ML20012F329

1989 Annual Rept

ML20012F329
Person / Time
Site:	Waterford
Issue date:	12/31/1989
From:	Cain J NEW ORLEANS PUBLIC SERVICE CO.
To:
Shared Package
ML20012F319	List: ML20012F327 ML20012F329 W3P90-1022, Forwards Util,New Orleans Public Svc,Inc & Entergy Corp 1989 Annual Repts
References
NUDOCS 9004110151
Download: ML20012F329 (47)

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.g Our nave ilhntration s>mluebes ininnutkin -

kicas thatillumina:e sww huiininh.1he a>intuil alw

. signifies chttricity-a la calthatnigh technohigy -

that han made gunwilAc nnuh of the pngreu of tht' last century.

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for numt of that century, New Odcaun Public Senice inc, has supplied elecuirity and natnral gas to the lxxipic.

and inninewei.of New

" Orleans.' A sulmidiary of:

Entergy Girix> ration, NOl'S1 :

for ens yart of the four r. tate '-

' Middle Scuith Electric Systern. l'or a description of the Gunpany's budnew and a niap of the Systein's senice arca, we the indde hac L ccnvu j.

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MM Nne Wimea 1%Mac %<aint, 1999 19M l'lant irnestment (thouwicts),

$ $$4,176

$ $21,269 Rnenuch (thinmuncis):

Dettric

$ 31:0,542

$ 361,544 G.

90,967 91,853 Total Rnenues

$ 470,999

$ 453,397 Net income (thousancis)

$ 14,464

$ 18,772 Peak kwl (occunect 8/31/H9 anct 6/28/M) (megawatts) 1,108 1,142 Generating capability (megawatts) 1,077 1,077 Dec tric customen 190,192 192,747 Gas customen 156,232 159,516 Awrage annual Likwat14ioun uwcl per schictential customei 1 0,6187 10,469 Awnige annual e nrnue per resklential Likwatt-hour.

7.Stf 6.91f CO M Wfl l>fonnanceitidslidas 1

1AIn to St<wUvkins 2

AMnniations avalikfrmi1Mns 6

lbfatifblanagmera i

Audit Gummitta Osainnan k IstIn S

IntbfculentAuditon*lbfat 9

bi ruyp~ma\\Hnancial(>ivussicm andAnabsis 10 RnancialStatemeras I6 Notes toFinancialStatements 2I IIrandcfbrpeu 40 ihmt<ns and 0))iters 44 f

I I

Lffftt 70 ff0CK9hfADtIts w <m,n im wo,, i.-

$$AR FlLLOW p?0CEN0lMR$ AND We alwi weir uu t ewtul thn past BalPLOYtt$

war in irmaming < unent in oui pn-The wai 19M9 < an tv si ix-nieni of piriencil uin L dnidenih atici (lew dust.n a p ru ni of < hange. : an+

dn lanng los pnmeni onJanuan I, ition, and im n around foi New ( h leans 1989 all quarteih dindend puments Pubh< 'w i m e Im. and thus who for 19% that had turn in,u irais dur hold a vale m oin ( Annpun - out in the finant ia' difliruhics < auvvi in stin Lhokleis, a nu emph nves and our the l'rhi uan 192 pi udem e thsdlows

< nunmcit aiu r. Ilownri. bis anw of the < onuim-mg efin is of this disdlowanc e and the subwxlurnt wnte-of t of $1% indlion of pinioush drien t ed (.r and (.ul! l < usts, the ( annpun has not pod a < r nunon

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ut u L <hndesul sinc e i chi uan 19m.

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IIkcI sid iwe sIw ((Hisn Cia C

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( hailga' iil l 9N9 ill (ht u/c of oul < H-n.Q gdui/.uion, the hx us of oin encipes p. g[ Fu

.uuithe w.n we pi.m ho theinin,c.

hh Thiough n nigamration and down-is

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uimg, we i x ame a icance, nioic cf h.

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<icnt (iimpun with spxific pionun l

MN and ohin tiws We h<r.une moic ag-

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girwive in m.u Leting out w nit es, I

'p,'n' our ruuomen We siw a transition m meeting om < ompetition and sitishing I

a!

1 4 r, out (or}MHate (dulowijdn -litHn that l

t of being a utihn opriating in the rusionn alul traditioin of a irgulatt11 inonopoh to a ior ward-h u iking, iniu m vatne eneigs < ompam irach to meet the < hallenges of the IRn.

/u,un u < o,,, a,p> mul t uunt,i ilu,a,'

I' rom a ruvomer siewpiint, we I rom a uoc thokh i uaidpiin mininM to tiimMe d p aid the war cud financial reudts foi 1989 deperutable ciertric and gas w nic e at weir p niine for the vx und < onww te iatn that still < ompu r quite f.nurabh tne was and cash flow < ontinued to with most other utihtin nationwitle.

impn ne following the net biw inn mied We alwi mainuuned our active innuha-m 19M7 as a ervilt of the $1% m lhon inent in < onununin allain, promhng i

p tulen< c disdlowaru e oidewd in leadenhip voin in bical n onomic i chi nai s 19e in oin irgulaini, the dnelopment at tnities progrunn to New ( hleans ( ;in ( W unu il In addition,

<nci< orne aduh illitetun and other we wer e un i ewf ul m ievihing w nne of philanthropic ende. nut s uu h as the irgulatoi s and legal una ce taintin

"( 'pciauon ( i nnehat L*, "I leiping that had been a < ause of < ont ein los llands' and "(:hnstin.a in the ( 1aks*.

tiu past sewral wars, not unh foi om

( Wonpun but foi the < ntor \\ liddle s iuih 1 Ic< tiit wicm The iewilunon of w one of thne usu n t.unun and oin till}HincYl lillain tal < t Hiththi:1 are i<'

floriMl HI LIle NtailaRCellCill'h IIrlain la!

lhw uwon aiul Anahsn'section of this annualicp t 2

+

(

So,1989 was an nrntful arul our customer irr einphner wur L practk n and in hniqun uwd in-historic year for New 0:lcans Public ratio..uiindicauir of organitational other leading companin that we touki Senic e Inc. and for you as stalchokles s etikirin3 n rnecting custorner avguise-adopt. We Irline we are the inst utility i

in our (innpmy. Iet us now iniew ments,was 102 customets per em-in the imlunry to coinplete un h a wirne of the highlights of the >rar.

ph 3rr for the 3 ear cumpared with a detailed an.s.dh spread aniew of this nitio of 171 customers per emphnre nattue,with the anthipation of c on-mamants gp 3909 in 19m. Thh impn ned efficieng iruli-tinuing impantment of etlicieng aiul The (kunpany) financial condi-cator is a iefin-tion of the chmmiting puwluttion of unt s.nings.

On wm irlathrly stahic this past 3rar aiul oiganisational t hangn imple-as nidenc ed in net income of $14.5 nented <ntt the pnt twu > cars in an x

inithon snun ded in 1989. Were it not oflos a to c ontinue making New Orleans 4

fc the ofhx ts of a witlement agitts Public Senic e Inc. a c ompetitive, tuv

[k' ment irac hed this pnt ) car letween tomer<unv ions or ganisation thiising

~

/[ p the Company and the New Oricain on ricathity and ininnathe pra< tkch.

City Council as part of *Pnsai Olhe

[""](h liranch', a prognun initiated by out IlfW PROGRAMS tlRPLlaRRIR$9 e

pu ent compiny, l'.nteigs (kwp u ation, As put of this new unpuute cul-3~

d b nother innova-and nn cuary to revihe nuious out-twe, we dntlopxl atulimplemented the pognun dnvlopxl and imph-standing inun and litigation sun ound-ernd new puignuin duiing the past mented in 1989 was the (knt Center ing Sptem l'.ncrgy and the Gnuul Gull seat that were designed to further (imrept that empowen the indhidual pusect, net income would hase been impune our ofhx thrnen and puuluc-emphnrn to hnome iiuunative and

$30.3 million. Spxific detaih about thit) and, at the sune time, to betto usa ma:Let fonn to impunt the

• Pnjn i Olhe linux h* and its un cow wrte our cmtomen. Ainong thew wm quality and cost of wnice pnnided in b rewihing wune of the uncertaintin our ik si Pnictic n Prograin in whk h we internal wnic e groups We dorloird facing out (innpany and the entire nuluated the pnx edm n and wxu k a (kat Center An ounting Splem to Middle South I'.ht tric Sptenuner the management techniqun of a onav inu L the 'true cust* of operating thew past snrnd >can can be found in Note m tion of our operating dhiuons and specific hminea aethitin within the 2,

• Rate Matten*, of the Notes to l'inan-plants and unnpu ed ont pn fonnant c (iimpany. The goal of the (hist Center cial Statnnents in this annual rep et.

with thow of a number of other top (kuu ept is to pnnide managers with per foi ming utilities and non-utilitin.

an accurate undentanding of the at-Oui purpne was to ntablish useful tual cost of thew wnico, and to allow

. wm.... m.

f helu himu ks Ior pnKlu( thitv and wn*

management to deler Wint the appni-

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k e quality in Ln fum tional atcas of the priatence of puniding these wnices

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(innpun in order to nuluate our internally or contracting for them with pei for mam e and to identify inntnative outside pnniders. We anticipate that pl the Ont Center Conc ept will punide l'i us with the ability to strategically plan e % otal openiting int-our businea arthitin and impnnr the nun were $170.9 million in 1989 m unt ef ficieng and quality ofinternal nunpaint with the $153.4 million in wnic e groups oirrating intnun s e<ualed in 19NH, while total oirrating exirnws weie

$130.7 inillion, or $21.9 million more than they were the pniom year.This inneaw wm due primarily to the fact that these wm a $28.9 million ieduc.

Lia in the annount of Grand Guli 1 onts delerred for iuture collection.

More detailed financialinforma-tia on our 1989 ojenitions can he land in the financial piges of the f

annual repwt that inunediately follow deicun.

1 i

IN5E N N h Muro 1%W &nwelea.

Thew futir pnigrains wrrr anxing are rusw alkmtvl to wlert their indhid.

d a inunber of iniunathe and highly ual health nnrnsge, hic insurarx e, 3

N stut mf ul crulemtus undertalen in the h,

unn[un) chuing the pnt 3rar that' anidental death lu nefits and a nune lu r of other options designed to gun NA wrie norninatnt for the inestigioin side cinnhnres and their farnities with Outirman's Award newnint annually a benefitn iw Lage nune c lowly tai-i k,

f.

b by our puent cumpan), Litergy hunt to fit their pe winal needs. The ill another outgiowth of Gupuution. The Ikst Pnutins Pn>

new Mexihte ik nefits Program went this uend toward hm> Ling to the future gnun and the host of gnognuns for into efin1 january 1,19'Kl.

is the Ruugnition and ACIlintment empknre dnvloprnent, nunmunine Twu l'.rnphntss of the \\iar weie Pnignun,better known as RI ACI1, tions and ufety accognition imphs wkried in 198ti-one from the ute whic h wm dntlopst in our ilunun mentalin our iluman Remiunrs rint ranks of the Gunpany and the Rewinnts Department chuing the just De[urtment luith won Chairman's othm from the hourly nmLs.Omgnti-3rar as a m,uugesnent dnvloprnent Awanh in the Spiemwide nunpetition.

ulations to Enginer Qeg Gillo of tool. RI'ACilis a training pnignun the West ikmL Dhision and to Tn hni-desigunt to oiler a nundinatni syuem SW6MWBNNW eian Chau hs 'Chuc L* Spratt of the for perw nul and profeuional giowth in 1989, thinugh the intnutur.

Water ford 3 organitation for being by Gun luny managers and nupeni-tion of a ficxible benefits pac Lage of-suunni 1989 Emphntes of the \\i ai, uns. The pn gram punides a regimen feint to all kliddle South Eintric of anuwsI n allinrhof manage.

System emphntes,03mpany emphiy-f h

[g/

p ment, with Ley courws aimed at all ces weer ghrn the op}xntunity to per-supenivus and managers and cln thrs winalire their benefits unrnige, in this designed to ineet indhidual goah.

• win +in* situation, emphnres natone t.I RIACII wauited in 1989 with the lie their untnige anst tuith the Ome Ei{

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(\\p p

Tntining Piognun Design Award by pany and ernphnves realire tax unings.

1 the American Society of Tntining and Under the new pn gnun,emphnm Dntlopment.

4 %,

1. it a sul note, we t

Although not an entirely new pn>

lost Iwu of our actie nt unnguny offi-gnun, but one of whic h we are niually cen in 1989 with the deaths of Clayton proud, our Public Safety Achertising

1. Nairne and QuulesJ. Sinnott. Mr.

md unnmunications Prognun is uwd Nairne actirnt in 19M af ter wning as

! a tiucate the genenti public aimiut the Pnsident and Chief Esceuthr Ofik er 1staads of not wur Ling or playing ufely of the Qnnymy. Ile subsequently around ehrtric and gas iacilities. In retirni as Chairman of the ikurd in 1989, the unn;uny continued its 1973.Mr.Sinnott etirnlin 1979 as unique achritising campaign called Vice President of MarLeting. Ikith had

' Don't Monkey Around Power 1.ines*

outstanding Qunpany carects and and *lhten to Wur Nose

• that usulted conuihuted greatly to the sua en of in widely senignlied mewtges warning New Or icans Public Senic e Inc. during the public abmit the dangers awwiated their tenure, with such acthities. We heline the high

)

renignition of thew ufety inenages L m e m legl, O pv e st t e gggelgill will awkt m in reducing the number of We continunt to litigate in laith liduries or deaths and property damage federal and state courtuhuing the past cauwd in auidental nintact with < ci-year the k gality of the $135 million tain electric and gas facilities.

prudence dkallowance and woe encounigni when the Unitc d States Supreme Onut iwuni a unanimum decision onJune 19,1989 that the 4

interal district court did not har the r elated niatter, inha rnadon nn essary state in the suu est of our Gunjuny diwredan to abstain inun takingjtuiv to naluate a propewd legal < onw ohd.e during thin geriod of c hange and tran-diction in the rnaner. As put of that tion of the unnpany and 1J'&l.was sition -a tirne in whk h we saw not only decision, the Supcine Giurt annand-filed with the City Giuncilin Nmrne the dirntion of the Onnpany < hange ed the case to the lower federal cotuts irr !!NI, and the Onnpuiy cuntinues but its ndtr.re as well.

Ion harther pnxenhngs. Ilowner,on to r< spind to d.ita inguchts by the City Januaiy 3, lVAl, the inieral dhuict Giuncil on cunwilidation.1he

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court iwued a sta) order in the aw G unputy lelinrs that its conwilid.e until a ptrallel raw in the state < otuts tion with 13'11. offers the test long-ii c ould te c oruludnt Ikith raws aie ter in opputunity for rate stability in k,

f g@b

((h ji still gending.

New Osleans and, thesefore,would A

'i Diwuwions contirned in 1989 le in the lost interest of customers, betwren Quupany negotiators and ernphnrn and sto( Lholdos.

irpewntathes of the Cit) Giuntil on d

tl ith )our < on-the popnnt negotiated hupout of the 111 tellC1800001 tinuni confidence and support, we unnpmy and the Algieri popertin of While 1989 saw nuny narnpen hok for ward to nrn greater suu rsws our shter unnpiny,Inukiana Power &

of the pnithe results of wo Ling ta in the IVAA.

IJght unn[uny (1J'&l.). A wrics of gether. ler haps none letter illustratal diwuwions took pla(c in the latter part elln thrnen of teamwurL than the of 1989 and early IV.Klon this matter.

Ilunicane ilugo relief efhn t let for the Ikuid:

Thew discuwions euhuinatalin a Octoler. Within 48 hours5.555556e-4 days <br />0.0133 hours <br />7.936508e-5 weeks <br />1.8264e-5 months <br /> of Iring propsd weting forth lusic tm nn and cuntacted in South Quolina Electric &

hlar c h $, IV.Kl c onditions irgar ding a negotiatal buy Gas Qunpany (SCE&G), our emphn*

out. '!his propnal could be the subject en and thow of 1J'Al.were able to Sinen eh, of public hearings by the Cin Giuncil collen and dhpatch ihr sun huds of and could finm the lush for a negoti-emergency relief items to sittinn of e ted huwiut should definithr chico-Ilurricane Ilogo in Charleston, South mentation be dntlopxt Alwn.in a Carolina. The sans anised in a cannun

• M of Gunpmy schicin carrying the ini-James 51. Odn tial Mi nnergency gersonnel sent from Prnident and the Onupun and 1J'&l. to the Chat-Chief liccudve ofliter leston area to awist SCFAG acm in rntoring senice to the hard-hit area.

/]

j The people of Charinton wne deeply

/

grateful for this generosity and for the quic L respmw to their nents. All ene Donald ilunter pknres who had a hand in this relief lieruthe Vice Pcnident and elfort are to be unmnended for this Chief OperatingOfficer show of cornpawinn and skill.

As we turn the pages on 1989 and begin focusing on the new decade ahead, the offic era and directors of New orleans Public Senic e Inc. wish to thank each of yuu who have had a 5

M AMim M New 04wa1%W.%w list.

19M6 Settlement Agrecinent Agritment, cfkrthe Mart h 25,1986, between the Onnpany and the Gnmcil regar ding the unnguny's Grand Gulf 1 related rate iunes 1989 Settlement Agreement Agnement twtwren the Camncil and the Gimpany, efIntheJuly 21,1989, that settini (vrtain kical retail rate inues regarding Grand Gulf 1 AFDC Alkmstnce for Funds Used During Qinstruction APkt.

Arkansas Power k light C4nnpany Arbiter's Report A certificate datedJune 24,1988 imuni by the indegendent arbiter Oty Oty of New Orleans,leiuisiana Gimpany New Orlearn Public Ser ice Inc.

