ML20012C638
| ML20012C638 | |
| Person / Time | |
|---|---|
| Site: | Vermont Yankee File:NorthStar Vermont Yankee icon.png |
| Issue date: | 03/15/1990 |
| From: | Tremblay L VERMONT YANKEE NUCLEAR POWER CORP. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| BVY-90-032, BVY-90-32, NUDOCS 9003220309 | |
| Download: ML20012C638 (24) | |
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,g . VERMONT -YANKEE l NUCLEAR = POWER CORPORATION
.- s Ferry Road, Brattleboro VT 053017002 ENGINE IN OFFICE 500 MAIN STREET DOLTON. M A D1740 ,
(508)779-6711 March 15,1990 BVY 90-032 United States Nuclear Regulatory Conunission '
Document Control Desk Washington, DC 20555 Refemnces: a. License No. DPR-28 (Docket No. 50-271)
Subject:
Vermont Yankee Nuclear Power Corporation -
Annual Financial Statements ,
Dear Sir:
In accordance with the provisions of 10CFR50.71(b), enclosed please find one (1) copy of Vermont Yankee Nuclear Power Corporation's certified financial statements for the thme (3) year 1 period ending December 31,1989,
.Should you have any questions regarding this report, please contact this office.
Very truly yours, VERMONT YANKEE NUCLEAR POWER CORPORATION 0, A '~ f.
Leonard A.Tremblay,Jr.
Senior Licensing Engineer cc: USNRC Region I Administrator (with enclosure)
USNRC Resident Inspector - VYNPS (with enclosure)
USNRC Project Manager - VYNPS (w/o enclosure)
ON q\
' 9003220309 900315
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i VERMONT YANKEE NUCLEAR POWER CORPORATION !
- p. FitAncial Statements December 31, 1989, 1988 and 1987 (With Independent Auditors' Report Thereon) i h
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L E Peat Marwick-Certified Public #ccountants
'" One Boston Place Telephone 617 723 7700 Telecopier 617 723 6864 Boston, MA 02100 Telex 617 443 0082 PMMBOST g} b6ependent Auditors' Repon The Stockholders and Board of Directors Vermont Yankee Nuclear Power Corporation:
D We have audited- the accompanying _ balance sheets- of Vermont Yankee Nuclear Power - Corporation as of December- 31, 1989 and 1988, and the related statements of . income and retained earnings and cash flows for each of the years in the three-year period ended December 31, 1989. These financial statements- are the responsibility of the Company's management. Our D' responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial - statements are f ree
$ of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes - assessing the accounting principles used and significant estimates made by management, as well- as evaluat3ng the overall financial statement presentation. We believe that our audits provide a reasonable basis for-our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vermont Yankee Nuclear Power Corporation at December 31, 1989 and 1988, and the results of its operations and cash flows for each of the years in the three-year period ended December 31, 1989, in conformity with generally accepted accounting k- principles.
((f tY & ft.k WLlt February 15, 1990 B:
M E MemoerFirmot Khnveld Poal Marwck Goerdeier
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VERMONT YANKEE NUCLEAR POWER CORPORATION
}y Palance Sheets December 31, 1989 and 1988 I
) Assets 1989 1988-(Dollars in thousands) j Utility plant:
Electric plant, at cost $ 352,082 340,044 l Less accumulated depreciation 148,616 137,207 l
). 203,466 202,837 )
Construction work in progress 125 12.245 Net electric plant. 203,591 215,082 Nuclear fuel, at cost.
89,188 90.858
)- Assemblies in reactor Fuel in process 10,086 4.444 Fuel in stock - 30,515 -
Spent fuel 195,275 162,921 !
294,549 288,738 Less accumulated amortization of burned nuclear
[ ' fuel 246,134 48,415 226,530 62,208 Less accumulated amortization of final core nuclear fuel 3,857 2.959 Net nuclear fuel 44,558 -
59,249 Net utility plant 248,149 274.331 Current assets:
- Cash 1,752 2,718
- Temporary-investments, at amortized cost which approximates market 249 6,711 Special deposit - 2,475 Accounts receivable, primarily from sponsors 11,166 13,156 Income tax refunds receivable 2,142 2,140 Materials and supplies 12,756 12,097 Prepaid expenses 2,721 2,561 Total current assets 30,786 41,858 Deferred charges
Deferred decommissioning costs (note 2) 30,328 24,148 Accumulated deferred income taxes 6,762 4,873 Other deferred charges (note 4) 1,810 9,362 Total deferred charges 38,900 38,383 Long-term funds at amortized cost:
Decommissioning fund (notes 2, 5 and 11) 39,072 28,590
} Postretirement medical benefits fund (notes 5 and 11) 1,155 1,062 Disposal fee defeasance fund (notes 5, 8 and 11) 10,278 -
Total long-term funds 50,505 29,652 l
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$ 368.360 384.224 See accompanying notes to financial statements.
