ML20030D467
| ML20030D467 | |
| Person / Time | |
|---|---|
| Site: | Waterford  |
| Issue date: | 02/23/1981 |
| From: | LOUISIANA POWER & LIGHT CO. |
| To: | |
| Shared Package | |
| ML20030D434 | List:
|
| References | |
| NUDOCS 8109010427 | |
| Download: ML20030D467 (36) | |
Text
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-a 1980 ANNUAL REPORT / LOUISIANA POWER & LIGIIT COMPANY l' L J.'
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Area Sersed by LP&L louisiana Power & Light Company operates in 46 of the M parishes of leuisiana-a 19,MW)-square-mile area which comprised an estimated population of 1,553,(XX) as of December 31,1960.
The territory served by LP&L includes most of north Imuisiana, a sniall portion of east bY central Louisiana, and most of southeastern Imuisiana including the metropolitan area
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around the City of New Orleans and the 15th f
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Ward of the City of New Orleans.
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LP&l's ss stem is interco inected w it h. and is f
a part of, tiie Middle South Utilities 5 stem.
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General Offices
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New Orleans. Louisiana 70174 y
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- r Iramler Agent for Preferred Stock:
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lhbernia Nationalllank of New Orleans I
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313 Carondelet Street i
New Orleans, Louisiana 70130 i.
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Registrar for Preferred Stock:
Whitney Nationalllank of New Orleans i
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22M 5t. L'harles Avenue New Orleans. Louisiana 70130
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Trustee for l'Irst 31ortgage Ilonds:
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M-F The Chase N1anhattan llank, N A.
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Corporate Trust Administration Disision i
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Ted Johnson (left), LP&Llineman in Arcadia, and Jack Johnston, LP& L 6
.Ihis 1980 Annual Report is prepared for the serviceman in Olla, help restore electric service in Mississippi following 4
information of stockholders, employees, and a hurricane which struck the Gulf Coast in 19110.
other interested persons.
i Mike Simoneaux drnes a fork-lift truck in %Iest Bank division seoies-
'Ihe Company's 1980 Annual Report to the j
in Gretna.
. Sue Knight posts customer secords in East Jefferson Securities and Eschange Commiwlon on l'orm g
10 K lincluding financial statements and financial
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statement schedulco is asallable to any stock-J.
holder upon request without charge. Stock-
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holders interested in obtaining a copy should j
E write to J. II. Erwin, Jr., Vice President and e
Iqtent Cesert Many kinds of j'obs are imolved in gettm' p electric power -
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to LP& L eussomers. Kearly T. Henn, of Algiers-Gretna service. climbs a Treasurer, at the addrew below:
e in a~ tesidential neighborhood. Continuing clockwise, Kenneth Loulslana Power & Liiht ComPans j
avenaugh (with cap) and Howard Allen are at the contml board at R
it O. Hos 6008 0
. Sterlington Generating Stanon: Kasen Famrise answers a call to Wiseerford i
3 Generating Station under construction at Taft, La.: Cli5 Rouselle is a Nev. Orleans, I ouisiana 70174 i.
serviceman in Algiers-Gretna: and Bobbie Doison, Pam Madsson, and Kaye Bordelon.,re application clerks in East JeBer mn.
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HIGHLIGHTS As of As of Dec. 31.1980 Dec. 31.1979 Plan t i nvest ment............................. 52,319,246,000 52,% 9,106,000 Re ve n u e......................
.......... 5 853,523,000 5 557,476,000 N e t I n co m e................................. 5 100,676,000 65,129,000 Peak Load (occurred 7/16/80 and 7/5/79).........
4,078,000 KW 4,091,000 KW Generating Capability.........................
4,625,000 KW 4,612,000 KW C u st o m e rs..................................
515, % 4 500,710 Average annual kilowatt hours per residential customer........................
14,177 13,758 Average annual revenue per residential kilowatt hour.....................
4.14e 3.01c Population in area served......................
1,553,000 1,509,000 Taxes charged to operating expenses............ 5 66,874,000 38,727,000 E m p l oye es..................................