Q>uncil Omncil of the Gry of New Orleans,le>uisiana D.C. Orcuit Unital States Giurt of Ap[wah for the Disuict of Gilumbia Circuit iASB linancial Acrounting Standanh Ikiard February 4 Rew>lution or Reuilution 11e unincil's rebnuary 4,1988 reuilutk n disalkming $ 135 milion of patioudy deferrni Grand Gulf 1-rclatal onts 11.RC ruleral F.ncrgy Regulatory Comeniuion IT.RC Settlenu nt Settlement ofIer fiktl with 'hi an mJun e 9,1989 by AP&l,1J'&l, h1P&l, System Dwigv, and the Com;w nd appnned by the I'l:RC onJuly 21,1989, to settle, among oil er things, certain then-pending Grand Gulf Station-triatal lunch, litigation and ottwr rate matters Faleraluntrt United States District C4>urt for Llw f astern District oflxiuisiana lifth Grcuit Unital States C4nirt of Apgrah for the lifth Giruit fourth Circuit Fourth Circuit Court of Appeal for the State of 14 uisiana G&R ikmds General and Refunding hiongage Ikmch issued and issuable under tlw Ceimpany's G&R hiongage GkR hlortgage

'Dw Onnpany's hlortgage and Dent of Trust, dated as of hiay 1,1987, as supplemental Grand Gulf Station Grand Gulf Steam Dectric Generating Stmion (nuclear)

Gnmd Gulf 1 Unit No. I of the Grand Gulf Station GrandGulf 2 Unit No. 2 of the Grand Gulf Station June 13 Dnision The IT.RC'sjune 13,1985 decision alkicating Grand Gulf I capacity and energy and the costs awociated therewith among the System open ting companies June 24 Decision The United States Supreme Coun's decision issued onJune 24,19S8, affirming hip &lls right to ret <ntr its Grand Gulf 1 related nuts ll'&l.

lentislana Power & light Company hiiddle South Dectric System or System Entngy Corporation and its nuious direct and indin ct subsidiaries hip &l.

hiiwiuippi P(mer & 1.ight Qimpany N<ntmtwr 30 Order The FLRC's 1987 traffirmation of theJune IS Decision Rex >lution or February 4 Rex >lution The Qnmcil's February 4,1988 tex >hition disalkming $135 million of prnioudy deferred Grand Gulf I related unts SIE Securities and Exchange Gimmiwion SFAS Statement of Financial Accounting Standarth Sil Sptem fueh,Inc.

State unirt Chil District Qntrt for the Parish of Orleans, leiuisiana System or hiiddle South Dectric Sptem Ditergy Corporation and its nuious din ci and indir ect subsidiaries System I;nergy System Dwrgy Rex >urces,Inc.

Systern o;wrating annpanies APkl,1J'kl., htP&l, and the unnpany, colk cthrly UPM Unit Power Sales Agreement I

I~

M PD M M E M E M a nft The inde;= ndent public a xinmtants Jutnide an ohin.

gym,i,m]

tne awenstnent of the degree us whic h snanagement snects f

a its ingxinsibility Ior iairnen of financial regan ting, They segularly naluate the system of inter nal amnanting cont oh d

and pei form suc h tc6ts and other in <x eduin as they derm j

nn ewuy to sca< h and es[ ness an opinion on the fair new of i

the financial statements.

2 2= he rnanagement of New Osleans Public hianagement belino that thne gxilicies and pnxe.

Senic e Inc. han gu epat ni and h ies;mimible for the financial dmn intnide reavmable awunmc e that its o}= rations arr statements and retaint financial inforrnation inc luded in canini out with a high standant of hminns conduct.

this annual legxnt. !he financial stateinents are haw d on genendly an epted acniunting principles. linancial infor ma-tia inc ludal clwshere in this re;xat is comistent with the financial staternents.

To meet its res;xunibilities with so;x ci to firiaticial Ms inic;mation, inanagement maintains and enfon n a estem Jamn bl. Gain of internal accounting rontroh that is designni to pnnide Prnident and reavinable auntance, on a cost clin the beis, ano the ChiefI Accutive Offic er integrity, ol inthiry and irliability of the financial nwrds t

and as to the pn.tection of awets. This system inc ludn cone

']

g munication thiuugh written [xilicies and gn<xedurn, as well as an organitational structure that pnnides for appra priate division of ingwinsibility and the training of awne Ibnald Ilunter J

net This system is alw intalin a compichemhr inte nal liccuthe Vice Pinident and audit program, Chief Operating Ollicer f

ht, i1. ht< !ric hic Senior Vice Prnident-Acnninting & linance 7

MWV (GBRM98 (RMenWS Lifftt NmDinna 1%kt %r her.

The New Orleans Public hersic e Inc. Audit (kunmit-The Audit (kunmitter diu uued with the (kunpanfs are of the ikiard of Direc tors is comprised of four Direc.

inter nal auditors and the independent public au ount.

tota who are not ofliters or employees of the (kunpany; ants (Deloitte A: Touc he) the overall wope and specific John B. Smallpage (Chair man), Ih. Ileni y I'.. Braden, plans for their capectise audits. The comminer also lit, Itrooke 11. Duncan, and Chailes C. Trainer, St. The discuued the (bmpany's financ ial.taternents and the committee held three meetings during 1989.

adequacy of the (kunpany's inter nal c ontiols. The c om.

mittee met separately with the (kanpany's internal audi.

turs and independent public auountants without man.

' d" agement preu nt to discun the results of their audits,

('4 their evaluations of the Company's inter nal controls and the overall quality of the Company's finamial repor ting, j

i The meetings also were designed to facilitate any pri, ate c ommunication with the mmmittee desired by the inter.

nal auditors or independent public accountants.

. he Audit Gmnmitttec <nersees the Company's financialicporting proccu on behalf of the ikiard of Directors and prosides reasonable anuran<c to the Itoard that nullicient operating, am ounting and financial c ontiols are in existenc e and are adequately 6

y o

miewed b prognuni of inteinal and ester nal audits.

3 The Chairman of the committee meets with Company John 11. Smallpage management and the unnpany's independent public Chaliman, Audit unnmitter amountants on a quarterly basis for the ieview and user.

sight of the quatterly financialicporting proccu.

S

MDSPONM M AWMfett' MPOM To the st<x tholde:$ and Ibard of Dirretors of New in our opinion, siu h finarnial staternents prcent fairly, Orleans Public Ser sit e Inc.:

in all snatorial respects, the finarnial nsition of the Corn-i pany at Decc~ 'rt S!,1989 and 1986(, and the ersults of its

;x rations anu its rash ihm for cat h of the three years in ghy k

the pericxl cruled lin ernher S t.19N9, in c onfor enity with y,,

y.3,.

y 4

generally au eptect auounung principles.

R

h p;' h '

.d V)

\\

. O have anulited the balatur slu'Ots of f

New Oileans Puhtic Scisic c Inc. as of Du ernher 'll,1989 and 19ss, and the telatal statenwnts of itu orne (low), rotn-New Oilcans, tvuisiana innn sharehokler's niuity, and rash flows for rac h of the I rbruary 14,1990 tlurc 3rais in the pericwl cauled Dnrinter 31,19N9. Thew financial statements air the irspinsibilii) of the Ocinputy's rnanagenwnt. Our ersjunsibility is to espicu an opinion on thew financial statements haux! on our audits.

We ronducted out audits in au or daiu e with genendly au epint auditing stauulaids. Thow star:dards recluit e that ur plan anel pei torin the audit to obtain reavinable autu-ante ainut whether the financial staternents suc fice of inaterial aniwtaternent An amlit includes ruunining, on a test basis, nidesu r suppa ting the amounts and diu losur es in the financial statements. An audit alviituludes awewing the auounting principles uws! and significant estirnates made by enanagement, as well as evaluating the overall fi-nancial statement prowntation. We heline that otu audits pnnide a reavinable basis for out opinion.

9

N $ M M M MIM NonDiasm 1%Ida.%a ha.

a 3

. i., e:dt/

s I?( N N S

\\s%,s ng d.L.A M b M N $PM NDOW 1%V te, I%N 1%kwlui 7 sake ht<nA I ndnl innmv Iw<rno innmv l> mat IMm.. pre.ne..

_..__1_%9_ _..._._ _1.% k.. _ _ _. _ -

tl&mrt (Anngr ilunwa thorns 1%1 g,

Net intorne(kiu)

$ 14.5

$ 18.8

$ (49.0)

$ (4.3)

(23)

$ 67.8 134 Operating intnues:

l'.httric

,W10.5 361.5 328.0 19.0 5

33.5 10 G,n 90.4 91.9 87.9 (1.5)

(2) 4.0 l'uct anct fuel 4 elated expenws 58.6 50.9 54.7 (12.3)

(24)

(3.8)

(7)

Purc hawel gxmer 220.6 206.6 207.3 14.0 7

(0.7)

Other olwration expenws 54.9 83.5 79.3 (28.6)

(34) 1.2 5

Taxes other than incoine inen 26.7 23.0 22.0 3.7 16 1.0 5

Delene<l Granct Gull 1 relaiect rosts (l)

(18.2)

(60.5)

(167)

(42.3)

(70)

(36.2)

(37)

Tintalincome taen 10.6 9.4 (45.7) 1.2 13 55.1 121 hiiscellaneous income anct ciecturtions-net 2.5 0.1 2.5 (0.1)

Inierest ex;wnw 27.5 26.0 18.2 1.5 6

7.8 43 Retail ekttric enemy sales (hlillionsof KWil) 5,192 5.154 5,053 38.0 1

101 2

(lI Ih<lude tier sneur edJ en 1W1 ef $lM unitum af puminnh d4*v alibund Gull!.ortatnt rush

• (Ave 1,4 D'4 i

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L Not lessess Gesel feeland Peelvelsted tapanses Not inctane derreawd in 1989 gnimarih due to rec ord-l'uel and inebrelated esgenwn decreauvi in 1989 prire t

ing the $15.5 million eficc t of the 19H9 5cttlement Agrn-c ipath due to a dersraw in the ammmt of fuel purc haw <l rnent, par tiath ofIwt by the gain, net of applicable taxes and for chttric generation as a ::Sult of u beduled and unv hed-adjustments, of $H.4 inillion ritor ded in c onnn tion with the ulnl outagc5 at certain of the Gimpany's generating units.

wttlernent of the Gunpany's gension plan. Additional far-The decreaw in fuel and futbrelawd esjenus for 1988 tors are divused behiw. The increaw in the Onnpany's was primarih cauwd try a decreaw in the wilume of fuel 198H net income was priinarih attributable to the write <>flin purc hawsl for ch ctric generation partial 4 ollwt by a higher i

19H7 of $135 million ($72.9 million, after tas) of prniomh average ter unit unt for fuel purc hawst, deferr ed Grand Gulf 14clated costs in addition to (crtain other factor 5 as discuwx! helow.

Perdiesed Posser Purc hawxt gxmtr expenes increawcl in 1989 primarih i

Westyle Opereslog teWesses sad Rotst Insegy Isles dus to the trcording in IM ember 19H9 of $19.7 inilhne of 1 httric ojeniting entnues in irawcl during 198H future estiinatnl kaws related to the 1989 5ettlement Agin*

and 1999 primarih as a result of increaws of $1(i.6 :nillion ment, ollwt ley a arduction of custs due to the application of and $17.3 million in haw rates due to implementation of the $H.5 million credit by System l'.nergy to the Gunpany's the third and fourth years of the Gunpany's phaw-in plan, Grand Gulf I bill pursuant to the IT.RC Settlement. Pur.

chawd xmtr esjenws for 19MH decreavvi slighth in com-Additionaly,increaws in the enntry of fuel and fneb i

related purc hawd xmer costs through the fuel adjustment pariwin to 1987 clue principath to lower Grand Gulf 1 non.

l

< lauw and slighth increawsl energy sales contributal to fuel c harges resulting from a reduction in System 1.ncrgy's the incicaws in ehrtric olerating intnues.1;hrtric :clail rate of r eturn on common ecluity in 1987, partialh ofIwt by energy sakS incicawxt in 1989 primarih due to an inneaw incerawd energy purc haws at a higher average Jer unit cost.

6 indmtrial sales to c hemical manufactureis. The 1988 increaw was attributable to incr eawd commercial as well as indmtrial sales.

038 M SepeSue$

Gas operating rnenues decreawd in 1989 as a result of e decreaw in the s cuntry of resale gas cmts, as well as a slight decreaw in the wilume of sales. The increaw in gas operating rnrnues nor 1988 was due mainh to an increaw in the iecmery of reule gas costs.

i 1

6 6

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$9999998 Pf9 5 W C5009 3 0PS

< stain,a vs.v

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L ;' ^ "MY a 3476.

1987 C.

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• l::' 7 01 315.]

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I j9Sgjr's~ a;L 2,,1;r ' m 3;S3

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t MammTl MARCIAL 906C98000N AN AllALY$ll Mooleum IWu % vee lua.

Ollier Opereglen Ispenew to6erted enind tell bee 6eted tests Other operation espenws demeauxlin 1999 priniatily Def ert ni Gnmd Guli 1-t elatal unts d(tr cauxi in 19M9 m a ichult of enording inJanuary 19n9 ap[nowirnatel>

piirnaril) due to the rn ording of the 19M9 Settleinent

$1?>.fiinillion as a redut tion to pernion eqerne to nellett Agreernent, whic h (1) prosided for an $8A inillion osedit the before-tas gain in c onrux tion with the *cttlernent of the applied 1 9 ystem liner gv to the Onnpany's Grand Gulf 1 S

Gimpany's pension plan. Additionally, the dreiraw is a hill gunsuant to the trista of the IT.RC Settlement, whic h tesult of < osts inc un cd in 19SM in tunnettion with the one-ordit inhu nt by $M.5 million the amount of future Grand titue wiluntar) eas h setirement prograin discuwed below.

Gulf l related costs that would otherwiw hase been deferiod As a tenuit of variotn ont control meastuos innplemented in lg the Onnp.m) under the pienenti) effectiw phast-in plan late 1987 and cuntinuing into 19SS, v.uiom other opesation and (2) resulted in a $6.2 million seduction in the amount rspenws dcoraux! in 198% l lowever, as a e chult of ( ertain of the delettal relating to the IWe ahvntr<l pution of the tramartioin, un h as the ont of the itnplementation of a Gimpany's IT.RGalhicated share of Grand Guli 1-selated out-tinne wihmtar) cally retirement ptognun ellecthrjune o nto AdditionaHy, the demeaw was the r esult of the ine

% 19SS, total othes operation espernes inneasnt foi the plementation in A nil 1989 of the four th annual nite ire i

year.The voluntar 3 var h tetirement program is one of the ceraw iii an nidanc e with the phaw-in prosisions of the ont conuol encasurch impleinented bs the unnpam to 1986 Settlement Agreennent as r edtu ed ly the Resolution.

iedtu e onts This rate incicaw allowed the unnpany to en use a larger pirtion of its Grand Gulf l tclated onts through haw lates leses telier finne Insesneleses and thus to deler a lesser aunount of un b unts in 19sM, de-Tases other than inunne tases increawd in 1989 pri-fened Giand Guli 1 e ctated onts deacawd primarily as a marily due to $1.8 inillion of exciw tases inuitt ed in schult of the implementation in April 19SS of the thisd an-c onnection with the settlement of the Onnpanyi peinion nual rate incteaw in ac cor dam e with the phaw-in prosisions plan, as well as a $l.2 million inacaw in real and pervmal of the 1956 Settlement Agirement m reduced 19 the Resohd propelty tases due to }no}wt t) tax rate inocaws Lion. Alvu onuibuting to the town delened G and Gulf l-telated costs were the lower carrying < haryes oli deferrah m a result of the $1.Vi million prudence disdlowatu e and a seduction in the carrying < harge rate, Additionally, a de-caraw in System I;nergy's rate of actur n from 16 pen cut to i 4 pes t ent, effectivejul) 1.1987, alvu onuihuuvl to the (hticaw in deferini Grand Gulf l related onts lor 19S8 Slightly ollwiting the decicase in defened Grand Gulf 1 related onts was an adjustment to the Gnuul Gulf I deterral of appiosimately $ l.9 inillion.

Blectrit $aergy $ ales le ReleN Costessors iILilwm n{%atJumn) rm

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} Q$Q t~ w"El-ska.Ja.ua e U.kke. % J a m;.i e s

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llotalInessie haes

~rme= mem Totalincome taxes.incivawd m. 1989 niisuuityasa b

g i

semh of tlw seinstatement of $2.(i nullion of state accumu-4

?'4[

lated defrinst income taxes, partially othet by a decreaw due to a reduction in in19ax income. The incicaw in total income taxes Ior 1988 mn duc inincipally to increawd n e-N i

tax income icsulting from tlw writmil in 1987 of $135 mil-3 lion of gutniously deferied Gnmd Gulf 1 selated costs, par.

M=. MW CellDiH001 tially olhet by a decreaw in the corporate fedend tax rate.

