ML19339B307

Annual Financial Rept 1976

ML19339B307
Person / Time
Site:	Yankee Rowe
Issue date:	12/31/1976
From:	YANKEE ATOMIC ELECTRIC CO.
To:
References
NUDOCS 8011060695
Download: ML19339B307 (10)

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Yankee Atomic Electric Company Annual Report 7976 i

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YANKEE ATOMIC ELECTRIC COMPANY 20 TURNPIKE ROAD WESTilOROUGil, MASSACilUSITITS 01581 DIR ECTORS

( As of 1)c(crnber 31,197(3)

DONALD G. ALLE N, l'ite President, Nere England Cr1ARLts E. EloNTY, l'ite Prrshlent, Centr.81 Al. tine Flatnc Splem, li'ntborough, AfJuathusats Pouer Company, Augusta, Afaine JollN E (i.151CitoRN,JR., Prrshhnt and diic[fitr(-

U utige Offuer, Eastern Utilitits Associates,130ston,

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Afans.husats horough, ofassarhusetts WILLI AAt II. ElLIS, l'he Prrsident, Northeast Utili-tia Senhe Co., llartford, G naticut don ALD C. SwsritR, Exnutise Vice Pr shhnt, h1 At:RlCE ). Ft i.Dkt ANN, Seri}or i'he Prnhhnf, llog.

Northeaft Utilt H Senice Co., 5$JrifGril, Con-tun flinon Company, Boston, Alassachusats nathat Gi oRos iI. GoWDY, Exttutire l'i e Prerklent, Narc Wmm C Tmmt Pslam Pd'ic hia England c;as and Garric Anoc., Gambridge, c,,,,,, of gn,,,,,,,y,,,, 3,,, y,,,,,, g,,,

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J AstLs E. GRif I-IN, Pinhirnt and d>id[ EArrutirr Ofher, Gntral l'ermont Public Senise Corpor. -

JA%1ES E. TRitstsLt, l' ice Prrsident, Netr Englan.1 tion, Rutland, l'ermont Electric Sprem, tr'estborough, Alanachusats OFFICERS

( As of Deternber 31,197ti)

DONAt D G. ALLEN, Prrsid<nt DoNat U li. VANDLNtil'RGil, Srnior l'he Pruid< nt Ricii ARD II. DUNN, Citrl WLND1 LL P. JOHNSON, I'/ce PrM5hnt JANIES C. NESIMTT, Assift.4nt Trrasurer Inuts iI. litiUIR, Aristant l'he Pinihnt ARss AND R. Sot;cy, Assistant Tre.nunr R. I.tiGii FirzGtR Ai.D, Tarasurrr FREDE Ric E. GREENht AN, dss /stant Clerk

' This reimrt is not to be considered an o!Ter to sell or buy'

, or solititation of an otter to sell or buy any security.,

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YANKEE ATOMIC ELECTRIC COAIPANY Yankee Atomic Electric Company, an cic(tric utility osmpany, was incorp> rated in Alascadiusetts in 1951 under the provisions of the Afassachus(tts utility law which permits two or more electric companies to join in the construaion and opcution of a generating plant to serve their (ommon needs. The organization of the Company was sponsored by cleven New England utihties for the purpose of constructmg and operating New EnglaniPs 6rst nudear power plant. In addition to the airporate p>wer to generate, buy, transmit and sdl clearidty,it has broad related powers,induding the power to ainduct research and assist othen engaged in a similar business The deven sponsoring utilities own the entire common upital stock of the Company and are entitled to and ohhgated to purchase the output of the plant.

The Yankee plant is looted on the Decr6cid Itiver in the lierkshire liills in the Village of 'lowe, Afassa(huset tsfi'he plant was pla(ed in uimmercial operation in 1961 and has ben in full operation since that time except for routine maintenan(c and refueling shutdowns. The unit is rated at 180 megawatts, and has generated more than 17 billion Kwh of clearidty at an average cost of about ten mills per Kwh.

