ML19319E367
| ML19319E367 | |
| Person / Time | |
|---|---|
| Site: | Arkansas Nuclear  |
| Issue date: | 04/27/1973 |
| From: | Phillips J ARKANSAS POWER & LIGHT CO. |
| To: | |
| References | |
| NUDOCS 8004100660 | |
| Download: ML19319E367 (175) | |
Text
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- i ARKANSAS NUCLEAR ONE, UNIT 1 Application For License
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l0, Application For - Licenses THIS DOCUMENT CONTAINS < i 1 POOR QUALITY PAGES l Qi.jpyM'+! . I -w pa. - . RKANSAS-i.- 1-l qh,, Apet l s- L L POWER & LI G H.y. -
- HELPING BUILO ARKANSAS
O V Before the UNITED STATES ATOMIC ENERGY COMMISSION Docket No. 50-313 In the Matter of Arkansas Power & Light Company
* *).0-AMENDMENT NO. W TO APPLICATION FOR LICENSES Arkansas Power & Light Company, Applicant in the above - T-captioned proceeding, hereby files Amendment No.19 to its Application for Licenses. /
M This Amendment No. 19 amends the Preliminary Safety Analysis Report and the-Application by furnishing the Final Safety' Analysis Report and a revised Application. WHEREFORE, Applicant requests the licenses specified in
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its original Application. N .. Respectfully submitted, ARKANSAS POWER & LIGHT COMPANY By /s/ J. D. Phillips Vice President DATE: April 19, 1971 O
I STATE OF ARKANSAS SS COUNTY OF PULASKI J. D. Phillips, being duly sworn, states that he is a Vice President of Arkansas Power & Light Company; that he is authorized on the part of said Company to sign and file
- o with the Atomic Energy Commission this Amendment No. Jdrto the Application heretofore filed by the Ccmpany; that he has read all of the statements contained in such Amendment No. 19 and that all such statements made and matters set forth therein are true and correct to the best of his knowledge, information and belief.
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/s/ J. .D. Phillips J. D. Phillips I SUBSCRIBED AND SWORN TO before me, a Notary Public in and for the County and State above named, this 19th day of April, 1971.
/s/ Annette O. Benson Notary Fu'olic 1
My commission expires; l l June 25, 1972 , l l
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0 , - BEFORE THE UNITED STATES ATOMIC ENERGY COMMISSION DOCKET NO. 50-313 4 In the Matter of ARKANSAS POWER & LIGHT COMPANY 1
- TO iMENDED !
APPLICATION FOR LICENSES UNDER THE ATOMIC ENERGY ACT OF 1954
~AS AMENDED 1
for ARKANSAS NUCLEAR ONE - UNIT 1 A DATE: April 19, 1971
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s O Before The UNITED STATES ATOMIC ENERGY COMMISSION Docket No. 50-313 In the Matter of Arkansas Power & Light Company AMENDED APPLICATION OR L'OENSES Arkansas Power & Light Company (herei.'after sometimes referred to as " Applicant") hereby makes this amended application, pursuant to the provisions of the Atomic Energy Act of 1954, as amended, and the* Atomic Energy Commission's Rules and Regulations thereunder, for the necessary licenses (including a construction permit) to own, use and operate a nuclear electric generating plant to be located in Pope County, Arkansas, and to be known as " Arkansas Nuclear One - Unit 1" (hereinafter sometimes referred to as " Facilities") as an integral part of its total operating system. Applicant was heretofore granted a provisional construction permit to construc* I O Ametidment No. 29 _y_ September 8, 1972
the Facilities on December 6,1968. This amended application 3 is filed pursuant to the requirement of 10 CFR #50.30 (d) . This application consists of the following three parts: (a) The general information requir. by 10 CFR #50.33, which is set out herein; (b) The technical information and safety analysis report required by 10 CFR #50.34(b), which is set out in a separate document entitled " Arkansas Power & Light Company, Arkansas Nuclear One - Unit 1, Final Safety Analysis Report", forwarded herewith and made a part hereof, and (c) Environmental Report - Operating License Stage, required by Appendix D of Part 50, 10 CFR. GENERAL INFORMATION
- a. Name of Applicant Arkansas Power & Light Company b .' Address of Applicant Ninth and Louisiana Streets P. O. Box 551 Little Rock, Arkansas 72203
- c. Description of Business or Occupation of Applicant Applicant is an operating public utility engaged ex clusively,in the production, transmission, distribution and sale of electric power and energy in the State of Arkansas and in 1
Amendment No. 29 - September 8, 1972
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i relatively insignificant areas in adjoining states immediately adjacent to the Arkansas border. Applicant's service area is shown generally on its system map on Page 12 of its annual report to shareholders for 1972, a copy of which is attached hereto as Exhibit II. This service area encompasses approxi-mately 18,200 square miles, having an estimated. population of about 1,200,000. Applicant provides electric service in 62 of the 75 counties in Arkansas as of December 31, 1972 to approximately 397,138 customers. It supplies electricity directly to retail 37 customers in 245 incorporated municipalities. It also sells () power and energy at wholesale to seven other incorporated municipalities, to three Rural Electrification Administration cooperatives, and to one private utility. Applicant's electric revenues for 1972 totaled l 184,810,000, 31% of which was derived from residential sales, i l 28% from industrial sales, 21% from commercial sales and 20% ) f rom other sources. In the five year period ended December 31, 37 l 1.T72 applicant experienced a growth in annual gross electric re enues of 75%. The average annual kwh sales per residential customer increased from 4695 kwh to 8,217 kwh during this period, an increase of 75%. The total installed generating capability of Applicant's r s Amendment No. 37 (,)- April 27, 1973 l
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t electric utility plant as of December 31, 1972 was 2,366,000 kw, 37 consisting of five steam electric plants with a total installed capability of 2,200,000 kw, five gas turbine generating units with a total installed capability of 91,000 kw, two hydro-electric plants with a total installed capability of 69,000 kw and diesel-
; electric units with a total capability of 6,000 kw. _In addition, Applicant had available an additional 605,000 kw of firm power.
The peak demand on Applicant's system in 1972 was 2,607,000 kw. The 1971 load included the Arkansas Missouri Power Company. Since the date of the 1971 peak, Arkansas Missouri Power Company has become an integrated operating company of Middle South Utilities. Restating the load increase under this condition, The Arkansas (% (_) Power & Light load increased from 2,392,000 kw in 1971 to 2,607,000 kw in 1972, an increase of 9%. 37 At December 31, 1972, Applicant's net utility plant totaled $795,191,000. For the five year period ended on that date, gross property additions totaled approximately $217,089,000 (not including approximately $216,055,900 of construction work in progress at December 31, 1972), and ~etteements totaled approx-imately $29,596,000. At December 31, 1972, Applicant.'s transmission and dis-tribution lines consisted of approximately 28,121 cole miles of various voltages and types of structure, of which approximately 3,533 miles are lines carrying more than 35,000 volts. The (r Amendment No. 37 April 27, 1973
iO, Applicant also owned and operated 237 substation with a 3 total transformer capa' city of 11,922,000 kva. ' Applicant is an operating subsidiary of Middle South Utilf. ties, Inc. Applicant and Mississippi Power & Light Company, 4 i !
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- 4a - Amendment No. 37 April 27, 1973 i
- Louisiana Pawet & Light Company, Arkansas-Missouri Power Company, and New Orleans Public Service, Inc. , the four other principal operating companies in the Middle South System, share generating capacity and other power resources. Each of these-five companies I constructs generating units to meet additional requirements of the entire Middle South System and sells capacity and energy 1
4 therefrom. This arrangement enables each company to install larger and more economical generating units than would other-4 wise be feasible. In addition, arransements have been made under which Applicant, the other four principal operating companies of the Middle South System, six neighboring utilities, and Tennessee Valley Authority exchange capacity which is available for such l purpose because of diversity in the periods of peak demand. i The diversity capacity available for exchange is approximately 1,500,000 kw, of which Applicant's share is approximately 10%. A network of Extra High Voltage transmission lines and related R l facilities have been constructed for the purpose of carrying out this exchange arrangement. 4 Applicant also has. direct transmission line connections with the facilities of Tennessee Valley Authority, Southwestern Electric Power Company, Empire District Electric Company, Oklahoma
' Gas & Electric Company, Arkansas Electric Cooperative Corporation, Amendment No. 29
, O September 8, 1972 I l
and certain multiple purpose projects of the Federal Government located in Arkansas. In addition, there are direct transmission connections between the Middle South System and Gulf States Utilities Company, Central Louisiana Electric Company, Mississippi Power Company, Union Electric, and Associated Electric Cooperative Corporatiott. 37
- d. Organization and Management of Applicant Applicant is a corporation organized and existing under, the laws of the State of Arkansas, and its principal office is located in Lidtle Rock, Arkansas, at the address stated above.
All of Applicant's principal officers and it: directors are citizens of the United States. Their names and addresses ( are as follows: DIRECTORS Name Address Lawresce Blackwell Pine Bluff, Arkansas Richard C. Butler Little Rock, Arkansas
, L. C. Carter Stuttgart, Arkansas A. B. Coen Little Rock, Arkansas Floyd N. Lewis New Orleans, Louisiana William C. Nolan, Jr. El Dorado, Arkansas I
J. D. Phillips Pine Bluff, Arkansas ! 6.- t (_/ - Amendment No. 37 April 27, 1973
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O Robert D. Pugh Portland, Arkansas Reeves E. Ritchie Little Rock, Arkansas Marshall T. Steel Hot Springs, Arkansas R. E. L. Wilson III Wilson, Arkansas PRINCIPAL OFFICERS Name Address Reeves E. Ritchie, President Little Rock, Arkansas A. B. Coen, Vice President, Little Rock, Arkansas Treasurer & Secretary J. T. Meek, Vice, President, Little Rock, Arkansas (} Geographic Divisions W. M. Murphey, Vice President, Little Rock, Arkansas Administrative Services ; Arch P. Pettit, Vice President, Little Rock, Arkansas Marketing J. D. Phillips, Vice President Pine Bluff, Arkansas and Chief Engineer Applicant is not owned, controlled or dominated by any alien, any foreign corporation, or any foreign government. It is making.this application in its own behalf, and not as agent i or representative of any other person.
- e. Class and Period of License Applied for and Use to Which 4
Facilities will be Put. Applicant was heretofore on December 6, 1968, granted a Amendment No. 29 September 8, 1972
Class 104 (b) provisional construction permit. The license hereby applied for is a Class 104 operating license as defined by 10 CFR #50.21(b) (1) . It is requested for a period of forty (40) years. Applicant further requests such additional source, special nuclear, and by-product material licenses as may be necessary or appropriate to the acquisition, construction, possession and operation of the licensed Facilities. The Babcock & Wilcox Company will supply the first two cores for the nuclear generating unit. The Facilities will be used as a part of Applicant's electric utility plant for the generation of electric power and energy. They will include one pressurized water reactor to be known as " Arkansas Nuclear One - Unit 1". Arkansas Nuclear One - Unit 1 is designed to operate at core power levels up to 2568 HNt which, when the 16 MNt contribution from the , i reactor coolant pumps is included, corresponds to a gross electrical output of 880 MWe. Site parameters, principal structures, engins' ring safeguards, physics, and certain hypo-thetical accidents are all evaluated at the design power levi of 2568 MNt.
- f. Financial Qualifications of Applicant Applicant estimates that the total cost of the Facilities, Amendment No. 29 ;
September 8, 1972 -. j l
n including the first full core for the unit, will be approximately
$226,100,000, 37 The estimated annual costs to operate Unit 1 for the first five years including interest on investment, overhead, taxes, depreciation and other operation, maintenance, insurance ,
and fuel costs are as follows: 1974 (from March) $33,922,000 1975 43,243,000 1976 42,370,000 37 1977 40,522,000 1978 42,523,000 At the end of the useful , life of Arkansas Nuclear One - ( ) Unit 1, which is presently designed to be forty (40) years, a program of decommissioning would be developed and carried out in order to achieve decommissioning in accordance with 10 CFR 50 33(f). Based on a review of the available literature and existing technology, a program as described below would be developed and carried out. The present-day cost estimate for accomplishing such a program would be of an order of magnitude of $10,000,000. This cost estimate is based on the reasonable effort necessary to achieve the desired goal as determined by a review of past decommissioning experiences of others, existing technology O Amenament No. 37 April 27, 1973
10 and environmental and safety considerations. , The major steps of such a decommissioning program would consist of the following:
- 1. All fuel would be removed from the site and shipped to a processing facility.
- 2. All radioactive wastes capable of being packaged and shipped would be removed from the site
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and sent to an approved storage facility.
- 3. All radioactive areas will be decontaminated as much as practical by chemical cleaning and flushing of the minor components, piping, etc. , and the resulting radioactive waste will be packaged and shipped to a storage facility.
- 4. Capping / sealing of the following items will be performed using welding, concrete, ehtombment, etc. , as appropriate to completely close them after the removal of all salvageable components.
- a. Isolate the NSS system by capping and sealing all pipes and pipeways.
- b. Seal all reactor building openings. Provide permanent barriers against access from any outside area.
- c. Install a cover over the spent fuel pool.
Amendment No. 29 O September 8, 1972
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- d. Seal all potentially radioactive vessels (e.g.
demineralizers, storage tanks, etc.)
- e. Seal all dcors, window, penetrations, and other g accesses to any compartment containing radioactive equipment or components.
The above would be the extent to which decc=missioning could be accomplished on Unit 1 until Unit 2 reached the end of its design life. These units share common facilities and are constructed directly adjacent to one another. When Unit 2 is ready to be decommissioned, than a much more extensive de-commissioning program could be carried out on the combined facility. The decommissioning of Unit 2 would follow the same O(_/ major steps as those outlined above. At that time, much of the station equipment would be disassembled and salvaged and non-nuclear related structures such as the turbine building would probably be torn down and the components salvaged. Applicant, after. shutting down Unit 1 would maintain said unit under shut-down status in a safe condition. The 1 operation to maintain would include inspection at prescribed f intervals by Applicant personnel, monitoring operations, 37 housekeeping jobs and any special maintenance required or found l necessary during the facility inspections. The estimated cost, based on review of available literature, existing technology, () Amendment No. 37 April 27, 1973
O and assuming interest rates basic to the same as today., would be approximately $40,000 per year. Construction of the Facilities is being financed as an l integral part~of Applicant's total construction program. A , l substantial part of the funds required for the construction pro-gram will be obtained from retained earnings, provisions for ! depreciation, and other internal sources. The remainder of the required funds will be obtained from time to time from temporary short-term borrowings from banks and the sale of commercial paper and from the sale and issuance of securities. . ! Applicant has lines of credit from commercial banks for {} short-term borrowings at the prime commercial inte. rest rate. From time to time the short-term borrowings will be repaid and additional funds obtained through the sale of Applicant's securities. Due to changing carket conditions, no definite statement can be made at this time as to the type of securities which will be sold or the dates of their sale. It is presently anticipated that Applicant will issue and sell long-term debt and equity securities during the period of construction of the Facilities in a manner consistent with the maintenance of desirable capitalization ratios. l In recent years, all of the issues of Applicant's First ( 1 Mortgage Bonds have been rated A by Moody's and by Standard & s Amendment No. 29 September 8, 1972 4
w O Poor's. None of Applicant's outstanding bonds mature prior
- to 1974.
~The costs for operation for the first five years of Unit 1 1
will be financed in the same fashion listed above for the construction of the Facilities. Even though Applicant has existing contracts for the acquisition of the completed first nuclear fuel core *or Unit 1 as well as three reload batches of 't fuel, it is considering arrangements under which Applicant's rights and obligations under these contracts will be assigned to another entity which will take title to the first core and the Applicant will buy the heat content of the fuel from such () entity and pay for same on a payment schedule related to the actual receipt and use of heat by the Applicant. Such arrangement, if consummated, will contain all necessary c,ontractual provisions assuring that Applicant will, at all times, have complete dominion and control over the fuel, its possession and use and will have full liability therefor. The arrangements described above are still in the negotiating stage and Applicant has not made a definite decision to enter into any 'uch s arrangement nor have any documents or agreements with respect thereto been finalized. If and when these documents are finalized, copies of the documents will be furnished to 13 - Amendment No. 29 , September 8, 1972 O y - - - -w,-
l 1 ix d the Atomic Energy Commission. Applicant may or may not finance the nuclear fuel through a lease or similar arrangement or through the use of separate financing for nuclear fuel. No definite plans have been made for such financing, however. Applicant will finance the cost of permanently shutting down the unit as well as the costs of maintaining it in a safe condition from retained earnings and company funds generated by operation. Information relating to the financial qualification of Applicant to engage in the proposed cctivities is contained in Exhibit I attached hereto. Included in this Exhibit are
, financial statements of Applicant and its parent, Middle South \
Utilities, Inc., as of December 31, 1972. Additional financial and statistical information is shown in Applicant's and Middle South Utilities, Inc.'s 1972 annual report to shareholders, , 37 which are attached as Exhibit II. Applicant will carry builders' risk insurance during the construction of the Facilities and charge,the cost thereof to construction expenditures. Applicant will also obtain all required and appropriate. property and liability insurance for the Facilities and their nuclear fuel, and w111' advise the Commission accordingly. I l l l l ~~ l j (3 - ~14 - Amendment No. 37 l \s) April 27, 1973 l l l
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- g. Technical Qualifications of Applicant
, The personnel in Applicant's Engineering Department is supervising the design and construction of the Facilities, and will operate the Facilities after completion. The nuclear-steam supply system (including reactor, primary loops and steam generators, miscellaneous systems, instrumentation and controls, and supporting technical services) for the unit, as well as initial fuel requirements and assistance in training, is being supplied by the Babcock & Wilcox Company. Bechtel Corporation, as architect-engineer, is designing the other
, portions of the Facilities, and is procuring all other materials, equipment and supplies for the construction of the Facilities, subject to instructions from and approval by the Applicant.
Bechtel Corporation is managing the construction of the Facilities including the making of certain quality control and compliance inspections. The actual construction of the Facilities-is being performed by Bechtel Corporation. Quality control and compliance inspections, in addition to those made by Bechtel Corporation, are being arranged for by the Applicant. e' ( The' technical qualifications of Applicant to engage in the proposed activities are described in Exhibit III which is attached hereto. Amendment No. 29 - September 8, 1972 1
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- h. Completion Dates.
Applicant's projected load requirements will necessitate normal power generating operation of the unit no later than March, 1974. The date for completion of construction (ready i for fuel loading) is estimatcd to be November, 1973, and the 37 latest such completion date is estimated to be January 1, 1974.
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- 1. Restricted Data.
An agreement limiting access to Restricted Data as O l 1 i n I l6 - Amendment No. 37 , ss April 27, 1973 ' 9 -,
- O-
. required by 10 CFR #50 37 is attached hereto as Exhibit IV.
This application in the form submitted does not contain restricted data or other defense information. It is requested that all communications pertaining to this application be nant to: J. D.'Phillips Vice President and Chief Engineer Arkansas Power & Light Company Sixth and Pine Streets Pine Bluff, Arkansas 71601 IN WITNESS WHEREOF, Arkansas Power & Light Company has caused its name to be hereunto signed by J. D. Phillips, one of its Vice Presidents, and its corporate seal to ' , hereto affixed by H. Leftwich, Asst. Secretary, this 19th day () of April, 1971. ARKANSAS POWER & LIGHT COMPANY
'By /s/ J. D. Phillips Vice President (CORPORATE SEAL)
ATTEST:
/s/ Helen C. Leftwich Asst. Secretary O .
O STATE OF ARKANSAS SS COUNTY OF PULASKI J. D. Phillips, being duly sworn, states that he is a Vice President of Arkansas Power & Light Company; that he is authorized on the part of said company to sign and file with the Atomic Energy Commission this appli. cation and exhibits attached thereto; that he has read all of the statements contained in such application and the exhibits attached thereto and made a part thereof; and that all such statements made and matters set forth therein are true and correct to the best of his knowledge, information and belief.
/s/ J. D. Phillips J. D. Phillips SUBSCRIBED AND SWORN TO before me, a Notary Public, in and for the County and State above named, this 19th day of April, 1971.
/s/ Annette O. Benson Notary Public (SEAL)
My Commission Expires: June 25, 1972 't em
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f' U) - EXHIBIT I Page 1 ARKANSAS POWER & LIGHT COMPANY FINANCIAL STATEMENTS Arkansas Power & Light Company's fiscal accounting is on the calendar year basis. The financial statements, submitted herewith, including balance sheets as of December 31, 1972, and statements of income and earned surplus for the last five calendar years and the most recent twelve months ended December 31, 1972, may be found in Arkansas Power & Light
,j es Company's 1972 Annual Report - Exhibit II. The notes to financial statements are an integral part of these statements.
Applicant also has included current financial inform-J ation as of December 31, 1972 for its parent, Middle South Utilities, Inc. which may be found in Middle South Utilities 1972 Annual Report - Exhibit II. A copy of a prospectus for a security issue of Arkansas Power & Light Company is also attached. h(')' ' Amendment No. 37 - April 27, 1973
l 1
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. l ARKANSAS PCWER & LIGHT COMPANY Balance Sheet )
1 becember 31, 1972 l l Assets In Thousands 1 1 Utility Plant (Notes IB and IE): I i At original cost: I Electric plant (including construction work in . progre s s o f $ 216 ,0 5 5 ,0 00 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . J 7 43 , 613 ) Nuclear fue1........................................................... 2C.722 ' Tota 1................................................................ 970,335 Less accumulated depreciation............................................ 175,144 ; Utility plant-net.................................................. 795,191 l 1 4 Other Property and Investments-At cost: Investments in associated companies (Note 4)............................. 2,982 Other (less accumulated depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 794 ; To tal o ther property and inves tments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.776 i Curre'nt Assets:
.O Cash..................................................................... 6,715 l Special deposits......................................................... 179 )
Notes receivable (less allowance for doubtful notes-$43,000)............. 1,795 Accounts receivable: Customer and other (less allowance for doubtful accounts-$175,000) . . . . . 9,786 Associated companies................................................... 50 Materials and supplies , including fuel oil (at average cost) . . . . . . . . . . . . . 4,299 , Prepayments.............................................................. 342 l 0ther.................................................................... 383 l To t a l Cu rr e n t as s e t s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,540 Deferred Debits............................................................ 580 l Tota 1................................................................ $823.005 See Notes to Financial Statements. ( )' I l i l
, Amendment No. 37 q.
April 27, 1973 v v - = - - - w $ w -- - - - w 7e
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, V . ARKANSAS POWER & LIGHT COMPANY Balance Sheet
. December 31, 1972 Liabilities In Thousands Capitalization:
Proprietary capital: Preferred s tock and premium (per schedule attached) . . . . . . . . . . . . . . . . . . . . $ 86,615 l Common stock, $12.50 par value; authorized,
; 20,000,000 shares; issued and outstanding, 16,190,000 shares.................................................... 202,375
. Re tai ne d e arning s (No t e 3 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.714 Total proprietary cap!.ca1............................................ 323,704 Long-teen debt (per schedule attached)................................... 398.175 Total capitalization............................................. ... 721.879 Current Liabilities:
Notes payable............................................................ 3,250 Accounts payable: Associated companies......................./........................... 5,348 O- 0ther.................................................................. 3,792 Customer deposits........................................................
. 4,611 T axe s a c c ru e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,590 I n t e r e s t a c c ru e d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,675 Dividends declared.......~............................................... 984 Other...........................................................,......... 1.370 To t al c u rr en t liabili tie s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.520 Deferred Credits:
Accumulated deferred investment tax credits.............................. 9,013 0ther.................................................................... 2,266 ! Total deferred credits............................................... 11.279 l 1 Reserves........................................................ .......... 1.077 Contributions in Aid of -Cons truction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ,
......... 4.612 Ac cu mu la t e d De f e rre d Income Taxe s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,629 l To t a 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8 2 3 . 0 0 6 1
See Notes to Financial Statements. * () . i 1 1 1 1 Amen tent no. 37 l [ April 27, 1973 l l l l
. 1 Schedule of Preferred Sto'ck and Long-Term Debt December 31, 1972 .C,.) .
Current Shares Shares Call Price Preferred Stock Authorized Outstanding Pe1 Share CUMULATIVE, $100, PAR VALUE: - - 4.327. series.......................... 70,000 70,000 $103.647 4.72% series.......................... 93,500 93,500 107.00 4.56% series.......................... 75,000 75,000 104.33 4.567.-1965 series..................... 75,000 75,000 104.00 6 . 08 % s e ri e s . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000 104.33 7.32% series.......................... 100,000 100,000 108.99 7 . 80% s e ri e s . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 150,000 109.10 7.40% series.......................... 200,000 200,000 108.35 Other series.......................... 136.500 None T0TAL................................... 1.000 000 863.500 In Thousands S TATED AT $ 100 A SHARE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,350 PREM1UM ON PR,EFERRED ST0CK.............................. 265 TOTAL................................................... $ 86.615 I l Long-Term Debt FIRST MORTGAGE BONDS: 3 - 1/8 % s e rie s due 19 74. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,000 2- 7/ 8 % s e rie s du e 19 7 7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000 3- 1/8 % s eries due 19 78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500
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[' 2-7 /8% s e rie s due 19 7 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,700 2-7/8 % series due 1980. . . . . . . . . . . . . . . . . . ............. 6,000 3 - 5 /8 % s e ri e s du e 19 81. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000 3-1/27. series due 1982................................ 15,000 3 - 1/4% s e ries due 1984. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,500 3-3 / L% se ri es due 1985. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000 4-7/8% series due 1991................................ 12,000' 4-3 / 8% s e rie s due 19 93. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 4-5/8 % s e rie s due 1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 5-3/4% series due 1996................................ 25,000 5- 7/8 % s e rie s due 19 9 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 7 - 3 / 8 % s e ri e s due 19 9 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000 9 - 1/4 % s e ries due 19 5 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 9-5 /8% s e rie s due 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 7-5/8% series due 2001................................ 30,000 8 % s e ri e s du e 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,000 7-3/47. series due 2002................................ 55,000 7- 1/2 % s e rie s due 2002. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.000 Total first mortgage bonds (annual sinking fund requirements, which may be met by certification of property additions at the rate of 167% cf such requirements, amount to $3, 78 7,000 in 19 73 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 393,700 3-3/87. SINKING FUND DEBENTURES DUE 1974 (cash sinking fund payment of $225,000 ()s
\m- required in 1973 was prepaid in 1972)................ 4.475 T0TAL................................................... $398.175 See Notes to Financial Statements. Amend =ent No. 37 April 27, 1973
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(g ARKANSAS POWER & LIG'dT COMPANY Statements of Income and Retained Earnings December 31, 1972 Statement of Income In Thousands Operating Revenues......................................................... $184,810 Operating Expenses: .--
' Operation: . _ - . . . . _ . _ . , _ .
Fue1................................................................... 36,648 Power purchased........................................................ 25,334 0ther.................................................................. 24,733 Maintenance.............................................................. 7,797 Depreciation............................................................. 19,609 Taxes other than income taxes............................................ 11,455 I ncome t axe s (No t e ID and 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,153 Deferred income taxes.................................................... 3,430 I n ve s tme n t t ax c re d i t adj u s tme n ts ne t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,250 Tota 1.......................................'......................... 139,409 O p e ra t ing I nc o me . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,401
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x_ Other Income and Deductions: Allowance for funds used during cons truction (Note 1E) . . . . . . . . . . . . . . . . . . . 14,170 Miscellaneous-net.~...................... ................................ 45 Tota 1................................................................ 14.215 Interest. Charges:. . Interest on long-term debt.......................................'........ 21,843 Otherinterest........................................................... 1,064 km;t..zation ci debt premium, discount and expense-net................... (62) Tota 1................................................................ 22.845 Net Income................. . . . . .
.......................................... $ 36.771 Statement of Retained Earnings Balance, January 1......................................................... $ 31,043 Add-Net income............ . . . . . ........................................... 36,771 Tota 1................................................................ 67.814 Deduct:
Dividends-cash: Preferred stock-at prescribed rates of each series. . . . . . . . . . . . . . . . . . . . . 3 606 29,.494 Co mmo n s t o c k * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tota 1................................................................ 33.100 Balance, December 31 (Note 3)............................ . . . . ............ $_2k.lls s_-)
- Includes a special dividend of $10,000,000 to the parent company which was concurrently reinvested in the Company's common stock.
Amend =ent No. 37 See. Notes to Financial Statements. April 27, 1973
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C , . . ARKANSAS POWER & LICHT COMPANY NOTES TO FINANCIAL STATEMENTS December 31, 1972 2
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- 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
-A. System of Accounts ,
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The accounta of the Company ar.e maintained in accordance with the system of accounts prescribed inr, the Federal Power Commission. B. Utility Plant and Depreciation Utility plant is stated at original cost. The cost of additions.to utility 2 plant includes contracted work, direct labor and materials, allocable overheads, and an allowance for the composite cost of funds used during construction. The
~
I costs of units of property retired, replaced, or renewed, are removed from i utility plant and such costs plus removal costs, less salvage are charged to accumulated depreciation. Maintenance and repairs of property and replacement and renewal of items determined to be less than units of property are charged to operating expenses.
'f Depreciation is computed on the straight-line basis at rates based on the i-estimated service lives of the various classes of property. Depreciation pro-
! ' vided in 1972 amounted to approximately 2.9% on average depreciable property. C. Pension Plan , ',The Company has a pension plan covering substantially all of its employees. The plan was amended in 1970 to provide for certain changes in' benefits and to reduce the amount of employee contributions until June 1,1972, when it became i .non-contributory. Pension cost in 1972 amounted to $2,486,000 including amortization of unfunded prior service cost over a period of 14 years. The ! Company's policy is to fund pension costs accrued. 2 D. . Income Taxes The book provisio. for current income taxes reflects n'et reductions resulting
~
I from the utilization of liberalized depreciation (including the class life method i provided knr the Internal Revenue Code) and accelerated amortization for tan
- purposes. Deferred taxes have been provided in amounts equivalent to such net l reductions.
The provision for current income tax for 1972 has also been reduced by the , Federal investment tax credit of $1,549,000 and amounts equivalent thereto have . been deferred by charges to inccue. Amounts deferred are being amorti:ed over l the average useful life of the'related property and such amortication in 1972- !- amounted to $299,000. ,
-() Th: Federal Power Commission has issued a Notice of Proposed Rulemaking which would provide, among other things, for more comprehensive interperiod
, tax ~ allocation by-~ electric and gas companies. The proposed change relates to the deferred method which gives recognition to the income tax effects of expense and revenue transactions reported either earlier or <1ater for tax purposes than A=endment No. 37 April 27, 1973
. 3.
l l l j) for book purposes. The effect, if any, of this proposal on- the results of operations will be dependent upon whether, and/or in what form, it is adopted by the Federal and state regulatory bodies and their treatment in the rate-i making process. Allowance for Funds Used During Construction E. The Federal Power Commission system of accounts provides that the net cost of funds (interest on borrowed funds and a reasonable rate on other fund's) used during the period of construction for construction purposes may be capitalized. The Company used a rate of 7-1/2% per annum in 1972 ia computing the allowance i for funds used during construction, and an amount equal to the amount capitalized j is reported in the accompanying Statement of Income.
- 2. INCOME TAXES * -
The provision for income taxes for- the year 1972, as ;ompared to prior periods and in relation to pre-tax book income, has declined because of the increased difference between taxable income and book income. The difference is primarily the result of (1) increased excess of depreciation for income tax purposes over depreciation for book purposes, (2) increased allowance for funds used during j construction, which is not included in taxable income, (3) increased amount of taxes other than income taxes, pension costs, etc. which are charged to utility plant for book purposes and deducted currently for income tax purposes, (4) increased investment tax credits, and (3) currently deducting the cost of removal j of utility plant in computing taxable income, as permitted by the Internal
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Revenue Service, which costs for book purposes are charged to accumulated depreciation. The Company received a ' refund of Federal income taxes in 1972 applicable to the years 1959 through 1961. Such refund including interest earned through August 8, 1972, less related income taxes, amounted to $509,000 and has been reflected.in.the 1972 results of operations. ,
- 3. RETAINED EARNINGS -
I The indenture provisions relating to the Company's long-term debt provide for rastrictions on the payment of cash dividends on common stock. As of December 31, 1972, $21,204,000 of retained earnings are free from such restrictions.
- 4. CC;91ITMENTS AND CONTINGENCIES i The Company has a 35% interest in System Fuels, Inc. (SFI), a jointly-owned
[ subsidiary. of four of the principal operating subsidiaries of Middle South Utilities, Inc. SFI operates on a nonprofit basis in planning and implementing programs for the procurement of fuel supplies for the generating units of these operating companies; its costs are recovered through charges for fuel delivered.
- The Company is committed to loan SFI from time to time through 1973, for ter s of not more than c'n e years, up to an aggregate of $10,500,000. As of December 31, -
1972, the Company had loaned $2,958,000. In January 1973, the Federal Power Commission initiated proceedings that -
~Q, could result. in further and possibly eventual total curtailment, for use as L\>. ' boiler fuel, of interstate natural gas supplies which are subject to juris- .
diction of Federal Power Commission. -In 'the event that the interstate gas i Amendment No. 37 April 27, 1973 4.' my +yu- p
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.,,s supplies used as- fuel by the Company are no longer available, a maximum of O.
approximately $46,000,000 additional expenditures would be required to enable these generating plants to use fuel oil as the primary fuel. . Such expenditures l would be made during a . conversion period of several years. In 1972, substantially ; all of the natural gas used by the Company was purchased from interstate supplies. ! Included in utility plant at December 31, 1972, are two hydroelectric pro-duction plants, with a net book value of $5,029,000, licensed by the Federal ! Power Commission. This license expired on February 7,1973; however a one year extension, through February 6, 1974, has been granted. An application for.a new license was filed with the FPC on February 4,1970. On August 4,1969, the FPC issued a revised order No. 387, specifying the method for determining
" net investment" component as equal, to the project original cost, less the project accumulated depreciation and subject to a maximum potential further deduction of the balance ~ in the~i5ortization reserves. It is not possible to s
predict the final outcome of this order; however, in the opinion of management, l the ultimate losses, if any, which may result from any takeover or relicensing { of the licensed project to others will not be material. . The Company is a defendant in a claim arising from a dispute on centract performance in connection with its construction program. In the opinion of counsel, the claim against the Company is substantially overstated and the i ultimate liability of the Company, if any, will not be material. O s 1 O Amendment No. 37 April 27, 1973
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O ARKANSAS POWER & LIGHT COMPANY Balance Sheet July 31, 1972 (Unaudiced) Assets In Thousands Utility Plant: At original cost (including construction work in progress of $206,163 000). ..... . . . . . . . . . . . . . S 898,389 Nuclear Fuel . . . ... ... ... . . . . . . . . . . . . . . 18,532 Total. . . . . . .... ...... . . . . . . . . . . 916,921 Less accumulated depreciation. ...... . . . . . . . . . . . 169,011 Utility plant--net. ...... . . . . . . . . . . 747.910 Other Property and Investments--At cost (less depreciation). . . . 1,293 Current Assets: Cash . . . . . . . . . . . ... . . .. . . . . . . . . . . . . 4,417 Special deposits . ... .. . . . . .... . . . . . . . . . . 2,998 Notes receivable (less allowance for doubtful notes of $43,000). 1,883 Accounts receivable: Customer and other (less accumulated provision for doubtful accounts of $175,000) . ... . . . . . . . . . . . 11,3n5 Associated companies . ... . . . . . . . . . . . . . . . . . 116 Materials and supplies, including fuel oil (at average cost) . . 7,113 Prepayments. . . .... . . . . . . . . . . . . . . . . . . . . 709 Other. . .. . .. ...... . . . . . . . . . . . . . . . . . 431 Total current assets . . .. . . . . . . . . . . . . . 28.977 Deferred Debits. . ... ....... ... . . . . . . . . . . . 362 Total . . . . . . . . . . . . . . . . . . . . . . S 77R.537 l See accompanying Notes to Financial Statements 9
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ARKANSAS POWER & LIGHT COMPANY Balance Sheet July 31, 1972 (Unaudited) Liabilities In Thousands Capitalization: Proprietary capital: Preferred stock and premium, per schedule. .... . .. . ..S 66,560 Common stock, $12.50 par value; authorized, 20,000,000 shares; issued and outstanding, 15,390,000 shares) . . . .. 192,375 Retained earnings (Note 1) . . . . . . . . . . . . . . . . . . 38,153 Total proprietary capital . ... ... .. . . . . .. . 297,088 Long-term debt, per schedule . . ...... . ... . . ... . 383,175 Total capitalization . .. .. .. .. .. . ... . 680,263 Current Liabilities: Cash sinking fund requirements . . .. .... .. . . . . . .. 225 Notes payable. ...... . . . .... . . .. .. . . . . .. 6,500 l Accounts payable: Associated companies . . . . . ... . . . . . ... . .. .. 696 Other. .. ...... . . . . .... .. . . . . . . . . .. 5,745 Customer deposits. .. . .... ....... . .. . .. . .. 4,415 Taxes accrued. ..... . . . . ....... .. . . . . . .. 13,014 Interest accrued . .. . ... . ... . . ... .. . . . .. . 9.084 Other. .. . ... ... . . . . ... ... . . .. . . . . .. 1,322
' Total current liabilities. . .. . . . . . . . . .. 41,001 Deferred Credits:
Accumulated deferred investment tax credits (Note 2). . ... .. 8,429 other. .. . .......... ........... . .. .. 2,120 Total deferred credits . . ... . ... . . . .. . 10,s49 Reserves . . . .... ......... .. . . ... .. . . .. 1, int Contributions in aid of construction . . ... . . . . . . . . .. 4.487 Accumulated deferred income taxes (Note 2). . . .. . . . . . . .. 41,136 Total. . . . . . . . .......... . . . . ..$ 7787 517 Sea, accompanying Notes to Financial Statements
ARKANSAS POWER & LIGHT CCMPANY Statement of Income and Retained Earnings
)
Tselve Months Ended July 31, 1972 (Unaudited) In Thousands Operating revenues . . . . .. ..... ....... .. . . .. .. $171,8 55 Operating expenses: Operation: Fuel and power purchases . .. ... ............... 52,095 Other . . . . . . .. ....... ............... ' 24,095 Maintenance. . . . ..... . ...... ........... .. 7,605 Depreciation (Note 2) . . . . . ... .............. . . 19,208 Income taxes (Note 2) . . . . . .. . . . . . .... ... .. . .. . 10,494 Deferred income taxes (Nor.e 2). ... ..... .. . .. .... .. 3,361 Investment tax credit adjustments--net (Note 2) . . . .. . . . ... 1, 1 09
. 0ther taxes . . . .. ... . . ..... ... .. .. ... . .. 11,437 Total . . . . . . . . . . . . . . . ... ... . .. . .. 179,399 operating income . . .. .. . ... ...... . . .. . . .. .. 42,456 ;
1 Other income and deductions: A11cwance for funds used during construction . .. . .. .... .. 11,842 Miscellaneous--net . ... . ............ .. ..... 87 Total . . . . . . ... ... ........ .. . ..... 11,979 kg Interest charges:
)
Interest on long-term debt . . .............. .. . .. 90,493 ) Other interest . . .. . ... .............. ... .. 899 ; Amortization of debt premium, discount and expense--net . .... . (61) i Total . . . .. . ... ... ................ 21,331 ! I Net income . . . . . .. .... .......... . .. . . . .. . $, 33. 0 y+ Retained earnings, August 1, 1971. . . . . . . . . . . . . . . . . . . S 30,787 Add--Net income . . .. .... ....... .... .. .. . ... 33,054 Total . . . . . .. .. ....... ... ... . . . .. . 63,836 Deduct: Dividends--cash: Preferred stock: 4.32% series . .. .... ... ................ 302 4.72% series . .. .... .... .............. . 441 4.56% series . ... ... ... ....... .... . . . .. 342 4.56%--1965 series . ... .......... ..... . ... 342 6.08% series . . . .... . ... ............... 608 7.32% series . .. . ... ... ........... .. . . . 739 7.80% series . . .. .. .... ......... .. . .... 2 54 Common secek . . . . ... ........... .... . ... . 17,667 Transfer to common capital stock acccunt (par value of , 400,000 shares issued ) .. .... ......... . ... .. 5,000 g~s b Total . . . .. ... . ........... ..... ... 25,683 1 i Retained earnings, July 31, 1972(Note 1) . . . . . . . . . ...... $ }8.153 See accompanying Notes to Financial Statements ! 1 l t :
4 ARKANSAS poler & LIGHT CCMPANY Statement of Preferred Stock and Long-Term Debt July 31, 1972 (Unaudited) Current Shares Shares Call Price Preferred Stock Authorized Outstanding Per Share CUMULATIVE, $100 PAR VALUE: , 4.32% series . . . . . . ....... 70,000 70,000 $103.647 4.72% series . .. . . . . . ..... 93,500 93,500 107.00 4.56% series . . . . . . .. ..... 75,000 75,000 104.33 4.56%--1965 series . . . ....... 75,000 75,000 104.00 6.08% series . . . . . . . ...... 100,000 100,000 104.33 7.32% series . . . . . . .. .. ... 100,000- 100,000 108.99 7.80% series . . . . . . . ...... 150,000 150,000 109.10 Other series . . . . . . . ... ... 336,500 None TO'IAL - . ................ L.Q9L.Q9.9. 89h,19,9. STATED AT $100 A SHARE . . . . ..... $66,350,000 PREM1UM ON PREFERRED STOCK . . ..... 209,488 TOTAL . . . . . . . . . . . . . . . . .. $66. 559.488 Long-Term Debt FIRST MORIGAGE BONDS: 3-1/8% series due 1974 . . . ............. $ 30,000,000 2-7/8 % serie s due 19 7 7 . . . . . . . . . . . . . . . . 11,000,000 ; 3-1/8% series due 1978 . . . . . . .. . ....... 7,500,000 1 2-7/S% aeries dus 1979 . . . ... ...... . .. . 8,700,000 2-7/8% series dua 1980 . . ... ........... 6,000.000 i 3-5/8% series due 1981. . .. ............ 8,000,000 l 3-1/2% series due 1982 . . . .. ........... 15,000,000 3-1/4% se rie s due 1984 . . . . . . . . . . . . . . . . 7,500,000 3-3/8 % series due 198 5 . . . . . . . . . . . . . .. . 18,000,000 4-7/8 % se rie s due 19 91 . . . . . . . . . ....... 12,000,000 4 3/8% series due 1993 . .. ......... . . . . 15,000,000 4-5/8 % series due 1995 . . . . . . . . . . . . . . . . 25,000,000 5-3/4% neries due 1996 . . . ... ..... . .. . . 25,000,000 5-7/8% saries 'due 1997 . . . ........... . . 30,000,000 7-3/8 % serie s due 1998 . . . . . . . . . . . . . . . . 15,000,000 9-1/4% series due 1999 . . . . .. ...... . ... 25,000,000 9-5/8% series due 2000 . . . ......... . .. . 25,000,000 7-5/8 % series due 2001 . . . . . . . . . . . . . . . . 30,000,000 8 % series due 2001. . . .. ....... ... 30,000,000 7-3/4% series due 2002 . . . ...... ....... 35,000,000
, Total first mortgage bonds (annual sinking i
fund requirements, which may be met by certification of property additions at the rate of 167% of such requirements, amount to $3,437,000 in 1972) . .............. 378,700,000 3-3/8% SINKING FUND DEBENTURES DUE 1974 I (cash sinking fund payment of $225,000 required l in 1972 was prepaid in 1971) .......... . . . 4,475,000 l TOTAL . ........... ... ....... . . . . $38 3.17 5.C00 l l See accompanying Notes to Financial Statements l I I _.m - ., .
l ARKANSAS P0tJER A. LTC"T COMPANV NOTES TO FINANCIAL STATEMENTS July 31, 1972 (Unaudited) 1 "ETATHED EARNINc3 Retained Earnings of $13,509,726 at July 31, 1972 are not available for payment of cash dividends on common stock because of indenture provisions relating co the company's long-term debt.