General malassammaama inesase and bedestions - llet The financial condition of the Onnpany declined Miscellaneous income and dedu-tions - net increawd slightly for the twehr months endext Decemtwr 31,1989 as in 1989 primarily as a result of a decreaw in 1989 expenws computxt to the same period in 1988 due to the recording ictated to the Council's considemtion of the involuntary in 1989 of the $15.5 million effect, net of applicable taxes, of municipalization of the Quupiny's electric and gas utility the 1989 Settlement Agreement, partially offset by the gain, P"'perties and opemtions, net of applicable taxes and adjusunents, of $8.4 million re-corded in connection with the witlement of the Quupany's laterest Espense pension plan. As a tesult,1989 net incone decreaxxl by $4.3 Interest expense increased in 1989 primarily due to million from the prior year. Ilowever, abwnt the effects of interest of approximately $1 million accrued on additional the 1989'widement Agreement and the unupany's pension tax assessments resulting from an audit of the Company's plan wttlenwnt, the financial condition of the Company state income and fnu chise tax returns. The increase in impnned when compared to tlw prior year.

interest expenw for 1988 resulted primarily from the issu-Certain other factors couki weaken the Company's ance of $75 million and $40 million of G&R Ikmds in May financial condition. These factoii include the ultimate out-1987 andJanuary 1988, res[wetively, come oflitigation related to the Qnupmy's $135 million prudence disallowance (see Licluidity discussed twlow), the outcome of the Omncil's consideration of the imuluntary municipalization of the Company's electric and gas pmper-ties and opemtions (which factor may ariw in the event that a negotiated buymut does not tale place) and the outconw of a challenge to the iT.RC alkwation of capacity and energy hum Gmnd Gulf 1 (see Note 8,'Conunitments and Contin-gencies" for fur ther discussio'i of these maners).

Averegt Wll Use Por liesidential Costoneet 1989 'iETGMMWFAMWWGM 10,687 19ss EMXTME215hmW310.469 1987 CiMDMX&%MMMMM 10,515 19s6 ERMEEGNETMESEEMU 10,74s 1985 MMaEM WiMWM 10,254 13 W

s 4

t

MAllA44Mllff'l HilAllCl&L DISCUS $10ll Alle ALLEYS 15

.% 0./.;m !ve s---

8-Llysiclhy Caphel ashi Refinansing RogstresionH The Onnpam's primary cash icquircinents for 1989 in-Omstruction expenditm es for the Gunpany are esti-clut ed, among other things, (1) payments to System 1.ncrgy mated to tw $17.2 million, $17.5 milliou, and $20.3 million t

totalling $136.4 million for G and Gtdf I capacity and en-for the years IV.NI, lWI, and IW2, respectively. Pun,uant to eigs (2) the finaming of $18.2 million of Grand Gulf I-its phase in plan, during IV.6-1992, the Gimpany will be L

tclatext costs not cunently sennesed thiungh rates, (3) collecting in nites a Ixn tion of the Gntud Gulf I related costs cunuruction expendiames (imluding Al DC) of $15.2 mil-incuraxi Init not collected in pr esious year s. These coller-lion, and (4) dhidends paid on pieler t ed ntuck of $ 18 mil-tions constitu4e cash muitable to satisf remstniction exlwn-3 lion. Tlw Company's cash needs for 1989 wcw utisfied with diture requirements. In addiunt to the above capital utpme-appiodmat$ $165 million of net pnicceds tehmded to the ments, the Gunpany will icqub e $26J million during Compaut inJanuary 1989 in connection with the settlement 1990-lW2 to meet long term debt matmities and to satisfy of the unnpant's pension plan, the use of internally genci-sinking fund sequirenwnts. The foregoing estimates assume, ated fund, and thc lxnitive efin ts of the cash ronservation among other things, fmaljudicial resolution in mid-lW2 of measures maintained in cf hrt by the Onnpany, litigation with n sixtt to the febru.trv 4 Resolution. reversal Nei cash 4mm operatig a' thities for the yeai ended of such Resolution, reinstatement on the unnpany'r,IxmLs Dn emtwi 31,1989 wm $43.8 million, an incicase of $61 J of an asset of $135 million previously wiitten oil ami ap-million mei 1988. This increase is due primarily to a de-proximately $121.6 million of related carrying cosn (attrib-ocase in nur defernds of $12.4 million, for a further analy-utable to the period from February 1988 throughJune sis of the incicase in net cash punided by olwrating acthi-IW2), and resumption of collection of the lesel of nues tips, refrience is made to the Statements of Cash Hows Net authorind by the 1986 Settlement Agreement, and no tran*

cash flow asmciated with imesting mthities denrased $6.0 fer of ownership of a substantial portion of the Qnnpany's million hum 1988 primarily due to an $8.1 million reduc-electric and/or gas utility properties.

tion.in 1988 ofimestment in subsidiary, oliset by reductions it is ex;wcted that the alxwe capital and refinancing in 1989 construction expenditures of $2.2 miUion, Net cash requirementa during the perim! IV.NL1992 willhe satisfied slow a sociaux! with financing aethities decr eard $ 13.3 hum internally generated funds and cash on hand. Never-million primarily due to the net cash proceeds from the sale theless, external financing could tw reqmred. The ability of in 1988 of$ 10 million of GkR ikmds. Also contributing to the Company to effect any external financing at this time is the decicase was a 54.0 million increase in dhidends paid un constrained, as discussed Irlow under Capital Resources.

preferred stock in 1989.

(sphelReseerees The Gunpany's G&R hlortgage and Restatement of Articles of Incorponuion, as amended, prmide for the issu-ance of G&R Ikmds and preferred sto(L, respectively. The unnpany's minimum carnings coverage requirenwnt.s for iuuing G&R ikmds and preferred stock are 2.0 tinws annual bond interest requirements (with respect to lxmds outstand-ing under both the G&R hlornrage and the Onnpany's 1944 hlortgage and Deed ofTrma.n 1.5 times annualinterest and preferred dhidend requirements, respectively, ors a piu Electric Construction Exponelltures (Mdlanm nllkdlem) 1 % 9 C C M M EI.U T. O JU.1 1988 %.3MXW M B% 13.3 1987 W M T.D d W M U ' ~ " T U W 19.1 19s6 SM?B'CILE 9.6 1985 &lh W M W :.T M ii.2 i4

fi>rma lutsis. Ilowxsvr, the Onnpany's GkR htortgage fur-Proled SIlve Breedi ther restricts the amount of GkR ikmds iuuable theietuuler in Dec emtwr 1989, the Gunpany s ecorded a $19.7 mil-by application of certain progerty or accounting tests, de.

lion expense, trin esenting the armaining future >rais' im-gwnding uixm the type of twmds to le issued. Ittsed u;xm pact of the temporary alunpti<nuif 18% ofits ITRGallo-data m of Dec emtwr 31,1989, including earnings cmtrage cated share of Grand Gulf 1 irtated unts (as discuwed in of 2.14 for tlw twehr months ended Decemler 31,1989 and Note 2, " Rate hiatters -Patject Olist liranch*). Ilowrsvr, the muitable limdable pro;wrty additions of $54.2 million at that Company does not twlinv that this agreement will have a date, the Qimp.my would have t w en able to Iwue appmxi-material achrew clli ct on pntjected cash flow dming this mately $17 million of additional GkR ikmds at an awumed period or on the Onnpany's ability to meet regularly scluxl-annual interest rate of 10% (plus any GkR llonds iwued uksi debt senice obligations and continuing preferied stock solely for pur1xwes of tefunding lumds outstanding under dividend and sinking fund nxiuirements. Tiw Resolution, tlw GkR 51ortage or the Gimpany'61944 hlortgage and hownrr, will continue to base an achen,e effect na the Gun-Deed of Trust). Further, Imed on an earnings coverage for pany's financial condition and to constrain the Company's preferred stock of 1.39, the Gunpany would not have been cash ilow and ability, mrr the near term, to raiw funds from able to issue any additional preferwd stoc L at Decemler 31, extermJ n<mrces (see Note 8, *Qimmitments and Contin-1989. Although the Gunpany's lxmd earnings coverage at gencies - Pnutence Disalkmance').

Decemtwr 31,1989 would haw ;wrinitted dw iwuance of GkR Ikeds, the issuance by the Gunpany oflonds wouki SMS 11o.96 s equire c crtain regulatory approvals, including appunut in December 1987, the Fast) issued SFAS No. iMi, innu the SEC.Tiw SEC has historically required that the

" Accounting for income Taxes', which was scheduled to be issuer of senior securities have a pro li>rma mtio of common effective fiir fiscal years leginning after December 15,1988, stock equity (including retained earnings) to total capitaliza-Tim FASil subsequently issued statement numlers 100 and tion plus 6hort term indebtedness of at least approximately 103, which delay the efli ctive date of SFAS No.14i to fiscal 30%. In light of the Gunpany's low common equity ratio, years beginning af ter December 15,1991. During the exten-22.0% of total capitalization as of December 31,1989, it is r< ion period, the FASil will be considering various irquests unlikely that the unnpany could obtain the requisite regula-for a;nendments to SFAS No.141.

tory appnwals for such financing at this time. Pursuant to an Ittsed upon a preliminary study, the Qnnpany expects onler iwued by the SEC in Decemtwr 1968, the unnpany is that the adoption of SFAS No.14iin its present iorm would precluded from eflecting any short term tornmings at this result in a net increase in accumtdated deferred income i

time (see Note 4, *l.ines of Gedit*,ihr ihrther discuwion of taxes with a corirsponding inciraw in aucts. it is not ex-

=

the Quninmy's short-term lorrowings),

pected that the Q)mpany's results of operations would tw significantly impacted by the adoption of SFAS No. 9(i in its present Ibrm (see Note 3,

• Income Taxes *).

i

-E 4

(Mimowfik&m) 1 19sy CLKMME.5UK: A!3?.!G.DMMU 433.5 19ss LM1MTMM251CEPM2a%3 423 o

~

y 1987 DMBMMMMMX h D 4098 1

1936 2,25BCE5fET22Mff"l3 393.6 3

19s5 C3"CMEMGU'2MEZL'2 3w.2 a

m l5

'1

[h -

j i

e s

is'

.I j,

's i

4

[

. Nm#lmra1%Idic.Wirrlow.

. y

&.... A_r w_m re.wint i.k_,m.. /.n. _3.,t 1989

- 1988, 1987 1

~. _

a J ', : fin huwuld ?

JS.4

.[7 Operasing Revenues (Note 18),

1,

l'.lecuic.

$ 380,H2 1 $ Nil,544,

$ D28h40

' '191,853 i A L 87,947 Natunt! gas

' 90,367 e s

.,s _a %-

Total 470,909

[453,397.

$415,967' f,

4

)

(

g i

OperatingExpenwe e K

Ogwnnian:

Jm Fuel and fuel-irtated exgwnws (Note lit).

..' 38,588 '

50,942, s 5v'A5 c

Purchawd power (Note 8F) -

n 230,805 :

- 206,617.

-W

. 207,283

. Gas purchawd tor iesale (Note 111).'

62,887 3 3 62,0411P,.C E 57,800 #

Other oleration expenws (Note 5).

54,900$ 9E y 83,513 n '

79,347 L MS Mair,tenance

19,897 N,

i17,756 ! ji, )18,460; y' c

Depreciation

,. J4

.15,546. ',,

'15,385 '

I 4,805 ~

3 Taxes other than income taxes.

i1 36,673'

'23,004-22,023 s

income tax expenw (benefit) (Note 3) 2,505 -

...e (11,181)j

(22,329);-

s

>J<

/

Rate deferrals (Notes 1G and 2): -

...r-0i

.m Deferred Gnmd Gulf 1 related costs 1(18,158);,

(60,523)'

' f(96,720)

Writeoff of previously deferrec' Gnmd Gulf 1.related costs..

1 -

1135,000 L *

-c Incume tax expense (trnefit) (Note 3)

L l.7,135 ? I '

20,578:

(?3,460)i

-z

.,. - ;, c. -...

Ibtal.

' ;430,861 L '

f_408,792i j - - 446,894 =

-.~

,. ' i

,N

',e L(30,927).

~

Operatingincome (Ims)

L40,148f

' 44,fd15 Other1nconnes'

. Allowimce for equity funds used duting construction (Note IF)

,, 2B ?,

,?

L 16 4

.124-1161 115 '

Miscellaneous income and deductions - net.

i 2,477 L,

Income tax expenst (Note 3)

L, (880)3,

f (6);

(49).

e c

"Ibtal

/

.,,i1,645 $. Q

l126' 190 E

Interest Chargen:

j _

, Jg r y Interest on long-term debt

./~ 24,472 E A i 24,290!. e

~ 16,119 Otherinterest-net.

M 3,001 E

' '1,387L 2,256 Allowance for bornmed funds used during construction (No'e IF),

< L (44)

U (218)' '

'. (II8) <

Total 27,429 B ' 25,959 G x18,237 -

4 o

s

] Netincome(Ims)-

(

$ 14,464,

$f I8,772 -

$ (48,974)

-- x.=w

-.-. w

.,a..n.c.n.::.,

.a.

U SrrNuks toRnaniialStatnwnts.

1\\

,a I

t

,w..

rI

't h

i; j

m z

a j'

i o

..,q

~

l.

]

,g a;

c,

, u, 1

.}6 l'y

, ; }{, i'

^

.1

,..r-l..[Y

,'l

,4

'4, Y L,jll. ; &x., (;l. 9 ; 7 ' ',

+

0 l

k. '

- ~

g w

' c 3. w ; g m ensamassaihBD8g ggggy Retained Common Paid in Earnings N"Ck.,, __ _ _ _ _, _ {gpl{ _ __

Q_fj!)

h

v. m av Balance December 31,1986

$ 84,359

$ 21,216

$ 105,575 Net lossIor 1987 (48,974)

(48.974)

Dividemisdeclared:

Preferredstock (2,907)

(2,907)

Conunon stock (2,984)

(2/J84)

Capital stock expense (29)

(29)

Balance Dm. 2131,1987 84,359 (33,678) 50,681 Net income forJanuary through November 1988 21,066 21,656 Dividendsdeclared:

Prefertedstock (2 /17 8)

(2,078)

Capi.al stock exgwnse 248 248

. -... ~. - -. -

Balance November 30,1988 Before Quasi <eorganisation 84,359 (13,852) 70J4)7 Q

'_wg airation (Note 7)._ _._.

(16,624)

$ 2,772 13,852 Balance Novem'.

' 1988 After Quasi <eorganisation 67,735 2,772 70,507 Net loss for khen.her 1988 (2,884)

(2,884)

Dividendsdeclared:

Preferredstock (694)

(694)

Balance b..Li 31,1988 67,735 2,078 (2,884) 66,929 Net Mcome for 1989 14,464 14,464 Dividendsdeclared:

Preferred suick (2,675)

(2,675)

Capitalstock expense (22)

(22)

Balance December 31,1989 (Note 7)

$ 67,755

$ 2,078

$ 8,883

$ 78,696

= = _ = = = = = = - - - -

=.===.== -

Nr Nobs toIismusnal.%terrwra.t 17 1

I i

s

o.,

3 l d f..

'3n J-r,.

a t'

' -)-

i i

. t

.'k

(

,' 1 s

i 1

g, MallN M Ne(%a twc SmkrInc.

d 9

N=br 31.

1999 1988' L

(In hund0 '

AgedIS Otmay Plant (Note IC)

Electric.i ' _.

, $ 427,147 :

$ 421,581'-

Propertytmdercapitalleanes-electric.

2,101; s

' 2,335

+

97,875'

94.942;

. Natumigan w.

' Property under capital leanes-natund gas.

'900'

'1,001' E Construction work in progrens.

6,153'

'1,410 n

Tbial...

534,176

' 521,20 %

Issaaccumulateddepreciation,,

274,401' 260,772s

?'r,.260,497

Utility plant-net 159,775.

4

~.

1 Oelierlavenernent:

h',

o Imestment in subsidiary company-at equity (Note 81),,

3,259 3,259,

Currenth

'Y-L4 o

Cashequivalents:. E o-

' Temporary imestmenis - at cost, which approxhnates market:'

q

(,

- ) Annociat dcompanies,

1,850;

- 1 4

Ottwis L. t 38,550 '

U

'12.236i c

t Total cash equialents (Note II).

35,380 y.,

12,236.,

, Specialdeposits IS 4'

+

.524-Accounts and notes receivable:

.1.

Customer and other (less allowance for doubtful accounts ~

lV7'

. 970l %.. f A

J of$1,350,000in 1989 and 1988) '

z 40,686

,. i (

J "c

1 6,943:

2,0591 1:

'k, Associatedcompanies.

s _' Accumulated deferird income taxes (Note 3) 16,147'

.G,

'6,384?

3 o

Materials and supplies-at awrage cost

).

' 8,261 ) '

4

' 8,8533 7,151; N_ g~

, Prepaym-ntsandother.

4,448 j 1

109,90') ? ' ' f'.0 470,358I o

Tbtal :

"w n s,

Deferre.d Deints:

. m.,

o

-16R,652 <q

! Deferred Grand Gulf I expenses (Notes 10 and 2).'

+ 186,810 77 - ?

,f W

Other,

a.

3,724 9 %

.4.108, m

r 190,554 f M< N '

i Total"

. 2,760 ' 4, t'

. 4 m

[Ui,,

M

'6,

' L.

' ' /. '

s r

x:

, +,

e r

c t

4

.i i

i f

y,'

]{I

?1'

.-[.

' ' ?),". _ !

s>

1 : 0,J.. i s /j 3 ; f

~a-1

/ il?

,b f s

t

{1j,

,f [hhq[-

\\)[

,f}-

[n ['

e [., ' ' ; !

,1 t

q.

c s i

it

,t i

,,,d *.%

',1, i

, I '.

., r j, ' '

'j ',

.).

J i

t I

e,{ (

3 0. / ' l d

., j ';,

1 t < j

' )N

+!,i,', J f l 0

c{

r, jf +

c,1 l c;,

rt, 'l(i =

f' e

1 f

i, i

l, YU y y):d/ r.nn%,TOTAli ' %',,.

.n a

, $ 565,475 j

1. $ +

l' g1 w[m..' h Mh NON h

l a, _..

a.a t

.1,6l y -

' )l

\\

u. 7,'i

.Y. Y.%. Q% [.;l.... ;.....Wl&, W l.

, ),i w

1.

...i I'

.o

.]

c s

e, a,

4.';;! w s. y M ;:Wgg';,A mQm

,. V l,pll.G t,b., s

,1,

<. ys1

j;,.

w3 '

n s

Qf.Wl.tip! )f.i t e,1:.

n. li&( A:

s

,c, ;u.x% N., v.) QU).-

b.

