ML19309A838
| ML19309A838 | |
| Person / Time | |
|---|---|
| Site: | Yankee Rowe |
| Issue date: | 02/15/1980 |
| From: | YANKEE ATOMIC ELECTRIC CO. |
| To: | |
| Shared Package | |
| ML19309A835 | List: |
| References | |
| NUDOCS 8004010398 | |
| Download: ML19309A838 (12) | |
Text
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Yankee Atomic Electric i
Company Annual Report 1979 800.401o34g
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e YANKEE ATOMIC ELECTRIC COMPANY 25 RESEARCH DRIVE WESTBOROUGH, MASSACHUSETTS C1581 DIRECTORS (As of December 31,1979)
JoAN T.
- Bon, l' ice Chairman, New GvY W. Nscuou, Chairman of the Company; England Electric System, if'estborough, Chairman, President and Chief Executive Massachusetts Ofcer, New England Electric System.
It'enborough, Manahuuns WnLuxM F. Bunt, Assistant to President, New England Gas and Electric Association, yong g, gggggzzg, g. ice President, Central Cambridge, Massachusetts Maine Power Company, Augusta Maine Jons F.G. EncnoRN, JR., President and Chief DosALD C. SwsiztR l' ice Chairman, Northeast Executive Ofcer, Eastern Utilities Associ-Utilities Service Company, Hartford, ates, Boston, Massachusetts WituAM B. Etus, President, Northeast Utilities Service Company, Hartford, Connecticut WILuAu C. TALLMAN, President, Public Service Company of New Hampshire Manchester, JAMES E. GRtrrns, President and ChiefExecutive New Hampshire Ofcer, Central l'ermont Public Service Corporation, Rutland. I'ermont yng7pg p, 3,gg77t, S,,;,,
g ;,, p,,,;g,,,,
LAWRENCE E. MsNuncu, President of the Boston Edison
- Company, Bostor.,
Company Massachusetts OFFICERS (As of December 31,1979)
GUY W. Nicuou, Chairman LAWRENCE E. MINNICK, President DONALD E. VANDENBURGn, Senior l' ice President FREDERic E. GREENMAN, Clerk WENDELL P. Jonsson, l' ice President JAuts C. NEsatrr, dssistant Treasurer EQUIS H. HEIDER, l' ice President ARMAND R. SoucY, Assistant Treasurer JAMn E. TRisaLE, Treasurer KIRK L. RAMSAUER, disistant Clerk This report is not to be censidered an offer to sell or buy }
or solicitation of an offer to sell or buy any security.,3 2
L
YANKEE ATOh11C ELECTRIC COh1PANY Yankee Atomic Electris Company, an electric utility company, was incorporated in hiassachusetts in 1954 under the provisions of the hiassachusetts utility law which permits two or more electric companies to join in the construction and operation of a generating plant to serve their common needs.
The organization of the Company was sponsored by cleven New England utilities for the purpose of constructing and operating New England's first nuclear power plant. In addition to its license to generate, buy, transmit and sell electricity, the Company is authorized to conduct research and assist others engaged in a similar business. The eleven sponsoring utilities own the entire common capital stock of the Company and are entitled to and obligated to purchase the output of the plant.
The Yankee plant is located on the Deerfield River in the Berkshire hills in the Village of Rowe, Afassachusetts. The plant was placed in commercial operation in 1%1 and has been in full operation since that time except for maintenance and refueling shutdowns. The unit is rated at 185 megawatts (gross), and has generated 22 billion Kwh of electricity since inception.
In 1%8, the Securities and Exchange Commission authorized the Company to organize a Nuclear Services Division under the Company creporate structure. The Nuclear Services Division has a staff of approximately 300 engineers who provide nuclear engineering services in all aspects of nuclear power plant construction and operation including Reactor Engineering, Environmental Engineering, Oper-ations, Quality Assurance and Construction Afanagement. Services are performed on a cost basis for the Yankee plant and other New England nuclear power plant projects.
COOPERS & LYllRAND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTAN13 YANKEE ATOMIC ELECTRIC COStPANY WESTROROUGil, SIASSACIIUSET*I3 We have examined the balance sheets of Yankee Atomic Electric Company as of December 31, 197c and 1978 and the related statements of income and retained earnings and changes in financial poution for the years 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, the aforementioned financial statements present fairly the financial position of Yankee Atomic Electric Company at December 31,1979 and 1978, and the results of its operations and the changes in its financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis.
Boston, Afassachusetts COOPERS & LyBRAND February 15,1980 3
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YANKEE ATOMIC ELECTRIC COMPANY Balance Sheets Deceml>cr 31, ASSETS 1979 1978 Electric plant, at original cost (Notes A and F)..
