ML19341D704
| ML19341D704 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 04/03/1981 |
| From: | Crawford W GULF STATES UTILITIES CO. |
| To: | |
| Shared Package | |
| ML19341D701 | List: |
| References | |
| NUDOCS 8104080460 | |
| Download: ML19341D704 (40) | |
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Description of Business Gulf States Utihties was incorporated in 1925 and is primarily in the business of generating, transmitting, and distributing electricity to 500.000 customers in Southeast Tenas and South Louisiana. The service area estends 350 miles westward from Baton Rouge, La , to a point about 60 miles cast of Austin, Texas. The service area encompasses the northern suburbs of flouston and major cities such as Conroe. Huntsville. Port Arthur, Orange and Beaummt, Ts.; Lake Charles and Baton Rouge, La.
Gulf States also sells electricity to municipalities and rural electric cooperatises in both Texas and Louisiana. In Baton Rouge, GSU supphes steam and electricity to industrial customers through a cogeneration facihty and the company owns and operates a natural gas retail dhtribution system serving 85.000 customers.
As a member of the Southwest Power Pool, the company has the abihty to interchange electricity between the di members serving seven states in the South and Southwest. The company had a peak load of 5604 megawatts in 1980 while it had installed capacity and firm power purchase agreements totalbrig 6602 megawatts providing a 17.8 percent margin.
The company also has a wholly-owned subsidiary, Varibus Corporation, engaged primarily in oil aco gas exploration. Varibus presently is expad<g its operations and has been authorizcd bv the board of directors of Gulf States to spend $10 million to $15 milhon per year for the nest fise years in search of oil and gas. Additional funds could be made available for desclopment and production of discoveries resulting from this search.
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Financia! Ifighlighb 199* 1979 % (hnge S 92,309 5 68,559 34.6 Income Applicable to Common Stock (000) . ..
Earnings per Share of Common Stock Eased on Average St. ares Outstanding. . .. .. . .. . $ 2.05 5 1.74 17.8
$ 1.96 5 1.65 18.8 Assuming Cc. aversion of Convertible Debentures . . . ... . .
$ 1.39 5 1.36 2.2 Dividends per Share .. . . . . ..... . .
44.987 39,310 14.4 Average Common Shares Outstanding (000) . .. .. .
Total Operating Revenue (000) .. . .. .... .. $1,005,126 5 8St.338 16.3 S 836,367 5 749,028 11.7 Operating Expenses and Taxes (000) . .. ... . .
.. .. .. . 500,043 483,195 3.5 Number of Electric Customers ... .... ..
30,585,482 29,741.949 2.8 Total Kilowatt-ilour Sales (000) .. . . . .. . .
5,604,400 5,229,300 7.2 System Peak Load - Kilowatts . . . ... . .. . ., .... .
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1976 1977 1978 1979 1980 1976 1977 1978 1979 1980 EARNINGS PER SHARE DIVIDENDS PER SIIARE 51,005.2 30.6
$864.3 29.7 ~~
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1976 1977 1978 1979 1980 1976 1977 1978 1979 1980 ELECTRIC SALES TOTAL OPERATING REVENUE OllLLIONS OF KWil)
(MILLIONS OF DOLLARS) 1 m
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-- ^ between GSU's financial health and 1980 was a > car in which Gulf F* r States Utilities made tangible
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g growth. The Louisiana Public high interest rates and a painful [. % g. A_ Service Commission Franted a total heat wave that placed a severe increase of $77.3 million in retail
electric rates, while the Public strain on many electric utilities in [ ,.,
7 Utility Commission of Texas the Sunbelt.
" D ,J Ps appr sed a 544 million hike. liigher Earnings per share of common rates for the company 5 85,000 stock increased to 52.05 from $1.74 W -
natural gas customers and ,ncreased i in 1979, when there were 14.4 -f transmission charges for wholesale percent fewer shares outstanding, Ib electncity users also were approved and dividends rose three cents to '
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51.39 per share. The new regular , dividend of 37 cents per quarter yw- 4 j Good progress continued to be was declared for the fourth quarter made on the two major generating of 1980 and produces an annual plants now under construction - __ X the River Bend I nuclear unit near rate of 51.48. As was the case in L[ St. Francisville, La., and the 1980, we hope to continue our Nelson 6 coal unit near Westlake, W. Donham Crawford policy to consider increasing La. Construction on River Bend is dividends approximately every six bilh.on for the first time and the about 30 percent complete, while quarters. company gained its 500,000th Nelson is nearly 50 percent As the year ended, the company electric customer. More than half of finished. Target date for geration passed two milestones. Total the company,s revenues were fuel of the River Bend facility n 1984, operat,ng i revenues surpassed 51 costs on which Gulf States makes and the Nelson coal unit is n Profit. scheduled to go on line in 1982.
, The company obtained rate relief in another constructio, matter, y in Texas and Louisiana during the ,.ork on GSU's new corporate
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/ year as both regulatory commissions recognized the link headquarters reached the midway point late in 1980. The 1,100 k employees who are working in five different buildings in downtown
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Beaumont should be able to move into the new 17-story Edison Plaza g N{ M Y structure this fall. Ng M C 1 w I h C- 3
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Several steps were ta' en during In another financial matter, the in the personnel area, I reported the year to conclude participation board of directnrs decided last fall to you last year on the dnelopment agreements for the River Bend and to set aside $10 million to 515 of a strong managermt team Nelson 6 :: nits. The Rural million annually for the next five equipped to lead the unpany Electrification Administration years for oil and gas exploration. during the decade of the '80s. A (REA) approved a loan agreement Additional funds will be committed few refinemats were made in the covering Cajun Electric Power to develop promising properties and corporate structure during 1980, Cooperative's 30 percent share of GSU's whollv-owned subsidiary, in,luding creation of a new River Bend I. Final approval of the Varibus, is Go !cok;ng for energy. Computer Applicatiens ownership agreement, which cleared related nor%tility properties that Department. The dvails of these the way for funding, came in could be acquired to further personnel matters are discussed January of 1981. Sam Rayburn broaden the ce.npany's financial elsewhere in this report. G&T, which is expected to acquire base. A new contract was negotiated 7 percent of the nuclear unit, als with the International Brotherhood GSU continued to work closely should begin participating in the of Electrical Workers during th: with the Nuclear Regulatory project er 1981. Commission during 1980 tc make year and the mood of the Sam Rayburn G&T became a certain that River Bend is safe. A bargaining is best reflected by the resident NRC inspector is now fact that agreement was reached partner in the Nelson coal unit during 1980 and is paying its 10 stationed at the construction site about a month before the previous and cur quality assurance personnel contract expired. percent of the project's cost. Sam Rayburn Municipal Power are cooperating with him fully. In Further evidence of strengthened Authority, a group of cities which is addition, the River Bend Safety relations between the company and to obtain 20 percent of the Nelson Advisory Committee, composed of its employees came from an unit, is attempting to complete three outside nuclear experts, held
, independent employee survey.
financing arrangements that will several meetings during the year According to the survey results, permit it to begin participation in and provided the company with employees give extremely high 1981. some valuable suggestions and marks to the company, the service insights. it provides,its efforts to help customers save energy and money, and its employee communications programs. Customer attitude p as r. .; g .__.h 1 j ng[w& ^ n n\,#-qfm.L > s. 8 e N- -
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surveys revealed strong support for Gulf States continues to promote board in May and served until his River Bend and favorable opinions conservation and is engaged in retirement from the company on of the company and its service. many innovative programs which December 1. Also in May, B. D. help our customers save energy and Orgain retired as an advisory Our employees performed m ney. At the same time, however, director after many years of remarkably under severe pressure the region that GSU serves is association with Gulf States. Mr. during the summer of 1980 when c ntinuing to grow and we must be Orgam's father had been corporate the entire Southwest sufTered counsel and a director of the through a severe heat wave. On PP .*.d I to provide the needed electncity. company, and B.D.,s retirement several occasions, the company was m rked the first time m 66 years forced to ask its customers to cut Nationally, electricity demand is that an Orgain has not been back on their use of electricity and expeded to doub!c or even tripic by associated with Gulf States. twice we had to institute brief tne gar 2000, even with intensive conservation efforts and sharply The remainder of this report
" rolling blackouts" in tbc Baton reduced economic growth. details the significant events and Rouge area to protect the GSU Electrkity is one of our most activities of 1980. It also reflects system. We could not have gotten the ha;d work and dedication of the through the crisis as well as we did expandable energy forms and can be produced with two fuels that the 4,200 men and women comprising without the splendid cooperation of U.S. has in abundance - coal and the Gulf States work force.
our employees and customers. uranium. Sincerely, The:e was one other event of 1980 v.hich may have a significant The new Administration appears impact en GSU in the future. The firmly committed to both coal and Amerign people went to the polls nuclear power, and I am hopeful in November and made it clear that that the nuclear option will become they want fundamental changes in more attractive in the not-too-the way the federal government is distant future. W. Donham Crawford approaching the nation's problems. Chairman of the Board In closing, I regret to report that and I believe the election results were the Gulf States board of directors , Chief Executive Officer a mandate br Washington to lost two veterans to retirement reduce its pervasive involvement in during the year. Joseph R. " Pat" so many areas of society, including Murphy, who was senior vice energy. I am hopeful that the president for production, joined the nation is finaily on the verge of having a coherent energy policy , ;, E@g which recognizes the importance of , ,ij ,, ,;g.p f' j A y JgI (q conservation but does not consider it the only solution. Nf
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.o Operations The company's severest operating at peak periods. The operational challenges in 1980 were s company's peak months unit posed by Mother Nature. The heat . ;% availability increased from 67 wave of '80 started with a preamble , y; percent in 1979 to 73 percent in L 2,' 1980 and the company has of 100 degree.plus temperatures in late June and continued scaring the
( t. committed itself to a maintenance ip l'N' Hgm
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Southwest with only minor breaks ; , program in 1981 to improse
# availability further.
until mid-September. By the middle 'Jg ,/% o of July, electric generating facilities l Another significant operational at GSU and the other 40 members 8 improvement in 1980 was a of the Southwest Power Pool were i k coordinated attempt to reduce bad straining to the limits. a A. 1 debt losses through tighter credit
,g A combination of the heat, policies and concerted collection
' p~
massive power demand and j .
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~
efforts in the residential and commercial arecs. These efforts equipment failures on the Gulf D v :!- States' and neighboring systems l ,JP ;J ~ - resulted in the recovery of about
$330,000 thai otherwise would have caused GSU to institute short-term L; , ..
rolling blackouts twice in mid-July
~
,] 1 been lost.