J.y l'Y h.o

..' m ; ' w % ' b,g, f? l..., n,f o-W ;

% h!. q ; l. -

j.

' ).M $

'), %

s > < ; Q^a v.

i f y > ;, s a. #.

3b.o

' ?~ gAl@r -. '. N@',. ;j s,hy,

7'm i H : '9,,#

• t, c ; f ;;V

+-

Qy s m%g.

J CY

.. f " ;Gy,!du.,,w.,,,,@ '$. a t,,

O,f.

, $ ch '

q v sy r

o

-a gf

.. pg,S 3 i

D a '

,(,

i w~

i

[.9 [

1,

a y

Ianmarr 31, 1989 198Ei (in Musands)

CAPlthutaB005 AllD usammB8 Capitalisation:-

' Common stock, $4 par value, authorir.ed 10,000,000 shares; lanued and outstanding 8,435,900 shares (Note 7)

$ 67,735

$ 67,735 Paid in capital (Note 7) 2,078 2,078 Retained earnings (accumulated deficit) subsequent to the elimination of the accumulated deficit of $13,852,000 on November 30,1988 (Note 7).

8,885 (2,884)

Total common shareholder's equity 78,696 66,929 Preferred stock without sinking fund (Note 7) 20,117 20,117 Preferred stock with sinking fund (Note 7) 10,505 11,232 temg-term debt (Note 6).

248,376 248,389 Total S57,694 346,667 Othee Noncurrent llabilities:

Accumulated provision for property insurance 12,922 12,072 Accumulated provision for injuries and damages 2,436 2,793 Obligations under capitalleases 2,169 2,444 Total 17.527 17,309 Current Liabilities:

Accounts paphle:

Asmclated companies 25,22S 21,747 Other 21,957 22,492 Customer deposits.

13,1b1 12,565 Taxes accrued 1,491 1,130 Interest accrued 8,620-7,197 Dhidends declared (Note 7).

5,117 7.224 1989 Settlement Agreement -liability to customers (Note 2) 14,988

, Deferred electric fuel and resale gas costs 1,179' 2,291 Obligations under capitalleases 8SS 891 Other,

2,979 2,010 Total 95,5381

.77,547 Deferred Credits:

Accumulated deferred income taxes (Note 3) 58,127 38,968 s

Accumulated deferred imestment tax credits (Note 3) 13,843 13,399 1989 Settlement Agreement -liability to customers (Note 2) 4,761

~

Pension obligation - associated company (Notes ID and 5) 13,031 10,659

' Other.

2,954

'2,325' s

Total 92,7'16 65,351 n i Comndtments and Contingencies (Notes 2 and 8)

TOTAL

$ 563,475

$ 506,874 m

, b NM IO.bflONdhlf h(Idt'II,tMU.

k,

.,4 19 e"'

g

"/h.

(ig, ( Y 4 y

t

hj~

s 9

N Of G8N FLOW 8 t.

, Nm>0thatul%Senkrlu.

Em ihrymm cuisflkmaer JI,'

1989 i ' 1988 1987 Iin Amueulo MA88M8i"8 Net income (kas).

$ 14,464 ~

$ 18,772 -

$ (48,974)1

, Noncadiitems included in net income:

Deperciatioi 15,546 '

' 15,585 14,005 '

1

• Defenni income taxes and invesunent tax credits-net.

' 9,740-17,168

-(46,320)

Rate deferrals-net, (18,158).

,(60,523) *,

38,280.

' Alkwance for equity funds used during construction,

(28)'

(116)

.(115)

Prmision for estimated kinesi.

3,242 >

2,239 4,298,

Changesin working capital:

Rarivables (7,582)

(13,768) 4,054 Accountspayable 2,HI 2,394 1,034 Deferrni electric fuel and resale gas c%s (1,112)

(127)

(3,762)

Taxes andinterest accrued.

1,784 (4,150) 1,249 '

Other cunrnt auets and liabilities (213)

(3,655) 2,118 Net pension expense 2,572 2,764 -

(2,333) 1989 Settlement Agreement -liability to customers Other

~

19,749 1,063 5,744 (5,094)

Net cash prmidnt (used) by openiting aethities 45,808 (17,873)

' (40,760)

InwetingActMenes:

Reduction ofimestment in subsidiary 8,119 Constniction expenditures (15,160)

(17,209)

(21,815)

Allowance for equity ftmds used during construction 28 116 115 Net cash used hJmesting acthities (15,132)

(8.974)..

(21,700)-

' FinancingActMtlesi

(

' linuance ofgenend and refunding mortgage bonds,

140,000'

.75,000 Retirement offirst mortgage bonds '

~ ~ '

(6,000) -

1 Redemption ofpreferred stock '.

. (750) L (1,800) "

-4 Changesinishort-term borrowings,

(, 5,000)-

Dividends paid on common stock.,

Dividends paid on preferred stock,

t (4,782).

(1,544)E

!(2,984) L (093) y

. (2,977);

pg Net cash pnwided (used) by financing activities ;

i

~. (5,532)"

! 37,763 '

L$6,239

' Net increase (decreane) in casti and cash equivalents..

23,144

'10,916:

(',221);

6 C wh'and cash equh aler.tk at beginning ofyear,

12,296 "

'1,320(

7,541 f,

'"'Wr

.. Cash and casti equivalents at end of year -

' $ 35,580

>; l $ 12.236 L '

' $1 1,320g s -

f.O

~

>9 s-tal Disdomine of Cadt Pldwlufoe==elaa, '

Wg l

Ptyi ' Cash paid (received) during the year for:l L't y

a e'

a M ' }* ' d hiterest (net of amount capitalized).

" $ 25,428 '

p$ 23,709 :

$,15,200 -'

^

, incune taxes >.

$. 615

$ (1,046) X i

$.(4,418)' T 3

e 4,,-

Schwlule of Noncash Invenng and Financing ActMdes:

, Jy l; jCapital lease obligations incurred '

n,-

'1

,.' $'.628'

. $.1,573

. $ '. 919 K y

? :

' NR*Nol0 ful'IFktNdalStaltFNtNii.'

gy e

.g

/'"

'i

fjQl,

'h, K

n y,

y D[

. ; :F

• 1 s(

' [*;

j l oa

. WQ.Q;G

~'

i ^

M

', $p, ;,

u y;

m s

o 2.

<g a

C

% NOIW10ftMERALSM ma 1

73; 6

i yf, arplacement ofitems determined to be less than

pioperty are charged to operating expemes. Pnnci,.+.1 p

of the utility plant is subject to the liens of the Company'si i

s two ' eparate mongages and deeds of tnist...

L,_

s t Depreciation is computed on the straight line basis at

~

s y

l 3

) rates based on the estimated service liws of the various s s*

jM s

dasses ofpmperty.Depr-intion powickti on awrage depir h f j.';

O m 0F 800l W IfA uf ACC081R ul8 pe utes

ciable propeny.in 1989 was appmximately S.165 he rate ? ' w l 7

'g1

for both 1988 and 1987 was appmmimately S.06% -

Q; s

. M 4

A.0peessi af Aman==es 31, y

,p s,

1 : The ac counts of the Company are mainsained in accor-D.PeelvedisessoasasseGes

C

- G ;(l' e

s? "f dance with the system of accotmts pres'ciihed by the Counc l' ?

ne Company'pmvides instredrement benefit plans )

.A l

which system of accounts conforms to the Uniform System

' cmering Substantially all empibyees. The Company is a par-

. of Accounts as perscribed by the FERC.L

, ' ~

~.ticipating employn in a~defhsd benefit pension plan spon-% X '

sored by an asociatal c#mpany.Thq Company has adopted

! S. Rosesses'eed Delessed pool Cools f,, t

- a pension expense alicdidan policy such that pension ex-I a

u The Company recognises electric and gas rewnues as,

e pense recorded on the Company's.lxmksis substantially the ?

billed to its custonwrs on a cyle billing basis; Rewnue for :

> same as t% expeme dvit uuuld haw been rMd if the.

y K energy and gas deliwred but not billed at the end of the ;

Company nad inaimpuedj separate defined benefit pen-

,T s

s:

linealperiodin not accrued [...

<j...,,

i guidelines establistied by the Employee Retirement income ;

^

< sion plan. Pemion cmts am funded in accordance with 1 The sute schedules of the Company include elecuic ; '

4

. fuel adjununent and city gate gas cost adjustment clauses

' Security Act of 1974., as amended, and the Internal Revemic j under which fuel costs are billed to customers. The Com-

• Code of1986;as amended. The costs ofposurtirement '.

f pany defers under/omr recmeries of electric fuel and pur heahh cannmd life insunmcc benefit plans'are ircorded on! :

ciwxxl gas costs through opemtiori of the electric fuel adi nacash basis l s:, y C

i justment'and city gate gas cons adjusunent clauses until these

[7I y,

m costs / credits are reflected in l'Hlings to customers.

A B. lassene h ees -

The Companyjoins i_ts parent and affiliates,in the filing.

C.Osmy Plane and Depsedseleen of a consolidated fedemi income tax return. Pursuan' to an -

t N

' ' Utility plant is statal at original cost. The cost of addi.

intra System income tax allocation agirement, income taxes :

tions to utility plant includes contracted work, direct laimr,.

- are allocated to the Companyin proportion to its contribu.

o

. materiah, allocable merheads, and AFDC.T. he costs of units -

tion to the consolidated taxable income In. 'accordance with

. of property rrtirrd are remmed fmm utility plant, and sucli SEC regulations, no System company is required to pay costa plus remmal costs less sahuge are charged to as cumu-more income taxes than would haw been paid had a sepa ?

laced depreciation. Maintenance and repairs of property and inte imome tax return been filed.D ' N * '

. Deferred income taxes are recorded based on differ-ences between book and taxable income to the extent per s mitted by the regulatory lxxiies for ratemaking purposes.

Invesunent tax credits allocated to the Company are defer. '

red and amortized based upon the ayerage useful life of the related pmperty in a manner consistent with ratemaking L

~

ueatment. In addition, the Company files a separate Hate income tax return. '

i

,n L

t h

};p>.x[}.

}l Q V.

Q 21 s:

M d.M /,

%[,

r.

3;;

a d.) !

yx _ n >;%s N.

q 5

s

+

i tN, s

i. m y,,

m

,4,

..,n.

, ar e., #

• * % ' l.N hjh,h'g j

';t 1

4 i,, ;

q

,yi'

@ 'li

. 3T ~ '

't M d

I movestopauscunsurumps Kne Wa IWc SmkrInc.

F. Abowease for Funds good During Cemeeredlen During periods when defenrd costs air recovered,intnue To the extent that the Company is not permitted by its collections will exceed, to the extent of such current recov-regulatory lxxly to recover in cunrnt nites the carrying costs cry, cun ent cash trquirements for these cmts. The carrying of funds used for construction, the Company capitalizes, as charges associated with financing the defernd are recovered an appropriate cost of utility plant, AFDC, which is calcu-cuitently (see Note 2. " Rate hiatters* for a discussion of the lated and recorded as pnnided by the regulatory system of Omncil's Resolution disallowing the tennery of $135 mil-accounts. Under this utility industry practice, construction lion of prniously deferred Grand Gulf I-related costs and a work in pmgress on the balance sheet is charged and the rnised phase-in plan),

income suuement is crnlited for the approximate net cone Ixwite interest cost of hormwed funds and a reasonable 18.Ottierllemeerrent Malmelos arturn on the equity funds used for construction.This pro-It is the policy of the Company to prmide for uninsured cedure is intended to remove fnun the income statement pmperty risks and for claims for injuries and damages the effect of the cost of financing the construction pmgram.

through chames to operating expenses on an accrual basis.

It effectively results in treating the AFDC charges in the Such expenses have been allowed for nuemaking puqmses.

same tnanner as construction labor and material costs in timt each is capitalized radier than expensed. As nuncash I.Statessents of Cooli Flows items, these crnlits to the income statement have no ellect For purposes of the Statements of Cash flows, the Cond

)

on current cash finws. After the pmperty is placed in senice, pany considers all unrestricted highly liquid debt instru-the AFDC charged to construction costa is recoverable from ments purchased with an original maturity of three months ctutomen through depreciation pneuions included in mtes or less to be cash equimlents.

charged for utility senice. The composhe AFDC mtes for the Company were 11.0%,10.3%, and 9.8% for 1989,1988, and 1987, respectively.

8.Este Delervals l

The Council appmved a rate phase-in phm for the i

Company in order to reduce the immediate effect on miepayr s of the inclusion in rates of the costs of capacity and energy from Gnmd Gulf 1. Under this plan, certain RAW RRRrMR$

costs are deferred in the early yean of commercial opemtion and collected in the later > ram from customen. By defening trend Gulf 1 Rete ReRef i

these costs to the future when they will be collected ti m"gl-On hlarch 20,1986, the Council offered the Company increased rates billed to customen, the impact of the cosa permanent mte relief of approximately $26 million on an associated with the phase-in plan on the income statement annual basis for bills rendered on and during the fint year has been largely removed. Because the actual collection of after Apdl 9,1986, with further scheduled inen ases annually rnenues to recover the deferred amount will not occur until until Gmnd Gulf 1-related costs are being fully n covered on the futurc, the Company records a deferred asset represent-a current basis and prniotisly deferred amounts have been ing the amount of the delerrals and, at the same time, incurs fully recovered, subject to the Gunpany's acceptance of a additional capital requirements to finance this deferml.

proposed 1986 Settlement Agreement with respect to the Company's hlay 17, '.985 application for an ek ctric rate increase. On hlara 25,1936 the Company accepted in -

writing the hlarch '.0,1986 etlement offer from the Council. The 1986 Settlement Agreement permitted the Onnpany to recowr currently fmm its retail electric custom-ers a portion ofits Gmnd Gulf 1-related costs and to defer J

for future recovery through a phase-in plan a portion of

)

these costs, l

.}

I t

l1' l

ll On April 2,1987,on the application of the Company On February 4,1988, the Council, in concluding its -

i and in accordance with the terms of the 1986 Settlement prudence inquiry, whk h was vigorously contested by the i

. Agreement, the Council adopted a rewlution ftuther imple. '

. Company, adopted the Resolution, which required the L menting the 1986 Settlement Agreement by appnning tars Compmy to write off and not recowr fmm its retail elecuic ifIs filed by the Company pnniding a schedulnl increase in cmtomers $135 million of the parviously deferrn! Grand base nites for electric ser ice of $29.4 million annually for Gulf 1 related costs in addition to the $51.2 million of such l

bills rendered on and after April 9,1987. Further, in acccus costs that the Cmnpany absorbed in connection wid. the dance with the 1986 Settleinent Agirement, the Resolution :

,1986 Settlement Agreement. The Resolution also required a alv> punided that carrying charyc. on the deferred costs be -

reduction in the rate increaws scheduled to be impk -

accrued at a 14.7% mte beginning April 9,1987, mented on April 9,19Nnd in April of each sulmequent Under the terms of the 1986 Settlement Agwement, 3rar as prmided in the 1986 Settlement Agreement. The i

the patics thereto agned that the k gal rights of the City, folkming is a comparison of the rate inciraws pnnided for the unmcil, and the Company therein, as the case may be, in the 1986 Settlement Agirement to the mte increases regarding, among other things, (1) potential municipaliza-provided for in the Resolution, commencing in 1988:

3 tion of the Company (see Note 8,"Commiunents and Om-tingencies -Potential Municipalization"),'and (2) inwstiga-I;()nthe Ratrhtw wIW Rattinnrum tion into the prudence of the Company's inmlvement in A.wil 9 iW Settimnd Aperand th Ihaluthm Grand Gulf 1 (discussed below), were not atTected.

(IM'an i= Aldk"a) 1988

$22.1

$16.6 1989

$23.4 '

$17.3 1996

$24.8

$18.1 199i and thereafter 6% of $439 4.5% of $420.7 compounded compounded annually

• annually *

• In nuh twe unta Gmnd Gulf I urbank ants arr Iringfulh runneml on a currrra bash and the amemnts pursmsty defermi (uruin the Rewlutwn, Irts the adddunm!

$1M millum ofdualbnwancr) hase IwnJedly tranemi. fmyntal to le aftruinately Splemin ofIVM.

In compliance with the Resolution and pending reschi-tion of the Company'sjudicial appeals (see discussions be-low under the captions

• Federal Court Proceedings" and

" State Court Procentings"), the Gmnpany implemented re-vised rate tariffs, effective April 9,1988 and April 9,1989, refletting the lower level of annual increases as nflected in the table atxnr.

The Quupa n h %rs that the Resolution isin viohi-tion of the Fecke fuwer Act, applicable FERC orders, and fnleral law as intespirted by the United States Supreme p

' Court and is contrary to the evid mcc presented to the

. Council, and will ultimately be so declared by the courts.

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1 i-NOBOS10 PMMOR STWINNIS New(unaIWk $mkrlu.

g h view of tlw fact that the Comptnywas not ahic to the Remlution was not " facially preempted" by the FERC.oss obtain a coun injunction staying enforcemenwf the Resoin.

dered allocation of 17% of the capacity and energy from tion, the Company was required by the tenns of the Resolu.

Gmnd Gulf 1 to the Company, and (?) adequate gmunds tion and applicable generally accepted accounting prin.

existed to stay the Faleral Court proceeding in deference to i

ciples to write off $135 million ofits proiomly deferred :

the pandlel state coun puccedings. The Federal Court Grand Gulf I-related ctats and to reflect that write off, not of stated that it would lift the stay if d e Company demon-E

. income taxes, as a loss in 1987. Such wiite off results in the ;

struted that the Gouvil is "puqxwely delaying the appellate further low of the accumulated carrying < harges that would,

. process"in the state courts. Onjanuary 19,1990, the Gmv haw been renntrable on the deferted amount m wiitten' pany filed with the Faleral Court. a notice r9pIwal ap;wal-

~, off, which could amount to an additional $106 n " ion <nrr ing the Fedend Court's stay order to the Fifth Circuit, The e

~

. the period of the 1986 Settlement Agreement, matter is pending.

