ML20012F548
| ML20012F548 | |
| Person / Time | |
|---|---|
| Site: | Haddam Neck File:Connecticut Yankee Atomic Power Co icon.png |
| Issue date: | 04/05/1990 |
| From: | Haight D CONNECTICUT YANKEE ATOMIC POWER CO. |
| To: | Office of Nuclear Reactor Regulation |
| References | |
| NUDOCS 9004160114 | |
| Download: ML20012F548 (21) | |
Text
. _ _.... _ _ _ _ _
g CONNECTICUT YANKEE AT O MIC POWEM COMPANY e t P t US C ON N E CT iC U T P O I40x 270
- HARTF0840. CONNEci# Cut (4ia1.o 70 t ti4 PotoNt mm4we Apr H 5, 1990 RE:
10 CPR 50.71(b)
Director Nuclear Reactor Regulation U.S. Ibclear Regulatory Commission Washington, D.C.
20555
Dear Sir:
In accorde c with paragraph 50.71(b) of 10CFR, Part 50, enclosed is one copy of the 19Bv.ssnual Financial Report of the Company, license holder, certified by Arthur Andersen 6 Corapany, certified public accountants.
Please acknowledge receipt by returning the duplicate copy of this letter in the stamped, self-addressed envelope enclosed for your convenience.
Very truly yours, Donald W. flaight Supervisor, Acesunting Research and Financial Reporting Northeast Utilities Service Co.
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CONNECTICUT YANKEE ATOMIC POWER COMPANY 5
t 1989 Annual Report
+
Together With E
Auditors' Report 9
4
Connecticut Yankee Atomic Power Company itepc%rt of Independent Public Account ant a To the Board of Directors of Connecticut Yankee Atomic Power Company We have audited the accompanying balance sheets of Connecticut Yankee Atomic power Company (a Connecticut corporation) as of December 31,1989 and 1988, and the related statements of income, retained earnings, and cash flows for each of the three years in the period ended Decenber 31, 1989.
These financial statements aN the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits te obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclocures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Connecticut Yankee Atomic Power Company as of December 31, 1989 and 1988 and the results of its operations and its cash flows for each of the three years in the period endod Deconber 31, 1989, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN f CO.
Hartford, Connecticut March 16, 1990 G,
V i
Y Connecticut YCnkee Atomic Power Company 0
81919ENTS OF Iw" For the Years Ended Decenter 31, 1989 1988 1987 (Thousands of Dollars, Except Shart Information)
(
Operating Revenues.........................
$200,241
$182,296
$207,162 Opereting Rupenoes:
Operation --
Nuclear fue1..........................
28,458 33,535 26,612 0ther.................................
70,824 67,910 68,237 Maintenance..............................
38,316 17,731 40,131 Dep re c i a t i on.............................
15,109 13,990 15,901 Federal and state income taxes (Note 2)..
6,087 0,433 17,101 o
Taxes other than income t axes............
7,010 8,584 6,502 Total operating expenses..............
165,804 150,183 174,564 operating Income...........................
34,437 32,113 32,598 other Inocuse:
Allowance for other funds used during const ruction....................
1,071 1,389 387 Interest income on special deposit (Note 7)...........................'....
3,037 1,250
- Other, net...............................
348 112 (29)
Income taxes applicable to other income (Note 2)........................
(144)
(67) 41 Other income, net....................
4,312 2,684 399 Income before interest charges.......
38,749 34,797 32,997 Interest Chargest Interest on long-term debt...............
23,607 17,307 10,440 Other interest...........................
2,792 3,042 5,007 Allowance for borrowed funds used during construction...................
(3,698)
(2,593)
(2,612)
Interest charges, net................
22,701 17,756 12,835 Not Income.......
$ 16,048
$ 17,041
$ 20,162 Earnings Per Common 8 hare..................
$ 45.85
$ 48.69
$ 57.61 Common Shares outstanding..................
350,000 350,000 350,000 BTATDENTS OF RETAINED EARNINGS Eor t he Years Ended December 31, 1989 1988 1987 (Thousands of Dollars)
Balance at beginning of period.............
$ 53,886
$ 50,145
$ 50,563 Net income...............................
16,048 17,041 20,162 Dividends declared on common stock.......
(11,550)
(13,300)
(20,500)
Balance at end of period...................
$ 58,384(a) $ 53,886
$ 50,145 (a) At Decenber 31, 1989, there was approximately $16,239,000 of retained earnings available for payment of cash dividends on common stock under the provisions of the Company's Mortgage Indenture and Deed of Trust.
The accompanying notes are an integral part of these financial statements.
l
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' Connecticut Y:nkee Atomic power Company STATENDITS OF Ch&H ricWS Tor the Years Ended Decenber 31, 1989 1988 1987 (Thousands of Dollars)
Cash Flows Frce Operations:
N e t i n c one..................................
$16,048
$17.041
$20,162 Adjusted for the following Depreciation (excludes decommissioning)..
11,232 10,113 10,794 Deferred income taxes and investnent tax
- credits, net............................
(2,907)
(3,6b5)
(1,078)
Allowance for other funds used during con s t ruc t i on............................
(1,071)
(1,389)
(387)
Amortization of nuclear fue1.............
