ML20023D795

Annual Financial Rept,1982

ML20023D795
Person / Time
Site:	Crystal River
Issue date:	02/18/1983
From:	FLORIDA POWER CORP.
To:
Shared Package
ML20023D793	List: ML20023D792 ML20023D795 ML20023D796 ML20023D798 ML20023D800 ML20023D801
References
NUDOCS 8306030322
Download: ML20023D795 (3)

Text

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Cover The employees on our cover represent the many highly skilled Transmission and Distribution employees of Florida Power Corporation who help to provide reliable and efficient electric service to its customers.

9 FLORIDA PROGRESS CORPORATION CORPORATE PROFILE Florida Progress Corporation, a Talquin Corporation, formed in May Dividend Reinvestment Plan holding company, was incorporated 1981, is involved in real estate The Company offers a Dividend on January 21,1982, for the purpose development and the marketing of Reinvestment Plan for shareholders of becoming the parent corporation computer software. of record. At the end of 1982, over of Florida Power Corporation and its 14,600 or 33% of the Company's subsidiaries. On March 27,1982, the Shareholder Information common shareholders participated in common and preferred shareholders investor Services Department the Company's Dividend of Florida Power Corporation Reinvestment and Stock Purchase approved the establishment of th All dividend checks, shareholder reports, proxy material and tax forms Plan, up from over 8,500 or 20% at holding company structure. Holders the end of 1981. Dividends reinvested of Florida Power s common stock are handled from our St. Petersburg General Office. All correspondence under this Plan qualify for the automatically became shareholders dividend exclusion provided by the of Florida Progress on a share- concerning address changes' atters Economic Recovery Tax Act of 1981.

share basis. dividend checks and related m should be directed to: Plan enrollments, withdrawals and Florida Power Corporation, the other correspondence should be Company's principal subsidiary, is Florida Progress Corporation directed to the Investor Services a public utility in the business of / Partment Department at the address shown.

generating, transm,tting, i distributing, P o purchasing and selling electric St. Petersburg, F/orida 33733 Annual Reports on Form 10-K energy whoPy within the State of Inquiries concerning the transfer of and Statistical Supplement Florida. First incorporated in 1899, stock certificates should be directed Upon request, the Company will Horida Power has a generating to our New York transfer agents. furnisn its shareholders without capability of 5,899,000 kilowatts and charge a copy of its 1982 Form 10-K, serves over 829,000 customers in 32 Transfer Agents and Registrars without exhibits, as fiicd with the counties along the gulf coast and Common Stock Securities and Exchange through the central " ridge" Manufacturers Hanover Trust Company Commission. A Florida Power sector of Florida. P.O. Box 24935, Church Street Station Corporation 1982 Form 10-K, without Electric Fuels Corporation, Florida New York, New York 10249 exhibits, and a detailed Ten-Year [

Progress's largest non-utility Statistical Report are also available.

subsidiary, was organized in March F/orida Power Corpcration Preferred Requests should be addressed to 1976, for the purpose of obtaining Stock J. G. Loader, Secretary.

and transporting coal. It is presently Chemical Bank involved in coal mining activities, the 55 Water Street Auditors operation of transloading facilities, New York, New York 10041 Arthur Andersen & Co.

rail cars, barges and tugs, and a Tampa, Florida coal-oil mixture plant. Common Stock Listed New York Stock Exchange Ticker symbol FPC

Consolidated Financial Highlights 1982 1981 Revenues Decreased 5.5% $1,213,671,000 $1,284,119,000 Earnings Decreased 13.6% $82,097,000 $95,070,000 Construction Expenditures Were Up $385,274,000 $379,752,000 Earnings Per Share Decreased $2.20 $2.80 Dividends on Common Stock-Up 8.9% $1.83 ticos Book Value Per Share-Year End $18.93 $13.67 Stock Price Range $14%-19% $12%-16%

Florida Power Corporation-Operating Highlights 1982 1981 Sales of Energy-Down 3.6% 18.8 Billion KWH 19.5 Billion KWH Average Customers increased 3.4% 829,810 802,787 Average Residential Usege-Down 7.4% Due to Mild Weather, the Weak Economy and Energy Conservation 9,964 KWH 10,758 KWH Peak Demand-Up 5.1% 5,347,000 KW 5,088,000 KW Contents 1 Highlights 2 Letter to Shareholders 4 Florida Power Corporation

,4 13 Electric Fuels Corporation 14 Talquin Corporation 14 Florida Progress Corporation's Financial Review-Management's Discussion 18 Consolidated Financial Statements 33 Selected Financial Data

- 31 Quarterly Data 32 Directors 33 Officers 1

Wh3 MM " ' ,

Dear Fellow Shareholder:

A' * ' '

The year 1982 saw storm flags 8 flying along the ramparts of the g.

Amencan economy Those thgs stdl fly in early 1983. Knd,as

' whether enc how the wMd is changing presents a Challtnging demand to the managements of trasinesses throughout the country There are confhcting signals, and e r is certanly no generally held consensus about the economy of 1983. ** ch.tr.HiN.

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.c a d Present For F;onaa Progress, I believe that 1983 Wdl bring an improving record of FCream ,, tne cividends mmc to further improve safety picture. Our performance in 1982 paid each year, vnh a veer enj ard aerto rrance. Im nucie. - .

reflecte the necec0r(y of financing annual rate of $^ 9? pc' E"4re unit's record during G81 and a '3rge c nstructen program for For your Co.' .Nny ' " ' ve a 9 m hd at N nahal our util?/ subsidiarv and the busy year ir '.L3 rctt are 1 Cases average and improving general dechne in ine conomy for utility rate increases ' vere filed For us, it was accentu'1ted by a F onda Power was active on with the Hof.da Pubhc service the legal front in a number of drop in energy sales of 3 6% Commission arm th< rideral This is the hrst time rce 1974 ar eas'dunng the past year.

Energy Reguerv vommisson A btigation is proceeding agtnst ina' such on event nas vcurred deciso by the 9'un a d Pt >hc It i9 thus important tha' we make Babcock and Wilece Compaay Service Comm(s9 ion granled and McDen.m Inc in connoction an accurate appraisal of its rehef of $1113 mdkon ehh*

significance. with the cast of i9/6 rtoc r' 1 . .

February 27,1983. an inc ease of the nuclear u: . and against IFT Cur analyses indicate that the $33 9 milhon was ~ anted in a Gnnnell Indust al piping. loc.,

drop is largely due to a dechne of two-step proceeding by 'he regarding a e laact dispute in '

24 8% in our kilowatt-hour sales Federal Energy Heguiatory connection wiu Crystal Rive- Unit to the phosphate industry and a Commissi'" This latter incrtas9 No. ' cons.ruction In December b, reduction in residential is subject to 'urthN legon on or 1982, the Flonda State Supreme consumption because of mdd Commission hetion As exnect to CO n' lanY down two decisions weather The numb" of bdhng have this mattar lescwi dum y , D. m8 'ers recting Florida degree days fo' heaieng and the first hab of the year, bu'. are Power T,e first confirmed the coohng in W82 was 4085 in already cohecting thL 'evenLe vahd N ; Honda Power's companson to 4,600 fo' #D01 A subject to mund appraach in its 1980 rate case, severe frecie early :n the fear In December our n9v 6/0.000 tiw6ay removing a cloud over estabhshed a high peak load. but knowatt coai burnirg t nit was the rever jes collected as a result this was not refleh in en.,r9Y placed in Mmmercial service at '

of that p< 1cceding The secono sales due to its short duration Crystal River TF 9 met 2 fa gd t ho,sion remanded to the Flonda Sales to the commercial sector date estabhshed MG. in D7 'wbhc SJ oce Commission their

!ncreased and our tota! number The new unit wdl cf.inge CW ordenng C a refund of $12.9 ..

of customers increased t>y 3 4% system fuel mix, decreasirig '.he r." ion in connection with the 1978 In the face of these facts we on component to 2E m 1983 Gbtagi of the nuclear unit for conclude that there wdl be a pick- ,epan Tho Court's order found - X up in energy consumption in 1983 The capacity factor of Crystal ihe Cucmissio*s Wund order to a level of abod O 1 bdhon River Unit No. 3-Flonda Power's had not been substantiated.

knowatt-hours. which is 7 3% nuclear unit-was 70% for 1982 above the 1982 level The net No refuehng outage w; s Flonda Power Corporation result of decreased sales and necessary dunng the year. A 16- cool.nued a very active load nsing expenses was a drop in week outage for this purpose is manages mot program dunng the earnings from $7 SI ,o $2 20 per planned beginning in March 1983 year insang about 14.000 share Nevertheress. voL' Board of Dunng this renod. a large remobj controhed switches for Directors has conunueJ a 30 year number of aiterations will be casomer loads Flonda Power 3

Earnings and

' Dividends Per Share o aentiy hp one c< the leading J Keesie. Jr., as President of orocr ime n thi- nrea. It is an Talquir Corporation I am

, imne' tant move .a order to confident that this gives us a redu;e 'uture capital requirements. strong team ;or movement into _

E 1 March 27,1982, the the future. It is a future that is shareholder; approved the fraJght with promises and for.,ation cf Flonda Progress problems. I beheve that we will be -- - -

Corporation as a holding able to respond effectively to both p

^ ' O "g compa o) for Flonda Power and in August 1982, Mr. P. Scott as sub5adianes Activities nf 'he Linder, Chairman of Linder & " N h$

subsidiarids are discussed D. this industna! Machinery Company, @ Ij h hj d report Effective January 3, '983. was elecBd to the Flonda

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we accomplished a substantial reaiignment of management to Progr esc Roard of Directors. Mr.