The Resolution continues to have an whrrse effect on the Company's financial condition and to constrain the

' 9IstoCourtpressedags.

' Compmy's cash flow and ability, mer the ricar term, to raise

.., On Fehniary 4,1988, the Council and other parties '

4 funds from external sources. Ilowner, asstiming no cata,

, filed in the State Court a petition for declaratory and injunc-suuphic or other extraordinary nrnt, the Gunpany now th relief seeking ajudgment, among other things, deitar-c estimates that, nrn if there were nojudicial torrsal of the ing.he Resolution valid and enforceable. Furthermore, a Resolution, the Company's projected cash flow will be sulli-suit way filed in the State Q4 rt against the Council by the.

cient to permit it to meet its projected regidarly scheduled Alliance for Affontale Energy, Inc, and others on February,

debt wnice obligations (including its' obligations uth tv.

4,1988 asking that the Rexdution be amended to order a 1

sgwrt to principd of, and interest on, its G&R Ikmds) amt to greater disallowance of Grand Gulf 1-related costs from the

, incet continuing preferred stock dhidend and sinking fimd Gunpany's electric ra:es, and by a sulmeq' ent plead.ing the u

requiremee y for the forewcable future.

Compmy was named as a party to this suit. On March 7,.

.1988, the Company also filal a petition in the Stme Omrt Federd Court Proseedags

. seeking torrsal of the Remlution. Tiwse tiuve suits were

\\ ue Gunpany filed a complaint in the Fedend Court '

consolidated in the State Court arid a hearing on the merits.

on February 9,1988 asking that the Council be prohibital of the case was held in the State Court on Nmember 30,'

from cuforcing the Resolution and imposing the $1S5 mil-1988.' OnJuly 21,1989, the Company filed a motioni to stay

' i lion disallowance. Folkming a series of achtrae contt all further State Court proceedings pending a determime -

/

decisions agaient the Compmy that were based on the tion of the matter in Federal Court. On August 30,1989,

. I docuine of abstention, on August 26,1988, the Company the State Court denied the Company's motion to stay the

. {

liled a petition for wiit of certiorari with the United States State Court proceedings and on November 15,1989, the 1

Supreme Omi t asserting that abstention is not appropriate.

. State Court rendered ajudgment in the consolidated cases The Uriited St.ttes Supreme Court granted the Gunpany's descriled ahmr. The State Omrt orderedjudgment in petition for wi'

, rari and onJune 19,1989, rendered famr of the Council, allirming the Resolution, and against a unan.non.

. t reversed and remanded the case

.the petitions of the Company and the Alliance for to the Fifth Cha fu,,her proceedings consistent with AITordab!c Energy,Inc.

. the opinion of the i nited States Supreme Court. On 1

Augtat 21,1989, the lifth Circuit remanded the case to the Fnteral Court. The Fedend Court, on its own motion,19 sued an order dataljanuary 3,1990, staying the Federal J

Court proceeding due to the progress of the concurrent state court pnxecdings (see " State Court Proceedings" di>

cussed beh>w). In determining to hsue the stay, the Federal -

Court ibund that (1) contrary to the Gungmy's argument,

'n.

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. Oii Nmember 27, h'n9, the Gimpany lik;d a motion

. led in the IT.RC Settlement, onJune 19,1989, the Gunpany stiro new uial.in the State Qiurt,khich was denini on

. 'In addition to settlement of FERGielated iwues emixxk ja' aary 10,' 1990. On Decemtwr 8,1989, the Alliance Ihr and the Orr :1 entered into a separate setdement agree.

m Allbnlable Energy, Inc., jointly with others, filed a petition '

. ment, the W Settlement Agicement, addressing certain

' for apgral to the Fourth Gircuit with respect to the State kical retail nue issues irm>hing Gnmd Gulf 1. Under the -

Giurt's Nmemtwr 15,1989 judgment. Such petition was,

terna of the 1989 Settlement Agreement the Company gitnted by the State Qiutt on Decemtwr 11,1989. On agtent to (1) tempanuity abson b, and not recowt from its

J+nuary 19,1990, the Onnpany filed with the State Qiurt its retail s atepayers,18% of its IT.RGallocated share of Grand.

Petition for Appeal to the Fourth Orcuit with resirct to -

Gulf I related costs, net of any sdes of energy fium the 18%

' the State Court's Nmember 15,1989 judgment. The matter absorted portion to the Gimpany's nitepap ni at 4.6 cents is pending.

per KWil, until sinh time as the present udue sanings to the unnpany's retail nucpayers shall total $23.5 million, pm. -

Proled OBro breede jected to be appmximately May of 1991 (the Compamy in connection with an efibrt,ieferred to by the Middle would, howewr,ir irrmitted to sell the energy from such South Flectric Sptem as "Pmject Oliw Bmnch," to settle -

portion to other pirties at more than 4.6 cents per KWII) outstanding issues and litign!!on surmunding Sptem En.

and (2) utilire an $8.5 million a edit, applied by System ergy and the Gnmd Gulf Station and to stabilize ertail rates Energy to the Company's G and Gulf I bill pursuant to in the area served by the Middle South Elecuic System, on the terna of the IT.RC Settlement, to reduce by $8.5 million June 9,1989, System Energy and the Sptem oiwrating com-

' the amount of future Gnmd Gulf I-related or,ts that wouki panies filed with the FFRC an ofter of settlemen; to resohr have otherwise twen delcried for future collection by the certain FERGirlated issues in a way that would le lwncficial Company under the piesently cfTective phaein plan for to the System, its imeston and its customers. Tle.iffer of Gnmd Gulf I-related wsts (such credit was reflected in settlement was sul*,equently supimrted by the IIRC staff, Spten. inergy'sjuly bill to the Company that was rendared

. state and kictd regulators and ollicials, and other interested in August 1989). The 1989 Seulement Agreement became pardes and was appnned by the ITRC onJuly 21,1989, effective onJuly 21, low. The 1980 Settlement Agreement The implementation of the FERC Settlement in the resuhed in a s eduction in 1989 net income of $15.5 milhon, third quar ter of 1989 trsulted in, among other things, the of which $12.0 million was cronted in December of 1989, cancella' ion and write.off tw System Energy of approximately representing the remaining f uture years' impact of the tem-

$900 million ofits $926 million invesunent in Grand Gulf 2 parary absorption of I8% ofits FERGalkicated share of (construction on which had been sus [wnded since Septem-Grand Gulf 1-related aists as described in'(1) alove. The her 1985) without seeking rate recovery from its customers, Onnpany does not twlieve that this agreement will have a

. the Sptem opemting companies, including the Company, mategias adwrse efh ci on projected cash flow or on the Additionally, System Energy made a one-time credit to the.

Company's ability to pay s egularly scheduled debt senice

n. Sptem operating companies' bills in an aggregtue amount of obligations and to meet continuing preferred stock dindend

$50 million, which was alk>cated among the System operat-'

. and sinking fund icquirements.

Ing corr.panies in accordance with their respective percent The Onnpany is a party to certain agreements and l age allocations of Gnuvi Gulf I capgity and energy. The proceedings concerning Sptem Energy and the Grand Gulf '

L Onnpany's share of this credit totallec. $8.5 million.

Station (see Note 8, "Onnmitments and Contingencies').'

While all parties to the FERC Settlement agreed not to l punue any prudence disalkmance c' Grand Gulf I cmi.

strucGon costs and operating and nu. tena ice expenses ' y

c recorded throughJune 9,1989. the FEl/bettlement.

'. among other things, chies not prejudice any party's right to,

l seck disallowance of such costs recorded af er that'date or to '

L ' continue to appeal the FERC's orders with resoect to the N allocation of Grand Gulf I capacity and energy and related.

costs among the Spiem operating companies or the right of E

t the parties to seek future changes to the UPSA which are not,

• (inconsistent with the FERC Settlement (see Note 8,' "Qnn-f miunents and Contingencies. Unit Power Sales' Agreement h

' and Controwrsies Concerning Grand Gulf 1"). Additionally -

i

' f the FERC Settlemern (k>cs not prejudice further prosecution -

j nflitigation with respect to the Resolution.

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S' MWalWMenarlw.

p ' : $;

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k J Income tax expense (benefit) consists of the following:

h989 '

1988.

x

.. s x

f,,9Y, i

. 1987o.

'; 0n mm,au

.,a f.y

ggg,

. ' $(6,568)l s 580)'

4 Fedemi

$. (64)

(4 State

913

^ (1,198)l

'4:

+

s I

enssyensa

• geeiin t

Total 849 f(7,766).

,.580:

a

,,f, 4

3'p2 m4

[g.

9

+e (23,460),

Ra:edefem h.

7,185 :

, ~. 20,580 '-

'j 1989 Settlement Agicement (7.757))

J

.7-l--,

. 4

( ;-w,

Inss carryformtrd utilization (irduction) ',

15,100 T

" (G,750)1 H. ' J (22,550)f \\,

b

, f(4,384)1

• (1,352) t i<* % ((798)? ? I

('t Unbilled erwnue IYnsion expeme,

f1

. (2,411)J

- (940) 'E1' 6 1932 L '.E,

s

,L i 1559l ? N.d,

'(659), y V Adjustment of prior years' tax Imwisions L 512 '

,^

Alte nativeminimumtax 325;,,. f J, I i 6f&

(1,139)f b,

Libemlintidepreiation

'(142); NW L 3761 ? i M (

}(233)s,.,"

484; g Ma

)(717)j y 4,964 Customerdeposits Q

. RTA benefit expense acciual r[M ' (1,197g. W L M,,[

. v:,1,210' b,

Deferred fuel or gas cost

,";.?490:164)( D:',Os,1H0/ J IL1J26 f I' s

irgl Other

(62) Q ' '

4(385)l '

m

,n w

p w,

(46,082) ";%n f,

, u:; 9,2954 ' ; g k 17,406 7.,.

i

',j Total

&e,

s.

.n](238);:[j,$c

,:;/

aj,, L444(, Q.

Y.

((237);h' ' [-

w.#'p-4,Z, Imestment tax credit adjustments rht T.i /$ 10,588 M N pt

~

j%. 4. s frt c.f1 ;

Ci' 7

f t iE'-.

as

..+t" Tota.l inicome tax expense (benefit) J.

' 9. $ 9,4031. i N.',. ',. %,..P. $ -(45,74,0)

• s 4

4 a

-zutiram

.. _.strer,m

-~r**

m a.

VYe J j [,' o '., > ',

. 4,.?.'.}<

l-$: 9,728 ? <

b-

.,.M$ 9 3971 W, a, y $ (45 789'yM 3

,t j,

so.

s

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...o d,s

@$ f f: Charged (credited) to openitions ;.

j

)

GV h.,

+%< 860 i.r.A. # a. M.o 6,f f>k,"

'.M, M 49. W

$U,W:;.J Cijarged to othcHncome., m

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m a.,

. s

. h,**

's,,?

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J, ~

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i

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' W:y$.m,

jTotal' income tax expense,(benefitU

" d,

• y"p'

[$.10,588i ' ' j@yj..,$. 9,403 We_lW.$L.(.45,740) W, o l

s

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k,C (,w m y:.h. a.. p &.

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= n"W ' w% Pn$hdM]

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Total income tax expense (benefit) differs fium the tunount computed by applying the statutory fnlend income tax mte to income before taxes. The rrasons Ior the differences are as folkms (dollan in thousands):

[f 1989 1988 1987

% of -

% of

% of l

Pre.'Ihx Pre. Tax Pre-Tax 0

Amount Income Amou M Income Amount income p

Computed at statutory mie

$ 8,518 54.0 % $ 9,580 34.0 % $(37,886) 40.0 %

inert ases (reductions) in tax resuhing from:

Impact of change in tax rate on write ofIof rat., 'eferrals

- (8,100) 8.6 State income taxes net of federal income tax efTect 2,677 10.7 (791)

. (2.8) '

Depreciation (551)- (2.2) 60 0.2 4-1.

(0.l)

No 4daluctihte excise tax on pension termination,

628 2.5 Amordzation ofinvestment tax credits :

(489).. (1.0)

(237) - (0.8)

(237) 0.2 s

3 Adjustment of prior years'. tax prxwisions (817): (3.3) 183 0.6.

(184) 0.2 Amortiration of excess deferred incoine tax 1 876 t1.5 441' l.6 340 (0.7)

Other net 246

' l.0

'167

' O.6 ;

,(17)

Totalincome tax expense (benelh)-

, $ 10,588 : 42.2 % $ 9,403 '

33.4 %~ $(45,740). 48.2 %

e

. w n_,,

~\\.

y The tax effect of the portion of thr: P187 mul 1"Kfed-trquirements to rt:.srd deferred income taxes for all tempo.

cral net operating losses that is carried torwmd has been re.

. rary diirerences that are regorted in one year for financial

. reporting purposes and a dilTerent 3 car for tax purposes.

]

corded as a rninction of deferred income taxes. These h>ss

' carryfbrwards toudling $82.3 million at December 31,1989 This will require the recognition of deferred nix balances for are muitable to offset taxable income in futnre )rars and, if l certain items siot presiously" reflected in the financial state-not utihzni, will expire in the yean 2002 and 2003. Unused ments, such as a deferred tax liability relating to AFDC.

Imrstnient tax credits at December 31,1989 amountal to "r

' Under the liability method adoptal by SFAS No,96, de.

~

$1.8 million afier the 35% reduction irquirnt by the Tax '

ferred vitchmcos will be based on' enacted tax laws at tax Reform Act of1986.These credits may be applied against -

rates that arr expected to be tu effect when the temporary federal income tax liabilities in future yean. If not used, they differences reverse.

A It is expected that ' eductions l'n deferred taxes resulting -

will expire in the year;. E; through 2002.

' from'the kwer corporate federal tax Wes will be reflected'as r

, Cumulathe income tax timing differences for which;,

defermi income taxes have not been provided are $27.8 ;

. liah' ities to customers since the Company's regulaton may d

million and $24.5 million as of the end of 1989 amt 1988, re<

require any such savings t6 he pamed through to the mtepay spectively.The alternative minimum tax credit' at December ers. Ilowever, based on a preliminary study, the Company '

L 31,1989 is $0.2 millian.This credit can be carried forward

. expects that the adoption of SFAS No. 96 in its present foran iindclinitely and will reduce the Company's income tax liabile

" would result in a net increase in accumulated deferred lik ity in the future.'

come taxes with'a corresponding increase is assets. It is not a Q; L ' counting for locome 'Ihxes, whicinvas scheduled to be ef-

.; expected that results of openit,ons for the Company would

.~ hi December 1987, the FASin issued SFAS No. 06, "Ac-i be significantly impacted by the adoption of SFAS No. 96 in 1 fecthe fbr fiscal years begmning after ikcember 15,1988;'

its present Ibrm.

[ _,

" Tlic FASB subsequentlyissued statement nimdien 100 and -

L 103, which delay the e!Iccthe date of SFAS No. 96 to fiscid

.w o

l years beginning after December 15,1991iDiiring the extem I

u s

4 sion period, the FASlhvill be comidering various requests > '

m ni 1

[y ifor as6endments to SFAS No. 96. SFAS No. 96 expands the ~-

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< short-term lorrtming w(juirements, thereby reducing the Syitcin's dependence ugon externallernm*ings. As of Decemler 31,1989 and 1988, due to the shortacim Imrmw-s 3

ing limitations mentioned alxne, the Comgany had no out-standing shor:4crm l>.. iwings.n The secured an. 9..eturd short4crm Imrnmings and -

applicable internt raw. t etermined by dividing applicable '

d 1

85W GHMOR

' { interest expem,e ly the awmge amount lorrtmed) for'the -

Companywere as follows:

1989' 1988-

'1987 in Decemler 1988 the SECissued an order ainthorir- -

ing the Company to effect maximum short4crm bontmings C JiaTam ma e..

Mi during the period through Decemler 31l1990 of up to an :

LMaximum lorrcming -

$.42,700 s

~:

aggregate amount outstanding at any one time of $30 mil

^

Awragelorrowing:

lion.' Additional lorrowings up to a maxinium of 10% of o.

' ' Bankloans

.o

$ 1,989.

Associated companin

<- ' $ 2,156 - '

capitaliration, as definni, are subject to further SEC ap.

1

' $ 10,214 proml. lk> wever, the SEr"s orxler pmhibits the Company

.. ; Other

.L a

fmm effecting any shortaerm tornmings if the Company's Awrage intenst mte dtuing n>mmon stock njuity (including irtained earnings) is, or theperiod:

would thereby twcome,less than 80% of the Company's Ikmkhans ht% '

total capitalization plus shott4crm indebtednos. Ajarmary Associatalcompanies L 6.7%f 1988 order of the SEC had im[msnt a similar rntrir.tlorr Othen 9.6%

on the Company's short4crm imrrowings during 1988. As a irsuit of the write ofrof $135 million of previously deferred -

Gnmd Gulf 1 related costs, the Company's ratio of common stock equity to, total capitalliation at December 31,1989 and Decemler 31,1988 was 22.0% and 19.3%, respectiwly.

Under these circunutances, the Company was precluded >

from effecting any short4cnn borrowings. The Company may be precluded fmm effecting short4erm Imrnmings untillate 1992 unless the Resolution is earlier rewned.