$53,673,628
$50,143,056 Less accumulated depreciation.
34,263.055 32,156,198 19,410,573 17,986,858 Construction work in progress (Note H).
3,399,431 3.239,248 Nuclear fuel, at amortized cost (Notes A and G).
21,018.394 19,652,894 Net utility plant,
43.828,398 40.879.000 Nonutility property,less accumulated depreciation of $110,931 and $61,959 (Note C) =
867,946 916,518 Current assets:
Cash, including temporary cash investments of $5,300,000 and $400,000..
5,4 %,285 813,807 Accounts receivable:
From sales of electric energy.-
3,825,426 2,946,858 From engineering services (Note C);
2,159,545 2,015,772 Other.,
117,332 58,747 Materials and supplies, at average cost..
1,237,254 1,058,733 Prepayments.
346.348 434,015 Total current assets..
13.182,190 7,327,932 Advance payment-nuclear fuel....
427,682
$57,878,534
$49.551,132 CAPITALIZATION AND LIABILITIES Capitalization:
Common stock, par value $100 per share; 153,400 shares authorized and outstanding..
$15,340,000
$15,340,000 Retained earnings =
5,136,776 5.372,921 8%% Note, duejanuary 2,1988 (Note E)--
10,000,000 10.000,000 Total capitalization.=
30.476,776 30,712,921 Current liabilities:
Short.:crm debt (Note D)......
I4,500,000 11,400.000 Accounts payable...........
6,791,926 1,539,215 Accrued federal income taxes (Note B);
690,769 299,113 Accrued interest (Note E)...
442,362 458,507 Total current liabilities 22,425,057 13.696.835 Deferred federalincome taxes (Note B)-
3,974,888 4,208.283 Unamortized investment tax credits (Note B) 1,001,813 933,093 Commitments and contingencies (Note H).
$57,878.534
$49,551,132 The accompanying notes are an integral part of these financial statements.
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d YANKEE ATOMIC ELECTRIC COMPANY Statements ofIncome and Retained Earnings Year Ended December 31, 1979 1978 Operating revenue (Notes C and F)--
$26,467,525
$21,293.156 Operating expenses (Note C):
Fuel (Notes A and G) -
7,213,665 5,643,645 Other operation 9,135,456 6,705,389 Maintenance-2,318,404 2,171,282 Depreciation (Notes A and F) 2.221,871 179,656 Taxes, other than federalincome (Note F) 755,602 656,786 Federalincome taxes (Notes B and F).
1,381,895 1,818,248 Total operating expenses-23.026.893 17.!75,006 Operating income 3,440,632 4,118,150 Other-net, including related taxes 123.088 96,347 Operating and other income-3,563,720 4,214,497 Interest:
Interest on short-term debt (Note D)..
1,075,025 1,133,689 Interest on long-term debt 887,153 435,% 9 Other (Note F) 1,100 89,628 Allowance for borrowed funds used during construction-credit (Note A).
(311,013)
(71,792)
Total interest =
1,652,265 1,586.594 Net income, $12.46 and $17.13 per share--
1,911,455 2,627,903 Retained earnings at beginning of year -
5.372,921 5,199,418 7,284,376 7,827,321 Cash dividends declared, $14.00 and $16.00 per share..
2,147,600 2,454,400 Retained earnings at end of year..
$ 5,136,776
$ 5,372,921 The accompanying notes are an integral part of these financial statements.
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YANKEE ATOMIC ELECTRIC COMPANY Statements of Changes in Financial Position Year Ended December 31, 1979 1978 Source of funds:
From operations:
Net income
$ 1,911,455
$ 2,627.903 Depreciation..
2,221,871 179,656 Amortization of nuclear fuel-7,213,665 5.643,645 Deferred federalincome taxes -
(233,395) 690,710 Investment tax credits-net -
68,142 158,57%
Allowance for borrowed funds used during construction--<redit..
(311,013)
(71,792)
Total funds from operations =
10,870,725 9,228,697 From financing transactions:
Net change in short. term debt.
3,100,000 (4,400,000)
Proceeds from long term debt-10,000,000 Total funds from financing transactions.--
3,100,000 5,600,000 From other sources (net),
49,150 127,178 Total source of funds;-
$14,019,875
$14,955,875 Application of funds:
Construction expenditures, excluding allowance for borrowed funds used during construction 5 3,494,756
$ 3,330,477 Nuclear fuel purchased..
8,151,483 7,938,044 Dividends on common stxk..
