ML19282C856

Forwards Registration Statement Filed by La Power & Light Co on 790321.W/o Encl

ML19282C856
Person / Time
Site:	Waterford
Issue date:	03/23/1979
From:	Borochoff I SECURITIES & EXCHANGE COMMISSION
To:	NRC OFFICE OF THE GENERAL COUNSEL (OGC)
References
NUDOCS 7905070166
Download: ML19282C856 (1)

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/I SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20S49 OsVISION OF (n I' W j'

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office 7f the General Counsel U.S. ;;uclear Regulatory Comnission q gg I[

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Re: LOUISIA!iA Poi l R & LIGilT COMPA"Y File ;io. 2-63820 Gentlenen:

Enclosed is a copy of the above named registration statement filed with the Commission on !! arch 21, 1979 under the Securities Act of 1933. This may be of interest to you since the company comes witbin your jurisdiction.

Should you have any informat ion about this Company or the proposed offering which you think would be helpful to us, we would appreciate receiving it.

Sincerely, y  ; wm L }l'/

Irv'ing D. Borochoff Branch Chief Enclosure 7905070146 ,y /

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U.S. L'uclear Regulatory Corrnission Washington, D.C. 20555

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Re: 1,0UISIN!A POUZR & LIGHT COMPA';Y File Ho. 2-63820 Centlemen:

Enclosed is a copy of the above named registration statement filed with the Commission on March 21, 1979 under the Securities Act of 1933. This may be of interest to you since the Corrpany corces within your jurisdiction.

Should you have any information about this Company or the proposed of fering which you think would be helpful to us, we vould appreciate receiving it.

Sincerely, .

>emL-.- l Irving D. Borochoff Branch Chief Enclosure o g,

&w/rr s 79c60701% 9;oQ

Registration No. 2- ( 3 Q

-(t SECURITIES AND EXCHANGE COMMISSION p.2- fred, 1 WASIllNGTON, D. C. 20549 __

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IlEGISTItATION STATE 31ENT g3; Under TIIE SECUlllTIES ACT OF 193 1 0Fm ' U woHTS l k ?V 'rq \

Louisiana Power & Light Company (Exact name of registrant as specified in charter)

State of Louisiana 72-0245590 (State or other jurisdiction of (I.R.S. Employer Identification No.)

incorporation or organf ration)

I12 Delaronde Street New 0 : cans, Louisiana 70174 (Address of principal executhe offices) (Zip Code)

Registrant's telephone number, including area code: 504 366-2345 J. 31. WYATl', President J. II. ERWIN, JIt., Vice Pruident 142 Delaronde Street and Treasurer New Orleans, Louisiana 70174 142 Delaronde Street New Orleans, Louisiana 70174 MELVIN I. SCHWARTZ 3IAN, Esq. CIIARLES A. READ, Esq.

3IONHOE & LE3IANN REIN & PRIEST Whitney Building 40 Wall Street New Orleans, Louisiana 70130 New York, New York 10005 (Names and addresses of agents for service)

It is respectfully requested that the Commission send copies of all notices, orders and communications to:

EDWIN P. STEVENS, Esq.

WINTIntOl', STI51 SON. PtrINA31 & ROBEllTS 40 Wall Street New York, N. V.10005 Approsimate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

CALCULATION OF REGISTRATION FEE Propovd Proposed Amount Alatimum Staximum Amount of Title of Each Claw of Securities to be Offering Price Aggregate Registration to be Registered Registered Per Unit' Offering Price

• Fee First Mortgage Bonde,  % Series due May 1, $45,000,000 10133 G $45,787,500 $9,158

• Estimated solely for the purpose of calculating the registration fee.

The registrant herchy amends this registration statement on such date or dates as may be necessary to delay its effectise date until the registrant sh:.ll file a further amendment which specifically states that this registration statement shall thereafter become cIIcctise in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

LOUISIANA POWER & LIGIIT COMPANY Cross Reference Sheet Form S-7 Item No. IIcading in Prospectus

1. Distribution Spread Cover Page

2. Plan of Distribution . Purchasers

3. Use of Proceeds to Registrant . Construction Program and Financing

4. Selling Security Holders Not applicable

5. Business . The Company; Industry and Com-pany Problems; Operating Statis-tics; Business; Property

6. Statement of Income . Statement of Income; Management's Discussion and Analysis of the State-ment of Income; Statement of Re-tained Earnings; Statement of Source of Funds for Utility Plant Additions

7. Capital Stock to be Registered Not applicable

8. Debt Securities to be Registered Description of New Bonds

9. Other Securities to be Registered Not applicable

10. Management and Others . Not applicable

! 1. Other Financial Statements and Schedules . Opinion of Independent Certified Public Accountants; Balance Shect; Notes to Financial Statements

12. Statement of Available Information Available Information

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E2 PRELDIINARY PROSPECTUS DATED MARCII 21, 1979 2;

3 PROSPECTUS E; '

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Louisiana Power & Light Company 5=m u? $45,000,000 3* First Mortgage Bonds,  % Series Due May 1,

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Interest payable Nosember I and May 1 La E3

-g i3 Reference is made to " Description of New Bonds--Redemption and Purchase of Bonds" herein for i _j the terms of a limitation on the right of the Company to redeem a New Bond at a general redemption price 5= prior to May 1, Such limitation does not, however, apply to redemptions of New Bonds at a special y" redemption price for the current sinking or improvement fund or for the ieplacement fund or with certain 5 li deposited cash and proceeds of released property. The special redemption prices for the New Bonds are

{$ G of the principal amount through April 30,1980, and decrease thereafter to 100% for the twelve E3 s-months ending April 30, , in each case together with accrued interest.

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p :- TIIESE SECURITIES IIAVE NOT IIEEN APPROVED OR DISAPPROVED BY TIIE SECURITIES

5 AND ENCIIANGE CO3IMISSION NOR IIAS TIIE CO3DIISSION PASSED UPON

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. TIIE ACCURACY OR ADEQUACY OF TIIIS PROSPECTUS. ANY REPRE-S~ SENTATION TO TIIE CONTRARY IS A CRDIINAL OFFENSE.

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[g This Prospectus is to be used in connection with the Company's Public Invitation for Bids for the FE purchase of the New Bonds referred to herein. Bids for the New Bonds will be received before 11:00 N3 A.M., New York Time, on April 26,1979, at the offices of Messrs. Reid & Priest,30th Floor,40 Wall Street, New York, N. Y. The Company will give notice not later than 11:00 A.M., New York Time,

.E i on April 23,1979 of the date on which the Bonds referred to herein shall mature, which date shall be a 3j May I not earlier than May 1,1984, and not later than May 1,2009.

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ag Company ofFeers and counsel, representatives of the independent certified public accountants, and ae counsel who will act for the successful bidder or bidders will be present at Irving Trust Company n} (Conference Room "B" 1.evel "A"), One Wall Street, New York, N. Y. at 11:00 A.M., New York g li Time, on April 24,1979, to review with prospective bidders the information with respect to the Company contained in the registration statement and the matters set forth in the Statement of Terms and Conditions "g=.aE Relating to Bids. All prospective bidders are invited to attend.

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The date of this Prospectus is April ,1979

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IN CONNECTION WITII Tills OFFERING, TIIE PURCilASERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WillCil STAlllLIZE OR MAINTAIN TIIE MARKET PRICE OF TIIE SECUnillES OFFERED IIEREBY AT A LEVEL AllOVE 'llIAT WillCll MIGilT OlllERWISE PREVAIL IN TIIE OPEN MARKET. SUCil STAlllLIZING, IF COMMENCED, MAY llE DIS-CONTINUED AT ANY TIME.

No dealer, salesman or other person has been authorised to give any information or to make any representation not contained in this Prospectus and, if gisen or made, such information or representation must not he relied upon as hasing been authoriicd by the Company r the Purchasers. This Prospectus does not constitute an otrer to sell or a solicitation of an offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction.

Neither the deliscry of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof.

TAllLE OF CONTENTS Page Page Available information 2 Ilusiness 13 Definitions 3 Property 21 The Company 3 Description of New Ilonds 24 Industry and Company Problems 4 Experts and Lecality

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Construction Program and Financing 5 Opinion of Independent Certified Public Statement of Income 8

\ccountants 29 Management's Discussion and Analysis of the Statement of Income 10 1 inancial Statements 30 Operating Statistics 12 Purchasers 42 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports and other information with the SEC. Such reports include information, as of particular dates, concerning the Company's directors anc %-s, their remuneration, the principal holders of the Company's securities and any material interest o.

• sons in transactions with the Company. Such reports and other information can be inspected t . topied at the public reference facilities maintained by the SEC at Room 6101, 1100 L Street, N.W., Washington, D. C.,

Room 1204, Everett McKinley Dirksen Building,219 South

Dearborn Street,

Chicago,111.; Room 1100, Federal Building,26 Federal Plaza, New York, N. Y.; and Suite 1710, Tishman Building,10960 Wilshire Boulevard, Los Angeles ~, Calif. Copies of this material can also be obtained at prescribed rates from the Public Reference Section of the SEC at its principal office at 500 North Capitol Street, N.W.,

Washington, D. C. 20549.

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DEFIN1110NS The following abbreviations or acronyms used in the text and notes are defined bdow:

Abbrettation Abbreviation or or

_ Aeronym Term Acronym Term AEC Atomic Energy Commission AISE Afiddle South Energy. Inc.

AFDC .. Allowance for Funds used Dur- htSS Middle South Services, Inc.

ing Construction New Bonds $45.000,000 Principal Amount Ambient Air Standards. National Ambient Air Quality of the Companyi First Standards Mortgage Honds. offered AP&L . . . . . Arkansas Power & Light Com-pany New Source Standards. New Source Performance Stand-ards Ark Mo . . . . Arkansas-Missouri Power Com-pany Ninemite Point Station The Company's Ninemite Point Steam Electric Generating Company Louisiana Power & Light Com- Station pany NOPSI New Orleans Public Service Inc.

Council Council of the City of New Orleans NPDES . National Pollutant Discharge CWIP Construction Work in Progress NRC Nuclear Regulatory Commis-DOE Department of Energy sion 11.4H% Preferred Stock 350.000 shares of the Com- SEC Securities and Exchange Com-pany's  ! !.48% Preferred mission Stock, Cumulative, $100 Par Value. issued and sold on SFI System Fuels, Inc.

March I.1979 State Plan . State Implementation Plan EPA Environmental Protection Agency Sterlington Station The Company's Sterlington Steam Electric Generating FERC . . . Federal Energy Regulatory Station Commission System Agreement . . Agreement. among the Com-FPC . Federal Power Commission pany and the four other Sys-tem operating companies, re-IWPCA . Federal Water Pollution Con- lating to the sharing of trol Act genc ting capacity and other Grand Gulf Plant . MSE's Grand Gulf Generating Station (nuclear) System operating com-panies The C?mpany, AP&L, Ark-hfo, IIolding Company Act. Public Utility IIolding Com- MP&L and NOPSI pany Act of 1935 LPSC . .. .... Louisiana Public Service Com- TVA Tennessee Valley Authority mission United . United Gas Pipe Line Company Middle South .. .. Middle South Utilities, Inc.

Waterford No. 3 . Unit No.3 (nuclear) at the Middle South System . Afiddle South and its various di- Waterford Station rect and indirect subsidiaries Waterford Station The Company's Waterford MP&L ........ Mississippi Power & Light Com- Steam Electric Generating pany Station TIIE CO3fPANY The Company was incorporated under the laws of the State of Lcuisiana on October 15,1974, and is successor by merger to a predecessor Louisiana Power & Light Company which was incorporated under the laws of the State of Florida in 1927. The merger of such predecessor corporation into the Company 3

became efIcetise on February 28,1975, and information and data herein with respect to a time or period on or prior to that date refer to the predecessor corporation. The Company's principal executise omce is located at 142 Delaronde Street, New Orleans, Louisiana 70174. Its telephone number, including area code, is 504-366-2345.

'Ihe Company is an electric public utility company with all of its operations in the State of Louisiana and is a subsidiary of hiiddle South, which is a registered public utility holding company under the lloiding Company Act, and owns all of the outstanding Common Stock of the Company. 'I he Company, AP&L, h1P&L, NOPSI and Ark-Sto are the principal operating subsidiaries of Aliddle South. Aliddle South owns all the capital stock of N1SE, a generating subsidiary organized in 1974 to proside financing and ownership of certain future base load generating units within the Niiddle South System. See " Property-Interconnections" N1idd:e South also has a wholly-owned service subsidiary, A1SS.

The Company, AP&L, 51P&l and NOPSI own all the capital stock of SFI, a special purpose company formed to plan and implement programs for the procurement, delisery and storage of fuel supplies for the 51iddle South System. See "llusiness-Fuel Supply" INDUSTRY AND CO31PANY PROBLESIS Industry Problems. The electric utility industry in general is currently experiencing problems of (a) increasing costs of fuel, wages and materials, (b) vast capital outlays and longer construction periods for the larger and more complex new generating units needed to meet current and future service require-ments of customers, (c) increased reliance on capital markets with higher costs of capital and limited availability of both equity and borrowed capital, (d) fuel shortages, (e) compliance with environmental requirements, (f) controversies over the use of nuclear power, and (g) regulatory lag in granting needed rate increases and the inadequacy of such increases when granted. In addition, recently enacted Federal energy legislation may adversely affect electric utilities, including the Company.

FucI Supply. For information with respect to the extent of the Company's dependence on natural gas for boiler fuel, the supply of natural gas available to the Company, the increased use of oil as a boiler fuel by the Company, the increasing costs of both natural gas and oil for boiler fuel and the greater cost of oil, and the availability to the Company of the necessary fuel oil, see " Business-Fuel Supply" See

" Business-Rates" as to adjustment clauses in the Company's rate schedules for changes in fuel costs.

The burning of natural gas as boiler fuel does not cause air polludon problems. The Company estimates that it will be able to fuel annroximately 80G of its 1979 generation with natural gas (IG with interstate gas), see "llusinew -Fuel Supply" For information with respcct to the Company's meeting emission regulations and ambient air quality standards in its use of oil as boiler fuel, and its compliance with environmental requirements generally, see " Business-Environmental hiatters" Construction Program and Financing Limitations. In common with the industry, the Company is also experiencing increasing costs for wages and materials. Waterford No. 3 will require larger capital outlays and a longer construction period than the conventional generating units constructed by the Company in the past. As a result, the Company is having to rely more heavily on capital markets for funding, in which connection the Company has experienced increased funding costs.

The Company estimates its requirements for capital funds from external sources during the period 1979-1981 will be approximately $609,000.000, principally for construction. The Company's Bond and Preferred Stock earnings coverages have declined, and without the recent authorization of the LPSC permitting the Company to defer certain fucI costs until such amounts are billed to customers (see "Need for Rate Relief" under this heading and " Business-Rates"), the Company would have been pree!uded, as of January 31,1979, from selling the New Bonds due to the inability to mect the earnings coverage requirements contained in the Company's Afortgage. As of January 31,1979, and after giving effect to the issuance of the 11.48c; Preferred Stock in N1 arch 1979, to the issuance of the New Bonds 4

at an assumed annual interest rate of 100;, and excluding revenues subject to refund, the Company could issue approximately $6,000,000 of additional Bonds at an assumed annual interest rate of 10G (plus any Bcnds issued for refunding purposes) or approximately $33,000,000 of additional Preferred Stock at an assumed annual dividend rate of 10G. See " Construction Program and Financing" and "Husiness-Rates" Need for Rate Relief. To continue its construction program, to o!Tset increasing costs in connection with its operations and to maintain earnings at acceptable levels, the Company is seeking and intends to continue to seek periodic rate relief as may be required in the future. In January 1979, the Company received authorization from the LPSC allowing and requiring the Company to credit or charge customers through the fuel adjustment clause in future billings for net over or under-collections of fuel costs in excess of those included in base rates. Concurrently with this change in billing for fuel costs, the Company commenced deferring on its books fuel costs to be collected through the fuel adjust-ment clause until such amounts are billed to customers. This deferral was $16,404,000 at January 31, 1979, and is being recovered in subsequent months through the fuel adjustment clause. The effect of this deferral, net of deferred income taxes, was to increase net income for the twelve months ended January 31,1979 by $8.461,000. Accordingly, the Company's Bond and Preferred Stock carnings coverages at January 31,1979 have improved, as compared with such coverages for the twelve months ended December 31,1978 (see " Construction Program and Financing"). It is expected that, in light of the effect of the LPSC authorization, the Company's earnings coverages will enable the Company to sell additional Bonds and Preferred Stock in 1979 to finance its on-going construction program. However, the ability of the Company to finance its construction program beyond 1979 will be dependent upon increases in earnings and the ability to obtain adequate rate relief. See "Rusiness-Rates" Federal Legislation. Recently enacted Federal legislation will, among other things, (i) require state public utility commissions to consider standards relating to retail rate design, restrictions on automatic adjustment clauses and time-of-day and seasonal rates, (ii) require states to develop residen-tial energy conservation plans, (iii) grant the FERC authority to order wheeling and interconnection in specified situations and to limit automatic adjustment clauses for wholesale rates, (iv) deregulate the first sale prices of natural gas in 1985, (v) cxtend price regulation of natural gas to the intrastate market, (vi) provide for incremental pricing of higher priced new gas to industrial customers (o'her than electric utilities) of interstate pipelines, (vii) prohibit existing power plants from using natural gas as boiler fuel after 1990 with prosisions for exemption from such prohibition until the year 2000 and (viii) grant the Secretary of Energy the authority to limit or prohibit the use of petroleum in certain existing power plants. The Company is unable to predict at this time what efTect this legislation will have on it.

CONSTRUCTION PROGRAM AND FINANCING The net proceeds to be received by the Company from the issuance and sale of the New Bonds will be used for the payment in part of outstanding short-term borrowings estimated not to exceed

$90,000,000 at the time the sale proceeds are received, for the financing in part of the Company's construction program, and for other corporate purposes. (The Company may sell less than all of the New Honds in the event of a default by less than all of the Purchasers, see "Perchasers".)

On March 1,1979 the Company issued and sold the 11.48G Preferred Stock. The proceeds from this sale (approximately $35,000,000) were used for the payment in part of outstanding shor:-

term borrowings, for the financing in part of the Company's construction program and for other corporate purposes. In addition, the Company has a quested authorization from the SEC under the Holding Company Act to sell from time to time during 1979, in increments to be determined by the Company and Middle South, 11,364.000 shares of Common Stock, no par value, to Middle South for

$75,000,000 in the aggregate. The proceeds to be received from this proposed sale will be used for similar purposes.

