RC-02-0083, Virgil C Summer - 2001 Annual Financial Reports

Virgil C Summer - 2001 Annual Financial Reports

ML021230499
Person / Time
Site:	Summer
Issue date:	04/29/2002
From:	Browne M South Carolina Electric & Gas Co
To:	Document Control Desk, Office of Nuclear Reactor Regulation
References
RC-02-0083
Download: ML021230499 (88)

Text

Melvin N. Browne Manager,NuclearLicensing & Operating Experience 803.345.4141 E

• a,'*

• April 29, 2002 A SCANA COMPANY RC-02-0083 Document Control Desk U. S. Nuclear Regulatory Commission Washington, DC 20555 Gentlemen:

Subject:

VIRGIL C. SUMMER NUCLEAR STATION DOCKET NO. 50/395 OPERATING LICENSE NO. NPF-12 2001 ANNUAL FINANCIAL REPORTS Pursuant to 10CFR50.71 (b), enclosed are ten (10) copies each of South Carolina Electric & Gas Company's 2001 Annual Financial Report and South Carolina Public Service Authority's 2001 Annual Financial Report.

Please contact Mrs. Donna Railey at (803) 345-4107 for additional copies.

Ve*

Melvin N. Browne DWR/MNB/dr Enclosures c: N. 0. Lorick N. S. Cams T. G. Eppink (w/o Enclosures)

R. J. White L. A. Reyes G. E. Edison NRC Resident Inspector K. M. Sutton RTS (0-L-99-0360-1)

File (818.02-5, RH 8200)

DMS (RC-02-0083)

SCE&G I Virgil C.Summer Nuclear Station

• P.0.Box 88 . Jenkinsville, South Carolina 29065 .T (803) 345.5209 -www.scana.com

CRITICALLY SPEAKING, you'll like what you hear about SCANA. We are a Southeastern-focused corporation with the breadth and depth of more than 150 years of experience in the energy industry. We are a diverse group of companies with enthusiastic people focused on providing affordable, reliable products and services. An electric and gas company providing our customers a warm home in the winter, a cool home in the summer, and the peace of mind to know the lights will come on with the flip of a switch. Aregional energy supplier delivering worry-free natural gas service and electricity at a fairprice. Aconfident and decisive manager of energy needs that optimizes energy portfolios for other businesses.

Atelecommunications carrierproviding leading-edge fiber optic capacity.A group of 5,500 caring, dedicated people setting the standards for excellence in customer service quality and reliability.A financially solid Fortune 500 corporationaggressivelypromoting our products and services through geographic,market and product expansions. SCANA is an industry leader focused on five areascriticalto the betterment of our shareholders, our customers, our employees and our communities.

[LE'rER]

To Shareholders

Iam pleased to submit the 2001 Summary Annual Report of SCANA Corporation and to highlight some of the significant accomplishments of the past year. There were many challenges, but our employees stayed focused on those factors critical to our success. These "critical success factors" are discussed throughout this report.

I would like to pause at the outset and recognize the passing of Allan Mustard, a former officer and director of the Company, and Virgil Summer, who was Chairman and Chief Executive Officer of the Company. They were instrumental inthe enormous growth of the Company inthe 1970's and 1980's. Virgil Summer started as a floor sweeper ina power plant and worked his way up through the Company to be its leader. They each made important contributions to the growth of our Company and they will be missed.

Financially, earnings from ongoing operations in2001 were $2.15 per share, about the same level as last year. The declining economy, extremely high natural gas costs and very temperate weather offset customer growth and lower interest costs. We also reported non-recurring earnings of $3.00 per share, net, from our various telecommunications and alternate energy investments. These earnings are not cash yet, and are still subject to fluctuations inthe market price of the various securities. In2002, we will continue to explore opportunities to monetize these investments and redeploy the proceeds to strengthen our financial condition. Acomplete discussion of the year's financial results isincluded inSCANA's 2002 Proxy Statement under the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations." At its meeting held February 21, 2002, the Board of Directors raised the indicated annual dividend rate on the Company's common stock by 8.3% to $1.30 per share, effective with the quarterly dividend to he paid April 1,2002.

The tragedy of September 11 affected our Company in many ways. We have significantly strengthened our security at major facilities, especially at the V.C. Summer Nuclear Station.

Iwant to assure you that we are working in very close coordination with police, military and other government agencies to ensure the public safety and the continued safe operation of our assets. Our employees have a renewed and heightened commitment to serving our customers.

We all recognize that introubled times, our customers need the security of reliable, affordable energy service.

The current economic downturn continues to affect our business. Obviously, industrial production isdown slightly and consumer spending seems to have slowed but housing remains strong. We have adjusted our expansion plans and operating budgets to reflect these new realities. Ibelieve our announced long-term earnings growth target of 6 percent to 8 percent wiAl be achieved for the foreseeable future, assuming normal weather inour utility service area.

I am frequently asked about the effect the Enron bankruptcy may have on the Company.

Operationally, itwill have very little effect on us. We did almost no business with Enron. Trading activities, which were fundamental to Enron's business, were never a part of our strategic plans or business operations. SCANA's historical role has been to supply energy directly to end-users.

Substantially all of our businesses are already closely regulated. Our operations are routinely audited by state regulatory agencies, the Federal Energy Regulatory Commission and the Securities and Exchange Commission.

The unfortunate part of the Enron debacle isthat many companies and their people, who have operated ina forthright and ethical manner, now find themselves under a cloud of suspicion solely because of the apparent actions of a very few people at Enron. At SCANA, we have a very strong culture and history of following the rules. Our values are integral to our every activity, and our reputation is based on demonstrated adherence to these values. We have a very effective corporate compliance program with annual training for all employees. Violations of company policies are dealt with sternly. Certainly we are not a perfect organization, but we are committed to observing and enforcing the highest ethical standards inall our operations.

As I look forward to the next few years, there are several major projects ongoing. The project to strengthen the Lake Murray Dam to the latest federal seismic standards isunderway. Itwill be completed in 2005, and will cost nearly $250 million. Our next increment of electric generation has been approved for siting in Jasper County, SC and we will be constructing

approximately 35 miles of interstate natural gas pipeline to serve that facility. These new facilities will be in service in2004. Later this year we will file for a plant life extension of 20 years for the V.C.Summer Nuclear Station so itcan operate until 2042. The opportunity for Summer Station to operate an additional 20 years will substantially lower the cost of power generated from that plant. At the same time, we will be significantly upgrading the pollution abatement equipment at our power plants. These major projects, plus the ongoing distribution system expansion to serve our new electric or gas customers, combined with the reinvestment of retained earnings, will allow us to meet our earnings growth targets.

At this year's Annual Shareholders Meeting, Hugh Chapman and Lawrence Gressette will retire from the Board of Directors. Both men have been instrumental inthe progress of the Company and the development of its executives. They have been great mentors and friends to me, and great leaders in the progress of the State of South Carolina. Their advice and counsel will be missed.

Inclosing, Iwant to pay a special tribute to our employees. Itseems like each month of the past year brought new and extremely challenging events for us. Still, employees garnered awards for excellence in operating the nuclear plant and for excellence in customer service. They have rescaled our operations and our plans to fit new economic realities. They have forthrightly dealt with the threat of terrorism. They have operated our Company inan exemplary manner. As a group, SCANA's employees own almost 13% of the outstanding common stock of our Company.

Their performance during the exceptional challenges of the past year gives me great confidence inour future.

Respectfully submitted, W.B. Timmerman Chairman, President and CEO February 21, 2002

"SOUTHERN HOSPITALITY" When / first moved to South Carolina, I dreaded the hassles of getting settled into my new home. But as soon as / got on the phone with my new electric and gas company, I knew I had made the right choice - talk about southern hospitality!

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" THE POWER "TO SAVE LIVES" Caring for human life requires an experienced staff, cutting-edge technology and a continuous supply of energy. Ina typical year, our hospital will use over 13 million kilowatt hours of electricity inthe course of treating some 80,000 patients. Inthat sense, the energy we receive from SCANA gives us the power to save lives.

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• of ou opraios Wehaeon fhms reional and naioa avrgs Th reliablt of ou sytmrnsaoeteindsr avrg as' wel And, we. ar alay loin aha tomk etihtlwcs expansio prjet tha ar unera wil add th aaiy eneootnet proid a more tha adqut powe suply A' reo gpoetiso *5-egwt scedl fo copeto in the summe of 202 and a new 87-m t geeain pln is exece to be onin inI th sumroI04 s rjcswl lost cotiu to eomicall mee fuur loa growth.

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"THE DECIDING FACTOR" Inselecting alocation for our new plont, we considered 18 states, with criteria weighted on regional services and cost of operation. Inthe end, SCANA's track record for low-cost, reliable electric and naturalgas service proved to be the deciding factor.

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"WORTH THE 11 INVESTMENT Life is what you make of it.But it helps to have the support of a company that really believes inyou.

Thanks to SCANA's generous tuition reimbursement program, Iwas able to go back to school and get ahead. It's been a long road,but it was definitely worth the investment.

Whilalasapioiya Cdvlpn the pepewodeie ., . h pout n inrasnl copttv worl, Our emplyee are enoraeIo9 xeiec*uiu chleg thouhaniten prgal that hotrealste t eactls o chng thrug pesoa leaersip Thi prga is deige to encourage acontbliy impov comuictin skls bul trus an sefcnfdne foste colboai on an toc reaiosi bilig s(N is als cmite toote employee~I deeomn aciite suc as*prfsiona cetifctos caer oh motrn III an -lmioa triig Aditoaly SIN' edcto assistance progra proide tito rimus en fo cotnun edctin Toehr these intaie9 hlhs of us ofI S N devlop thI bes n brghes cra ivsouiost ou buins needs an proid our cutoer wih 'hsricsthydeeveadu shrhodr th reun *he xet Deeopn Our Peopl

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"ONE OF THE ROCKS" In a rapidly evolving economic landscape, where assumptions about how to increase shareholder value don't always hold, SANA Corporationhas proven to be a solid, smart investment. They're one of the rocks inmy portfolio, no matter what the financialclimate.

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SCANA CORPORATION SELECTED FINANCIAL AND OTHER STATISTICAL DAT)

For the Years Ended December 31, 2001 2000 1999 1998 1997 Statement of Income Data Operating Revenues $3,451 $3,433 $2,078 $2,106 $1,725 Operating Income 528 554 353 470 425 Other Income 550 44 90 19 41 Income Before Cumulative Effect of Accounting Change 539 221 179 223 221 Net Income $539 $250 $179 $223 $221 Balance Sheet Data Utility Plant, Net $5,263 $4,949 $3,851 $3,787 $3,648 Total Assets 7,822 7,427 6,011 5,281 4,932 Capitalization:

Common equity 2,194 2,032 2,099 1,746 1,788 Preferred Stock [Not subject to purchase or sinking funds] 106 106 106 106 106 Preferred Stock [Subject to purchase or sinking funds] 10 10 11 11 12 Mandatorily Redeemable Preferred Stock 50 50 50 50 50 Long-term Debt, net 2,646 2,850 1,563 1,623 1,566 Total Capitalization $5,006 $5,048 $3,829 $3,536 $3,522 Common Stack Data Weighted Average Shares Outstanding [Millions] 104.7 104.5 103.6 105.3 107.1 Basic and Diluted Earnings Per Share $5.15 $2.40 $1.73 $2.12 $2.06 Dividends Declared Per Share of Common Stock $1.20 $1.15 $1.32 $1.54 $1.51 Other Statistics [1]

Electric:

Customers [Year-End] 547,388 537,253 523,552 517,447 503,905 Total sales [Million KWH] 22,928 23,352 21,744 21,203 18,852 Residential:

Average annual use per customer [KWH] 14,196 14,596 14,011 14,481 13,214 Average annual rate per KWH $.0805 $.0787 $.0787 $.0801 $.0799 Generating capability- Net MW [Year-End] 4,520 4,544 4,483 4,387 4,350 Territorial peek demand- Net MW 4,196 4,211 4,158 3,935 3,734 Regulated Gas:

Customers [Year-End] 646,230 637,018 260,456 257,051 252,797 Sales, excluding transportation [Thousand Therms] 1,183,463 1,389,975 1,013,083 1,002,952 945,289 Residential:

Average annual use per customer [Therms] 616 644 507 521 531 Average annual rate per therm $1.17 $1.08 $.86 $.86 $.86 Nonregulated Gas:

Retail customers [Year-End] 385,581 431,814 430,950 78,091 n/a Firm customer deliveries [Thousand Therms] 359,602 431,115 229,660 4,692 n/a Interruptible customer deliveries [Thousand Therms] 407,188 306,099 188,828 2,167,931 782,248

[1] Other Statistics for 2000 exclude the effect of the change inaccountingfor unbilledrevenues, where applicable.

SCANA CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS December 31,

[Millions of dollars] 2001 2000 Assets Utility Plant, net $5,263 $4,949 Nonutility Property, net 93 79 Non-current Investments 191 203 Utility and Nonufility Property and Investments, net 5,547 5,231 Current Assets:

Cash and temporary investments 212 159 Receivables, net 424 694 Inventories 236 183 Prepayments and other 21 16 Investments 664 479 Total Current Assets 1,557 1,531 Deferred Debits 718 665 Total Assets $7,822 $7,427 Capitalization and Uabilities Shareholders' Investment Common Equity $2,194 $2,032 Preferred stock [Not subject to purchase or sinking funds] 106 106 Total Shareholders' Investment 2,300 2,138 Preferred Stock, net [Subject to purchase or sinking funds] 10 10 SCE&G-Obligated Mandatorily Redeemable Preferred Securities, due 2027 50 50 Long-Term Debt, net 2,646 2,850 Total Capitalization 5,006 5,048 Current Uabilities:

Short-term borrowings 165 398 Current portion of long-term debt 739 41 Accounts payable and accrued liabilities 503 579 Deferred income taxes, net 154 98 Total Current Liabilities 1,561 1,116 Deferred Credits 1,255 1,263 Commitments and Contingencies Total Capitalization and ULabilities $7,822 $7,427

SCANA CORPORATION CONDENSED CONSOUDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2001 2000 1999

[Millions of Dollars]

Operating Activities:

Net income $539 $250 $179 Adjustments to reconcile net income to net cash provided by operating activities:

Cumulative effect of accounting change, net of taxes - 1(29)

Depreciation and amortization 236 227 177 Amortization of nuclear fuel 16 16 18 Gain on sale of assets and investments (558) (3) (68)

Impairment on investments 62 -

Hedging activities (65)

Allowance for funds used during construction (26) (9) (7)

Over (under) collection, fuel adjustment clauses 20 (25) (6)

Changes incertain assets and liabilities 292 ! (112) (53)

Other (20) *76 (15)

Net Cash Provided By Operating Activities 496 391 225 Investing Activities:

Utility property additions and construction expenditures, net of AFC (523) (334) (238)

Purchase of subsidiary, net of cash acquired - (212)

Other investing activities (43) (39) 15 Net Cash Used InInvesting Activities (566) (585) (223)

Financing Activities:

Proceeds from debt issuance 803 1,146 299 Debt repayments and stock repurchases (317) 7 (772) (97)

Dividends on preferred and common stock (130) (131) (155)

Short-term borrowings, net (233) (6) 5 Net Cash Provided By Financing Activities 123 - 237 52 Net Increase inCash and Temporary Investments 53 43 54 Cash and Temporary Investments, January 1 159 116 62 Cash and Temporary Investments, December 31 $212 $159 $116

SCANA CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Years Ended December 31, 2001 2000 1999

[Millions of Dollars, except per share amounts]

Operating Revenues:

Electric $1,369 $1,344 $1,226 Gas - Regulated 1,015 998 422 Gas - Nonregulated 1,067 1,091 430 Total Operating Revenues 3,451 3,433 2,078 Operating Expenses:

Fuel used inelectric generation 283 295 285 Purchased power 138 82 36 Gas purchased for resale 1,681 1,694 721 Other operation and maintenance 482 477 411 Depreciation and amortization 224 217 169 Other taxes 115 114 103 Total Operating Expenses 2,923 2,879 1,725 Operating Income 528 554 353 Other Income (Expense):

Other income, including allowance for equity funds used during construction 54 41 22 Gain on sale of assets 13 3 68 Gain on sale of investments 545 Impairment of investments (62)

Total Other Income 550 44 90 Income Before Interest Charges, Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 1,078 598 443 Interest Charges, Net of Allowance for Borrowed Funds 223 225 142 Income Before Income Taxes, Preferred Stock Dividends and Cumulative Effect of Accounting Change 855 373 301 Income Taxes 305 141 111 Income Before Preferred Stock Dividends and Cumulative Effect of Accounting Change 550 232 190 Preferred Stock Dividends 11 11 11 Income Before Cumulative Effect of Accounting Change 539 221 179 Cumulative Effect of Accounting Change, net of taxes - 29 Net Income $539 $250 $179 Basic and Diluted Earnings Per Share of Common Stock:

Before Cumulative Effect of Accounting Change $5.15 $2.12 $1.73 Cumulative Effect of Accounting Change, net of taxes .28 Basic and diluted earnings per share $5.15 $2.40 $1.73 Weighted average shares outstanding [Millions] 104.7 104.5 103.6

SCANA CORPORATION SCA/NA isissuing its annualreport insummary format. Complete RETAIL GAS MARKETING - Retail gas operating revenues finoandal statements and an extensive review of its financial increased in2001 due to cold weather and record high gas condition and results of operations are provided to shareholders costs early inthe year. Net income increased primarily as a result of record as of March 14, 2002 as part of SCANA's proxy of increases ingross margins on gas sales.

statement. The full financials and extensive discussion of the business and operation of SCANA and ils subsidiaries also are ENERGY MARKETING - Energy marketing operating included inthe 2001 Form 10-K filed with the Securities and revenues decreased in2001 primarily due to lower prices for Exchange Commission. natural gas inthe latter part of the year, however, net income increased primarily due to improved margins.

