnings. . . . . . 28,158 4};Q 800 Total . . . . . . . . . ... ... 982,276 D eco long-term debt: $6 ,

First mortgage bonds 2.. . . 1,014,797 9s-d0 Installment purchase contracts.2.. . 133,391 4 c "s 200 long-term obligation-DOE3. . . . . 49,400 1.( : .

0 ** *** *** * *

• 1975 1977 1979 1981 1982 1983 t.

Total capitalization. ... .. $2,179,864 ,. ; ..f

, .3 _

Annual Payment Requirements: M .y Utility Plant Interest on:

First mortgage bonds. $ 108,727 .j, 3 *.s .

3a00 uwONS OF DOdARS Installment purchase contracts . . .

11,688 -g 30m Dividends on preferred stock . . . . . . . 24,366 . _.g w urm m.ne Utility Plant (end of period): I g;f 2700 w ui% m.at .

Plant completed . . . . . . . . . $2,910,470 3, 6 ress..... 306,398 M'.

24m Construction Nuclear fuel inwork in profuel leases. . 24,979 excess of 1:*(JM 2im -

Total utihty plant . . . .. 3,241,847

• f,-i isoo - .

Less-accumulated depreciation. . 679,232 %g 33m _ _ ._

Net utility plant . . . . . . $2,562,615 g e.<

1200 -

Income Statement:

$1,206,145 pfg.

oog . _

Operating revenues. . . . j 7c coa Operating expenses: q QL. ;

Fuel . . . . . . . . . . 322,658 3* -

Purchased power . . . . . . . . .. 166,126 .; r. 6 o Gas purchased for resale . . . 44,150 7.' -?

1974 75 76 77 78 79 Bo '81 '8219M PayToll-operation and = q* :- "7 maintenance . . . . . . .. . . 87,210 .

Other operation and r c' maintenance . .. . 150,459 .g. N Not incom* Depreciaiion . . . . 92,621 c4 N

M MLLONS OF DOLLARS Taxes.. .. . .. .. . 131,644

'5 E

Total . . . . . .. 994,868 "ib:

120 -

TOL Operating income . . . .. ... 211,277

~ O T O" Other income and deductions-net (excluding AFDC 4) . . . 14,457 90 -

Interest and other charges:

g Interest on long-term debt. .... . 119,466 75 Other interest-net of oo E debt premium. . ..

4

. .. 7,152 T tal (exc uding AFDC )... 126,618 d5 E a income from revenues . . . . . . . . . 99,116 4 27,780 3a _ . ..

Non-cash Income from income from AFDC accounting change . h* ,

15 -- -

Net income . .. . .. .. $ 126,896 o

1974 75' 76 77 78 79 Bo B1 B21983 ,

nmvr Compan.; The finam tal data en tha rep.,* for the years prurr to 1981 hats not been restated for the conwlutatune sunce the effa-t es ummate rrat.

2. Es ludes current!v maturmg pertum.

3. DOE-Department of Energv.

4 ArDC A!!owance for funds uvd durmg construstson.

s. Cumulatni etin t to lanuary 1,1976, of s hange un aacuntmg for fuel w>ts-

1982 1981 1980 1979 1978 1977 1976 1975 1974 I

g $1,046,143 $1,015,561 $ 750,497 $ 582,610 $ 553,605 $ 535,298 $ 396,597 $ 316,831 $ 296,811 107,372 96,410 65,230 82,404 86,014 69,305 46,963 40,713 55,562 2,669,417 2,474,249 2,147,983 1,940,643 1,693,906 1,562,999 1,421,940 1,311,433 1,124,177 1,129,440 992,163 848,667 819,716 749,262 667,484 591,382 586,318 546,284 141,138 144,120 147,065 100,518 60,063 60,063 60.063 60,063