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The Company has received authority under the Holding Company Act, and has made arrangements with a commercial paper dealer and with various banks which enable the Company, to make short-term borrowings from time to time through December 31,1979, maturing not later than December 31,1979, of up to $120,000,000 outstanding at any one time by the issuance and sale of commercial paper and by loans from such banks. The proceeds of such borrowings are used to finance construction and other corporate expenditures pending permanent financing. At January 31, 1979, the Company had out-standing $43,800,000 of commercial paper and $59,675,000 of bank loans. Reference is made to Note 5 to Financial Statements.

The Company's construction program cantemplates expenditures of approximately $268,600,000 in 1979. This estimate contemplates the expenditure of approximately $221,500,000 for production facilities, $7,300,000 for transmission facilities, $38,500,000 for distribution facilities and $1,300,000 for general plant, induding cilice and service facilities and transportation and communication equip-ment. These amounts exclude expenditures for nuclear fuel. The Company estimates that its construction expenditures (excluding nuclear fuel expenditures) will amount to approximately $289,000,000 in 1980 and $280,000,000 in 1981.

The Co,npany estimates that subsequent to the receipt of the proceeds from the sale of the New Bonds, it will require approximately $145,000,000 of additional funds from external sources to finance its 1979 construction program, and expects to obtain such funds through short-term borrowings from banks, the issuance and sale of commercial paper and the issuance and sale of such other securities as may be determined to be appropriate.

Reference is made to " Business-Environmental hlatters" for information with respect to estimated amounts allocable to environmental matters included above in the Company's estimated construction expenditures' for the years 1979-1981.

The following tabulation shows details with respect to certain new generating facilities included in the estimated construction expenditures for 1979-1981.

Net Scheduled Capa- Prior Cost Year of bility to Total per Comple.

Unit Location in SIW 1979 1979 1980 1981 Cost KW tion (5tillions of Dollars-except Cost per KW)

• Waterford No. 3 Killona, La. 1,165 $590.8 $202.6 $192.8 $ 119.4 $ 1.109.0 $952 1981

• The costs shown above include AFDC. Expenditures for nuclear fuel are excluded from the construction costs. See Note 9 to Financial Statements and " Business-Fuel Supply" Actual expenditures and dates of completion for construction projects may vary from the estimates because of availability of financing, changes in the Company's plans, additions and changes required by regulatory authorities, cost fluctuations, the availability of labor, materials and equipment, licensing delays and other factors.

The financing program followed by the Company in recent years has involved in large measure the issuance of First Afortgage Bonds in amounts designed to maintain the ratio of First hfortgage Bonds to total capitalization in the general range of 56%. Earnings coverage provisions are contained in the Company's hfortgage and its Articles of Incorporation for the issuance of additional First htortgage Bonds and additional shares of Preferred Stock, respectively. Under the Company's hfortgage, additional First hfortgage Bonds may not (except for the purpose of refunding maturing First hfortgage Bonds and certain other purposes) be issued unless the adjusted net earnings of tbc Company (as defined in the hfortgage) for 12 consecutive months out of the 15 months immediately preceding the issuance of the additional First 5fortgage Bonds shall have been at least twice the amount of the annual interest requirements on all First h!ortgage Bonds at the time outstanding, including the additional First Afortgage 6

Bonds being issued, and any indebtedness of prior rank. Under the Company's Articles of Incorporation, the Company may not, without the consent of the holders of at least a majority of the total number of shares of Preferred Stock then outstanding, issue additional shares of Preferred Stock unless the gross income of the Company (an defined in the Articles of Incorporation) for 12 consecutive months out of the 15 months immediately preceding the issuance of the additional shares shall hue been at least one and one-half times the sum of t'!e annual interest charges on allinterest bearing securities of the Company and the annual dividend requirements on all outstanding shares of Preferred Stock, including the additional shares being issued.

On the basis of these requirements, the First Mortgage Bond and Preferred Stock earnings coverages would be those stated in the following tabulation:

Twelve Months Ended December 31 January 31,1979' 1974 1975 1976 1977 1978 Actual Pro Forma First Mortgage Bond Coverage . 2.62 2.45 2.24 2.39 1.94 2.19 2.02 *

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Preferred Stock Coverage . . 1.82 1.S1 1.67 1.68 1.63 1.72 1.56* *

• Excludes revenues subject to refund, see " Business-Rates"

• • As adjusted to give effect to the sale of the New Bonds at an assumed annual interest rate of 10cF; and, in the case of Preferred Stock coverage, as also adjusted to give efIcct to the sale of the 11.48?L Preferred Stock on March 1,1979.

The amounts of additional First Mortgage Bonds and Preferred Stock which may be issued in the future are contingent upon increases in carnings and the ability of the Company to obtain adequate rate relief. Unless earnings are increased (see " Business-Rates" for information with respect to the Company's pending rate applications), the amounts of additional First Mortgage Bonds and Preferred Stock which the Company can issue will be limited. As of January 31,1979, and after giving ellect to the issuance of the 11.48CF Preferred Stock in March 1979, to the issuance of the New Bonds at an assumed annual interest rate of 10%, and excluding revenues subject to refund, the Company could issue approximately $6,000,000 of additional Bonds at an assumed annual interest rate of 10?F (plus any Bonds issued for refunding purposes) or approximately $33,000,000 of additional Preferred Stock at an assumed annual dividend rate of 109. If the Company is unable to obtain the required capital funds, it will find it necessary to reduce, defer or eliminate certain construction expenditures, including expenditures for the construction of Waterford No. 3. See " Industry and Company Problems" and

" Business-Rates" Initial authorizmg resolutions have been adopted by the Police Jury (the governing body) of the Parish (county) of St. Charles, Louisiana, and memoranda of agreement have been executed by the Company with the Police Jury, looking toward the issuance and sale by the Parish at a time or times not now determinable of tax-exempt revenue bonds to finance pollution control facilities at Waterford No. 3. Determination of what facilities are pollution control facilities for purposes of tax-exempt financing is dependent upon action by the Internal Revenue Service.

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STN!DIENT OF INCO31E The following statement of income for the Gve years ended December 31,1978 has been examined by Deleitte IIaskins & Sells, independent Certified Public Accountants, whose opinion with respect thereto is included elsewhere in this Prospectus. 'ihe statement for the twelve months ended January 31,1979 has not been audited but, in the opinion of the Company, includes all adjustments (consisting of only normal recurring accruals; see Notes (a) and (f)) necessary for a fair statement of the results of operations for that period. 'lhis statement should be considered in conjunction with its notes and with the other financial statements and related notes appearing elsewhere in this Prospectus.

Twelve Months Ended December 31, January 31, 1979 1974 1975 1976 1977 1978 (Unaudited)

(In 'Ihousands)

Operating Resenues(b) $242,752 $264,844 $331,277 $378,951 $456,375 $462,956 Operating Expenses:

Operation:

Fuel for electric generation (b) 76,846 85,134 135,211 141,236 168,177 171,824 Purchased power (b) 16,028 14,095 18,260 44,047 69,730 70,412 Other 27,587 30,625 33,035 36,061 43,430 27,746(a)

Maintenance . 13,875 14,523 16,728 20,817 29,213 30,711 Depreciation , . 24,447 27,837 33,866 35,999 38,389 38,594 Amortization of property losses (c) - 2,720 2,720 2,835 4,101 4,101 Taxes other than income taxes 11,035 11,746 12,414 13,918 14,106 14,138 Income taxes (d) 13,78R 18,535 19,990 21,482 19,919 27,467 Total operating e7penses 183,606 205,215 272,224 316,395 387,065 384,993 Operating Income 59,146 59,629 59,053 62,556 69,310 77,963 Other Income:

Allowance for funds used during construction (e).

Total (prior to 1177) 11,440 14,029 12,823 - _ _

Equity funds - - -

13,047 20.823 21,591 Miscellaneous income and deductions

-net .,, . . 2,221 2,723 3,590 1,938 2,422 2,449 Income taxes (d) (1,310) 3,776 2,802 5,456 9,058 9,352 Total other income 12,351 20,528 19,215 20,441 32,303 33,392 Interest Charges:

Interest on mortgage bonds 28,303 34,434 37,664 41,267 50,007 50,931 Interest on other long-term debt - -

72 826 1,952 2,052 Other interest-net of debt premium . 2,308 2,028 1,055 2,924 6,166 6,801 Allowance for borrowed funds used during construction (e) - - -

(6,426) (10.256) (10.634)

Total interest charges-net 30,611 36,462 38,991 38,591 47,869 49,150 Net income $ 40,886 5 43,695 $ 39,277 $ 44,406 $ 53,744 $ 62,205(a)

Ratio of Earnings to Fixed Charges (as defined)(g):

Actual 2.82 2.60 2.44 2.34 2.11 2.34(a )

Pro forma .

2.04(a )

(a) In January 1979, the Company received authorization from the LPSC allowing and requiring the Company to credit or charge customers through the fuel adjustment clause in future billings for net over or under-collections of fuel costs in excess of those included in base rates. Concurrently with this change in billing for fuel costs, the Company commenced deferring on its books fuel costs to be collected through the fuel adjustment clause until such amounts are billed to customers. This deferral xas

$16,404,000 at January 31,1979, and is being recovered in subsequent months through the fuel adjust-ment clause. The eficct of this deferral, net of deferred income taxes, was to increase net income for the twelve months ended January 31,1979 by $8,461,000, 8

(b) Operating revenues include sales ;o affiliates, and operating expenses include fuel purchased from an affiliate and purchased power from alliliates, as follows:

Fuel purchased Purchased Sales to from an power from Year aHiliates affiliate affiliates (In Thousands) 1974 ...... .. ........ $38,268 $24,179 $ 11,905 1975 . ... ... .. ....... 53,823 18,960 6,767 1976 . .... ...... ...... 95,129 62,817 3,047 1977 .. .. . .. 48,412 79,917 22,009 1978 41,655 92,203 27,205 Twelve months ended January 31.1979 40,997 93,726 27,680 Included in operating revenues for 1977,1978 and the twelve months ended January 31,1979 is

$150,000, $2,730,000 and $2,355,000, respectively, of revenues subject to refund (see " Business-Rates") .

(c) Reference is made to Note 7 to Financial Statements for information relating to an extraordinary property loss.

(d) In 1978, income tax expenses were reduced by $1,730,000 for ie excess taxes prosided for the years 1967 through 1970 over the settlement amount reached wi the Internal Revenue Service.

Reference is made to Notes 1(E) and 6 to Financial Statements for information relating to income taxes and in estment tax credits.

(e) In accordance with the accounting practice with respect to the capitalizing of AFDC (a non-cash item) described in Note 1(F) to Financial Statements, the Company has used a composite accrual rate of 7.50% for the years 1974 throuch 1976,6.75% for 1977 and 1978, and 6.94% for the first month of 1979. Such accrual rates were determined on the basis of, but were less than, the cost of incremental capital employed to finance the Company's construction program and were arrived at on the assumption that over the three year period ended December 31,1976. funds required for construction were supplied 60% from debt,5% from preferred stock and 35% from common stock equity. On this basis (without giving tax c!Iect to interest on debt for periods prior to 1975 but thereafter considering the tax effect of interest on debt) the portion of the allowance attributable to funds provided by common equity, as a percentage of net incomt, ! css preferred dividends, amounted to 7% for the year 1974, 20 % for the year 1975, and 22% for the year 1976. Effective January 1,1977, in accordance with FPC Order No. 561, the Company adopted the formula, which permits compounding, for determining the rate to be used in computing AFDC, and ade,pted the accounting and reporting requirements for AFDC.

The Company has not reclassiF.ed AFDC into its debt and equity components fcr periods prior to January 1,1977 because the Company believes such reclassification would be inappiopriate since the allocation between the debt and equity components for periods prior to January 1,1977 would not be comparable to the allocation between such components determined after December 31, 1976 utilizing the revised procedures of the FPC.

(f) Unaudited operating results for the four quarters of 1977 and 1978 are as follows:

Operating Operating Revenues Income Net Income (In 'Ihousands)

Quarter Ended:

March 31,1977 .... ..... $ 78,952 $ 9,023 $ 3,903 June 30,1977 89,265 8,037 2,850 September 30, 1977 121,895 27,225 22,678 December 31,1977 88.839 18,271 14,975 March 31,1978 112,993 13,692 9,007 June 30,1978 . 88,757 4,195 639 September 30, 1978 148,957 28,368 24,432 December 31,1978 . 105,668 23,055 19,666 9

In the opinion of the Company, these operating results inclu& all adjustments (consisting of only normal recurring accruals except for a $1,730,000 reduction in income tax expense in the quarter ended Decem-ber 31,1978 for the excess taxes provided for the years 1967 through 1970 over the settlement amount reached with the Internal Revenue Service) necessary for a fair presentation of the amounts shown. The business of the Company is subject to seasonal fluctuations with the peak period occurring during the summer months. Accordingly, earnings information for any interim period should not be considered as a basis for estimating the results of operations for a full year.

(g) " Earnings" represent the aggregate of (1) net income, (2) taxes based on income, (3) invest-ment tax credit adjustments-net and (4) fixed charges. " Fixed charges" represent interest, related amortization and interest applicable to rentals (which are immaterial) charged to operating expenses.

Excluded from " fixed charges" is the interest factor related to fuel purchased from SFI, an affiliated company, the eticct of which is not significant. The pro forma ratio of earnings to fixed charges (as defined) for the twehe months ended January 31, 1979, after giving effect to the annual inter-est requirements on the New Llonds (10% rate assumed), to the full annual interest requirements on the First hfortgage llonds issued and retired in July 1978 and h1 arch 1978, respectively, end on the municipal revenue bond interest obligations assumed in 1978, to interest, at a current weighted avera;c rate of 11.6% (bank loans) and 11.2% (commercial paper), on average short-term borrowings of approximately $24,683,000 for bank loans and $29,455,000 for commercial paper outstanding during the twehe months ended January 31,1979 assumed to be reborrowed during the next twelve months, and to the elimination of revenues subject to refund ($2,880,000), would be 2.04. A change of

% of 1% in the interest rate on the New 13onds would result in a change of approximately .0017 in this ratio.

Annual interest requirements on the presently outstanding 13onds amount to $53,704,500. Annual interest requirements on the New Ilonds will amount to S For the twelve months ended February 28, 1979, operating revenues and net income amounted to $ and 5 , respectively; the ratio of earnings to fixed charges (as defined) was and the pro forma ratio of carnings to fixed charges (as defined) as referred to in Nute (g) to Statement of Income, after excluding revenues subject to refund, would be These amounts are unaudited but, in the opinion of the Company, include all adjustments (consisting of only normal recurring accruals; see Notes (a) and (f) to Statement of Income) necessary for a fair statement of the results of operations for that period.

51ANAGE31ENT'S DISCUSSION AND ANALYSIS OF TIIE STATEAIENT OF INCO31E The following factors, which may not be indicative of future operations or carnings, have had a significant effect upon the Company's results of operations during the years 1977 and 1978 and the twelve months ended January 31,1979. Each comparison is made with the comparable period for the preceding year.

Operating Revenues. The principal components of the increase in revenues were increased demand for electric utility service and recovery of increased fuel costs as shown in the following tabulation.

Twelve Months l'nded December 31' January 31, 1977 1978 1979 Amount % of Amount  % of Amount  % of

($000) Total ($000) Total ($000) Total increase (decrease) in Operating Revenues Attributable to:

Sales of energy . . . $22,050 46 % $33,339 43 % $39,825 48 %

Rate increase . . . - - 11,419 15 5,273 6 Increased fuel cost recovery

• 28,642 60 33,850 44 39,587 47 Miscellaneous (3.019) (6) _ (1,184) (2) (1.050) (1)

Total $47,673 100% $77.424 100 % $83.635 100 %

• Includes increased fuel cost recovered through fuel adjustment clauses, increased fuel cost in-cluded in new levels of base rates and fuel costs recovered through sales for resale.

10

Revenues for 1977, 1978 and the twelve months ended January 31, 1979 increased pri-marily due to increased energy sales to ultimate customers as a result of weather conditions, and the recovery of increased fuel and purchased power costs. Also, during the first quarter of 1978, the Company was called on to supply large quantities of energy to other utilities as a result of a national coal miners' strike and extremely cold weather.

Of :he total payments received from alliliates in 1977, 1978, and the twelve months ended January 31,1979 amounting to approximately $48,412,000,541,655,000, and $40,997,000, respectively (see Note (b) to Statement of locome), approximate!y $45,246,000, $40,476,000, and $39,907,000, respectively, represented payments to the Company for fuel costs and $2,849,000, $961,000, and

$877,000, respectively, represented payments to the Company for capability equalization charges.

During 1977, 1978, and the twehe months ended January 31,1979 revenues derived from payments under the System Agreement decreased due primarily to the availability from other Middle South System companies of lower cost sources of power to meet Middle South System demands.

Fuel for Electric Generation and Purchased Power. Fuel costs increased $27 million in 1978 and

$29 million for the twelve months ended January 31,1979. The increases for 1978 and the twelve months ended January 31,1979 resulted from a higher demand for electric service, higher unit prices for natural gas and oil, and increased oil-fired generation. See " Business-Fuel Supply" for percent of generation by type of fuel.

Purchased power expense increased $26 million in 1977,$26 million in 1978 and $25 million for the twelve months ended January 31, 1979. The increases for 1978 and the twelve months ended January 31, 1979 resulttd from increased demand for electric service and higher unit prices. The increase in 1977 resulted from higher unit prices and unscheduled outages at Ninemite Point Station Unit Nos. 4 and 5.

Other Operation and Mainten.mee Expenses. Increases in maintenance expense ($4.1 million in 1977, $8.4 million in 1978, and $10.1 million in the twelve months ended January 31,1979) are due to increased scheduled maintenance on generating units, which is required by greater usage of oil as a boiler fuel, unscheduled maintenance and inflationary pressures. The increase in 1977 reflects the unscheduled maintenance due to generator failure at Ninemite Point Station Unit Nos. 4 and 5.

t he increases in 1977 and 1978 in other operation expense items, such as costs of labor, materials and supplies and services, reflect principally the efIects of inflation.

The decrease in other operation expense for the twelve months ended January 31,1979 ($8.5 million) is due to the deferring in January 1979 of fuel costs ($16.4 million) until such amounts are billed to customers. See Note (a) to Statement of Income.

Amortiration of property losses. The increase in amortization expense for 1978 ($1.3 million) and for the twelve months ended January 31,1979 ($1.2 million) is due to the settlement of the cancellation charges with the contractor in excess of the amount estimated. See Note 7 to Financial Statements.

Income Taxes. Reference is made to Note 6 to Financial Statements for details of income taxes, including deferred taxes, and a reconciliation of the statutory to the effective book income tax rates.

In general, fluctuations' in current tax provisions result primarily from investment tax credits attributable to construction of generating facilities, variations in currently taxable income, and other matters disclosed in Note 6 to Financial Statements.