FINANCIAL REVIEW OTHER OPERATING EXPENSES -Other operating expenses increased in2001 primarily as a result of increases inemployee Earnings derived from continuing operations increased by $ .03 in benefit costs. Depreciation and amortization increased primarily 2001, from $2.12 to $2.15, primarily as a result of improved as a result of normal increases in utility plant. Other taxes results from retail gas marketing and other energy marketing increased primarily due to increased property taxes.

activities. These improvements were partially offset by decreases inelectric and gas margins, primarily attributable to milder than OTHER INCOME -Other income increased in2001 primarily normal weather and the effects of a slowing economy. In2001 as a result of the non-recurring gains recognized inconnection the Company also recognized a non-recurring gain of $3.38 per with the sale of the Company's investment inPowertel, Inc. and share in connection with the sale of its investment in the sale of the assets of SCANA Security. These gains were Powertel, Inc., which was acquired by Deutsche Telekom AG, and partially offset by the impairments recorded related to a gain of $.04 per share inconnection with the sale of the investments in ITCADeltoCom, a developer of micro-turbine assets of SCANA Security. In2001 the Company also recorded technology, and a lime production plant.

impairment charges related to investments in ITCADeltaCom

($.34), a developer of micro-tuibine technology ($.04) and a INTEREST EXPENSE - Interest expense decreased in2001 lime production plant (6.04). due to the effects of declining variable interest rates, the Company's use of interest rote swap contracts to convert ELECTRIC OPERATIONS -Electric sales margin decreased in higher fixed rate debt to lower variable rate debt and a decrease 2001 primarily due to milder weather and higher purchased inthe weighted average interest rate on long-term debt. These power costs, which were partially offset by customer growth and decreases were partially offset by increased borrowings.

lower fuel costs. Sales volume decreased primarily due to milder weather and the impact of the slowing economy. INCOME TAXES -Income taxes increased in2001, primarily due to the recording of deferred income taxes inconnection with GAS DISTRIBUTION -Gas distribution sales margins decreased the non-recurring gain on the sale of the Company's investment in in2001 primarily as a result of a slowing economy and increased Powertel, Inc.

competition with alternate fuels. Sales volume decreased due to milder weather and use of alternate fuels by industrial customers. CASH FLOWS - In2001, cash flows from operating activities increased primarily due to decreases inthe levels of accounts GAS TRANSMISSION - Gas transmission sales morgins receivable. Receivables were unusually high inDecember 2000 decreased in2001 primarily as a result of decreased volumes. due to record high gas prices and cold weather. Cash was also Sales to industrial customers were reduced due to competitive obtained from several financings, including the issuance of notes pricing of alternate fuels and a slowing economy, while sales and bonds, and was utilized primarily for construction of utility to electric generation and sales for resole were reduced due to assets, other debt repayments and the payment of dividends.

milder weather.

INVESTOR INFORMATION DIVIDENDS Dividends on SCANA's common stock and SCE&G's Corporate Headquarters cumulative preferred stock are declared quarterly by the SCANA Corporation Company's board of directors, and are normally payable 1426 Main Street on the first day of January, April, July and October to Columbia, SC 29201-2845 shareholders of record on or about the 10th day of the Telephone: (803) 217-9000 preceding month.

INTERNET ACCESS SCANA INVESTOR PLUS PLAN Information about the Company, including stock quotes, The Plan provides investors a convenient and economical financial reports, press releases and information on the means of acquiring, holding and transferring shares of Company's products and services, isavailable on SCANA's SCANA's common stock. Participants may purchase home page on the Internet. Registered shareholders additional shares of common stock through automatic may also access a variety of information about their reinvestment of all or a portion of their cash dividends stock account 24-hours a day, seven days a week on SCANA's common stock and SCE&G's cumulative through our Company's Web site at www.scana.com. preferred stock and/or by making optional cash payments of up to $100,000 per calendar year. The Plan also features a direct purchase provision through ANNUAL MEETING which investors can acquire their first shares of SCANA's SCANA Corporation's 2002 Annual Meeting of common stock directly from the Company. A variety Shareholders will be held at 9:00 a.m. on Thursday, May of other services, including direct deposit of dividends 2,at Leaside, 100 East Exchange Place, inColumbia, SC. and safekeeping of share certificates, are also available.

Toreceive a Plan prospectus and enrollment form, please contact Shareholder Services.

COMMON STOCK SCANA Corporation's common stock islisted and traded on the New York Stock Exchange (NYSE). The ticker symbol is SCG. Quotes may be obtained in daily newspapers under the listing SCANA.

SHAREHOLDER SERVICES FORM 10-K Questions concerning SCANA's Investor Plus Plan, stock Acopy of SCANA's 2001 Annual Report on Form 10-K transfer requirements, replacement of lost or stolen (as filed with the Securities and Exchange Commission) stock certificates or dividend checks, address changes, is available without charge by contacting Shareholder Services.

direct deposit of dividends, elimination of duplicate mailings, or other account services should be directed to the Shareholder Services Department:

AUDITORS Deloitte &Touche LLP SCANA Corporation Attention: Shareholder Services (054)

Certified Public Accountants 1426 Main Street, Suite 820 Columbia, SC 29218-0001 Columbia, SC 29201 (800) 763-5891 (24-hour toll-free Investor Line)

(803) 217-7817 (Columbia)

(Note: A ShareholderServices representativeisavailable INVESTOR RELATIONS CONTACTS between 9:00 a.m. and 4:00 p.m. Eastern time, Monday through Friday) H.John Winn, III (803) 217-9240 E-MAIL shareholder@scana.com FAX (803) 217-7344 FAX(803) 217-7389 E-MAIL jwinn@scana.com Byron W.Hinson TRANSFER AGENT AND REGISTRAR (803) 217-7458 FAX (803) 217-7344 SCANA Corporation maintains shareholder records, E-MAIL bhinson@scana.com issues dividend checks and acts as Transfer Agent and Registrar for the Company's common stock and SCE&G's cumulative preferred stock. Shareholders may send INVESTORS' ASSOCIATION stock certificates directly to the Company's Shareholder For information about this organization's activities, Services Department for transfer. There isno charge for please write to:

this service. The Company recommends that certificates be mailed by registered or certified mail. Signatures Association of SCANA Corporation Investors required for transfer must be guaranteed by an official c/o Julian E.Keil of a financial institution that is an approved member of P.O. Box 32115 a Medallion Signature Guarantee Program. Charleston, SC 29417-2115

BOARD OF DIRECTORS DIRECTORS EMERITI Bill. Amick 0. Maybank Hagood William R.Bruce, Sr Chairman and CEO President and CEO William T.Cassels, Jr.

Amick Farms, Inc. William M.Bird &Co., Inc James B.Edwards Batesburg, SC Charleston, SC Benjamin A.Hogood Jack F Hassell, Jr.

James A.Bennett W.Hayne Hipp FCreighton McMaster President and CEO Chairman, President and CEO Henry Ponder South Carolina The Liberty Corporation John B.Rhodes 1' Community Bank Greenville, SC John A.Warren Columbia, SC Lynrne M.Miller William B.Bvokhart Jr. CEO EXECUTIVE OFFICERS Partner Environmental

.4 Bookhart Farms Strategies Corporation H.Thomas Arthur Elloree, SC Reston, VA Legal George J. Bulivinkel, Jr.

William C.Burkhardt Harold C.Stowe Telecommunications; President and CEO, Retired President and CEO Governmental Affairs Austin Quality Foods, Inc. Canal Holdings, LLC Cary, NC Conway, SC Stephen A.Byrne Nuclear Operations Maceo K.Sloean Hugh MiChapman Asbury H.Gibhes Chairman, President and CEO Retired Chairman Natural Gas Transmission, SC Sloan Financial Group, Inc.

NationsBank South Chairman and CEO Duane C.Harris Atlanta, GA NCM Capital Mgt. Group, Inc. Human Resources Durham, NC Neville 0. Lorick Elaine T.Freeman Executive Director Electric and Natural Gas Operations, SC William B.Timmerman ETV Endowment of SC,Inc. Kevin B.Marsh Chairman, President and CEO Spartanburg, SC Finance; Natural Gas Operations, NC; SCANA Corporation Columbia, SC Interstate Supply and Capacity Lawrence MiGressette, Jr.

Chairman Emeritus Ann M.Milligan G.Smedes York SCANA Corporation Marketing; President and Treasurer Columbia, SC Retail Natural Gas, GA York Properties, Inc.

Raleigh, NC William B.Timmerman Chief Executive Officer

SA No T E E A NNUA L P P 0 R 4

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IINTRODUCTION I Santee Cooper - Dependable Power, Dependable People.

Construction of the Santee Cooper Santee Cooper also owns and project began on April 18, 1939, operates combustion turbine-peaking with the first electricity generated on units at Myrtle Beach and Hilton Feb. 17, 1942, from the Pinopolis Sae Head Island, and a small hydroelec Power Plant, (renamed Jefferies tric unit at the Santee Dam.

Hydroelectric Station in 1966), a The utility has a one-third own five-unit hydroelectric facility near ership in the V.C. Summer Nuclear Moncks Corner. Station near Jenkinsville.

Two above-groundstorage tainks hold approximately Santee Cooper serves nearly 2 million gallons of liqui I fue I for use at the Rainey In 2001, Santee Cooper became 131,000 retail customers in Berkeley, Generating Station. the first utility in South Carolina to Georgetown and Horry counties and supplies power to offer green power. Electricity is generated using methane the municipalities of Bamberg and Georgetown, 32 large gas from the Horry County Solid Waste Authority.

industries, and one military installation. The state-owned In October 1994, the Santee Cooper Regional Water electric and water utility generates the power distributed by System began commercial operation. This signaled a new the state's 20 electric cooperatives to almost 600,000 customers era in Santee Cooper service to South Carolina. The in the state's 46 counties. Over 1.6 million South Carolinians citizens of Moncks Corner, Goose Creek and Summerville, receive their power from Santee Cooper. and customers of the Berkeley County Water & Sanitation In addition to its original hydroelectric station, the utility Authority, some 94,000 water users, are the beneficiaries of operates four large-scale, coal-fired generating stations in this stable supply of one of life's most precious commodities.

South Carolina: Jefferies Station in Moncks Corner; Cross Station in Cross; Winyah Station in Georgetown; and Grainger Station in Conway.

Cover. Construction continued throughout the year on Santee Cooper's 500-megawatt, combined-cycle John S. Rainey Generating Station near Ivo, S.C.

The combined cycle unit began commercial operation on Jan. 1, 2002. Pictured at top, from left to right are Earl Fouch, auxiliary operator; Donna Burnette, technician A; Aaron Langdale, technician A; and Kathy Jones, Stores specialist, all Rainey Station employees.

Santee Cooper 2001 Annual Report theme: Dependable Power. Dependable People.

I~~

TAL FCNET Santee Cooper has 4,386 miles of transmission lines all across South Carolina.

2 Mission Statement 2 Energy Sales 3 Executive Summary 7 Corporate Statistics 7 Comparative Highlights 8 Power 16 People 23 Glossary 24 Financials 25 Finance-Audit Committee Chairman's Letter 26 Management's Discussion and Analysis 29 Report of Independent Public Accountants 30 Financial Statements and Notes 50 Board of Directors 52 Advisory Board and Management 53 Schedule of Refunded and Defeased Bonds Outstanding 54 Schedule of Bonds Outstanding 56 Customer Service Offices 1

0 ISONSA The mission of Santee Cooper is to be the state's leading resource for improving the quality of life for the people of South Carolina.

To filfill this mission, Santee Cooper is committed to:

"*being the lowest-cost producer and distributorof reliable energy, water, and other essential services;

"*providing excellent customer service;

"*maintaininga quality workforce through effective employee involvement and training;

"*operatingaccording to the highest ethical standards;

"*protecting our environment; and

"*being a leader in economic development.

I ENERGY SALES i Direct Retail Service Military & Large Industrial Central is Santee Cooper's largest single At the end of 2001, Santee Cooper was Military and large industrial sales were customer. These electric cooperatives serving 130,897 residential, commercial, up 1 percent over the previous year. distribute power to almost 600,000 and other retail customers located in customers across the state.

Berkeley, Georgetown, and Horry coun Wholesale Santee Cooper also provides ties. This was an increase of 2 percent Sales to the Central Electric Power electricity to the municipalities of over 2000. Sales to these retail customers System and Saluda River Electric Bamberg and Georgetown. Sales to were 3,084 gigawatt-hours, up 1 percent Cooperative Inc. for their member these municipalities decreased 3 percent.

from the previous year. cooperatives increased 7 percent.

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Santee Cooper's corporate headquartersare located in Moncks Corner, S.C.

EXECUTIVE

SUMMARY

We saw tremendous changes in 2001, as a nation, as Americans, and as a company. Following the terrorist attacks on Sept. 11, 2001, our whole world changed. As American citizens, our freedom was challenged. We have changed the way we do so many things that have long been a part of our normal lives. Many businesses, including Santee Cooper, improved procedures to protect our employees and facilities.

Despite many challenges, it was nevertheless a good year at Santee Cooper. We are steadfast in our mission to generate, transmit and distribute low-cost electricity with excellent customer service.

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I EXECUTl /IVE SUMM]*v hAR ];¥ Generation Santee Cooper is preparing for the future by adding new electric generation.

As South Carolina's population continues to grow, we're meeting the energy needs of our customers. With 40 percent of the state's population receiving Santee Cooper power, we have committed to our customers that they will not experience the electricity shortages and high costs of power which occurred recently in California.

In 1999, Santee Cooper began construction on a 500-megawatt combined-cycle unit and two 150-MW combustion turbines for an 800 MW generating facility in Anderson County. This is Santee Cooper's first venture in natural gas-fueled base load generation. The combined cycle unit at the John S. Rainey Generating Station began commercial John H. Tiencken Jr., President and CEO operation on Jan. 1, 2002, with construction costs totaling $347 million.

Completion of the combustion turbines is expected in 2002. This facility was completed on time and under budget and will bring increased fuel Leadership and diversity to our generation portfolio.

Management In November, the board of directors approved the construction of three additional 80-MW generating units at Rainey Station.

H. Donald McElveen, P.E., Santee Cooper's Construction on this $120 million project will begin in spring 2002, with new board chairman, was confirmed by the commercial operation in January 2004. Upon completion, the total gener South Carolina Senate on Aug. 30, 2001. ating capability at this station will be approximately 1,040 MW.

He is a professional engineer and a founding Also, in May, the board approved the construction of an additional partner of GMK Associates Architects and 600-MW unit at Cross Station in Berkeley County. Work on the $675 Engineers of Columbia, S.C. million project is underway, with an expected commercial operation date Management changes this year included of January 2007.

the promotions of Elaine Peterson and Santee Cooper became the first utility in the state to provide a Lonnie Carter to the executive management green power alternative for customers. The Green Power facility near team. Peterson was promoted to senior vice Conway, S.C. generates electricity using methane gas produced from president of Administration and Finance. the county's landfill. The $2.5 million plant went into commercial Carter was promoted to senior vice president operation Sept. 4 and provides 2 MWs of renewable resource generation.

of Corporate Planning and Bulk Power. Santee Cooper's residential and commercial customers can purchase green power in 100 kilowatt-hour and 200 kilowatt-hour blocks, respectively.

Funds generated from the sale of green power will be used to fund future renewable energy projects. This joint project was accomplished with the help of the Horry County Solid Waste Authority and Horry Electric Cooperative.

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I EXECUTIVE

SUMMARY

Santee Cooper has added new features to Transmission its customer service menu. We now provide an interactive voice-response system and In June, Santee Cooper was asked to join a diverse group of other e-Billing to better serve our customers.

utilities across Alabama, Florida, Georgia and Mississippi to explore Customer growth continued to be strong at the mutual benefits of forming a Regional Transmission Organization 2 percent for 2001. Santee Cooper now or RTO. Known as SeTrans, this would be one of the nation's largest provides electric service to almost 131,000 RTOs, covering more than 39,000 miles of transmission with assets retail customers in our direct service territory valued at approximately $6 billion. The future of this new arrangement of Berkeley, Georgetown and Horry counties.

is dependent upon several factors, including the receipt of the requisite New franchise agreements were signed approvals from the Federal Energy Regulatory Commission and other in 2001 with the cities of Myrtle Beach applicable regulatory agencies. In addition, for each of the FERC non and Moncks Corner, along with a 10-year jurisdictional transmission owners participating in the SeTrans process, contract extension with the Bamberg Board a precondition to entering into this new arrangement is careful of Public Works.

review of the final SeTrans structure and a cost-benefit analysis that would demonstrate that subjecting one's transmission system to this arrangement would provide an overall benefit to the transmission owner's native load customers.

New Service Area On Jan. 1, 2001, all of the state's 20 electric cooperatives were, for the first time, receiving their power from Santee Cooper. Members of five Upstate cooperatives (Blue Ridge Electric Cooperative, Broad River Electric Cooperative, Laurens Electric Cooperative, Little River Electric Cooperative, and York Electric Cooperative) began receiving Santee Cooper power, bringing the total number of ultimate electric cooperative member-consumers to about 600,000.

H. Donald McElveen, Chairman of the Board Distribution Excellent customer service has always been an essential part of Santee Cooper's mission. Once again, we have received excellent marks for our work in this area. According to survey results released in November, 99.3 percent of our residential electric customers were satisfied with Santee Cooper's performance, well above the national average for utilities.

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IIEXEC:[*UTIn VE l'aSUM MAR F' ¥I Financial Standing In August, the Santee Cooper Board of Directors authorized the sale of $54.89 million of revenue bonds to finance a portion of the

$397 million Rainey Station. The debt was issued at an all in true interest rate of 4.734 percent.

Also in August, the board authorized two separate refundings. First,

$113.38 million 1992 Series A Bonds were refunded with a gross savings of $15.1 million. Later in the month, $10 million in 1991 Series B bonds were refunded with a gross savings of $1.23 million over the life of the bonds.

At the end of 2001, Santee Cooper had approximately $2.2 billion in bonds outstanding. Our bonds continued to be highly rated. We have maintained AA ratings with Moody's and Fitch and AA- with Standard & Poor's.

Santee Cooper had $1 billion in revenues during 2001 and income before contributions and transfers which totaled $66.5 million.

Our People Santee Cooper's diverse, talented and competent employees are to be commended for their hard work. Their efforts and loyalty through the years have contributed greatly to making Santee Cooper what it is today. Dedication to providing superb customer service and dependable power from dependable people is what keeps Santee Cooper one of America's most resourceful electric utilities.

John H. Tiencken Jr. H. Donald McElveen, P.E.

President and Chief Executive Officer Chairman Board of Directors 6

I~ S CORORTE 2001 2000 19919819 I YeaCaena Total Electric Revenue (in thousands of dollars) 968,795 858,458 810,572 772,157 724,211 Interdepartmental Sales of Electricity and Water (300) (260) (230) (223) (239)

Total Electric Revenue-Net of Interdepartmental Sales (in thousands of dollars) 968,495 858,198 810,342 771,934 723,972 Water System 4,544 4,21 7 3,824 3,705 3,852 Total Operating Revenues (in thousands of dollars) 973,039 862,415 814,166 775,639 727,824 Operating & Maintenance Expenses Charged to Operations (in thousands of dollars) 627,493 541,515 480,371 446,537 429,209 Sums in Lieu of Taxes Charged to Operations(" (in thousands of dollars) 2,521 2,490 2,238 2,134 2,203 Payments to the State (in thousands of dollars) 9,216 8,497 7,883 7,605 7,462 Net Operating Revenues Available for Debt Service (in thousands of dollars) 366,435 354,114 354,830 345,498 317,940 Income Before Contributions and Transfers 2

(in thousands of dollars)(" 66,510 74,817 47,384 39,345 13,596 Energy Sales (in gigawatt-hours) 22,400 22,139 20,281 19,466 18,437 Number of Customers (at year end)

Retail 130,897 128,513 124,647 119,470 114,290 Military and Large Industrial 33tut 35 35 33 33 Wholesale(') 5 4 4 5 5 Total 130,935 128,552 124,686 119,508 114,328 Summer Peak Generating Capability (net megawatts) 3,520 3,518 3,518 3,518 3,360 Power Requirements and Supply (in gigawatt-hours)

Generation: Hydro 220 301 304 571 520 Steam 18,581 19,206 17,165 15,933 15,401 Combustion Turbine 12 33 46 41 7 Nuclear 2,243 2,113 2,450 2,723 2,412 Landfill Methane Gas 4 Total (in gigawatt-hours) 21,060 21,653 19,965 19,268 18,340 Purchases, Net Interchanges, etc. (in gigawatt-hours) 1,445 170 408 506 310 Total Territorial Energy Sales (in gigawatt-hours) 22,505 21,823 20,373 19,774 18,650 Territorial Peak Demand (in megawatts) 4,803 3,876 3,729 3,523 3,336 (1) Amounts accrued for payment to the municipalities as franchise fees are not included. Amounts totaled $2,679,000 for 2001, $2,544,00 for 2000, $2,427,000 for 1999,

$2 333,000 for 1998, and $2,168,000 for 1997.