- 2. DEPRECTATION AND INCatE TAXES Depreciation is computed on the straight-line basis at rates ;
based on the estimated service lives of the various clases of ; orone rty. The deoreciation provided amounted to approximately 3.07. t of the average depreciable property for the twelve month period 1 cnded July 31, 1972. For purposes of computing the book provision for income taxes, l the Company used the Class Life Asset Depreciation Range System (ADR) ! provided for by the Revenue Act of 1971. The Company will make a l final decision as to the election of the new Class Life Asset Depreciation I Rance System for income tax nurposes when final reculations are oromulgated.by the Treasury Department. Provisions for Federal and State l income taxes reflece net reductions attributable to the recoenition of 1 ( accelerated amortization and liberalized depreciation (including the new Class Life Asset Depreciation Range System) for tax purposes only, in advance of the periods in which depreciation'would otherwise be deductible in conputing such taxes. Net income, however, is nnt affected since provision has been made for deferred taxes in amounts equivalent to such net reductions. i Provision for current r deral e income tax has also been reduced by the ' investment tax credit. An amaunt equivalent to such reduction has been deferred by a charge to income. The deferred amount is being amortized over the average useful life of the related prooerty. The investment tax , credit for the twelve month period ended July 31, 1972 was S1,391,220, the amount credited to income was $281,873. j
- 3. PENSION PLAN The Company has a pension plan covering substantially all of its )
employees which became non-contributory in June 1972. The total pension i cost, including amortization of past service liability, amounted to l
$2,520 303 in the twelve month period ended July - 31,1972. The company's oolicy is to fund pension cost accrued.
The unfunded past service liability, as of January 1,1972, is being funded over a fourteen-year period. The pension funds exceed the actuarially computed value of vested benefits. () ( Continued ) - t.
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- 4. CQt11TMENTS, FT,NANCINC AND CONTINGENCIES The Company's construction program for 1972 is . expected to result in
,s/ expenditures of approximately $118,400,000. This amount includes
$77,200,000 for two nuclear power plants expected to be completed in 1973 and 1975 at a total cost of approximately $180,000,000 and $220,000,000, respectively. Tn addition, the cost of initial fuel cores for the two nuclear units is expected to aggregate approximately $52,000,000.
In December 1972, the Company, by competitive bidding, olans to sell
$15,000,000 in principal amount of a new series of its First Mortgage Bonds, and 200,000 shares of a new series of its $100 par value, cumulative preferred stock for $20,000,000. The Company will also issue and sell 800,000 sharcs of its common stock, $12.50 par value to Middle South Utilities, Inc., the holder of all of the Company's common stock. The funds to purchase this stock will be provided by a cash dividend to be paid to Middle South Utilities. Inc.
concurrently with the purchase of the stock. The Company and three other principal operating companies of Middle Sours Utilities, Inc. have organized a jointly owned corporation to plan and implement programs for the procurement of fuel supplies. The Company is committed to make loans of approximately $10,500,000 to the new corporation from time to time throunh 1973. The Company entered into an agreement with Edison Electric Institute and Areeder Reactor Corporation whereby, pending the necessary regulatory approvals, the. Company would contribute $2,188,446.30 over a ten year period in suoport of the financing,, design, development and construction of a Liquid Metal Fast Breeder Reactor demonstration plant. Tncluded in utility plant at July 31, 1972 are two hydroelectric oroduction plants, with a net book value of $4,698,812, licensed by the Federal Power Commission. This license expires on February 7,1973, and an application for a new license was filed with the FPC on r eb rua ry 4, 1970. On August 4,1969 the FPC issued a revised order No. 387, specifying the method for determining " net investment" component as equal to the project original cost, less the oroject accumulated depreciation and subject to a maximum ootential further deduction of the balance in the amortization reserves. It is not possible to predict the final outcome of this order; however, in the opinion of management, the ultimate losses, of any, which may result from any takeover or relicensing of the licensed nroject to others will not be material. The Company is a defendant in a claim arising from a dispute on contract oerformance in connection with its construction program. Tn the opinion of counsel, the claim against the Company is substantially overstated and the ultimate liability of the Company, if any, will n'ot be material. On August 6,1971 and July 6,1972 the FPC in Docket No. R-424 and R 446, respectively, issued Notices of Proposed Rulemaking wherein amendments were proposed to revise, among other things, the accounting of electric and gas companies for interneriod tax allocation. The oroposed change relates to the deferred method which gives recognition to the income tax effects of expense and revenue transactions reported either earlier or later for tax purposes than for accounting purposes. The Company cannat predict uhether or in what form the ' g~s proposal will be adopted, when or if it will be made effective, or what effect f, s ) the FPC's final action with respect thereto will have upon the Company and its results of operations. ( Concluded ) - 2.
EXHIBIT I n ., b q 7 MIDDLE SOUTH UTILITIES,INC. AND SUBSIDIARIES COMPARATIVE STATEMENT OF CONSOLIDATED INCOME Seven Months Ended Twelve Months Ended Jdy Jdy 1972 1971 1972 1971 Operadag Revenues: Electric.. . ... . . .. $288.640.250 $252.750.586 $509.302.461 $445.032.428 Natural gas. . . .. .. .... . ... . 20.201.730 11.241 2 8 30.228.041 17.242.757 Transit. .. . . .. . .. . 6.674.649 6.800.641 11.519.939 11.691.480 Tota!. . . .. . ... .. 315.516.o22 270.792.455 551.050.441 473.966.665 Operatlag Expenses: Operation.. .. . ... .. ... . 140.1N.530 113.606.495 235.224.401 190.356.019 Maintenance . .. ... . . . 19,918.172 17,797.333 33.654.207 31.605.283 Depreciation.. .. .. . . 37.595.571 33.078.916 62.681.295 55.191.274 Income taxes: Federal... .. .. .. . 13.122.393 15.276.447 32.380.761 36.502.484 State... . .. .. ... . . 1.812.327 1.931.274 3.837.677 4.376.154 Deferred income taxes.. . .. .. . . 7.M O447 5.632.695 12.156.041 9.262.234 Investment tax credit adjustmente-net.. 1.786.523 2.481.516 3.697.666 2.617.213 Other taxes.. ... . .. . ... ... . . _2_6.987.019 24.535.037 44.815.027 40.295.789 Total taxes. . .. .... . ... 50.798.709 49.856.969 96.887.172 93.053.874 r v Total. , . . . . . .... . 248.416.982 214.339.713 428.447.075 370.206.450 Operadag Income... .. ... . . 67.099.647 56.452.742 102.603.366 103.760.215 Other Income and Dodsedeas: Allowance for funds used during construction , . ... .... ...... 11.551.036 8.484.332 17.694.211 13.800.231 M i d a'==_**--net * . . . . . 253.739 150.476 389.573 555.061 j Total. . . . . . . . . . . . 11.804.775 8.634.808 18.083.7M 14.355.292 Income Before laterest and Other Charges.. . 78.904.422 65.087.550 140.687.150 118.115.507 Interest and Other Charges: Interest on long-term deot. . . . 34.733.932 27.959.303 57,4 % 219 4.9.724.891 Other interest. . . ... . .... ... 1.552.372 847,196 2.399.914 1.655.483 Amortization of premium, debt discount and m~ net (credit) . . . . . . . . .. (83.118) (82.313) (142.746) (138.734) Preferred dividend requirements of sub-sufianes . . . . . . .. .... ...... . 6,012.575 5.058.939 9.786.612 8.309,766 Minority interest in suhauhary's net income . ........ ..... .. 45359 - 64.276 - Total. . . . ........ . .. . 42.261.620 33.783.125 69.544.275 55.551.406 Ceaseau.ead Net Imenme. . . . . . . . . . . S 36.642.802 S 31.304.425 $ 71.142.875 $ 62.564.101
' Includes Apptrahle Income Taxes... .... . $214.028 $263.451 . $254.670 5711.280 Cor.solidated Earmngs per Share of Middle South Utilities. Inc. Common Stock: -
p On average number of shares outstanding., On shares outstanding at end of period.. . 30.91 50.91 S0.81 30.78 S1.77 $1.63 yf 31.77 $1.56 Averaga Number of Shares Outs.anding..... . . 40.241.034 38.503.198 40.227.351 38.489.764 Shares Outstanding at End of Period....... .. 40.279.481 40.021.428 40.279.481 40,021.428 ranum. m-.-e am -ms en we n. : m ==== .=n me m.m .ry === ==e.e = um w.n, e w m. w .-omm 1 1
EXHIBIT I Q PR OSPE C T US
$35,000,000 Arkansas Power & Light Company First Mortgage Bonds, 7M% Series due 2002 Interest payable April 1 and October 1 Due April 1,2002 The Bonds will be redeemable at the redemption prices set forth herein provided that, prior to Apri! 1,1977, no reden:ption may be made at a general redemption price throurk refunding at an efective interest cost to the Company of lese than 7.702% per annum.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PAum UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE. SENTATION TO THE CONTRARY IS A CRlhDNAL OFFENSE. Undrewriting Price to Discounts and Proceeds to Company (!)(3)
'O Per Unit Public(1) 10130 %
Comaksiens(2)
.9301 % 100.5699 %
Total $35,525,000 $325,535 $35,199,465 (1) Plus accrued interest from April 1,1972. (2) The Company has agreed to indemnify the several Purchasers against certain civil liabilities, including liabilities under the Securities Act of 1933. (3) Before deduction of expenses payable by the Company estimated at $100,000. The Bonds are ofered by the several Purchasers when, as and if issued by the Comocny and accepted by the Purchasers and subject to their right to reject orders in whole or in part. It is expected that the Bonds, in defnitive fully registered form, will be ready for delivery on or about dpril 13, 1972. Blyth & Co., Inc. The First Boston Corporation Salomon Brothers Dean Witter & Co. lacorporated O' The date of this Prospectus is dpril 6,1972. l
1 IN CONNECTION WITH THIS OFFERING, THE PURCHASERS MAY OVER ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHER-WISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE h' DISCONTINUED AT ANY TIME. No dealer, salesman or other persom has been authorised to give any "aformadou or to make any representados not c=*=l-d la this Pr-;-- :- and, if gives or made, such Warmados or representation anst not be relied upon as having been anthorised by the Company or the Parchasers. This Prospectas , does not consdtate an ofer to sell or a solicitados of an ofer to bay any of the securities ofered hereby l In any M ""'- = to any person to whom it is enlawful to make such ofer la such jurisdiction. Neither the delivery of this P.a _ t-- nor any sale made hereunder shall, nader any circumstances, create any Isaplicados that there has been no change la the afairs of the Company since the date hereoL Dis Prospectas, with appropriate changes, w21 be used by separate groups of Parchasers for the ofering of $35,000,000 principal amount of First Mortgage Bonds, 7M% Series due 2002, and for the ofering of 150,000 shares of 7.80% Preferred Stock, Cumalative, $100 Par Valse. He sala of
- the New Bonds and the sale of the New Preferred Stock are not dependent upon one another.
. TARM OF CONTENIS l
. Pag I!g Available Informatian . . . . . . . . . . . . . . . . . . . . 2 Descripdon of New Bonds . ... . ... 13 )
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Description of New Preferred Stock .. ... 17 Purpose of Issue and Co-ewies Program., 3 Experts and Legality . . . m m o . mom-m 20 Statement of Tarama ...... ............. 5 Opinion of Independent Cemfled Public Operating Stadsdes . . . . . . . . . . . . . . . . . . . . . . 7 Accountants .m. .mm.m.m.mmmm. 21 B"*I"="" ................................ I Financial Statements . . . . . . . . . . . . . . . . . . . 22 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Purchasers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 AVAILABI' INFORMATION i 1 Arkansas Power & Light Company (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 Securities and Exchange Commmion. Such reports include information, as of particular dates, , concerning the Company's directors and officers, their remuneration, options granted to them, the principal I holders of the Company's securities and any material interest of such persons in transactions with the Company, nese reports and other information can be inspected at the principal office of the Com-mission at 500 North Capitol Street, N. W., Washington, D. C. 20549, and copies of such material can be obtained from the Commission at prescribed rates. THE COMPANY The Company was incorporated under the laws of Arkansas in 1926. De Company's principal executive odices are located at Ninth and Louisiana Streets, Little Rock, Arkansas 72203;its telephone i number, including area code, is 501-372-4311. l l 'N Company is a public utility company with substantially all of its operations in the State of l Arkansas and is a cubsidiary of Middle South Utilities, Inc. (Middle South), which is a registered public l utility holding company under the Public Utility Holding Company Act of 1935 (Holding Company l Act). De electric properties of the Company, Arkansas-Missouri Power Company, Louisiana Power & IJght Company, Mississippi Power & Light Company, and New Orleans Public Service Inc., the principal operating subsidiaries of Middle South, constitute an integrated public utility system under the Holding Company Act, which is known as, and sometimes hereinafter called, the Middle South System. Arkansas-1
Missouri Power Company (Ark-Mo) became an operating subsidiary of Middle South as a result of Middle South's acquisition of Ark-Mo stock pursuant to exchange offers made by Middle South which O became effective July 26,1971. Two municipalities have petitioned the United States Court of Appeals for the District of Columbia Circuit to review the order of the Securities and Exchange Commission (SEC) under the Holding Company Act approving such acquisition by Middle South. PURPOSE OF ISSUE AND CONSTRUCTION PROGRAM The net proceeds to be received by the Company from the issuance and sale of $35,000,000 in principal amount of a new series of its First Mortgage Bonds (New Bonds) and 150,000 shares of a new series of its Preferred Stock, Cumulative, $100 par value (New Preferred Stock), as described herein, will be used for the Company's construction program and for the payment of bank loans and commercial paper indebtedness (estimated to approximate $25,000,000 at the time the, proceeds are received) incurred to Snance such program. In February 1972, the Company received $20,000,000 from the issuance and sale of 1,600,000 shares of its Common Stock, $12.50 par value, to Middle South. Part of the proceeds was used for the payment of $17,500,000 of the $26,350,000 of bank loans and commercial paper indebtedness then outstanding. The Company has received requisite regulatory authority to issue and sell, from time to time through May 31,1973, unsecured short-term promissory notes to various commercial banks and/or to a dealer in commercial paper. The aggregate principal amount of all such notes which may be outstanding at any one time may net exceed $45,000,000. Pursuant to such authority, the Company has lines of credit covering loans of up to an aggregate of $12,000,000 with 10 banks in Arkansas. De Company maintains a working balance with each of these banks approximating 10% of the amount of the line of credit with the bank. In some cases, part of these balances could be deemed compensating balances. Also, pursuant to such authority, the Company has a line of credit covering loans of up to an aggregate of $20,000,000 with a bank in New York City under which the bank may require a compensating balance of up to 15% of the amount of the loans outstanding thereunder, the exact amount of the compensating balance being negotiated at the time loans are made thereunder. He interest rate on loans under each line of credit is O the prime rate. At March 20, 1972, the Company had outstanding a total of S8,850,000 of loans from the Arkansas banks and the interest rates thereon ranged from 5%% to 5%%. At March 20, 1972, the Company also had outstanding a total of $8,500,000 of commercial paper, which was sold at the discount rate prevailing at the time of issuance, ranging from 3% % to 4% %. He Company's construction program for 1972, as revised February 17, 1972, is expected to result in expenditures of approximately $117,600,000. It consists of $79,600,000 for generating facilities (excluding the cost of nuclear fuel); $8,900,000 for transmission facilities; $25,200,000 for distribution facilities; and $3,900,000 for other facilities. He Company estimates that its construction expenditures (excluding the cost of nuclear fuel) will amount to $137,200,000 in 1973, $103,500,000 in 1974, and $83,700,000 in 1975. The Company's construction program includes two nuclear units at the Company's Arkansas Nuclear One generating plant near Russellville, Arkansas. Unit No. I presently is scheduled for commercial operation in August 1973. Unit No. 2 presently is scheduled for commercial operation in December 1975. De following tabulation shows the estimated net capability, expenditures and total cost of both nuclear units: Net Prior to Total CapeMIity 1972 1972 1973 1974 1975 Cost Omlions of Dollars) Unit No.1.. . 850 MW S123.3 S35.3 $16.4 - - $175.0 Unit No. 2.. 950 MW 12.2 42.2 72.9 $52.4 $20.3 200.0 In addition, the cost of initial fuel cores for the two nuclear units is expected to aggregate approximately
$52,000,000, of which $9,148,056 had been expended as of December 31, 1971 and approximately
$17,400,000 is expected to be expended in 1972.
For information with respect to the status of licenses for the construction and operation of Arkansas ~ Nuclear One, see " Business-Regulation" and for information with respect to the fuel supply for 'j Arkansas Nuclear One, see " Business-Fuel Supply". 3
Actual expenditures and dates of completion for the vanous construction projects may vary from the estimates because of changes in the Company's plans, cost fluctuations, the availability of labor, materials and equipment, licensing delays and other factors. The Company is continuing to experience increases in costs for construction of new facilities as a result of recurring rises in the costs of material and h iabor and as a result of increasing requirements of expenditures for environmental and ecological purposes. De Company estimates that it will require approximately $42,000,000 of additional funds to finance its 1972 construction program, including the cost of nuclear fuel, and expects to obtain such funds through short-term borrowings from banks, the issuance and sale of commercial paper and, depending on market conditions and the progress of the construction program, the issuance and sale of other securities. He types, amounts and timing of the future sales of securities will depend upon market conditions and other factors at the time, including the then effect of limitations contained in the Company's Mortgage (see " Description of New Bonds-Issuance of Additional Bonds") and the Company's Debenture Agree-ment on the incurring of additional funded debt and the limitations contained in the Company's Charter on the issuance of additiont,1 shares of Preferred Stock (see " Description of New Preferred Stock-Restrictions on Merger, Sale of Assets, Issuance of Unsecured Debt and Sale of Additional Preferred Stock") . Among other things, these limitations deal with the ratio of earnings to interest requirements and preferred stock dividend requirements. The sales of Bonds in recent years to finance the Company's large construction program during a period of high interest rates have, together with increasing costs of operation and construction, caused a decline in such ratios. The financing program followed by the Company in recent years involved in large measure the issuance of Bonds under the Company's Mortgage in amounts designed to maintr.in the ratio of Bonds to total capitalization in the general range of 56%. There are presently outstanding $343,700,000 principal amount of such Bonds. Under the provisions of the Company's Mortgage, additional Bonds may not (with certain exceptions) be issued unless the adjusted net earnings of the Company (as defined in the Mortgage) for 12 out of the 15 months immediately preceding the issuance of the additional Bonds shall have been at least twice the amount of the annual interest requirements on all Bonds at the time outstanding, including the additional Bonds being issued, and any indebtedness of prior rank. The Company's earnings coverage of Bond interest has declined on an actual basis from 4.53 for 1967 to 3.38 for 1971. After giving effect to the sale of the New Bonds at an assumed interest rate of 8% per annum, such coverage would t)e 2.96 for the year 1971. The Debenture Agreement under wFich the Company's outstanding $4,700,000 principal amount of 3%% Sinking Fund Debentures due 1974 were issued provides in general that the Company may not incur additional indebtedness having a maturity of more than one year (other than Bonds secured by the Company's Mortgage, certain other secured debt, and certain subordinated debt) unless adjusted net earnings (as defined in the Debenture Agreement) have been not less than twice the annual interest requirements on all indebtedness to be outstanding upon the incurrence of such additional indebtedness. If the Company were able to meet the earnings test contained in its Mortgage, it would in all probability also be able to meet the similar camings test contained in the Debenture Agreement. The Company's Charter provides, among other things, that the Company may not, without the consent of the holders of at least a majority of the total number of shares of the Preferred Stock then outstanding, issue additional shares of the Preferred Stock unless the gross income 6f the Company (as defined in the Charter) for 12 out of the 15 months immediately preceding the issuance of the additional shares shall have been at least one and one-half times the sum of the annual interest charges on all taterest bearing securities of the Company and the annual dividend requirements on all outstanding shares of the Preferred Stock, including the additional shares being issued. He Company's earnings coserage under this test has declined on an actual basis from 3.61 for 1967 to 2.92 for 1971. After [ giving effect to the sale of the New Bonds at an assumed intrrest rate of 8% per annum and the sale of l the New Preferred Stock at an assumed annual dividend rate of 8%, this coverage would be 2.49 for the year 1971. , l 4 h
~
m-:. .m:
g ARKANSAS POWER & LIGHT COMPANY V STATEMENT OF INCOME The following statement of income for the five years ended December 31, 1971 has been examined by Haskins L. Sells, independent Certified Public Accountants, whose opinion with respect thereto is included c!sewhere in this Prospectus. This statement should be considered in conjunction with its notes and with the other financial statements and related notes appearing elsewhere herein. Year Ended Decembee 31, 1967 1964 1969_ 1970 1971 We f Dollars) o Operating Revenues (al . . . . . . . .. $105,516 $118,943 $136,044 3149,317 $166,063 Operating Expenses: Operation: Fuel and power purchased (a) . . . .. .. 25,302 26,239 34,324 36,716 46.856 Other production, transmission and distribution. 4,798 4,957 5,433 5.964 6,362 Customer accounts and sales 4,700 5,008 5,554 6,068 6,646 Administrative and general . . 6,261 8,114 8,401 10,118 10,070 Total operation .. .. . . 41,061 44.318 53,712 58.866 69,934 Maintenance .... .. .. . 4,786 5,172 6.116 6,191 7,384 Depreciation . . . . 12,970 .15,060 16,059 17,400 18,742 Taxes-other than income (b) . . 8,305 8.946 9,538 10,607 11.218 Income taxes (c)(d): Federal . .. . .. . 7,760 13,110 14,940 14,653 13,708 State . . .. . ... . .. 1,232 I,384 1,906 1090 1,761 , Deferred-net . . .. . . 1236 1733 L615 2,851 3,185 Investment tax credit adjustments._ net (c) .. L422 512 376 909 363 Total operating expenses . 80,7*2 91,235 105,262 113,567 126.295 Operating Income . . . . 24,744 27,708 30,782 35,750 39,768 Other income and Deductions: Allowance for funds used during construction (e) 3,039 1,405 1878 3,429 7,407 Miscellaneous income (deductions)-net (c) , 114 (100) 12 (10) 286 Income taxes applicable to miscellaneous income and deductions (c)(d) .. . .. . . (180) (79) (161) (117) (211) Total other income and deduct ons-net i 2,973 1,226 L729 3,302 7,482 Interest Charges: Intettst on mortgage bonds . .. .. .... 8,7R3 9,703 10,364 13.422 17,587 Interest on debentures . . ... . .. 193 185 179 172 163 Amortization of debt premium, discount and expenw-net ................. . .. .. .. ... . 41 (35) (46) (51) (55) Other interest . ... . .. ... .. 398 670 1.210 752 647 Total interest charges-net .. .. . 9,415 10,523 11,707 14,295 18,342 Net income (c) .... . . .. . .. .. . ... $ 18,302 $ 18.411 $ 21.804 $ 24,757 $ 28,908 Ratio of Earnings to Fixed Charges (g) .. ... . .. 4.30 4.35 4.48 4.10 3.58 Ratio of Earnings to Fixed Charges and Preferred Dividends (as denned)(3) . ... ...... .. ... . .. ..... 3.15 3.17 3.12 3.05 2.87
~
See accompanying Notes to Statement of Income. V 5 m . = ,- , - :4
NOTES TO STATDfENT OF INCO%fE (a) Includes transactions with affiliates. Effective January 1,1970, with regulatory approval, an account-ing change was made to eliminate from Operating Revenues and Power Purchased certain offsettine amounts of sales to and purchases of energy from certain neighboring utilities. Retroactive effect has been made in this Statement of Income reducing Operating Revenues and Power Purchased by
$2,427.529 for 1967, $2,398,350 for 1968, and $6,283,862 for 1969.
(b) Reference is made to Note 8 to Financial Statements regarding changes made in 197C in accounting for real estate and personal property taxes. (c) Reference is msde to Note 5 to Financial Statements relating to tax provisiens, the treatment of the investment ta. credit, and retroactive application of a Federal income tax refund and interest earned thereon. (d) Effective January 1,1970, Federal and State income taxes are being allocated between Operating Income and Other Income and Deductions in accordance with Federal Power Commission regula-tions. Retroactive effect of this change has been given to the years covered by this Statement of income. (e) Allowance for funds used during construction, an item of non-operatmg income, is defined in the applicable regulatory system of accounts as the net cost, during the period of construction, of borrowed funds used for construction purposes and a reasonable rate on other funds when so used. This amount equaled 25.62% of the Net Income of the Company for the year 1971. 'Ihe amount so reflected for the year 1971 has increased substantially over the amounts similarly shown for the years
!967 through 1970, principally as a result of substantial increases in the amount of construction work in progress and also as a result of an increase, reflecting increased costs of capital, by the Company in the rate of such allowances from 6% to 6M% effective January 1,1968, from 6%% to 7%
effective January 1,1969, and from 7% to 7% % effective January 1,19'70. (f) Reference is made to " Business-Regulation" for information regarding va.ious regulatory matters including proposed rulemaking by the Federal Power ~ Commission in Docket No. R-424, and infor-mation regarding compliance with regulations as to air and water quality and other safety and environmental matters. Reference is also made to " Business-Fuel* Supply" for information relating to recent developments pertaining to fuel supply. (g) " Earnings" represent the aggregate of (1) net income, (2) taxes based on income, (3) investment tax gy credit adjustments-net, and (4) fixed charges. " Fixed charees" represent interest, related amortiza-tion, and one-third of the total rentals charged to operating expenses; and " preferred dividends (as defined)" represent the preferred dividend requirement multiplied by the ratio that pre-tax iticome bears to net income. The pro forma ratio of carnings to fixed charges for the year ended December 31,1971, after giving etYe :t to the annual interest requirements on the New Bonds (8% rate assumed), and adjusted for int rest related to Bonds issued in March 1971 and August 1971, and elimination of interest on temporary loans, would be 2.86. A change of % of 1% in the interest rate on the New Bonds wbuld result in a change of approximately .005 in this ratio. The pro forma ratio of earnings to fixed charges and preferred dividends (as defined) for the year ended December 31,1971, adjusted as above and further adjusted to provide for dividends on the New Preferred Stock (8% ote assumed), would be 2.24 A change of 1/25 of 1% in the dividend rate on the New Preferred Stock would result in a change of approximately .001 in this ratio. Reference is made to " Purpose of Issue and Construction Program" for informatio t with respect to various carnings tests for the issuance of additional Bonds and the issuance of additional shares of l Preferred Stock. Annualinterest requirements on the presently outstandi .g Bonds amount to $19,687,000. Annual l interest requirements on the New Bonds will amount to $2,712,500. l Annual dividend requirements on the presently outstanding Preferred Stock amount to $2,767,720. I Annual dividend requirements on the New Preferred Stock will amount to $1,170,000. Operating revenues and net income for the twelve months ended February 29, 1972, amounted to $166,953,978 and $29,688,238, respectively. These amounts are unaudited, but, in the opinion of the Company, include all adjustments (consisting of only normal recurring accruals) necessary to a fair state- [ ment of the results of operations for that period. 6 1 1
l 1 1 OPERATING STATISTICS O O' Year Ended December 31 1967 1v68 1969 1970 1971 Energy Generated. Purchased and Interchanged (Thousands of KWH): i Generated-Net Station Output ... . .. . 4,118,432 4,706.375 7.701225 10,191.375 9,218,214 ) 4,873,685 4,077,780 5,466,542 4,267.855 5.474,371 l Purchased . . . . . . . . . . . . . . . . . . . . . I Interchange-Net . . .. . .. . .. .. ... (62,305) 88.308 40,922 36,084 17,199 Total Generated. Purchased and Interchanged 8,929.812 10,872.463 13.209.689 14.495.314 14,709,784 Company Use, Distribution f osses and Unac. j counted For . . . .. ...... .... . .. 623,134 736,317 790,981 835,347 866,407 Total Energy Sales . . . . . . . . . . . .. 8.306,678 10.136.146 12,418,708 13,659,967 13.843,377 Energy Sales (Thousands of KWH): l Residential ..... ........ ................. I,401,326 1,643,753 1,917,141 2,182.291 1393,296 Commercial . ... ...... ...... ........ 1,115,546 1,247,614 1,37 1827 1.503,278 1,613,593 f Industrial ... .... ... ...... ... ....... 4,264,239 4,533,063 4,743,980 4.803,330 4,965,864 Government and Municipal . .. . . . 228,502 241,912 261.566 264,886 276,004 i Total Sales to Ultimate Customers ... 7,009,613 7,666.342 8,295,514 8,753,785 9,248,757 Public Utilities (1) . .. . . ..... .. ... 1.297,065 2,469.804 4,123,194 4,906,182 4.594,620 Total Energy Sales .. .. 8,306,678 10,136,146 IL418,708 13,659,967 13,843,377 Number of Customers (End of Year): Residential .............. ................. 301,335 306,950 311,815 318,732 330.566 Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,747 44,195 44,771 45,606 46,785 Industrial ................... ............. 4,260 4,429 4,533 4,639 4,734 Government and Municipal . . . .... ..... 1.043 1,085 1.131 1,188 1,235 Total Ultimate Customers . . . ... .. . 350,385 356,659 362.250 370,165 383,320 Public Utilities ( 1) . . . . . . . . . . . . . . . . ........ 73 78 75 75 71 Total Electric Customers .. . .. .. 350,458 356,737 362.325 370,240 ' 383,391 Operating Revenues: Residential . . . . . . . . . . . . . . . . . ... ..... . $ 33,656,093 $ 36,997,433 $ 41,045,058 $ 45,230.503 $ 49,718,196 Commercial .. .. . .. . ..... ... 24,630,824 26,575,241 28,696,693 31,213,752 33,988,946 Industrial .... .. .... . ..... .... . 33.987,583 37,230,237 39,392J25 40.264,014 44,272,432 Government and Municipal .. ........ 2,951,658 3,138.749 3,424,300 3,594,186 3,836,145 Total Revenues from Ultimate Customers .. ~95,226,158 103,941,660 111558,576 120.302.455 131.815,719 Public Utilities (l) . ....................... 9,171,379 13,894.004 21,934.342 27.067,135 32,208,365 Total From Energy Sales .. .. .. 104,397,537 117,835,664 134,492,918 147,369,590 164.024,584 Miscellaneous Revenues . .... . .... 1,118,560 1,107,112 1,551,579 1,947,864 1038,608 Total Revenues . . . . ....... ......... $105,516,097 $118,942.776 $136.044,497 $149,317,454 $166,063,192 (1) This item includes intra-system transactions and the Company's portion of emergency, economy and other transactions with neighboring unaffiliated 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. In connection with the accounting change referred to in note (a) to the Statement of Income, retroactive effect has been given in the above statistics. For Energy Purchased and Energy Sales this amounted to a reduction of 354,543 for 1967; 369,288 for 1968; and 1,362,248 for 1969. A mM
BUSINESS Territory. The Company owns electric facilities in 62 of the 75 counties in the State of Arkansas. At Decembcr 31,1971, it furnished retail electric energy in 244 incorporated municipalities and electric h energy at wholesale to 7 munivpalities and 9 rural electric cooperatives. He principal industries served by the Company cover a wide variety of products, including aluminum processing, food processing, wood products, paper products, chemicals, petroleum refming, metal products, rubber and plastic products, estric equipment and textiles. Electric Service. The Company provided electric service to 383,391 customers et December 31,1971. During the year then ended, the Company received 30% of its operating revenues from residential customers, 20% from commercial customers, 27% from industrial customers (including 8% from Reynolds Metals Company) and 23% from government customers, public utilities and others. Regulation. As a subsidiary of Middle South, the Compny is subject to the regulatory provisions of the Holding Company Act. The Company is subject in certain of its activities to the provisions of the Federal Power Act, which provides for the regulation by the Federal Power Commission (FPC) of the business of, and facilities for, transmission of electric energy in interstate commerce and sale of electric energy at wholesale in inter-state commerce. The FPC also exercises accounting jurisdiction over the Company. Additionally, the Company is subject to the provisions of Part I of the Federal Power Mt with respect to its two hydro-electric plants. (See Note 7 to Financial Statements.) On August 6,1971, the FPC issued a Notice of Proposed Rulemaking in Docket No. R-424 wherein an amendment was proposed to revise, among other things, the accounting of afectric and gas companies for interperiod tax allocation. The proposed change relates to the deferred method which _ives recogni-tion to the income tax effects of expense and revenue transactions reported either earlier or later for tax purposes than for accounting purposes. De FPC has extended to April 4,1972, the time for comments. The Company cannot predict whether or in what form the proposal will be adopted, when or if it will g be made effective, or what effect the FPC's final action with respect thereto will have upon the Company and its re:ults of operations. Public utilities in Arkansas are subject to regulation by the State and by the municipalities in which they operate. Regulation by the State, under the Arkansas Public Service Commission (APSC), in-ciudes the authority to fix rates, determine reasonable and adequate service, fix the value of propeny used and useful, require proper accounting, control leasing, buying and selling of utility properties, in-cluding extensions, additions and betterments, fix rat:4 of depreciation, issue certificates of convenience and necessity, and control the issuance and sale of securities. Municipalities in Arkansas can regulate rates charged in the community, but the public utility can appeal any order of the municipality to the APSC for review. The Tennessee Public Service Commission has jurisdiction over the issuance of securities by the Company and has jurisdiction over certificates of convenience and necessity, standards of service and rates for service to customers in Tennessee and to require the Company to maintain a uniform system of accounts. The Atomic Energy Act of 1954 vests broad jurisdiction in the Atomic Energy Commission (AEC) over the construction and operation of nuclear reactors, particularly with regard to public health and safety. As th' owner and prospective operator of the Arkansas Nuclear One generating plant, the Company is subject to such jurisdiction. The construction permit for Unit No. I of Arkansas Nuclear One was issued by the AEC on December 6,1968. At December 31, 1971, construction was approxi-mately 73% complete and engineering was approximate!) 15% complete. Fuel loading and preliminary operations are scheduled to begin in April 1973 and commercial operation is expected to begin in August ,, l 8
' ~
- 1973. De revised application for an operating license and the Final Safety Analy>Is Report were filed with the AEC on April 26,1971 and are presently under review. De Environmental Report required
, by the AEC regulations at that time was Aled with the AEC on June 14,1971, O 1 sePte-6 e 197>. the ^=c Promui.ated ne- re.uiations cencernin environ-entai matters in connection with nuclear power plant licensing proceedings. As required by the new regulations, the l Company submitted additional environmental information with respect to Unit No. I so as to enable the AEC to make an independent review of its environmental impact. On November 26,1971,. the AEC determined that construction of Unit No. I could continue pending completion of its environ-mental review. An application for a construction permit for Unit No. 2 of Arkansas Nuclear One was filed with the AEC on September 15, 1970. That part of the revicw of this application by the Regulatory Staff l of the AEC and by the Advisory Committee on Reactor Safeguards which is required before the holding of the public hearing on the granting of a construction permit has been substantially completed. The i- information on environmental matters required by the original and the new AEC regulations has been filed with the AEC and is now being reviewed. On July 15, 1971, the AEC granted an exemption authortzing the Company to begin construction before the issuance of the construction permit of a substantial part of the belew-grade portions of Unit No. 2. It is presently estimated that the construction authorized by this exemption will be completed in May 1972. De AEC has promulgated new regulations, effective March 21, 1972, which restrict the construction of facilities before a construction permit is granted.' The Company does not believe that these new regulations will have any immediate material effect upon construction expected to be completed in May 1972, but delays and increased costs will result if the AEC does not permit addidonal construction prior to the issuance of the construction permit. Unit No. 2 presently is scheduled for commercial operation in December 1975. The issuance of permits or licenses by the AEC may be conditioned upon substantial changes in design or operation to meet safety and environmental standards, with further delay and added expense. The Company is subject to regulation as to air and water quality and other environmental matters by various State and Federal authorities. At the present time, no complaints concerning the Company's compliance with present environmental protection standards are outstanding. In meeting these stand-ards and in making further efforts to preserve the environment, the Company is incurring some increased
'O' costs e< eenstruction and eeeration. oevernmentai re uiatiens reistin. te envirenmentai standards have not been fully established and the Company is not able to estimate the cost of meeting the standards and requirements which may be imposed in the future.
l The State of Arkansas has adopted standards restricting emission to the air and these standards have been submitted to the Environmental Protection Agency (EPA) for approval under the Clean Air Act, as amended. The Company believes that all of the Company's generating plants comply with the applicable Arkansas air standards. Because natural gas is the primary fuel in four of the dve steam generating plants, the Company normally has no difficulty in meeting the staodards. However, the Company has been encountering difficulties in obtaining natural gas (see " Business-Fuel Supply"). To reduce emissions of sulfur when oil is used as an alternate fuel, the Company has, since the latter part of 1971, undertaken to burn oil containing 1% or less sulfur unless such oil is unavailable. The cost of low sulfur oil has increased signOantly and is expected to increase further in the future. At the present time, the entire State of ArLasas is in cornpliance with the National Secondary Ambient Air Quality Standards for sulfur oxides promulgated by EPA. Therefore, if present ambient air con-ditions continue, the Company would be exempt from the Federal tax on sulfur emissions recommended by the President in his recent environmental message to Congress if that tax were enacted in its presently proposed form. De Company has obtained all permits required by Arkansas law for discharges into navigable and non-navigable waters including thermal discharges from Arkansas Nuclear One. In order to comply with Arkansas standards and the conditions of its State permit, the Company has included in its con-struction program a cooling tower for condenser cooling water for Unit No. 2 of Arkansas Nuclear One.