Allowance for Funds Used During Construction. The increase in this item in 1977,1978, and the twelve months ended January 31, 1979 is attributable to the increased amounts of CWIP. See Note (e) to Statement of Income, Note 1(F) to Financial Statements and information under "Construc-tion Program and Financing" Interest Charges. Interest on mortgage bonds and other interest charges increased primarily as a result of increases in outstanding debt and rising interest rates. The proceeds derived from such borrowings were used in conjunction with the Company's construction program, for refunding purposes.

and for other corporate purposes.

Miscellaneous-Net. Interest income was unusually high in 1976 due to interest earnings on advance payments for future oil deliveries. The absence of these advance payments in 1977 accounted for the decrease in miscellaneous-net in 1977.

11

OPERATING STATISTICS Twelve Afonths Ended December 31, _ January 31, 1974 1975 1976 1977 1978 1979 Energy Generated, Purchased and Inter-changed (Mdhons of KWii):

Generated-oct station output 17,904 18,932 21,541 20,204 21,251 21,405 Purchased . 1,594 1,153 1,077 1,901 2,799 2,814 Interchanged-net (4) 2 134 (32) (70) (34)

Total generated, purchased and interchanged . ._

19,494 20,087 22,752 22,073 23,980 24,185 Company use, distribution losses and unaccoumed for 946 930 1,201 1,121 1,268 1.281 Total energy sales .

18,548 19,157 21 551 20,952 22,712 22,904 Average Fuel Cost per KWil Generated (Cents) . . 0.43 0.45 0.63 0.70 0.79 0.80 Energy Sales (Millions of KWil):

Residential . 3,956 4,346 4,597 5,334 5,F62 5,927 Commercial 1,671 1,852 1,965 2,268 2,624 2,656 Industrial .

6,133 6,600 8,068 9,028 9.685 9.826 Governmental 275 290 297 359 394 403 Total sales to ultimate customers 12,035 13,088 14,927 16,989 18,565 18,812 Sales for resale (l) . 6,513 6,069 6,624 3,963 4.147 4,092 Total energy is 18,548 19,157 21,551 20,952 22,712 22,904 Total Operating Expenses per KWil of Energy Sales (Cents)(2) 0.99 1.07 1.26 1.51 1.70 1.68 Number of Customers (End of period):

Residential 356,479 366,242 384,213 395,479 427.938 429,173 Commercial 35,014 36,166 38,632 40,096 44,884 44.935 Industrial . 5,424 5,824 6,586 7,651 7,518 7,217 Governmental 2,362 2,434 2,569 2,704 2,978 2.982 Total ultimate customers 399,279 410,666 432,000 445,930 483,318 484,307 Sales for resale . 63 62 65 66 66 67 Total customers 399,342 410,728 432,065 445,996 483,384 484.374 Operating Revenues (In Thousands):

Residential . $ 85,791 $ 87,819 $ 93,712 $ 124,500 $ 146.326 $ 149,107 Commercial 38,092 39,789 42,505 55,398 68,328 69.876 Industrial _ 65,264 64,386 77.278 114,874 141,803 145,434 Governmental _ 4,951 4,854 5,153 7,129 8,451 8,724 Total from ultimate customers . 194,098 196,848 218,648 301,901 364,908 373,141 Sales for resale (l) 47,039 65,455 109,977 73,963 87.677 86.091 Total from energy sales . 241,137 262,303 328,625 375,864 452,585 459,232 Miscellaneous . 1,615 2.541 2,652 3,087 3.790 3.724 Total operating revenues . $242.752 $ 264.844 $331,277 $378,951 $456,375 $462,956 Average Revenue per KWII (Cents):

Residential 2.17 2.02 2.04 2.33 2.50 2.52 Commercial 2.28 2.15 2.16 2.44 2.60 2.63 Industrial (2) 1,06 0.98 0.96 1.27 1.46 1.48 Governmental . 1.80 1.67 1.74 1.99 2.15 2.17 Sales for resale (l).. 0.72 1.08 1.66 1.87 2.11 2.10 Total energy sales 1.30 1.37 1.52 1.79 1.99 2.01 (1) This item includes intra-system transactions and the Company's portion of emergency, economy, interchange (net) and other transactions with neighboring unafliliated systems. These transactions, which are made on a when available and needed basis, are subject to considerable fluctuation. This item also includes firm sales to others for resale.

Approximately 487c of the sales for resale for the twelve months ended January 31,1979 were intra-system sales. For information concerning intra-system sales and planning, see " Property-Inter-connections" (2) Total Operating Expenses per KWII represent an average for all sales to all classes of customers.

Although Average Revenues per KWH from industrial customers are lower than such average, Average Revenues per KWH sold to industrial customers are greater than the expenses per KWH sold to industrial customers.

12

BUSINESS Territory. The Company operates in 46 of the 64 parishes (counties) in Louisiana. Electric service is supplied directly in 520 communitics. The estimated population of the area in which the Company furnishes electric senice was 1,459,000 as of January 31,1979.

The Mississippi River, which flows through areas served by the Company, makes availabic ample water to industries requiring water transportation, water for cooling or water for processing. The advantages of deep . vater sites along the Mississippi River are added to the vast resources of the area as industrial attractions. The principal industries served by the Company include pctroleum refining, chemical processing, sugar processing, and the manufacturing of wood, paper and plastic products.

Electric Senice. During the twehe months ended January 31, 1979 the Company derived 32%

of its operating revenues from the sale of electric service to residential customers; 1596 from sales to commercial customers; 32cb from sales to industrial customers; and 21% from sales to governmental customers, public utilities and others. During that twelve month period, the Company derived 439L of its industrial revenues from chemical and allied product industries and 1896 of its industrial revenues from petroleum refining and related industries.

Rates. All rate schedules include adjustments for changes in the cost of fuel (which generally results in a two month lag between changes in fuel costs and billings therefor) and directly allocable taxes such as sales or excise taxes. In January 1979, the Company received authorization from the LPSC allowing and requiring the Company to credit or charge customers through the fuel adjustment clause in future billings for net over or under-collections of fuel costs in excess of those included in base rates.

Concurrently with this change in billing for fuel costs, the Company commenced deferring on its books fuel costs to be collected through the fuel adjustment clause until such amounts are billed to customers. This deferral was $16,404.000 at January 31, 1979, and is being recovered in subsequent months through the fuel adjustment clause. The efIect of this deferral, net of deferred income taxes, was to increase net income for the twehe months ended January 31,1979 by $8,461,000.

On February 4,1974 the Company filed with the FPC an application for an increase in its rates to rural electric cooperatises which would result in additional annual revenues of approximately

$4,943,000. This rate increase was put into effect September 14,1974, subject to refund with interest.

On July 21, 1977, the FPC issued its Opinion and Order the ultimate efIect of which was to allow approximately $3,953,000 of additional annual revenues based on the test year 1974. Operating revenues reflect only those amounts which were not subject to refund under the July 21,1977 order.

The cooperatives received a refund of $3,994,000 on October 25, 1978.

On July 29,1977 the Company filed with the FPC an application for an increase in the Company's rates to rural electric cooperatives, the effect of which would result in additional annual revenues of approximately $7,489,000 above the revenues which resulted from the FPC order of July 21, 1977.

The Company's application also requested an increase in the Company's rates to the four municipalities to which it serves' firm power, the efIcct of which would result in additional annual revenues of approxi-mately $1,055,000 above the revenues produced by rate schedules currently in efIect as to these munici-palities, based on a test year ending December 31,1977. The application proposed, among other things, the inclusion of all CWIP in the rate base and the concurrent cessation of capitalization of AFDC on the CWIP so included. Decision on the application is currently pending before the FERC.

On November 12, 1976, the Company filed with the LPSC a general rate increase application, asking authorization to put into efIect new retail rate schedules designed to provide additional revenues of approximately $54,000,000 annually on the basis of pro forma 1976 test year data. The application proposed, among other things, the inclusion of CWIP in the rate base and the concurrent cessation of 13

capitalization of AFDC on the CWIP so included. On November 23, 1977, the LPSC issued its order thereon allowing the Company rate increases only to industrial customers designed to produce additional revenues of approximately $4,970,000 annually on the basis of the test year and denying the proposed treatment of CWIP. On appeal by the Company to the 19th Judicial District Court for the Parish of East llaton Rouge, Louisiana, that Court, on July 24, 1978, signed a judgment setting aside the LPSC order, permitting the Company a rate increase of $13,790,000, allocated in the manner which the LPSC, acting at the direction of the Court, had theretofore found to be in order, which allocation included rate increases to industrial customers of approximately $4,970,000, and ordering the Com-pany to render an accounting as to any refund or credit due the industrial customers for amounts paid by them pursuant to the LPSC order of Nosember 23, 1977, from the implementation thereof by the Company to July 24,1978, in excess of the amount which would have been allocable to them if the increase permitted by the LPSC order had been allocated among all classes of customers in the pro-portions established by the Court's judgment. The Company appealed to the Louisiana Supreme Court that part of the judgment ordering such accounting. On Alarch 5,1979, the Louisiana Supreme Court affirmed the District Court's judgment. The Company estimates that the refund or credit due the industrial customers will approximate $2,880,000.

The rates of the Company's retail customers in the Fifteenth Ward of the City of New Orleans are regulated by the Council rather than by the LPSC. A rate increase application with regard to such cus-tomers was originally filed with the Council on December 30, 1976, seeking additional revenues of approximately $1,700,000 on the basis of the above-mentioned test year, and, in light of the July 24, 1978 judgment of the District Court in the LPSC rate case, an amendment to the application was sub-sequently filed reducing the request for increase to $508,000. The Council. under date of November 9, 1978, adopted a resolution permitting the Company to implement rates calculated to provide additional revenues of approximately $443,000, based on such test year.

On December 18,1978, the Company filed with the LPSC a general rate increase application with respect to customers under its' jurisdiction. asking authorization to put into eficct new retail rate schedules designed to provide additional revenues of approximately $114,700,000 annually on the basis of the test year ended August 31,1978. The application proposes, among other things, the inclusion of CWIP in the rate base and the concurrent cessatien of capitalization of AFDC on the CWIP so included.

dr: der Louisiana law, if no decision is rendered on the Company's' application within twelve months after the filing date, the pioposed increase may be put into efTect under bond, subject to refund with interest. The matter is pending.

On h1 arch 6,1979, the Company filed with the Council a rate increase application with respect to the rates of the Company's retail customers in the Fifteenth Ward of the City of New Orleans, asking authorization to put into effect new retail rate schedules designed to provide additional revenues of approximately $3,191,000 annually on the basis of the test year ended August 31, 1978. The matter is pending.

Fuel Supply. He Company's primary fuel is natural gas and all of the Company's generating units have the capability of burning gas as primary fuel. Of the Company's total net capability of 4.603 51W, units with an aggregate net capability of 1,584 h1W hase been built or converted to burn gas or oil or a combination of the two as primary fuel. The Company's other steam electrie units (except for a 44 h1W unit at the Sterlington Station) are equipped to burn oil as a standby fuel but cannot burn oil on a continuous basis for more than a few days at a time.

The Company's major gas supply contracts by their terms are non-interruptible except by reason of force majeure and provide for an adequate supply of gas for the Little Gypsy Steam Electric Generating Station (1,253 51W) through 1985; and for the Ninemite Point Station (1,827 51W) through 1990 and in part through 1992; and provide for part of the fuel requirements for1he Sterlington Station (471 MW) through August 10,2001 (but see footnotes to second table below under this subheading).

14

Oilis the primary fuelin use at Unit Nos. I and 2 of the Waterford Station and is used as necessary at the other major generating stations. The burning of oil causes generating units to require more maintenance and restoration work, with increased shutdown time. When oilis burned in a unit not built or converted to burn oil as primary fuel, the oil is burned in combination with gas to minimize the effect of burning oil. While there are no plans at this time for so converting other generating units, the Company is continually reviewing this matter.

The Company's average fuel cost per KWH generated by natural gas and fuel oil, and the percentage of cach used during the last live years and the twelve months ended January 31, 1979, are shown in the following table:

Natural Gas Fnel Oil Cost per Percent of Cost per Percent of Year KWil Generation KWst Generation 1974 0.31 e 92.8 % 1.93c 7.2 %

1975 0.37 94.8 1.93 5.2 1976 0.40 84.1 1.83 15.9 1977 0.38 79.9 1.96 20.1 1978 0.46 78.2 1.98 21.8 12 Months ended 1/31/79 0.47 78.l* 2.00 21.9

• 95G of this pas was supplied under the major gas supply contracts tabulated below.

For information with respect to the average fuel cost per KWH generated and purchased power costs, se: " Operating Statistics" The Company's current arrangements with its only interstate supplier, United, provide for a gas supply for approximately 10% of the Company's total maximum generating capability. Gas supplied by United under these arrangements has been subjected to various curtailment, certification and abandon-ment proceedings under the Natural Gas Act, some of which proceedings are still pending.

Deliveries by United have been curtailed in generally increasing amounts since 1970 and the Company aaticipates that such curtailments will continue to be severe. During the twelve months ended January 31,1979 such curtailments amounted to 88G of contract entitlement, and for the year 1979 such curtailments are estimated to be 90% of contract entitlement. Due to uncertainties of United's curtailment plan currently before Federal regulatory authorities and the courts, it is impossible to predict with certainty anticipated 1979 deliveries from United. The deficiencies in deliveries by United have been, and will be, compensated for by the use of fuel oil and by energy purchases from other companies.

Expiration dates of the Company's major natural gas supply contracts and entitlement thereunder are shown in the following table:

Annual Q santity 1979 1980 Contract Expiradon Date (Trillion BTU)

January 1,1986 . . .. . 66.6 "

January 1,1991 . . .. . .... ... .. 43.0 "

January 1,1993 .. ... . . 42.0 "

January 1,1993 . . . 29.2*

August 11, 2001 . ... .. .. .. 18.1 " *

• Interstate gas contract with United which has been subject to substantial curtailments (see above under this subheading).

" Each of these contracts is with a major gas supplier and is for intrastate gas. Under recently enacted Federal energy legislation, during periods of national emergency the President may direct the 15

emergency allocation of intrastate gas to others, subject to provisions for compensation. Such an allocation could adversely affe<;t the intrastate market. In the event of " extreme shortages" :n the Louisiana intrastate market anc. the declaration by the Governor of Louisiana of a state of emergency, deliveries under these contra;'s may be subject to reduction of up to 10% of the maximum daily quantities contracted to be dehe red.

"* Deliveries under this contract (or contracts) are for the Sterlington Station and entitlement is at least 49,644 hlef per day but actual deliveries have been at a declining rate and in the last six months base been aseraging only about 3,300 h1cf per day. See " Regulation and Litigation" under this heading for a lawsuit involving this contract (or contracts) in which the Company is one of the defendants. Other supply arrangements, some of them short-term, currently provide additional deliveries to the Sterlington Station averaging about 25,700 51cf per day.

The Company estimates that its requirements for oil for boiler fuel will be approximately 20% of generation for 1979. Factors which may atIcct the percentages in future years include availability of supplies of natural gas and oil, customer power demands, availability and price of purchased power, environmental protection requirements and the effect of recently enacted Federal energy legislation restricting the use of natural gas as boiler fuel.

The Company has been able to obtain and expects to obtain an adequate supply of fuel oil during 1979. Such supplies have been and will be supplied by SFl. The Company owns 33% of the common stock of SFI, which operates on a non-profit basis. SFI's costs are recovered through charges for fuel delisered. As of January 31,1979, estimates of the fuel oil requirements of the Aliddle South System through 1979 were approximately 35.4 million barrels. At January 31, 1979, total usable fuel oil insentory for the Aliddle South System was approximately 4.9 million barrels which represented approxi-mately a 1 %-month normal supply of hiiddle South System's fuel oil requirements. At January 31, 1979, approximately 21.3 million banels were under contract through 1979. SFI has been able, and expects through 1979 to be able, to meet its oil supply requirements through long-term arrangements for the purchase of oil and through purchases of oil in the spot market.

Generally, the supply of fuel for nuclear generating units insolves the mining and milling of uranium ore to produce a concentrate, the conversion of uranium concentrate to uranium hexauuoride, enrichment of that gas, fabrication of the nuclear fuel assemblics and reprocessing of the spent fuel. 'I he Company has firm arrangemen;s for segments of the nuclear fuel cycle for the continued operation of Waterford No. 3 to the extent indicated below:

Pnrchase of Year Concentrate Conversion Enrichment Fabricatbn Reprocewing' 1980 . .. .. . X X X 1981 X X X 1982 . . X X h I X 1983 .. X X Firm X 1984 . . X Contract X 1985 X with X 1986 .. . . DOE X 1987 . through X 1988 .. 2007 X 1989 .

j ( X 1990 X 1991 . X

• 'The Company has no contract for the reprocessing of spent fuel. It is the Company's understanding that no contractor in the United States is presently availabic to supply this service for the nuclear fuel 16

involved. Presently planned on site storage facilitics will be sufficient so that reprocessing services will not be needed until 1995.

The initial full load of nuclear fuel for Waterford No. 3 is to be purchased, converted, enriched and fabricated ready for use by mid-1981, and the first reload is to be ready for use in mid-1983. Additional arrangements for segments of the nuclear fuel supply assembly process beyond the dates shown above will be required. At this time the ultimate availability and cost thereof are not predictable.

In April 1978, requisite SEC approval was obtained for a program under which SFI has acquired nuclear materials and contracts relating thereto and nuclear services contracts from certain of the Aliddle South System companies. Pursuant to this program, SFI will contract for the acquisition, conversion and enrichment of those nuclear materials required for the fabrication of nuclear fuel which may be utilized for any of the present or proposed h1iddle South System nuclear units and establish an inventory of such materials during their various' stages of processing. Each hiiddle South System company having nuclear capacity will contract for the fabrication of its own nuclear fuel and purchase the required enriched uranium hexafluoride from SFI. When possible, SFI will arrange for reprocessing of spent fuel and will purchase the uranium and plutonium residuals from the appropriate System operating company, unless such company is contractually obligated to sell such residuals to a third party. To finance its acquisition of nuclear materials from afliliated companies as well as to provide funds for certain ongoing payments under acquired contrau, SFI is issuing and selling commercial paper notes backed by an insurance company bond of indemnity up to a maximum amount outstanding at any one time of $60,000,000.

SFI's parent companies, including the Company, as sole stockholders of the common stock of SFI, hae covenanted and agreed, severally, in accordance with their respective shares of ownership of SFI's common stock, that they will take any and all action necessary to keep SFIin a sound financial condi-tion and to place SFI in a position to discharge, aM to cause SFI to discharge, its obligations under this arrangement.

