ML17054C161

Forwards 1986 Annual Repts for Rochester Gas & Electric Corp,New York State Electric & Gas Corp,Central Hudson Gas & Electric Corp & Lilco

ML17054C161
Person / Time
Site:	Nine Mile Point
Issue date:	06/01/1987
From:	Mangan C NIAGARA MOHAWK POWER CORP.
To:	NRC OFFICE OF ADMINISTRATION & RESOURCES MANAGEMENT (ARM)
Shared Package
ML17054C162	List: ML17054C161 ML18038A257
References
(NMP2L-1043), NUDOCS 8706100028
Download: ML17054C161 (10)

Text

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BE REFERRED TO FILE PERSONNEL.

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DEADI.INE RETURN DATE

CENTRAL HUDSON GAS & ELECTRIC CORPORATION 284 SOUTH AVENUE or ONE WALLSTREET Telephone 91 4 452-2000 Telephone 212 344-5680 POUGHKEEPSIE, N.Y. 12601-4879 NEW YORK, N.Y. 10005 THIS REPORT IS NOT A REPRESENTATION OR PROSPECTUS INREGARD TO THE COMPANY'S SECURITIES AND IS NOT FURNISHED IN CON-NECTION WITH ANY PROPOSED SALE OR OFFER TO SELL OR BUY ANY STOCK OR SECURITIES.

DATA CONTAINED HEREIN WITH RESPECT TO ANY PARTICULAR YEAR SHOULD BE CONSIDERED IN CONJUNCTION WITH THE NOTES AND COMMENTS APPEARING IN THE COMPANY'S ANNUAL REPORT FOR THAT YEAR TO ITS SHAREHOLDERS.

APRIL 1987 TWENTY-EIGHTH EDITION

TABLE OF CONTENTS Page Introduction .

Area Served.

Growth Summary .

Management 8 Employees .

Rates.

Company Securities 8 Markets. 4 Construction Program . 6 Forecast of Cash Requirements 7 Financing Cash Requirements 7 Statement of Income . 8 Income from Operations 'Electric and Gas Departments . 9 Summary Balance Sheet at December 31 .10 Statement of Retained Earnings and Statement of Changes in Financial Position. ..11 Detail of UtilityPlant and Accumulated Depreciation. 12 Electric Revenues, Sales, and Customers .13 Gas Revenues, Sales, and Customers. .14 Electric and Gas Production Data. 15 Labor Data and Industrial Revenues . .16 Capitalization and Financial Ratios .17 Detail of Long-term Debt .18 Detail of Preferred Stock and Common Stock. .19 Directors, Officers, Transfer Agent, Registrar, General Counsel, and Independent Accountants.. ...20 INTRODUCTION This Financial and Statistical Report, including charts and tabulations covering the ten-year period1976-1986, is designed to supplement the Annual Report to shareholders which contains a detailed review of operations during the year 1986.

AREA SERVED LOCATION Central Hudson serves a 2,600 square-mile area, including all or parts of eight counties, in New York's Mid-Hudson Valley. The area extends about 85 miles along the Hudson River and about 25'to 40 miles east and west from the river. The southern end of the territory is about 25 miles north of New York City and the northern end is about10 miles south of Albany. A map of the area is showninside the back cover.

POPULATION The population of the Company's service area is currently estimated to be 579,000. During the last ten years the population has increased approximately 12%, or an average annual increase of about 1%.

UTILITYSERVICE Electric service is available throughout the territory, while gas service is provided primarily in and about the cities of Poughkeepsie, Beacon, Newburgh, and Kingston and in certain other outlying areas.

ECONOMY The Company's territory reflects a diversified economy, including manufacturing industries, research firms, farms, governmental agencies, public and private institutioris, resorts, and wholesale and retail trade operations.

The Company's largest customer is International Business Machines Corporation. For the year1986, sales to IBM accounted for 19% of the Company's total electric revenues and 3% of its total gas revenues.

