ML19308D774

SER Input from Assistant Director of QA & Operations Approving Util Financial Qualifications to Operate Facility

ML19308D774
Person / Time
Site:	Crystal River
Issue date:	09/10/1974
From:	US ATOMIC ENERGY COMMISSION (AEC)
To:
Shared Package
ML19308D772	List: ML19308D771 ML19308D774
References
NUDOCS 8003130819
Download: ML19308D774 (6)

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' FINANCL\\L CUALIFICATIONS J The Commission's regulations which relate to financial data and interna-trion required to establish financial qualifications for applicants for.

. operating licenses are. Section 50.33(f)'of 10'CFR Part 50 and Appendin C

.to-10:CFR Part 50.

We have reviewed.the financial information presented in the application and 'a:end:ents ' thereto regarding financial qualifica-tions.. Based -on this review, we have concluded that Florida Power Corpora-

. tion possesses or can 'obtain the necessary funds to neat the requirements

-of.10 CFR 50.33(f) to operate the crystal River Unit 3 Nuclear Generating

~ Plant and if. necessary percanently shut down the facility and maintain it in a' safe shutdown condition.

L-Crystal River Unit 3 Nuclear Generating Plcnt (CR-3) uill be used te augtent

'the applicant's1present electrical generating capacity.

At the ti 2 Cl-3 is proposed 'to b'e':placed' in service in 1975, it vill rapresent, cecordbn;

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to the applicant, 17.7% of the applicant's total net manimum dependable

-generati.g capability of 4,646,000 kW including CR-3 and assusing no facility _ retirements. ' Operation and caintenance costs including nuclear l-

' fuel costs during the first five years.of cccmercial operation of Unit 3 i-(September-December of'1975 and calendar years 1976-1979) are esticated 5

,by the applicantias follows in millions of dollars:

$7.5, $9.8, $14.1,.

S16.1, and $14.0, respectively. Annual fined costs on a levelized bnsis

-for the same period are esti=ated by the applicant at S54.3 million.

Assuming a' plant factor of 80%, total annual costs to eperate CR-3 rcnge fron.a lov of 1.07c per kh during 1976 te a high of 1.2Sc per kWh during r-i r

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2-is L months of ' September through December 1975' with an average' cost of 1.24c per kWh during the period from September 1975 through December 1979. Esti-

=ated-fuel' costs.during 'the sa=e period average 0.17c per kWh.

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The applicant's levelized annual fixed costs of 17.01% (actually 17.0088%),-

which1was applied to the estimated $319 million cost o.

CR-3 excluding the cost'of the initial core, consist of the following components:

equivalent Jreturn on investment: 7.6748% (cost of capital as computed by the appli-cant plus the depreciation annuity and less straight-line depreciation),

Federal Incore taxes (FIT) :

1.5512%; FIT credit for liberalized deprecia-tion:

-1.4435%; FlI credit for the lavestment tax credit:

-0.3070%;

. depreciation on the straight-line basis :

3.333% (30 years); insurance:

.0.7%; and other tanes:

2.5".

Revenues fron.the sale of electric power to retail and wholesale custc=ars are expected to. provide funds necessary to cover the total costs estinated to _be-applicable to CR-3.

Assuming.a plant factor of 80%, total annual costs to operate CR-3, as noted above, range fro = 1.07c to 1.23c per kWh.

-These unit costs are substantially below the unit price of 1.88c per kWh cxperienced by the applicant on its 1973 system-wide sales of electric

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pcwer to retail and wholesale custocers.

The cost.of permanently shutting down CR-3 is esticated by the applicant at S750,000' based upon leaving-the reac:or and its associated nuclear systems.in place and salvaging the secondary side of the plant, with all m

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6 nuclear fuel: removed from the plant.and sent off site for final reprocess-

- ing. ' The ' annual ~ cost of maintaining the ' subject facility in a safe shut-

- down condition' is estimated by_ the applicant at $50,000 based upon isolatin:;-

the plant area by suitable fencing and monitoring the area periodically by guards. The source of funds to cover these costs is expected to be obtained~

fron revenues derived $ron sale of electric power to retail and wholesale custoners.-

The applicant _ states Lthat uraniu= for - the first core and for subsequent cores will-be purchased on the open carket and then toll enriched, i.~e have er.anined the financial information submitted by Florida Feuer Corporatibn to' determine uhether it is financially qualified to'neet the above esticated costs. The information presented i.n Florida Power Corpora-tion's annual report for 1973 indicatas that operating revcanes ta aled

$255 million.

Operating revenue deductions were c:ated at $202.3 million, of which 324.6 million represented depreciation.

Total interest char;es were earned 2.2 tices.. 5et income totaled $44.1 millien, of which $25.9

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cillion was distributed as dividends-to stockholders with the recaining

'S18.2 n1111on retained for use in the business.

As of _ December 31, 1973,

' the company's assets totaled.$1,230 tillion, nost of which was invested

~ in' utility plant'($1,148.3 million).