25,491 30,207 24,071 Interest on prior period spent nuclear fuel disposal costs............
11,046 9,994 6,994 Interest incone on special deposit (Note 7)................................
(3,037)
(1,250)
Anortization of deferred charges and other noncash items.....................
(3,345) 1,741 1,156 Changes in working capitalt Receivables............................
3,629 5,001 (12,986)
Materials and supplies.................
(1,410)
(1,744)
(1,814)
Accounts payab10.......................
10,750 (11,162) 13,851 Ac c rued t axe s..........................
(1,528)
(7,467) 3,114 Other working capital (excludes cash)..
679 683 722 Net cash flows from operations................
66,377 48,713 64,599 Cash Flows Free Financing Activitiest 100,000 Long-term debt..............................
(30,000)
Special deposit (Note 7)....................
Net increase (decrease) in short-term debt.,
13,000 (60,500) 18,500 Cash dividends..............................
(11,550)
(13,300)
(20,580)
Reacquisitions and retirements of long-term debt and financing expenses................
(8,977)
(9.295)
(6,332)
Net cash flows from financing activities......
(7,527)
,(13,095)
(8,412)
Investments:
Electric utility plant......................
(20,971)
(29,291)
(42,667)
Nuclear fuel................................
(19,678)
(3,233)
(13,901)
Gross investments.............................
(48,649)
(32,524)
(56,568)
Less: Allowance for other funds used during construction..........................
(1,071)
(1,389)
(387)
Het investments...............................
(47,578)
(31,135)
(56,181)
Transfer of additional decommissioning funds to an external decommissioning trust.........
(15,767)
Met Increase (Decrease) In Cash For the Period.......................................
$(4,495)
$ 4,483 6
Cash beginning of period......................
4,502 19 13 Cash end of period............................
5 7
3 4,502 19 j
Supplemental Cash Flow Inforisation Cash paid during the year fort Interest, net of amounts capitalized during construction....................
$16,543
$12,444
$ 9,569 income taxes............................
512,651 514,505 515,217 The accompanying notes are an integral part of these financial statenents.
3
I
' Connecticut Yhnkee Atom 13 Power C 4 any BMelME RESTS At Decenber 31, 1909 1966
(' thousands of. Dollare)
ASSSTS Utility Plant, et original oost:
E1*ctric..........................................
3332,329 4287,706 i.ess: Accumulated provision for depreciation....
111,134 121.115 221,19b 166,591 Construction work in progress.....................
10,076 27,026 Nuclear fuel, net of amortization.................
87,902 80,715 Total net utility plant......................
_314.173.
.287,332 Special esposit (Note 7)............................
34,287 31,250 Current hasets Cash..............................................
7 4,502 Accounts receivable...............................
17,281 20,910 Materials and supplies, at average cost...........
17,041 17,166 prepayments and other.............................
2,171 2,231 37,300 44,809 Deferred Charpest Unrecovered spent nuclear fuel disposal costs.....
3,166 8,570 Unamortised debt exponse..........................
3,371 3,70$
Other.............................................
6,676 5,067 13,213 17,422 Total Assets.....................................
$398,973
$375,813 The accompanying notes are an integral part of these financial statenents..
Connectio3t Yankee Atomic Power Cortpany anLhnCs suurfs q
At Deconder 31, 1989 1988 (Thousands of Dollars)
CSPIThL154T10W Als LIABILITIES Capitalisation Common stock " $100 par value. Authorized 700,000 shares; outstanding 350,000 shares in 1909 and 1988................................-
$ 35,000
$ 35,000 Capital surplus, paid in.......................
2,964 2,964 Retained earnings..............................
58,384 53,886 Total common stockholders' equity..........
96,340 91,050 Long-term debt, net (Note 5)...................
203,210 204,846 Total capitalization.......................
299.558 296,696 current Liabilities:
Commercial paper (Note 6)......................
27,000 14,000 Current portion of long-term debt (Note 5).....
4,226 5,105 Accounts payable...........
22,844' 12,094 Ac c ru ed t ax e s.................................,
7,974 9,502 f
Ace rued int e re s t...............................
2,009 2,361 0ther..........................................
2,989 2.018 67,042 45,080 Deferred credits:
Unamortized gain on reacquired debt............
1,257 1,519 Accumulated deferred investment tax credits....
11',072 12,762 Accumulated deferred income taxes..............
18,306 18,448 i
0ther..........................................
1,838 1,308 32,373 34,037 Ccsunitments and Contingencies (Note 9)
Total Capitalisation and Liabilities........
1398,973 3375,813 i
1 i
The accompanying notes are an integral part of these financial statements.
! I 7
1
{i donnectiGut Yankee Atomic Power Comp *any
]gI7g,TO FINANCIAL STATEMENTS (1) mROthkY OF SIGIIFICANT ACCOUNTING POLICIES General - Connecticut Yankee Atomic Power Company (the Company) owns and operates a single unit nuclear-power electric ~ generating plant of the pressurized water type, having. a net capability of 591,000 kilowatt s ' (the Plant ). : The Plant commenced consnercial operation on January 1,1968.
The Company's consnon stock is owned by ten New England electric utilities.