Linder also serves on the board Cp} ]h h'fj#)

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i provide for an orderly transition n of directcrs of several other 13 Q management succession and to Flors aaseo companies. q]kh@dh h

provide adddional separation including Smty's. Inc . First dhaUh between Jubsidianes As a result National Bank of Lakeland and g of these changes. I was General Telephone Company elected to the position of Chairman of Flonda of the Poard and Chief Executive message to the world. It was Officer of Fionda %wer March 1983, concludes the broadcast on June 11,1931, from Corporation, with Mr L ee H. Scott service of Mr. Sam T. Dell as a the convention of the National assuming the responsibihties of member of the Board of Electnc Light Association in President and Cilef Operating Directors. M' L iell has served Atlantic City That message was Off,cer Mr C!arenca W McKee, faithfully and well. His acumen gg ggi;g

, Jr. and Mr Staniey A and business ludgment have been a gr .at r alp in carrying out ,My message to you is to drandimue were efected to the be courageous. I have positions of Executive Vice the affairs ;f your Company.

Pr6sident-Randa Prcgress Dunng dark Jays in our seen history repeat itself Corporation. A number of other nation's ht+ory, Thomas A.

Ed: son, the father of the electnc 9 '" " 9 reahgnmcats were made, a" .

includn o the election of Mr. Ailen utihty industiy gave a final g ess. as America has come out

'Jinies meets wl:h the presidents of the subsidiary companies;(I to r) A. J. Keesler, Jr., Talquin Cor-tion; Hiwar; H. G. Wells, Electric Fuels Corporation; and Let h. Scott, Florida Power Corporation strong and more prosperous Be as brave as your fathers were before you Have faith-go forward '

The spirit of that message of over 50 years ago is as appropnate today as it was then We expect to go forward.

For the Board of Directors, y

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y A Chairman of the Board and Pres! dent

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j .j Florida Power's transmission (- 4 1 .

{d engineers evaluate route ,_, [q, ' ;j h '  ?

and design alternatives to provide cost-effective, 43?

i. O reliable bulk power transfer t b facilities and to satisfy environmental concerns.

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USE OF ENERGY Energy sales ounng 1982 1981. Commercial customers ps decreased 3.6% compared to an grew 2.4% in 1982 compared to T lji increase of 3 5% during 1981. 42% in 1981. Energy sales to the  ; '

This was due primanly to mild commercial sector remained weather, weak economic strong despite reduced customer '

conditions, and energy growth and the nationai recession. ~ . '- =

conservation efforts. Flonda Energy saler to industrial Power s average customer growth z ,

customers decreased 17.4%

rate dunng 1982 was 3.4% down during 1982. This decrease is a

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from the 4% experienced in 1981- result of a significant reduction in 9p, Sales of electricity to residential customers decreased 4.2%

two of Flonda Power's major RS '

industrial categories: phosphate {pg during 1982. This is well below mining and chemicals. The the 5% growth rate in 1981, and phosphate industry has been

%Cf3 is due primarily to mild weather severely impacted by the J'f7 ,

which caused a 12.9% decrease reduction in demand 'or t[' 7, in biling l

degree days from 1981. phosphate related produen both '7 Also, the average residential use nationally and internationally. k per customer decreased 7.4% RATES AND REGULATION ..

during 1982. Residential in June 1982. Florida Powe:

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a customers inc eased 3 4% dunng Corporation f, led a petition with 1932 cornpared to 3 9% in 1981. th- Florida Public Service Flonda Power's commerciai Commission muesting a $169.2 '

customers used 4.3% more miilion retait rate increase. In -

kilowatt-hours in 1982 than in August 1982. the Commission ,

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granted a $331 million interim i;*12h e. .h8- M [ [, increase effective September 29, a...H~

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1982. On January 28,1983, tha .

.? Q.; . . . . . [rp 7. s  ?~ Commission reached a final l i; ...,

. u . 4: .' . y 4 1, decision granting a $111.3 million i 4, . .x .by . 7./

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V- permanent increase effective  !

February 27,1983.

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. Flonda Power also filed a w,. --

request with the Federal Energy

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Regulatory Commission in July 1982 to increase the wholesalo j

' (: .j ;. y. . *y rates in two phases, totaling $33 9 T- 1 %y" 1.

.s million. The Commission gave

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k ' M' -(?} Florida Power approval to increase wholesale rates on an N QQ.

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. $ z p .g  % ~lM, V [j*: . - intenm basis by $10 million,

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effective September 29,1982. In W ll .*  ? .

December, the Commission l O

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1. V 1 - .. '.77' 4qse;N ~ MMS: {l" approved the second phase of the rate increase which totaled l

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$23.9 million, effective December 30,1982. The increase will not be made permanent unta y . h. x., .; ....- [. b-a: se :.

D P .i [ f ' S [ ' P.;- 'w;. k ,- , ' "e .In . J the Commission issues a final ruling, or a negotiated settlement r;3'.ht.h,.ch S h '. h h [; hg.j.g , :. ]n' C D can be reachea with Flonda 3.ilt.1(;f'6g 1G.,

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g, 1:.J 1< Power's wholesale customers-ef g~ {lg. .:

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_< ; ,g h ' . SYSTEM OPERATIONS ,

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During the past four years, Florida Power Corporation, in N(. . ..

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y. nz ' T ,./. yy cooperation with other Florida 3 ,,s.V g;.% .

f 1; % . % '. T .S._ g.\ ' T'i ? .Y .y .l ' - - e7y'y in developingplayed utilities. has a strong role

[$ : . 9 : power interchange c f F. - - ....y .

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( 1 i ' .i G ; capabilities and programs. One of

'.p . < . = - a s. ,n ,? these, the ' Energy Broker,' is so

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/ 7 J successful that it is being used as jy ;< :g.( ' 4 ; .y(.

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yy 3 r N- 1. i a model for utilities elsewhere in

).. ( ' -] ' ? * ;l g . . I. 9 ,. Q i ;' T y 4 (. 1,4 Q [ ' . ',. the United States. The " Broker" b /.7 s , g i . T , .' . , - 4 ; . hc f g. j ..s.. currently matches buyers and

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f 't..j.g.Q4 ~ - 9.3 sellers bourly after each company f '- ' .b * '}'"{c.- t4 ',

• 7 -' CD. " : 7  :. i s quotes its respective costs.

QC. ..; . , . . f ). (.d ., ,". $. . . .,i.~J ( @e . . l , , - ( i c C.'p Florida

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1( M Power and other Florida es e e g n q N Many technical support personnel of Florida P.wer are required for the concept to permit multiple hourly transmission and distribution of electricity. For example, meter technicians e AM examine approximately 60,000 electric meters annually to see if they are in of this ' Extended Broker,,

L need of repair. Rubber gloves, essential to the safety of line crews, also receive a thorough inspection for defects. Concept began in November 1982.

System Capability Dunng 1982, the Crystal River Tranzmission planning personr+i o, Florida Power determine the future nuCiear unit experienced its first transmission and substation facilities year witnout a refueling outage.

ruedad to reliably and economically The increased nuclear generation.

sirve customers' needs.

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[. I.? temperatures, reduced peaking generation to a significantly lower

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. . . s . p 4. s a M "e level than m prior years. The most  : < . ?, u. ~ ?..I d 4 Yd'~i-t

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significant impact on capacity was

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W %;L pt. Vj. r the addition of the coal-fircd R2 ".*

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Crystal River Unit No. 4 capable N. X5 , O n ~ %?#

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of producing 640,000 kilowatts. ,i:.$ j y . < M ,j. g. 4g,..: s .. . c.?.y This changes the production mix

'(j 2 to 4,194,000 kilowatts base load, 1%.y.i'.dl

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%.$1 e f .N C#.. i.p,., i,o. .., .@M IT h ,f d' M v.

,. O, y 1,705.000 kilowatts peaking, and i: @. . . . .

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. .,9 ' 430,000 kilowatts firm purchase, 'i

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I)f for a total of 6.329,000 kilowatts. $[ y- (.% . . '.l* .N.g hj.[k ;N %

3 An all time peak demand of Y 40 W-

?. A 5,347,000 kilowatts occurred M ". ,h j M ' ' ,[h. , ,O [.k.DW1E  % Mf "'.$ ~ 7  ; 7 [I M k A . .

.x ( ! January 12, 1982. Horida Power's 4 ;j  ; U > F ' j " ^ / 4..

..f generation and purchased power $.y i,gd .7 r 4 (V[ !h %l . i U./. MD,7 / b .[ < - W '"i *[7.

n1 were sufficient to meet this i 1 9@'.o. -

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. .7 demand without any reduction of s,9 p .mma.-

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customers' usage. T1* ^ , V M.C;.