(2) Prior year amounts for 1997 have been re-stated to conform to current year presentation.

(3) Does not include non-firm sales to other utilities.

(4) The number of facilities served by the Authority under the Large Light & Power category has not decreased; however, one facility previously served under three service agreements is now served under one service agreement.

Caledarear2001200  % C ang Total Revenues & Income $ 999,925 $912,206 9 Total Expenses & Interest Charges 896,834 816,346 9 Other (36,581) (21,043) 57 Income Before Contributions and Transfers $ 66,510 $ 74,817 (12)

Debt Service Coverage (w/o Commercial Paper) 1.79 times 1.81 times Debt/Equity Ratio (w/o Commercial Paper) 69/31 73/27 Financial (in thousands of dollars) 7

Some 1.6 million South Caroliniansreceive power generated by Santee Cooper.

Santee Cooper adds generating capacity to meet forecast demands.

The combined-cycle portion of the John S. Rainey Generating Station, Santee Cooper's first major venture into natural gas-fired electric generation, was completed by year's end. The Rainey Station is Santee Cooper's first wholly owned electric generating facility constructed outside the state's Lowcountry and Pee Dee areas. The 500-megawatt combined-cycle unit, which began commercial operation on Jan. 1, 2002, features two combustion-turbine generators and one steam-turbine generator. The station's two 150-MW simple-cycle generators are slated for commercial operation in the spring of 2002.

"*In November, the Santee CooperBoard of Directors voted to construct three additional 80-MW combustion-turbine units at Rainey Station. The $120 million project is scheduled for completion by 2004.

"*The new units bring the station's total cost to $517 million and total generating capability to 1,040 megawatts.

This new station will be the third largestgeneratingfacility on the Santee Cooper system.

"*By comparison, the Cross Station's capability is 1,160 MWs, nearly matched by Winyah Station's 1,155 MWs.

Generating electricity is one thing. Getting the power where it needs to go is another. Completion of the 30-mile long Rainey-Greenwood County 230-kilovolt double-circuit transmission line, and the Rainey 230-kV switching station, were projects critical to Rainey Station's successful startup.

I POWER I Territorial Peak Based on load forecasts, even more Demand generation is needed. In May, the board authorized a third coal-fired 1997 1998 1999 2000 2001 unit at the Cross Station. The 600-MW unit, costing $675 million, is projected to enter commercial operation no later than 2007.

With a total of 1,760 MWs online, Cross will become Santee Cooper's largest station in terms of generating capability.

Cross GeneratingStation has a generating capacity of 1,160 megawatts.

3,336 3,523 3,729 3,876 4,803 (in megawatts)

Green Power: A first Capacity for South Carolina.

1997 1998 1999 2000 2001 Santee Cooper, as well as South Carolina, had another electric generation "first" in 2001. The Horry County Landfill Gas Generating Facility began commercial operation in September. Methane gas, produced from decaying refuse at the landfill provides fuel for the small plant.

The plant was dedicated in October with Gov. Jim Hodges giving the keynote address before a host of dignitaries.

Using two Austrian-built V-20 engines, the plant can produce 2 MWs of power. Another unit has been ordered, and additional studies are 3,659 3,817 3,917 3,967 4,306 (in megawatts, includes Rainey Station and underway to determine if the site can accommodate more units.

purchased power from SEPA and COE) The landfill gas project was truly a cooperative project. The Horry County Solid Waste Authority constructed and owns the gas collection SEPA =Southeastern Power Administration COE=U.S. Army Corps of Engineers and blower system. Santee Cooper owns the generators and associated equipment. Because Santee Cooper lines were not in close proximity to the site, Horry Electric Cooperative rebuilt their line to allow power from the plant to enter the grid.

It's called "Green Power" because the fuel is produced from a renewable resource. Santee Cooper began offering Green Power to its Horry and Georgetown county customers in October. The Green Power program is entirely voluntary. A total of 328 customers, purchasing 2,658 100 kWh blocks of power, signed up in 2001. Because it generally costs more to produce Green Power than electricity produced from 10

I P conventional sources, customers pay a 3 cents per kilowatt-hour premium. Money More customers create from premiums is being set aside to fund future renewable energy projects. Initially, more demand for power.

Green Power is being offered to customers Approximately 6,300 retail customers of Horry Electric Cooperative and Santee have been added in the last two years, Electric Cooperative.

nearly 2,400 in 2001. Santee Cooper now has approximately 131,000

'01, retail customers.

More customers mean an increased demand for power. The state's population growth in the last decade dramatically shows why Santee Cooper Chairman Donald McElveen, Gov. Jim Hodges, Horry County Council

+teeooDe eOER Santee Cooper is actively constructing Chairman Chad Prosser, and Harry County Solid Waste Authority Chairman Carson Benton new generation, pull a symbolic switch signifying the start of According to the U.S. Census green power generation.

Santee Cooper became the first utility in the state to Bureau, the state's population grew 15.1 percent from 1990 to 2000. This provide green power to its customers.

ranked South Carolina as the 15th fastest growing state in the nation.

Horry County, one of three counties where Santee Cooper has retail customers, showed the most dramatic increase, growing 36.5 percent. This translated into nearly 53,000 more residents, all of whom expect reliable and affordable electricity.

Georgetown County grew 18 percent, adding 9,500 people while Berkeley County's decade of growth was 11 percent or 34,500 additional citizens.

Santee Cooper set an all-time record for power delivery on Jan. 4 when 4,803 MWs were delivered between 7 and 8 a.m. The all-time demand record was the third in as many days.

Santee Cooper line crews restore power quickly.

Weather is a threat to Santee Cooper's ability to deliver reliablepower. Fortunately,a hurricanedid not threaten South Carolina in 2001. But on July 6, two separate afternoon tornadoes struck Myrtle Beach.

The twisters injured 36 persons, hospitalized 30 and caused $6.5 million in damages to buildings and at least $1 million in damages to vehicles. Thousands lost power and crews went into action as soon as the threat of severe weather subsided.

Tornadoes are a threat any time of year in South Carolinaand last summer's experience was a dramatic reminder to monitor weather conditions.

Power was restored to the majority of Santee Cooper customers in just over 12 hours1.388889e-4 days <br />0.00333 hours <br />1.984127e-5 weeks <br />4.566e-6 months <br />.

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Storage tanks at Rainey Station hold 500,000 gallons of filtered water used in the generation of electricity.

For the first time, Santee Cooper is now a statewide electric utility.

On Jan. 1, Santee Cooper became the source of power for Duke Energy Corp.'s Catawba Nuclear Station's Unit 1 in five Upstate electric cooperatives that serve 160,000 York County. The cooperative also owns 17 MWs of its own member-consumers in 15 counties. diesel generation and two megawatts of hydroelectric gener For over half a century, Santee Cooper has been the ation. Saluda River is also entitled to 40 megawatts of capac primary source of power for 15 of the state's 20 electric it), from the Southeastern Power Administration.

cooperatives, wholesaling power to Central Electric Power Santee Cooper welcomes Saluda River Electric Cooperative. The Columbia-based Central is a transmission Cooperative and its member cooperatives, now a member cooperative, and beginning in the late 1940s has sold of Central. A new public power and cooperative alliance power directly to these distribution cooperatives serving has been forged that serves the people of South Carolina.

member-consumers in 38 counties. Saluda River's member cooperatives are:

On New Year's Day 2001, Saluda River Electric Cooperative "*Blue Ridge Electric Cooperative - headquartered in Pickens began receiving power from Santee Cooper under a separate - serving 55,300 member-consumers in Anderson, power agreement. Greenville, Oconee, Pickens and Spartanburg counties.

These developments are very significant. For the first "*Broad River Electric Cooperative - headquartered in Gaffney time in Santee Cooper's nearly six decades of providing - serving 17,600 member-consumers in Cherokee, power, Santee Cooper is a statewide electric utility. Newberry, Spartanburg and Union counties - and Headquartered in Laurens, Saluda River is a generation North Carolina member-consumers in Cleveland, Polk and transmission cooperative that owns 18.75 percent of and Rutherfordton counties.

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I P

"*Laurens Electric Cooperative - headquartered in Laurens - serving 43,250 member-con sumers in Abbeville, Anderson, Greenville, Laurens, Newberry and Union counties.

"*Little River Electric Cooperative - headquar tered in Abbeville - serving 12,600 member consumers in Abbeville, Anderson, Greenwood and McCormick counties.

"*York Electric Cooperative - headquartered in York - serving 31,000 member-consumers in Of Santee Cooper's 2001 total power supply, 82 percent was provided by Cherokee, Chester, Lancaster and York counties. coal-fired generation.

Growth in Central Electric Power Cooperative's territory in 2001 was approxi mately 3 percent. Santee Cooper operates with Santee Cooper is the direct or indirect source of power for 1.6 million South Carolinians. dependability and efficiency.

For 2001, Winyah Station claimed the top honor in the 17th annual Generation Goals Program. Winyah won by operating below its nonfuel operations and maintenance goal, its net heat-rate target, reducing unplanned outage time and meeting its safety targets.

Santee Cooper and three other publicly owned electric utilities became founding members of Colectric Partners Inc., a generation alliance. Members are provided information and purchasing leverage related to the development, project management, operations and A New Horizon employee places a new logo on one of maintenance areas of their generation, transmission, distribution, their service vehicles which will help increase awareness gas and infrastructure facilities. Other founders are JEA (formerly the of Santee Cooper in the Upstate. The decal identifies Santee Cooper Poweras the source of energy for Saluda Jacksonville Electric Authority), MEAG Power (the Municipal Electric River Electric Cooperative, for which New Horizon provides transmission services. Authority of Georgia) and the Nebraska Public Power District.

Three of these utilities (Santee Cooper, MEAG and JEA) also founded The Energy Authority in 1997, which is responsible for marketing and trading on Santee Cooper's behalf in the wholesale electric market, as well as managing Santee Cooper's natural gas requirements for its Rainey Station.

Santee Cooper burned approximately 7.1 million tons of coal in 2001.

Santee Cooper is taking the fly ash and other combustion byproducts that historically have been waste and is developing uses and markets for these byproducts. Annual utilization of combustion products has reached 47 percent.

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In September, Santee Cooper began an awarenessprogram to educate customers about the Green Power program. Some 328 customers have signed up for the program.

Highlights included: approximately 320 MWs of the station's generating capability.

• 315,000 tons of ash were utilized in cement, redi-mix For the year 2001, this represented nearly 10 percent of concrete and concrete block. Santee Cooper's total power supply.

• 70,000 tons of gypsum produced at Cross Station were In commercial operation since 1983, the V.C. Summer shipped to cement plants at Harleyville, S.C. Station is operated by S.C. Electric & Gas Co., an investor

• Revenues for ash and gypsum sales exceeded $1.6 million. owned utility. Summer Station has had an exemplary oper The city of Myrtle Beach inked a 20-year franchise agree ating and safety record. It routinely receives high marks in ment extension, and the Bamberg Board of Public Works periodic reviews by the Nuclear Regulatory Commission.

inked a 10-year contract extension. Santee Cooper has served "°Total megawatt-hour sales increased 1 percent, totaling Myrtle Beach since the mid-1940s. The municipally owned 22,400,015 MWhs. Retail MWh sales were up 1 percent, electric utility in Bamberg has had Santee Cooper as its source industrial 0.6 percent and wholesale 1.6 percent.

of power since the 1950s. "*Electric revenue growth increased 13 percent, totaling The V.C. Summer Nuclear Station returned to service in $968,795,000. Retail revenue increased 6 percent, industrial March after a nearly five-month refueling and maintenance 8 percent and wholesale 18 percent.

outage. What began as a routine refueling and inspection Santee Cooper sold, through The Energy Authority, soon changed when a small leak was discovered in a weld 308,851 MWhs in 2001.

in the reactor's coolant system pipe. Generation set an all-time availability record at 96.1 A section of piping, including the entire weld, was percent. The national average is in the mid-80s.

removed and replaced with a new section of pipe. This At Santee Cooper, the term "dependable power" isn't repair work, unique to the . just a saying. Santee Cooper's industry, extended the outage I . transmission reliability in 2001 longer than expected. was 99.998 percent. On the Santee Cooper owns one distribution side, the reliability third of the 1,000-MW station, __ was also high at 99.994 percent.

located near the Fairfield County town of Jenkinsville, and receives Mechanic A Derrick Ginn tightens a pipe flange at Rainey's fuel oil filling station.

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I POWER Santee Cooper has 4,386 miles of trans mission lines, an increase of 153 miles. Customer service works A group of nine utilities and transmission system operators, including hard to make life easier.

Santee Cooper, announced plans in Customer service has always been a hallmark of Santee Cooper's service to June to explore the possible development the people we serve. A new call center, which receives an average of 17,000 of a regional transmission organization calls per month, gives customers a faster, more efficient way to do business.

or RTO. The organization would be called As another example, customers can now pay their bill via the Internet, the SeTrans RTO. The Federal Energy using "e-Billing." This service is free to customers and reflects Santee Cooper's Regulatory Commission, through its "easy to do business with" philosophy.

Order 2000, is encouraging utilities to Retail bills were reformatted to be more easily understood with added form RTOs.

information on consumption history.

The Interactive Voice Response, or IVR system, was implemented. It efficiently allows customers to report power outages and is capable of handling over 3,000 reports every hour.

More than 9,000 meters in Horry, Georgetown and Berkeley counties are being read using an automated meter reading system. This reduces the need for additional meter readers and allows meters in difficult locations to be more easily read.

The annual Residential Customer CustomerCore Center Manager Ken Sandiford shows some of the many features of Santee Cooper's Satisfaction Rating released in November Interactive Voice Response system. indicated 99.3 percent of customers are satisfied overall with the performance of Santee Cooper.

A new program, leasing standby Once again, Santee Cooper employees generators to commercial customers had a very successful safety year. Santee Cooper hosted the APPA Lineman's who desire a backup source of power, Rodeo in Myrtle Beach, S.C. March 24. Three The 2.39 incident rate (number of began in June. Santee Cooper installs and Santee Cooper teams placed in the event, with one team being named the overall winner.

recordable injuries/illnessesper 100 maintains the equipment and the customer employees) was the second best in pays a monthly fee.

company history,surpassed only by Santee Cooper was host to the first American Public Power Association the prior year's 2.30 rate. As a result, Lineman's Rodeo. Held in Myrtle Beach, one of Santee Cooper's teams won associated Workers' Compensation first place in the event.

costs were approximately 30 percent To meet the increased threat to corporate information and systems posed below budgeted levels. by expanding Internet connectivity, Santee Cooper recently established a new MIS unit. The unit is dedicated to enhancing Santee Cooper's Information Technology, or IT, security program.

15

Santee Cooper employees give many hours to outreachprograms in the community and schools. Picturedhere from left to right is Nan Faulk (Moth Buddies at Berkeley IntermediateSchool), Chris Hively (liaison with business-educationpartner Westview Middle School), Arthur Ford (liaison with Sampit Elementary School),

Darby Gallagher (liaison with Cross High School), Susie McCaskill (liaison with Waccamaw Elementary School), Lisa Napier (Lunch Buddies at Berkeley Middle School),

Santee Cooper programs star in a supporting role.

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Linda Pickens (liaison with Loris Elementary School), Mitch Mitchum (liaison with Conway Elementary School), Neil James (CHOICES participantat Loris Middle School), Susan Jackson (Read with a Child, Berkeley Elementary School), and Mike Lankford (CHOICES participantat Macedonia Middle School).

The Community Relations unit at Santee Cooper completed its most extensive and successful year through outreach programs.

These programs improve education, support the arts and culture, and help to protect the environment. Support is also lent to key charitable efforts in the communities we serve.

High Performance Partnerships were signed with Berkeley Middle School, Macedonia Middle School and Loris Middle School. A cooperative project with the S.C. Chamber of Commerce, these partnerships help schools identify issues that may be keeping teachers from teaching and students from learning.

CHOICES is a program that introduces eighth-graders to adult-like challenges. Santee Cooper employees teach the nationally known program at Carolina Forest Middle School in Myrtle Beach, Macedonia Middle School in Macedonia and Berkeley Middle School in Moncks Corner.

How is this done? In the program's primary exercise, students are told they are "on their own." They are then given an imaginary job and salary, then instructed to start paying monthly bills that are a routine part of adult life.

Participants quickly discover they must budget for the necessities. It's an eye-opening experience and these young people soon discover the importance of getting an education to get a better job. The message for these youngsters is: The choices you make now largely determine the type of life you will live.

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PEOP1LE 1 The Read With a Child Program at Berkeley Elementary School puts employees in the classroom to share stories with young minds eager to learn about the world.

Math Buddies at Berkeley Intermediate School is direct instruction for third-graders who are learning their multiplication tables.

Pairing a student with a mentor is what Lunch Buddies is all about. A child is assigned an employee and they get to know each other throughout the school year.

There are 22 employees participating in this program, now in its 4th year.

The Santee Cooper Energy Educators Seminar exemplifies educational outreach.

Now in its 13th year, over 850 educators from across the state have come to the Wampee Conference Center for a week of intense instruction on the electric power industry in general and Santee Cooper in particular. This program has continued to receive rave reviews. Teachers can receive recertification credit by completing this program.

The Power Line Hazard Awareness Demonstration unit, called PHAD for short, is one of Santee Cooper's more popular outreach programs. Training and Development instructors showcase and educate the public on power line safety. Eighty-one demonstrations were made to nearly 7,100 children and 250 adults throughout the state in 2001.

.q Santee Cooper sponsors the Cypress After Five concert series in Senior Auditor Belinda Nelson reads with a student at Berkeley Manning. It's the most popular cultural event in Clarendon County, Elementoryi SchooL bringing the Charleston Symphony Orchestra, jazz and popular music to the heart of Santee Cooper Country.

Other participation in the community included the 2001 Fire & Safety Expo held in Myrtle Beach in October and the Black Business Expo held in Charleston in March.

Santee Cooper co-sponsored a community benchmarking project on quality of life issues in Berkeley, Charleston and Dorchester counties. Other sponsors were The Community Foundation Serving Coastal South Carolina, the Charleston Metro Chamber of Commerce and the Trident United Way.

