ML19331C368
| ML19331C368 | |
| Person / Time | |
|---|---|
| Site: | Crystal River  |
| Issue date: | 12/31/1977 |
| From: | FLORIDA POWER CORP. |
| To: | |
| References | |
| NUDOCS 8008150063 | |
| Download: ML19331C368 (32) | |
Text
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@o%tS@63 l l
3 3
- 3 4) Highlights of 1977
) 1977 1976 s J
" $656,138,000 $551,439.000 Revenues increased 19% . .
Fuel And Purchased Power-About Even $274,845,000 $274,385.000 Earnings Per Share Recovered . . S4.82 S3.21 Dividends On Common Stock increased $2.33 S2.145 Construction-Lowest In 7 Years C94,423,000 $137,631.000 Sales Of Energy increased 7.5% 15.9 Billion KWH 14.8 Billion KWH Average Customers Were Up 3.8% 669,615 644.846 Average Residential Usage Was Up 6.8% 10,604 KWH 9,932 KWH Peak Demand increased 10.5% 3,899,000 KW 3,530,000 KW Contents 1 P'es de-t's Pepc' :0 Sra ehc ders 16 Pe'scrre' 5 F1rar.ca: 17 C ranc a: State ents 9 Rates ard L't gat on 26 Su~. a y of Opera:ces 1973 1977 12 Fuei 27 D'scuss on of tre Summay of Oce a:ons 13 System Excars on 27 Ccm cn Sicek Prce 13 Environment a-c D v dencs Pe' Sha'e 14 Erergy Sa'es 28 D 'ecicrs and C'f ce's Covsr 15 Ere'gy Corse'va: en 29 Bus ress and System Vao Tow; ring above the Crystal River coat handling facilities is the reictor building of our n:w 812.000 kilowatt nucl:ar unit. Ten percent of tne nuclear capacity is ownId by other F cr da Powe' Coroc'at on 320134:n St'eet Sov h
- Te'ephere 813-866-5151 Floridt utilities. Va rg Ada ess P.O Box 14042. St Petersburg. F c',da 33733
r I l To Our Fellow Shareholders: In 1977. Florida Power was ab'e to comp!ete the second stage of a majo" effort to change the basic nature of its fuel mix. The commerc:a! operation of Crystal R>ver Unit No. 3, our first nuclear unit, occurred in March Af ter some initial prob! ems, this unit assumed a major role in power production for our customers and, in the latter part of the year, provided over one-th rd of our total generation. Substantial operation of Crysta! River Un:t No 2. a coat-burning unit, combined to effect major fue' savings in our operatons
,k, [ These combined savings amounted to S73.5 mLon dur ng the yea' and reduced our annua' requirements for oH by 9 2 mi";on ba're's
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; N N[ 6 Due pnncipally to the very coid w'nter early in the year and a warmer summer than the prev:ous year. our customers utilized 7 5% more e e gy
_,~F."! f i -- r 3 f 91 than in 1976 Also, an upturn in the Florida economy and custome" g cath Mi hE-Qg of 3 8% contributed tc tne increase Q = g." - Dunng the year. adjustments in base rates were received at both the 6E g- wholesa!e and retaillevels which cover the fmed costs on the $405 m%cr
'd g investment in the nucl ear unit at the date of commercia! operat:on. Tne ret reduction accruing to our customers as a resu'.t of the nuc'ea' un;t was
- S101 million for 1977 The reconversion to coa! saved customers $9 5
,, million this year.
As a rescit of the above factors financia! resu!:s for the yea' were good g rg Earnings per share increased to $4.82 a ga:n of 50.2% ove the g depressed tevel of 1976 During the year, it was possib'e to substantia!ly improve and strengthen s g the Company's ba!ance sheet. Long-term debt decreased from S4% to 51%. Interest and preferred dividend coverages improved sign;ficantly
/ The Board of Directors increased the quarterly dividend to S 62 per share.
or an annuai rate of $2.48, effective with the December dividend payment This is the 25th consecutive year in which the total common stock dividends of the Company increased. This action ref'ects the continuing view of your Board that shareholders are entitled to reasonab'e compensation for the use of their funds. l l
- - - - ~ _ ,
e In order to achieve a more balanced organization and to strenginen the management of the Company for the years ahead, new pos'tions of . responsibility at the senior vice president level were established in March 1977. This reorganization reduced the number of executives reporting to the President, relieving some of the burdens p! aced upon that office. It permitted a greater death of senior management and strengthened our short and long range planning efforts. The departmental alignments were placed under four new positions of responsibihty: Clarence W. McKee. Jr. Senior Vice President, Financia! Services, and member of the Board of Directors; Stanley A. Brandimore, Senior Vice President and Genera! Corse Corporate Services; Billy L Griffin, Sen:or Vice President. Engineenng and Construction and Lee H. Scott, Senior Vice President. Operations. There are a number of innovative programs under way in Florida Power at this time, These include the study of a composite fuel which i , a m xture o' powdereo coal suspended in oil. In addition, we are engaged in the stucy of fuel cleaning techniques to reduce emissions, possib!e solar app!; cations and new systems of load leveling to he!p curb inf!at,onary pressures in the future. Programs of this kind take the dedicated effort c' highly skilled employees. I am very proud of the 3.546 men and wome, who make up the Florida Power team. They are not listed on any ba!ance sheet, but they constttute the Company's greatest asset. The impact of the 1973-74 energy crisis brought on many disparJ>es anc comp!exities for oil-buming utilities throughout the country. The uncertainties of fuel supplies and deliveries reflected in some unconscionab!e pricing of these products. In early 1975, we requested r investigation by the Federal Energy Administration concerning our suspicions of possib!e pricing irregularities in the " spot" market for l ght oil. Fo: lowing three years of investigation, this agency (now part-of the Department of Energy) released its findings to the Department of Just ce i and to the Florida State Attorney's Office. In light of al!egations made public through media sources, the Company initiated a suit in Federa' Distnct Court to seek any recoveries due our customers, and our i
sha'eho!ders, stemm;ng from these activities The st.!t was filed in September against mu:tip'e defendants believed to be invo:ved in the al!eged pricing irregulanties, including a retired member of our Board of Directors who served as Chairman through September 1973 We are making a concerted effort to resolve this htigation and reheve the stra n of suspicion asscciated with the allegations The dedicated efforts of our emp!oyees through th:s particular y crit cal t:me in our Company's h; story should remain as the lasting memory of this period Those of you who have read my annualletter to shareho!cers are fam.!:ar with my past comments on our nation's oeepening energy cris s The year 1977 has seen a national effor; to "get it together ' to estabt:sh a reahst:c solution to the underlying prob' ems As a peopie. we have not been ab'e to get it done, and the Crisis will Str;ke w;th increasing severity in the next few years. We are continuing to p!an on thi5 bas;s and intend to conduct the affairs of this Company so that we can be responsive to the needs of our customers and minimize the ill effects on the area we serve Tnree of our present Directors will not stand for ree'ect'on at the annual meeting to be held in March 1978. Mr. George W Jenk:ns and Mr. R. chard E Raymond, who retired as an efficer of the Company, are ret.nng from Board serv'ce. Dr Jack B. Cnichf;e!d has assumed other respons:bilit'es in a capacity which w!!! make it impossible for n,m to serve further at this time. I would hke to thank these Directors for the,r long. effective and ioya!
