BVY-91-031, Forwards Vermont Yankee Nuclear Power Co Annual Financial Statements for 3-yr Period Ending 901231

Forwards Vermont Yankee Nuclear Power Co Annual Financial Statements for 3-yr Period Ending 901231

ML20070T109
Person / Time
Site:	Vermont Yankee
Issue date:	03/29/1991
From:	Tremblay L VERMONT YANKEE NUCLEAR POWER CORP.
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
BVY-91-031, BVY-91-31, NUDOCS 9104030261
Download: ML20070T109 (25)

Text

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VERMONT:YAN,K EE4 NUCLEARL POWER CORPORATION .

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. - 9" ~ Ferry Road, Brattleboro, VT 05301+7002 ,

/ , ENGINEERING OFFICE

$80 M AIN STRIEI dol ton t.iA 01740

{608)779 6711 ,

1 March 29,1991 BW 91-031 United States Nuclear Regulatory Commission Document Control Desk Washington, DC 20555

References:

a,- License No. DPR 28 (Docket No. 50-271)

Subject:

Vermont Yankee Nuclear Power Corporation {

Annual Financial Statements

Dear Sir:

1 In accordance with the provisions of 10CFR50,71(b), enclosed please find one (1) copy of Vermont-Yankee Nuclear Power Corporation's certified financial statements for the three (3) year period ending December 31,1990, a Should you have any questions regarding this report, p! case contact this office.

l' Very truly yours, .

VERMONT YANKEE NUCLEAR' POWER CORPOR ATION

\$\C /DYY b>f s, Leonard A. Tremblay, Jr. '( '

Senior Licensing Engineer cc with enclosure:-

USNRC Region i Administrator

- USNRC Resident Inspector- VYNPS

' USNRC Project Manager - VYNPS

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) I VERMONT YANKEE NUCLEAR POWER COT,PORATION j7 Financial Statements-December 31, 1990, 1989 and 1988 (With Independent Auditors' Report Thereon)

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EPeat Marwic(

Certified Public Accountants One Boston Place - Telephone 617 723 T/00 ' Telecopier 617 723 6864 7 Boston, MA 02108 Telex 017 443 0082 PMMBOST 1 Independent Auditors' Report I

The: Stockholders 'and Board of Directors Vermont Yankee Nuclear Power Corporation:

D' We have audited the accompanying balance sheets of ' Vermont Yank'ee Nuclear Power- Corporation as of December 31, 1990 and 1989, and the related statements ofiincome and retained earnings and cash flows for each of the yen s in ' the three-year perlod ended Docenber 31, 1990.

These financtal statements are the' responsibility- of the Company's management. Our y responsibility is to express an opinion on these financial statements based on'our audits.

We ' conducted our audits in accordance' with generally . accepted auditing standards. Those standards require that we plan. and perform the -audit to obtain reasonable . assurance aboutcwhether the financial statements are f ree

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of ' material misstatement. An audit includes examining, on a test . basis, evidence supporting. the' amounts and disclosures in the financial statements.. An' audit also includes assessing the accounting principles used l and significant estimates made; by management, as well as evaluating the- j

'overall financial statement presentation. We- believe that our audits i

y. , provide a-reasonable basis for our opinion.

Lin . ourt--opinion, the ~ financial statements ref erred to above present f airly, -

-in: all? material respects, the financial position of Vermont Yankee Nuclear

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Power -Corporation at December ' 31, 1990 and -1989, and the results of- its -

j op.e_ rations and cash - flows for each of the years in the three-year - period J pj ' ended: December 31; 1990, in - conf ormity with generally accepted accounting l principles.

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VERT 4di ANKEE NUCLEAR POWER CORPORATION Balance Sheets O December 31, 1990 and 1989 Assets 1990 1989 (Dollars in thousands)

Utility plant:

Electric plant, at cost $ 353,054 352,082 Less accumulated depreciation 162,065 148,616 190,989 203,466 g Construction work in progress 140 125 Net electric plant 191,129 203,591 Nuclear fuel, at cost:

Assemblies in reactor 83,213 89,188 Fuel in process 4,267 10,086 gg Fuel in stock 789 -

Spent fuel 227,040 195,275 315,309 294,549 Less accumulated amortization of burned nuclear fuel 265,000 246,134 50,309 48,415 g Less accumulated amortization of final core nuclear fuel 5,011 3,857 Net nuclear fuel 45,298 44,558 Net utility plant 236,427 248,149 g Current assets:

Cash 2,271 1,752 Temporary investments, at amortized cost which approximates market 5,032 249 Accounts receivable, primarily from sponsors 15,560 11.166 G Income tax refunds receivable 3,121 2,142 Materials and supplies 14,877 12,756 Prepaid expenses 4,363 2,721 Total current assets 45,224 30,786 1

p Deferred charges:

Deferred decommissioning coss.s (note 2) 31,560 30,328 Accumulated deferred income taxes 9.164 6,762 Other deferred charges 2,332 1,810 Total deferred charges 43,056 38,900 #

Long-term funds at amortized cost:

Decommissioning fund (notes 2, 4 and 9) 53,339 39,072 Postemployment medical benefits fund (notes 4 and 9) - 1,155 17,606 10,278 O Disposal fee defeasance fund (notes 4, 6 and 9)

Total long-term funds 70,945 50,505 3 311a/All lfdaMS See accompanying notes to financial statements.