2,342 2,329
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A Message Net income of LP&L in 1980 was $100.7 million, an f
increase of $35.6 million over 1979 net income: 49% of i From the President
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this net income in 1950, as compared to 70% in 1979, was comprised of Alhmance for Funds Used During Con-struction ( AFUDC). This non-cash item amounted to 549.5 million in 1980, an increase of 53.6 million over The fact that I.ouisiana Power & Light Company I979-successfully got through 1980 represents a considerable accomplishment. And it could not have been done with-Operating resenues in 19N) totaled 5853.5 million, out the dedicated effort and cooperation of LP&L's 53% more than the 5557.5 million for 1979. Most of this excellent employee team. We t.re deeply grateful to each increase was due to Ihe recovery through fuel adjustment employee who contributed to this accomplishment.
of the rapidly increasing cost of fuel for generation.
Because of prolonged delay in obtaining adequate rate Primarily because of a record-breaking hot summer, relief, LP&L entered 1980 in a relatively weak financial LP&Ls average residential customer used 14,177 kikwatt condition. In recent years, LP&L's first mortgage bonds hours-an increase of 419 kilowatt hours over 1979.
and preferred stock have been downgraded ly the rating ihmever, as energy costs climb,it has become obvious agencies from A to Baa/BBB-and Ba/BB, respectively.
that customers are increasing their efforts to conserve This threatened the Company's construction program, energy.
including Waterford 3, LP& L's nuclear power plant being At :he end of 1950, LP&L was serving 515,9N custo-constructed at Taft,12.,25 miles upriwr from New Orleans mers-an increase of 15,194 (or 3%) over ihe end-of-1979 on the west bank of the Mississippi River.
total. Included in this increase were 2.325 customers Construction costs in 1980 totaled 5260 million and added when LP&L assumed operation of the electric required 5175 million of funds from external sources, utility system in Jonesboro, formerly a municipal opera-l including the sale in November of 530 million of 15.20%,
tion. In December 1979, the voters of Jonesboro had l
525 par value, preferred stock at a net cost to the Company approved, by a ratio of more than 9 to I,Ihe operation by of 16.06%, and the sale in December of $50 million of LP&L of the town's electric utility system.
15%% first mortgage bonds at a net cost to LP&L of LP&L's retail customers are under the junsdiction 16.01 %.
of the Louisiana Public Sersice Commission (LPSC)
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Because of anticipated delays in obtaining an operat-with the exception of the more than 17.(XX) customers ing license and financing limitations, LP&L shmed con-in the 15th Ward of the City of New Orleans ( Algiers),
i struction on its Waterford 3 plant in May. The construction who are under ihe regulatory jurisdietion of he Council l
work force was reduced from about 3.0(X) to 2.(XX), and of the City of New Orleans.
the 1,104,000-kilowatt facility is now scheduled for com-On May 30, the Company filed with the LPSC an l
mercial operation in the early spring of 1983, and will application for a rate increase of 5203.6 million. This l
cost an estimated $1.5 billion. At the end of 1980, con-requested increase, approximately 37%,is only the third struction of Waterford 3 was 82% complete, and slightly rate increase application to the LPSC in the Company's more than 51 billion had been invested by the Company.
history, and would amount to about 48 cents a day for LP& L's merage residential customer. The Ccmpany was i
granted a rate increase of 513.8 million (6%%) in 1978, anj $59.6 million (17%) in 1979.
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l On July 3, LP&L filed with the Council of the City of As we move into 1981, with a new and fresh outlook l
New Orleans for a rate increase of 54.4 million in Algiers, nationally, we believe that some of our problems may be l
the basis of which is similar to its application to the solved and others will have their severity diminished.
l LPSC, and which would result in base rates consistent Particularly do we see potential improvement in the with those proposed for other areas of the state served by outlook for further orderly deselopment of nuclear power, I
LP&L.
which is badly needed along with coal if we are to meet On July 15. LP&L requested emergency interim rate energy demands and provide service at more reasonable rates than those based on the use of imported oil during relief from the LPSC, and October 8 the LPSC granted the next several decades. Even with continued inflation LP&L 532.4 million in emergency interim rate relief, and hi;h mterest rates, we believe the future looks i
under bond and subject to refund, pending decision on the 5203.6 million rate request filed N1ay 30. On October promising for the Company and for Louisiana.
t 24, LP&L filed with the Council of the City of New Orleans for 5704.WO in emergency interim rate relief in For the Board of Directors Algiers, but the Council has taken no action on this February 23,1981 request. The LPSC has one year to act upon our $1ay j
1980 application llearings are scheduled in mid-N1 arch
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1981, and a decision is expected in Ntay 1981.
gy LP&L's employee benefit program was further im-pnned by the Company,effectise January I 19M1,with a dental plan being made available to employees: 96"e of J. N1. Wyatt employees are participating. At the end of the year,1,902 President LP&L employees were participating in the N1iddle South Utilities Sptem Sasings Plan begun October 1,1978.
