ML20023D989

Annual Financial Rept 1982

ML20023D989
Person / Time
Site:	Waterford
Issue date:	05/30/1983
From:	Lewis F MIDDLE SOUTH UTILITIES, INC.
To:
Shared Package
ML20023D883	List: ML20023D882 ML20023D886 ML20023D989 W3P83-1711, Forwards La Power & Light Co & Middle South Utils,Inc Annual Financial Repts 1982
References
NUDOCS 8306060225
Download: ML20023D989 (40)

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m...,, s _,, s PERFORMANCE HIGHLIGHTS 1982 1981

% Change Total Operating Revenues (millions)

$ 2,902

$ 2,772 4.7 Total Operating Expenses (millions)

$ 2,465

$ 2,364 4.3 Fuel, Purchased Power & Purchased Gas Costs (millions)

$ 1,550

$ 1,454 6.6 a

Operating Income (millions)

$ 436

$ 408 6.9 Allowance for Funds Used During Construction (millions)

$ 353

$ 301 17.3 Net Income (millions)

$ 311

$ 281 10.7 Rate of Return on Average Common Eqaity 13.30 %

13.75 %

Earnings per Share

$ 2.33

$ 2.44 (4.5)

Dividends Paid per Share

$ 1.66

$ 1.62 2.5 Retail Electric Customers at Year-end 1,586,874 1,570,251 1.1 Retail Electric Energy Sales (million kwh) 49,353 50,232 (1.7)

System Peak Load (megawatts) 10,382 11,394 (8.9)*

Net Utility Plant at Year-end (billions)

$ 8.9

$ 7.7 15.6 Construction Expenditures (millions)

$ 1,393

$ 1,169 19.2 Average Number of Common Shares Outstanding (thousands) 133,193 115,176 15.6

• This decline was caused primarily by the recessionary effect on industrialloads an.1 the planned removal of about 550 megawatts of the loads of cooperatives which began meeting their own requirements. Peak load in 1983 is expected to increase over 1982 as we pull out of the recession.

CORPORATION IDENTIFICATION TRANSFER AGENTS. hlorgan Guaranty Trust Company of New York, New York 10015.The First Nationalllank of Boston, Boston, MIDDLE SOUlli UTII.ITIES, INC. is an insestor-owned pub-Massachusetts 02102, Continental Illinois National Bank and Trust he utdity holdmg company that ow ns all of the outstanding common Company of Chicago. Illinois 60690. Bank of America National stock of four operating companies. Those companies are Arkansas Trust and Savings Association. San Francisco, California 94120.

Power & Light Company, Louisiana Power & Light Company.

REGISTRARS. Morgan Guaranty Trust Company of New York, Mississippi Power & Light Company, and New Orleans Public New York 10015. State Street Bank and Trust Compar.v. Boston.

Senice Inc. The two other principal subsidiaries of Middle South Massachusetts 02102. The First National Bank of Chicabo. Ilhnois Utilities, Inc. are Middle South Senices, Inc., a senice company.

60670, Wells Fargo Bank N. A. San Francisco, Cahfornia 74120.

• nd Middle South Energy, Inc., w hich ow ns the maior portion of a

. 5-million-kilowatt generating facility, Grand Gulf Nuclear Sta-The Middle South Utilities Sy stem 1982 Annual Report to the F

G IM dN tion, now under construction in Mississippi.

Financial statement schedules) is asailable to ans stockholder System Fuels, Inc. is a fuels procurement subsidiary of the four upon request. To receise a cops without charge, w' rite to Dan E.

i operating companies. Associated Natural Gas Company is a gas Stapp, Secretary, at the address below. Additional statistical distnbution subsidiary of Arkansas Power & Light Company-information is asailable in the 1982 Financial and Statistical These companies constitute the Middle South Utilities System.

Report by w riting to Edwin Lupberger, Senior Vice President.

The commim stock of Middle South Utdities. Inc. is hsted on the Chief Financial Omcer at the address below.

New York, Midwest, and Pacific Stock Exchanges. The Middle South Utilities. Inc. stock exchange symbol is MSU.

ANNUAL MEETING. The Annual Meeting of Stockholders is scheduled to be held in Little Rock, Arkansas, at 10 00 a.m. <CD fi, MiDDI E SOUTil UTILITIES, INC.

May 20.1983. 'Ihe 1982 Annual Meetmg was held in New Orleans.

Box 61005 Louisiana, on May 21. Of shares outstanding at that time. N1.79 New Orleans, Louisiana 70161 percent were represented in person or by prosy.

(5 % 529-5262 l

l

i

. 09 MIDDLE SOUTII UTILITIES, INC.

1982 ANNUAL REPORT SE,ts =EwEGr&= n p 2-m :=r e. m i iTIIE l

. W. -iis & 5 a & + - = =.z.:9 Contents

~

Chairman's Letter to Stockholders.

2 l

_. 3$144e-d gs 1982 In Review.

4 r

y Customer Energy Usage Levels b N T+D A N k-ra ing R n es Operating Expenses d

Consolidated Net income and Earnings 1

Financing Requirements Capitalization Ratios Rate Activities During 1982 and Early 1983 Innovative Rate Phase-In j

Texaco Settlement MSU Corporate Objectives.

9 Electric Reliability Fmancial Integrity l

Employee Development and Work Environment

\\g Corporate Citizenship k.

Energy Conservation - Research and Development g%g w

s.

Report of Management and Auditors' Opinion.

13 l

p s

Yf Consolidated Financial Statements.

14 b

Management's Financial Discussica and Analysis.

32

\\

IIistorical Financial Summaries.

34 g\\h Corporate Information.

36 Directors and Officers.

37 l

Middle South Utihties takes pride in its history of paying l

common stock dividendsfor more than 130 consecutive quarters

[

ssnce itsfounding in 1949. The number of stockholders 1

increased during 1982 to more than 200,000.

Abbreviations: In this report, references to companies in the Middle South Utilities System are as tollows:

i MSU or the Company.

Middle South Utilities, Inc.

AP&L.

Arkansas Power & Light Company

(

LP&L.

. leuisiana Power & Light Company MP&L.

Mississippi Power & Light Company l

l NOPSI.

New Orleans Public Service Inc.

MSS.

Middle South Services, Inc.

l SFI.

System Fuels, Inc.

I MSF..

Middle South Energy, Inc.

Assocuted.

Associated Natural Gas Company System.

the compames of Middle South Utilities System r

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y A

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- jfl Cover: The Middle South Utilitirs System is carrmg a secure energyfuture.

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CHAIRMANSS LETTER TO STOCKHOLDERS L

=

Dear Fellow Stockholders:

the Seventies, even with the economic disruptions resulting from the trauma of the Arab oil embargo, two recessions, the Iranian revolution with the From the Performance Highlights on the m. side sharp drop in Iranian oil production, and the high-front cover and the body of the report, you will see est inflation rates and interest rates in modern U.S.

that 1982 was in numerous respects a difficult history, our customers' electric service require-year, but nevertheless one m, which some progress ments grew at a compound annual rate of about 6.7 was made by the Middle South Utilities System.

percent. Making use of the most advanced com-As with practically the whole nation, the extended puterized techniques now available to us and tak-duration of recessionary conditions took its toll in ing into account customer conservation efforts and our service area-particularly with respect to in-the impact of the run-up in energy prices, we are austrial production and industrial use of electric-projecting for the period 1983 through the first half ity.

of the Nineties a growth rate of somewhat less than As electric utility stockholders, you have an 3 percent per year. Our generation constniction appreciation for the basic role which the electric program is designed to provide for this growth in utility industry plays in the functioning of the customer requirements, to shift our base fuels from national, regional, and state economies. Nearly all primarily natural gas and oil to nuclear and coal, economic and personal activities make use of, or and to provide for the orderly retirement of equip-are affected by the use of electricity. The growth of ment which reaches the end of its useful life.

the role of electricity is shown by the fact that in With the pressures of high costs of new con-1950 it accounted for about 15 percent of total struction, the continuing uncertainties with respect energy used in the United States; now it is about 33 to every major fuel choice, and inadequate earn-percent of the total and is still growing. A know-ings allowed by regulatory authorities-assurance ledgeable analyst has expressed the role ofelectric~

of an ample supply of electricity to meet whatever ity thusly: "I started out thinkmg that electricity our customers demand during the remainder of this was one of our basic mdustnes but have concluded i

century is far from a sure thing. It is almost ax-that it,s our most basic mdustry-nothing works iomatic that those who urge the shortest range view without it."

of this problem are those who have no responsibil-Studies of the relationship of electricity use and ity for, or experience with, the meeting of energy real gross national product (GNP) indicate that the needs. Yet the news media provide them with use of electricity can be expected to grow (some platforms from which to attack those who are say "must grow") at a rate at least equal to the rate struggling to develop and execute a responsible of growth in real GNP and perhaps at a rate as course of action to meet this critical need. Our much as 1 percent higher. The electric utility in-industry is taking steps to do a more effective job of dustry, facing lead times of 8 to 12 or more years informing the public about these matters. I hope for major new generating plants, is planning addi-that you will each become awane of these com-tional capacity to serve an increase in customer munications during 1983.

requirements on the order of 3 percent per year.

The effort to secure repeal or major revision of This leaves little flexibility to accommodate a the federal Public Utility Holding Company Act of healthier rate of growth in real GNP and, in fact, 1935 was unsuccessful in the last Congress, but could prove to be a constraint on economic growth groundwork for some future action was laid in in the years ahead, hearings which were held in committees of both Efforts to quantify the economic costs of a the Senate and the House of Representatives. The chronic shortage of electricity indicate that the Securities and Exchange Commission, which range of such costs is likely to be many times administers this law, took the public position that greater than the cost of carrying some larger the Holding Company Act had long since accom-amount of reserve electric generating capacity if plished the objectives for which it was enacted and the economic growth rate should prove to be lower should be repealed. Efforts will continue in the than projected.

new Congress to secure legislative action to permit On the Middle South Utilities System, customer Middle South, and other electric and gas utilities requirements grew during the Fiftics and Sixties at which make use of the holding company form of 2

compound annual rates of around 10 percent. In organization, to function under regulatory burdens

4 P.

as comparable as possible to those borne by similar y

f...,+, /, %., #. _g utilities which are not holding companies.

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3. ; -

A major accomplishment in 1982 was the enact-

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' f h, ment by the Congress of legislation to provide for a

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national program for handling of nuclear waste f.E t 'r.

material. While not everything we had hoped for,

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q the final form of the legislation was generally

,0 acceptable to our industry as providing a

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framework which should lead to decisions and f g" 1,1 f

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actions to meet our nation's needs for nuclear

. ?

t.. /,

f

$ >7.

waste disposal in a timely fashion. Your Com-

~M pany's representatives played an active role in

?

achieving this significant milestone in assuring the

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viability of the nuclear option among our nation's

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energy choices.

7 P

~.u The successful completion of the coal-fueled

.y

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Independence Unit 1 in Arkansas-on schedule P'

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and within budget-was a noteworthy event in

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early 1983. This 836 megawatt unit is the first in 1-E. 1 C. :.. k ~_ c

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which two System companies share ownership.

f

. ' A. ; ~ jr ;-1 Arkansas Power & Light Company owns 31.5 3(.4*

• . - -7 3

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, ;f percent and Mississippi Power & Light Company gm r.

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owns 25 percent. The remainder is owned by

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others.

Our primary construction efforts are concen-The companies of your System have made ex-trated on the completion of the Grand Gulf Unit I tensive use of the new shelf registration provisions for f' ancing adopted by the Securities and Ex-and the Waterford 3 nuclear units scheduled for m

commercial operation late this year and in 1984, change Commission in 1982. Our experience in respectively.

one such issue prompted the SEC to remove some f the restrictions previously imposed only on Other major challenges facing the System com_

holding companies.

panies are securing rate orders which will reflect On behalf of the Board of Directors, officers and the completion of these units in our customer ser.

vice rates and the financing necessary for the sup_

more than 13,700 employees of the Middle South port of this heavy construction program. You will Utilities System, I express our appreciation and find both of these discussed in the body of the thanks for your continued interest and support.

report.

Most sincerely, We are quite pleased with the participation of current stockholders and our employees in System financing through the Dividend Reinvestment and W

)

Stock Purchase Plan and the Employee Savings Floyd W. Lewis Plan. The Dividend Reinvestment and Stock Pur-Chairman / President chase Plan, which offers a 5 percent discount on

(

common shares purchased with reinvested div-idends, was opened to holders of preferred stock of the operating companies last December, and the level of participation by those investors has ex-ceeded our expectations. These Plans provided almost $67 million of new capital in 1982 and are expected to rmunt for a significant part of the new common, suity required in 1983.

3

1982 IN REVIEW The dominant feature of the economy in 1982 was Retail Custome Fuels for the prolonged duration of recessionary conditions ex-Electr Electric Generation (soon,o,ic Sales tending beyond what had been predicted by most eco-nowait Hours) aus ou a cas sus soci r as coai nomic forecasters. In the service area of the Middle South Utilities System, this was most evident in hous-ing constmetion and heavy industry where use of elec-tric energy by industrial customers decreased. Several financial components were up over the previous year, while others were down as explained below.

CUSTOMER ENERGY USAGE LEVELS Egyh Weather fluctuation and the recession are foremost y

among the factors that affected customer electnc ener-gy usage in 1982. The System peak demand occurs use of gas decreased 6.3 percent from 1981 to a total of dunng the one hour of the year m which customer

34. l billion cubic feet. The total number of gas custom-requirements for electric energy are the greatest. In ers remained relatively constant with a year-end total of 1982, that one-hour penod occurred on August 5, at approximately 241,000. The decreased gas usage is 4:00 p.m., when demand of 10,382 megawatts was due to the combined effects of milder weather, the recorded. The 1982 peak demand exceeded the fore-recession, and customer conservation.

casted peak by only 9 megawatts, or a fraction of a In summary, the MSU System experienced a lag in percent. While it is not always possible to achieve that sales growth due to the effects of the economic reces-degree, of accuracy because of the multitude of van-sion, continued customer conservation activities, and -

ables mvolved, we believe the 1982 results mdicate weather conditions that required less air conditioning progress in our extensive efforts to improve our fore-usage. We believe that, in many respects, the Middle casting.

South Utilities System service area has experienced

~

The System,s four operating companie,s have four fewer adverse economie effects of the recession than classifications of retail customers (industnal, residen-many other areas of the country and anticipate that the tial, ccmmercial, and governmental). Overall retail area will rebound as the U.S. economy recovers.

customer usage of electncity m 1982 declined by 1.7 percent to 49.4 billion kilowatt-hours, with the decline NEW CUSTOMERS ADDED totally due to the recession-related drop m mdustnal activity, since electric sa!es were up in all other retail Despite the economic recession, the Middle South customer categories.

Utilities System experienced growth in the number of Industrial sales for the System, mirroring economic residential, commercial, and governmental customers conditions, decreased by 5.8 percent to 22.1 billion served. However, the depressed economy caused a 1 kilowatt-hours in 1982. The decline was influenced by Percent decline in industrial customers, leaving the two key factors: slightly fewer industrial customers and System-wide total number of industrial customers at curtailed production at existing industrial facilities.

almost 24,400. The lower number of industrial custom-Approximately 87 percent of the System's retail ers is partly associated with a decrease in electrical electnc customers are residential.

connections for new housing construction.