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Nuclear Energy 4;G flf:%,R;a.;: 'L ,;. }. , f $NQ. - pw ' j,. Q-[4., }

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On October 10, 1982, Florida C : [,, h I k.$,b 1. 1C 'e' C.'

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Power's Crystal River nuclear unit T . ' 13 D p f ?. f, @4 I.

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set a new calendar year generation record. On that date.

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e. -+8 the previous record of 31 billion

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.h.' 1982. the nuclear unit achieved a (q.1.* g 3. [,%.

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total output of 4.4 billion kiiowatt-U. .- S .,

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hours, a 19% improvement over r<

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hy 5 the previous record. This resulted in a 70% capacity factor for 1982.

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[ .9 A scheduled outage did not occur in 198<n because of the new

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Q. ; t 18-month fuel cycle. However, yghf4 [.[. . (~[ [ . . [ ' . . }:h.2,-- _

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plant is shut down for refueling J.%

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(.- Fionda Power is moving V  ; p# 3 M,@ ;N 'f,jf. . ' . .1 b f f5 C #-E 9 lf J.. . .+Qy^W' .e': WT,,J g .4 Q 4;d'#i" g.M steadily to convert its fuel dOD "*A -

f.f: mix from one formerly based Q pnmanly on oil, to one based on supply of electncity to support control by continuing a policy of domestic coal This fuel mix will Flonda's economic growth and maintaining oil and gas contracts

-",]J.. continue to enable Flonda Power development. To increase the with vanous suppliers and

y to provide customers with a reliability of the fuel supply, secunng a coal supply through an 4

g reliable and competitively pnced Flonda Power is achieving greater affiliate. Electnc Fuels Corporation.

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l l Florida Power's long-range fuel 1980's are the coal-fired Crystal Annual Peak Demand Forecast

, objective is to obtain fuel at the River Units Nos. 4 and 5. Unit -= ==

lowest economic cost and to No.4 went into commercial ,1,1, gnergy l ervation diversify by type, source, tim,ng i operation on December 24,1982. I l and transportation method. Construction on Unit No. 5 is 8f Florida Power's major fuel in 1982 about 33% completed and 0 ""

was oil which fluctuated in price throughout the year. However, as is scheduled to be in service in December 1984.

g g[

I8 a result of a worldwide Following the weak first half of - ** C""S6 ""*6on ~

oversupply, oil costs at year end m 1982, Florida's economic

1982 were somewhat lower than indicators are showing signs of F at year end 1981. During 1982, recovery. Housing starts edged Florida Power's fuel mix was 36% j upward for the first time in more -

mm oil,29% coal,26% nuclear,7% than a year, and tourism gas and 2% coal-oil mixture. increased during the year.

The conversion of Bartow Unit Tourism remains a primary '

No.1 in April 1982 to burn a coal- source of strength for the i oil mixture marks the first time economy. The population growth m ms m mt this fuel has been used rate remained about the same but I commercially by Florida Power. is expected to turn upward in .

Successful operating experience early 1983. As the national in the area of energy conservation '

with this fuel will demonstrate its economy regains momentum, and load management. Many of potential for other sites. Florida's growth rate should the goals included in the plans are ahead of schedule, and new in 1983 coal will become accelerate and recover in 1983.

programs are be,ng i ,ntroduced i as ;

Florida Power's primary fuel, with needs arise. The key to the an annual consumption of ENERGY CONSERVATION success of energy conservation approximately 3.4 million tons.

During 1982, Florida Power Electric Fuels will supply all of tilgh above ground, Florida Power's Florida Power's coal requirements made excellent progress in implementin9 the Pro 9 rams and by both water and rail install new high voltage power lines.

transportation. The 1983 fuel mix guidelines established by the The new cable is capable of carrying is expected to be 44% coal,28% FI rida Public Service Commission up to 115,000 voits of power.

oil,23% nuclear,3% gas and 2%

coal-oil mixture.

• SYSTEM DEVELOPMENT k ^

g -

Providing an adequate and reliable source of electric energy ~

at a reasonable cost to the g '

customer is a principal obligation N ..

of Florida Power. This commitment is met by emphasizing flexibility in strategic -

- I planning. Future groCh in .'

customer demand must be balanced with the ability to <

conserve energy. In keeping with this balance, the need for future .

power plants has been reduced .- , ,

substantially. The only two generating units planned for the '

8

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gy, .1" @%  ;# 2y Jg;j w b programs is customer awareness

\I

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and acceptance. Through speeches, newsprint, television, u;# + 4 ,

[b 1 SM r . . M j_ g g radio or personal contact, Florida m i w ;;, i Power's objective is to reach

$p%g p g:p['

4 Af ?37- fibR$ each customer at least once e t IN M}$)$%k during the year to emphasize the 3~

y

a. j'ildD ' il D M g d advantages of energy

~ 4M {," conservation. Only when

~

$ygg"g0f @I. customers know what programs J sy Off{m$ are avai!able and how they will

'+ .

p~h f 7 , benefit frorr, them will they be 4

able to make intelligent decisions

• M.s .W as to which programs will be most V Mg advantageous Customers will also benefit through the reduction V P g

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in generating plant construction resulting from the various energy conservation programs.

of q. a( Audit Programs

1. M 1 YD During 1982. Flonda Power j performed over 35,000 energy 6 a ,

audits. There are two types o; d ,

, energy audit programs available f '

to residential, commercial and

n. industria! customers walk-through uppA- audits and the more detailed gpg computerized audits Auditors y 5-A performing the free walk-through

- audits identify measures which y wtll save energy /ith minimal expense and tune A checklist is left with the residential customers

., oumning the various practices and measures they can employ to save energy. The Home Energy Checkup Audit Program provides the residential customer with a computerized analysis showing cost estimates and projected savings for recommended erergy conservation practices and measures There is a $15 charge for this audit Audits assist commercial and industrial customers with their conservation efforts by identrfying areas where energy and demand reduction savings are possible for each facihty. including ecpipment operation and modification 9

Y A

Home Energy Fixup Program implementation of load ,

A new program which began in management programs. Plans call 1982 provides minor conservation for over 600,000 kilowatts of and weatherization services to customer appliance load to be at residential customers through the control of the system the use of local contractors. dispatcher by 1990. As an Flonda Power pays one-half of incentive to participate in the -

the firs' $100 of expenses. These Residential Load Management services include weatherstripping, Program, credits of up to $17 are caulking, duct taping, installation 9'ven on monthly electric bilis.

of water flow restnctors, low-flow Flonda Power offers a test shower 7eads, electnc switch and program to selected cornmercial  ? 1'O ^

L 1 V W .,

outlet gaskets and insulation of and industnal customers who water heaters and piping. This allow it to control their air '

program has been well accepted conditioning, heating. or svater -

cy customers as indicated by heating equipment dunng peak over 16,000 Home Energy Fixups periods. Under this program, .

L completed dunng 1982. called the Commercial and ,

Industnal Demand Control Program, equipment can be shut -

Load Management Programs off for up to 15 out of 30 minutes Flonda Power is a leader in The commercial customers will the development and the receive a credit of $1 per month ..

for each 1.000 watts of load '

7 . ._

. . 4 under control.

,' ' '; A new voltage regulation

• 4

/ program designed to reduce '

system peak demands by means

~

.. of a 2% voltage reduction at -

• -.* selected substations is well unJer

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.' -]' _' - f ., .,# When electric service is f, f y

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e restore service more quickly y.,i than Florida Power, it takes a combination of skill, strength

.  : . .: - ),t .

and concentration to Florida Power's line employees, protected complete electric line work s.

by rubber gloves, work on energized efficiently and safely in electric lines. adverse weather conditions.

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- 5-CLEARWATER p O TAMP

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"t ST. PETERSBURG 69

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MIAMI 9 Dvs c" C ces W Genera

• ng P a"t 5 Ms _ T ra smss a- 5,sm- -- r ,r enrencns Florida Power serves over I

829.000 customers in more than 375 Cities, towns and 'd  ?

'i t" '

' ' l I+ ' I ' 4 rural communities. The ie '"

' ' ' ' ' " + ' + '!, 5f- .

' r j+ c r ri m t territory comprises 1; ,r  ::+ 1 . , h., grq*4.++. r+~ . ,je,

. . ' . 'p , t; approximately 20.000 squa e q ,, ,,; ,

miles with a population rf , , . ,

17 over 3.400.000, located in 32 of ,*

67 Florida counties In addition RESEARCH AND  ;- "+ '

to the generating plants DEVELOPMENT .. 3-Indicated on the map, electric , ,, ; ,, , , , , .

power Can be supplied from ,

interconnected electrtC utility 1'"' , - * '! ' ' '

.i' systems throughout Florida . .

7

' ' * + a and the southeast. +

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L With Walt Disney World's " Spaceship the most cost-effective means of Mit S' s

Earth" in the t:ackground, Florida Power's meeting regulatory requirements 4 substation employees perform preventive maintenance and testing. Florida Power for Clean air and clean water.