Santee Cooper employees have traditionally been generous to the annual United Way campaigns. Over $150,000 was raised by employees for Trident United Way, Horry County United Way, and Georgetown County United Way.

The American Cancer Society's Relay for Life fund-raising campaign, conducted over several months, raised almost $45,000 from six Santee Cooper teams. The Relay for Life campaign in Berkeley County was tops in the state, raising $190,000.

The Society of Human Resource Management's Innovative Practice Award was presented to Santee Cooper. This occurred in October for the Equal Opportunity Administration's diversity awareness exercise. Santee Cooper's overall affirmative action goals progress remained at 100 percent.

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__ POWER LI1 JE HAZARDS 6WARENESS DE-' NSTRATION I:t In 2001, Santee Cooper employees and retirees made over 80 demonstrations of the Power Line Hazards Awareness Demonstration unit. Employees participat ing in this demonstration ore Everette Wright, line technician and Anthony German and Cloud Wessinger both Training instructors.

Santee Cooper works to create a more dependable economic base.

The human tragedy that will forever be v - I The St. Stephen Commerce Park broke summarized by the date, Sept. 11, had ground for its first tenant, Acutec an immediate impact on economic Precision Machining. The 12-year-old activity and economic development.

The economy was instantly slowed, an economy already nearing an expected I Pennsylvania-based manufacturer makes aeronautical components for Boeing jets, Bell helicopters and gas turbines. Its downturn and recession. Still, consider $2 million, 20,000-square foot facility able progress was made during the year became operational in the fall and by economic development activities employs approximately 20 people.

conducted by Santee Cooper and Construction was completed and Palmetto Economic Development the dedication was held in September Corporation (PEDC). Construction of a 2.5,0010 square-footshell on a 25,000-square foot shell manufac manufacturing facihity in the Loris Commerce turing facility at the Loris Commerce Formed in 1988 by Santee Cooper Center was complet ed in September.

and Columbia-based Central Electric Center. This building directly and Power Cooperative, PEDC promotes economic development positively affects the economic development of the city of in the service territories of Santee Cooper and the areas Loris with a much-needed "product," critical to its future served by the state's 20 distribution cooperatives in every economic growth.

South Carolina county. The 2001 report card includes: Santee Cooper, the Horry County-based PARTNERS

• $17.97 million in new investment Economic Development Corp., PEDC and Loris are now

• 810 new jobs actively marketing the new facility.

• 2,000 kilowatts of new load Santee Cooper continued to provide important resources to critical needs, funding economic development through matching grants and economic-development incentive funds to rural communities in their efforts.

19

The Wadboo Creek Canoe Trail was recently constructed as a joint effort between Santee Cooper, the U.S. Forest Service and Berkeley County. Trail users canoeing through the creek will enjoy an unspoiled view of a Lowcountry black water creek environment.

Santee Cooper shows its true color: green.

In the same year that Santee Cooper introduced Green Power, This has produced enough electricity to light up 13,700 our Give Oil for Energy Recovery or GOFER program celebrated average-sized homes for one year.

its 11th year by collecting 2 million gallons of used oil, While the number of GOFER sites essentially remained another new record. This exceeded last year's collection the same as last year, 275 new industrial and commercial by 30 percent. clients joined the program. Estimates are this new source of GOFER began as a way to collect used motor oil oil will contribute approximately 300,000 gallons annually.

from do-it-yourself (DIY) oil changers - and to protect The GOFER program is the state's largest used motor oil South Carolina's soil and water resources from improper collection program. Figures published by S.C. DHEC's Office disposal. Working with the S.C. Department of Health and of Solid Waste Reduction and Recycling show the GOFER Environmental Control (DHEC), county and municipal program collects approximately 84 percent of collections governments, and electric cooperatives, 545 collection tanks annually reported to the agency.

have been placed statewide. Santee Cooper has a fleet of GOFER is a highly visible aspect of Santee Cooper's trucks and four drivers picking up used oil. It is transported service to the state. The program offers DIYers convenience to a Santee Cooper generating station where it is safely and safety and is an outstanding example of how converted into electric power. governmental partnering can result in tremendous Since its inception, 10 million gallons have been collected. environmental benefits.

20

I PEOPLEJ Clean sweeps. by the Santee Cooper board in May. Marsulex, based in Toronto, Canada, will construct and own two special flue gas desulfurization units, commonly called "scrubbers," at The Santee Cooper board voted in June to spend $280 million Winyah. Marsulex will lease 15 acres from Santee Cooper on equipment that will reduce nitrogen oxide emissions at for the project, which will create 25 to 30 permanent jobs.

coal-fired generating stations. The equipment will be installed The new process will use Marsulex's patented scrubber over the next four years on certain units at the Cross, Grainger technology. The byproduct of the scrubbing process is and Winyah stations.

a granular form of ammonium sulfate, highly desirable The expenditure and the equipment's installation is as a fertilizer.

necessary for Santee Cooper to maintain compliance with new federal air emissions requirements. In addition to Santee Cooper, utilities in 22 Eastern states are affected by the requirements.

Ground was broken in June on construction of a new plant at Winyah Station to recycle one-half million tons of fly ash. Southeastern Fly Ash Co. is constructing a $13.5 million carbon recycling facility. When completed in June 2002, it will employ 30 people and have a payroll in excess of $1 million.

A $100 million project to significantly reduce overall sulfur Employees load fly ash into a SEFA truck at the fly ash silo at Winyah dioxide emissions at the Winyah Station got the go-ahead Generating Station.

Environmental excellence by the gallon.

In May, the Santee Cooper Regional Water System was named as the newest member of the S.C. Environmental Excellence Program. The system earned the honor because the system is designed and operated in a way that reduces the use of electricity and finds alternate reuse for residual material after water is treated.

Santee Cooper sells drinking water wholesale to four Lowcountry water utilities. They are Berkeley County Water and Sanitation Authority, Summerville Commissioners of Public Works, the City of Goose Creek and the Town of Moncks Corner Public Works Commission. The 30-million gallons per day system became operational in 1994 and now serves 94,000 consumers.

The 10th South Carolina Environmental Symposium, of which Santee Cooper is the founder and primary sponsor, drew a diverse gathering of 150 leaders from industry, government and business at the two-day event.

Held in Columbia, the keynote speaker was self-described "corporate environmentalist" Ray Anderson. The author of three acclaimed books, including 1995's "The Journey From Here to There - the Eco-Odyssey of a CEO," Anderson is the chairman of the board of the Georgia-based Interface Research Corp. Interface is a major carpet and home furnishings manufacturing firm.

In November, volunteers from the committee for the Preservation of Lakes Moultrie and Marion, the Lake Marion Association and the Santee Cooper Waterfowl & Fisheries Coalition conducted a cooperative project. Along with Santee Cooper employees, they planted 665 button bushes at mud flats on Lakes Marion and Moultrie. The plants will provide additional structure and cover for fish in shallow water and provide food for migratory waterfowl.

21

IPEOPLE wildlife. Santee Cooper is one of 41 utilities participating in the seven-year-old program.

Santee Cooper assisted the S.C.

Department of Natural Resources and local lake-user groups in stocking native game fish into Lakes Marion and Moultrie. During 2001, some 100,000 largemouth bass and 20,000 white crappie were spawned and stocked.

A productive partnership continued with the U.S. Fish and Wildlife Service to improve Supervisor of Analytical and Biological Services Larry McCord assists with the planting of operations at the Santee National Wildlife 665 button bushes in Lakes Marion and Moultrie. Refuge located on Lake Marion. Aquatic plant management operations were conducted on Improving habitats. 30 acres of refuge property, returning the land to productive use. Two water-control structures Employees in Berkeley County are partners with the S.C. Department of were provided and one large pump and one Transportation. In the Adopt-a-Highway program, they scour U.S. Highway diesel engine were repaired for refuge use.

52 between Cypress Gardens Road and Oakley Road, just south of Moncks Corner. In May, the S.C. Department of Transportation recognized Santee Cooper as the Outstanding State Group of the Year.

In October, the Fall for Beautiful Berkeley cleanup campaign puts volun teer employees to work to make the county's highways and byways more attractive. Over three tons of trash were collected and the Berkeley County Water and Sanitation Authority honored Santee Cooper for the cleanup effort.

Santee Cooper co-sponsored the Envirothon in April, a program whereby 32 teams of high school students test their knowledge and skills in five areas of natural resources study: soils, aquatics, forestry, wildlife and household nonpoint-source pollution. Envirothon is now held annually in 42 states and eight Canadian provinces. The South Carolina event was held at Clemson University's Sandhills Research and Education Center near Columbia.

Representatives of Project Habitat presented Santee Cooper their Wildlife Enhancement Partnership Award. Project Habitat utility members use low-volume herbicides to manage their rights of way. This method of management controls fast-growing trees that can grow into power lines, Supervisor of Aquaculture Jim Tuten and Equipment Operator11Scott Nelson seine for largemouth bass while encouraging the growth of low-growing plants and flowers favored by which will be introduced into the Santee Cooper lakes.

values - torcass wha ism truym potn il ulives.~

SatePoc prahdt7 erilS* 41)-H vi- erc fsudpicpe ha ilsreyuwlilteodtlisal

I 11O * %

Availability - The amount of time that a system Gypsum - This is both a naturally occurring and Public power - Refers collectively to those utilities is available to provide service, usually expressed in an artificially produced calcium sulfate (CaSO4) owned by municipalities or the state or federal percentage, for a specific period of time such as a compound. It is used for a multitude of purposes government. Although not government owned, month or year. including sheetrock, fertilizer and cement produc electric cooperatives are sometimes considered Btu (British Thermal Unit) - The standard unit tion. Artificial gypsum may be produced by utilities within the scope of public power.

for measuring quantity of heat energy, such as using forced-oxidation desulfurization systems. Regional Transmission Organization (RTO) the heat content of fuel. It is the amount of heat Heat rate - A measure of generating station ther A voluntarily created entity approved by the energy necessary to raise the temperature of one Federal Energy Regulatory Commission to efficient mal efficiency, generally expressed in Btu per net pound of water one degree Fahrenheit. ly coordinate transmission planning, operation and kilowatt-hour. It is computed by dividing the total Capacity - The load for which a generating unit, use on a regional and interregional basis. It may be Btu content of fuel burned for electric generation by generating station, or other electrical apparatus is a nonprofit or for-profit entity and it may or may the resulting kilowatt-hour generation. The lower rated either by the user or by the manufacturer. not own the transmission facilities that it operates.

the heat rate, the more efficient the production.

Combustion turbine - A jet-type turbine engine Residential customer- The classification of Income before contributions and transfers which burns gas or oil and propels a generator to customers to whom electricity is sold for house Net revenues available for reinvestment in the produce electricity. hold purposes.

business.

Commercial customer - All nonresidential retail Restructuring - The changes in the regulatory Industrial customer - Very large retail customers customers served under the General Service rate and statutory policies governing electric utilities as served under Santee Cooper's Large Light and well as the changes that are taking place in the schedules. Generally, these customers have a Power rate schedule (or associated riders). These marketplace and electric utility industry as a result demand less than 1,000 kW per month.

customers have a demand greater than 1,000 kW. of these changes in policies.

Demand - The rate at which electric energy is Investor-owned utility - Refers collectively to Retail customer - These customers are the delivered to or by a system, part of a system or a piece of equipment. It is expressed in kilowatts at a those integrated utilities organized as privately ultimate consumer of electric energy. Includes given instant or averaged over any designated owned, taxpaying entities financed by the sale of residential, commercial, small industrial and other period of time. The primary source of "demand" is stock in the free market and managed by represen non-wholesale customers.

the power-consuming equipment of the customers. tatives (directors) regularly elected by stockholders. Revenue bond - A bond payable solely from net Deregulation - The elimination of regulation from Kilowatt (kW) - 1,000 watts. or gross non-taxable revenues derived from the operation and charges paid by users of the system.

a previously regulated industry of sector.

Kilowatt-hour (kWh) - The basic unit of electric Substation - An assemblage of equipment for Distribution - The process of delivering electric energy equal to one kilowatt (1,000 watts) of the purpose of switching and/or changing or energy from convenient points on the transmission power flowing through an electric circuit steadily regulating the voltage of electricity.

or bulk power system to the consumers. Also, a for one hour.

functional classification relating to that portion Tax-exempt financing - Aform of financing Load - The amount of electric power delivered or of utility plant used for the purpose of delivering employed by publicly owned utilities that allows required at any specified point or points on a system.

electric energy from convenient points on the such utilities to issue bonds where the interest paid transmission system to consumers, or to expenses Megawatt (MW) - One million watts or 1,000 on the bonds is not generally subject to taxation.

relating to the operation and maintenance of kilowatts. This policy, established in law, stems from the distribution plant. long-standing philosophical viewpoint that publicly Megawatt-hour (MWh) -The basic unit of owned utilities (electric, water, sewer) provide Electric cooperative - A group of persons who electric energy equal to one megawatt (1,000 basic services to the citizens they serve and thus have organized a joint venture for the purpose of kilowatts) of power flowing through an electric should not be taxed.

supplying electric energy to a specified area. In circuit steadily for one hour.

South Carolina, there are 20 electric co-ops, which Transmission - The process of transporting receive Santee Cooper-generated power. North American Electric Reliability Council electric energy in bulk from a source or sources (NERC) - Formed in 1968, its mission is to of supply to other principal parts of the system Energy sales - The sale of electric energy to promote the reliability of the electricity supply for or to other utility systems. Also, a functional wholesale and retail customers usually expressed North America. classification relating to that portion of utility in kilowatt-hours.

plant used for the purpose of transmitting electric FERC (Federal Energy Regulatory Open Access Same-Time Information System energy in bulk to other principal parts of the Commission) - An independent federal agency (OASIS) - A computer information system that system or to other utility systems, or to expenses created within the Department of Energy, FERC is enables all buyers and sellers to have equal access relating to the operation and maintenance of vested with broad regulatory authority over whole to Santee Cooper's transmission system. It is transmission plant.

sale electric, natural gas, and oil production and designed to ensure that transmission owners do Watt - The basic electrical unit of power or the licensing of hydroelectric facilities. Among not have an unfair advantage in using their own rate of doing work. The rate of energy transfer other things, the agency has regulatory authority transmission resources to sell or wheel power.

equivalent to one ampere flowing due to an over the safety of Santee Cooper's dams and dikes.

Peak demand - The maximum amount of electrical pressure of one volt at unity power Fly ash - Gas-borne particles of matter resulting electricity used by a utility customer at any instant factor. One watt is equivalent to approximately from the combustion of fuels and other materials. during a specific time period. The peak is used 1/746 horsepower, or one joule per second.

Generating unit - A combination of equipment to measure the amount of electric generating Wholesale customer - Acustomer who purchases needed to produce electricity, such as a turbine capacity that is required to meet that maximum all or part of their electricity from the electric utility generator and its boiler. Agenerating station usually demand. for resale.

consists of several units.

23

Santee Cooper's Winyah Station, located in Georgetown County, has a generating capacity of 7,155 megawatts. It was at this generating station that one of the first scrubbed units in the Southeast was installed.

FINANCIAL STATEMENTS CALENDAR YEAR 2001 24

FIiNC-ADI I, hOMIT C LETTER The Finance-Audit Committee of the Board of Directors is composed of six independent directors: Merl F. Code, Laura M. Fleming, Frances B. Gilbert, Rev. Willie E. Givens Jr.,

John R. Jordan Jr. and Joseph J. Turner Jr.

The Committee meets monthly with members of management and Internal Audit to review and discuss their activities and responsibilities.

The Finance-Audit Committee oversees Santee Cooper's financial reporting and internal auditing processes on behalf of the Board of Directors. Periodic financial statements and reports from management and the internal auditors pertaining to operations and representations were received. In fulfilling its responsibilities, the Committee also reviewed the overall scope and specific plans for the respective audits by the internal auditors and the independent public accountants. The Committee discussed the Company's financial statements and the adequacy of its system of internal controls.

The Committee met with the independent public accountants and with the General Auditor, without management present, to discuss the results of the examination, the evaluation of Santee Cooper's internal controls, and the overall quality of Santee Cooper's financial reporting.

Laura M. Fleming Chairman Finance-Audit Committee 25

Management's Discussion and Analysis Financial Highlights gains on the sale of leased lots.

Change in net assets for 2001 was down $9.3 mil 2001 1 2000 lion due to these differences.

(Thousands)

Overview of the Financial Statements Operating revenues $ 973,039 $ 862,415 InJune 1999 the Governmental Accounting Operating expenses $ 741,004 $ 652,805 Standards Board issued Statement No. 34, "Basic Operating income $ 232,035 $ 209,610 Financial Statements - Management's Discussion and Interest charges ($ 155,830) ($ 163,541) Analysis - for State and Local Governments." The objective of this Statement is to enhance the under Cost to be recovered standability and usefulness of the external financial from future revenue ($ 36,581) ($ 21,043) reports of state and local governments to the citizenry, Other income $ 26,886 $ 49,791 legislative and oversight bodies, and investors and Change in net assets $ 57,294 $ 66,591 creditors. This Statement is effective for the Authority beginning in fiscal year 2001 ; consequently the pres Ending net assets $ 992,468 $ 935,174 entation of financial information this year is different from previous reports.

Operating revenues for 2001 increased $110.6 million By definition within this Statement, Santee Cooper or 13% primarily due to higher fuel adjustment revenue is deemed a special-purpose government engaged and a small gain in kWh sales. Fuel adjustment revenue only in business-type activities; where a government was up $117.8 million over last year due to higher entity operates like a business. GASB 34 requires fuel and purchased power costs. The Authority began the following components in a governmental entity's supplying wholesale electric service to the Saluda annual report.

cooperatives on January 1,2001, which added about 160,000 customers to the system. In that same month, Management's Discussion and Analysis a new historical generation peak of 4,803 mWh was The purpose is to provide an objective and easily established in January. However, 2001 as a whole readable analysis of the Authority's financial had the lowest number of degree days in recent 5-year activities based on currently known facts, decisions, history. This warmer weather resulted in less than or conditions.

expected electric sales. Balance Sheet Operating expenses for 2001 increased $88.2 million Assets and liabilities of proprietary funds should or 14%. Fuel and purchased power expense was up be presented to distinguish between current and

$68.8 million compared to last year due to the combi long-term assets and liabilities.

nation of the gain in kWh sales and the extended Statement of Revenues, Expenses and Changes in outage at V.C. Summer Nuclear Station causing a Net Assets greater reliance on more expensive fuel types and This statement provides the operating results of higher purchased power. the Authority broken into the various categories Operating income was up $22.4 million or 11% as of operating revenue and expenses, non-operat a result of these differences. ing revenues and expenses, as well as capital Interest charges for 2001 were down $7.7 million contributions and transfers out.

(5%) compared to last year due to lower debt balances Statement of Cash Flows and lower commercial paper rates. Using the direct method, sources and uses of Costs to be recovered from future revenue was cash from operating activities are illustrated.