'It is estimated that this cooling tower will cost approximately $11,000,000.
Pursuant to Executive Order No.-11574, the Army Corps of Engineers (Corps) interpreted the itefuse Act of 1899 and promulgated regulations, in 1971, providing for the issuance of permits authorizing discharges into navigable waters or into any tributary which flows into such waters. The
,O. Company has applied for permits under such regulations. No permits have been issued or denied to the Company. In a recent court decision, in a case in which the Company is not a party, it was held 9
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l that discharge permits cannot be issued without prior preparation of an environmental impact statement ! mder the National Environmental Policy Act and that in no event may a permit be issued to discharge g into non-navigable waarways. The Corps has declared a moratorium on the issuance of permits to W comply with such court decision, but is continuing to process applications for permits. The Company is unable at this time to predict what steps it may be required to take as a result of these judicial and ; administrative actions or the costs which might result therefrom. Fuel Supply. Four of the five steam electric generating plants (2,056,000 KW) of the Company use natural gas as the principal fuel. Oil is the alternate fuel for these plants. The fifth steam electric generating plant (144,000 KW) was designed to use natural gas as its principal fuel but has, since May 1971, used oil as its sole fuel because it has been impossible to obtain natural gas for this plant. These 71 ants do not operate as efficiently on oil as they do on natural gas. A study is presently being 1 made to attempt to estimate the reduced reliable capability of the plants when using oil as fuel. When oil is burned, the plants require more maintenance, repair and restoration work. Prior to August 9,1971, the plants using gas as the principal fuel were supplied on an interruptible basis under arrangements which expire in December 1974 for units totaling J79,000 KW; November 1981 for a 30,000 KW unit; December 1987 for units totaling 900,000 KW; and August 1991 for a 547,000 KW unit. The principal supplier is Arkansas Louisiana Gas Company (Arkla). Under date of August 9,1971, the APSC, after extended hearings, issued an order in Docket No. 2307 withdrawing its prior approval of all long-term gas supply contracts between Arkla and its large industrial customers in Arkansas, including the Company, converting the contracts into "Large Industrial Tariffs" subject to the continuing jurisd ction of the APSC, and prescribing new standard terms and conditions under which these customers are to be served. These new terms and conditions are not materially different from there contained in the contracts between the Company and Artia except that they specify a procedure for the curtailment of gas by priority categories of customers in time of shortage of gas. In addition, the order cancelled provisions in two contracts of the Company which required Arkla to pay the Company the excess cost of fuel consumed if Arkla did not supply at least 97% of the gas required for the Compa7y's generating plants totaling 1,091,000 KW. The Company has appealed the order to the Circuit Court of Pulaski County, Arkansas. The order of the APSC of August 9,1971, continued in effect temporarily the contract rates for gas g supplied by Arkla to the Company. At these rates, the Company's cost for gas supplied by Arkla was
$19,635,662 for the year 1971. On August 11,1971, the APSC entered an order in Docket No. 2338 instituting a cost of service study to determine just and reasonable rates to be charged and terms and conditions to be applied by Arkla to its industrial customers. The Company has intervened in this proceeding. The APSC consolidated this proceeding and Docket No. 2348, heribed below, into one proceeding and further investigations and hearings will continue in the consolidated proceeding.
On October 1,1971, Arkla filed with the APSC in Docket No. 2348 an application for authority to increase its rates to its large industrial customers, including the Company, ne Company intervened in this proceeding. After an interim hearing, the APSC entered an order dated November 5,1971, authorizing Arkla to file an interim tariff increasing its large industrial rates to 32c per Mcf, with a cost l of gas adjustment clause, and to file a bond to assure the refund of any amount found to be excessive after complete investigation, with the interim rate to become effective the day after the FPC approved the application by Arkla to build a pipeline connecting its existing system to new gas reserves in the ( Anadarko Basin of Western Okhhoma and the Icxas Panhandle. The order provided that the increase l could become " effective only if not violative of the Economic Stabilization Order issued by President i Nixon on August 16,1971, extensions thereof er amendments thereto" Arkla filed such a rate schedule l on December 30,1971. The 32c rate, as applied to the Company, probably would be slightly lower than the rates proposed by Arkla in its October 1,1971, application. The weighted average rate under l the APSC August 9,1971 order applied to gas purchased by the Company from Arkla in 1971 is estimated to be 25.85c per Mcf. Under date of February 18, 1972, the FPC entered an order issuing a certificate of convenience and necessity to Arkla to construct the pipeline to the Anadarko Basin, subject to the approval by the FPC of a plan for financing the construction to be filed by Arkla. Sub-sequently, Arkla advised the Company that it had placed the 32g rate in effect at noon February 19, - 10 w
l 1972, and that the increase at that time is permitted under the regulations issued pursuant to the Economic Stabilization Act, as amended, without any further approval or action by the Price Commission. O - On February 29,1972, the bond required by the APSC order as a condition to placing the rate increase in effect was filed by Arku. The Company is investigating the validity of the rate increase at this time. If this rate had been in effect throughout 1971, it is estimated that the Company's fuel cost for the war 1971 would have been increased by approximately $5,154,000, excluding any effect of the cost of gas adjustment provision. Pursuant to FPC Order No. 431 issued April 15, 1971, directing gas pipeline companies to file i reports and tarif provisions containing curtailment plans if unusual curtailments were anticipated, Arkla filed with the FPC on May 18,1971, revised tariff sheets containing proposed curtailment policies. The Company intervened and protested in this proceeding. By order dated June !$,1971, the FPC provisionally suspended the effectiveness of Arkla's proposed revised tariff sheets until October 15,1971. The initial decision of the Presiding Examiner issued October 13,1971, after extended hearings, found that the Arkla revised tariff sheets violated the Natural Gas Act and should be cancelled. Various parties, including the Company and Arkla, have filed exceptions to the initial decision. The matter is presently pending before the FPC, During 1971 and continuing to date, the Company has encountered increasing curtailments in the ? supply of gas and Arida has stated that more severe curtailments will occur in the future, due to a shortage ' la its presently available gas supply, untilit has completed the new pipeline to the Anadarko Basin. During the months of August, September, October, November and December of 1971, the Company requested Arkla to supply 8,593,175, 7,495,632, 8,321,689,11,046,958, and 11,556,554 Mcf. but only received 6,892,101,5,530,233,5,145,437,6,202,804, and 6,104,884 Mcf, respectively. Commencing October 15, 1971, and continuing to date, Arkla has claimed the right to curtail in accordance with the policies set forth in its revised tariff sheets filed with the FPC on May 15, 1971. These policies permit it to curtail the gas supply of the Company substantially more than does the plan set forth in the August 9,1971, order of the APSC. Arkla has stated that it will require 11 months to complete the pipeline to th's < Anadarko Basin after construction begins and that the completion of this pipeline will help alleviate l'.s gas shortage. The Company is unable to estimate the extent, if any, to which the construction of te proposed pipeline might abate the curtailment o' ts gas supply. De Company has net storage capacity for fuel oil of 1,150,000 barrels, with some storage facilitier at each of its steam electric generating stations. In 1969,1970 and 1971, the Company used approximately - 318,600, 698,500 and 2,587,000 barrels of oil, respectively. De cost of oil is substantially higher l than the cost of natural gas. Although there is a direct relation between the amount of fuel oil burned by the Company and the amount of gas supply curtailment, the amounts are not necessarily directly , 1 proportional because the Company purchases power from other utility companies when it can do so at a cost lower than burning oil. ; The Company intends to take such legal steps as may be available to it and as it may deem j appropriate to protect its and its customers' interests in the foregoing proceedings. While the Company l I is unable to predict the final outcome of any of the foregoing proceedings, if the determinations, therein are adverse to the Company, increases in the Company's cost of fuel would result and, depending upon the l nature of curtailment programs authorized and the availability of alternate sources of power and fuel, j interruptions of electric service to customers could result. ! j ~ For information with respect to fuel adjustment clauses' contained in the Company's rate schedules, l see " Rates" below, On June 29,1971, after a hearing, the APSC entered an order, effective immediately, prohibiting promotional practices by electric and gas utilities except those which might be filed with and approved by the APSC. The gas shortage was cited as one of the reasons for the prohibition. The Company has obtained approval of several of its marketing policies and will continue to design its marketing program so as to comply with the rules contrined in the order. The Company is unable to predict the effect which this order will have on its overall marketing objectives. As a result of the shortage of natural gas, the APSC by order dated June 25.1971, directed each of the electric utilities subject to its jurisdiction to file a Contingency Power Conservation and Curtailment O u e w g--- y- --.y- - -*- --
Plan for overcoming any critical deficiency in the supply of electricity if it should occur. De Company filed a plan providing for curtailment primarily through voluntary cooperation of its customers, and the APSC has approved this plan. Pursuant to authority received under the Holding Company Act, the Company and Louisiana Power k '
& Light Company, Mississippi Power & Light Company, and New Orleans Public Service Inc., have organized a jointly-owned corporation, System Fuels, Inc., to plan and implement programs for the procurement of fuel supplies. The four companies contemplate making investments in the new cor-poration from time to time through 1973 totaling approximately $30,000,000 of which the Company's share will be approximately $10,500,000.
Arrangements have been made for nuclear fuel for Unit No.1 of Arkansas Nuclear One generating plant through 1977. Arrangements also have been made for a supply of nuclear materials for both Unit No. I and Unit No. 2 which, when fabricated, will supply fuel needs for these units through 1990. Rates. All rate schedules (including contracts fixing rates), except the large power supply contracts with Reynolds Metals Company, the service schedules under interconnection agreements with other utilities, those applicable to rural electric cooperatives, and certain of those applicable to unmetered service, contain a tax adjustment clause to cover increases and decreases in taxes which is operative only by approval of the APSC. A municipal tax adjustment rider is in effect whereby billings to customers of the Company within a municipality will be increased by an amount equal to the excess of any charges (other than special millage or general taxes applicable to all taxpayers) levied by that municipality upon the Company over the standard franchise tax. All presently effective rate schedules for metered service, which constitute substantially all of the service provided by the Compan-, contain fuel adjustment clauses or their equivalent. 4 Present regulations under the Economic Stabilization Act permit the Company to pass on increased taxes (except income taxes) and fuel costs if the increase resulting therefrom is not objected to by the appropriate regulatory agency and is authorized by statute, regulation or order of the appropriate regulatory agency or by an approved tariff provision. With certain other minor exceptions, any other increases in rates which may be proposed by the Company would be subject to regulations promulgated by tue Price Commission under the Economic Stabilization Act. These regulations, as revised effective March 20, 1972, provide a procedure whereby final approval of any rate increase by the Company after May 24, 1972, will rest with each Federal and State regulatory agency having jurisdiction if such agency adopts and follows rules and procedures, appad by the Price Commission, for considering requests for increases. Insofar as is consistent with constitutional an(. statutory provisions 'mder which a regulatory agency operates,its rules and procedures for considering requests for increases are to incorporate criteria specified by the Price Commen to attain the goals and aims of the Economic Stabilization Program. With certain minor exceptions, the revised regulations require that a rate increase must be .*eported to, and approved by, the Price Comnussion if the appropriate regulatory agency does not adopt approved rules and procedures or if the rate increase is to take effect prior to May 25,1972. De APSC has held hearings pursuant to its order requiring gas utilities and electric utilities, in:!ud-hg the Company, to show cause why certain space and water heating rates and certain other rates
*iesigned to encourage off-peak usage are not discrumnatory and this proceeding has been continued indefinitely.
Average revenues per KWH sold for the past five calendar years were as follows: 1967 19sa 1969 1970 1971 Residential . . . . . . . . . . . . . 2.40# 2.25( 2.14# 2.07p 2.08d Commercial . . . . . . . . . . . . 2.21 2.13 2.09 2.08 2.11 Industrial . . . . . . . . . . . . . . .80 .82 .83 .84 .89 ne average revenues per KWH sold during the same periods to industrial customers, excluding sales under the large power supply contracts with Reynolds Metals Company, were 1.30,1.27,1.26,1.25 and 1.28 cents, respectively. PROPERTY General. All property of the Company is located in Arkansas (except for minor properties adjacent ,; to the Arhnm border in certain adjoining states). He information hereunder, except as otherwise noted, is as of December 31,1971. - 12 . I l
I Generadog Stadoes. He Company owes ave steam electric generating stations, Sve gas turbine O 8 <i 8 i' '- ar a i i ri
- e ai i i
- i it a vi 8 KW,91,000 KW,69,000 KW and 6,000 KW, respectively, or an aggregate net capabdity of 2,366,000 6itii < 2 2oo ooo KW. " Net capability" as used herein is the present dependable load carrying ability of the generating ,
stations as demonstrated under actual operating conditions with natural gas being used as the czclusive j fuel except in the diesel unit. (See " Business ~ nel Supply"). Plant Addideas and Retirennests. From Jau ry 1,1967 to December 31,1971, the Company made expenditures of approximately $263,167,000 for gross additions to utility plant (not including work in progress which amounted to $151,798,000 at December 31, 1971). During this same period approxi-mately $28,406,000 of utility property was retired. De net additions during this period amounted to
$234,761,000, an increase of 52%. , Iness*===ada== ne Company and the four other principal operating companies in the Middle
' ~ South System share generating capacity and other power resources. The Company also has direct connec- ; tions with the facahttes of Southwestern Power Administration, Tennessee Valley Authority, Southwestern j
- Electric Power Company, Empire District Electric Company, Oklahoma Gas and Electric Company, and Arkansas Electric Cooperative Corporation. In addition there are direct connections between the Middle South Sysum and Gulf States Utilities Company, Central Louisiana Electric Company, Inc., Mississippi ~
Power Company, Union Electric Company, and Associated Electric Cooperative. He peak demand (exclusive of station uses) of the Middle South System through December 31, 1971 was 7,645,000 KW, including sales of 867,000 KW to non-affiliated companies (of which 347,000 KW were emergency sales). This peak occurred on July 14,1971. At that time the net capability of the principal generating stations of the Middle South System, plus 1,091,000 KW of Srm power availabic under major contracts, totaled 8,582,000 KW. At the time of the Middle South System peak load, the Company's service area load was 2,565,000 KW and the net capability of the ges 41sg stations of the l Company's system, plus $18,000 KW of firm power available to the Company, totaled 2,884,000 KW. Representadves of the Middle South System so se -l.ily review load and capacity conditions in order to coordinate and recommend the location and time of inerallation of additional generating capacity and of Interconnections in the light of the availability of power, the location of new loads, and maximum
~
economy to the Middle South System. The power supply has at all times been =^a==*= to meet the needs of the Company and other compamos in the Middle South System. Arrangements have been made under which the Middle South System, seven neighboring utilities and the Tennessee Valley Authority 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 bene 8t of each of the systems involved. The diversity capacity available for exchange is approximately 1,500,000 KW. Of the total amount to be exchanged, the Middle South System's share is approximately 30% and the Company's share is rpproximately 10%. Each participant in the arrange-ments is providing the necessary transmission lines and related facilities 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 saV=ad=Hy in eve 4ian to their respective benents. Sehstadoes. The Company owned and operated 218 substations with a total transformer capacity of 10/i38,000 kilovoit-amperes, of which 2,712,500 kilovolt-amperes were located at generating stations.
- These Agures do not include transformer installations serving individual customers at secondary voltage.
Electric Lines. The Company owned and operated 27,691 miles of line (pole miles irrespective of the number of circuits carried), of which 3,634 miles of line are at voltages of 35KV to 500KV. DESCRIPTION OF NEW BONDS l General De New Bonds are to be issued under the Company's Mortgage and Deed of Trust, dated as of October 1,1944, to Guaranty Trust Company of New York (now Morgan Guaranty Trust Company of New York) and Henry A. Theis (John W. Flaherty, successor), as Trustees, as supplemented by twenty-two supplementalindentures, all of which are collectively referred to as the " Mortgage". The state- - ments herein concerning'the New Bonds and the Mortgage are merely an outline and do not purport to be O complete. They make use of terms defined in the Mortgage and are qualified in their entirety by express reference to the cited Sections and Articles. 13
Forma and E*= The New Bonds will be registered bonds without coupons and will be initially delivered in such authorized denominations and registered in such names as may be reasonably requested in writing at least three business days prior to the closing date. The New Bonds will be exchangeable without charge for other New Bonds of different authorized denominations, in each case for a like aggre-gate principal amount, and may be transferred without charge, other than for applicable taxes or other governmental charges in either case. Interest and Payment. The New Bonds will mature April 1. 2002, and will bear interest at the rate shown in their title, payable October 1 and April 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 pay-ment 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 Bonds 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 improve-meit fund or for the maintenance and replacement fund or with certain deposited cash and proceeds of M.ased property, and (b) at the general redemption prices set forth below for all other redemptions: it r.4 4 it rea a E8/m"d EU*d- tr red.emed . $?e7d EM*d-
'"#AU*.= n" March 31_
#ta g E8.Ed sia g a*e M*d#ia March 31
'%AU*.2
(%)
#ia d%AU*an"
(%) n* March 31
#ia
(%) sia ( *r. ) 1973.. 109.25 101.50 1983.. 106.07 101.31 1993... 102.88 100.89 1974... 108.94 101.4'l 1984... 105.75 101.28 1994... 102.56 100.83 1975. 108.62 101.48 1985.. 105.43 101.25 1995... 102.24 100.76 1976.. 108.30 101.46 1986.. 105.11 101.21 1996... 101.92 100.69
- 1977.. 107.98 101.44 1987... 104.79 101.18 1978.
1997... Ibl.60 100.61 { 107.66 101.42 1988.. 104.47 101.14 1998... 1979. 101.23 100.53 107.34 101.40 1989. 104.15 101.09 1999... 1980.. 100.96 100.44 107.02 101.38 1990.. 103.83 101.05 2000... 1981.. 100.64 100.34 106.70 101.36 1991. 103.51 101.00 2001.. 1982.. 100.32 100.24 106.38 101.33 1992... 103.19 100.95 2002... 100.00 100.00 in each case, together 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 April 1,1977 if such ' redemption is for the purpose or in anticipation of refunding such Bond through the use, directly or indi-rectly, of funds borrowed
- the Company at an effective interest cost to the Cornpany (computed in accordance with generally accep' financial practice) of less than 7.702% per annum.
If, at t!.e time notice of redemption is given, the redemption moneys are not on deposit with the Trustec, 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. I Cash deposited under any provisions of the Mortgage (with certain exceptions) may be applied to the purchase of Bonds of any series. (Mortgage, Art. X: Twenty-second Supplemental, Sec.1.) Sisking or Improvement Fund. The sinking or improvement fund payments, beginning in 1973, are 1% per year of the greatest amount of the New Bonds outstanding prior to the beginning of the year less certain credits. Payments may be made in cash or principal amount of New Bonds *or with property additions at 60%. The requirement may be anticipated at any time, but if the date fixed for any resulting l, redemption shall be prior to the calendar year in which such sinking fund payment is due, redemption shall be at the general redemptio.. price and subject to the limitation on such redemptions set forth under l " Redemption and Purchase of Bonds". Similar but not idemical provisions are in etTect with respect to the Bonds of other series row outstanding. (Mortgage, Sec. 40; First to Fifteenth and Seventeenth to Twenty-second Supplemeatals, Sec. 2.) l Maintenance and Replacement Fund. 'Ihere shall be expended each year 15% of the unlity adjusted gross operating revenues for maintenance and replacement of the mortgaged property and auto-motive equipment used in such utility business. Excess expenditures for such purposes in any year may be ~ 14 O
credited against the requirmnents in any subsequent year. If the amount prescribed by the Arh== Public Service Commissum for maintenance and depreciation of utility pepi exceeds such 15%, O ia >a - i = i> > i r a erei 8i r 6 i v7 such requirements may be met by depositing cash or by certifying expenditures for maintenance and 8i = 2o*. ^>> repairs, gross property additions or net cash expenditures for automotive equipment. Such cash may be withdrawn on similar expenditures (except for maintenance and repairs) or on waiver of the right to issue Bonds or may be applied to the retirement of Bonds. The Company has reserved the right (without any consent or other action by holders of the 1989 Series Bonds or any subsequently created series, including the New Bonds) to substitute (renoscrively to September 30, 1959) for the foregoing requirement a requimment that, in additica to actual expenditures for maintenance and repairs, the Company will expend or deposit each year, for replacements and improvements in respect of its utility property and automotive
~ equipment, an amount equal to $5,800,000 ;>ius 2%% of net additions to such depreciable utility 3
property, made after September 30,1959, and prior to the beginning of the year for which the calculation is made. Such $5,800,000 and 2%% are subject to being changed to such other amount or pcreent as the Securities and Exchange Commission may authorize or require at the time such amendment is made. In the event that the Mortgage is hereafter so amended and the amounts required since September 30, 1959 to comply %th the present provisions of the Mortgage are more or less than those which would have been required had the Mortgage been so amended on that date, then adjustment is to be made to credit or charge the Company with such excess or deficiency. (Mortgage, Sec. 39; Third and Twenty-1 second Supplementals, Sec. 3; Tenth Supplemental, Sec. 5; Twer 7-second Supplemental, Sec. 4.) Special Provisions for Retirennent of Bonds. If, during xy 12 months period, mortgaged p'roperty is disposed of by order of or to any governmental authority, resulting in the receipt of $10,000,000 or more as proceeds, the Company (subject to certain conditions) must apply such proceeds, less certain deductions, to the retirement of Bonds. (Mortgage, Sec. 64.) The New Bonds are, redeemable at the special redemption prices for this purpose. The Mor: gage now provides in substance that no modification of the obligations of the Company under Section 64 is effective against any Bondholder without his i consent. (Mortgage, Sec.113.) The Company has, however, reserved the right (without any consent or other action by holders of the 2000 Series Bonds or any subsequently created series, including the New
-O Bonds) to modify its obligations under Section 64 with the consent of the holders of 66M%' of the Bonds, and, if less than all series of Bonds are affected, the consent also of holders of 66M% of the Bonds of each series affected. (Nineteenth Supplemental, Sec. 7.)
Security. The New Bonds, together with all other Bonds now or hereafter issued under the Mortgage, will be secured by the Mortgage, whic}' constitutes, in the opinion of General Counsel for the Company,
- a first mortgage lien on all of the present properties of the Company (except as stated b-!cw), subject to (a) leases of minor portions of the Company's property to others for uses which, in the opinion of such counsel, do rot interfere with the Company's business, (b) leases of certain property of the Company not used in its electric utility business, and (c) excepted encumbrances. There are excepted from the lien all cash and securities; certain equipment, materials or supplies; automobiles, other vehicles and aircraft; timber, minerals, mineral rights and royalties; receivables, contracts, leases and operating agreements; the electric distribution system in Junction City, Louisiana; and certain unimproved lands sold or to be sold.
The Mortgage contains provisions for subj-eting 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.) .
"Ilie Mortgage provides th.t the Trustees shall have 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. (Mortgage, Sec. 96.) .,
The Mortgage contains restrictions on the acquisition of property subject to tiens and on the issuance of Bonds under divisional or prior lien mortgages. (Mortgage, Sec. 46; Third and Seventh Supplementals, Secs. 4 and 5; Eleventh Supplemental, Sec. 4.) I- of Additional Bonds. The maximum principal amount of Bonds which may be issued under the Mortgage is unlimited. Bonds of any series may be issued from time to time on the bases of - 15 S
.e.> ----%
_ , , _ _ ,,_,---m ,-. m+ , , . _ . - _ _ ,- ,... --, . - ,- - -- - . ,
(1) 60% of propeny additions after adjustments to offset retirements; (2) retirement of Bonds or quahfied lien bonds; and (3) deposit of cash. With certain exceptions in the case of (2) above, the g. issuance of Bonds is subject to adjusted net earnings for,12 out of the preceding 15 months, before W interest and income taxes, being at least twice the annual interest requirements on all Bonds at the time outstanding, including the additionalissue, and allindebtedness of prior rank. Such adjusted net earnings are computed after provisions for maintenance, retirement and depreciation of property equai to the maintenance and replacement fund required for such period. Property additions generally include electric, gas, steam or hot water propeny acquired after June 30, 1944, but may not include securities or rolling stock, or (except to the extent of offsetting retirements of property of such character) other transportation property or property used principally for the production l or gathering of natural gas. The Company estimates that, after the issuance of the New Bonds on the basis of property additions, there will be available, as of March 31, 1972, approximately 330,000,000 of unfunded net property additions. The Mortgage contains cenain restrictions on the issuance of Bonds against property subject to tiens and on the increase of the amount of such liens. (Mortgage, Secs. 4 to 7 and 20 to 30; Sixteenth Supplemental, Sec.1; Eighteenth Supplemental, Sec.5.) l Release and Substitution of Property. Property may be released on the bases of (1) deposit of cash ; or, to a limited extent, purchase money mortgages, (2) property additions, after adjustments in certain l cases to offset retirements and after making adjustments for qualified lien bonds outstanding against , property additions, or (3) waiver of the right to issue Bonds without applying any earnings test. Cash l may be withdrawn on the bases stated in (2) and (3) above. The Mongage contains special provisions with respect to qualified lien bonds pledged. and disposition of moneys received on pledged prior lien bonds. (Mortgage, Secs. 5, 31, 32, 37, 46 to 50, 59 to 61 and 100.) Dividend Covenset. 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 after March 31,1972, except h from credits to retained earnings after March 31,1972, plus $19,000,000 plus such additional amount as shall be approved by the Securities and Exchange Commission. (Mongage, Sec. 39; Twenty-second Supplemental, Sec. 3 and Note 4 to Financial Statements.) Mediacation. The rights of the Bondhoiders may be modified with the consent of the holders of 70% of the Bonds, and,if less than all series of Bonds are affected, the consent also of the holders of 70% of the Bonds of each series atYected. The Company has reserved the right (without any consent or , other action by holders of the 2000 Series Bonds or any subsequently created series, including the New Bonds) to substitute for the foregoing provision a provision to the effect that the rights of the Bondholders may be modified with the consent of holders of 66% % of the Bonds, and, if less than all series of Bonds are affected, the consent also of holders of 66%% of the Bonds of each series affected. In general, no modification of the terms of payment of principal or interest, and no modification affecting the lien or reducing the percentage required for modification, is effective against any Bondholder without < his consent. (Mortgage, Article XIX; Nineteenth Supplemental, Sec. 7.) See also "Special Provisions i for Rews of Bonds". l Deimmits and Notice'IbereoL An event of default is defined as being: default in payment of principal; default for 60 days in payment of interest or of installments of funds for retirement of Bonds; certain events in bankruptcy, insolvency or reorganization; default in payment of interest or principal of any outstanding qualified lien bonds continued beyond grace periods; and default, for 90 days after notice, in other covenants. (Mortgage, Sec. 65.) The Trustees may with' 'd notice of default (except in payment ; of principal, interest or funds for retirement of Bonds) if they thi: t is in the interests of the Bondholders. ; (Mortgage, Sec. 66.)
-l
The holders of 25% of the Bonds niay declare the principal and interest due and payable on default, but the holders of a majority may annul such declaration and destroy its effect if such default has been h cured. (Mortgage, Sec. 67.) No holder of Bonds may enforce the lien of the Mortgage unless such holder shall have given 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 have offered the Trustees reasonable opportunity to act and indemnity satisfactory to the Trustees against the costs, expenses and liabilities to be incurred thereby and the Trustee shall have declined or failed to act. (Mortgage, Sec. 80.) Holders of a majcrity of the Boids 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.) The Trustees are not required m risk their funds or incur personal liability if there is reasonable ground for believing that repayment is not resonably assured. (Mortgage, Sec,95.) The Company must file an annual certi6cate with the Corporate Trustee as to compliance with the provisions of the Mor gage and as to the absence of default with respect to any of its covenants contained in the Mortgage. (Mortgage, Sec. 44.) DESCRIFTION OF NEW PREFERRED STOCK A copy of the Agreement of Consolidation or Merger, as amended, which comprises the Company's Articles of Incorporation as now in effect (Charter) and the proposed form of Statement creating the New Preferred Stock are filed as Exhibits to the Registration Statement. The following information and summaries do not purport to be complete and are subject in all respects to the provisions of the Com-pany's Charter and said Staterrmt and do not relate to or give effect to the provisions of statutory or common law. The following information and summaries are qualified in their entirety by reference to Ardele Fifth of the Charter. General 'Ilic Charter of the Company provides for a class of Preferred Stock, Cumulative, $100 f Par Value, which may be issued from time to time in series. Except in certain respects as to which there may be variadons among series, the shares of each series have the same rank and are identical with each other. The respects in which there may be variations as between series consist of (i) the number of shares con-stituting each series and the distinctive designation thereof, (ii) the dividend rate, dividend payment dates and the date from which dividends shall be cumulative, (iii) the amount or amounts payable upon redemp-don, and (iv) certain terms and conditions of redemption. When a new series of Preferred Stock is issued, those characteristics thereof as to which there may be variations between series are stated and expressed in the resolution of ;ne Board of Directors creating suca senes. Dividend Rights. The New Preferred Stock, pari parru with all preferred stock then outstanding, shall be entitled when and as declared by the Board of Directors, in preference to the Common Stock, to dividends at the rate stated on the cover page hereof, payable quarterly on January 1, April 1, July 1, and October 1 of each year. The first dividend payment date for the New Preferred Stock will be July 1,1972. Dividends will be cumulative from April 13,1972. R" , N Provisions. Subject'to certain restrictions, the Company may, upon the affirmative vote of a majority of the outstanding Common Stock, redeem all or any part of the New Preferred Stock upon not less than 30 days notice at $109.10 per share if redeemed on or before April 1,1977, at $107.15 per share if redeemed after April 1,1977, and on or before April 1,1982, at $105.20 per share if redeemed after April 1.1982, and on or before April 1,1987, and at $103.25 per share if redeemed after April 1, 1987, in each case plus an amount couivalent to the accumulated and unpaid dividends thereon, if any, to the date fixed for redemption; provided, however, that no share of the New Preferred Stock shall be redeemed before April 1,1977, if such redemption is for the purpose or in anticipation of refunding such share through the use, directly or indirectly, of funds borrowed by the Company or' through the use, directly or indirectly, of funds derived through the issuance by the Company of stock ranking prior - 17
m to or on a parity with the New Preferred Stock as to dividends or assets, if such borrowed funds have an effective interest cost to the Company (computed in accordance with generally accepted financial practice) . or such stock has an efective dividend cost to the Company (so computed) of less than 7.785% per annum. In general, at any time when dividends payable on the Preferred Stock are in default, the Company may not acquire any shares of the Preferred Stock (except b, redemption of all outstanding shares of the Preferred Stock) unless approvalis obtained under the Pubtis Utility Holding Company Act of 1935. Any shares of the Preferred Stock so redeemed, purchased or acquired shall be retired and cancelled. Yoting Rights. Except as expressly provided by law or the Charter, the holders of the Preferred Lock have no power to vote and are not entitled to notice of any meeting of stockholders of the Company. If and when dividends payable on any preferred stock of the Company shall be in default in an amount eque.1 to four full quarterly payments or more per share, and thereafter until all dividends in default on any such preferred stock shall have been paid, the holders of all preferred stock, voting separately as a class, shall be entitled to elect the smallest number of directors necessary to constitute a majority of the full Board of Directors, and the holders of the Common Stock, voting separately as a c!r.ss, shall be entitled to elect the remaining directors of the Company. Restrictions on Issaance of Prior Ranklag Stock and on Altering Rights of Preferred Stock. So long as any shares of the Preferred Stock are outstanding, the Company shall not, without the consent of the holders of atleast two-thirds of the total number of shares of the Preferred Stock then outstanding: (1) Create, authorize or issue any new stock which would rank prior to the Preferred Stock or create, authorize or issue any security convertible into shares of any such stock except for the purpose of providing funds for the redemption of all of the Preferred Stock then outstanding. provided that any such new stock or security shall be issued within twelve months after the vote of the Preferred Stock authorizing its issuance; or (2) Amend, alter or repeal any of the rights, preferences or powers of the holders of the Preferred Stock so as to affect adversely any such rights, preferences or powers; if such amendment would affect adversely the rights, preferences or powers of less than all series of the Preferred Stock, only the consent of the holders of at least two-thirds of the total number of all outstanding shares of all series so affected is required; and the increase or decrease in the authorized amount of the Preferred Stock or the creation, or increase or decrease in the amount, of any class of stock ranking on a parity with the Preferred Stock shall not be deemed to affect adversely the rights, preferences or powers of the holders of the Preferred Stock. Restrictions on Merger, Sale of Assets, Issuance of Unsecured Debt and Sale of Additional Preferred Stock. So long as any shares of the Preferred Stock are outstanding, the Company shall not, without the consent of the holders of at least a majority of the total number of shares of the Preferred Stock then outstanding: (1) Merge or consolidate with or into any other corporation or sell or otherwise dispose of all or substantially all of its assets, unless such merger, consolidation, sale or other disposition, or the issuance or assumption of securities in the efectuation thereof shall have been ordered or approved under the Public Utility Holding Company Act of 1935; or (2) Issue or assume any unsecured notes, debentures or other securities representing unsecured debt (other than for the purpose of refunding or renewing outstanding unsecured securities issued or assumed by the Company resulting in equal or longer maturities or redeeming or otherwise retiring all outstanding shares of the Preferred Stock) if immediately after such issue or assumption (a) the total outstanding principal amount of all unsecured notes, debentures or other securities representing , I8
unsecured debt of the Company will thereby exceed 20% of the aggregate of all existing secured debt (N of the Company and the capital stock, premiums thereon, and surplus of the Company, as stated on C) its books, or (b) the total outstandbg principal amount of all unsecured notes, debentures or other securities representing unsecured debt of the Company of maturities of less than 10 years will thereby exceed 10% of such aggregate. For the purpose of this paragraph, the payment due upon the maturity of unsecured debt having an original single maturity in excess of 10 years or the payment due upon the final maturity of any unsecured serial debt which had original maturities in excess of 10 years shall not be regarded as unsecured debt of a maturity of less than 10 years until such pay-ment shall be required to be made within 3 years; or (3) Issue, sell or otherwise dispose of any additional shares of the Preferred Stock, or of any other class of stock ranking on a parity with the Preferred Stock as to dividends or in liquidation, dissolution, winding up or distribution, unless the gross income of the Company for a period of 12 :onsecutive calendar months within the 15 calendar months preceding the issuance, sale, or dis. position of such stock, available for the payment of interest, shall have been at least 1% times the sum of the annual interest charges on allinterest bearing securities of the Company and the annual dividend requirements on all outstanding Preferred Stock, and of all other stock, if any, ranking prior to, or on a parity with the Preferred Stock, including the shares proposed to l>e issued, and unless the aggregate of the capital of the Company applicable to the Common Stock and the surplus of the Company shall be not less than the aggregate amount payable on the involuntary dissolution, liquida-tion er winding up of the Company in respect of all shares of the Preferred Stock and all shares of stock, if any, ranking prior thereto, or on a parity therewith, as to dividends or distributions, which will be outstanding after the issue of the shares proposed to be issued. Liquidation Rights. In the event of any voluntary liquidation, dissolution or winding up of the Company, the Preferred Stock, part possu with all preferred stock then outstanding, shall have a preference over the Common Stock until an amount equal to the then current redemption price shall have been paid. In the event of any involuntary liquidation, dissolution or winding up of the Company, the Preferred Stock, part possu wtth all preferred stock then outstanding, shall also have a preference over the Common Stock until the full par value (5100) thereof plus accumulated and unpaid dividends thereon shall have been paid. Preemptive or Other Subscripnop Afghts. No holder of any stock of the Company shall be entitled as of right to purchase or subscribe for any part of any stock of the Company or of any securities con-vertible into stock of the Company. Liability to Further Calls and to Assessment. All shares of the New Preferred Stock, when issue *d in accordance with the terms of the Prospectus, will be validly issued and fully paid and non-assessable. Certain Limitations on Common Stock Dividends. The Charter in effect restricts the payment of dividends on the Common Stock to 75% of net income available for Common Stock dividends if the percentage of Common Stock equity to total capitalization is between 20% and 25%, and to 50% of such net income if such percentage is less than 20%. Certain other limitations on the payment of Com-mon Stock dividends also exist in the Charter. Certain limitations on the payment of Common Stock dividends exist in the Mortgage and Deed of Trust, dated as of October 1,1944, to Guaranty Trust Company of New York (now Morgan Guaranty Trust Company of New York) and Henry A. Theis (John W. Flaherty, successor), Trustees, as supplemented, and in the Debenture Agreement, dated as l of May 1,1949, with Central Hanover Bank and Trust Company (now Manufacturers Hanover Trust Company), Trustee, copies of which are filed as exhibits to ,the Registration Statement. (See " Description of New Bonds-Dividend Covenant" and Note 4 to Financial Statements.) Transfer Agent and Registrar. The transfer agent for the New Preferred Stock is The Commercial i National Bank of Littic Rock, Little Rock, Arkansas, and the registrar is The First National Bank in - Little T.ock, Little Rock, Arh===
EXPERTS AND LEGALITY Tha balance sheet as of December 31, 1971 and the related statements of income, retained earn-ings and changes in financial position for the five years then ended included in this Prospectus have h been examined by Haskins & Sells, independent Certified Public Accountants, as stated in their opinion appearing herein, and have been so included in reliance upon such opinion given upon their authority as experts in accounting and auditing. The statements made as to matters of law and legal conclusions under " Description of New Bonds",
" Description of New Preferred Stock" and Note 7 to Financial Statements have been reviewed by Messrs.
