ML20024H322
| ML20024H322 | |
| Person / Time | |
|---|---|
| Site: | La Crosse File:Dairyland Power Cooperative icon.png |
| Issue date: | 05/22/1991 |
| From: | Mueller R DAIRYLAND POWER COOPERATIVE |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| References | |
| LAC-13062, NUDOCS 9105310191 | |
| Download: ML20024H322 (51) | |
Text
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DA/RYLAND hN/a/
COOPERATlVE. 3200 tAST AVE SO
- PO BOX 89 + LACROSSE,WISCONS!NJ_4p02 OBU (608) 788-4000 FAX NO (608) 787-1420 May 22, 1991 RE:
1AC-13062 DOCKET NO. 50-409 U.S. Nuclear Regulatory Commission Attn:
Docament Control Desk Washington, D.C.
20555 Centlemen:
DAIRYlAND POWER COOPERATIVE LA CROSSE BOII.ING WATER REACTOR (IACBWR)
PROVISIONAL LICENSE NO. DPR-45 FINANCIAL STATEMENTS AND AUDITORS' REPORT
Reference:
1) 10 CFR 50.71.(b)
In accordance with the requircments of Reference 1, we are forwarding three (3) copies of the annual financial report and certified financial statements for Dairyland Power Cooperative for the years 1990 and 1989. We will forward our 1990 Annual Report to you as soon as it is completed.
Sincerely, DAIRYIAND POWER COOPERATIVE j,n
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Robert C. Mueller Assistant General Manager and Controller RCM:pls Enclosures cc:
C. Bert Davis, Regional Administrator, NRC-DRO 111 Peter B. Erickson, NRC Project Manager J.
Parkyn, LACBWR g
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7 9105310191 9.10500 PDR ADOCK 05000I09 I
PDR m
ARTHUR ANDERSEN AR1110d ANDI.RSE N & CO.,S.C.
Jairylanc Power Cooaerative anc Suasiciary Consolidated Financial Statements as ofDecember 31,1990 and 1989 Together With Report of Independent Public Accountants
i n
1 l
Mis s cwous, M issimon REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Members and the Board of Directors, Dairyland Power Cooperative:
We have audited the accompanying consolidated balance sheets of Dairyland Po+er Cooperative (a Wisconsin cooperative) and Subsidiary as of December 31, 1990 and 1989, and the related consolidated statements of revenues, expenses and patronage capital, and cash flows for the years then ended. These financial statements are the responsibility of the Cooperative's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dairyland Power Cooperative and Subsidiary as of December 31, 1990 and 1989, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Minneapolis, Minnesota, March 6, 1991 l
1
o s e -o l
DAIRYLAND POWER C00PERA CONSOLIDATED BAl DECEMBEl (In Thous ASSETS 1990 1989 ELECTRIC PLANT (Notes 1, 2 and 9):
Plant and equipment, at original cost
$531,762 $521,914 Less-Accumulated depreciation (249,061) (232,306) 282,701 289,608 Construction work in progress 15,607 14,431 Total electric plant 298,308 304,039 OTHER ASSETS:
Investments (Note 1) 44,370 45,946 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation 9,856 9,856 Investment in fiber optics venture (Note 8) 2,031 2,431 Pollution Control Bond proceeds on deposit with trustee 1,953 1,945 Deferred charges-LACBWR costs, net (Note 9) 11,569 13,412 Other 1,664 1,368 Total other assets 71,443 74,958 CURRENT ASSETS:
Cash and cash equivalents (Note 1) 23,472 32,643 Short-term investments, at cost, which approximates market 27,328 13,302 Acccunts receivable-Energy sales 14,663 15,865 other 1,610 1,300 Inventories, at average cost-Fossil fuels 25,741 31,853 Materials and supplies 11,137 10,120 Prepaid expenses 827 763 Total current assets 104,778 105,846
$474,529 $484,843 I a accompanying notes are an integral pat
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. _ _ _ - _. _ _ -. - _ _ _ - _ _ _ _ _. - _ _ _ -. _ __--.-_ J
EIVE AND SUBSIDIARY SI APERTURE ANCE SHEETS CARD
- 31 AISD AV3II"h\\"
ands)
Aperture Card
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CAPITALIZATION AND LIABILITIES 1990 1989 CAPITALIZATION:
Member and patron equities-Membership fees 10 $
10 Patronage capital 83,088 78,360 Total member and patron equities 83,098 78,370 Long-term obligations, net of current maturities (Note 2) 335,754 346,018 Total capitalization 418,852 424,388 DEFERRED CREDITS (Notes 5 and 7) 22,500 19,724 COMMITMENTS AND CONTINGENCIES (Note 6)
CURRENT LIABILITIES:
Current maturities of long-term obligations 9,632 9,348 Advances from member cooperatives (Note 3) 9,260 10,744 Accounts payable 4,470 7,441 Accrued liabilities-Payroll and vacation pay 3,112 3,233 Taxes 1,512 1,526 Interest 859 5,463 Other (Note 6) 4,332 2,976 Total current liabilities 33,177 40,731
$474,529 $484,843 t of these consolidated balance sheets.
Cl 0 5~ 3 ) o } 9 ) - 0)
I DAIEYLAHp POWER _GDDEERATlYE_AHD__S11MIDIARY l
CDESSLIDATED._S.TATEMfMILDf_EXVE tules,
EXPEESIE_AND_.fATEQNAGE_CAELTAL FOR Tl[H YEARS ERDED_DEG21BER_31 (In Thousands)
__199D._
___1189 OPERATING REVENUES:
Sales of electric energy
$156,170 $155,855 Other 1,472 947 Total operating revenues 157,642 156,802 OPERATING EXPENSES:
Fuel 60,012 59,129 Purchased and interchanged power 7,699 10,093 Other operations 28,716 25,603 Maintenance 12,143 11,730 Depreciation and amortization (Notes 1 and 9) 19,570 18,456 Taxes 6,783
' 611 Total operating expenses 134,923 131,622 Operating margin before interest and other deductions 22,719 25,180 INTEREST AND OTHER DEDUCTIONS:
Interest 24,973 25,545 Allowance for funds used during construction (Note 1)
(828)
(1,683)
Other (Notes 1 and 8) 972 2,829 Total interest and other deductions 25,117 26,691 Operating deficit (2,398)
(1,511)
NONOPERATING MARGIN, principally investment income 9,303 9,292 Net margin 6,905 7,781 PATRONAGE CAPITAL, beginning of year 78,360 73,494 RETIREMENT OF CAPITAL CREDITS (Note 4)
(2,177)
(2,915)
PATRONAGE CAPITAL, end of year, including margins assignable of $6,905 and $7,781
$ 83,088 $ 78,360
====
The accompanying notes are an integral part of these consolidated statements.
i DAIRYlAND I'0WER C001'EKATIVE AND SUliS1 DIARY CONSOLIDATED.lTATEMENIS._OF CASIL ELOWS FOR_ Tile JEAKS 3NDED.DECEMDEIL31 (In Thousands) 1990.