Northeast Utilities (NU),' whose' operating subsidiaries have-a combined 44 percent ownership interest in the
- Company, furnishes accounting,
. engineering, construction, maintenance,-
financial, legal and other administrative services to' the' Company through its Northeast Utilities Service Conpany (NUSCO) subsidiary.
The total. cost of these services billed to the Company amounted to $44,171,000, $39,805,000 an_d $48,741,000 for'the v
years ended December 31, 1989, 1988 and 1987, respectively.
Sponsors - The Company has entered into power contracts with its ten stock-holders (Sponsors) for the sale to them of the entire output of the plant for the life of the Plant.
Under.the terms of the. contracts, each Sponsor is.
required to pay the Company an amount equal to its entitlement percentage of 1
the company's total operating expenses, including a return on net. unit investment.
In recent years, one or more of the Sponsors have experienced, in varying degrees, financial ' difficulties and liquidity constraints.
One Sponsor, Public Service Company of New Hampshire (PSNH, a 5 percent owner of r
the Company) filed a petition seeking reorganization under Chapter 11 of the federal Bankruptcy Code on January 28, 1988.
PSNH has paid in full the amount due under its power contract while in reorganization, and the Company has no reason to expect that PSNH will not make ' future power contract payments when due. A plan for NU to acquire pSNH is pending. That plan does not reject the Company's power contract with pSNH.
L So far as the Company is aware, no other Sponsor has announced or informed the company that it is experiencing financial difficulties or liquidity constraints which may impact the Sponsor's ability to perform under j
its power contract.
i public Utility Regulation - The Company and each of its Sponsors is:a public
{
utility under Part II of the Federal Power Act and is subject to regulation by the Federal Energy Regulatory Commission (FERC) with respect to, among l
other matters, wholesale rates and accounting procedures.
The Company is '
l subject to further regulation regarding both its long-term and short-term financings by the Securities and Exchange commission under the public Utility Holding Company Act of 1935.
In addition, the Connecticut Department of f
Public Utility control (DPUC) has jurisdicticn over the Company with respect to, among other things, accounting procedures, certain dispositions of.
property and plant, mergers' and consolidations, securities issues, and
.l construction and operation of generation, transmission and dit,tribution facilities.
4 Allowance for Funds Used Durina Construction (AFUDC) - AFUDC, a noncash item I
calculated in accordance with FERC guidelines, represents the estimated cost
.i
=? l t
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- 8 Connecticut Yankee AtomiG power Conpany NOTES TO FINANCIA1, STATEMENTS of capital funds used to finance the Conpany'6 construction and nuclear fuel program. These costs, which are one conponent of the total capitalized costs of nuclear fuel, plant modifications and improvements, generally are. not recognized as part of the net unit investment until facilities are placed in service.
.The ef fective AFUDC rates for 1989, 1988 and 1987 were 12.2 percent, 11.0 percent and 8.6 percent, rerpectively.
These rates were calculated in accordance with FERC guidelines.
Nuclear ruel - The cost of nuclear fuel is amortized to operation expense on a units-of-production method at rates based on estimated kilowatthours of energy provided.
Under the Nuclear Waste policy Act of 1982, the Company must pay the United States Department of Energy (DOE) for the disposal of spent nuclear fuel and high-level radioactive waste. For nuclear fuel burned prior to April 7, 1983 (prior period fuel), the paynent may be made anytime prior to the first delivery of spent fuel to the DOE.
At December 31, 1989, fees due to the DOE for the disposal of prior period. fuel were approximately
$81.4 million including accrued interest costs of $32.7 million.
As of December 31, 1989, approximately $78.2 million of these fees -had been collected through rates.
Current rates include a provision for the collection of remaining prior period fuel costs, including interest.
Fees for fuel burned after April 7, 1983 are paid to the DOE on a quarterly basis.
Depreciation The provision for depreciation is calculated using the straight-line nethod based on estimated remaining ' lives of the depreciable utility plant in service, adjusted for expected salvage value and removal -
costs as approved by the FERC.
Depreciation factors are applied to the average plant in service during the period.
When plant is, retired from service, the original cost of plant, including costs of removal', less salvage, is charged to the accumulated provision for depreciation.
The depreciation rates for the various classes of plant in service are equivalent to composite rates of 5.0 percent in 1989, 4.8' percent in 1988 and 6.2 percent in 1987.
Income Taxes - The tax effect of timing differences (differences between the periods in which transactions affect income in.the financial statements and' the periods in which they affect. taxable income) is accounted for in.
accordance with the ratemaking treatment ~of the FERC.
The Company had not provided deferred income taxes for certain timing.
differences during periods when the FERC did not permit the current' recovery of such income taxes through rates.
The cumulative net' amount of income tax.
timing differences for which deferred taxes have not been provided was approximately $22.6 million at December 31, 1989.~
As allowed under current regulatory practices, deferred taxes not previously provided' are being-collected in rates over the remaining life of the unit.
In December 1987, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 96, " Accounting for. Income Taxes" (SFAS 96).
SFAS 96, as amended, supersedes previously issued income Connecticut Yankee A*.omia Power Cosqpany NOTES TO FINANCIAL STATEMENTS tax accounting standards and will be effective in 1992.