In 19M, the Securities and Enhange Commission authorized the Company to organite a Nudcar Servues thision under the Company (orporate stnature. The Nudear Senices Division has a statTof 175 engineers who provide nudcar engineering services in all aspeas of nudcar pow er plant operation induJing f(eattor Engineering, Environmental Engineering, Operations, Quality Assurance and Construction Scr-vites are performed on a osst basis to other New England nudear power plant projc(ts.

COoi> tits & LYhnANn CI Ri till D I'U'U.IC A000CNI ANTS YANKit A1osuc Es trinic CosfPANY Ti s uionorcn, AI A55AcHU$m S We have examined the balante sheet of Yankee Atomic Eleurit Company as of December 31,1976 and the related statements ofin(ome and retained earnings and thanges in 6nandal position for the Scar then ended. Our examination was made in anonlante with generally auepted auditing stand 2nis and, acu>rd-ingly,induded suth tests of the auounting ruords and such other auditing procedures as we omsidered necessary in the drcumstances. We previously examined and reported upon the 6nancial statements for the 3 car 1975.

In our opinion, the aforementioned 6nancial statements present fairly the 6nanaal position of Yankee Atomic Elcoric Compan~ at December 31,1976 and 1975 and the results ofits operations and the dunges in its hnantial pinition fe the years then ended,in conformity with generally aacpted accounting prindples applied on a ainsisten basis.

lloston, AI nsachusetts Coorrns A IXt4 RAND February 11,1977 3

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YANKEE ATOMIC ELECTRIC COMPANY Balance Sheets December 31 1976 1975 ASSLTS Utility plant, at original cost (Note A)

$48,221,067 $ 17.368,145 less aaumulated provisions for depreciation 29,717,281 27,351,65_0 Total net utility plant 18,503.786 20,016,495, Nudear fuel (Note A):

In process of refmement, conversion, enrithment and fabrication 7,929,695 3,817,915 hlaterials and assemblics in sto(k 683 65,681 Assemblies ir. reactor 9,993,320 9,912,325 Spent nuclear fuel 10,376,336 10,376,336 Gross nudcar fuel 28,300,031 24,202,287 less accumulated provision for amortizat;on of nudear fuel 12,918,724 8,594255 Net nudear fuel 15,361,310 15,608.032 Current assets:

Cash 1,175.786 312,196 Auounts receivable:

From sales of electric energy 1,563,317 1,941,098 Other 1,143,291 912,564 hlaterials and supplies, at average cost 671,825 563,295 159,n10 275,710 Prepayments Total current assets 5,013.289 4,037,863 Advante payment - nudcar fuel (Note D) 1,331,250 1,331,250 Deferreti charges 22,347 21,959

$ 40,251,982 $41,015,599 STOCKilOLDERS' EQUITY AND IJAllILITIES Stoc kholders' equity:

Capital stock, par value $100 per share; 153,100 shares authoriecd and outstanding

$ 15,340,000 $15,340,000 Retained earnings 5,138,612 5,195,800 Total capitalisation 20,478,612 20,535,800 Cuirent I.i2bilities:

Short term debt (Note E) 14,900,000 16,400,000 Aaounts payable 377,062 660,447 A(cructl federal in(ome taxes 455,672 Total current liabilities 15,277,062 17,516,119 Deferred federal income taxes (Note II) 4,038,965 2,676,580 Unamortiicd investment tax (retlits (Note 11) 457,343 287,100 Commitments and contingencies (Notes A F and G)

$40,251,982 $41,015,599 The anompanying notes are an integral part of these fmancial statements.

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YANKEE ATOMIC El.EGRIC COMPANY Statements ofIncome and Retained Earnings Year Ended Decernber 31, 1976 1975 Operating revenue:

Sales of electric energy (Note F)

$18,228,759 $15,004,135 Operating expenses:

Other operation 1,519,986 3,910,892 Fuel, after deducting $167,133 in 1975 for recoverable value of nuclear by products (Note A) 4,324,469 2,955,808 Maintenance 1,402,969 1,(41,755 Depreciation (Note A) 2,367,673 2,280,917 Taxes, other than federal income 706,449 549,756 Federal income taxes (Note 11) 1,931,235 1,207,180 Total operating expensa 15,252,781 12,539,308 Operating income 2,975,97H 2,465,127 Allowar.c for funds used during (onstruction (Note A) 6,608 23,419 Other - net,induding related taxes (275)