Residential sales increased by 0.8 percent to 15.6 With a total net increase of 16,623 in all classifica-billion kilowatt-hours. The number of residential elec.

tions of retail electric customers for the year, the four tric custcmers increased by 1.1 percent to a year-end System operating companies were serving more than total of over 1,387,000. With evidence of continuing 1.82 million electric and gas customers at year-end. Of energy conservation efforts in use, residential sales also this total, Arkansas Power & Light serves more than reflected a more normal summer cooling season than 535,000 customers, Louisiana Power & Light serves the record-setting heat of 1980 and hotter-than-normal just over 540,000 customers, Mississippi Power &

1981.

Light serves almost 313,000 customers, and New Commercial sales were up 2.4 percent to 9.6 billion Orleans Public Service Inc. has more than 198,000 kilowatt-hours. Governmental customers increased us.

electric customers as well as approximately 175,000 age by 7.5 percent during the year to 2.0 billion kilo.

gas customers. Almost 66,000 gas customers are watt-hours.

served by Arkansas Power & Light's subsidiary,

'Ihe System's wholesale electricity sales to munici-Associated Natural Gas Company.

pals, rural cooperatives, and other utility systems OPERATING REVENUES totaled 2.1 billion kilowatt-hours in 1982, down by 25 percent. This expected decrease was in line with prior Total operating revenues increased by 4 7 percent arrangements with several cooperatives and municipals and reached $2.9 billion for 1982. Electric revenues that began supplying energy requirements for their dis-increased overall by 3.5 percent for the year to $2.7 tribution systems or shifted to other sources of supply.

billion. The revenue increases were the result of rate Customer total kilowatt-hour use of electricity, both increases and recovery from customers of fuel cost 4

retail and wholesale, decreased 3 percent. Customer increases by our suppliers. The fuel cost increases were

RESIDENTIAL ELECTRIC CUSTOMER STATISTICS Cost of Fuel and Average Revenue Per Purchased Power Number of Kilowatt-Hours Kilowatt-Hour Per Kilowatt-Hour

• Year Customers Per Customer (cents)

(cents) 1982 1,379,4 %

11,306 6.0 2.7 1981 1,363,498 11,347 5.7 2.6 1980 1,341,297 11,977 4.6 2.2 1979 1,314,028 11,116 3.8 1.8 1978 1,280,694 11,542 3.4 1.5 1977 1,238,597 11,184 3.4 1.4 1976 1,208,140 10,125 3.0 1.I 1975 1,182,925 10,096 2.7

.8 1974 1,159,536 9,497 2.6

.8 1973 1,124,746 10,012 2.1

.5 1972 1,077,509 9,542 2.0

.4

(

• Average cost based on total energy sales.

moderated by our centralized fuel purchasing proce-CONSOLIDATED NET INCOME dures which enable the System to compete more effec-AND EARNINGS tively in the fuel marketplace for the lowest cost com.

bination of fuels.

Net income for 1982 increased by 10.7 percent to Gas revenues for 1982 increased by 24 percent over

$311 million. This is primarily the result of an increase l

1981 to $172.7 million or approximately 6 percent of in allowance for funds used during construction as the total operating revenues. The increase was due almost System had $5 billion invested in utility plant under totally to increased prices charged by our gas suppliers.

construction at December 31, 1982. Earnings were Transit revenues from New Orleans Public Service helped by small rate increases implemented since the Inc.'s public transportation operation were $55.5 mil-spring of 1981 and our determined effort to control lion, an increase of i1.4 percent during the year. The costs. Earnings per share declined by 4.5 percent to Regional Transit Authority has announced plans to

$2.33 based on 133,193,000 average shares outstand-acquire NOPSI's transit operation within the first half i'ig. The average number of shares outstanding in-of 1983.

creased by 15.6 percent during the year.

OPERATING EXPENSES FINANCING REQUIREMENTS The System was able to hold total operating expenses In May 1982, MSU raised $139.8 million of needed to only 4.3 percent above the prior year, and signifi-new capital through a common stock offering of 10 cantly below the 1982 annual rate of inflation. Of the million shares. These shares were sold to underwriters total operating expenses, those associated with fuel, who offered them to the public at $14.30 per share. An purchased power, and gas purchased for resale in-additional $66.7 million was raised in 1982 through the creased by approximately $96 million to $1.55 billion, Dividend Reinvestment and Stock Purchase Plan and a 6.6 percent increase.

the Employee Savings Plan.

Interest on long-term debt and dividends on pre-During 1982, Middle South Energy required addi-ferred stock increased 10.9 percent to $557 million in tional capital because ofits 90 percent ownership of the 1982. This increase reflects the issuance of additional Grand Gulf Nuclear Station. Unit 1 of Grand Gulf is debt and preferred stock at the prevailing high rates of currently scheduled to begin commercial operation in l

interest and preferred dis idends during 1981 and 1982.

late 1983. In February 1982, negotiations were com-5

Total Operating Revenues and as follows: AP&L, $80 million; LP&L, $50 million; and MSE, $99 million. Funds for these investments Total Operating Expenses were raised through sales of MSU common stock and through bank loans to be repaid from proceeds of future AEfY/%'N'I' e w9 pue m,m.,

Middle South Utilities common stock offerings.

9 ims Tds operamg Wses MSU's total investments in common stocks of System compames m 1983 are expected to approximate $372 w a.ium a pue-.o -.,=.m aum ram operanng a. venues million.

IIiII"(f The System's total capital requirements for 1983 are h,i estimated to be $1.46 billion. The System expects to raise substantially all of that sum from external sources including the sale of first mortgage bonds, preferred stock, long-and short-term bank loans, sale and lease-back or repurchase of certain System properties, leas-ing of nuclear fuels, pollution control revenue bond f nancing, and the sale of MSU common stock.

1978 1979 1980 1981 1982 The Company expects to raise approximately $400 million in 1983 through the sale of common stock. In Earnings and Dividends Per Share January 1983, MSU began a program of selling up to 2 on oas) million shares of common stock in small amounts through The First Boston Corporation as agent. The shares are sold through the public marketplace as con-ditions warrant. In February 1983, MSU raised $122.6 million of new capital through a common stock offering

' i

, ' Em of 8 million shares These shares were sold to under-f' b

h lf E#

e NW writers who offered them to the public at $15.65 per ma p

share.

i h

'L9 AP&L sold $25 million of 30-year first mortgage

.. h.

I'pk' L h^3

' h~{

. h' bonds in February 1983 at an interest rate of 13.25

~

percent.

1978 1979 1944 1981 1982 Also in February 1983, LP&L sold $75 million of preferred stock, $25 par value, at a dividend rate of pleted w. h a group of European lenders for a "Euro-12.64 percent' it dollar" loan of $315 million. The rate on this loan is the Two LP&L sales of first mortgage bonds, each con-London Inter-Bank Offered Rate (which generally has sisting of $100 million principal amount, were com-been less than U.S. pnme rate) plus I percent. The pleted in March 1983, at interest rates of 13.25 percent proceeds of this loan were used to finance continued maturing in 30 years and 12 percent maturing in 10 construction of MSE s share of the Grand Gulf project.

years, respectively. MP&L sold $10 million 'in pre-Arkansas Power & Light, in February and agam,n ferred stock, $100 par value, in March 1983 at a di-i December, sold first mortgage bonds. The February vidend rate of 12 percent.

offen,ng consisted of $80 milh,on of nme-year first mortgage bonds at an interest rate of 16.5 percent.

December's sale was $75 million of 30-year first mort.

CAPITALIZATION RATIOS gage bonds at an interest rate of 13.375 percent.

The Middle South Utilities System's capitalization Louisiana Power & Light sold $50 million in pre-ratios at the end of the year were: long-term debt,58.3 ferred stock, $25 par value, at a dividend rate of 14.72 percent; preferred stock,9 percent; and common equi-percent in May.

ty, 32.7 percent. The System intends to further Mississippi Power & Light sought outside financing strengthen its common equity ratio in future years.

four times during 1982. In March, MP&L privately placed $10 million in preferred stock, $100 par value, RATE ACTIVITIES DURING 1982 at a dividend rate of 14.75 percent. In June, MP&L sold

$30 million of eight-year first mortgage bonds at an AND EARIX 1983 interest rate of 15.125 percent. In July, M P&L sold $ 15 As needed to assure an opportunity to earn a reason-million of tax-exempt adjustable rate pollution control able return on the capital dedicated to assuring adequate revenue bonds at an initial interest rate of 11 percent for and reliable service to customers now and in the future,

$10 million,11.25 percent for $2 million, and i1.5 System companies have filed rate requests with their percent for $3 million. And in December, MP&L sold respective state or federal regulatory agencies. As of

$15 million of tax-exempt adjustable rate pollution January 31,1983, rate increases totaling $746 million control revenue bonds at an initial interest rate of 9.75 in additional net revenue were either pending or on percent for $8 million and to percent for $7 million.

appeal. Each of the System operating companies had at i

Equity investments in the common stocks of AP&L, least one rate case included in this total, and a portion of 6

LP&L, and MSE by MSU totaled $229 million in 1982 the total was classified by the companies as emergency i

^7

$58 million of costs associated with the LP&L share of prr, 7 e Grand Gulf Nuclear Unit 1, full inclusion of Waterford M

t j;r 1* q 3 in LP&L rates, and inflationary effects on operating costs. The full relief, covering the inclusion in rates of l

s-

. ; %gi, _.m 1:- *fQ&

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1,538 megawatts of new nuclear capacity, representing g

a combmed estimated investment of $3.02 billion, is tv.

~

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m.

p fp, proposed to increase customers' bills overall by 28.5

\\y.

-c._,-

y ff percent in 1984. This amount would be more without 1-x

~ -: M j the innovative rate phase-in procedure which the com-9

~ i {# R pany has proposed to the LPSC.

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MP&L

~N" p3 In January 1983, the Mississippi Public Service k

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73;d.#g

• Commission granted Mississippi Power & Light Com-

$' s'1 -

.c pany a retail electric rate increase of $47.5 million, or 6 l

-"9 percent over the bonded rate level, in response to a

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request for an increase of $93.9 million filed in July i

wa, 1982. A substantial part of this rate case related to

-Na 1.2 _ _

1 MP&L's 25 percent ownership of the 836 megawatt

1. 1

/"S coal-fueled Independence Steam Electric Station Unit i I>-

which began commercial operation in January 1983.

4

/!_ ~

NOPSI P5 In a two-stage rate filing with the Louisiana Public e,a Service Commission in January 1983, New Orleans The sprem's total ograting expen esfor 198. were only 4.3 Public Servbe Inc. requested cdoitional net revenues of i

percent more than the prior year, well below the 1982 annual

$113 million over projected 1983 revenues. NOPSI rate ofinpation. operating revenues increased by 4.7 percent.

asked that $52.5 million of the total $113 million be-partly due to rate increases.

come effective in July 1983 :o cover higher expenses and capital costs since its last rate filing in 1980. The ietief deserving of expedited regulatory approval. The rema'nder, covering cests relating to power and energy majority of the requested mereases are asked for 1984 from Grand Gulf Nuclear Unit 1, would take effect as compared to projected 1983 revenues. In several when that unit becomes operational. Together, the two cases the last previous rate increase was asked in 1980.

stages of the filing would raise customer bills by ap-proximately 36 percent.

AP&L in July 1982, NOPSI filed for a $16.9 million annual A request for a retail electric rate increase of $93 increase in jurisdictional natural gas revenues. The million, or 11.8 percent, was filed in November 1982 LPSC has conducted one hearing on this case and is by Arkansas Power & Light Company with the Arkan-expected to render a decision by mid-1983.

sas Public Service Commission. Earlier in 1982, the APSC granted AP&L a retail electric rate increase of MSE

$29 million, considerably below the $101.4 million requested in May 1981. AP&L is currently appealing to Middle South Energy, as owner of 90 percent of Grand Gulf Nuclear Station Unit 1, m, June 1982, filed the Pulaski County Circuit Court for the difference between the amount requested and the amount granted, w th the Federal Energy Regulatory Commission a subject to certain adjustments.

Proposed Unit Power Sales Agreement to recover the cost of power sold at wholesale to System operating companies. The Commission has scheduled hearings in gpg this case for March 1983.

Louisiana Power & Light Company filed with the Louisiana Public Service Commission a January 1983 INNOVATIVE RATE PIIASE-IN application for retail electric rate adjustments that would increase 1984 net revenues by $412 million, Regarding costs associated with power and energy over projected 1983 revenues. LP&L asked for an 11.1 from Grand Gulf Nuclear Unit I when it begins com-percent increase, or $161 million of the total as mercial operation, LP&L and NOPSI are proposing an emergency relief, and requested a decision from the innovative rate-making procedure which should enable LPSC in March 1983. This portion of the increase them to achieve necessary increases in revenue, while would support necessary financing for continued con-significantly lessening the initial impact on customer struction of the Waterford 3 nuclear station. The re-bills. Under the proposed method, the initial cost of i

maining $251 million of the full increase would cover energy from Grand Gulf would be phased in during the 7

i l

SELECTED FINANCIAL DATA-FIVE YEAR COMPARISON (dollars in thousands, except per share amounts) i 1982 1981 1980 1979 1978 l

l Net Operating Revenues

$2,901,730 $2,771,788 $2,339,411 $1,825,743 $1,617,584 Net Income 310,595 281,483 195,907 180,719 183,833 Earnings Per Share 2.33 2.44 2.01 2.12 2.43 Dividends Declared Per Share 1.67 1.63 1.59 1.535 1.46 Total Assets 10,364,653 8,318,556 7,334,030 6,503,068 5,500,597 Long-Term Debt (excluding current maturities) 4,429,447 3,896,370 3,392,309 3,017,816 2,629,711 Preferred Stock with Sinking Fund 354,957 300,219 283,165 193,507 60, % 3 l

COMMON STOCK DATA BY QUARTER First Second Third Fourth l

1982 Price Range liigh - Low

$14%-12%

$14%-12%

$15%-12%

$15%-14%

l Dividend Declared

$.41 %

$.41 %

$.41%

$.42%

1981 Price Range High - Low

$12%-11

$13%-11

$13%-11%

$13%-11 Dividend Declared

$.40%

$.40%

$.40%

$.41 %

first four years of the plant's life (1984-87), by de-21, 1982, voted to require LP&L to refund the cash ferring a portion of the costs. These deferred costs portion of the settlement to LP&L custome s. Over 70 would be recovered during the following five years percent of the refund would go to industrial and com-(1988-92), when the price per kilowatt-hour for energy mercial customers, with residential customers receiv-from the plant will be lower.

ing only 28 percent.

LP&L, as of early March, had not decided whether TEXACO SETTLEMENT to appeal the LPSC decision to the courts. If it does not On June 4,1982 Louisiana Power & Light Com-appeal, the first refund is scheduled for March 1983 pany reached agreement with Texaco. Inc. to settle with additional refunds scheduled for July 1983 and disputes with respect to natural gas power plant fuel early 1984.

contracts extending to 1992. Texaco agreed to pay

$1.087 billion in cash in three installments and to guarantee at least $585 million in other benefits.

LP&L proposed to flow benefits of the settlement to

(

its customers by reducing the rate base upon which l

customers' electric rates are determined. Ilowever, the l 8 Louisiana Public Service Commission on December

1 MSU CORPORKfE OBJECTIVES Since our founding in 1949, our corporate mission at changes. From these calculations and other considera-hiiddle South Utilities, Inc. has been to provide our tions, our professional staff produces forecasts of fu-customers with reliable electric energy at a reasonable ture customer requirements which are a base for iden-cost while, at the same time, providing a fair return to tifying needed additions to System capacity.

our stockholders. Our total organization and its re-A major step toward the assurance of reliable service sources are keyed to fulfilling that mission through into the next century is being taken through an aggres-programs and policies that will supply logical, timely, sive fuel diversification program. From the end of the and cost-effective solutions to the challenging tasks at Second World War to the late Sixties, the hiiddle South hand.