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Capitalization and Liabilities 1990 1989 (Dollars in thousands)

Capitalization:

Common stock equity (note 13):

C1 Common stock, $100 par value; authorized 400,L00 shares; outstandir.g 400,014 shares $ 40,001 40,001 Additional paid-in capital 14,227 14,227 Retained earnings 1,982 5,444 Total common stock equity 56,210 59,672 Long-term. obligations, net (note 5) 79,233 78,657 Total capitalization 135,443 138,329 Connitments and contingencies (notes 2,11 and 12)

Disposal fee and accrued interest for spent nuclear ,

fuel (note 6) 71,125 65,806 j l

Current liabilities:

Accrued liabilities 23,690 15,301 1

.() Accounts payable 2,372 286 Accrued interest 1,398 1,320 Accrued taxes 1,502 718 Total current liabilities 28,962 17,625 sj - 1 70,570 86,887

- ' Accrued decommissioning costs (note 2) l Accumulated deferred income taxes 60,720 62,842 Accumulated deferred investment, tax credits 8,971 9,397 Unamortized gain on reacquired debt, net 3,267 3,689

-Other deferred credits 277 82

'O Total deferred credits 160,122 146,580 C

,0 C $ 191 d52 MdiQ

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) -U"RMONT YANKEE NUCLEAR POWER CORPORATION Statements of Income and Retained Earnings Years ended December 31, 1990, 1989 and 1988 j 1990 op_9 1988

,Doliars in thousands )

Operating revenues $ 166,583 145,585 139,833 Operating expenses:

' Nuclear fuel expense 22.110 24.109 31,347 D' 52,181 Other operating expense 64,677 51,301 Maintenance 26,578 19,446 8,279 Depreciation 14,852 14,857 14,247 Decommissioning expense (note 2) 11,536 6,778 6,108 Taxes on income (note 8) 1,669 3,364 2,616 Property and other taxes- 5,246 5,599 5,511

.. Total operating expenses 146,668 125,454 120,269 Operating income 19,915 20,131 19,544 Other income and (deductions):

) Interest on decommissioning fund (notes 2, 4 and 9) 3,318 3,017 1,526 Decommisaloning expense (note 2) (3,318) (3,017) (1,526)

Allowance for equity funds used during construction 126 219 433 3,634 801 604

) Interest-Taxes on other income (note 8) (1,397)

(55)

(313)

(50)

(236)

(25)

Other,. net 2,308 657 776 I Income before interest expense 22,223 20,788 20,320 Interest expense:

-Interest on long-term debt 7,889 8,551 8,831 Interest on disposal costs of spent nuclear fuel (note 6) 5,319 5,319 3,845 Other-interest expense - 330 82 Allowance-for borrowed funds useu during 3' construction (451) (1,205) (866)

. Total interest expense 12,757 12,995 11 d92 Net income 9,466 7,793 8,428 Retained earnin n at beginning of year 5,444 5,411 5,449

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14,910 13,204 13,877 Dividends declared:

Preferred stock, $7.48 per share - 592 674 Common stock, $32.32, $17.92 and $19.48 per share, respectively 12,928 7,168 7,792

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Retained earnings at end of year $ 1. 9 8 ?, 5.444 5.411 Net income per average share of common stock outstanding $ SM, LL,Q2 11),1 0

-See accompanying notes to financial statements.

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VERMOI YANKEE N11 CLEAR POWER CORPORATION O

Statements of Cash-Flows Years ended December 31, 1990, 1989 and 1988 1990 1989 1988 0 (Dollars in thousands)

Cash flows from operating activities:

Net income i , f 136 _7a 793 8,428 Adjustments to reconcile net income to r.et cash provided by operating activities:

Amortization of nuclear fuel 20,020 20,502 27,234 O 14,852 14,857 14,247

. Depreciation Decommissioning expense 11,536 6,778 6,108 Income tax accrual 7,439 6,162 (2,472)

Income taxes paid (6.683) (5,777) (6,220)

Income tax refund received - - 6,801 C Nuclear fuel disposal fee interest accrual 5,319 5,319 3,845 Amortization of deferred taxes (3,796) (1,770) 7,570 Amortization of deferred investment tax credits (426) (1,918) (2,246)

Increase (decrease) in accounts payable 10,475 (11,097) 8,461 Other (3,414) (1,573) (5,63)

Total adjustments 55,322 31,983 57,634 O-Net cash provided by operating activities 64,788 39,776 _66,062 Cash flows from investing activities:

Electric plant additions (2,390) (3,367) (5,832)

Nuclear fuel additions (20,760) (5,811) (26,366)

,O Purchase of materials and supplies (8,376) (5,443) (3,028)

Payments to decommissioning fund (11,526) (6,499) (17,262)

Reimbursement from (payments to) postemployment medical benefits fund 1,264 - (1,062)

Payments to disposal fee defeasance fund (5,930) (10,000) -

Reimbursement for emergency response

_0 fac111ty-intormation system - 12,001 -

Other 577 1,424 1,252 Net cash used in investing activities (47,141) (17,695) s52,298)

O '**" *** " '*" "*'"* "***' (12,928) (7,168) (7,792)

Comon stock dividends Preferred stock dividends -

(592) (674)

(Payment) issuance of notes payable - (6,185) 6,185

'Borrowings under long-term agreements 63,200 229,900 227,708 Issuance of Series G first mortgage bonds 25,000 - -

Payments of long-term obligations (87,617) (237,111) (236,271)

O - (806)

Redemption of preferred stock - (8,353)

Net cash used'in financing activities (12,345) _ _( 29,509 ) (11.650)

Net increase (decrease) in cash and temporary investments 5,302 (7,428) 2,tik LO Cash and temporary investments at beginning of year 2,001 9,429 7,315 Cash and temporary investments at end of year (note 9) $ 7.303 2.001 EQ O

.See accompanying notes to financial statements.

O VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements '

December 31, 1990, 1989 and 1988 (1) Summary of Significant Accounting Policies O (a) Regulations and Operations The Company ;is subject to regulations prescribed by the Federal Energy Regulatory Commission ("FERC"), the Securities and Exchange Commission

("SEC".) and the Public Service Board of the State of Vermont as to accounting, transactions subject to the Public Utility Holding Company Act of 1935, and securities issues. The Company is also subject to

'g regulation by the Nuclear Regulatory Commission ("NRC") for nuclear plant licensing and safety, and by Federal and state agencies for environmental matters such as air quality, water quality and land use.

The Company recognizes revenue pursuant to the terms of the Power g Contracts and Additional Power Contracts. The Sponsors, a group of nine New England utilities, are obligated to pay the Company each month their entitlement percentage of amounts equal to the Company's total fuel costs and operating expenses of its plant, plus an allowed return on equity (sinco December 1, 1989, 12-1/4%; from May 6, 1988. to December 1, 1989, 12%).- Such contracts . also obligate the -Sponsors to

.nake de mmissi ning payments through the end of the plant's service O' life and the completion of the decommissioning of the plant. All Sponsors are committed to such payments regardless of the plant's operating level or whether the plant is out of service during the period.

Under the terms of the Capital Funds Agreements, the Sponsors _ are g committed, subject to obtaining necessary regulatory authorizations, to make funds available to obtain or maintain licenses necessary to keep the plant in operation.

(b) Depreciation and Maintenance O Electric plant is being depreciated on the straight-.line method at rates designed to fully depreciate all depreciable properties over the lesser of estimated usef ul lives or the plant's _ remaining NRC license life.

The operating : license originally expired in 2007 but in December'1990 was extended to ' 2012. See note 3 for a discussion of the plant's NRC li 'nse extension and the _ prospective treatment of depreciation in 0 fu o years. Depeeciation expense was equivalent to overall ef f ective rates of 4.08%, 4.18% and 4.10%' for the = years 1990, 1989 and 1988,-

respectively.

Renewals and betterments constituting retirement units are charged to

-electric plant. Minor renewals and betterments are charged to O maintenance expense. When properties are retired, the original cost,-

plus cost of removal, less salvage are charged to the accumulated

_ provision f or depreciation.

(Continued)

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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (c) Amortizatio_n_,,f Nuclear Fuel The cost' of ..uclear fuel is amortized to 3xpense ba ed on the rate of

. burn-up of t. a individual assemblies comprising the total core. The

)-- --Company also provides for the costs oi posing of spent nuclear f uel at rates specified by the United States Department of Energy (" DOE")

under a ' contract for disposal between the Company and the DOE. See note 6.

In_1985, the Company began amortizing to expense on a straight-line basis

). seventy-five percent of the- estimated costs of the final unspent nuclear fuel core which is expected to be in place at the expiration of the plant's NRC operating license. Effective December 1, 1989, the Company began amortizing one hundred percent of these costs in conformity with rates authorized by the FERC. See note 3 for a discussion of the _ plant's NRC operating license extension - and the

)= prospective treatment of final core amortization in future years.

(d) Amortization of Materials and Supplies In 1985, the Company began amortizing to expense a formula amount designed

'to' fully amortize the cost of the material and supplies inventory which is expected to be on hand at the expiration of- the plant's NRC

).- operating license. See note 3 for a discussion of the plant's NRC operating license _ extension and the prospective treatment of final core

. amortization in future years.

(e).Long-term Funds The Company ' accounts for its investments in long-term f unds at amortized cost since it has both the intent and ability to hold these investments for the -foreseeable future. Amortized esst represents the cost tc l= purchase the investment net of .any ' unamortized premiums or discounts.

See note'4 (f) Amortization of Gain on Reacquired Debt The - dif f erence between the amount paid upon reacquisition and the face

_value, plus any ' unamortized - premium less any related unamortized debt expense and: reacquisition. costs, or less any unamortized discount, related debt expense and reacquisition costs applicable to the debt redeemed, retired and cancelled is deferred by the Company and amortized to expense on a straight-line basis over the remaining life of_the respective security issues.

(g) Allowance for Funds Used During Constructior

' Allowance for funds used during construction (AFUDC) is the estimated cost of funds used to finance the Company's construction work in progress and nuclear fuel in process which is not recovered from the

)- Sponsors through current revenues. The allowance is not realized in cash currently, but under the Power Contracts the allowance will be recovered in cash over the plant's service life because of higher revenues associated with higher depreciation and amortization expense.