. Service to the sharehofders and customers of Fionda Power They have made a major contribut:on to your Company's progress For the Board of D; rectors,
/
President February 10,1978 3
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FIN A N CI AL l The sharp recovery in earnings dunng 1977 is a result of increased revenues from rate adjustments granted in the first half of tha year and higher energy Sa'es from an unusually cold 1976-77 winter. Earnings per share increaseo from S3 21 in 1976 to
$4 82 in 1977. This reflects a continuation of our earnings recovery following the devastat;ng effects of the energy crisis on our earnings in 1974.
The annual dividend rate was rd; sed from S2.28 to S2.48 per common share beginning with the December 20.1977 quarterly payment This was the 25th consecutive year that tne Company's total common stock dividends have increased. Revenues and Expenses As a result of the higher energy sates and adjusted base rates,1977 revenues reached
$656.1 m;lhon, up 19% from 1976 The wholesa!e and retail rate adjustments, granted in early 1977, contributed $53.9 million to the increase. However, the savings in fuel expense due to the nuclear-fueled generat;on amounted to about 564 mhon when compared to fossil fuel which would otherwise have been burned The effects of weather. Customer growth and usage dJring 1977 resulted in most of the remain.ng increase in revenues.
Operating expenses rose S69.3 mi!! ion in 1977, or 15% above 1976 Fue! expenses were up only 4.7% as a result of the savings achieved from nuclear-fue!ed generation Purchased power expenses decllned as our abibty to generate virtua!!y all of our energy requirerrents improved. Otner operating expenses increased, reflecting the higher depreciation expenses additional maintenance requirements higher property taxes and other operating expenses associated with the nuclear unit. The al;owance for funds used during construction decreased from S21.1 million in 1976 to S5.1 million in 1977. The reduction in the construction program reduced this a!!owance which improved the Quahty of our earnings.
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nuclear unit reip .nsure uninter'seted Operatf ors AuthCZeo Dersonne enter , tap e't; Oriy g a'ter they rave Deer O'Cper'y ident hed Airport-tyce ,
# seCyr ty dewCes taDCve r ght; scan a Oe' sonne and i
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q. 4 EieCtror'C security eau preent enc rCies the u- ! s e Derimeter and inciudes C!Osed-C1'Cuit teiev s on and
'adar-We a arm syster-s Neft Center) The gua'd 'Crce on Catrol(lef t) masqtains Constant Commun:CatiOr with the seCJrf ty Control Center i
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y@W Mutt, pie safegua as are designed to nsee 4 :. Y 1 dependable Operation under even the .
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F. influences On # t 00erata ns Any adverse impact the un t may have on the su 'Cund. r 1.00 _
$ n1g environment WCu C Ce detected Oy !"e thermal D:O'Og Cai Chem Cal and 0
radiological reon.tcr ,g systems 73 74 75 76 77 (
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1 l i g ' l I I ! l l l Oil Pricing Litigation j l The Florida Public Service Commission has announced its intent to schedule pubitC neanngs stemming from an investigation by the Federal Energy Administration, now l part of the Department of Energy (DOE), into alleged overpricing of light oil purchased by the Company during 1973-74. In addition to the DOE. the Florida Public Service Commission and other state and Federal agencies are independently investigating this i matter. Also, a special committee of the Board of Directors of the Company is making a j thorough investigation of these allegations. The pnmary investigative work in this matter has been developed by the DOE. The investigative effort was in:tiated at the i Company's request early in 1975 as a result of our suspicions surrounding possible ! pncing irregulanties in the " spot" market for light oil. The results of the DOE I investigation have been turned over to the U.S. Department of Justice but have not
- been released at this time.
- , The Company is proceeding in the courts for the disclosure of the DOE's investigation, since it is extremely germane to a suit filed by the Company on September 19,1977 in Federal District Court. The suit was filed against multiple defendants believed to be invo!ved in the alleged pricing irregularities, including a retired member of our Board of Directors who served as Chairman through September 1973. The suit claims damages for an amount to be determined upon completion of the investigations.