, has 292 transmission and distribution Flonda Power actively substations throughout its service area. partlCipates with other Florida utilities in the Flonda Acid Deposition Study. During 1982, During 1981, Florida Power hI: approximately 870 samples were installed a 9 kilowatt wind collected from the 14-station acid generator to determine the energy deposition monitoring network potential for wind power. The throughout the State of Florida.

wind generator has been in The data will be used to oceration for over a year. and determine the level and extent of caly 2,000 kilowatt-hours of power acid deposition throughout have been generated. Although Flonda. The data will also be w -

the ability to integrate wind used to provide information in generators into Florida Power's order to assess any adverse consumed and 400,000 kilowatt- electric system has been fully effect on the state's environment.

demonstrated, this equipment will hours of electncal energy produced. In addition- see kmited use in most areas of UNION CONTRACT Flonda due to the lack of improvements were made to sufficient wind to make it On March 8, W82, h enhance system performance and employees of Flonda Power.

economically attractive.

Other alternate fuels were tested. represented by the Internatio.'al but wood still remains the primary Brotherhood of Electrical Workers, fuel source for the gasifier. An ENVIRONMENTAL approved a two-year contract investigation is now underway to COMPLlANCE retroactive to December 14, 1981.

develop cleanup methods to Flonda Power's pohcy toward Approximately one-half of Florida further improve the quakty compliance with environmenta! Power's employees are of the wood gas regulations continues to focus on represented by this union. It Florida Power's new coal-fired 640,000 kilowatt Crystal River Unit No. 4 became operational in December 1982. Crystal River Unit No. 5, also a coal- .3-

,a

. p-fired 640.000 kilowatt unit, is ~

scheduled to go on-line in late .g;g

[# ' RIQ { ' - 5  % ~ ; -

1984, completing Florida

, ] '

y y-.g M:-

> c Power's generation _y- q_ l ;' ,

construction program for

• ths 1980's. These units, rspresenting an investment of about $890 million, will burn low-sulfur coal.

12

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, y.

393 p;, g ; gy a yp/{jf@y ) .

3::4 Q

marked the 42nd consecutive year since the union was organized at Florida Power in which there have been no work stoppages involving Florida

Power employees. The new contract, which expires on December 11, 1983, includes a 9.5% pay increase for the first year and a 9.2% increase in

_ the second year, plus an l E improved retirement plan for An Electric Fuels' partnership, International Marine Terminals, owns transioading longer service empioyees. ,aciiities wnicn a,e located 4o miies soutn o, new o,,eans. Tnese ,aciiiiies a,e

=

operational 24 hours2.777778e-4 days <br />0.00667 hours <br />3.968254e-5 weeks <br />9.132e-6 months <br /> a day.

f EMPLOYEE COMMUNICATIONS Both pnnt and electronic media Electric Fuels  !

I

[ The transmission of ideas and are used to communicate with Corporation informaiion to employees is as employees Flonda Power Electric Fuels o_orporation s vital to the successful operation of publishes a monthly news _

magaz:ne titled Power Lines. total coal management program I* Florida Power as the transmission means rehable supphes and

of energy is to the quality of Power Lines is mailed to the homes of all employees so that deliveries of coal. Through its I service rendered to customers In own fully-integrated system of they and their families may be P recognition of the crucial role kept abreast of Company news. coal handkng. Electnc Fuels E communications play, a maior Flonda Power also nroduces a provides coal from mine site to emphams is placed on keeping market Customers have included =

E employees fully informed about monthly videotaped' news program called ACCESS. The utilities and major industnal firms.

$ the issues and events that affect Florida Power. ACCESS program was created to Customers are assured of high give employees access to people, quality coal when it comes from 5

F places and events taking place Electre Fuels' mining partnership witnin Florida Power's service whose mine sites are located on area Dunng the year, a number a 200 milhon ton coal reserve in y of special edition video programs eastern Kentucky and southwest were also produced, including Virginia.

y one titled "AbcVe the Bottom An Electnc Fuels' partnership.

_ a Line.' The program helped to International Manne Terminals, a =

accomplish a corporate objective bulk materials terminalling facihty 4 of help:ng employees understand on the Mississippi River, provides how the utihty business works by a vital transloading knk between i

A explaining utihty finance. coal supphers and coal users all g

over the world. A $63 million

" expansion was recently comp +ted To insure rettable deliveries, which wtll substantially increasa unit trains owned by Electric the capacity of the terminal.

r_

Fuels arrive three times a g g 7 week at Florida Power's coal

-s transportation an Electnc Fuc Is' I handling facilities at the Crystal River Plant. Each unit partnership, Dixie Fuels Limit ( d.

/

train carries approximately owns and operates ocean-go ng 7p t ns of coal. barges for coal shipments from International Manne T armina s to

+

.e 13

Florida Power Corporation's Lake Talquin, located about 12 l Florida Progress Crystal River generating site. miles west of Tallahassee, is one UI th 'r FI a Corporation's Electric Fuels has taken a pioneering role in the eh at ks ha see s Financial Review-development of alternative fuels the state capital as well as an Management,s Discussion education center w,th i three to reduce the world's dependency on fuel oil through COMCO. institutions of higher learning: LIQUIDITY AND CAPITAL COMCO, an Electric Fuels, Florida State University, Florida RESOURCES partnership, operates one of the A & M University and Tallahassee few coal-oil mixture plants in the Community College. Tallahassee Florida Progress Corporation's l United States. With coal-oil from also enjoys one of the highest largest subsidiary, Flo~rida Power l l COMCO, fuel oil users can use levels of household income Corporation, operates in a highly l coal to meet a portion of their in the state.

l capital intensive industry. Electric l

energy needs without installing Talquin expects to be part of Fuels Corporation's activities are l

costly coal-burning facilities. In the explosive growth forecasted also of a capitalintensive nature.

l 1982, COMCO introduced for the computer technology field. Therefore, the Company is unable l REDICOAL , a new powdered Computer software developed to fund construction programs specifically for utility companies is coal product for industry, which with funds derived only from can be used in place of fuel oil. being actively marketed by operations. In 1982 and 1981, Talquin. In late 1982, Talquin funds derived from operations I introduced FLEET, a unique, provided 56% and 52%,

Talquin Corporation highly sophisticated fleet respectively, of the funds Talquin Corporation is involved management computer software used for construction.

in real estate development and system which provides up-to-date The shortfall in funds provided the marketing of computer Information on vehicle inventory, by operations is met through the j software. During 1982, Talquin assignments, repair, fuel and began planning for the use of both short-term and long-maintenance. Since FLEET's term financings. Short-term debt development of property on Lake introduction into the market, it has Talquin. The property contains increased from $30 million at the end begun to attract the attention of approximately 1,300 acres, with of 1981 to $37.2 million at the end

! fleet managers throughout the of 1982. The Company, through its 3.4 miles of shoreline on the lake. United States. operating companies, can borrow up to $110 million in short-term l

i planning has begun, by Talquin Corporation, for the development of waterfront funds from banks or through the property on Lake Talquin near Taliahassee. sale of Commercial paper.

j r~m**m e@Pm ew ~e During 1982, Florida Progress

~ " "

a 4 </MW '.

Corporation issued 1.5 million shares of common stock through the dividend reinvestment plan and the employee benefit plans.

• . . . . . Proceeds from the common stock

. . . ,g sales totaled $24 million.

j

'F l - <s, .

J CONSTRUCTION FINANCING l Florida Progress, in conjunction with its subsidiaries, funds part of

its major construction projects ]

through long-term financing. As part of the financing program, }

Florida Power issued a total of l

, $225 million in external financings. l This included a $25 million Citrus j ,

14 l

County Pollution Control Bond decreases due to declines in to increase during 1982. The Anticipation Note which was sold kilowatt-hour sales and fuel costs, percentage increases over prior in January, and $50 mlIlion in which are passed on to years for 1982 and 1981 were Citrus County Pollution Control customers through the fuel 15.2% and 22.4%, respectively.

Revenue Bonds issued in adjustment clauses. The impact of The increase in 1982 was due October. The revenue bonds will the various factors on primarily to increases in have two maturity dates: the first consolidated revenues is shown production expenses which series of $10 million will be due in in the following table: increased $15.0 millian or 17.9%

2002 at a rate of 11%%, and the inn int imo over 1981. Other increases in second series of $40 million will gg,,n,) 1982, as well as increases in 1981 be due in 2012 at a rate of increased (decreased) and 1980, were due to the effect ruei costs . (s21.3) $187.3 s 42A of nflation in all areas of 11%%. In July, Florida Power sold 500,000 shares, representing 8"cgasgldey,eas ,o dd} sao operation, combined with the m) 33A

$50 million, of 13.32% cumulative increased base rates . 31.9 51.5 46.5 expenses of meeting preferred stock. The last increased (decreased) H&meds at h Wstal %er construction financing for Florida deferred fuei revenue (30.o) 27.2 (13.6) Unit No. 3 nuclear plant.

Power in 1982 was $100 million of otner . (e.e> 14 s 1.4 13%% First Mortgage Bonds (37o3) $33#o $33(7 Other income and Expenses issued in October. The bonds increases in income attributable have a maturity date of 2012. to allowance for equity and The laigest decrease in borrowed funds amounted to con:truction Expenditures revenues for 1982 was the result $42.7 million in 1982. This of the decline in kilowatt-hour increase was primarily due to

"' " sales due to the combined effects construction expeditures made on of mild weather, energy Crystal River Unit No. 4 which conservation and the weak went into service in December dm economy. The recessionary

,__ 1982, and expenditures on Crystal pressures expenenced in 1982 River Unit No. 5 which has a a contributed significantly to the I:sE

• 3m 17.4% decrease in industrial kilowatt-hour sales.

scheduled in-service date of December 1984.