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O O Capitalization and Liabilities 1989 1988 (Dollars in thousands)
Capitalization:
Comon stock equity (note 6):
O Common stock, $100 par value; authorized 400,100 .
shares; outstanding 400,014 shares $ 40,001 40,001 Additional paid-in capital 14,227 14,431 Retained earnings 5.444 5.411 Total common stock equity __59,672 59,843 O Redeemable cumulative preferred stock, 7.48% series;
$100 par value; authorized 300,000 shares; out-standing 83,535 shares in 1988 (note 6) -
8.353 Long-term obligations, net (note 7) 78,657 85,875 138,329 154,071 O Total capitalization Disposal fee and accrued interest for spent nuclear fuel (note 8) 65.806 60,487 Current liabilities:
O Notes payable (note 9) - 6,185 Accounts payable 15,587 26,684 Accrued interest 1,320 1,366 Accrued taxes 718 663 Total current liabilities 17,625 34.898 Accrued decommissioning costs (note 2) 70,570 55,176 Accumulated deferred income taxes 62,842 63,530 Accumulated deferred investment tax credits 9,397 10,815 Unamortized gain on reacquired debt, net 3,689 4.110 Other deferred credits 82 1,137 Total deferred credits 146,580 134,768 Commitments and contingencies (notes 2, 13 and 14)
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$ 368.340 384.224 g
,4 VERMONT YANKEE NUCLEAR POWER-CORPORATION ,
f(
x Statements of Income and Retained Earnings ,
Years ended December 31, 1989, 1988 and 1987
):
1989 '1988 1987 :
(Dollars in thousands) ,
Operating revenues $ 145,585 139,833 143,346 f Operating expenses:
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Nuclear fuel expense 24,109 31,347 26,306 Other operating expense 51,301 52,181 50,306 -
Maintenance 19,446 8,279 14.584 Depreciation- 14,857 14.247 15,255-Decommissioning expense (note 2) 6,778 6,108 5.811 Taxes on income (note 10) 3,364 2,616 3,851'
[ Property and other taxes 5.599 5,511 5,654 Total operating expenses 125,454 120.289 121,767 Operating income 20,131 19.544 21,579
) Other income and (deductions):
J Allowance for equity funds used during construction 219 433 381 Interest 801 604 1,006 Taxes on other income (note 10) (313) (236) (452)
(50) (25) (51)
)
t-: Other, net 657 776 884 Income before interest expense 20,788 20,320 22.463
' Interest expense:
Interest on long-term debt 8,551 8,831 8,970 ,
Interest on disposal costs of spent nuclear fuel'(note 8) 5,319 3,845 3,347 Other interest expense 330 82 1,210 Allowance for borrowed funds used during-construction (1,205) (866) (739)
Total interest expense 12.995 11,892 12,788 Net income 7,793 8,428 9,675 Retained earnings at beginning of year 5,411 5.449 5.494 13,204 13,877 15,169
= Dividends declared:
Preferred stock, $7.48 per share 592 674 728 Common stock, $17.92, $19.48, and $22.48 7.168 7,792 8,992 per share, respectively Retained earnings at end of year 5.444 5.411 5.449 j- $
Net income per average share of common stock 3-outstanding $ 1.EdQ IL33 M e
- See accompanying notes to financial statements.
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VERMONT YANKEE NUCLEAR POWER CORPORATION Statements of Cash Flows g Years ended December 31, 1989, 1988 and 1987 1989 1988 1987 (Dollars in thousands)
. Cash flows from operating activities:
Net income $ 7,793 8,428 9,675 g) Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of nuclear fuel 20,502 27,234 22,770 Depreciation 14,857 14,247 15,255 Income tax accrual 6,162 (2,472) 9,195 Income taxes paid (5,777) (6,220) (1,531)
El Income tax refund received - 6,801 -
Nuclear fuel disposal fee interest accrual 5,319 3,845 3,347 Amortization of deferred taxes (1,770) 7,570 (2,559)
Amortization of deferred investment tax credits (1,418) (2,246) (2,333)
Increase (decrease) in accounts payable (11.097) 8,461 6,819 Other (1,294) (5,662) (153) l> Total adjustments 25,484 51,558 50,810 Net cash provided by operating activities 33,277 59,986 60,485 Cash flows from investing activities:
Electric plant additions (3,367) (5,832) (7,737)
Il Nuclear fuel additions (5,811) (26,366) (23,311)-
Purchase of materials and supplies (5,443) (3,028) (6.783)
Payments to decommissioning fund - (11,186) -
Payments to postretirement medical benefits fund - (1,062) -
Payments to disposal fee defeasance fund (10,000) - -
Reimbursement for emergency response II facility information system 12,001 - -
Other 1,424 1,252 439 Net cash used in investing activities (11,196) (46,222) (37,392)
Cash flows from financing activities:
gg Common stock dividends (7,168) (7.792) (8,992)
Preferred stock dividends (592) (674) (728)
(Payment) issuance of notes payable (6,185) 6,185 (4,000)
Reduction of long-term obligations (7.211) (8,563) (903)
Redemption of preferred stock (8,353) (806) '( 2,024 )
S Net cash used in financing activities (29,509) (11,650) (16,647)
Net increase (decrease) in cash and temporary investments (7,428) 2,114 6,446 gp Cash and temporary investments at beginning of year 9,429 7,315 869 Cash and temporary investments at end of year (note 11) $ _ 2.001 9.429 7.315
[) See accompanying notes to financial statements.
D VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements D' December 31, 1989, 1988 and 1987 (1) Summary of Significant Accounting Policies (a) Regulations and Operations D The Company is subject to regulations prescribed by the Federal Energy Regulatory Comission ("FERC"), the Securities and Exchange Commission
("SEC") and the Public Service Board of the State of Vermont as to accounting, transactions subject to the Public Utility lloiding Company Act of 1935, and securities issues. The Company is also subject to regulation by the Nuclear Regulatory Commission ("NRC") for nuclear D plant licensing and safety, and by Federal and state egencies for environmental matters such as air quality, water quality and land use.
Pursuant to the terms of the Power Contracts and Additional Power Contracts, the Sponsors are obligated to pay the Company each month their entitlement percentage of, amounts equal to the Company's total I fuel costs and operating expenses of its plant, plus an allowed return on equity (since December 1, 1989, 12-1/4%; from May 6, 1988 to December 1, 1989, 12%). Such contracts also obligate the Sponso s to make decommissioning payments through the end of the plant's service life and the completion of the decommissioning of the plant. All g
Sponsors are committed to such payments regardless of the plant's operating level or whether the plant is out of service during the period.
Under the terms of the Capital Funds Agreements, the Sponsors are committed, subject to obtaining necessary regulatory authorizations, to maks funds available to obtain or maintain licenses necessary to keep g
the plant in operation.
See note 14 for information regarding one of the Company's Sponsors, with a 4% ownership interest, having f116 voluntarily for protection under the U.S. Bankruptcy Code.
9 (b) Depreciation and Maintenance Electric plant is being depreciated on the straight-line method at rates designed to fully depreciate all depreciable properties over the lesser of estimated useful lives or the plant's remaining NRC license life which currently extends to 2007. Depreciation expense was equivalent g to overall effective rates of 4.18%, 4.10%, and 4.43% f or the years 1989, 1988 and 1987, respectively.
Renewals and betterments constituting retirement units are charged to electric plant. Minor renewals and betterments are charged to maintenance expense. When properties are retired, the original cost, P plus cost of removal, less salvage are charged to the accumulated provision for depreciation.
(Continued) 1 9
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements b
(c) Amortization of Nuclear Fuel The cost of nuclear fuel is amortized to expense based on the rate of burn-up of the individual assemblies comprising the total core. The Company also provides for the costs of disposing of spent nuclear fuel g at rates specified by the United States Department of Energy (" DOE")
under a contract for disposal between the Company and the DOE. See note 8.
In 1985, the Company began amortizing to expense on a straight-line basis seventy-five percent of the estimated costs of the final unspent j nuclear f uel core which is expected to be in place at the expiration of the plant's NRC operating license in 2007. Ef fective December 1,1989, the Company began amortizing one. hundred percent of these costs in conformity with interim rates authorized by the FERC pursuant to a proposed settlement agreement (see note 3).
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(d) Amortization of Materials and Supplies In 1985, the Company began amortizing to expense a formula amount designed to fully amortize the cost of the material and supplies inventory which is expected to be on hand at the expiration of the plant's NRC operating license in 2007.
3 (e) Long-term Funds The Company accounts for its investments in long-term funds at amortized cost since they have both the intent and ability to hold these investments for the foreseeable future. See note 5.
(f) Amortization of Cain on Reacquired Debt J The dif ference between the amount paid upon reacquisition and the face value, plus any unamortizzd premium less any related unamortized debt expense and reacquisition costs, or less any unamc hized discount, related debt expense and reacquisition costs applicable to the debt redeemed, retired and cancelled is deferred by the Company and
, amortized to expense on a straight-line basis over the remaining life J of the respective security issues.