.1989_
CASil Fl0W PROVIDED BY (USED FOR):
Operating activities-Net margin
$ 6,905 $ 7.781 Depreciation and amortization 19,570 18,456 Provision for diminution in value of investment 1,350 1osses from fiber optics venture 602 1,341 Other 886 1,461 Change in current operating items:
Accounts receivable 892 1,473 Inventorier.
5,095 (2,709)
Prepaid expenses (64)
(95)
Accounts payabic (2,971)
(1,848)
Accrued liabilities (3,383) 1,233 Cash provided m: operating activitlen 27,532 28,443 Financing activities-Proceeds from borrowings 4,439 7,b44 Repayment of debt obligations (15,903) (14,402)
Retirement of capital credits (2,177)
(2,915)
Funds provided under cost sharing agreement, net 3,250 Cash used for financing activities (10,391)
(9,473)
Investing activities-Electric plant additions, net (13,660) (21,819)
Net sale (purchase) of short-tr.rm and other lavestments (12.450) 13,891 Investment in nad advances to fiber optics venture (202)
(625)
Cash used for investing activities (26,312)
(8,553)
Net cash flow during the year (9,171) 10,417 CASil AND CASil EQUIVALENTS:
Beginning of year 32,643 22,226 End of year
$23,472 $32,643
...o...
The accompanying notes arc an integral part of these connolidated statements.
DAIRY 14NDl0W ER_ COD EERAIIVILNRL SUMIDJ ARY NQIEs To CONSOLIDAIEDl1NANCIALSIAIEMENIS
- 1. SIMARLOLSIGNE1CANLACCDURIINGl0LlClES:
Organiz_ation Dalryland Power Cooperative (the Cooperative) is an electric generation and transmission cooperative association organized under the laws of the states of Wisconsin and Minnesota. The Cooperative's principal offices are located in Wisconsin. The Cooperative provides wholesale electric service to Class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota. Iowa, Illinois and Michigan and provides electric and other services to Class C, D and E members.
The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Commission as adopted by the Rural Electrification Administration (REA), the Cooperative's principal regulatory agency.
The consolidated financial statements include the accounts of the Cooperative and its wholly owned subsidiary, Curtis Telecommunications. Inc. (CTI). All intercompany balances and transactions between the Cooperative and CTI have been eliminated.
DePIe.clation Depreciation is provided based on the straight-line method at rates which are designed to amortize the original cost of properties over their estimated useful lives and includes a provision for the cost of removal and decommissioning of the properties. The provision for depreciation averaged 3.9% and 3.8% of depreciable plant balances for 1990 and 1989.
Income _laxes The Cooperative is exempt from federal and state income taxes and, accordingly, no provision for such taxes is reflected in the consolidated financial statements.
Allswancedor._fsnsidsid_DurinL_ConaltsrAion Allowance for funds used during construction represents the cost of external and internal funds used for construction purposes and is capitalized as a component of electric plant. The amount of such allowance is determined by applying a rate to certain electric plant additions under construction. The rates used were 8.0% in 1990 and 7.8% in 1989.
Eraner1LAdditions The cost of renewals and betterments of units of property (as distinguished from minor items of property) is charged to electric plant accounts. The cost of units of property retired, sold or otherwise disposed of, plus removal costs, less salvage, is chargM to accumulated depreciation. No profit or
i
. l loss is recognized in connection with ordinary retirements of property units.
Maintenance and repair costs and replacement and renewal of minor items of l
property are charged to operating expenses.
IMtElmtMH Investments consist primarily of commercial paper and government obligations.
All investments are recorded at the lower of aggregate cost or quoted market value. The carrying value of the investments is adjusted for amortization of premiums and accretion of discounts.
During 1989, the Cooperative reduced the carrying value of one of its investments by $1,350,000 to recognize the estimated permanent decline in the value of this investment. The provision for loss is included in other deductions in the accompanying consolidated statements of revenues, expenses and patronage capital. This investment was sold in 1990 for net proceede that approximated carrying value.
Gaalkend GASH _EsluinlrMR Cash equivalents include all highly liquid investments with an original maturity of three months or less. Cash and cash equivalents primarily consist of conmercial paper stated at cost, which approximates market.
SnphmentnLGanhJ10w_Inf91molisn During 1990 and 1989, the Cooperative paid interest, net of capitalized interest, of $28,749,000 and $24,013,000, respectively.
- 2. LQNG-TERM OBLIGATIOES:
Long-term obligations at December 31 consist of the following (in thousands):
_1%Q--
-,.1 % 9 _
REA obligations, 2%
$ 58,257 $ 62,963 REA obligations, 5%
31,498 32,163 FFB obligations, 7.5% to 10.6%
218,518 221,791 h8UCFC obligations, 8.9%
5,310 5,728 City of Alma, Wisconsin, pollution Control Bonds:
Fixed rate (5.6%)
10,645 10,990 Adjustable rate (6.2% at December 31, 1990) 13,900 13,900 City of La Crosse, Wisconsin, Industrial Development Revenue Bonds, adjustable rate (6.2% at December 31, 1990) 4,160 4,160 Capitalized lease obligations, principally at implicit interest rates of 7.1%, due in varying amounts through 1995 3,098 3,671 345,386 355,366 Less-Current maturities (9,632)
(9,348)
Total long-term obligations
$335,754 $3a6,018
====
. Long-term obilgations to the REA are payable in equal quarterly principal and interest installments through 2016. principal repayments on the long-term obligation to the Federal Financing Bank (FFB) extend through 2021.
principal and interest payments on the National Rural Utilities Cooperative Finance Corporation (NRUCFC) obligatiens are rayable quarterly through 1999. The fixed rate pellution Control Bonds are payable in increasing annual amounts through 2008.
The adjustable rate pollution Control and Industrial Developa. tnt Revenue Bonda mature in 2015 unless previously called for redemption.
Bank letters of credit aggregating $20,000,000 which expire in February 1994 have been issued on behalf of the Cooperative to the trustee to provide funds for payment of principal of any such bonds to be redeemed or repurchased prior to that date.
Accordingly, the entire prlw;1;al amount of these bonds is classified as long-ter. obligations Substantially all of the Cooperative's assets are pledged as collateral for these sbligations. The Cooperative is required i and has maintained certain finanenal ratio = related to earnings and liq e t
,4 accordance with the covenan,s of its loan agreements.
Msturitie; of the Cooperative's long-term obligations are as follows (in thobaands):
__ Year
_Ampm i_
1991
$ 9,632 1992 10,014 1993 10,257 1994 11,513 1995 10,847 Thereafter 293,123 Total
$345,386
- 3. LINE1 SLCifdllIt To provide interim financing, the Cooperative has arranged lines of credit aggregating approximately $29.5 million, principally through NRUCFC.
Sorrowings are at a rate no greater than prime plus 1% and were not significant in either 1990 or 1989.
Compensating balance requirements or fees 4
relating to the lines of credit are not significant. While the lines of credit expire in May 1991, the Cooperativt believes such lines will be renewed.
The Cooperative also allows member coo;eratives to prepay their power bills cnd pays interest on these prepayments based on current short-term borrowing rates.
Interest expense on member cooperative advances ($1,298,000 in 1990 and $1,276,000 in 1989) has been included in interest expense, while interest income earned by the Cooperative on prepayments ($1,293,000 in 1990 and
$1,279,000 in 1989) is reflected as nonoperating margin.