GROWTH

SUMMARY

Growth over the last five and ten years in terms of earnings per share, dividends dedared, electric and gas sales, revenues, and plant is shown below:

Average Annual Growth Rates 1976-1986 Earnings Per Share-Common Stock. 4.5% 5.6%

Dividends Dedared Per Share-Common Stock .. 4.5 5.7 Electric Sales-Own Territory (a) 4.1 2.4 Electric Revenues-Own Territory (a) 5.3 11.3 Gas Sales(b) .. 2.3 2.7 Gas Revenues (b). 7.3 13.2 Electric UtilityPlant (c). 10.4 9.2 Gas Utility Plant (c) . 4.1 4.1 (a) Excluding sales to other utilities.

(b) Excluding sales of interruptible gas service.

(c) Including construction work in progress.

MANAGEMENT5 EMPLOYEES The main office of the Company is located at Poughkeepsie, New York, and a financial office is located at One Wall Street, New York City. (For telephone numbers see inside front cover)

A list of officers and members of the Board of Directors may be found on page 20.

The Company is an equal opportunity employer which maintains an active management development program and offers a wide range of educational opportunities. Included in the Company's educational policy are provisions for financial assistance to employees for voluntary education, training, and other self-improvement programs. Other benefits provided by the Company are set forth on page 16.

Union shop contracts are maintained with Locals 320 and 2218 of the International Brotherhood of Electri-cal Workers (AFL-CIO). The Company and these employee groups have maintained an excellent record of cooperation.

The present two-year contracts between the Company and the I.B.E.W. Locals became effective July 1, 1985 and continue through June 30, 1987.

EMPLOYEE DATA Number of Employees December 31, 1986 (a)

Supervisory and Total Officers Professional Classified 25 years or more of service .. 362 6 127 229 15-24 years of service..... 414 3 98 313 5-14 years of service. 303 2 94 207 Less than 5 years of service . 248 1 72 175 Total.. 1 327 12 391 924 (a) Indudes 120 employees at the Roseton Plant in which the Company has a 35% interest (see page 16).

RATES GENERAL The electric and gas retail rates of the Company applicable to service supplied within the State of New York(other than contractually established rates for service to municipalities and governmental bodies) are regulated by the Public Service Commission of the State of New York(PSC). Transmission rates and rates for electricity sold for resale in interstate commerce are regulated by the Federal Energy Regulatory Commission.

RATE INCREASES 1986: On July 17, 1986, the PSC issued its Opinion and Order which authorized an increase in base electric revenues of $ 1 3.3 million, an increase of 4.2%. After reflecting projected fuel savings from the Nine Mile 2 Plant (NMP-2), increased electric revenues would amount to approximately $ 10.5 million, an increase of 3.3%. The rate year is the twelve months ending July 31, 1987, the first year in which the new rates will be effective. The new rates became effective on July 25, 1986 and are applicable to all usage thereafter.

The authorized rate of return on common equity was12.4% as compared to the 15.7% return authorized in the Company's last rate case order (April 1985) and the authorized overall return on invested capital was 10.66%.

In its order, the PSC approved the rate. making principles for the inclusion in rates of the capital and operating expenses associated with the Company's interest in NMP-2. Among other things, the PSC adopted a seven-year phase-in of the prudently incurred investment in the Plant, provided for the accrual and recovery of carrying charges on the investment remaining to be phased into rate base and for the recovery of operating expenses and property taxes at the time they are incurred. The PSC approved the inclusioninrate base of an additional $ 75 million of NMP-2 investment which brings the total amount of NMP-2 investment included in the Company's rate base to

$ 222.4 million. For the purpose of this rate case the PSC assumed that NMP-2 would commence commercial operation on April 1, 1987. The PSC also provided for deferred accounting for any differences resulting from a variationin the projectedin-service date. The Company's request to use any disallowed costs to shorten the phase-in period was considered premature and will be considered in a subsequent rate proceeding.