(300)

Operating and other income 2,982,311 2,488,246 Interest charges:

Interest on notes payable (Note E) 853,379 1,003,036 Other interest 170 44 Total interest charges 853,549 1fo3,080 Net income $13M and $9.68 per share 2,128,762 1,485,166 Retained earnings at beginning of year 5,195,800 5,206,286 7,324,562 6,691,450 Cash disidends dedared, $14.25 and $9.75 per share 2,185,950 1,495,650 Retained earnings at end of year S 5,138,612 $ 5,195,800 The accompanying notes are an integral part of these nnancial statements.

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YANKEE ATOMIC El. ECTR.C COMPANY Statements of Changes in Fmancial Position Year Ended December 31, 1976 1975 Source ef funds:

From operations:

Net income'

$ 2,128,762 $ 1,185,166 Depreciation 2,367,673 2,280,917 Amortization of nu(lear fuel 4,321,469 2,955,808 Defe'Td federal income taxes 1,362,385 (98,720)

Ikferred investment tax credit (17,900) 118,300 Adjustment of prior years

• investment tax credit - net 218,143 Allowante for funds during construction (6,608)

(23,419) 10,316,921 6,718,052 Net change in short term debt (1,500,000) 1,100,000 Other sources (net)*

6,293 180,818 Total sour (c of funds 5 8,853,217 $11,298.8m Application of funds:

Construction expenditures *

$ 855,037 $ 1,105,482 Nu(lear fuel purchased 4,097,747 3,690,133 Dividends on common sto(k 2,185,950 1,495,650 Advan(c payment - nudcar fuel 1,331,250 Net increaw in working capital excluding short term debt 1,714,483 3,376,355 Total application of funds S 8.853,217 $11,298,870 increase (decrease) in (omponents of working capital:

Cash

$ 833,590 $ (53,168)

Anounts seteivable 149,976 (314,008)

Materials and supplies 108,530 59,437 Prepayments (l16,670)

(18,212)

Accounts payable 283,385 4,070,973 Aurued federal income taxes 455,672 (368,367)

$ 1,714,483 $ 3,376,355

'Intludes allowan(c for funds used during construction.

The aaompanying notes are an integral part of these fmancial statements.

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YANKEE Kf0MIC El.ECTRIC COMPANY Notes to FinancialStatements N<m A - Summary of Accounting Policies:

1.

Acmunting System Prestnbed:

The acmunes of the Company are maintained in accordance with the Uniform System of Accounts prescribed by Regulatory liodies having jurisdiction.

2.

Plant:

The Company capitalizes, as a part of construction costs, a non-cash item of other income called allowance for funds used during mnstruuion at 69 which approximates the pret2x cost of funds.

The Company charges mots of current repairs and minor replacements of plant and properties to maintenante expense acmunts as incurred. Plant retired or otherwise disposed of, together with msts of removal less salvage, is (harged to accumulated provisions for depreciation.

3.

Depreciation:

The Company provides depreciation on a straight.line basis by (harges w hich equal 59 of the cost of depreciable assets (see Note F).

.l. Nudear Fuel:

The total cost of nuclear fuelis amortiied and charged to fuel expense over the estimated life of the nudear wrc, in 1976, amortization of the current core reflects an estimate of zero for ner salvage due to the vendor's cancellation of the Company's nudear fuel repnxe sing wntract. For prior wres, induding 1975, amortization was reduced by the net value of residual uranium and plutonium by product.The residual balance of $3,080,000 at December 31,1976, representing the estimated salvage value of spent fuel, will be (harged to fuel expense ratably over the estimated life of future cores through 1981. During 1976, $8 /,000 was charged to fuel expense. These charges have no effect on the Company's net income since its customers are billed for total operating expenses plus a retum on investment.

5.