(Continued)

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3 VERMONT YANKEE NUCLEAR POWER CORPORATION O

Notes to Financial Statements AFUDC was capitalized at overall effective tes- of 7.00T , 7.87% and 7.72%

for 1990, 1989 and 1988, respectively, u ing the gross rate method.

O (h) Decommissioning The Company is accruing the estimated costs of decommissioning its plant over the plant's remaining NRC license life. Any amendments to these  ;

estimated costs are at ounted f or prospectively. See note 2. See note l 3 f or a discussion of the plant's NRC license extension and the  ;

O prospective treatment of decommissioning costs in future years.

I (i) Taxes on Income The , tax et f ects. of timing dif f erences are accounted f or in accordance with the rate-making policies of the FERC. Provisions for deferred income j taxes reflect the tax effects of all timing differences.

Investment tax credits have been deferred and are being amortized to income over the lives of the related assets.

(j) Cash Equivalents For purposes of the Statements - of Cash Flows, the Company considers all O highly liquid short-term investments with a maturity of three months or less to be cash equivalents.

(2) Decommissioning n i The Company accrues estimated decommissioning costs for its nuclear plant V- -based on an updated 1981 study by an independent engineering firm which assumes , that decommissioning will be accomplished by the prompt removal and dismantling- method. This method requires that radioactive materials be removed from the- plant site -with all buildings and f acilities dismantled immediately af ter shutdown. The study estimates that approximately six years would be required to dismantle the plant

'O at shutdown, remove. was tes and restore the site. The original study-which estimated total decommissioning costs of $72.8 million in 1981 dollars was updated in connection with the 1985 FERC' rate case to an estimate of $96.8 million in 1984 dollars. In February 1989, a second

-decommissioning study was completed which estimated total g decommissioning costs of approximately $220 million in 1988 dollars.

The Company has implemented rates based on a settlement agreement with the FERC which allowed $190 million, in 1988 dollars, as the estimated decommissioning costs. This allowed amount is used to compute the Company's liability and billings to the Sponsors. Based on an assumed inflacion rate of 6% per annum and an expiration of the plant's NRC O perating ticense in 2007, the estimated cost of decommissioning at end of life is approximately $575 million. The present value of the prorata portion of decommissioning costs recorded to date is $86.9 million.

(Continued)

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. VERMONT YANKEE NUCLEAR POWER CORPORATION Not's to Financial Statements Bill.ngs - :o Sponsors for estimated decommissioning costs commenced during 19b3, s.t which time the Company recorded a deferred charge for the 1 presant value of the prorata portion of decommissioning costs applicable - to operations of the plant for prior periods. Current period decommissioning costs not funded through billings to Sponsors or l earnings on decommissioning- fund assets are also deferred. These deferred costs will be amortized to expense as they are f unded over the remaining life of the NRC operating license.

On January.1, 1993, and each four year period thereaf ter, pursuant to the FERC rate' order, the Company must revise its schedule of future annual decommissioning fund collections to reflect historical differences between assumed and actual rates of inflation, and historical differences between assumed and actual rates of earnings on )

' decommissioning fund assets. Changes in Federal corporate income tax  !

laws _and rates require immediate revision in the decommissioning j funding schedule and subsequently in billings.

-In March,'1988, the Internal Revenue Service issued the final regulations implementing Section 468A of the Code and delineating the criteria for

-) - establishing a qualified decommissioning trust, deposits into which would be allowed as a current deduction for tax purposes. In

.accordance with these regulations, the Company estabitsbed the Vermont Yankee Decommissioning Trust, pursuant to an Indenture of Trust, dated March 11, 1988, and deposited therein $12,106,000, being the amount of decommissioning costs collected in 1988 and prior years. In July 1988,

} the Internal Revenue Service issued its letter, pursuant to said regulations, establishing' the Ruling Amount allowable for each year since 1984. Based on this letter, the Company filed amended returns for the years 1982 and 1984 through 1986.

j Cash received f rom Sponsors for plant decommissioning costs is deposited into the . Decommissioning Trust - in either the Qualified Fund (i.e.,

amounts . deductible pursuant to the IRS letter) or the Non-Qualified-Fund (i.e., excess collections pursuant to FERC authorization which are not _ currently deductible).

Funds held by the Trust are - invested in high grade government securities or certificates of deposit of banking institutions with assets in excess of ' $100 million. Interest on the Decommissioning Trust assets is recorded in other income and deductions with an equal amount . representing the - current period deenmmissioning cost funded by such earnings reflected as decommissioning expense in other income and deductions.

} (Continued)

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O-5 VERMONT YANKEE NUCLEAR POWER CORPORATION O

Notes to Financial Statements (3) FERC Rate Case Matters O On January 2, 1990, the FERC issued an order granting the Company's motion to implement rates based on the proposed settlement agreement on an interim basis, subject to refund, effective as of December l, 1989.

The proposed settlement agreement specifles a return on equity of 12.25% as compared to the 14. 25% the Company requested; an allowance for the estimated cost of decommissioning of $190 million in 1988

.O dollars, as compared to the $212 million the Company requested; and that the Company will be allowed to amortize 100% of the final fuel core as compared to the 75% previously allowed. The proposed settlement agreement was approved on August 1, 1990. Under the settlement as approved, decommissioning charges, depreciation and amortization are calculated based on a service life ending in December O- 2007.