System was almost totally a natural gas-fueled generat-To guide us in achieving continuing success, we ing system. However, curtailment of supplies, increas-have adopted five key corporate objectives that serve as ing prices, and the need to plan for future growth led to a framework for management identification and eval-the decision to diversify from this single-fuel base.

uation of strategies open to us:

Fuel diversification efforts are keyed to reducing the (1) Electric Reliability System's reliance on expensive oil and natural gas (2) Financial Integrity (thereby moderating future electric price increases) and (3) Employee Development and Work to avoiding possible disruption of service because of Environment curtailment of fuel supplies. With those objectives in (4) Corporate Citizenship mind, the Aliddle South operating companies began (5) Energy Conservation and Research and moving their generating systems toward use of coal and Development nuclear fuels because these are abundant, domestically These objectives are designed to lead us to both long-available, environmentally compatible, and economi-term and short-term accomplishments that will be in the cally sound.

best interests of our customers, our employees, and our in the past 10 years, the System has installed about investors.

3,100 megawatts of nuclear-and coal-fueled genera-F.LECTRIC RELIAHILITY tion to meet its fuel diversification goals. Over the past three years, three coal-fueled umts hase been placed An area of growing complexity and major manage-into commercial service-two at White Bluff Steam ment priority at hiiddle South Utilities centers on the Electric Station near Redfield, Arkansas, and one at planmng and development of our System to assure Independence Steam Electric Station near Newark, reliatie electric service-today and tomonow--at the Arkansas. Another unit is scheduled for completion at lowest practicable cost. We recogm,ze that, to a large Independence Station in 1985. Arkansas Nuclear One degree, our successful accomplishment of th,is task will near Russellville-the Southwest's first nuclear-fueled be an essential element m furthenng the economic electric generating station-has been an important Sys-development of the total h1iddle South region. For that tem addition since it first went into service in 1974, and reason, we are committed to usmg the most sophisti-the second unit at that station came on line in 1980.

cated planmng processes avad, able so that mvestments hlore nuclear-fueled generation will be added to the m electnc generatmg transmission, and distnbution System with the scheduled commercial operation of systems will be made m a responsible, responsive, and Grand Gulf Station near Port Gibson, Alississippi, in far-s,ghted fashion.

i iate 1983 and Waterford 3 near Taft, Louisiana, in The first step in planning for System development is 1984 in forecasting future electric demand. Such forecasts Electric generation in the h1iddle South System is cover a period of at least 15 years into the future, controlled through a centralized Operations Center in because of the current long lead times requ, red for Pine Bluff, Arkansas, coordinating the over 70 units i

construction of additional generating capacity.

available in the four-state area along with nearly 60 During the decades of the Forties, Fifties, and S.

interconnections with neighboring utility systems. This ix-ties, the h1SU annual load growth was at the rate of 9 to computer-based scheduling of available sources 10 percent per year. Even with the sharp run-up in fuel assures that System power and energy requirements are prices, record inflation, and other dish > cations of the met in an efficient, economical, anli reliable manner.

decade of the Seventies, our customers' loads grew at FINANCIAL INTEGRITY an average annual rate of 6.7 percent. Load growth has slowed further, influenced in some measure by the The maintenance of Aliddle South's financial in-recession, and we are currently forecasting average tegrity has a direct bearing on our ability to fulfill yearly electric growth rate for the next 10 years at about successfully our responsibility in meeting the growing 3 percent. The uncertainty of predicting future demand electric energy demand in our service area. With a has created a need for the use of new and more intricate projected construction requirement totaling $3.I bil-statistical methods to assure future reliability at a lion over the next three years, we are keenly aware that reasonable price.

we must provide a fair return to our shareholders if we At hiiddle South, our econometric equations recog-are to attract economically and hold the investors nire the causal factors that influence energy usage by needed to finance present and future System expansion.

customer type, including population growth, income For that reason, we have developed a strategy to lessen levels, prices for electricity and alternative energy financial risk by establishing sound capitalization ratios sources, industrial production, and technological while fulfilling the capital requirements of the System 9

and maintaining a prudent payout of earnings to our Inc.; Middle South Energy, Inc.; and Middle South stockholders.

Services, Inc. By procuring fuel on a System-wide Despite a 10.7 percent increase in consolidated net basis, System Fuels achieves significant savings from income in 1982 over the prior year, earnings per share economies realized through large-volume purchases declined from $2.44 to $2.33. Two factors are re-and by eliminating upward pressure on fuel prices sponsible. First, the decrease in earnings per share is which would stem from competitive bidding by each of attributable to a 15.6 percent increase in the average our operating companies in the same fuel markets.

number of shares outstanding, since the System issued Middle South Energy provides the means for financing some $211 million in common stock in 1982 to meet large capital investments-such as the Grand Gulf Sta-capital requirements. Second, earnings were adversely tion-that would not be feasible for a single operating affected by a 1.7 percent decrease in retail energy sales company. Middle South Services, the service com-from the previous year due to a 5.8 percent decrease in pany, achieves savings by avoiding the duplication of industrial sales, primarily related to the recession.

staffing in those areas where System needs are best In the future, the financial pressure of meeting cus-served on a centralized basis.

tomer needs and providing fair shareholder return should lighten with the scheduled completion of more nuclear-fueled generation in late 1983 and 1984. The resulting decrease in capital requirements-coupled with appropriate rate adjustments and an increase in industrial sales as the economy recovers-should

.i reduce required future amounts of external financing.

" ' ' "g sN '

mw

.A Of course, the commercial operation of additional generating units will necessitate the granting of addi-k.A[}g g

rip e -

9. m l ~ _

, A.---- Q-P r ;'

tional rate mereases to cover the operating and capital g

costs of those new facilities. To mitigate these initial

• g/p.

rate increases, the Middle South System is proposmg

.~

u an innovative alternative to traditional rate-setting pro-cedures. This ne,v approach aids time customer by hold-

1. r Wic.

3 ing down the cost of electricity in the early years of 4-q'i g

plant operation, while protecting the stockholder by

- 415 4 s allowing for full recovery of these deferred costs at a cyn,,ruc,fyn j, ung,7 way on,3, f 984 Louisiana World later date.

Exposition site. bordered by the blississippi River. This major Continuing steps toward fiscal health ar.4 cost-event will draw millions of visitors to the Afiddle South region savings are evident in the operation of System Fuels, and promote the area's economic attractiieness.

CONSTRUCTION PROGRAM Major Generating Units Scheduled Megawatt Commercial Unit Company Fuel Capacity Operation Independence 1 AP&lJMP&L Coal 472*

1983 Grand Gulf I MSE Nuclear 1,125**

1983 Waterford 3 LP&L Nuclear 1,104 1984 j

Independence 2 AP&IJMP&L Coal 461***

1985 Grand Gulf 2 MSE Nuclear 1,125**

• Represents the System's 56.5% interest in this 836MW unit which went into commercial operation in January 1983.

• • Represents the System's anticipated 90% interest in these 1,250MW units.

• " Represents the System's 56.5% interest in this 815MW unit.

"* *The schedule to complete Grand Gulf 2 will be dependent, among other things, upon the commercial operation of Grand Gulf 1.

10

EMPLOYEE DEVELOPMENT p =),.p.jp

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AND WORK ENVIRONMENT e

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• 'N a 1 At h1iddle South Utilities, we strive to create a favor-I MY

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73 able work environment for our more than 13,700 em-G#

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. 4 {3 '., " '

ployees. The Company has no more valuable resource p

than its people. If corporate goals are to be met and the

-[

3 &k business is to operate successfully, its employees must 3

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make it happen.

..y To meet this challenge, we are forging new manage-3<

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5 ment-employee relationships directed toward making

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the System an even more safe, productive, motivating

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workplace. The evidence can be found in a 1.ouisiana

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t generating station where our Availability Improvement

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f Program is boosting performance standards. Another

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example is the " Grow Your Own Program" in Arkan-G

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.c sas, which provides nuclear operator training tech-A g

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i niques that have achieved industry-wide recognition.

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In N,ew Orleans, computer skills are upgraded at a

p. f _

g; k s. l.,f '.

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f special training center, and power plant operations are

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taught at a training center near Little Rock.

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T-h1iddle South is implementing career development

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programs to meet present and future System personnel q

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requirements. This people-to-people corporate ob.jec-g' ',

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j.7 tive is vital to our continuing success and remains a O

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E priority of high management attention and action.

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i' CORPORATE CITIZENSIIIP

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I The heritage of h1iddle South Utilities is rooted in our record of socially responsible corporate citizenship 2

E*P '") " d'"'"P *'"' ""' "/ ""' A'J '"'P"'"" "hl# " -

and our continuing practice of sound environmental

1. " "'""'"' "" '""" "#""h 'h"" """""" 'h"" " #

P'ilicies. Our emP ovees Partici ate in communit5, employees and the speciali:ed skills and taleras which they l

P state, and regional activities des,gned to make the N1id-i go,3,,,.

die South area a better place in which to live and prosper. A notable example is the leadership being 7

provided by h1SU Chairman and President Floyd W.

Lewis, who is serving as chairman of the 1984 J

H, Louisiana World Exposition to be held in New Orleans.

g, This event is expected to generate approximately 52 p

.d, billion in regional economic activity and create over 10,000 jobs during its siemonth ru'n.

f

~l Also, in the area of economic development, N1SU m

operating companies are working with state and com-G L

munity agencies and groups to attract new and ex-k'

],

panded industry. For instance, thanks to the role played I'

by AP&L, a new steel tubing plant is hicating in Little E"

5 Rock, representing one of the state's largest manufac-p q

turmg mvestments ever.

3

(

Environmental protection programs also demon-p t

j strate N1iddle South's corporate citizenship. The use of low-sulfur coal at new generating facilities, the moni-h"l-1 foring of aquatic and wildlife conditions around plant

5 locations, and the installation of numerous anti-t j

pollution processes are examples of this commitment in

[

l-action.

We are concerned about the needs of the commum-ties and region we serve, and we are proving it every

(

E day in 1982, both AP&L, through its " Helping Hand Program," and N1P&L. through its " Concern" pro-(

ject, introduced new programs to aid elderly, handi-1i capped, and low-income customers.

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Unit i ofIndependence Steam Electnc Station in North Central Arkansas began commercial service in January 1983. The 836 megawatt unit is jomtly ouned by AP&L. MP&L. a wholesale cooperative, andfour municipalaies in Arkansas. n hite clouds rising from the plant are harmless water vapor.

ENERGV CONSERVATION AND servation techniques; and in of fering special plans-RESEARCil AND DEVELOPMENT such as average billing-to alleviate energy budgeting problems Middle South 1:as taken a national lead in energy In the area of energy research and development, the conservation and load management. F,or example, the Middle South System companies are participating with Energy Saving Ilome, an AP&L design concept for the Electric Power Research Institute in seeking out residential construction created m, the Sixties, is now alternative energy solutions. This electric utility indus-being adopted nationwide m both the conventional and try-sponsored R&D organization includes among its manufactured housing markets because of its high-numerous research projects studies of the technological efficiency heating and cooling performance. Similarly, and economic feasibility of various energy potentiali-the Con 1mercial Energy Analysis Program created by ties, such as renewable resources, co-generation, geo-MP&L is being used throughout the country as a com-thermal energy, solid wastes as fuel, and solar power.

puterized energy use operating / cost-estimating method to aid designers, architects, and builders in developing small-to-medium-size, energy-efficient commercial buildings.

In addition, all System operating companies are actively involved in providing customers with energy audit and weatherization analysis and assistance; in i

12 supplying consumer literature and programs on con-i

Middle South Utilitics, Inc. & Subsidiaries REPORT OF MANAGEMENT i

The management of Middle South Utilities, Inc. has prepared and is responsible for the financial statements and related financial information included in this annual report. The financial statements are based on generally accepted accounting l

principles, consistently applied. Financial information included elsewhere in this report is consistent with the imancial statements.

To meet its responsibilities with respect to financial information, management maintains and enforces a system of internal accounting controls which is designed to provide reasonable assurance, on a cost-effective basis, as to the integrity, objectivity and reliability of the financial records and as to the protection of assets. This system includes communication through written policies and procedures, and an organizational structure that provides for appropriate division of responsibility and the training of personnel. This system is also tested by a comprehensive internal audit program.

The board of directors pursues its responsibility for reported financial information through its audit committee, composed of outside directors. The audit committee meets periodically with management, the internal auditors and the independent public accountants to discuss auditing, internal control and financial reporting matters. The independent public accountants and the internal auditors have free access to the audit committee at any time.

l The independent public accountants provide an objective assessment of the degree to which management meets its responsibility for fairness of financial reporting. They regularly evaluate the system of internal accounting controls and perform such tests and other procedures as they deem necessary to reach and express an opinion on the fairness of the financial statements.

Management believes that these policies and procedures provide reasonable assurance that its operations are carried out with a high standard of business conduct.

AUDITORS' OPINION The Stockholders and the Board of Directors of Middle South Utilities, Inc.:

We hase examined the consolidated balance sheets of Midd:e South Uti!ities, Inc. and its subsidiaries as of December 31, 1982 and 1981 and the related consolidated statements ofincome, retained earnings, paid-in capital, and changes in financial position 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 and such other auditing procedures as we considered necessary in the circumstances.

In our opinion, the above-mentioned consolidated financial statements present fairly the fmancial position of the Company and its subsidiaries at December 31,1982 and 1981 and the results of their operations and the changes in their financial position for each of the three years in the period ended December 31,1982, in conformity with generally accepted accounting principles applied on a consistent basis.

0&W t

New Orleans, Louisiana February 11,1983 i

13 l l

i

Middle South Utilities, Inc. & Subsidiaries CONSOLIDATED BALANCE SHEETS December 31,1982 and 1981 i

ASSETS 1982 1981 (in Thousands)

Utility Plant (Notes 9 and 10):

j Electric...........

$ 5,158,736

$4,%9,887 Natural gas...

113,719 109,874 Transit....

15,920 15,930 Construction work in progress...............

5,022,635 3,882,871 Nuclear fuel.......

153,178 101,874 Total..

10,464.188 9,080,436 less-Accumulated depreciation.........

I 551,700 1,407,584 Utility plant--net..

8.912,488 7,672,852 Other Property and Investments..

83.846 87,820 Current Assets:

Cash (Note 4).....................................

10,023 22,103 Special deposits..................................

11,198 18,656 Temporary investments-at cost, wh:ch approximates market (Note 12).

283,142 29,524 Notes receivable.........

2.584 2,260 Accounts receivable:

Customer (less allowance for doubtful accounts of (in thousands)

$2,602 in 1982 and $2,260 in 1981)..

147,241 123,413 Other.......

35,368 41,758 Receivable from gas supplier (Note 12).......

250,000 Deferred fuel cost....................

24,120 (7,734)

Fuel inventory-at average cost (Note 4)...

146,592 160,089 Materials and supplies-at average cost......

63,602 52,4 %

Other.....

27,425 27.278 j

Total.....

1,010.295 469,843 Deferred Debits:

Receivable from gas supplier (Note 12)...

250,000 Other......

108.024 88,041 Total.........

358,024 88,041 TO TA l,..................

$10.364,653

$8,318,556 4

14 See Notes to Consolidated Financial Statements l

i

f i

CAPITALIZATION AND LIABILITIES 1982 1981 (in Thousands)

Capitalization:

Common stock, $5 par value, authorized 250,000,000 shares in 1982 and 150,000,000 shares in 1981; issued and outstanding 139,333,934 shares in 1982 and 123.787,341 shares

$ 6 %,669

$ 618,937 in 1981 (Note 5)..

994.760 860,833 Paid-in capital 790.487 705,776 Retained earnings (Notes I and 8).