(g) Allowance for Funds Used During Construction Allowance for funds used during construction (AFUDC) is the estimated cost of funds used to finance the Company's construction work in
, progress and nuclear fuel in process which is not recovered from the Sponsors through current revenues. The allowance is not realized in cash currently, but under the Power Contracts the allowance will be recovered in cash over the plant's service life because of higher revenues associated with higher depreciation and amortization expense, q AFUDC was capitalized at overall effective rates of 7.87%, 7.72% and 7.11%
for 1989, 1988 and 1987 respectively, using the gross rate method.
(Continued)
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements
)
(h) Decommissioning The Company is accruing the estimated costs of decommissioning its plant over the pla6t's remaining NRC license life. Any amendraents to these estimated costs are accounted for prospectively. See note 2.
(i) Taxes on Ince,me The tax ef fectsf of timing dif ferences are accounted for in accordance with the rate-making policies of the FERC. Provisions for deferred income taxes reflect the tax effects of all timing differences.
) Investment tax credits have been deferred and are being amortized to income over the lives of the related assets. (
(j) Cash Equivalents i For purposes of the Statements of Cash Flows, the Company considers all i highly liquid short-term investments with a maturity of three months or less to be cash equivalents.
(k) Reclassifications .
Reclassifications have been made to prior years financial- statements sto conform with the current year presentation of long-term funds and the disposal fee and accrued interest for spent nuclear fuel.
}
(2) Decommissioning i The Company ac'crues estimated decommissioning costs for its nuclear plant based on arP' updated 1981 study by an independent engineering firm which assumes that decommissioning will be accomplished by the prompt removal
] and distanYling method. This method requires that radioactive I materialf be removed from the plant site ~ with all buildings and /
f acilities
- dismantled immediately af ter shutdown. The study estimates that approximately six years would be required to dismantle the plant at shutdown',~ remove wastes and restore the site. The original study
] which estimated total decommissioning costs of $72.8 million in 1981 dollars was' updated in connection with the 1985 FERC rate case to an estimate of,$96.8 million in 1984 dollars. In February 1989, a second decommissioning study was completed which estimated total decommissioning costs of approximately $220 million in 1988 dollars.
The Company has implemented rates based on a settlement agreement with
) the FERC which allowed $190 million, in 1988 dollars, as the estimated decommissioning costs. This allowed amount is used to compute the .
Company's liability and billings to the Sponsors. Based on an assumed j inflation rate of 6% per annum the estimated cost of decommissioning at the expiration of the plant's NRC operating license in 2007 is approximately $575 million. The present value of the prorata portion
) of decommissioning costs recorded to date is $70.6 million.
(Continued) i
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' 4 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements D
Billings to Sponsors for estimated decommissioning costs commenced during 1983, at which time the Company recorded a deferred charge for the present value of the prorata portion of decommissioning costs 9 applicable to operations of the plant for _ prior periods. Current period decommissioning costs- not funded through billings to Sponsors or earnings on decommissioning fund assets are also deferred. These deferred costs will be amortized to expense as they are f unded over the remaining life of the NRC operating license.
D On January 1,1993, and each four year period thereaf ter, the Company must revise its schedule of future annual decommissioning f und collections to reflect historical dif ferences between assumed and actual rates of inflation, and historical dif ferences between assumed and actual rates of earnings on decommissioning fund assets. Changes in Federal corporate income tax laws and rates require immediate revision in the E decomissioning funding schedule and subsequently in billings. As a result of the 1985 FERC rate case, the Company is also required to update its decommissioning cost estimate at least every four years.
In March, 1988, the Internal Revenue Service issued the final regulations implementing Section 468A of the Code and delineating the criteria for O establishing a qualified decommissioning trust, deposits into which would be allowed as a current deduction for tax purposes. In accordance with these regulations, the Company established the Vermont Yankee Decommissioning Trust, pursuant to an Indenture of Trust, dated March 11, 1988, and deposited therein $12,106,000, being the amount of g decommissioning costs collected in 1988 and prior years. In July, 1988, the Internal Revenue Service issued its letter, pursuant to said regulations, establishing the Ruling Amount allowable for each year since 1984 Based on this letter, the Company filed amended returns for the years 1982 and 1984 through 1986.
g Cash received f rom Sponsors for plant decomissioning costs is deposited into the Decommissioning Trust in either the Qualified Fund (i.e.,
amounts deductible pursuant to the IRS letter) or the Non-Qualifled Fund (i.e. , excess collections pursuant to FEAC authorization which are not currently deductible). Funds held by the Trust are invested in high grade government securities or certificates of deposit of banking g institutions with assets in excess of $100 million.
(Continued) 9 O=
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- 5 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (3) TERC Rate Case Settlement On January 2,1990 the FERC issued an order granting the Company's motion to implement rates based on the proposed settlement agreement on an interim basis, subject to refund, effective as of December 1, 1989.