In 1976, SF1 entereo into a contract with a joint venture consisting of a subsidiary of Peabody Coal Company and a subsidiary of Panhandle Eastern Pipeline Company for the supply from a mine to be developed in Wyoming of an expected 150 to 210 million tons of coal over a period from 26 to 42 years. Coal so supplied is expected to be used in two future coal-fueled units to be canstructed for the hiiddle South System. The Company, AP&L, AIP&L, and NOPSI, each acting in accordance with its present share of ownership of SFI, joined in, ratified, confirmed and adopted the contract and the obligations of SFI thereunder, and Peabody joined in, ratified, confirmed and adopted the contract and the obligations of the joint venture thereunder. Under the contract, investment in the mine for leases, piant and equipment is the responsibility of the joint venture. However, in order to limit the joint venture's investment rights and, hence, the amount to be paid to it as a component of the price of coal, the contract provides that SFI invest 50% of the funds for plant and equipment in excess of $43,800,000 up to

$49,000,000 and 100% of any funds required for such purposes in excess of the latter amount. SFI also has, under the terms of the contract, the option of investing funds in certain rail facilities' at the mine and certain coal leases to be mined by the joint venture. Through January 31, 1979, SFI made such an investment of $4.8 million, which it borrowed from its parent companies. In addition to this amount, SFI anticipates its total additional investments to be approximately $15 to $20 million in current dollars over the 26 to 42 year life of the contract. Any funds supplied by SFI under these conditions will be obtained either through borrowings from its parent companies or other methods of financing. If these funds are borrowed from the parent companies, the Company's share would be

$6 million to $8 million.

To finance, in part, its fuel supply arrangements, SFI has entered into various borrowing arrange-ments with its parent companies, including the Company, as follows:

17

Company's Share of Company's hiasimum Alaximum Total Share of Total Period Term Borrowings Borrowings Amount Amount in of Loans Authorized Authorized At 1/31/79 Outstanding Effect Outstanding At 1/31/79 At 1/31/79 Outstanding At 1/31/79 Loan Agreement dated January 4,1972 1/4/72 10 years from date 12/31/73 of borrowing - - $26,500,000 $ 8,92!,250 Iman Agreement dated January 5,1974, as amended 1/5/74 - 25 years from date 12/31/77 of borrowing - 13,000,000 5,070,000 Loan Agreement dated January 4, 1978, as amended 1/4/78 - due 12/31/2004 $ 109,900,000 $44,889,000 12,000,000 4,750.000

$51,500,000 $18,745,250 In connection with certain bank borrowings by SFI, the Company and the three other companies, as sole holders of the common stock of SFI, have covenanted and agreed severally in accordance with their respective shares of ownership of SFI s common stock, that they will take any and all action necessary to keep SFlin a sound financial condition and to place SFI in a position to discharge, and to cause SFI to discharge, its obligations urder the borrowing arrangements. The total loan commitment of these banks amounted to $56,56J,000, all of which had been borrowed by SFI at January 31, 1979. Also, SFrs stockholders, including the Company, have made similar covenants and agree-ments in connection with arrangements entered into by SF1 covering the sale, for a consideration of

$20,827,104, and lease-back pursuant to a 25-year lease of certain oil storage and handling facilities.

As a result of the current national fuel shortage, a national effort to reduce the use of electricity has been launched. Primary emphasis has so far been placed on requests by Federal energy authorities that businesses and individual customers volunarily reduce their use of electric energy. These measures generally have resulted in a slower rate of increase in sales of electric energy to these customers by the Company.

Regulation and Litigation. As a subsidiary of Middle South, the Company is subjec* to regulation by the SEC pursuant to the provisions of the lloiding Company Act.

The Company is subject in certain of its activities to the provisions of the Federal Power Act, which is administered by the FERC and the DOE and provides for regulation of the business of, and facilities for, transmission of electric energy in interstate commerce and sale of electric energy at wholesale in interstate comuerce. The CERC also exercises accounting jurisdiction over the Company.

The Company is subject to the jurisdiction of the LPSC as to rates and charges, standards of service, depreciation, accounting and other matters, except in the City of New Orleans which has power of local regulation. The LPSC does not exercise jurisdiction over the issuance of securities by the Company because these matters are subject to the jurisdiction of the SEC under the lloiding Company Act.

Under the Atomic Energy Act of 1954, as amended, and the Energy Reorganization Act of 1974, broad jurisdiction is vested in the NRC over the construction and operation of nuclear reactors, par-ticularly with regard to public health and safety and antitrust matters.

The Company, as owner and prospective operator of Waterford No. 3, is subject to the jurisdiction of the NAC. The Company's application for the necessary permit and license to construct the Unit was filed witu the AEC on December 31,1970. After hearings with respect to certain interventions, and after the Company, in connection with the question whether its construction and operation of the Unit would create or maintain a situation inconsistent with the antitrust laws, and for the purpose of maintaining corapetitive conditions, had accepted licensing conditions relating principally to reserve-sharing coordina-tion, bulk power supply, access to nuclear generation and transmission service, the AEC issued a 18

construction permit for the Unit on November 14,1974. Construction of the Unit is proceeding under the permit. On September 29,1978, the Company filed with the NRC an application for the necessary operating license for the Unit. Petitions for leave to intervene in the operating license proceeding have been filed by OystershcIl Alliance, Inc. and Save Our Wetlands, Inc. and by Louisiana Consumer's League, Inc. In general, these petitions ask that the Company's application be disapproved or, if apprmed, that it be approved subject to additional safeguards. The Company has answered and in':nds to oppose these petitions. The application is pending.

On October 31,1978, a suit was filed against the Company in the Civil District Court for the Parish of Orleans, State of Louisiana (Docket No. 78-15965), by Save Our Wetlands, Inc., seeking a declaratory judgment decreeing Waterford No. 3 to be a nuisance, apparently on the basis that it will (allegedly) endanger de safety of the public, and an injunction to prevent the Company from proceeding with the construction of such Unit. On Nosember 17, 1978, the Company filed a declinatory exception directed at the insufliciency of service of process upon it. 't he matter is pending.

On September 5,1974, the Company filed suit in Civil District Court for the Parish of Orleans, State of Louisiana, against United and Pennzoil Company, alleging breach of gas supply contracts, tortious conduct, and violations of Louisiana antitrust laws, and seeking compensatory damages in the amount of $182,904,607 (of which $55,639,457 is for the increased cost for replacement fuel through June 1974), trebled to $548,713,82L On the same date the Company filed with the LPSC a petition for a declaratory order providing a method whereby that part of the damages recovered from United in such suit attributable to increased cost of fuel passed through to the Company's customers under fuel a'J justment clauses would be made available to customers who receive service under the jurisdictional authority of the LPSC, less an appropriate portion of the costs of recovery. Discovery procedures are under way and the suit is pending in the state court.

The Company has been named as one of the defendants in a class action which was filed in the United States District Court for the Southern District of Texas on or about August i1,1975 against Petrofunds, Inc. and numerous other defendants arising out of investments by plaintifIs in certain oil and gas drilling funds. The alleged involvement of the Company is based upon a long-term gas purchase contract or contracts entered into by the Company with one of the other defendants, Louisiana Gas Purchasing Corporation. The suit is based upon alleged fraudulent violations of the securities laws, common law actions of fraud, breach of con'ract and of liduciary duties, tortious conspiracy, conversion and other matters; alleges, in connection with the contract or contracts, that the Company knowingly conspired with certain defendants to implement a fraudulent scheme to deprive the plaintiffs of profits to which they were allegedly entitled; and, insofar as the Company is concerned, seeks judgment for damages against the Company and certain other defendants, jointly and severally, in the sum of $200,000,000 c,r such lesser or greater sum as may be found upon trial, or alternatively, the setting aside of the contract or contracts, together with actual damages for the "true excess" market value of gas so far purchased by the Company ("true excess" apparemly meaning the difference between market value and either what the plaintifTs received or what the Company paid), and " exemplary damages in the sum of Ten Million Dollars ($10,000.000.00) against all defendants iavolved or participating in the fraudulent or tortious conduct" (which would, under the allegations of the suit, include the Company). The Company has moved to dismiss the suit as to it for lack of jurisdiction, which motion is pending.

Following discovery on tN e en of the entitlement of the plaintitTs to have the suit certified by the Court as a class actiori, ti.f Court, on June 12. 1978, reMered an order certifying the suit, at least provisionally, as a class action and ordering that discovery on the merits be proceeded with. In the opinion of General Counsel for the Company the suit is without merit as against the Company and will be unsuccessful as against the Company if and when proceeded with to final judgment.

On November 21,1975 the Company was charged by the Equal Employment Opportunity Com-mission with discrimination in employment on the basis of race, sex and/or national origin, in violation of the Civil Richts Act of 1964. The Company has denied the charge. An investigation was commenced and the charge is pending before that Commission.

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Ensironmental Matters. The Company is subject to regulation as to air and water quality and other environmental matters by state and Federal authorities. Regulations on ensironmental matters are con:inuously subject to change, and it is impossible to know what their ultimate cost to the Company will be in the future. It is estimated, however, that the Company will make capital expenditures for environmental control facilities during 1979,1980 and 1981 in the approximate amounts of $50,800,000,

$32,500,000 and $35,900,000, respectively.

Air Guality: Under the Clean Air Act as amended through 1970, the EPA was required to establish Ambient Air Standards for certain air pollutants and to establish New Source Standards for all new facilities emitting such air pollutants. It also provided a framework for the states to establish air emission stan: lards for existing sources in order to achieve the Ambient Air Standards.

The State of Louisiana has adopted a State Plan, including regulations to meet Ambient Air Standards, as applicable, which was approved, subject to certain exceptions, by the EPA pursuant to the Clean Air Act, as amended through 1970.

De Clean Air Act Amendments of 1977 require that the states review and revise, as appropriate, certain elements of their state Plans; that the Administrator of the EPA promulgate revised New Source Standards; and that State Plans contain emission limitations and such other measures as may be necessary to prevent significant deterioration of air qua9y in accordance with maximum allowable increases in sulfur oxides and particulates. The eticct of the amendments on existing regulations cannot presently be determined. On June 19, 1978, the EPA promulgated its regulations for the prevention of significant deterioration of air quality. A group of utilities, including the Company, has pentioned for judicial review of certain portions of the regulations to the United States Court of Appeals for the District of Columbia Circuit. In addition, the Company is an intervenor in a suit pending in that Court concerning a challenge of the timing of the EPA's implementation of the prevention of significant deterioration program of the 1977 Clean Air Act Amendments. It is anticipated that additional litigation may follow the EPA's promulgation of the New Source Standards, expected shortly. It is not possible, at this time, to predict the outcome of the litigation stemming from the EPA's implememation of the 1977 Clean Air Act Amendments. It is possible that adverse decisions could necessitate the expenditure of substantial additional funds for pollution control equipment.

The Company believes that the operation of its existing plants is meeting applicabie emission regulations and ambient air quality standards and that such plants will be able to continue to do so.

Water Guality: The FWPCA discontinued the discharge permit system of the Army Corps of Engin:ers under the Refuse Act of March 3,1899 and established the NPDES. Pursuant to the FWPCA, in October 1974 the EPA promulgated efIluent limitations and guidelines for certain existing and future steam power generating plants. The Company appealed certain portions of the regulations to appropriate United States Courts' of Appeals. The appeals were consolidated in the United States Court of Appeals for the Fourth Circuit, which rendered an opinion July 16,1976 remanding a significant portion of the regulations to the EPA for further consideration. If, as a result of the EPA limitations and guidelines, the Company should be required to install closed cycle cooling systems at certain existing steam electric generating stations, substantial additional expenditures would be involved.

The Company has requisite NPDES permits for all major existing generating stations. Permits for these generating stations have also been issued by the applicable state authority.

The Clean Water Act Amendments of 1977, in concert with ongoing programs instituted under the FWPCA, have raised a variety of issues concerning toxic and hazardous wastes, which may relate to the operation of electric generating plants. The EPA's proposed resision of existing regulations regarding NPDES program administration contain significant changes in the EPA policy which could entail substantial increases in expenditures for pollution control equipment and sampling or monitoring pro-cedures. The EPA's Polychlorinated Biphenyl rules recently proposed or promulgated under the 20

authority of the Toxic Substances Control Act will require additional expenditure of funds for the marking, handling, storage, transportation and disposal of this substance. However, the full efIcct of such changes on existing regulations and resultant costs cannot be determined at this time.

The Company, in common, it understands, with many other c!cctric utilities, was not able to meet a July 1,1977 deadline for applying the "best practicable control technology currently available" to efiluent discharges from existing plants, but pollution control facilities necessary to meet these standards have now been constructed at all major generating stations and (although not yet accepted from the contractor as completed) are operational. These pollution control projects also require the Company to obtain amendments to its above-mentioned NPDES permit 3, and the Company has obtained such amend-ments for three of its four major generating stations and is preparing for filing an application for such an amendment for the fourth station. The Company's inability to meet the above-mentioned July 1,1977 deadline could subject it to claims for fines which, if imposed, might in the aggregate be substantial.

Iloweser, the Company has had no indication of any intention on the part of the EPA to seek to have any such fines imposed, and further, the Company believes that it would have meritorious defenses to claims for any such fines. The Company has commenced a study with respect to the compliance under state and Federal laws and regulations dealing with environmental matters of the generating facilities of four municipalities which the Company is now operating pursuant to three operating agreements and an emergency interim agreement, and intends to take any compliance action which it finds to be necessary.

PROPERTY Generating Stations. The Company owns four steam electric generating stations with a total net capability of 4,373,000 KW (including a 203,000 KW combined cycle unit) and a gas turbine unit with a net capability of 19,000 KW, for an aggregate net capability of 4,392,000 KW. " Net capability", as used herein, is the present dependable load carrying ability of generating stations, as demonstrated under actual operating conditions, using natural gas for fuel (except for 822,000 KW tested with fuel oil). For information with respect to reduction of generating capability resulting from the use of fuel oil, see " Property-Interconnections" In addition, the Company is operating as part of its system the generating stations of the Towns of Lake Providence and Homer, Louisiana and the City of Thibodaux, Louisiana pursuant to operating agreements, and of the City of Monroe, Louisiana pursuant to an emergency interim agreement, which generating stations have a total net capability of 211,000 KW (consisting of 166,000 KW of steam units and 45.000 KW of internal combustion units). The Company has filed with 6 C r der the Holding Company Act for authority to enter into an operating agreement with the . rue. A citizens group has filed a petition to intervene and a protest and request for hearog. 9 sta 8,1978 the same citizens group filed with the FERC a complaint directed at the C- pan;, ,equesting that an investigation be instituted and a hearing held and that the FERC order % Cerpany to sell to the City of Monroe firm base load power on terms (allegedly not offered to the City at cast equivalent to the arrangement afforded another Louisiana municipality, and further, that the FMC on ie r immedi-ate temporary service to the City on such terms. Both matters are pending.

Under the terms of the above mentioned operating agreements and emerge: y interim agreement, the Company has the right and option, but not the obligation, to maintain the generating facilities of the respective municipalities involved. The Company is presently operating and maintaining ;hese generating stations and this had no significant eficct on the Company's operations.

The FWPCA has made it necessary for the Company to consume additional electric power, estimated at approximately 1800 KW, at generating stations in order to operate pollution control equipment and, by limiting the maximum permitted temperature of once through cooling water, could cause, under certain conditions, a minor reduction in generating capacity.

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Additions and Retirements of Electrie Utility Property. From January 1,1974 to January 31, 1979, the Company made expenditures of $424,968,148 for gross additions (not including CWIP which amounted to S607,359,622 at January 31,1979) to electric utility plant. During the same pericd

$28,987,455 of utility plant was retired. The net additions during this period thus amounted to

$395,980,693, an inercase of 49.7%.

Interconnections. The electric power supply facilities of the Middle South System consist princi-pally of steam electric production facilities strategically located with reference to availa'o ility of fuel, protection of local leads, and other controlling economic factors. These are interconnected by a trans-mission system operating at voltages of up to 500 KV. With the exception of MSE's Grand Gulf Plant described below, ownership of facilities is in each instance in the System operating company, including the Company, in the area in which the facilities are located. The System Agreement provides that parties to the System Agreement who hase excess generating capacity will sell the available excess to those parties to the System Agreement who have deficiencies in generating capacity and that for this entitlement the purchasers will pay to the sellers capability equalization charge suflicient to cover the sellers' related operating expenses, fixed charges on debt and a fair rate of return on related equity investment. Generating facilities are operated with a view to realizing the greatest economy. This opera-tion seeks, among other things, the lowest cost sources of power from hour to hour. The minimum of investment and the most eflicient use of plant are sought to be achieved in part through the coordi-nated scheduling of maintenance, inspection and overhaul. Where energy is supplied with respect to which capability equalization payments have been made, the purchaser is required only to pay the cost of fuel consumed in generating such energy. For other energy generated and supplied under the System Agreement, the purchasers are required to pay the cost of fuel consumed in generating such energy plus a charge to cover other incremental costs.

The Company also has direct interconnections with facilities of the Gulf States Utilities Company, Mississippi Power Company, Southwestern Electric Power Company and Central Louisiana Electric Company, Inc. In addition there are direct interconnections between other companies of the Middle South System and Mississippi Power Company, Oklahoma Gas and Electric Company, Southwestern Electric Power Company, Empire District Electric Company, Union Electric Company, Arkansas Electric Cooperative Corporation, TVA, and Associated Electric Cooperative Inc.

The Company is a member of the Southwest Power Pool, which has 37 members. The primary purpose of the Southwest Power Poolis to ensure the reliability and adequacy of the electric bulk power supply in the Southwest Region of the United States. The Southwest Power Pool is a member of the National Electric Reliability Council.

The peak demand of the Middle South System for 1978 was 10,648,000 KW. This peak occurred on August 24,1978. At that time the net capability of the principal generating stations of the Middle South System, plus 1,199,000 KW of power available under major contracts, totaled 13,036,000 KW.

Continuing capability evaluations' by the Middle South System indicate that during the 1978 peak load season its loss of generating capability due to natural gas curtailment and the substitution of fuel oil was approximately 743,000 KW, of which the Company's share was approximately 147,000 KW. During 1978, the peak demand for the Company's service area load was 3,852.000 KW. This peak demand occurred on August 3,1978. At the time of the Company's peak demand, the Company's net capability was 4,456,000 KW, which includes 211,000 KW of municipal capability operated by the Company and takes into account the reduction of 147,000 KW in generating capability resulting from the use of oil as fuel.

Arrangements have been made under which the Company, AP&L, MP&L and NOPSI, seven neighboring utilities and the TVA exchange capacity which is available for such purpose because of diversity in the periods of peak demands. The purpose of these exchange arrangements is to effect economies for the benefit of each of the systems' involved. From 1968 through November 14, 1979, 22

the investor-owned companies are supplying 1,500,000 KW to TVA cach year during the winter ex-change period, November 15 through March 15, and TVA is supplying a like amount of power to the investor-owned companies during the summer exchange period, June I through October 1. From Novem-ber 15,1979 through November 1980, the amount exchanged will be 1,100,000 KW. Thereafter, the amount exchanged will be 700,000 KW unless terminated by one of the parties after four years' notice.