$15.5 million or 74% higher than last year due to higher Notes to the FinancialStatements principal payments this year compared to last year. Used to explain some of the information in Other income dropped $22.9 million or 46%. the financial statements and provide more Interest income was down $11.7 million (41%) detailed data.

due to lower interest rates and less funds available for investment. Miscellaneous income decreased

$9.2 million (71%) primarily due to decreased 26

Competition to formally disband the group. The Authority is unable The electric utility industry in general has been to predict whether there will be retail deregulation in affected by regulatory changes, market developments the State and, if so, when or under what conditions.

and other factors that have impacted, and will proba bly continue to impact, the financial condition and Regulatory Matters competitiveness of electric utilities and the level of uti Hydroelectric Relicensing lization of facilities, such as those of the Authority. The Authority operates its Jefferies Hydro Station and Historically, electric utilities have operated as certain other property, including the Pinopolis Dam on monopolies in their service areas, subject to certain the Cooper River and the Santee Dam on the Santee exceptions. Under this regulatory regime, electric River, which are major parts of the Authority's integrated utilities have generally been able to charge rates hydroelectric complex, under a license issued by the determined by reference to their costs of service, FERC pursuant to the Federal Power Act. The license, rather than by competitive forces, and customers of which has been renewed once, is scheduled to expire an electric utility with high rates have not been on March 31, 2006. A Notice of Intent to relicense allowed to purchase power at lower rates from other the hydroelectric complex was filed with the FERC on electric utilities. In contrast, in a deregulated market, it November 13, 2000. The Authority has begun the ini is anticipated that customers in a particular service tial strategic planning and preparation for relicensing.

area will be permitted to choose among competing electric suppliers, resulting in a market price for elec SeTrans ParticipationAgreement tric power in that service area. An electric utility with On September 24, 2001 the Authority, along with six power costs that are high in relation to the power municipal and electric cooperative transmission owners costs of competing electric utilities may have costs that and Southern Company (together with the Authority, cannot be recovered by charging the market rate. the "participating transmission owners"), executed an Although certain deregulation measures proposed to agreement to investigate the development of a date would allow for recovery of some portion of the Regional Transmission Organization (RTO) for the costs that would otherwise be non-recoverable when southeastern United States, currently referred to as markets are deregulated, the ultimate regulatory treat SeTrans. The Entergy Companies recently became ment of such costs cannot be predicted. The loss of signatories to this agreement; other transmission own customers by an electric utility, particularly in the ers in this region are expected to join the SeTrans absence of a method to recover costs allocable to such development process. The RTO concept that is being customers, could have a material adverse effect on the explored involves utilizing an independent entity, which financial condition of the utility. would own no generation or transmission assets, to operate the combined transmission assets of the Senate Task Force on Deregulationof South Carolina's participating transmission owners. The participating Electric Utility Industry. transmission owners would continue to own their Late in 1998, a 19 member Senate task force was respective transmission assets. These discussions and established to study the deregulation of South Carolina's negotiations regarding the development of an RTO in electric utility industry. The Task Force had its organi the Authority's region are ongoing, and their outcome zational meeting on December 1, 1998 and consists and any potential impact on the Authority are of eight members of the Senate and 11 additional unknown at this time.

members, including the Authority's President and Chief Executive Officer, representing various stakeholder Impact of September 11, 2001 groups. The mission of the Task Force is to answer the The impact that the terrorist attacks of September threshold question of whether a fundamental restructur 11, 2001, may have on the Authority are not fully ing of the electric utility industry is in the best interests known at this time including changes in the cost and of the citizens of the State and, if so, to recommend availability of sufficient insurance. Additional efforts legislative changes. The Task Force established five have been implemented to bolster the security of subcommittees: Operations, Consumer, Financial, employees and the generating, transmission and Regulatory and Legal and Oversight. The Task Force distribution facilities from direct attack. In addition, has no specific deadline within which it must accom the Nuclear Regulatory Commission has instituted a plish its work. The Task Force last met in November series of heightened security measures at nuclear 1999. No future meetings of the Task Force have facilities around the country which apply to the V.C.

been scheduled, although no action has been taken Summer Nuclear Station, of which the Authority is a one-third owner.

27

Capital Improvement Program The Authority's capital improvement program for (2) $459 million for Cross Unit 3 and Rainey years 2002 through 2004 consists of expenditures Units 3, 4 and 5, for the completion of the Rainey Generating Station, (3) $232 million for environmental compliance construction expenditures for Cross Unit 3 and expenditures, and Rainey Units 3, 4 and 5 and general improvements (4) $331 million for general improvements to to the Authority's System. These general improve the System.

ments include the power supply facilities, extensions The cost of the capital improvement program will of and improvements to transmission and distribution be provided from internally generated funds of the facilities, environmental compliance, and other Authority, long-term bonds, and Commercial Paper improvements to general facilities. Notes and other short-term obligations of the The total cost of the capital improvement program Authority, as determined by the Authority.

in years 2002 through 2004 is estimated to be The Authority has been active in the bond market approximately $1,028,000,000. This amount is due to needing funds for planned construction, as well expected to be applied as follows: as "refunding" outstanding debt to take advantage of (1) $6 million for completion of Rainey lower interest rates.

Generating Station, Bond Market Transactions during 2001 Par Date Amount Type Closed Purpose Comments

$54,890,000 Revenue 09/18/2001 Finance portion of Rainey All-in-true interest Obligations: Generating Station cost of 4.734%.

2001A and refund the 1991 Refunding Gross savings of

& Improvements Series B Bonds. $668,000 over the life of the bonds Bond Market Transactions during 2002 (Known to date)

Par Date Amount Type Closed Purpose Comments

$108,035,000 Revenue 04/03/2002* Refund 1992 Series A Gross savings of Obligations: Refunding Bonds. $15.1 million 2002A over the life of the bonds

$281,140,000 Revenue 02/13/2002 To finance the tax-exempt portion Tax-exempt bonds.

Obligations: of construction for Cross Unit #3 All-in-true interest 2002B and the three simple cycle units cost of 5.28%.

at Rainey Generating Station.

$91,775,000 Revenue 02/13/2002 To finance the taxable portion Taxable bonds as Obligations: of construction of the three required by IRS 2002C simple cycle units at Rainey Private Use ruling.

Generating Station and All-in-true interest SIP CALL environmental cost 5.38%.

requirements.

• On August 10, 2001, the Authority entered into a Forward Delivery Bond Purchase Agreement which is scheduled to close on April 3, 2002.

28

I

• REOTO INEND T PULI ACONAT To the Advisory Board and Board of Directors of the South Carolina Public Service Authority:

We have audited the accompanying combined balance sheets of the South Carolina Public Service Authority (a component unit of the state of South Carolina-Note 1) as of December 31, 2001 and 2000, and the related combined statements of revenues, expenses and changes in net assets, and cash flows for each of the years then ended. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the South Carolina Public Service Authority as of December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States.

Arthur Anderson, L.L.P Charlotte, North Carolina February 15, 2002 29

ý 1.

Combined Balance Sheets South Carolina Public Service Authority As of December 31, 2001 and 2000 ASSETS 2001 2000 (Thousands)

Current assets Unrestricted cash and cash equivalents $ 70,473 $ 77,882 Unrestricted investments 122,645 120,040 Restricted cash and cash equivalents 98,268 117,702 Restricted investments 73,233 52,544 Receivables, net of allowance for doubtful accounts of

$4,236,000 and $332,000 at December 31, 2001 and 2000, respectively 93,891 95,695 Materials inventory 37,524 35,221 Fuel inventory Fossil fuels 71,300 35,754 Nuclear fuel-net 21,157 27,240 Interest receivable 3,199 3,238 Prepaid expenses 1,759 537 Total current assets 593,449 565,853 Noncurrent assets Restricted cash and cash equivalents 37,474 86,756 Restricted investments 123,682 129,558 Capital assets Utility plant 3,567,720 3,464,528 Accumulated depreciation (1,467,312) (1,387,482)

Total utility plant-net 2,100,408 2,077,046 Construction work in progress 410,711 331,793 Other physical property-net 1,647 1,688 Investment in associated company 10,972 8,307 Deferred debits and other noncurrent assets Unamortized debt expenses 23,622 25,390 Costs to be recovered from future revenue 246,849 283,430 Other 54,387 53,991 Total noncurrent assets 3,009,752 2,997,959 Total $ 3,603,201 $ 3,563,872 The accompanying notes to financial statements are an integral part of these balance sheets.

LIABILITIES 2001 2000 (Thousands)

Current liabilities Current portion of long term debt 71,814 $ 68,082 Accrued interest on long term debt 60,458 61,646 Commercial paper-net 308,965 331,578 Accounts payable 74,110 59,723 Other current liabilities 17,459 31,478 Total current liabilities 532,806 552,507 Noncurrent liabilities:

Construction Fund liabilities 15,035 11,901 Accrued nuclear decommissioning costs 84,366 75,775 Total long-term debt (net of current portion) 2,213,108 2,240,033 Unamortized loss on refunded debt (233,602) (247,695)

Unamortized debt discount and premium-net (35,101) (38,374)

Long term debt-net 1,944,405 1,953,964 Other deferred credits and noncurrent liabilities 34,121 34,491 Total noncurrent liabilities 2,077,927 2,076,131 Total 2,610,733 2,628,638 COMMITMENTS AND CONTINGENCIES (Notes 7, 8 and 9)

NET ASSETS Invested in capital assets, net of related debt 231,233 161,418 Restricted for debt service 111,043 108,601 Restricted for capital projects 64,181 131,006 Restricted for other 55,654 49,862 Unrestricted 530,357 484,287 Total 992,468 935,174 Total $ 3,603,201 $ 3,563,812 31

Combined Statements of Revenues, Expenses and Changes in Net Assets South CarolinaPublic Service Authority Years Ended December 31, 2001 and 2000 2001 2000 (Thousands)

Operating revenues Sale of electricity $ 955,670 $ 847,960 Sale of water 4,544 4,217 Other operating revenue 12,825 10,238 Total operating revenues 973,039 862,415 Operating expenses Electric operation expense Production 48,746 42,910 Fuel 309,560 295,334 Purchased and interchanged power 118,143 63,577 Transmission 14,096 10,896 Distribution 7,134 6,598 Customer accounts 9,354 4,361 Sales 2,358 2,330 Administrative and general 51,319 48,957 Electric maintenance expense 65,471 65,143 Water operation expense 1,017 1,116 Water maintenance expense 295 293 Total operation and maintenance expenses 627,493 541,515 Depreciation and amortization 110,990 108,800 Sums in lieu of taxes 2,521 2,490 Total operating expenses 741,004 652,805 Operating income $ 232,035 $ 209,610 The accompanying notes to financial statements are an integral part of these statements.

32

2001 2000 (Thousands)

Nonoperating revenues (expenses)

Interest and investment revenue $ 16,480 $ 28,145 Net increase in the fair value of investments 6,602 8,654 Interest expense on long term debt (124,882) (127,406)

Other interest expense (30,948) (36,135)

Costs to be recovered from future revenue (36,581) (21,043)

Other-net 3,804 12,992 Total nonoperating revenues (expenses) (165,525) (134,793)

Income before contributions and transfers 66,510 74,817 Capital contributions 0 271 Transfers out (9,216) (8,497)

Change in net assets 57,294 66,591 Total net assets-beginning of year 935,174 868,583 Total net assets-end of year $ 992,468 $ 935,174 33

Combined Statements of Cash Flows South Carolina Public Service Authority Years Ended December 31, 2001 and 2000 2001 2000 (Thousands)

Cash flows from operating activities Receipts from customers $ 970,939 $ 850,535 Payments to non-fuel suppliers (133,812) (60,171)

Payments for fuel (304,987) (291,453)

Purchased power (118,163) (61,853)

Payments to employees (94,330) (89,674)

Other (payments) receipts, net (287) 9,491 Net cash provided by operating activities 319,360 356,875 Cash flows from non-capital related financing activities Distribution to the state of South Carolina (9,216) (8,497)

Water system grant 0 271 Net cash used in non-capital related financing activities (9,216) (8,226)

Cash flows from capital-relatedfinancing activities Proceeds from sale of bonds 54,890 0 Retirements of reacquired debt 2 1,071 Net commercial paper repayments (22,630) (38,488)

Repayment and refunding of bonds (75,530) (83,520)

Interest paid on borrowings (136,811) (142,833)

Construction and betterments of utility plant (209,372) (237,212)

Debt premium (issuance costs) 90 (506)

Other, net (2,552) (2,763)

Net cash used in cpital-related financing activities (391,913) (504,251)

Cash flows from investing activities Net (increase) decrease in investments (10,816) 196,114 Interest on investments 16,460 30,031 Net cash provided by investing activities 5,644 226,145 Net (decrease) increase in cash and cash equivalents (76,125) 70,543 Balance-beginning of year 282,340 211,797 Balance-end of year $ 206,215 $ 282,340 The accompanying notes to financial statements are an integral part of these statements.

34

2001 2000 (Thousands)

Reconciliation of operating income to net cash provided by operating activities:

Operating income $ 232,035 $ 209,610 Adjustments to reconcile operating income to net cash provided by operating activities Depreciation and amortization 118,961 116,539 Impact of transactions involving associated company (48,909) (43,779)

Distributions from associated company 39,789 39,367 Advance to associated company 0 (1,083)

Other income 135 101 Changes in assets and liabilities:

Accounts receivable, net 1,804 (12,539)

Inventories (37,334) 11,502 Prepaid expenses (1,222) 236 Other deferred debits (6,332) (11,567)

Deferred coal contract buy-out costs 7,300 6,976 Accounts payable 14,387 6,059 Other current liabilities (12,941) 11,347 Other noncurrent liabilities 11,687 24,106 Net cash provided by operating activities $ 319,360 $ 356,875 Reconciliation of cash and cash equivalents Cash and investments held by trustee (designated) $ 248,003 $ 318,986 Cash and investments held by trustee 175,523 164,347 Bond funds - current portion 102,249 101,149 Less investments, not considered cash and cash equivalents 319,560 302,142 Cash and cash equivalents at the end of the year $ 206,215 $ 282,340 35

ýI Notes to Financial Statements D - Depreciation - Depreciation is computed on a straight-line basis over the estimated useful lives of the various classes of the Note 1 - Summary of Significant Accounting Policies: plant. Annual depreciation provisions, expressed as a percentage of average depreciable utility plant in service, were approximately A - Reporting Entity - The South Carolina Public Service Authority 3.3% and 3.4% for the periods ended December 31, 2001 and (the Authority), a component unit of the state of South Carolina, 2000, respectively. Amortization of capitalized leases is also was created in 1934 by the state legislature. The Board of included in depreciation expense.

Directors is appointed by the Governor of South Carolina with the advice and consent of the Senate. The purpose of the Authority is E - Revenue Recognition and Fuel Costs - Substantially all to provide electric power and wholesale water to the people of wholesale and industrial revenues are billed and recorded at the South Carolina. Capital projects are funded by commercial paper end of each month. Revenues for electricity delivered to retail notes in addition to bonds and internally generated funds. The customers which have not been billed are accrued. Fuel costs are Board of Directors sets rates charged to customers to pay debt reflected in operating expenses as fuel is consumed.

service and operating expenses and to provide funds required under bond covenants. F - Bond Issuance Costs - Unamortized debt discount, premium, and expense are amortized to income over the terms of the B - System of Accounts - The accounting records of the Authority related debt issues. Gains or losses on refunded debt are are maintained on an accrual basis in accordance with generally amortized to income over the shorter of the remaining life of accepted accounting principles (GAAP) issued by the the refunded debt or the life of the new debt.

Governmental Accounting Standards Board (GASB) applicable to governmental entities that use proprietary fund accounting and G - Cash and Cash Equivalents - For purposes of the statements the Financial Accounting Standards Board (FASB) that do not of cash flows, the Authority considers highly liquid investments conflict with rules issued by the GASB. The Authority's financial with original maturities of less than three months and cash on statements include the accounts of the Lake Moultrie Regional deposit with financial institutions as cash and cash equivalents.

Water System after elimination of intercompany accounts and As stated in Note L,the Authority adopted GASB 34 which transactions. The accounts are maintained substantially in accor requires cash and cash equivalents to be shown as either restricted dance with the Uniform System of Accounts prescribed by the or unrestricted. "Restricted" refers to those funds limited by law, Federal Energy Regulatory Commission (FERC) for the electric regulations or Board action as to their allowable disbursement.

system and the National Association of Regulatory Utility "Unrestricted" is all other funds not meeting the requirements Commissioners (NARUC) for the water system. The Authority also of restricted.

complies with policies and practices prescribed by its Board of Directors and to practices common in both industries. As the Board H - Payment to the State - The distribution to the state of South of Directors sets rates, the Authority has historically followed FASB Carolina is a payment in lieu of taxes and is determined consistent 71, which provides for the reporting of assets and liabilities consis with requirements under bond indentures. This payment totaled tent with the economic effect of the rate structure. The preparation $9.2 million in 2001 and $8.5 million in 2000. The distribution of financial statements in conformity with accounting principles for payment to the state is shown as "Transfers out" on the generally accepted in the United States requires management to Statements of Revenues, Expenses, and Changes in Net Assets.

make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and I - Deferred Coal Contract Buy-Out Costs - During 1995, the liabilities at the date of the financial statements and the reported Authority exercised a buy-out option on an existing coal contract amounts of revenues and expenses during the reporting period. in order to take advantage of lower coal costs. The cost of the Actual results may differ from those estimates. buy-out, which was approximately $53.0 million is recorded in deferred debits and included as a component of fuel costs over C - Utility Plant - Utility plant is recorded at cost, which includes the remaining life of the former contract. The balance in this materials, labor, overhead, and interest capitalized during con account at December 31, 2001 was $11.3 million.

struction. Interest is capitalized when funded through borrowings.

There was no interest capitalized in 2001 or 2000. The costs of J - Investment in Associated Company - The Authority is a maintenance, repairs and minor replacements are charged to member of The Energy Authority (TEA) along with City Utilities appropriate operation and maintenance expense accounts. The of Springfield (Missouri), Gainesville Regional Utilities (Florida),

costs of renewals and betterments are capitalized. The original Jacksonville Electric Authority (Florida), the Municipal Electric cost of utility plant retired and the cost of removal, less salvage, Authority of Georgia, and Nebraska Public Power District.

are charged to accumulated depreciation. TEA markets wholesale power and coordinates the operation of the generation assets of its members to maximize the efficient 36

use of electrical energy resources, reduce operating costs and Governments" as well as GASB Statement No. 38, "Certain increase operating revenues of the members. TEA is expected to Financial Statement Note Disclosures," and has presented the accomplish the foregoing without impacting the safety and reliabil prior year's financial statements on a basis consistent with that of ity of the electric system of each member. TEA does not engage in 2001. The adoption of GASB 34, as amended by GASB 37, the construction or ownership of generation or transmission assets. requires the Authority to make several changes to the presentation All of TEA's revenues and its costs are allocated to the mem of its basic financial statements in addition to requiring the pres bers. The Authority's exposure relating to TEA is limited to the entation of the Authority's Management's Discussion and Analysis Authority's capital investments in TEA, any accounts receivable (MD&A). MD&A will introduce the basic financial statements and from TEA and trade guarantees provided to TEA by the Authority. provide an analytical overview of the Authority's financial activities.