J The proposed settlement agreement specifies a return on equity of 12.25% as compared to the 14.25% the Company requested; an allowance for the estimated cost of decommissioning of $190 million in 1988 dollars, ao compared to the $212 million the Company requested; and that the Company will be allowed to amortire 100% of the final fuel
-. core as compared to the 75% previously allowed.
(4) Other Deferred Charges Approximately $8.1 million of the $9.4 million in total other deferred charges at December 31, 1988 relate to payments made to contractors for O the construction of an emergency response f acility inf ormation system.
The Company financed the construction of the project which, in December of 1989, was purchased at cost of approximately $12.1 million by a
- third party and is being leased to the Company under an operating lease.
(5) Long-term Funds
-3 The book value and estimated market value of long-term fund investment securities at December 31 follows:
1989 1988 Book Market Book Market
@ value value value value (Dollars in thousands)
Decommissioning fund:
U.S. Treasury obligations $ 7,590 7,590 24,697 24,699 U.S. Government agency O obligations 5,722 5.779 - -
State of Vermont obligations 25,140 25,140 - -
Money market funds 620 620 2.853 2,853 Bank certificates of deposit - - 1,040 1,040 39,072 39.129 28,590 28,592 O Postretirement medical benefits fund:
- U.S. Treasury obligations 1.155 1,155 1,062 1,062 Disposal fee defeasance fund
Corporate bonds and notes 10,062 9,941 - -
g Money market funds 216 216 - -
10,278 10,157 - -
Total long-term fund investments $ 50.505 50.441 29.652 MM .
(Continued)
6 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements Maturities of obligations, bonds and notes (f ace amount) at December 31, 1989 are as follows (dollars in thousands):
Within one year $ 39,608 2- Two to five years 5,041 Over five years 5,020
$ h24542
! (6) Capital Stock l If cumulative preferred stock is outstanding, the payment of cash dividends and distributions on Common Stock are limited when Common Stock Equity (as defined) is less than 25% of Total Capitalization (as defined). This excludes redemptions which require 30% Common Stock Equity after redemption. At December 31, 1989, Common Stock Equity was 43.14% of Total Capitalization and the Company had retained earnings of
$5,444,000 available for payment of dividends on Common Stock.
The 7.48% series preferred stock was retired in December of 1989. The shares were redeemed in two phases; 10,000 shares in March of 1989 at
- $96.75 per share as a mandatory sinking fund redemption, and 73,535
= shares at $103.23 per share along with accrued dividends to the
- redemption date.
I The changes in additional paid-in capital and preferred stock for 1989 are
- as follows:
1 Additional paid-in Preferred capital stock (Dollars in thousands)
Balance at December 31, 1988 $ 14.431 8.353
-3 (1,000)
Redemption of preferred stock at $96.75 32 Redemption of preferred stock at $103.23 (236) (7.353)
Balance at December 31, 1989 $ 14.227 -
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(Continued) 0 3
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s VERMONT YANKEE NUCLEAR POWER 00RPORAT10N Notes to Financial Statements (7) Lont-Term Obligations A summary of long-term obligations at December 31, 1989 and 1988 is as follows:
3 1989 1988 e
(Dollars in thousands)
First mortgage bonds:
Series A - 9.625% due 1998 $ 10.485 10.485 O series B - 8.50% due 1998 1,332 1,332 Series C - 7.70% due 1998 3.695 3,695 Series D - 10 1/8% due 2007 27,259 27,259 Series E - 9 7/8% due 2007 5.703 5,703
- Series F - 9 3/8% due 2007 5.704 5.704 Total first mortgage bonds 54,178 54,178 Unamortized premium on debt 62 69 54,247 Net first mortgage bonds 54.240 Commercial paper issued under Eurodollar Credit Agreement - weighted average interest rate
.O of 8.58% and 8.50% at December 31, 1989 and 1988 24.417 31.628 Total long-term obligations $ 78.657 85.875 g The first mortgage bonds are secured by a first lien on utility plant, exclusive of nucicar fuel. Such bonds are further secured by a pledge of the Power Contracts (except for fuel payments) and the Capital Funds Agreements with Sponsors. Annual sinking fund requirements for Series A, Series B and Series C first mortgage bonds will be met by depositing bonds held in treasury. The bonds held in treasury will be suf ficient O t meet the sinking fund requirements for the series A and B bonds through 1994 and 1995, respectively. A cash sinking fund payment in the amount of $594.000 will be required for the Series C bonds in 1994. Cash sinking fund requirements for Series D. Series E and Series F first mortgage bonds will commence in 1998.