House. Holmes & Jewell, General Counsel for the Company, and such statements are included herein in reliance upon their authority as experts. W. Horace Jewell, a member of that firm acting for that firm in connection with this matter, owns 30 shares of Preferred Stock of the Company, and 655 shares of Com-mon Stock of Middle South, the Company's parent. The legality of the securities offered hereby will be passed upon for the Company by Messrs. House, Holmes & Jewc!!, General Counsel for the Company, Tower Building, Little Rock, Arkansas, and Messrs. Reid & Priest,40 Wall Street, New York, Nc.w York, and for the Purchasers by Messrs. Winthrop Stimson, Putnam & Roberts, 40 Wall Street, New York, New York. However, all matters pertaining to the incorporation of the Company, titles to property, franchises, and the lien of the Mortgage and all matters of Arkansas, Missouri, Tennessee and Louisiana law will be passed upon only by Messrs. House, Holmes & Jewell. O l e5* w 9
OFINION OF INDEFENDENT CERTIFIED FUBLIC ACCOUNTANTS AaKANSAs Powan & LIGHT COMPANY: We have examined the balance sheet of Arkansas Power & Light Company as of Decernber 31,1971 and the related statements of income, retained earnings and changes in Anancial position for the five pars then ended. Our examination was 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 31,1971 and the results of its operations and the changes in its financial positica for the five years then ended, in conformity with generally accepted accounting principles applied, except for the change, in which we concur, of capitalizing taxes as explained in Note 8 to the Financial Statements, on a consistent basis (after restatement of such financial statements as described in Notes (a), (c) and (d) to Statement of Income). HAsKINS & SELI.S Saint Louis, Missouri, February 11,1972
'6 l
l
]
e 21
l ARKANSAS POWER & LIGHT 'COMPANY l BALANCE SHEET , December 31,1971 1 j i ASSETS l UTIUTY Pt. ANT---at original Cost (notes 1 and 2)t I
~
E!cetric plant (exclusive of nuclear fuel) . . . . . . . . . . . . . . . . . . . . . . . . . $836,465,593 Nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................ 9,148,056 Total utility plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 845,613,649 Less accumu'2ted depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,665,203 Utility plant-net . . . . . . . . . . . . . . . . . .
... ............ 684,948,446 OTHER PROPERTY AND INVESTMENTS-at cost (less depreciation of $273,331) 681,518 CURRENT ASSETS:
Cash.................................................... 4,762,542 Special deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,926 Notes receivable (less allowance for doubtful notes of $42,820) ..... 2,016,535 Accounts receivable: Associated companies . . . . . . . . . . . . .............. ...... 112,642 Customer and other (less allowance for doubtful accounts of
$ 17 5,000 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,10,$,023 Materials and supplies, including fuel oil (at average cost) . . . . . . . . . 7,813,264 Prepayments and other . . . . . . . ... ...... .. ...... ....... . 661,306 Total current assets . . . . ...... ....... .. ........ 23,650,238 DEFERRED des Ts:
Unamortized debt discount and expense-being amortized over lives of related issues ..... ... ........ ......... .............. 112.105 Other............................................... 458,679 Total deferred debits . . . . .. ................. .. 570,784 Total........................................ $709,850,986 See accompanying Notes to Financial Statements. 22 0;
1 ARKANSAS POWER & LIGHT COMPANY v BALANCE SWEET-Dee-her 31,1971 LI A B ILITIE S CAPITAUZATIONt Proprietary capital: Preferred stock and premium (note 3) ..... ......... ... S 51.529,038 Common stock, $12.50 par value; authorized, 20,000,000 shares: issued and outstanding, 13,790,000 shares .................. I'72 175,000 Retained earnings (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,042,903 Total proprietary capital . . . . . . . . . . . . . . . . . . . . . . . . . 254,946,941 Lon g-term debt (note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348,400,000 i Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 603,346,941 CUTAENT LIABIUTIEs: Notes payable: Banks............................................... 9,850,000 Others .............................................. 9,500,000 Accounts payable: l Associated comp oies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342,112 Other................................................ 5,152,448 Payroll accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,571 s / Custo:ner deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,224,461 Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,521,779 Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,637,059 Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691,930 Other.................................................... 1,052,055 Total current liabilities ..................'..... ..... 52,145,415 DEFERRED CREDITS: Accumulated deferred investment tax credits (note 5) . .. . . 7,763,033 Unamortized premium on debt-being amortized over lives of related issues............................................ 1,039,904 Other.................................................. .... 998.681 Total deferred credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,801,618 RESERVES ................................ .................. 1,163,671 CONTRIBUTIONS IN AID OF CONSTRUCTION . . ..... ..... ... . . 4,193,768 ACCUMUI.ATED DEFERRED INCOME TAXES (note 5) . . . . . . . ... ..... 39,199,573 COMMITMENTS AND CONTINGENCIES (note 7) Total......................................... 5709.850,986 See accompanying Notes to Financia1 Statements. O n
ARKANSAS POWER & LIGHT COMPANY ft'ATEMENT OF RETAINED EARNINGS Year Ended December 31, 1967 1968 1969 1970 1971 Balance at beginning of year: As originaPy reported ........ ....... 323,764,623 - - - - Adjustment (note 5) ...... . 662,424 - - - - As restated .. .. .... ..... 24,427.047 $27.736.497 $23,953,598 $26,582,065 525,982.200 Add-Net income ... .. ..... .. . .... 18,301,570 18.411.321 21,804,529 24,757,705 28.908,223 Total ...... . . .. 42,728,617 46.147,818 45.758.127 51,339,770 54,890,423 Deduct: Dividends-cash: Preferred stock: 4.32% series . . . . .. .... 302,400 302,400 302,400 302,400 302,400 4.72% series ...,. .. .. ... 441,320 441,320 441.320 441,320 441,320 4J6% series ............. .. 342,000 342,000 342,000 342,000 342,000 4.56 % 1965 series . . . ..... . 342,000 342,000 342,000 342,000 342.000 6.08% series . .. .... .. 603,000 608,000 608,000 608,000 608,000 7.32% series . . . . . . . . . . . . . . . - - 687,267 732.000 732,000 Common stock (51.22 per share for 1967; 31.32 per share for 1968;
$1.28 per share for 1969 and 1970; and $1.22 per share for 1971, on snares outstanding at respectivo divi.
dead dates) . . . . . . . . . . . . . . . . 9,956,400 11.533.500 12.453.075 13,589,850 16,079,800 Transfer to common stock account (repre-sents $12.50 par value of shares issued as follows: 240,000 shares in 1967; 690,000 shares in 1968; 120,000 shares in 1969; 720,000 shares in 1970: and 400.000 shares in 1971) . ... .. 3,000,000 8,625,000 4,000.000 9,000.000 5.000.000 Total .. . ... . .... 14,992,120 22,194.220 19.176,062 25,357,570 23,847,520 Balance at end of year (note 4) .. . 527,736,497 523,953,598 $26,582,065 525.982.200 $31,042,903 See accompanying Notes to Financial Statements. I
~ mm m =.y
AREANSAS POWER & UGHT COMPANY STATDtINT OF CHANGES IN FINANCIAL PORTION
, Year Ended December 31, 1967 1968 1969 1978 1971 Souros of Funds:
From operations: Not income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,302 $18,411 $21,804 $24.757 $ 28,908 Depreciation and assortizadoe . . . . . . . . . . . . . . . . . . . . . 13,758 16,074 17,133 18,521 19,832 Deferred Income taxes and investment tax credit adjust-mento-ast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,658 3,246 2,991 3,760 3.548 Total *.................................. 36,718 37.731 41.928 47,038 52.288 From sale of securitise: Preferred stock and premium . . . . . . . . . . . . . . . . . . . . . . - - 10,042 - - Common stock (480,000 shares in 1969, 560,000 shares in 1970, and 2.400,000 sharse la 1971) . . . . . . . . . . . . - - 6,000 7,000 30,000 First mortgage bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.000 15.000 25,000 25,000 60,000 Total................................... 30,000 15.000 41,042 32,000 90,000 M iscellaneous-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.229 (275) 564 (246) 1,052 Total................................... 67.947 52.456 83,534 78.792 143J40 Application of Funds: ! Plant additions and . - -- - - (not of selvese)* . . . . . . . . 53,136 47,367 57,647 68.834 132,365 [ Nuclear fuel' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - 9,148 Itatirement of sinkin8 fund debentures . . . . . . . . . . . . . . . . . . . 225 225 225 225 225 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............ 11,992 13J69 15.176 16.358 18.847 Total................................ 65.333 61.161 73.048 85.417 161.085 Increase (Decrease) in' Workin8 Capital . . . . . . . . . . . . . . . . . . . . $ 2,594 $(8,705) 510,486 $(6,625) $(17,745) ' l
~ I Chaness la Components of Workin8 Capital:
l Cash and temporary cash investments (decrease) . . 3 (226) 5 1.135 5 1,140 $(2.412) $ 185 Materials and supplies, including fuel oil (decrease) ...... 812 (62) (88) 2,586 1,212 i 1 Notes payable (increase) ... .......... ......... .... 555 (8,195) 10.695 (5,500) (13,850) ; MM "-- _ ed .... ......... ... I.453 (1,583) (1.261) (1.299) (5.292)
)
Total.................................. 3 2.594 5(8,705) 510,486 3(6,625) $(17,745)
- Includes allowance for funds used during construction.
See accompanying Notes to Financial Statements. l e O = I I ' " ~ L rit m&W ~
ARKANSAS POWER & LIGHT COMPANY NOTES TO FINANCIAL STATEMLVI3 For the FIve Years Ended December 31, 1971
- 1. Urrt.try FI. ANT The original cost of utility plant (exclusive of nuclear fuel) at December 31,1971, segrepted as to functional classification, follows:
In service: . Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3210,025,140 Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,297,829 Distrilmtion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284,211,791 General ......................................... 33,751,197 Intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,384 Total utility plant in service . . . . . . . . . . . . . . 682,372,341 Construction work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,797,678 Held for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.295.574 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $836,465,593
- 2. DEFRECIATION, MAtNTENANCE AND REFAIRS Depreciation is computed on the straight-line basis at rates based on the estimated service lives of the various classes of property. Depreciation provided was approximately 2.9% of the original cost of the average depreciable property for 1967, and 3.0% for 1968,1969,1970, and 1971.
The cost of maintenance, repairs, and the renewal of items determined to be less than umts or property is charged to maintenance expense accounts. The cost of betterments and the renewal of units of property is charged to property accounts, the book value of property replaced being concurrently removed from such accounts and charged to accumulated depreciation, together with removal cost, less salvage. h
- 3. PREFERRED STOCK AND PREuztru Preferred stock outstanding at December 31,1971,' consists of the following:
Current Shares Shares Call Price ! Preferred Stock Amehortaed Ousm-stant Per Share , Cumulative, $100 Par Value: l 4.32 % series . . . . . . . . . . . . . . . . . . . . . 70,000 70,000 $103.647 4.72 % series . . . . . . . . . . . ......... 93,500 93,500 107.00 4.5 6 % series . . . . . . . . . . . . . . . . . . . . . . 75,000 75,000 104.33 1 4.56 % 1965 series . . . . . . . . . . . . . . . . . 75,000 75,000 104.00 1 6.08 % series . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000 104.33 7.32% series . . . . . . . . . . . . . . . . . . . . . . 100,000 100,000 108.99 Other series . . . . . . . . . . . . . . . . . . . . . . . 486.500 None l To tal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.000.000 513.500 l Stated at $ 100 a share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351,350,000 Premium on Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . 179,038 Total.......................................... $51.529.038 During the five years ended December 31,1971, Premium on Preferred Stock increased $42,300 from the sale of 100,000 shares of 7.32% series in 1969. 26 h
ARKANSAS POWER & LkGHT COMPANY . NOTFS TO FINANCIAL TTATEMENTS-4Condeoed) lang-term debt outstanding at December 31, 1971, consists of the following: First mortgage bonds: 3%% series due 1974 .......... .. $ 30,000,000 2% % series due 1977 . . . . . . . . . . . . . . . 11,000,000 3% % series due 1978 . . . . . . . . . . . . . . . . 7,500,000 2% % series due 1979 . . . . . . . . . . . . . . . . 8,700,000 2% % series due 1980 . . . . . . . . . . . . . . 6,000,000 3% % series due 1981 . . . . . . . . . . . . . . 8,000,000 3% % series due 1982 . . . . . . . . . . . . . . . 15,000,000 3% % series due 1984 . . . . . . . . . . . . . . . . 7,500,000 3% % series due 1985 . . . . . . . . . . . . . . . 18,000,000 4% % series due 1991 . . . . . . . . . . . . . . 12,000,000 4% % series due 1993 . . . . . . . . . . . . . . . . 15,000.000 4% % series due 1995 . . . . . . . . . . . . . . . 25,000,000 5% % series due 1996 . . . . . . . . . . . . . . . . 25,000,000 5% % series due 1997 . . . . . . . . . . . . . . . . 30,000,000 7% % series due 1998 . . . . . . . . . . .. 15,000,000 9% % series due 1999 . . . . . .. 25,000,000 9% % series due 2000 . . . . . .. . . 25,000,000 7% % series due 2001. . . . . .... ... 30,000,000 8 % series due 2001. . . . . .. . 30.000.000 Total . . . . . . . . . . . . . . . . . . . . . . . 343,700,000 3% % sinking fund debentures due 1974 . . . . . 4.700.000 i Total long-term debt . . . .. $348.400.000 Long-term debt sinking fund requirements, including maturities, for the five years from December 31, 1971, amount to $3,437,000 for 1972,53.662.000 for 1973,537,612,000 for 1974 and $3,137,000 for 1975 and 1976. Of these requirements, $3,437,000 for 1972 and 1973, and $3,137,000 for 1974 through 1976 may be met by certification of ptsperty additions at the rate of 167% of requirements. The cash requirement for the year 1972 was anticipated prior to December 31,1971. It is anticipated that maturities of $34,475,000 in 1974 will be refinanced at that time. Various restrictions on the payment of cash dividends or other distributions on common stock and on the purchase of Company common stock are contained in the indentures underlying the Company's mortgage bonds and sinking fund debentures and in the Company's articles of incorporation, as amended. At December 31,1971. $7,282,756 of the retained earnings was restricted under the bond indenture provisions which were then the most restrictive. Forinformation relating to a dividend restriction to become effective in connection with the issuance of the New Bonds, reference is made to " Description of New Bonds-Dividend Covenant".
- 5. IncouzTAXES In 1971, for purposes of computing the book provision for income taxes, the Company used the Class Life Asset Depreciation Range System (ADR) provided for by the Revenue Act of 1971. The l Company will make a final decision as to the election of the new Class Life Asset Depreciation ~ umge System for income tax purposes when final regulations are promulgated by the Treasury Department.
Provisions for Federal and State income taxes reflect net reductions attributable to the recognition of accelerated amortization and liberalized depreciation (including the new Class Life Asset Depreciation Range System) for tax purposes only, in advance of the periods in which depreciation would otherwise be deductible in computing such taxes. Amounts equivalent to such net reductions are charged to deferred income taxes and credited to accumuiated deferred income taxes. Estimated deductions for
' depreciation computed for Federal income tax purposes were: 518,667,000 in 1967t S21,539,000 in 1968; 522,215,000 in 1969; $23,493,000 in 1970; and $26,180.000 in 1971.
27
ARKANSAS POWER h LIGHT COMPANY NOfES TO FINANCIAL STATEMENTS-(Condosed) The investment tax credit is being taken into income over the life of the related property. The amounts recorded during the five years ended December 31,1971 are as follows: Amount of Amount Credited Year Emded Investment Credit to Income December 31,1967 ...................... 32,566,369 $144,815 December 31,1968 ...................... 708,327 195,572 December 31,1969 ...................... 591,810 215,724 December 31,1970 ...................... 1,151,931 242,752 December 31,1971 ...................... 633,220 270,422 The balances of retained earnings have been restated from amounts oripnally reported to reflect a refund of Federal income taxes received in 1970 applicable to the years 1952 through 1958. The retroactive adjustment of $662,424 includes interest earned through December 31, 1966 less related income taxes. The appropriate accounts in the years 1967 through 1969 have also been restated to reflect interest earned of $36.299 less related income taxes of $18,965 applicable to each of those years.
- 6. PENS!ON PI.AN The Company has a contributory form of pension plan covering substantially all of its employees.
The Plan was amended effective June 1.1970. to provide for certain changes in benefits and to reduce the amount of employee contributions until June 1.1972, when the Plan will become non-contributory. In addition, certain changes were made in actuarial ssumptions used in computing costs of the amended Plan. The Company' elected to make its pension payment in 1970 as if these changes had been made etTective January 1,1970. The pension cost amounted to $613.116 in 1967, $831,558 in 1968, $1,106,425 g in 1969. $2.252,000 in 1970, and $2.360.505 in 1971. The Company's policy is to fund pension cost accrued. The unfunded past service liability as of January 1,1971 was $8,134,790 which is being funded over a fifteen-yect period. The pension fund exceeds the actuarially computed value of vested beneSts.
- 7. COMMITMENTS AND CONTINGENCIES Reference is made to " Purpose of Issue and Construction Program" for information relating to estimated expenditures in connection with the Company's construction program. Reference also is made to " Fuel Supply" under " Business" for information relating to the recent developments pertaining to fuel supply.
The Company is lessee under long-term leases involving, on the present basis, anmaal rentals of approximately $475,000. The Company is a defendant in a lawsuit involving a claim for approximately $3,500,000 arising from a disput on contract performance in connection with its construction program. In the opinion et counsel, the e aim against the Company is substantially overstated and the ultimate liability of the Com-pany,if any, will not be material. Tacluded in utility plant at December 31,1971 are two hydroelectric production plants, with a net book value of $4,763,060 licensed by the Federal Power Commission. This license expires on Feb-ruary 7,1973 and an application for a new license was filed with the FPC on February 4,1970. On August 4,1969, the FPC issued a revised order No. 387, specifying the method fcr determining " net investment of the project for purposes of recapture or relicensing. Order No. 387 indicates that the - l , l 28 - l l t 1 l l
AREANSAS POWER & LIGHT COMPANY NOTES TO FINANCIAL STATEMENTS-4Coedened) FPC will estimate the " net investment" component as eq tal to the project original cost, less the project accumulated depreciation and subject to a maximum potential further deduction of the balance in the amortization reserves. It is not possible to predict the final outcome of this tuling; however, in the opinion of management, the ultimate losses, if any, which may result from any takeover or relicensing of the licensed project will not be material.
- 8. CAPITALIZATION OF REAL ESTATE AND PER$oNAL PRorERTY TAXES
'llie Company's consistent practice until 1970 was to charge to operating expense all real estate and personal property taxes incurred. Due to the longer periods and greater sums involved in the construction of nuclear generating stations, the Company, efective January 1,1970, adopted the practice of charging to construction that portion of real estate and personal property taxes which is assessed on larger property additions during the period of construction. The taxes thus capitalized amounted to $302,785 and $624,177 for the years ended December 31,1970 and 1971, respectively. The change would have had no material efect on net income during the three years ended December 31,1969.
- 9. SUFFL2MENTARYINFORMATION Year Ended Decessber 31, 1967 1968 1969 1970 1971 (thousands of Dollars)
Provision for depreciation, other than that set out separately in the Stateme-f. of Income, charged to transportation expenses-clearing accounts 5 655 5 769 3 831 3 875 5 967
=memme name== ===mma _
Taxes, other than income taxes: Real and personal property $5,943 $6,372 $6,616 5 7,031 1 7,710 Fayroll taxes 717 840 933 990 1,124 1 State and city franchise . 1,815 1,932 2,185 3.092 3,227 l Other . . . _ . . . 56 53 113 134 665 l Total 58,531 $9,197 $9,847 311.247 312,726 m.m -- ==m== ==us-m _ . _ _ - Charged to: Operating expenses-taxes $8,305 $8,946 $9,538 510,607 311.218 Utility plant and sundry accounts 226 251 309 640 1,508 I
==========
Technical servkes, consultation, and assistance rendered at cost under contract wh Middle South Services, Inc. (an adtliated company) charged to: Operating expensee 5 414 5 755 $1,261 3 1,723 $ 1,973 Uti!Ity plant and sundry accounts 126 88 83 283 82 Total . _ . . . . . . . S 540 $ 843 51,344 5 2.006 $ 2,053 Rents--charged to operating esponses 5 3 902 b$ 964 5 941 Maintenance other than amounts set out separately in the statmient of income was not signiScant.
- 1 m 1 29 1
l
PURCHASERS ne Purchasers named below have severally agreed to purchase from the Company the following respective principal amounts of the New Bonds: Peteespel Pdmetpel Neem Ameent Name Aeneset Blyth & Co., Inc. S 4.900.000 First CsIlfornia Company incorporated . S 500,000 'fhe First Boston Corporation. 4,950,000 Nmrd, Weil, Labovisse, Friedrichs focor. Salomon Brothen 4.900,000 porated 500,000 Dean Witter & Co. Incorporated . 4.900.000 D. H. Blair & Company .. 400,000 Drexel FIrestone Incorporated.. 2,000,000 CMaie Incorporatd M.N Smith. Barney & Co. Incorporated... 2,000,000 CCadey mpany, k._ M.M Baker, Watts & Co 300,000 Robert Fleming Incorporated . IJ00,000 Connors & Co., Tae- 300,000 Harris, Upham & Co. Incorporated .. IJ00,000 Fe & Capuy, incorporated _ 300,000 R. W. Pressprich & Co. Incorporated . 1,500.000 Hill, Crawford & Lanford, Inc .. 300,000 Abraham & Co.- 750,000 Kroeze, McLarty & Duddleston 200,000 Weis, Voisin & Co, Inc... 750,000 Russ & Company, Incorporated... 200,000 Wood, Walker & Co .. 750,000 Sweney Cartwright & Co .. 200,000 The Chicago Corporation.. 500,000 Filor, Bullard & Smyth... 100,000 Total.. $35,000.000 De Purchase Contract provides that the obligations of the Purchasers are subject to certain condi-tions precedent, and that the Purchasers will be obligated to purchase all of the New Bonds if any are purchased, provided that, under certain circumstances involving a default of Purchasers, less than all of the New Bonds may be purchased. The Company has been advised by Blyth & Co., Inc., ne First Boston Corporation, Salomon Brothers and Dean Witter & Co. Incorporated, as Representatives of the Purchasers, that the Purchasers propose to offer the New Bonds to the public initially at the offering price set forth on the cover page of this Prospectus and, through the Representatives, to certain dealers at such price less a concession of
.70 of 1% of the principal amount of the New Bonds; that the Purchasers and such dealers may allow a discount of .375 of 1% of such principal amount on sales to other dealers; and that the public offering price and concession and discount to dealers may be changed by the Representatives.
. 9
J O ARKANSAS POUER & LIGHT CG1PANY BALANCE SHF.ET December 31, 1970 ASSETS Utility Plant (notes 1 and 2): At original cost S 700,326,406 Plant acquisition adjustments-unamortized portion 121,731 Total utility plant 703,440,137 Less accumulated depreciation _1_45,711,762 Utility plant - net 562,736,375 Other Property and Investments - at cost: Non-utility property (less accumulated depreciation of $292,367) 202,991 Other investments 251,090 Special funds 131,546 Total other property and investments 635,635 Current Assets: Cash 4,476,153 Special deposits 100,604f torking funds 102,227 Notes receivable (less allowance for uncollectible notes of $42,820) 2,414,314 ! Accounts receivable: I Associated companies 1,008,196 Customer and other (less allowance for uncollectible ) i accounts of $175,000) 7,357,974
!!aterials and supplies (at average cost) 6,600,639 Prepayments and other 560,705 1 i
Total current assets 22,780,942 ; Deferred Debits: i Unamortised debt discount and expense - being amortized over lives of related issues 131,365 "' Preliminary survey and investigation charges 252,904 Other 312,153 ) Total deferred debits 696,422 Total J 536,349,374 - () See accompanying Notes to Financial Statements, i l
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+
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BALANCE SHEET December 31, LIABILITIES 1970 Capitalization: Proprietary capital: Preferred stock and premium (note 3) $ 51,529,030 Common stock, $12.50 par value; authorized, 20,000,000 shares; outstanding, 10,990,000 shares 137,375,000 Ratained earnings (notes 4 and 5) , _25,932,200 Total proprietary capital 214,086,230 Long-term debt (note 4) 288,625,000 Total capitalization 503,511,230_ Current Liabilities: Notes payables Eanka 1,000,000 Others 4,500,000 Accounts payable: () Associated companies other 264,037 5,075,079 Payroll accrued 146,021 Customer deposits 3,365,413 Taxes accrued 12,394,478 Interest accrued 4,591,403 Dividends declared 691,930 Other 1,002,099 Total current liabilities 33,530,550 Deferred Credits: Unamortized premium on debt - being amortized over lives of related issues 795,442 Customer advances for construction 272,922 Accumulated deferred investment tax credits (note 5) 7,400,236 Other 257,512 Total deferred credits _ 0,726,112 Reserves: Property insurance 500,158 Injuries and damages 130,000 Pensions and benefits 640,217 i Total reserves 1,270,375 ; Contribution's in Aid of Construction 3,797,155 Accumulated Deferred Income Taxes (nota 5) 36,013,944 - () Commitments and Contingencies (note 7) Total $ 586,349,374 l l See accompanying Notes to Financial Statements.
O STATEMENT CF INCGtE Year Ended December 31,
)
1966 1967 196a 1969 1970 . l (Thousands of Dollars) Operating Revenues (a) $97,058 $105,516 $118,943 $136,044 4149,317 Operating Espenses: Operations . l Fuel and power pure:ssed (s) 21,133 25,302 26,239 34,324 36,716 Other production, transmission and distribution 4,842 4,793 4,957 5,433 5,964 Customer accounts and sales 4,604 4,700 5,000 5,554 6,0C8 Administrative and general 6.061 6,261 8.114 8.401 10,113 Total operation 36,640 41,061 44,313 53,712 58,366 Maintenance 4,522 4,78 6 5,172 6,116 6,191 Depre ciation 12,212 12,970 15,060 16,059 17,400 Taxes - other than income (b) 7.355 8,305 8,946 9,538 10,607 Income taxes (c) (d): Federal 10,592 7,760 13,110 14,940 14,G53 State 1,205 1,232 1,33 4 1,906 2,090 Deferred - not 1.633 2, 23 5 2,133 2,615 2,031 Investment tax credit adjustments. net (c) 68 0 2,422 512 376 909_ Total operating expenses 74,344 80,772 91,235 105,26{ 113,557 Operating Income 22,214 24,744 27,703 30,702 35.750 Other Income and Deductions: ( Intercat charged to construction - credit 1,425 3,039 1,405 2,3 73 3,4 29 Miscellaneous incoms (deduccions)-net (c) 112 114 (100) 12 (10) Incocie taxes applicable to miscellaneous incocie and deductions (c) (d) (199) (130) (79) (161) (117) Total other income and deductions.nec __1,333 2,973 1,226 2,729 3,302 Interest Char;es: Interest on raortgage bonds 7,140 3,73 3 9,703 10,354 13,422 Interest on debentures 203 193 13 5 179 172 Amortization of debt premium, discount and expense - not 46 41 (35) (46) (31) Other interest 447 393 670 1,210 752 Total interest charges - not 7,336 9,415 10,523 11,707 14,295 Net Income (c) $15,716 $ 13,302 $ 13,411 S 21,' 04 $ 24,757 (a) Includes transactions with affiliates. Effective January 1, 1970, with regulatory approval, an accounting change use made to elimiitte from Operating Revenues and Power Purchased offsetting amounts representing affiliated companies' portion of sales and purchases of energy with neighborin3 unaffiliated utilities. Retroactive effect has been mada in this Statement of Income reducing Operating sevenues and Four Purchased by $2,693,933 for 1966, $2,427,529 for 1967, $2,393,350 for 1963, and $6,233,862 for 1969. (b) Reference is made to note 3 to Financial Statements regarding changes made in 1970 in accountin;; for real estate and personal property taxes. (c) Reference is made to note 5 to Financial Statements relating to tax provisions, the treat::ent of . p the investment tax credit, and retroactive application of a Federal income tax refund and interest earned thereon. (d) Effective January 1,1970 Federal and State income taxes are being allocated between Operating Income and other Income and Deductions in accordance with Federal Pouer Consnission regulations. Retroactive effect of this change has been given to the years covered by this Statement of Income. Y I
AREANSAS FOWER & LIGHT C21FAlfr STATEMEtr! 0F ItETALNED EA2NI23G3 Year Inded December 11, 1966 1967 1963 1969 1970 Salance at beginning of years As originally reported $21.245,375 Adjustment (note 5) 645,091 As restated 21,890,466 424,427,047 $27,736,497 $23,953,590 426,532,063
.dd - Net incone 15,716,3O 10,301 5,70 0 13,411,311 21,004,529 24,757,705 Total 37,606.834 42,723,617
- 46,147,313 45,755,127 51.331,770 Deduct Dividends = cash:
Freferred stocks 4.32% series 302.40C 302,400 302,400 302,400 302,400 4.72% series 441,320 441,320 441,320 441,320 441,320 4.56% series 342,000 342,000 342,000 342,0C0 342,000 , 4.55% 1965 series 342,000 342,000 342,000 342,000 342,000 1 6.00% series ' 111,467 603,000 608,000 000,000 C00,000 4 7.32% series . - - 6G7,267 732,000 Ocenon stock ($1.17 per share for 1966; $1,'l per share for 1967; $1.32 pet share for
'O 1950; 31.21 per share for 1969 and 1970, on shares out- '
standing at respective s dividond dates) 3,640,600 9,956,400 11,533,500 12,453,075 13,333,0 7; 1 Transfer to coumon stock account (represents $12.50 per value of i shares tsaued as fo11 oust 240,000 shares in 1966 and 1967; 690,000 shares in 1968; 320,000 shares in 1959; and 720,000 , shares in 1970, respectively) 3,000,000 3,000,000 1,525,000 4,000,000 9,000,c00 Total 13,179,707 14.992,120 12,194,220 10,176,062 25,357,R0 3alance at and c! year (note 4) 324,427,047 $27,735,437 423,953,5M ,2G,572,0G5 ,;?$,0.t.200 3ee accompanying Notes to Finan:ial Statenants. O
i 'r . O ARKANSAS POUER & LIGHT CCMPANY NorES TO FINANCIAL STATEMENTS l i i FOR THE FIVE YEARS ENDED DECD1BER 31,1970
- 1. Utility Plant The original cost of utility plant at December 31, 1970, segregated as to functional classification, follows:
In service: Production $203,67 2,318 Transmission 149,045,370 Distribution 263,177,372 General 31,532,923 Intangible 36,384 Total utility plant in service 657,515,367 Construction work in progress 49,594,532 Held for future use 1,216,457 Total $703,326,406
- 2. Depreciation, Maintenance and Repairs Depreciation is computed on the straight-line basis at rates based on the estimated service lives of the various classes of property. Depreciation provided uns approximately 3.1% of the original east of the average depreciable property for 1966, 2.9% for 1967, and 3.0% for IN8,1969, and 1970.
The cost of maintenance, repairs, and the renewal of items determined to be less than units of property is charged to maintenance expense accounts. The cost of betterments and the reneual of units of property is charged to property accounts, the book value of property replaced being concurrently removed from such accounts and charged to accumulated depreciation, together with removal cost, less salvage. Plant acquisition adjustments, which relate to property acquired in 1961, are being amortized by charges to income over the period ending June 30, 1971.
# e M.
O
NOTES TO FINANCIAL STATEMENTS-(Continued)
- 3. Preferred Stock and Premium Preferred stock outstanding at December 31, 1970, consists of the following:
Current Shares Shares Call Price Preferred Stock Authorized Outstanding Per Share Caulative, S100 Par Value: 4.327. series 70,000 70,000 $ 103.547 4.727. series 93,500 93,500 107.00 4.56% series 75,000 75,000 104.33 4.56% 1965 series 75,000 75,000 104.00 6.087. series' 100,000 100,000 107.41 7.327. series 100,000 100,000 103.99 Other series 486,500 None Total 513,500 Stated at $100 a Share $51,350,000 Premium on Preferred Stock 179,038 Total $51,529,038 During the five years ended December 31, 1970, Premium on Preferred Stock increased $3,300 from the sale of 100,000 shares of 6.037. series in 1966 and increased $42,300 from the sale of 100,000 shares of 7.32% series in 1969. 4 Long-Tem Debt Long-term debt outstanding at December 31, 1970, consists of the following: Pirst mortgage bonds: 3-1/87. series due 1974 S 30,000,000 2-7/07. series due 1977 11,000,000 3-1/8% series due 1978 7,500,000 2-7/8% series due 1979 l 8,700,000 1 2-7/87. series due 1980 6,000,000 3-5/87. series due 1931 8,000,000 3-1/2% series due 1902 15,000,000 3-1/47 series due 1984 7,500,000 3-3/87. series due 1985 18,000,000 4-7/37 series due 1991 12,000,000 4-3/37. series due 1993 15,000,000 4-5/87. series due 1995 25,000,000 5-3/47. series due 1996 25,000,000 5-7/87. series due 1997 30,000, # 4 7-3/87. series due 1993 15,00r, 40 9-1/47. series due 1999 25,jek 10 l 9-5/87. series due 2000 J g'gCjd Total 'J s, b , p0 . 3-3/87. sinking fund debentures due 1974 4,925,000
^
Total long-tem debt $283,625,000
h NOTES TO FINANCIAL STATDENTS-(Continued) O Long-term debt naturities for the five yr rs from December 31, 1970, including sinking fund requirements, amount to $2,337,000 for 1971, $3,062,000 for 1972 and 1973, $37,012,000 for 1974 and $2,537,000 for 1975. Of these requirements,
- S2,837,000 for 1971 through 1973, and $2,537,000 for 1974 and 1975 may be met by certification of property additions at the rate of 167% of requirements. The cash requirement for the year 1971 uas anticipated prior to December 31, 1970.
It is anticipated that maturities of $34,475,000 in 1974 will be refinanced at that time. l Various reatrictions on the payment of cash dividends or other distributions ; on common stock and on the purchase of Company common stock are contained in the l indentures underlying the Company's mortgage bonds and sinking fund debentures and in the Company's articles of incorporation, as amended. At December 31, 1970, J4,956,107 of the retained earningt was restricted under the bond indenture provisions which "are then the most restrictive.
- 5. Income Taxes Provisions for current Federal and State income taxes reflect net reductions attributable to the recognition of accelerated amortization and liberalized depractation, for tax purposes only, in advance of the periods in which depreciation would otherwise be did uctible in computing such taxes. Amounts equivalent to such net reductions are charged to deferred income taxes and credited to accumulated deferred income taxes.
% The balances of retained earnings have been restated from amounts originally reported to reflect a refund of Federal income taxes received in 1970 applicable to the years 1952 through 1958 The retroactive adjustment of S645,091 includes interest earned through December 31, 1965 less related income ta:ces. The appropriate accounts in the years 1966 through 1969 have also been restated to reflect interest earned of $36,299 less related income taxes of $13,965 applicable to each of these years.
The investment tax credit is being taken into income over the life of the related property. The amounts recorded during the five years ended December 31, 1970 are as follows: Amount of Amount Credited Year Ended Investment Credit to Income December 31, 1966 0 772,934 S 93,056 December 31, 1967 2,566,369 144,315 December 31, 1968 708,327 195,572 December 31, 1969 591,310 215,724 December 31, 1970 1,151,931 242,752
- 1 0
NorES TO FINANCIAL STATEMENTS-(Continued) O 6. Pension Plan The Company has a contributory from of pension plan covering substantially all of its employees. The Plan was amended effective June 1, 1970, to provide for certain changes in benefits and to reduce the amount of employee contributions until 1972, when the Plan will become non-contributory. In addition, certain changes uere made in actuarial assumptions used in computing costs of the amended Plan. The Company elected to make its pension payment in 1970 as if these changes had been made effective January 1, 1970 Consequently, the pension cost for 1970 uns $2,252,000 as compared with $1,106,000 in 1969. The Company's policy is to fund pension cost accrued. The changes in the Plan increased the unfunded past service liability as of wanuary 1,1970 to $8,419,026 uhich is being funded over a sixteen-year period. The pension fund exceeds the actuarially computed value of vested benefits.
- 7. Commitments and Contingencies The Company is lessee under long-term leases involving, on the present basis, annual rentals of approximately $480,000.
The Company is a defendant in a claim arising from a dispute on contract perfonnance in connection with its construction program. In the opinion of counsel, the claim against the Company is substantially overstated and the ultimate liability of the Company, if any, will not be material. Included in utility plant at December 31, 1970 are two hydroelectric production plants, with a net book value of $4,846,454, licensed by the Federal Power Commissicn. This license expires on February 7,1973 and an application for a new license was filed with the FPC on February 4,1970. On August 4,1969, the FPC issued a revised order No. 387, specifying the method for determining " net investment" of the project for purposes of recapture or relicensing. Order No. 387 indicates that the FPC will estimate the " net investment" component as equal to the project original cost, less the project accumulated depreciation and subject to a maximum potential further deduction of the balance in the amortization reserves. It is not possible to predict the final outcome of this ruling; houever, in the opinion of management, the ultimate losses, if any, which may result from any takeover or relicensing of the licensed project will not be material. 8 .' Capitalization of Real Estate and Personal Property Taxes It has been ths Company's consistent practice to charge to operating expense all real estate and personal property taxes incurred. Due to the longer periods and greater sums involved in the construction of nuclear generating stations, the Company, effective January 1,1970, adopted the practice of charging to construction that portion of real estate and personal property taxes which is assessed on larger property additions during the period of construction. This change had no material effect on net income for the year ended December 31, 1970 (sithough it may have such effect in the future) nor would it have had c material effect on net incote during the four years ended December 31, 1969, - t a 96
NOTES TO FINANCIAL STATS 2NTS-(Continued)
). Supplementary Information Year Ended December 31, 1966 1967 1968 1969 1970 (Thousands of Dollars)
Provisions for depreciation of property other than those provisions for depreciation and amortization set out separately - in the statement of income, represent provisions applicable - to transportation equipment (automobiles, trucks and air-craft), charged to clearing accounts S 624 S 655 $ 769 Sg $ 075 Taxes, other than income taxes: Real and personal property $5,044 $5,943 $6,372 $6,616 $ 7,031 Payroll taxes 68 1 717 040 933 99 0 State and city franchise 1,731 1,015 1,932 2,185 3,09 2 Other 103 56 53 113 J Total Sg $ g3 Sg SM Sig tO
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Charged tot Operating expenses-taxes $7,355 $8,305 $8,946 $9,538 S10,607 Utility plant and sundry accounts 204 226 251 309 640 Rents-charged to operating e::penses S 924 S 924 S 902 S 907 $ 964 Maintenance other than amounts set out separately in the state of incoce was not significant. 9 edD O
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O i % f ( 1 Nuclear. fueled generating plant construction. Environmental control projects. Organizational streamlining. Research and development efforts. These activities were just events in a year at Arkansas Power & Light that brought all pro-grams into concentrated focus. That focus was centered on improving the quality of AP&L's customer service and in establishing greater two-way communication be- r - tween the Company and its J over 390,000 customers. Thespirit of AP&L was keyed
,I to a simple, sincere and cordial invitation. Let's get together. $?Slg'sNsE And it's working.