During 2001, the Authority recorded distributions from The basic financial statements consist of the Statement of Revenues, power marketing of $39,789,000 from TEA and recognized Expenses & Changes in Net Assets, the Balance Sheets, the

$39,977,000 in reductions to power costs partially offset by Statement of Cash Flows, and notes to the financial statements.

$1,439,000 in equity losses. With respect to natural gas market FASB 133/ FASB 138: In June 1998, FASB issued Statement No.

ing, the Authority advanced $10,245,000 to fund authorized gas 133, "Accounting for Derivative Instruments and Hedging forward purchases and sales contracts. During 2001, the Authority Activities," which established accounting and reporting standards recorded $3,217,000 in realized losses from natural gas hedging requiring that every derivative instrument (including certain deriv transactions and $3,119,000 as unrealized losses using mark-to ative instruments embedded in other contracts) be recorded in the market accounting as outlined by FASB 133. The unrealized losses balance sheet as either an asset or liability measured at its fair were deferred at December 31, 2001, as regulatory assets and value. The Statement required that changes in a derivative's fair will be recognized and recovered through rates as the hedged value be recognized currently in earnings unless specific hedge power delivery occurs and is recorded to fuel expense. accounting criteria are met. In June 1999, FASB Statement No.

During 2000, the Authority recorded distributions from power 137, "Accounting for Derivative Instruments and Hedging marketing of $39,153,000 from TEA and recognized $43,779,000 Activities-Deferral of the Effective Date of Statement No. 133," was in reductions to power costs partially offset by $1,569,000 in issued which delayed the original effective date of FASB 133 until equity losses. The Authority also received $214,000 representing fiscal years beginning after June 15, 2000. In June 2000, FASB return of a portion of trading capital previously extended due to Statement No. 138, "Accounting for Certain Derivative Instruments the entry of additional members. Also, in 2000, TEA's members and Certain Hedging Activities," was issued which amends FASB voted to authorize TEA to engage in natural gas marketing on 133. FASB 138 addresses a limited number of issues related to behalf of the members. During 2000, the Authority advanced the implementation of FASB 133. The implementation of FASB

$1,083,000 to TEA in support of its future gas marketing activities, 133, as amended, continues to have no material impact on the but no gas marketing transactions occurred. Authority's financial position or results of operations.

The amount approved by the Authority's Board of Directors to support TEA's activities is an amount not to exceed approximately M - Issued But Not Yet Effective Pronouncements

$44.3 million as of December 31, 2001. Statement of Financial Accounting Standards No. 143: This Statement, "Accounting for Asset Retirement Obligations," will K - Impairment of Long-Lived Assets - The Authority follows the change the way companies recognize and measure retirement accounting requirement of FASB Statement No. 121, "Accounting obligations that result from the acquisition, construction, develop for the Impairment of Long-Lived Assets and Long-Lived Assets to ment or normal operation of a long-lived asset. Generally, Be Disposed Of." This statement requires that long-lived assets be companies will begin to recognize much sooner any liability reviewed for impairment whenever events or changes in circum associated with retiring long-lived assets. Effective for fiscal years stances indicate that the carrying amount of an asset may not be beginning after June 15, 2002, asset retirement obligations recoverable. This statement also imposes stricter criteria for regu must be recognized as a liability and be measured at fair value.

latory assets by requiring that such assets be probable of future The liability will be recognized when the obligation is incurred recovery at each balance sheet date. Upon adoption, and to date, which, in many cases, will be when the long-lived asset is placed FASB 121 has had no effect on the Authority's financial position. in service. Management has not yet determined the impact of The Authority will reassess the effect of FASB 121 in the future as this Statement.

competitive factors influence wholesale and retail pricing in the Statement of Financial Accounting Standards No.144: Effective for industry. Refer to Note M, "Statement of Financial Accounting fiscal year 2002, this Statement, "Accounting for the Impairment Standards No. 144." or Disposal of Long-lived Assets," addresses financial accounting and reporting for the impairment or disposal of long-lived assets L- Newly Adopted Standards for 2001 and supersedes FASB Statement No. 121, "Accounting for the GASB 34 and GASB 38: For calendar year 2001, the Authority Impairment of Long-Lived Assets and for Long-Lived Assets to Be adopted GASB Statement No. 34, "Basic Financial Statements Disposed Of". FASB 144 states the required accounting for dis and Management's Discussion and Analysis - for State and Local posing of long-lived assets whether previously held and used or 37

newly acquired, and broadens the presentation of discontinued $10,721,000. As of December 31, 2000, decommissioning funds operations to include more disposal transactions. The implementa totaled $75,420,000 with related unrealized holding gains of tion of FASB 144 is expected to have no material impact on the $11,827,000. These unrealized holding gains are reflected in the Authority's financial position or results of operations. decommissioning liability and not as a separate component of nonoperating income in the Statement of Revenues, Expenses, and Note 2 - Costs to Be Recovered from Future Revenue: Changes in Net Assets.

The Authority's electric rates are established based upon debt All the Authority's investments with the exception of decommis service and operating fund requirements. Straight-line deprecia sioning funds are limited to a maturity of ten years or less. For the tion is not considered in the cost of service calculation used to year ended December 31, 2001, the Authority made investment design rates. The differences between debt principal maturities purchases and sales at cost totalling approximately $37.6 billion, (adjusted for the effects of premiums, discounts, and amortization respectively. For the year ended December 31, 2000, the of deferred gains and losses) and straight-line depreciation on Authority made investment purchases at cost totalling $26.7 bil debt financed assets are recognized as costs to be recovered from lion and realized proceeds from the sale of investments totalling future revenue. The recovery of outstanding amounts associated approximately $26.9 billion.

with costs to be recovered from future revenue will coincide with the retirement of the outstanding long-term debt of the Authority. Investments - Trust indentures and resolutions authorize the Authority to invest in obligations of the U.S. Treasury, agencies, Note 3 - Cash and Investments Held by Trustee (Designated): instrumentalities, and certificates of deposit. The Authority's invest Unexpended funds from the sale of bonds, debt service funds, ments consist of U.S. government securities, certificates of deposit, other special funds, and cash and investments are held and and repurchase agreements. The Authority requires that securities maintained by trustees, and their use is designated in accordance underlying repurchase agreements have a market value of at least with applicable provisions of various trust indentures, bond 102 percent of the cost of the repurchase agreement. Securities resolutions, lease agreements, and the Enabling Act included in underlying repurchase agreements are delivered by broker/dealers the South Carolina law. Such funds consist principally of invest to the Authority's trust agents. At December 31, 2001, the ments in government securities. In 1998, the Authority adopted Authority's repurchase agreements totaled $164,655,000.

the provisions of the GASB Statement No. 31, "Accounting and The Authority's investments are categorized to give an indication Financial Reporting for Certain Investments and for External of the level of risk assumed by the Authority at year-end. Category Investment Pools." GASB Statement No. 31 establishes standards 1 includes investments that are insured or registered or for which of accounting and financial reporting for certain investments in the securities are held by trust agents in the Authority's name.

securities and requires that all equity and debt securities be Category 2 includes uninsured certificates of deposit which are recorded at their fair value with gains and losses in fair value collateralized with securities pledged to the Authority by pledging reflected as a component of nonoperating income in the Statement financial institutions but not held in the Authority's name.

of Revenues, Expenses, and Changes in Net Assets.

As of December 31, 2001 and 2000, the Authority had Cash - Cash is categorized as follows: Category 1 includes bank investments totalling $518,927,000 and $579,081,000, balances entirely covered by federal depository insurance.

respectively. Category 2 includes bank balances that are uncollateralized or As of December 31, 2001, the Authority's investments carried collateralized with securities pledged to the Authority by pledging at fair market value included nuclear decommissioning funds of financial institutions but not held in the Authority's name.

$84,044,000 with related unrealized holding gains of 38

2001 Investments Cash Total Category Category Category Category Carrying Market 1 2 1 2 Value Value (Thousands)

Cash and Investments Held by Trustee (Designated)

General Improvement Funds $ 1,490 $ 1,300 $ 15 $ 0 $ 2,805 $ 2,805 Debt Service Reserve Funds 69,239 0 13 0 69,252 69,252 Other Special Funds 175,919 0 27 0 175,946 175,946 Total Cash and Investments Held by Trustee (Designated) $ 246,648 $ 1,300 $ 55 $ 0 $ 248,003 $ 248,003 Cash and Investments Held by Trustee Revenue Fund $ 65,496 $ 0 $ 1,131 $ 5,878 $ 72,505 $ 72,505 Revenue Fund-Water System 530 0 0 0 530 530 Special Reserve Fund 102,614 0 (216) 0 102,398 102,398 Special Reserve Fund-Water 90 0 0 0 90 90 Total Cash and Investments Held byTrustee $ 168,730 $ 0 $ 915 $ 5,878 $ 175,523 $ 175,523 Bond Funds-Current Portion Interest $ 49,838 $ 0 $ 0 $ 0 $ 49,838 $ 49,838 Bond Principal 52,092 0 0 0 52,092 52,092 Lease 319 0 0 0 319 319 Total Bond Funds-Current Portion $ 102,249 $ 0 $ 0 $ 0 $ 102,249 $ 102,249 2000 Investments Cash Total Category Category Category Category Carrying Market 1 2 1 2 Value Value (Thousands)

Cash and Investments Held by Trustee (Designated)

General Improvement Funds $ 19,554 $ 1,250 $ 5 $ 0 $ 20,809 $ 20,809 Debt Service Reserve Funds 68,144 0 954 0 69,098 69,098 Other Special Funds 227,040 0 2,037 2 229,079 229,079 Total Cash and Investments Held by Trustee (Designated) $ 314,738 $ 1,250 $ 2,996 $ 2 $ 318,986 $ 318,986 Cash and Investments Held by Trustee Revenue Fund $ 78,413 $ 0 $ 14,193 $ (16,716) $ 75,890 $ 75,890 Revenue Fund - Water System 244 0 0 0 244 244 Special Reserve Fund 83,100 0 4,926 0 88,026 88,026 Special Reserve Fund - Water 187 0 0 0 187 187 Total Cash and Investments Held by Trustee $ 161,944 $ 0 $ 19,119 $ (16,716) $ 164,347 $ 164,347 Bond Funds-Current Portion Interest $ 51,819 $ 0 $ 0 $ 0 $ 51,819 $ 51,819 Bond Principal 49,011 0 0 0 49,011 49,011 Lease 319 0 0 0 319 319 Total Bond Funds-Current Portion $ 101,149 $ 0 $ 0 $ 0 $ 101,149 $ 101,149 39

Note 4 - Long-Term Debt Outstanding:

The Authority's long-term debt at December 31, 2001 and 2000 consisted of the following:

Interest Call 2001 2000 Rate(s) Price (Thousands)

Electric Revenue Bonds-Priority Obligations:

(mature through 2006) $ 20,270 $ 23,815 4.1% 100 Capitalized Lease Obligations:

(mature through 2014) 26,932 29,485 2.0-5.0 N/A Revenue Bonds: (mature through 2032) 1991 Refunding & Improvement Series B 0 10,000 6.70-7.00 N/A 1992 Refunding Series A 113,380 135,885 5.70-6.375 102 1993 Refunding Series A&B 361,140 368,130 5.0-5.60 102 1993 Refunding Series C 583,060 583,515 4.40-5.125 102 1995 Refunding Series A 106,900 112,905 6.125-6.25 102 1995 Refunding Series B 166,655 168,670 5.30-6.50 102 1996 Refunding Series A 223,690 223,690 5.75-6.50 102 1996 Refunding Series B 21,505 21,505 5.50 102 1997 Refunding Series A 208,835 210,670 4.875-5.125 101 1998 Refunding Series A 48,265 69,875 5.00 Non-callable 1998 Refunding Series B 25,760 26,330 4.00-5.25 101 Total Revenue Bonds 1,859,190 1,931,175 Revenue Obligations: (mature through 2022) 1999 Tax-exempt Series A 198,320 198,320 4.80-5.75 101 1999 Taxable Series B 125,320 125,320 6.53-7.42 Non-callable 2001 Tax-Exempt Improvement Series A 46,285 0 3.25-5.25 101 2001 Tax-Exempt Refunding Series A 8,605 0 3.50-4.00 Non-callable Total Revenue Obligations 378,530 323,640 Less: Current Portion-Long-term Debt 71,814 68,082 Total Long-term Debt - (Net of current portion) $ 2,213,108 $ 2,240,033 Maturities of long-term debt are as follows:

Priority Capitalized Revenue Revenue Total Obligations Leases Bonds Obligations Principal Interest Total Year Ending December 31, (Thousands) 2002 $ 3,705 $ 2,654 $ 54,950 $ 10,505 $ 71,814 $ 123,293 $ 195,107 2003 3,870 2,762 58,500 24,365 89,497 119,877 209,374 2004 4,045 2,761 37,085 34,625 78,516 114,810 193,326 2005 4,230 2,771 37,930 12,235 57,166 111,356 168,522 2006 4,420 2,672 34,775 15,975 57,842 107,958 165,800 2007-2011 0 10,806 216,765 115,630 343,201 494,621 837,822 2012-2016 0 2,506 387,215 80,220 469,941 371,774 841,715 2017-2021 0 0 550,650 70,050 620,700 229,613 850,313 2022-2026 0 0 276,905 14,925 291,830 78,048 369,878 2027-2032 0 0 204,415 0 204,415 30,241 234,656 Total $ 20,270 $ 26,932 $ 1,859,1 90 $ 378,530 $ 2,284,922 $ 1,781,591 $ 4,066,513 The fair value of the Authority's debt is estimated based on Authority for tax-exempt bonds and other debt with similar terms quoted market prices for the same or similar issues or on the cur and average maturities, the fair value of debt is approximately rent rates offered to the Authority for debt with the same remaining $2.62 billion and $2.68 billion at December 31, 2001 and maturities. Based on the borrowing rates currently available to the 2000, respectively.

40

Refunded amounts outstanding, original loss on refunding, and the unamortized loss at December 31, 2001 are as follows:

Refunding Issue Refunded Bonds Refunded Original Unamortized Amount Loss Loss Outstanding (Thousands)

Cash Defeasance $ 20,000 of the 1982 Series A $ - $ 2,763 $ 1,510 1992 A Refunding $ 3,370 of the 1985 Refunding Series

$ 5,405 of the 1985 A Refunding Series

$ 100,010 of the 1986 Refunding Series A

$ 22,555 of the 1988 Refunding Series A

$ 15,370 of the 1991 Refunding Series B

$ 12,085 of the 1991 Series D 6,215 42,188 18,974 1993 A&B Refunding $ 86,180 of the 1974 Series

$ 93,360 of the 1979 Series A

$ 4,980 of the 1985 A Refunding Series

$ 14,935 of the 1986 Refunding Series A

$ 23,675 of the 1986 Refunding Series B

$ 135,705 of the 1991 Refunding &

Improvement Series B and C 38,870 35,337 1993 C Refunding $ 167,660 of the 1977 Refunding Series

$ 1,565 of the 1979 Series A

$ 900 of the 1985 Refunding Series

$ 2,390 of the 1985 A Refunding Series

$ 6,365 of the 1986 Refunding Series A

$ 14,905 of the 1988 Refunding Series A

$ 100,110 of the 1991 Refunding & Improvement Series B and C

$ 279,905 of the 1991 Series D 279,905 72,311 57,477 1995 A Refunding $ 138,505 of the 1988 Refunding Series A 20,024 12,127 1995 B Refunding $ 175,330 of the 1987 Refunding Series A 40,758 24,936 1996 A Refundinc $ 257,795 of the 1986 Refunding Series C 92,596 61,062 1996 B Refunding $ 5,925 of the 1986 Refunding Series A

$ 5,830 of the 1986 Refunding Series C

$ 62,325 of the 1986 Refunding Series D

$ 6,940 of the 1987 Refunding Series A

$ 4,155 of the 1988 Refunding Series A 4,831 2,346 Cash Defeasance $ 14,080 of the 1992 Series A

$ 14,955 of the 1996 Series A 24,245 4,779 2,560 1997 A Refunding $ 100,000 of the 1978 Series

$ 68,325 of the 1991 Series B

$ 37,495 of the 1991 Series D 37,495 16,990 13,991 Commercial Paper $ 76,050 of the 1973 Series

$ 105,605 of the 1977 Series

$ 81,420 of the 1978 Series 2,099 1,447 1998 B Refunding $ 25,000 of the 1992 B Series 24,305 1,970 1,584 2001 A Refunding $ 10,000 of the 1991 Refunding & 286 251 Improvement Series B Total $ 372,165 $ 340,465 $ 233,602 41

The Authority issued Revenue Obligations Bonds, 2001 At December 31, 2001 the Authority had a Revolving Refunding and Improvement Series A, on September 18, Credit Agreement with Toronto-Dominion (Texas), Inc.,

2001, for the par amount of $54,890,000. The purpose of the Commerzbank Aktiengesellschaft, acting through its Atlanta bonds was to finance a portion of Rainey Generating Station agency and The Bank of Nova Scotia, acting through its New and to refund a portion of the 1991 Refunding and York agency for $425,000,000. This agreement is used to Improvement Series B Bonds. The refunding will save the support the Authority's issuance of commercial paper. There Authority approximately $668,000 over the life of the bonds were no borrowings under the agreement during 2001 or 2000.

resulting in an economic gain over the life of the bonds of approximately $470,000. Commercial Paper outstanding at December 31, was as follows:

On August 10, 2001, the Authority entered into a Forward Delivery Bond Purchase Agreement for the sale of

$108,035,000 Revenue Obligations, 2002 Refunding Series A 2001 2000 Bonds (2002 A Bonds) to be delivered on or about April 3, (Thousands) 2002. This refunding will reduce the Authority's total debt serv Commercial ice over the life of the bonds by approximately $15,124,000 Paper-Gross $ 308,984 $331,614 resulting in an economic gain over the life of the bonds of Less: Unamortized approximately $8,573,000 after the bonds close.

Discount on Taxable The Authority's bond indentures provide for certain restric tions, the most significant of which are: Commercial Paper 19 36

1. The Authority covenants to establish rates sufficient to pay all debt service, required lease payments, capital improve Commercial Paper-Net $ 308,965 $ 331,578 ment fund requirements, and all costs of operation and maintenance of the Authority's electric system and all neces Note 6 - Summer Nuclear Station:

sary repairs, replacements, and renewals thereof. The Authority and South Carolina Electric and Gas

2. The Authority is restricted from issuing additional parity (SCE&G) are parties to a joint ownership agreement providing bonds unless certain conditions are met. that the Authority and SCE&G shall own the Summer Nuclear As of December 31, 2001, the Authority is in compliance Station with undivided interests of 33 1/3% and 66 2/3%,

with all debt covenants. respectively. SCE&G is solely responsible for the design, construction, budgeting, management, operation, maintenance, Note 5 - Commercial Paper:

and decommissioning of the Summer Nuclear Station, and the The Board of Directors has authorized the issuance of Authority is obligated to pay its ownership share of all costs commercial paper not to exceed $500,000,000. The paper is relating thereto. The Authority receives 33 1/3% of the net issued for valid corporate purposes with a term not to exceed electricity generated. At December 31, 2001 and 2000, the 270 days. For the years ended December 31, 2001 and 2000, the information related to commercial paper was as follows: plant accounts included approximately $491,000,000 and

$494,000,000 representing the Authority's investment, includ ing capitalized interest, in the Summer Nuclear Station. For the 2001 2000 years ended December 31, 2001 and 2000, the Authority's Effective interest rate operation and maintenance expenses included $47,683,000 (at December 31) 1.71% 4.35% and $45,593,000, respectively, for the Summer Nuclear Station.