6 s M on 85WW The Cornpany has participated with certain other com-J, panies of the Middle South Electric System in a' money lxml Effectim October 1,1988, the Company terminated

)

arrangement (Money Pool) whereby those companies

- its defined benefit pen. ion plan and as of that same date :

with available funds make short4e-m kans to other compa-

adopted, as'a participating empksyer, a' defined benefit nies in the System (other than Entergy Corpoiation) having

pension plan sponsored by an associated conipeny. Thisj p successorplan pro'vides Compan' employeeswith'aubstan i y

~ tially the same benefit progmm with^no loss of accrued T

' ; benefits las prmided under the terminated' plan.The pen -

A sion plan, cmtring substandally all empkiyees, is concon,.

- tributory and prmides pension tenefits that are based on !

g the employees credited service and awrage compensation,'

4-

%y

generally du_ ring the last five yean before retirement. Pen-j sion costs are funded in accordance wl:h guidelines estals J q '

lished liy the Empksyee Retirement income Security Act u ' 4

' of 1974 as amended and the Internal Reventic Code of M i h

7 1986, as amended.

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InJanuary 1989, the accmuulated lenefit obligation of The Gunpany's total 1989,1988, and 1987 pension

[

the terminated plan was witled by part hasing annuity con-

' expense was compried of the following r,>mponents

tracts. As a irsult, the Gunpany recortled a nonrecurring '

wttlement gain (trflected as a $15.5 million decrease to 1981e*

1988 1987.,_

ottwr opetution expense), net of applicable taxes and adjust.

(la Rampuls) ments, of approximately $8.4 million in the finit quarter of.

Senicecost lenefits 1989. In addition, onJanuary 31,1989, the Compmy was camed during :

triunded appmximately $16.7 million (net of a 10% excise tlw period -

$1.498

$1,510

$ 2,227 tax) fium the terminated plan wpresenting the funds in Interest cost on pmjected excess of amounts required to purchaw the annuity con.

benefit obligation 931 7,795 -

7,446 tmets, pay certain plan participants a pnwrata portion (ap.

Actual return on proximately $1.3 million) of exceu nian assets as trquired by plan asets'

- (9,277)

(4,612) t law, and satisfy other related cost', w.i expenses connected Net amortization and.

S with the settlenwnt, defermt (57)

. (3,415)-

(7,394)

At Decemler 31,1989, the projected benefit obligation Early rrtirement pmgnun 5,512 '

Pens,on e3 rnse allocau,on and plan amets of the succewir plan totalled $162.6 million i

(including appmximately $14.1 million related to Qunpmy fmmassociatalcompany -

639 employees) and $190.2 million, respecthely. At December -,

31,1988, the pmjected benefit obligation and plan anwts of Net pension.

the successor plan totalled $139.7 million (including ap.

expense (lenefit)

$2,372

$ 2,764 '

$(2,333) pmximately $10 million transferred from the terminated

~~.

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plan) and $166.4 million, respectively.The significant actu-

• #*""""*""A N "f"""' M'""*"4 "8"""'l"*""/ 84' 8"'ai arial assumptions used for both 1989 and 1988 included a

. /*N**'"' I'" ""#'N "" ""W" "#""M W'*'

weighted merage discount mie of 8.5% arul 9.0%, respec.

thrly, and a rate ofincrease in future compensation levels of The ( m. pany also girovides certain health care and life 5.6% for valuing the projected benefit obligation. The de-

' insurance ben-fits for retired empknres. Substanually all.

crease in the weighted merage discount mte Imm 9.0% to -

empknees may become eligible for these benefits if they 8.5% increasal the projected lenefit obligation of the suc -

reach retirement age while still working ihr the Company, cessor phm by appioximately $10.4 million at December 31, The cos' of providing ther her.elits for retirees is not sepa-1989. An assumal expected long-term ute of return on ~

rable fmm the cost of paiding bene fits for active employ-plan assets of 8.5% was uwd for 1989 tuxi 1988.

ces.The total cost of pnMding these tenefits and the num-

' ber of active empkiyees and retirees fbr the last three fiscal 3rars were as folk)ws:

1989

'1988 1987 Total cost of health care and life insumace -

(in thousands)

$5,114 -

$7,482

$5,910 Number of actim emplo>res 1,128 1,200 1,412 Number ofretirees.

970 937 800 e

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L

. InJanuary 1988, the Company sokt $40' milli 6n in ag-gregate principal amount of additional C&R ikmds, bring-

. ing the total outstanding amount of CAR ikmds to $115 million. In view of the fact that the Cot.,.any wm not able to s

y

obtain a timely count injunction staying enfuirement of the.

5

' Rew>httion, an independent arbiter, acting pluiuant to the. '

prmisions of the Company's OkR Mortgage, certified in an 40N M ERR 90Bf'

.. Arbiter's Report to the trustee for the Company's C&R L o'

lxmdhukien the independent arbiter's opiidon to the elTect y 11ong-term debt at Decemix r 31,1989 and 1988 consisted of -

. that the Resolution would materially impair the Company's ; '

O the folkming:

ability to perform its obligations in respect of the outstand-4 1909

' 1988' l ing CAR ikmd*,, As a' result, hoklen of the outstanding C&R'-

din maandr J ikmda most recently had the right to tender their lxmda

._4 a

' PhelBangsgo Roads:

! dining the perkxl Nmrmber 24,1989 through Decembe:Sf R 5.000% Seiies due 1991

$ '15,000

$ A5,000 -

IS,1989 for purrhane by the Oxunpany on February 9,1990 L y'

' : 4.500% Series due 1992

8,000. '

8,000 L

~.

E at a price of 100% of the principal amount plus accrued.

s 5.625% Sedes duc 1996 23,250 n 23,250.

interest to the date of purrhase. The tender pesi(xl expirvi' l 3dthout'any of the C&R lumdholden tendering their bonds ?: :.

p 11.000% Series duc 1996 25,000 ;

-25,000 -

U 5.875% Series due 1997 12,000 -

12.000

• for putthase by the Company,:

10.000% Series duc 2004

35,000' 35,000'

. Under the Company's C&R Mo'itgage, CARlxinds :

9.500% Series due 2008 15,000

15,000 L are' issuable imed upon.70% 6flxmdable pmperty additions a

J or based upon 50% of accumulated deferred Grand Gulf 1. ;

5 J)

'Ibtal First Mortgage Ikmds 133,250 133.250 telated costs. Further, the CAR Mortgage prechutes the i issuance of any additional CAR Ikmds if the total amount ',

.J"

of certain 6utstariding CAR bonds (referred to'as "Ratel Q Geassed and ReisalReg Mongsgo Roads'.,

1,400:

! Recovery Mortgage. Bonds") issued on the basis of accumu-f 1M00% Series due 1991

-1.400 13.600% Series due 1993 29,400 29,400 i lated deferred Grand Gulf 1 related costs exceeds 66 2/3%L ' '

13.900% Series duc 1995 9,200.

9.200 of the balance of suclideferred costs. At December 31.1989,!'

10.950% Series due 1997 75,000 75,000 lthe total amou6t of Rate Recowry Mortgage lionds out-!

+'

standing aggregated $115 million, or appmximately 62%

TotalGenend aiulRefunding

of the Company's amumulated deferred Gnmd Gulf 1. ' '

Mortgagelkmds 115,000 115,000

. rel.ned costs.M.

M L

L i At December 31,1989, the sinking fund requirements.

Unamortlied premium and discount

- and maturities for long-term debt for the yean 1990 through L 2'

on long-term debt-net 196

.139 1994 were as follows (in thousands):

Totallong-Term Debt

$ 248,376

$ 248,389 Nr -

" 'siuAingliends Matuntivi -

(

1990

'm

$:1,083 o.

1991

' 933

. $ 16,400 -

.lW2L i

853~

8,(XX)L '

1993l

.15,853 a 29,400 e < >

IW4

' 15,853 D t

/14195 % Srsws of GWR ituruh aur $15 million. UAer.inkingfutui rmuirrwents.

.J

• Guh sunkingjund 99uirrnwnts in I991 and ifMI rubsMi to the CunnprunyY :

eny le satisfud & krtifimtion t]prnfety aukidi.ms ut the mte of 167% of suth ;

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N $NCEAlm M M m m0LN H 800M Preferred stock at December 31,1989 and 1988 consisted of the following:

s

%m Ausksrted

. ~ Gdihkr i and ik.ttmdmg Arvnmat IW %rrat -

atIMem M 31, atIMrmM 31,

' inrremM 31,b Iwo 1%s

' IMO.

1%8 190

[+

. (in 1kwndQ Cumulathr,$100 ParValue Without sinking fund:

4.75% Preferred Stock,

77,798 77,798

. $ ' 7,780

$ H7,780

,$ 105,001 s,.

$ 104.58.

V 4.36% Sedes.

60,000 60,000 6,000

.6,000' 5.56% Series,

60,000 60,000 6,000 -

6,000

• $102.59

6 337,'.

337

'?

Premhun

Total 197,798 197,798

$ 20,117 :.$ 20,117x With sinking fund:

.15.44% Sedes 109,495

'116,995

' $ 10,950,

$ 11,699 :

$ 111.58

' lssuancecx}wnse (445)

(467)

Totd -

109,495 116,995

$ 10,505

$ 11,232 i

li Cash sinking fund recluirements ihr the Onnpany's As of December 31,1987, due to the write ofTof $135 9 15M4 % Series Preferred Stock outstanding at December 31, million of previously deferred Grand Gulf 1 related costs in -

1989 Ior each of the years 1990 through 1994 are $750,000, accordance with the Resolution, the Company's retrined.

.p g

in addition, each year the Company has the n<m<umulative

' earnings were eliminated and the Company had an accunnd

. option to redeem additional amounts ofits M. 9% Series lated deficit of $33.7 million. As a resuh, the Cmnpany was :

l' Prefi rted Stock outsuuuling in accordance with its artirles.

precluded from decladng or paying any dividends on pre-ofincoqxiration.

ferred or common stock. Accordingly, prior to the elimina -

tion of the accumulated deficit in Novem'oer 1988 (as dis-f, cussed below), the Comp;my's ik>ard of Directors did not i.,..,

declare cluarterly dhidends on preferred stock ordinarily '

['

payable on April 1. July 1, mid October 1,1988 totalling ap-

proximately $2.1 million-

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'llw Onnpany's Restatement of Articles of hxorpone in 1987, the Qnnpany skthu ed and paid $3 million in tion, as amended, pnnide that if and when dhidends pay-

' cash dhidends on <ummon stoc L to Enteigy Girpmation.

tble on any outstanding shares of the Qimpany's prefi tied Piior to these dividends, common suwk dhidends had not stock shall be in ariran in an amount e<lual to four quarterly been declaird sinceJune 1985. Additionally, on l't bniary 1, dhidends, and tlwicalter unti! all dhidends in an can on 1988, the Onupany paid $1,554,000 ofits unpaid 1985 any stu b pieferred stock shall have leen paid, tlw holden of conunon stoc L dhidend declarations, thereby irdining the the Onnpany's 4.75% Preferitsi Stock, suting sepanitely as a amount of such un;xtid dhidends to $ 1,453,(K10 at Decem-single class, shall be entitled to elect the smallest numtwr of ber 31,1988 and 1989, t

dis ecton necessary to cunstitute a majority of the full Ikiard of Disrcton, and the holder of the Qnnjutny's conunon stock, Entetyy Q>rymration, shall be entitled to ek ct the

]

remaining directors. Further, the Gnupany was pn cluded '

from making sinking fund payments on its Ineferred stock until ancarages in preft rred stock dividends were paid, in order to facilitaie the elimination of past arrearages and the dechtnition of pirferred stock dhidends, the Qnnpany,in Nmrmber 198S af ter recching regulatory and C" :. i m A199 C00mlB089BC188 other nxluhite appnmds, effected a recapitalization pn>

gnun pursuant to which the Company restructured its cone A.Semeral mon stock accounts and climinated the deficit as of Novem-The FERC Settlement resohrd a numtwr of significant

[

ber 30,1988. Tiw Onnpany's Restatement of Articles of uncertainties that had twen achersely afTecting the System, Incorixnution were amended to reduce the par value ofits including the Company, for a number of > cars. For a diwus-common stock from $10 per share to $4 per share. This sion of the FERC Settlement and of a separate settlement q

enabled the unnpany to tnmsfer appnaimately $16.6 inil '

agreement letwren the Company and the Omncil (f 989 lion from cominon stock to paid in capital, a portion of Settlement Agreement), see Note 2, " Rate Matters".

which was then applied to eliminate the accumulated deficit -

. At Decemler 31,1989, the Gunpany's mo',t significant (approximately $13.9 million as of Novemler 30,1988 prior contingencies telated to (l) the ultimate outcome oflitiga-to the recapitalization), Also,in Novemler 1988, the Com-tion reLued to the February 4 Resolution disallowing $135 pany's Ikiard of Diiectors declared fin payment onJanuary inillion of pre iously deferred Gnuul Gulf 1-related costs, 1,1989, the afinrmentioned prefi tred stock dhidends in -

(2) the outcome of tlw Omncil's consideration of the imal-arrears and the regular quarterly preferred dhidend payable untary inunicipalization of the Gunpany's electric and gas i

onJanuary 1,1989.Tiwse dhidends aggiegating $2.8 mil-pmperties and operations (which contingency may arise in lion were paid as ofjanuary 1,1989.The Q)mpmy remains the event a negotiated buy out does not nLe placet and current with t es[wct to payment of prefened suick dhidends

, '(3) the outcome of a challenge to the FERC allocation of and preferred stock sinking fund requirements.

capacity and energy from Gnux! Gulf 1. For additional infiw-l The indentures relating to the unnpany's long-tenn

.mation with respect ?o these matters and other commit.

debt and pnnisions of the Restatement of Articles ofincor-

. ments and contingencies, see Note 2. " Rate Matteis* and j

lxnution, as mnended, rehting to the Company's preferred-

. the discussion below.

stock pnnide for resuictiom on the payment of cash 'dhi.

L dends on conunon stock. As of December 31,1989, the retained earnings t estriction was approximately $24.2 mil.

3 lion. Ilowner, as of Decemler 31,1989, the Om?pany had retained earnings of $8.9 million mid I., thereby precluded inun paying cash dhidends on common suick.

e 9

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32

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m._._.___.___m____h._______.

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B. Capital %'

^ end Finendag

9. Peteellel "- it-"----

i The Onnpanyhonstruction prognun contemplates The G aupany hokhindeterminate pen nits to gninide L

esponditmen (including AFDC) of apinoximately $61.0 ek cuic and gas senice in the City. The ordinances tuuler million during the period I!MNLl!M)2. purwitant to its phas(*

which the Gunpar y ojwnites state, amotig odier things, that in plan, duiing 1!MKLl!FJ2, the Gimpany will be collecting the City has a continuing option to purchase the Onupany's in rates a pirtion of the Grand Gulf I co,ts incm red but not elecuic and gas utility gungwrties. The unmcil luu been collected in prnious yean6. These nillections constitute cash

~ considering exercising this option, and on Maurb 7,1985, anillable to satisfy construction ex[wnditure requirements, the unmcil established a [mblic 1x)wer authority for the pur-In addition to the alunv capital requirements, the Company pose, aumng others, of acquiring and operating elecuic will require $26.7 million during itKKLl!M12 to meet long-lxmtr utilities in the City. Also, onjulv 28,1989, a state 1.nv term debt maturities and to sathly sinking fund require-terame eflective that expuuted, for certain municipalities, ments. The (birgoing estimates awume, among other including the City of New Orleans, existing statutes irgard-l things, finaljudicial tesolution in inid-1992 of litigation with

. ing the creation of a public 1xmvr authority as a political ses[wct to the February 4 Resolution, rnrrsal of such Re o-sulxlivisic,a of the state Ibr the purpise of paniding electric lution, reinstatement on the O>mpany's luxits of an awet -

pnver tuul energy or pu senices, and pnnided for the pm-of $135 million prniously written ofIand approximately ers and duties of the authoiity, including the issuance and i

$121.6 million of related carrying costs (attributable to the

. sale oflxmds and pledge of rnenues. Tlw Council has also t

gwriod inun February 1988 throughJune 1992), resumption acceivnl nuious reports oflegal, engineering, and financial ~

g of collection of the Inr1 of nues authoriied by the 1986 advisors with sespect to the potential municipalization of the Seidement Agreement, and no uansfer of a substantial pir-Qunpany's electric utility facilities. These irpirts have av 1

tion of the Qimpany's electric and/or pu utlity proper ties.

serted, among other things, that such municipalisation it is expected that the alxnv capital and irlinancing icquin-could be accomplished without the City being required to ments during the [wriod !!MKLl992 will be satisfied from assume the Gunpany's obligations with reslect to its FERG-l internally generated funds and cash on hand. Norrtheless, alkicated share of Grand Gulf I capacity and energy. The external financing coukt be required. The O>mpany's ability Qimp,my belines that any attempt by the City to municipal-to cili ct any external financing at this time is constmined.

lie the Onnpany's electric utility facilities in an attempt to enable electric customers in the City to avoid paying their C. Predense Dissuswenes fe lerally alkicated share of Gnmd Gulf 1 related costs could The February 4 Resolution continues to ha e an ad-result in extensive and complex proceedings before nuiom verse elfcct upm the Onnpany's financial condition and to regulatory authorities and the courts, all of which coukt take constrain the Gimpany's cash flow and ability, mvr the near-many years to resohr, The Resolution, if not rnrrsed, could term, to raise funds Irom external sources. Ilownrr, msum-have the effict of reducitig the purchase price tmder mu-ing no catastniphic or other extraonlinary ntnt, the nicipaliiation by $135 million. The matter is pending.