On April 27, 1989, . Vermont Yankee filed an application with the NRC to extend the term of the operating license to 2012, so that the plant may operate for forty years af ter ~ it entered commercial service in 1972.

On- December 17, 1990 - the NRC issued an amendment of the operating g' license extending its term to March 21, 2012 The extension is subject to - reversal or modification - upon further proceedings at the NRC. In addition, a final NRC determination is subject to judicial review. The Company submitted a rate reduction filing with the FERC to reflect in l rates the adjustments to decommissioning, depreciation and amortization resulting from the' license . extension. The Company proposes to make O. this reduction' effective as of March 1, 1991 and, since the extension was issued in 1990, to reflect the necessary adjustment for the period January.1, 1990 throubh February 28, 1991.

On February 28, 1991, the FERC approved the Company's rate reduction

'O' filin8 . The ef f ects of this ruling will be accounted for prospectively beginning in fiscal year 1991 and will produce a net annual reduction of approximately_ $8 million and $4 million _in projected revenue requirements for fiscal' year 1991 and years thereaf ter, respectively.

L The reduction in 1991 reflects the retroactive treatment _to January 1, 1990.

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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (4) M -term Funds 1 The book value and estimated market value of long-term fund investment securities at December 31, is as follows:

1990 1989 Book Market Book Market value value value value

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(Dollars in thousands) .

Decommissioning fund U.S. Treasury obligations $ 21,666 22,243 7,590 7,590 U.S. Government agency obligations - - 5,722 5,779 25,140 25,140 State of Vermont obligations 31,522 31,436

. Money market funds 151 151 620 620 53,339 -53,83.0 39,072 39,129 Postemployment medical benefits fund:

U.S. Treasury obligations - - 1,155 1,155 Disposal fee defeasance fund:

Corporate bonds and notes 17,205 16,983 10,062 9,941 Money market funds 401 40L 216 216 17,606 .17,384 LO,278 10,157 3 Total'long-term fund investments $.M Z,LM 5A 5D3 50.441 j t

~At December 31, 1990 ~and - 1989, gross unrealized gains and gross unrealized losses, pertaining _ to the long-term fund investment securities were as j follows:

1990 1989 (Dollars in thousands)

Unrealized gains on U.S. Treasury obligations $ ,,1ZJ, -

j, Unrealized gains on U.S. Government agency obligations $ -

2 Unrealized gains on State of Vermont Jobligations $J -

Unrealized losses on State of Vermont obligations $ {,Llf,1) ,,,,,,,

Unrealized gains on corporate bonds

} and notes $J ,, ,;,,,

Unrealized losses on corporate bonds a'nd notes $ 11?,],) [2]

(Continued)

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4 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements 3

Maturities of obligations, bonds and notes (face amount) at December 31, 1990 are as follows (dollars in thousands):

Within one year $ 10,034 l Two to five years 5,249 l

3. Five to'seven years 20,765 i Over seven years 34,345

$ IDa M (5) Long-Term obligntions A summary of long-term obligations at December 31, 1990 and 1989 is as follows:

1990 1989 (Dollars in thousands)

First mortgage bonds:

V Series A - 9.625% due 1998 $ 10,485 10,485 f Series B - 8.50% due 1998 1,332 1,332 l Series C - 7.70% due 1998 3,695 3,695 i Series D - 10.l25% due 2007 27,259 27,259 Series E - 9.075% due 2007 5,703 5,703 Series F - 9.375% due 2007 5,704 5,704 n

V~ Series G - 8.94% due 1995 25,000 -

Total first mortgage bonds 79,178 54,178 Unamortized premium on debt 55 62 Net ftrst mortgage bonds 79,233 54,240 g_

Commercial paper issued under Eurodollar Credit Agreement - weighted average interest rate of 8.58% at December 31, 1989 - 24,417 O

T tal 1 ng-term obligations $&m ZLW 1 The _ first mortgage bonds are issued under, have the terms and provisions set forth in, and are ratably and equally with all other bonds outstanding thereunder secured by, an Indenture of Mortgage dated as of October 1, 1970 between the Company and the Trustee, as modified and-Q supplemented by eleven supplemental indentures. All bonds are secured by a first lien on utility plant, exclusive of nuclear fuel, and a pledge of the Power Contracts (except for fuel payments) and the Capital Funds Agreements with Sponsors. . Annual sinking fund requirements for Series A, Series B and Series C first mortgage bonds will be partially met by depositing bonds held in treasury. The bonds Q- held in treasury will be sufficient to meet the sinking fund requirements for these bonds through 1995; except, to the extent cash ,

sinking fund payments will be required as follows:

Series A Series C (Dollars in thousands)

$ - 594 1994 l.090 786

-O 1995

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VERMONT YANKEE NUCLEAR POWER CORPORATION 1 Notes to Financial Statements Cash sinking fund requirements f or Series D, Series E and Series F first mortgage bonds will commence in 1999. There are no sinking fund requirements on the Series O first mortgage bonds.

In February of 1990 the Company issued $25,000,000 of series 0 8.941 first mortgage bonds stated to mature on January 1, 1995. The Company a ppl ieri the proceeds of the sale of the bonds to retire other long-term obligations.