The Company expects that when SFAS 96 is adopted it will increase assets and liabilities between-
$10 million and $15 million but will not have a naterial effect on not income.
(2)
IN00NE T&ERS The components of the federal and state income tax provisions aret i
For the Years Ended December 31, 1989 1988 1987 (Thousands of Dollars)
Current income taxes:
Federal...........................
$'5,840
$ 9,180
$13,177 State.............................
3,298 2,975 4,961 Total current...................
9,138 12,155 18,138 Def erred income taxes, nett Federa1...........................
(1,164)
(724) 155-State.............................
(53)
(789) 590 Total deferred..................
(1,217)
(1,513) 745 Investment tax credits...............
(1,690)
(2,142)
(1,823)
Total income tax expense..........
6,231 8,500 17,060 Less:
Income taxes (credits) included in other income..................
144 67 (41)
Total income taxes charged to operating expenses...............
$ 6,087
$ 8,433
$17,101 Deferred income taxes are comprised Lof the tax effects of timing differences as follows:
Sales tax accrual....................
$ 2,506 Spent nuclear fuel disposal costs, including interest..................
(2,089)
(2,821)
(1,923)
Decommissioning cost accruals........
(183) 1,348 (2,072)
Liberalized depreciation.............
(1,639) 2,400 6, ??7 Decommissioning trust earnings.......
1,331 (1,930)
Other................................
'(343)
(510)
(1,497)
Deferred income taxes, net........
$(1,217)
$(1,513) 745 -
Conn:cticut Y nk;O Atomic pow;r Company NOTFS TO FINANCI AL S1 ATEMENTS The effective income tax rate is computed by dividing total income tax expense by the sum of such taxes and net income.
The differences between the effective income tax rate and the federal statutory income tax rate aret gr the Years Ended December 31, 1989 1988 1987 Federal statutory income tax rate......
34.00%
34.00%
39.95%
Tax effect of differer.ces:
Depreciation differences.............
(3.97) 4.44 5.06 Investment tax credit anortization...
(8.23)
(8.85)
(9.29)
State income taxes, net of f oderal benefit.............................
9.61 5.65 8.96 Allowance for other funds used during construction--not recognized as income for tax purposes..........
(1.63)
(1.85)
(0.42)
Unrecovered final core and materials and supply inventory................
4.54 3.90 2.36 Tax rate differential................
(6.47)
(3.73)
(0.41)
- Other, net...........................
0.12 (0.28)
(0.38)
Effective income tax rate..............
27.97%
33.28%
45.83%
(3)
NUCLEAR DECONNISSIONING The Company accrues decommissioning costs, which are included in depreciation expense, on the basis of immediate dismantlement at retirement.
The estimated decommissioning cost, based on a 1989 study, is approximately
$198.4 million in year-end 1989 dollars. Decommissioning studies are reviewed and updated periodically to reflect changes in decommissioning requirements, technology and inflation.
Changes in requirements, technology or adoption of a decommissioning method other than immediate dismantlement could increase these estimates. As a result of 1987 FERC actions, the Company's depreciation expense includes a provision for decommissioning at a level of $130 million.
The Company believes that revenue in amounts greater than those currently being collected will be required to pay the full projected cost of decommissioning.
The Company has established an independent, irrevocable decommissioning trust with a commercial bank.
Each month, the Sponsors are billed for their proportionate shares of decommissioning expense, as allowed by the FERC, and make payments directly to the trust.
The trust balance, including interest earnings, must be used exclusively to discharge decommissioning costs as incurred.
As of December 31, 1989, the Company has collected $58.2 million through rates; this entire amount has been transferred to the external trust.
(4)
CAPITAL CONTRIBUTIONS The Sponsors are obligated under the terms of the capital Funds Agreements, entered into with the Company in 1964, to provide their percentage ownership of capital to the company either through common stock purchases, loans or advances.
The total obligation of the Sponsors under these agreements is limited to an aggregate amount of $70 million, of which
$32 million had not been drawn down at December 31, 1989......
ConnectiGEt Yankee U20mic power Company NOTES TO FINANCIAL STATF.MENTS (5) 14110-TElst DEST Details of outstanding long-term debt (net of reacquired amounts) aret Pfeember 31.
_1989 1986-(Thousands of Dollars)
General and Refunding Mortgage Bonds, Series A, 12% due June 1, 2000............
$100,000
$100,000' First Mortgage Bonds, Series A, 879.
4-1/2% due January 1, 1993...............
Debentures, 17% due 1996 Series A..................................
.22,011 29,365 Series B........................
1,032 1,380 pollution Control Note, 64 due 1997.........
3,000 3,375 Fees and interest due for spent nuclear fuel disposal costs.......................
81,393' 74,951 1
Unamortized premium........................
207,436 209,951 Less: Amounts due within one year.........
4,226 5,105
$203.210
$204.846 The General and Refunding Mortgage Bonds (the 12 percent Series A Bonds), secured by a direct lien on the Company's electric generating plant and a pledge of the Company's rights under the power contracts and capital funds egreements with 'its Sponsors, require minimum annual sinking fund payments sufficient to retire $14,000,000 principal amount of the 12 percent Series A Bonds on each June 1, commencing 1994 to and including June 1, 1999.