[? t A' :" in the Baton Rouge area. The heat Construction storm was interripted by Hurricane , Allen that skirted the GSU service s o m Construction moved briskly' area,1 ut forced one of the Norman R. Lee, President and Chief ahead in 1980 with major company s major suppliers of Operating Omccr. milestones being reached at both natural gas to close a very large the 540-megawatt Nelson 6 coal-production field in South Texas. percent decline in industrial sales fired generating unit under Appeals to GSU customers t
, during the period attributable to th construction near Lake Charles, conserve electncity until the field national recession. 1.a., and the 940-megawatt River was reopened were successful and . Bend I nuclear generating unit near the incident passed with only minor Despite the increase in generation Baton Rouge.
inconvenience. and sales, the company was able to cut back its use of very expensive Nelson 6 neared the 50 percent Gulf States set a peak generation oil for generating electricity, in completion mark by year's end and record of 5604 megawatts at 5 p.m. 1980 GSU used 96 percent gas and remains on schedule for a 1982 in-August 22. That was 375 only four percent oil compared to service date. Although union wage mega uatts higher than the 1979 84 percent gas and 16 percent oil in renegotiations in the Lake Charles peak of $229 megawatts and equals 1979. Although fuel costs passed area spilled over to the Nelson 6 a 7.2 percent increase. However, along to customers continue to rise, project and caused minor delays, the increase is somewhat inflated reducing fuel oil requirements made major portions of the construction because GSU was scheduled t the increase less severe. were completed. Included among transfer nearly 250 megawatts to a these prime components nearing neighboring utihty earlier in the Functionally crucial to any completior; are the immense coal year, but due to techmcal problems e!cctne utihty is having as many
, handling facilities.
in the neighboring system the generating umts as possible When operating at full capacity, transfer had to be delayed until the unit will consume 338 tons of 1981. Wyoming coal an haur. To supply Sales during the third quarter, that amount of coal, a 110-car unit which meluded almost all of the train will move onto the plant site period of the heat wave, showed every other day. The train will total kilowatthour sales increasing f,r.f move car by car to a rotary dumper by >cven percent over the JANA which turns each car upside down comparable period a year earlier. The major contributor was , e 4-@kkMM
.$gher to pcur its 100 tons of coal into a residential sales which were much higher than anticipated. %.g[gywg 3)Q gby The increased residential sales ,. E ((kd "#$
were partially offset by a six . .F'" b ,
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pit where the coal begins its move provisions. Overall, the agreement attention to others. GSU made the to the storage areas and pulverizers has created an amicable work changes requested and is continuing before it i- burned. climate with absenteeism about one its commitment to building River half of what would normally be Bend with safety and quality as its Cars fu five unit trains are being expected. It is anticipated that the prime consideration. acquired and when the generating
Rolling 4-10's schedule will save p, g unit is complete, all fne trains will ne ye r and $220 milhon in be on the rails shuttling coal ,
c nstructs n c sts. between the Gillette, Wyo., mine River Bend Safety Advisory and the plant site. Paralleling the enormous Committee made up of three construction project is the huge task outside nuclear experts. They are Presently, two shifts totaling about 2200 craftsmen are working a of c nstant safety and quahty Dr. Thomas 11. Pigford, a member total of 16 hours daily on the $502 assurance work. The Nuclear of the Presidential commission Regulatory Commission has which investigated the Three Mile million project. established, as a matter of course, a Island accident and former Of even greater magnitude ,s i the full time inspector on the site and chairman of the Nuclear 940-megawatt River Bend I nuclear continues its regular inspections Engineering Department at the unit that passed the 26 percent that check virtually every aspect of University of California at completion point m December. the project. These inspections were Berkeley; Dr. lierbert 11. Woodson, Currently estimated to cost in the rigorously conducted during 1980. chairman of the Electrical range of 52.2 to $2.3 billion, the in a September,1980, meeting with nuclear unit remains on schedule for the NRC that reviewed the prior 12 a 1984 start up. With about 8000 months construction, the NRC yards of concrete being poured commended the company in some monthly, construction is underway areas and suggested increased y: on virtually every building at the [. site. r ~
~
Working under the Nuclear Construction Stabilization " ' ' Agreement, one 2000-member crew works 10 hour shifts for four days ~~ and is then replaced by a secord ., fQ 2000-member crew. The agreement r j . /g S calls for no strikes, no slowdowns, . ,. / 3 streamlined methods for setthng crafts disputes, and other
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Engineering Department at the will be on permanent loan from the A second gasification project is University of Texas at Austint and Edison Laboratory in
Dearborn,
being studied by Westinghouse and Dr. Edward Lambremont, director Mich., and others will be from GSU at the Nelson site. This of the Nuclear Science Center at other sources such as electrical project would supply fuel for a IM-Louisiana State University in Baton manufacturers and the Charles megawatt gas turbir e peaking unit Rouge. Edison Foindation in New Jersey. designated as Nelson 7 (planned for While not actually started in ' "5""CN"" .beginning this year). The committee is an independent Tha project is in the proposal stage advisory board that monitors the 1980, several significant projects and will be submitted to the work at Rivcr Bend with the goal of were under study or engineering Department of Energy for possib'e assuring the unit is built and design during the year. operated in the safest manner The Department of Energy has possibic. A small, but potentially approved a 55 mi!! ion grant for benefici 1, project is a 25-kilowatt Work on GSU's new company engineering designs of a coal wind generator under constructra headquarters is now more than 60 gasification demonstration project near a residential subdivision on the percent complete with plans calling at Nelson Station near Lake Texas Gulf Coast. The project is for occupancy this autumn. The 17- Charles, La. The Combustion prim tily experimental and story structuct was topped out in Engineering / Gulf States project represents an attempt m measure December and work is turning calls for a low BTU gasification the ability of wind p;xrators to toward completion of the interior, plant to be built on the site with an w rk effectively .n the Gulf Coast To be called Edison Plaza, the new end use of providing gas from coal and to measure puntial wind building will consolidate about 1100 for the operation of the 146- generator effects on GSU , headquarters
- employees who are megawatt Nelson 3 generating unit. uansmission and distribution I. now working in five different Studies are underway to evaluate ,
the cost of the plant's synthetic gas equipment. This mstallation also downtown Beaumont locations. The will allow GSU to measure the building willinclude an Edison in comparison to the anticipated e st-effectiveness of such wind-Plaza Museum in the lobby which cost of oil or natural gas in 1985 Powered generators. will house many original production and 1986. If the project is models of Thomas Alva Edison eventually pven the go-ahead for construction, it would be a inventions. Some of the artifacts pioneering efTort and could set the course for future synthetic gas plants.
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Financing Gulf States' 1980 construction Conventional i...ancing of the Preferred stock again was sold in program required a capital outlay year's construction began with a September. The 550 million $100 of 5644 million or about 5197 550 million January sale of par value olTering carries an annual million more than originally preferred stock. The $100 par value dividend of 513.64. anticipated. The extra capital, stock bears an annual dividend of A final common stock sale was demand resulted from delays in $ 11.48. concluded in December when two receiving construction funds from A 5100 million offering of first million shares were issued at or anizations either now mortgage bonds was completed in $10.625 per share.
*'
- Proceeds from each of these sales ic t n n truction and " , ' ' ;g,' *," te 5 were used to reduce short-term debt ownership of the 940 megawatt Percert and, because of their River Bend I nuclear unit being that had been incurred for interim relatively short term to maturity, financing of the 1980 construction built near Baton Rouge, La., and they are considered intermediate program.
the 540 megawatt coal-fired . financmg. Nelson 6 unit under construction An additional 5160 million used near Lake Charles, La. In June, another $75 m.!h.on of :n the construction program came f rst mortgage bonds were sold and through a revolving credit Details of these participations are pn have an 112 percent annual agreement between GSU and a in the following section of this mterest rate. The bonds were consortium of nearly two dozen p - followed by a sale of three m.lh.i on major national and international The net effect of participation in shares of common stock sold at banks ~ the River Bend proje,;t will be to $12.50 per share. Subsequent to the end of 1980, a lower Gulf States' financial major security holder converted obligation to the plam to abeat $1.4 515.2 mih;on of ~1%% convertible billion of the estimated 52.2 to 52.3 debentures into about one million billion cost while assuring shares of common stock at $14.85 GSU of adequate power supplies when they are needed. Per share. Internally generated capital dedicated to construction was $186 million in 1980 with the balance raind through several debt and equity financings. y4[.' p . . , .
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Participation Joint ventur s between The Texas-based Sam Rayburn loan to keep its participation neighboring utilities to share the G&T, Inc., a membar of Sam payments current until REA ownership and output of major Rayburn Dam Electric Cooperative approval of the joint-venture which generating units is becoming is completing its application to the is expected this year. increasingly commonplace. For Rural Electrification Administration GSU, Cajun Electric Power Sam Rayburn Mun. .icipal Power (REA) to acquire a seven percent Cooperative, and Sam Rayburn Agency, an du mem r of the interest in the River Bend unit. If Dam Electric Cooperative, Texas-based Sam Rayburn Dam the agreement is finalized this year, economic advantages of such Electric Cooperative, is arranging as expected, GSU will not have to ventures have forged a series of ancing that will allow it to bear any of the River Bend planned or completed participation construction costs in 1981.
- 9 *
- agreements. The prime element is Nelson 6t. um.Pucent Its participation intues} in th that as electric demand grows for Details are being completed on payments are expected to begm, GSU and the cooperatives, each an ownership agreement through sometime in 1981.
needs to add capacity periodically. which GSU will acquire a 42 Under the circumstances now - Percent interest in a 540-megawatt Rates existing, it is desirable to sharc Cajun Electric Power Cooperative ownership and output in order to coal-fired unit now under The company received a series of build large units that provide construction in Louisiana and rate increases m 1980 that allowed economies of scale. ' scheduled for completion in 1983. GSU to maintain an acceptable
. The contract, which is similar to financial condition despite In January,1981, Cajun Electric. the Cajun agreement to acquire 30 continuing double-digit inflation, Power Cooperative began
, percent of the River Bend unit,is exceptionally high interest rates and participatmg m the construction scheduled for closing April-15,- a large construction program.
and ownership of GSU's 940- g9gi* .. I" March, the Louisiana Pubh.c megawatt River Bend I nuclear power plant. The participation Sam Rayburn G AT, Inc., is Serv.we Commission (LPSC), acquiring a 10 percent interest in responded to a GSU application for
. agreement calls for Cajun to pay the company's Nelson 6 coal-fired an interim rate increase by
. the monthly construction costs on ,
generating plant, a 540-megawatt. authorizing the company the full River Bend until it has paid its 30 unit scheduled for completion in _ $27.1 milhon in additional annual percent proportionate share of the 1982. SRG&T is using an interim revenue Gulf States sought.The total expended to that date. mterim rate increase was the first Thereafter, each participant will ever granted by the LPSC and was pay its prorata share until thc. part of a total 598.9 million rate plant's completion. Under th,is increase request. agreement Caj,un will pay all construction costs, estimated at about $35 million per month, for most of the remainder of 1981. t
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% hen complete data became in a separate case, the company In another rate matter, the asailable for 1979, GSU updated filed in November,1979, for a $3.4 Federal Energy Regulatory the rate filing to indicate the million increase in natural gas rates Commission granted $1.1 million of company was entitled to 5132.9 for the 85,000 customers GSU a 51.2 million GSU request to million. Subsequently, the LPSC serves in the Baton Rouge area. increase transmission service authorized the company $50.2 The LPSC granted that request at charges. The April,1980, decision million in addition to the $27.1 the same time it made its final allowed Gulf States to inwease by million interim increase. Rates decision on the electric rate case. $1.1 million annually re enue based on the full 577.3 million were collected from municipalities and In June, GSU applied to more other organizations that hase power put into effect in November. The than 60 Texas municipalities in the transmitted through GSU final rate order allowed the GSU service area and the Pubhc transmission facilities.