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- 4. IGTiltl211741. Or cal' ITAL, CIGDITS:
E has adopted a policy of retiring capital The Cooperat ive 's board of dit t s
creditr. allocated to members on a "iirst-in, fitst-out" basis so that at no time will the Cooperative retain as patronage capital any capital contributed or depon.ited more than 20 years prior to the current year. Accordingly, the 1970 and 1969 capital credits were retired in 1990 and 1989, respectively.
Implementation of this policy is subjec' to aiumal r eview and approval by the board of directors and the RIA, and no cash retirements are to be made which would impair the financini condition of the Cooperative or violate any terms of its agreements.
- 5. SilAlWIt TPR4SMISS10N AGIErt1DiTS:
The Cooperative has entered into shared trat..-mission agreements with the Southern Minnesota Municipal Tower Agency (SBt1PA) and the Western Wisconsin Municipal Power Group (k%HPG) which provide SFt1PA and b%'MPC use of the Cooperative-owned transmission system to deliver power and energy requirements to SBt1PA and WMPG members in the Cooperative's electri service area f or a period of 50 years.
Payments received f r om SFt1PA and k%HPG f or use of the Cooperative's transmission system are included in deferred credits and are being amortired to operations over the termo of the related agreements. The Cooperative may be entitled to further payments depending on the investment in, and joiin. use of, the system.
- 6. COMMITMENTS _AND_ CONTINGENCIES:
The Cooperative's estimated 1991 construction program is $22.2 million.
I'inancing of construction is expected to be provided by borrowings from the FFIL and iunds generated internally.
The Cooperative is involved in a dispute with anothet utility related to costs f
under a shared transmission agreement.
The Cooperative's estimated liability under the agreement was accrued in 1990 and is included in other accrued liabilities in the 1990 consolidated balance sheet.
The Cooperative has also been naned a defendant in several inwsuits and claims, primarily related to construction and opetation of its electric plant. Although the outcome of these matters cannot be precisely determined at the present time, management and legal counsel believe these actions can be successfully defended or resolved without a material effect on the financial position of the Cooperative.
In January 1990, the Cooperative reached an agreement with Cooperative Power Association (CPA) regarding the cost shering agreement for a jointly operated power plant. The settlement, which resulted in the Cooperative receiving a caeh payment of approximately $1.1 million, had no effect on net margins in 1990 ai the boaro of directors required the Cooperative to reduce service rates in 1990 by the amount of the settlement.
In connection with this coat sharing agreement, CPA agreed to advance working capital to the Cooperative for the purchase of coal.
The amount of the advance is adjusted annually based on estimated requirements.
The net advance of $3,250,000 at December 31, 1990 is inclided in deferred credits in the accompanying consolidated balance sheet.
1
-b-
- 7. PENSION _IIAN:
Pension benefits for substantially all employees are provided through participation in the National Rural Electric Cooperative Association (NRECA)
Retirement and Security Program. Contributions are determined in accordance with the provisions of the program and are based on the salaries, as defined, of each participant. NRECA declared a moratorium on plan contributions effective July 1, 1987 and, accordingly, pension expense was substantially eliminated in 1989 and 1990. As of December 31, 1985, the date of the last available actuarial valuatlon, net assets of the plan exceeded the actuarial present value of accumulated plan benetits.
Effective January 1, 1986, the Cooperative adopted an amendment to the pent. ion plan which reduced the normal retirement age irom 65 to 62.
This amendment resulted in the creation of a liability for unfunded prior service cost of
$2,407,000, the unpaid portion of which is included in deferred credits.
- 8. FlEEIL01'IICS_ VENTURE:
CTI owns a 33.3% partnership interest in Nortight, a venture with two other partners to own and operate a fiber optics network in the Upper Midwest. This investment is accounted for under the equity method.
In addition, the Cooperative periodically reviews the carrying value of this investment in relation to its estimated fair market value.
CTI made advances and contributions to NorLight of $202,000 in 1990 e d
$625,000 in 1989. CTI's share of Nortight losses was approximately $J'2,000 in 1990 and $1,341,000 in 1989 and is included in other deduc 4 ens.
CTI has assigned its interest in Nortight to a bank as collnteral scrurite NorLight's ilaancing.
Based upon information currently available, the Occ, perative expects to continue its involvement in the NorLight venture and to be able to recover the carrying value of its investment either through operations of Nortight or divestiture of its ownership interest.
- 9. NUCLEAR _REACIOR:
The La Crosse Boiling Water Nuclear Reactor (LACBWR) was voluntarily removed from service by the Cooperative effective April 30, 1987.
The intent was to terminate operation of the reactor and a " possession only" license was obtained from the Nuclear Regulatory Commission in August 1987. The facility is in a " safe storage" status and will remain so until at least the year 2010 to 2014, at which time decommissioning will be completed. All LACBWR-related assets totaling $18.4 million were transferred to a deferred charge in 1987 and are being amortized to operating expense over a ten-year period ending in 1997 with appropriate recognition in rates charged to members for electric s e rvic e.
The provision for depreciation includes $2.6 million in 1990 and $2.4 million in 1989 to provide for the estimated costs of decommissioning the nuclear generating facility; however, the manner of decommissioning the facility has
. not been determined. The Cooperative continues to review its decommissioning cost estimates and expects that any increases in such costs will be recovered through future rates. The Cooperative has adopted a policy of funding decommissioning costs currently, and the related investments of $16.5 million are included in investments in the consolidated balonce sheets, while the decommissioning restrye of $16.5 million in included in accumulated depreciation.
e ARTHUR ANDERSEN ARlilUR ANDI Rbt N & CO..$ C.
Jairy anc 3ower Coo 3erative anc Subsiciary Consolidated Financial Statements as ofDecember 31,1990 and 1989 Together With Report of Independent Public Accountants
Alf 1 Ittilt AN I)l{lf S t.N & CO.
Missialutis, MINN Lwola REPORT OF INDEPENDD4T PUBLIC ACCOUNTANTS To the Members and the Board of Directors Dalryland Power Cooperative:
We have audited the accompanying consolidated balance sheets of Dairyland Power Cooperative (a Wisconsin cooperative) and Subsidiary as of December 31, 1990 and 1989, and the related consolidated statements of revenues, expenses and patronage capital, and cash flows for the years then ended.