For additional information regarding the 12 percent Series A Bonds, see Note 6 "Short-Term Debt" and Note 7 "Special Deposit."
The Company's 17% Series A Debentures, which are guaranteed by nine of the Sponsors or the Series B Debenture, which is owned by the other Sponsor, have annual minimum sinking fund requirements aggregating $3,851,000 through October 1, 1995, and a final payment of $3,788,000 due on October 1, 1996.
The 6% Pollution Control Hote has annual sinking fund requirements of $375,000 l
through November 1, 1996.
[
The remaining $879,000 First Mortgage Bonds, Series A, were retired in January 1989.
i (6)
SHORT-TEI0t DEBT To meet its general working capital needs, the Company has a $90 million l
Credit and Letter of Credit Agreement (the Credit Agreement) with a group of l
banks ( the Banks ).
Under the terms of the Credit Agreement, the Company is l
obligated to pay a commitment fee of one-quarter of one percent' per annum on the daily average of the unused amount.
The Credit Agreement allows the
.l Company to obtain funds through either direct borrowings (with rates based on the London Interbank Offered Rate plus a margin of one-half of one percent or a certificate of deposit rate plus a margin of five-eighths of one percent or prime rate) or issuance of letter of credit-backed commercial paper.
The
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Connecticut Yankee Atomic power Conhany NOTES TO FINANCIAL S1ATEMENTS P
credit Agreement also allows for participations of portions of the commitment.
On December 31, 1989, the Cotapany had $27 million of borrowings outstanding under the Credit Agreement.
Borrowings under the Credit Agreement are not guaranteed by the Sponsors.
In order to issue the 12 percent Series A Bonds under the Company's Mortgage Indenture and Deed of Trust. (the Refunding Indenture) as secured indebtedness, the Corgpany had to obtain approval from the Banks under the 5
Credit Agreement.
The Company agreed to secure the Banks equally with the holders of the 12 percent. Series A Bonds.
In order to obtain this approval, the Company issued a Series B Bond under the Refunding Indenture to the agent for the Banks.
The Series B Bond will secure the aggregate amount owed from time to time under the Credit Agreement. The Series B Eond will bear interest at a rate equal to that borne by loans under the Credit Agreement, but interest on the Series B Bond will accrue only during a period when the loans under the credit Agreement have been accelerated.
The Series B Bond will mnture on the termination date of the Credit Agreement, which is November 20, 19'31, unless extended.
For additional information regarding the 12 percent Series A Bonds and the Series B Bond, see Note 5 "Long-Term Debt" and Note 7 "Special Deposit."
(7)
SPECIAL DEPOSIT Ab additional security for the 12 percent Series A Bonds and the Series B Bond, $30 million was deposited with the indenture trustee under the Refunding Indenture in a cash collateral account.
The funds in the cash t
collateral account may not be withdrawn by the Company prior to 1998.
In 1998, funds in the cash collateral account will be available to be combined with other funds to satisfy the Company's obligation to the DOE for the disposal of prior period fuel.
For additional information regarding the 12 percent Series A Bonds and the Series B Bond, see Note 5 "Long-Term Debt" and Note 6 "Short-Term Debt."
For additional information regarding prior i
period fuel, see Note 1 " Summary of Significant Accounting Policies."
(8)
RETIRENDfT PIAN The Company has a noncontributory defined benefit retirement plan covering all regular employees.
Benefits are based on years of service with l
the Company and average annual compensation for the five highest consecutive years in the last ten years of employment.
Total pension cost, part of which was charged to utility plant, approximated $879,000 in 1989, $779,000 in 1988 and $961,000 in 1987.
It is the policy of the Company to fund annually an amount at least equal to that which will satisfy the requirements of the Employee Retirement Income Security Act and the Internal Revenue Code, pension costs are determined using market-related values of pension assets.
Pension assets are i
j invested primarily in equity securities and bonds.
i l
- Connecticut Yankee Atomic power Company '
HOTES TO F1MANCIAL STATEMENTS The components of net pension cost are For the Years Ended December 31.
1989 1988 1987 (Thousands of Dollars)
Se rvice cos t....................
982
$ 1,034
$1,046 Interest cost...................
1,476 1,242 1,075 Return on plan assets...........
(3,001)
(1,504)
(502)
Net amortization................
1,502 7
(658).
Net pension cost................
8 879 8
779 1 961 For calculating pension costs, the following actuarial assumptions were used:
~
For the Years Ended December 31, 1989 1988 1987 Discount rate...................
9.5%
9.5%
0.5%
Expected long-term rate of return......................
10.0%
.10.0%
.9.7%
i compensation / progress' ion rate...
8.5%
8.5%
7.5%
f The'following table shows the plan's funded status reconciled to the 5
balance sheets i
t For the Years Ended Decenber 31.
1989 1988 (Thousands of Dollars) i Accumulated benefit obligation, i
including $5,449,000 of vested i
benefits at December 31, 1989 and
$3,922,000 at Decenber 31, 1988......
$ 6,426
$ 5,194 i
Projected benefit obligation
$17,189
$15,275 Less: Market value of plan assets....
18,497 15,630 Market value in excess of projected benefit obligation...................