Of the total amount to be exchanged, the Middle South System's share is approximately 30% and the Company's share is approximately 11 %. Each participant in the arrangements is prosiding the neces-sary transmission lines and related facilitics in its territory at voltages up to 500 KV. The annual costs of these lines and facilities are shared among the participants in the exchange substantially in proportion to their respective benefits.

Representatises of the Middle South System regularly review load and capacity conditions in order to coordinate and recommend the location and time of installation of additional generating capacity and of interconnections in the light of the availability of power, the location of new loads, and maxanum economy to the Middle South System. The Middle South System presently is planning additional gen-erating facilities designed for a 16% reserve at the time of the Middle South System peak. The Middle South System anticipates that it will have the ability to supply its presently forecasted load, subject to its ability to install presently planned capacity, to the receipt of purchased power under various contracts, to the magnitude, duration and timing of equipment forced outar ,es, to the availability of fuel as required and to other factors.

MSE has under construction a two-unit nuclear generating plant, the Grand Gulf Plant, having an expected aggregate capability of approximately 2,500 MW, on the Mississippi River near Grand Gulf, Mississippi. The first unit is scheduled for commercial operation in 1981 and the second unit in 1984. The total cost of the Grand Gulf Plant (exclusive of nuclear fuel) is currently estimated to be approximately $2.324 billion, of which approximately $1.056 billion had been expended through January 31, 1979. Middle South has undertaken to furnish or cause to be furnished to MSE sutli-cient capital for construction and continued operation of the Grand Gulf Plant and related purposes to the extent not obtained by MSE from other sources. In addition, MSE and the System operating companies, including the Company, have entered into a series of agreements (collectively, Availability Agreement) whereby (i) MSE has agreed to complete the Grand Gulf Plant, to join in the System Agreement on or lafore the completion of the first unit of the Grand Gulf Plant and to sell to the System operating companies power available from the Grand Gulf Plant under the terms of the System Agreement, (ii) the System operating companies have agreed to pay to MSE (on the apportionment bases provided for in the Availability Agreement) such amounts as (when added to any amounts received by MSE under the System Agreement or otherwise) will be at least equal to MSE's operating expenses or an equivalent amount if either unit is not in operation (including such expenses as might be incurred by MSE for maintenance and surveillance in the event of shutdown of either or both units), including MSE's interest charges and an amount equal to an assumed depreciation rate for 27.4 years of 3.65G per annum applied to MSE's gross investment in the Grand Gulf Piant (exclusive of land and land rights), (iii) the System operating companies have agreed to make subordinated advances under certain circumstances to MSE in amounts equal to payments which would otherwise be owing under the payment formula of the Availability Agreement described in (ii) above, and (iv) the System operating companies have agreed that their obligations to make payments or advances to MSE are absolute and unconditional. The requirement to make payments under (ii) above com-mences on the date on which either unit of the Grand Gulf Plant is placed in commercial operation; provided that if Unit No.1 is not placed in commercial operation prior to December 31,1982, the commencement date is December 31, 1982; and provided, further, if Unit No.1 is placed in com-mercial operation prior to December 31,1982 then, with respect to the assumed depreciation charge related to Unit No. 2, the commencement date is the earlier of the date of commercial operation of Unit No. 2 or December 31,1986.

23

Substations. As of January 31, 1979, the Company owned and operated 307 substations with a total transformer capacity, not including spare transformers, of 17,595,000 kilovolt-amperes, of which transformers with a total capacity of 4,949,000 kilosclt-amperes were located at generating stations.

These figures do not include "line-type" transformer installations serving customers at secondary voltages ander 2,200 volts.

DESCitIPTION OF NEW BONUS General. The New Bonds are to be issued under the Company's hlortgage and Deed of Trust, dated as of April 1,1944, with The Chase National Bank of the City of New York (The Chase hianhattan Bank (National Association), successor) and Carl E. Buckley (Charles F. Ituge, successor), as Trustees, as suppicmented by twenty-six suppiemental indentures. all of which (collectively referred to as the "hfortgage") are filed as exhibits to the Registration Statement. The statements herein concerning the New Bonds and the Sfortgage are merely an outline and do not purport to be complete. They make use of terms defined in the Stortgage and are qualified in their entirety by express reference to the cited Sections and Articles.

Form and Eschanges. The New Ilonds will be registered bonds without coupons in denominations of

$1,000 or any multiple thereof. The New Bonds will be exchangeable without charge for other New Ilonds of different authorized denominations, in each case for a like aggregate principal amount, and may be transferred without charge, other than for applicable taxcs or other governmental charges in either case.

Interest and Payment. The New Ilonds will mature hlay 1, , and will bear interest at the rate shown in their title, payable November I and Niay 1. Principal and interest are payable in New York City. The Company has covenanted to pay interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest on the Bonds of all series at the rate of 6% per annum.

Redemption and Purchase of Bonds. The New Ilonds will be redeemable, in whole or in part, on 30 days' notice (a) at the special redemption prices set forth below for the current sinking or improvement fund or for the replacement fund or with certain deposited cash and proceeds of released property, and (b) at the general redemption prices set forth below for all other redemptions:

If redeemed during 12 months period ending General Special the last day Redemption Redemption of April Price (G) Price (%)

24

together,in each case, with accrued interest to the date fixed for redemption; provided, however, that none of the New Bonds shall be redeemed at the general redemption prices prior to hlay 1, , if such redemption is for the purpose or in anticipation of refundmg such bond through the use, directly or indirectly, of funds borrowed by the Company at an cifective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than % per annum. Such limitation does not, however, restrict the right of the Company to redeem a New Bond at any time at a special redemption price for the current sinking or improvement fund or for the replacement fund or with certain deposited cash and proceeds of released property.

If at the time the notice is gisen, the redemption moneys are not on deposit with the Trustee, the redemption may be made subject to their receipt before the date fixed for redemption, and such notice shall be of no effect unless such moneys are so received.

Cash deposited under any provisions of the h1ortgage (with certain exceptions) may be applied to the purchase of Bonds of any series.

( Alortgage, Art. X; Twenty-sixth Supplemental, Sec.1.)

Replacement Fund. In addition to actual expenditures for maintenance and repairs, the Company is required to expend or deposit for each year, for replacements and improvements in respect of the mortgaged electric, gas, steam and/or hot water utility property and certain automotive equipment, an amount eyeal to $800,000 plus 2% CL of net additions to the mortgaged electric, gas, steam and/or hot water utility property made after December 31, 1943 and prior to the beginning of such year. Such requirement may be met by depositing cash or certifying gross property additions or expenditures for certain automotive equipment or by taking credit for Bonds and qualified lien bonds retired. Such cash may be withdrawn against gross property additions or waiver of the right to issue Bonds. ( Mortgage, Sec. 39; I wenty-sixth Supplemental, Sec. 7.)

Sinking or Improsement Fund. The sinking or improsement fund requirement with respect to the New Bonds begins in 1981 and is stated as 1% per year of the greatest amount of the New Bonds outstanding prior to the beginning of the year, less deductions for certain New Bonds retired. The Company, however, may in effect reduce such stated requirement by amounts not exceeding $104,000 in any year or $3,000,000 in the aggregate on the basis of the principal amount of Bonds that the Company had the right to have authenticated and delivered against property additions during the period 1954 through 1977 but which right the Company waived during such period to satisfy sinking fund requirements in respect of the Company's $10.000,000 principal amount of 1978 Series Bonds. The resulting requirement with respe,t to the New Bonds may be satisfied in cash or principal amount of New Bonds or with property additions at 60% . The sinking or improvement fund requirement in respect of the New Bonds may be anticipated at any time, but if the date fixed for any resulting redemption shall be prior to the calendar year in which such sinking fund payment is due, redemption shall be at the general redemption price and subject to the limitation on such redemptions as set forth under " Redemption and Purchase of Bonds" Similar but not identical provisions are in elTect with respect to the Bonds of other series now outstanding. (Second through Eleventh, Thirteenth through Twentieth and Twenty-second through Twenty-sixth Supplementals, Sec. 2.)

Special P ovisions for Retirement of Bands. If, during any 12 months' period, mortgaged property is disposed of by order of or to any governmental authvity, resulting in the receipt of $5,000,000 or more as proceeds, the Company (subject to certain conditions) must apply such proceeds, less certain deductions, to the retirement of Bonds. (hfortgage, Sec. 64.) The New Bonds are redeemable at the special redemption prices for this purpose.

Security. The New Bonds, together with all other Bonds now or hereafter issued under the hfortgage, will be secured by the hfortgage, which constitutes, in the opinion of General Counsel for the Company, a 25

first mortgage lien on all of the present properties of the Company (except as stated below), subject to (a) leases of minor portions of the Company's property to others for uses w hich,in the opinion of such counsel, do not interfere with the Company's business,(b) leases of certain property of the Company not used in its business, and (c) excepted encumbrances. 'Ibere are excepted from the lien all cash and securities; certain equipment, materials and supplies; automobiles and other vehicles and aircraft; timber, mineral rights and royalties; receivables, contracts, leases and operating agreements.

The hlortgage contains provisions subjecting after-acquired property (subject to pre-existing liens) to the lien thereof, subject to limitations in the case of consolidation, merger or sale of substantially all of the Company's assets. (Mortgage, Sec. 87.)

The Mortgage prosides that the Trustees shall base a lien on the mortgaged property, prior to the Bonds, for the payment of their reasonable compensation and expenses and for indemnity against certain liabilities. (hlortgage, Sec. 96.)

The hfortgage contains restrictions, some of which apply only so long as certain prior series are outstanding, on the acquisition of property subc et to tiens and on the issuance of bonds under divisional or prior lien mortgages. (hlortgage, Sec. 46; Second and Third Supplementals, Secs. 4 and 5; and Fourth through Sixth Supplementals, Sec. 4.)

Issuance of Additional Bonds. The maximum principa! amount of Bonds which may be issued under the hfortgage is limited to One Hundred Billion Dollars at any time outstanding, subject to property, carnings and other limitations of the hfortgage. Bonds of any series may be issued from time to time upon the bases of: (1) 60% of property additions after adjustments to oliset retirements;(2) retirement of Bonds or qualified lien bonds; and (31 deposit of cash. Property additions generally include electric, gas, steam or hot water property acquired after December 31,1943, but may not include securities, automobiles or other vehicles or aircraft or property used principally for the production or gathering of natural gas.

With certain exceptions in the case of (2) above, the issuance of Bonds is subject to adjusted net earnings (before intciest and income taxes) for 12 consecutive months out of the 15 months immediately preceding the issuance of additional Bonds being at least twice the annual interest requirements on all Bonds at the time outstanding, including the additional Bonds being issued, and all indebtedness of prior rank. Such adjusted net earnings are computed after prosisions for retirement and depreciation of property at least equal to the replacement fund requirements for such period.

The New Bonds will be issued against property additions. The Company estimates that after the issuance of the New Bonds there will be approximately $230,000,000 remaining property additions available as of Anuary 31,1979.

The Company has reserved the right (without any consent or other action by Solders of the 1999 Series Bonds or any subsequently created series, including the New Bonds) to include nuclear fuel (and similar or analogous devices or substances) as property additions. The Company has also reserved the right to amend the Mortgage, without any consent or other action of the holders of the 2008 Series Bonds or any subsequently created series (including the New Bonds), to make available as property additions any form of space satellites (including solar power satellites), space stations and other analogous facilities.

No Bonds may be issued on the basis of property additions subject to qualified liens, if the qualified lien bonds secured thereby exceed 50% of such property additions, or if the qualified lien bonds and Bonds then outstanding which have been issued against property additions subject to continuing quali'ied liens and certain other items would in the aggregate exceed 15% of the Bonds and qualified lien bonds outstanding.

26

(Mortgage, Secs. 4 to 7 and 20 to 30; Twelfth Suppicmental, Sec.1; Thirteenth Supplemental, Sec. 5; and Twenty-fifth Supplemental, Sec. 5.)

Release and Substitution ot Property. Property may be released upon the bases of (1) deposit of cash, or to a limited extent, purchase money mortgages, (2) property additions, after adjustments in certain cases to offset retirements and after making adjustments for qualitied lice bonds outstanding against property additions, and (3) waiver of the right to issue Bonds without applying any earnings test.

Cash may be withdrawn upon the bases stated in (2) and (3) abose. When property released is not funded property, property additions used to effect the release may again, in certain cases, become available as credits under the Mortgage, and the waiver of the right to issue Bonds, to effect the release may, in certain cases, cease to be clicctise as such a waiser. Similar provisions are in efIcct as to cash proceeds of such property. 'The Mortgage contains special provisions with respect to qualified lien bonds pledged, and disposition of moneys receised on pledged prior lien bonds. (Mortgage, Sces. 5, 31, 32, 37, 46 to 50, 58 to 62 and 100.)

Dividend Cosenant. The Company covenants in substance that so long as any of the New Bonds remain outstanding, it will not pay any cash dividends on common stock except from credits to earned surplus after April 30,1979, plus $67,000,000, plus such additional amounts as shall be approsed by the SEC. (Mortgage, Sec. 39; Twenty-sixth Supplemental, Sec. 3; and Note 3 to Financial Statements.)

Modification. The rights of the Bondholders may be modified with the consent of the holders of 709 of the Bonds, and,if less than all series of Bonds are atTected, the consent also of the imiders of 70% of the Bonds of each series affected. The Company has resened the right (without any consent or other action by holders of the 2000 Series Bonds or any subsequently created series, i.,c'uding the New Bonds) to substitute for the foregoing prosision a prosision to the efIect that the rights of the Bondholders may be modified with the consent of holders of 66%G of the Bonds, and, if less than all series of Bonds are allected, the consent also of holders of 66%9 of the Bonds of each series affected. In general, no modification of the terms of payment of principal or interest, no modification of the obligations of the Company under Section 64 (until the foregoing substitution is made), and no modification afIecting the lien or reducing the percentage required for modification, is efTective against any Bondholder without his consent. (Mortgage, Art. XIX; Fourteenth Supplemental, Sec. 5.)

Relationships with Corporate Trustee. The Company and certain of its afIllbted companies maintain bank accounts with, and from time to time make short-term borrowings from, the Corporate Trustee and make short-term investments in commercial paper of an alliliate of the Corporate Trustee.

Defaults and Notice Thereof. Defaults are: default in payment of principal; default for 60 days in payment of interest or installments of funds for retirement of Bonds; certain events in bankruptcy, insolvency or reorganization; defaults with respect to qualified lien bonds; and default for 90 days after notice in other covenants. (Mortgage, Sec. 65.) The Trustees may withhold notice of default (except in payment of principal, interest or fund for retirement of Bonds) if they think it is in the intemts cf the Bondholders. (Mortgage, Sec. 66; First Supplemental, Sec.11.) No periodic evidence is required to be furnished as to the absence of default or as to compliance with the terms of the Mortgage.

The Corporate Trustee or the holders of 25G of the Bonds may declare the principal and interest due on default, but a majority may annul such declaration if such default has been cured. (Mortgage, Sec. 67.)

No holder of Bonds may enforce the lien of the Mortgage without giving the Trustees written notice of a default and unless the holders of 25% of the Bonds have requested the Trustees in writing to act and ofTered them reasonable opportunity to act and indemnity satisfactory to the Trustees against the costs, expenses and liabilities to b : incurred thereby and the Trustees shall have failed to act. (Mortgage, Sec.

80.) IIolders of a majority of the Bonds may direct the time, method and place of conducting any proceedings for any remedy available to the Trustees, or exercising any trust or power conferred upon the Trustees. (Mortgage, Sec. 71; First Supplemental, Sec.12.)

27

EXPLRTS AND LEGALITY The balance sheet as of December 31,1978 and the related statements of income, retained earnings and source of funds for utility plant additions for each of the fise years in the period then ended included in this Prospectus have been examined by Deloitte liaskins & Sells, independent Certified Public Accountants, as stated in their opinion appearing herein and hase been so included in reliance upon such opinion given upon their authority as experts in accounting and auditing.

'lhe statements made as to matters of law and legal conclusions under " Description of New Bonds" have been reviewed by Stessrs. h!omoe & Lemann, General Ccunsel for the Company, and, except as to " Security" under " Description of New Bonds", by Alessrs. Reid & Priest, and are set forth herein in reliance upon the opinions of said firms, respectively, and upon their authority as experts. The statements as to matters of law and legal conclusions made under " Business-Regulation and Litigation" and " Business-Environmental hiatters" have been resiewed by hiessrs. hionroe & Lemann and are set forth herein in reliance upon the opinion of said firm and upon their authority as experts. At January 31,1979 attorneys with hiessrs. hionro.. & Lemann participating or who may participate in the work on this financing held 1,267 shares of the Common Stock of the Company's parent, hiiddle South.

The legality of the New Bonds will be passed upon for the Company by hiessrs. hienroe & Lemann, General Counsel for the Company, Whitney Building, New Orleans, Louisiana, and hiessrs. Reid &

Priest, 40 Wall Street, New York, New York, and for the Purchasers by hiessrs. Winthrop, Stimson, Putnam & Roberts, 40 Wall Street, New York, New York. Ilowever, all legal matters pertaining to the organization of the Company and all matters of Louisiana law will be passed upon only by hiessrs.

hionroe & Lemann.

28

OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Louisiana Power & Light Company:

We have examined the balance sheet of Louisiana Power & Light Company as of December 31,1978 and the related statements of income, retained earnings and source of funds for utility plant additions for each of the five years in the period then ended. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, such financial statements present fairly the financial position of the Company at December 31,1978 and the results of its operations and source of funds for utility plant additions for cach of the five years in the period then ended, in conformity with generally accepted accounting principles applied on a consistent basis.