2,147,600 2,454,400 Net increase in working capital excluding short. term debt 226,036 1,232,954 Total application of funds..
$14,019,875
$14,955,875 Increase (decrease) in components of working capital:
Cash..
$ 4,682,478
$ (210,594)
Accounts receivable ;
1,080,926 1,358,543 Af aterials and supplies 178,521 177,793 F repayments.
(87,667) 1,167 Accounts payable..
(5,252,7 I I)
(684,964)
Accrued federal income taxes..
(391,656) 1,040,173 Accrued interest -
16,145 (449,164)
$ 226.036
$ 1,232,954 The accompanying notes are an integral part of these financial statements.
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.' d i..
YANKEE ATOMIC ELECTRIC COMPANY Notes to Financial Statements Non A-Summary of Accounting Policies:
1.
System of Accounts:
The accounts of the Company are maintained in accordance with the Uniform System of Accounts prescribed by regulatory bodies having jurisdiction.
2.
Plant:
The Company capitalized as a part of construction costs, a non-cash item called allowance for borrowed funds used during construction at 12.2C'o in 1979 and 8.4?e in 1978 which approximated the pre-tax cost of short-term debt. There was no allowance for equity funds used during construction in 1979 or 1978.
Costs of current repairs and minor replacements of plant and properties are charged to maintenance expense accounts as incurred. Plant retired or otherwise disposed of, together with costs of removal less salvage, is charged to accumulated provisions for depreciation.
3.
Depreciation:
The Company provides depreciation on a remaining life basis effective with the settlement of a rate proceeding in 1978. The estimated weighted average remaining life at December 31,1979 is 9 years. Previously, depreciation was provided on a straight line basis by charges equal to Sc'o of the cost of depreciable assets. Depreciation expense for 1978 under the remaining life method, $1.952,813, was reduced by $1.773.157 due to a retroactive adjustment as a result of a rate case settlement (see Note F).
4.
Nuclear Fuel:
The Company expenses nuclear fuel as follows (see also Note G):
The cost of the current core, installed in December 1978, plus the estimated cost of its permanent storage is being amortized and charged to fuel expense over the estimated life of the nuclear fuel core. The cost of the core installed in 1977 and burned through November 1978 was ratably amortized during this period.
Because of the present moratorium on nuclear fuel reprocessing, the salvage value for cores burned prior to 1976 is being ratably amortized and charged to fuel expense through 1981.
CommencingJanuary 1980, the Company will include a charge in nuclear fuel expense for the permanent storage of spent fuel used in cores prior to December 1978. Under the billing provisions of the power contracts these charges are includable and therefore have no effect on the Company's net income.
5.
Retirement Plan:
The funded plans in effect are noncontributory and provide retirement benefits for substantially all employees. Current service costs are funded annually; prior service costs commencing in 1977, are being funded over a 15 year period. Total pension expenses in 1979 and 1978.
including amortization of prior service costs charged principally to operating expenses of both the Yankee plant and the Nuclear Services Division, were $666,000 and $558,000 respective-ly. The market value of pension fund assets exceeded the actuarially computed value of vested benefits as of April 1.1979, the latest actuarial valuation date. Unfunded prior service costs are estimated to be $700,000 at December 31,1979.
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YANKEE ATOMIC ELECTRIC COMPANY Notes to Financial Statements NOTE B-Federal Income Taxes:
Federal income taxes consist of the following components:
1979 1978 Current federal income taxes
$1,547,148
$ 968,963 Deferred federal income taxes (233,395) 690,710 Investment tax credits-net.-
68,]
158.575
$1,3o 15
$1,818.248 Total federal income taxes difier from the amounts computed by applying the statutory tax rate to income before taxes. The reason for the differences are as follows:
1979 1978 Computed tax it statutory rates
$1,563,173
$2.176,843 Reductions in tax resulting from:
Amortis.ation of investment tax credits..
(263,483)
(230,620)
Provis;on for permanent storage.
357,109 9,519 Allow ance for borrowed funds used during censtruction -
(143,066)
(34,402)
Other -
(26,986)
(14,155)
Federal mcome tax provisions (including $104,852 and S88.937 charged to other income).
$1,486,747
$1.907,185 Eficctive federalincome tax rate 43.8%
42.1%
The Company has adopted comprehensive interperiod tax allocation (normalization) consistent with regulatory approval. The following table details the components of deferred federal income taxes.
1979 1978 Excess tax depreciation -
$ 50,025
$ 977,122 Amartization of nuclear fuel salvage value (see Note A)..