Retained earnings acounted to-

S160.6 million.

FinanciaI ratios corputed from the 1973 statements indi-cate an adequate financial condition, e.g.,

long-term debt to total m

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-4 capitalization - 55%, and to net utility plant - 51%; net plant to capitalization - 1.08; the operating ratio - 72*.; and the rates of earnings on average common equity - 12.2%, on stockholders' equity - 9.2%, and on-

. average net utility plant - 5.1%.

The record of_ the ccmpany's operaticas during 1971-73 shows that operating revenues increased from $176.5 million in 1971 to $255 million in 1973; net income increased from $35.2 million to $44.1 million; and net investment in utility plant increased from $778.4 million to $1,148.3 million. However, the number of times total interest charges were earned declined from'2.7 to 2.2, the return on average net utility plant declined from 6.6% to 5.1%, and the rate of earnings or return on average comon equity declined frcm 13.6% to 12.2t. On August 16, 1974, ratings of the company's outstanding first mortgage bonds ar.d de-bentures were revised downward by Moody's Investors Service freu Aa (high-

_ grade bonds) and A (upper medit:a grade obligatiens) to A :nd Eaa 'medit:n-grade obligations), respectively.

The company's current Dun G Eradstreet rating 'is 5A1, the highest rating.

Recent published data (Moody's Public Utility News' Reports dated August 16, 1974) indicates that operating reve~aes increased from $223 million for the 12 months ended June 30, 1973, to $310.5 million for the 12 months ended June 30, 1974; however, net income ' declined from $43.9 million to $34.9 million, and earnings available for cc:rmon stock declined from $38.4 nillion to $27.1 million (S3.39 to

$2.27 per average cc=on share outstanding versus the current annual divident requirement of $1.95 per con =cn share).

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During fAugust '1974', the ico-pany filed a petition 'tiith the Florirla Public Service Cot =ission.asking ' for a te=porary rate increase-that, trould-allev

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.it"to raise-$14~.5 cillion in' additional revenues betteeen August 1-and Dece=ber 31,1974,?in order to be able to issue first =crtgage be:id: edrly

in -1975.'

If the. petition is granted, rates will increase by an -additicnal

15.5% during the remainder of 1974.

A' summary analysis reflecting selected financial ratios and other pertinent

'datafor-FloridaPowerCorp$ratien'isattached'asanappendix.

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FI.0RIDA POWER CORPORATION E. a -

FIliAtiCIAL A.*:AI.YSIS DOCKET.NO. 50-302 (dollars in millions)

Calendar Year Ended December 31 1973 1972 1971

_cng-tena cebt S 5S0.8

$ 469.3 S 374.2 utility plant (net) 1,148.3-937.2 775.4 Ratio - debt to fixed plant

.51

.50

.48 atility plant (net)-

1,148.3 937.2 773.4 Japitalization 1,062.3 S34.5 690.3

~Ratic of net plant to capitalization 1.08 1.12 1.13

.atockholders'; equity, 481.5 365.2 316.1

~ tal. assets 1,230.0 931.2 817.5 o

Proprietary ratio

.39

.37

.39 Tarnings available-to common equity 33.4 37.5 31.9

,erage cc.ncon equity 314.9 272.2 233.8 Rate of earnings on average coccca equity 12.2%

13.8%

13.6%

2t irc0me 44.1 42.0 35.2

-tockholders' equity 431.5 365.3 31u.1 Rate of earnings on.stockholcars' equity 9.2%

11.3%

11.Ut

.tility cperating:inccme 32.7_

53.1 46.3

/erace utility' plant (net) 1,042.8 337.8 709.3 neturn un avg.: utility plant (ne+.)

5.1%

o.27 6.6%

.+; inter.e before total-interest charges 80.8 68.6 55.9 otal interest chargas 36.6.

25.6 20'7 c

1lo. of-ti:.es total interest charges earned 2.2 2.6 2.7 et inccme 44.1 42.0 35.2

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tility operating revenues 235.0 201.9 176.5 liet -inccme ratio

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.;ar. exp., depr., taxes other than income 182.5 125.8 111.6 itility' operating revenues 255.0 201.9 176.5 Operating ratio :

.72

.62

~.6 3 etility plant (gross) 1,337.8 1,105.6 927.7 Jcility operating revenues 255.0 201.9 176.5

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Ratic of plant investment to. revenues 3.25 5.48 5.25

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-1972

.coi tal iza tion:

Amount Amount t

Long-term aebt

$ 530.8 54.7%

$ 469.3 5 5.2% -

Preferrec stock

-133.5' 12.6 83.5 10.0

-Coacon stcck;&; surplus 3ts.0 22.7 281.7 33.8 Total

$1.062.3 100.0%

S'834.5 100.0%

$0dyj5-30nd' Rating: Mer: gage A, Debentures Eaa ran.a.draostreet Credit Nating: 5A1 e

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