These financial statements are the responsibility of the Cooperative's snanagement.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dairyland Powar Cooperative and Subsidiary as of December 31, 1990 and 1989, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Minneapolis, Mianesota, March 6, 1991
f 9
DAIRYLAND POWER C00pERA CONSOLIDATED BA:
DECEMBEl (In Thouc ASSETS 1990 1989 ELECTRIC PLANT (Notes 1, 2 and 9):
Plant and equipment, at original cost
$531,762 $521,914 Less-Accumulated depreciation (249,061) (232,306) 282,701 289,608 Construction work in progress 15,607 14,431 Total electric plant 298,308 304,039 OTHER ASSETS:
Investments (Note 1) 44,370 45,946 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation 9,856 9,856 Investment in fiber optics venture (Note 8) 2,031 2,431 Pollution Control Bond proceeds on depostt with trustee 1,953 1,945 Deferred charges-LACBWR costs, net (Note 9) 11,569 13,412 Other 1,664 1,368 Total other assets 71,443 74,958 CURRENT ASSETS:
Cash and cash equivalents (Note 1) 23,472 32,643 Short-term investments, at cost, which approximates market 27,328 13,302 Accounts receivable-Energy sales 14,663 15,865 Other 1,610 1,300 Inventories, at average cost-Fossil fuels 25,741 31,853 Materials and supplieu 11,137 10,120 Prepaid expenses 827 763 Total current assets 104,778 105,846
$474,529 $484,843 The accompanying notes are an integral pat s - s_
is TIVE AND SUBSIDIARY ANCE SHEETS
- APERTURE, 31
(;ARI)
- d "
Also Availab!. On Aperture Card
. CAPITALIZATION AND LI ABILITIES 1990 1989 CAPITALIZATIONt Member and patron equities-Membership fees 10 $
10 Patronage capital 83,088 78,360 Total member and patron equities 83,098 78,370 Long-term obligations, net of current maturitien (Note 2) 335,754 346,018 Total capitalization 418,852 424,388 DEFERRED CREDITS (Notes 5 and 7) 22,500 19,724 COMMITMENTS AND CONTINGENCIES (Note 6)
CURRENT LIABILITIES:
Current maturities of long-term obligations 9,632 9,348 Advances from member cooperatives (Note 3) 9,260 10,744 Accounts payable 4,470 7,441 Accrued liabilities-Payroll and vacation pay 3,112 3,233 Taxes 1,512 1,526 Interest 859 5,463 Other (Note 6) 4.332 2,976 Total current liabilities 33,177 40,731
$474,529 $484,843 t of these consolidated balance sheets.
Cl 0 7 3 \\D,'l)- c a.
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DAIRYLAHD_l'QVELC001' ERAT 1YE_lsHD_.SUBSI DI AKY C ON SOLI D AT EIL STAIEM0 HIS_D E..RE VE NU E L EX1'INSES_AUDJATR0RACLCAtlTAL EQLTIIR.lEARSJEDEILDECIMDEL31 (In Thousands)
__1910_._
.-_1919_ _
OPERATIllG REVENUES:
Sales of electric energy
$156,170 $155,855 Other 1,472 947 Total operating revenues 157,642 156,802 OPERATING EXPENSES:
Puel 60,012 59,129 Purchased and interchanged power 7,699 10,093 Other operations 28,716 25,603 Maintenance 12,143 11,730 Depreciation and amortization (Notes 1 and 9) 19,570 18,456 Taxes 6,783 6,611 Total operating expenses 134,923 131,622 Operating margin before interest and other deductions 22,719 25,180 INTEREST AND OTHER DEDUCTIONS:
Interest 24,973 25,545 Allowance for funds used during construction (Note 1)
(828)
(1,683)
Other (Notes 1 and 8) 972 2,829 Total interest and other deductions 25,117 26,691 Operating deficit (2,398)
(1,511)
NONOPERATING MARGIN, principally investment income 9,303 9,292 Het margin 6,905 7,781 PATRONAGE CAPITAL, beginning of year 78,360 73,494 RETIREMENT OF CAPITAL CREDITS (Note 4)
(2,177)
(2,915)
PATROEAGE CAPITAL, end of year, including margins assignable of $6,905 and $7,781
$ 83,088 $ 78,360 The accompanying notes are an integral part of these consolidated statements.
DAIRYlMD l'0WEIL C001'ERATIVE N4D SVitSIDIARY CONSOLIDAIELLSTATi210HS _OF_CASILTLOWS f.OR.. Tile _Y EAli S l!4 DE D_ DE C l?11' EIL 31 (In Thousands)
_ _19 90..
_198L CASH FLOW PROVIDED BY (USED LOR):
Operating activities-Net margin
$ 6,905 $ 7,781 Depreciation and amortization 19,570 18,456 1,350 Provision for diminution in value of investment 1,osses from fiber optics venture 602 1,341 Other 886 1,461 Change in current operating items:
Accounts receivable 892 1,473 Inventories 5,095 (2,709)
Prepaid expenses (64)
(95)
Accounts payable (2,971)
(1,848)
Accrued liabilities (3,383) 1,233 Cash provided by operating activities 27,532 28,443 Financing activities-Proceeds from borrowings 4,439 7,844 Repayment of debt obligations (15,903) (14,402)
Retirement of capital credits (2,177)
(2,915)
Funds provided under cost sharing agreement, net 3,250 Cash used for financing activities (10.391)
(9,473)
Investing activities-Electric plant additions, net (13,660) (21,819)
Net sale (purchase) of short-term and other investments (12,450) 13,891 Investment in and advances to fiber optics venture (202)
(625)
Cash used for investing activities (26,312)
(8,553)
Nel cash flow during the year (9,171) 10.417 CAS11 AND CAS11 EQUIVALENTS:
Beginning of year 32,643 22,226 End of year
$23,472 $32,643
.......==.....
The accompanying notes are an integral part of these consolidated statements.
DAIRYlWEPOW0 LLC 000ERATIVE ED_ SVltSIDI ARY N 01ES_IO._ CON S OL I DAT E 03] NANC I AL_ S TAlm MIS
- 1. SUrt1ARLOT SIGNlrICANT_ACCOUNIING TOLICIES Organization Dairyland power Cooperative (the Cooperative) is an electric generation and transmission cooperative association organized under the laws of the states of Wisconsin and Minnesota.
The Cooperative's principal offices are located in Wisconsin. The Cooperative provides wholesale electric service to Class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa, Illinois and Michigan and provides electric and other services to Class C, D and E members.
The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Conunission as adopted by the Rural Electrification Administration (REA), the Cooperative's principal regulatory agency.
The consolidated financial statements include the accounts of the Cooperative and its wholly owned subsidiary, Curtis Telecommunications, Inc. (CTI). All intercompany balances and transactions between the Cooperative and CT1 have been eliminated.
Dcpreciation Depreciation is provided based on the straight-line method at rates which are designed to amortize the original cost of properties over their estimated useful lives and includes a provision for the cost of removal and decommissioning of the properties.
The provision for depreciation averaged 3.9% and 3.8% of depreciable plant balances for 1990 and 1989.
Incomn_Inxes The Cooperative is exempt from federal and state income taxes and, accordingly, no provision for such taxes is reflected in the consolidated financial statements.
Allow anct. lor _Eund a_U s c LDu ring _ Con s tru c tion Allowance for funds used during construction represents the cost of external and internal funds used f or construction purposes and is capitalized as a component of electric plant. The amount of such allowance is determined by applying a rate to certain electric plant additions under construction. The rates used were 8.0% in 1990 and 7.8% in 1989.
Propcrty_ Additions The cost of renewals and betterments of units of property (as distinguished f rom minor items of property) is charged to electric plant accounts. The cost of units of property retired, sold or otherwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation. No profit or
. loss is recognized in connection with ordinary retirements of property units.
Maintenance and repair costs and replacement and renewel of minor items of property are charged to operating expenses.
IDvtalmente Investments consist primarily of commercial paper and government obligations.