The Company has been named as a defendant in several suits which seek to recover j any overcharges which may have been passed on to the customer through the Company's fuel adjustment clause, aang with related damages. In the opinion of the
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Company and its General Counsel, the Company should be successful in the deferse of these suits but cannot guarantee success; however, in any event, possib'e liaDJ.ty C' the Company, if any, in connection therewith, is not deemed material. FUEL Responding to national energy objectives and seeking increased reliabihty, we are shifting our fuel dependence from oil and gas to a mixture of coal, nuclear ano 03. Beginning in 1976, we implemented the objective of expanding our present and fut/e use of coa.. When our gas supply contracts end in mid 1979, we will have a hea'iny mixture of the three remaining fuels. In 1976, our fuel mix was 88% oil and 12% gas. In 1977, this changed to 56% cit 23 a nuclear,10% coal and 11 % gas. During 1978, we will add the oil-fired 513,000 K4e.a". Anclote Unit No. 2, and we will convert the 383,000 kilowatt Crystal River Unit No. * ":~ ' oil to coal. By 1980, our fuel mix is expected to be 47% oil,26% nuc! ear and 27% cca Fuel Supplies The Company's objective is to maintain firm contracts for the supply of al chases c' aur fuel requirements. Our supp!y of oit is under firm contracts witn five major suppliers. Our supply of nuclear fuelis under long-term contracts well into the 19BCs 12 a x ,. . , ..;... n .- - e
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i O/ coa 'eourements are being supplied by our subsidiary, Electric Fuels CO'oc'at on it nas negotiated firm contracts to provide a substantial portion of our annva: recu:rements of more than 2 million tons of coal for our two units at Crystal
' R ve" Tne sabs o>ary will provide coal from southern Illinois and Indiana by barge and easte n Kentucky coal will be delivered by rail to a new un!oading f acility at the Crystal ' R.ve' mant site The subsid:ary is securing additional sources of coal for the generating un;:s schedu!ed to be bu?t nn this site in 1982 and 1984.
SYSTEM EXPANSION W.th tne add; tion of our nuclear unit in March, the Company's generating capacity increased 14.3% to 4,452,000 kilowatts at year end 1977. Our 513,000 kilowatt Anclote Un1t No 2. which is scheduled to go on-line in April 1978, will complete the addition of new base load generation during this decade. Baseo on our current outlook for customer growth and usage, the Company has p!anned for sufficient base load generating capacity into the early 1980s. Our next major base load generating units are scheduled for operation in 1982 and 1984. These two 640,000 kilowatt coal-burning units are to be built at our Crysta! River site. We are now in the process of completing initial site studies in order to receive the necessary I; censing and permits to begin construction. Once approved. construction is scnedu!ed to begin in late 1978 on the first unit which is expected to cost about S400 m!! hon. Until these units are ready, we will meet our growing customer demand through the comb; nation of additional combustion turbine peaking units and firm purchased power contracts with neighboring utility systems. ENVIRONMENT Meeting tne Company's environmentaf obligations is an increasingfy compfex and expensive accomplishment. In recent years, facilities required for the protection of the environment have become a major part of our operating plant. These facilities do not produce efectric energy. and in most instances they consume large amounts of electncity, thus affecting both the output and the efficiency of the Company's e!ectrical system. We continue to actively work with state and Federal environmental agencies iri order to comply with air and water quality standaros. We have made progress in the control of solid and gaseous emissions from our power plants but have experienced some d,fficulty in meeting the time requirements imposed upon us. This difficulty was evidenced in October 1977, when the Company's Crystal River Unit No. 2 did not comply with Florida's particulate emission standards. The unit was held out of service unt!! January 2,1978, while we negotiated an agreement with regulatory agencies and perforrmd minimal modifications. The Company plans to build a duplicate electrostatic precipitator to operate in parallel with the existing equipment. This will require three years to construct at a cost of about $12 million.
r. ENERGY SALES Reflecting strong increases in kilowatt-hour sales early in the year dunng one of Flonda's coldest winters in history and a warmer summer than 1976, total energy sa'es in 1977 continued its growth from the lows experienced during the energy crisis. In 1977, energy safes were up 7.5% compared to 6 3% in 1976. Our average custo rer i growth rate during 1977 was 3.8% compared to the 3.7% in 1976 and 2.7% in 1975 The outlook for customer grawth is in the 3-4% range during the remainder of the 1970s Residential Energy sales to our residential customers have increased sharply. The 10.8% inc' ease during :977 was significantly above the 6.3% recoroed fast year. This increase 'e' e::s the impact of the unseasonable weather during 1977, the continuing popuiation g're - and the increase in usage by existing customers. The average energy usage by 0 < residential customers increased 6.8% in 1977, from 9,932 kilowatt-hours to 10 604 kilowatt-hours. The comparable increase during 1976 was 2.4%. Commercial Our commercial customers used 6.9% more energy in 1977 than 1976. This ;s a ~ s: twice the 3.5% increase during 1976. The number of commercial customers gree, c, ;;: which is a significant improvement over the 2.8% growth during 1976. The ecorc~ : recovery in Florida, as well as in the nation as a whole, contributed to these increases industrial Energy sales to our industrial customers gained only 4.6% during 1977. This s considerably below the 1976 increase of 8.5% The decline is primanly dce to a reduction in the requirements by the phosphate industry which compr.3e3 mc'e :'3' one-half of ourindustrialenergy sates. i Florida Economy Florida's economy continued to improve during 1977. Our population- :- grow:r a:e c' about 2% is more than twice the current national rate. The construction ircus:', . lagged the recent national economic recovery, has strengthened cons;derac . 0 9 primarily to residential building activity. As construction improved, our unemployment rate steadily declined and was a: 6 :: I at year end. From a high of 11.6% in late 1975, the rate fell below the nat:cna "3'e dunng the latter half of the year for the first time in three years. Tota!C' emo'c,~e ~ 3 increased 13.6% since the recessionary period two years ago. Tounst act v , had a tate start early in the year because of the unseasonably cold weathe' s as c 7.2%, compared to 6.1% in 1976. 14 , r. m
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Research and Development. We accelerated our emphasis in 1977 on research and development programs by seeking practical solutions for current and long-term energy problems.While looking for newer and better fuel sources. like solar energy, the Company is directing major emphasis on the development of improved f uel utilization and combustion efficiencies of existing f acilities. The Company and Dravo Corporation have developed a coal-oil mixture for use in our oil-fired steam boilers. This test plant (above) mixes coaf of a powdery finen .ss with residual oil to f orm the " slurry." If successful, the burning of this slur 'ill be the first large-scale application of its kind in the country and could ultimately reduce the Company's oil requirements. e i ENERGY CONSERVATION Energy management has taken on a new impoi _nce for our Company. The growth of peak demand, which is the prime f actor controlling the need for new f acihties, is expected to grow 6.5% annually during the next several years. The ability to moderate this growth will benefit both customers and investors by reducing the capitat requirements and operating expenses for addttional facilities. d
The purpose of load leveling is to slow the growth of peak demand by shifting some energy usage from peak periods to off peak periods. The Company is studying this area by testing both voluntary and automatic shifts of demand by customers. If . effective, these tools will make more efficient use of both our current and future generating facilities and realize a savings for all of our customers. r During the past year, the Company completed a time-of-day rate study on a group of 200 volunteer residential customers. The study indicated that the rate incentives designed to encourage voluntary off peak usage by our customers would not be effective at this time. The customers' savings through reduced usage during peak periods was not enough to offset the cost of providing the special metering equipment. The Florida Public Service Commission approved a two-year study on the effect of us:ng radio-controlled devices on a group of our residential customers' water heaters and central air conditioning and heating units. This system will use radio transmitters to operate control devices attached to the customers' appliances. Most controlled outages will last less than 30 minutes, providing little or no inconvenience to the customer. To encourage energy efficiency in new homes, the Company has developed the Energy Saver Program. The Program provides both building contractors and home buyers with guidelines for selecting energy saving options which are most beneficial for individual needs. A home built to minimum energy saver standards may provide energy savings to the tomeowner of up to 35% annually. PERSONNEL Much of the success for our Company's recovery from the damaging effects of the energy cr sis has been the result of the productivity and dedication of our employees. In March 1977, organizational realignments established new positions of responsibility at the senior vice president level. In order to more clearly define management accountability, to provide departmental alignments to meet our Company's future growth and to strengthen our short and long-range planning efforts, all related departmental responsibilities were placed under four senior vice presidents. This reduced the number of executives reporting directly to the President and broadened his ability to concentrate on long-term corporate objectives. The promotions were: C!arence W. McKee, Jr. to Senior Vice President, Financial Services; Stanley A.