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The Company has a $75,000,000 Eurodollar Credit Agreement which expires on December 31, 1994 A prior agreement with similar terms expired on July 19, 1990. The Company issued commercial paper under these agreements with weighted average interest rates of 8.44% for 1990 and 9.26% for 1989. Payment of the commercial paper is supported by the Eurodollar Credit Agreement which is secured by the nuclear core of the Company's generating facility. Although the prior agreement expired on July 19, 1990, the Company had effcctively refinanced the outstanding obligation with the issuance of the series G first mortgage bonds which expire in 1995. Accordingly, the commercial paper had been classified as long-term det:t at December 31, 1989.

'(6). Disposal' Fee for Speat Nuclear Fuel The Company has a contract with the United States Department of Energy

(" DOE") for the permanent disposal of spent nuclear fuel. Under the terms of this contract, in exchange for the one-time fee discussed

'below .and a current fee of 1 mil per kwh of not generation paid v - quarterly, DOE agrees .to provide disposal services when a f acility for spent nuclear f uel and other high-level radioactive waste is-available, which is required by current statute to be prior to January 31, 1998. i The DOE- contract obligates the Company to pay a one-time fee of

$39,285,000 for disposal . costs for all spent fuel discharged through f April 7,'1983.~ Although such amount has been collected N rates. f rom the ' Sponsors, the Company has elected to defer payment of the fee to the DOE as permitted by the DOE contract. The fee must be paid- no later than the first delivery of spent nuclear fuel to the DOE.

Interest accrues on the unpaid obligation based on the thirteen-week y Treasury Bill rate and is compounded quarterly.

In 1989 the Company deposited $l0,000,000 in an irrevocable trust to be used exclusively for defensing this obligation at some future date provided the DOE complies with the terms of the. aforementioned contract. In 1990, the Company deposited an additional $5,929,939 into

} this trust.

(Continued)

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) 9 VERMONT YANKEE NUCLEAR POWER CORPORATION 3 Notes to Financial Statements i

(7) Short-Term Borrowings The Company had lines of credit from various banks totalling $14,200,000 J at December 31, 1990 and 1989. The maximum amount of short-term borrowings outstanding at any month-end during 1990, 19-89, and 1988 was $-0 , $8,000,000 and $6,185,000, respectively. The average daily amount of short-term borrowings outstanding was approximately $92,000,

$4,782,000 and $2,172,000 with corresponding weighted average interest rates of 9.77%, 10.69% and 9.78%, respectively.

rJ j (8) Taxes __on Income l The components of income tax expense for the years ended December 31, 1990, 1989 and 1988 are as follows:

O 1990 to89 1988 (Dollars in thousands) (

Taxes on operating income:

Federal - current $ 5,251 6,084 (2,607)

_ Federal - deferred (3,675) (2,335) 5,941 l U. State - current 1,368 1,375 (101)

State - deferred (849) (242) 1,629 l Investment tax credit adjustments (426) h4_18) ( 2 ,. 24 6 ) I 1,669 3.364 2,616 Taxes on.other income:

Federal - current l,124 252 190 n

V State - current 273 61 46

,1,397 313 236 Total income taxes $ 1MA MZZ a$1],

A rec nciliati n f the Company's effective income tax rates with the O Federal statutory rate is as follows:

1990 1989 1988 Federal statutory rate 34.0% 34.0% 34.0%

l o State income taxes, net of Federal income tax benefit 5.2 5.6 9.2 Investment credit (7.3) (10.3, (l9.9)

Book depreciation in excess of tax basis 2.7 4.2 5.9 AEUDC equity (l.8) -

(6.9) l l

Flowback of excess deferred taxes (8.8) (2.1)

Other 0.5 _ 0.7 3.0 O

bl% 3M1 Edd%

(Continued) lO ,

D 10 VERMONT YANKEE NUCLEAR POWER CORPORATION D Notes to Financial Statements The items comprising deferred income tax expense are as follows:

1990 1989 1988 9 (Dollars in thousands)

Decommissioning costs $ (281) (651) 10,476 Tax depreciation aver (under) financial statement depreciation (2,160) (249) 1,315 Tax f uel amorti::ation over (under) financial 9 statement amortization (141) (304) (1,841)

I Pension expense disallowed (232) (519) (463)

Postemployment benefits (disallowed) reversed -

414 (414)

Low level waste accrual discllowed (441) (390) -

Flowback of excess deferred taxes (1,101) (243) (775)

, Other (168) j 635) (728)

.)

$dd2) 11d17.) ddi,9 In December 1987, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 96, " Accounting for

, Income Taxes". This Statement will require the Company to change from J the deferred method to the liability method of accounting for income taxes. The liability method accounts for deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to differences between the book basis and the tax basis of assets and liabilities. Adoption of this Statement, which is required for years beginning after December L5, 1902 but may be adopted earlier, will not have a significant effect on tax axpense or cash flows of the Company.