The Order also provided for the indusion in the Company's rate base of $ 85 million of investment (including $ 49 million of CWIP) related to the reconversion to coal-firing of the Danskammer Plant, which amount is approximately two thirds of the total projected investment in the coal reconversion project. The present schedule for the completion of the reconversion of the two Danskammer units is March 1987 for Unit 4 (239 mw) and September 1987 for Unit 3 (147 mw.).

The inclusion in rate base of the additional $ 75 million of NMP-2 investment and the $49 million of Danskammer CWIP, in conjunction with the Commission's other determinations, produces a cash coverage target of 2.60 times.

The associated coverage of total interest charges when including AFDC is 3.14 times and the projected AFDC ratio (AFDC as a percentage of income available for common stock) is 46%.

In establishing retail electric rates, the PSC imputed $ 6.2 million of net revenues (revenues less incremental costs, principally fuel) from electric sales to other utilities which is $ 4.8 million lower than previously imputed. The symmetri ~

cal sharing arrangement initiated in the Company's last rate order (April 1985) is continued, whereby shortfalls below the imputed amount as well as net revenues in excess of the imputed amount will be shared between the Company and its customers on a 20%/80% basis, respectively.

The PSC continued the sharing, within limits, of variations in fuel costs from those levels projected in the July 17, 1986 order. The Company will continue to bear 20% of the first $ 10 million of variation either above or below the forecast level of fuel costs and 10% of the second $ 10 million of variation. Thus the Company's maximum exposure, or benefit, remains at $ 3 million before taxes.

1987: On August 28, 1986, the Company fi!ed an application with the PSC to increase its base rates for electric service to produce additional annual revenues of $ 27.1 million (7.9%). The new rates are requested for the twelve-month period August 1, 1987 through July 31, 1988, the first year the revised rates are expected to be in effect.

Additional fuel savings of $ 14.9 million from the operation of NMP-2 and the reconversion to coal of Danskammer Plant Units 3 and 4 are projected to reduce the net increase in electric revenues to $ 12.2 million (3.6%). The higher electric revenues have been requested (1) to include an additional increment of the Company's investment in NMP-2 in rates pursuant to the phase-in program adopted by the PSC, (2) to include in rates the balance of NMP-2 operating costs not included in current rates, (3) to include in rates additional capital and operating costs associated with the reconversion of Danskammer Plant Units 3 and 4 and (4) to recover other increases in capital and operating costs for the Rate Year not adequately provided for in current rates.

The rate increase application is based on a return on common equity of13.75% and an overall return on invested capital of 11.02% and produces pretax coverage of total interest charges of 2.8 times, when exduding AFDC, for the twelve months ending July 31, 1988.

During the course of the proceeding the Company has submitted a revised sales forecast, reflected the effects of the Tax Reform Act of 1986 and reflected the effects of lower interest costs. The proposed increase could be reduced from $ 27.1 million to $ 14.3 million as a result of these changes.

Last Five Years: Rate increases authorized by the PSC during the preceding five years are summarized in the table below.

Return on Vo Increase Total Effective Amount Amount of Test Year Common Invested Date Requested Granted Revenues Equity Capital 7/25/86 Electric $21,057,000 $ 10,474,000* 3.3% 12.4% 10.66%

4/20/85 Electric 27,100,000 18,124,000" " 3.9 15.7 . 12.84 4/20/85 Gas 2,800,000 53,000** (0.2) 15.7 12.84 1/16/84 Electric 22,673,000 11,726,000 3.2 15.9 12.57 1/16/84 Gas 2,178,000 3,11-1,000 6.1 15.9 12.57 10/22/82 Electric 32,974,000 18,374,000 5.3 15.9 12 49 10/22/82 Gas 2,641,000 2,334,000 3.6 15.9 12.49

'The Commission also directed the Company to rofl.out $ .0075 of the base cost of fuel in order to reflect dedining fuel costs.

• Indudes second stage increases which became effective September 5, 1 985.