Interest on long-term debt Operating Expenses increased $17 million or 20.8% in m 2m 1982 over 1981 primarily due to Fuel expense . increased additional long-term financing significantly during the 1980 and necessary to support Florida im 1981 periods. However, in 1982, Power's construction program.

fuel expense decreased 14.4%

from the prior year. The decrease Accounting Change in fuel expense was due to both si a o u as , lower prices and to lower net . In 1981, a significant increase in s

income resulted from a change .in estinno generation.

an accounting pnnciple when OPERATING RESULTS co t ued o i cr ase n 1982 on ue por ion o evenue R:v:nues although the price per kilowatt. related to service rendered but Many of toe factors that hour purchased decreased. This unbilled as of the end of the contributed to the increasing increase in purchased power period. Previously, revenues were revenues of prior years did not expense was the result of recorded as billed. The effect of continue into 1982. The increased kilowatt-hour purchases the change in 1981 was a net of Company's largest subsidiary, brought about by the availability income taxes increase of $11.5 Floriria Power, which accounted of lower cost energy. million or $.34 per share.

for 99.7% of total 1982 operating Other operation and revenues, showed revenue maintenance expenses continued 15

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• FLORIDA PROGRESS CORPORATION Consolidated Balance Sheets DECEMBER 31,1982 AND 1981 Assets 1982 1981 (Thousands)

ELECTRIC PLANT (Notes 1,6a and 7):

In service $2,754,695 $2,196,645 Less-Accumulated depreciat;on 609,360 542,876 2,145,335 1,653,769 Construction work in progress 245,004 445,860 Nuclear fuel, at amortized cost 51,361 97,230 2,441,700 2,196,859 OTHER PROPERTY AND INVESTMENTS:

Other property and investments 24,070 13,594 Investment in unconsolidated subsidiaries and partnerships 23,405 19,044 47,475 32,638 CURRENT ASSETS:

Cash 6,201 2,975 Special deposits 30,142 9,227 Accounts receivable, less reserve of $1,317,000 in 1982 and

$1,424,000 in 1981 85,164 87,697 Accrued unbilled revenues 29,116 28,667 inventor,es, at average cost-Fuel 156,397 130,269 Materials and supplies 38,901 34,905 Prepayments 3,701 3,382 349,622 297,122 DEFERRED CHARGES:

Unamortized debt expense, being amortized over term of debt 8,980 7,139 Deferred fuel expense (Note 1c) - 27,292 Unamortized nuclear fuel disposal costs (Note 1c) 30,628 -

Other 36,451 28,190 76,059 62,621

$2,914,856 $2,589,240 The accompan';ing notes are an integral part of these financial statements.

18

Capitalization and Liabilities 1982 1981 (Thousands)

CAPITALIZATION (see accompanying statements):

5 Common stock equity $ 725,012 $ 681,169 Florida Power Corporation cumulatiu preferred stock 275,859 227,471 Long-term debt 1,195,147 1,028,524 2,196,018 1,937,164 CURRENT LIABILITIES:

Accounts payable 61,607 71,472 Custome;s' deposits -33,098 30,864 Accrued income taxes 1,204 9,441 Accrued other taxes 12,294 23,906 Accrued interest 25,759 18,023 Other 15,908 10,914 149,870 164,620 Long-term debt due within one year 5,372 8,338 Notes payable 37,205 30,017 192,447 202,975 DEFERRED CREDITS:

Accumulated deferred income taxes (Note 3) 334,651 311,862 Accumulated deferred investment tax credits (Note 3) 164,007 133,909 Deferred fuel revenue (Note 1c) 17,907 -

Other 9,826 3,350 526,391 449,101 3 COMMITMENTS AND CONTINGENCIES (Note 6)

$2,914,856 $2,589,240 19

FLORIDA PROGRESS CORPORATION Consolidated Statements of income FOR THE YEARS ENDED DECEMBER 31,1982,1981 AND 1980 1982 1981 1980 (Thousands)

OPERATING REVENUES-(Notes 1c and 6b) $1,213,671 $1,284,119 $970,161 OPERATING EXPENSES:

Operation- .

Fuel (Note 1c) 514,335 600,678 417,511 Purchased power 109,797 102,275 92,634 Other 140,313 124,149 94,800 764,445 827.102 604,945 Maintenance (Note 1d) 82,228 68,948 62,952 Depreciation (Note 1d) 81,016 75,992 70,115 Taxes other than income taxes 63,172 64,990 53,374 Income taxes (Note 3) 54,006 72,893 50,620 1,044,867 1,109,925 842,006 OPERATING INCOME 168,804 174,194 128,155 OTHER INCOME AND DEDUCTIONS:

Allowance for equity funds used during construction (Note 1e) 19,077 8,144 2,687 Preferred dividend requirements of Florida Power Corporation (22,089) (19,074) (18,197)

Miscellaneous other income and (deductions) 4,214 2,120 (1,227) 1,202 (8,810) (16,737)

INTEREST CHARGES:

Interest on long-term debt 98,929 81,880 59,087 Other interest expense 12,575 11,719 8,265 111,504 93,599 67,352 Allowance for borrowed funds used during construction (Note 1e) (23,595) (11,786) (5,816) 87,909 81,813 61,536 INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN AN ACCOUNTING PRINCIPLE 82,097 83,571 49,882 Cumulative effect to January 1,1981, of accruing unbilled revenues-net of income taxes of $10,916,000 (Note Ic) - 11,499 -

NET INCOME $ 82,097 $ 95,070 $ 49,882 AVERAGE SHARES OF COMMON STOCK OUTSTANDING 37,239,609 33,938,859 30,137,689 EARNINGS PER AVERAGE COMMON SHARE Before cumulative effect o) a change in an accounting principle $2.20 $2.46 $1.66 Cumulative effect to January 1,1981, of accruing unbilled revenues-net - .34 -

EARNINGS PER AVERAGE COMMON SHARE (Note 1c) $2.20 $2.80 $1.66 j The accompanying notes are an integral part of these financial statements.

20

l Consolidated Statements of Capitalization DECEMBER 31,1982 AND 1981 1982 1981

@"'*"d')

COMMON STOCK EQUITY (Note 4):

Common stock without par value, authorized 60,000,000 shares (641,610 shares reserved for conversion of convertible debentures), outstanding 38,301,159 shares in 1982 and 36.493,269 in 1981 $ 382,791 $ 352,460 Retained earnings, including $105,901,000 not available for dividends on common stock 342,221 328,709 725,012 681,169 CUMULATIVE PREFERRED STOCK (Note 4):

Florida Power Corporation, $100 par value, authorized 4,000,000 shares-Without sinking funds 133,497 133,500 With sinking funds 142,362 93,971 275,859 227,471 LONG-TERM DEBT (Note 5):

Florida Power Corporation-First mortgage bonds-3%% due November 1,1982 - 8,349 3%% due November 1,1983 5,311 5,486 3%% due July 1,1984 6,459 6,669 3%% due July 1,1986 10,687 11,037 13%% due April 1,1987 100,000 100,000 Maturing 1988 through 2012-4%% to 13.30% 759,938 663,176 Premium, being amortized over term of bonds 4,930 5,169 Par value of bonds reacquired to meet cash sinking fund requirements (4,119) (4,663) 883,206 795,223 Convertible debentures,4%% due August 1,1986 (convertible into shares of common stock at the rate of one share for each $20.50 of principal amount) 13,153 19,291 11% electric consumer capital notes due October 1,1985 4,685 4,697 Variable rate term loan due December 15,1986 75,000 75,000 Guarantee of pollution control revenue bonds and notes-Maturing May 1, 1984-9 % % 50,000 50,000 Maturing 2000 through 2012-6%% to 11%% 138,575 88,575 Pollution control bond anticipation note due May 1,1984 25,000 -

Other subsidiaries 10,900 4.076 1,200,519 1,036,862 Long-term debt due within one year (5,372) (8.338) 1,195,147 1,028,524

$2,196,018 $1,937,164

> The accompanying notes are an integral part of these financial statements.