Onnpany now estimates that nen if their were nojudicial reversal of the Fehniary 4 Resolution, the Company's pn>-

jected cash flow will be sufficient to lwrmit it to meet its pn jected segularly scheduled debt senice oblipuions (in-i (luding its oblipuiom with s espect to principal of and inter-est on its G&R IkmdQ and to meet continuing preferred su>ck dhidend and sinking fund requirements ibr the Ihre-sceable fbtme (see Notc 6,"Inng term Debt" fbr iurther inibrmation iciated to the Onnpany's C&R llonds).

The Gimpany belines that the February 4 Resolution is in violation of the Federal Powei Act, applicable FERC onlers and iedemi law as interpreted by the United St.ucs r

Supicme O>urt and is nmuary to the nidence presented l

to the Qiuncil, and will ultimately be so declared by the courts (see Note 2, " Rate Mauers" for further infbrmation ielated to legal procenlings with resp ci to the Febraiary 4 7

Resolution).

1

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NOR$10 MARIAL M Nm#inna IWk knar Iav.

i E. Ilegselsded Boy out and Deleer Preposals On Nmember 30,1987, the IT.RC iwurd an orde:

On klarch 29,1988, the Gnuicil proixi ed to Entergy maintaining the previota alkication of Grand Gulf I capacity Girlmmtkin to diuun a twgotiated buy <mt of tiu-Qunpany and enew anmng dw Spten. o;wrating companies as man-by the City, Entergy Qirimmtion irs lxmded by indicating a dated by theJune 13 Decision. Petitions for sninv were filed willingness to consider any alternatives that the Omncil uith the D.C Circuit by various parties. On hiay 26,1989, might propose if tlwy sur in the test inte:ests ofits stock-the D.C Circuit denied the petitium for icvine, holding that holders, customers, and empki> ces. On July 12,1989, the the IT.RC's action was trith national and uithin the IT.RC's parties to the negotiations concluded discuulons resulting range of discres. ion, inJuly 1989, separate motions (br re-in a conceptual pmjumal that could mssibly have lecome hearing of the D.C Ciicuit's hiay 26,1989 order uric filed I

the basis for a negotiated buymut. Additional meetings were by the City of New Odeans and by the hiississippi Attorney held to further dnvlop the pro lmsal, but onJuly 31,1989.

General and the hiiwiwippi Public Ser ice Gimmission the negotiating parties separately announced that they had (h!PSC). On Augmt 28,1989, the D.C Citcuit denied the reached an impasse in formalizing the conceptual pro;msal.

MPSC's and the hiiwissippi Attorney General's petitions fbr On October 23,1989, disetmions ersumed in order to con-rehearing and trjected the City of New Orleans' petition as sider the following three pro lwwds: (1) legal comolidation not being filed in a timely manner. On December 27,1989, of LP&L and the Company, (2) the City's negotiated buy out the hlPSC and the hlississippi Attorney General filed a peti-of the Gimpany wheirby the City would initially purchase tion for writ of certiomri to the D.C. Circuit seeking rniew only the trammission and distribution system of the Com-by the United States Supreme Omrt of the May 26,1989 pany and later acquire the genemting facilities, and (3) a dis-decision of the D.C Circuit.Tlw matter is pending.

tribution system pmthase option in which the Company it is not imssible at this time to predict the ultimate uuuld continue to pmvide bulk mwer to a Cit ><nened distri-outcome of this matter, including the possible realkication, i

bution sptem Ibr 15 to 20 years. These disemsions ruhni-if any, of Grand Gulf 1-irlated costs or the efTect thereof nated in a propos;d setting (brth basic terms and conditions u;xm the Con 3pany, the other System operating companies, regarding the negotiated buy out propmal referred to in (2) and System Eiwrgy, including possible nehmds,if any. Any above.This pro}md coukt tw the subject of public hearings matedal nuxlification of the alk> cation established by the and could Ibrm the basis for a negnuated buy.out should June 13 Decision, could give rise to additional litigation, definitive documentation le dnvloped. Ilownrr, no bind-disputes, and challenges in the affectedjurisdictions, imd in ing or (telinithe agreements have tren reached and con-the event of the Company's recching a material increase in summation of any agreements with tlw Council is subject to alkcation, couki rossibly ght holders of outstanding G&R a number of significant uncertainties. The eventual outcome ihmds the right to require the Com[xmy to redeem their of this matter cannot be predicted at this time.

G&R Ikmds. Specificidly, the option of the G&R bondhoki-eni to put back outst.uuling G&R ikmds arises il, in the F. Unit Power Sales Ayeesment and Cesdreversies Conseralog opinion of an independent arbiter, a materially incurased trend Sull1 share of Gnuid Gulf 1-triated costs is imposed u;mn the Pursuant to the alkication s}wcified in the UPSA among Company and is not reflected in retail rates uithin 450 days System Energy and the System operating companies as or.

(15 months) of such imposition.

dered by the FERC in itsjune 13 Decision, Sptem Energy wils to the System o[wrating companies all ofits 90% share of the capacity ami energy from Gnmd Gulf I in accordance with specifwd [wrcentages (the Gimpany,17%; AP&L,36%;

LP&L,14%; amt hlPN.,33%). Charges under the UIM, which are billed monthly, are based on System Energy's total cost of service, including Sptem Energy's operating expenses, depreciation, and capital costs. The Company's monthly obligation for payments to System Energy tbr Gnmd Gulf I capacity and energy is approximately $13 million.

l l

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4. AmeAsimey and Reebesselon Apvoeneses The Company cannot predict whether any such claims or I

The Spiem operating compmies are mendly obli-demands, if made and upheld, coukt be satisfied. If any such.

i gated, under the Amilability Agreement in accordance with claims or demands wear upheld, the boklen of the out-

-l

' stated petrentages (the Company,24.7% AP&I,17.1%

standing G&R ikmds could, subject to certain conditions,.

l

, IJ'&L,2a9%; and MPkl. 31.3%), to make payments or.

tequire redemption of their bonds at par.

l',

subordinated advances in amotmts that, when added to any '

. In Nmember 1981, the Sptem uperating companiics.

g amounts rnriwd by Spiem Dwrgy tuider the UNAM entered into n Reallocation Agreement,which would haw -

'f

'otherwise,areadequate tocmtrallof the operatingex.

alkicated the capacity and energy amilable to System Energy d

penses, including depreciation and interest charges, of Sp.

fmm the Grand Gulf Station and die irlated costs to the -

l i

tem Energy Spiem Energy has,with the consent of the' Coinpany, LP&l, and MP&L These companies tims agired j

4

' Sptem operating companics, assigned its rights to payments -

to assume all the responsibilities and obligations ofAP&L

_ and advances imm the Sptem operating companies under with respect to the Gmnd Gulf Station under the Availability

J

the AvailabilityAgreement to certain creditors auccurity for '

_ Agirement, with AP&L relinquishing its rights to the capac-1 4'

' certain ofitsindebtedness for bommed money, Payments or '

ity and energy of the Gnmd Gulf Station. Each of the System ;

i

. achunces under the Availability Agreement are only required l operating companies, including AP&L, would have re-'

i to be made to the extent Spteni Energy's receipts fium all.,

' mained primarily liable to System Energy and its assignees sourtes, including the UlM approwd by the IT.RC (of

_ for payments or achimces ander the Availability Agreement ?

l

which the Omipuiy's share is 17%), are less than the L and assignments therrof. AP&L was obligated to make its '

j

, amotmt required under the Amilability Agreement?

share of the payments or achances only if the other System j

inJune 1989, System Energy and the Sptem operating openiting companies were unable to meet their contractual j

companies, with the prior consent of such creditors,'

obligations. Ihmever, the IT.RC'sjune 13 Decision allocat-4 i anended the Availability Agreement so that the Gmnd Gulf ing a portion of Grand Gulf I capacity and energy to AP&L jl 2 writooff(discussed in Note 2 " Rate Matten") would be

' supersedes the Realkication Agreement insofar as it relates 7

. amortized for Amilability Agreement purposes mer 27 yean to Gmnd Gulf 1.

rather than in the month the wiite off was recognized on' Responsibility for the Grand Gulf 2 amortization -

Spiem Energy's books. This amendment was made so that -

_ amounts described abmr has been alkicated to the.

ll the wdtooff of Grand Gulf 2 in September 1989 would not Company, LP&L, and MP&L under the terms of the Reallo-cause a payment by the Sptem operating companies to be -

cation Agreement. The Company's share of such amounts is 4

3 required under the Availability Agreement. Since commers 29.8%. AP&L is liable for its share of such amounts only if l

cial operation of Gnmd Gulf 1, payments under the UPSA -

the other System operating companies are unable to meet -

l

' (which include a return on equity) haw exceeded the

' their contractual obligations. No payments of any amortiza-

, amounts pnable under the Availability Agirement (which tion amounts will be required as long as amounts paid to i

chies not prmide for a return on aluity). Accordingly, no System Energy under the UPSA, together with other funds pn ments have ever been required under the Availability amilable to Sptem Energy, exceed amounts required under y

Agreement.

. the Availabilty Agreement, which is' expected to be the case If a System operating company other than the Ibr the foreseeable future.

>i Onnpany becomes unable in whole or in part to continue y

Lmaking pninents to System Energy under the UPSA and 1

Jiystem Energy were unable to procure funds from curr sources sulficient to cover any potential shortfall between the amount owing under the Amihdiility Agreement and the f

amount of continuing payments under the UPSA plus other J,

a

- fimds then available to System Energy, the Canpany coukt p

become subject to claims or demands by System Energy

'i p

or its creditors for payments or admnces under the Availabil-b

.ity Agreement or the assignments thereof. The amount,if

'1 any, that the Company would become liable to pay or ad-3) vance mer and abmr amounts it currently pap under the

. UPSA lbr capacity and energy from Grand Gulf I would depend on a variety of factors (especially the degree of any 1

such shortiall and System Energy's access to other funds).

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NDHS10 FM M GALS N Sow OrInnu l%Na %&rIra.

\\

ll. 9ntergy C-r 90eereineiller Utigstlea Circuit. OnJune 7,1988, the lif th Circuit renderec' a dai.

Entergy Diqxuation and certain other System compa-sion vacating thejudgment of the Fedend Qutrt,lxwed,in nies (including the Gunpany) and indhidualuue defi n-part, on the concimion that the Fedend Court had not ade-dants in a conxdidated puqmrted class action suit. The quately explainni the bases liir its decision, in remanding initial romplaint was fikxl on August 19,1985 by an Enten;y the case to the Fedend Omrt fier further proceedings, the Qiqxntion shairhokler (puqmrting to tepresent a class Fifth Ciiruit suggested that the Fedend Giurt could again that pu/ chased Enten;y Coqmration conunon stock). Four consider the merits of the defendants' motion for sununary similar complaints were filed on August 20,1985, August 23 Judgment and detennine, with the benefit of certain guide.

1985, Septend>cr 6,1985, and September 19,1985, res;wo lines as to the inteynrtation of gmvrning law articulated by thely, by nhareholders of Entergy Giqmration (purporting the Fifth Citruit, whether the defendants are entitled to to scpreu nt classes that purrhased Entergy Coqx> ration -

summaryjudgment as a matter oflaw. The Fedend Gmrt common s tock). The ihr actioin were conmlidatnl in the was directed ifit makes such a determination, to pmvide a Fedend Court. The conwlidated, amendnt, and supplemen-detailed analpis supporting its conclusions that could facili-tal complat it alleges violations of the disclosure require tatejudicial review. Ahernatively, the Fifth Circuit noted the mente of tlm Securities Exchange Act of 1934 and of the Fedend Court could decline to rule on the defendants' Securities Act of 1933, common law fraud, and common law motion Ihr summaryjudgment until further dnvlopment negligent miurpresentation in connection with the financial of the case has taken place and the issues have tren nar-condition of Entergy Corporation and pmys fbr com;wnsa-rowed through the available pre-trial techniques, ikwed tory and puni'hv damages, legid costs and fees, and other uprm the Fifth Orcuit's decision, the Fedend Giun allowed.

pro;wr relief against Fntergy Quimration, System Energy, the parties to rebrief the motion for summaryjudgment Ifkl MP&l, AP&l,, and the Onnpany; cert;dn of the '

- and, onJanuary 17,1989, the System defendants filed a members of Enten;y Coqmnuion's Ikiard of Directors, renewed motion for summaryjudgment and an answer to certidn current oflicen and former oflicers of Entergy Cor.

the conudidated, & mended, and supplemental complaint.

poration and Sptem Ener gy, l.P&l, MP&l, AP&l, and the Company, the independent auditors of Entnyy Coqmra-tion, and certain underwriters of Entergy Qrporation com-mon stock. On March 14,1986, the plaintiffs in the conmli-datnl action filed a motion for clan action determination.

On April 18,1986, Entergy Qigmration and certidn other System companies (inchiding the Qimpany) and individual defendants (Sptem defendants) filed a motion to dismiu or, in the ahernathr, a motion Ihr summaryjudgn.ent. On Jarmary 12,1987 the Federal Court entered ajudgment granting defendants' motion ibr summaryjudgment and dismiwed the suit. On February 6,1987, the plaintills in the consolidated action filnl a notice of appeal with the Fifth i

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< OnJuly 10,19H9, the plaNitifl's filed a enemonuulum in op; g

E posiskm to.the renewed mouun for summaryjudgment.

The Federal Omrt has scheduled the tdal to commence on

a'

, Marrh 4,1991.The outcome sithis [wnding matter and its ;

^ impact on the Spiem's fmancial conoitinn cannot be pn- ~

( ' dicial,.

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~

s 8, System feele,0ms. '

InassaM19018 WIIW AffMMB y :The Gimpany has a 13% inte est in.SFI, ajointly owned '

s.

o

' subsidiary.of the Spiem operating companies. SF1 operates.

L The Gimpany buys electricity from and/or sells elco.

m on a non pmlit basis for the purpone of planning and impk%

tricity to the other operating subsidiades of Entergy nwnting pmgiams for the pmcurement of fuel supplies for i Corpontion, Including Spiem Energy, under rate schedules

. all of the Sptem operating companies and System D crgy.

. filed with the FEltC.' in addition, the Comgiany purchases,

Its costs are primarily renwemt through charges for fi el --

i deliwred.

fuel fmm SFI and receiws technical and achisory senices <

imm Entergy Senices,Inc..,

. Fuel expkiration and dwelopment acthities of SF1 have

' Operating revenues include rewnues from sales to af -

. declinal mer recent years aiul some fuel pmgnms are i filiates amounting to $2 million in 1989, $2.5 million in

.. being phased out or transferred th othen, in this conneo.

.1988land $3.1 million in 1987. Operating expenses include -

tion, eertain charges and crnlits relating to SFI s imentment.

charges fmm afliliates for fuel cost, purchased power and '

in the fuel programs may le alkicated to the Sptem operai. ~

. related charges, and technical and advisory senices totalling.

ing companics, including the Company. Any such charges or -

$208.8 million in 1989,.220.6 million in 1988,'and $225 credits alkicated to the Company are not expected to signitii million in 1987.'

cantly affect future irsult> of operationsi :

' The parent comp.mies of SFI agreed to make hums to SFl to finance its fuel supply busiriens under a loan agree-mesit datedJanuary 4i 1978, as amended tiimugh Decene -

ber 31,1983. At this time, no further k>ans may he made to SFI by the parent companies. During 1988, SFI repaid $8.1 million ofits long-term hums from the Company resulting in remaining hutm ouutanding to SFI at December 31,1988.

. and 1989 of $3.3 million. The hians mature in 2008.'

' SFI's parent companies (including the unnpany) have

~

/.

cmenanted and agreed, sewrally in accordance with their

respectim shares ofmmership of SITS common stock, that they will take any and all action necessar y to keep SFI in a '

sound financial condition and to place SFI in a position to

' discharge, and to came SFl to discharge, its obligations. un-der nuious long-term lemes by SFI of oil storage and hard L dling facilities and coal hopper cars. At December 31,1989,

' tit. aggregate discounted unlue of these lease arrangements was $66.9 million.

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'I OWIM M NWSEANION

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' As an operating public utility, the Company supplies elecide and natunit gas services in the Oty. Segnwnt inkirmation alumt.

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the Company's operations u as folkm (in thousands):,

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, i Operating rewnues ;

l i'$ 880,542 I $ 90,367.'

$ 361,544j $ 91,853

' 5. 328,040 L $ 87,927 h

. 359,001. ( 91,853 :,

, 324.962-87,927 j

. Revenue from sales to un' ffiliated customers

' 578,586'- l 90,367 -

a l Operating income (kus) tek>re income taxes '

' 48,367*,

1,709'-

-~ 57,909 l ' (3,307)

. (75,605)** ;; (1,111).

j Opemting income (loss) "

87,488*i 2,810;<

'45,643;

. (1,038)':.,

j (31,385)**. ' 458.

g

Net utihtyplant '

• L 202,805, ' 56,970

..' 205,6301 54,493: "

3, - ' 204,924 i 53,222 Depreciation expenne ;

It,694 -

l2,852, M

.12,556

2,829 L 12,079 i 2,726

)

,s Construction expenditures -

10,103 -

5,057 L 12,911. '

4.345,

19,115 - 5,429 l

f'.

1

%savansimaw (kms) ynr sense was and opmais inme ckns) apnt a nonmwris d,mer of$25. r amt sis.3 mik mpann4,' in am')

Asalavat4====s..

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.4 W)W400tM INN 4NP (EES) Opuff im(plNr jeJett #4d aft,tadiq N(INfte (IIRS) ff[NT ikt %C[$l33 94ildNNI (OF $I2.9 Bldl00N, a[pr JAQ d[pm glfy dfrFMI.

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am=d avsieduntami. -

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GNMWV MIWJ Wasselee j

Unaudited operating results for the four quarters of C,i 1989 and 1988 follow.

l

Opermary NW -

Quarner '

' Qvemmy ;

'. lnmuw lnanne i

1;ndal

- linnum (lms)

(las)

, (in 7nseuendo gg..

e

$ 15,426 March (1) :

~ $ 106,681

. I13,025',, $ 21,354 "3;

10,278 3,441 June Septemler '

139,348; 13,115'

_ ' 6,036 -

ikccmler(2) 111,855

,(4,499)

(10,439);

. j s

March.