$ 268,028 $ 271,010 $ 273,955 $ 227,408 $ 171,772 $ 171,772 $ 171,772 $ 161,720 $101,657 627,709 547,185 458,569 427,960 397,960 382,960 367,960 337,375 292,375 33,365 43,134 54,700 86,333 78,462 54,261 39,040 41,297 41,869 929,102 861,329 787,224 741,701 648,194 608,993 578,772 540,392 435,901 1,000,255 849,585 765,430 763,549 709,549 642,979 575,184 586,318 546,284 129,185 143,578 83,237 56,167 39,713 24,505 16,198 1,129,440 993,163 848,667 819,716 749,262 667,484 591,382 586,318 546,284

$2,058,542 $1,854,492 $1,635,891 $1,561,417 $1,397,456 $1,276,477 $1,170,154 $1,126,710 $ 982,185

$ 105,568 $ 82,986 $ 73,551 $ 62,436 $ 56,536 $ 49,364 $ 42,837 $ 42,837 $ 38,787 10,386 14,016 6,593 4,980 4,980 4,103 1,224 25,131 25,456 25,778 19,548 14,020 14,020 14,020 13,136 6,600

$2,623,319 $2,546,046 $2,133,704 $1,231,832 $1,178,601 $1,139,511 $1,111,119 $1,097,913 $1,051,248 364,252 255,468 282,376 980,054 785,684 610,557 505,669 350,941 215,794 16,869 10,214 7,151 12,747 4,562 8,179 5,229 3,004,440 2,811,728 2,423,231 2,211,886 1,964,285 1,762,815 1,621,350 1,457,033 1,272,271 605,404 532,261 417,435 364,447 331,231 297,464 265,099 240,014 211,456

$2,399,036 $2,279,467 $2,005,796 $1,847,439 $1,633,054 $1,465,351 $1,356,251 $1,217,019 $1,060,815

$1,046,143 $1,015,561 5 750,497 $ 582,610 $ 553,605 5 535,298 $ 396,597 $ 316,831 $ 296,811 262,604 307,213 237,346 174,667 167,681 169,890 107,213 76,322 83,840 178,841 141,316 154,126 171,425 120,804 114,225 107,983 56,022 55,936 40,986 30,637 77,566 67,897 49,774 40,607 35,400 29,448 26,626 24,286 19,486 109,500 132,862 100,700 50,994 55,478 53,014 31,224 30,637 24,114 i 84,194 77,923 59,574 39,708 38,365 36,768 35,025 33,790 23,885 101,146 90,530 54,033 34,948 55,693 62,753 36,022 38,352 24,949 854,837 848,378 655,553 512,349 473,421 466,098 344,093 259,409 232,210 191,306 167,183 94,944 70,261 80,184 69,200 52,504 57,422 64,601

, 12,687 17,497 17,468 23,627 16,986 12.466 10,328 8,131 1,352 108,557 90,755 67,036 67,091 56,949 45,047 43,152 40,553 32,554

\

11,272 21,038 17,649 10,296 4,469 3,980 2,703 3,265 3,323 119,829 111,793 84,685 77,387 61,418 49,027 45,855 43,818 35,877 84,164 72,887 27,727 16,501 35,752 32,639 16,977 21,735 30,076 23,208 23,253 37,503 65,903 50,262 36,666 26,445 18,978 25,486 3,541

$ 107,372 $ 96,140 $ 65,230 $ 82,404 5 86,014 5 69,305 $ 46,963 $ 40,713 $ 55,562 F

33 l t

Arkansas Power & Light Company

< TEN YEARS OF PROGRESS / OPERATING (Electric) 2 1983 Average Annual Kilowatt Hour Use Residential Customers THOUSANDS OF KWH Electric Operating Revenues (thousands of dollars): 1 "5 Residential . .. . . . . $ 315,960 12 0 C' Z L Commercial . .. . ... . 169,367 56,629 Industrial-aluminum processing . .

'05 Industrial-other . . . ... . 200,296 90 - .. -

Government and municipal . . . .. 20,989 j Total from retail customers . . . . . . 763,241

1. '5 ~~ ~ ' ~

Public utilities . . .. . 379,598 eo -

Miscellaneous revenues. . . 6,052 ,

45 - Total electric operating revenues. . . $1,148,891 30 - .