All investments are recorded at the lower of aggregate cost or quoted market value. The carrying value of the investments is adjusted for amortization of f
premiums and accretion of discounts.
During 1989, the Cooperative reduced the carrying value of one of its investments by $1,350,000 to recognize the estimated permanent decline in the value of this investment. The provision for loss is included in other deductions in the accompanying consolidated statements of revenues, expenses and patronage capital. This investment was sold in 1990 for net proceeds that approximated carrying value.
Enattend_C.nalLERilal thi0 Cash equivalents include all highly liquid investments with an original maturity of three months or less.
Cash and cash equivalents primarily consist of concercial paper stated at cost, which approximates market.
Eup pitmfn tJtl_C ASIL U ow_] nfp rmal ign During 1990 and 1989, the Cooperative paid interest, net of capitalized interest, of $28,749,000 and $24,013,000, respectively.
- 2. LQ1 E IERti_0DLIGATJDilS Long-term obligations at December 31 consist of the following (in thousands):
__1910__
__1989__
REA obligations, 2%
$ 58,257 $ 62,963 REA obligations, 5%
31,498 32,163 FFB obligations, 7.5% to 10.6%
218,518 221,791 NRUCFC obligations, 8.9%
5,310 5,728 City of Alma, Wisconsin, pollution Control Bonds:
Fixed rate (5.6%)
10,645 10,990 Adjustable rate (6.2% at December 31, 1990) 13,900 13,900 City of La Crosse, Wisconsin, Industrial Development Revenue Bonds, adjustable rate (6.2% at December 31, 1990) 4,160 4,160 Capitalized lease obligations, principally at implicit interest rates of 7.1%, due in varying amounts through 1995 3,098 3,671 345,386 355,366 Less-Current maturities (9,632)
(9,348)
Total long-term obligations
$335,754 $346,018
====
~
_3_
Long-term obligations to the REA are payable in equal quarterly principal and interest installments through 2016.
principal repayments on the long-term obligation to the rederal Financing Bank (ITB) extend through 2021.
principal and interest payments on the National Rural Utilities Cooperative Finance Corporation (HRUCFC) obligations are payable quarterly through 1999. The fixed rate pollution Control Bonds are payable in increasing annual amounts through 2008.
The adjustable rate pollution Control and Industrial Development Revenue Bondo mature in 2015 unicas previously called for redemption.
Bank letters of credit aggregating $20,000,000 which expire in February 1994 have been issued on behalf of the Cooperative to the trustee to provide funds for payment of principal of any such bonds to be redeemed or repurchased prior to that date.
Accordingly, the entire principal amount of these bonds is classified au long-term obligations.
Substantic11y all of the Cooperative's assets are pledged as collateral for these obligations. The Cooperative is required to and has maintained certain financial ration related to earnings and liquidity in accordance with the covenants of its loan agreements.
Maturities of the Cooperative's long-term obligations are as follows (in thousands):
Yfar
_Amovnt_
1991 8 9,632 1992 10,014 1993 10,257 1994 11,513 1995 10,847 Thereafter 293,123 Total
$345,386
- 3. LINELQF__CREELT:
To provide interim financing, the Cooperative has arranged lines of credit aggregating approximately $29.5 million, principally through NRUCFC.
Borrowings are at a rate no greater than prime plus 1% and were not significant in either 1990 or 1989.
Compensating balance requirements or fees relatinb to the lines of credit are not significant. While the lines of credit expire in May 1991, the Cooperative believes such lines vill be renewed.
The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowing rates.
Interest expense on member cooperative advances ($1,298,000 in 1990 and $1,276,000 in 1989) has been included in interest expense, while interest income earned by the Cooperative on prepryments ($1,293,000 in 1990 and
$1,279,000 in 1989) is reflected as nonoperating margin.
~
, 4. BETIRU1ENT_07 fAPITAL FRED 175:
The Cooperative's boatd of directors has adopted a policy of retiring capital credits allocated to members on a "first-in, flist-out" basis so that at no time will the Cooperative retain as patronage capital any capital contributed or deposited more than 20 years prior to the current year.
Accordingly, the 1970 and 1969 capital credits were retired in 1990 and 1989, respectively.
Implementation of this policy is subject to annual review and approval by the board of directors and the REA, and no cash retirements ate to be made which would impair the financial condition of the Cooperative or violate any terms of its agreements.
- 5. SilARED_TRAN"SSIOR AGREINTS:
The Cooperative has entered into shared transmission agreements with the Southern Minnesota Municipal Power Agency (SMMPA) and the Western Wisconsin Municipal Power Group (WMPC) which provide SMMPA and WMPG use of the Cooperative-owned transmission system to deliver power and energy requirements to SMMPA and WWMPG members in the Cooperative's electric service area for a period of 50 years.
Payments received f rom SMMPA and WMPG f or use of the Cooperative's transmission system are included in deferred credits and are being amortized to operations over the terms of the related agreements.
The Cooperative may be entitled to further payments depending on the investment in, and joint use of, the system.
- 6. COT 11R1ENTS_ AND _f 0NT INGENC IES :
The Cooperative's es t imated 1991 cons t ruc tion program is $22.2 million.
Financing of construction is expected to be provided by borrowings from the FFil and f unds generated internally.
The Cooperative is involved in a dispute with another ut111ty related to costs under a shared transmission agreement.
The Cooperative's estimated liability under the agreement was accrued in 1990 and is included in other accrued liabilities in the 1990 consolidated balance sheet.
The Cooperative has also been named a defendant in several lawsuits and claims, primarily related to construction and operation of its electric plant. Although the outcome of these matters cannot be precisely determined at the present time, management and legal counsel believe these actions can be successfully defended or resolved without a material effect on the financial position of the Cooperative.
In January 1990, the Cooperative reached an agreement with Cooperative Power Association (CPA) regarding the cost sharing agreement for a jointly operated power plant. The settlement, which resulted in the Cooperative receiving a cash payment of approximately $1.1 million, had no effect on net margins in 1990 as the board of directors required the Cooperative to reduce service rates in 1990 by the amount of the settlement.
In connection with this cost sharing agreement, CPA agreed to advance working capital to the Cooperative for the purchase of coal.
The amount of the advance is adjusted annually based on estimated requirements.
The net advance of $3,250,000 at December 31, 1990 is included in deferred credits in the accompanying consolidated balance sheet.
_s_
- 7. l'DG I ON _ l'IAN :
Pension benefits for substantially all employees are provided through participation in the National Rural Electric Cooperative Association (NRITA )
Retirement and Security l'rogram.
Contributions ar e detennined in accordance with the provisions of the program a*id c.e based on t he salaries, as def ined, of each participant.
NRECA declared a moratorium on plan contributions offective July 1, 1987 and, accordingly, pension expense was substantially eliminated in 1989 and 1990. As of December 31, 1985, the date of the last available actuarial saluation, net assets of the plan exceeded the actuarial present value of accumulated plan benefits.
Effective January 1, 1986, the Cooperative adopted an amendment to the pension plan which reduced the normal retirement age from 65 to 62.
This amendment resulted in the creation of a liability for unfunded prior secvice cost of
$2,407,000, the unpaid portion of which is included in deferred credits.