O The company has a $75,000,000 Eurodollar Credit Agreement which expires on July 19, 1990. The Company has issued commercial paper under this Agreement with weighted average interest rates of 9.26% for 1989 and 8.15% for 1988. Payment of the commercial paper is supported by the Eurodollar Credit Agreement which is secured by the nuclear core of the Company's generating facility. Although the agreement expires on July
-O 19, 1990, the Company has effectively refinanced the outstanding obligation with the issuance of the series G first mortgage bonds which
- expire in 1995. Accordingly, the commercial paper has been classified as long-term debt at December 31, 1989. j (Continued)
O 1
l p3 8 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements The Company had a $40,000,000 Nuclear Fuel Sales Agreement with Vernon Energy Trust which was terminated by the Company in October of 1989.
This agreement permitted the Company within that limit (i) to finance its nuclear fuel requiremants and repay the same as the fuel was
> consumed, or (ii) to obtain term loans payable when the agreement terminated. The Trust financed its nuclear fuel requirements through the issuance of commercial paper supported by a revolving credit agreement or by direct borrowings under that agreement. The Company l secured its borrowings from the Trust by a pledge of the fuel payments l payable under its Power Contracts with Sponsors. During 1988 the
) average amount of commercial paper outstanding was $1,120,000 with a weighted average interest rate of 6.99%; there was no commercial paper '
outstanding under this agreement in 1989.
l In February of 1990 the Company issued $25,000,000 of Series G S.94% first mortgage bonds stated to mature on January 1, 1995. The bonds shall be ;
D issued under, shall have the terms and provisions set forth in, and i shall, ratably and equally with the bonds of other series outstanding I thereunder, be secured by an Indenture of Mortgage dated as of October !
1, 1970 between the Company and the Trustee, as modified and i supplemented by eleven indentures supplemental thereto. The Company will apply the proceeds of the sale of the Bonds to retire other )
O long-term obligations. l l
(8) Disposal Fee for Spent Nuclear Fuel j l
The Company has a contract with the United States Department of Energy j
(" DOE") for the permanent disposal of spent nuclear fuel. Under the I terms of this contract, in exchange for the one-time fee discussed ;
below and a current fee of 1 mil per kwh of generation paid quarterly. l DOE agrees to provide disposal services when a facility for spent I nuclear fuel and other high-level radioactive waste is available, which l 1s required by current statute to be prior to January 31, 1998, l 1
The DOE contract obligates the Company to pay a one-time fee of '
$39,285,000 for disposal costs for all spent fuel discharged through i April 7, 1983. Although such amount has been collected in rates from ]
the Sponsors, the Company has elected to defer payment of the fee to i the DOE as permitted by the DOE contract. The fee must be paid no l g later than the first delivery of spent nuclear fuel to the DOE. '
l Interest accrues on the unpaid obligation based on the thirteen-week Treasury Bill rate and is compounded quarterly.
In the current year the Company deposited $10,000,000 in an irrevocable trust to be used exclusively for defeasing this obligation at some g future date provided the DOE complies with the terms of the aforementioned contract.
(Continued) 0
' 9 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements
- _- (9) Short-Term Borrowings The Company had lines of credit from various banks totalling $14,200,000 and $26,500,000 at December 31, 1989 and 1988, respectively. The maximum amount of short-term borrowings outstanding at any month-end during 1989,1988, and 1987 was $8,000,000, $6,185,000 and $4,000,000,
- respectively. The average daily amount of short-term borrowings outstanding was approximately $4,782,000, $2,172,000, and $367,000 with corresponding weighted average interest rates of 10.69%, 9. 78%,
and 7.26%, respectively.
(10) Taxes on Income 3
The components of income tax expense for the years ended December 31, 1989, 1988 and 1987 are as follows:
1989 1988 1987 (Dollars in thousands)
?
Taxes on operating income:
Federal - current $ 6.084 (2,607) 6,a87 Federal - deferred (2,335) 5,941 (1,947)
State - current 1,275 (101) 1,756 State - deferred (242) 1,629 (612) 40 Investment tax credit adjustments (1.418) (2.246) (2.333) 3.364 2.616 3.851 Taxes on other income Federal - current 252 190 369 State - current 61 46 83 313 236 452
)
Total income taxes $ 3.677 _11812 4.303 A reconciliation of the Company's effective income tax rates with the Federal statutory rate is as follows:
C 1989 1988 1987
~
Federal statutory rate 34.0% 34.0% 40.0%
State income taxes, net of Federal income tax benefit 5.6 9.2 5.4 Investment credit (10.3) (19.9) (16.7)
() Book depreciation in excess of tax basis 4.2 5.9 6.8
= AFUDC equity - -
(1.1)
Flowback of excess deferred taxes (2.1) (6.9) (3.6)
Other 0.7 3.0 -
O M% M% 18%
(Continued)
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VERMONT YANKEE NUCLEAR POWER CORPORATION ,
Notes to Financial Statements ,
The items comprising deferred income tax expense are as follows:
1989 1988 1987 (Dollars in thousands)
) Decommissioning costs $ (651) 10,476 (3,048)
Tax depreciation over (under) financial statement depreciation (249) 1,315 2,316 Tax fuel amortization over (under) financial
, statement amortization (304) (1,841) (765)
Pension expense disallowed (519) (463) -
) Postretirement benefits (disallowed) reversed 414 (414) -
Low level waste accrual disallowed (390) - -
Flowback of excess deferred taxes (243) (775) (478)
Other (635) (728) (584)
) $ 12.577) 7.570 (2.559)
In December 1987, the Financial Accounting Standards Board issued
- Statement of Financial Accounting Standards No. 96, " Accounting for Income Taxes". This Statement will require the Company to change f rom the def. erred method to the liability method of accounting for income
) taxes. The liability ne thod accounts for deferred income taxes by applying enacted statutory rates in effect at the balance sheet date to dif ferences between the book basis and the tax basis of assets and liabilities. Adoption of this Statement, which is required for years beginning after December 15, 1991 but may be adopted earlier, will not have a significant effect on tax expense or cash flows of the Company.