FUEL ADJUSTMENT CLAUSES The Company's tariff for retail electric service indudes a fuel cost adjustment dause pursuant to which electric rates are adjusted to reflect changes in the costs of fuels usedin electric generation and of certain purchased power from the level of such costs induded in the Company's base rates for electricity. At the present time, the cost of fuel reflected in base rates is $ .032 per kwhr. Generally, there is a delay of approximately 40 days for customers whose bills are rendered monthly and 70 days for customers whose bills are rendered bimonthly between a change in fuel costs and the time when charges to customers are adjusted. Effective April 20, 1985, such electric fuel adjustment dause was revised to provide for a partial sharing of fuel costs from levels projected in rate proceedings. The Com-pany's maximum exposure, or benefit, is $ 3 million before taxes. With respect to net revenues from electric sales to other utilities, the Company's retail rates are currently based on an annual imputation of $ 6.2 million. Shor tfalls below the imputed amount, as well as amounts above the imputed amount, will be shared 80% by the customers and 20% by the Company.

The Company's tariff for gas service indudes a gas cost adjustment dause pursuant to which all retail gas rates are adjusted to reflect changes in the price of natural gas purchased from pipeline suppliers and certain costs of manufactured gas from the levels of such costs indudedin base rates. The Commission has also directed changes in the base cost of gas to reflect more dosely the total cost of serving gas customers. Presently, a cost of $2.05 per mcf. is reflected in the firm customer base rates. Generally, there is a delay of approximately one month between a change in the cost of gas and the time when rates charged to customers are adjusted. In addition, the charges under the gas cost adjustment are reducedif annual net revenues from sales ofinterruptible gas are in excess of the amount imputed in base gas rates.

In accordance with permission granted by the PSC, changes in electric fuel costs and gas costs are deferred in the Company's accounts until the month in which such changes are reflected in the electric fuel or gas cost adjust-ment, thereby permitting the Company to match costs and revenues.

COMPANY SECURITIES 8c MARKETS During the ten-year period from January 1, 1977 through December 31, 1986 the Company issued securities viith proceeds of approximately $ 653 million of which $ 141 million was applied to the repayment of long-term debt which matured during the period. The amount of securities outstanding at December 31, 1986 was 178% greater than the amount outstanding at December 31, 1976. In addition, during this same ten-yeai period retained earn-ings increased by about $ 108 million.

FIRST MORTGAGE BONDS At December 31, 1986, the Company had $ 327.4 million principal amount of first mortgage bonds outstanding, of which $ 100 million had been placed privately. On September 15, 1986, the 17 1/8% series due August 15, 1991 and the12 3/8% series due May15, 2010 were called for redemption. The funds required to finance these redemp-tions were obtained from the issuance of $ 50 million of new bonds, 81/8% series due September 1, 1994, and from short-term investments.

The Company's First Mortgage Bonds at year-end 1986 were rated A- by Standard L Poor's Corporation and Fitch Investors Service; A3 by Moody's Investors Service; and /f7 (Low A) by Duff and Phelps, Inc. In February 1987 Moody's Investors Service lowered its rating to Baal, and in March 1987 Standard 8 Poor's Corporation reduced the Company's rating to BBB+ and Duff and Phelps, Inc. to III8 (High BBB).

Additional bonds may be issued under the Mortgage Indenture for purposes other than refunding outstanding bonds only if net earnings, as defined in the Mortgage, for twelve consecutive ca! endar months within the fifteen calendar months preceding the date of issue shall exceed two times the interest charges for one year on all bonds outstanding under the Mortgage plus the additional bonds to be issued. For the twelve months ended December 31, 1986, the Company could have issued $ 338 million of additional first mortgage bonds, assuming an annual interest rate of 9.0%.