- 8. Fil)EIL OPTICS NRiTURE:
CTI owns a 33.3% partnership interest in NorLight, a venture with two other partners to own and operate a fiber optics network in the Upper Midwest.
This investment is accounted for under tbc equity method.
In addition, the Cooperative periodically reviewr the carrying value of this investment in relation to its estimated fair market value.
CTI made advances and contributions to NorLight of $202,000 in 1990 and
$625,000 in 1989.
CTI's share of Nortight losses was approximately $602,000 in 1990 and $1,341,000 in 1989 and is included in other deductions.
CTI has assigned its interest in NorLight to a bank as collateral securing NorLight's financing.
Based upon information currently available, the Cooperative expects to continue its involvement in the Nortight venture and to be able to recover the carrying value of its investment either through operations of Norlight or divestiture of its ownership interest.
- 9. NUClIAR_ REACTOR:
The La Crosse Boiling Water Nuclear Reactor sLACPWR) was voluntarily removed from service by the Cooperative effective April 30, 1987.
The intent was to tenninate operation of the reactor and a " possession only" license was obtained f rom the Nuclear Regulatory Consnission in August 1987.
The facility is in a " safe storage" status and will remain so until at least the year 2010 to 2014, at which time decommissioning will be completed.
All LACPWR-related assets totaling $18.4 million were transf er red to a def erred charge in 1987 and are being amortized to operating expense over a ten-year period ending in 1997 with appropriate recognition in rates charged to members for electric service.
The provision for depreciation includes $2.6 million in 1990 and $2.4 million in 1989 to provide for the estimated costs of decommissioning the nuclear generating facilityl however, the manner of deconunissioning the f acility has
not been determined. The Cooperative continues to review its decommissioning I
cost estimates and expect 1 that any increases in such costs will be recovered through future rates. The Cooperative has adopted a policy of Junding decommissioning costs currently, and the related investments of $16.5 million are included in investments in the consolidated balance sheets, while the decommissioning reserve of $16.5 million is included in accumulated depreciation.
ARTHUR ANDERSEN AR111UR ANDI R$1 N & CO..h.C.
Dairylanc 3ower Cooaerative anc Suasidiary Consolidated Financial Statements as ofDecember 31,1990 and 1989 Together With Report of Independent Public Accountants
A lf i ll Uli A N 1))' ItS E N N O b
\\11 N s t A tuit i s, $11 N NIN ilA kEPORT 0; INDEPLNDENT PUBLIC ACCOUNTANT
\\
To the Members S
Dalryland Power Cooperativand the Board of Directors et i
We have audited the Power Cooperative (a Wiscaccompanying consolidated b l
\\
1990 and 1989 onsin
\\
a ance sheets financial statements are thand the related consolidatedcooperat of Dalryland and patronage, capital, and cash flows for the years thenstatements of revenuesof December 3 as Our responsibility is to e responsibility of the Coo based on
, expenses ended.
These express our audits.
an opinion on these financial statementpera t ive 's mannge We conducted our standards.
audits in s
Those standards require that we placcordance with generally obtain reasonable snaterial misstatement.
assurance about whether th an and perform the auditaccepted auditing supporting the An audit examining, on a test basise financial statem also includes amounts includes to assessing the accounting priand disclosures in the fin statement presentation. estimates made by management ree of ancial statements., evidence evaluatint; thenciples used and significantAn audit
, as well as for our opinion.
We believe that our overall financial
- opinion, audito provide n reasonable b In our all rnaterial respects,the financial statement asis and Subsidiary as of Decembthe financial positions referred to above present f generally accepted accountioperations and their cash fler 31,1990 as.d airly, in ng principles.ows for the years then ended i.. the results e
of their n conformity with ARTilUR ANDERSEN & CO.
inneapolis, Minnesota, March 6, 1991
l AIrillelt Ax131 Itsl:N & Cct i
Slls s t s tulls >l t N N Lso ! A REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Members and the Board of Directors, Dairyland Power Cooperative:
We have audited the accompanying consolidated balance sheets of Dairyland Power Cooperative (a Wisconsin cooperative) and Subsidiary as of December 31, 1990 and 1989, and the related consolidated statements of revenues, expenses and patronage capital, and cash flows for the years then ended.
These financial statements are the responsibility of the Cooperative's management.
Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the f!nancial statements are free of material misstatement.
An audit 1..cludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dairyland Power Cooperative and Subsidiary as of December 31, 1990 and 1989, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
ARTilUR ANDERSEN & CO.
Minneapolis, Minnesota, March 6, 1991
l Y
DAIRYLAND p0WER COOPER CONSOLIDATED BA M CD4BI (In Thout ASSETS 1990 1989__
ELECTRIC PLANT (Notes 1, 2 and 9):
plant and equipment, at original cost
$531,762 $521,914 Less-Accumulated depreciation (249,061) (232,306) 282,701 289,608 Construction work in progress 15,607 14,431 Total electric plant 298,308 304,039 OTilER ASSETS:
Investments (Note 1) 44,370 45,946 Investments in capital term certificates of National Rural Utilities Cooperative Finance Corporation 9,856 9,856 Investment in fiber optics venture (Note 8) 2,031 2,431 pollution control bond proceeds on deposit with trustee 1,953 1,945 Deferred charges-LACBWR costs, net (Note 9) 11,569 13,412 Other 1,664 1,368 Total other assets 71,443 74,958 CURRENT ASSETS:
Cash and cash equivalents (Note 1) 23,472 32,643 Short-term investments, at cost, which approximates market 27,328 13,302 Accounts receivable-Energy sales 14,663 15,865 Other 1,610 1,300 Inventories, at average cost-Fossil fuels 25,741 31,853 Materials and supplies 11,137 10,120 prepaid expenses 827 763 Total current assets 104,778 105,846
$474,529 $484,843 The accompanyi: g notes are an integral pa w..
<TIVE AND SUBSIDIARY St LANCE SilEETS gg,gy
( 31 CAllD unds)
Also Available ()n Aperture Card CAPITAL 17.AT10N AND LI ABILITIES 1990 1989 CAPITALIZATION:
Member and patron equities-Membership fees 10 $
10 Patronage capital 83,088 78,360 Total member and patron equities 83,098 78,370 Long-term obligations, net of current maturities (Note 2) 335.754 346,018 Total capitalization 418.852 424,388 DEFERRED CREDITS (Notes 5 and 7) 22,500 19,724 C0HMITMENTS AND CONTINGENCIES (Note 6)
CURRENT LIABILITIES:
Current maturities of long-term obligations 9,632 9,348 Advances from member cooperatives (Note 3) 9,260 10,744 Accounts payable 4,470 7,441 Accrued liabilities-Payroll and vacatien pay 3,112 3,233 Taxes 1,512 1,526 Interest 859 5,463 Other (Note 6) 4,332 2,976 Total current liabilities 33,177 40,731
$474,529 $484,843
't of these consolidated balance sheets.
9 ! o 5 3101 cl i - 03
DAIRYLAND_IWEILC O 0 f E RAT 1YElHILS UB S I D I A kY C0H SOLII)AT E D_1TATEME NT L0E_REYINUE S2 EXPERSELANILfATRONAGE_ cal' TAL l
EQR_I11E_.YEAPLERDE D._DXC EMB ell 31 (In Thousands)
- 1%%D.