1,300 355 Unrecognized transition amount........
(632)
(666)
Unrecognized prior service costs......
419 426 Unrecognized not gain.................
(3,406)
(1,547)
Accrued pension (11ab111ty)...........
$(2,311)
$(1,432)
The following actuarial assumptions were used in calculating the plan's year-end funded status:
For the Years Ended December 31, 1989 1938 Discount rate........................
9.0%
9.5%
Compensation / progression rate........
7.5%
8.5% l
i Connecticut yankee Atomic power Company.
i MOTES 'IO FINANCI Ah STATEMENTS In addition to pension benefits, the Company provides certain health care and life insurance benefits to retired employees.
The cost of providing those benefits was not material for the years 1989, 1988 and 1987.
The company reconizes health care benefits primarily as incurred and provides for.
life insurance benefits through premiums paid to an insurance company.
(9)
, CC40lIDIElfTS AIID COIfTillGEIICIES Construction Program The Company. currently forecasts cor.struction expenditures (including AFUDC) of $60.9 million for the years 1990-1994, including $11.6 million for 1990.
These estimated construction expenditures are for Plant modifications and inprovements, to meet requirements. imposed by:
the Nuclear Regulatory Consnission and to maintain and improve the reliability of the Plant.
The estimates are subject to periodic review and revision by the-Company to reflect changen in regulatory requirements, the Plant's operating experience and other matters.
i The 1990 forecasted construction' expenditures'do not include an amount for the removal of the Plant's thermal shield.
The cost of removing the thermal
- 3 shield is estimated to be approximately $25 million._ Removal,of the thermal shield will not adversely affect plant safety or operation.
The company will submit an insurance claim for the full cost of removing the thermal. shield, less a $250,000 deductible.
The Company is also currently
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negotiating with Westinghouse. Electric Corporation, the' contractor that performed the repairs to the Plant's thermal.. shield.in 1987, concerning its liability for the rccent problems.
The costs associated with the thermal shield removal are billed to.the '
Sponsors under their respective power contracts with the Company, subject to-
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refund in the event and to the extent insurance proceeds or warranty payments become available.
The Connecticut DPUC has commenced proceedings against two of the Company's Sponsors to investigate the prudence of the Company's actions r
during this outage.
l Nuclear Fuel - The Company estimates that nuclear fuel requirements will be j
$72.8 million (excluding AFUDC) for the years 1990-1994, including r
$24.0 million for 1990.
i The Price-Anderson Act currently limits
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Noelear Insurance contingencies public liability from a single incident. at a nuclear power plant to
$7.8 billion.
The first $200 million of liability would be provided by.
purchasing the maximum amount of commercially available insurance. Additional coverage of up to $7.2 billion would be provided by an assessment of
$63 million per incident levied on each of the 115 nuclear units ~ currently '
licensed to operate in the-United States,' subject to a maximum assessment of
$10 million per incident per nuclear unit in any year.
In addition, if the
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sum of all public liability claims and legal costs arising from any. nuclear incident-exceeds the maximum amount of financial protection, each reactor
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operator can be assessed an additional five percent, up to $3.2 million or
$362.3 million in total, for all 115 nuclear units. The maximum assessment is to be adjusted at least every five years to reflect inf1ationary changes..The' i
maximum amount which the Company would currently be required to pay with f
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Connecticut Y:nkee Atomic power Conpany NOTES TO FINANCIAL STATEMENTS respect to an incident at any nuclear plant is $66.2 million.
payments would be limited to a maximum payment of $10 million per incident in any year.
Under the terms of the Company's power contracts, any. assessment would be passed on to the Sponsors.
Insurance has been purchased from Nuclear Electric Insurance Limited (NEIL) to cover the cost of repair, replacement or decontamination of utilityi property resulting from insured occurrences.- Under this policy, the Conpany is subject to retroactive assessments if losses exceed the accumulated funds available to NEIL.
The maximum potential assessment against the Company with respect to losses arising during the current policy year is approximately 40 million which, under the terms of the Conpany's powar contracts, would be passed on to the sponsors.
Although the Company has purchased the limits of coverage currently available from conventional nuclear insurance pools, the cost of a nuclear incident could exceed available insurance proceeds.
In addition, insurance has been purchased from American Nuclear Insurers / Mutual Atomic Energy Liability Underwriters, aggregating $200 million on an industry basis, for-coverage for worker claims.
All companies insured under this coverage are subject to retrospective assessments.
The maximum-potential assessments against the Company with respect to losses arising during the current policy period are approximately $3.25 million.
Any such assessments, under the terms of the Company's power contracts, would be passed on to the Sponsors.
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(10) 1245ES The Company is leasing a portion of Northeast Nuclear Energy Company's (an affiliate of two of the Sponsors) nuclear control room simulator building.
In addition, NUSCO, which provides administrative support to the Company, has entered into lease agreements for the use of data processing equipment, office equipment, vehicles and office space.
The Company is billed for its proportionate share of these leases.
For the years 1989, 1988 and 1987, the Company charged rental payments of $1,613,000, $2,027,000 and $2,223,000, i
respectively, to operating expense.
Future minimum lease payments, excluding executory costs, are approximately:
1990...................