- Brandimore to Senior Vice President and General Counsel, Corporate Services; Billy L.
Griffin to Senior Vice President, Engineering and Construction and Lee H. Scott to Senior Vice President, Operations. About one-half of our employees are represented by the International Brotherhood of E!ectrical Workers. Effective December 19,1977. the Company and the Union began a new two-year contract. It provides a 7% wage increase during the first year and a 6.5% increase in the second year, plus an improved retirement plan for longer service employees. 16 vp===wasegg
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Mv - Fb@RIDA POWER CORPORATION STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,1977 AND 1976 1977 1976 (Thousands) OPERATING REVENUES (Note 1b): $287,382 5240,968 Residential 164,265 142,121 4 Commercial 88,084 75,657 Industrial 116,407 92,693 Other 656,138 551,439 OPERATING EXPENSES: Operation- 260,610 248,849 Fuel (Note 1b) 14,235 25,536 Purchased power . 41,371 _ 52,923 Other , 327,768 315,756 28,239 23,208 Maintenance (Note 1c) 54,440 41,440 Depreciation (Note 1c) 40,382 33,197 Taxes other than income taxes . income taxes (Notes 1g and 5)- 72,147 43,361 Federal 8,392 5,067 State 531,368 462,029 124,770 89.410 OPERATING INCOME OTHER INCOME AND DEDUCTIONS: Allowance f or other f unds used during construction 3,071 1',,,, (Note 1d) 1,094 1,214 Gain on reacquired bonds 2,510 i , s' ' Miscellaneous other income and (deductions) . 6,675 12.574 INTEREST CHARGES- 49,611 46,028 Interest on long-term debt 1,487 5,030 Other interest expense 51,058 51,098 Allowance for borrowed funos used during construction (2,005) (8.336) (Note 1d) ' 49,093 42,722 82,352 59,262 NET INCOME 13,498 13,655
' DIVIDENDS ON PREFERRED STOCK . S 68,854 S 45,607 NET INCOME AFTER DIV;DENDS ON PREFERRED STOCK .
14,291,866 14,199,190 AVERAGE SHARES OF COMMON STOCK OUTSTANDING $4.82 $3.21 EARNINGS PER AVERAGE COMMON SHARE . The accompanying notes are an integral part of these financial statements.
BALANCE SHEETS DECEMBER 31,1977 AND 1976 s 1977 1976 ASSETS ELECTRIC PLANT (Notes 1,6 and 8): $1,684,821 S1,262,328 In service and held for future use 307,390 261,407 Less-Accumulated depreciation 1,000,921 1,377,431 113,406 454,006 Construction work in progress 24,769 33 C95 Nuclear tuel, at amortized cost 1,488,022 1,515,606 OTHER PROPERTY AND INVESTMENTS: 4,186 4,438 l Nonutility property 7,371 - f Investment in and advances to subsidiary (Note 1e) 836 j 870 Other investments 12,427 5,274 CURRENT ASSETS: 9,077 11,511 Cash (Note 4) 4,418 643 / Special deposits 4,000 - Temporary cash investments Accounts receivable,less reserve of $1,009.000 in 1977 31,316 30.045 and $1,199,000 in 1976 - 13.058 income taxes receivable Materials and supplies, at average cost- 51,359 34,649 Fuel 25,109 26,201 Plant materials and operating supplies 837 1,233 , J Prepayments 126,512 116,944 DEFERRED CHARGES: Unamortized debt expense, being amortized over term of 4,381 4,676 f l debt 6.233 7,831 ( Cther 10,614 12,507 l
$1,665,159 $1,622,747 The accompanying notes are an integral part of these financial statements.
)
I RAsRIDA POWER CoReoRiTioN I CA0F AltZATloN AND LIABILITIES 1977 1976 usands) CAPITALIZATION (see accompanying statements): Common stock equity S 481,412 S 442,165 173,775 175,350 Cumulative preferred stock 674,043 724.617 Long-term debt 1,329,230 1,342.132 CURRENT LIABILITIES: 17,263 23,093 Accounts payable 25,370 20,903 Customers' deposits Accrued income taxes 29,751 - 12,361 11,080 Accrued other taxes 9,403 10,434 Accrued interest 6,706 3,264 Other 100,854 68,774 4,984 12,800 Long-term debt due within one year
- 9,000 Commercial paper (Note 4) 105,838 90,574 DEFERRED CREDITS:
Accumulated deferred income taxes (Note 1g) 171,478 140,436
- Accumulated deferred investment tax cred;ts (Note 1g) 55,852 46,619 2,761 2,986 Other 230,091 190,041 COMMITMENTS AND CONTINGENCIES (Note 6) l
$1,665,159 S1,622,747 1
19 l l
STATEMENTS OF RETAINED EARNINGS FOR THE YEARS ENDED DECEMBER 31,1977 AND 1976 1977 1976 (Thousands)
$205,772 $190,702 Balance at Beginning of Year . .