company to increase annual Utility Commission of Texas Louisiana revenue by 21.6 percent %,hile new rates were which provided a rate of return of (PUCT) to increase annual revenue by 584.8 million.The PUCT acted , implemented for all GSU retail 10.77 percent and a return on customers during the year, the in October by authorizing the common equity of 14 percent. company continues to carefully company a $44 million increase Significant in the LPSC occision that was the result of negotiations monitor the effects of inflation, was the authcrization for full cash between GSU and intervenor construction costs and interest rates return on about $190 million of groups. The new rates were put into and intends to act promptly in 1981 Constru Mion Work in Progress effect Oct. 20. The commission if the situation warrants additional related to the building of the River decision had the erfect of allowing a rate adjustments. Unfortunately, Bend I nuclear unit. rate of return of 11.24 percent and the indications are that the a return on common equity of 16.1 company will have to ask for The Louisiana commission also increased rates again this year to authorized the 10-year amortization Percent. Important aspects of the , continue its construction program of GSU's $11.3 million investment decision include authorization for full cash return on about $226 and provide a fair return to
.in the proposed Blue Hills nuclear shareholders.
unit in Texas that was canceled in million of Construction Work in 1978. Progress in the rate base and continuation of the existing fuel adjustment clause. Under that clause, all fuel costs and components of purchased energy costs are estimated monthly and billed immediately. Over or under billing is adjusted in the following month. pw
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Conservation Energy conservation, like solar Economic growth of the Texas. The benefit of conservation is energy,is no total cure for our Louisiana Gulf Coast continues to that for each kilowatt of capacity energy problems. Properly used in expand, and along with it, the need the compary can avoid installing, energy management, though, for additional electricity. Older the shareholder avoids the burden conservation can be an important generating units will have to be of financing it and, of course, the step toward cutting the innds of retired and replaced, but new oil- or customer does not pay for it. energy dependence. The effect of gas-fired capacity can no longer be Our continued commitment to conservation is easily seen in a built be:ause of federal legislation. conservation and load management Department of Energy report to Choices then are limited. The more includes cogeneration, a technology C)ngress that states the nation's 10 expensive technologies of coal and in which GSU has been a pioneer. haviest energy consuming nuclear energy will have to be used. Cogenerating units produce industries since 1972 have reduced Building additional generating electricity and steam for industrial their needs by the equivalent of a capacity is not the sole answer; processes. The company's 1.ouisiana million barrels of oil a day. however,in light of the economic Station began cogenerating steam realities utilities face today, and electricity 51 years ago and But conservation carried to c nservation has become an today supplies 100 megawatts of unreasonable extremes - such as essential part of the energy picture. power and 15 to 19 billion pounds arbitrarily limiting energy to of steam annually. Cogeneration homes, businesses and industry or A few years ago, Gulf States could build 3,000 kilowatts of has proven to be at least 25 percent other forms of energy rationing - more energy efficient than the would tend to deny economic generating capacity, or roughly en ugh capacity to serve 800 conventional generation of steam growth and smother expansion. and electncity. homes, for $1 million. Today, that Such measures should not be
$1 milhon will buy only 1,000 In 1980 the company made a viewed as realistic or desirable kilowatts of capacity to seive about means of attaining the country's commitment to developing an 250 homes. Inflation, environmental additional 300 megawatts of energy future. Ilowever, c sts and technological complexity conservation that utilizes energy as cogeneration in this decade. If the c ntribute to the higher costs of the company is successful in meeting efliciently as practicable can help new umts.
keep the economy healthy and this goal, it is possible that a 300 megawatt unit planned for the late prove beneficial to the entire 1980's could be canceled along with country. That approach is especially important during this time of its construction cost of more than transition from low to high-cost $300 million. energy. , u ~. Properly managed, conservation V % benefits the shareholder, the <
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Development of methods to avoid home energy inspections, the mobile One 1980 project that had little new, high-cost capacity took many home program offers inspections by glamor or fanfare but proved to forms in 1980. These ranged from qualified GSU representatives. This have positive results was the conferences with city and county effort is expected to result in establishment of an ad hoc officials to encourage more energy significant energy cost savings to committee of industry eflicient building codes to classroom customers, as well as a reduction in representatives to exchange demonstra'" '
- e students were peak energy demand on the industrial conservation ideas, taught energy company, studies and results. Such trading of Additionally, t._ .m gS t. Energy Stores in major shopping information has helped many employees conduct residential malls in Beaumont and Baton industries in GSU service area to energy audits checking for ways Rouge are staffed with well traine.1 reduce peak energy requirements.
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- A number of conservation and nspect ons are par f the what they can do to cut home load management projects are company's National Energy Watch energy bills. The stores are currently being evaluated. Under Program %, hen an N.E.W,. energy advertised in the two cities and "*
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- Ch 1 8 GSU to heat water used in the him both the good and bad aspects of the home's weatherization, and The company also is conducting a houses. These systems can be quite details of what needs to be done to study to determine the feasibility of beneficial to customer and company further conserve dollars and energy. GSU entering the " solar energy" alike. A solar water heater is most business. This detailed review is efTective at the time of peak Another program that holds great projecting a solar development plan demand for elecnicity -- a hot potential for 1981 is the newly which could include marketing and summer's afternmn.
instituted National Energy Watch installation of solar hardware. . program for mobile homes. More When the preliminary work is Studies continue in radio control and more residential customers are of residential air condition:rs for completed in 1981, a corollary finding mobile homes as the only brief periods near the time of peak study will be conducted to quantify option open to them for housing. In demand, thus reducing the peak. the solar development plan in some parts of our service area, Technologically, the study is dollars and cents. If the second mobile homes account for well over successful, but much of the ultimate study indicates that the project 60 percent of the new service could be profitable, a management application depends on customer connections. The program stresses plan on implementation will be acceptance. proper site orientation. maximum developed. shading, insulation, , .ather-stripping, storm windows and caulking. fiailar to conventional l
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A load management project being evaluated in Texas relates to " time I of day metering " Customer-volunteers have had special meters installed to measure the amount of electricity used and the time at which it was used. The customer s management structure. virtuany use is then billed at very low rates Human Resources complete at year's end, these data for off peak power and at high rates The company and representatives for on-peak power. The idea is to of the more than 1900 GSU v H be used to eva)uate i '"^ "* E* * *
- j in re atie to provide a rate incentive to shift load employee-members of the each other w.it h the end result be,mg away from the peak demand period. International Brotherhood of equitable compensation to Another load management project Electrical Workers AFL-CIO, is the installation of thermal storage Local No. 2286, reached an maqagernent empoyees W m
- the job s value to the company and units which make ice at night with amicable 25-month contract i m al s Performance.
t off-peak power and then use it to agreement in June. The contract provide cooling during the day- provided for a 12.5 percent wage During the course of 1980, a increase etTective May 25,1980, number of top management Most of these projects require functions were strengthened with with an 8 percent increase sescral summers of evaluation to scheduled for June 21,1981, promotions and additions of new assess accurately their benefit to officers. William J. Cahill, Jr., foll wed by a two percent increase both the customer and the November 1,1981. The contract joined the company as senior vice company. Those that are successful president for construction and expires June 19,1982. will help to create the basis upon Project management in the River which homes and businesses will be For management employees, the Bend Nuclear Group. William J. able to develop improved and more iluman Resources Department e&rse was named vice presidem effective energy use programs in the began a far ranging program in of rates and regulatory afra rs. . i, future. 1980 that has the goal of clarifying James R. Aldridge became sice i . job responsibilities and assuring president of Human Resources, and Virtually all of the companv's advertising and bill inserts in 1980 equitable compensation for the total Anthony F. Gabrielle hined GSU management group. The program in the newly created pasition of vice ? were geared to inform customers , began with the writing of about how to save money and president-comp ter applications.
- c mPrehensive job descriptions fcr
? conserve energy. The broad based the management employees. These Edward J. Serwan was promoted information program covered the descriptions quantify and qualify . to vice president of production, spectrum cf conservation the responsibilities and functions of _ succeeding J. R. ' Pat) Murphy who ' each existing job in the - retired after 44 years with GSU. s ru at u d om as an ene gy conservation tool, to weatherization information, programs for
- weatherizing in low income areas, and the use of energy efficient appliances.
While it is too soon to evaluate the full magnitude and impact of 9- all these etTorts, in combination " ' they represent a balanced approach. Their favorable effects are already reflected in customer attitude
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Diversification Fundamentally, electric utilities Toward that end, the board of flowever, the new funding program are in an era of transition. The era directors has authorized that $10 to willincrease many fold the amount of electric service rates continually $15 million per year be spent over that has been advanced for oil and decreasing because of technological the course of the next fa : years on gas operations. An otlice will be advances has coded. Today, most oil and gas exploration. The opened in llouston because r its electric utilities must face very exploration will be carried out by importance in the worldwiw carch expensive new plant additions, an unregulated, wholly-owned for energy and several potential conversion to fuels other than oil subsidiary. The company's existing a.quisitions are presently being and gas, debilitating inflation rates, subsidiary, Varibus, has been considered. and the upward spiral of fuel costs. involved in a modest oil and gas Varibus continued its own exploration and development . program for oil and gas discoveries GSU had not been immune to pr gram ver the last decade and and development with reasonable these pressures and had embarked has met with moderate success. on a diversification program in the success. Strikes were made in area of oil and gas exploration to Mississippi, Louisiana and Texas and give Varibus reserves of one suppl-ment the company's utility income. The effort is aimed at million barrels of oil and 10 billion cubic feet of natural gas. providing significant earnings and increasing the value of GSU's common stock. Such an increase would help to make construction financing less burdensome and that would be of benefit to shareholders and customers alike. Q. 8 s '] -
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Financial Section Contents Management Responsibility for Financial Statements .. . . . . .. . 20 . Selected Financial Data. . . . . . . . . . . . .... ... .. . . . .. 21 Common Stock Prices and Cash Dividends Per Share . . . . . . . .. . . ... 21 Management's Discussion and Analysis of Resubs of Operations and Financial Condition . 22 Statement of Income . . ... . . .. .. . .. .. .. . . . .. .. 24 Sources of Funds invested in Utility and Other Plant . ... . . . . . . 25 Balance Sheet . . . ...... . . ... ... ,. .. . . 26 Statement of Capitalization ... .. ....... ... . .. . . ... 27 Notes to Financial Statements . . . . . . . . . . . .. . .... . . . . . . . 28 Auditor's Report.. ..... . .. .... . . .. .. . . . 35 Statistical Summary. . .. ..... . . ... .. . .... . .. .. . . . 36 Management Responsibility for Financial Statements Management is responsible for the preparation, internal accounting controls, a test of transactions, integrity, and objectivity of the following financial and other procedures sufficient to provide statements of Gulf States Utilities Company. The reasonable assurance that the financial statements statements have been prepared in conformity with are neither materially misleading nor contain generally accepted accounting principles applied on material errors. a consistent basis and, in some cases, reflect The Board of Directors, through the Audit amounts based on estimates and judgment of Committee of the Board, has general oversight of management, giving due consideration to management's preparation of the financial materiality. statements and is responsible for engaging, subject The Compaay maintains a system of internal to shareholder approval, the independent controls designed to help give reasonable assurance accountants. The Committee reviews with the - that the books and records properly reflect the independent accountants the scope of their audits transactions of the Company and that established and the accounting principles applied in financial policies and procedures are followed. Internal reporting. The Audit Committee meets regularly, control systems are subject to inherent limits in both separately and jointly, with independent recognition of the need to balance their costs with accountants, representatives of management, and ' the benefits they produce. The Company's the internal auditors, to review activities in management strives to maintain this balance. connection with financial reporting. The independent accountants have full and free access Coopers & Lybrand, independent certified public t meet with the Audit Committee, without accountants, are engaged to examine,in ' management representatjves present, to discuss the accordance with generally accepted auditing results of the,ir examination and the,ir opimon on standards, the financial statements of the Company the adequacy of internal accounting controls and and issue a report thereon, which appears on page the quality of financial reporting.