DELOITTE HASKINS & SELLS New Orleans, Louisiana February 16,1979 29

LOUISIANA POWER & LIGIIT COMPANY BALANCE SIIEET ASSETS January 31 December 31, 1979 1978 (Unaudited)

(In1housands)

Utility Plant (Note IC):

Electric plant . .... ..... ... .. ... ......... $1,193,456 $ 1,193,446 Construction work in progress . . .... ... ............. .... 599,496 607,360 Total 1,792,952 1,800,806 Less accumulated depreciation . . ... ............. 317,583 321,202 Utility plant-net . . . .. ... .. .. ........ 1,475,369 1,479,604 Other Property and Investments:

Investment in associated company-at equity (Note 4) . . . . . 20,802 18,752 Other . . . ... . . ..... .. .... . 358 360 Total . . .... ........................ . 21,160 19,112 Current Assets:

Cash (Note 5) . .. ... . .............. ... ..... . 13,559 11,326 Special deposits .. .. ... .......... .. .. .... 10,015 4,968 Notes receivable . ................................... 698 772 Accounts receivable:

Customer and other (less allowance for doubtful accounts of

$135,000) . .. . ..... ... ...... ............ 17,651 17,283 Associated companies . . . . ... .............. ...... 64 37 Deferred fuel costs (Note IB) - 16,404 Materials and supplies-at average cost . .. ........... 8,043 6,619 Prepayments and other . . . . . . .. . ....... 4,143 11,106 Total 54,173 68,515 Deferred Debits:

Unamortized debt expense ..... .. ............ .. ..... 2,354 2.342 Extraordinary property losses (Note 7) . . ...... .... .. ... 4,101 3,759 Other . . . . . .. ...................................... -

167 Total 6,455 6,268 Total $ 1,557,157 $ 1,573,499 See Notes to Financial Statements.

30

LOUISIANA POWER & LIGIIT CO3fPANY BALANCE SIIEET LI ABILITIES January 31, December 31, 1979 1978 (Unaudited)

(In Thousands)

Capitalization:

Proprietary capital:

Preferred stock and premium (Note 2) . ............. $ 110,809 $ 110,809 Common stock, no par value; authorized, 100,000,000 shares; issued and outstanding, 53,776,000 shares at December 31, 1978 and January 31,1979 (Note 2) 353,900 353,900 Retained earnings (Note 3) . 63,292 71,927 Total proprietary capital . 528,001 536,636 Long-term debt and premium (Note 3) . . . . . . . . . . . . . . . . . . . . . 728,748 728,738 Total .................................... 1,256,749 1,265,374 Current Liabihbes:

Currently maturing long-term debt . . . . ...... ........... 1,783 1,783 Notes payable (Note 5):

Banks .... ... ................................ 59,675 59,675 Commercial paper . . ..... ....... ............... 24,415 43,800 Acce'mts payable:

Associated companies . ... ........ . . ........ 7,757 8,365 Other . . . . . . ......................... ........... 43,268 24,306 Customer deposits . . . ...... . ...................... I1,837 11,855 Taxes accrued (Note 6) 1,485 1,860 Accumulated deferred income taxes (Notes IE and 6) -

7,943 Interest accrued . . . . . . . ....................... ....... 17,727 15,282 Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,027 2,027 Other . ..

. .......................................... 545 581 Total . ........ ......................... 170,519 177,477 Deferred Credits:

Accumulated deferred income taxes (Notes IE and 6) .. ...... 90,032 87,021 Accu nulated deferred investment tax credits (Notes IE and 6) 29,400 29,392 Other ........ . .... ....... ................... 5,602 5,879 Total................................... 125,034 122,292 Reserves (Note IG):

Property insurance . . . . .... ....... ................. 3,661 7,144 Injuries and damages . . . . .... .. ... ................ . 1,194 1,212 Total .... ............................. . 4,855 8,356 Commitments and Contingencies (Notes 4 and 9)

Total .. .. . .. . .. $ 1,557,157 $1,573,499 See Notes to Financial Statements.

31

LOUISIANA POWER & LIGIIT COMPANY STATE 31ENT OF RETAINED EARNINGS Twelve 51onths Ended Jan 31, December 31 1974 1975 1976 1977 1978 (L'naudited)

(la Thousands)

Halance at beginning of period , $55,458 $ 67,356 $ 68,601 $ 58,825 5 59,863 $ 60,037 Add-net income 40,886 43,695 39,277 44,406 53,744 62,205 Total . 96,344 111,051 107,878 103,231 113,607 122,242 Deduct:

Dividends-Cash:

Preferred stock at prescribed rates (Note 2) 5,162 5,276 5,276 5,976 8,108 8,108 Common stock (per share:

1974, $0.84; 1975, $0.8475; 1976 and 1977, $0.85; 1978 and the twelve menths ended January 31, 1979,

$0.86) . 23,787 28,195 33,617 37,273 42,194 42,194 Special common dividend * - 6,797 - - - -

Transfer to common stock ac-count .

- 2,145 10,140 - - -

Capital stock expense, etc. 39 37 20 119 13 13 Total 28,988 42,450 49,053 43,368 50,315 50,315 Halance at end of period (Note 3) $67,356 $ 68,601 $ 58,825 5 59,863 $ 63,292 5 71,927

• Special dividend to the parent company which was concurrentl3 reinvested in the Company's common stock.

See Notes to Financial Statements.

32

LOUISIANA POWER & LIGIIT COMPANY STATEMENT OF SOURCE OF FUNDS FOR U11LITY PLANT ADDITIONS Twelve Months Ended December 31, Jam 31, g g 1974 1975 1976 1977 1978 (Unaudited)

Source of Funds: (In Thousands)

From operations:

Net income $ 40,886 $ 43,695 5 39,277 $ 44,406 $ 53,744 5 62,205 Depreciation < .. . .... . 24,447 27,837 33,866 35,999 38,389 38,594 Amortization of property losses (Note 7) - 2,720 2,720 2,835 4,101 4,101 Deferred income taxes and invest-ment tax credit adjustments--net 7,081 22,657 13,005 8,618 4,915 4,980 Allowance for funds used during construction (11,440) (14.029) (12,823) (19,473) (31,079) (32,225)

Total from operations 60,974 82,880 76,045 72,385 70.070 77,655 Dividends declared:

Preferred stock (5,162) (5,276) (5,276) (5,976) (8,108) (8,108)

Common stock (23.787) (34,992)* (33,617) (37,273) (42,194) (42,194)

Funds retained in business 32,025 42,612 37,152 29,136 19,768 27,353 From (increases) decreases in working capital (excluding short-term securities and currently maturing long-term debt) . 10.670 (4,072) 10,964 5,586 3,187 (25,130) "

From reimbursement of advances for fuel oil purchases - - 23,492 - - _

Less funds used for:

Advances for fuel oil purchases (2,806) (8,057) (12,629) - - -

Investments in associated company (8,704) 784 510 (6.240) 1,780 1,880 Extraordinary property losses (Note

7) - (l3,600) -

(2,877) - -

Other-net .. 2,938 11,239 1,609 2,133 2,366 2,925 Total 34,123 28,906 61,098 27,738 27,101 7,028 From financing transactions:

Common stock -

56,797' 25,000 30 000 50,000 50,000 Preferred stock 10,016 - -

30,033 - -

First mortgage bonds:

Issues . 95,000 50,000 40,000 - 135,000 60,000 Retirements . (15,297) - - - (10,000) (10,000)

Other long-term debt-net - - 16,837 978 29,017 29,023 Sale and leaseback of nuclear fuct . - - - - 8,210 8,210 Sale of nuclear fuel - - - - 4,834 4,834 Short-term securities-net 14.012 (40,685) (15,760) 90.627 23,923 104,350 Total 103,731 66.112 66,077 151,638 240,984 246,417 TOTAL $137,854 5 95,018 $ 127,175 $ 179,376 $268,085 $253,445 Utility Plant Additions (exclusive of allow-ance for funds used during construction):

Construction expenditures $133,869 $ 93,750 $ 109,726 $172,340 $242,269 $227,727 Nuclear fuel expenditures . 3,985 1,268 574 7,036 131 33 Other plant additions . - -

16.875 - 25,685 25,685 TOTAL $ 137,854 $ 95,018 $_127,175 $179,376 $268,085 $253,445

• In the year 1975, a special dividend of $6,797,000 was paid to the parent company which was concurrently reinvested in the Company's common stock.

" The increase in working capital for the twelve months ended January 31,1979 is primarily due to an increase in deferred fuel costs and a decrease in taxes accrued.

See Notes to Financial Statements.

33

LOUISIANA POWER & LIGHT CO31PANY NOTES TO FINANCIAL STATEMENTS For the Five Years Ended December 31,1978 and (Unaudited) the Twelve Months Ended January 31,1979

1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES A. System of Accounts The accounts of the Company are maintained in accordance with the system of accounts prescribed by the LPSC, which substantially conforms to that of the FERC.

B. Revenues The Company records revenues as billed to its customers on a cycle billing basis. Revenue is not accrued for energy delivered but not billed at the end of the fiscal period. The rates of the Company include fuel adjustment clauses under which fuel costs above or below the levels allowed in the various rate schedules are permitted to be billed or required to be credited to customers. As described in Note (a) to Statement of Income, etIcctive in January 1979 the Company commenced deferring on its books fuel costs to be collected through the fuel adjustment clause until such amounts are billed to customers.

C. Utility Plant and Depreciation Utility plant is stated at original cost. The costs of additions to utility plant include contracted work, direct labor and materials, allocable overheads, and AFDC. The costs of units of property retired are removed from utility plant and such costs plus removal costs, less salvage, are charged to accumulated depreciation. Maintenance and repairs of property and the replacement of items determined to be less than units of property are charged to operating expenses. Substantially all of the utility plant is subject to the lien of the Company's Mortgage.

Depreciation is computed on the straight-line basis at rates based on the estimated service lives of the various classes of property. Depreciation provided amounted to approximately 3.2% on average depreciable property in each of the years 1974 and 1975, 3.4% for the years 1976 and 1977 and 3.5%

for the year 1978 and the twelve months ended January 31,1979.

D. Pension Plan The Company's pension plan is non-contributory and covers substantially all employees. Pension costs amounted to approximately $2,339,000 in 1974, $3,494,000 in 1975, $3.331,000 in 1976,

$3,237,000 in 1977, $3,639,000 in 1978 and $3,698,000 in the twelve months ended January 31, 1979, including amortization of unfunded prior service costs over remaining periods up to 28 years.

The Company's policy is to fund pension cost accrued. As of December 31, 1977, the latest actuarial report, the unfunded prior service cost approximated $21,583,000.

E. Income Taxes The Company joins its parent in filing a consolidated Federal income tax return. Income taxes are allocated to all subsidiaries in proportion to their contribution to the consolidated tax liability.

Deferred income taxes are provided for differences between book and taxable income to the extent permitted by the regulatory bodies for rate-making purposes.

Investment tax credits utilized are deferred and amortized over the average usefullife of the related plant.

F. Allowance for Funds Used During Construction In accordance with the regulatory system of accounts, the Company capitalizes AFDC as an appropriate cost of utility plant. This allowance (a non-cash item) represents the net costs of funds used to finance construction. Prior to January 1,1977 the corresponding credit ws.s to non-operating income. Effective January 1,1977 the Company adopted FPC Order No. 561 (see Note (e) to 34

LOUISIANA POWER & LIGIIT COMPANY NOTES TO FINANCIAL SUTEMENIS -(Continued)

Statement of Income) as to rate determination and reporting -aq. :rements which provide for separation of the equity component and borrowed funds component of funus used during construction.

G. Reserves It is the policy of the Company to provide reserves for uninsured property risks and for claims for injuries and damages through charges to operating expense on an accrual basis. Accruals for these reserves have been allowed for rate-making purposes.

Effective January 1,1979, the Company commenced recording deferred income taxes on its prop-erty insurance reserve.

2. PREFERRED AND CON! MON STOCK Preferred stock at Deecmber 31. 1978 and January 31, 1979 consists of cumulativc, $100 par value stock as follows:

Current Call Shares Shares Price Far Authorized Outstanding Share -

Preferred Stock:

4.96 % . 60,000 60,000 $104.25 4.I6% . 70,000 70,000 104.21 4.44 % . 70,000 70,000 104.06 5.I6% . .. . 75,000 75,000 104.I8 5.40 % . .... 80,000 80,000 103.00 6.44 % . . 80,000 80,000 102.92 9.52 % 70,000 70,000 108.96 7.84 % . . . 100,000 100,000 107.70 7.36 % . . 100,000 100,000 107.04 8.56 % . 100,000 100,000 109.56 9.44 % 300,000 300,000 111.44 Unissued . . .. 950,000 -

Total 2,055,000 1,105,000 Stated at $100 a share . . . . $110,500,000 Premium on Preferred Stock 309,124 TotaI $ 110,809,124 The 8.56% and 9.44% preferred stock issues contain provisions restricting the redemption of any of the shares thereof prior to March 1,1979 and November 1,1982, respectively, with funds effectively costing the Company less than 8.5461% and 9.42979 per annum, respectively.

The increases in the number of shares of common and preferred stock outstanding and premium on preferred stock during the five years ended December 31,1978 and the one month ended January 31, 1979 were as follows: One Month Twelve Months Ended December 31. Ended

,lanuary 31, 1974 1975 1976 1977 1978 1979 Common stock shares sold - 9,282,500 3,900,000 4,700,000 7,576,000 -

Preferred stock shares sold 100,000 - -

300,000 - -

Premium on preferred stock , $16,000 - - 533,000 - -

On March 1,1979. the Company issued and sold 350,000 shares of 11.48% Preferred Stock.

In addition. the Company has requested authorization from the SEC under the IIolding Company Act to sell from time to time during 1979, in increments to be determined by the Company and Middle South, i1.364,000 shares of Common Stock. no par value, to Middle South for $75,000,000 in the aggregate.

35

LOUISIANA POWER & LIGIIT COMPANY NOTES TO FINANCIAL STATE 31EN'IS-(Continued)

3. LONG-TERM DEBT Long-term debt at December 31,1978 and January 31,1979 consisted of the following:

December 31, January 31, 1978 1979 (In Thousands)

First Mortgage Bonds:

3% Series due 1980 . . $ 9,900 $ 9,900 9%% Series due 1981 . 50,000 50,000 9%% Series due 1983 . 50,000 50,000 3%% Series due 1984 . I8,000 18,000 9% Series due 1986 . 75,000 75,000 4% % Series due 1987 20,000 20,000 5% Series due 1990 20,000 20,000 4%% Series due 1994 25,000 25,000 5% % Series due 1996 . .. .. 35,000 35,000 5%% Series due 1997 . . .. 16,000 16,000 6% s Series due September 1,1997 18,000 18,000 7%% Series due 1998 35,000 35,000 9%% Series due 1999 25,000 25,000 9%% Series due 2000 20,000 20,000 7%% Seiies due 2001 . 25,000 25,000 7% % Series due 2002 . .. 25,000 25,000 7% % Series due November 1,2002 .. 25,000 25,000 8% Series due 2003 . . 45,000 45,000 8% % Series due 2004 45,000 45,000 8% % Series due 2006 40,000 40,000 10% Series due 2008 . . 60,000 60,000 Tota' First Mortgage Bonds . 681,900 681,900 Other:

Principal amount of municipal revenue bond obliga-tions,1 % %-8% due serially, 1980-2004 and other future obligations under operating agreements 39,681 39,681 Pollution control and industrial revenue bond obliga-tions, 6.40%, due 1988-2007 .. 7,000 7,000 Less: Amounts held by trustees .. . .. (1,632) (1,632)

Total Other . 45,049 45,049 Unamortized premium on long-term debt 1,799 1,789 Total Long-Term Debt .. 5728.748 $728,738 36

LOUISIANA POWER & LIGIIT COMPANY NOTES TO FINANCIAL STATE 31ENIL-(Continued)

Sinking fund and maturity requirements for the years 1979 through 1984 under long-term debt instruments in effect at December 31,1978 and January 31,1979 are as follows:

Sinking Year Fund

• Maturity" (In Thousands) 1979 . . . $6,220 $ 1,783 1980 ... . . 6,820 11,771 1981 .. ... .. . 6,820 51,934 1982 . ... . ...... .. 6,820 2,021 1983 ... . .. ..... . 6.820 52,094 1984 6,820 20,197

• Sinking fund requirements may be satisfied by certification of property additions at a rate of 167% of such requirements.

• • It is anticipated that First Mortgage Bond maturities will be refinanced at maturity.

The Mortgage, which is presently more restrictive than the Articles of Incorporation, contains pro-visions restricting the payment of dividends or other distributions to common stockholders based gen-erally on an initial restriction in the amount of retained earnings at various dates, less certain deductions as provided in the Mortgage, and a restriction based on a comparison of the Company's provisions for depreciation and retirement of property with the related replacement fund requirements.

At December 31,1978 and January 31,1979. $49,170,000 and $57,805,000, respectively, of the retained earnings was free under the Mortgage provisions which were then the most restrictive.

4. COMMITMENTS AND CONTINGENCIES Reference is made to " Construction Program and Financing" for information concerning the Company's construction program and restrictions with respect to the issuance of First Mortgage Bonds and Preferred Stock.

Reference is also made to " Business-Fuel Supply" for information concerning the Company's commitments and obligations relating to SFI and to " Business-Regulation and Litigation" for infor-mation concerning certain litigation involving the Company.

5. SHORT-TERM BORROWINGS The Company has arrangements with certain banks and a commercial paper dealer under which the Company may effect short-term borrowings of up to $120,000,000 outstanding at any one time.

Accounts are maintained with the Louisiana lending banks and, although immaterial balances in some of these accounts may be deemed to be compensating balances, most of these accounts are working accounts and fluctuations in their balances do not reflect or depend upon fluctuations in the amounts of bank loans outstanding. Each of the non-Louisiana lending banks requires a compensating balance with respect to the amount of its loan commitment and/or with respect to the amount of its loans to the Company outstanding, but in no case does any compensating balance or the total of such compensating balances so required exceed 20G. The amount of unused short-term borrowings as of December 31, 1978 an 1 January 31,1979 was $35,910,000 and $16.525,000, respectively.

37

LOUISIANA POWER & LIGIIT COMPANY NOTES TO FINANCIAL STATEMENTS-(Continued)

The bank and commercial paper notes are unsecured short-term loans with various maturit" dates not in excess of twelve and nine months, respectively. The interest rates on bank loans are the prime commercial rates in effect from time to time. The average interest rates on the bank notes and com-mercial paper notes outstanding at December 31.1978 were 11.8% and 11.5%, respectively, and at January 31,1979 were 11.6% and i1.2%, respectively. During the twelve month period ended January 31, 1979, the maximum aggregate amount of short-term borrowings outstanding at the end of any month was $103,475,000, consisting of $59,675,000 bank loans and $43,800,000 com-mercial paper. The average amount of short-term borrowings outstanding during the period (based on the average of the sum of daily outstanding principal balances) approximated $54,138,000, consisting of $24,683,000 bank loans and $29,455,000 commercial paper. The approximate average interest rate (determined by dividing actualinterest expense on short-term borrowings during the period by aserage short-tecm borrowings outstanding) was 9.5% for bank loans and 9.2% for commercial paper. During 1978 the maximum aggregate amount of short-term borrowings outstanding at the end of any month was

$84,090,000, consisting of $59,675,000 bank loans and $24.415,000 commercial paper. The average amount of short-term borrowings outstanding during 1978 (based on the average of the sum of daily outstanding principal balances) approximated $22,340,000 of bank loans and $28,476,000 of commercial paper. The approximate average interest rate (determined by dividing the actual interest expense on short-term borrowings during the year by the average short-term borrowings) was 8.8% for both bank loans and commercial paper.