68,854 45.607 Add-Net income after dividends on preferred stock 274,626 236.309 Deduct: Cash dividends on common stock; quarterly dividends equivalent to the following annual rates- - 22.356 .
$2.10 24,443 8.106 52.28 8,889 -
S2.48 30 75 Expense of issuing common stock . 33,362 30.537
$241,264 $205.772 Balance at EnJ of Year .
STATEMENTS OF SOURCE OF FUNDS USED FOR CONSTRUCTION FOR THE YEARS ENDED DECEMBER 31,1977 AND 1976 1977 1976 (Thousands) SOURCE OF FUNDS: Funds Derived from Operations- $ 68,854 S 45.607 Net income after dividends on preferred stock 33,332 30.462 Less-Dividends on common stock 35,522 15.145 Earnings r-tainec in the business . Items included in net income not requiring cash outlay- 54,440 41,440 Depreciation . 8,638 - Amortization of nuclear fuel . . 40,965 53.765 Deferred ir ame taxes and investment tax credit . (5.076) (21.108) Allowance tw all funds used during construction . 134,489 89.242 Decrease in Net Cu' rent Assets (exclusive of current debt and 26,512 1.402 temporary cash investments) (a) Funds f rom Financing anci Other Sources (Uas)- - 80.582 F,rst mortgage bonds . (50,000) - Decrease in bank term loan . (12,784) - Electric consumer capital notes redeemed . 10,000 - Pollution control bonds anticipation note 3,725 1.387 Common stock . (9,000) (58.700) Net decrease in short term debt . (4,000) - Increase in temporary cash investments Long-term debt and preferred stock matured or reacquired for (6,562) (6.546) sinking fund (7,371) - Ir. crease in investment and advances to subsidiary . 4,338 9.156 . Other sources (net) . 25 879 (71,654) 89,347 116.523 5.076 21.108 Allowance for All Funds Used Daring Construction . S 94,423 5137.631 FUNDS USED FOR CONSTRUCTION . (a) Analysis of Decreasein Net Current Assets- S (1,341) S 1.432 Cash and special deposits (1,271) 4874 Accounts ret eivable 13,058 (13.058) income taxes receivabfe (15,618) (2.661) Materials and supplies . (5,830) 7.480 Accounts payable 29,751 (2.919) Accrued income taxes 7,763 6.254 Other (net) S 26,512 S 1.402 The accompanying notes are an integral part of these financial statements. J 20
FLORIDA POWE R CORPORATION STATEMENTS OF CAPITAllZATION DECEMBER 31,1977 AND 1976 1977 1976 l COMMON STOCK EOUlTY (Note 3): Common Sim L sted Common stock, S2.50 par, authorized 30,000,000 shares hw York (443.045 shares reserved for conversion of convertible Stock Enchange debentures), outstanding 14.350,326 shares in 1977 and 14,229,520 ir,1976 , S 35,876 5 35,574 Premium on capital stock 202,829 199,376 Traasfer Agep 1,443 Cwon Sm Other paid-in capital . 1,443 Retained earnings, including $40,221,000 not available for Manuf acturers Hanover dividends on common stock . 241,264 205.772 Trust Company 442,165 33 % hew York, NM. 481 3 36% CUMULATIVE PREFERRED STOCK (Notes 2 and 3): q $100 par, authorized 4,000,000 shares-Shares Outstanding t
.j Series December 31,1977 335,000 33,500 33.500 Trars'er Agent f:r 4 * .-4. 7 5 * .
7.40 % 530.000 30,000 30.000 D e'e"e:' St::k 7.76*6 500,000 50,000 50,000 Chemical Bank 8.80*6 200,000 20,000 20.000 New York, N.Y. 10%. 402,750 40,275 41,850
-173,775 13% 175,350 13 %
_4
'I LONG-TERM DEBT (Note 2):
{l First mortgage bonds-h, 3%'t due November 1,1978 5,332 5.481 Trustees for
.! 33 e% due July 1,1981 8,745 8.995 Fest Wrigage Boncs d 33fe% due November 1,1982 9,401 9,676 Morgan Guaranty Trust Maturing 1983 inrough 1992-3%% to 43/4% 78,526 80,713 Company of NewYork Maturing 1993 through 2002-45/e% to 9% 314,083 316,209 p, Flor da F rst National
~,- Maturing 2003 through 2006-7%'6 to 8%% 210,000 210,000
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Premium, being amortized over term of bonds . 6,711 7,066 Par value of bonds reacquired to meet cash sinking fund requirements (5,311) _ (5.123) 627,487 633.017 Convertible debentures,43/s% due August 1,1986 Trustee f:r (convertible into shares of common stock at the rate of one ConvertSe Debentures share for each $44.00 of principal amount) . 19,494 19,494 Ining Trust Company Electric consunier capital notes- New York, N1 Due October 1,1977 - 8 50 % . - 12,800 Due October 1,1980 - 9.10 % . 11,295 11,297 Trustee for Guarantee of 7%% pollution control revenue bonds due 2004 10,575 10,575 E!ectne Censumer 4.10% pollution control bonds anticipation note due 1979 . 10,000 - Capta' Notes Bank term loan - 50.000 Southeast Banks Trust Promissory notes,7%% . 176 234 737,417 ""'"I'" 679,027 argo. nonda Long-term debt due within one year . (4,984) (12,800) 674,043 51 % 724.617 54 %
$1,329,230 $1,342,132 The accompanying notes are an integral part of these financial statements.