- 35. Such auSing standards include a review of 20 L _ _ . - n .:--.- - - - -----
Selected Financial Data s'or the five years ended December 31,1980 (in thomands except per share amounts and KWH sales) 1980 1979 1978 1977 1976 30,585 29,742 28,892 26,537 23,802 Electric Sales (in Millions of KWII) . Operating Re,enue. . 51,005,226 5 864,338 5 717,958 5 587,760 5 447,739 Operating Expenses and Taxes 378,794 318,494 316,559 257,013 183,190 Fuel . . . . . 136,261 160,882 54,501 30,931 8,481 Purchased power . 169,083 139,331 107,239 84,698 64,519 Other operations and maintenance . 73,422 62,887 62,573 59,882 53,717 Depreciation and amortization . . 78,807 _ 67,434 72,651 65,387 53,215 Taxes - net .. 836,367 749,028 613,523 497,911 363,152 168,859 115,310 104,435 89,849 84,587 Operating Income Other Income and Deductions Allowance for equity funds used during 40,590 27,260 15,710 15,072 13,110 construction . . . .. (5,019) 1,805 (290) 4,443 (445) Other - net . , 204,430 144,375 119,855 109,364 97,252 Income Before Interest Charges. . toterest Charges 99,198 68,784 59,485 53,622 47,078 Long. term debt . . . ,. 20,954 17.539 7,010 2.931 4,403 Other. . . . . Allowance for borrowed funds used during (32,911) (26,129) (16,786) (12,839) (10,640) construction . . . 117,189 84,181 70,146 65,650 56,411 Net Income. .. .. 6,730 24.380 15,622 10,990 10,576 Dividends on Preferred Stock . . Iname Applicable to Common Stock . S 92,309_ $ 68,559 $ 59,156 5 55,074 5 49,681 44,987 39,31G 34,265 32,637 32,214 Average Shares of Cammon Stock Outstanding. Earnings Per Share of Common Stock Based on average shares outstanding . . 5 2.05 5 1.74 5 1.73 $ 1.69 5 1.54 Assuming conversion of convertible 1.96 1.65 1.62 1.65 - debentures ... . . .... .. . 1.39 1.36 1.24 1.15 1.12 Dividends Per Share of Common Stock. .. . i Total Assets . . . . . . .. 52,925,701 52,439,345 52,059,425 51,758,574 $1,599,085 Long-term Debt and Preferred Stock Subject to Maadatory Redemption . . . 51,444,505 51,066,938 5 877,097 5 805,656 $ 705.480 t Common Stock Prices and Cash Dividends Per Share I l For years Ended December 31,1980 and 1979 Cash ! Cash Dividends Dividends Paid Paid High Im Per Share High Law Per Share 1980 19 3 Fourth Quarter S 11.875 $10.125 5 .37 Fourth Quarter 512.500 510.125 S.34 12.250 10.750 .34 Third Quarter 13.625 11.875 .34 l Third Quarter 12.250 .34 ! 12.625 9.750 .34 Second Quarter 13.500 Second Quarter .34 11.750 - 9.000 .34 First Quarter 13.500 11.750 l First Quarter i The Common Stock of the Company is listed on the New York, Midwest and Pacific Stock Exchanges. The approximate number of common shareholders on December 31,1980 was 71,196 21 1 - .
constitute an increasingly large percentage of the Management's Discussion and C mpanys revenue. In 1976, these two expense k' sis of Results P items amounted to 47% of total electric revenue and 1,nanc,ial i Condit, ofionO erations and increased to 57% by 1980. In 1980, fuel costs were 19% greater than 1979, while purchased Results of Operations power costs decreased 15% compared to 1979. The The Company derived 90% of its operating greater availability of both natural gas and the revenue from sales of electricity in both 1980 and Company's generating units in 1980, compared to 1978 and 89% of its revenue from such sales in 1979, acquired less purchased power and fuel oil to 1979. The balance of operating revenue resulted meet customer demand. Unit costs of both gas and from sales of sicam and gas. The changes in oil used for generation increased during 1980. In operating revenue for the three years, when addition, in late 1979, the Company put into compared to previous years, were attributable to service Sabine 5, a gas. fired generating unit, which the following (in thousands): increased the Company's use of low cost natural gas under a long-term contract and provided an 1980 1979 1978 additional 480 megawatts of generating capacity. Gennal Rate In 1979, fuel expense for electric generation Increases 5 61,771 5 31,804 5 14,896 increased $1,871,000, as compared to 1978, due to
""E** increased prices for fuel oil and natural gas even though generation requirements for the same Cost PC cu as An nu ase Pudad pown Recovery 57,536 79,167 74,233 ,000 for 1979, as compared to 21,581 35,409 Sales Volume 41'069 .
1978, was prmcipally caused by a combination of Net load growth, generating units out of service for increase. $140,888 5146,380 $130,198 in:reased preventive maintenance, forced outages, and economics gained from purchasing power increase Over rather than generating power. Previous Period . 16 % 20 % 22% Other operating expenses have risen approximately 20% to 30% annually over the last The general rate increases resulted from electric five years due to increases in gas purchased for rate increases granted to the Company by both the resale; payroll and associated benefit costs; Louisiana Public Service Comm:ssion (LSPC) and the Public Utility Commission of Texas (PUCT). production, transmission and distribution expenses The increases Franted by the LPSC became necessary to serve the increasing nurnber of effective on December 18,1978; March 11,1980 customers; and general adminstrative costs. The and November 17,1980. The PUCT increases major causes for these increases are inflation, were effective on June 28,1978; November 4,1979 increased demand for energy services and the complexity of doing business in a highly regulated . and October 20,1980. envir nment. The LPSC also approved increases in rates for gas customers effective November 17,1980. Rates Maintenance expense increased by 22% in 1980 for sales of steam are not regulated and were over 1979. This growth rate is less than the 29% increased effective January 1,1978 in accordance increase in 1979 ovee 1978. These increases are with contracts with steam customens. primarily due to an extensive preventive ' The 1980 sales volume was slightly more than in maintenance schedule for generating units to 1979 because of a 10% increase in sales of improve their availability in addition to electricity to residential customers, which wu un :heduled outages of certain generating units. slightly ofTset by a 1% decrease in sales to Depreciation charges in 1980 increased industrial customers. In 1979, the increase in sales approximately $7,000,000 over 1979 principally volume was due principally to increased industrial due to Sabine 5 being placed in service on use of electricity. The 1978 increased sales volume December 21,1979. The additional depreciation on was due to unusually cold winter weather, warmer this unit alone amounted to approximately than normal summer temperatures, and increasing 54,800,000 in 1980. numbers of customers. An additional factor in the 1980 revenue increase over 1979 was the recovery The increases in income tax expense from 1979 of previously unrecovered fuel costs. to 1980 and from 1977 to 1978 were due The primary operating expenses for the principally to an increase in taxable income. The Company are fuel for power generation and decrease in income taxes between 1979 and 1978 purchased power. These two categories of expenses was partially due to a reduction in the Federal 22
income tax rate. In addition,in 1979 the Company be obtained through external financing. Such experienced an increase in the allowance for funds external funds are expected to be obtained through used dusg construction (AFUDC) which is short-term and intermediate-term borrowings which included m accounting incom: but is not are expected to be refinanced periodically through r-cognized for Federal income tax purposes. the issuance of additional bonds, common and Preferred or preference stocks of the Company. The Other taxes have increased in the past several amount of each class of securities sold and the years and are expected to continue to rise in the timing of the sales will depend on a number of future. Thne taxes have mereased as a rest lt of factors including market conditions, earnings, and growth and inflation. capitalization ratios. The decrease in Other Income and Deductions The Company's Mortgage and debenture
- "Other-net"in 1980 compared to 1979 was indentures place certain limitations up;n the - principally due to associated income taxes incurred issuance of additional first mortgage bonds and with respec' to gains on sales of uranium. The funded debt, respectively. On the basis of the increase in this category in 1919 compared to 1978 financial position of the Company as of December was due to the sale of certain distribution facilities. 31,19S0, the amount of additional first mortgage The changes in other income for the years 1978 bonds permitted to be issued under the Mortgage and 1977 were primarily due to the gain on the indenture (assuming current interest rates) would be sales of certain eqi,ipment and a portion of the approximately $260.000,000; however, under the Company's uranium concentrates and a loss on more restrictive debenture indenture, the Company abandonment of certain property under would not be able to issue any additional funded construction which occurred in 1977. debt.
Interest charges increased from 1978 to 1980 Similar limitations are placed upon the issuance due to significant increases in the amount of debt of additional preferred stock by the Company's outstanding and higher borrowing costs associated Restated Articles of Incorporation. Based on the with such debt. The large increases in outstanding financial position of the Company as of December < debt were attributable to the Company's significant 31,1980 and due to current high levels of interest construction program. Interest charges are and dividend rates, the Company would not be able expected to continue to increase due to the to issue any additional preferred stock. Company's construction program and the possible The Company's ability to obtaia necessary continuance or high levels of interest rates. additional permanent financing is currently under Pressure principally due to unstable securities Construction Program and Financing markets and high interest and preferred dividend ' Since 1975, the total assets of the Company rates. Should the current high interest and preferred have more than doubled, as a result of the large dividend rates decline, the ability to issue additional on-going construction program. In 1980 and 1979, debt and preferred stock is expected to improve. the Company expended approximately $644 million Financing limitations now and in the near term and $417 million, respectively, for new . may adversely impact the Company's ability to construction. This construction program is expected provide generating capacity needed to meet future to continue into the near future due to the demand ~ continuing groe.h in energy demand within the Company's service area. However, the rate of growth in expenditures is expected to decline. The funding of construction expenditures (see Note 6 to the Financial Statements), by the participants in the jointly-owned facilities which began in July, 1980 and January,1981 is expected to continue throughout 1981, and will help reduce the Company's cash outlay for construction expenditures during 1981. In addition to the construction program, the Company must also periodically retire maturing securities (debentures, bonds and trust obligations) and pay dividends to holders of shares ofits outstanding preferred stock. While a portion of the funds required by the Company for its construction program and its other capital needs is generated internally from operations, the remaining funds must 23
Statement of Income For the ti ree 3 ears ended December 31,1980 (in thousands except per share amounts) 1980 1979 1978 Operating Reienue S 904,871 $769,415 5645,899 Electric . . . . 69,346 68,278 50,513 Steam . . . . .. . . 31,009 26.645 21,546 Gas . 1,005,226 864,338 717,958 Operating Expenses and Taxes 378,794 318,494 316,559 Fuel . . . . 136,261 160,882 54,501 Purchased power . . 111,928 92,631 71,079 Other operations . . . .. . . 57,155 46,700 36,160 Maintenance . . . . . . 73,422 62,887 62,573 Depreciation and amortization . Taxes (Note 9) .. . . Income Current . . . . . 8,199 (7,163) 3,974 16,000 16,911 24,309 Deferred - net . . 19,972 28,446 17,900 Investment tax credits - net 34,636 29,240 26,468 Other . . .. . 836,367 749,028 613,523 168,859 115,310 104,435 Operating income . . ... , Other income and Deductions 40,590 27,260 15,710 Allowance for equity funds used during construction . . (5,019) 1,805 (290) Other - net .. . , 204,430 144.375 119,855 Income Before Interest Charges. . Interest Charges 99,198 68,784 59,485 Long-term debt . . . . . . . 20,954 17,539 7,010 ( Other .. . . . .. . . . . Allowance for borrowed funds used during construction . . . . (32,911) (26,129) (16,786)
'87,241 60,194 49,709 117,189 84,181 70,146 Net income . . . . . . . . . . .. . . . .