6. INCOME tax EXPENSE Income tax expense is made up of the following components:

Twelve Months Ended December 31 January 31, 1974 1975 1976 1977 1978 1979 (In Thousands)

Charged (credited) to operating ex-penses:

Federal income taxes . .... S 5,952 $(4,746) $ 5,913 $10,217 $ 13,426 $13,024 State income taxes ........ 755 624 1,072 2,647 1,578 1,520 Deferred Federal income taxes-net .. .......... .... 5,373 14,178 6,294 5,335 5,506 12,665 Deferred state income taxes-net 230 657 300 688 614 1,351 Investment tax credit adjustments

-net , ..... ... ... 1,478 7,822 6,411 2,595 (1,205 ) (1,093)

To tal . . . . . . . . . . . . . . . . . 13,788 18,535 19,990 21,482 19,919 27,467 Charged (credited) to other income and deductions:

Federal income taxes . . ... 1,243 (3,613) (2,681) (4,986) (8,277) (8,540)

State income taxes . . . . . ..... 67 (163) (121) (470) (731) (812)

Total . ..... .... .... 1,310 (3,776) (2,802) (5,456) (9,058) (9,352)

Total income tax expense .........

$15,098 $14,759 $17,188 $ 16,026 510,861 $ 18,1 ]}

38

LOUISIANA POWER & LIGIIT COMPANY NOTES TO FINANCIAL STATE 31ENTS-(Continued)

Deferred income tax provisions have been made as follows:

Twelve 51onths Ended December 31 January 31, 1974 1975 1976 1977 1978 1979 (in Thousands)

Excess of liberalized tax depreciation and amortization over straight-line tax deprecia-tion and amortization ..... .. . $6,053 $ 8,400 $8,262 $6,517 58,494 S 8.471 Fuel costs deferred per books but deducted for tax purposes - - - - -

7,943 Net costs of test energy which for book pur-poses are capitalized as part of the cost of utility plant .. . . .. ...... -

1,819 (70) (70) (70) (70)

Deduction for tax purposes of the costs associ-ated with the cancellation of plans to con-struct two nuclear-fueled units which for book purposes are amortized over five years commencing in 1975 .. ...... - 5,169 (1,292) 96 (1,986) (1,986)

Unbilled revenues taxed but not recorded per books.. .. .. .. ............ . (450) (553) (306) (520) (318) (318)

Net provisions to the property insurance reserve - - - - -

(24)

Total . . . . . . .. ........ . $5,603 $14,835 $6,594 $6,023 $6.120 $14,016 The Company's effective income tax rates were less than the Federal income tax statutory rates for each period. The reasons for these ditIerences follow:

Twelve Alonths Ended December 31, January 31, 1974 1975 1976 1977 1978 1979 Federal income tax statutory rates 48.0 % 48.0 % 48.0 % 48.0 % 48.0 % 47.7 %

Increase (decrease) in income tax rates resulting from:

Exclusion from taxable income of allowance for funds used during construction for which no deferred taxes are provided (9.8) (11.5) (10.9) (15.5) (23.1 ) ( 19.2)

Estimated tax reduction attributable to the filing of a consolidated return (5.9) (2.1) ' 3.7) (2.1) ( l .5 ) (1.2)

Taxes charged to construction (1.6) (1.3) (2.2) (2.5 ) (2.8 ) (2.4 )

State income tax, net of Federal in-come tax benefit 1.0 1.1 1.2 2.4 1.1 1.3 Other miscellaneous items, none of which is individually greater than 5% of computed tax expense (4.7) (9.0) (2.0) (3.8) ( 4.9 ) ( 3.6)

Eficctive income tax rates 27.0 % 25.2 % 30.4 % 26.5 % 16.8 % 22.6 %

Etiective January 1,1979 the Federal corporate statutory income tax rate was decreased from 48% to 46%. The composite rate of 47.7% was derived by applying the 48% rate to income for the elesen months ended December 31,1978, and the 46% rate to income for the month of January,1979.

Unused investment tax credits aggregated approximately $36,555.000 at December 31,1978 and January 31, 1979 of which $12,187,000 may be carried forward through 1984 and $24,368,000 through 1985. Certain reclassifications of previously reported amounts have been made to reflect current classifications.

39

LOUISIANA POWER & LIGIIT CO31PANY NOTES TO FINANCIAL STATE 31ENTS-(Continued)

The Federal income tax returns for the years 1971 through 1974 have 1 cen examined and assess-ments, which have been protested, have been proposed by the Internal Revenue Service. The years subsequent to 1974 are subject to examination. Management is of the opinion that adequate provisions have been mad . for any taxes that may ultimately be assessed.

7. EXTRAORDINARY PROPERTY Loss In June 1975 the Company cancelled plans for construction of two nuclear-fueled generating units.

Unrecovered expenditures on this project totalled $12,100,000. A loss of $13,600,000 including estimated cancellation charges of $1,500,000 was recorded in 1975. The Company has received regulatory authorization to amortize this abandonment loss as a charge to income over five years. In November 1977 the cancellation charges were settled with the contractor in the amount of $4,354,800.

The excess over the estimated cancellation charges is being amortized over the remainder of the five year amortization period. The amortization in each of the years 1975 and 1976 of $2,720,000, in 1977 of $2,835,000, and in 1978 and the twelve months ended January 31,1979 of $4.101,000 reduced net income by $1,428,000 in 1975 and 1976, $1,485,000 in 1977, and $2,115,000 in 1978 and the twelve months ended January 31,1979.

8. SUPPLEMENTARY INCOME STATEMENT INFORMATION Twelve Stonths Ended Decernber 31, January 31, 1974 1975 1976 1977 1978 1979 (In Thousands)

Depreciation, other than that set out separately in the Statement of In-come, charged to transportation expenses-clearing account . . . . . $ 940 $ 963 $ 1,048 $ 1,096 S 1,688 $ 1,737 Taxes, other than income taxes:

Ad valorem . ..... . . . . $ 8,304 $ 8,692 $ 9,063 $ 9,971 $ 9,123 $ 9,079 All other taxes . ... .... 4,421 4,473 5,210 6,757 8,791 8,860 Total . . . ... 12,725 13,165 14,273 16,728 17,914 17,939 Amounts included above charged prin-cipally to construction and other nonoperating accounts . . ... (1,690) (1,419) (1,859) (2,810) (3,808) (3,801)

Total charged to operations $11,035 $11,746 $12,414 $13,918 $ 14,106 $14,138 Technical services, consultation and assistance rendered at cost under contract with MSS (an alTiliated company) $ 3,417 $ 3,778 $ 3,515 $ 3,846 5 4,825 5 4,914 Other than amounts set out separately in the Statement of Income, the amounts for maintenance and repairs, royalties and advertisirig costs were not significant.

9. LEASES On June 1,1978, the Company sold its interest in the supply of nuclear fuel for $8,210,000, representing cost, and simultaneously entered into a $60,000,000 nuclear fuel lease. Lease payments, based upon nuclear fuel used, will be treated as cost of fuel. The lease unless sooner terminated by one of the parties will continue through June 1. 2028. The unrecovered cost base of the lease at December 31,1978 and January 31,1979 was $11,700,000 and $11.800,000, respectively. Other lease comniit-ments are not significant.

40

LOUISIANA POWER & LIGIIT COMPANY NOTES TO FINANCIAL STATEMENTS-(Concluded)

10. REPLACEMENT COST DATA (Unaudited)

The following replacement cost information for the Company is presented to comply with the reporting acquirements of the SEC as set forth in their Accounting Series Release No.190.

The Company estimates that the replacement cost of its productive capacity (excluding land, land rights and other intangible property) as of December 3i,1978 would be approximately $2,500,000,000.

The corresponding accumulated replacement cost depreciation would be approximately $733,000,000.

Depreciation expense computed on the average estimated replacement cost for the years 1977 and 1978 would be approximately $77,000,000 and $84,000,000, respectively.

Accumulated replacement cost depreciation was determined by applying the same percentage relationship that existed between gross utility plant in service and accumulated reserve for depreciation by functional group on a historical cost basis at year-end to the current replacement cost of the productive capacity. The annual depreciation expense on a replacement cost basis was determined by multiplying the rate currently in use for cach functional grouping by the average replacement cost of each functional grouping.

It was assumed that plant would be replaced in kind with allowances for technological changes and environmental requirements. Replacement cost figures were developed by applying appropriate cost indices to the various categories of utility plant. Approximately $660,000,000 of original cost of the Company's gross utility plant is, by definition, excluded from replacement cost calculations because it does not fit the definition of " productive capacity" (for example, CWIP) or because it was non-depreciable land or for other reasons. Since the leases of the Company do not in the aggregate meet the SEC's tests that would require separate non-capitalized financing lease disclosure, replacement cost on the leased facilities has not been included in the calculation of replacement cost.

Because the rate schedules of the Company include adjustment clauses under which the cost of fuel above or below the base levels included in the various rate schedules are permitted to be billed or required to be credited to customers, a calculation was not made to determine the replacement cost of the inventory of fuel oil or the cost of sale at replacement cost. Inventories other than fuel oil are immaterial in comparison to the other assets, therefore they have not been included in the calculation of the replacement cost.

The Company wishes to advise of the imprecise nature of these data and of the many subjective judgments required in the replacement cost estimation. Not all of the replacements assumed could be accomplished in fact due to fuel availability and various factors which preclude the application of new technologies to existing elements of the Company's productive capacity.

Such information as presented does not purport to represent the current value or reproduction costs of the Company's productive capacity or the amounts which could be realized if the assets were sold. In addition, the Company is subject to governmental regulations in the determination of a fair rate of return on its investment. Under current ratemaking policy (which does not allow the Company to recover the excess of replacement cost over historical cost), it is not possible to predict the efIccts of either the additional revenues that would be realized from the increased replacement cost or the possible savings resulting from the operating efliciencies of technically improved replacement facilities.

These data and related disclosures should not be used to adjust the Company's financial statements.

41

PURCHASERS The Purchasers named below have severally agreed to purchase from the Company the respective principal amounts of the New Bonds set forth below opposite their names.

Paincipal Name of Purchaser Amount Total $45,000,000 The Purchase Agreement provides that the obligations of the Purchasers are subject to certain conditions precedent and that the Purchasers will be obligated to purchase all of the New Bonds if any New Bonds are purchased, provided that, under certain circumstances involving a default of Purchasers, less than all of the New Bonds may be purchased. Default by one or more Purchasers would not relieve the non-defaulting Purchasers from their several obligations, and in the event of such default, the non-defaulting Purchasers may be required by the Company to purchase the respective principal amounts of the New Bonds which they have severally agreed to purchase and, in addition, to purchase the principal amount of the New Bonds which the defaulting Purchaser or Purchasers shall have so failed to purchase up to a principal amount thereof equal to one-ninth (1/9th) of the respective principal amounts of the New Bonds which such non-defaulting Purchasers have otherwise agreed to purchase.

42

PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 13. Other Expenses of issuance and Distribution.

Filing fees-Securities and Exchange Commisison:

Registration Statement S 9,158 Declaration 2,000

• Fees of Trustee 22,000

• Rating agency fees 18,250

• Fces of Company's Counsel:

Messrs. Monroc & Lemann 22,000 Messrs. Reid & Priest 25,000

• Fees of Middle South Services, Inc. 5,000

• Accountants' fees 14,000

• Printing and engraving costs 55,000

• Mortgage recording fees 3,500

• Miscellaneous expense (including blue-sky expenses) 14,092 Total Expenses $ 190,000

• Estimated.

Ite m 1 1. Relationship seith Registrant of Experts Named in Registration Statement.

Reference is made to " Experts and Legality" in Prospectus.

Item 15. Indemnification of Directors and Oficers.

Sect.on 83 of Title 12 of the Louisiana Revised Statutes, as amended, provides as follows:

"A. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative or investiga-tive (including any action by or in the right of the corporation) by reason of the fact that he is or was a director, oflicer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another business, foreign or nonprofit corporation, partnership, joint venture or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful; prosided that in case of actions by or in the right of the corporation, the indemnity shall be limited to expenses (including attorneys' fees, and ame ..nts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expense of litigating the action to conclusion) actually and reasonably incurred in connection witu the defense or settlement of such action and no in-demnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in 11-1

good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

"B. To the extent that a director, ollicer, employee or agent of a corporation has been success-ful on the merits or otherwise in defense of any such action, suit or proceeding, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.

" C. Any indemnification under subsection A of this section (unless ordered by the court) shall be made by the corporation only as authorized in a specific case upon determination that the applicable standard of conduct has been met. Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable or a quorum of disinterested directors so directs, by independent legal counsel, or (3) by the shareholders.

"D. Expenses incurred in defending such an action, suit or proceeding may be paid by the corporation in advance of the final disposition thereof if authorized by the board of directors in the manner provided in subsection C of this section, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this section.

"E. The indemnification provided by this section shall not be deemed exclusive of any other rights to which the person indemnified may be entitled under any by-law, agreement, authorization of shareholders or disinterested directors or otherwise, both as to action in his cilicial capacity and as to action in another capacity while holding such omce, and shall continue as to a person who has ceased to be a director, oflicer, employee or agent and shall inure to the benefit of his heirs and legal representative.

"F. A corporation shall have power to procure insurance on behalf of any person who is or was a director, ollicer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another business, nonprofit or foreign corporation, partnership, joint venture or other enterprise against any liability asserted against or incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this section.

The following resolution was adopted. pursuant to Louisiana law, by the unanimous written consent of all of the stockholders of the Company having voting power, signed on March 1,1975:

" RESOLVED, That:

"The Company shall rUmburse or indemnify each present and future director and ofIicer of the Company (and his heirs, executors and administrators) for or against all expenses reasonably incurred by him or imposed on him, subsequent to the adoption of this resolution, in connection with or arising out of, any action, suit or proceeding in which he may be involved by reason of his being or having been a director or officer of the Company, where disposition of such action, suit or proceeding is made in favor of such director or oflicer; provided that no reimbursement shall be made until such time has elapsed that appeal can no longer be taken and that, in the judgment of the Board of Directors, such action, suit or proceeding will not be recommenced.

"No present or future director or officer of the Company (or his heirs, executors and administrators) shall be liable for any act, omission, step or conduct taken or had in good faith, at any time on or after March 1,1975, which (whether by condition or otherwise) is required, authorized o; approved by any order or orders issued pursuant to: the Public Utility IIolding Company Act of 1935; the Federal II-2

Power Act; or any statute or ordinance regulating the Company; or any amendments to any thereof.

In any action, suit or proceeding based on any act, cmission, step or conduct, as in this paragraph described, the provisions hereof shall be brought to the attention of the court. In the event that the foregoing provisions of this paragraph are found by the court not to constitute a valid defense on the grounds of not being applicable to the particular class of plaintiff, each such director and officer (and his heirs, executors and administrators) shall be reimbursed for, or indemnitied against, all expenses and liabilities incurred by him or imposed on him, in connection with, or arising out of any such action, suit or proceeding based on any act, omission, step or conduct taken or had in good faith as in this paragraph described. Such expenses and liabilities shall include, but shall not be limited to, judgments, court costs and attorneys' fees.

"The foregoing rights shall not be exclusive of other rights to which any director or ofIlcer may be otherwise entitled and shall be available whether or not the director or ollicer continues to be a director or ollicer at the time of incurring such expenses and liabilities."

The following resolution was adopted by the Board of Directors of the Company on September 18, 1978:

" RESOLVED, as follows:

Section 1. Mandatory Indemnification. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (' Action'), whether civil, criminal, administrative or investigative (including any Action by or in the right of the Company) by reason of the fact that he is or was a director or of]icer of the Company, or is or was serving at the request of the Company, while a director or ofIicer of the Company, as a director, officer, partner, joint venturer, trustee, participant or employee (' Participant')

of another corporation, partnership, joint venture, trust or other enterprise, against expenses (in-cluding attorneys' fec3), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such Action, if he acted in good faith and in a manner he rea-sonably believed to be in or not opposed to the best interests' of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

In the case of Actions by or in the right of the Company, such indemnity shall be limited to expenses (including attorneys' fees and amounts paid in settlement not exceeding the estimated expense of litigating the Action to conclusion) actually and reasonably incurred in connection with the defense or settlement of such Action and, in such case, no indemnification under thisSection I shall be made in respect of any claim, issue or matter as to which the person proposed to be in-demnified shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Company unless and only to the extent that the court shall determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, he is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

The termination of any Action by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal Action had reasonable cause to believe that his conduct was unlawful.

Section 2. Mandatory Indemnification-Successfid Party. To the extent that a person who is or was a director or otlicer of the Company, or is or was serving at the request of the Company, while a director or officer of the Company, as a Participant of another corporation, partnership, joint venture, trust or other enterprise, has been successful on the merits' or otherwise in the defense of any such Action, or in defense of any claim, issue, or matter therein he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.

II-3

Section 3. Permissive Indemnification. Notwithstanding any limitations of the indemnification provided by Section 1, the Company may indemnify any person who is or was a party or is threatened to be made a party to any such Action by reason of the fact that he is or was a director, officer, employee, or agent of the Company, or is or was serving at the request of the Company as a Participant of a.iother corporation, partnership, joint venture, trust or other enter-prise against all or part of any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such Action, if it shall be determined in accordance with the applicable procedures set forth in Section 4, below, that such person is fairly and reasonably entitled to such indemnification.

Section 4. Procedure. Any indemnification under Section 1 or 3 (unless ordered by court) shall be made by the Company only as authorized by the Board of Directors (which may so act whether or not there is a sutlicient number of disinterested directors to constitute a quorum) in a specific case upon a determination that indemnification of the person proposed to be indemnified is proper in the circumstances because he has met the applicable standards set forth in Section 1 or is entitled to indemnification under Section 3. Such determination, in the case of indemnification made pursuant to Section 1, shall be made (1) by the Board of Directors by a majority vote of a quorum, as defined by law and/or in the Articles of Incorporation or the By-laws, consisting of directors who are not or were not parties to any pending or completed Action giving rise to the proposed indemnification or (2) if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel (who may be, but need not be, outside counsel to the Company) in a written opinion, or (3) by the shareholders.

Such determination, in the case of indemnification made pursuant to Section 3, shall be made by the Board of Directors by a majority vote of a quorum, as defined by law and/or in the Articles of Incorporation or the By-laws, consisting of directors who are not cr were not parties to any pending or completed Action giving rise to the proposed indemnification or by the shareholders.

Section 5. Advance Payments. Expenses (including attorneys' fees) incurred or reasonably expected to be incurred by a director, oflicer, employee or agent of the Company in defending against any claim asserted or threatened against him in such capacity or arising out of his status as such shall be paid by the Company in advance of the final determination thereof if authorized by the Board of Directors (which may so act whether or not there is a suflicient number of disinterested directors to constitute a quorum) upon receipt by the Company of his written request therefor and his written promise to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized or required in this Resolution.