21
NOTES TO FINANCIAL STATEMENTS (1)
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (:) Electric Plant-E!ectnc plant is stated at the original cost of construction which includec payroll and related costs such as taxes, pensions, and other fnnge benefits, general and administrative costs and an allowance for funds - used dunng construction. Substantially all of the Company's electric plant is pledged as collateral for the fi'st mortgage bonds. (b) Cperating Revenues and Fuel Expense The Company recognizes revenues concurrent with b lhng to customers on a cyc'e bdling basis. The cost of fuel for e!ectnc generation is charged to expense as burned. The cost of nuclear fuelis amortized to fuel expense based on the quantity of heat produced for generat:on of e!ectric ere'gy in relation to the quantity of heat expecteo to be produced over the life of the nuclear fuel core Because of the uncertainties involving nuclear fuel sto' age ard reprocessing, the Florida Pubbc Se'vice Commission (FPSC) does not presently allow a provision for these costs to be recovered in the Company's fuel ad;ustment clause Accordirgly, the Company is riot providing for such costs. J (c) Depreciation and Maintenance-The Company provides for the depreciation cf the original cost of properties over their estimated usefullives on a straight-line baois. The annual provision for depreciation, expressed as a percentage of the average balances of depreciable plant, for 1977 and 1976 was 3.65%. Tne deprec'at:en rate appl ed to nuclear facihties includes a factor for dismanthng or removal costs to the extent allowed bv rhe FPSC The Company charges maintenance with the cost of repairs and minor renewals of property, the p! ant accounts with the cost of renewals and replacements of property units and accumulated depreciation'with cost. Iess net sa'vage. of . crcperty units retired. (d) Allowance for Funds Used During Construction (AFDC)-This item represents the estimated cost of funds apphcable to ubhty plant under construction. Recogn; tion of this item as a cost of utihty plant is appropnate because it constitutes an actual cost of construction and, under established regulatory rate practices, the Company is permitted to earn a return on such costs and to recover them in the rates charged for utihty services. % o The rate used in computing AFDC for 1977 and 1976 was 8.66%, which after consicers on of deferred :ncome taxes on the debt component of AFDC produces an after tax rate of 6.93% The rate of 8.66% is apo!ied to the construction work in progress base which excludes $106.250,000. the amount allowed in the rate base for rate-mahng purpcses in accordance with a Federal Power Commission Order, the debt component of AFDC for 1976 has been rec assf ed from other income and deductions to a reduction of interest charges in the accompanying statements of income to conform with the 1977 presentation. (n) Investment in Subsidiary-The Company has & wholly-owned subsidiary, Electnc Fuels Corpo'ation. formed for the purpose of secunng tong-term fuel supplies. The Company accounts for the investment in the subsic:ary on the equity method. (f) Pension Costs-The Company has a retirement plan for substantially all em;.,loyees. The Comoany's ochcy is to fund pension costs accrued. Pension costs for the years 1977 and 1976 were S6,151.000 and SS 640.000 rescect:vely. The unfunded past service liability of the plan, which is being funded over 10 years, was approx mateh
$14.500.000 at December 31,1977. Amendments to the plan effective in December,1977, increased the unfunded past service habihty by approximately S5.350,000. However, as a result of a change in the actua'ial assumpt;cns. the increase in annual pension costs will not be s:gnificant. The assets of the plan exceed the actuanally compLted vale of the Vested benefits at December 31,1977.
22
FLORIDA POWER c: RRoR* Tion (g) Income Taxes-Deferred i.icome taxes result primarily from the use of hberabzed depreciation, accelerated amortization and from the deferral of taxes on the debt component of the allowance for funds used dunng construction and substantially all other current book-tax timing differences as recognized in rates by the Flonda Public Service Commission. The investment tax credits, including job development investment tax credits, have been deferred and are being amortized through credits toincome over the lives of the related property. (2) SINKING FUND REQUIREMENTS The annual senking fund requirement relating to the first mortgage bonds at December 31,1977 is $10.050.000 of which S4,987,500 must be satisfied in cash or an equal principal amount of bonds and the balance may be satisfied with bondable additions. At December 31,1977 the Company had reacquired 55,311,000 principal amount of bonos This amount will be used to satisfy the 1978 sinking fund requirement and the remainder will be used for futu'e sinking func requirements. The balance of the 1978 sinking fund requirement will be met with bondable addittons. The Company is also required to redeem and retire 15,750 shares of the cumulative preferred stock.10% senes, before August 15 of eachyear. (3) EQUITY SECURITIES The changes in equity securities for 1977 and 1976 are as follows. Premium Other Common on Paid-in Preferred Stock Capital Stock Capital Stock (Thousands) 5198,043 S1.443 - $176,920 Balance December .31,1975 . 535.445 129 1.333 - - 51.703 common shares sold .. 10% senes,15,700 shares reacquired . - - - (1.570) 35,574 199,376 1.443 175.350 Balance December 31,1976 . . . 302 3.453 - - 120.806 common snares sold . .. . . (1.575) 10% senes,15,750 shares reacquired . - - S35.876 $202,829_ S1,443 5173.775 Balance December 31,1977 . . .. The Company has 1.000.000 shares of authorized but unissued preference stock,5100 par, and 5,000.000 shares of authonzed but unissued cumulative preferred stock, no par. (4) SHORT TERM DEBT During 1977, the Company had established lines of credit which totaled $100 milhon, with interest payable at the prime rate. With the exception of basic working funds, substantially all cash of the Company represents legally unrestricted compensating balances, maintained in support of these lines of credit which were unused at December 31,1977. On January 1,1978, the Company reduced its lines of credit to S80 milkon. The maximum amount, average monthly amount and the weighted average interest rate of short-term borrowings during 1977 and 1976 were: 1977 1976 (Thousands) 59,000 579.450 Maximum amount . . . 51,667 550.238 Average monthly amount . . . 5.6% 6.3%
- Weighted average interest rate . ... . . .