15,622 10,990 24,880 Dividen.h on Preferred Stock .. . . . . .. ... S 92,309 $ 68,559 $ 59,156 Income Applicable to Common Stock . . . . . . . 44,987 39,310 34,265 Average Shares of Common Stock Outstanding. . . Earnings Per Share of Common Stock (Note 10) . . . 52.05 51.74 S t.73 Based on average shares outstanding . . . . 1.96 1.65 1.62 i Assuming conversion of convertible debentures . . . .. r The accompanying noies are an integral part of the financial statements. i I 28
Sources of Funds Invested In Utility and Other Plant For the three years ended December 31,1980 (in thouunds) 1980 1979 1978 Proiided From Operations Net income . .. .
$117,189 5 84,181 5 70,146 Principal income items not requiring current funds 73,422 62,887 62,573 Depreciation and amortization. .. ..
16,000 16,911 24,309 Deferred income taxes - net 19,972 28,446 17,900 investment tax credits - net . Equity component of allowance for funds used during construction. (40,590) (27,260) (15,710) 185,993 165,165 159,218 Total provided from operations . Dividends (24,880) (15,622) (10,990) Preferred dividends . (62,299) (53,846) (42,478) Common dividends .. . 98,814 95,697 105,750 Reinvested funds provided from operations . Proiided From Financing Sales of securities 71,422 50,103 69,789 Com ion stock . . . ... . . Preferred stock not subject to mandatory redemption .
- 35,000 -
Preferred stock subject to mandatory redemption. . . 100,000 35,000 - 175,000 150,000 - First mortgage bonds (principal amount). . (39,579) 8,162 56,331 Net change in short-term borrowings . Reduction of long term debt . . (17,133) (11,992) (12,377) 8,811 9,784 51,277 Equipment purchase obligations . Revolvi.ig credit agre: ment . . .. 160,000 - - 458,521 276,057 165.020 Total provided from financing . .. Other Sources and Uses Provided from sales of nuclear fuel 6,379 10,818 56,682 (including capitalized interest) and other property . . . .
- 33,000 (33,000)
Temporary cash investments . . . 39,844 (25,419) 3,761 Other - net (principally changes in working capital) . 46,223 18,399 27,443 lotal prc,vided from other sources and uses. 693,558 390,153 298,213 Expenditures for Utility and Other Plant . . . . .... . 40,590 27,260 15,710 Equity component of allowance for funds used during construction. . . Iniested in Utility arel Other Plant . .. . . . . 5644,148 5417.413 5313.923 Statement of Retained Earnings For the three 3 ears ended December 31,1980 (in thousands) 1980 1979 1978 Balance at beginning of year . . . .. . .. .. . . ... $240,751 5226,038 5209,360 Add (Deduct) Net income . ....... . . . . .. .. 117,189 84,181 70,146 Dividends on preferred stock . . .. . .. . . . . (24,880) (15,622) (10.990) Dividends on common stock . . . . . .. .. . ...... .. (62,299) (53,846) (42,475) Capital stock expense .. . ... ........ . . . . . . (786) - Balance at end of year (Note 2) . ...... ... ..... .. .. . .. $269,975 5240,751 5226,038 The accompanying notes are an integral part of the financial statements. 25
- h. -
)
Balance Sheet Ikcember 31,1980 and 1979 1980 1979 (in thousands) Assets Utility and Other Plant, at original cost 51,978,622 $1,898,363 Plant in service ... . . ... .. ... . . . . Less: Accumulated provision for depreciation .. . ,. .. . .. .. . 674,450 607,428 1,304,172 1,290,935 1,335,237 812,227 Construction work in progress (Notes 6 and 7) . . . 87,934 97,847 Nuclear fuel (Note 7) . .. . . . 22 27,343 2.201.009 Other Property and Investments 22,099 22,327 Subsidiary company (Note 1) . . . .. . 1,455 1,936 Other . . .. . .. . .. .. 23,754 24,263 Current Assets 3,748 1,153 Cash (Note 5) . . .. .. . . Receivables 68,519 75,951 Customers . . . . . . . . 13,387 3,134 Other . . . . . . . . . . .. . . ... .. .
- 24,867 Refundable Federal income taxes . . . . . . . .. .
10,452 Materials and supplies, at average cost .. . . . . . 15,574 34,677 48,351 Fuel stock, at average cost. . .,. . . .. 5,379 7.599 Prepayments and other. .. . . . . . 138,689 174,102 Deferred Charges 5,463 3,900 Unamortized debt expense . . . . . .. . .. 21,158 25,027 Unar.ortized project cancellation costs .. . .. . . . . . 9,294 11.044 Other . .. . . . .. . . . .. . 35,915 39.971
$2,925,701 52,439,345 Capitalization and Liabilities Capitalization (See Statement of capitalization) 5 663,625 Common shareholders' equity . . . . . . ... . .. . .. . .. . S 763,196 Preferred stock 136,444 136,444 Not subject to mandatory redemption . .. . . .. .. .. . ..
75,553 175,553 Subject to mandatory redemption. . . . .. .. . . . ... 1,268,952 991.385 Long-term debt . . . .. ... . .. .. .... .. . ... . . 2,344,145 1,867,007 Current Liabilities - 61,948 13,340 Long. term debt due within one year (Note 4) . ..... . . .. . Notes payable (Note 5) 20,000 - Banks . ...... .. .. .. .. . ... .. . .. .. 94,757 35,178 Commercial paper. .... . .. .. . . .. . . Accounts payable 100,340 56,213 Trade . .. .... . ........... ... .... ... . ...... .. . 2,984 2.509 Subsidiary . . . . . . . . . . ..... ... . .. ... . .. ... .. .. 13,789 14,752 Taxes accrued . . . . . . . . . . . . . . . . . ..... ........ .... . ...... ... 27,484 18,020 Interest accrued. .... .. ........... ... ....... . ... .... 15,735 47,397 Other . . . .. .. ... . . . .. ................... .. .... . ..... 264,993 - 259,453 Deferred Credits 113,354 99,226 investment tax credits .. . . . ... ............ .. . ... . ... . 163,521 143,883 Accumulated deferred income taxes. . . .. ...... .. .. . . .... .. 15,295 4,619 Other . ..... . . .... . .............. . .. 292,170 247,728 24,393 65,157_ Pr.x:ceds from Sale of Nuclear Fuel (Note 7) . . . . . . . . . . . . . .. .. ... The accompanying notes are an integ=1 part of the financial statements.
'26
Statement of Capitalization December 31,1980 and 1979 g,go g i,79 g (in thousands) Common Shareholders' Equity (Notes 2 and 3) Common stock Authorized 100,000,000 shares without par value Outstanding 48,907,824 and 42,721,874 shares, respectively . 5 469,543 5 398,121 Premium and expense on capital stock . . (2,169) (1,094) 25,847 25,847 Other paid.in capital . ... . .. . . . . Retained earnings. . . .. . . . 269,975 240.751 763,196 32.6 663,625 35.6 Preferred Stock (Notes 2 and 3) 5100 par value Current Ibidend Shares Redemption Series Outst:.nding Price Not subject to mandatory redemption 51,173 5108.00 5,117 5,117 5 4.40 . . . 4.5 0 . . . . . . . 5,830 105.00 583 583 4.40-1949 . 1,653 103.00 166 166 4.20 . . 9,745 102.818 975 975 4.44 . . . 14,804 103.75 1,480 1,480 5.00 . 10,993 104.25 1,099 1,099 5.08 . 26,845 104.63 2,685 2,685 4.52 . 10,564 103.57 1,056 1,056 6.08 . . 32,829 103.34 3,283 3,283 7.56 .. . . 350,000 106.80 35,000 35,000 8.52 ..... . .. 500 900 109.95 50,000 50,000 9.96 . .. 350,000 111.60 35,000 35.000 136,444 5.8 136,444 7.3 Subject to mandatory redemption 8.80 . . . . 371,835 107.00 37,1C3 37,183 33,697 107.00 3,370 3,370 9.75 . ... . 8.64 350,000 108.64 35,000 35,000 11.48 ..... 500,000 111.48 50,000 - 13.64 ... .. .. . 500,000 113.64 50,000 - 175,553 7.5 75,553 4.0 Long-Term Debt (Note 4) First mortgage bonds Maturing 1981 through 1985 3%% duc November 1,1981. .. .. . .
- 10,000 3%% due December 1,1982 . . . . . . . ... . .. .. 10,000 10,000 3%% due December 1,1983 ....... . . .. . . 10,000 10,000 Maturing 1986 through 1995 -
212,000 112,000 4% to 14%% . . . . .... . .. ... .. ... .. . .. l Maturing 1996 through 2005 - 415,000 415,000 5% ta 10.15% . . . . ..... .... ... ...... .... .... Maturing 2006 through 2010 - 345,000 270,000 8 %% to 12.3% . . . . . . . . . . . . . . . . . . . ... .... . . Po!!ution control and industrial development bonds - due 2006 and 48,000 48,000 2007 - 5.9% to 7% . . . . . . .... . .. ........ ... ..
- 7,875 Debentures - due 1981 - 4%% . . . . . . . .... .... ..... .