Section 6. Provisions Not Exclusive. The indemnification provided by this Resolution shall not be deemed exclusive of any other rights to which any person seeking indemnification may be entitled under any law, By-law, agreement, resolution, vote of shareholders or disinterested directors, or otherwise, and shall continue as to a person who has ceased to be a director, oflicer, employee or agent of the Company and shall inure to the benefit of the heirs, executors and administrators of such a person.

Section 7. Afiscellaneous. For purposes of this Resolution, and without any limitation whatsoever upon the generality thereof: the terra 1ines' as used herein shall be deemed to include (i) penalties imposed by the Nuclear Regulatory Commission (the 'NRC') pursuant to Section 206 of the Energy Reorganization Act of 1974 and Part 21 of NRC regulations thereunder, as they may be amended from time to time, and any other penalties, whether similar or dissimilar, imposed by the NRC, and (ii) excise taxes assessed with respect to an employee benefit plan pursuant to the Employee Retirement Income Security Act of 1974, as it may be amended from time to time

('ERISA'); for purposes of determining the entitlement of a director, ollicer, employee or agent II-4

of the Company to indemnification under this Resolution, the term 'other enterprise' shall be deemed to include an employee benefit plan governed by ERISA, and the Company shall be deemed to have requested such person to serve as an employee of such a plan where such person is a trustee of the plan or where the performance by such person of his duties to the Company also imposes duties on, or otherwise involves services by, such person to such plan or its participants or beneficiaries, and action taken or permitted by such person in the performance of his duties with respect to such employee benefit plan for a purpose reasonably believed by him to be in the interest of the participants and beneficiaries of the plan shall be deemed to meet the standard of conduct required for indemnification hereunder; and any act, omission, step or conduct taken or had in good faith which is required, authorized or approved by any order or orders issued pursuant to the Public Utility llolding Company Act of 1935 or any other federal statute or any state statute or municipal ordinance shall be deemed to meet the standard of conduct required for indemnification hereunder."

The following resolution wa adopted, pursuant to Louisiana law, by the unanimous written consent of all of the stockholders of the Company having voting power, signed on January 23,1979.

" RESOLVED, That the indemnification resolution which was adopted by the Board of Directors of the Company at its meeting held on September 18,1978, prosiding certain mandatory and permissive indemnifications in favor of persons serving in certain capacities as therein set forth, be and it is hereby in all respects approved, confirmed and ratified; and further

" RESOLVED, That the indemnification resolution which was adopted on March 1,1975 by the unani-mous written consent of all of the stockholders of the Company entitled to vote, and which provided for certain relief from liability and indemnifications in favor of persons serving in certain capacities' as therein set forth, be and such stockholders' resolution is hereby cancelled and annulled, and shall no longer be of further force or c!Icct, except that any person entitled to benefits or relief thereunder who is denied benefits or relief at least equivalent thereto under the indemnification resolution adopted by the Board of Directors' of the Company on September 18, 1978, hereinabove ratified, by reason of the fact that the act or omission gising rise to such entitlement occurred prior to the eficctiveness of said Board of Directors' resolution, shall continue to be entitled to such benefits or relief as may be available to such person under the terms or by virtue of said stockholders' resolution of March 1,1975."

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted pursuant to the foregoing resolutions or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in said Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company of expenses incurred or paid by a director or ofIicer of the Company in the successful defense of any action, suit or proceeding) is asserted by such director or otlicer in ccnnection with the securities being registered hereby and the Securities and Exchange Commission is still of the same opinion, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against put,lic policy a> cxpressed in said Act and will be governed by the final adjudication of such issue.

The Company has insurance covering its expenditures which might arise in connection with its lawful indemnification of its directors and oflicers for their liabilities and expenses. Directors and otlicers of the Company also have insurance which insures them against certain other liabilities and expenses.

Item 16. Treatment of Proceeds from Stock to be Registered.

Not applicable.

11-5

Item 17. Other Documents Filed as a Part of the Registration Statement.

(a) Statements of eligibility and qualification of persons designated to act as trustees under an indenture to be qualified under the Trust indenture Act of 1939:

Statement on Form T-1 of The Chase Alanhattan Bank (National Association), Corporate Trustee.

Statement on Form T-2 of Charles it Ruge, successor Co-Trustec.

(b) Exhibits:

1(a) -Copy of Public Invitation for Bids, together with Statement of Terms and Condi-Telating to Bids.

1(b) _,, of Form of Bid for the purchase of the New Bonds, together with Tenns of Purchase.

1(c) -Form of Agreement Aniong Purchasers of the New Bonds (to be supplied by amendment).

2(a) -Copy of form of the New Bonds.

• 2(b)-1 -hfortgage and Deed of Trust, as amended by twenty-five Supplemental In-dentures (tiled, respectively, as the exhibits and in the file numbers indicated:

7(d) in 2-5317 ( Alortgage); 7(b) in 2-7408 (First); 7(c) in 2 8636 (Second);

4(b)-3 in 2-10412 (Third); 4(b)-4 in 2-12264 (Fourth); 2(b)-5 in 2-12936 (Fifth); D in 70-3862 (Sixth); 2(b)-7 in 2-22340 (Seventh); 2(c) in 2-24429 (Eighth); 4(c)-9 in 2-25801 (Ninth); 4(c)-lO in 2-26911 (Tenth); 2(c) in 2-28123 (Eleventh); 2(c) in 2-34659 (Twelfth); C to Rule 24 Certificate in 70-4793 (Thirteenth ); 2(b)-2 in 2-38378 ( Fourteenth); 2(b)-2 in 2-39437 (Fifteenth); 2(b)-2 in 2-42523 (Sixteenth); C to Rule 24 Certificate in 70-5242 (Seventeenth); C to Rule 24 Certificate in 70-5330 (Eighteenth); C-1 to Rule 24 Certiricate in 70-5449 (Nineteenth); C-1 to Rule 24 Certificate in 70-5550 (Twentieth); A-6(a) to Rule 24 Certificate in 70-5598 (Twenty-first); C-1 to Rule 24 Certificate in 70-5711 (Twenty-second); C-1 to Rule 24 Certificate in 70-5919 (Twenty-third); C-1 to Rule 24 Certificate in 70-6102 (Twenty-feurth);

and C-1 to Rule 24 Certificate in 70-6169 (Twenty-fifth)).

2(b)-2 -Copy of form of Twenty-sixth Supplemental Ir. denture.

3(a) -Copy of Opinion of hiessrs. hionroc & Lemann, General Counsel for the Company, as to the legality of the securities being registered.

3(b) -Copy of Opinion of hiessrs. Reid & Priest as to the legality of the securities being registered.

4(a) -Reference is made to item 15.

• 4(b) -Directors and Officers Liability Insurance Policies (filed as Exhibit 4(b) in 2-59894).

• S(a)-1 -Agreement among the Campany and certain other h1iddle South System com-panies, relating to System Planning and Development and Intra-System Transac-tions, dated April 16,1973 (filed as Exhibit 5(a)-1 in 2-49306).

• S(a)-1(a) -Revised Service Schedules 51SS-1 and hlSS-2, efTective July 2,1973, to Agreement among the Company and certain other hiiddle South System companies, dated April 16,1973 (filed as Exhibit 5(a)-1(a) in 2-50187).

• 5(a)-2 -hiiddle South Utilities System Agency Agreement, dated December 11,1970 (filed as Exhib;t 5(a)-2 in 2-41080).

II-6

• 5 (a)-3 -Amendment, dated as of February 10, 1971, to Middle South Utilities System Agency Agreement, dated December 11,1970 (filed as Exhibit 5(a)-4 in 2-41080).

• 5 (a)-4 -Middle South Utilities System Agency Coordination Agreement, dated December 11,1970 (filed as Exhibit 5(a)-3 in 2-41080).

• 5 (a)-5 - Service Agreement with Middle South Services, Inc., dated as of April 1,1963 (filed as Exhibit 5(a)-5 in 2-42523).

• 5(a)-6 -Amendment, dated as of January 1,1972, to Service Agreement with Middle South Services, Inc. (filed as Exhibit 4(a)-6 in 2-45916).

• 5 (a)-7 -Availability Agreement among Middle South Energy, Inc. and certain other Middle South System companies, dated June 21,1974 (" Availability Agreement") (filed as Exhibit B to Rule 24 Certificate dated June 24,1974 in 70-5399).

• 5(a)-8 -First Amendment to Availability Agreement, dated as of June 30,1977 (filed as Exhibit B to Rule 24 Certificate dated June 30,1977 in 70-5399).

• 5(a)-9 -First Assignment of Availability Agreement, Consent and Agreement, dated as of June 30,1977, with Manufacturers llanoser Trust Company, as Agent (filed as Exhibit B to Exhibit A to Rule 24 Certificate dated June 30,1977 in 70-5399).

• 5 (a)-10 -Second Assignment of Availability Agreement, Consent and Agreement, dated as of June 30,1977, with United States Trust Company and Malcolm T. Hood, as Trustees (filed as Exhibit C to Exhibit A to Rule 24 Certificate dated June 30,1977 in 70-5890).

• 5(b)-1 -South Central Electric Companies-Tennessee Valley Authority Diversity Power Exchange Arrangements with exhibits and related documents as compiled Decem-ber 20,1962 (filed as Exhibit 4(b) in 2-21005).

• 5(b)-2 -Amendments of July 1,1963 to South Central Electric Companics-Tennessee Valley Authority Diversity Power Exchange Arrangements (filed as Exhibit 4(c) in 2-22340).

• 5 (b)-3 -Amendment of April 11,1972 to South Central Electric Companies-Tennessee Valley Authority Diversity Power Exchange Arrangements (filed as Exhibit 4(b)-3 in 2-45916).

• 5(c)-1 Coordination Agreement, dated as of February 10,1964, and Memorandum of Agreement, dated June 24,1971, regarding Scheduling of Diversity Capacity and Energy, among the Company and other South Central Electric Companies (filed as Exhibit 5(n)-2 in 2-41080).

• 5 0)-2 -Reliability Coordination Agreement between Tennessee Valley Authority and Arkansas Power & Light Company, Louisiana Power & Light Company, Mississippi Power & Light Company, New Orleans Public Service Inc., and Middle South Services, Inc., dated as of November 21,1968 (filed as Exhibit 5(n)-3 in 2-41080).

• 5(c)-3 Reliability Coordination Agreement between Middle Sauth System companies and

. Southern Companies, dated as of November 1,1967 (filed as Exhibit 5(n)-4 in 2-41080).

• 5(d) Interconnection Agreement of September 1,1951 among the Company, Central Louisiana Electric Company, Inc. and Gulf States Utilities Company, as suppie-mented and/or amended by letter of agreement dated October 15,1962 extending the term of said Interconnection Agreement, and by various service schedules and agreements for additional interconnection points, through Service Schedule K dated May 11,1971 (filed as Exhibit 5(e) in 2-42523).

II-7

• 5(e)-1 -Coordination Agreement of September 1,1955 between the Company and Central Louisiana Electric Company, Inc., covering system planning for coordination of construction and operation of generating, transmission and substation facilities (filed as Exhibit 5(f)-1 in 2-42523).

• 5(e)-2 -Letter of Agrument, dated January 20,1959, between the Company and Central Louisiana Electric Company, Inc., supplementing and modifying their Coordina-tion Agreement of September 1,1955 as set forth in the " Operating Instructions" attached to said letter of agreement (filed as Exhibit 5(f)-2 in 2-42523).

• 5(e)-3 -Letter of Agreement, dated September 18,1970, between the Company and Cen-tral Louisiana Electric Company, Inc., supplementing and modifying their Co-ordination Agreement of September 1,1955 as set forth in the memorandum attached to said letter of agreement (filed as Exhibit 5(f)-3 in 2-42523).

• 5(e)-4 -Letter of Agreement, dated May 1,1973, between the Company and Central Louisiana Electric Company, Inc., supplementing their Coordination Agreement of September 1,1955 (filed as Exhibit 5(e)-4 in 2-50187).

• 5(f) -Southwest Power Pool Coordination Agreement, dated as of December 17,1969, Amendment to Southwest Power Pool Coordination Agreement, dated December 17,1969, and Southwest Power Pool Amendatory Agreement, dated as of Novem-ber 19,1970 (filed as Exhibit 5(n)-1 in 2-41080).

6 --Computation of ratio of caruings to fixed charges, as defined.

• Incorporated herein by reference as indicated.

11-8

UNDERTAKINGS The undersigned registrant hereby undertakes (i) to file an amendment to the registration state-ment reflecting the results of bidding, the terms of the reoIIering and related matters to the extent required by the applicable form, not later than the first use, authorized by the registrant after the open-ing of hids, of a prospectus relating to the securities offered at competitive bidding, unless no further public offering of such s(curities by the registrant and no reoffering of such securities by the purchasers is proposed to be made, and (ii) to use its best efforts to distribute prior to the opening of bids, to prospectise bidders, underwriters and dealers a reasonable number of copies of a prospectus which at that time meets the requirements of Section 10(a) of the Securities Act of 1933, and relating to the securities offered at competitise hidding, as contained in the registration statement, together with any supplements thereto.

POWER OF ATTORNEY Each director and/or ol!icer of the registrant whose signature appears below hereby appoints J. M.

Wyatt, J.11. Erwin, Jr., Charles A. Read and Melsin I. Schwartzman, the Agents for Sersice named in this registration statement, and each of them sescrally, as his attorney-in-fact, to sign in his name and behalf, in any and all capacities stated below, and to file with the Securities nnd Exchange Commission, any and all amendments, including post-effectise amendments, to this registration statement, and the registrant herchy also appoints each such Agent for Sersice as its attorney-in-fact with like authority to sign and fle any such amendments in its name and behalf.

II-9

SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New Orleans, and State of Louisiana, on the 20th day of March,1979.

LOU 151ANA POWER & l.lGitT COM PANY 13y J. M. WYATT J. M. Wyatt (President and Director)

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

Signature Title Date 3

J. M. WYATT President and Director (Principal Executive Ollicer) y, g, g,,,,

J.11. ERWIN, J R. Vice President and Treasurer (Principal Financial and J. II. Erwin, Jr.

Accounting Ollicer)

JAMES M. CAIN Director James M. Caln CIIARLES J. CASSIDY Director Charles J. Cassidy llARRY M. ENGLAND Director

• March 20,1979 IIarry M. England TEX R. KILPATRICK Director Tex R.1G! patrick F. W. lewis Director Hoyd W. Lewis E. A. RODRIGUF. Director E. A. Rodrigue II. DUKE SIIACKELFORn Director II. Duke Shackelford s 11-1 0

CONSENTS OF EXPERTS Louisiana Power & Light Company:

We hereby consent to the use in this Registration Statement on Form S-7 of our opinion dated February 16,1979 appearing in the Prospectus which is a part of such Registration Statement, and to the references to us in the Prospectus under the headings " Statement of Income ' and " Experts and Legality" DELo!TTE llASKINS & SELLS New Orleans, Louisiana Alarch 20,1979 (The consents of 51cssrs. Stonroe & Lemann and Niessrs. Reid & Priest are included in their opinions filed as exhibits to the Registration Statement.)

II-l1

EXHIBIT 6 LOUISLiNA POWER & LIGHT COMPANY CO31PUTATION OF RATIO OF EARNINGS TO l'IXED CIIARGES, AS DEFINED, ACTUAL AND AS ADJUSTED TO GIVE EFFECT TO ISSUANCE OF SECURITIES IIEING REGISTERED, TO INTEREST RELATED TO IlONDS ISSUED IN JULY 1978 TO INTEREST RELATED TO AlUNICIPAL REVENUE IlOND OllLIGAllONS ASSUSIED IN AIARCII 1978, TO Tile ELI511 NATION OF INTEREST RELATED TO IlONDS RETIRED IN SIARCll 1978 AND TO Tile Ell 311 NATION OF REVENUES SUIMECT TO REFUND Twelve 31onths Faded December 31, January 31,1979 1974 1975 1976 1977 1978 Actual Adjustments Ad ted (la 1 housands)

Fixed Charges, as defined:

Interest on mortgage bonds $28,303 $34,434 $37,864 5 41,267 5 50,007 $ 50,931 $ 7,274(a) $ 58,205 Interest on other long-term debt - -

72 826 1,952 2,052 195(a) 2,247 Interest on notes payable 2,096 1,743 456 2,058 4.540 5,122 -

5,122 Other interest charges . . 254 309 626 889 1,625 1,675 - 1,675 Amortization of premium on debt-net (cr.) , . .. (42) (24) (27) (23) 1 4 -

4 Interest applicable to rentals , 104 144 151 185 233 264 - 754 Total fixed charges, as definM $30,715 $36,606 $39,142 5 45,202 $ 58,358 $ 60,048 $ 7,469 $ 67,517 Earnings, as defmed:

Net income . . $40,886 $43,695 $39,277 $ 44,406 $ 53,744 5 62,205 $ (3,852) $ 58,353 Add:

Proviso for income taxes:

Federal ad state 8,017 (7,898) 4,183 7,408 5,946 5,192 (3,617) 1,575 Deferred Federal and state-net , 5,603 14,835 6,594 6,023 6,120 14,016 - 14,016 Investment tax credit adjustments-net 1,478 7,822 6,411 2,595 (1,205) (1,093) -

(1,093)

Fixed charges as above . . 30,715 36,606 39,142 45,202 58,358 60,048 7,469 67,517 Deduct:

Revenues subject to refund - - -

_- - - (2.880 )( a ) (2,880)

~ otal earnings, as defined . $86,699 $ 95,0_6_0_ _$95,607 $ 10!,634 $122,963 $140.368 $ - $ 137,488 Ratio of Earnings to Fixed Charges, as defined 2.82 2.60 2.44 2.34 2.11 2.34 2.04 (a) To give etIect to annual interest requirements ($4,500,000) on $45,000,000 principal amount of the New Bonds at an assumed rate of 10% per annum; to give eIIect to the balance of annual interest requirements on the First Mortgage Bonds issued in July 1978 ($2,800,000); to give effect to the balance of annual interest requirements on the municipal revenue bond obligations assumed in 1978 ($195,000); to climinate the balance of annualinterest requirements on $10,000,000 principal amount of First Mortgage Bonds,3% Series paid at maturity on March 1,1978 ($26,000); to give effect to interest, at a current weighted average rate of 11.6% (bank loans) and 11.2G (commercial paper), on average short-term borrowings outstar. ding which approximated

$24,683,000 for bank loans and $29,455,000 for commeccial paper during the twelve months ended January 31, 1979, assumed to be reborrowed within the next twehe months; and to eliminate revenues subject to refund

($2,880,000).