l
NOTES TO FINANCIAL STATEMENTS (5) INCOME TAX EXPENSE Th3 amounts comprising income tax expense are detailed as follows: 1977 1976 Federal State Federal State , (Thousands) Payable currently (refund) . .. . . $31,851 $4,955 $ (7,413) $1,877 Deferred to subsequent years (a) . . 33,477 3,667 32,678 3,587 ' Deferred income taxes--credits . (6,683) (498) (5,478) (395) Investment tax credit, net of amortization 11,002 - 23,373 - Income tax expense . . 69,647 8,124 43,160 5.069 Taxes included in miscellaneous other income and deductions . 2,500 268 201 (2) Income tax expense in operating expenses . $72,147 $8,392 $43,361 $5.067 (a) The components of income tax deferred to subsequent years were as follows: 1977 1976 Feders? State Federal state (Thoussnds) Excess of accelerated tax over straight-line tax depreciation $20,135 $2,210 $16,223
$1.777 Normalization of construction costs and other property
, related items deducted for tax purposes t657 618 7,739 853 l Repair allowance 6,501 711 4,649 512 Debt component of AFDC . 913 98 3,797 416 Other . 271 30 270 29
$33,477 $3,667 $32,678 $3.587 The provision for Federal income tax, including amounts allocated to miscellaneous other income and deductions, produced an effective income tax rate of 46% in 1977 and 42% in 1976. The effective tax rate is ess than the statutory Federat inccme tax rate of 48% by 2% in 1977 and 6% in 1976 for reasons shown below:
1977 1976 Equity portion of AFDC, which is not taxab!e income . . . .9% 5.7% Excess of tax deduction over cost of land donated to State of Florida 1.5 - Other . . ( 4) .3 2.0% 60% (6) COMMITMENTS AND CONTINGENCIES (:) Construction Program-Substantia 1 commitments have been made in connection with the Company's 1978 . construction program which is presently estimated to be $150 million. (b) Legal Proceedings-Since 1975, the Federal Energy Administration, now part of the Department of Energy, has bien investigating poss:b:e overpricing of light o;l purchased on the " spot" market by the Company during 1973-74 The Company has filed suit against defendants believed to be involved in these pricing irregulant:es. 24
E R CERPORATilN The Company has been named as a defendant in several suits which seek to recover any overcharges wh:ch may E ha ve been passed on to the customer through the Company's fuel adjustment clause, along with related damages. In E me oc qion of the Company and its General Counsel, the Company should prevailin the defense of these suits. not,e e . if not successful, the liability of the Company,in connection therewith,is not c'eemed material.
- p. ARTERLY FINANCIAL DATA (Unaudited) k Tne 'c !owing quarterly information has been prepared without audit.
Three Months Ended 3 March 31 June 30 September 30 December 31 (Thousands) 1977
$171,813 5146,042 S187,140 $151,143 Goerating revenues .
S 23,918 S 12,088 $ 26.210 $ 20,136 Net income
$ 20,528 5 8,699 5 22,840 $ 16,787 Ea'nings on common stock 5 1.44 S .61 5 1.60 $ 1.17 Ea'n:ngs per average common share 1976
$138,945 5120.342 S1E3,862 $138,290 Operating revenues S 18,327 S 10,686 5 17,033 S 13,216 Net income Earnings on common stock S 14,898 $ 7,257 5 13.624 5 9.828 S 1.05 5 .51 S .96 5 .69 Ea'nings per average common share ,
7ne business of the Company is seasonalin nature and it is management's opinion tnat comparisons of earnings for y tne carters do not give a true indication of overall trends and changes in the Company's operations P REPLACEMENT COST INFORMATION (Unaudited) e. Tne impact of the rate of inflation experienced in recent years has resulted in rep!acement costs that are significantly p g' eater than the historical costs reported in the Company's financial statements Estimated replacement cost W , information is disclosed in the Company's annual report on Form 10-K (a copy of which is available on request) p g F :. PORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholde's of Florida Power Corporation: We have examined the balance sheets and statements of capitalization of Florida Power Corporation (a Flonda r corporation) as of December 31,1977 and 1976, and the related statements of incorne, retained earn,ngs and sou ce c' funds used for construction for the years then ended. Our examinat:on was made in accordance w;th generahy accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion. the financial statements ref erred to above present f airly the financial position of Florida Power Corporation as of Decamber 31,1977 and 1976, and the resu'ts of its operations and the source of funds used for construction for the years then ended, in conformity with generally accepted accounting pr:nciples Consistent!y acplied dunng tne periods Tampa, Florida, ARTHUR ANDERSEN & CO-January 30,1978. 2
SUMMARY
OF OPERATIONS 1973-1977 (Thousands) 1976 1975 1974 1973 1977 Operating Revenues . . .
$ 656,138 $ 551,439 $ 504,496 5 404,993 $ 255,045 Operating Expenses:
260,610 248,849 235,138 200,270 75,087 Fuel .... .. .. 190,219 164,752 145,676 138,090 107,411 . Other Operating Expenses . 80,539 48,428 35.307 10,930 19,813 Income Taxes . . . .. Total Operating Expenses . . 531,368 462,029 416.121 349,290 202,311 Operating income . . 124,770 89,410 88,375 55,703 ' 52,734
- 6,675 12,574 17,192 22,954 16,039 Other income (Net) .