1 Performance /1972 1972 1971 % increase h Revenues from operations (000) .. ..... ... $184,810 $166,063 11 Operation and maintenance expenses (000) . . . . . $ 94,512 $ 77,318 22 Net income (000) . .. .... ...... . . $ 36,771 $ 28,908 27 Capitalization (000) .. . . .. . . $721,879 $603,347 20 Construction expenditures (000) . . ... .. . .. $113,258 $132,867 (15) Total utility plant investment-end of year (000) $970,335 $845,613 15 Customers (End of year) ................ . . 397,138 383,391 4 Energy sales to ultimate customers (Millions of Kilowatt-hours) . . . . . . . . . . . . . . . 10,079 9,249 9 Employees (End of year) . . . ..... . . .. 2,894 2,784 4 w Peak demand (Megawatts) ............ .. .. 2,607 2,565 2 Average use per customer (Kilowatt-hours) Reside ntial . . . . . . . . . . . . . . . . . . . . . . . . . ... 8,21 7 7,371 11 Commercial ..... .......... .... . .. 38,663 34,841 11 Average price per kilowatt-hour R esiden tial . . . . . . . . . . . . . . . . . . . . . . .. .. . 2.09c 2.08c - C o m m e rcial . . . . . . . . . . . . . . . . . . . . . . . . . 2.17c 2.11e 3
~ _ ---
A Message from the President Q V In many respects,1972 was the best year ever for Arkansas Power & Light Company. he management of AP&L cannot help but feel a glow of satisfaction that these successes b a 'nd accomplishments came in a year when many segments of the ele were not so blessed and were faced with many major problems. The challenges faced and met by Arkansas Power & Light Company during the year included fuel supply, delays in construction at Arkansas Nuclear One and increas-ing costs. The amount of gas available was curtailed drastically as our gas supplier was caught up in the national energy crisis and was unable to deliver the volumes for which we had contracted previously. This necessitated the burning of higher-cost fuel oils, which are also in short supply, as well as seeking other sources of electric energy to supply the ned of our consuming public. All these were reflected in increased electric energy costs to our customers. Delays were experienced in construction of Unit 2 at Arkansas Nuclear One while we waited for over a year for approval of our Construction Permit by the Atomic Energy Commission.This delay resulted primarily from the backlash of environmental consider-ations and court rulings affecting issuing of such permits. We're delighted, however, that all public hearings on the Construction Permit and she environmental impact of our second unit were held without formal intervention. We feel strongly that the public in Arkansas understands the necescity of constructing nuclear-fueled generating facilities to assure a future with an adequate and dependable supply of electric energy for the ' continued economic growth of our State. n We were faced with the same problems of inflation, increased material costs and Q.ibor costs, as were all other businesses in our service area and in the nation.
-We attribute our success this past year, as in previous years, to the dedication of our team of approximately 2900 employees. The results of their efforts are highlighted on the opposite page and give a graphic summary of their successful accomp6hments in 1972.
These successea in planning, operating, marketing, construction and financing-in addition to being a cause for oride-reflect the benefits of careful planning in previous years, anticipating the needs and being prepared to meet the record energy requirements registered this past summer. Among other areas given special attention during this past year was the attempt l by AP&L to keep customers informed of efforts to assure an adequate supply of electric I energy. We shall continue our efforts during the coming year, and years, to keep our customers fully informed of the actions of the Company and the reasons for these actions. In addition, management is continually monitoring investments being made in the
- Company, as well as the cost of providing electric energy. For the investor, this attention
' helps to insure that they receive adequate compensation for their investment. For AP&L's customers, this monitoring helps assure that the necessary facilities will be available l when needed to meet their increasing energy needs. l The challenges of the past have been met, and we dedicate ourselves to meeting the challenges of the future. l l Sincerely, _
.< A Reeves Ritchie 3 President Arkansas Power & Light Company li j
,0, 0
- Arkansas Power & Light Company Highlights /1972 Energy Sales Total Electric unit sales in the new construction market reached over 8,000, or 40 per cent of the market, as compared with 29 per cent the previous year. AP&L made a significant penetration of the mobile home market, capturing 11 per cent during 1972.
Residential electric heating sales pushed the total to seven per cent of all customers. Total customers increased by 13,747 to 397,138, an increase of 4 per cent. The lease agreement for distribution facilities in the city of Dermott was termi-nated when AP&L entered into a standard franchise agreement with the city. Two newly-incorporated communities, Willisville and Fifty-six, also entered into A franchise agreements with the Company.
"U u Customer complaints received .special attention, as a system-wide program to
-identify problems was put into effect.
h I New control centers, at Little Rock and Searcy, were completed, giving capability of remote supervisory control over many of the transmission and distribution sub-stations within areas served. Treasury A total of S115 million in additional money was invested in Arkansas Power & Light securities in 1972. In February, Middle South Utilities invested S20 million in common stock. In April, 535 million in first mortgage bonds, with a coupon rate of 7-3/4 per cent, and $15 million in preferred stock, carrying a 57.80 annual dividend rate, were sold. In December, $15 million in bonds, with a 7-1/2 per cent coupon rate; S20 % million in preferred, carrying a 57.40 annual dividend rate; and S10 million in common stock were sold. Total utility plant (including $26.7 million in nuclear fuel) amounted to $970.3 million at year's end, an increase of 15 per cent over 1971. Sales to ultimate customers rose to 10.1 billion kilowatt hours, an increase of nine per cent, and revenue from ultimate customers was $151.5 million. Total revenues reached a new high at S184.8 million, compared to $166.1 million in 1971. Operation and maintenance expenses also were at a record level at 594.5 million, influenced upward by rising fuel costs. Net income in
~
m 1972 was $36.8 million, an increase of 27 per cent over the previous year. l j Customer accounting processing was converted to the Middle South Services - l Computer Center for all 72 local offices. All offices received teleprocessing terminals, giving immediate access to customer records. 1 2
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_ ,.? early warning capability. Engineering / Production During 1972, over 4 million barrels of oil were burned, more than twice that used last year. The peak load of 2,607 MW occurred at 3 p.m. on August 21. Sixteen new substations were constructed and capacity was increased at five existing facilities. Distribution construction expenditures totaled about 529.3 million. 5 Underground residential distribution installations were approved for 51 sub-divisions (compared with 40 for 1971). Personnel I _. General Sales Manager Arch Pettit was elected vice president at the Board of Directors meeting in May, Vice Presidents A. B. Coen and J. D. Phillips were named to the Board of Director:. Jim Clare, mantger at Pine Bluff, became Ozark Division Manager, and Willie Ray Southern, manager at Camden, was named Executive Assistant to the President. Total employees rose to 2,894. Minority employment increased from 6.33 per cent to 7.96 per cent. Employee contributions to the retirement plan ceased in June, as the Company assumed all costs connected with these benefits. Rates /Research A new Data 100 Computer Terminal was installed in the Little Rock General Office as a part of the Company-wide computer network. This equipment provides '" access to the Middle South Computer Center in New Orleans and enables rapid pro-cessing of financial and engineering studies. A new power coordination agreement was put into effect for interchange and transmission with Arkansas Electric Cooperative Corporation (a generation and trans-mission cooperative). The Company schedules generation from AECC's McClellan Generation Station and delivers power to points of delivery of individual member cooperatives. The contract also provides for the Company to purchase excess capacity from the McClellan Station and to sell power to member cooperatives when their - requirements exceed the capacity of the McClellan Station.
.g J
C Arkansas Public Service Commission approved a revised underground policy in new residential subdivisions, lowering charges for installation of underground distribution facilities. 3
-1 l
l Taking a New Look at Living 6 With record levels in electric energy Energy sales to commercial and industrial sales reached in 1972, the Company con- customers increased as AP&L consultants tinued to concentrate its marketing efforts worked with business and agricultural in helping present and prospective custom- users. During the year, a total of 56 new ers to gain the most from the benefits of and expanded industries in the Company's Total Electric Living. service area aided the territory's economic The success of those efforts can be development. Throughout the service area, measured by the fact that in the new con- AP&L sales representatives provided assist-struction market Total Electric unit sales ance to architects, builders, farmers and
~
(homes, apartments and mobile homes) manufacturers in making the best use of reached 8,000, representing 40% of the the latest in electric systems. market as compared to 29% the previous In addition, the General Office sales year. staff began the implementation of a state-A rapidly-expanding market for mobile wide restructuring of the Company's sales
~ homes received special attention by the force. This organizational streamlining Company.Through a series of Mobilectric will aid AP&L in taking advantage of the Shows, AP&L promoted the advan' ages marketing opportunities in the Seventies.
(O of Total Electric Mobile Homes and gained ;~
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11 per cent of the market with the sale of .. N_g' over 600 Total Electric units. .. .i Electric heating, the key to future load i
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s I growth, was the subject of much study and promotion during the year. Before the
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> . aM,f { O In 1972, special studies were conducted -
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the best method of seeking out prospects d l for electric heating sales. The results of l this research were then used as a founda- \ - 0 tion for the development of a unique sales Atu protcssionals like applications engineer Ed Barry, fr., training program for Company personnel. ('l[,'j,Egi,,'/l,', p J ,S,f
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,oi .l" At year-end, the Company achieved a new 'l;c','l,c,5ll;'7g,$ g'c ;'l@ '5gl;",g,"ll,8/g,'o',*,"j Ig;','[4;g archircces for the ncw rirst nationar sanu suitsing in titute high in residential electric heating as sales Rock (opposite pagel. which will be Arkansas' largest total 1- exceeded 100,000 kilowatts. clectric office con,pic1.
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. . , .. - w w.;- e , . ~ q O e Meeting Tomorrow's Energy Needs Head-On With electric power requirements ex- operational centers are in Little Rock and pecte'd to double about every seven years Searcy with construction underway at in our service area, AP&L is continually Pine Bluff and El Dorado and with the planning ahead and building ahead to other planned at Hot Springs.These centers meet the present and future needs of our are designed to improve our system relia-customers. With construction expenditures bility and to speed the restoration of of over $113 million in -1972, we made service when trouble develops.
headway in fulfilling that obligation Other expansion highlights included the through development of generation, trans- completion of four major transmission mission, and distribution additions and lines; the building of 16 new substations improvements. and the uprating of five more to handle More than 60 per cent of the total ex- increased capacity; ar.d the installation penditures (over $71 million) was spent of underground distribution lines in 51 for construction of Units 1 and 2 of residential subdivisions and 248 commer-cial and apartment complexes. C.\rkansas Nuclearelectric irst.nudear-fueled One, generating the Southwest's AP&L's aggressive construction program b stati6n. At year's end, Unit I was about will help to insure that all of our customers 93 per cent complete and is expected to be will have plenty of dependable electric in commercial operation in early 1974 with power when and where they need it.. . a capacity of 850,000 kilowatts. today and tomorrow. Expected to be in commercial operation in 1976, Unit 2 with a capacity of 950,000 jy -:
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at the end of the year. On Lake Dardanelle near Russellville, fj$ 3 15 n x g
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n U g Helping to Preserve and Protect Arkansas As a corporate citizen of Arkansas, accurately. Also, environmental considera-AP&L continued to place heavy emphasis tions dictated construction of a 450-foot on environmental considerations in 1972. natural draft cooling tower for Unit 2 that in fact, the nation's investor-owned utility will provide a self-contained condenser industry joined in a concerted effort to water cooling system rather than using implement environmental controls during lake water, as in Unit 1. the year and invested over 52.1 billion in At Arkansas Power & Light, environ-safeguarding the quality of the air, the mental considerations are playing a water and the land. significant role in all of the Company's The Company's program of planting operations. This concern is evidenced by grasses in selected rights-of-way was ex- the fact that within the bounds of present panded by 118 acres, bringing the total technology AP&L makes efforts in its acreage in the project to 1,200. While con- operations to keep effects upon the environ-trolling erosion, these grasses benefit wild- ment well within accepted levels. This aim life by providing supplemental winter food. to help preserve and protect our state is In addition, new techniques were initiated one that will continue as the Company {' duripg the year in the clearing of trans- expands to meet Arkansas' growing electric g mission rights-of-way which emphasize energy needs. leaving as much native vegetation as - possible. , Improved appearance of substations and ; distribution poles also received high priority as the Company continued to emphasize " low profile" design in construc- h7
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A f. - , a native stone wall was constructed to help N # p M$3 ' Ei D# blend the facility into its natural hillside surroundings. Part of a ten-year program, environ-i g i db) A mental studies reached the five-year mark '4 u j, ' ". D . on Lake Dardanelle where the Company is , ~I~ ...g.( l building Arkansas Nuclear One. Under an ' ' y i* . O AP&L contract, the Biology Department V' j $ y(;d ,
" of the University of Arkansas at Little "' k Rock is conductin0 research into the A" '"'r'ove'$ a' E' Dorado (a6 "'1 check 'h' Erow'h of the Bahia grass that has been planted along selected trans-ecology of the lake so that the effects of rnissim rights-of-way (opposite paget This grass not only .
helps to control crosion, but also provides supplernental winter the plant, if any, can be measured fooa for arransa, wiidiff,. 8
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i l l O Putting People Power to Work "Let's Get Together"-the major Com- Civic involvement historically has been pany theme in 1972-served as an impetus a hallmark of the Company and its employ- ! for an AP&L-wide emphasis on improving ees. In 1972, that participation continued ) customer relations. Listening and respond- with AP&L demonstrating its corporate ing to customer needs became a part of citizenship by providing leadership in everyone's job and the findings of an community improvement associations, opinion survey late in the year testified . industrial development groups, various , to the results of the effort. youth organizations and by supporting For instance, an overwhelming number institutions and charities through contri- o of those interviewed in the survey con- butions of time, talent and resources. ducted throughout the service territory One of the most dramatic demonstra-felt that AP&L was extremely interested tions of public service by AP&L employees in providing good quality customer came when employees saved lives on six service. different occasions during the year. Three i To aid AP&L employees in their relations AP&L employees were presented with the National Safety Council's highest award-
. Oith vencustomers, specialized to many employees, instruction with particular the President's was Medal-in ceremonies in g attention provided to those having daily late December. Three other employees who contact with the public. In operations, saved lives in 1972 are being considered efforts concentrated on speeding restor- for this coveted awcrd.
ations of service after outages, in keeping a p%p1 [~. ./ g g 71 55 p the public informed on emergency - ( j . .] j-situations and in providing timely initial M - service. A total in-depth effort was imple- ,
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Arkansas Power & Light Company Electric System and Service Area Arkansas Power & Light owns electric facilities in 62 of Arkansas' 75 ' counties. At December 31,1972, the Company furnished retail electric energy in 245 incorporated municipalities. AP&L also furnished power at wholesale to three rural electric cooperatives, seven municipalities and one small investor-owned system. AP&L's system is interconnected with and operated as part of the Middle South Utilities System, which supplies the power requirements for more than 1.2 million customers in a 92,000-square mile area of Arkansas, Louisiana, Mississippi and Southeast Missouri. Transmission Line-500 KV -- - - - ' - - Transmission Line-Leased E3 m M M O Transmission Line-345 KV Transmission Line-230 KV t Transmission Line-161 KV and smaller
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a Principal Power sources New units under construc - l - l l I 12
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i . 1972 ; )_O Arkansas Power & Light Company l Financial Review i i 4 b Statement of Accounting Policies k A. System of Accounts The accounts of the Company are maintained in accordance with the system of accounts prescribed by the Federal Power Commission., j] B. Utility Plant and Depreciation l Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work, direct ' labor and materials, allocable overheads, and an allowance for the composite cost of funds used during con-struction. The costs of units of property retired, replaced, or renewed, are removed from utility plant and - such costs plus removal costs, less salvage are charged to accumulated depreciation. Maintenance and re-pairs of property and replacement and renewal of items determined to be less than units of property are charged to opecating expenses.
?Deprectstion h computed on the straight-line basis at rates based on the estimated service lives of the !
various classes of property. Depreciation provided in 1972 and in 1971 amounted to approximately 2.9% and j 3.0%, respectively, on average depreciable property. 7
. Pension Plans / Ibe Company has a pension plan covering substantially all of its employees. The plan was amended in j.
1 1970Tp provide for certain changes in benefits and to reduce the amount of employee contributions untilJune 1,1972, when it became non-contributory. Pension cost in 1972 and 1971 amounted to $2,486,000 and /
$2,361,000, respectively, including amortization of unfunded prior service cost over a period of 14 years.The Company's policy is to fund pension costs accrued.
D. Income Taxes The book provision for current income taxes reflects net reductions resulting from the utilization of Ilber-alized depreciation (including the class life method provided by the Internal Revenue Code) and accelerated amortization for tax purposes. Deferred taxes have been provided in amounts equivale.nt to such net reduc-tions. k The provision for current income tax for 1972 and 1971 has also been reduced Ly the Federal investment tax Y credits of $1,549,000 and $633,000, respectively, and amounts equivalent thereto have been deferred by j charges to income. Amounts deferred are being amortized over the average usefullife of the related property 4 and such amortization in 1972 and 1971 amounted to $E99,000 and $270,000, respectively. j The Federal Power Commission has issued a Notice of Proposed Rulemaking which would provide, among j other things, for more comprehensive interperiod tax allocation by electric and gas companies.The proposed m change relates to the deferred method which gives recognition to the income tax effects of expense and rev-enue transactions reported either earlier or later for tax purposes than for book purposes. The effect, if any, ;j" of this proposal on the results of operations will be dependent upon whether, and/or in what form,it is adopt-ed by the Federal and state regulatory bodies and their treatment in the rate-making process. j E. Allowance for Funds Used During Construction The Federal Power Comm!ssion system of accounts provides that the net cost of funds (interest on bor- 2 rowed funds and a reasonable rate on othr funds) used during the period of construction for construction 5 purposes may be capitalized. The Company used a rate of 7%% per annum in 1972 and 1971 in computing G the allowance for funds used during construction, and an amount equal to the amount capitalized is reported J 5 the accompanying Statement of Income. I O a
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z Arkcnsa3 P;w r & Light Comp:ny Assets O (U (, 1972 1971 Utility Plant: In Thousands At criginal cost: Electric plant (including construction work in
- progress of $216,055,000 in 1972 and
$151,798,000 in 1971 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $943,613 $836,465 Nuclearfuel.................................................. 26,722 9,148 To tal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 970,33 5 845,613 Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,144 160.665 U tility plant-n et . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 795,191 684,948 Other Property and investments-At cost:
Investments in associated companies (Note 3) . . . . . . . . . . . . . . . . . . . . . . 2,982 17 Other (less accumulated depreciation) . . . . . . . . . . . . . . . . . . . . .. . 794 665 Total other property and investments . . . . . . . . . . . . . . . . . . . . 3,776 682
, h' Current Assets:
Cash........................................................ '6,715 4,763 S p e c i al d e p o s i ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 180 Notes receivable (less allowance for doubtful i notes-543,000 in 1972 and 1971) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,795 2,016 l Accounts receivable: Customer and other (less allowance for doubtful accounts-5175,000 in 1972 and 1971) . . . . . . . . . . . . . . 9,786 8,104 Associated com panies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 113 Materials and supplies, including fuei oil (at average cost) . .......... 4,299 7,813 l P re p ay m e n ts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 397 I Other ......................................................... 383 264 Total cu rrent a ssets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,549 23,650 De f e rre d De bits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 571 To ta l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8 23,0 9 6 $709,851
~
See Notes to Financial Statements. 14
g _ e a 1 Cci:nce Sheet, December 31,1972 cnd 1971
- Liabilities 1
k l a Capitalization: 1972 1971 ' f ,, In Thousands l l Proprietary capital: ," '
~ , .
I Preferred stock and premium, per page 17 ;. . . . . . . . . . . . . . . . . . . . . . . . $ 86,615 '
$ 51,529 l
~ Common stock, $12.50 par value; authorized, 20,000,000 shares; issued and outstanding, * )
16,190,000 shares in 1972 and 13,790,000 ' shares in 1971. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .;. . . . . . . .172,375 . . . . 202,375 l Retained earnings (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,714 31,043 Total proprietary capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323,704 254,947 Long-term debt, per page 17 . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . 3 98,175 ~ 348,400 Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 721,879 603,347 t Current Liabilities: . .f
., No t es p ayab le . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........... .
3,250 19,350
- Accounts payable: ~
Associated companies . . . . . . . . . .. . . . . .'. . . . .' . . . . . .c. . . . . . . . .' . . . . 5,348 342 Other............'...................'.....'.^....~.q......'........ 3,792 5,326 r Custom e r de posits . . . . . . . . . . . . . . . . . . . . J. . . . . . . . . . . . . . . . . . . . . . . 4,611 4,224
~
Tax e s a c c ru ed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,590 14,522. Infe rest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,675 6,637 Dividen ds declared . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : 984 - - 692 Other..............:............................................ 1,370 1,052 Total cu rrent liabilities . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . 41,620 52,145
~
Deferred Credits: ' in .-
- w ": L 1".' ' .., >
. . . ,. w. --
Accumulated deferred investment tax credits . . . e . . . . . .T. . . ..- .. .. .;!;.~. ' / 9,013; 7,763-
- ;t
-.7." 2,039 Other............. .
-. . . . -.. . .:. . a. . . . . . . . .: . . . . . . . . / .'. . .W.. . .A . P. 0 2,266 '
.f a .' - w --
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Total deferred credits .i . ... . ..m. .m . .- : . . . . .L.T. . . ".'. . d.; .:. 2.11,279 -: 9,802 '
. .y . .. p e
- w. c. v. ;
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a v ', Res e rves . . . . . . . . . . . . . . . . . . . . . . . -. . . . . . . . . C . . . . . . . . . . . . . ~.[. . . ; .l . , ' 1,077 ( , *.. 1,164 . - Contributions in Aid of Construction . . . . . . . .' . ; . . . . . . . . . . ~;. . ., /. . . .. .- ., . .:
, 4.6121 -a -cc3 4,194. . .' .
Accumulated Deferred income Taxes . . . . . . .. :.....~..........:...'....;.. '42,629: .< > 39,199 To ta l . . . . . . . . . . . . . . .' . . . . . . . . . . . . . . . . . . . . :. . . $823,096
$709,851
.. - .l; ,- , 2 ;-yy..g gyg,-
- y .:-
; .. -.7. . .
See Notes to Financial Statements. . > ;e '
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g 1972 1971 , Statement of income in Thousands Operating Revenues . . . . . . . . ......... .... ........ .. . .... 5184,810 $166,063 Operating Expenses: Operation: Fuel ... ..................... ............... ............. 36,648 30,151 Power purchased ........................ . ....... ....... 25,334 16,705 Other . .... ... ....... .. . ........ . . ....... ...... . 24,733 23,078 Mai nt e n a n c e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... 7,797 7,384 ! D e p r e c i a ti o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,609 18,742 l 11,455 11,218 Taxes other than income taxes . . . . . . . . . . . . . . . . . . ... .... ... J 9,153 15,469 Income taxes (Note 1 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Deferred income taxes . . . . . . . . . . . . . . . . . . . . . .. . ... .. .. 3,430 3,185 investment tax credit adjustments-net . . .. ... ... .. .... . 1,250 363 139,409 126,295 Total . . . . . . . ..... .............. .. ........ ..... .. Operating income . . . . . . ... ......... . . .... . .. ... 45,401 39.768 Other income and Deductions: Allowance for funds used during construction . . . . . . . . . . . . . . . .. 14,170 7,407 Miscellaneous-net . . . . . ............... . ..... . ... ...... 45 75 Total . . 14,215 7,482 ,O ^ t Charges: Interes 0 Interest on long-term debt . . . . ... . ............. . . ... . . . 21,843 17,750 Other interest . . . . . . . . . . . . ......... . .. .. .... ... . 1,064 647 Amortization of debt premium, discount and expense-net . .. (62) (55) Total . . ... .... .... .. .. ... . . ... ... 22,845 18,342 Net income ..... ...... ...... . .. . ..... . ... .S_ 36,771 S 28,908 Statement of Retained Earnings B alan c e, J a nua ry 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . $ 31,043 $ 25,982 Add-Net income . . . ..................... ..... .. . . ......... 36,771 28,908 w To t al . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...... ........... 67,814 54,890 Deduct: Dividends-cash: Preferred stock-at prescribed rates of each series . ....... 3,606 2,767 Co m m on sto c k' . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . 29,494 16,080 Transfer to common capital stock account (par value of 400,000 shares issued to parent company) . . . . . ... .... 5,000 Total .. ..................... ..................... . . 33,100 23,847 Balance, December 31 (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 34,714 S 31,043
*1972 includes a special dividend of $10.000.000 to the parent company which was concurrently reinve:ted in the Com-pany's common stock.
See Notes to Financial Statements. } 16
3 Schedule of P' referred Stock and Long-Term Debt I i O Current . Shares . . . Shares Outstanding . . . Call Price Preferred Stock Authorized 1972 1971 Per Share , CUMULATIVE, $100 PAR VALUE: ' ! 4.32% series . . . . . . . . . . . . . . . . . . . 70,000 70,000 70,000 $103.647 I 93,500 4.72% series . . . . . . . . . . . . . . . . . . . 93,500 93,500 107.00 I 4.56% series . . . . . . . . . . . . . . . . . . . 75,000 75,000 75,000 104.33 4.58 % - 1965 series . . . . . . . . . . . . . 75,000 75,000 75,000 104.00 6.08% series . . . . . . . . . . . . . . . . . . . 100,000 100,000 100,000 104.33 7.32% series . . . . . . . . . . . . . . . . . . . 100,000 100,000 100,000 108.99 7.80% series . . . . . . . . . . . . . . . . . . . 150,000 150,000 109.10 7.40 % se ries . . . . . . . . . . . . . . . . . . . 200,000 200,000 108.35 , Other series . . . . . . . . . . . . . . . . . . . - 136,500 None None ! TOTA L . . . . . . . . . . . . . . . . . . , . . . . . . . . 1,000,000 863,500 513,500 ! i in Thousands l STATED AT $100 A SHARE . . . . . . . . . . . . . . . . . . . . . . . $ 86,350 $ 51,350 PREMlUM ON PREFERRED STOCK . . . . . . . . . . . . . . . 265 179 T OTA L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86,615 $ 51,529
., Long-Term Debt 1972 1971 l' FIR'ST MORTGAGE BONDS: In Thousands l 3-1/8% series due 1974 . . . . . . . . . . . . . . . . . . . . . . $ 30,000 $ 30,000 2-7/8% series due 1977 . . . . . . . . . . . . . . . . . . . . . . . 11,000 11,000 l '( 3-1/8% series due 1978 . . . . . . . . . . . . . . . . . . . . .
7,500
. .8,700 7,500 ;l 2-7/8% series due 1979 . . . . . . . . . . . . . . . . . . . . . . 8,700 '!
2-7/8% series due 1980 . . . . . . . . . . . . . . . . . . . . . . . 6,000 6,000 l 3-5/8% series due 1981 . . . . . . . . . . . . . . . . . . . . . . . 8,000 8,000 3-1/2% series due 1982 . . . . . . . . . . . . . . . . . . . . . . . 15,000 15,000 - 3-1/4% series due 1984 . . . . . . . . . . . . . . . . . . . . . . . 7,500 7,500 l 3-3/8% series due 1985 . . . . . . . . . . . . . . . . . . . . . . . 18,000 18,000 4-7/8% series due 1991 . . . . . . . . . . . . . . . . . . . . . . . 12,000 12,000 4-3/8% series due 1993 . . . . . . . . . . . . . . . . . . . . . . . 15,000 15,000 4-5/8% series due 1995 . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000 ! 5-3/4% series due 1996 . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000 5-7/8% series due 1997 . . . . . . . . . . . . . . . . . . . . . . . 30,000 30,000 7-3/8% series due 1998 . . . . . . . . . . . . . . . . . . . . . . . 15,000 15,000 9-1/4% series due 1999 . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000 ., 9-5/8% series due 2000 . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000 j 7-5/8% series due 2001 . . . . . . . . . . . . . . . . . . . . . . . 30,000 30,000 . 8% series due 2001 . . . . . . . . . . . . . . . . . . . . . . . 30,000 30,000 l 7-3/4% series duo 2002 . . . . . . . . . . . . . . . . . . . . . . . 35,000 l 7-1/2% series due 2002 . . . . . . . . . . . . . . . . . . . . . . . 15,000 t Total first mortgage bonds (annual sinking fund ' requirements, which may be met by certification of property additions at the rate of 167% of such - requirements, amount to $3,787,000 in 1973) . . . . . 393,700 343,700 hpU 3-3/8% SINKING FUND DEBENTURES DUE 1974
~ -
(cash sinking fund payment of $225,000
; required in 1973 was prepald in 1972) . . . . . . . . . . . . . 4,475 4,700 .
TOTA L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $398,175 5348,400 ' ~ . See Notes to Financial Statements. 17 ,
St:t:r.Ent cf S urc3 cf Funds far Utility Pirnt Additiona n 1972 1971 b in Thousands g Source of Funds: From operations: N e t i n co m e ' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3 6,771 $ 28.908 Less-dividends declared: P re f e rre d sto c k . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,606 2,767 C o m m o n st o c k * * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,494 16,080 Total.................................................... 33,100 18,847 R e m ai n d e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,671 10,061
'D e p re c i a ti o n . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,609 18,742 Deferred income taxes and investment tax credit adj ustments-net . . . . . . . . . . . . . . . .................. ......... 4,680 3.548 Total............................................ 27,960 32,351 From sale of securities:
Common stock (2,400,000 shares in 1972 and 1971)* * . . . . . . . . . . . . . . 30,000 30,000 Preferred stoc k . . . . . . . . . . . . . . . . . . . . . . . ... ................. 35,000 First mortgage bonds . . . . . . . . . . . . . . . . . . . . . . .... ............ 50,000 60,000 Sinking f und debentu res . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (225) (225) S h o rt-te rm note s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,100) 13,850 Total.............................................. 98,675 103,625 From (increase) decrease in working capital (excluding short-term notes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,676 3,895 7 Miscellaneous-net . . . . . . . . . . . . . . . . . . . . . .. . .... ....... ..... (2,459) 1,083 A ((/ )
- ^ TOTA L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $129,8 52 $140,954 W Utility Plant Additions:
Construction expenditures * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $113,258 $132,867 Nuclear fuel expenditures * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,574 9,148 Other plant additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (980) (1,061) TO TA L . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........ .$129,852 $140,954 (Increase) di." ease in working capital (9xcluding short-term notes): Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,9 5 2) $ (185) Accou nts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,619) 229 , Materials and supplies (including fuel oil) . . . . . . . . . . . . . . . . . . . . . . 3,514 (1,21 2) Ac c o u n ts payab le . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,472 183 Acc ru ed taxes . . . . . . . . . . . . . . . . . . . . . . ........ ............. 68 2,127 O t h e r-n e t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....... .......... 2,193 2,753 TO TA L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,676 $ 3,895
- Includes allowance for funds used during construction.
"1972 includes a speciai dividend of $10,000,000 to the parent company which was concurrently reinvested in the Company's common stcck. ,
Certain amounts in 1971 have been restated to conform to the 1972 classifications and format. See Notes to Financial Statements. 18
r 1 1
! l otes to Financial Statements ! I 1come Taxes 1973, for terms of not more than ten years, up to an
,he provision for income taxes for the year 1972,
. aggregate of $10,500,000. As of December 31,1972, as compared to 1971 and in relatfor, to pre 4ax book the Company had loaned $2,958,000.
Income, has dec!!ned because of the increased dif- In January 1973, the Federal Power Commission
? l fIrence between taxable income and book income. Initiated proceedings that could result in further and The difference is primarily the result of (1) increased possibly eventual total curtailment, for use as boiler cxcess of depreciation for income tax purposes over fuel, of interstate natural gas supplies which are sub-d;preciation for book purposes, (2) increased al- ject to jurisdiction of Federal Power Commission. In i Iowance for funds used during construction, which the event that the interstate gas supplies used as .
is not included in taxable income, (3) increased fuel by the Company are no longer available, a maxi-tmount of taxes other than income taxes, pension mum of approximately $46,000,000 additional ex- ;
. costs, etc. which are charged to utility plant for book penditures would be required to enable these gen- I purposes and deducted currently for income tax - erating plants to use fbel oil as the primary fuel. !
purposes, (4) increased investment tax credits, and Such expenditures would be made during a con-1 (5) currently deducting the cost of removal of utility version period of several years,in 1972,substantially ,,) plant in computing taxable income, as permitted by all of the natural gas used by the Company was pur-the Internal Revenue Service, which costs for book chased from interstate supplies. ) purposes are charged to accumulated depreciallon. Included in utility plant at December 31,1972,are .I The Company received a refund of Federalincome two hydroelectric production plants, with a net book ~l t:xes in 1972 applicable to the years 1959 through value of $5,029,000, licensed by the Federal Power 1961. Such refund including interest earned through Commission. This license expires on February 7, ; August 8,1972, less related income taxes, amounted 1973, and an application for a new license was (Med : t2 $509,000 and has been reflected in the 1972 re- with the FPC on February 4,1970. On August 4,1969, f:1 I suils of operations. the FPC issued a revised order No. 387, specifying .)
- 2. Retained Earnings the method for determining " net investment" com-The indenture provisions relating to the Com- ponent as equal to the project original cost, less the ,' .
piny's long-term debt provide for restrictions on the project accumulated depreciation and subject to a iI pryment of cash dividends on common stock. As of maximum potential further deduction of the balance i December 31,1972,$21,204,000 of retained earnings in the amortization reserves. It is not possible to pre-are free from such restrictions. dict the final outcome of this order; however, in the
. Oommitments and Contingencies opinion of management, the ultimate losses, if any. - (he_. Company's construction program contem . which may result from any takeover or relicensing plates expenditures of approximately $156,627,000 of the licensed project to others will not be material.
In 1973. The Company is a defendant in a claim arising . .s !
~ '
The Company has a 35% interest in System Fuels, from a dispute on contra::t performance in connec-inc. (SFI), a jointly-owned subsidiary of four of the tion with its construction program. In f.he opinion of - principal operating subsidiaries of Middle South counsel, the claim against the Company is substan-Utilities, Inc. SFl operates on a nonprofit basis in tially overstated and the ultimate liability of the Com-planning and implementing programs for the pro. pany, if any, will not be material. , curement of fuel supplies for the generating units of 4. Accounting Policies J these operating companies;its costs are recovered The statement of accounting policies on page 13 through charges for fuel delivered. The Company is is an integral part of these notes to financial state- - committed to loan SFI from time to time through rr.ents. -
. s, -
HASKINS & SELLS x' ' Ten Broadway Certified Public Accountants .., y Saint Louis 63102 Accountants' Opinion u Arkansas Power & Light Company: . [ We have examined the balance sheet of Arkansas Power & Light Company as of December 31,1972, and the related statements of income, retained earnings, and source of funds for utility plant additions for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and ac- , cordingly included such tests of the accounting records and such other auditmg procedures as we considered ~
'ecessary in the circumstances. . '._ u.' -
in our opinion, such financial statements present fairly the financial position of the Company at Decem-p ar 31,1972 and the results of its operations and its source of funds for utility plant additions for the year then
- h. O cnded, in confort,ity with generally accepted accounting principles applied on a basis consistent with that of 3 ^
f the preceding year. . l. . ;- O ._ _ l' _$ ' Q& . 7 [ - - W- 5f c .9 . --
., q l -Y-t February 1,1973 /s/ HASKINS & SELLS L 19 . .
e um$ w.pwgh' w
i Ten Years of Progress / Financial 197 I ( Operating Revenues and Expenses (in Thousands of Dollars) l~ M_LICNS OF DOLLARS 2" Capitalization: First mortgage bonds . . . . . . . . . . . . . . . . . . . . .' $393,7C ' 175 c operating Revenues 4,4' ;
. Other long-term debt . . . . . . . . . . . . . . . . . . . . . .
m perating Expenses 86,3E 150 v Pref e rred stock . . . . . . . . . . . . . . . . . . . . . . . . . . L.
; - 125 Premium on capital stock . . . . . . . . . . . . . . . . . . 2E
,g Common stoc k . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,37
- N ~' Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 34,71 75 Total capitalization . . . . . . . . . . . . . . . . . . . . . $721,87 50 25 Utility Plant:
h 963 '64 '65 '66 '67 ~68 '69 '70 '71 1972 Construction work in progress .' ' . . . . . . . . . . . 216,0. Nuclea r fu el . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,72 [ Total utility plant . . . . . . . . . . . . . . . . . . . . . . . $970,33 4 i Total Capitalization 1 MILLIONS OF DOLLARS Accumulated Provisions for Depreciation 800 and Amortization . . . . . . . . . . . . . . . . . . . . . . . $175,14 s
., - 700 - O Common Equity - Accumulated Deferred Income Taxes . . . . . . . . . $ 42,65 t
M Preferred h
. 600 - M Bonds Soo
_ income Statement:
- i. , -
Operating revenues . . . . . . . . . . . . . . . . . . . . . . . $184,8_1
> 400 -
[ s Operating expenses: a; 3* Operation and maintenance . . . . . . . . . . . . . 94,{5
! 200 De p reciation . . . . . . . . . . . . . . . . . . . . . . . . . . 19,6C
' l. ioo Taxes................................. 25,2E o To W . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,4C P 1963 '64 '65 '66 '67 '68 '69 '70 '71 11#/2 Operating income . . . . . . . . . . . . . . . . . . . . . . . . 45,4C
~
F Other income and deductions:
$ Utility Plant Allowance for funds used g MILLIONS OF DOLLARS during construction . . . . . . . . . . . . . . . . . . . 14,1) 10 "
i- Miscellaneous--net .................... e E'"3 Gross Plant To ta l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 4,21 0 M Net Plant 3
.- Interest and other charges: .% $ 600 Interest on long-term debt . . . . . . . . . . . . . . . 21,84 Other interest . . . . . . . . . . . . . . . . . . . . . . . . . . 1,0(
F 400
~
Amortization of debt premium,
}
discount and expense-net-. . . . . . . . . . . . (( b 2m To t a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2,84 , [ o N e t i n c o m e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3 6,71 [ 1963 '64 '65 '66 '67 '68 '69 '70 '71 1972 . L-10 : 4 L . }- - Ii _ l I
'.i
- i. N - - -
--- - - - - - - ~w --n - -m_-w. _o, s -
v - 1971 1970 1969 1968 1967 1966 1965 1964- 1963 g\. . Q. -
. .n*. - . .h ' Q
- p- 'f 3e . . .**'., 'y ,
s 4 ' ' $343,700 $283,700 - ,$258,700 ; ,$233,700.' $218,700 $.188,700 .. ms. [. ' 4,700 ' ;"".4,925'?: ,, . 5,150M., 5,3757 7 5,600 ~ 5,825 $163,700
. 6,050.; _.6,275
$,138,700..~ 6,500. . $./.1q.)
r '; ~ 51,350 51,3507 - 51,350 f 41,350, 41,350 . , .41,350 f 31,350 , 31,350 23,850 ;
- 179 179 . . .179 W . ~ 137J. : .-;; 137 .
137. c. . 133 a 202 H _ 186 Ne. 172,375 137,375 121,375 .111,375:' 102,750 99,750 y 86,750 ' 83,750 78,750 , 31,043 25,982 26,582 23,954': : T27,736~ ' ~ ~24,427c * ' 21,890: - 18,574' '19,219
$603,347 $503,511 $463,336 $415,891 $396,273 $360,189 $309,873 $278,851 $267,205 l y 4::.: n R ;%- '-
.... - ~..