-_1163__.
OPERATING REVENtIES:
Sales of electric energy
$156,170 $155,855 Other 1,472 947 Total operating revenues 157,642 156,802 OPERATING EXPENSES:
Fuel 60,012 59,129 Purchased and interchar.ged power 7,699 10,093 Other operations 28,716 25,603 Maintenance 12,143 11,730 Depreciation and amortization (Notes 1 and 9) 19,570 18,456 Taxes 6,783 6,611 Total operating expenses 134,923 131,622 Operating margin before interest and other deductions 22,719 25,180 INTEREST AND 07MER DEDllCTIONS:
Interest 24,973 25,545 Allowance for funds used during construction (Note 1)
(828)
(1,683)
Other (Notes 1 and 8) 972 2,829 Total interest and other deductions 25,117 26.691 Operating deficit (2,398)
(1,511)
NONOPERATING MARCIN, principally investment income 9,303 9,292 Net margin 6,905 7,781 PATRONAGE CAPITAL, beginning of year 78,360 73,494 RETIREMENT OF CAPITAL CPEDITS (Note 4)
(2,177)
(2,915)
PATRONAGE CAPITAL, end of year, including margins assignable of $6,905 and $7,781
$ 83,088 $ 78,360
..=.............
The accompanying notes are an integral part of these consolidated statements.
DAI RY1W4ILT OW EIL C 001' E R411VIL1J4 D_ S U E S I D I ARY l
CDNSP' IDAIEILSIAID1FRIS_0E_CASILIl0WS FOR_IllE_ YEARS INDEILDECD1 DER _31 (In Thousands)
_1990.
__1939_
CAsil FLOW PROVIDED BY (USED FOR):
Operating activities-Net margin
$ 6,905 $ 7,781 Depreciation and amortization 19,570 18,456 Provision for diminution in value of investment 1,350 Losses from fiber optics venture 602 1,341 Other 886 1,461 Change in current operating items:
Accounts receivable 892 1,473 Inventories 5,095 (2,709)
Prepaid expenses (64)
(95)
Accounts payable (2,971)
(1,848)
Accrued liabilities (3,383) 1,233 Cash provided by operating activities 27,532 28,443 Financing activities-Proceeds from borrowings 4,439 7,844 Repayment of debt obligations (15,903) (14,402)
Retirement of capital credits (2,177)
(2,915)
Funds provided under cost sharing agreement, net 3,250
- - = -------
Cash used for financing activities (10,391)
(9,473)
Investing activities-Electric plant additions, net (13,660) (21,817)
Net sale (purchase) of short-term and other investments (12.450) 13,891 Investment in and advances to fiber optics venture (202)
(625)
Cash used for investing activities (26,3 2)
(8,553)
Net cash flow during the year (9,171) 10.417 CASil AND CASil EQU1VALENTS:
Beginning of year 32,643 22,226 End of year
$23,472 $32,643
==
The accompanying notes are an integral part of these consolidated statements.
DAIRYlWHLt0h'EILC001'ERATIVE ANP SUBSIDIARY NOTES _Tol0N S01,1 DATEDllN ANC J A k STATT.M ENTS
- 1. SUMMARLOF_SIGNIFICANT ACCOUNTING _l'OLICIES:
Organiration Dairylano Power Cooperative (the Cooperative) is an electric generation and transmission cooperative association organized under the laws of the states of Wisconsin and Minnesota. The Cooperative's principal offices are located in Wisconsin. The Cooperative provides wholesale electric service to Class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa, lilinois and Michigan and provides electric and other services to Class C, D and E rnembers.
The accounting records of the Cooperative are maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory Connission as adopted by the Rural Electrification Administration (REA), the Cooperative's principal regulatory agency.
The consolidated financial statements include the accounts of the Cooperative and its wholly owned subsidiary, Curtis Teleconnunications, Inc. (CTI). All intercompany balances and transactions between the Cooperative and CTI have been eliminated.
Depreciation Depreciation is provided based on the straight-line method at rates which are designed to amortize the original cost of properties over their estimated useful lives and includes a provision for the cost of removal and decommissioning of the properties.
The provision for depreciation averaged 3.9% and 3.8% of depreciable plant balances for 1990 and 1989.
Jncome_ Taxes The Cooperative is exempt from federal and state income taxet and, accordingly, no provision for such taxes is reflected in the consolidated financial statements.
Allowantele rlunds _Us e d_During_ Cons t ruc t ion Allowance for funds used during construction represents the cost of external and internal funds used for construction purposes and is capitalized as a component. of electric plant.
The amount of such allowance is determined by applying a rate to certain electric plant additions under construction.
The rates used were 8.0% in 1990 and 7.8% in 1989.
11operty_ Additions The cost of renewals and betterments of units of property (as distinguished f rom minor items of property) is charged to electric plant accounts.
The cost of units of property retired, sold or otherwise disposed of, plus removal costs, less salvage, is charged to acewnulated depreciation. No profit or
-2_
loss is recognized in connection with ordinary retirements of property units.
Maintenance and repair costs and replacement and renewal of minor items of property are charged to operating expenses.
3RYf11MRt.S Investments consist primarily of commercial paper and government obligations.
All investments are recorded at the lower of aggregate cost or quoted market value. The carrying value of the investments is adjusted for amortization of premiums and accretion of discounts.
During 1989, the Cooperative reduced the carrying value of one of its investments by $1,350,000 to recognize the estin.ated permanent decline in the value of this investment.
The provision for loss is included in other deductions in the accompanying consolidated statements of revenues, expenses and patronage capital. This investment was sold in 1990 for net proceeds that approximated carrying value.
CAph and_CAnh lquiy11rnt.n Cash equivalents include all highly liquid invtatments with an original maturity of three months or less. Cash and cash equivalents primarily consist of commercial paper stated at cost, which approximates market.
SMPElfERtallAsh_ daw _lnfarmaljan During 1990 and 1989, the Cooperative paid interest, net of capitalized interest, of $28,749,000 and $24,013,000, respectively.
- 2. LQEG-TERti_QBLIGATIONS:
Long-term obligations at December 31 consist of the following (in thousands):
1990
__11L1__
REA obligations, 2%
$ 58,257 $ 62,963 REA obligations, 5%
31,498 32,163 FFB obligations, 7.5% to 10.6%
218,518 221,791 NRUCFC obligations, 8.9%
5,310 5,728 City of Alma, Wisconsin, pollution Control Bonds:
Fixed rate (5.6%)
10,645 10,990 Adjustable rate (6.2% at Decetber 31, 1990) 13,900 13,900 City of La Crosse, Wisconsin, Industrial Development Revenue Bonds, adjustable rate (6.2% at December 31, 1990) 4,160 4,160 Capitalized lease obligations, principally at implicit interest rates of 7.1%, due in varying amounts through 1995 3,098 3,671 345,386 355,366 Less-Current maturities (9,632)
(9,348)
Total long-term obligations
$335,754 $346,018
====
, Long-term obligations to the RLA are payabic in equal quarterly principal ar.d interest installments through 2016. Principal repayments on the long-term obligation to the Federal % ancing Bank (FFB) extend through 2021.