2,481,916 2,185,546 Total common shareholders' equity.....

Subsidiaries' preferred stock, without sinking fund (Note 6)_

330, % 7 330, % 7 354,957 300,219 l

Subsidiaries

• preferred stock, with sinking fund (Note 6).

4,429,447 3,8 %.370 Long-term debt (Notes 7 and 9)....

7,597.287 6,713,102 Total........

Current Liabilities:

Notes payable (Notes 4 and 9):

159,565 216,183 Banks........

107.725 79,115 Commercial paper....

Other.

72,885 100,000 73,102 26,935 Currently maturing long-term debt (Note 7)..

316.806 357,728 Accounts payable.

Gas contract settlement-liability to customers (Note 12).

882,535 47,794 42,670 Customer deposits.

67.655 66,669 Taxes accrued..

12,033 (7,811)

Accumulated deferred income taxes (Note 3)..

104,854 98,408 Interest accrued 77,058 67,091 Dividends declared..

73,467 49,862 Other..

1,995,479 1,096.550 Total.......

Deferred Credits:

331,591 334.071 Accumulated deferred income taxes (Note 3).

77.142 80.367 Accumulated deferred investment tax credits (Note 3)...

Gas contract settlement-liability to customers (Note 12).

250,000 79.829 63,365 Other......

Total.....

738,562 477,803 33.325 30,801 Resers es..

Commitments and runtingencies (Notes 2,9 and 10)

TOTAL,

$10,3M.653

$8.318,556 4

15 4,

4 h

1

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-,m

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Middle South Utilities, Inc. & Subsidiaries STATEMENTS OF CONSOI.IDATED INCOME For the Years Ended December 31,1982,1981 and 1980 1982 1981 1980 (in Thousands)

Operating Resenues (Note 2):

Electric.

$2,673,572

$2,582,778

$2,179,232 Natural gas...

172,692 139,242 116, % 7 Transit.

55,466 49,768 44,112 Total 2,901,730 2.771,788 2,339,411 Operating thpenses:

Operation:

Fuel for electric generation I,066,325 1,083,064 946,145 Purchased power.

345,076 263,559 281,951 Gas purchased for resale 138,890 107,768 88,864 Deferred fuel and other 327,315 343,661 281,088 Maintenance.

142,806 135,500 1I1,831 Depreciation.

168,454 159,015 141,997 Taxes other than income taxes.

103,956 95,495 84,690 income taxes tNote 3).

172,582 175,732 105,023 Total 2,465,404 2.363,794 2.041,589 Operating Income 436.326 407,994 297,822 Other Income:

Allowance for equity funds used during constmetion (Note IG).

182,342 143.369 122,277 Miscellaneous income and deductions--net.

4,778 22,545 7,019 income taxes-cr. (Note 3).

148,027 127,056 106,284 Total.

335,147 292,970 235,580 Interest and Other Charges:

Interest on long-term debt..

488,750 441,894 327,468 Other interest-net.

74,130 74,507 72,666 Allowance for borrowed funds used during constructionHer.)(Note IG).

(170,438)

(157,511)

(117,663)

Preferred dividend requirements of subsidiaries (Note 6).

68,436 60,591 55,024 Total 460,878 419,481 337,495 Net Income (Note 2)......

$ 310,595

$ 281,483

$ 195,907 Earnings Per Common Share.

$2.33

$2.44

$2.01 1

Disidends Declared Per Common Share.

$1.67

$1.63

$1.59 I

Ascrage Number of Common Shares Outstanding.

133,193,296 115,175,550 97,469,169 l

i i

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,,------,,--,---,------,,e

,m,,v,e a,-.,.,-.-...,.,,-n.

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Middl3 South Utilities, Inc. & Subsidiaries STATEMENTS OF CONSOLIDATED RETAINED EARNINGS AND PAID-IN CAPITAL For the Years Ended December 31,1982,1981 and 1980 1982 1981 1980 (in Thousands)

RETAINED EARNINGS i

$ 705,776

$615,248

$577,121 Retained Earnings, January I.

310.595 281,483 195.907 Add-Net income..

1,016.371 8 %,731 773,028 Total.......

Deduct:

Dividends declared on common stock-$1.67, $1.63 and $1.59 per share for 1982,1981 and 1980, respectively......

224,825 190,175 156, % 8 Capital stock expenses, etc............

1.059 780 812 225.884 190,955 157,780 Total......

Retained Earnings, December 31 (Notes I and 8).......

$ 790,487

$705,776

$615,248 PAID-IN CAPITAL Paid-in Capital, January I......

$ 860,833

$749,206

$630,450 Add:

Excess of net proceeds over par value:

Public sales of common stock:

89,800 10,000,000 shares in May 1982....

5,000,000 shares in November 1981 37,010 8,000,000 shares in May 1981..............

51,368 8,000,000 shares in October 1980..

54,023 50,819 7,000,000 shares in May 1980....

Common stock issued in connection with dividend reinvestment and stock purchase plan....

39,871 20,132 11,029 Common stock issued in connection with employrc stock ownership plan.

74 Common stock issued in connection with employee 3,732 2,617 2,202 savings plan..........

524 500 609 Other............

Paid-in Capital, December 31.................

$ 994,760

$860,833

$749,206 17 See Notes to ConsoMated Financial Statements.

Middle South Utiliti:s, Inc. & Subsidiaries STATEMENTS OF CIIANGES IN CONSOLIDATED FINANCIAL POSITION For the Years Ended December 31,1982,1981 and 1980 1982 1981 1980 Funds Pro ided By:

(In Thousands)

Operations:

Net income...

$ 310,595 $ 281,483 $ 195,907 Depreciation..

168,454 159,015 141,997 Deferred income taxes and investment tax credit adjustments-net...

14,720 37,667 (6,060)

Allowance for funds used dudng construction (Note IG)....

(352,780)

(300,880)

(239,940)

Total funds provided by operations.

140,989 177,285 91,904 Other:

Allowance for funds used during construction (Note IG).

352,780 300,880 239,940 Gas contract settlement (Note 12) 1,132,535 Funds on hand or due from gas supplier (Note 12).

(782,197)

Deferred costs relating to SFI's fuel acquisition programs.

2,350 Decrease in working capital *..

145,207 70,830 Miscellaneous-net...

13,672 23,6 %

17.206 Total funds provided by operations and other.

860,129 647,068 419,880 f

Financing and other transactions:

Common stock.

211,135 193,314 202,732 Preferred stock...

60,000 20,000 93,444 First raortgage bonds.

185,000 250,000 218,500 Promissory notes and other long-term debt.

515,512 442,315 282,626 Book value of utility plant sold..........

25,1II 934 Short-term securities--net..

139, % 9 10,739 Sale and leaseback transactions 22,136 45,484 Total funds provided by financing and other transactions.

996,758 1,067,734 854,459 Total funds prmided.

$1.856,N87 $1,714,802 $1,274,339 Funds Applied To:

Utility plant additions:

1 Construction expenditures for utility plant.

$1,393,399 $1,168,828 $ 909,844 Nuclear fuel.....

51,304 56,132 26,288 Other....

3,045 4,219 Total gross additiors (includes allowance for funds used during construction)..

1.444,703 1,228,005 940,351 Other:

Dividends declared on common stock...

224,825 190,175 156,968 increase in working capital *.

31,628 Deferred costs on coal plant standardization program.

9,169 6,116 5,749 Deferred costs relating to SFI's fuel acquisition programs....

7,934 13.817 Total funds applied to other...

265,622 204,2R 176,534 Financing transactions:

Retirement of promissory notes and other long-term debt.

68,320 160,266 129,586 Retirement of first mortgage bonds.....

48.719 119,363 24,081 Redemption of preferred stock...............

2,979 2,943 3,787 Short-term securities-net.

26,544 Total funds applied to financing transactions.

_ 146,562 282.572 157,454

$1.M56.NH7 $1,714.802 $1.274.339 Total funds applied....

• Working capaaldoes not include share-term securities, currendy maturung long-term debt, the gas contract settlement or deferred taxes includedin current liabihrses. The 1982 net increase in working capitalis prumardy due to increases in deferredfuel cost and customer accounts receivable and a dec. ease in accounts payable reduced by an increase in other current liabdairs; the 1981 net decrease in woriing capitalis primardy due to an increase in accounts payable and decreases in cash and deferredfuel costs; the 1980 net decrease in working capitalis prumardy due to increases in accounts payable and other current liabdaies reduced by an increase in customer accounts receivable.

I8 See Notes to ConschJared Financial Statements.

I

Middle South Utilities, Inc. & Subsidiaries 1

NOTES TO CONSOLIDATED HNANCIAL STATEMENTS NOTE 1. SUN 151ARY OF SIGNIFICANT ACCOUNTING POLICIES A. PRINCIPLES OF CONSOLIDATION De accompanying consolidated financial statements include the accounts of hiiddle South Utilities, Inc. (the Company or htSU) and its direct and indirect subsidiaries, Arkansas Power & Light Company (AP&L), Louisiana Power & Light Company (LP&L), hiississippi Power & Light Company (h1P&L), New Orleans Public Service Inc. (NOPSI), htiddle South Services, Inc. (htSS), hiiddle South Energy, Inc. (htSE) and System Fuels, Inc. (SFI) which are collectively referred to as the System Companies or the htiddle South System. All significant intercompany transactions have been eliminated.

B. SYSTEhtS OF ACCOUNTS i

ne accounts of the Company and its service subsidiary (htSS) are maintained in accordance with the Public Utility Holding Company Act of 1935 (llolding Company Act), as administered by the Securities and Exchange Commission (SEC) which has adopted the systems of accounts prescribed by the Federal Energy Regulatory Commission (FERC).

The accounts of the operating subsidiaries (AP&L, LP&L, h1P&L and NOPSI) and the generating subsidiary (htSE) are maintained in accordance with the systems of accounts prescribed by the applicable regulatory bodies, which systems of accounts substantially conform to those prescribed by the FERC.

SFI capitalizes all costs related to its explorrtion activities. These costs are reduced by profits realized on sales to non-af filiated companies and are amortized by the unit-of-production method in the period in which revenue is recognized on oil and gas reserves produced and sold.

C. REVENUES AND FUEL COSTS The operating subsidiaries record electric and gas revenues as billel to their customers on a cycle billing basis. R evenue is not accrued for energy delivered but not billed at the end of the fiscal period. Suostantially all of the rate schedules of the operating subsidiaries include adjustment clauses under which the cost of fuel used for generation and gas purchased for resale above or below specified base levels is permitted to be billed or required to be credited to customer-One operating subsidiary has a fuel adjustment clause which allows current recovery of fuel costs. All the other operating subsidiaries utilize a deferral raethod of accounting for those fuel costs recoverable under fuel adjustment clauses. Under this method, such costs are deferred until the related revenues are billed.

De fuel adjustment clause for AP&L contains a provision for a nuclear reserve fund to cover the estimated costs of replacement energy w hen the nuclear plant is down for scheduled maintenance and refueling. Credits to the reserve are provided by charges to operating expenses when the nuclear plants are operating and interest accrued on the reserve balance. The balance in the reserve is used to reduce fuel expense for fuel adjustment purposes during the shutdown period.

D. UTILITY PLANT AND DEPRECIATION Utility plant is stated at original cost. The cost of additions to utility plant includes contracted work, direct labor and materials, allocable overheads and an allowance for the composite cost of funds used during construction. The costs of units of property retired are removed from utility plant and such costs, plus removal costs, less salvage, are charged to accumulated depreciation.

hiaintenance and repairs of property and replacement of items determined to be less than units of property are charged to operating expenses.

Depreciation is computed on the straight-line basis at rates based on the estimated service lives of the various classes of property. Depreciation rates for AP&L's nuclear plant include a provision for nuclear plant decommissioning costs. Deprecia-tion provisions on average depreciable property approximated 3.3%,3.4% and 3.4% in 1982,1981 and 1980, respectively.

Substantially all of the utility plant of the Company's operating subsidiaries and generating subsidiary is subject to the liens of their respective first mortgage bond indentures.

E. PENSION PLANS ne Company and its subsidiaries have various defined benefit pension plans covering substantially all of their employees.

De policy of the Company and its subsidiaries is to fund pension costs accrued.

F. INCOhlE TAXES ne Company and its subsidiaries file a consolidated federal income tax retum. Income taxes are allocated to all subsidiaries based on their contributions to the consolidated tax liability. Deferred income taxes are provided for differences between book y

and taxable income to the extent permitted by the regulatory bodies for ratemaking purposes. Investment tax credits utilized are deferred and amortiied based upon the average useful life of the related property.

G. ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION To the extent that the Company's operating subsidiaries are not permitted by their regulatory bodies to recover in current rates the carrying costs of funds used for construction, they capitalize, as an appropriate cost of utility plant, an allewance for funds used during construction ( Al'DC) w hich is calculated and recorded as provided by the regulatory systems of accounts. Under this utility industry practice, construction work in progress on the balance sheet is charged and the income statement is credited for the approximate net composite interest cost of borrowed funds and for a reasonable return on the equity funds used for gg

construction. This procedure is intended to remove from the income statement the effect of the cost of financing the coratruction program and results in treating the AFDC charges in the same manner as construction labor and material costs. As non-cash items, these credits to the income statement have no effect on current cash earnings. After the property is placed in ser~ ice, the AFDC charged to construction costs is recoverable from customers through depreciation provisions included in rates charged for utility service.

During 1982, one of the operating subsidiaries used an accrual rate of 3% on $1.3 billion of construction costs in accordance with a May 1981 rate order from its regulatory commission. The effective composite rates of the operating subsidiaries for the balance of AFDC were 9.1%,8.8% and 8.0% for 1982,1981 and 1980, respectively. MSE has determined its 1982 accrual rate for AFDC based on a return on average common equity of 14%, plus actual interest costs, net of releed income taxes.

The Company's subsidiaries continue to capitalize allowance for funds used during construction on projects during periods of I

interrupted construction w hen such interruption is temporary and the continuation can bejustified as being reasonable under the circumstances.

H. RESERVES

{

lt is the policy of the Company's operating subsidiaries to provide reserves for uninsured property risks and for claims for injuries and damages through charges to operating expenses on an accrual basis. Accruals for these reserves have been allowed for ratemaking purposes.

I, RECLASSIFICATIONS AND RESTATEMENTS The 1977-1981 Consolidated Financial Statements of MSU have been restated to reflect provisions for refunds by AP&L as ordered by the Arkansas Supreme Court. Retained earnings at the beginning of 1980 have been decreased $4.3 million to reflect the reduction in net income previously reported for the three years ended December 31,1979.

In addition, certain reclassifications of previously reported amounts have been made to conform with current classifications.

NOTE 2. RATE MNITERS On March 1,1982, the Arkansas Public Service Commission (APSC) grante ' %26.2 million of AP&L's $101.4 million retail rate request and also directed AP&L to refund approximately $19.3 million (o. t a two-year period) related to collections that the APSC contends resulted from AP&L's past practice of tax normalization. Upon AP&L's request, the APSC gran'ed a rehearing to reconsider ceitain parts of the rate request and order and postponed the $19.3 million refund. He APSC also accepted AP&L's proposal to defer collection of the disputed amount until the review process is complete. On September 8, 1982, the APSC granted an additional annual increase of $2.8 million, raising the total rate increase graated to $29 million. His increase was placed into effect on October 6,1982. AP&L filed an appeal with the Circuit Court of Pulaski County, Arkansas placing before it th-issues related to the difference between the $101.4 million sought and the $29.0 million granted, subject to cutain adjustments, and that portion of the order that directed AP&L to refund approximately $ 19.3 million. In lieu of collection of the full disputed portion of rates subject to refund during appeal by AP&L, and pursuant to a procedure approved by the APSC, the APSC has approved rate schedules which would allow collection of a portion of the denied rate relief, $33.0 million, during the appeal period. Collection of this amount has been deferred by AP&L pending final court review. Any portion of the deferred amount which is finally granted by the Court may be collected by a surcharge over a period equal to the length of deferral. Further, all relief granted by the Court will be collected prospectively from the date of the Court's decision. This appeal is pending.