This plan provides for the Company to contribute 50 cents for each dollar an employee puts into the Savings Plan, up to a maximum of 6"o of the employee's earnings.
The Company's share of funds contributed to this plan in 1950 amounted to 5895.154. In November, LP&L announced a 9.25*. earnings increase for its hourly employees, and awarded salary increases to those em-phnees in the Salary Administration Program. A new insurance policy, covering accidental death and dismem-berment, and paid for by the Company, has been made part of the emphiyees' Group Life Insurance Plan.
Ibr the sh.th consecutive year LP&L has had the hnvest expense per customer, excluding production ex-pense, among the operating companies in the N1iddle South System. This is largely due to the hip,h caliber of emphiyeesin th LP&Lorganization and theirdedication to get the most out of each Company dollar spent.
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i Louisiana Power & Light Company i
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Net Income LP& L's net income for 1950 was l l
$1(X).7 million, an increase of $35.6 L i
million,or 55% oser net income of (
565.1 million in 1979. Although i; l
l 49". of 'he 1980 net income was j.
accounted for by Allowance for !
Funds Used During Construction l
( AFUDC), a non cash item, this j was an improvement over 1979 when AFUDC represented 70*.of l
net income.
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Operating Revenues From l
Retail Customers i
l Operating revenues from retail i
customers increased fmm 5490.9 !
million in 1979 to 5764.1 million in i
1950, an increase of $273.2 million, or 56%. The sharpincrease in 1980 j.
operating revenues was caused pri-l g
marily by higher levels of fuel l
adjustment in customer service j bills, the $59.6 million rate increase f
granted LPKL December th,1979, by the LPSC, and an emergency i f
interim rate increase in October, also granted by the LPSC.
Total Operating Expenses Total operating expenses in 1960 amounted to 5737.2 million.
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an increase of 52*e over the 1979 i_
operating expenses of $483.6 mil-lion. This increase was caused p
primarily by greater purchases of ;
I higher cost fuel for generation due to the shortfall of deliveries under 2
our existing major natural gas
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contracts. and additional power c
purchased from other utilities when
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. his s t ti ilu t ates Dr. Rene Males (with tiel. director of the Energy Analpis and Ensironment disision of badly LP&L needs to complete l
the Electric Ibwer Research Institute, gets a tour'of Waterfud 3.
Waterford 3 and get this nuclear facility in operation.
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Operating Taxes LP&L's present generating capa-Average Residential Use Local, state, and federal taxes bility of 4,623JXX) kilowatts. At the Primarily because of a record-end of 1980. Waterford 3 was 82%
totaled 566.9 million in 1980, show.
breaking hot summer, the average ine an increase of $28.2 million over complete.and more than 51 bilhon annual residential use of electric takes in 1979. This was a 73"a in, had been m, vested in the facility by power by LP&L eustomers climbed LPAL.
crease, due primarily to the in.
to 14.177 kik) watt hours in 1950.an increase of 419 kilowatt hours over crease in operating revenues.
LP&L Customers the 13.755 kilowatt hours used by Construction Costs LP&L had 515.904 customers the average residential customer at the end of 1980. an merease of in 1979. This was a 3.0% increase.
t,ompany construction costs in 15,194 over the 1979 vear-end tota!
Despite this increase. LP&L could 19N) amounted to S260.0 million.a of 500.710 customers. This was see serious efforts to conserve
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decrease of 520.3 million from the 3.0% increase. and included 2.825 energy among its customers. and 5250.3 million spent on construc-customers added when LP&L be-as costs of energy elimb. conser-tion in 1979. In 1950. 5191.3 milhon pan serving Jonesboro June 5.
vation may become a more deter-was spent to continue construction mined goal among customers.
of Waterford 3. LPALs nuclear Energy Sales to generating facility at Taft. La. 2' miles upriver fronI New Orleans on Retail Customers LP&L Peak 1 oatI the west bank of the N1ississippi Electric energy sales to retail LP&l's 1980 peak load was Riser. Waterford 3. which w ill have customers totaled 21.7 billion kilo.