J 21

FLORIDA PROGRESS CORPORATION Consolidated Statements of Source of Funds Used for Construction FOR THE YEARS ENDED DECEMBER 31,1982,1981 AND 1980 1982 1981 1980 (Thousands)

SOURCE OF FUNDS:

Funds Derived from Operations-Net income $ 82,097 $ 95,070 $ 49,882 Less-Dividends on common stock 68,181 56,965 47,154 Earnings retained in the business 13,916 38,105 2,728 items included in net income not requiring (providing) funds-Depreciation 81,016 75,992 70,115 Amortization of nuclear fuel 25,755 10,741 9,562 Deferred income taxes and investment tax credits 49,986 72,003 78,178 Deferred fuel expense 45,199 898 (28,190)

Allowance for all funds used during construction (42,672) (19,930) (8,503) 173,200 177,809 123,890 (locrease) Decrease in Net Current Assets (exclusive of tempo-rary cash investments and current debt)(a) (67,250) 7,725 (109,693)

Funds from Financing and Other Sources (Uses)-

Common stock - 42,000 44,625 Common stock-employee benefit and dividend reinvestment plans 24,040 11.828 6,600 Preferred stock 50,000 10,000 -

First mortgage bonds 100,000 -

200,000 Pollution control revenue bonds and bond anticipation notes 75,000 50,000 38,000 Electric consumer capital notes - -

(6,480)

Variable rate term loan - 75,000 -

Long-term debt and preferred stock matured or reacquired for sinking funds (13,387) (13,660) (5,962)

Decrease in temporary cash investments - - 6,000 7,188 (739) 16,146 Increase (decrease) in short-term debt increase in investment in unconsolidated subsidiaries and partnerships (4,361) (805) (3,331)

Other sources-nct (1,828) 664 (1,324) 236,552 174,288 294,274 342,602 359,822 308,471 Allowance for All Funds Used During Construction 42,672 19,930 8,503 FUNDS USED FOR CONSTRUCTION $385,274 $379,752 $316,974 (a) Analysis of (Increase) Decrease in Net Current Assets-Special deposits ($20,915) $13,489 ($ 15,178)

Accounts receivable 2,533 (7,857) (29,310)

Accrued unvilled resenues (449) (28,667) -

Income taxes receivable - 16,442 (16,442)

{

inventories (30,174) (26,545) (15,091)

Accounts payable (9,865) 31,340 5,129 Accrued income taxes (8,237) 8,646 (42,927) /

Accrued other taxes (11,612) (5,376) (4,545)

Accrued interest 7,736 1,547 (1,330)

Ciher-net 3,683 4,706 10,001

($67,250) $ 7,725 ($109,693)

The accompanying notes are an integral part of these financial statements.

22

f Consolidated Statements of Retained Earnings FOR THE YEARS ENDED DECEMBER 31,1982,1981 AND 1980 1982 1981 1980 (Thousands)

Balance at Beginning of Year $328,709 $292,237 $291,119 Add-Net mcome 82,097 95,070 49,882 410,806 387,307 341,001 Deduct:

Cash dividends on common stock 68,181 56,965 47,154 Expense of issuing equity securities 404 1,633 1,610 68,585 58,598 48,764 Balance at End of Year $342,221 $328,709 $292,237 Notes to Consolidated Financial Statements (1)

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

(:) Principles of Consolidation-The consolidated financial statements include the financial results of Florida Progress Corporation (Florida Progress), and its wholly-owned subsidiaries: Florida Power Corporation (Florida Power), Electric Fuels Corporation (Electric Fuels), and Talquin Co coration (Ta! quin).

Florida Power, the Company's largest sub diary, is an operating public utility engaged in the production, transmission, distribution and sale of electric energy wholly within the State of Florida.

Electric Fuels, along with its subsidiaries, has primary responsibility for the procurement and transportation of coal. It is involved in such activities as coal mining, the operation of transloading facilities, rail cars, barges and tugs, and a coal-oil mixture plant.

Talquin, formed in 1981, is involved in real estate development and the marketing of computer software.

All significant intercompany balances and intercompany transactions have been eliminated in consolidation. Prior to the reorganization (Note 2), Electric Fuels and Ta! quin were reported on the equity method by Florida Power.They are now reported on a consolidated basis. Reclassifications have been made in prior years to be consistent with classifications now used.

(b) Electric Plant-Electric plant is stated at the original cost of construction which includes payroll and related costs such as taxes, pensions and_other fringe benefits, general and administrative costs and an allowance for funds used during construction.

Substantially all the electric plant is pledged as collateral for Florida Power's first mortgage bonds.

(c) Operating Revenues and Fuel Expense-Prior to 1981. Florida Power recognized utility revenues concurrent with billings to customers on a cycle billing basis. To more closely match revenues and expenses, in 1981 Florida Power began accruing revenues for service rendered but unbilled. The pro forma effects of this change in accounting principle for the year 1980 increased net income to $52,183,000 and eamings per share to $1.73, compared to the previously reported net income and earnings per share of $49,882,000 and $1.66, respectively.

f The cost of fossil fuel for electric generation is charged to expense as burned. The cost of nuclear fuel is amortized to fuel expense based on the quantity of heat produced for the generation of electric energy in relation to the quantity of heat expected to be produced over the life of the nuclear fuel core. Florida Power is allowed to recover fuel and purchased power costs

/ through fuel adjustment clauses. Revenues or fuel expenses are adjusted for differences between recoverable fuel costs and amounts included in current rates.

Florida Power was authorized by the Florida Public Service Commission (FPSC), to collect from its retail customers estimated future permanent storage and disposal costs of spent nuclear fuel beginning April 1,1982. The Federal Energy Regulatory Commission has also granted Florida Power permission to collect these ccsts from its wholesale customers effective September 29,1982. Nuclear fuel storage and disposal costs, related to fuel that has been previously consumed, have been estimated an '

23

FLOR!DA PROGRESS CORPORATION Notes to Consolidated Financial Statements set up as a deferred charge on the balance sheet. This charge, which amounted to $30,628,000 at December 31,1982, will be amortized over future years as prescribed by the state and Federal regulatory commissions. On January 7,1983, the President of the United States signed the Nuclear Waste Disposal Act of 1982 which makes the Company liable for payments to the Federal government for permanent disposal of spent fuel. The Company will assess the impact of this legislation upon the amounts which will need to be provided and collected from customers for this obligation.

(d) Depreciation and Maintenance-Florida Progress and its subsidiaries provide for the depreciation of the original cost of properties over their estimated useful lives on a straight-line basis. The annual provision for depreciation, expressed as a percentage of the average balances of depreciable electric plant of Florida Pcwer was 3.65% for 1982 and 1981 and 3.62% for 1980. The depreciation rate applied to nuclear facilities includes a factor for dismantling or removal costs to the extent allowed by the FPSC. The cost of decommissioning, based on decommissioning promptly after the unit is taken out of service, is presently estimated to be $80,000,000.

Florida Power charges maintenance with the cost of repairs and minor renewals of property, the plant accounts with the cost of renewals and replacements of property units and accumulated depreciation with cost, less net salvage, of property units retired.

(e) Allowance for Funds Used During Construction (AFDC)-This iiem represents the estimated cost of funds applicable to utility plant under construction. Recognition of this item as a cost of utility plant is appropriate because it constitutes an actual cost of construction and, under established regulatory rate practices, Florida Power is permitted to earn a return on these costs and to recover them in the rates charged for utility services.

Effective February 1,1982, the rate used in computing AFDC was changed to 9.81%. For the ten-month period beqinning April 1, 1981, the rate used was 9.55%. Prior to that date and throughout 1980, a rate of 8.66% was used.

(f) Pension Costs-Florida Progress and its subsidiaries have a retirement plan covering substantially all of thek employees.

The total pension costs for 1982,1981 and 1980 were $9,532,000, $8,064,000 and $8,483,000, respectively, which includes amortization of prior service cost over 10 years. The plan was amended, effective January 1,1982, to revise the early retirement benefits for long-service employees. This amendment increased the unfunded prior service cost and the 1982 annual cost by

$4,321,000 and $580,000, respectively. Annual contributions to the plan equal the amounts accrued for pension expense. A comparison of the actuarial present value of accumulated plan benefits based on an assumed rate of investment return of 8% a year and plan net assets is presented below:

January 1, 1982 1981 Actuarial present value of accumulated plan benefits:

Vested $ 53,561 $ 47,385 Nonvested 8,054 6,636 Total $ 61,615 $ $4,021 Net assets available for benefits $113,449 $105.801 The actuarial present value of accumulated plan benefits does not recognize any improvements in benefits and ignores the effects of future compensation increases on the benefits participants will receive for their past service. If this value is adjusted for projected compensation increases consistent with the assumed rate of investment return, the adjusted actuarial present value of accumulated plan benefits would be approximately $92,600,000 and $80,000,000 for 1982 and 1981, respectively.

(2) REORGANIZATION AND RELATED RESTRUCTURING Florida Progress was incorporated in Florida on January 21,1982, for the purpose of becoming the parent corporation of Florida Power and its subsidiaries. The stockholders of Florida Power approved the corporate restructuring on March 27,1982, at Florida Power's Annual Meeting of Common Stockholders and Special Meeting of Preferred Stockholders. The restructuring became effective on March 29,1982, and the common stockholders of Florida Power automatically became the common stockholders of Florida Progress on a share-for-share basis. The preferred stock of Flonda Power is held by non-affiliated persons.

As part of the corporate restructuring Florida Power transferred to Florida Progress through the declaration of a dividend, the capital stocks of Electric Fuels and Talquin at their book value of $15,625,000.

Florida Progress is exempt from regulation as a registered holding company under the Public Utility Holding Company Act of 1935.