On November 19,1982, AP&L filed an application with the APSC requesting an annual increase in Arkansas retail rates of approximately $93.2 million over that level of rates that would be reflected had AP&L been collecting the $33 million of additional annual revenues that it has determined to defer. Hearings associated with this filing are scheduled to begin May 31, 1983. In the filing, AP&L also requested immediate action by the APSC to approve an increase in rates recognizing the commercial operation of Unit One of the Independence Steam Electric Generating Station, which began commercial operation on January 18,1983. On January 14,1983, die APSC issued an order allowing AP&L to capitalize depreciation and carrying costs of the unit from the date of commercial operation until such time that the unit is recognized in AP&L's rates. The order also directed that related fuel savings during this interim period, less current operation and maintenance expenses, be flowed through to customers under the fuel adjustment clause.

On January 24,1983. LP&L filed a retail rate case with the Louisiana Public Service Commission (LPSC) for $412 million of c

additional net customer revenues in 1984 over projected 1983 revenues. The LP&L request is intended to cover completion and commercial operation of both the Waterford 3 and Grand Gulf Unit No. I nuclear stations. LP&L asked that $160.8 million of the retail rate request be implemented as emergency rate relief no later than March 17,1983. Hearings on the emergency portion of the rate request were scheduled to begin March 7,1983.

c NOPSI filed a $ 16.9 million gas rate increase with the LPSC on July 21,1982 which included a request for $ 11.1 million in interim rate relief. Hearings have been held and the matter is pending before the LPSC.

NOPSI filed an application with the LPSC on January 28,1983 for $112.9 million in additional net reventics for 1984 over projected 1983 revenues. Of this amount, NOPSI asked the Commission to approve $52.5 million in additional revenues by July 1983 to cover increases in expenses and capital costs; the remainder is to become effective upon commercial operation of Grand Gulf Unit No.1.

Regarding costs associated with power and energy from Grand Gulf Unit No. I when it begins commercial operation, currently scheduled for the fourth quarter of 1983, LP&L and NOPSI are proposing a ratemaking procedure which should enable 20 them to achieve necessary increases in revenue, while significantly lessening the initial impact on customer bills. Under the

r' l

proposed method, the bitial higher cost of energy from Grand Gulf Unit No. I would be phand in during the first four years of the station's life (1984-87) by deferring a portion of these costs. These deferred costs would be recovered during the following five years (1988-92) when the projected price per kilowatt-hour for energy from the plant will be lower.

During 1982 while the case was on appeal to the hiississippi Supreme Court.h1P&L continued to cellect the full level of its retail rate increase requested in 1980. These rates produced an additional $66.1 million of revenue in 1982. Of this total, $46.6 million, the amount which would have been billed at the level of rates approved by the Alississippi Pcblic Service Commission (h1PSC), was recorded as revenue and the remainder was recorded as a liability. At the end of 192, h1P&L had a liability of

$49.0 million recorded for possible refunds excluding any interest which h1P&L might be required to pay. The case is on appeal by various parties, including h1P&L.

)

On July 30,1982, h1P&L filed for a rate increase before the A1PSC which would increase retail revenues $93.9 mil' ion over the revenue level approved by the commission in h1P&L's 1980 retail rate case or $74.2 million over the revenue level of the bonded rates under which customers are currently being billed. On January 21,1983, h1P&L was granted $47.5 million, or approximately 50.6 % of the $93.9 million sought. h1P&L has not appealed the order and, pursuant to the order's provisions, the I

new rates were to be made effective on bills rendered to customers on and after February 15, 1983.

NOTE 3. INCOS1E TAXES Income tax expense (credit) consists of the following:

1982 1981 1980 (in Thousands)

Current:

Federal 5 (972)

$ 9,835 11,981 5 4,799 State 9,835 I I,009 4,799 Total Deferred-net:

Liberalized depreciation.

47,652 31,818 33,994 Deferred fuel cost.

15,652 (17,986)

(582)

Taxes capitalized in the financial statements.

I1,783 7,853 6,985 Differences between book and tax gains and losses on sales and abandonments of property.

(823) 7,250 (5,753)

Revenues subject to refund.

(9,567)

(9,224)

(4,989)

Other.

(9,626) 536 (l1,003)

Restoration (reduction) due to tax loss carryforwards (36.902) 38,190 (21,027)

Total 18,169 58,437_

(2,37$)

Investment tax credit adjustments-net.

(3,449)

(20,770)

(3,685)

Recorded income tax expense.

$ 24,555

$ 48,676

$ (1,261)

$172,582

$175,732

$105,023 Charged to operations.

Credited to other income.

(148,027) (127,056) (106,284)

Recorded income tax expense.

24,555 48,676 (1,261)

Income taxes applied against the debt component of AFDC.

145,514 133,8 %

109,424 Total income taxes.

$170,069

$182,572

$108,163 Total income taxes differ from the amounts computed l'y applying the statutory federal income tax rate to income before taxes.

The reasons for the differences are as follows (dollars in thousands):

1982 1981 1980

% of

% of

% of Pre-Tax Pre-Tax Pre-Tax Amount income Amount Income Amount Income Computed at statutony rate.

$185,650 46.0

$179,745 46.0

$114,848 46.0 Increases (reductions) in tax resulting from:

Allowance for funds used during construction.

(159,912)

(39.6) (137,099)

(35.1) (110,372)

(44.2) 4 State income taxes net of federal income tax effect.

8,605 2.1 11,203 2.9 2,352 0.9 Other-net (9.788)

(2.4)

(5,173)

(1.3)

(8,089)

(3.2)

Recorded income tax expense.

24,555 6.1 48,676 12.5 (1,261)

(0.5)

Income taxes applied against the debt component of AFDC.

145.514 24.9 133.896 22.3 109.424 28.8 Total income taxes.

$170.0n9 31.0

$182.572 34.8

$108,163 28.3 21

ne tax effect of the consolidated 1982 and 1980 federal tax losses has been recorded as a reduction of deferred income taxes.

{

Re tax effect of the utilization in 1981 of net operating losses has been recorded as a restoration of deferred income taxes. The remaining federal tax loss carryforward at December 31,1982 is $263.7 million. Unused investment tax credits at December 31, 1982 amounted to $5v2.9 million of which $2.8 million nay be carried forward through 1991, $49.4 million through 1992,

$93.0 million through 1993, $100.5 million through 1994, $68.3 million through 1995, $80.8 million through 1996 and $108.2 million through 1997.

NOTE 4. LINES OF CREDIT AND RELATED HORROWINGS t

The Company has a revolving credit agreement with various banks providing for the issuance of unsecured promissory notes totaling $172.5 million. This agreement will terminate December 31,1984, and the maximum principal amount of allowable borrowings will be reduced to $ 115 million on December 31,1983. The Company pays a commitment fee on the unused portion of the credit line.

h1SE has two revolving credit agreements with various banks providing for borrowings totaling $1,626 million. One agreement, for $1,311 million, is with a group of domestic banks; the other agreement, with foreign banks, is for $315 million (subsequent to year-end, this amount was increased to $378 million). Under both agreements, h1SE pays a fee on the unused commitment. All borrowings under these agreements will convert to term loans on the earlier of the commercial operation date of Grand Gulf Unit No. I or December 31,1983. The term loans with domestic banks have a maturity date of December 31, 1986, subject to mandatory prepayment requirements of $100 million plus interest in both 1984 and 1985. The maturity date for the term loans with foreign banks is February 5,1989, subject to mandatory prepayment requirements of $70 million plus interest in 1985 through 1988.

h1SE also has agreements for short-term borrowinFs of $74.2 million which require compensating balances totaling approximately 1% of the commitment w hich are not restricted as to withdrawal. At December 31,1982,51SE had $54.8 million outstanding under these agreements and had other unsect. red short-term borrowings totaling $60 million with additional banks.

The operating subsidiaries have lines of credit not requiring commitment fees providing for short-term borrowings through bank loans. Of the total bank lines of credit at December 31,1982, $100 million was provided by banks located outside of the htiddle South System service area (subsequent to year-end, this amount was increased to $200 million). Any of the four System operating companies may borrow any portion of these lines subject only to each company's maximum authorized level of borrowings. Compensating balances (approximately 5% of the commitment amount) or equivalent fees are required by certain of these non-service area lending banks. These compensating balances are not restricted as to withdrawal. Additionally, the four System operating companies, together with htSU and AISS, are authorized to participate in a System money pool w hereby those companies in the System with available funds can invest in the pool while other companies in the System (other than h1SU) having short-term needs can borrow from the pool, thereby reducing the System's dependence on external short-term borrowings.

SFI has a fuel oil financing arrangement allowing for borrowings of up to $100 mulion subject to a limit equivalent to the sum of certain accounts receivable arising from the sale of fuel oil inventory and the lower of the cost or the fair market value of SFI's fuel oil inventory, in addition, SFI may borrow up to $135 million through the sale of commercial paper for use in financing its nuclear fuel inventory. Borrowings under these short-term arrangements are restricted as to use and are secured respectively by SFI's fuel oil and nuclear fuel inventories and certain accounts receis able arising from the sale of these inventories. SFI also has a revolving bank credit agreement w hich allows for borrowings of up to $60 million through 1984. A commitment fee is paid on the unused portien of this commitment The credit facilities and borrowings of the System companies were as follows:

December 31,1982 December 31,1981 December 31,1980 Credit Credit Credit Facilities Borrowings Facilities Borrowings Facilities Borrowings (in Thousands of Dollars)

Short-term:

a h1SE.

134,150 114,815 102,600 92,375 100,000 78,151 SFI.

235,000 180,610 160,000 156,115 160,000 108,128 h1SS.

50,000 30,550 30,000 14,650 Operating subsidiaries.

237,535 44,750 367,585 93,258 393,085 94,693

)

Long-term:

Company 172,500 71,000 230,000 51,650 230,000 108,150 h1SE.

1,626,000 1,379,000 1.311,000 941,000 808,000 671,000 SFl 60,000 17,600 60,000 6,500 60,000 18,900 22 h1SS.

75,000 9,000 i

1 I

l The short-term bcrrowings and the interest rates (determined by dividing applicable interest expense by the average amount borrowed) for the Middle South System were as follows:

Year Ended December 31, 1982 1981 1980 (in Thousands)

Average Borrowing..

$379,049

$402,479

$340,245 Maximum Borrowing.

$469,786

$449,330

$469,740 Year-end Borrowing..

$340,175

$395.298

$295,622 Average Interest Rate:

3 During period-14.3 %

18.4 %

14.9 %

Bank loans.

14.2 %

17.8 %

14.4 %

v Commercial paper...

Other..

13.0 %

17.4 %

12.7 %

At end of period-Dank loans 10.9 %

15.0 %

21.4 %

Commercial paper.

9.9%

13.8 %

20.6 %

Other..

10.1 %

12.8 %

19.9 %

NOTE 5. CONINION STOCK Cha ges in the number of shares of the Company's common stock outstanding during 1982,1981 and 1980 were as follows:

Type of Transaction Number of Shares 1982 1981 1980 Public sales.

10,000,000 13,000,000 15,000,000 Dividend reinvestment and stock purchase plan 5,126,169 3,081,214 1,604,174 Employee stock ownership plan.

11,487 Employee savings plan.

420,424 356,184 301,284 Total.

15,546,593 16,437,398 16,916,945 In January 1983, the Company issued 1,234,968 shares of its common stock under the Dividend Reinvestment and Stock Purchase Plan, and received authorization from the SEC to issue and sell 2,000,000 shares of its common stock on a continuous offering basis. In February 1983, the Company sold 8,000,000 shares ofits $5 par value common stock in an underwritten public offering. The proceeds from the underwritten public offering of $122.6 million were or will be used to reduce the Company's bank borrowings, purchase the common stock of its subsidiaries and for other corporate purposes.

NOTE 6. PREFERRED STOCK The number of shares of preferred stock of the operating subsidiaries as of the end of the last two fiscal years was as follows:

Shares Authorized at Shares Outstanding Call Price December 31,1982 at December 31, Per Share 1982 1981 Cumulative, $100 Par Value Without sinking fund:

4.16-5.56 %.

1,070,774 1,070,1%

1,070,106

$102.50 to $107.00 6.08-8.56%...

1,180,000 1,180,000 1,180,000

$102.83 to $107.70 9.16-Il.48%.

795,000 795,000 795,000

$106.35 to $113.98 3.045,774 3,045,106 3,045,1 %

With sinking fund:

10.60-11.04%.

503,009 503,009 532,709

$109.39 to $109.78 14.75-17.00 %..

450,000 450,000 350,000

$112.00 to $117.00 953,009 953,009 882,709 Unissued.

6,756,500 Total..

10,755.283 23

l Shares Authorized at Shares Outstanding Call Price December 31.1982 at December 31.

Per Share Cumulative, $25 Par Value 1982 1981 Without sinking fund:

8.84 %

400,000 400,000 400,000

$ 27.66 10.40 %

600,000 600,000 600,000

$ 28.60 1,000,000 1,000,000 1,000,000 d

With sinking fund:

9.92 %

1,5 h,M0 1,599,640 1,600,000

$ 28.18 10.72 %

2,400,000 2,400,000 2,400,000

$ 27.68 13.12 %

1,600,000 1.600,000 1,600,000

$ 28.28 13.28 %

2,000.000 2,000,000 2,000,000

$ 29.E8 14.72 %

2,000,000 2,000,000

$ 28.68 15.20 %

I,200,000 1,200,000 1,200,000

$ 28.80 10,799,M0 10,799,MO 8,800,000 Unissued.

10,200,000 Total..

21,999,M0 Changes in the number of shares of preferred stock of the operating subsidiaries during the last three fiscal years were as follows:

Number of Shares 1982 _

1981 1980 Sales:

AP&L 13.28%, $25 par, with sinking fund.

- 2,000,000 LP&L 15.20%, $25 par, with sinking fund.

- 1,200,000 14.72%, $25 par, with sinking fund.

2,000,000 MP&L 17.00%, $100 par, with sinking fund.

200,000 14.75%, $100 par, with sinking fund.

100,000 NOPSI 15.44%, 3100 par, with sinking fund.

150,000 Redemptions:

AP&L 9.92%, $25 par, with sinking fund.

(360) 11.N%, $100 par, with sinking fund.

(20,150)

(22,253)

(20,000) 10.60%, $100 par, with sinking fund.

(9,550)

(7,172)

(17,866)

Total 2,069,940 170,575 3,312,134 The amounts of preferred stock of the operating subsidiaries as of the end of the last two fiscal years were as follows:

December 31, 1982 1981 (in Thousands)

Without sinking fund:

Stated at $100 a share.

$3M,511

$304,511 Stated at $25 a share,

25,000 25,000 Premium.

1,456 1,456 Total without sinking fund.

5330, % 7

$330,%7 With sinking fund:

Stated at $100 a share.

$ 95,301

$ 88,271 Stated at $25 a share.

269,991 220,000 Premium,

845 848

)

Issuance expense..

(11,180)

(8,900)

Total with sinking fund.

$354,957

$300,219 Annual preferred stock dividend requirements.