$ 108,565

$ '13,886

$. 7,796 l

June (3) 100,623.'

5,884'

.(593).

Septemler 130,033-

' 15,088 L 8,589 l

December 114,176

' 9,747..

2,980

(!) 7bfrst parser of1M9induda as inamurin opsennyinnunr and ad -

inanne of$84 minum, an of hm, due so the monummiggain menint in}nnua,y 1%9i.e amnntism ukh the uninnent of the Company t pmeien pien (wNeer 3

'ItutrNrmnent lerrw)iU*).

. [

J (2) Thefnuth parerr of1%9 ottirthis dermur in optrunginamer and not inanne,

)

of $la milium, not of ksu, en amnrthon unth the wugninne of Ar nonmurrig r)prt of the 1M9 Snarnernt Agnenernt (m Noir 2, 'Ranr hfacun*)?AddshonaHy, qurrany luu and not laufer the parerr endalikarnebrr 31,1M9 rrjint the A

l tmgranem of $2.6 neillum dw su mnsknernernt ofscant anwmulunni defmniinamer eres ta Nenenierr 1%9. '

h (3) The servoul parser of1%8 induda a dumurin %q inunner and not '

inanne of$% enilium, nn of tax, due to the egnt of a wluntary wrly untrrnrent.

1 pngrum, unich enn rfretrurfune 30,1MR

~

The businetis of the Company is sulhject to seasonal fluc-

' {

tuations with peak periods occurring during the summer months for electric and during the winter months for gas.

Accordingly, earnings information for any intenm period should not be considered as a basis for estimating the results

. ofoperations for a full year.'

'i a

y 39 i

WC0000F P900WB 1979-1999 1

New(kts1%Ik.%rxerinr.

1 i

1989 198&

19t[7,

)

Selected Hnancial Data (Ik>llan in Millions).

]

TotalUtilityPlant.

$ 5H.!

. $ $21.3

$ 507.6 Total Aewts.

$ 565.5 -

$ 506.9

$ 424.6

> Capitalinition:

4 long-Term Debt (Excluding Current Maturities),...

$ 248.4,

$ 248.4

$ 208.4 PerferredStockwidiSinking Fund.

10.5 11.2 11.5 Preferred Stock without Sinking Fund.

30.1 '.

20.1 20.1 Common Equity 78.7 66.9 50.7

.)

"Ibtal

$ 357.7

$ 346.6 '

~ $ 290.7 L

'Ibtal Openiting Roenues (Excluding interdepartmental)

$ 470.9.

' 5 453.4

$ 416.0 Operating income (loss)

$ 40.2 5 44.6

$ (30.9)

Income (loss) fmm Contimiing Opemtions.

~ $ 14.5

$ 18.8

$ (49.0) -

Net lncome (loss) (1)

$ ~ 14.5

$ ' 18.8

$ (49.0)

Employees Year End (2).

1,149 1,240 1,411 '

Elect:4c Operations Openiting Revenues (Excluding Interdepartmental) (Dollars in Millions):

Residential

$ 134.0

$ 125.5

$ 116.9 Commercial,

158.0 150.4 L 134.2 Industrial. -

25.2 22.9 20.1 Government and Municipal 51.5 :

48.9 43.9 Odier 11.8 13.8 12.9 Total

$ 380.5 -

' $ 361.5

$ 328.0 Sales (Excluding intentepartmental) (Millions of KWil):

Residential 1,850, 1,815 1,840 Commetrial 2,035 2,051 1,983 Industrial 490 446.

414 Gmernment and Municipal 887 :

842 816 Odier.

384 301 309

'Ibtal 5,476 '

5.455 5,362 Customen Year End (Thousands):

Residential 170.1 172.4 174.2 i

Commercial 17.5 17.8 17.9 Industrial 0.9 0.9 1.0 l

Government and Municipal 1.7 -

1.7 1.6 1

i Total 190.2 192.8 194.7 j

l Residential Customer Data:

Average Armual Use (Kilowatt-floun) 10,687 10,469 10,515 I

Average Antiual Revenue per Kilowatt 4 lour 7.32f 6.91e 6.35c Company Sptem Input (Millions of KWil):

Net Generation 1,718

. 2.268 2,913 Purchased Power and Interchange-in 4,151 3,500 2,834 l

• 1btal 5,849

'5,768 5,747

[

l eak Denumd (MW) 1,108 1,142 1,132 Genentting Capability (MW).

1,077 1,077 1,077 (l) I989 nflkts tlw mvnling of the $IS.S nullum, ape tax, eget ofik I989 Settlement Armnent.1987 rrflats the usstegof $72. 9 millum, after tax, ofpm40usly defmni Gmmt j

Gdf lotlatal ants.1956 iruludes $IS.9 millum of defmni Gmnd Gulf 14ritunt casts, oper tax, applaaNr to 1M3

@ 'lle Gmfany sold its tmruit opmairnu onjurw 30,1981 l

to r

~

1(e6 1!W5 list 1983-1982 1!B1 19R0 192tL_

$ 486.3

$ 476.6

$ 463.9

$ 450.5 5 450.8

$ 436.6

$ 424.0

$ 412.0

$ 400.5

$ 346.9

$ 359.8

$ 345.2

$ 348.0

$ 345.3

$331.0

$ 305.8

$ 133.4

' $ 114.4

$ 114.4

$ 114.5

$ 120.5

$ 126.5

$ 126.5

$ 126.5 13.3 13.3-13.3

'14.6 14.6 14.6 14.6 20.1 20.1 20.1 20.1.

20.1 20.1 20.1

' 20.1 105.6 67.4 69.5 69.4 67.2 (0.7 72.5 78.7 m

$ 272.4

$ 215.2

$ 217.3:

$ 218.6

$ 222.4

$ 230.9

$ 233.7

$ 225.3

$ 428.8

$ 420.6.

$ 448.4 -

$ 423.4

$ 457.7 5 438.9

$ 348.5

$ 329.6

$ $2.4

$ (13.0)

$ 23.5

$ 13.0

$ 13.6

$ 16.1

$ 14.1

5. 17.3

$ 42.0

$ (18.8)

. $ 18.4 -

5.3 7.7 9.4 -

6.0 9.3

$ 18.4 8.4 9.0

$ 10.5 5

6.7

$ 10.0

$ 42.0

$ (18.8) 1,424 1,452 1,512 1,522 2,786' 2,878 2.913 2,945

$ 118.1

$ 107.9

$ 109.2

$ 97.8

$ 107.1

$ 106.8

$ 84.3

$ ' 73.2 131.9 120.5 123.0' 104.3 109.1 105.0 82.8 75.6 '

22.9 25.1 35.4 36.4 40.8 41.1-34.8 31.6 43.4 42.5 44.6 41.1 43.3 39.6 29.5 25.3 9.8 19.0 9.9 7.7 56.8 48.0 38.2 37.6

$ 326.1

$ 315.0

$ 322.1

. $ 287.3

$ 337.1

$ 340.5

$ 269.6

$ 243.3 1

1,901 1,833 1,722 1,643 1,700 1,706 1,685 1,565 1,!F.K) 1,939 1,855 1,654 1,631 1,622 1,571 1,537 448 496 670 728 756 823 881 873 i

804 809 786 762 756 723 673

'627 i

198 333 118 91 688 891 909 1,226 l

5,344 5,410 5,151

'4,878 5,531 5,765 5,719 5.828 1

176.0 178.0 179.9 178.1 177.7 176.2 174.8 173.3 i

18.2 18.4 18.4 18.3 18.1 17.9 17.8 17.8 1.0 1.0 1.1 1.2 1.0 1.1 1.1 1.2 1.6 1.6 1.6 1.6 1.6 1.6 1.6 1.5 196.8 199.0 201.0 199.2 198.4 196.8 195.3 193.8 10,748 10,254 9,622 9,248 9,590 9,723 9,677 9,049 6.20f 5.89f 6.34c 5.96f 6.30c 6.26c 5.00c 4for J

8 2,267 2,703 2,820 2,155 3.650 4,198 4,186 4,093 3,433 3,108 2,645 3,016 2,185 1,912 1,884 2,049 i

5,700 5,811 5,465 5,171 5,835 6,110 6,070 6,142 1,185 1,115 1,092 1,106 1,035 1,067 1,091 981 1,077 1,077 1,077 1,270 1,257 1,257 1,257 1,257 1

41

t RIC00D W P90000081979-1989 Knv(hhva IWbc.%wrinc.

1999 11 %

J9f!7 Gas Opernelons

. Operating Revenues (Excluding Inte: departmental) (Dollars in Millions):

Residential.

$ 49.5

$ 50.7

$ 48.8 Omunesrial 16.8 17.4 16.4 7.8.

7.8

7.2 Industdal Government and Municipal 15.1 14.8

,14.2 Other 1.2 1.2 1.3 Total

. $ 90.4.

$ 91.9

$ 87.9 Sales (Excluding Intentlepartmental) (Billions of Cubic Feet): '

Residential,

8.9 9.6-10.0 Conuncarial 3.3

.3.5-3.7 Industdal 2.5 2.5 2.3 Government and Municipal

-3.2 3.3 3.5

'Ibtal 17.9 '

18.9 19.5 Customers. Year End (Thousands):

Residential 146.0 148.8 ~

151.1 Quumeirial 9.4 9.9 10.2 Industrial 0.3-0.3 -

0.3 Government and Municip.d

,0.5 0.5 0.5 Total 156.2

'159.5 162.1 Rrsidential Customer Data

Average Annual Use (Thousands of Cubic Feet) 60.47-64.14

' 65.80 Avemge Annual Revenue per Thousand Cubic Feet

$ 5.57

$ 5.27

$ 4.88 Natund Gas Purchased (Billions of Cubic Feet):

For Renale 19.9 16.2 19.3 For Fuel in Company's Electric Generating Stations 19.3 -

25.4 31.5 Total 39.2' 41.0 508 I

n Maximum 24-ilour Res;de Demand (Millions of Cubic Feet) 232

'183 179 I

i i

42 l

..1980

..J985

,_19M 1981_

___1982 11M 11W 197R_

$ 54.7

$ 53.2

$ 67.0

$ 68.4

$ 58.7

$ 44.8

$ 37.2 -

$ 37.1 19.1 18.6 21.6 25.1 22.8 17.5.

13.2 '

.13.5 7.4 9.0

'12.2 13.9 14.5 15.4 14.7 22.3 20.I 23.3 23.4 27.2 23.5 18.8 12.1 12.7 1.4 1.5 2.2 1.5 1.2 1.9 1.7 x 0.7

$ 102.7

$ 105.6

$ 126.4

$ 136.1-

$ 120.7 -

$ 98.4

$ 78.9

$ 86.3 9.5 9.5 11.3 10.9 10.6 L 11.3 11.6 12.7 '-

l 3.6 3.0 -

4.0 4.2 4.4 4.6-4.7 e 5.3 1.9 1.9 2.6 2.7 '

2.9 '

4.2 6.3 9.6 -

4.1 4.7 4.8 4.7 4.7 5.1.

. 5.0 5.50 l

19.1 19.7 22.7 22.5 22.6 25.2

'27.6 33.1 153.7 156.5 159.5 160.8 162.4 103.3 163.9 164.4 10.5 10.8 11.1 11.3 11.6' 11.6 11.6 11.7 0.4 0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 '

O.5 165.1 106.2 171.5 173.0 174.9 175.9 176.5L 177.1 61.18 60.62 70.89 67.63 65.48

-69.49 70,38 77.36

$ 5.77

$ 5.57

$ 5.92

$ 6.28

$ 5.52

$ 3.94

$ 3.23

- $ 2.91 19.5 22.1 22.1 23.8 22.7 25.4 28.3 33.8 24.9 28.5 30.3 23.7 36.6 46.7 44.1 34.8' 44.4 50.0 52.4 47.5 59.3 72.1 72.4 68.6

..=mmm -

-. _ =

198 258 239 238 225 235 232 267 t

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M M OFMCIRS Nne % msIWa.% # rim.

RWCVON OFFIC8tl itaIIIPIB AGElff AIIS BIGIfftat Pet PREPISBID ff0CII Dr. llenry I'. llraden,1!! ^

James hl.Cain llank of hiontreal Trust Company Private Physician President and Chief Executive Ollicrr 77 Water Street New Wrk, New Wrk 1(MX)5 t

James hl.Qdn Donald flunter President and Chief Executhe Officer Executhe Vice President and Cetretalt 190STtt Det FIRIT Nett0 AGE of the Onn}xmy Chief Operating OfTicer 301Ftl Chairman and Chief Executive Officcr, The ihmL of New Wrk Inuisiana Powrr & IJght Gunpany JohnJ. Girdaro 101 Ilarclay Street Group Vice Persident-External Alfairs 21st Floor linxilei1.DuncanA New Wrk, New WiL 10286 i

Piesident.The Foster Gungxmy, Inc.

Thomasj. Wright Senior Vice President - Customer Sersice 1908185 Pet GIIIERAL AIID REFUND 1110 Donald Ilunter 00NB6 Executive Vice Persident and Chief S. G. Cunningham,Jr.

IkmL of hiontreal Trust Company Operating Oflicer of the unnpany Senior Vice President-77 Water Street President and Chief Operating OITicer, Rates & Regulatory AtTairs New Wrk, New Wrk 1(XXB Inuisiana Power & l.ight Gunpany hl. I1. hicirtchie Josephj. Krehs,Jr.

Senior Vice President-Chairman and Chief Executhr Officer, Accounting & Finance This 1989 Annual Report is J.J. Krebs & Sons, Inc, prepared for the information of stock-W.J. lannes,111 holders, employees, and other inter-ested mins.The Gunpany's 1989 Edwin 1.upherger Senior Vice President-1 Chairman and President, Enci);y Supply-Fouil Annual Reixwt to the Securities and Entei);y Qirporation Exchange unnmission on form 10 K Thomas O.1.ind (including financial statement sched-John ll.Smallpage ^

Vice President - Regulatory Giunsel, utes) is available to any stockholder Chairman and Serirtary, Secretary and Auistant Treasurcr without charge. Suickholders can Dommm hlarine,Inc.

obtain a copy by cauling or writing to:

Richard C. Guthrie CharlesC.Tearrer,Sr ^

Vice President - Public Alfairs Imrstor Relations Department Vice President for Fiwal Affairs, New Orleans Public Sersice Inc.

Dillard University J. D.11runo P. O. Ikix 60340 Vice President-Dhision hianager hiail Unit G0760 NewOrleans,lA 70160 4 Mmwpuda coun, David C. Ilarlan Telephone: (50l) 587-M39 Vice President-htarleting T. W. Schnati Vice Piesident -Centnd Engineering To request a copy of the 1989 Entergy Corporation Annual Re[xirt, Donald R. Wells call or write to:

Vice President-lluman Resomres & Administration Enu rgy Ow;x> ration Sysu m invesun Reladons hiichael A.Caruso P,O Ikix 61(K6 Tietomet.

Neworleans lA 70161 N.J. liriley 1 8 5 292-9960 Assistant Secretary and A.uistant Treasurer CaryJ. Dudenhefer l

Auistant Secretary f

1 i

44 1

i E

New Orleans Publir generating subsidiary Service Inc. (NOPSI) serves icspon ible fier inanageinent the City of New Orleans and openition of the Gntnd (Orleans Parish), a land area Gull Nuclean Station.

of approxiinately 2(NN uare Another subsidiary, Enter);v 1

iniles. Naniralgas is Services, Inc., provides provided for the entire nuious technical.adininiv piuish while electricity is trative, and corixirate servicca supplied ihr all ascas of the to Entergy Gorponition and parish except the 15th Waud the System rompaudes.

{9j {y[]d[p p)[P N

]g (Algicis), an 18-upiansmile The S. tem is curiently

?

scotion on the we st bank of seeking regssatory approval 3p$@M3-[N u

the Niissiwippi Riv: r. 'the to consolidate openning h!

f Onnpuiy's electric and gas icslxmsibility Ior the System's h f @?}l)f

'^d IM openitions are argulated by lon nuclear units into a the Omnrilof the City of progxned new subsidiary, I

New Orleans.

Enteigy Ogwnuions, Inc,

?

hdM NOPSIis a wholly Alm pending regulatory

k owned subsidiary of Einergy approud, a new subsidiary Girixiration, the ch ctiir Entergy Power, lur, n utility holding company foi planned as a wholesale the hiiddle South Electric genenuor that woukt gggggggg System. For 41 years, the purchaw AP&llsintciest in hiiddle South Electric the Independenec 2 and System has beeni the leadirig Ritchie 2genientting tiiiits, ciertric energy supplici to a and then sell the capacity and 91JMHNpian-mile region eneigv hom these units along the lower iraches of outside the hliddle South the hiiwissippi River.

Electric System.

3-.cc The Sy stein's unt network of inteu onnected tnunmiwion and distribution lines and diversified grid of g

Inssil fuel and nuclea:

gene uting plants punides cleruirity to mme than i

1.7 million ictail customers j

in Aikmmn,lemmana, Missiwippi,and hiiwouri.

Ileadquarteird in New Oilcain, Inuisiana, Entergy MIDDLE SOUTH ELEURIC SYSTEM Qirpn ation inchides linu E N'IdilM7"i'r A'ru a ctadl operating ruinpanies:

Aikanuts Power & !.ight, New Orleans Public Scruce Inc. provides electiir service to loui',iana Powei & !.ight, the majority of the City of New Oileiun.

h1iwiwippi Power & l.ight, I

and NOPSI. Spiem Encigy Resources, lin. is a nuclem t

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