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' " ~ $684,668 $658,853 $587,608 $563,176 $540,917 $451,002 ~ $424,003 ' ~ $377,028' $367,027 f, p 151,797 ' 49,595'
'~ ~
56,557' ' 28,808 ' ~ 7,690? ~ ~ 49,0155 14,193' 16,323' ~ 2,4731 Y ! 9,148 - '
~
# "M ~ - ~.A- .~ ~
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.;d. .. $845,613 $708,448 $644,165 $591,984 $548,607 $500,017 $438,196 $393,351 $369,500 y'l yv. ..
,.yMj::
Q. 4i.k%%ky. . g . ~.w. y:g:);.g . v.gn.w.d && Y $166 $149,317 $136,044 $118,943 $105,516 - $ 97,058, $ 93,676 $ 86,9174. $ .79,688W 0 w,063 .
.7 L yDgg:2l.'r._ l D75%ggg;MD.?g.lMf& '
M re.' '. 74318 65,057:' 59,828~ 49,490.c . 45,847 41,162 i 40,501 M 37,755 ' 33,640 % i
+ U ' 18,742 - 17,400:. L16,059' .,. I 15,060 9 112,970 12,212 11,256y II 10,.406 $
21,470 5 " 20,447 ^ ^20,27518,751Mi E. 10,250 30,235 31,110:. 29,3751 '26,685i 21,955
._ 126,295 113,567 ~ 105,262' 91,235 " 80,772- 74,844 E - 72,204 68,436 2 , 62,641 %
. . . . - _ m. , . . - ;; , . .
24,744 i,
... . , 7% p ..- ._ %.e..Qg 39,768- 35,750- 30,782 27,708 - 22,214 F21,472~ - .18,4815, m , 17,047b.a -
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13,594f 10,543 f~ .c 9,888.9 _w8,976 ' 7,343 5,852 : ' . ...,5,037..,. st...g _. y% - ' 5,068 4.%: m,
..17,750 1 6471 . l 752<.~ 1 670 i 398 4471 c
s : g ,210 3 -y .< .; v. : 4 m
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(51) (46) - , . Mr '- 557 '.~ 548.4 ~ ( 7 18,342' 14,295 - 11,707 10,523? 9,415. : a 7,836.? ' 6,0911.% 5,309 A . 5,740 4
$ 28,908 $ 24,757 -' $ 21,804 $ 18,411 $ 18,302~ $ 15,71Gc $,16,239 *, $ 13,384 $ ' 11,470 4
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Ten Years of Progress / Operating 1972 Averag9 Annual KWH Use Electric Operating Revenues: Residential Customers (In Thousands of Dollars)
.HOUSANOS OF KWH a4 - R esid e n tial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ < 57,976 Co m m e rcl e . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,092 7~2 6.0 g g .
L';9 3 1 I n d u st rial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Government and municipal . . . . . . . . . . . . . . . . 51,183 4,248 4.8 Total from ultimate customers . . . . . . . . . . . . 151,499 3, E ":'*"n?Psj'.i;~.. ~ u m ..} d 2 Pu blic utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous revenues . . . . . . . . . . . . . . . . . . . 30,392 2,919
- 3. :gp 4 T . <.p.f
, .w , J, ,. 'e 1 2.4 .
Total electric operating revenues . . . . . . . . . $184,810 1.2
- "i
~
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~
T '
~---} Electric Sales (Millions of KWH):
R esid e n tial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,770 1963 '64' '65 '66 '67 '68 .'69 '70 '71 1972 1,753 Co m m e rcial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I n d u s t ri al . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,271 Government and municipal . . . . . . . . . . . . . . . . . 285 Total KWH Sales to Ultimate Customers Total sales to ultimate customers . . . . . . . . . . 10,079 BILLIO,c. SF KWH g Public utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,382 Total energy sold . . . . . . . . . . . . . . . . . . . . . . 13,461
. r9 F e - -
a Number of customers-end of year:
, l L
P R esid e ntial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 343,468 8 ' ~ ~ [ ' [ l, i Co m m e rcial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,1 % O -7 L r L c L
~
s 1-L , r L industriai................................ Government and municipal . . . . . . . . . . . . . . . . . 9.1 1,282 2_ - - - H k ' ' Total ultimate customers . . . . . . . . . . . . . . . . 397,114 i L ! h b Public utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 h o_u_W_h_k_L_L_6 _h _~ Total custom ers . . . . . . . . . . . . . . . . . . . . . . . . 397,138' 1963 '64 '65 '66 '67 '68 '69 '70 '71 1972 Electric Energy: Source and disposition (Millions of KWH) Generated-net station output Payroll MILLIONS OF DOLLARS H y d ro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 30 Steam.............................. 8,391 d i Other............................... 25 2s - Total generated . . . . . . . . . . . . . . . . . . . . 8,541
,- l l go I E I Pu rc hased . . . . . . . . . . . . . . . . . . . . . . . . . . . . .w S,944 l _
M W [ Net inte rchang e . . . . . . . . . . . . . . . . . . . . . . . . 10 ' ';! n_m m J ,_ , H r - _ y - f - 9 - - nl To t a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,495 10 -- f! g fg N U l h I Company use, furnished without g p [ - g
- h -
q charge, losses and unaccounted for . . . . . 1,034 f h l ho f N E H Total energy sold . . . . . . . . . . . . . . . . . . . 13,461 l 3 5_ _ _ H a
? -
H t . i o_ sal _h_WJW_E_E_m(_l 4L- Peak demand (Megawatts) . . . . . . . . . . . . . . . . 2,607 ' I 1963 '64 '65 '66 '67 '68 '39 '70 '71 1972 i l - l O e .
- 3 4
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;. ~ ..$ 49,718 $ 45,230 $ 41,045,, $ 39,998 5 33,656 _ $ .31,552t.. .$ 30,1871., $,;28,389[ . $,. 26,0J2 g
.. ~. 33,989 31,214 ' 28,697 - 26,575 24,631. ~.. 22,731:'w21e831 A... ,
3,728-w bW 29,845.<n.28,799.M.. 20, 44,273 40,264 '.39,393 ' - 37',230 33,987 .. . . . : l 3,836 3,594 s - 3,4242 3,139. 2,952 . 2,789 ' , . ,.2,723 c 2,559 :' .
.131,816 120,302 ,112,559 , 103,942 95,226 ^ 83,540 ~ -
32,209- 27,067 21,934 13,894 9,172. ?.r 86,917:, 9.,338 m.. - 9,578 4 ~ 77,690
, r.,70,832~
9,696v . . ' . 8,391;W:
; ,. M 558; n'.. 531: w-. 465 h T 2,038 1,948 1,551 - 1,107- ~ 1,118- + 8031 %,
$106,063 $149,317 $136,044 $118,943~ $105,516 $ 97,058 . $ 93,676 $ 86,917 - $ 79,688 M , . . . .
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. 924.M. d..:: ..
1,614 1,503 1,373- - 1,247 ~ 1,116 .'- 1,025 ,945 ,. .O. . 845.+ . 760.."II.;.. @3 - [ - y 5, - u 4,966 4,804 . 4,744 4,533 ; 4,264 3,989 3,707, .3,271. . 2,822 . 4 -: :276.. 265 262 242- 229 7 233 "" s 218.; - ! 202" # '181M_~.; 1 -
' 7,010 6,049 5,37.5..^ . . % *4,687.d2 :
r- 9,249' 8,754 8,296 .w 7,666 - . w.- 6,547' sxe. -
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- -4,123* 1,297 . 1,259 ~ ? T1,206' - 1,146 x w.. 1,098{.g, i!
' ;. ~ 4,594 4,906. 2,470
. . 13,843 13,660' 12,419 10,136 - 8,307 - 7,806' _ -7,255 7-6,5215 r 5,785%.p m l
-1
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)
330,566 318,732 2
. 44,1,95/ . 43,747 "~.296,2117.1;u.89,248 ... 42,930T. 42 2577 ',.uN. ,
.., + n 311,815 ,s .306. ,950.M ~ 301,335 46,785 45,606 .44,7717. s ., -
_4,260 p l 4,077 Q, .~ ,3,965h ,3,907.'g Q,054h ,l f()~ 4,639 4,533 . '429 , ( ' Q ,734-1,188 1,131 J . 1,085-- 1,043 .' .1,002?'.G 972D .". 1,273. 7 7.:.1,186 h235 . 321,693W 383,320 370,165 362,250 356,659 350,385 344 220 ' 336,442e .328,'245f, ~ 75 75 ' u e78 - .' 73 V ,777.I .r ,
!,- .. _. . s .< ' . 71 108.. 328,3570 -d' 1'12 @ ', ; 112 1 " 383,391: 370,240- 362,325 356,737 350,458 C. 1,297' - - 336,550 321,805?
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q r 1 Board of Directors Seated (lef t to rt<ht): R. E. L. LVilson, h ' pressdent, Lee LVilson & Company, tvils< n; L. C. Carter, president, Riceland Foods, Stuttgart; Reeves E. Ritchse, president at :ne Company, Little Rock; Floyd LV. Lewis, presudent and chief executive officer, Midd!c South Utihties, Inc., New Orleans. 1 Standmg llef t to right): Lawrence Black cell, attornev, Pine Bluff; Dr. Marshall T. Steel, president emeritus, Hendrix Col!cge, Ilot Spring; Robert D. Pugh, rartner, Pugh and Comvany, Portland; Richard C. But!cr, chairman of the bcard. The Commercial National Bank, Lirie Rock; l. D. Phi:livs. vice president of the Company, Pme Bluff; LValiam C. Nolan, ii Jr., attorney, El Dorado; e
- A is. Coen, vice president, treauarer and secretary ol the Company, Lattle Rock.
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J 4 1 iI l r lf I This report is prepared for the information of security holders, employees, and other interested persons, it is not trar'smitted in connection with the sale of i any security, or offer to sell, or offer tc buy, any security. *l J l
" . l
- t' *i l
{ Officers b F' Reeves E. Ritchie A.B.Coen John T. Meek
- .. President Vice President, Treasurer Vice President ,
Lj Little Rock and Secretary Little Rock l Little Rock
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, A)fe .. e W. M. Murphey Arch P. Pettit J. D. Phillips d Vice President Little Rock V!:e President Little Rock Vice President Pine Bluff h
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~
i __ 4, r Mrs. Helen Lef twich Jerry L Maulden W. A. Mebane 2 Assistant Secretary Assistant Treasurer Assistant Treasurer
,] Little Rock and Assistant Secretary Pine Bluff Little Rock g !;t Company Directory Trinsfer Agents for Preferred Stock-Union National Bank of Little Rock,1 -l i Union National Plaza, Little Rock, Arkansas 72203 and The Commercial Na- l tional Bank of Little Rock, Second and Main Streets, Little Rock, Arkansas l
I 72203 Certified Public Accountants-Haskins & Sells, Ten Broadway, Saint l 1, Louis, Missouri 63102. Executive Office-Ninth and Louisiana Stree's, Little iji Rock, Arkansas 72203, Phone (501) 372-4311 + Engineering Office-Sixth Ave-
', nue and Pine Street, Pine Bluff, Arkansas 71601, Phone: (501) 534-1330
- Annual Meeting-Fourth Thursday of May.
! 24 j'.! ,
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,..="*.U"'gE J The future. One of the Middle South's most impre'gssive dimensions:-
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. ' ilddle South Utilities, Inc. 280 Park Avenue. New York. New York 10017.(212)687-7181 w
4 PERFORMANCE P "t 1972 1971 ncrease Total Operating Revenues S593.4 million S506.3 million 17.2 Electric Operating Revenues S550.1 million S473.4 million 16.2 Total Operating Expenses S461.6 million S394.3 million 17.1 Electric Operating Expenses S414.9 million S357.1 million 16.2 i Net income S 79.8 million S 65.8 million 21.2 3arnings per Share S 1.98 S 1.68 , 7.9
.O _
' A Dividends Paid per Share S 1.06 S 1.02 3.9 Customers (Electric-Year-end) 1,256,132 1,212,774 3.6 Electric Energy Sales (Total) 37.8 billion kwh 35.1 billion kwh 7.6 Electric Energy Sales (Ultimate Customers) 31.0 billion kwh 27.3 billion kwh 13.4 Average Annual Use/ Residential Customer 9,542 kwh 8,680 kwh 9.9 System Capability (At Time of Peak Load) 9,703,000 kw 8,582,000 kw 13.1 System Peak Load 8,322,000 kw 7,338,000 kw 13.4 T=
Gross Utility Plant S 2.7 billion S 2.4 billion 12.0 CONTENTS Performance cage 1 ~ ' Stockholders Letter page 2 Officers & Directors page 3 Energy Sales page 5 ~
/ stem Development page 12 inanciel Review page 19
( It U Financial Statements page 21 ~ System Electric Statistics page 32 l System Map Inside Back Cover ; i
3 I h h To Our Stockholders Measured by performance,1972 was one complex; some new, with widespread of the most successful years in the history ramifications. of the Middle South Utilities System. The major problems were those associ-New records were established in sales of ated with the worsening fossil fuel supply, electric energy, in operating revenues, in particularly natural gas for use as boiler consolidated net income, and in earnings fuel. Increased curtailments by suppliers per share. Major construction projects were made necessary the utilization of substan-continued, new construction programs tial amounts of fuel oil, which, too, was in were implemented, and broader emphasis short supply. The extended burning of fuel was given to long-range planning. The 1972 oil in generating units designed for use of construction program required the ex- natural gas as primary fuel lowered the e penditureof $293 miilion. efficiency of the units and increased main-T . The quarterly dividend paid January 2, tenance problems and costs. 1973, was increased to $0.27% per share, Among other problems encountered dur- ({;) equivalent to an annual rate of $1.10 a ing the year were the frustrating delays in share. This marked the 16th consecutive licensing and related procedures as they year in which dividends were increased by pertain to nuclear-fueled units; the spiral-your Company. ing costs of planned generating capacity; Several significant developments that the continuing promotion by some con-affected our day-to-day operations in 1972 servationists tnat there are irreconcilable and which will contribute to the shaping of conflicts in growth and environmental the System's future in the years ahead preservation. include: On the following pages we have detailed The chartering of a new subsidiary, Sys- for your information and comment, what we l
- tem Fuels, Inc., by four of the System's have done, are doing, and plan to do to l operating companies. cope with these problems. We will continue '
Regulatory authority approval for New to rely heavily on the skills and talents of thev
, Orleans Public Service Inc. to increase 9,900 Middle South Utilities System men ,
electric and gas reL snd women-our basic strength. For their ) The commitment of $10.2 million for new inJividual and collective contributions to research and development programs. the favorable 1972 operating results-and A favorable vote by members of a rural for the confidence of stockholders and
' electric cooperative to sell its physical customers-we are grateful.
~
properties to Mississippi Power & Light For the Board of Directors, Company for $10.5 million subject to regulatory approval. - - pv
,. The addition of 18,779 total-electric living i units, the best one-year gain ever.
While 1972 was a successful year, in total, Y ' g~
! for the Middle South Utilities System, ,ti was fres d nt an .hief Executive Officer not without problems-some old, but more March 22,1973 :
6 2 -l
__ _ _ _ _ _ ._ . - _ _ - - - - -- ____ __ 3 r 11 1 , _ OFFICERS r.- g~R' 'M
~
)c' hr[d: Mi
\
($ . FLOYD W. LEWIS President & Chief Executive Otticer
.01 the Company
'j 1y $t; g,y GERALD L. ANDRUS l '{ .>
p*.-- e Chairman at the Board
^
c
,,-',Jg Pi^'
DONALD'J. WINFIELD I
. Vice President
,i 'q " E JAMES E. AMMON
?. ,j gj l Treasurer & Secretary I
NML "ZZ u
~ ' - ~ ~ " '
% ROBERT L. BURGESS. JR.
' Asst. Secretary & Asst. Treasurer f
I p ,. ] < DIRECTORS bNEh , GERALD L. ANDRUS WW - '
* ~
Chairman of the Board of the Company L,}. f .a , New Orleans. Louisiana
! FO' b .<
W #
, GEORGE F. BENNETT
.l && .
~~
't
) President. State Street Investment Corporatiot.
u 4 ,, W ,- Treasurerof Harvard University
.] -
Boston Massachusetts a %,,. .,.< ' g ; i 1' Q 4 & RICHARD W. FREEMAN Chairman of the Board
$ Louisiana Coca-Cola Bottlit'g Company New Orleans. Louisiana
- ?. t
)'~nishmed~ ~ ~ w.P qh$ae?$ ' FLOYD W. LEWIS President & Chief Executive Otticer of the Compe..
l gl* ' . New Orleans Louisiana W'#
'I .
1 - DONALD C. LUTKEN y Q & ^ r President. Mississippi Power & Light Company 9 {.q;g. v. f : Jackson Mississippi t
- M " '
'T WILLIAM McCOLLAM. JR.
}f'M ~:h ~~ President. New Orleans Public Service Inc.
, -i pCy? New Orleans, Louisiana
'b .
FRED H. MERRILL Chairman of the Executive Committee at Fireman's Fund Insurance Company
,tf !; mc- _
San Francisco, California U i- - LeROY P. PERCY w t' E!$ .
~
Chairman of the Board. Mississippi i.hk
? *
. Chemical Corporation Greenville. Mississippi y 4 % REEVES E. RITCHIE
' .y f;$h President. Arkansas Power & Light Company
\,
W Little Rock, Arkansas WN EDWARD A. RODRIGUE
' President. Louisiana Power & Light Comesny lG -
New Orleans. Louisiana w
~ ROBERT E. LEE WILSON 3rd l f *7- President. Lee Wilson and Co.
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i By major classification, the System's in all uttimate utomer classifications-s electric customers were 1,096,567, or residential, comme mial, industrial and 87.3%, residential; 132,267, or 10.5%, com- governments!-impressive increases in merical; 20,192, or 1.6%, industrial; and energy sales were recorded. Energy sales (,N 6,941 governmental. to ultimate customers totaled 31 billion New Orleans Public Service Inc. was sup- kilowatt-hours, a 13.4% increase over the plying natural gas to 180,923 customers previous year. Th,s i compares w,th i an 8.1% , and Arkansas-Missouri Power Company customers {in 1971 over 1970. increase o total en and its subsidiary to 61,619 customers. An additional 6.8 billion kilowatt-hours of Electric Customers (End ,i s eriod) electric energy was sold to neir;hocring { utilities in 1972, some 995 million kilosvatt-Ca n a **a a hours less than in the previous year. Cur-l
~~
tailment of contracted for natural gas sup-12m plies, the limited availability of fuel oil, the 2000 -
- m '
priority of first serving System customers'
,, l l II I 'i ~
electric requirements with available fuels, l l , l and the higher price of both natural gas and I l
, i j fuel oil, all tended to limit eLctric energy I 4m sales to neighboring utilities.
ll ' l f
,, i 2m : Electric Operating Revenues i ! i l i J o
1963 1964 1965 1966 1967 1968 1969 197o 1971 1972 L - Conc urrent with the increase in electric g j g g g Electric Energy Sales operating revenues, which totaled S550.1 l { xws saies mill,oni in 1972. Total operating revenues-3 (Millions) % increase from electric, natural gas and transit serv-l 1972 5 ,O Residential . 10.281 _1971 8 808 1972/1971 16 7 ices-were $593.4 million. {
' bs r Goet'nmental.
1
. 1340 1
1.256 1 67 Electric Operating Revenues () Ult.*iate Customers . 30.975 27.308 13 4 (Thousands) % increase Utstities 6.834 7.829 (12 7) 1972 1971 1972M 971 tot *L . 37.80a 35.137 ~-76 Residential. .3206.086 5174.859 17.9 Ccmmercial . 120.853 ' 105.795 14.2 Industnal . 131.318 110.172 19.2 Sales of Electric Energy Governmentai . 18.244 16.451 la.9 1 Ultimate Customers 476.501 407.277 17.0
- A favorable economic cl.imate .in the Sys- utiiit;es . e6.720 e0.271 10.7 g tem cnmpanics' service area complemented M'5ce',ieneous 7 ,, g 6.868 5.e04 182 i with near-normal weather r:onditions, par- Revenues. .5550.089 $473 352 16.2 l ticularly in the summer months, was a major -~ - - -- -
factcr that contributed to record sales of Electric operating revenues from ultimate electric energy in 1972. customers-5476.5 million, and the dollar and percent increase, S69.2 million and 17.0%, respectivety-were records for the w l Energy Stes ts mons at niiownit-hoursi System. n Toi . c uisimar. costom.,, Revenues from sales of electric energy to utilit,es increased $6.4 million, a 10.7% 40 _ i t gain over the previous year. This increase i g i reflects firm sales to neighboring utilities of 3 - p "1 [ 700,000 kilowatts of capacity during por-25 , tions of the year compared to 520,000 kilo-
- o = ~ M 1 watts the prior year and higher base rates g- E, b ! )I h_ Li_ for firm, economy and emergency energy -
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used in providing such services. Operating revenues from gas and transit g - o Lj ; n *{- l g; --- services were $43.3 million, compared to 1963 1964 196S 1966 1967 1968 1969 197o 1971 1972 532.9 million in 1971. , 6
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2 l Residential Sales Over 10 Billion KWH The average annual use in such a unit is C in 1972 sales of electric energy to resi- approximately 19,000 kilowatt-hours for b dential customers set a new record of 10.3 which the System receives some $300. y billion kilowatt-hours, an increase of 1.5 Th,si compares with an average annual use S billion kilowatt-hours, or 16.7% over such for all residential customers of 9,542 kilo-sales in 1971. The residential classification watt-hours and average annual revenue of accounted for 33.2% of energy sales to ulti- Sl mate customers and 27.2% of total energy Th a erage annual use of electricity by System residential customers increased B enues from these salcs exceeded 862 kilowa,tt-hours in 1972, or 9.9%, to
$200 million for the first time-$206.1 mil- 9,542. This is 21% above the national aver-lion was the actual amount-a 17.9% in- age annual usage of all residential electn,c crease over 1971. Revenues from the resi- customers.
dential classification accounted for 37.5% in the past ten years, the System's resi-of total electric revenues. dential customers have increased the,r i Several factors contributed to sales and average annual use of electricity by 145 revenue increases: Per capita and total percent. In tho penod-1963-1972-the personalincome in the System companies average kilowatt-hour cost to residential service area is increasing (at a rate that customers decreased from 2.51C to 2.00C. exceeds the national average increase) Commercial Sales Up 11.9% and customers are availing themselves of Kilowatt-hour sales to commercial cus-the advantages of electric energy; market- tomers-retail complexes, office buildings, ! ing programs that emphasize the efficient hotels, motels, schools, service and other use of electric energy; concern over curtail- establishments-were up 11.9% over 1971. ments of natural gas; and the growing popu- Revenues from the sale of the 5.8 billion larity of the total-electric concept. kilowatt-hours of electric energy to com-This latter factor-the growing popularity mercial customers in 1972 totaled $120.9 ) I/7 of the total-electric concept-is evidenced million, a 14.2% gain over the previous year. V by the number of total-electric living units The average kilowatt-hour use per com-( (houtes and apartments) added in the past mercial customer in 1972 was 43,706, a three years: 6,539 in 1970,11,469 in 1971, 6.8% increase over 1971. The average and 18,779 in 1972. At year-end 1972, the revenue was $905.38, a 9.1% gain over the System companies were serving 67,555 previous year. total-electric living units,6.2% of total resi-dential customers. Industrial Sales 13.5 Billion KWH Several major advantages accrue to the Reflecting the general increase in in-System through service to a total-electnc dustrial activity, the System's sales to in-unit. These units utilize year-round space dustrial customers reached a record 13.5 conditiening, rather than summer air condi- billion kilowatt-hours in 1972, a 12.4% in- I tioning alone and, thus, contribute to a more crease over 1971. Electric energy sales in ' desirable load factor. this classification have doubled since 1963. Operating 'evenues from industrial sales, Average KWH Use per Residential Customer $131.3 millic 1 in 1972, were 19.2% more s n usu symm C Totas industry than in the preceding year. g3 gg 33 . '_ New Orleans Public Service Inc. had l
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, I q sales of 31.2 billion cubic feet of natural a
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pany had 13.9 billion cubic feet of such 3300 ,, 2_ l 'l I' L, t .__ sales. C ! E' I I i !. New Orleans Public Service Inc. provided
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[, j i g} l i fU l--- transit service to 116,711,697 riders. Rav-enue passengers were 72,487,710, down V w_ 2 i g; { g; gj I i, 1,516,670 from 1971. pl-6 3 :,,, _ !i lI E! ll
! ! i Industrial Expansion Continues o_!'t- Ej l} ! l} l} I I 1 A high level of industrial development- .
1963 1964 19ti" 1966 1967 1968 1969 1970 1971 1972 the location of new plants, the expansion
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* %f b M R2 sl d e s M M f A new shopping complex at Jackson. Messessippi of existing plants-was maintained in 1972. In addition to having full-time personnel in total, there were 279 projects completed assigned to these economic advancement
-134 new and 145 expansions. programs, the System companies sponsor a comprehensive national advertising and industrial Expansien public information program as an integral Plant phase of this activity.
Numcer of Profet.!s . 4 9 9.877 4.644 O Thw new aocs . Payrons . 14.521 554 5 minion 127.1 milhon 5816 methon area development and travel pro' motion' Q advertisements appeared in nationally
.nu 5"* 52 a min.on 54 a m,nion 56 a m,nion circulated publications. This is the oldest New industrial plants were located by continuous national advertising program such nationally known firms as General sponsored by an investor-owned utility.
Motors (Packard E!ectronic Division), Geor- A quarterly magazine. The Changing Mid-gia Pacific, Gulf Refining Company, Piper die South, with a circulation of 60,000 Industries, Shell Oil Company, Timex Cor- copies, complements the national advertis-poration, and Weyerhauser, which, along ing program. with the 127 other new plants and expan- Rate Adjustments sions, increased the diversity of products produced in the area. Historically, the Middle South Utilities Area Development System has viewed as its principal obliga-tion the providing of an adequate and relia-Industrial development long has been an ble supply of electric energy at reasonable integral phase of economic advancement rates to meet ail the requirements of its '
- programs sponsored by System companies customers.
! in cooperation with civic leaders and public Over the years the System has met this officials. Initially, the thrust of these pro- obligation through an orderly expansion of , grams was to obtain a more favorable bal- physical facilities, adopting technological . ance between agricultural and industrial improvements to increase economies and employment. With the accomplishment of efficiencies and giving careful attention to this objective-manufacturing emoloyment costs and the development of markets.
in the area now exceeds agricultural-ef- The end result has been to continually ' forts were broadened to accelerate further lower the average unit cost of electricity the development of service industries, par- to ultimate customers-in 1972 it was 1.5C l.
] ticularly those associated with travel, whilecompared with 1.8C ten years ago. gd -
still maintaining the industrial development However, the continued upward pres- - l momentum, sures on costs-both of operation and main-
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r g'p tenance expense and of capitrJ additions- - (Ark-Mo), the two System operating com-can outpace increased economies and effi- panies that distribute natural gas, have ciencies. When this occurs, it is necessary purchased gas adjustment clauses to seek regulatory approval to incregg applicable to all gas customers. rates. Ark-Mo had received approval from its Such was the conclusion of New Orleans two regulatory authorities, Arkansas Public Public Service Inc.'s management in late Service Commission and Public Service 1971, following intensive study of rate Commission of Missouri, to pass on in- , structures in the context of current and creased gas costs after November 1970. projected costs. On January 4,1972, the in 1972, Ark-Mo r,eceived approval from company filed an application with the both the Commissions to put into effect Council of the City of New Orleans, its reg. an automatic purchased gas adjustment
'ulatory authority, requesting approval to clause from a base period of January 1, increase electric and gas-rates and transit 1969. This will increase gas revenues of fares. It was the first time in its 50-year that company approximately $500,000 history that the company requested in. annually.
creases in electric and gas rates. Capability at Time of Peak Load ; The increases originally requested were and Peak Load (Mdhon KHowatts) , designed to provide additional annual rev- M **' Cao*bddy C o**d C*o*b'hty E Peak Load enues of approximately $18.9 million, or 'o 1 some 18% over the company's projected 9 E l revenues for the 12-month period ending . E-mm October 31,1972. During the course of the hearings before 7 yv EE the Council, agreements on a test period of e - g"gg 1 1 T theJ2-month period ending May 31,1972, s b EEEE 1
. andchanges in the schedule of certain con- , n EEEEEE struction projects and required financing reduced the requested ,ncrease to $16 mil- BmEEEEEEE l i ggggggggg '
e u cil,on November 22, authorized MEEEEEEEEE new electric and gas rate schedules that are estimated to increase the company's o EEE EEEE ise4 m ines iero sera revenues $10:5 million annually. The ap-proved increases in electric rates of $6.7 Peak Load 8.3 Million Kilowatts million annually and increases in gas rates For many years, our customers' use of of $3.8 million amount to about 65 percent electricity for cooling requirements has of the $16 million sought by the company. caused the peak demand-a 60-minute The increased rates became effective on period when customers require more elec- , January 25, 1973. The increases comply tricity than in with the criteria for public utility rate in. tem to come in ,any theother summer hour-on the Sys-months.1972 creases established by the Cost of Uving was no exception: the load on the System Council on January 13,1973. reached a peak of 8,322,003 kilowatts on Management of the operating companies August 21, including 700,000 kilnwatts of is intensively aware of the need to protect firm sales to neighboring u,uues. the financialintegrity of the companies and At the time ' the 1972 peak demand, the steps will be taken to aggressively pursue Middle South Utilit,ies System had a total increases in rates for services when it is normal rated capability of 9,703,000 kilo-ietermined that this is the only appropriate watts which includeal 1,395,000 kilowatts , ~
,owse og act;on. available under farrr contracts. Reserve ,( Purchased Gas Adjustment Clauses capacity on this basia was 1,381,000 kilo-watts,16-1/2% over requirements of our -
j Both New Orleans Public Service Inc. customers and firm contract commitments ,j and Arkansas-Missouri Power Company to other utilities. y j I. 9 -
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SYSTEM EXPANSION AND C DEVELOPMENT in 1972 the System moved forward with o,oss piani u,n.oo, o oeuers 0 t 'ec"'c g a vom an expansion program of unprecedented 27 % - dimensions. More funds were expended in ~ 1972-5286.8 million-for additions to gen- 24w g1 [ erating capacity, extension of transmission 2i w ,-- and distribution systems and for other re- El l1 isted facilities and equipment, than in any ' aw - i , other comparable period. Thase expendi- 35 % E~',l - tures of $286.8 million were 532.8 million. l1l llll s - or 12.9%, higher than in 1971, the previous i2m g g g ggg, g record year. However, expenditures for ,, 1 E] B m - eiBI )- both years are well below the S450 million-per-year scale of the System's expansion ex - l l gl gl a lll l projected for the 1973-1977 period. 3. B.gE s a gg m g g' ' ' Actual Estirnamet 1972 1973 1974 1975 1976 1977 0 l l l l l ) 1963 1964 1965 1966 1967 1968 1969 1970 1971 197? L (in Mdhons) i ELECTRIC TransNss on ~ !! 69 8
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' $88 bine units at 15 strategically located sta-tions in Arkansas, Louisiana and Mississippi.
Distribution 78 TcY ~ 28!a 4$8 3 5! 3T T3! 6s " M# D "- l gas.TRAUslT iCO were designed to use natural gas as AND oTHER _ 6.1 __25 __5 4 ___8_ 7 primary fuel, with oil as emergency standby Total . 5292 9 5463 $388 5321 5444 $_661 fuel. Because of natural gas curtailments by . Of the $286.8 million electric construc- suppliers, several of the Systern's generat-
-[ 'ti"gn expenditures made in1972, $187.5 in units had to use oil extensively as pri- (,
million, or 65.4%, was expended for elec- mary fuel, which made the units less effi-tric production facilities to meet the pro- cient ,n i the production of electricity. jected demtads for electric service in the Capability evaluations dunng the 1972 peak load season indicated that the loss of Middle South area-generating capability due to natural gas Construction Expenditures (M ii.ons ot oonars; shortages and curtailments and the substi-l m Toi.i c e.cu.c tution of fuel oil was approximately 6 per- ! aw , cent of the System's normally rated owned C generating capability. 2 ,o 5- 4-- The use of oil and gas, separately or in 5i " combination, the quality of the oil, the ca-
,, ,m II h' pacity at which the unit is operated and ui ,; aj pI current cooling water temperatures are all Jj ,, 5; ji rj factors which determine a unit's efficiencys iso q' n; , , p g, , and capability. Continued and more wide-jl ,1 gj gli spread curtailment of natural gas supplies
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un,itsSystem so as toalready use oilhasasconverted a primary two fuel.of - Owned Generating Caps 5ility Partial conversions have been made on O At year-end 1972 the System owned generating capability totaling 8.2 million otner units and studies are being conducted on the feasibility of complete conversion g). kilowatts when normally rated, 8.0 million of certain other units. The time the unit kilowatts of which was in major steam tur- would be required to be out of service and 12
1 the cost of conversion are two of the major Construction work on the fossil-fueled factors being considered in the studies. units, scheduled for operation in 1974 and The costof conversionif allinterstate gas 1975, respectively, was approximately 20 was fully curtailed is estimated at about percent complete at year-end 1972; how-
$121 million cver a period of years. ever, site preparation for the nuclear-fueled unit was suspended awaiting either an AEC Construction Proceeded on 5.5 Million KW exemption to allow certain specified con-While no major generating units were struction or a construction permit. The placed in commercial operation in 1972, AEC's Atomic Safety and Licensing Board l cortstruction work rnoved forward on conducted a prehearing conference on , 5,525,000 kilowatts of new capacity sched- December 20 on Louisiana Power & Light uled for the 1973-1977 period. Over half of Company's application for a construction this scheduled capacitywill be from nuclear- permit. A date for a formal hearing on the fueled units. application for a construction permit is ex-LP&L's Sterlington. Installation of two pected to be set for sometime in March.
gas-fired turbines, rated at 50,000 kilowatts MP&L's Gerald Andrus. A 750,000 kilo-each, located at Sterlington Steam Electric watt fossil-fueled unit under construction at Station, was begun in the year. Exhaust this new station was approximately 23 per-gases from these turbines to a waste heat cent complete at year-end. It is scheduled recovery boiler will be utilized to produce for completion in late 1974. steam for a conventional steam turbine gen- MP&L's Grand Gulf. The application for erator, rated at 100,000 kilowatts, to be an AEC permit to construct two 1,290,000 added in 1974. Upon completion this com- kilowatt nuclear-fueled generating units
.bined-cycle unit will have a total capacity at Grand Gulf Nuclear Station was acceptea of 200,000 kilowatts. for docketing in 1972 and was undergoing LP&L's Ninemile Point. Unit 5 of Ninemile an in-depth review by the AEC's staff at Point Steam Electric Station, a 750,000 year-end.
A kilowatt gas fired unit, is scheduled for While MP&L is proce 3 ding with the engi-V commercial operation in the Spring of 1973. neering for the projecs and has applied to AP&L's Arkansas Nuclear One. The Sys- the AEC for construction permits for the two stem's first nuclear-fueled unit. Arkansas units, the System companies have jointly Nuclear One unit #1, was 95 percent com- undertaken studies with respect to alterna-plete at year-end 1972. On February 5, tive plans for the ownership and financing 1973, the Atomic Energy Commission is- of the new project.These completed studies sued its Final Environmental Statement on will be the basis for considering the ad-l Unit #1, finding that an operating license vantages of joint ownership of major gen- ' for the facility should be issued. It is ex- erating units or the creation of a generating pected that the AEC will complete the op- company subsidiary. erating license review during the second quarter,1973, and that an operating license ' neraurig units _ ] Fuel Kilowatt Scheduled will be granted shortly thereafter. Maior unit source capauty operation Unit 2 at this station, of 950,000 kilowatt pnernao point ny .a . , as0.000murs!T 1 ; capacity, was 8 percent complete at the end Arkansas Nuclear Or e 31 Nuclear 630.000 1973 in ! of the year. The AEC issued a construction paiorrordg 7 u fog .430.00o. - A4 ._t 3 l permit for the unit on December 6, twenty- Gerald Andrus Gas / Oil 750.000 1974 i
,f six months after filing of the application. pvaterford ez'c ._ n sasmu +4so,coomW.i i Work had proceeded on both the non- Arkansas Nuclear One s2 Nuclear 950.000 1976 h nuclear and nuclear portions below grade paionore ,3c.x, 3 .gucienji.iss.000- ;1 sin, ,_ 1 level under an AEC granted variance. This GrandGulf g1 Nuclear 1.290.000 1980 -
unit currently is scheduled for commercial igrand au it s2<.- # . _1 Nuclear 3290.000 71982 f./ j operation in late 1976. TOTAL 7.905.000 I r LP&L's Waterford. Three major generat- ~ l O ing units are scheduled for the Waterford Coal-Fired Units. Consideration ,s cur-V Steam Electric Station, two 430,000 kilo- rently being given to the possibility of con- l watt fossil-fueled units and a 1,165,000 structing some coal-fired units, in the north- , 1
! kilowatt nuclear-fueled unit. ern part of our service area, based on use of l 4l i V
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s \ l low-sulphur western coal. A decision if and i (3 when to construct coal-fired units is de- ' T(Y pendent on detailed economic evaluations _~ , s ( taking into account fuel availability, costs L . - and environmental impact among other ,. I facters. ,, ,
,. f Transmission System Additions , .4 , ,,
. Concurrent with the addition of new gen- i - - */ s'*
erating capacity, the necessary transmis-sion lines must be available for the eco-
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nomical dispatch of electricity from the *#^ 'v point of production to the point of use. Fur- 8S , ther, load growth, usually associated with N population increase and industrial develop- ~ ment, indicates where and in what capacity transmission lines are added. , , The System pioneered in the construc- construction on me Gerald Andrus Steam Electnc Station, tion and operation of transmission lines of G r** a'""*. "$'$5'c o' 500,000-volt capacity. In 1972, a segment new customers made necessary the con-of thes,e lines, that extends from Little Rock struction of 854 pole miles of new distribu-to an interconnection with Oklahoma Gas tion lines, increasing total miles of distribu-and Electric Company at Fort Smith, Ar- tion lines in service to 54,283. kansas,was tied into Arkansas Nuclear One and will be utilized to move electricity from Middle South System Operations Center that station when the first unit is piaced in in the planning and constructing of the operation in late 1973. This made a net Middle South Utilities System, reliability ai*avs has beea a primarv objective. O -asioition 500,000-voltof 48then miies to the s'o miie of in operation. The location and capacity of generating Construction work began during the year units, the adequacy of transmission grids on another 500,000-volt transmission line and distribution systems, the control of bulk addition, from Arkansas Nuclear One to a power supplies and interconnections with new substation to be constructed near neighboring utilities, all are searchingly Little Rock. When completed, this will add measured agsinst the yardstick of reliability 91.5 miles to the 500,000-volt grid. prior to their incorporation into the System. In addition to providing an economical . To this end, construction work was con- , means for the transmission of large blocks tinued in 1972 on a major expansion of the l of electric energy, the 500,000-volt grid, Middle South Utilities System Operations through interconnections with other major Center, located at Pine Bluff, Arkansas. ! utility systems, further strengthens the re- When completed and in operation, now liabilityof the Middle South Utilities System. scheduled for late m 1973, the expanded initial construction work was begun on Ce,nter w,ll i be one of the most modern and,, 230,000-volt transmission lines from the efficient computerized power management Gerald Andrus Steam Electric Station, systems i ,n the world. lt will initially control l a total of 62 generating units with a total under construction near Greenville, l Mississippi tointerconnect with the Svetem's capability exceeding 9,000,000 kilowatts ' on the Middle South Utilities System and transmission grid, The System also completed and placed in 35 interconnections with neighboring .utili- : operation 10 pole miles of other transmis- ties. It will improve further the high degree sion lines. At year end, the System had a of reliability of the System,s bulk power network of 8,959 pole miles of transmission supply and assure the use of the most eco- , lines
- nomical sources of electric power available 7 to the System. A I (O Distribution System Expanded W The increased demand for electric energy g,*j;5,' gag' *,', ^,'l,*g*A"c",c7*' o,agu$5,, egg,s;cn4eg from ultimate customers and the addition of ano s coonaa 'o-** *en' 'or-aro cunna ine year.