$ 71,398 5 62,887 Average annual preferred stock dividend 24 rate on par value 10.28 %

9.h6%

l l

l f

Cash sinking fund requirements for the ensuing five years for preferred stock outstanding at December 31,1982, are as follows (in thousands): 1983, $3,000; 1984, $10,000; 1985, $14,750; 1986, $15,750; and 1987, $18,250.

Subsequent to year-end, LP&L sold 3,000,000 shares ofits 12.64% Preferred Stock, cumulative, $25 par value and MP&L sold 100,000 shares of its 12.00% Preferred Stock, cumulative, $100 par value.

NOTE 7, LONG-TERN 1 DEllT The long-term debt of the Company and its subsidiaries as of the end of the last two fiscal years was as follows:

5 Outstanding at December 31, 1982 1981 (in Thousands)

First Mortgage Bonds.

52,k)7,050 $2,670,770 Promissory Notes:

Due:

1982, at prime plus % of 1%.

1,022 1982, at prime.

6,500 1984, at Federal funds rate plus % of 1%.

17,600 1984, at prime.

9,000 1784, at 107% of prime plus % of 1%,

71,000 51,650 1986, at i10% of the sum of prime and 1.3%.

1,064,000 941,000 1989, at London prime plus 1%.

315,000 Total Promissory Notes.

1,476,600 1,000,172 Other:

Bank Loans-at prime rate.

16,105 Capitalized lease--due serially through 1993,8%.

5,890 6,217 Municipal Revenue Bonds-due serially 1983-2004, 1 %-8 %.

39,154 41,421 Pollution Control Revenue Bonds and Installment Purchase Contracts:

Due serially through 2009, 6 %-8 % %

17,250 17,350 Due 1984-2014,6%-11%%.

182,425 152,425 less-Funds on deposit with trustees.

(21,307)

(10,870)

Total Other.

223,412 252,648 Unamortized Premium and Discount-Net..

(4,513)

(285)

Total leng-Term Debt 4,502,549 3,923,305 less-Amount due within one year..

73,102 26,935 Long-Term Debt Excluding Amount Due Within One Year.

$4,429,447 $3,896,370 Annual interest requirements on Long-Term Debt

$ 492,275 $ 465,928 Average annual interest rate on Total Long-Term Debt (excluding unamortized premium and discount-net).

10.92 %

11.88 %

5 Maturities Sinking Fund Requirements December 31,1982 December 31,1981 Cash Other*

Cash Other*

(In Thousands of Dollars) 1982.

33,309 17,161 1983.

71,806 41,295 " 18,995 41,295 18,695 1984 273,G44 49,365 18,870 49,365 17,820 1985.

191,062 55,600 18,630 55,600 17,580 1986.

1,082,946 55,600 18,330 55,600 16,830 1987.

100,166 63,600 18,420

• Sin ingfund requirements may he met by certnficat m ofproperts addesums at the rate of 167% of the required amount.

k i

• • Includes a $40 million MSE bond sinkmgfund requsrement whis h as emected to be refinanced.

25

De outstanding first mongage bonds of the Company's subsidiaries as of December 31,1982 and 1981 were:

Maturity 2%% to S%% 6% to 8%% 9% to ll%% 12 % 1o 14 % %

15 % 17 % %

TOTAL (in Thousands of Dollars) 1982 1983.

19,002 50,000 69,002 1984....

31,500 31,500 1985 18,000 18,000 1986.

75,000 70,000 145,000 s

1987...

26,000 26,000 1988-1997..

322,958 31,160 419,230 410,000 1,183,348 1998 2007..

519,000 376,700 98,500 994,200 2008 2012.

210,000 130,000 340,000 Total First Mortgage Bonds...

2,807,050 1981 1982 15,464 15,464 1983 19,102 50,000 69,102 1984 31,500 31,500 f

1985 18,000 18,000 1986.

75,000 70,000 145,000 1987-1996..

291,1M 13,360 451,440 300,000 1,055,904 1997 2006.

58,000 537,400 301,900 98,500 995,800 2007-201I.

285,000 55,000 340,000 Total First Mortgage Bonds.

2,670,770 Subsequent to year-end, AP&L sold $25 million of 13%% First Mortgage Bonds due in 2013 and LP&L sold $100 million of 12.00% First Mortgage Bonds due in 1993 and $100 million of 13.25% First Mortgage Bonds due in 2013.

)

NOTE 8. RETAINED EARNINGS He Public Utility llolding Company Act of 1935 prohibits the Company's subsidiaries from making loans or advances to MSU. The indenture provisions relating to the operating subsidiaries' long-term debt and transfers by such subsidiaries from retained earnings to the stated value of common stock and the provisions of the MSE bank loan agreements and indenture restrict the amount of consolidated retained earnings available for cash dividends on common stock. As of December 31,1982, $157.6 million of consolidated retained earnings were free from such restrictions, including $99.0 million of unrestricted, undistributed retained earnings of the Company's subsidiaries. He unrestricted, undistributed retained earnings of any subsidiary of MSU are not available for distribution to the common stockholders of MSU until such earnings are made available to the Company through the declaration of dividends by the subsidiary.

NOTE 9. COMN11TNIENTS AND FINANCING He Middle South System's corstruction program contemplates construction expenditures of $1,343.5 million in 1983,

$815.0 million in 1984 and $922.1 million in 1985 (including AFDC of $377.9 million in 1983, $149.6 million in 1984 and

$155.6 million in 1985) Of these expenditures, $496.2 million, $260.4 million and $339.2 million, respectively, are applicable to MSE's 90% ownership interest in the Grand Gulf Nuclear Statior., a two-unit nuclear generating station. Based upon MSE's 90% ownership interest and a fourth quarter 1983 commercial operation date, MSE presently projects the total cost (excluding ncclerr fuel) for Unit No. I to be approximately $2.50 billion. A limited amount of construction on Unit No. 2 was performed in q

1982. Full resumption of construction on Unit No. 2 and the cost to complete Unit No. 2 will be dependent, among other things, upon completion and commercial operation of Unit No.1. Through December 31,1982, MSE had invested $2,736 million in the Grand Gulf Nuclear Station. MSE estimates, pending a final review of the cost allocation between the two umts upon the completion of Unit No.1, that of this total, $2,177 million was invested in Unit No. I and $559 million in Unit No. 2.

In connection with the Grand Gulf Nuclear Station, MSU has undertaken, to the extent not obtained by MSE from other sources, to furnish or cause to be furnished to MSE sufficient capital for construction and operation of the station and related purposes. % rough December 31, 1982. MSU had invested $590.9 million in the commen stock of MSE. In addition, at December 31,1982, MSE had made short-term borrowings of $114.8 million, had cutstanding bank borrowings of $1,0M million under a $1,31I million revolving loan agreement with a group of dome tic banks, had outstanding bank borrowings of

$315 million under a $31', rr/llion revolving loan agreement with a group of foreign banks and had outstanding $466.5 million of first mortgage bonds. In February 1983 the foreign hnk revolving loan agreement was increased to $378 million.

MSE is obligated to make annual cash sinking fund payments with respect to its 9%% bonds on July I of each year designed to 26 retire $2% rnilhon of those bonds by maturity and with respect to its 12%% bonds commencing on January 1,1985 designed to

(

retire approximately $93.5 million of those bonds by maturity. In addition, MSE is obligated to make prepayments from time to time of bank borrowings outstanding under its domestic and foreign revolving credit agreements. MSE has covenanted with the bondholders that it will complete Unit No. I no later than December 31,1984 and that Unit No. 2 will be completed no later than December 31,1988. In the event either of these covenants is not fulfilled or MSE defaults in respect of either the bonds or the bank borrowings, the bonds and the bank borrowir gs will become due end payable unless extensions of time can be arranged. In this event, MSU would be required to provide MSE with sufficient funds, to the extent not obta'ned by MSE from other sources, to meet the payment obligations of MSE with respect to any of the bonds and bank borrowings under the $1,311 million and $378 million revolving loan agreements then outstanding.

ne System oprcrating companies are obligated under agreements with MSE (MSE Agreements) in accordance with stated a

percentages to make payments or subordinated ad v ances adequate to cover all of the operating expenses and certain of the capital costs of MSE. Effective November 1981, the System operating companies entered into a reallocation agreement allocating the capacity and energy available to MSE from Unit Nos. I and 2 to LP&L, MP&L and NOPSI. This allocation was consistent with a prior allocation of capacity and energy for the units made among LP&L, MP&L and NOPSI pursuant to a memorandum of understanding executed by the System operating companies on July 21,1980. Each of the System operating companies, in accordance with the stated percentages set forth in the MSE Agreements, will remain primarily liable to MSE and its assignees for payments under the MSE Agreements. However, LP&L, MP&L and NOPSI, in proportion to their percentage allocations for Unit Nos. I and 2 as provided in the reallocation agreement, have agreed to assume and hold AP&L harmless from all of the responsibilities and obligations of AP&L with respect to the MSE Agreements, and, in consideration thereof, AP&L has relinquished its rights in the Grand Gulf Nuclear Station. AP&L would be required to make its share of the payments or advances under the MSE Agreements in accordance with its stated percentage set forth in the MSE Agreements only if the other System operating companies were unable to meet their contractual obligations.

De Federal income tax returns for the years 1971 through 1976 have been examined by the Internal Revenue Service (IRS) and adjustments have been proposed. The principal issue is whether customer deposits are includable in taxable income. Formal written protests have been filed and conferences are being held with Appeals Officers of the IRS. Any final liability for taxes resulting from settlement with the IRS would not have a material ef fect on net income since income taxes on customer deposits would be no malized. Most of the other issues have been settled and adequate provisior.s have been recorded.

SFI has contracted with a joint venture for a supply of coal from a mine to be developed in Wyoming which is expected to provide 150 to 210 million tons over a period of twenty-six to forty-two years primarily for the Independence Station. Under the contract, investment in the mine for leases, plant and equipment is the responsibility of the joint venture. However, in order to limit thejoint venture's investment rights and, hence, the amount to be paid to it as a component of the price of coal, the contract provided that SH invest 50% of the funds for plant and equipment in excess of $43.8 million up to $49.0 million and 100% of any funds required for such purposes in excess of the latter amount. Through 1982, SFI invested $4.8 million, which was borrowed from its parent companies, in coal leases to be mined by the joint venture. In addition to this amount, SFI anticipated at December 31,1982, that its total additional investment would be approximately $ 100 million, over the twenty-six to forty-two year life of the contract, including $44.8 million in 1983. Any funds supplied by SFI under the contract will be obtained either through borrowings or other arrangemants with its parent companies or through other methods of f'mancing he joint venture management had advised SFI that due to delays in obtaining mining permits first deliveries under the contract are estimated to be delayed until the first quarter of 1984. However, the necessary permits have been granted and mine construction is under way.

SFI is not experiencing any difficulty in obtaining alternate coal supplies at reasonable costs during this delay period. AP&L is currently purchasing coal for the White Bluff Station under an agreement that will provide approximately 100 million tons of coal over a twenty-year period.

SFI has entered into a long-term oil supply agreement with a major oil company providing for the purchase of 25,000 barrels of oil per day through 1996 with the options (1) upon one year's written notice, to permanently reduce the contract quantity to no less than 10,000 barrels per day, and (2) upon a sivmonth written notice, from time to time, to reduce the contract quantity by up to 10,000 barrels per day independent of (1) aNve. SFI has an agreement with another major oil company providing for the purchase by SFl of up to 200.000 barrels of oil per month through 1984.

SFI has a long-term program for the acquisition, conversion and enrichment of nuclear materials required for the fabrication of l

nuclear fuel which may be utilized in any of the present or proposed Middle South System nuclear generating stations. SFI presently has firm purchase commitments for the acquisition in 1983 of 125,000 pounds and in 1984 of 500,000 pounds of uranium in various stages of processing.

He Price-Anderson Act limits the public liability of a licensee of a nuclear power plant to $560 million for a single nuclear incident. Insurance for this exposure is provided by private insurance and an indemnity agreement with the Nuclear Regulatory l

Commission (NRC). Every licensee of a nuclear power plant is obligated, in the event of a nuclear incident involving any commercial nuclear facility in the United States that results in damages in excess of the private insurance, to pay retrospective l

assessments of up to $5 million per incident for each licensed reactor operated by it or up to a maximum per reactor owned of $10 million in any calendar year. At December 31,1982, the Middle South System had three licensed reactors.

AP&L is a rnember-insured of Nuclear Electric Insurance Limited (NEIL), a mutual insurer which provides its members with insurance coverage for the cost of replacement power incurred due to prolonged outages of nuclear units (NEIL I) and fer propeny damage in excess of $500 million caused by radioactive contamination or other specified damage (NEIL II). MSE is a member-insured under the NEIL 11 excess property insurance program and under a primary propeny damage insurance program

[

pmvided by Nuclear Mutual Limited (NML), another mutual insurer. As member-insureds with these mutuals, AP&L and MSF are sulject to assessments if losses exceed the accumulated funds available to the insurer. AP&L's present maximum assessment for incidents occurring during a policy year is approximately $25 million and MSE's is approximately $33 million.

27

Under the terms of their nuclear fuelleases, three subsidiaries are responsible for the disposal of spent nuclear fuel. Dese companies consider all costs incum:d or to be incurred in the use and dispot., l nuclear fuel to be proper components of nuclear fuel expense and provisions to recover such costs have been or will be made a applications to regulatory commissions. As of December 31,1982, AP&L, the only System company with an operating nuclear station, had collected approximately $31.3 million for the storage and disposal of spent fuel. AP&L is recovering a total of approximately $160 miilion for decommission-ing costs for its two nuclear units through increased depreciation charges.

In the interest of increased economic efficiency, LP&L and NOPSI have jointly begun development of a plan to consolidat:

the two companies and t$eir operations. Under the proposed arrangement, subject to the receipt of necessary regulatory and other approvals, the two companies will be consolidated into a new company to be called Louisiana Power & Light Company.

MSU, which currently owns all the outstanding scmmon stock of LP&L and NOPSI, would own all the common stock of the new company.

NOTE 10. LEASES De Company's subsidiaries account for leases on the same basis as that used by their respective regulatory authorities in the ratemaking process which determines the revenues utilized to recover the lease costs.

Application of criteria used to define a capital lease would permit recording the following assets and liabilities on the balance sheet:

1982 1981 1900 (in Musands)

Assets:

Utility plant.

$135,676

$129,308

$11I,988 Accumulated amortization.

(22,225)

(20,890)

(21,227)

Net.

$113,451

$108,418

$ 90,761 Other property and investments-net..

$ 47,406

$ 50,702 5 47,885 Liabilities:

Non-cunent obligatior.s under capital leases.

$162,388

$160,697

$143,305 Current obligations under capital leases.

$ 13,919

$ 10,804

$ 6,703 The recording of such leases would not materially affect the amounts reported as either expenses or net income.

At December 31,1982, the System companies had noncancellable leases (excluding nuclear fuel leases) with minimum rental commitments as follows:

(in Wusands)

$ 49,761 1983.

1984....

52,452 1985.

50,118 1986...

49,286 1987...

44,217 For years thereafter.

480. % 3

$726,797 Rental expense amounted to approximately $53.8 million, $45.9 million and $34.4 million in 1982,1981 and 1980, respectively.

Dree subsidiaries have entered into nuclear fuel leases aggregating $390.0 million. De leases, unless terminated sooner by one of the parties, will continue through 2018,2028 and 2029. Lease payments, which are not included in the tabulations above, are based on nuclear fuel use. Nuclear fuel lease expense of $40.1 million, $51.5 million and $37.3 million was charged to operations in 1982,1981 and 1980, respectively. The unrecovered cost base of the leases was $361.4 million, $309.2 million and $238.4 million at December 31,1982,1981 and 1980, respectively.