$ 2,277,000
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1991...................
1,887,000 l
1992...................
1,464,000 1993...................
941,000 l
1994...................
668,000 i
After 1994.............
4,923.000 i
$12,160.000.
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t'onnectiGut Yankee Atomic Power Company NOTES TO FINANCIAL STATEMENTS (11) QUARTrJtLY FINANCIAI. INFOBOIATICII (unaudited)
Quarter Ended 1989 March 31 June 30 Septenbor 30 Decenber 31 l
(Thousands of Dollars, Except Share Information)
Operating Revenues
$42,429 43,799
$58,993
$5,020 Operating Incone 5 7,527 7,769 5 9,113 10,008 Net Income 3 3,737 3,873 3 3,7/8 4,710 Earnings Per Common Share
$ 10.68
$ 11.07
$ 10.65
$ 13.45 Quarter Ende6 1988 March 31 June 30 Septonber 30 Decenber 31 (Thousands of Dollars, Except Share Information)
Operating Revenues
$42,875
$44,881
$46,858
$47,682 Operating Income 5 8,989 5 8,047 5 7,374 5 7,703 Net Incone 5 5,586 5 4,259 5 3,388 5 3,808 Earnings Per Common Share
$ 15.96
$ 12.17
$ 9.68
$ 10.88 L
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ConnectiGEt YCnkee Atomic power Company t x _
.t's Discussion and Analysis of Financial Condition and hoevits of emereyen This section contains management's asses ament of Connecticut Yankee Atomic Power company's (the Conpany) financia\\ condition and the principal factors which had an impact on the results of operations.
This discussion should be read in conjunction with the Conpany's financial statem nts and footnotes.
FIN 4tlCIAL C001DITICII The power contracts between the Company snd its ten stockholders (Sponsors) obligate the Sponsors to purchase all of the het electrical output of its single unit nuclear electric plant (the Plant) and to make monthly payments during the balance of the Plant's life designated to cover the Conpany's total operating expenses plus a return on the Company's net unit investment.
Outside financing is necessary.to the extent that planned expendittres for nuclear fuel, construction projects and refunding of debt maturities exceed funds provided by the Sponsors.
The Conpany's net income decreased to'$16 million for the twelve months ended December 31, 1989 from $17 million for the two:lve months ended December 31, 1908.
The decrease in not income is primarily attributable to a reduction in the allowed return on equity (ROE), partially offset by an 1.ncrease in the not unit investment.
Construction Program and Financing i
construction expenditures to support Plant modifications and improvements, to meet requirements inposed by the Nuclear Regulatory Commission and to maintain and improve the reliability of the Plant, amounted to $29.0 million in 1909.
Nuclear fuel expenditures for the same period amounted to $19.7 million.
An estimated
$60.9 million, including allowance for funds used during construction (ATUDC), will be needed for the period 1990 through 1994 to support planned construction expenditures for Plant modifications and improvements; these forecasted construction expenditures do not include an amount for the rem > val of the Plant's thermal ~ shield.
For additional information regarding the remeval of the thermal shield, seo
" Outages."
Nuclear fuel expenditures, excluding APUDC, for the same period are estimated at $72.8 million.
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To meet its general working capital needs, the Company has a $90 million Credit and Letter of Credit Agreement with a group of banks.
The agreement' allows
,the Company to obtain funds through, either direct borrowings or issuance of letter of credit-backed commercial paper.
The agreement also allows for participations of portions of the commitment. On December 31, 1989, the Company had $27.0 million of borrowings outstanding.under this agreement.
Borrowings under this agreement are not guaranteed by the Sponsors.
The company's aggregate short term borrowings under this agreement and any other arrangements will not exceed $80 million without further Securities and Exchange Commission approvnl.
The Company also intends to i
meet its spent fuel obligation to the United States Department of Energy with respect to the period prior to April 7, 1983 (after taking into account the
$30 million deposited with the trustee as required under the Mortgage Indenture and l
Dned of Trust) through deposits in a proposed spent fuel trust during the next five years, although it hoc no obligation to do so.
' Connecticut Yankee Atomic Power Conpany The Conpany is obligated to neet $35.1 million of long-tera debt maturities and cash sinking fund requirements in the years 1990 through 1994.
In 1990, long-tem debt maturities and cash sinking fund requiroments will be $4.2 million.
Cash requirements for construction, nuclear fuel, long-tem debt maturities and sinking funds in these years are expected to be largely satisfied from internal sources.
The Conpany expects to obtain the belance of its requirements under the bank credit arrangement and, to the extent necessary, from additional sales of securities.
Outages On July 18, 1987, the Conpany began a refueling and maintenance outage for the Plant, which was conpleted on April 9, 1988. During the outage, all of the fuel was renoved from the reactor to allow inspection of the reactor vessel.
The inspection revealed damage to support assemblies which hold the Plant's thermal shield in place. As part of that refueling and maintenance outage, one-third of the reactor's fuel assenblies were replaced with fresh fuel, nodifications were made to piping in the Plant's emergency core cooling system and instrumentation in the reactor protection system, two new low-pressure turbines were installed to increase reliability and efficiency, a new control room process cceputer was installed, and 1
en inspection and maintenance program for the Plant's four steam generators was i
coupleted. Repairs to the Plant's thermal shield were also effected.
l On April 30, 1988, the Company began an outage to replace a reactor coolant pump seal, to improve water chemistry in the steam generators, and to evaluate and resolve some emerging design criteria issues on reactor plant systems.