24

Notes to Consolidated Financial Statements (3) INCOME TAX EXPENSE Federal:

Payable currently (refund) $ 3,801 $11,378 ($26,041)

Deferred to subsequent years (a) 47,030 61,938 62,061 Deferred income taxes-credits (34,746) (30,735) (21,302)

Investment tax credits, net of amortization 35,638 33,245 32,321 Income tax expense 51,723 78,826 47,039 Taxes included in miscellaneous ott er income and (deductions) and the cumulative effect of a change in an accounting principle (4,370) (14.212) (2,474)

Income tax expense in operating expenses 47,353 64,614 44,565 State:

Fayable currently 5,153 5,334 1,264 Deferred to subsequent years (a) 5,589 7,751 7,133 Deferred income taxes-credits (3,525) (3,1%) (2,035)

Income tax expense 7,217 9,889 6,362 Taxes included in miscellaneous other income and (deductions) and the cumulative effect of a change in an accounting principle (564) (1,610) (307)

Income tax expense in operating expenses 6,653 8,279 6,055 income taxes $54,006 $72,893 $50,620 (a) The components of income tax deferred to subsequent years were as follows:

Federal:

Excess tax over book depreciation $34,667 $25,586 $29,553 Construction costs and other property related items deducted for tax purposes 12.236 3,286 6,573 Repair allowance -

766 765 Underrecovery (overrecovery) of fuel expenses (3,228) 14,323 18,267 Other 3,355 20,977 6,900

$47,030 $64,938 $62,061 State:

Excess tax over book depreciation $3,810 $2,922 $3,414 Construction costs and other property related items deoucted for tax purposes 1,401 376 741 Repair allowance 375 413 100 Underrecovery (overrecovery) of fuel expenses (370) 1,638 2,091 Other 373 2,402 787

$5,589 $7,751 $7,133 The invcstment tax credits. including job development investment tax credits, have been deferred and are being amortized through credits to income over the lives of the related property. The provision for federal income tax as a percent of income before taxes, including amounts allocated to miscellaneous otner income and deductions, and cumulative effect of change in an accounting principle, was less than the statutory federal income tax rate. The primary differences between the statutory rates and the effechve income tax rates are detailed below:

3 1982 1981 1980 Federal income tax statutory rate 46.0 % 46.0 % 46.0 %

Amortization of investment tax credits (4.4) (2.6) (3.1)

Allowance for equity funds used during construction (6.7) (2.6) (2.0)

Other (1.7) .1 -

Effective federal income tax rate 33.2 % 40.9 % 40.9 %

25

V FLORIDA PROGRESS CORPORATION Notes to Consolidated Financial Statements (4) EQUITY SECURITIES Flo-ida Power Corporation F dda Preferred Stock p ,,,,

C h The changes in equity securities for 1982, E m' n" $' sk'iq 1981 and 1980 are as follows: Stock Funds Funds (Thousands)

Balance December 31,1979 $247,062 $133,500 $ 87,125 3,462,898 common shares issued 51,277 - -

15,855 shares reacquired - - (1,585)

Balance December 31,1980 298,339 133,500 85,540 3,870,619 common shares issued 54,121 - -

l 11% series, 100,000 shares issued - - 10,000 15.682 shares reacquired - -

(1,569)

Balance December 31,1981 352,460 133,500 93,971 1,807,890 common shares issued 30,331 - -

13.32% series,500,000 shares issued - - 50,000 16,120 shares reacquired -

(3) (1,609)

Balance December 31,1982 $382,791 $133,497 $142,362 Florida Power has 1,000,000 shares of authorized but unissued preference stock, $100 par value, and 5,000,000 shares of authorized but unissued cumulative preferred stock, without par value.

(5) FIRST MORTGAGE BOND SINKING FUND REQUIREMENTS The annual sinking fund requirement relating to Florida Power's first mortgage bonds at December 31,1982, is $13,050,000 cf which $4,987,500 must be satisfied in cash or an equal principal amount of bonds, and the balance may be satisfied with bondable additions. At December 31,1982, Florida Power had available $9,124,000 principal amount of bonds. This amount will be used to satisfy the 1983 cash sinking fund requirement, and the remainder will be used for future cash sinking fund requirements. The balance of the 1983 sinking fund requirement will be met with bondable additions.

(6) COMMITMENTS AND CONTINGENCIES (a) Constr;cllon Program-Substantial commitments have been made in connection with Florida Power's construction program wl.0h is presently estimated to be $334,500,000.

(b) Legal F e xeedings-On December 16,1982, the Florida Supreme Court denied the Florida Public Counsel's appeal of the Florida Pubk Service Commission Order of March 11,1981 grc.nting Florida Power a permanent rate increase of $57,100,000.

The Court's i.ecision concluded this matter and, therefore, these revenues are no longer subject to refund.

On June 30,19E2, Florida Power filed a petition with the Florida Public Service Commission (FPSC) seeking a $169,200,000 annual rate increase. On August 30,1982, Florida Power was granted a $33,100,000 interim rate increase which became effective September 29,1982. On January 28,1983, the FPSC reached a final decision granting an $111,300,000 permanent increase effective February 27,1983. )

On July 30,1982, Florida Power filed a petition with the Federal Energy Regulatory Commission to increase its wholesale rates in two phases, totaling $33,900,000 annually. Florida Power was granted an interim rate increase of $10,000,000, effective c September 29,1982; the second phase, which totaled $23,900,000 became effective December 30,1982. The total increase is subject to refund, pending the Commission's final decision in this case. In the opinion of Florida Power management and legal counsel, the resolution of thic rate matter will not result in any material adjustment to the amounts collected in 1982.

26

Notes to Consolidated Financial Statements

( ) Nuf...ar Insurance-The Price-Anderson Act currently timits the liability of an owner of a nuclear power plant to

$560,000,000 for a single nuclear incident. Florida Power has purchased the maximum available private insurance of

$160,000,000, and the balance is provided by indemnity agreements with the Nuclear Regulatory Commission. In the event of a nuclear incident, Florida Power could be assessed up to $5,000,000 for the licensed reactor it owns with a maximum assessment of $10,000,000 in a year. Florida Power carries additional insurance with Nuclear Electric Insurance, Ltd. (NEIL) to cover the cost of replacement power during prolonged outages of the nuclear unit. Florida Power is subject to a retrospective primium liability of up to $7,400,000 in any year in wh".ilosses exceed accumulated funds available to NEIL.

Florida Power currently carries approximately $1,000,000,000 in property insurance representing the maximum available. This coverage is provided by various underwriters through several different policies. Under one of the policies underwritten by NEIL, which provides $400,000,000 excess coverage, Florida Power is contingently liable for a retrospective premium assessment of up to $6,700,000 in any one policy year in the event NEIL's excess property losses exceed available funds.

( 0 Guarantee of Indebtedness-Electric Fuels is involved in a variety of activities in connection with the procurement and sale of fuel. Most of these activities are carried on in the form of joint ventures by Electric Fuels or one of its subsidiaries.

Florida Power may under certain circumstances advance amounts to Electric Fuels in order for it to meet its obligations. Such advances, if required, would not materially affect Florida Progress or Florida Power.

(7) SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (Unaudited)

The following supplementary presentation is made consistent with Statement No. 33 of the Financial Accounting Standards Board and is intended to set forth the effect of both general inflation and changes in specific prices on Florida Progress and its subsidiaries. It should be viewed as an estimate of the approximate effect of inflation, rather than as a precise measure.

Constant dollar amounts represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumers Price Index for all Urban Consumers. Current cost amounts reflect the changes in specific prices of property, plant and equipment (plant) from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than the general rate of inflation. The current cost of plant is determined by indexing surviving plant by the Handy-Whitman Index of Public Utility Construction Costs. Since the plant is not expected to be replaced precisely in kind, current cost does not necessarily represent the replacement cost of the Company's productive capacity.

A,mortization of nuclear fuel, an item included in operating and maintenance expense, and depreciation are determined by applying the Company's amortization and depreciation rates to the average indexed plant amounts.

Since only historical costs are deductible for income tax purposes, the income tax expense in the historical cost financial statements is not adjusted.

Under the rate-making prescribed by the regulatory commissions to which Florida Power is subject, only the historical cost of plant is recoverable in revenues as amortization and depreciation. Therefore, the excess of the cost of plant stated in terms of constant dellars or current cost that exceeds the historical cost of plant is not presently recoverable in rates as amortization or depreciation, and is reflected as a reduction to net recoverable cost.

j To properly reflect the economics of rate regulation in the consolidated statement of income from continuing operations, the reduction of Flonda Power's net plant should be offset by the gain from the decline in purchasing power of net amounts owed.

During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attributable to the substantial amount of debt which has been used to finance plant. Since the amortization and depreciation on this plant is limited to the recovery of historical costs, Florida Power does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital.

27

FLORIDA PROGRESS CORPORATION Notes to Consolidated Financial Statements CONSOLIDATED FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (Thousands, Except Per Share Amounts, of Average 1982 Dollars)

Years Ended December 31, 1982 1981 1980 1979 1978 Operating revenues Historical $1,213,671 $1,284,119 $970,161 $835,465 $751,209 Adjusted $1,213,671 $1,363,734 $1,137,029 $1,112,004 $1,112,541 Historica! Cost Information Adjusted for General Inflation l Income from continuing operations (excluding reduction l to net recoverable cost)* (13,597) 3,115 (20,371) 9,816 income (loss) per common share * (.37) .09 (.68) .34 Net assets at year end at net recoverable cost 712,687 700,252 661,261 677,499 Current Cost Information income (loss) from continuing operations (excluding reduction to net recoverable cost)* (15,118) 2,736 (29,740) (4,774)

Income (loss) per common share * (.41) .08 (.99) (.16)

Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost 5,746 101,592 152,659 174,292 Net assets at year end at net recoverable cost 712,687 700,252 661,261 677,499 General Information Gain from decline in purchasing power of net amounts owed 69,826 124,996 152,940 176,544 Cash dividends declared per common share:

Historical $1.83 $1.68 $1.565 $1.41 $1.275 Adjusted $1.83 $1.78 $1.83 $1.88 $1.89 Market price per common share at year end:

Historical $19.00 $15.625 $13.625 $14.125 $15.375 Adjusted $19.00 $16.59 $15.97 $18.80 $22.77 Average consumer price index 289.3 272.4 246.8 217.4 195.4

• The year 1981 excludes the cumulative effect of change in an accounting principle for unbilled revenues.