(Continued)
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VERMONT YANKEE NUC1. EAR POWER CORPORATION Notes to Financial Statements C) -
(11) Supplemental Cash Flow Information The following information supplements the cash flow information provided in the Statements of Cash Flows:
C) 1989 1988 1987 (Dollars in thousands)
Cash paid during the year fort Interest (net of amount capitalized) $ 7.722 .24222 ,g 123 Income taxes $ 5.777 6.220 1.531 Deconaissioning fund activity:
Payments from the Company related to tax refunds $ - 11,186 -
() Cash received from Sponsors 6.499 6.076 5,793 Investment income 3,017 1,526 972 Income taxes paid (1,509) (1,050) (7,675)
Net increase (decrease) 8,007 17,738 (910)
Balances at beginning of year:
[) Decommissioning fund 28,590 11,588 8,274 Special deposit 2,475 1,739 5,963 Balances at end of year $ 39.072 11,qkk 122222 Decommissioning fund 39.072 28,590 11,588
() Special deposit - 2,475 1,739
$ 39.072 31.065 13.327 Postretirement medical benefits fund activity:
~ C) 1989 1988 1987 (Dollars in thousands)
Payments from the Company $ - 1,062 -
Investment income 93 - -
C) 1,062 Net increase 93 -
Balance at beginning of year 1,062 - -
j Balance at end of year $ 1.d11 1.dil -
i C)
(Continued)
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VERMONT YANKEE NUC1. EAR F0WER CORPORATION Notes to Financial Statements 2
In November,1988 the Company's Board of Directors approved the funding of
$1,062,000 for postretirement medical benefits based on an estimate calculated by the Company's actuary. The Company subsequently deposited $1,062,000 into an escrow account established to accumulate 9 these funds. Future fundings for postretirement medical benefits will be collected through decommissioning billings.
DOE defeasance fund activity (see note 8):
1989 1988 1987
- -- (Dollars in thousands)
Payments from the Company $ 10,000 - -
Investment incone 278 - -
Net increase 10,278 - -
Balance at beginning af year - - -
Balance at end of year $ 10.278 - -
. (12) Pension Plans The Company has two noncontributory trusteed pension plans covering substantially all of its regular employees. The Company's funding policy is to fund the net periodic pension expense accrued each year.
Benefits are based on age, years of service and the level of compensation during the final years of employment.
3 The aggregate funded status of the Company's pension plans as of December 31, 1989 and January 1, 1989 is as follows:
December 31, January 1, 1989 1989 0 (Dollars in thousands)
Vested benefits $ 3,890 3,005 Nonvested benefits 627 870 Accumulated benefit obligation 4,517 3,875 g Additional benefits related to future compensation levels 6,924 6,183 10,058 Projected benefit obligation 11,441 Fair value of plan assets, invested primarily in equities and bonds 9.163 8,203 g Projected benefit obligation in excess of plan assets $ 2.278 1.855 7 (Continued)
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. e- 13 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements Certain changes in toe items shown above are not recognized as they occur, but are amortized systematically over subsequent periods. Unrecognized amounts still to be amortized and the amount which is included in the balance sheet appear below.
December 31 January 1,
! 1989 1989 (Dollars in thousands)
Unrecognized net transition obligation $ 1,237 1,298 s (1,429)
Unrecognized net (gain) loss 135 Pension liability (prepaid cost) included in balance sheet 2,451 422 Unrecognized prior service costs 19 -
Projected benefit obligation in excess of plan assets $ 2.278 14311 The weighted average discount rate was 8.0% as of December 31, 1989 and January 1, 1989. The rate of increase in future compensation levels used in determining the actuarial present value of the projected i benefit obligation was 7.5%, and the expected long-term rate of return on plan assets was 8.5% as of December 31, 1989 and January 1, 1989.