48,381 44,623 Convertible debentures - due 1992 - 7%% . . . . . . . . . . . . . . . 61,061 Equipment purchase obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 25,754 Revolving credit agreement , ... .... . .... ........ . . 160,000 - 1,270,377 992,317 Uramortized premium and discount on debt - net. . . .... ...... (1,425) (932) 1,268,952 54.1 991,385 53.1 52.344.145 100.0 51,867.007 100.0 The accompanying notes are an integral part of the financial statements. 1 27 1 1
Notes to Financial Statements For the three years evded December 31,1980 Revenue. Fuel and Purchased Power. The Company records revenue as billed to its customers
- 1. Summary r4 Significant Accounting on a cycle billing basis. Revenue is not recorded pg;;g;y "
for energy delivered and unbilled at the end of each fiscal period. The costs of fuel, purchased System of Accounts. The accounting records of power and gas distiibuted are charged to expense the Company are maintained in accordance with cs used. Rate schedules of the Company provide the Uniform System of Accounts as prescribed by for adjustments to substantially all rates for the Federal Energy Regulatory Commission increases or decreases in the costs of fuel for (FERC) and adopttd by the Louisiana Public generation, purchased power, and gas distributed. Service Commission (LPSC) and the Public Utility Commission of Texas (PUCT). Income Taxes. The Company follows a policy of comprehensive inter-period income tax allocation where such treatment is permitted far rate-making
, Utility and Other Plant. Utility and other plar.t purposes by regulatory bodies. Deferred Federal is stated at original cost when first dedicated t income taxes result from timing differences in the public service and the amounts shown do not recognition of revenue and expenses for tax and represent reproduction costs or current values. accounting purposes. These defeivd income taxes Costs of repairs and minor replacements are ,
are charged to income and concurrently credited to charged to expense as incurred. The origmal cost accumulated deferred income taxes. of depreciable utility plant retired and cost of removal, less salvage, are charged to accumulated investment tax credits have been deferred and are being amortized ratably over the useful lives of provision for depreciation. The provision for the related property. depreciation is computed using the straight-line method at rates which will amortize the unrecovered cost of depreciab'e plant over the Subsidiary Company. The Company has made estimated remaining service life. _ investments in and advances to Varibus Corpocation and accounts for its investments on the equity basis. Composite depreciation rates were as follows: Employee Benefts. The Company has a contributory pension plan covering all employees 1980 1979 1978 meeting certain age and service requirements. The Electric . . 3.72% 3.76% 3.86% accrued cost of this plan is being funded. Past and Steam . 2.77 2.79 2.91 prior service costs are being funded and amortized y th Company mer a tWygear pcM otai domp'any . 3. 4 3. Earnings Per Share. Earnings per share are based on the weighted average number of common Allowancefor funds Used During Construction shares outstanding during the period. Earnings per and Capitalization ofInterest. Allowance for share assuming conversion of convertible funds used during construction (AFUDC) is a non- debentures are based on the weighted average cash item which is calculated under guidelines number of common shares outstanding plus the prescribed by the FERC and is capitalized as part shares which would have been issued if the of the cost of utility plant representing the cost of outstanding convertible debentures had been servicing the capital invested in construction work converted on the date of original issue, after giving in progress. The rate used in computing AFUDC cffect to the elimination of related interest expense, was 8.07 (net) compounded semi-annually in 1980 amortization of bond discount, and expense of issue and 7.6% (net) compounded effective July 1,1979. (net of related income taxes). The number of Prior to July,1979, the Company used a net rate shares for the latter computation was of 7.5%. approximately 47,992,347,42,599,999 and Such AFUDC has been segregated into two ccmponent part< - borrowed funds and equity 2. Capital Stock and Retained Earnings funds.That portion allocated to borrowed funds .is reflected as an adjustment of interest charges. The changes in common stock, resulting from Interest incurred by certain trusts (see Notes 4 and public ofTerings, shares issued to the Employees
- 7) is included in interest expense in the statement Thrift Plan (Thrift), Automatic Dividend of income with a corresponding amount included as Reinvestment and Stock Purchase Plan (DRIP),
part of the borrowed funds component of AFUDC. Employee Stock Ownership Plan (ESOP), and 28
i conversion of convertible debentures, were as paid after December 31,1976, are limited to the ) I0II0*5; sum of $100,000,000 plus (or minus in the case of I i,so Number of Amount un a deficit) the aggregate amount of net income sh.res abous adil available for dividends, as defined, accumulated 1 Public Offering. . 5,000,000 557,400 after December 31,1976. The retained earnings Thrift. . . . 261,468 2,918 available for payment of dividends as of December DRIP. . . .. 522,440 5,761 31,1980 and 1979, amounted to $170,680,000 and ESOP . . .. 148,988 1,6 12 5157,251,000, respectively (see Note 3 for Conversion of debentures . 253,054 3,701 restrictions on common dividends under the sinking Total . 6,185,950 571,422 fund provisions for preferred stock). 1979 3, Preferred Stock Subject to Mandatory Number of Amount ti= Redemption Shares thousands) In J nuary,1980, the Company sold 500,000 3,500,000 $38,546 Public. .Offering [ .[., 185,493 2,310 shares of $11.48 Divide.1d Preferred Stock and in Thrift . October,1980 the Company sold another 500,000 DRIP. . . . ... 326,206 4,003 298,869 3,654 shares of 513.64 Dividend Preferred Stock. These ESOP 108,886 1,590 issues together with the 58.64 Dividend Preferred Conversion of debentures . . 4,419,454 550,103 Stock issued in 1979 are entitled to mandatory Total . sinking funds sufficient to retire 4% of each series 197s beginning the sixth year after the date of issuance.
$$ D2,7 The Company consummated in January,1979, an exchange of certain series of its preferred stock not Public Offering. . 5,000,000 563,200 147,145 1,945 subject to mandatcry redemption, for shares of its Thrift ' '
$8.80 and $9.75 Dividend Preferred Stock subject DRIP. . ' ... 187,537 2,420 172,052 2,222 to mandatory redemption. As a result of such ESOP .. .
exchang, approximately $25,847,600 (consist i ng Conversion of debentures . . 134 2 5,506,868 569,789 of $6,550,000 and $19,297,000 for 1979 and 1978, Total . . respectively) of paid-in capital was recognized due At December 31,1980, the Company had to the difference in the aggregate par value and reserved approximately 3,102,000 shares of exchange ratios of the series exchanged. The 58.80 common stock to be issued in connection with and 59.75 Dividend series are entitled to Thrift DRIP and ESOP. See Note 4 with respect mandatory sinking funds sufficient to retire 3% of to the conversion in January,1981 of a portion of the shares of each series beginning in 1984. the Company's Convertible Debentures mto additional common stock. The aggregate sinking fund requirements in 1984 and 1985 are $1,217,000 and $2,617,000, At December 31,1980, the Company had respectively. Preferred stock smking fund authorized 6,000,000 and issued 3.120,000 shares Provisions restrict the payment of common stock of $100 par value, cumulative preferred stock, authorized 10,000,000 shares of no par preferred dividends and the purchase of such stock by the stock (none issued) and authorized 20,000,000 Company unless the sinking fund requirements are shares of no par preference stock (none issued). In met. January,1U9. the Company issued 350,000 shares of 59.96 Dividend Preferred Stock not subject to 4. Long-Term Debt mandatory redemption. The Company's preferred The Company's Mortgage contains sinking fund and preference stock not subject w mandatory provisions w hich require, generally, that the redemption is redeemable at the option of the Company make annual cash deposits equal to 1.3 Company upon payment of the redemption price of the greatest aggregate principal amount of first (see Statement of Capita'ization) together with mortgage bonds subsequently authenticated and accrued dividends. delivered or, in lieu thereof, to apply property additions or reacquired first mortgage bonds for Certain limitations on the payment of cash that purpose. The Company hcs satisfied the dividends on common stock are contained in the . mortgage requirements m past years by certify,mg Company's Restated Articles of Incorporation and "available net additions" to the trustee. Sinking indentures. The most restrictive limitation is fund requirements on the first mortgage bonds contained in the Trust Indenture, dated as of which the Company currently plans to meet by September 1,1977. The amounts which may be certifying "available net additions" to the trustee 29
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for each of the five years subsequent to December 5. Short-Term Borrowings . 31,1980, are as follows: On December 31,1980, the Company had agree-1981 - 510,824,000 ments with various banks and banking institutions 1982 - $10,704,000 providing for borrowings as follows (in thousands): 1983 - 510,584,000 Masimum 1984 - 510,464,000 Available Interest other Credit Rate Costs
~
5 36,000 LIiOR % of 14 The 7%% Convertible Debentures may be Rate (a) Commitment Fee converted into the Company's common stock. at a 38,500 115% of 5% of Prime Rate price of $14.85 per share. The closing market price Prime Commitment Fee of the Company's common stock at December 31 Rate (b) 1980 was 511.625. In January, 1981, 515,200,000 128,840 Prime 10% Compensating of the Convertible Debentures were converted into Rate (b) Cash Balance 1,024,000 shar,:s of common stock. (a) London Interbank Offering Rate - 19.375% During 1978, the Company entered into two at December 31,1980. agreements whereby the Company assigned its (b) Varied from 20.5% to 21.5% at December 31, right to purchase turbine generators to certain 1980. trusts. The agreements provided that the trusts Information regarding short-term debt outstanding would make required payments to the turbine is as follows (in thousands): generators' manufacturers and the Company would hfaximum amount purchase such generators from the trusts for an amount equal to the payments made plus certain [;ujstanding
, at any one carrying costs, including mterest which varies with Average daily outstanding . 111,984 79,186 the prime interest rate. Weighted average interest rate for amount out-
. standing at year-end . . . 16.75 % 14.06 %
information regarding the trusts is as follows (in weighted average annual thousands): interest rate (c). . 13.69 % 11.33% Tur-Gen Trm: itso 1579 (c) Calculated by dividing the sum of the Obligation . . . . . . . 525,754 521,496 effective interest for the year by the average daily 3,888 2,621 short. term debt outstanding. Interest Cost . . .. .. Average Interest Rate . . 17.19 % 14.06% cideo. Trme 19so 1979 6. ,lointly-Owned Facilities Obligation . . . 544,118 539,565 Under a joint ownership agreement the Interest Cost.. . 4,125 3,505 Company is the manager of a project to construct
* **E***** } *
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- I at (a) ' " * '- - ~ 10.03 % 9.44 %
(Nelson 6). The Company will eventually hold, as (a) In 1980 and 1979 this varied with the a tenant in common, a 70% undivided interest in prime interest rate with the exception of Nelson 6 with Sam Rayburn Municipal Power the first $37,500,000 which bore mterest at 9%%. Agency (SRMPA) and Sam Rayburn G & T (SRG &D, t At December 31,1980 the Gideon Trust obliga- respectively,g hold 20% andfunded 10%the interests, tion was included in " Current Liabilities -leng- in the um,t. The Company term debt due within one year." total construction costs of Nelson 6 until June, 1980. At that time, SRG&T provided full funding in March,1980, the Company entered into a of the construction costs of Nelson 6 until
$200,000,000 revolving credit agreement which September,1980 when such funding reached bears interest at the prime interest rate (20.5% at SRG&T's proportionate share of cumulative-December 31, 1980). Under *.he terms of the construction costs of the unit. SRG&T then began agreement, the Company can borrow up to the funding its proportionate share of construction limit of the agreemant,in principal amounts of costs. SRMPA is expected to begin funding its 55,000,000 or more, until September,1982. Such share of construction costs later in 1981.