The Plant returned to service on May 29, 1988 and reached full power on May 31, 1988.
4 The unit is currently out of service for an outage that began on September 2, 1989.
During this outage, inspections showed (a) that individual fuel rods within some of the nuclear fuel assemblies had defects and (b) that the Plant's thermal shield was damaged.
To correct the fuel defects, 92 of the 157 nuclear fuel assemblies in the unit were repaired.
The repairs involved repir.cing the f ailed rods and known damaged I
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rods with irradiated fuel from donor fuel assemblies and the purchase of eight new fuel assemblies to replace the donors.
The total cost of the fuel repairs, including the cost of eight new fuel assemblies, is estimated at approximately $8
- million, j
Also during the current outage, the Plant's thermal shield is being removed to prevent the recurrence of the problems encountered during recent years. The cost of removing the thermal shield is estimated to be approximately $25 million.
Removal
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of the thermal shield will not adversely affect Plant safety or operation.
i The Conpany will submit an insurance claim for the full cost of removing the thermal shield and repair / replacement of the fuel, less in each case a $250,000 deductible. The Company is also currently negotiating with Westinghouse Electric Corporation, the contractor that performed the repairs to the Plant's thermal shield in 1987, concerning its liability for the recent problems.
The costs associated with the thermal shield removal and fuel repair / replacement are billed to the Sponsors under their respective power contracts
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Connecticut Yankee Atomic power Company i
with the company, subject to refund in the event and to the extent insurance proceeds or warranty payments become available.
The Connecticut Department of public Utility control has commenced proceedings against two of the Cogany's Sponsors to investigate the prudence of the Conpany's actions during this outage.
t The current outage la now scheduled to be completed in early July 1990, eight months later than originally scheduled.
Sponsors I
In recent years, one or more of the Sponsors have experienced, in varying degrees, financial difficulties and liquidity constraints.
See Note 1 of Notes to Financial Statements" for further discussion on Sponsors.
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New Accounting Standard The Financial Accounting Standards Board has issued a new income tax accounting standard which will become effective in 1992.
The new accounting standard requires, among other things, that regulated utilities reflect, on their balance sheets, the taxes related to the cumulative amount of income tax timing differences for which deferred taxes have not been provided.
The Company expects that when the new standard is adopted, it will increase assets and liabilities between $10 million and $15 million, but will not have a material effect on net income.
s RESULTS OF OPERATIONS i
Operating revenues earned by the Company are the aggregate of operating expenses, including depreciation, plus a return on net unit investment as stipulated in the power contracts with the ten Sponsors.
Substantial operation and maintenance l
costs are incurred during refueling and maintenance outages and, as a result, are i
one of the primary causes of fluctuation in such expenses.
operating revenues increased $17.9 million in 1989 as compared to 1988 as a result of higher operating expenses (as discussed below) and return on a higher net unit investment, partially offset by lower nuclear fuel expense. Operating revenues decreased $24.9 million in 1988 as compared to 1987 as a result of lower operating expenses and lower allowed ROE, partially offset by higher debt expense.
Kilowatthour generation decreased 10.8 percent in 1989 as compared to 1988 as a result of the extended refueling and, maintenance outage -in 1989 and increased i
30.9 percent in 1988 as compared to 1987 primarily as the result of the extended l
refueling and maintenance outage in 1987.
Accordingly, nuclear fuel expense decreased $5.1 million in 1989 as compared to 1988 and increased $6.9 million in l
1988 as compared to 1987.
Other operation and maintenance expenses increased $23.5 million in 1989 as compared to 1988 as a result of higher expenses associated with the outage in 1989, and decreased $22.7 million in 1988 as compared to 1987 primarily because of lower j
outage expenses in 1988.
j Depreciation expense increased $1.1 million in 1989 as compared to 1988 as a i
result of increased depreciation rates and higher plant balances, and decreased j
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Connecticut Yankee Atomic Power Company i
$2.0 million in 1988 as compared to 1987 as a result of adjustments resulting' from the extension of the Plant's depreciable life.
Federal and state income taxes decreased $2.3 million in 1989 as compared to 1988 as a result of' lower taxable ir.come, and decreased $8.7 million in 1988 as conpared to 1987 primarily as a result of lower taxable income and a lower Federal income tax rate, partially offset by a ' decrease in the amortization of prior normalized investment tax credit.
Interest charges increased $6.1 million in '1989 as conpared to 1988 as - a result of higher average long-term borrowings resulting from the issuance of General and Refunding Mortgage Bonds in June 1988.
Interest charges increased $4.9 million in 1988 as conpared to 1987 primarily because of higher average long-term borrowings in 1988, partially offset by lower average short-term borrowings in 1988.
other income, net (excluding APUDC) increased $2.0 million in 1989 as conpared i
to 1988 primarily as a result of the interest income on the $30 million deposited t
with the indenture trustee in the cash collateral account as required under the Company's Mortgage Indenture and Deed of Trust.
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