Average annual amount Nuclear fuel costs are being amortized based on energy outstanding ($000) $ 332,438 $ 367,991 expended, which includes a component for estimated disposal costs of spent nuclear fuel. This amortization is included in fuel Average maturity 50 days 69 days expense and is recovered through the Authority's rates.

Average annual effective interest rate 2.83% 4.13%

42

SCE&G has an on-site spent fuel storage capability until Note 7 - Leases:

2007. It expects to be able to expand its storage capacity to The Authority has capital lease contracts with Central accommodate the spent fuel output for the life of the plant Electric Power Cooperative, Inc. (Central), covering a steam through pool reracking, dry cask storage, or other technology electric generating plant, transmission facilities, and various as it becomes available. other facilities. The remaining lease terms range from 1 to 13 The Nuclear Regulatory Commission (NRC) requires a years. Quarterly lease payments are based on a sum equal licensee of a nuclear reactor to provide minimum financial to the interest on and principal of Central's indebtedness to assurance of its ability to decommission its nuclear facilities. In the Rural Utilities Service (formerly Rural Electrification compliance with the applicable NRC regulations, the Authority Administration) for funds borrowed to construct the above established an external trust fund and began making deposits mentioned facilities. The Authority has options to purchase the into this fund in September 1990. In addition to providing for leased properties at any time during the period of the lease the minimum requirements imposed by the NRC, the Authority agreements for sums equal to Central's indebtedness remaining makes deposits into an internal fund in the amount necessary outstanding on the properties at the time the options are to fund the difference between a site-specific decommissioning exercised or to return the properties at the termination of the study completed in 2000 and the NRC's imposed minimum lease. The Authority plans to exercise each and every option requirement. Based on these estimates,the Authority's one-third to acquire ownership of such facilities prior to expiration of share of the estimated decommissioning costs of the Summer the leases.

Nuclear Station equals approximately $143,419,000 in 1999 dollars. The Authority accrues for its share of the estimated Future minimum lease payments on Central leases at decommissioning costs over the remaining life of the facility. December 31, 2001 were:

These costs are being recovered through the Authority's rates.

See Note 1, item M for a discussion of issued, but not yet effective, accounting pronouncement FASB 143. Year ending December 31: Amount Based on current decommissioning cost estimates devel (Thousands) oped by SCE&G, these funds, which totaled approximately 20 0 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3,818

$84,070,000 (adjusted to market) at December 31, 2001, 20 0 3 . . . . . . . . . . . . . . . . . . . . .. .. .. .. 3,819 along with future deposits into both the external and internal 20 0 4 . . . . . . . . . . . . . . . . . . . . .. .. .. .. 3,708 decommissioning accounts and investment earnings, are 20 05 . . . . . . . . . . . . . . . . . . . . .. .. .. .. 3,604 estimated to provide sufficient funds for the Authority's 20 06 . . . . . . . . . . . . . . . . . . . . .. .. .. .. 3,388 one-third share of the total decommissioning costs. 2007-2011 ....................... 12,653 The Energy Policy Act of 1992 gave the Department of 2012-2014 ....................... 2,658 Energy (DOE) the authority to assess utilities for the decommis Total minimum lease payments .......... 33,648 sioning of its facilities used for the enrichment of uranium Less amounts representing interest........ 6,716 included in nuclear fuel costs. In order to decommission these Balance at December 31, 2001 .......... $ 26,932 facilities, the DOE estimates that it would need to charge utili ties a total of $150,000,000, indexed for inflation, annually Property under capital leases and related accumulated for 15 years based on enrichment services used by utilities in amortization included in utility plant at December 31, 2001 past periods. Based on an estimate from SCE&G covering the totaled $93,925,000 and $73,234,000, respectively and at 15 years, the Authority's remaining one-third share of the lia December 31, 2000 totaled $96,556,000 and bility at December 31, 2001 totals $1,197,000. Such amount $73,215,000, respectively.

has been deferred and will be recovered through rates as Operating lease payments totaled $5,989,000 and paid. These costs are included on the accompanying balance $5,284,000 during the years ended December 31, 2001 and sheets in "Deferred debits and other noncurrent assets-Other" 2000, respectively. Included in these operating leases are the and "Other deferred credits and noncurrent liabilities." leased coal cars, which are reflected in fuel inventory. The terms of the current coal car leases vary from one month to seven years, with the seven-year lease expiring in 2003.

43

I-I The lease amounts for the coal cars to be paid in calendar year Central pursuant to the provisions of the Coordination 2002 and 2003 amount to $4,373,000 and $2,796,000, Agreement. The change in the Authority's total revenues from respectively. serving Saluda either through Central under the Coordination Agreement or the Power Sales Agreement is not expected to Note 8 - Contracts with Electric Power Cooperatives: have a material adverse impact on the Authority's results of Power supply and transmission services are provided operations or financial position.

to Central Electric Power Cooperative Inc. (Central) in accor Saluda has notified Central and the Authority that Saluda dance with a power system coordination and integration and the Saluda Cooperatives intend to pay Central and the agreement (the "Coordination Agreement"). In addition, the Authority for power service. As of December 31, 2001 Saluda Authority is the sole supplier of Central's energy needs owes the Authority approximately $5.4 million, which includes excluding energy Central receives from the Southeastern interest, for power received under the Power Sales Agreement.

Power Administration and SCE&G. At Saluda's request, the Authority is negotiating payment terms Saluda River Electric Cooperative Inc. (Saluda) began with Saluda for the full amount plus interest through equal receiving power from the Authority on January 1, 2001 pur monthly payments during the period March 2002 through suant to a long-term power supply agreement between Saluda December 2002. Saluda has indicated that the Saluda and the Authority (the "Power Sales Agreement"). The Power Cooperatives will guarantee such payments in the event Sales Agreement was to terminate upon the earlier of (i) two Saluda is unable to pay the Authority. The Authority is unable years notice that Saluda has disposed of its interest in the to predict the outcome of these negotiations or if Saluda will Catawba Nuclear Station or (ii) January 31, 2009. Pursuant make further payments to the Authority or Central.

to the Power Sales Agreement, the Authority serves all of Sales to Saluda amounted to approximately 8.9% of the Saluda's power needs over and above that which it receives Authority's revenues for the period January 1, 2001 through from its ownership interest in the Catawba Nuclear Station, its October 25, 2001.

Southeastern Power Administration entitlements, its diesel powered generators, and a small run of the river hydroelectric Note 9 - Commitments and Contingencies:

plant. On October 25, 2001 Saluda notified the Authority in Budget - The Authority's capital budget provides for expendi writing that Saluda would be unable to pay the power usage tures of approximately $337,685,000 during the year ending bill for September 2001 due to its cash position and failed to December 31, 2002 and $690,781,000 during the two years make its payment to the Authority in October. Pursuant to the thereafter. These expenditures include $6,479,000 associated terms of the Power Sales Agreement, the Authority notified with new generating facilities being constructed to begin oper Saluda and Central that the Power Sales Agreement terminated ations in 2002, $459,010,000 for future generating facilities on October 25, 2001 and that subject to the terms of the and $231,879,000 for environmental compliance expendi Wholesale Power Contract between Central and Saluda, tures. The total cost, including the financing costs, of the new the Authority was thereafter providing Saluda's power generating facilities to begin operations in 2002 is estimated requirements to Central under the Coordination Agreement. to be $397,000,000. Capital expenditures will be financed by Subsequently, the Authority has billed Central for Saluda's internally generated funds and a combination of taxable and power usage under the Coordination Agreement and Central tax-exempt debt.

has paid such bills when due. Notwithstanding Central's payments, Central has notified the Authority that Central dis putes its obligation to serve Saluda under its wholesale power contract with Saluda. The Authority, Central and Saluda are discussing the applicable terms and conditions of service under their respective agreements. See unaudited Subsequent Event in Note 13, item B. The Authority is unable to predict the outcome of such discussions. However, the Authority believes that it will continue to serve Saluda either pursuant to the provisions of the Power Sales Agreement or through 44

Purchase Commitments - The Authority has contracted for insurance coverage in any of the past three years. Policies are long-term coal purchases under contracts with estimated subject to deductibles ranging from $5,000 to approximately outstanding minimum obligations after December 31, 2001 $850,000 with the exception of named storm losses which as follows: carry deductibles up to $3,000,000. Also a $1 million general liability self-insured layer exists between the Authority's primary and excess liability policies.

Year ending December 31: Amount The Authority is self-insured for auto, dental, and environ (Thousands) mental incidents that do not arise out of an insured event. The 2002 ...... . . . . . . . . . . . . . . . . .$ 126,936 Authority purchases commercial insurance, subject to coverage 2003 ...... 115,024 limits and various exclusions, to cover automotive exposure in 2004 ...... 85,278 excess of $2 million per incident. Risk exposure for the dental 2005 ...... 85,590 plan is limited by plan provisions. There have been no third 2006 ...... 43,230 party claims for environmental damages for 2001 or 2000.

2007-2008 .. 87,735 Claims expenditures and liabilities are reported when it is Total ....... . . . . . . . . . . . . . . . . .$ 543,793 probable that a loss has occurred and the amount of the loss can be reasonably estimated.

The Authority's outstanding minimum obligations under At December 31, 2001, the amount of the self-insured two existing long-term purchased power contracts as of liabilities for auto, dental, worker's compensation and environ December 31, 2001 were approximately $85.9 million and mental remediation was $1.4 million. The liability is the

$19.6 million with remaining terms of 33 and 2 years, respec Authority's best estimate based on available information.

tively. In addition, the Authority has one short-term purchased Changes in the reported liability are as follows:

power contract with minimum obligations of approximately

$3 million with a term of one year or less beginning in 2002.

The Authority has commitments for nuclear fuel enrichment 2001 2000 and fabrication contracts which are contingent upon the (Thousands) operating requirements of the nuclear unit. As of December Unpaid claims and claim 31, 2001, these commitments total approximately $76.9 expenses at beginning million over the next 8 years. of year $ 1,907 $ 2,135 The Authority has entered into a long-term service Incurred claims and agreement with General Electric International Inc. in the claim adjustment expenses:

approximate amount of $76.0 million at the Rainey Provision for insured events Generation Station. The contract term is effective through of the current ear 1,138 1,252 2009. The agreement provides a service director, initial spare Increases (decreases) in provision 37 (14) parts, parts and services for specified planned and unplanned Payments for current maintenance outages and remote monitoring and diagnostics and nor years 1,656 1,466 of the turbine generators. The agreement contains certain Total unpaid claims and claim guarantees pertaining to unit availability, performance and epenses at end of year $ 1,426 $ 1,907 NOx emissions and can be cancelled on Unit 1 after the first hot gas path inspection for $3 million and on Unit 2 after the first combustion inspection for $1,250,000.

Risk Management - The Authority is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; business interruption; and errors and omissions. The Authority purchases commercial insurance to cover these risks, subject to coverage limits and various exclusions. Settled claims resulting from these risks have not exceeded commercial 45

The Authority pays insurance premiums to certain other interest, the Authority's maximum retrospective premium would state agencies to cover risks that may occur in normal opera be $2.8 million for the primary policy and $3.0 million for tions. The insurers promise to pay to, or on behalf of, the the excess policy.

insured for covered economic losses sustained during the SCE&G and the Authority also maintain accidental outage policy period in accordance with insurance policy and insurance to cover replacement power costs (within policy benefit program limits. Several state funds accumulate assets, limits) associated with an insured property loss. This policy also and the state itself assumes all risks for the following: carries a potential retrospective assessment of $1.4 million.

1) Claims of covered employees for health benefits The Authority is self-insured for any retrospective premium (Employee Insurance Program Office); and assessments, claims in excess of stated coverage, or cost

2) Claims of covered employees for long-term disability and increases due to the purchase of replacement power associated group life insurance benefits (Retirement System). with an uninsured event.

Employees elect health coverage through either a health Clean Air Act - The Authority endeavors to ensure that its maintenance organization or through the state's self-insured facilities comply with applicable environmental regulations plan. All other coverages listed above are through the and standards.

applicable state self-insured plan except that additional group Congress has promulgated comprehensive amendments life and long-term disability premiums are remitted to com to the Clean Air Act, including the addition of a new federal mercial carriers. The Authority assumes the risk for claims of program relating to acid precipitation. The Authority has employees for unemployment compensation benefits and pays evaluated the potential impact of this legislation, including claims through the state's self-insured plan. new limits on the allowable rates of emission of sulfur dioxide Nuclear Insurance - The maximum liability for public claims and nitrogen oxides. While the legislation contains a number arising from any nuclear incident has been established at of new restrictions, the most significant new requirements,

$9.5 billion by the Price-Anderson Indemnification Act. This relating to acid precipitation, became effective January 1, 2000.

$9.5 billion would be covered by nuclear liability insurance The Clean Air Act Amendments require, among other of about $200 million per site, with potential retrospective things, specific reductions in sulfur dioxide and nitrogen oxide assessments of up to $88.1 million per licensee for each emissions from fossil-fired generating units. These reductions nuclear incident occurring at any reactor in the United States were required in two phases. Phase I compliance was imple (payable at a rate not to exceed $10 million per incident, mented January 1, 1995, while Phase II compliance became per year). Based on its one-third interest in Summer Nuclear effective January 1, 2000. The Authority has purchased sulfur Station, the Authority would be responsible for the maximum dioxide emission credits and upgraded the sulfur removal assessment of $29.4 million, not to exceed approximately capabilities of existing units to meet Phase II sulfur dioxide

$3.3 million per incident, per year. This amount is subject to emission limitations. To meet monitoring requirements of the further increases to reflect the effect of (i) inflation, (ii) the Clean Air Act, the Authority has installed continuous emissions licensing for operation of additional nuclear reactors, and (iii) monitoring equipment at a cost of $5.2 million. The Authority any increase in the amount of commercial liability insurance also upgraded the combustion systems on some of its boilers required to be maintained by the NRC. to meet Phase II nitrogen oxide limitations. These efforts com Additionally, SCE&G and the Authority maintain with menced in 1998 and were completed in 1999. The Authority Nuclear Electric Insurance Limited (NEIL) $500 million primary expended $8.02 million to complete these combustion upgrades.

and $1.5 billion excess property and decontamination insur In July 2000, the Authority received a request for ance to cover the costs of cleanup of the facility in the event of information from the U.S. Environmental Protection Agency an accident. In addition to the premiums paid on the primary (EPA) pursuant to Section 114 of the Clean Air Act. The and excess policies, SCE&G and the Authority could also be request is part of the EPA's ongoing enforcement initiative assessed a retrospective premium, not to exceed ten times involving the power generating sector, with particular emphasis the annual premium of each policy, in the event of property on coal-fired units. The Authority has responded to the request damage to any nuclear generating facility covered by NEIL. for information and expects to engage in discussions with EPA Based on current annual premiums and the Authority's one-third about its compliance status. Management cannot determine the impact of this request at this time.

46

The Authority recently signed agreements with Marsulex Competition - The electric industry has become, and is expect to provide two SO2 scrubbers which are expected to be ed to be, increasingly competitive due to regulatory changes operational by June 2004 at the Winyah Generating Station and market developments. As utilities move from a regulated Units 1 and 2. Under a capital lease agreement, Marsulex environment where rates are based on cost of service to a will own and the Authority will operate the new S02 scrubbers deregulated environment where rates are based on market and a by-product processing facility. Once the performance forces, there may be costs that cannot be recovered by charging standards are met, the agreements require the Authority to the market rate. Some deregulation measures proposed to date pay an annual service fee to Marsulex of an amount not to allow for recovery of some portion of these costs but ultimate exceed $13.5 million for 15 years. regulatory treatment of such costs cannot be predicted.

The EPA has finalized regulations related to ozone transport The Authority has developed and is implementing a for 22 eastern states including South Carolina. These regulations long-term strategic plan to position the Authority to compete (known as the "SIP CALL") require significant NOx emission effectively in the changing competitive environment. Consistent reductions from the power industry. As a result, the Authority with the plan, the Authority is implementing initiatives to reduce believes that its cost of compliance, including capital costs, outstanding debt, achieve more financial flexibility, reduce could approach approximately $280 million by 2005 and operating, maintenance and capital costs, increase revenue, annual operating costs associated with such compliance could retain customers, and strengthen employee performance and approach $10 million. accountability.

Safe Drinking Water Act - The Safe Drinking Water Act While the Authority is taking these and other actions to (SDWA) was reauthorized during 1996. The Authority prepare for a deregulated market, the Authority cannot predict continues to stay abreast of proposed regulatory changes what effects increased competition will have on the operations as they are developed. and financial condition of the Authority.

Clean Water Act - The Congress is due to consider reautho Legal Matters - The Authority is a party in various claims and rization of the Clean Water Act (CWA). The complex act lawsuits that arise in the conduct of its business. Although the could generate regulatory changes that could impact the results of litigation cannot be predicted with certainty, in the power generation sector. The Authority will be monitoring opinion of management and Authority counsel, the ultimate for CWA regulatory issues impacting electrical utilities. disposition of these matters will not have a material adverse Open Access Transmission Tariff - In 1997, FERC adopted an effect on the financial position or results of operations of the order approving the Authority's transmission rates, ancillary Authority, except as described below.

charges, and non-rate terms and conditions. Certain plaintiffs have filed suit against the Authority The Authority is participating in the VACAR Open Access seeking monetary damages arising out of a change in the Same-Time Information System (OASIS) via the Internet and Authority's "Good Cents" rate. The plaintiffs seek to represent has implemented and filed with FERC procedures for implemen a class of all "Good Cents" customers of the Authority. The tation of non-discriminatory standards of conduct. Authority answered the complaint by denying the material Regional Transmission Organizations (RTOs) - On September allegations and opposing the request for class certification.

24, 2001, the Authority, along with six municipal and electric A class certification was granted to the plaintiffs. Discovery cooperative transmission owners and Southern Company, is ongoing. No accurate prediction of the outcome can be executed an agreement to investigate the development of a made. In the opinion of management and Authority counsel, it RTO for the southeastern United States, currently referred to is not probable, but it is reasonably possible, that if the plaintiffs as SeTrans. Discussions and negotiations regarding the devel are successful on all claims, the ultimate liabilities arising out of opment of a RTO in the Authority's region are ongoing, and this claim could be between $20 and $30 million.

their outcome and any potential impact on the Authority are In a separate case, landowners located along the Santee unknown at this time. River contend that the Authority is liable for damage to their real estate as a result of flooding that has occurred since the U.S. Army Corps of Engineers Cooper River Rediversion Project was completed in 1985. A trial held in 1997 returned a jury verdict against the Authority on certain causes of action.