NOTE II, PENSION PLANS De companies of the Middle South System have various pension plans covering substantially all of their employees. Dese plans are administered by a trustee who is responsible for pension payments to retirees. Various investment managers have responsibility for management of the plans' assets. In addition, an independent actuary performs the necessary actuarial valuations for the individual company plans.

Effective January 1,1982, the companies modified the method of amoitizing prior service costs by changing from fixed amortization periods of from ten to thirty years to varying amortization periods not to exceed thirty years. De effec.of this change on 1982 pension expense was not significant. Total pension expense of the Company and its subsidiaries for 1982,1981 28 and 1980 was $24.5 million, $26.4 million and $21.3 million, respectively.

1 he comparison of the actuarial present values of accumulated plan benefits and plan net assets for the defined benefit plans is presented below. His comparison was determined in accordance with the provisions of Statement of Financial Accounting Standards No. 36 which requires the use of certain assumptions which are different from those used by the Company's actuary in determining an appropriate level of funding for the Company.

January 1, 1982 1981 (in Thousands)

Actuarial present value of accumulated plan benefits:

$209,812

$182,412 Vested...

Nonvested....

14,167 15,7 %

$223,979

$198,208 Total...

Net assets available for benefits..

5331,771

$289,4]6 He assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 9%.

NOTE 12. SETTLE 31ENT AGREESIENT WITil GAS SUPPLIER A dispute between a gas supplier and LP&L arising from the gas supplier's claimed inability to deliver full quantities of fuel gas due LP&L under several natural gas contracts was resolved by the execution of a settlement agreement on June 4,1982. De settlement agreement provides for the payment of $1.087 billion in cash (of which $587 million and $250 million were received by LP&L on June 4,1982 and January 3,1983, respectively, with the balance of $250 million to be received in January 1984) plus a guaranty of savings of at least $585 million in certain gas acquisition costs between 1982 and 1996. At a hearing held on December 21,1982, the LPSC voted to require LP&L to refund the settlement funds, including interest earned on the funds, to LP&L's customers as soon as administratively and legally feasible. By order dated January 17,1983, the LPSC required LP&L to make refunds to its customers in two installments in respect of the funds received in 1982 and 1983 under the settlement agreement, p!us interest earned on those funds. He first installment is to be made within sixty days of the order, and the second installment within six months of the order. In addition, the January 17 order required LP&L to refund the $250 million expected to be received in January 1984. Under Louisiana law and LPSC rules, any appeal of the LPSC order must be made by April 27, 1983.

Pending the decision by the LPSC, LP&L had used approximately $329 million of the settlement funds to repay its short-term borrowings incurred to finance its construction program and for other corporate purposes. As a result of the LPSC action, LP&L accrued in December 1982 interest expense in the amount of $19.2 million representing imputed interest on the amounts expended by LP&L during the period from June 4,1982 through December 31,1982.

NOTE 13. QUARTERIX RESULTS (UNAUDilED)

Consolidated operating results for the four quarters of 1982 and 1981 were as follows:

Quarter Operating Operating Net Earnings Ended Revenues income income Per Share (In Thousands of Dollars) 1982:

l March.

643,318 106,282 70,191

$0.56 June.

657,872 93,223 59,795

$0.46 September.

887,990 152,031 130,803

$0.95 December *..

712,550 84,790 49,806

$0.36 1981:

March.

588,403 79,544 51,850

$0.48 June.

589,472 70,170 44,129

$0.39 September..

914,636 173,1%

129,249

$1.10 1

I December.

679,277 85,084 56,255

$0.47 l

• In the month of December 1982, net income was decreased $9.9 million for interest expense accrued on the settlement agreement funds used by LP&L (see Note 12).

He business of the Middle South System is subject to seasonal fluctuations with the peak period occurring during the summer months. Accordingly, camings information for any three-month period should not be considered as a basis for estimating results 1

l of operations for a fell year.

29 i

f' l

l NOTE 14. EFFECT OF INFLATION ON OPERATIONS (UNAUDITED) 4 i

'Ihe following supplementary information about the effect of changing prices on the Company is provided in accordance with the requirements of Statement of Financial Accounting Standards No. 33, " Financial Reporting and Changing Prices". It should be viewed as an estimate of the effect of changing prices rather than as a precise measure.

Statement of Income from Operations and Other Financial Data Adjusted for Effects of Changing Prices for the Year Ended December 31,1982 (In Thousands)

Adjusted for Adjusted for As Reported in General Changes in the Financial Inflation Specific Prices Statements (Constant Dollars)

(Current Costs)

Revenuest.

$2,901,730

$2,901,730

$2,901,730 Operating expenses (excluding depreciation):.

2,2 %,950 2,296.950 2,2 %,950 Depreciation........

168,454 264,656 398,959 Total operating expenses..

2,465,404 2,661,606 2,695,909 Operating income........

436,326 240,124 205,821 Other income 8 335,147 335,147 335,147 Interest and other charges'....

460,878 460,878 460,878 Income from operations (excluding reduction to net recoverable cost)2..

$ 310,595

$ 114,393

$ 80,090 Increase in specific prices (current costs) of property, plant and equipment held during the yeari.

$ 682,694 Reduction to net recoverable cost.

5 (77,744)

(189,979)

Effect of increase in general price level.

(536,157)

Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost.

(43,442)

Gain from decline in purchasing power of net amounts owed..

220,723 220,723 Net

$ 142,979

$ 177,281

%ssumed to be in "averagefor the year" Jollars and thus are not restated.

'includmg the reduction to net recoverable cost, incomefrom operations on a constant Jollar basis would have been $36.649for 1982.

Mt December 31,1982 current cost ofproperty, plan. and equipment, net of accumulated depreciation, was $15.311.215, while historical cost or net cost l

recoverable through depreciatwn was $8.912.488.

Five. Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changir.g Prices (In Thousands of Average 1982 Dollars) 1982 1981 1980 1979 1978 OPERATING REVENUES.

$2,901,730 $2,941,718 $2,740,372 $2,427,885 $2,393,263 IIISTORICAL COST INFORMATION ADJUSTED FOR GENERAL INFLATION Income from operations (excluding reduction to net recoverable cost).

$ 114,393 $ 123,548 $ 61,665 $ 86,741 j

Income per common share (after dividend requirements on preferred stock and excluding reduction to net recoverable cost) 0.86 1.07 $

0.63 1.01 Net assets at year-end at net 30 recoverable cost.

52,453,905 $2,244,552 $2,127,082 $2,087,123 l

l

5 i

Five-Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices (in Dousands ofAverage 1982 Dollars) 1982 1981 1980 1979 1978 CURRENT COST INFORMATION Income from operations (excluding reduction to net recoverable cost).

S 80,090 $ 81,339 $ 20,850 $ 48,616 Income per common share (after dividend requirements on preferred stock and f

excluding reduction to net recoverable cost).

0.60 0.71 0.21 0.57 Excess of increase in general price level over increase in specific prices after reduction to net recoverable cost 5 43,442 $ 4 N,206 $ 547,692 $ 692,266 Net assets at year-end at net recoverable cost..

$2,453,905 $2,244,552 $2,127,082 $2,087,123 GENERAL INFORMATION Gain from decline in purchasing power of net amounts owed.

$ 220,723 $ 460,122 $ 610,553 $ M6,166 Cash dividends declared per common share..

1.67 1.73 1.86 $

2.N 2.16 Market price per common share at year-end.

14 % $

13 $

12 % $

15 % $

21 %

Average consumer price index 289.1 272.4 246.8 217.4 195.4 NOTE: TheStatementrequiresthathistoricalcostinformationadjustedforgenera!inflationandcurrentwstinformationbeprovidedfor1979andsubsequent years. Comparable information is not readily availablefor 1978 and thus is not provided.

Constant dollar amounts represent historical costs adjusted for the effects of general inflation. The etfects are determined by converting these costs into dollars of equal purchasing power using the Consumer Price Index for all Urban Consumers (CPI-U).

Current cost amounts reflect the changes in specific prices of property, plant and equipment from the year of acquisition to the present. He current costs of property, plant and equipment, which represent the estimated costs of replacing existing plant assets, are determined by applying the llandy-Whitman Index of Public Utility Construction Costs (liWI) to the cost of the surviving plant by year of acquisition. Land and certain other plant assets which are not included in the IIWI were converted using the CPI-U The difference between current cost amounts and constant dollar amounts results from specific prices of property, plant and equipment (as measured by the llWI) changing at a rate different than the rate of general inflation (as measured by the CPI-U).

De current year's depreciation expense on the constant dollar and current cost balances of property, plant and equipment were determined by applying the Company's depreciation rates to the indexed amounts.

Fuel inventories, oil and gas reserves, the cost of fuel used in generation and gas purchased for resale have not been restated from their historical cost in nominal dollars. Regulation limits the recovery of fuel and purchased gas costs through the operation of adjustment clauses or adjustments in basic rate schedules to actual costs. For this reason, fuel inventories and oil and gas reserves are effectively monetary assets.

As prescribed in Statement of Financial Accounting Standards No. 33, income taxes were not adjusted.

The regulatory commissions to which the Company's subsidiaries are subject allow only the historical cost of plant to be recovered in revenues as depreciation. Therefore, the excess cost of plant stated in terms of constant dollars or current cost over the historical cost of plant is not presently recoverable in rates. This excess is reflected as a reduction to net recoverable cost.

While the ratemaking process gives no recognition to the current cost of replacing property, plant and equipment, the Company believes, based on past experiences, that it will be allowed to earn on the increased cost ofits net investment when replacement of facilities actually occurs.

To properly reflect the economics of rate regulation in the Statement of Income from Operations presented above, the

^

reduction of net property, plant and equipment to net recoverable cost is 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 property, plant and equipment. Since the depreciation c.n this plant is limited to the recovery of historical costs, the Company 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.

31 i

Middle South Utilities Inc. & Subsidiaries 0

MANAGEMENT'S FINANCIAL DISCUSSION AND ANAIXSIS Financial Condition tem operating companies at year-end 1982 as compared to The rate increases implemented during 1980 through 1982 year-end 1981. These ratios limit the amounts of additional strengthened the Middle South System's financial condition first mortgage bonds and preferred stock w hich the operating during 1981 and 1982. Ilowever, additional rate relief is companies may issue to finance their construction programs critical to generate adequate internal funds to supplement the and other capital requirements. Based on 1982 year-end external financings needed to continue the System's con-ratios, and after giving effect to the sales in February and struction progam and to cover the costs of two nuclear March 1983 of $225 million of bonds and $85 million of generating stations expected to be placed in commercial preferred stock, the operating companies could have issued operation in 1983 and 1984. At the end of 1982, the amount approximately $546 million of additional bonds or $60 mil-invested in construction work in progress (CWIP) was ap-lion of additional preferred stock at annual interest or div-proximately $5.0 billion, an increase of $1.1 billion over the idend rates of 12 percent. Further increases in earnings end of 1981 and $1.9 billion over the end of 1980. Despite through timely and adequate rate relief will be essential to the 1980-82 rate increases, the System is still earning below permit continued sales of these senior securities in amounts the rates of return granted to the operating companies in their sufficient to finance externally the System's capital require-recent rate proceedings, which indicates that some of the ments.

increases were neither timely nor adequate.

The System operating companies are currently authorized At the end of 1982, the System Companies had $314.5 to make short-term borrowings in an aggregate amount out-1 million in rate increase requests that were either pending or standing at any one time of up to the lesser of $510 million or on appeal. In January 1983, LP&L and NOPSI filed rate 10 percent of capitalization. At December 31,1982, these requests aggregating $525 million in additional net revenues companies had outstanding $45 million of short-term bor-for 1984 over projected 1983 revenues, of which $213 mil-rowings, compared to $116 million and $95 million at De-lion was classified by the companies as requiring expedited cember 31,1981 and 1980, respectively. Unused lines of regulatory approval. These two rate requests were filed to credit available to the operating companies amounted to cover both the increased costs of operations in general and

$193 million at year-end 1982. Subsequent to year-end, the the costs associated with the nuclear generating stations consolidated lines of credit, which are available to the oper-expected to be placed in commercial operation in 1983 and ating companies, were increased an additional $ 100 million.

1984. Concurrent with these filings, the companies proposed On June 4,1982 LP&L received an initial payment of a rate moderation plan as an alternative to traditional

$587 million resulting from the settlement of a dispute with a ratesetting procedures that is intended to mitigate the imtially gas supplier (see Note 12 to the Consolidated Financial higher cost of power from one of the nuclear stations. In the Statements " Settlement Agreement With Gas Supplier").

long mn, the plan is expected to serve the best interests of Pending a decision by the Louisiana Public Service Commis-both the ratepayers and the stockholders because the com-s on (LPSC) as to how the proceeds were to be returned to panies wdl be able to provide adequate energy at a reasonable ratepayers, LP&L used approximately $329 million of the cost while maintaining their financial stability. Also, in proceeds thmugh December 21,1982 to repay its short-term January 1983, MP&L was granted a $47.5 million rate borrowings incurred to finance its construction piogram and mcrease, effective February 15, 1983, out of the $93.9 for other corporate purposes. On December 21,1982, the million requested. (See Note 2 to the Consolidated Fmancial LPSC voted and subsequently ordered on January 17,1983, Statements - Rate Matters.)

that refunds be made to ratepayers of all proceeds received Liquidity and Capital Resources under the settlement agreement, plus interest earned on those 1

During the period 1980 to 1982, the Middle South System funds. After December 21,1982, LP&L ceased expending had construction expenditures of $3.5 billion, including al-any further portion of the settlement proceeds and continued lowance for funds used during construction (AFDC), of to finance its construction program and other corporate re-which 59 percent was funded by external financing. Pro-quirements through short-term borrowings and, i, early j

jected construction expenditures for 1983 through 1985 are 1983, through sales of additional first mortgage bonds and

$3.1 billion and it is expected that approximately the same preferred stock. LP&L's ability to continue to finance its percentage will be landed through external sources.

construction program through 1983 and to make such cash In 1982, funds were generated externally by the System refunds to ratepayers arising from the settlement agreement operating companies through the sales of $60 million of as may legally be reqmred will be dependant on prompt and f

preferred stock, $185 million in first mortgage bonds and favorable regulatory action on its recent request for emergen-through the sale of a portion of the coal handling equipment cy rate relief.

at the Independence Station yielding proceeds of $25 mil-MSL contemplates construction expenditures for 1983 lion. In addition, promissory notes and other Ic,ng-term debt, through 1985 of $1,096 mi!Iion, including AFDC, for its m an aggregate amount of approximately $516 million, were portion of the costs of the Grand Gulf Nuclear Station. The issued by the Company and its non-operating subsidiaries.

f rst unit of Grand Gulf is scheduled for commercial opera-Also during 1982, the Company raised $21 I million through tion during the fourth quarter of 1983. Comtruction on the sales of its common stock.

second unit has been limited and the schedule and cost to Although net income for the System increased from $281 comp!cte the second unit are dependent, among other things, million to $311 million, net income exclusive of AFDC upon the completion of the first unit. In connection with decreased by $23 million, principally as a result of construe.