Furthermore, any additional bonds issued under the Mortgage shall not in principal amount exceed 66 2/3% of the net bondable value of property additions as that termis definedin the Mortgage. As of December 31,1986, the amount of such net bondable value was approximately $ 292 million, and the amount of the additional first mortgage bonds issuable viith respect thereto was approximately $ 195 million.

PROMISSORY NOTES POLLUTION CONTROL The Company has issued $ 105.65 million of its promissory notes to secure an equal amount of New York State Energy Research and Development Authority (NYSERDA) tax-exempt Pollution Control Revenue Bonds.

These debt offerings will help finance the pollution control facilities at NMP-2 and Danskammer coal reconver-sion projects.

The pollution control bonds, series A and B, issued in1984, bear interest at 7 1/2% per annum from the date of issuance up to and including September 30, 1989. The bonds will be subject to repricing and investor tender on each October1, commencing October1,1989. The Company has a one-time option for each series to convert to a long-term fixed rate at any annual tender date.

The pollution control bonds, series A and B, issued in 1985, had an interest rate of 5 1/8% through January 31, 1986. At that date these bonds become variable rate obligations subject to weekly repricing andinvestor tender. The

" Company has a one-time option for each series to convert to a long-term fixed rate. In its July 1986 rate order, the PSC provided for deferred accounting and future rate treatment for the effect of any variation in interest rates from levels projected in rate orders.

UNSECURED SINKING FUND NOTES

$6.85 million principal amount of 4.85% promissory notes due 1995 was outstanding at December 31, 1986.

These notes were placed privately and have an annual sinking fund requirement of $ 175,000.

PREFERRED STOCK As of December 31, 1986, 490,300 shares (4 1/2%, 4.75%, 7.72%, 7.44%, and 8.40% series) were held by 2,692 holders. These shares are traded over the counter. There were also outstanding at the time 60,000 shares (4.35% series), 60,000 shares (4.96% series), both placed privately, and 200,000 shares of Adjustable Rate Pre-ferred Stock that were issued on March 30, 1983. The series of preferred stock which are not privately placed are currently rated BBB by Standard & Poor's Corporation, ¹10 (LowBBB) by Duff and Phelps,lnc.,BBB+ by Fitch Investors Service and baa2 by Moody's Investors Service. Moody's Investors Service lowered its rate to the baa2 level during February 1987 while Standard & Poor's Corporation and Duff and Phelps, Inc. reduced their ratings to BBB and ¹10, respectively, during March 1987.

For each quarterly dividend period after January1, 1984, dividends on the Adjustable Rate Preferred Stock are based on a rate which is 1% per annum below the highest of three specific Treasury rates. The rate, however, will never be less than 6% per annum or greater than 12.5% per annum. The adjusted rates applied for each quarter since January 1, 1984 ranged between 6.48% and 12.48% per annum. A sinking fund provides for the annual retirement of 8,000 shares on each March 30, commencing March 30, 1993.

Under provisions of the tax laws, a portion of the dividends paid on the 4 1/2% and 7.72% series of preferred stock is deductible for purposes of computing the Company's federal income tax, and, accordingly, a corporation receiving dividends on these seriesof preferred stock will not be allowed the full 85%credit. Allother preferred stock series qualify for the 85% credit for corporate shareholders, which credit was reduced to 80% as of January 1, 1987.

The Company's Certificate of Incorporation, as amended, provided at December 31,1986 for a total of1,200 000 authorized shares of preferred stock, $ 100 par value. 810,300 shares are issued and outstanding and 389,700 shares are authorized but unissued.

COMMON STOCK The stock has been listed on the New York Stock Exchange since 1945 and dividends have been paid by the Company and its principal predecessors for 83 years.

On April3, 1986 the Company sold 1,300,000 new shares of its common stock and received proceeds of $ 42.9 million from the offering. On December 1, 1986 the Company sold an additional 500,000 new shares and received

$ 14.8 million from that offering. In addition, the Company issued 194,109 shares under its Dividend Reinvestment Program, 30,723 shares under its Customer Stock Purchase Plan and 6,253 shares under its Employee Stock Ownership Plan. Total proceeds from stock issued pursuant to these three plans amounted to an additional $ 7.5 million.