Electric Sales (millions of kilowatt hours):

Residential . . . . . .... . .. 4,612 L5 ~ ~ ~

Commercial . . . . . . . . . ... 2,927 Industrial-aluminum processing . . . . . 2,571 j o

1974 75 76 77 78 79 Bo '81 'oE 1003 i Industrial-other. . . 4,251 Governmental and municipal. . 394 i Total sales to retail customers. 14,755 Kilowatt Hour Sales Public utilities . . . ... . . 8,965

" 23,720 e S Total energy sold. . . . . .

16.o Number of Customers (end of year):

14.0 -

Residential . . . .. . 471,508 Commercial . . . 57,141 12o -

Industrial-aluminum processing . . 1

' ~

Industrial-other. . . . . 14,161 I Government and municipal . 2,481 a.o -

Total retail customers. . . . 545,292 Public utilities . . . . . . .. . . 17 8 ~~

Total customers . . 545,309 4.0 -- - - -

20 . .

Electric Energy (millions of kilowatt hours):

Source and disposition 1974 75 76 77 78 '79 Bo B1 B21983 Generated-net station output:

Coal . 7,237 Gas. . . .. . 2,978 Oil . . .... . . 35 Generation By Fuel Nuclear . .. . .. .. .. 7,583 (Excluding Hydro) 1{ydro. .. . . 201 BILLIONS OF KWH 20 Total generated . . .. . 18,034

, . Purchased. . . 7,402 g _ _

- Net interchange. 100 16 ~

o' ~

Total. . . 25,536 .

14 Less: Company uses, losses and

,,,,,, unaccounted for. . 1,816

- Total energy sold. . . 23,720 g n E Peak demand (megawatts) 2 . .. 3,748 6 8 i 1. See note i en Ivttom of page thsrty-tuu 4 -

4

2. The year 1981 induJes 538 megawatts to supply Ariansas Dettric Cooperetary k' > E . .

2 ~

.jb .

Corporation 's (AECC) lawJ wkss h as now benng supplsed by theur own capahlsty.

Ye.urs pvror to 1981 also indude varying amounts of load supplied to AECC.

1974 75 76 77 78 79 Bo B1 B21983

f l

1982 1981 1980 1979 1978 1977 1976 1975 1974

$282,204 $257,801 $212,833 $160,992 $164,224 $154,403 $121,267 $104,440 $ 86,337 153,393 148,938 128,477 100,741 98,293 92,999 75,641 62,325 53,438 50,175 69,527 69,171 65,861 43,972 40,482 33,100 12,652 28,061 183,975 179,331 140,422 112,515 104,930 102,264 83,844 61,619 58,566 19,081 14,787 12,824 11,447 11,234 10,468 8,536 7,144 6,003 688,828 670,384 563,727 451,556 422,653 400,616 322,388 248,180 232,405 299,724 298,781 181,650 125,980 124,653 128,174 70,362 65,346 61,168 5,572 5,569 5,120 5,074 6,299 6,508 3,847 3,305 3,238

$994,124 $974,734 $750,497 $582,610 $553,605 $535,298 $396,597 $316,831 $296,811 4,514 4,418 4,480 3,884 4,062 3,838 3,369 3,386 3,077 2,870 2,819 2,682 2,444 2,472 2,353 2,162 2,072 1,893 2,081 3,064 3,411 3,349 2,686 2,597 2,145 1,011 2,569 4,246 4,311 3,675 3,681 3,545 3,443 3,160 2,840 3,042 410 312 292 326 334 325 307 297 284 14,121 14,924 14,540 13,684 13,099 12,556 11,143 9,606 10,865 7,388 8,358 5,445 4,204 4,475 5,170 3,247 3,548 3,640 21,509 23,282 19,985 17,888 17,574 17,726 14,390 13,154 14,505 462,753 458,941 405,717 400,290 394,766 387,495 379,556 371,491 364,954 56,709 57,133 49,444 49,009 48,424 47,580 46,844 45,657 44,957 1 1 1 1 1 1 1 1 1 13,528 13,529 12,284 12,151 11,724 11,182 10,913 10,431 9,926 2,372 2,332 1,548 1,617 1,573 1,519 1,500 1,446 1,396 535,363 531,936 468,994 463,068 456,488 447,777 438,814 429,026 421,234 18 23 19 19 19 25 25 25 25 535,381 531,959 469,013 463,087 456,507 447,802 438,839 429,051 421,259 5,224 4,293 601 2,660 4,727 4,741 2,468 470 487 1,168 2,645 3,209 72 389 1,653 4,050 6,741 6,973 4,010 2,242 3,920 7,463 9,173 7,831 4,101 5,220 5,085 3,858 4,874 171 176 140 103 251 131 98 94 172 230 15,595 18,722 14,929 10,870 12,562 12,643 9,130 9,933 7,530 7,241 5,980 6,459 7,740 6,162 6,133 6,172 4,070 7,670 82 12 (209) 296 8 (65) 43 101 181 22,918 24,714 21,179 18,906 18,732 18,711 15,345 14,104 15,381 1,409 1,432 1,194 1,018 1,158 985 955 950 876 21,509 23,282 19,985 17,888 17,574 17,726 14,390 13,154 14,505 3,541 4,369 4,179 3,521 3,654 3,336 3,242 2,868 3,049 i