Retirement Plan:

The plans in effect for substantially all employees are funded plans and provide retirement benefits, principally fixed and variable annuities. Unfunded prior service costs are estimated to be 5907,000 at December 31,1976. Prior service m ts are being amortized over a 20-year period. Total pension costs in 1976 and 1975, charged princi[> ally to operating expenses and billable services were

$166,630 and $363.900, respectively, and induded the amortization of prior service costs. The increase in pension expense in 1976 resulted principally from an increase in the number and salaries of the employees covered by the plans. The market value of pension fund assets exceeded the actuarially computed value of vested benefus as of April 1,1976, the last valuation date.

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YANKEE ATOMIC ELECTRIC COMPANY Notes to FinancialStatements Non 15 - Federal Income Taxes:

Federal inmme taxes consists of the followirIg components:

1976 1975 Federal inmme taxes

$ 616,750

$1,187/>00 Deferred federal inwn'c taxes 1,362,385 (98,720)

Investment tax ucdits - net (47,900) 118,300

$1,931,235

$1,207,180 Factors a!Tecting federal inmme tax expense are as follows:

1976 1975 Computed "expened" federal income tax expense at 48'V

$ 1.948,799

$ 1,292,182 Tax effect resulting from:

State tax expense 102,731 (44,839)

Amortization ofinvestment tax credits (96,400)

(12,300)

All other differentes (23,898)

(28,163)

Federalinmme tax provisions

$ 1,931,235

$ 1,206,8s0 F.ffective federal inmme tax rate 47.69 44.8%

The Company has adopted mmprehensive interperiod tax allocation (normalization) consistent with regulatory approval. The following table details the com[mnents of deferred federalincome t.rxes.

1976 1975 Reversal of prior years' deferrals

$ (116,228)

$(98,720)

Additional amortiration of nuclear fuel salvage value (see Note A) 1,478,613

$ 1,362,385

${98,720)

Investment tax credits are deferred and amortised over the estimated lives of the property giving rise to the tredits. Investment tax credits-net retlects reductions in federal inmme taxes attributable to such investment tax uedits which have been deferred.

Federal income tax returns for the Company lave been examined and reported upon by the Internal Revenue Setvite through 1974.

Not t C - Nuclear Servhes Division:

The Company, an electric utility subsidiary of two registered holding mmpanies, operates a Nuclear Services Division under the applicable rules and regulations of the Public Utility liohling Company Act for the purpose of furnishing nuclear engineering services, at the cost of such services, to its sponsoring utilities and the organizations in which they may have a substantial financial or mntrattual interest. The cost of suc h servhes and the related revenues are not included in the accompanying statement ofincome and retained earnings. A summary of these is as follows:

1976 1975 Revenues

$8,297,640

$7,132,982 Cost of servi (es:

Salaries and related fringe benetits

$ 1,619,037

$3,727,201 Outside services 1,632,816 1,686,235 Taxes other than income 219,662 154,3 %

l Other general and administratise expenses 1,826,125 1,565,150

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$_8,297/>to

$7,13_2,982

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e YANKEE ATOMIC ELECTRIC COMPANY Notes to FinandalStatements N<rrai D - Advante Payment - Nuclear Fuel:

On Setirember 2,1975, the Company made an advance payment in the amount of $1,331,250 under an agreement to purchase uranium as yellowcake.

Not it li-Short Term llorrowing Arrangements:

Information as to short. term borrowings is summarized as follows:

1976 1975 Amount outstanding at end of year.

Commercial paper

$ 14,900,000 $ 16,400,000 Weighted average interest rate at end of year 1.89 5.99 Maximum amount of bormwings at any month end

$16,300,000 $ 16,400,000 Weighted average borrowings during year

$14,634 /x)0 $ 14,075,000 I!!Teuive weighted average intercsr rate during year 5.89 7.19 The Company has a bank line of credit totaling $20,000,000 which includes a commitment of

$1 ifx)0,000 supporting commercial paju ofTerings, the terms of whic h provide for borrowings at the prime rate or the prime rate plus a frauion thereof. Amounts reported as cash in the auompanying balance sheets are demand deposits which provide operating funds and compensat-ing balantes informally required to support bank borrowings, no amount of which is legally restriued.

Short term debt outstanding at Decemtu 31,1976 has maturities ranging from 10 to 95 days.