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ll Y A - U i Middle South Services Computer Center "ated System basis rather than by the indi-vidual System companies. This conclusion The installation of tele-processing equip- led to the formation of a fuels company, ment in all of the System companies' cus- System Fuels, Inc. (SFI), as a subsidiary of tomer service offices, giving these offices four System operating companies on Janu-instant access via microwave and leased ary 4,1972. telephone lines to the Computer Center, System Fuels, Inc. located near New Orleans, was completed The fuels subsidiary has the responsibili-during the year. ty for the System's fuel oil supply, including Additionally, conversion to a new cus- purchasing, financing, transporting, storing, tomer accounting system, which processes selling and accounting to assure a coordi- : billing data fcr all System customers (ex- nated fuels acquisition program. ' cept those of Arkansas-Missouri Power SFl contracted with two domestic pro- < Company), using the Center's two large ducers and refineries, Murphy Oil Company compute" systems was completed in 1972. and Shell Oil Company, both of which have
' The Fuel Situation major facilities in Louisiana, for approxi-in 1972, there were considerable editorial mately 5.8 million barrels of fuel oil per
' comment, speeches, advertisements, and year, for a period of five to ten years. De-
! multiple (sometimes conflicting) studies I very under these contracts began in July.
concerning the nation's energy resources. In addition, major quantities of fuel oil were Primarily this concern was with.the ade- purchased from these and other suppliers quacy and availability of fossil fuels to meet Linder spot and short term contracts. To transport fuel oil, SFl leased five tows I) q the nation's existing and projected de-Unands. Because the Middle South Utilities --towboats and barges-that have a com- { System is a convertor of energy-histori- bined capacity of 178,000 barrels. cally this has been a conversion of natural Late in 1972 SFl purchased oil storage gas to electric energy-the System has and related physical facilities from two of been acutely aware of the problems stem- the System companies-Arkansas Power & ming from fossil fuel shortages. Ligh , 1 Serv,t iceCompany and N,ew Orleans Inc.-for approximately Public S3.8 million. In anticipation of the developing natural
! gas shortages, detailed studies were con- '". addition SFI in 1972 engaged in sev-I ducted in the 1965-67 period. These studies eralJod vem gas expWadons in Louisi-resulted in the decision to construct the ana, Arkansas and Mississippi; analyzed System's first nuclear-fueled generating pr p sais that would involve the importa-unit, of 850,000 kilowatt capacity, which is "
- IU feed one or more scheduled for operation in late 1973. This refineries to be located in the lower Mis-was the first nuclear-fueled unit announced sissippi River area to produce low suiphur in a predominately natural gas area, oil nd naphtha; and , initiated s,tudies th Subsequently, the System has announced determine the feastbility of utilizing low plans to construct four other nuclear-fueled suW coal as a major fuel units. When the five units are in commer- Other Fuel Developments cial production, approximately one-half of Louisiana Power & Light Company and the System's electric energy will be from Mississippi Power & Light Company have -
nuclear-fueled units. contracted to purchase some natural gas Since 1969, all planned new major fossil- in intrastate commerce. These new gas fueled units have been designed to use oil supplies will be delivered from the fields to as primary fuel or any combination cf oil generating stations via pipelines construct-i p and natural gas. ed or to be constructed for that purpose. V in 1971, it was concluded that it wou'd C]ntracts have been signed for sufficient be to the System's advantage if acquisition amounts of yellow cake to supply the Sys-
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of fuel supplies was pursued on a coordi- tem's first two nuclear units through the late i. 16
r , ___ _, F 1980's. These units-Arkansas Power & The next step in fast-breeder develop-Light Company's Arkansas Nuclear One, ment is the construction of a demonstration units 1 and 2-are scheduled for operation unit of commercial size. Plans to construct in 1973 and 1976, respectively. Contracts and operate a demonstration unit, of are being negotiated for reload fuel (the 350,000 to 400,000 kilowatt capability, first fuel core will be provided by the re- were announced in 1972 by Commonwealth actor supplier)for the third unit-Louisiana Edison Company, the Atomic Energy Com-Power & Light Company's Waterford Steam mission, and the Tennessee Valley Authori-Electric Station unit 3-scheduled for op- ty to be located at Oak Ridge, Tennessee. eration in 1977. The electric utility industry has been asked The Fast Breeder Reactors to raise $250 million for this project over a The Middle South Utilities System's major ten-year period. The System operating dependence on fossil fuels for generating companies have committed to contribute electric energy will be somewhat mitigated $6.5 million over a 10 year period. as the nuclear-fueled units under construc- Other Research Projects tion and planned become operative. How- Further, the System operating companies ever, the projections of electric energy are associated with eleven other P,vevor-
. requirements through the 1970's and the owned utilities, several related business next two decades indicate that additional enterprises, and an engineering consulting electric generating resources must be de- firm in the evaluation of the ootential of the veloped if these projected requirements are molten salt reactor concept.
n to be met. Developed at the Oak Ridge National
'V To this end, the System operating com- Laboratory, this concept would convert
- t. .s panies have participated in several research programs-some concluded, others on-thorium into the fuel uranium 233. Further development and successful application going-that hold promise of expanding the of this concept would increase the nation's nation's energy resources. overall energy resources by adding tnorium The most notable of these programs, as a fuel material.
successfully concluded in 1972, was one conducted at the Southwest Nuclear Re- The companies also are partlcipating in search Center, located near Fayetteville, the development of the gas-cooled reactor Arkansas. T: s System operating companies concept and in a program to demonstrate were major oponsors of this program which, that plutonium, which is produced by re-through expenments, verified physics cal-actors currently in operation, can be used culations indicating that breeder reactors as a fuel in those reactors, thus reducing the current and projected requirements for can be designed with, des,rable i operating uranium. and safety characteristics for la~rge central- The System companies in 1972 broad- '
- station electric power generators. ened their financial support of research and l These experiments were a nec lude to the development of a l,essary pre-iquid metal development programs coordinated fast breeder reactor. It is the second gen- through Edison Electric Institute. This fi-eration of nuclear reactors-the fast breed- nancial commitment for the 1972-1974 period is S3.7 million.
p en ial or bro n ng the electr c Capital Electric Power Association energy base and more efficiently utilizing in December,1972, the membersh,p i of fuel resources. Capital Electric Power Association, an elec- - m The fast-breeder reactor converts the tric distribution cooperative that serves some 17,000 member-customers in seven
. U*k)cent U-238 isotope, which makes upCentral 99.3 Mississippi per-of natural uranium, into fissionable ,
counties, voted, to sell . plutonium. Where the conventional reactor its physical properties to Mississippi Power produces less of this new fuel than it con- & Light Company for $10.5 million. The vote . sumes, the fast breeder produces more. in favor of the purchase proposition was , 17
- 1 i
8,458, or 70 percent of the total votes cast. chairman of the Board and other officers The Mississippi Public Service Commis- were re-elected. O sion issued an orde,r on February 12 stating that public convenience and necessity re-Communications g' The Company's graphic communications quires the sale of Capital Electric ,Powe5 program in 1972 was complemented with Assoc,ation,s i properties to Mississippi , personal presentations by Company of-Power & Ught Company in accordance with the terms of the purchase agreement. The ficers to financial analyst societies in Wil-mington, Rochester' Nashville' New Or-Commission authonzed and approved the transfer of Capital's certificate to serve its leans, Boston, New York, Toledo, and S,t. area to that company. The purchase agree- L u,sandtorepresentative3of i the Memphis ment provides for the company to begin op- II"ancia community eration of the property on April 1,1973. Th Stockholders was awarded first place in Arkansas-Missouri Power Company the holding company classification in both Acquisition Developments the Reddy Kilowatt Annual Report Competi-The legal action in which two Louisiana tion and the Financial World competition. cities appealed the Securities and Ex- A new auarterly publication, Middie South change Commission's approval of the Com- Utilities Syst9m, for System companies, pany's acquisition of Arkansas-Missour employees, wa, begun in 1972. Power Company (Ark-Mo) is still pending Dividend Re-Investment Survey in the United States Court of Appeals for A survey of a sample of Company stock-the District of Columbia. holders conducted in the Fall of 1972, indi-Pursuant to approval by the United States cated insufficient interest in a dividend re- ! District Court in St. Louis of the plan ap- investment program to justify instituting proved by the SEC for elimination of the such a program. publicly held minority interest in Ark-Mo, Annual Meeting of Stockholders that company became a wholly-owned sub-At theheld 23rdinAnnual Meeting of Stock-May {/
-st, diary of the Company on May 1,1972.
,The period for disposition of the gas prop- nolders, Blytheville, Arkansas, 19,1972, 26 291 stockholders holding erties of Ark-Mo and its subsidiary, Associ- 35,202,633 shhtres were represented in per-ated Natural Gas Company, has been ex-tended by the SEC until May 5,1973. son or by proxy. This was 87.5 percent of the shares outstand,ng. i Floyd W. Lewis Employees Floyd W. Lewis, elected president of the The accomplishments of 1972 reflect the Company in May,1970, was named presi- ability and dedication of the System's em-dent and chief executive officer following ployees. At year end, the System employed
,' the Annual Meeting of Stockholders on May 9,901 persons,104 more than at year-end
. 19, 1972. Gerald L. Andrus was elected 1971.
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y I FINANCIAL REVIEW E E rnings E Divedends I F. Operating Rovenues $593.4 Million ::oo ! The Middle South Utilities System com-panies received $593.4 million in 1972 i.75 1* E l- ' from the sale of electric energy, natural gas tas g , g ,E , ,E ,E_
, and transit services. This was an increase 5m m E E E E L b F E' E' of- 17.2% over 1971 total operating 75 revenues.
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0- - Operating Revenues (Meon.o, con rsi ines toe. ines nose iner ises isso into 1971 1972 Consolidated Net income E_ Consolidated netincome of $79.8 million in g ll 1972 was a $14 million, or 21.2% increase g) g j over the previous year. Earnings per share E 2o on average number of shares outstanding bI II EI 3o - was $1.98, a 30.30 or 17.8% increase over _ m El l, E. ll l1 1971. g g, g g! gi g; Dividends totaling $1.06 were paid in 2.o
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g, g, g g, g g g' g g g; g gg 1972 compared to $1.02 in 1971. The quar-terly dividend was increased to $0.27% a
,,, E' E E' E' El E E< E EI EI share beginning with the payment of Janu- l l l ll ll ll ll l; li lj ll ary 2,1973. This new rate is equivalent to E; E. E! EI E: E, Ej El Ej gj $1.10 a share annually. l
{ i.es im i es im im im i.e toro seri ior, Retained Earnings slectric operating revenues ins 1972 ex- '" the pastten years,59.7% of consoli net income was paid to stockholdersin, dated the ceeded the half-billion dollar level for the form of dividends. The retained earninga I first time, $550.1 million, an increase of
$76.7 million, or 16.2%, over 1971. were reinvested in the business, primarily Operating revenues from the sale of for the ourpose of partially financing the '
natural gas were $31.9 million and from construction program. transit services $11.4 million, Dividends paid in 1972 were 54% of con-solidated net incorne. The increase in divi-Operating Expenses $461.6 Million dends per sharewaslimited by the 4% maxi- 1 Total operating expenses in 1972 were mum permissible increase in dividend pay-
$461.6 million, $67.3 million, or 17.1 % more ments under the guidelines established than in 1971. pursuant to the Economic Stabilization Act.
The major increase'in operating expense The relationship of consolidated net in-was fuel-natural gas and oil-used in gen- come to total dividends declared and of = erating electric energy. Total fuei costs in- earnings per share to dividends declared l j creased $28.5 million for the year, and ac- pershare le shown in the following table: , counted for come 42 percent of total operat- consoricated civieenes cividenes 14 ing expense increases. Approximately 52% Net incorne Declared Payout Earnings Declared A of this increase is attributable to expanded }g'E Ws2 "*$*l "hsS*$*' s*Eo Per re* Pershare* - j generation and the remainder,48%,to higher 1964 33.734 19.913 59.o 1.00 o.s9 7 fuel costs, which were or will be recovered 198s 37.s23 21.43s sr.i 1.11 o.sss by the operation 'lg 42gg 24jg gg 2; o 7o, h( C clauses which are ,of the fuel adjustment all base electric rates. included in substantially 19e8 1969 48.3ss s2.521 29.511 31.819 es.e 60.6 1.31 1.48 o.835 0.9o Other major increases in operating ex- 1 70 se o s
.s r 9 g7g j ie %; [Q, depreciation ($6.3 million),
penses were power purchased ($ 6.4 million), e...o onmaintenance 1972 79.771
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19 _ . . _
l l 1 System Companies Financing The System companies sold $115 million kansas-Missouri Power Company nor New of first mortgage bonds and $45 million in Orleans Public Service Inc. plaru perma-preferred stock in 1972 to finance, in part, nent financing during 1973. the expansion program. The Company is currently budgeting addi-By companies Arkansas Power & Light tional investments of $35 million in the com-Company, in April, sold $35 million of 7- mon stock of Arkansas Power & Light Com-3/4% first mortgage bonds and 215 million pany and $30 raillion in the common stock of S100 par value 7.80% preferred stock and, of Louisiana Power & Light Company in in December, $15 million of 7-1/2% first 1973. It is anticipated that the funds for mortgage bonds and $20 million of $100 par such investments in the common stocks of value 7.40% preferred stock. Louisiana these System operating companies will be Power & Light Company, in January, sold raised through bank borrowings. The
$25 million of 7-1/2% first mortgage bonds timing of these equity investments by the and $10 million of $100 par value 7.36% Company will depend upon the pace at preferred stock, and, in November, $25 which the construction program proceeds.
million of 7-1/2% first mortgage bonds. Mis-sissippi Power & Light, in April, sold $15 Common Stock Sold million of 7-3/4% first mortgage bonds. The Company sold, through competitive No new permanent capital financing was bidding,4,000,000 shares of common stock required by Arkansas-Missouri Power Com- on March 22, 1973. The proceeds of the pany or New Orleans Public Service Inc. in sale were used for the repayment of 590 1972. During the year, the Company invested million of bank loans with the balance to be p used for investment in subsidiaries and for
$20 million in the common stock of Arkan- other corporate purposes.
C sas Power & Light Company and $20 million The proceeds from the bank loans were g indhe common stock of Louisiana Power & used to purchase additional common stock Light Company which it financed by bor-rowings from banks. in Arkansas Power & Light Company ($50 million). Louisiana Power & Light Company Future Financing ($30 million), and Mississippi Power & Light The capital requirements of the System Company ($10 million) between February operating companies to finance construc- 1971 and January 1973. tion expenditures and to repay short-term The Company now has 44,279,481 shares borrowings by the companies for this pur-of common stock outstanding.
. pose are at present expected to be met with internally generated funds and tough Allowance for Funds Used During Con-sales of additional first mortgag;t conds struction.
l and preferred stocks and by additional The allowance for funds used during con-
, investments by the Company in the com- struction in 1972 was $22.2 million' based '
l mon stocks of the operating companies. on a rate of 7-1/2% per annum
,ln, January, the Company invested $10 The allowance for funds used during con- , million in Mississippi Power & Light Com- struction is estimated to be 530.2 million in ; pany common stock, in February,1973, 1973, $39.4 million in 1974, and $40.9 that company sold $30 million of 7-3/4% million in 1975, based on a rate of 7-1/2%
first mortgage bonds and $10 million of per annum. -l i t $100 par value 7.44% preferred stock. Capitalization During 1973, Arkansas Power & Light Capitalization ratios as of December 31, Company and Louisiana Power & Light l 1972, were as follows: long-term debt, - Company plan to sell additional senior se- 59%; preferred stock,11%; common equity, i (l curities to finance their portior, of the cur-V rent year's construction program, but the 30%. These ratios have been maintained at g approximately these levels in recent years - type and amount of securities to be offered and they are not expected to change ma-has not yet been determined. Neither Ar- terially in the foreseeable future. -
- a 2o ;
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES sr A. Pnnciples of Consolidation and Parent Company D. Pension Plans Operations The Company and its subsidiaries have various lhe accompanying consolidated financial state- pension plans covering substantially all of their ments include the accounts of the Company and employees. Pension costs in 1972 and 1971 its wholly-owned subsidiaries. All intercompany amounted to $7.536.000 and $6,625.000, respec-tr@sactions have been eliminated. tively, including amortization of unfunded prior In 1972, the income of Middle South Utilities, service costs over periods of 10 to 25 years. The Inc., the parent company, amounted to $65,557,- policy of the Company and its subsidiaries is to 000. consisting almo,st entirely of dividends from fund pension costs accrued. l its operating subsidiaries. After deducting the interest and general expenses of Middle South E. Income Taxes Utilities, Inc., its net income amounted to The provision for current income taxes reflects
$ 61.269.000. ,
net reductions resulting from the utilization of B. Systems of Accounts erah demedah Undu&g me class Me The accounts of the Company and its service method provided by the Internal Revenue Code) subsidiary are maintained in accordance with the aM accelerated amdzadon Jor tag moses. systems of accounts prescribed by the Public Deferred taxes have been provided in amounts equivalent to such net reductions. Utility Holding Company Act of 1935. The ac-counts of the operating subsidiaries are main- The provision for current income taxes for 1972 tained in accordance with the system of accounts and 1971 has also been reduced by the Federal investment tax credits of $4,248.000 and prescribed by the applicable regulatory bodies, which systems of accounts substantially conform $5,296.000, respectively, and amounts equivalent to that prescribed by the Federal Power Commis- thereto have been deferred by charges to income.
<- sion. The full-cost method of accounting is fol- Amounts deferred are being amortized over the towed by System Fuels. Inc. (See Note 2), average useful life of the related property and
.: tiew Orleans Public Service Inc. operates pur- such amortization in 1972 and 1971 amounted to
$1,077.000 and $904.000, respectively.
suant to the " Settlement Ordinance" (No. 6822 C.C.S.) and ordinances and orders supplementary The Federal Power Commission has issued a thereto of the City of New Orleans, relating to Notice of Proposed Rulemaking which would regulation, supervision control and option to PIOVIde. among other things, for more compre-purchase by the City of the company's properties hensive interperiod tax allocation by electric and and operations. gas companies. The proposed change relates to the deferred method which gives recognition to C. Utility Plant and Depreciation the income tax effects of expense and revenue Principally all of the utility plant of the Com. transactions reported either earlier or later for tax purposes than for book purposes. The effect. ' pany's operating subsidiaries is subject to the liens of their respective first mortgage bond indentures, if any, of this proposal on the consolidated results Utility plant is stated at original cost. The cost cf operations will be dependent upon whether, of additions to utility plant includes contracted and/or in what form, it is adopted by the Federal , work, d! rect labor and materials, allocable over. and state regulatory bodies and their treatment 4 heads, and an allowance for the composite cost in the rate-making process. I i of funds used during construction. The costs of units of property retired, replaced, or renewed F. Allowance for Funds Used During Construction i are removed from utility plant and such costs, The Federal Pov,er Commission system of ac- ! plus removal costs, less salvage are charged to counts provides that the net cost of funds (interest . accumulated depreciation. Maintenance and re- on borrowed funds and a reasonable rate on other pairs of property and replacement and renewal funds) used during the period of construction for of items determined to be less than units of prop- construction purposes may be capitalized. The , erty are charged to operating expenses, operating subsidiaries used a rate of 7-1/2% per i P Depreciation is computed on the straight-line annum in 1972 and 1971 in computing the allow- i basis at rates based on the estimated servica lives ance for funds used during construction, and an of the various classes of property. Depreciation amount equal to the amount capitalized is re- ~j provided in 1972 and in 1971 amounted to ap- ported in the accompanying Statement of Cons- ' proximately 3.1 % on average depreciable proper ty. olidated Income. I l 1
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/T STATEMENT OF CONSOLIDATED INCOME ior tn. v..r. .ne.a p.c.me., ar. on saa eor' i
1972 1971 In Thousands
. OPERATING REVENUES:
. Electric. .. . 5550.089 $473.352
- Natural gas. . 31.884 21.267 l Transit. . . 11.408 11.646 Total . . . 593 381 506 265 t
OPERATING EXPENSES: l Operation: 1 Fuel for power. .. ..... .. . . . . ... . 120.940 92.409 i Other. . . . . . 140.447 116.290 1 Maintenance . 36.893 31.540 Depreciation . . 64.439 58.132 l
- Taxes other than income taxes. 46.068 42.363 Income taxes. . . 35.481 38.492 Deferred income taxes-net . 14.149 10.698 Investment tax credit adjustments-net . 3.171 4 392 l Total . 461.588 394 316 l
OPERATING INCOM E. I 131.793 111 949 v D OTHER INCOME AND DEDUCTIONS: I Allowance for funds used during construction. 22.188 14.628 Miscellaneous-net . . 458 286 Total . . 22.646 14 914 i INTEREST AND OTHER CHARGES: , o interest on long-term debt. . . 61.110 50.662 Other interest . . . . 3.013 1.695 Amortization of premium, debt discount and expense-net (crediti. (143) (142) Preferred dividend requirements of subsidianes. 10.642 8.833 , M,nority interest in subsidiary s net income. 46 28 Total . 74 668 61.066 NET INCOME . . . . s 79.771 S 65.797 EARNINGS PER SHARE OF COMMON STOCK (Note 21: On average number of sharea outstanding (40.257.053) . 51.98 51.68 On number of shares outstanding at end of period (40.279,481). 51.98 51.64 See Notes to fnnancoal Statements. l 22
y_w_, -U - I .[ y I r .
- k' fU STATEMENT OF CONSOLIDATED SOURCE OF FUNDS FOR t UTILITY PLANT ADDITIONS 11 for the years ended December 31.1972 and 1971
?. p 1972 1971 ] In Thousands SOURCE OF FUNDS: From Operations: 3 Net income *. . . . . . . ....... . ... . .... . .. S 79.771 3 65.797 l Less-dividends declared on common stock . . . . . ... .. ... . . 43,081 40.545 g Remainder . . . . . . . . . . . . . . . . .. . ... . .. .. . . .. . 36.690 25.252 Depreciation. . . . .... .. . . . ... ..... . .. .... . 64.439 58.132 Deferred income taxes and irwestment tax credit adjustments-net. . . . . ... ... .. .. ...... .. .. 17.320 15.090 Total . .... .... ....... .. . . .. . ... .. . ... . . 118.449 98.474 From S&,e of Securities: Common stock. . ... . . .. . .. . ... . ... 669 19,282 Preferred stock . . . . . . ... . . ....... . . . ... . ... .. 45.126 10.042 First mortgage bonds . . . . . 114.647
. ... . . .. ..... . . . .. 106.677
- Promissory notes and other long. term debt-net. . . . ... . .. . . .. 48.540 48,211 i Short. term notes-net . . . . . . . . .. . . .. ...... .. .. . (17.205) 31.805 Total . . . . ..... .... .... ... .. .. .. .. .. . .. 191.777 216.017 From (increase) decrease in working capital
} , (excluding short-term debt) (a) . .. . .. . .. . .. . .. .. .. 11.222 4.632
~
!\ ISon-utility property and other investments . . . . .
' ... ... .. . . . (13.823) (4.116)
Miscellaneous-net . . .. . .. . .... . .. ...... . 1.773 6.010 TOTAL.... ..... . .. . .. ... . ... .. .. .. 5309.398 $321.017 UTILITY PLANT ADDITIONS: Construction expenditures *. . . . . . . ... . . . ... .. . 3292.868 3258,417 Fabrication costs of nuclear core. .. . . . . .. 17.574 9,148 !q Other plant additions-net ( 1971 includes acquisition of h Arkansas-Missouri Power Company net utility plant). ... .. . . (1.044) 53,452 TOTAL.. .. .. .. ... .. . . S309.398 5321.017 (a) From. (increase) decrease in working capital ,, (excluding short-term debt): Cash and cash items. . .... . ... -
$ (1.958) S 2.861 Materials and supplies . . .. .. ... *
(3.238) (2.328) = Accounts payable . . .. -* 13.027 4.019 Other-net . . 3.391 80 TOTAL. .. .. . .. . 3 11.222 S 4.532-
- Includes allowance for funds used during construction.
1 a . $1 See Notes to Financial Statements.
. ~
t CONSOLIDATEC 53ALANCE SHEET at December 31, f 972 and 197f 1972 1971 , ASSETS In Thousands UTILITY PLANT. At onginal cost: Electne . 52.145.943 52.058.830 Natural gas . 76.010 73.573 Transit . 22.601 22.550 Construction work in progress. 427 910 231.124 Total . 2.672.464 2.386.077 Less-Accumulated depreciation. 546.378 502.740 Utility P' ant-Net . 2.126.086 1.883.337 OTHER PROPERTY AND INVESTMENTS. at cost or less. 20.853 7.018 O N,.)
~
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e CURRENT ASSETS. Casn. 23.938 21.213 l Special deposits . 14.043 12.725 Temporary investments. at cost . 8.038 10.015 l Notes receivable 2.879 3.103 ! l Accounts receivable-custorner and other-less allowance for doubtful accounts . 35.749 31.831 Materials and supplies, at average cost . 27.821 24.582 l Prepayments . 6.784 2.967 I Otner. 6.348 7.700 Total . 125.600 114 139 l l DEFERRED DE3lTS. 4.771 2.101 l
% l l
l l l TOTAL. 52.277.310 $ 2.006.592 See Notes to Fonancrat Statements and onges 26 and 27. 24 . 6
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e y-bh 1972 1971 In Thousands LIABILITIES y CAPITALIZATION: . P Common stock (55 par value), authorized 50.000.000 share's; issued and outstanding 40.279.481 shares in 1972 and 40.212.198 shares in 1971. s 201,397 s 201.061 h C Paid.in surplus . 98.654 98.321
? Retained earnings (Note 3). . 276.211 239.553
[* Total. 576.262 538.935 Minority interest in the common equity of Arkansas-Missouri Power Company. 637 Y Subsidianes' areferred stocks and premium (Page 26 ) . 205.558 160.431 j 'Long . term debt: i Middle South Utilities. Inc. (Note 2) . 80.000 40.000 h Subsidiaries (Page 27). . 1.067.127 943.941 k Total . 1.147.127 983 941 P a .O Total . 1.928.947 1.683.944 D N, ! ~ a h '.9 kURREf4T LIABILITIES: p Notes payable. 26.350 43.555 M Accounts payaole. 35.586 22.558 la Cusiomer deposits . 16.838 15.411 N Taxes accrued. 36.512 33.359 [j interest accrued . . 22.099 18.892 t} Dividends declared . 13.818 12,920 jj Otner. 4.426 3.513
.' Total . 155.689 150.208
?
- d !
. DEFERRED CREDITS: , l Accumulated deferred investment tax credits. 29.869 26,697
.i Other . . 6.289 5.653 2' Total . 36.158 32.350 I %
l RESERVES:
- e. Pensions and benefits . 1.153 1.501 I' Property insurance. 7.013 6.309 Other . 2.213 1.951
{
- 1 Total . 10.379 9.761 .
CONTRIBUTIONS IN Af D OF CONSTRUCTION. 14 939 13.281 4 ACCUMULATED DEFERRED INCOME TAXES . 131.198 117.048 f< [: - ki TOTAL. . 52.277,310 52.006.502 i'
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f STATEMENTS OF CONSOLIDATED RETAINED EARNINGS & PAID-IN SURPLUS tor me years ended Decemoer 3 7. 7 972 and 197 t 1972 jg71 RETAINED EARNINGS In 7housands
/3 RETAINED EARNINGS. JANUARY 1 5239.553 $ 214.404 V ADD-Net income . 79 771 65 797 Total . 319.324 280 201 DEDUCT:
Dividends declared on common stock-51.07 a share in 1972 and 51.03 a share in 1971 43.081 40.545 Capital stock expense, etc. . 32 103 Totat . 43.113 40 648
~
RETAINED EARNINGS. DECEMBER 31. (Note 31. s276 211 s239.553 PAID-IN SURPLUS PAID-u SURPLUS JANUARY 1. S 98.321 5 87.676 ADO: Excess of proceeds over par value of Middle South Utihties. Inc common stock issued upon exercise of stock options . 470 Excess of underlying book value of Arkansas-Missouri Power Company at daies of acquisition over par value of 67.283 shares in + 1972 and 1.700.049 shares in 1971 of Middle South Utilities. Inc. common stock issued therefor . 333 10 175 PAID-IN SURPLUS. DECEMBER 31 s 98.654 5 98 321 See Notes to Fnnancial Statements. 1 PREFERRED STOCKS OF SUBSIDIARIES Snares outstandin9 Current at December 31 Call Price 1972 1971 Per Share Arkansas Power & Light Company: 4.32% . 70.000 70.000 s103.647 4.70% . 93.500 93.500 107.00
, g 4.56% . 75.000 75.000 104.33 F ~ -+ 4.56% (1965 Series) 75.000 75.000 104.00 6.08% - 100.000 100.000 104.33 7.32% . 100.000 100.000 108.99 7.80% . 150.000 109.10 7.40% . 200.000 109.35 Louisiana Power & Light Company- 4.16% , 70.000 70.000 104 21 4.44% . 70.000 70.000 104 06 4.96% . 60.000 60.000 104 25 5.16% . 75.000 75.000 104.18 5.40% . 80.000 80.000 104.50 6.44% . 80.000 80.000 104 42 9.52% . 70.000 70.000 111.34 7.84% . 100.000 100.000 109.66 7.36% . 100.000 108.88 Mississippi Power & Light Company- 4 36% . 59.920 59.920 103.86 4.56% . 43.988 43.888 107.00
- 4.92% 100.000 100.000 104 38 9.16% . 75.000 75.000 110.93 New Orleans Public Service Inc.: 4.36% . 60.000 60.000 104.58 4-3/4% . 77.798 77.798 105.00 5.56% . 60 000 60.000 104.09 ~
Total . . . 2.045.106 1.595.106 In Thousands Total amount at $100 par value per share . 5 204.511 $ 159.510 _ Premium on preferred stocks. 1.047 921 Total . 5 205.558 s 160.431 . Annual preferred stock dividend requirements . s 12.443 s 9.057
- Average annual preferred stock dividend rate on par value . 6.08% 5.68%
See Notes to Fonancial Statements. . 96 .
f .
}ii 0 ] .
l LONG-TERM DEBT OF SUBSIDIARIES l j . Outstanding Outstanding g' f At December 31 At December 31 Q]' FIRST MORTGAGE BONDS: 1972 In Thousands 1971 1972 1971 in Thousands
.' Arkansas Power & Light Company- Louisiana Power & Light Company-
{r 3-1/8% due 1974 2-7/8% due 1977. .. . .
.530.000 11.000
$30.000 11.000 3 % due 1974.
3-1/8% due 1978.
.5 15.297 10.000
$ 15.297 10.000 "I 3-1/8% due 1978. . 7.500 7.500 3 % due 1980. 9.900 9.900 b 2-7/8% due 1979. 8.700 8.700 3-1/8% due 1984 18.000 18.000
[t: 2-7/8% due 1980. .. . 6.000 6.000 4-3/4% due 1987. 20,000 20.000 3-5/8% due 1981. 8.000 8.000 5 % due 1990. 20.000 20.000 h - 3-1/2% due 1982. . . 15.000 15.000 4-5/8% due 1994. 25.000 25.000 b 3-1/4% due 1984.. . 7.500 7.500 5-3/4% due 1996. 35.000 35.000 I 3-3/8% due 1985. 18.000 18.000 5-5/8% due 1997. . 16.000 16.000 I 4-7/8% due 1991. . -. . 12.000 12.000 6-1/2% due 1997. 18.000 18.000 1 4-3/8% due 1993. . 15.000 15.000 7-1/8% due 1998. 35.000 35.000 r 4-5/8% due 1995. 25.000 25.000 9-3/8% due 1999. . . 25.000 25.000 4 I 5-3/4% due 1996. 25.000 25.000 9-3/8% due 2000. . 20.000 20.000 t 5-7/8% due 1997. .. . 30.000 30.000 7-7/8% due 2001. . 25.000 25.000 i, 7-3/8% due 1998. . . 15.000 15.000 7-1/2% due 2002. 25.000 9-1/4% due 1999. . .; . 25.000 25.000 7-1/2% due 2002. . 25.000 9-5/8% due 2000. . ..... 25.000 25.000 y 7-5/8% due 2001. . 30.000 30.000 Mississippi Power & Light Company:
- 8 % due 2001. . . 30.000 30.000 3-1/8% due 1974. . 12.000 12.000
[ t 7-3/4% due 2002. . 7-1/2% due 2002. .
. 35.000 15.000 2-7/8% due 1977.
3-1/8% due 1979. - 8.498 7.500 8.498 7.500 2-7/8% due 1980. . . 7.500 7.500 Arkansas-Missouri Power Company 3-5/8% due 1983. 12.000 and Subsidiary: 12.000
)' 4-1/8% due 1988. . 15.000 15.000
{ 31/8% due 1974 .. 2.000 2.000 4-5/8% due 1995. 20.000 20.000
, ., 2-7/8% due 1976. . .. 500 500 5-1/8% due 1996. 25.000 25.000 3-1/2% due 1977. . 1.000 1.000 6-3/8% due 1996. 10.000 10.000 i; 3-1/2% due 1979. .
3.603 3.685 9-5/8% due 1999. 20.000 20.000 5-3/8% due 1982. 1.328 1.436 9-1/4% due 2000. 17.500 17.500 4-1/2% due 1983. 1.412 1.442 7-3/4% due 2002. 15.000 .-. 5-1/2% due 1988. 692 706 h h ~~ 5-5/8% due 1990. . 1.610 1.640 New Orleans Public Service 1nc.:
^ ! F 6-1/4% due 1996. . 3.840 3.880 3-1/8% due 1974. 31.983 31.983 f
- 9-3/4% due 2000. . 4.950 5.000 3-1/4% due 1978. 10.000 10.000
} 4-1/8% due 1983. 6.000 6.000 p 3-1/4% due 1984. . 6.000 6.000 t
4-1/2% due 1987. 6.000 6.000 h s 5 % due 1991. . 15.000 15.000 g 4-1/2% due 1992. 8.000 8.000 5-5/8% due 1996. 23.250 23.250 gi 5-7/8% due 1997. 12.000 12.000 L. .
,', Total First Mortgage Bonds (1973 sinking fund requirements, which may be met by certification of property additions at the rate of 167% of requirements. amount to $9.485 thousand.1973 cash sinking fund requirements amount to $353 thousand] . .. ..g., .. .. ... . .... 1.045.063 930.417
.! DEBENTURES:
Arkansas Power & Light Company: 3-3/8% due 1974 4.475 4.700 9 I Arkansas-Missouri Power Company and Subsidiary-fi 4-1/4% due 1972 . - 267 p 4-1/4% due 1977. . 434 477 5-7/8% due 1983 . . 550 580 6-7/8% due 1993. 4.550 4.700 i f Total Debentures (1973 cash sinking fund payments amount to $223 thousand) . . . .. 10.009 10.724 PROMISSORY NOTES: ' lf l ;' Middle South Services. Inc.-At prime rate plus 1/2 of 1%. due 1982. System Fuels, Inc.:
. 6.693 2.800 l il At onme rate plus 3/4 of 1% due 1974 (maximum line of credit. 312 million) . 2.000 I f4 At onme rate plus 1/2 of 1% due 1982 . . .
3.382 - l [ Total Promissory Notes. . .. . .. .. 12.055 2.800 yj Total Long-Term Debt of Subsidiaries . . . .. s i .067.127 $943.941 Annualinterest requirements on Long-Terrn Debt . . . . .s 62.127 3 52.797 Average annualinterest rate on Long-Term Debt . . . . .. 5.82% 5.59% L See Notes to Fonencoal Statements. . h t- .- Ij 27 -
1
?_ i.
bq ( l l 1 I l NOTES TO FINANCIAL STATEMENTS Four of the Company's operating subsidiaries have organized a jointly-owned subsidiary Sys- ' tem Fuels, Inc. (SFI). SFI operates on a non-profit ; basis in planning and implementing programs for j the procurement of fuel supplies for the generat-ing units of the operating companies. It follows the full-cost method of accounting for costs in-curred in connection with its exploration and de-
- 1. CURRENT INCOME TAX MATTERS velopment activities and such costs will be re-l 1
The provision for Federal income tax for 1972 covered, beginning in 1973, through charges for was reouced by approximately $2,407,000 as a fuel delivered. The four companies have regula-result of the operating subsidiaries receiving per. tory authority to make investments in SFl. from mission from the Internal Revenue Service to de. time to time through 1973, for terms of not more ductcurrentlythecostof removalof utility plantin than ten years, up to an aggregate of $30,000,000. computing taxable income, which for book pur. The Company has taken appropriate action to
, poses is charged to accumulated depreciation. obtain authorization to offer 4,000,000 shares of Four of the operating subsidiaries received a $5 par value common stock for sale in March 1973. g "r,efund of Federalincome taxes in 1972 appficable The pro forma earnings per share for the year tn the years 1959 through 1961. Such refund, in- ended December 31,1972, assuming that a suf-cluding total interest earned through the settle- ficient number of shares of Common Stock had ment date,less related income taxes, amounted to been issued to replace the Company's promissory 51,260,000 and has been included in the 1972 notes outstanding during the year ended results of operations. December 31,1972, would have been $1.91, based on an adjusted average number of Common
. shares outstanding of 42,580,013 and after giv-
- 2. COMMITMENTS AND FINANCING ing effect to the related reouction of interest ex-The subsidiary companies' construction pro- pense, net of income taxes.
graras contemplate expenditures of approximately in February 1973. Mississippi Power & Light , 5463.000,000 in 1973. Company sold $30,000,000 of 7-3/4% first mort-Middle South Utilities, Inc. has a $90,000,000 gage bonds and $10,000,000 of $100 par value,
" Revolving Credit Agreement" with various banks 7.44% preferred. stock. ,
through June 30,1973. The notes issued under in January 1973, the Federal Power Commis-this agreement, as amended, bore interest at the sion initiated proceedings that could result in prime rate until December 31, 1971, and there- further, and possibly total, curtailment of inter-after at a rate per annum equal to 1/4 of 1% above state natural gas supplies which are subject to prime rate. In addition, the Company pays a com- Jurisdiction of the Federal Power Commission. It mitment fee for the period from January 1,1971 is estimated that if all present interstate supplies I through June 30,1973 computed at the rate of of natural gas were to be fully curtailed, maximum 1/2 of 1% per annum on the average daily unused additional expenditures of approximately portion of the commitments in effect during the $121,000,000 would be required during the period , period for which payment is made. In January of modification in order to convert generating 1973, the Company reached the maximum bor-
' stations of the operating subsidiaries to permit g
! rowings under this agreement and used the pro- the use of oil as the primary fuel. Presently there
~
ceeds to invest in the common stock of a subsidiary. is no assurance that oil would be available in the 28 i
- .- ~ - y 3
'd
=M quantity, or of the quality, required for such use. year ended May 31,1972, would increase annual in 1972, approximately 62% of the natural gas revenues in the aggregate of $10,499.000 and used for the operation of the generating stations provide a return on common equity of 12.125%.
was obtained from pipeline suppiiers considered The increased rates became effective on January to be interstate by the Federal Power Commission. 25,1973. The increases comply with the crite:la for public utility rate increases established by the Cost of Livirig Counci! on January 13,1973. Ref-
- 3. RETAINED EARNINGS erence is made to " Rate Adjustments", page 8 The indenture provisions relating to the sub. for further details.