As of December 31, 1986, 14,105,850 shares were outstanding. The number of registered holders of common stock was 31,212 at that time, and the largest single holder of record, other than the nominees, Cede & Co. for The Depository Trust Company and Stanley & Co. for the Dividend Reinvestment Plan, held less than 2.1% of the out-standing shares.

The Company's Certificate of Incorporation was amended on April 5, 1983 to increase the number of shares of common stock authorized to be issued from 10,000,000 to15,000,000. Accordingly, as of December 31, 1986, the number of authorized but unissued shares amounts to 894,150, of which 466,787 shares are reserved for the Com-pany's DiVidend Reinvestment Plan and its Customer Stock Purchase Plan.

The Company has submitted a proposal to itscommon stock shareholders to amend the Certificate of Incorpora-tion to increase the number of shares of common stock which the Corporation is authorized to issue from 15,000,000 to 30,000,000. Such proposal will be considered and voted upon at the Annual Meeting of Sharehold-ers to be held on April 7, 1987.

Additional information on outstanding securities is shown on page 19.

The Company has available for interested shareholders an Automatic Dividend Reinvestment and Stock Pur-chase Plan providing for the issuance of original issue shares of stock.

CONSTRUCTION PROGRAM The Company is engaged in a construction program which is presently estimated to involve cash expenditures during the period 1987 through 1991 of $ 287.4 million. The estimates by years are as set forth below:

Total 1987 1988 1989 1990 1991 1987-1991 (Thousands of Dotlars)

Construction Expenditures:

Participation in Unit No. 2 of the Nine Mile Point Nuclear Station (9%)..... $ 22,000 $ 1,700 $ $ $ $ 23,700 Reconversion of Danskammer Units 3 and 4 to coal-firing ............. 59,000 800 59,800 Expenditures excluding major generating projects............. 41,500 40,500 32,400 34,000 41,400 189,800 Total . 122,500 43,000 32,400 34,000 41,400 273,300 Nuclear Fuel. 1,500 4,200 2,200 4,000 2,200 14,100 Total Induding NuclearFuel .............. $ 124,000 $ 47,200 $ 34,600 $ 38,000 $ 43,600 $287,400

'Exduding at kwvance for funds used during construction (AFDC), a noncash item.

Estimates of construction expenditures are subject to continuous review and adjustment, and actual construction expenditures may vary from such estimates.

The Company's two most significant construction projects are its 9% participation (97 mw) in NMP-2 and the reconversion of Danskammer Units 3 and 4 from oil- to coal-firing.

NMP-2 is presently scheduled for operation in early 1988. The reconversion of the Danskammer units is pro-ceeding on schedule with Unit 4 (239 mw) commencing coal operation on March 10, 1987 and Unit 3 (147 mw) scheduled for coal operation in September 1987. The total cost, exclusive of AFDC, of the reconversion is currently estimated to be $ 120.2 million, of which $ 60.4 million has been expended through 1986.

The PSC, by Order adopted October 2, 1985, approved the recovery of project costs for the Danskammer coal reconversion over a ten-year period with the precise amortization schedule to be consideredin rate case proceed-ings. It also concurred that the coal reconversion program is a sound, economic undertaking.

The Company's tentative annual cash requirements for the years1987-1991 basedupon the above construction program are shown below:

Total 1987 1988 1989 1990 1991 1987-1991 (Millions of Dotlars)

Construction Expenditures Cash Expenditures (from page 6) .. .. $ 124.0 $ 47.2 $ 34.6 $38.0 $ 43.6 $ 287.4 Internal Funds Available Depreciation Accruals (a)(b) . 21.1 29.8 31.8 33.0 33.8 149.5 Amortization of Danskammer Coal Reconversion. 3.0 4.4 4.4 12.7 12.7 37.2 Deferred Income Tax Net (c) ... 11.3 16.0 14.4 12.6 12.4 66.7 Retained Earnings (d) 4.8 (3.3) (3.4) (3 7) (4 2) (9.8)