Principal and interest payments on the National Rural Utilities Cooperative Finance Corporation (NRUCFC) obligations are payabic quarterly through 1999. The fixed rate pollution Control Bonds are payable in increasing annual amounts through 2008.
The adjustable rate Pollution Control and Industrial Development Revenue Bonda mature in 2015 unless previously called for redemption.
Bank letters of credit aggregating $20,000,000 which expire in February 1994 have been issued on behalf of the Cooperative to the trustee to provide funds for payment of principal of any such bonds to be redeemed or repurchased prior to that date.
Accordingly, the entire principal amount of these bonds is classified as long-term obligations.
Substantially all of the Cooperative's assets 2re pledged as collateral for these obligations. The Cooperative is required to and has maintained certain financial ratios related to earnings and liquidity in accordance with the covenants of its loan agreements.
Maturities of the Cooperative's long-term obligations are as fo11 ova (in thousande):
Yrar
_ Amount 1991
$ 9,632 1992 10,014 1993 10,257 1994 11,513 1995 10,847 Thereafter 293,123 Total
$345,386
- 3. Lil{ES OF CRED11:
To provide interim financing, the Cooperative has arranged lines of credit aggregating approximately $29.5 million, principally through NRUCFC.
Borrowings are at a rate no greater than prime plus 1% and were not significant in either 1990 or 1989.
Compensating balance requirements or fees relating to the lines of credit ere not significant. While the lines of credit expire in May 1993, the Cooperative believes such lines will be renewed.
The Cooperative also allows member cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowing rates.
Interest expense on member cooperative advances ($1,298,000 in 1990 and $1,276,000 in 1989) has been included in interest expense, while interest income earned by the Cooperative on prepayments ($1,293,000 in 1990 and
$1,279,000 in 1989) is reflected as nonoperating margin.
. 4. REIIRM MI_0 LCAPlIAL CREDIIS:
The Cooperative's board of directors has adopted a policy of retiring capital credits allocated to members on a "first-in, first-out" basis so that at no time will the Coope:ative retain as patronage capital any capital contributed or deposited more than 20 years prior to the current year. Accordingly, the 1970 and 1969 capital credits were retired in 1990 and 1989, respectively.
Implementation of this policy is subject to annual review and approval by the board of directors and the REA, and no cash retirements are to be made which would impair the financial condition of the Cooperctive or violate any terms of its agreements.
- 5. SilAREILIRANSMISS10lLAGREMMIS:
The Cooperative has entered into shared transmission agreements with the Southern Minnesota Municipal Power Agency (SMMPA) and the Western Wisconsin Municipal Power Group (WWMPG) which provide SMMPA and WMPC use of the Cooperative-owned transmission syrtem to deliver power and enargy requirements to SMMPA and WWMPG members in the Cooperative's electric service area f or a period of 50 years.
Payments received from CMMPA and WWMPG for use of the Cooperative's transmission system are included in deferred credits and are being amortized to operations over the terms of the related agreements.
The Cooperative may be entitled to further payments depending on the investment in, and joint use of, the system.
- 6. C0ttilIMMIS_ANILCONIINGENCIES:
The Cooperative's estimated 1991 construction program is $22.2 million.
Financing of construction is expected to be provided by borrowings from the FFB and f unds generated internally.
The Cooperative is involved in a dispute with another utility related to costs undar a shared transmission agreement.
The Cooperative's estimated liability undt.
he agreement was accrued in 1990 and is in21uded in other accrued liabis les in the 1990 consolidated balance sheet.
The Cooperative has also been named a defendant in several lawsuits and claims, primarily related to construction and operation of its electric plant. Although the outcome of these matters cannot be precisely determined at the present time, management and legal counsel believe these actions can be successfully defended or resolved without a material effect on the financial position of the Cooperative.
In January 1990, the Cooperative reached an agreement with Cooperative Power Association (CPA) regarding the cost sharing agreement for a jointly operated power plant.
The settlement, which resulted in the Cooperative receiving a cash payment of approximately $1.1 million, had no effect on net margins in 1990 as the board of directors required the Cooperative to reduce service rates in 1990 by the amount of the settlement.
In connection with this cost sharing agreement, CPA agreed to advance working capital to the Cooperative for the purchase of coal.
The amount of the advance is adjusted annually based on estimated requirements. The net advance of $3,250,000 at December 31, 1990 is included in deferred credits in the accompanying consolidated balance sheet.
- 7. f ENSIO!LPLAN:
Pension benefits for subriantially all employees are provided through participation in the National Rural Electric Cooperative Association (NRECA)
Retirement and Security ptogram.
Contributions are determined in accordance with the provisions of the 3rogram and are based on the salaries, as defined, of each participant. NRECA declared a moratorium on plan contributions effective July 1, 1987 and, accordingly, pension expense was substantially eliminated in 1989 and 1990. As of December 31, 1985, the date of the last available actuarial valuation, net assets of the plan exceeded the actuarial present value of accumelated plan benefits.
Effective January 1, 1986, the Cooperative adopted an amendment to the pension plan which reduced the normal retirement age from 65 to 62.
This amendment resulted in the creation of a liability for unfunded prior service cost of
$2.407,000, the unpaid portion of which is included in deferred credits.
- 8. EIPER_0PIICS_ VENTURE:
CT1 owns a 33.3% partnership interest in Nortight, a venture with two other partners to own and operate a fiber optics network in the Upper Midwest.
This investment is accounted for under the equity method.
In addition, the Cooperative periodically reviews the carrying value of this investment in relation to its estimated Iair manket value.
CTI n.ade advances and contributions to Nortight of $202,000 in 1990 and
$625,000 in 1989.
CTI's share of NorLight losses was approximately $602,000 in 1990 and $1,341,000 in 1989 and is included in other deductions.
CTI has assigned its interest in Nortight to a bank as collateral securing NorLight's financing.
Based upon information currently available, the Cooperative expects ta continue its involvement in the Norlight venture and to be able to recover the carrying value of its investment either through operations of NorLight or divestiture of its ownership interest.
- 9. HUCLEAILREACIOR:
The La Crosse Boiling Water Nuclear Reactor (IACBWR) was voluntarily removed from service by the Cooperative effective April 30, 1987.
The intent was to terminate operation of the reactor and a " possession only" license was obtained from the Nuclear Regulatory Commission in August 1987.
The facility is in a 'saf e storage" status and will remain so unt il at least the year 2010 to 2014, at which time decommissioning will be completed.
All LACEWR-related assets totaling $18.4 million were transferred to a deferred charge in 1987 and are being amortized to operating expence over a ten-year period ending in 1997 with appropriate recognition in rates charged to members for electric service.
The provision for depreciation includes $2.6 million in 1990 and $2.4 million in 1989 to provide for the estirnated costs of decommissioning the nuclear generating facility; however, the manner of decommissioning the facility has
4 not been determined. The Cooperative continues to review its decommissioning coat estimates and expects that any increases in such costs will be recovered through future rates. The Cooperative has adopted a policy of funding decommissioning costs currently, and the related investments of $16.5 million are included in investments in the consolidated balance sheets, while the decommissioning reserve of $16.5 million is included in accumulated depreciation, p
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