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Notes to Consolidated Financial Statements CONSOLIDATED STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR CHANGING PRICES For the Year Ended December 31,1982 (Thousands)

Conventional Constant Dollar Current Cost Historical Average Average Cost 1982 Dollars 1982 Dollars Op3 rating revenues 51,213.671 $1,213,671 $1,213,671 Operating and maintenance expense a id taxes other than income taxes 909.845 913,345 913,345 Depreciation expense 81,016 173,210 174,731 income tax expense 54,006 54,006 54,006 Interest expense-net 87.909 81,909 87,909 Other income and deductions-net (1,202) (1,202) (1,202) 1,131,574 1227,268 1,228,789 Income from continuing operations (excluding reduction to net recoverable cost) $ 82,097 ($ 13.597) ($ 15,118)

Increase in specific prices (current cost) of plant held during the year $155,646 Less increase in cost of plant adjusted for changes in general price level 154,974 Excess of increase in specific prices over general pnce level 672 Reduction to net recoverable cost ($ 7,267) (6,418)

(7.267) (5,746)

Gain from decline in purchasing power of net amounts owed 69,826 69,826 Net price level adjustment $62.559 $ 64,080 Report of Independent Certified Public Accountants To the Shareholders of Florida Progress Corporation:

We have examined the consolidated balance sheets and statements of capitalization of Florida Progress Corporation (a Florida corporation) and subsidiaries as of December 31,1982 and 1981, and the related consolidated statements of income, retained earnings and source of funds used for construction for each of the three years in the period ended December 31,1982. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records ano such other auditing procedures as we considered necessary in the circumstances.

l In our opinion, the financial statements referred to above present fairly the financial position of Florida Progress l Corporation and subsidiaries as of December 31,1982 and 1981, and the results of their operations and their l source of funds used for construction for each of the three years in the period ended December 3',1982, in conformity with generally accepted accounting principles applied on a consistent basis, except for the change, with which we concur, in the method of recording revenues as described in Note 1 to the consolidated financial statements.

ARTHUR ANDERSEN & CO.

Tampa, Florida, January 28,1983.

I I

FLORIDA PROGRESS CORFORATION Selected Consolidated Financial Data 1978-19b2 1982 1981 1980 1979 1978 (Thousands, Except Per Share Amcunts)

Operat:ng Revenues $1,213,671 $1,284,119 $970,161 $835,465 $751,209 Net income $82,097 $95,070 $52,183* $60,487 * $66,057*

Earnings per Average Common Share $2.20 $2.80 $1,73* $2.09 * $2.30*

Dividends per Common Share $1,83 $1.68 $1.565 $1.41 $1.275 Total Assets $2,914,856 $2,589,240 $2,265,667 $1,931,673 $1,741,743 Long-Term Debt $1,195,147 $1,028,524 $912,895 $682,605 $658,676

• Pro forma-To give effect of a change in an account:ng principle for unbilled revenues, Note 1c-Notes to Financial Statements.

Selected Operating Data of Florida Power Corporation 1978-1982 1982 1981 1980 1979 1978 Electric Sales (Thousands of KWH)

Residential 7,424,984 7,752,265 7,379,740 6,927,339 6,838,906 Commercial 3,895,216 3,735,191 3,581,112 3,646,279 3,766,194 Industrial 2,715,541 3,288,325 e 3.480.993 3,215,932 2,942,065 Other 4,725,075 4,680.974 4.365.810 3,779,639 3,499,576 Total 18,760,816 19,456,755 18.807 655 17.569,189 17.046 741 Residential Service (Average Annual)

KWH Sales per Customer 9,964 10,758 10,643 10,496 10,895 Revenue per Customer $720.47 $763.19 $591.32 $540.29 $521.19 Revenue per KWH 7.23c 7.09c 5.56c 5.15e 4.78c t

Operating Data Net Generating Capability (KW) 5,899,000 5,255,000 5,117,000 4,884,000 4,929,000 Net System Peak Load (KW; 5,347,000 5.088,000 4,419,000 4,224,000 4,135,000 BTU per KWH of Net Output 10,383 10,357 10,443 10,503 10,481 Fuel Cost rer M llion BTU $2,78 $312 $2.52 $2.01 $1.68 Average Number of Customers 829,810 802.787 772,265 735.633 699,677 Number of Employees 4 829 4.533 4.195 3.891 3,738 30

{

Quarterly Financial Data (Unaudited)

Three Months Ended March 31 June 30 September 30 December 31 (Thousands, Except Per Share Amounts) .

-As Stated Restated As Stated Restated As Stated Restated As Stated Restated 1982 Operating revenues $297,641 -

$285.148 -

$331,759 -

$299,123 -

Net income 17,751 -

15,127 -

28,826 -

20,383 -

Earnings per average common share $/9 -

$.41 -

$.77 -

$.54 -

1981 Operating revenues $325,897 $322,051 $298.945 $308,625 $351,845 $351,710 $301,733 -

Net income 20,317 29,343 19,162 24.128 29,292 29,223 11,876 -

Earnings per average common share $.62 $.91 $.58 $.73 $.87 $.87 $.33 Quarterly earnings for the first three quarters of 1981 have been restated to give effect to a change in an accounting principle for unbilled revenues, Note 1c-Notes to Financial Statements.

Earnings per average common share as presen:ed above do not equal amounts reported in the Statements of !ncome as a result of issuing additional shares cf common stock during the periods.

The business of the Company's largest subsidiary, Florida Power Corporation, is seasonal in nature and it is management's opinion that comparisons of earnirigs for the quar'ers do not give a true indication of overall trends and changes in the Company's operations.

Ccmmon Stock Data Price of Common Stock Dividends Paid on New York Stock Exchange Per Share 1982 1981 1982 1981 High Low High Low First Quarter $17 $15% $14% $12% $.45 $ .41 Second Quarter 17 % 15 % 16 12 % .45 .41 Third Quarter 17 % 14 % 16 13 .46 .41 Fourth Quarter 19 % 16 % 16 % 13 % 48 .45 At December 31,1982, the number of common shareholderr of record was 43,887.

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Corporate Officers Florida Progress Corporation Andrew H. Hines, Jr. J. G. Loader Douglas M. Bagge Chairman of the Board and President Vice President and Secretary Assistant Secretary S. A. Brandimore J.H. Joyce Betty M. Clayton Executive Vice President and General Coursel Treasurer and Controller Assistant Secretary Clarence W. McKee, Jr. J. H. Richardson Executive Vice President Assistant Secretary and Assistant General Counsel Florida Power Corporation Andrew H. Hines, Jr. J. H. Blanchard P. C. Henry Chairman of the Board and Vice President, System Operations Vice President, Transmission and Substation Chief Executive Officer Projects C. R. Collins, Jr.

Lee H. Scott Vice President, Suncoast Division J. G. Loader President and Chief O rating Officer Vice President and Secretary J. F. Cronin B. L Griffin Vice President, Corporate Communications G. C. Moore Executive Vice President Vice President Power Production J. E. Gleason G. E. Greene,111 Vice President, Eastern and Ridge Divisions N.B. Spake Senior Vice President. Financial Services Vice President, Environment and New J.A.Hancock Technology n o'r V e resident and General Counsel

• ** *"' " 8' P*' "8 J. A. McClure, til R.R. Hayes Treasurer M. H. Phillips . Vice President and Controller Senior Vice President. Operations Betty M. Clayton M.F.Hebb Assistant Secretary T. F. Thompson Vice President, Staff Senior Vice President. Administrative Services Electric Fuels Corporation Andrew H. Hines, Jr. J. G. Loader J.H. Joyce Chairman of the Board Vice President, Secretary and Treasurer Assistant Secretary and Assistant Treasurer H. G. Wells S. A. Brandimore Betty M. Clayton President and Chief Executive Officer Gerieral Counsel Assistant Secretary E. A. Upmeyer, lil A. W. Pitcher Vice President Controller Talquin Corporation Andrew H. Hines, Jr. J. G. Loader J.H. Joyce Chairman of the Board Secretary and Treasurer Assistant Secretary and Assistant Treasurer A. J. Keester, Jr. S. A. Brandimore Betty M. Clayton President and Chief Executive Officer General Counsel Assistant Secretary 33

City of Tallahassee FLORIDA COMPREHENSIVE ANNUAL FINANCIAL REPORT FiscalYear Ended September 30,1982 l

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[ " Florida's Capital City"- Serving all Florida I

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