Net pension expense for 1989 included the following components:
(Dollars in thousands)
Service cost - benefits earned $ 1,009 Interest cost on projected benefit obligation 854 Actual return on plan assets (1,920)
Net amortization and deferral 1.379 Net pension expense $ 1.322 Pension expense was $1,322,000, $1,166,000 and $1,120,000 for the years j 1989, 1988 and 1987, respectively.
(13) Lease Commitments The Company leases equipment and systems under non-cancellable operating leases: Charges against income for rentals under these leases were
$1,060,000, $753,000 and $525,000 in 1989, 1988 and 1987, respectively. Minimum future rentals as of December 31, 1989 are as follows:
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(Continued)
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14 VERMONT YANKEE NUC1. EAR POWER CORPORATION Notes to Financial Statements D
Annual Fiscal years ended rentals (Dollars in thousands) p 1990 $ 2.858 1991 2,784 1992 2,436 1993 2,193 1994 2,045 After 1994 9,566 D
(14) Commitments and Contingencies The Company has consnitments through 1999 approximating $84,000,000 associated with nuclear fuel requirements. Such commitments amount to approximately $19,000,000, $11,000,000, $17,000,000, $19,000,000 and D $10,000,000 for the years 1990 through 1994, respectively, and approximately $8,000,000 thereafter.
The Company has contracted for uranium concentrate to meet substantially all of its power production requirements through 1999.
9 The Company has contracted for uranium enrichment services from a company in France. This contract provides for all the Company's uranium enrichment services for the period 1989 to 1996, with an option to extend. The Company also has an enrichment contract with the DOE which expires in 2001. However, the Company has exercised its right to partially terminate the DOE contract for the period 1989 to 1996.
The Company has commitments for capital expenditures amounting to approximately $4,900,000 for 1990.
One of the Company's Sponsors, Public Service Company of New Hampshire, g purchaser of 4% of the Company's energy output, voluntarily filed for protection under provisions of the U.S. Bankruptcy Code in January, 1988. At the time of such filing and at all times since then, that Sponsor has been current in all its obligations to the Company. The Company believes such Sponsor will continue to honor its obligations pursuant to the contracts and agreements described in note 1, but there g can be no assurance that it will do so. If such Sponsor does not honor its obligations, the Company would petition the Bankruptcy Court to require the Sponsor to make prompt payment.
(Continued) 9 9
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VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements 3
The trice-Anderson Act provides, among other things, that the liability f or damages resulting from a nuclear incident would not exceed the greater of $560,000,000 or the amount of financial protection required of the licensee (presently about $7.5 billion). Under the NRC O regulations promulgated pursuant to the Price-Anderson Act, the Company has insured against this exposure by purchasing the maximum available private insurance and maintaining an indemnity agreement with the NRC. Under a mandatory industry-wide program, owners of operating nuclear facilities (including the Company) may be assessed a retrospective premium of up to $63,000,000 for each reactor owned in
- the event of any one nuclear incident occurring at any licensed commercial reactor in the United States, with a maximum assessment of
$10,000,000 per year per reactor owned. Such owners may also - be assessed additional retrospective premiums with respect to insurance purchased to cover third party property and bodily injury damages resulting from nuclear accident related events at licensed commercial
- reactor facilities, but in no case wi? 1 such additional premiums exceed 5% of above-referenced retrospective premium.
(15) Unaudited Quarterly Financial Information The f 11 wing quarterly financial inf rmati n is unaudited and in the O opinion of management includes all adjustments (consisting only of normal recurring accruals) necessary for a fair statement of results of operations for such periods.
Quarter ended 1989 March June September December 0 (Dollars in thousands - except per share amounts)
Operating revenues $ 45,330 33,977 33,606 32,672 Fuel expense
- 3,415 6,387 6,993 7,314 Other operating expenses
- 16.015 12,650 12,218 10,418 Maintenance expense
- 13,275 2,885 1,718 1,568 O Operating income 5,132 4,543 4,985 5.471 Net income 1,935 1,923 1,926 2,009 Net income per share of common stock 4.45 4.46 4.47 4.62 0 1988 operating revenues $ 34,978 33,575 36,731 36,549 Fuel expense
- 8,490 7,653 6,818 8,386 Other operating expenses
- 12,349 12,126 14,073 13,633 O Maintenance expense
- 1,574 1,979 2,539 2,187 Operating income 5,372 4,764 4,561 4.847 Net income 2,406 2,123 1,957 1,942 Net income per share of common stock 5.59 4.88 4.48 4.43 l
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- These selected expenses fluctuate from quarter to quarter due to plant '
outages. The operating expenses not presented remain relatively constant.
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