^
sidiaries' long-term debt and transfers by the subsidiaries from retained earnings to the stated 5 RECLASSIFICATIONS value of common stock restrict the amount of j consolidated retained earnings available for cash Certain reclassifications have been made of 1 dividends on common stock. As of December 31, previously reported amounts in order to conform !
- j 1972, $96.000.000 are free from such restrictions. to 1972 classifications. i bi y
. 4f RATE MATTERS 6. ACCOUNTING POLICIES On November 22,1972 the Council of the City The summary of significant accounting policies of New Orleans approved increases for NOPSI on page 21 is an integral part of these notes to l l
, in electric and gas rates which, based on the test financial statements.
I1 li n j ., OPINION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS h HASKINS & SELLS, Certified Public Accountants, l Two Broadway, New York, New York 10004 l s 1 j Middle South Utilities, Inc., its Directors and Stockholders: We have examined the consolidated balance sheet of Middle South Utilities, Inc. and its subsid ' j iaries as of December 31,1972 and the related statements of income, retained earnings, paid-in surplus and source of funds for utility plant additions for the year then ended. Our examination was made in ac-tf cordance with generally accepted auditing standards, and accordingly included such tests of the ac-
)
- counting records and such other auditing procedures as we considered necessary in the circumstances. .
In our opinion, the above-mentioned financial statements present fairly the consolidated financial + position of the companies at December 31,1972 and the results of their operations and source of l '! funds for utility plant additions for the year then ended, in conformity with generally accepted account- ~ g, ing principles applied on a basis consistent with that of the preceding year.
~
g February 8,1973 / Mg
- i c i
29 -
~
t
%/
1962 -1972 FINANCIAL RECORD OF MIDDL5 SOUTH UTILITIES 1972 1971 1970 CONSOLIDATED INCOME ACCOUNT DATA ODERATING REVENUES. Electric,
$550.089 $473.352 5420.937 Natural gas . 31.884 21.267 17.885 Transit . 11.408 11.646 11.668 Total . 593.381 506.265 450.490 DEDUCT:
Operating expenses-coeration. 261.387 208.699 174.214
-maintenance. .
36.893 31.540 29.391 Depreciation . 64.439 58.132 52.926 Taxes other than income taxes . 46.068 42.363 39.211 income taxes. 35.481 38.492 45.125 Deferred income taxes . 14.149 10.698 8.841 investment tax credit adjustments-net - 3.171 4.392 538 Allowance for funds used dunng construction. (22.188) (14.628) (10.080) Amortization of utility plant acouisition adjustments. 24 129 243 Interest on long-term debt . 61.110 50.662 40.209 Other deductions-net. 2.388 1.138 1.799 Preferred dividends and minonty interest . 10 688 8 851 7.287 CONSOLIDATED NET INCOME . S 79.771 s 65.797 5 86 {mJ 2ARNINGS PER SHARE ton average number of snares outstanding). , $ 1.98 s1.68 61
' ' DIVIDENDS DECLARED PER SHARE . 51.07 51 03 $0.975
- NUMBER OF COMMON SHARES ($5 PAR VALUE) OUTSTANDING (year end) 40.279.481 40.212.198 38.484.724 Certson amounts snown for years proor to 1970 have been restated for comparative purooses.
*Retroactree ettect given to 2-tor-t stock solut on February 1966. l UTILITY PLANT AND CAPITALtZATION DATA (AT DECEMBER 31) i FIXED ASSETS:
Utility plant . 52.672.464 $ 2.386.077 $ 2.059.387 t less accumulated depreciation and amortization . 546.378 502.740 436.579 Utility plant-net . 52.126.086 51.883.337 s1.622.808 CAPITALIZATION: Long-term debt. $ 1,147.127 s 983.941 5 83 9.053 Preferred stock (including premium). 205.558 160.431, 150.389 ttCommon eaunty. . 576.262 538.935 494.504 Minonty interest in the common ecuity of Arkansas-Missoun Power Company. ' 637 Totat . s1.928.947 $ 1.683.944 51.473.946 . CAPITALIZATION RATIOS: Long-term debt. 59.5% 58 5% 56.3% Preferred stock (including premium). 10.6 95 10.2 Common ecuity. . 29 9 32.0 33.5
- i
, 1 Amounts shown for years peror to 1964 restated for comparative purcoses.
t+ Amounts shown for years peror to 1970 restated for comparative purposes. l
'1 30 i'
o
- V
,J l
i S Y ST E M ,,, ...... , oo,,.,. I
! 1969 1968 1967 1966 1965 1964 1963 1%2
$386.063 $342.419 5304.228 $ 280.081 5258.893 5245.294 52,28.015 $216.214 i 17.542 17,789 15.659 16.634 15.423 17.026 16.031 15.065 8.884 8.980 9.013 9.181 9.173 8.963 9.029 9.398 j
]
412.489 369.188 328.900 305.896 283.489 271.283 253.075 240.677 j 4 135.776 122.60,1 118.957 115.739 105.077 96.959 92,935 155.530 h 25.090 22.288 21.897 21.139 18.392 19.523 17.215 15.787 4 50.107 46.647 41.731 36.816 33.149 31.091 29.632 28.014 , I 36.510 34.865 32.256 29.159 26.594 25.270 23.841 22.143 I 43.691 38.347 25.047 26.092 26.243 33.109 31,875 30.748 j q
- 8.389 8.651 7.525 5.619 4.308 4.005 4.353 4.935 J
2.127 1.929 5.236 4.001 3.182 1.554 1.765 1.050 l (5.920) (5.086) (6,049) (5.945) (3.160) (S49) (352) (1,113) 3 -243 243 243 243 243 243 243 243 33.728 32.210 27.135 22.623 17.178 14.546 13.928 13.996 l 752 232 487 762 351 3.598 765 1.281 6,188 5 665 4.394 3.866 3.593 3.534 3.535 _ 6.875
! ; O 521 s 46.365 5 44.332 3 42.046 s .37.523 3 33.734 5 29.320 5 28.053
~
31.00 50.87 50.83 f \h 48 ^ #
$1.31 51.25 31.21 31.11
$0.635 50.59 50.565 $0.54 30.90 50.835 30.775 $0.70 35.356.634 35.349.434 35.312.821 35.288.387 33,758.850 33,751.700 33.749.600 33.748.600 l
g
?-
]
$ 1.866.800 31.730.795 51.604.803 $1.458.131 31.251.342 51.112.569 51.044.165 $ 999.775 l
. 396 512 359.564 322.892 298.941 273.103 251.738 231.979 209.751
$1.470.288 $1.371.231 31.281.911 $1.159.190 5 978.239 3 860.831 5 812.186 5 790.024 l 5 766.778 s 720.003 5 662.25'1 3 584.611 3 482.708 s 408.815 5 384.048 $ 384.056 h 135.848 125.806 125.806 103.732 83.640 83.709 76.192 76.193 I I 407.275 386.441 368.894 351.356 302.557 286.801 272.962 262.686 m
!i L 51.309.901 31.232.250 $ 1.156.953 31.039.699 5 868.905 5 779.325 $ 733.202 3 722.935 ,
s
?
j 58.5% 58.4% 57.2% 56.2% 55.6% 52.5% 52.4% 53.1% k 10.4 10.2 10.9 10.0 9.6 10.7 10.4 10.6 , I 11.1 31.4 31.9 33.8 34.8 36.8 37.2 36 3 q' p
'! 31 ;
-~
,j F 4 LJ '
hiYSTEM ELECTRIC STATISTICS 1962 -1972 SALES IN KILOWATT-HOURS (thousands) Total Residential Commercial industnal Other 1972. . 37.808.576 10.281.403 5.834.029 13.519.543 8.173.601 1971.. .. . 35.136.681 8.808.078 5.214.614 12.029.426 9.084.563 1970. .32.531.614 8.005.340 4.761.833 11.267.636 8.496.805 1969. .29.735.683 7.190.888 4.336.216 10.872.686 7.335.893 1968. .24.971.358 6.296.664 3.936.852 10.118.391 4.619.451 1967. .21.168.185 5.350.460 3.541.238 9.125.496 3.150.991 1966. .19.507.733 4.949.480 3.237.831 8.141.605 3.178.817 1965. .17.171.256 4.387.468 2.992.341 6.980.371 2.811.076 1964. .15.436.629 3.969.751 2.713.791 6.169.232 2.583.855 1963 .13.850.416 3.501.981 2.489.791 5.466.078 2.392.566 1962. .12.585.970 3.169.832 2.286.362 4.999.619 2.130.157
'] 'k/ . REVENUE FROM ELECTRIC Total ENERGY Residential SALES (thousands)
Commercial Industnal Other M72 . $543.221 S206.086 S120.853 5131.318 584.964 s 1971 467.548 174.859 105.795 110.172 76.722 1970. 415.543 158.579 96.169 98.476 62.319 1969. 381.363 145.567 88.788 94.789 52.219 1968. 338.416 131.732 82.090 87.456 37.138 1967. 300.332 117.384 75.626 78.749 28.573 1966. 276.593 109.865 69.722 69.797 27.209 1965. 25C.055 101.083 65.630 63.655 25.687 1964. 242.802 95.656 63.506 59.384 24.256 1963. 225.752 87.914 59.936 54.677 23.225 1962. 214.020 83.558 57.527 52.497 20.438 I RESIDENTIAL CUSTOMERS AND USE w l Average Kilowatt- Revenue Revenue per number of hours per per kilowatt- ) customers customer customer hour I 1972. 1.077.509 9.542 5191.26 2.00c 1971 1.014.735 8.680 172.32 1.99 1970. 973.621 8.222 162.88 1 98 -) 1969. 955.365 7.527 152.37 2.02 1968. 937.905 6.714 140.45 2.09 1967. 920.317 5.814 127.55 2.19 1966. 900.171 5.498 122.05 2.22 (-t 1955. 875.810 5.010 115 42 2.30
-/ 1964 854.411 4.646 111.96 2.41 1963 832.949 4.204 105 55 2.51 .
1962. 813.267 3.898 102.74 2.64 2 5 32
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1. Contents Performance Highlights . . . . . . . 2 ( A Message from { the President. . . . . . . . . . . . 3 System Operations. . . . . . . . . . 5 Financial Review . . . . . . . . . . 7
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M arketing . . . . . . . . . . . . . . . . 20 Personnel . . . . . . . . . . . . . . . . 22 Environment . . . . . . . . . . . . . . 22 Officers ................23 System and Service Area Map . . 24 Board of Directors Company Directory . . . . Inside Back Cover
. Performance Highlights /1970 1970 1969 % Increase i Revenues from operations (000) ................. $ 149.317 5 136,044 10
(': Operation and maintenance expenses (000) ........... $ 65.057 5 59,828 9 Taxes (000) ............................. $ 31.110 $ 29,375 6 Depreciation (000) ......................... $ 17,400 $ 16,059 8 Net income (000) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,757 $ 21,787 14 Construction cost (000) ...................... $ 68,830 $ 57,629 19 Total utility plant investment-end of year (000) ........ $ 708,448 $ 644,165 10 Customers (End of year) . . . . . . . . . . . . . . . . . . . . . . 370,240 362,325 2 Energy sales (Millions of kilowatt-hours) ............ 13,660 12,419 10 % Employees (End of year) ..................... 2,767 2,683 3 Peak demand (Megawatts) .................... 2,282 2,176 5 Average use per customer (Kilowatt-hours) : Residential .......................... 6,934 6,199 12 $ Commercial .......................... 33,244 30,804 8 Average price per kilowatt-hour Residential Commercial 2.07c 2.08c 2.14c 2.09c (3) h - i . 2
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n _ g.;6.e,-,._.m- _.m., .,- - _.__ m _ _ m 3 . n d' A Message from the President For Arkansas Power & Light gains were attained without the aid Comp my,1970 was a period of AP&L spent over $68 million for of extended periods of unseasonably construction in 1970 and we have continuing growth at a time when hot or cold weather. The degree the cost of doing business continued projected a record Company cooling hours for 1970 were only construction budget of $124 million to rise. New highs in sales and one percent above the average for rev:nues marked the year as one - for 1971. A major part of these the past 16 years. funds is being utilized for the that reflects the stability of our Operating expenses, including service area and your Company, construction of Arkansas Nuclear taxes,in 1970 were 5113.6 million, One, the Southwest's first nuclear-Last year we also took major steps an increase of 58.3 million over in assuring the future expansion of fueled electric generating station. 1969. This totalincludes increases In 1970 we announced plans to our generation and transmission in operation and maintenance build the second unit at this plant facilities so that we will continue expenses of 55.2 milliont to meet the power needs of our which will bring Arkansas Nuclear depreciation,51.4 milliont and One's generating capability up to astomers throughout Arkansas, taxes, $ 1.7 million. Of the increase 1,800,000 kilowatts. Operating revenues reached in operation and maintenance costs, 5149.3 million, an increase of The start of commercial production expenses increased $2.7 operations at Unit Four of the Lake
' J million over 1969.The million partially due to increased Catherine Steam Electric Generating h ~[;
/ \5 sapy had a net increase of generation and also to the Company customers and on December Station and the continuation ofour use of greater amounts of higher- program ofinterconnections with 31, served a total of 370,240 cost emergency fuel oil due to customers. neighboring power companies curtailments of gas supply. improved system reliability in 1970.
The economic progress of Net income for the Company The decade of the Seventies will Arkansas was reflected ir. the during the year was up $3 million record electric energy sales by be a challenging one for all of us in to 524.8 million. The Company paid the electric utility industry. A l AP&L last year. Sales totaled 13.7 ' 516.4 million in dividends to owners tightening economy, fuel shortages, billion kilowatt hours in 1970, an ofits preferred and common stock increase of 1.2 billion kilowatt concern for environment, increasing and 58.4 million was reinvested in demands for more electric energy hours over 1969. Residential the Company. ' customer sales increased 14 percent and large capitalinvestments daily One increased cost of doing test the management of Arkansas over the previous year while sales business was emphasized in August Power & Light. to commercial customers rose 10 when the Company sold $25 million percent and to others for resale However, it is a time when I ' of first mortgage bonds at a coupon
- increased 19 percent. believe that the men and women of rate of 9 5/8 percent, an all-time AP&L are fully equal to the Residential customers used an high for AP&L financing.The average of 6,934 kilowatt hours in challenges that face our Company.
Company also sold $7 million of 1970, an increase of 735 kilowatt common stock to the parent hours, or 12 percent over 1969. companyin August. Average annual use by commercial t Growing demands for electric 'e e j- ' - - customers increased by 2,440 energy makes it imperative for the ' kilowatt hours to a total of 33,244 Reeves Ritchie Company to carry out an expansion President - kilowatt hours, or 8 percent. These program requiring large capital investments. Arkansas Power & Light Company - Il# \
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Deeg 8etier ef tittie Reck is He garticipated in a feer-year oever sgrings C e m m eeity justifiably proud of his profession. program that combined classroom Association and has coached Little He and the other linemen of instruction with on-the-job training. League baseball and YMCA Arkansas Power & Light form an Over 350 employees have been football. He has also attended the essential team in the building and trained in the present program since University of Arkansas at Little
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system. Today Doug is part of a three-man Doug realizes the importance of Promoted tojourneyman lineman crew in the Little Rock Division with providing reliable electric power and in 1970, Doug has earned his the responsibilities of providing his record of service proves that he . professional status through years maintenance on the existing system is dedicated to the future growth " of training and experience. Hejoined and of assisting in the construction of Arkansas. As a father of two , AP&L in 1964 after serving for five of new overhead distribution lines. children, he is aware that progress years in the U.S. Navy as an aviation It's a demandingjob for Doug and will need power to grow on. That's
-lectrician for anti-submarine his co-workers, but one that they why he and all AP&L employees -
rfare aircraft. perform at all times of the day or are preparing today for tomorrow's (p)Like all AP&Llinemen,Doug began his career as an apprentice. night and in all kinds of weather conditions. greater energy needs. h. . An interested citizen, Doug is an active member of his church, the h 4 (
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(j ' System Operations In order to meet the growing Unit Two will require about an demand for more and more Other production highlights electricity, the largest construction $ 183 million investment. When both included the filing of an application units are operational, they will be program in AP&L's history was with the Federal Power Commission capable of generating about the for relicensing the Company's underway in 1970 to insure the same amount of power as the entire hydroelectric projects, the availability and reliability of electric AP&L syster< ,d at the end of the power. formalization of the personnel last d7cade, The increasing demand was training program for Arkansas in making the annot.ncement of Nuclear One, the finalization of vividly illustrated on July 2,1970, UnitTwo, AP&L President Reev:s : at 4 p.m. when AP&L customers - purchase contracts for nuclear fuel Ritchie said that the Company had through 1990 and a continuing set a new record peak load of not anticipated building a second 2.282.000 kilowatts-topping the program of preventive maintenar.;e nuclear unit to soon. However, he to assure reli:ble operatu n of 1969 mark of 2,176.000 kilowatt. pointed out that the inability to get generating ucits. To keep the pace in an expanded commitments on other type fuels [,; service area, the production. , , made the decision necessary. transmission, distribution and
, "The primary fuel used at present TranSmiSSlon customer service sectors of the m other AP&L generatmg umts ts A total of 226 miles of new and Company played vital roles in natural gas, but gas companies rebuilt transmission lines was system operations. f mP eted l or put under construction declined to quote a 20' year supply contract." Ritchie said. " Oil and in 1970. AP&L construction crews . P- 'uction coal bids were invited. However, registered a first last year when they ')
( ) . suppliers either declined to quote or uly 533 million was spent on -
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o~ i use a tower in its cooling cycle. The Unit Four at the Lake Catherine l' Steam Electric Station began tower cooling method will insure * - d?.I. - ^ {. ' . commercial operation in April. the preservation of the natural bY~ '"{~i .1- Y h- -Yk.I M ', b 3Yt - NW environment near the plant area. Started in 1967, the 540 million project added 547,000 kilowatts, A step toward augmenting the
'b' making the unit one of the largest in th: Middle South Utilities Company's power supply during peak periods was taken when five N k k ~~
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station represents the largest single .) d ; Ay . Rock with a single unit capable of private construction project in the h. Nk y[N 6 history of Arkansas. Started in 1968, construction on Umt One was generating 18,000 kilowatts at the Robert E. Ritchie Steam Electric h@k . f5h l y! h' j . 5 P b; .7(5M M ? f 38 percent complete at the end of Station at Helena. All five will be N.* E. i the year. The first unit should begin used primarily for peaking power "# commercial operation in time to while the one at Helena will also E Rrg h 1 met Iand winter load of 1973-74 serve as a start-up and safe shutdown source of power for the Ritchie 1( i 7.j .. *
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Estim ted total cost for Unit One procedures as part of the Apprentice loneman Trenong Program conducted at the Basehne is now set at S159 million, while #"""#""'"'""'#"'" 4 5 ' o -
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V h Distribution hiore than S19 million was spent I on distribution projects last year as the undergrounding program {! 4] - begun in 1959 reached a record peak of activity. Im_ _.
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V environment received continued 3 ,,- k_ Mh( emphasis. h Dr..bOI Os t
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Arkansas Nuclear One. the largest single pervate construction ororect on the state's bestory. wolf be the tws, Customer Sery*ce I nuclear. fueled electric generatung statron on the Southwest Plans to burld a second umt at the plant were innouncedby AP&L onMay.1970 0 orTice buildings in Wynne and hicGehee during 1970 to provide erected all the towers for the volt transmission line crosses better service facilities for l 500,000-volt transmission line from Dardanelle Reservoir. customers. The 7,275-square-foot El Dorado to the Louisiana state The river crossing was the second Wynne office will improve service line. Part of a project to provide another for 3,100 customers.The new Scheduled to be energized in early important interconnection between hicGehee ofTice serves five major 1971, the line is part of a project AP&L and the Southwestern Power communities with a staff of 25. to provide an interconnection Adm,mistration. In June the Osceola City Council between AP&L and Gulf States Transmission line construction approved and authorized the mayqt Utilities at Beaumont, Texas. was begun at Arkansas Nuclear to sign a 20-year contract with Other companies participating in One to provide for two 500,000-volt AP&L to furnish the city's wholesale the project are Louisiana Power & transmission lines that should be electric power needs. AP&L had Light Company, Central Louisiana completed by April,1972. Right-of- been furnishing the city's electric Electric Company and Gulf States way was purchased and cleared, power requirements under an -i Utilities. The entire line from El anri the foundations were being interim arrangement.
~~
Dorado to Beaumont will span constructed. Standard franchise ag.eements 4 approximately 230 miles. New substations were built at were also approved by officials in Another first was recorded by Ola, DeValls Bluff, Haskell, Taylor, South Lead Hill, Enola and Sunset
'ompany crews in February when Flippin, Altheimer, Newport and to bring to a total of 240 the '
- y completed the first major river hiountain Pine. The capacity of 16 number ofincorporated towns and rossing by AP&L personnel. Near existmg substations was mereased. cities with which AP&L has an the Dardanelle Dam, this 161,000- exclusive franchise for electric ('
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't 1970 1969 j -
(In Thousands) UTILITY PLANT: l At original cost (including construction work in j progress of $49.595.000 in 1970 and 1 556.557.000 in 1969) ...... . . . . . . . . . . . .................. 5708,327 $643.800 i i Plant acquisition adjustments Oess amortization) . . . . . .................. 121 365 Total ................................... ...... 708.448 644,165 i
! less accumulated depreciation . . . . . . . . . . . . . . . .................. 145.712 131.726 Utility plant-net . . . . . . . . . . . . . . ........,.......... 562,736 512.439 (D)
OTjiER PROPERTY AND INVESTMENTS-A- W .-) At cost Cess depreciation) .................................... 636 735 CURRENT ASSETS: Cash............................. ................. 4.578 4,999 Temporary cash investments . . . . . . . . . . . . . . . . ............. .... 1.993 Special deposits . . . . . . . . . . . . . . . . . . . . . . . ..... ..... ...... 181 187 Notes receivable Gess a!!owance for uncollectible notes of $43,000) ...................................... 2.414 2,505 Accounts receivable: Customer and other Oess allowance for uncollectil,le accounts of $175,000 in 1970 and $130,000 in 1969) . . . . . . . . . ......... . . ... 7.358 8,6098 Associated companies ..... . . . . . . . . . . . ........ . ....... 1.0b8 772 Materials and supplies, at average cost . . . . . . . . ........ ......... 6.601 4,015 Prepayments ............ . . . . . . . . . . . . ......... ........ 279 338 , Other . ................... . . . . . . . .............. . 282 241 -
.l Total current assets . . . . . . . . . . . . . ................ . 22.781 23.659
- DEFERRED DEBITS ........................................ 696 688 TOTAL ................................... 3536.849 $537.521 l See accompanpng Notes to Financial Statements 1
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[ h Statement ofIncome and Retained Earnings vortheyearsendedDecembersi,i970and1969 1970 1969 (Notes I and 3) (In Thousands) OPERATING REVENUES ..................................... $149,317 5136.044 OPERATING EXPENSES: Operation ............................................. 58.866 53,712 Maintenance ........................................... 6,191 6,116 Depreciation ........................................... 17,400 16,059 Income taxes (Note 2) ........................ ............. 16,743 16,846 Deferred income taxes (Note 2) ................................. 2,851 2,615 Investment tax credit adjustments . net (Note 2) ....................... 909 376 Other tax es (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.607 9.538 Total .......................................... I13.567 105.262 OPERATING INCOME ....................................... 35.750 30.782
/m OTHER INCOME AND DEDUCTIONS:
Interest charged to construc* ion . credit 3,429 2,878
' (IV) ^
Miscellaneous . net .......................
............... (127) (149)
)
.e Total .......................................... 3.302 2,729 i INTEREST CHARGES:
Interest on long-term debt .................................... 13,594 10,543 i Other interest ....................... .. ................ 752 1,210 Amortization of debt premium, discount and expense - net ........ ......... (51) (46) Total .......................................... 14.295 11.707 NET INi'OME ............................................ $ 24,757 $ 21,804 RET /JWI, EARNINGS. JANUARY 1: As previously reported ...................................... ~ $ 23.257. Adjustment (Note 1) . . . .................................... 697 As restated ....................................... $ 26.582 23,954 AD D - Net income (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.757 21.804 Total .......................... ............... SlJ39 45.758 DEDUCT: N l Dividends-cash: l Preferred stock:
, 4.32% series ....................... ........ ...... 302 302 l 4.72% series .......................... ............ 441 441 J 4.56% series .................... .......... ....... 342 342 .
R 4.56 % . 1965 serie s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 342 .-
/ 6.08% series ......... ............................. 608 608 .-
7.32% series ............. . ............ ......... 732 688 - f' Common stock ....................................... 13,590 12.453 Transfer to common capital stock account (par value of 720,000 shares issued in 1970 and -
' 320.000 shares in 1969) .................................. 9.000 4.000 Total .......................................... 25J57 19.176 h',)
RETAINED EARNINGS, DECEMBER 31 (Noie 1) . . . . . . . . . . . . . . . . . . . . . . . 5 25.982 _ $ 26.582 , See accompanying Notes to Financial Sistements E. 10 , k ~ . .
-g .
a M
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Stat ment of Preferred Stock and Long-Term Debt December 31,1970and 1969
. l
. CURRENT SHARES .. . SHARES OUTSTANDING .. . CALL PRICE 1' PREFERRED STOCK AUTHORIZED 1970 1969 PER SHARE CUMULATIVE. $100 PAR VALUE: :
4.32% series ............. 70,000 ,,000 70,000 $ 103.647 ,j 4.72% series ............. 93.500 93,500 93.500 107.00 y: 4.56% series ............. 75,000 75,000 75,000 104.33 .h ' 4.56%-1965 series ........ 75,000 75,000 75,000 104.00 d 6.08% series ............. 100,000 100,000 100,000 107.41 ..
' 7.32% series Other series
............. 100,000 486,500 100,000 100,000 108.99 j'
............. None None "
TOTAL .................. .......... 513.500 513.500 , 7ATED AT $100 A SHARE ................ 5 51,350,000 5 51,350,000 {
.......... 179.000 179.000 "'
( p 'EMlUM ON PREFERRED STOCK sj0TA'L*............................. 5 51.529,000 5 51.529.000 ! LONG-TERM DEBT 1970 1969 FIRST MORTGAGE BONDS: il 31/8% series due 1974 .................. 5 30,000,000 5 30,000,000 I 2 7/8% seriis due 1977 . . . . . . . . . . . . . . . . . . I1,000,000 11,000,000 ! J 3 1/8% series due 1978 . . . . . . . . . . . . . . . . . . 7.500,000 7,500,000 i 2 7/8% series due 1979 . . . . . . . . . . . . . . . . . . 8,700,000 8,700,000 2 7/8% series due 1980 . . . . . . . . . . . . . . . . . . 6.000,000 6,000,000 ; 3 5/8% series due 1981 .................. 8,000,000 8,000,000 ' 3 1/2% series due 1982 . . . . . . . . . . . . . . . . . . 15,000,000 15,000,000 3 1/4% series due 1984 . . . . . . . . . . . . . . . . . 7.500,000 7.500.000 3 3/8% series due 1985 . . . . . . . . . . . . . . . . . . 18,000,000 18,000,000 4 7/8% series due 1991 .................. 12.000,000 12,000,000
)
4 3/8% series due 1993 . . . . . . . . . . . . . . . . . . 15,000,000 15,000,000 - 4 5/8% series due 1995 . . . . . . . . .. ...... 25.000,000 25,000,000 5 3/4% series due 1996 . . . . . . . . . . . . . . . . . . 25,000,000 25,000.000
. 5 7/8% series duc 1997 . . . . . . . . . . . . . . . . . . 30.000,000 30,000.000 7 3/8% series due 1998 . . . . . . . . . . . . . . . . . . 15,000.000 15,000.000 91/4% series due 1999 . . . . . . . . . . . . .... 25,000,000 25,000,000 6 9 5/8% series due 2000 . . . . . . . . . . . . ..... 25.000,000 -
Total first mortgage bonds (annual sinking fund requirements, which may be met by - certification of property additions at the 3 rate of 167% of such requirements, i~ amount to $2,837.000 in 197!) . . . . . . . . . . . 283,700,000 258,700,000
' 1/8% SINKING FUND DEBENTURES DUE 1974 < l
#, A \(cash sinking fund payment of $225.000 required in 1971 was prepaid in 1970) ......... 4.925.000 5.150.000 G % -) TOTAL ................. ..... ..... 5288.625.000 $ 263.850.000 ,.,
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,go ,
m OPERATING EXPENSES I I I, 47 Ms88 . *J'.*, CAPITALIZATIONR ' dc, ['M t': *-NCNo'h, Mi/+23 First~m' o rtgage- bonds . . ;'. ; .' . . ~. .$ .'.M-.S."M'9 $283,700 A
, ;. ..l].Other long-term debt [t 2 , . 2; ~. '.~. .'.1..
1. 75 4 gesu
- i . *9QT6 ._ ; "
Preferred stock ". ; : .*. . . . . i T. c : . . .. /.$. .c . .u$J.4,925.4 r- 51,350 /,h 7[ s
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# Premium'on rig + stock capital '. . . . . ~.stock . . .' : .. M. . . ..'J..'.'f.~! .; iJO*. ifh'F.#AY 5b 0 c '+ *?N 1-!.4'Commen SE137,375h
. yfG ,
m p . . .Retamed earnings.' .f.~". .l; 2 : . . .W .. - ^/WT.Y'J..".'I:4.I725.981M. y. h:. 9A,. _;- ~ . r . r.rs .
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.s. .: 7 3708.448 32ty,g;3;Ma,'ygg;,,(' - MQ.Q,g y
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'N:? $145.712M.f;,.
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' s7.s .W BONO.S0J s'r.1: 1 J. . .- wmIN.COME STATEMENT:
+..O per,. .g r.ev.enues.. i " .4 . - 4. .~-.J. .'.._. ..-V. !,.. ,;,
s mo
. .$149.317.'$
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w*.. j. 150 3
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i T '*' S Othe'r in'coTne7md dech'dtEns'Tr$diT-N@ b kh'od.".*NEbNNb".*44YM8cb:D '- Mk(I,ntir_e'st credit 2 chirged ; c. . . . .to construcUon.). 7,%'; :h2-$p,j: s y429m d i 1 .- r . . . . . . . :. ; . . ':
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./c. M._ n f Interest mM^ and'P other ' charges:- f; /3 .J,.g.f,8d; ?.:;g;t-;
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~
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f --J-j ~ Other interest l . T; .n'U&:?.~ i WP.2llGM;; ?.?5*. I3,594".-4 2" - * - " 800 GROSS PLANT .
. EM NE' PLANT -
@7 ' *
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4 1, } Ten Years of Progress / Operating Average Annual KWH Use
' Residential Customers THOUSANDS OF KWH 1970 t 7.2
' EI.ECTRIC OPERATING REVENUES:
6.0 / (In Thousands of Dollars) Residential . . . . . . . . . . $ 45.230 J ............... l 46 j IL Commercial ......... ............... 31.214 Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . sed g :$- ag[f%q i;t7 40.264 I 36 , 1hTi; Government and municipal . . . . . . . . . . . . . . . . . 3.594
; ,.7.-.* n ,Jcp; gf- Q Total from ultimate customers . . . . . . . . . . . . . . 120,302 24 dMD NM #",; ,
.; ,#. a M% Public utilities ........................ 27.067
. r.;. 4 Misce!!aneous revenues ................... 1.948 i .,,
M,'-fNikfDr.e k ,h M 8lh.r:! Total electric operating revenues ............ 5149.317 o $Y Yhh 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 S onsO W @ Residential .......................... 2.182 O. V Commercial ......................... 1.50. Ind ustrial . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8
- Total KWH sales Government and municipal . . . . . . . . . . . . . . . . . 265 BILLIONS OF KWH Total sales to ultimate custonsers ............ 8.754 15 0 Public utilities ........................ 4.906 PJ Total energy sold ... ................. 13.660 12 0 7-n e 90 q -h I -
(A - NUMBER OF CUSTOMERS-END OF YEAR: ,
.; Residential .......................... 318.732 I b:- I @ Commercial p' ......................... 45.606 60 '
b-
- Industrial . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.639 l L" ( Government and municipal . . . . .
q . : 4 1.188 js 9 j N b p] \ % RJ Total ultimate customers . ......'........ 370.165
-4 i--4 r.
g 3.0 -" - -- P
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Public utilities ........................ 75 l 8 h 3
". -U-pd C $l $ Total customers . . . . . . . . . . . . . . . . . . . . . . 370.240 k* 0 6 -- - N "6 E U-- -E 1961 62 63 64 65 66 67 68 69 1970 l % I
' ELECTRIC ENERGY:
Source and disposition (Millions of KWII)
}!' ~
Generated-net station output 1 I Payroll H ydro . . . . . . . . . . . . . . . . . . . . . . . . . . 133 ,g MILLIONS 0F OOLLARS 250 Steam .......................... 10.057 }t g Other .......................... I
~ ;. ~.
g-- fy Total generated ................... 10.191
'! 'oo " --
Purchased '. .
...................... 4.268 -
r- , T , ? Net interchange ...................... 36 I! 35 0 - _m.. I . _. R _ __ l _. (2 Total ............. ........... 14.495 i! 5 - 4 N tu p< j W Company use. furnished without - ( } i.1 b 1' 1 charge, losses and unaccounted for .......... 835 00
"{ "W" f ($
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f p,5 f1 j Total energy sold .................. 13.66 8: 50 -L--
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- f - h Peak demand (Megawatts) ........... ..... 2.282 .
b f! i. . b b lj b o . d .. E ., e . U 6 Ed.. b E
. . .. . . Ed lJ U 1961 62 63 64 65 66 67 68 69 1970 .
. 16- .
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$ 41,045 3 36,998 $ 33,656 $31,552 5.'0,187 $28,389 $26,022 525,498 $22,681 28,697 26,575 24,631 22,731 21,831 20,328 18,727 18,445 16,870 j 39,393 37,230 33,987 29,845 28,799 26,414 23,728 22,783 20,499 '
3,424 3,139 ' 2.952 2,789 2,723 2,559 2,355 2,122 1,911 112,559 103,942 95.226 86,917 83,540 77,690 70,832 68,848 61,961 21,934 13,894 9,172 9.338 9,578 8,696 8,391 7,276 5,908
.l 551 1,107 1,118 803 558 531 465 532 642 5136,044 511J,943 5105,516 $97,058 593.676 586,917 579,688 576,656 568,511 i I,917 1,644 1,401 1,300 1,179 1,057 924 819 695 1,373 I,247 1,116 1,025 945 845 760 694 610 4,744 , 4,533 4,264 3,989 3,707 3,271 2,822 2,539 2,218 I 262 242 229 233 218 202 181 159 148 8,296 7,666 7,010 6,547 6,049 5,375 4,687 4,211 3,671 4,123 2.470 1,297 1,259 1,206 1,146 1,098 1,023 842 12,419 10,136 8J07 7,806 7.255 6,521 5.785 5.234 4,513 311,815 306,950 301,335 296.211 289,248 281,125 275,544 269,345 262,960 44,771 44,195 43,747 42,930 42,257 41,940 40,909 40,239 40,482 4.533 4,429 4,260 4,077 3,965 3,907 4,034 4,015 3,805 1,131 1.085 1,043 1,002 972 1,273 1.186 1,118 672 362.250 356,659 350,385 344,220 336,442 328,245 321,693 314,717 307,919 75 78 73 77 108 112 112 107 !_05, 362,325 356,737 350,458 344,297 336,550 328,357 321,805 314,824 308,u24 139 208 97 112 97 102 35 144 182 7,563 6.498 4,021 5,600 5,880 5,635 5,200 4,563 3,725 .
j 7,702 6,7% 4,118 5,712 5,977 5,737 5,235 4,807 E 3,907 5,467 4,078 4,874 2,743 1,895 1,333 1,132 883 882 ) 41 88 (62) (43) (32) (41) (99) (49) 108 l 13,210 10.872 8,930 8,412 7,840 7,029 6.268 5,641 4,897 .
., 791- 736 623 606 585 508 483 407 384 2,419 10.136 8,307 7,806 7,255 6,521 5,234 5.785 4.513
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t 34, Jerry L. Maulden of Pine Little Rock. He has shown his evaluate new procedures in his BlufT typifies the kind of dynamic dedication to the continued growth profession and to apply the latest young leadership that forms the of the Company, his profession and techniques to strengthen the AP&L core of the AP&L mant.gement his community. system.
- i team. In his work as the Company Like many other AP&L As a father of four, Jerry is controller and assistant secretary, executives, Jerry has completed naturally concerned with community he applies modern executive skills managerr. cat courses at Louisiana improvement. That's why he is an to a task that involves supervision State University and Georgia Tech. active member of his church, the -
of all accounting areas in the This graduate education is part of Pine Bluff Kiwanis Club and serves
~
Treasury and Accounting the program that trains competent as chairman of a city-wide cd i Department. leadership for future responsibility organization that recognizes i In this position, he is responsible within Arkansas Power & Light. outstanding students. r- customer accounting, general His professional credentials Jerry is a man who cares about the - anting, payrolls, budgets, include membership in the National future and is doing everything easting, property taxes, property Association of Accountants;the possible to make it better through accounting, corporate records and American Institute of Certified his business, professional and internal auditing. Public Accountants;and the community activities. AP&L is Jerry, whojoined AP&L six years Arkansas and Southeast Arkansas proud to have men like him ago,is a graduate in accounting Societies of CPA's. Through these throughout the Company helping j from the University of Arkansas at afTiliations, Jerry is able to build Arkansas. 19
z r V E Marketing The 1.2 billion kilowatt hour ysw gg 3 7.e< 7 ;g. 7R"'-" increase of electric power sales gry';mwr bgaa g g.f. M g., g. Vf r T"' 7. .h. - registered in 1970 was indicative ,,g '
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M@b . of the growing demands of customers. To a large degree, this Wx @M w - ;m e.
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increase in sales can be credited to g .,\;{, ,\ Y '
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** ; ri i) ,h the aggressive marketing program 75 0 d
- pursued by Arkansas Power & Light. 4 1
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NY A 31 percent increase over the \
, , 2 ,
m \-T 'p ~- g(h y'!r'Jg-M ,g[ previous year's sale of Total Electric j$ K ,I dwelling units spearheaded the 1970 h g. ;1 sales effort. In spite of the sluggish y, p;*g ge[ p$ca], .< , g["j7{ a f. 9% /-* c-housing situation during the year, 4
^
the Company was able to hold "ff.% - ,'g., -3. , w"'---w. t ' 7"-.' ' Gold Medallion sales slightly above $ wt c M,TS 1969 levels and to boost Total "' Y "- " = -D . ;.A - [N ""@M @id 9 ,% Electric sales by 37 percent. '
., e Contributing to the success of the
%, f R44f ?
program was the Company decision . ' h[.g/j ,g (.: \y%g " q~ Q [ ^ d5-*- " t v g[ i g,i.y !'k G:7 in Ma.ch to modify electric heating ,E ' ; .. ~-
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.tandards. Additionally,many builders took advantage of Section 235 of the National Housing Act R
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