(283.420)
(286,412)
$ (233,395)
$ 690,710 Investment tax credits are deferred and amortized over the estimated lives of the property giving rise to the credits. Investment tax creditenet reflects increases in current federal income taxes attributable to such investment tax credits which have been deferred.
F deral income tax returns for the Company have been examined and reported upon by the Internal Revenue Service through 1976.
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- l YANKEE ATOMIC ELECTRIC COMPANY Notes to Financial Statements NOTE C-Nuclear Services Division:
The Company, an electric utility subsidiary of two registered holding companies, operates a Nuclear Services Division under the applicable rules and regulations of the Public Utility Holding Company Act for the purpose of furnishing nuclear engineering sersices, at the cost of such services, to the Company and its sponsoring utilities and the organizations in which they may have a substantial financial or contractual interest. The cost of such services and related revenues are not included in the accompanying statements of income and retained earnings except for $4,536,885 in 1979 and 53,250,535 in 1978 for services provided for the Comp:4ny's generating plant. A summary of these is as follows:
1979 1978 Revenue
$16,631.212
$12,170,2%
Cost of services:
Salaries and related fringe benefits._
$ 7,389,987
$ 6,303,369 Outside services Computer service bureau -
2,459,909 1,724,073 Other.
2,848,541 1,419,458 Taxes other than income taxes 452,327 327,908 Other general and administrative expenses.
3,480,448 2.395,398
$16,631,212
$12,170,206 Nonutility property consists of facilities used in rendering a portion of the above services.
NOTE D-Short-Term Borrowing Arrangements:
The Company has available lines of credit with banks totaling $17,800,000, the terms of which provide for borrowing at the prime; rate plus a fraction thereof. No compensating balances are required to support bank borrowings. Information as to short term borrowings is summarized as follows:
1979 1978 Commercial paper outstanding at end of year..
$14,500,000
$11,400,000 Weighted average interest rate of borrowings at end of year 13.9 %
10.5%
Maximum amount of borrowings at any month end..
$14,500,000
$19,600,000 Weighted monthly average borrowings during year..
$ 9,199,000
$13,677,000 Effective weighted average interest rate during year..
I1.5%
8.3%
NOTE E-8%% Note:
The Company has an unsecured long-term note for $10,000,000 with an 8 3/4% interest rate maturing on January 2,1988. Beginning on July 1,1982 and continuing semi-annually thereafter, the Company will prepay $900,000 principal amount for 10 consecutive in-stallments and $500,000 principal amount for the last 2 installments of the note.
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D YANKEE ATOhlIC ELECTRIC COAIPANY Notes to Financial Statements NOTE F-Rate Proceedings:
On February 22, 1978 the Federal Energy Regulatory Commission accepted a filing by the Company revising its rates as of June 2,1975 in compliance with a Commission determina-tion on July 20,1977. A refund to customers of $1,083,735 (including $88,985 of interest expense) was made and recorded in 1978 representing the net effect of reduc'tions of
$1,773.157 in depreciation, increases in tax expenses of $354,223, and an increase in the rate of return of $424,184 since June 2,1975. Because of the billing provisions of the power contracts, this increased rate of return less interest increased net income in 1978 by $335,199.
The revised rates place into eficct a 9.72% rate of return and remaining life depreciation rates, in heu of a rate of return varying pursuant to a formula and a composite depreciation rate of SE Nort G-Nuclear Fuel:
Nuclear fuel consists of the following items:
1979 1978 In process.;
$13.229,461
$ 4,650,296 Assemblies ia reactor--
17,151,717 17,151,717 Spent nuclear fuel..
17,557,949 17,557,949 Gross nuclear fuel.
47.939,127 39,359,962 Lns accumulated amortization of nuclear fuel:
Assemblies in reactor..
10,363,104 3,765,570 Spent nuclear fuel 16,557,629 15,941,498 Net nuclear iuel -
$21.018,394
$19,652,894 The following table details the components of fuel expense:
1979 1973 Current Core:
Amortization of cost,
$5,821,210
$5,027.123 Provision for permanent storage..
776,324 19,831 6,597,534 5,046,954 Prior Cores:
Amortization of salvage value-616.131 596,691 Fuel expense-
$7,213,665
$5,643,645 L
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t
YANKEE ATOMIC ELECTRIC COMPANY Notes to Financial Statements NOTE H--Commitments and Contingencies:
(!) The Company has contracts for the fabrication, conversion and enrichment of nuclear fuel through 1999.
Contractual obligations under these agreements amounted to approximately
$3,900,000 at December 31,1979, of which $1,600,000 is scheduled for 1980.