(Continued)

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) 11 VERMONT YANKEE NUCLEAR POWER CORPORATION Jo Notes to Financ'.a1 Statements (9) Supplemental Cash Flow Information The following information supplements the cash flow information provided 63 in the Statements of Cash Flows:

1990 1989 1988 (Dollars in thousands )

Cash paid during the year for:

1 3 Interest (net of amount capitalized) $ 1)12 ,,ldB .L M l

Income taxes $ itM 11,ZJ, _L22D Decommissioning fund activity:

Payments from the Company related to C) tax refunds $ - - 11,186 Cash received from Sponsors 11.526 6,499 6,076 Investment income 3,318 3,017 1,526 Income taxes paid (577) (1,509) (1,050)

Net increase 14.267 8,007 17,738

() Pslances at beginning of year:

Decommissioning fund 39,072 28,590 11,588 Special deposit - 2,475 1,739 Balances at end of year 8 $L'3J9 12#9 3 ll#QQ1

$) Decommissioning fund 53,339 39,072 28,590 Special deposit - - 2,475 81h112 2LSM lkdQ1

, Postemployment medical benefits fund activity:

Payments from the Company $ - - 1,062 Investment income 109 93 -

Reimbursement to the Company (1,264) - -

Net-increase (decrease) (1,155) 93 1,062 i

Balance at beginning of year 1,155 1,062 -

l Balance at end of year $ -

14111 LiDhl l

' (Continued) lO l-O

D 12 VERMONT YANKEE NUCLEAR POWER CORP 0F.ATION 3 Notes to Financial $tatements In November,1988 the Company's Board of Directors approved the funding of

$1,062,000 for postemployment medical benefits based on an estimate calculated by the Company's actuary. The Company subsequently 3 deposited $1,062,000 into an escrow account established to accumulate these funds. In 1989 the Company reversed the liability established for postemployment medical benefits as these amounts are included in the current FERC approved rate settlement as a component of decommissioning. In l990 the Company transferred this fund to the Company's operating account.

DOE defeasance fund activity (see note 6):

1990 1989 1988 (Dollars in thousands)

O Payments from the Company $ s,930 10,000 -

Investment income 1,398 278 -

Net increase 7,328 10,278 -

Balance at beginning of year 10,278 - -

g Balance at end of year $ QdQ) LQ M -

(10) Pension Plans and Postemployment Benefits Other titan Pensions The Company has two noncontributory trusteed pension plans covering O substantially all of its regular employees. The Company's funding policy is to fund the net periodic pension expense accrued each year.

Benefits are based on age, years of service and the level of compensation during the final years of employment.

g (Continued)

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b 13 .

VERMONT YnNKEE NUCLEAR POWER CORPORATION I

O Notes to Financial Statements The aggregate funded status of the Ccapany's pension plans as of December _

31, 1990 and 1989 in as follows:

O 1990 1989 (Dollars in thousands)

Vested benefits $ 4,484 3,890 673 627 l Nonvested benefits Accumulated benefit obligation 5,15/ ,4,517 V Additional benofits related to future )

compensation levele _7,703 6,924 .

1 Projected benefit o'oligation 12,860 11,441 Fair value of plan assets, invested primarily in equities and bonds 9,239 9,163  ;

O' Projected berafit obilgation in excess of plan assets $ M1 J2 Certain changes in the items shown above are not recognized as they occur, but are- emortized systematically over subsequent periods.

Unrecognized amounts still to be amortized and the. amount which - is '

O included in the balance sheet appear botow.

1990 1989 (Collers in thousands)

Unrecognized uet t.ransition obligation $ 1,177 1,237 O Unrecognized net (gain)' loss (925) (1,429)

Pension liabil.ity included in balance sheet 3,351 2 A51 Unrecognized prior aervice costs !8 19 Projectea benetit ub'igation in excess of O-plan assets $ ad2L M The weighted average discount rate was 8.0% cs of December 31, 1990 and December- 31, 1989. 'The rate of increase in future compensation levels used in determining the actutrial present value of :he projected benefit obligation was 7.5%, and the expected long-term rate of return g on plan assets was 8.5% as of December 31, 1990 and December 31, 1989.

(Continued)

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V 14 VERMONT YANME NWLEAR POWER CORPORATION O Notes to Financial Stateaents Net pepelon expense f or 1990 (n :luded the f ollowing components:

(Collars in thousands)

Q Service cost - benefits earned $ 1,047 Interest cost un project <it berJet i t obligatien 959 Actual (return) Ic+s on plan assets 118 Net amortization and deferrul (730)

O Net pension expense $ M Pft w

Pension exputse was $1,394,000, $1,320,000 and $1,166,000 f or the years 1990, 1980 and 1988, respectively, In Dec embe.- 1990, the Financial Accounting Standards B.ard i s s ..c d O Statament of Financial Accounting Stanb ri s No. 106, ' t mploye rs '

decounting for Postretireinent Benef i ts Other Than Pensic:2s . This S ta t emen t will require the Company to change from the cash nic ; hod to the accrual nothod of accounting for postemployment benettts. The aceraal method will require the Company to record the estinated expense of po s t eui > t oyme ri t benefits as einployees render the services O necessary to earn thei< pos temp t oyme nt benefits. Adoption of this Statemeet, which is required for years beginning 'tter December l5, 1992, is not expected to have a material impact on the Company's ,

future financial pot it ion or resultu of operations becanst* the .osts are, and wil? continue to be, recovered in rates.