AFDC(a) .. (22.1) (1.3) (.8) (8) (6) (25.6)

Sterling Amortization Net. 4.9 1.5 1.6 .8 .2 9.0 Carrying Charges on NMP-2 (a) .. (2 3) ( 7) (7) (7) (4.4)

Nine Mile 2 Deferred Credit (e)... (4.5) (12.6) (17.8) (1 7.8) (10.4) (63.1)

Amortization Nuclear Fuel. 4.4 6.1 4.9 7.3 22.7 Decommissioning Costs . .2 .2 .3 .3 1.0 Other Net. .3 .4 .4 .5 ~ .5 2.1 Total Internal Funds 18.8 37.2 36.2 41.8 51.3 185.3 Balance of Construction Requirements to be Financed 105.2 10.0 (1.6) (3.8) (7.7) 102.1 Mandatory Redemption of Long-Term Debt Securities First Mortgage Bonds 18.0 25.0 14.0 57.0 Promissory Notes .2 .2 .2 .2 .2 1.0 Total .. .2 18.2 .2 25.2 14.2 58.0 Other Cash Requirements .. 5.0 5.6 5.2 5.4 5.0 26.2 Payment from Niagara Mohawk .. (26.1) (26.1)

Total Cash Requirements .. .. $ 110.4 $ 7.7 $ 3.8 $ 26.8 $ 11.5 $ 160.2 (a) Assumes NMP-2 willcommence commercial operation in January1988 and will be phased into rate base over a period of three years commencing 8/1/86 and ending 7/31/89. AFDC witt be discontinued once the Plant is placed into service, but noncash carrying charges will be accrued on the portion of the investment that is not induded in rate base.

(b) The assumed depreciation rate for NMP.2 is 2.5o/o and such rate will be applied to the allowed investment induded in rate base.

(c) Based on federal income tax faw under the Tax Reform Act of 1986.

(d) For the purpose of this estimate the Company has assumed a return on average common equity of 13o/o and continuation of the current annual dividend rate of $ 2.96. Also assumes that the after-tax effect of the disallowance under the Settlement proposal will be $ 151 million.

(e) Assumes that the accumulated deferred credit resulting from the indusion of NMP.2 CWIP in rate base witt be amortized as a credit to the Company's cost of service over a five. year period commencing 8/1/86 and ending 7/31/91.

FINANCING CASH REQUIREMENTS As shown above, it is currently estimated that 64% of the cash construction expenditures for the five-year period 1987-1991 will be provided internally The balance will be met from interim short-term borrowings and the issuance of new securities.

The Company anticipates that it will be able to issue an additional $ 35 million of new tax-exempt pollution control debt in1987. The issuance of any other new securities will be based upon the Company's general financial policies in regard to capital structure, coverage, and pay-out ratios, as well as market and other economic conditions exist-ing over the next five years.

EARNINGS AND DIVIDENDS PER SHARE 5.00 Total Earnings 4.50 Per Share 4.00 Dividends Declared Per Share 3.50 tf) 3.00

,g 250 0

Q 2.00 The Company's dividend 1.50 policy has been to generally maintain a pay.out ratio of 1.00 approximately 65% but the figure has fluctuated widely

.50 in some years because ofthe variations in yearly earnings.

1976 77 78 79 80 81 82 83 84 85 86 CURRENT RETAINED EARNINGS ON AVERAGE SHARES OUTSTANDING 21.0 Average Shares of Common Stock 19.5 Outstanding (Millions of Shares) 18.0

~ Current Retained Earnings (Millions of S) 16.5 15.0 13.5 tn 12.0 nf 10.5 O 9.0 7.5 6.0 4.5 3.0 1.5 0

1976 77 78 79 80 81 82 83 84 85 86