The Company has contracted for uranium through the year 1999. Total commitments under these contracts at December 31,1979 are estimated to be as follows:
1980
$ 4,326,000 1981 3,088,000 1982 4.093,000 1983 4,120,000 1984 4,151,000 1985-1989 17,666,000 1990-1994 16,040,000 1995-1999 11,845,000
$65,329,000 The above table includes minimum payment, aggregating $15,775,000 through 1993, which may be required under a contract for uranium if certain levels of production are not achieved by a supplier.
(2) The Company is reviewing the need to establish a method to provide for the future decommission-ing cost of the nuclear power plant. Decommissioning is subject to a number of uncertainties as to methodology and cost. If it is concluded that future decommissioning expenses be funded, these amounts would be added to power costs during the life of the power contracts which terminate onJune 30,1991. The inclusion of a decommissioning charge in the cost of power would require approval of the Federal Energy Regulatory Commission.
(3) The Company maintains the maximum amount of public liability insurance, currently
$160,000,000, available from piivate insurers. A Federal statute, the Price-Anderson Act, mandates an industry wide program under which nuclear facilities could be assessed in the event that a nuclear incident resulted in damages exceet'ing the $160,000,000 of private coverage. Under this act er.ch nuclear reactor may be assessed a retrospective insurance premium of up to $5,000,000 for each nuclear incident within the United States. In the event of more than >ne incident per year the maximum annual assessment per reactor is
$10,000,000. Under the billing provisions of the power contracts, the retrospective insurance premium would be includable in the cost of power.
(4) The Company has non-capitalized financing leases for laboratory and certain office equipment.
Had these leases been capitalized, the additional amount of nonutility preperty that.vould appear on the December 31,1979 balance sheet is $1,399,000. Total rental expenses for these leases and non-financing leases amounted to $878,000 in 1979 and $745,000 ir 1978 respectively. Such rentals are included in and recovered through the billings of the Nuclear Services Division and therefore have no effect on net income. Future minimum annual rental payments, exclusive of taxes and insurance, for non-capitalized financing leases are as follows:
1980, $312,000,1981. $294.009,1982, $27+,000,1983, $258,000,1984, $230,000,1985-1989,
$4%,000.
(5) The Company,in common with other utilities, is subject to current and future regulations relative to nudear power plant licensing. The Company estimates that plant capital expenditures, related primarily to licensing requirements, will be $6,000,000 in 1980, excluding allowance for fun? 2 sed during construction.
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YANKEE ATOMIC ELECTRIC COMPANY Summary of Operations (in thousands except per share data)
Year Ended December 31, 1979 1978 1977 1976 1975 Operating revenue -
$26,468
$21,293
$20,011
$18,229
$15,004 Operating expenses, excluding federal income taxes....
21,645 15,357 15.248 13,322 11,332 Federalincome taxes-1,382 1,818 1,735 1,931 1,207 Operating income 3,441 4,118 3.028 2,976 2,465 Other income ;
123 48 Operating and other income -
3,564 4,214 3,076 2,976 2,465 Interest chargesx 1,652 1,586 829 847 980 Net income
$ 1,912
$ 2.628
$ 2,247
$ 2,129
$ 1,485 Common dividends
$ 2,148
$ 2,454
$ 2,186
$ 2,186
$ 1,496 Earnings per share -
$12.46
$17.13
$14.65
$13.88
$9.68 Net generation (millions of Kwh) -
1,232 1,193 1,022 1,248 1,193 Management's Discussion and Analysis of the Summary of Operations The Company has power contracts with its stockholders through June 1991 which provide that ti ese utilities must purchase all of the electrical output of the plant at a cost equal to total operating expenses plus a return on investment. Increases in operating revenue of $5,175,000 in 1979 and $1,282,000 in 1978 were directly relat:d to increased operating expenses and reflect the rate refund made in February,1978. See Note F of Notes to Financial Statements.
Operating expenses, excluding federal income taxes, increased by $6,288,000 in 1979. The primary reasons for the increase were the additional cost of engineering studies mandated by regulatory requirements, increased depreciation expense of approximately $1,770,000 (see Note F of Notes to Financial Statements), increased fuel expense due to the implementation of an accrual for permanent storage of spent fuel and the increased cost of the core installed in December 1978.
Federal income taxes decreased in 1979 by $436,000 due to lower statutory tax rates and reduced operating income.
Other income, which represents primarily an allowance for funds used by the Company's Nuclear Services Division (NSD), increased $27,000 in 1979 due to an increase in the funds used by the NSD.
In 1978, interest charges increased by $757,000 due to higher interest rates and increased debt to finance fuel purchases and the Company's capital expenditure program.
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