Noti. F - Pending Rate Proceedings; 1.lfeuiveJune 2,1975, the Company was permitted to inacase its rates subjec t to possible refund upon fmal determination by the Federal Power Commission (FPC). Additional revenue related to such inucase was $2,100,000 in 1976 and $1,400,000 in 1975 which intreased net income by approxi-mately $1,100AXX) in 1976 and $730,000 in 1975. Witnesses for the FPC Staff and (crtain intervenors base opposed the increase in rates. During 1976 the Presiding Administrative law Judge rendued an initial decision calling for a fixed 9.729 rate of return after deduuing the amount of aaumulated de tred taxes in determining the net investment to which the rate of r

return is applied and no (hange in depreciation rate. Although all parties have appealed the initial dec ision, the Company 2nd its outside legal counsel believe it is unlikely that the return portion of the increased rates will be materially less than auually collected. With respect to depreciation, because of the billing provision of the power wntract any (hange would have no etfeu on net ino>me.

Noti G - Commitments:

The Company has contraus for the fahncation, wnversion and emithment of nuclear fuel through 1999. Slinimism contractual obligations under these agreements amounted to approximately

$1/MM)JMX) at December 31,1976.

The Company h.is contracted to purchase quantities of uranium with delivety between June 1977 and Slay 1980. Payments are schedu!cd as follows:

1977

$ 2,900,000 1978 4,200.000

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1980

_5 J)00JK)O

$12,100,000 9

l YANKEE ATOMIC El.ECTRIC COMPANY Summary of Operations (in thousands exaptpershare data)

_ Year liided December 31, 1976 1975 1974 1973 1972 Operating revenue

$ 18,229

$15/)O1

$12,285

$10.279

$10,280 Operating expenses, excluding federalincome taxes 13,322 11,332 10,147 7,500 7,505 Federal income taxes 1,9J1 1.207 161 763 1,023 Operating income 2,976 2,165 1,677 1,716 1,752 Ot her inwmc 6

23 32 22 37 i

Operating anil other income 2,982 2,188 1,709 1,738 1,789 Interest t h.try,es 853 1,003 1,122 892 600 Net income

$ 2,129

$ 1,185 5 587

$ 816

$ 1,189 Common dividends

$ 2,186

$ 1,196 5 537

$ 882

$ 1,112 Farnings per share

$ 13.88

$9.68

$3.83

$5.52

$7.75 Net generation (millions of Kwh) 1,218 1,193 911 1,016 (et t Alanagement's Discussion and Analysis of'the Summary of Operations The Company tus pow er contra (rs with its stockhohlers throughJune 1991 which provide that these utilities must purchase all of the elettricJ1 output of the plant Jt J cost e({ual to total operating expenses plus a return on investment.

Int reaws in operating revenue of $3,200,000 in 1976 and $2,700jkM1in 1975 were directly related to increased operating expenws and a higher return on investment.

N ut ica r fuel ex pense int reased by s t,369,000 in 1976 due primarily to amortization of S809,000 0f t he salvage value of tiepleted nuticar fuel. During the year 1976, the Company's spent fuel reprocessing contract was cancelled by the fuel pnxevor, and the Company omsidered the most realistic salvage estimate for depleted fuel to be zero. See Note A of Notes to Finantial Statements. The balance ot the int reawin nu(Ic.ir fuel ex pense was due primari'y to a reduction in the estinuted output of the current wre.

Operation expenses increased by $579,(R)0 in 1976 and $550,000 in 1975 due primarily to increased regulatory ruguirements mn(crning security and safety related matters.

4 Federal income t.ixes increawd by $721,000 in 1976 and $i16,000 in 1975 due to increased income. See Note Il of Notes to Financial Statements.

interest tharges decreased by $150,(kK)in 1976 and $118,0tX1in 1975 due to reduced interest rates.

Net income inc reased by $(>t l.000 in 1976 and $s98,0(x) in 1975 due to the increased rate of return allowed, beginningJune 2,1975, under a reviwd power mntrat t filed with the Federal Power Commission. See Note F of Notes to Finantial Statements.

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