47

The Authority appealed the decision and remanded the case and 2000 was $6,540,000 and $6,230,000, respectively, to the District Court. No estimate relative to potential loss to from the Authority and $4,996,000 and $4,945,000, the Authority can be made at this time. respectively from employees. The Authority made 100% of An action was instituted in State Court by a number of the required contributions for each of the years ended leaseholders of land offered for sale to them by the Authority, December 31, 2001 and 2000.

the lessor. The Plaintiffs allege that the property was improper The System issues a stand alone financial report that ly appraised and offered to them at an unfair price. Summary includes all required supplementary information. The report Judgement has been granted in the favor of the Authority, and may be obtained by writing to: South Carolina Retirement Plaintiffs have appealed the decision. System, P.O. Box 11960, Columbia, S.C. 29211 Contract Dispute with Central - Central, under the terms of The Authority also provides compensation benefits to the contract with the Authority, has the right to audit costs certain employees designated by management and the board billed to them under the cost of service contract. Management of directors under the Supplemental Executive Retirement Plan has recorded a liability at December 31, 2001, of approxi (SERP). The cost of these benefits is accrued on an actuarially mately $10.7 million for exposure related to Central audit determined basis. The accrued liability at December 31, 2001 issues through 2001. and 2000 was $6,419,000 and $6,197,000, respectively.

Note 10 - Retirement Plan: Note 11 - Other Postretirement Benefits:

Substantially all Authority regular employees must The South Carolina Retirement System provides certain participate in one of the components of the South Carolina health, dental, and life insurance benefits for retired Retirement System (System), a cost sharing, multiple-employer employees of the Authority. Substantially all of the Authority's public employee retirement system, which was established employees may become eligible for these benefits if they retire by Section 9-1-20 of the South Carolina Code of Laws. The at any age with 28 years of service or at age 60 with at least payroll for employees covered by the System for each of 20 years of service. Currently, approximately 405 retirees the years ended December 31, 2001 and 2000 was meet these requirements. The cost of the health, dental, and

$83,045,000 and $82,216,000, respectively. life insurance benefits are recognized as expense as the Vested employees who retire at age 65 or with 28 years premiums are paid. For the years ended December 31, 2001 of service at any age are entitled to a retirement benefit, and 2000, these costs totaled $1,495,000 and $1,149,000, payable monthly for life. The annual benefit amount is equal respectively.

to 1 .82 percent of their average final compensation times During their first ten years of service, full-time employees years of service. Benefits fully vest on reaching five years can earn up to 15 days vacation leave per year. After ten of service. Reduced retirement benefits are payable as early years of service, employees earn an additional day of as age 55 with 25 years of service. The System also provides vacation leave for each year of service over ten until they death and disability benefits. Benefits are established by reach the maximum of 25 days per year. Employees earn state statute. annually a half day per month plus three additional days Article X, Section 16 of the South Carolina Constitution at year-end for sick leave.

requires that all state-operated retirement plans be funded on Employees may carry forward up to 45 days of vacation a sound actuarial basis. Title 9 of the South Carolina Code leave and 180 days of sick leave from one calendar year to of Laws (as amended) prescribes requirements relating to the next. Upon termination, the Authority pays employees for membership, benefits, and employee/employer contributions. accumulated vacation leave at the pay rate then in effect. In Employees are required by state statute to contribute 6 addition, the Authority pays employees upon retirement 20 percent of salary. The Authority is required by the same percent of their accumulated sick leave at the pay rate then statute to contribute 7.55 percent of total payroll. The contri in effect. The Authority recognizes these costs as expenses in bution requirement for the years ended December 31,2001 the period incurred.

48

Note 12 - Credit Risk and Major Customers: B (Unaudited) - On March 4, 2002, Saluda filed in the Concentrations of credit risk with respect to the South Carolina Court of Common Pleas for the Eighth Circuit Authority's receivables are limited due to the large number an Action for Declaratory Judgement requesting the court to of customers in the Authority's customer base and their order among other things that Central has a legal obligation dispersion across different industries. The Authority maintains and contractual duty to provide electrical power and energy an allowance for uncollectible accounts based upon the to Saluda pursuant to Saluda's wholesale power contract with expected collectibility of all accounts receivable. Central. At the same time, Saluda also filed with the court an Sales to two major customers for the years ended Action for an Injunction With a Motion for a Temporary December 31, 2001 and 2000 were as follows: Restraining Order to require Central to continue to serve Saluda under the wholesale power contract until the Action for Declaratory Judgement is adjudicated. Central's response to 2001 2000 the litigation is pending. The Authority is unable to predict the (Thousands) outcome of such litigation.

Central (including Saluda) $ 473,000 $379,000 Alumax of South Carolina $ 99,000 $ 89,000 No other customer accounted for more than 10 percent of the Authority's sales for either of the years ended December 31, 2001 or 2000.

Note 13 - Subsequent Events:

A - On January 25, 2002, the Authority's Board of Directors authorized the sale of $372,915,000 Revenue Obligations, 2002 Series B & C (2002 B & C Bonds). The 2002 Tax Exempt Series B (2002 B Bonds) totaled $281,140,000. The 2002 Taxable Series C (2002 C Bonds) totaled $91,775,000 and were issued as taxable bonds to comply with the IRS Private Use Regulations. The 2002 B & C Bonds were issued on February 13, 2002.

The proceeds will be used to fund a portion of the cost of constructing a 580-MW coal-fired, steam-electric generating unit at the Cross Generating Station, three 80-MW simple cycle combustion turbines at the Rainey Generating Station and environmental compliance.

The 2002 B & C Bonds were sold at a combined all-in-true interest cost of 5.29 percent and mature between January 1, 2005 and 2037.

49

I Al IBOR . OF DIETR I H. Donald McElveen, P.E. J. Calhoun Land IV Julius Barnes Patrick T. Allen Chairman First Vice Chairman Second Vice Chairman Merl F. Code Laura M. Fleming Frances B. Gilbert Willie E. Givens Jr.

John R. Jordan Jr. Joseph J. Turner Jr. J. Mike Wooten so

I e~

BOR OF DIECOS H. Donald McElveen, P.E. Frances B. Gilbert Chairman Represents Horry County Columbia, S.C. Conway, S.C.

J. Calhoun Land IV Willie E. Givens Jr.

First Vice Chairman Represents 1st Congressional District Represents 6th Congressional District Charleston, S.C.

Manning, S.C.

John R.Jordan Jr.

Julius Barnes Represents 2nd Congressional District Second Vice Chairman Columbia, S.C.

Represents Berkeley County St. Stephen, S.C. Joseph J. Turner Jr.

Represents 3rd Congressional District Patrick T. Allen Clemson, S.C.

Represents the electric cooperatives of South Carolina J. Mike Wooten Columbia, S.C. Represents Georgetown County Georgetown, S.C.

Merl F. Code Represents 4th Congressional District Greenville, S.C.

Laura M. Fleming Represents 5th Congressional District Lancaster, S.C.

Changes in the Board On Aug. 30, 2001, H. Donald McElveen replaced Alec B. McLeod as chairman of the board of directors.

51

' DISR BOARD, James H. Hodges Governor Charles M. Condon Attorney General James A. Lander Comptroller General James M. Miles Secretary of State Grady L. Patterson State Treasurer I MANAGEMENT I President and CEO John H. Tiencken Jr.*

Executive Vice President and Chief Operating Officer Bill McCall*

Executive Vice President and Chief Legal Officer John S. West*

Senior Vice Presidents:

Power Delivery Terry L. Blackwell Corporate Planning and Bulk Power Lonnie N. Carter*

Generation Maxie C. Chaplin Community Development and Corporate Communications Ben Cole Administration and Finance Elaine G. Peterson*

Vice Presidents:

Marketing and Retail Services Zack W. Dusenbury Human Resource Management Ronald H. Holmes Engineering and Construction Services Byron C. Rodgers Jr.

Fossil & Hydro Generation R.M. Singletary Corporate Communications Jerry L. Stafford Planning and Power Supply William R. Sutton Controller Glenda W. Gillette Treasurer H. Roderick Murchison Auditor Thomas L. Richardson Corporate Secretary W. Glen Brown Jr.

• Member of executive management team

ISCHEDULE OF RE.' E AND!

- BS OUTSlTA INGI As of December 31, 2001 (In Thousands)

T r

Call Date July 1, 2002 July 1, 2002 At Maturity At Maturity Series 1991-D 1992-B 1992-A REF (6) 1996-A REF (6)(2)

Original Maturity July 1 Int. Rate Amount Int. Rate Amount Int. Rate Amount Int. Rate Amount 2002 6.00 6,215 5 1/2 380 5.80 7,400 6 1/4 4,500 2003 5.60 405 2004 5.70 435 2005 5.80 460 2006 6.40 6,590 5.90 490 6.20 6,680 61/4 5,665 2007 5.90 525 2008 6.00 555 2009 6.00 595 2010 6.00 630 2011 6 1/2 7,010

• 6.00 670 2012 6 1/2 7,470

• 6.00 715 2013 6 1/2 7,955

• 6.00 765 2014 6 1/2 8,470

• 6.00 810 2015 6.10 865*

2016 6.10 920

• 2017 6.10 980

• 2018 6.10 1,045

• 2019 6.10 1,115

• 2020 6.10 1,185

• 2021 6.10 1,260

• 2022 6.10 1,345

• 2023 6.10 1,430" 2024 61/2 130,275

• 6.10 1,525

• 2025 6.10 1,625

• 2026 6.10 1,730*

2027 6.10 1,845

• 2028 2029 2030 2031 6 5/8 149,630

• 2032 Totals per 24,305 14,080 10,165 323,615 Series Totals per 347,920 24,245 Call Date

• Term Bonds 53

I-LL As of December 31, 2001 (In Thousands)

PRIORITY BONDS I~~: REEU OD 192 A 1993 A&B 1993 C 1995 A 1995 B 1996 A 1996 B Maturity 1967 Refunding Refunding Refundinq Refunding Refundin? Refunding Date Refunding Series Series Series Series (2) Series (2J Series (2) Series (2*

July 1 Int. Rate A,mt. Series (2)

Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt.

2002 4.10 3, 705

• 5.00 9,810 4 1/2 3,625 6 1/4 5,700 5.35 4,260 61/4 1,450 2003 4.10 3, 870* 6.00 5,940 5.20 6,280 41/2 12,030 61/4 7,890 5.40 3,410 6 1/4 1,645 2004 4.10 4,0045* 5.20 10,115 4 1/2 12,590 6 1/2 10,160 6 1/4 3,565 2005 4.10 4, 230* 6.20 6,290 5.30 7,080 4 5/8 6,440 6 1/2 10,765 6 1/4 4,645 2006 4.10 4,4420

• 5.40 10,400 (3) 4 3/4 13,310 6 1/2 10,350 2007 6.20 7,100 5 1/2 8,410 4 7/8 11,755 2008 6.20 7,540 5 1/2 10,920 5.00 18,230 6 1/8 815

• 5.70 3,255 61/2 3,730 2009 6 3/8 8,005

• 5 1/2 9,765 5.00 1,470 5 3/4 1,035

• 2010 6 3/8 8,515

• 5 1/2 11,480 5.10 19,210 (4) 6 1/8 860

• 5.80 3,485 5 3/4 15,170

• 2011 6 3/8 10,835

• 5 1/2 11,240 5.10 16,740

• 6 1/8 915

• 5.80 3,705 5 3/4 6,165

• 2012 63/8 11,520* 5.60 12,100 (3) 5.00 19,040

• 6 1/8 970

• 5 7/8 3,940 5 3/4 5,615*

2013 63/8 12,265

• 5.60 29,300 (3) 5.00 16,645

• 61/8 1,025

• 5 7/8 4,180 5 3/4 5,925

• 2014 6 3/8 1,935

• 5 1/2 38,255

• 5.00 9,255

• 6 1/8 4,460

• 5 7/8 4,430 5 3/4 6,530

• 2015 6 3/8 2,055

• 5 1/2 18,905

• 5.00 15,825

• 61/4 8,275

• 5 7/8 4,705 5 3/4 7,005

• 2016 6 3/8 2,275

• 5 1/2 19,880

• 5.00 23,265

• 6 1/4 4,670

• 5 7/8 5,000 5 3/4 13,075

• 2017 6 3/8 2,400

• 5 1/2 20,920

• 5.00 19,045

• 6 1/4 680

• 5 7/8 5,320 5 3/4 19,650

• 2018 6 3/8 2,570

• 5 1/2 22,000

• 5.00 14,055

• 6 1/4 720

• 5 7/8 5,685 5 3/4 20,735

• 2019 6 3/8 9,570

• 5 1/2 43,270

• 5 1/8 18,555

• 6 1/4 10,400

• 5 7/8 6,085 5 3/4 21,875

• 2020 6 3/8 7,695

• 5 1/2 42,015

• 5 1/8 23,880

• 6 1/4 23,100

• 5 7/8 6,515 5 3/4 23,155

• 2021 6 3/8 6,870

• 5 1/2 18,995

• 5 1/8 27,120

• 6 1/4 24,915

• 5 7/8 6,970' 5 3/4 38,535

• 2022 5.00 29,460

• 6 1/4 11,505

• 5 7/8 34,165

• 5 3/4 24,185

• 5 1/2 11,435

• 2023 5.00 28,595

• 5 7/8 30,270 5 1/2 10,070 2024 5.00 28,165

• 2025 5.00 29,575

• 2026 5 1/8 31,055

• 2027 5 1/8 26,585

• 2028 5 1/8 21,890

• 2029 5 1/8 23,010

• 2030 5 1/8 24,185

• 2031 5 1/8 25,425

• 2032 5 1/8 13,030

• Add:

Total Outstanding As of 12/31/01 20,270 113,380 361,140 583,060 106,900 166,655 223,690 21,505 Bonds Redeemed As of 12/31/01 31,3 41,085 23,985 48,300 32,785 10,420 33,190 61,965 Bonds Refunded As of 12/31/01 0 14,080 (6) 0 0 0 0 10,165 (6) 0 Net:

Original Issue Amt. 51,6 00 168,545 385,125 631,360 139,685 177,075 267,045 83,470

• Term Bonds tax-exempt ("RITES") bonds which have a semiannual bond equivalent (1) Rounding may cause small variances. yield of 5.40% per annum on those maturing 6/30/06 and 5.60% per (2) Maturities are on January 1 instead on July 1. annum on those with a final maturity of 6/28/13.

(3) These are floating auction tax-exempt ("FLOATs") and residual interest (4) $10,210,000 are serial bonds and $9,000,000 are term bonds.

54

1997A 1998 A 1998 B 1999A 1999 B 2001 A 2001 A Refunding Refunding Refundinq Tax-Exempt Taxable Improvement Refunding T Series 2 Series (2) Series (24 Series (2) Series (2) Series (2) Series P R e Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. Int. Rate Amt. M (

5.00 1,925 5.00 27,585 4.00 595 6.53 5,000 31/2 5,505 69,160 122,130 191,290 5.00 20,680 4.00 625 5.00 5,360 6.68 19,005 86,735 118,821 205,556 4 1/8 655 5 3/8 5,670 6.85 28,955 75,755 113,865 189,620 5.00 2,025 41/4 685 5.00 5,990 6.97 4,225 3 1/4 2,020 54,395 110,525 164,920 4.40 715 5 3/8 6,335 7.07 4,455 3.40 2,085 4.00 3,100 55,170 107,243 162,413 41/2 750 4.80 6,695 7.12 4,705 4.00 2,155 41,570 104,912 146,482 4 1/2 785 5 1/2 7,070 7.17 4,980 41/2 2,240 59,565 101,986 161,551 41/2 825 5 1/2 7,480 7.22 5,270 41/2 2,340 36,190 99,248 135,438 47/8 2,505 4.70 865 5 1/2 7,940 7.27 5,590

• 2,450 (7) 78,070 96,272 174,342 4.90 9,780 4 3/4 905 5 1/2 18,325 7.27 38,390

• 117,000 90,362 207,362 5.00 15,040 51/4 955

• 55/8 10,910 7.32 1,465 5.00 2,565 84,120 84,757 168,877 5.00 15,815 51/4 1,010* 55/8 11,540 7.37 1,580 5.00 2,690 101,975 79,929 181,904 5.00 16,630 5.00 1,065

• 5 3/4 12,220 7.42 1,700 5.00 2,830 99,310 74,383 173,693 5.00 12,980 5.00 1,120

• 5 3/4 12,940 5 1/4 2,965 86,775 68,746 155,521 5.00 9,095

• 5.00 1,180

• 5 1/2 13,690 5 1/4 3,125 95,255 63,813 159,068 5.00 9,485

• 5.00 1,245

• 5 1/2 14,470 5 1/4 3,290 96,505 58,638 155,143 5.00 22,410

• 5.00 1,310

• 5 1/2 9,230 5 1/4 2,800 101,515 53,306 154,821 5.00 17,755

• 5.00 1,380

• 5 1/2 9,755 5 1/4 2,945 141,590 47,443 189,033 5.00 380

• 5.00 1,455

• 5 1/2 10,305* 5 1/4 3,100 141,600 39,419 181,019 5.00 400

• 5.00 1,530

• 5 1/2 10,890* 4 3/4 3,265

• 139,490 30,805 170,295 5.00 420

• 5.00 1,615

• 5 1/2 11,505* 4 3/4 3,420

• 127,710 22,553 150,263 5.00 440

• 5.00 1,700

• 71,075 17,060 88,135 5.00 465

• 5.00 1,790

• 30,420 14,365 44,785 5.00 485

• 5.00 1,000

• 31,060 12,828 43,888 5.00 510

• 31,565 11,243 42,808 5.00 6,595

• 33,180 9,589 42,769 5.00 12,985

• 34,875 7,857 42,732 5.00 13,635

• 36,645 6,041 42,686 51/8 14,315

• 38,500 4,124 42,624 51/8 15,050

• 40,475 2,100 42,575 51/8 7,710

• 20,740 531 21,271 208,835 48,265 25,760 198,320 125,320 46,285 8,605 2,257,990 1,774,894 4,032,884 1,055 0 0 342,455 5,720 52,620 0 0 0 0 0 0 24,245 0 0 0 26,815 198,320 125,320 46,285 8,605 2,624,690 214,555 100,885 (5) Included in year that payment is made. in each official statement. (For Details on Calls See "Schedule of Refunded (6) Cash defeased to maturity, $14,080,000 of the 1992A Refunding Bonds due and Defeased Bonds Outstanding.")

7/1/02 and 7/1/06 and $10,165,000 of the 1996A Refunding Bonds due (7) The 2010 maturity has a split coupon; $2,000,000 at 5.00% and $450,000 1/1/02 and 1/1/06. Bonds are subject to the original call provisions as stated at 4.00%.

5S

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Myrtle Beach, SC 29577 (843) 448-2411 56

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