borrowings are payable over a five. year period beginning in 1982. At December 31,1980, the Under another joint ownership agreement with Company had borrowed $160,000,000 under this Cajun Electric Power Cooperative Inc. (Cajun) agreement. and SRG&T, the Company plans to hold as a 30
tenant in common, an undivided interest in a 940- reduced by the participants' futiding of their MW nuclear generating unit (River Bend 1). The interests in the units under construction (see Note planned ownership shares are: Cajun - 30%, 6). In connection with the construction program, SRG&T - 7% and the Company - 63%. The the Company has incurred substantial commitments, some of which are related to 1982 Company is the manager of the project and has and subsequent years. financed the total construction costs through the end of 1980. Cajun began funding total There are sundry claims pending against the construction costs in January,1981 while SRG&T , Company, all of which are incidental to the is expected to begin funding its portion of the rdinary course of bus,i ness and in the opinion of construction costs sometime later in 1981. the Company management and caunsel should not
- 7. Commitments and Contingencies In 1978, the Company entered into an agreement with a trust, whereby the Company sold 8. Employee Benef'.ts it a portion (2,286,000 pounds) of its uranium The costs of the Company's contributory pension inventory for approximately 555,836,000 (the plan for the respective years were (in thousands):
Company's book value). The Company has retained certain options to repurchase the uranium inventory for an amount equal to the trust's cost 19so 1979 197s plus interest and other costs incurred to the date Charged to income 53,506 52,447 52,211 the options are exercis:d. The balance sheet at Charged to December 31,1980 and 1979, included construction and
$24,393,000 and 565,157,000, respectively, other 1,887 1,283 983 recorded in " Utility and Other Plant, at original Total pension expense55,393 53,730 $3,194 cost - Nuclear Fuel" and " Proceeds from Sale of Nuclear Fuel." Interest costs in 1980,1979 and 1978 were 55,994,000,58,320,000 and 560,000 The valuation date of the latest pension respectively. information is January 1 of the subsequent years for each of the plan years ended December 31. The In 1980, the Company sold approximately valuation information as of December 31 for the respective plan years is shown below. Such 1,540,000 pounds of the uranium oxide inventory valuation information is not yet available w,th i
previously held by the trust for approximately 550,800,000. These sales of uranium oxide reduced respect to plan year 1980. the level of" Proceeds from Sale of Nuclear Fuel" 1979 19?: in 1980 approximately 547,100,000. Of the inventory sold,927,000 pounds and 216,000 pounds Assumed rate of return in of the inventory were sold to the participants in determining actuarial River Bend I, Cajun and SRG&T, respectively - Present values of plan benefits 8% 8% (see Note 6). Should it be ultimately determined Actuarial present value of that SRG&T is unable to partivgate in River ac i lated plan benefits Bend 1. GSU will have first opin to purchase the nuclear fuel from SRG&T at its cost to SRG&T Nonvested 2,531 2,005 Pl us carrying charges. Present value of accumulated plan benefits $41,329 536,006 Various state and Federal laws require Net assets available for benefits $50,027 543,835 - governmental permits prior to construction and operation of certain facilities. Substantial Unfunded past and prior expenditures and commitments are made prior to service costs $20,447 518,014 obtaining such permits. Unless and until events occur making such permits ur.ohtainable, no provision is made in the financia statements for The Employee Thrift Plan provides for basic possible losses which could occur if such permits contributions by eligible employees of up to 6% of should not be obtained. their base salaries, which are matched 50% by the Cormany. Supplemental contributions by The 1981 construction program is estimated to empioyees may be made up to an additional 6% of be 5363,000,000, including approximately base salary. These supplemental contributions are ' 577,000,000 of AFUDC. This amount has been not matched by the Company. 31
The Company claims investment tax credits income which were used to reduce the Company's under the provisions of the Employee Stock current tax liability for the respective years were Ownership Plan (ESOP). Under such provisions of (in thousands): the ESOP, cont 6autions may be made by the Company either in cash or the Company's common Excess of accelerated stock in amour.ts up to an additional 1%% of the tax depreciation Company's qualified investments as provided by over straight-line the Internal Revenue Code. depreciation . . 510,865 5 8,955 5 8,454 Cancellation costs of pr posed nuclear For the )cers 1980,1979 and 1978, the umtS expensed for Company generated investment tax credits under tax rposes in the ESOP of approximately 59,000,000,55,400,000
'9 and $2,700,000, respectively. The 1979 ESOP amortized for books (1,594) (136) 10,676 credit has been carried forward to 1980. The 1980 ESOP credit is included in the $57,500,000 Excess of accelerated investment tax credit carryforward for 1980 and is amortizdion of expected to be realized by employees in the future pollution control provided that the Company is able to utilize these facilitie< aver investment credits prior to 1987(see Note 9). straightyne tax depreciation . . . 2,371 2,377 2,549 Items expensed for tax purposes, but
- 9. Federal Income Taxes capitalized as The provisions for Federal income tax were less depreciable plant than the amounts produced by applying the for books . . . . . 4,891 5,762 2,677 Federal income statutory tax rate to pre-tax .
Am rtization of loss income. The reasons for these differences are as on p llution control follows. ' bond refunding for 19s0 ters 191s book purposes only . (47) (47) (47) Statutory Rate . 46.0 % 46.0% 48.0% Gain on Sale of increases Nuclear Fuel . . . . (486) (decreases) resulting from: $16,000 $16,911 524,309 Exclusions from taxable income of allowance for The Company was able to reduce its income tax liability for the years 1980,1979 and 1978 by eq ty un used , utilizing mvestment tax credits. The Company had durmg construction . . . . carryforwards of investment tax credit :n 1980 and (20.1) (20.2) (13.8) 1979 of 557,500,000 and $12,200,000, respectively. The 1979 investment tax credit carryforward was items capitalized fully used in 1980. The 1980 carryforward of for book purposes, investment tax credit will not expire until 1987 and but expensed for will be carried forward to reduce income taxes tax purposes. (2.4) (2.0) (1.6) payable in future years to the extent possible. The investment tax credit utilization limit is increasing Effect of excess progressively, from a maximum of 70% of the book depreciation income tax liability (before application of the over straight-line investment tax credit) in 1980 to 80% in 1981 and tax depreciation. - 4.0 6.5 6.9 90% in 1982 and subsequent years. Other items . . 2.7 .6 (1.6) Effective Tax Rate 30.2 % 30.9 % 37.9 %
- 10. Supplemental Earnings Per Share Data Deferred income tax expense results from timing Supplemental earnings per share for the year differences in the recognition of revenue and ended December 31,1980, were calculated expenses for tax and accounting purposes. The assuming that any shares of common stock issued sources of the differences between book and tax during the year and the additional shares of 32 4
common stock resulti ng from the conversion of to the portion of convertible debentures converted certain of the convertible debentures in January, d sing 1980 and in January,1981, has been 1981 (see Notes 2 and 4) had been outstanding chminated (net of relatrd income taxes). Based on during the entire year ended December 31,1980. such aszmptions, tre earnings per average share in addition,it has also been assumed (1) that the for the year ended December 31,1980, wouG have proceeds of such issuances had been used to reduce been $1.93 using a calculated average of average short. term indebtedness outstanding during approximately 49,931,000 common shares. the year,(2) that the Company's actual finaneirg Assuming conversion of the remaining convertible program for 1980 had not been otherwise a!tered debentures as of January 1,1980, such earnings due to the issuances and sale of such common per averr.ge share would have been $1.88 based on stock, and (3) the annual interest expense and a calculated average of approximately 51,913,000 amortization of bond discount and expense related common shares.
- 11. Quarterly Financial Information (Unaudited)
(la thousands escept per share autounts) Earnings Per Share of Common Stock Based On Assuming Conversion Operating Operating Net Average Shares of 1980 Re,enue Incomme Income Outstanding Coniertible Debentures Fourth Quarter . . . .. $237,303 $44,671 $22,194 5.31 5.30 297,511 54,378 45,292 .85 .81 Third Quarter .. . . Second Quarter . . . .. 242,539 42,125 29,424 .54 .52 227,873 27,685 20,279 .34 .33 First Quarter . . .. .. PP 216,969 31,912 25,835 .52 .49 Fourth Quarter . .. . . 250,891 41,945 31,930 .72 .67 Third Quarter . . . .. 211,185 22,355 13,037 .24 .23 Second Quarter . . ..... .. 185,293 19,098 13,379 .26 .25 First Quarter . . . .. .. During the fourth quarter of 1979, the Company charged to operations through October,1979, and changed its AFUDC rate effective to July 1,1979. a portion in November,1979, was reversed in The effect of this change was to iner ase net December,1979, thereby increasing net income by income by approximately $2,699,00( (5.07 per approximately $2,600,000 (5.07 per share). The share). The FEF : authorized the C npany in Company also changed its composite electric December,1979 to commence amortizing depreciation rate effective January 1,1979, to cancellation costs (net of income taxes) of the Blue conform with the rate allowed by the PUCT. The Hills nuclear units no later than January 1,1980. effect of the change was to increase net income by The FERC had previously authorized such approximately $1,925,000 (5.05 per share) during amortization to begin in January,1979. As a result the four*h quarter of 1979. Previously reported of the F1-RC amending its original order, the ' quarterly financial information was not restated. amortization of the nuclear units cancellation costs
- 12. Supplemental Information on Changing Prices (Unaudited)
The following supplementary information is for all Urban Consumers. Current cost amounts supplied in accordance with the requirements of reflect the changes in specific prices of plant from the Statement of Financial Accounting Standards the date the plant was acquired to the present, and No. 33 for the purpose of providing certain differ from constant dollar amounts to the extent information about the effects of changing prices. It that specific prices have increased more or less should be viewed as an estimate of the approximate rapidly than prices in general. effect of inflation, rather than as a precise measure. The current cost of utility and other plant, which Constant dollar amounts represent historical includes land, land rights, nuclear fuel, plant held costs stated in terms of dollars of equal purchasing for future use, and construction work in progress, power, as measured by th- Consumers Price Index apresents the estimated cost of replacing existing 33
plant assets and was determined by indexing as depreciation, and is reflected as a reduction to surviving plant by the Handy-Whitman Index of net recoverable cost. While the rate-making Public Utility Construction Costs. The current process gives no recognition to the current cost of year's provision for depreciation on the constant replacing utility and other plant, based on past dollar and current cost amounts of utility and other practices, the Company believes it will be allowed plant was determined by applying the Company's to earn on the increased cost of its net investment depreciation rates to the indexed plant amounts. when replacement of facilities actually occurs. Fuel inventories, the cost of fuel used in generation, and gas purchased for resale hau not To reflect properly the economics of rate been restated from their historical cost in nominal regulation in the statement ofincome adjusted for dollars. Regulation limits the recovery of fuel and changing prices, the reduction of net utility and purchaud costs through the operation of other plant should be offset by the gain from the adjustment clauses or adjustments in basic rate decline in purchasing power of net amounts owed. schedules to actual costs. For this reason fuel During a period of inflation, holders of monetary inventories are efTectively monetary assets. assets suffer a loss of general purchasing power while holders of monetary liabilities experience a As prescribed .in statement No. 33, income taxes gain. The gain from the decline in purchasing were not adjusted. power of net amounts owed is primarily Under the rate-making prescribed by the attributable to the substantial amount of debt regulatory commissions to which the Company is w which has been used to finance utility and other subject, only the historical cost of plant is plant. Since the depreciation on this plant is recoverable in revenue as depreciation. Therefore, limited to the recovery of historical costs, the the excess of the cost of plant, stated in terms of Company does not have the opportunity to realize constant dollars or current cost, over the historical a holding gain on debt and is limited to recovery cost of plant,is not presently recoverable in rates only of the embedded cost of debt capital. Statement of Income Adjusted for Changing Prices Conventional Constant Dollar Current cost For the 3 ear er.Jed December 31,1980 llistorical Aserage Aserage Cost 1980 Dollars 1980 Dollars (in abousands) Operating revenue . .. . . ... 51,005,226 51,005,226 51,005,226 Fuel. . . .. 378,794 378,794 378,794 Purchased power .. . . . 136,261 136,261 136,261 Other operations and maintenance . 169,083 169,083 169,083 Depreciation and amortization. .. ... 73,422 152,918 170,516 Taxes . . . ... 78,807 78,807 78,807 Other income and deductions - net. . . (35,571) (35,571) (35,571) Interest charges .. .. . . . .. 87,241 87,241 87.241 888,037 967,533 985,131
- l Net income (excluding reduction to net recoverable cost). .. .. . .... S 117,189 5 37,693* $ 20.095 Increase in specific prices (carrent cost) of utility and other plant held during the year" . .