35

E OFFICERS

.-' ~

'. {' _

!b lh.i(;3 -

-} .

l'W i

}- f._ ,

Jerry L Maulden Michael B. Bemis William Cavanaugh,111 Jack L King Presdent & Senior Vsce Presdent. Finance. 5,thw Vice hesdent. Senkw Vice President, Chsf Luccurrw Officev latu n Sevrices; Envyy Supply Energy Deltnry & Strices

& Assistant &mfary W

i

] D. Phillips Charles L Steel Cecil L Aleunder R.A. Allen Sermw Vuce President Senwr Vsce President Vsce Presiden.e Vut Presadost

& Assistant to the President PuNic Agairs Customer Serruces f

~'

4 i

-[ :-

John M. Griffin John J. Ilarton Charles KcIly Ralph C. Mitchell, Ill Vsce President. Vuce Prnutent Chkf Vke Presdent. Vice President. C<msemstkus Nuclear Operatunts financial Offacnv. Treasurer Corporate Communicatums & Reru~xaNe Ra snarces

& Assistant Srn1ary 2H Steve L Riggs Vsce besident.

General Counvl & Secretary W.R. Southern Vue President.

Admini4ratin Savices 36

i CARUTHERSVILLE v.

Arkansas Power & Light Company Electric System and Service Area Arkansas Power & Light Company owns electric facilities in 65 of Arkansas' 75 counties and in 13 of Missouri's 114 counties. At December 31,1983, the Company furnished retail electric service in 321 Arkansas and Missouri incorporated municipalities.

AP&L also provides power at wholesale to eight Arkansas and two Missouri municipalities and in Arkansas to two rural electric cooperatives and one association of rural electric cooperatives.

AP&L's system is interconnected with and operated as a part of the Middle South Utilities System, which supplies the power requirements of more than 1.6 million customers in a 92,000-square-mile area of Arkansas, Louisiana, Mississippi and southeast Missouri.

ARKANSAS POWER & LIGHT COMPANY POST OFRCE BOX 551 UTTLE ROCK. ARKANSAS 72203 (501)371-4000 April 5, 1984 BCAN048405 Mr. Harold R. Denton, Director Office of Nuclear Reactor Regulation U. S. Nuclear Regulatory Commission Washington, DC 20555

SUBJECT:

Arkansas Nuclear One - Units 1 & 2 Docket Nos. 50-313 and 50-368 License Nos. DPR-51 and NPF-6 Annual Financial Report Gentlemen:

As required by 10CFR140.15(b)] and 10CFR50.71b, enclosed are thirteen (13) copies of the 1983 Annual Financial Report for Arkansas Power & Light Company. This report contains financial statements for the fiscal years 1981, 1982, and 1983. It also includes balance sheets, operating statements and supporting schedules which may be needed for interpretation of the balance sheets and operating statements.

Very truly yours,

' ohn J R. Marshall Manager, Licensing JRM:SAB:ac Enclosure I

i is MEMBEA MIDOLE SOUTH UTtuTIES SYGTEM