O (11) gase commitments The Company leases equipi int and systems under non-cancellable operating leases. Charges againe r income for tentals under these leases were approximately $3,417,000, $1,060,000 and $733,000 in 1990, 1989 and 1988' '"*P* '1"*1 Y ' M l" l *"" I "'"'" '""'"I' "* I U"*D*' 31' 1990 O are as follows:

Annual Fiscal years ended rentals (Doll tra in thousands )

O 1991 $ 3.114 1992 3,155 ;_

1993 2,892 _

1994 2,680 1995 2.380 1996 ""d "fter 8 652 O

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7 15 VEW ' YANKEE NUCLEAR POWER CORPORATION O Notes to Financle' Statements (12) Commitments and Contingencies The Company has commitments through 1999 approximating $54,000,000

!v associated with nuclear fuel requirements. Such connitments amount to 2 W approximately $18,000,000, $3,000,000, $18,000,000, $i2,000,000 and $0 7

for the years 1991 through 1995, respectively, and approximately

$3,000,000 thereaf'er.

The Company has contracted for uranium concentrate to meet lubstantially all of its power production requirements through 1999 74 7 The Coinpany had contracted for urantum enrichment ut lee- f roin a company

.3 in France. This contract provided for all the company's u

• ium enrichment services for the period 1989 t0 1996 wirt an optN<t to extend. However, the Company terminated dis contract in 1990. The

{ Company also has an enrichment mntract wtta the DOE vD ic h expires (?

9 2001. Hnwever, the Compan) i> exercised its r ign to partially 7

tetminate the DOE contract for t6 w p'riod 1989 :.o 1996. In 19 h , tr t

"' Company cona.cted im e.ranimm wr s dme' t service; from NUEXCO anc I Techsnabexport Sr the period 1991 through 1993 and 1994 through 2002, respectively.

"O The Company has ccacitments for capital expenditu m ano un t ing tv y aporoximately $4,300,000 for 194l.

The Price-Anderson Act j r o v id e,. s , amon '; other things, that the liability

- (;r damages resulting from a nuclear incident would not exceed the greatar of $560,000,000 or the amount of financial p ro tec t ion required U of the licentee (presently about $7.8 billion). Under :. he Nhc >

{ . reguat ians promulgated pursuant to the Price-Anderson Ac t , the Company has insured against this exposure by purchasing the maxi, mum available

-: private insurance and malotaining an indeinnity agreement with the NR Under a mandatory indu.c ury-wide program, owners of operating nuclear

' '"*' * **"d'"' '*" C**P""') *' b' ***"'d " " 'P'*"'

hO P !

premium of up to $63,000,000 for each reactor owneti in the event of any cne nuclo:a incident occurring at any licensed commercial reactor in the Urlf.ed States, with a maximum assessment of $10,000,000 per year i per reactor owned. Such owners may also be assessed additional re'. ros&: t ivt: premiums with respect to insurance purchased to cover g third party property and bodily injury damages resulting f rom nuclear acefdent related events at licensed commercial reactor facilities, but

- in nc- :ase will such additiona'. premiums exceed 5% of above-referenced retruspective premium.

(Continued) i O _

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D 16 VERMONT YANKEL NUC'. EAR POWER CORPORATION Notes to Financial 5tatements G

(13) Capital Stock The changes in additional patd-in c.:p i t a l and preferred stock for the three years ended December 31, 1990 are as folicws:

Additional

@ paid-in Pre.% rred OE.i_t!d stock (Dollars in thousanus)

Balance at December 31, 1987 $ 14,455 9,159 Redemption of preferred stock at $102.98 s24) (906)

J Balance at December 31, 1988 s 4 '$ 1 . S 353 Redemption of preferred . *ock at $96.75 32 (1,000)

Recemption of preferred stock at $103.23 (236) (7,353)

O Balance at DecemLer 31, 1989 and 1990 $ }JQ gi __

(14) Unaudited Quarterly Financial __I,nformation The following quarterly financial information is unaudited and in the opinion of management includes all adjustments (consisti ; only of norme l recurring accruals) necessary for a fair re.atement of results O of operations for such periods.

quarter ended 1990 March June september December (Dollars in thousands - excep per share amounts)

O Operating revenues $ 37,200 37,904 47.361 44,118 Fuel expense

• 6.548 7.106 4,485 3,971 Other operating e",penses* 14,430 13,997 15,181 21,069 Maintenance expense

• 2,303 3,020 14,093 7.162 Operating income 5,276 5,135 5,150 4,354 O Net income 2,364 2,391 2,257 2.354 Net income per share of common stock 5.90 5.98 5.89 5.89 1489 O Opert4 ing revenues $ 45,330 33,977 33,606 32,672 Fuel expense

• 3,415 6,387 6,993 7,314 Other operating expenses

• 16.015 12.650 12,218 10.418 Maintenance expense

• 13,275 2,885 1,718 1.568 Operating income 5,132 4.543 4,985 5.471 Net income 1,935 t,923 1,926 2,009 O Net income per share of common stock 4.45 4.46 4.47 4.62

• These selected expenses fluctuate from quarter to quarter due to plant outagest the majority of the outage activity occurred in the third quarter O f 1940 nd the first quarter of 1989. The operating expenses not presented remain relatively constant.

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