$ 440,067 Reduction to net recoverable cost . . .. . 5 (189,024) (188,635)
EtTect of increase in general price level . . .. (457,278) Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost . .. . .. .. . (205,846) Gain from decline in purchasing power of net amounts owed . . . . . . . ... . .. . .. 187,666 187,666 Net. . . .. ... .. ... . 5 (1,356) $ (18,180)
- Including the reduction to net recoverable cost, the loss on a constant dollar basis would have been $151,329 for 1980.
** At December 31,1980 current cost of utility and other plant, net of accumulated depreciation was $4,401,795 while historical cost or net cost recoverable through depreciation was 52,727,343 34
Fite Year Comrarison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices (in thousands of aserage 1980 dollars) Years Ended December 31, 1980 1979 1978 1977 1976 Operating resenue. . . . 51,005,226 5981,226 5906,817 5799,224 5648,105 llistorical cost information adjusted for general inflation Net income (excluding reduction to net recoverable cost) . . 37,693 24,534 Net income per common share (after divi-dend requirements on preferred stock) . .28 .17 Net assets at year-end at net recoverable cost . . . 838,147 835,641 Current Cost Information Net income (excluding reduction to net recoverable cost) . . . 20,095 6,24(, Loss per common share (after dividend re-quirements on preferred stock and ex-cluding reduction to net recoverable co:t) . . . (.11) (.29) Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost . . (171,424) (194,232) Net assets at year-end at net recoverable cost . .. 838,147 835,641 General Information Gain from decline in purchasing power of net amounts owed . 187,666 180,108 Cash dividends declared per common share . .. . . . .. 5 1.39 5 1.54 5 1.57 5 1.56 5 1.62 Market price per common share at year-end. ' . .. ... . . 11.10 11.81 14.29 19.23 19.65 Average consumer price index . . . . . 246.8 217.4 195.4 181.5 170.5 To the Shareholders of Gulf States Utilities Company: We have examined the balance sheet and statement of capitalization of GULF STATES UTILITIES COMPANY as of December 31,1980 and 1979, and the related statements of income, retained earnings and sources of funds invested in utility and other plant for each of the three years in the period ended December 31,1980. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion. the financial statements referred to above present fairly the financial position of GULF STATES UTILITIES COMPANY as of December 31,1980 and 1979, and the results of its operations and sources of its funds invested in utility and other plant for each of the three years in the period ended December 31,1980, in conformity with generally accepted accounting principles applied on a consistent basis. COOPERS & LYBRAND Houston, Texas February 12,1981 35
Statistical Summary For the Ave years ended December 31,1980 1980 1979 1978 1977 1976 Electric Department Number of Customers-End of Year Residential . . . . . . 438,560 423,850 407,761 391,031 377,302 Commercial . . . . . . . . 52,731 50,807 48,892 47,352 45,752 Industrial . . . . . . . . 3,414 3,386 3,392 3,379 3,455 Temporary construction . . . . 3,354 1,279 4,304 4,389 3,404 Other. . . . . 1,984 i,873 1,790 1,690 1,626 500,043 483,195 466,139 447,841 431,539 Electrical Sales-Thousands of KWH Residential . . . . . . 5,682,016 5.147,436 5,198,421 4,789,630 4,198,447 Commercial . . . . . 3,969,390 3,759,289 3,738,114 3,486,193 3,170,084 Industrial . . . . . . . . . 14,870,419 14,961,211 14,447,417 13,216,824 11,886,799 Temporary construction . . . .. . . 37,691 44,059 42,358 23,017 14,269 Other. . . . . . . 3,098,910 2,638,490 2,452,228 2,025,933 1,713,762 27,558,426 26,$50,485 25.878,538 23,541.597 20,983,361
. 2,927,056 3,191,464 3.012,993 2,995,619 2,818,637 Steam . . . .
30,585,482 29,741,949 28,891,531 26,537,216 23,801,998 Average Annual KWH Use Per Customer Residential . . ... . . 13,173 12,374 13,009 12.480 11.303 76,529 75,291 77,472 74,875 70,370 Commercial . . . . . . . . . . Industrial . . . . . . . . . . 4,340,461 4,402,946 4,221,922 3,858,927 3,477,705 Electric Energy Output - Thousands of KWH Net Generated . . . . . . . 27,775,374 25,381,996 23,299,011 26,295,869 24,336,097 Net Purchased and Interchanged . . . 4,507,245 5.871,615 1,985,508 1,603,807 789,078 32,282,619 31,253,611 30,284,519 27,899,676 25,125,175 l Peak Load, including Interruptible 5,604,400 5,229,300 5,137,700 4,656,800 4,160,800 Load-Kilowatts . . . . . . . . . . . Total Capability, Including Contract Purchases at Time of Peak Load - 6,602,000 6,169,000 5,737,000 5."'34,000 5,686,000 Kilowatts . . . . . . . . . . . . , 65.2 % 68.2% 67.3 % 68.4 % 68.7 % l Annual Load Factor . . . . . . . . . . . . . l Steam Department Steam Sales - Millions of Pounds . . . . . . 14,906 14,796 15,787 16,987 19,346 Gas Department 85,218 83,910 82,391 80,116 77,260 Number of Customers - End of Year . . . . 9,097,207 9,891,822 10,207,194 9,865,995 9,781,941 Sales - M C F . . . . . . . . . . . . . . . . . . . . 36 9
Directors ' John W. Barton Alvin T. Raetzsch, Sr. President - Jack's Cookie Company Retired Assistant to the Vice President and General Baton Rouge, La. (1970) Manage - U.S. Chemical Division of PPG bdustries, I"C- 'W. Donham Crawford Lake Charles, La. (1975) Chairman of the Board and Chief Executive Officer Monroe J. Rathbone, Jr. Beaumont, Tx. (1977) Medical doctor and parte:r - The Surgical Clinic Edwin Hiam Baton Rouge, La. (1975) Investment Adviser Boston, Mass. (1959) Lorene L. Rogers Dr. Frederic A. Holloway President Emeritus, The University of Texas at Austin Consultant Austin, Tx. (1976) Retired Exxon Vice President - Science and Technology *Nathaniel S. Rogers Baton Rouge, La. (1979) President - First City Bancorporation of Texas, Inc.; Chairman of the Board - First City National Bank of William H. LeBlanc, Jr. Houston President - Baton Rouge Supply Co., Inc. Houston, Tx. (1978) Baton Rouge, La. (1974) Norman R. Lee
- Bismark A. Steinhagen President and Chief Operating Officer Partner - Steinhagen Oil Co.
Beaumont Tx. (1967) Beaumont, Tx. (1974)
- Paul W. Murrill Senior Vice President - Research and Development of James E. Taussig 11 the Ethyl Corporation Real Estate Development Baton Rouge, La. (1978) Lake Charles, La. (1975)
- Executive Committee
( ) Year Elected O 37
Officers Chairman William J. Jefferson (I) [51] Vice President - Rates and Regulatory Affairs W. Donham Crawford (3) [57] Chairman of the Board and Chief Executive Officer Fred C. Repper (2) [53] President Vice President - Public Affairs Norman R. Lee (32) [56] President and Chief Operating Officer Edward J. Serwan (2) [59]
#* '* *"*~'d"**"
Executise Vice Presidents Joseph E. Bondurant (23) [51] Aubrey D. Sprawls (31) [52] ices Vice President - Consumer Serv Executive Vice President - Operations Summa L. Stelly (32) [55] Joseph L Donnelly (2) [51) Vice President - Louisiana Operations Executive Vice President - Finance J. Gary Weigand (3) [45] Edward M. Loggins (22) [$0]inistrative Services Vice President - Nuclear Operations Executive Vice President - Adm Senior Vice Presidents Jasper F. Worthy (25) [52] ices Vice President - General Serv Thomas H. Burbank (2) [59] Senior Vice President and Treasurer William J. Cahill, Jr. (1) [57] Din. .sion b..ce Presidents Senior Vice President - River Bend Nuclear Group John W. Conley (23) [44] Vice Presidents Division Vice President - Wenern James R. Aldridge (1) [50] Vice President - Human Resources 3 ( D s '[ esid)nt aton Rouge William E. Barksdale (23) [49] Arden D. L hmiller (20) [43] Vice President - Technical Services Division Vice esident - Beaumont Philip T. Boerger (2) [56] J. Ted Meinscher (30) [48] h* President - Fossil Projects Division Vice President - Port Arthur James H. Derr, Vice President Jr. Plant
- Power (40) [60hrgineerir.g and ign Des.
WilliamVice Division E. President Richard- bke(30) [51] Charles Dr. E. Linn Draper (2) [39]
. Vice President -Nuclear Technology g .
Anthony F. Gabrielic (1) [53] Leslie D. Ogden (25) [46] Vice President - Computer Applications Secretary Charles D. Glass (31) [52] Bobby J. Willis (19) [45] Vice President -- Texas Operations . Controller - Calvin J. Heben (18) (46] ' Roy E. Evler (22) [56] Vice President - !~inancial Services Assistant Secretary ( ) years of service [ ] age 38-I , . , , - - -
Principal Offices Stockholder Information 285 Liberty Avenue Stock Listing Beaumont, Texas 77701 Gulf States Utilities Company is traded under the symbol GSU on New York, Midwest, Philadelphia Divisions and Pacific Stock Exchanges.
~ Beasmont, Texas 77704 Stock Transfer Agents American National Bank of Beaumont 1540 Ninth Avenue Beaumont, Texas Port Arthur, Texas 77640 M rgan Guaranty Trust Compary Highway 75 North .
Conroe, Texas 77301
. ew Y rL ew York First National Bank of Chicago 446 North Boulevard Chicaga, Illinois Baton Rouge, Louisiana 70802 Registrars 314 Broad Street Lake Charles, Louisiana 70601 First Security Bank of Beaumont, N.A.
Beaumont, Texas Merpn Guaranty Trust Comptny New York, New York Northern Trust Company Chicago, Illinois Form 10-K The form 10-K Annual Report to the Securities and
- Exchange Commission will be available March 31, 1981. Copies of Form 10-K and GSU's 1980
- Financial and Statistical Report can be obtained without charge from Les' lie D. Ogden, Secretary, P.O. Fox 295' Beaumont, Texas 77704.
Notice of Annual Meeting The 1981 annual meeting of shareholders will be - held at 2 p.m., Thursday, May 14,1981, in the company headquarters,285 Liberty Avenue,
. Beaumont, Texas. A formal notice of the meeting.
proxy statement and proxy will be mailed to the common shareholders about April 10,1981. Shareholders are invited to attend, but if they cannot, they are urged to fill out and return their proxy. 39
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