Interest Charges (Net) .. (49,093) (42,722) (38,524) (36,829) (24,640) Net income . . 82,352 59,264 67,043 41,828 44,133 Dividends on Preferred Stock 13,498 13,655 13,733 11,785 5,718 Net income after Dividends on Preferred Stock . . $ 68,854 S 45,607 $ 53,310 $ 30,043 S 38,415 Average Shares of Common Stock Outstanding (000) , . 14,292 14,199 13,246 12,436 11,303 Ea:nirgs per Average Common Share $4,82 S3.21 S4.02 S2.42 S3.40 Dividends per Common Share $2.33 S2.145 S1.9875 S1.95 $1.80 OTHER FINANCIAL AND OPERATING DATA 1973-1977 CAPITALIZATION (Thousands) Long-Term Debt S 674,043 $ 724,617 S 661,525 $ 642,808 S 586,971 Preferred Stock 173,775 175,350 176,920 178,500 133,500 Common Stock Equity . . . 481,412 442,165 425,633 370,907 347,967 Total $1,329,230 S1,342,132 $1,264,078 S1,192.215 S1,068,438 ELECTRIC SALES (Thousands of KWH) Residential 6,373,899 5,750,889 5,411,991 5,285,716 5,793,242 Commercial , . 3,526,562 3,298,036 3,187,479 2,935,162 2,836,292 Industrial . . . . 2,813,000 2,690,525 2,479,378 2,421,715 2,349,572 Other 3,221,536 3,077,572 2,864,816 2,671.120 2,594,171 Total ., 15,934,997 14,817,022 13.943,664 13,313,713 13,573,277 RESIDENTIAL SERVICE (Average Annual) KWH Sales per Customer 10,604 9,932 9,701 9,758 11.459 Revenue per Customer $478.12 $416.15 $396.37 S333.37 S248.34 Revenue per KWH . 4.51C 4,19c 4.09 3.42c 2.17c OPERATING DATA
- Investment in Electric Plant (000) . $1,831,680 S1,749,429 S1,623,387 S1,529,801 S1,332,487 Net Generating Capability (KW) . 4,452,000 3,895,000 3,712,000 3,625,000 2.720,000 Net System Peak Load (KW) . 3,899,000 3,530,000 3,281,000 2,989,000 2,862,000 BTU par KWH of Net Output . 10,423 10,136 10,046 10.371 10,662 Fuel Cost per Million BTU $1.51 $1.67 $1.68 S1.51 S.54 Aserage Number of Customers . 669,615 644,846 621,780 605,332 566,935 Number of Employees . 3,546 3,443 3,372 3,478 3,576 26
CRIDA POWER c RP:RArius
- 5:USS OF THE
SUMMARY
OF OPERATIONS In 1976. the increase in fuel decreased. In 1976, the increase in C he'
. :. nes es e.as caused byincreased operatng expenses ref!ects substanta!
increases in ma.ntenance. due to the resump'cn a es as a result of colder weather. u: a g'eate' heat:rg load, and of regu'ar ma ntenance schedu res, anc in
- : co c::ons For the year depreciaton expenses pnmardy due to the estabhshment of nlgher deprec:a on rates
- Ces due to base rate
-/e c :::ne Crysta! R:ver nuc' ear The 1977 increase in other operatng expenses
. r e: < cwatt-hour sa:es due to the was e:tributed to an increase in deprec at cn of
; a f.a ~e summer resu:ted in $13 m#cn. an increase in taxes othe' than T g "evenues. Operating income of $7.2 rnthon and an increase ,n
- -se:: accroximately $1047 matntenance of $5 mdhon. assocta:ed prrnar,'y with the operat,ng expenses of the nuc! ear un.
'~ v: 5.:6 9 ml' on in 1976 The Th:s was part. ally offset by a reducton in 5 :2 s ng these increases were purchased power of $113 mean increasesin Orner locome- In 1976 and 1977, the dec:ine in
" "* ' " other income was caused by a reducten in the
'877 1 '78 a!!cwance for othe' funds used dunng
- e.e e due to construction (See Note 1d to the Financ'ai
- ' c' Ce Ce' Statements fo* an exp:anat:on of the alcwance
. / s: . S 61.8 S13 8 for funds used dunng construct:en )
.e .e due :c
. ;s se d 40 9 31 1 Interest Cnarges in 1976 a-d 1977, interest on
- ~ e eve ues. 2.0 20 short-term debt dechned however. net interes:
5104 7 546.9 charges increased p'.rrardy because of hig er long-term in:erest due to the tssuance of the 8%% f:rst mo*! gage boncs in October 1976 as
- Ece ses For both 1976 and 1977. well as the effect of the decreases in the
- c - Le costs was due pnmanty to a!!cwance for borrowed funds used du' ng r
-~s p: cn since the unit cost of construction.
0 0 '.". : 'OOK PRICE AND DIVIDENDS PER SHARE Price of Common Stock on New York Stock Exchange Dividends Paid 1977 1976 Per Share High Low High Low 1977 1976 First Quarter $32'/s $285/s $303/s $26 S.57 S.525 Second Quarter 34 % 293/4 281/4 25is .57 .525 inird Quarter 33 % 293!s 30 % 26 % .57 .525 Fourth Quarter . 33 % 293/8 32 % 27 % .62 .57 U = de 4 nvestment Plan Available
j O ' :3^, s cont nu'ng to offe'sha'eho'de's the oppoqun ty to buy acd: .ona' common stock imoogh i . ' e r vest ent P;an Th:s P;an alows tne reinvest'"ent of cash dvcerds and opt ona' casn E 3 ~' . 3 o *: 53 000 cuarter y. without ccmrn:ss;ons or aod tiona! cost For more #c* mat.on, vWe to
_ :' 03 -:z.e' Cc'00r aron clo Manuf actu e's Hanove? Trust Comoany. D vidend Re nves: Tent r e:a~ e~ E x 24S50 Church Street Stat:on, New Yo'k. N.Y.10242 [e Oc~c y wm provide its annual report on Form 10-K. without exhib:ts. fded w:th the 09: es C-d Exchange Commission and a detailed ten-year statistical report. Address request
':a G Mace", Secretary. P.O. Box 14042. St. Petersburg, Flonda 33733.
27
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, OFFICERS OTHER THAN DIRECTORS S. A. Brandimore M. F. Hebb. Jr. R. W. Ne+ser Senior Voce President and Vice President. Staff Assistant Voce Presscent and General Counsel. Assistant General Counsel i Corporate Services A. J. Ormston J T. Rodgers 1 : Vice President Assistant Vice Presicent i ;
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$t Pete sturg. Florida e BUSINESS AND SYSTEM MAP p., . ~ -
t The Company renders e' ectr.c serv,ce to a:most 670.000 customers n 375 c.: es
- towns and rural commun. :es. The terr. tory comprises aco osma:ety 20 600 i M square miles w.th a popu'at:on over 2.800 000 located n 32 of 67 Porida counties. In add, tion to the power p' ants ind cated en the t*ac. eiecir,c coaer can
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