Grand Gulf, the Company has undertaken to provide or cause tion financing costs. This decrease resulted in declines in the to be provided to MSE, sufficient capital to complete the 32 Mortgage and Charter coverage ratios of certain of the Sys-plant. To this end, through 1982, the Company had invested J

i I

$590.9 million in the common stock of $1SE. In addition, at 1981 over 1980 revenues which was primarily due to rate December 31,1982, N1SE had made short-term borrowings increases implemented during 1980 and 1981and higher of $114.8 million, had outstanding bank borrowings of KWil sales in 1980 and 1981. In contrast, during 1982, the

$1,06% million under a $1,31 I million revolving loan agree-increase in purchased power costs (which were recovered ment with a group of domestic banks, had borrowed the full through billings to customers) amounted to $82 million, or

$315 million then available under a separate revolving loan 31 percent, over 1981, and was the main component of the agreement with a group of foreign banks and had outstanding increase in operating revenues. Energy sales to retai! custom-

$466.5 million of first mortgage bonds. Since year-end, ers decreased 1.7 percent to 49.4 billion KWil in 1982 as 51SE obtained a $63 million increase in its foreign revolving compared to 50.2 billion KWil in 1981 w hich was less than a loan agreement and is negotiating with its domestic banks for 1 percent increase over 1 30 KWil sales. The decline in an increase of up to $340 million in the domestic loan sales to industrial customers of 5.8 percent in 1982 redects agreement to provide N1SE with additional funds necessary the adverse impact on industrial activity of the recent reces-to complete the first unit of the plant. 51SE has covenanted to sion and is the major cause of the decline in retail energy complete Unit No. I by December 31,1984 and to complete sales. Residential sales have been level since 1980 due to Unit No. 2 by December 31,1988. If either of these cove-conservation efforts by residential customers and the return nants is not fulfilled, the oustanding bonds and bank borrow-of more normal weather conditions in 1931 and 1982.

ings would then become due and payable, unless extensions Gas operating revenues continued to grow rapidly during could be arranged, and the Company would be required to 1982 as increases in the cost of purchased gas (which was provide htSE with suf0cient funds to meet these obligations billed to customers) more than offset the r-duction in the to the extent that the funds are not provided from other volume of gas sold. Gas operating revenues increased 24 percent and 20 percent, respectively, in 1982 and 1981 as sources.

in order to maintain an acceptable capital structure and to purchased gas costs increased 29 percent and 21 percent and provide the System operating companies and htSE with the volume of gas sold declined 6 percent and 8 percent in additional funds to continue their construction programs, the each of the tyco years.

Company must maintain its ability to sell its common stock.

The increases in interest on long-term debt and preferred During the period 1980 through 1982, the Company issued dividend requirements of 1I percent and 13 percent, respec-an aggregate of 48,900,936 shares of common stock, provid-tively, in 1982 and 35 percent and 10 percent, respectively, ing the Company with net cash proceeds of approximately in 1981 rcGect the issuances of additional debt and preferred

$607 million. Rese funds were utilized to purchase addi-stock, the proceeds of which were appliert to finance con-tional common stock of certain of the Company's sub-struction and to refund maturing obligations, at rates that sidiaries and to repay revolving bank borrowings. The Com-exceeded historical levels.

pany's existing revolving credit agreement provides for bor-Income tax expense declined in 1932 from 1981 by $24 rowings of up to $172.5 million, of which $101.5 million million, or 50 percent, due primarily to the increased amount remained unu:cd at December 31, 1982.

of AFDC recorded in 1982 over that recorded in 1981.

In addition to obtaining ;unds for its constmetion pro-The decrease in miscellaneous income and deductions in gram, the hiiddle South System will need to raise approx-1982 reDects a retum to a more normal level. The 1981 imately $710 million during the period of 1983 through 1985 amount was unusually large due to the recording of gains on to meet debt maturities, cash sinking fund requirements and the sale of CWIP.

to make preferred stock sinking fund redemptions. It is Effect of InHation anticipated that a substantial portion of these requirements Despite the reduced level of inflation during 1982, its will be funded through external sources, including the sales impact on the Company's operations in recent years has been of similar securities, with the balance being provided by significant. (See Note 14 to the Consolidated Financial State-intemally generated funds.

ments "Effect of InHation on Operations".)

Results of Operations Summary De hiiddle South System's net income for 1982 was The improvement in the financial condition of the hiiddle approximately $311 million, an increase of $29 million over South System during 1981 and 1982 was largely attributable 1981 and $115 million over 1980. Ilowever, the quality of to the rate increases and cost savings implemented since these earnings decreased since AFDC as a percent of net 1980. At Febmary 1,1983, approximately $746 million in income increased from 107 percent to 114 percent from 1981 net rate increase requests were either pending or on appeal, to 1982. He 1982 ratio, however, was an improvement over of which $525 million oas primarily related to two generat-1980's ratio of 122 percent. AFDC increased to $353 million ing stations nearing completion. These stations, which will in 1982 up from $301 million and $240 million in 1981 and provide an additional 2.229 megawatts of electric generating 7

1980, respectively. AFDC will remain a substantial portion capacity, represent an investment in CWIP of over $4.5 of net income until the two nuclear generating stations sched-billion, of which less than $1.0 billion has been earning a full uled for commercial operation in 1983 and 1984 are in cash return for the Company. Since they are expected to be commercial operation.

placed in commercial operation in 1983 and 1984, it is Although 1982 consolidated net income increased 10.7 critical that the mechanism to recover the capital and operat-percent over the prior year, earnings per share declined from ing costs of the stations be in place in 1983. The actions taken

$2.44 to $2.33. The decrease was primarily the result of a by the System's various regulatory commissions and the 15.6 percent increase in the average number of shares out-courts on these and other rate applications currently pending standing.

or on appeal, in terms of swift, fair and sufficient rate relief.

Electric operating revenues for 1982 increased $91 mil-will determine the Company's ability to meet the energy lion, or 3.5 percent, over 1981 revenues. This was substan-requirements of its customers, while maintaining financial

.i tially less than the $404 million, or 19 percent, increase in stability and providing a reasonable return to stockholders.

33 J

1 Middle South Utilities, Inc. & Subsidiaries 1972-1982 FINANCIAI, RECORD (in ihomandu CONSOI.lDATED SU.%1.\\1ARY OF OPERATIONS 1982 1981 1980 Operating Resenues:

Electric

$ 2,673,572

$2,582,778

$2,179,232 Natural gas 172,692 139,242 116,067 Transit.

55 466 49,768 44,i12 Total.

2,901,730 2,771,788 2.339,4 I I Operating Expenses:

Operation:

Fuel for electric generation.

1,066,325 1,083,064 946,145 Purchased power.

345,076 263,559 281,951 Gas purchased for resale.

138,890 107,768 88,864 Deferred fuel and other.

327,315 343,661 281,088 Mainternnce 142,806 135,500 111,831 Depreciation 168,454 159,015 141,997 Taxes other than income taxes.

103,456 95,495 84,690 Income taxes.

172,582 175,732 105,023 Total.

2,465,404 2,363,794 2,041,589 Operating Income.

436,326 407.994 297,822 Other Income:

Allowance for equity funds used during construction.

182,342 143,369 122,277 Miscellaneous income and deductions-net 4,778 22,545 7,019 income taxes-cr.

148,027 127.056 106,284 Total.

335,147 292.970 235,580 Interest and Other Charges:

Interest on long-term debt 488,750 441,894 327,468 Other interest-net.

74,130 74,507 72,666 Allowance for borrowed funds used during construction-(cr.).

(170,438)

(157,5 I I)

(l!7,663)

Preferred dividend requirements of subsidiaries 68,436 60,591 55,024 Minority interest in subsidiary's net income.

Total.

460,878 419,481 337,495 Net income.

$ 310,595

$ 281,48.!

$ 195.907 Earnings Per Share (based on average number of shares outstanding).

$2,33

$2.44

$2.01 Disidends Declared Per Share.

$1,67

$1.63

$1.59 Ascrage Number of Common Shares Outstanding

($5 Par Value).

133,193,296 115,175,550 97,469.169 UTl!.lTY Pl. ANT AND CAPITAL.lZATION DATA (at December 31)

Fixed Assets:

Utility plant.

$10,464,188

$9,080,436

$7,893,636 Less-Accumulated depreciation and amortization.

I,551,700 1,407.584 1.2M,525 Utility plant-net

$ 8,912,488

$7.672,852 56,629,111 Capitalization:

Long-term debt.

$ 4,429,447

$3,896,370

$3,392,309 Preferred stock (including premium and issuance expense)

Without sinkinc funel 330,967 330,967 330,967 With sinkmg turid.

354,957 300,219 283,165 Common equity.

2,481,916 2,185,546 1,901,2N Total.

$ 7,597,287

$6,713,102

$5,907.645 Capitalization Ratios:

Long-term debt.

58.3 9 58.09 57.49 Preferred stock (including premium and issuance expense).

9,0 9.4 10.4 34 Common equity.

32.7 32.6 32.2 1

L i

1979 1978 1977 1976 1975 1974 1973 1972

$1,671,491

$1,485,901

$1,325,264

$1,064,116

$ 867,MI

$ 768,433

$ 609.082

$ 550,089 117,256 95,284 83,040 63,852 48,928 38,373 38,362 31,884 36,996 36,399 31,828 I8,873 13,176 11,091 10,933 11,408

> I,825,743 1,'il 7.584 1,440,132 1,146,841 929,745 817,897 658,377 593,381 697,606 623,402 568,990 422,2N 294,482 259,435 149.882 120,940 258,377 133,929 86,087 61,439 35,075 43,880 22,458 18,705 88,801 68,657 58,577 37,852 30,994 21,807 19,936 18,774 203,733 197,582 180,617 147,919 138,664 116,586 107,776 102,968 111,394 99,941 72,708 58,694 50,729 46,662 40,776 36,893 119,3N I12,805 106,748 101,045 92,770 74.635 68,78i M,439 77,349 69,771 67,306 61,561 56,481 49,127 49,224 46,068 49,969 84,448 96,753 68,795 55,560 31,632 52,957 52,801 1,607,033 1,390.535 1.237,786 959.509 754,755 643,7M 511,790 461,588 218,710 227.049 202,346 187,332 174,990 174,133 146,587 131,793 124,086 93,573 65,346 62,169 46,064 49,509 31,948 22,188 7,940 6,239 6,910 8.329 4,397 2,385 2,421 913 76,232 50,105 29,393 18,287 14,175 (1,788)

(1,069)

(455) 208,22 149,917 101,649 88.785 M,636 50,606 33,300 22,646 255,242 199,212 153,005 132.719 113,486 105,532 72,464 61,i10 43,990 23,161 18.323 15,571 19,177 8,094 3,723 2,870 (89,247)

(54,717)

(34,031) 36,2M 25,477 23,109 21,780 16,660 15,040 13.I81 10,M2 46 246,249 193,133 160,406 170,070 IJ9,323 128,666 89.368 74,668

$ 180,719

$ 183,833

$ 143.589

$ 106,047

$ 90.303

$ 96,073

$ 90,5I9 5 79,771

$2.12

$2.43

$2.16

$l.82

$1.78

$2.I7

$2.09

$1.98

$1.535 51,46

$1.395

$1.335

$1,275

$1.23

$1,15

$1.07 85,444,691 75,522,179 66,598,876 58,395,628 50,733,782 44,279,481 43,376,255 40,257,053

(

$7,002,052

$6,052,023

$5,183,284

$4,539,891

$3,953.814

$3,470,598

$3,054,867

$2.672,4M 1,139,164 1,038,256 935,702 831,930 747,63 668,148 608.613 546,378 L $5,862,888

$5,013,767

$4,247,582

$3,707,961

$3.206.202

$2.802,450

$2.446,254

$2,126,086

$3,017,816

$2,629,711

$2,175,471

$1,965,985 51.75I.328

$1.529,958

$I.341,637 51,I47,127 330,967 280,712 280,712 250,679 240,627 240,627 230,611 205,558 193,507 60,063 60,063 60,063 60,063 1,659,736 1,412,254 1,196,427 1,010.278 864,035 746,628 705,212 576,262

$5,202.026

$4,382,740

$3,712.673

$3,287,005

$2.916,053

$2,517,213

$2,277,460

$ 1.928,947 58.0%

60.0 %

58.6 %

59.8 %

60.1 %

60.8 %

58.9 %

59.5 %

10.1 7.8 9.2 9.5 10.3 9.5 10.1 10.6 31,9 32.2 32.2 30.7 29.6 29.7 3I.0 29.9 35

)

CORPORATE INFORMATION i

INVESTOR INFORMATION DIVIDENDS DECLARED At the close of 1982, there were 200.114 stockhold-Recognizing the importance of providing a fair re-ers of record of Middle South Utilities, or about 6.5 turn on stockholder investment, the Board of Directors percent more than a year earlier. The number of shares authorized the increasing of the common stock quarter-of common stock outstanding increased from ly dividend payment by one cent per share, effective 123,787,000 to 139,334,000 during the 1982 calendar with the January 3,1983, dividend. The new quarterly year.

rate,42% cents per share, is equivalent to an annual DIVIDEND REINVESTMENT yte f $1.70. In all but one year since its organization in 1949, Middle South Utilities has been able to m-AND STOCK PURCIIASE PLAN crease its dividend rate.

1 The Company's Dividend Reinvestment and Stock An estimated 92 percent of dividends paid in 1982, Purchase Plan was amended as of December 2,1982, to for income tax purposes, are treated as nontaxable permit participation by holders of preferred stock return of capital to the stockholder primarily because a l

issued by the System operating companies. The Plan large portion of net income resulting from capitalizing continued to be a popular option during the year.

costs of capital invested in projects still under construc-The Plan provides for stockholders to purchase addi-tion does not constitute taxable income.

tional shares of MSU common stock with reinvested ORGANIZATIONAL CIIANGES dividends at a 5 percent discount without payment of any brokerage commission or service charge. More Regulatory agencies are presently reviewing the fil-than 67,000 stockholders are now participating in the ings made to effect the consolidation of two System Plan, an increase of 60 percent over 1981.

companies, Louisiana Power & Light Company and For federal income tax purposes, the difference be-New Orleans Public Service Inc., into a new company tween the price paid and the fair market value on the to be called Louisiana Power & Light Company. Plans investiaent date is considered as an additional distribu-are ready for completing the necessary personnel and tion and is treated the same as dividends paid. The operational adjustments required for the consolidation.

MSU common stockholder may elect to exclude up to which will be implemented following regulatory

$750 ($1,500 jointly) of the taxable amount of div-approval. Benefits to be derived from consolidation idends reinvested in the MSU Dividend Reinvestment include improved efficiency in operations, reduced du-and Stock Purchase Plan for 1982. Taxes on such rein-plication of organization structure, and simplified pro-vested dividends in a qualified program are deferred ceedings before regulatory authorities.

until the stock is sold or otherwise disposed of.

Middle South has received approval from the Secur-l ities and Exchange Commission to organize a new

]

subsidiary corporation. The new unit would be formed j

to develop various investment opportunities for the m,

_g System and could include putting to greater use the

%*;,j capabilities and expertise presently included in the Sys-a tem.

i d Possible projects or services to be explored include 1

pn co-generation facilities, renewable resource projects, 9

steam production facilities, waste disposal facih, ties, s

waste management and load control programs, devel-

)

( " j opment of solar energy and solar power facilities, ex-e pioration and development of mineral resources, syn-1 thetic fuel development, fuels transportation programs, communications facilities, educational services, and computer softwaie services. Further regulatory filings j

would be required prior to the new subsidiary undertak-ing any new type of activity.

I The new subsidiary would use the present physical 9

facilities of the System, and its officers would consist of certain managerial people within the System. Once i

g y personnel would be dedicated solely to its business.

]j significant activity had begun, full-time management aJ+

l U.S. Congressman Gillis Long of Louisiana, right. presented MSU Chairman and President Floyd W. Lewis a ceremonial White flouse pen from the signing of the Nuclear Waste Policy f

Act of 1982, which provides for a national program that will include the handling of spent nuclearfuelfrom electric plants.

36 famg was instrumentalin passage of the bill.

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1 Middle South l'tilitieN. Inc g..q I

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