4.078,000 kilowatts. This occurred
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a 1.104 000 kilowatt generating watt hours in 1980. This was a 6%
at 4 p.m. July 16 during prolonged capability when it goes into com-increase over the 20.6 billion kilo.
and unusually hot weather. This will increase by approximately 24"o 1979.
compares to LP&l's 1979 peak load mercial operation in early l'M3, watt hours sold by the Company in of 4,091.000kilowattsJuly 5of that year. Although the 1979 peak load was slightly greater, the Company was then serving nine rural electric cooperati' es to which service had Retail Energy Sales been discontinued before the 1980 h u n saies % Gain Hesenues
% Gain peak. Altogether, these coopera-niunono user 1979 nuniono user 1979 tives required approximately ucsidential..
6.39M 7
5265.1 47 3()(),()00 kilowatts at the time of
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lj 1979 peak demand.
Go.ernrnental..
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17 2 47 Int:1 sales to Fuel for Generation e
necu ruuon4en..
2i.700 6
s7u.i s6 Fuel purchased for generation
- - - - - g -,mq - - "- M T " " m " "" M of electricity by LP&L in 1980 cost Oper: ting Espenses
$296.8 million, an increase of $106.6 million, or 56%, over fuel pur-1980 1979
% Increas,e chased for generation in 1979.
nuniono nuniono user 197 liel Pa rthased for Generation.
... $2%.M S190.2 56 N1uch of this increase was caused 1%er Purt hased.
242.3 140.1 73 by the purchase of higher cost fuel Delerred fuel Omts...
12.01 t 15.l l 87 laes.....
66.9 38.7 73 needed to replace natural gas not Depreciation........
42.5 40.9 4
de[jvered by the Company's largest Parnil charged to operating bpemes...
31.0 27.5 31,3, supplier,ascalled forunderex. ing ist ot'her..
59.7 61.3 latl...
737.2 4x3.6 s2 contracts. Fuel for generation amounted to40% of the Company's
--asseca+%&ae 1-a m i A s swea 5
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19M operating expenses. If Water-ford 3 had been in operation during 19N). appnnimately 5122 million q
m-of this fuel bill could hase been e
saved.
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Purchased Power NQ w
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Power purchased in 19N) cost e 'j [ ;M' f
_f pany spent for purchased power in
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i LP&L 5242.3 million-73"o more g
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than the 5140.1 million the Com-s t
,g &(M 1979. This increase in purchased q
power resulted from mereased de-
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mand for electric service, from additional purchased power re-s quired to replace higher-cost oil-s
,p fired generation, and from the cur-tailment of deliveries of natural gas 7-
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N for generation, particularly by the
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Company's largest supplier,..hich was 40"o behind on its deliveries
.1 for 19N).
Third LPSC Rate Increase Nt J
p Request
[ [/,. <d On May 30 LP&L filed with the g
The Water Treatment Ssstem (c...ml Board is discussed tw LPX.! Engineers Beth Troster.
Louisiana Public Service Com-Gerald Sanchez, and O' scar Pipkins.
mission an application for a rate increase of 5203.6 million, which was proposed to be applied essen-tially on an equal percentage to all its retail customers in Louisiana other than in the 15th Ward of the City of New Orleans ( Algiers).This increase which is appnnimately 37"o, would amount to about 48 cents a day for LP&L's average residential customer, based on the test year 1979. A similar request, for an increase of 54.4 million affecting the more than 17.000 LP&L customers in Algiers, was filed July 3 with the Council of the City of New Orleans because this area is under Ihejurisdiction of the Council. This would result in rates consistent with those proposed for LP&L customers in other areas of the state.
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On October b the LP5C granted Also important in belt tighten-LP&L $32.4 million in emergency ing in LP&L operations was the interim rate relief, under bond una closing of three sub-offices-Jena E
subject to refund pending final in Northern division, Ponchatoula F
action on the 530.6 million rate in Southeastern division, and White g8 increase appi; cation. The Com-Castle in West Bank division. Cus-3 pany had initially fikd July 15 for tomers in these communities have V
9 emergency rehef in the amount of been assured that their electric N
nearly 553 million, but revised the service will not be impaired m any 9
way. Additionally, the Company amount to 536.5 million at an A ugus. " LPSC hearing due to continued another cash conser-h" y
changes in proportions of the ration plan.which requires indus-n N
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summer peak load with other trial customers needing construc-1 Niiddle South System compames.
tion of extensive facilities to
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Thisemergenc> reliefis part of the advance cash for these facilities overall 5203.6 million filed in Nia).
prior to construction, which will
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LP& L also filed October 24 for be refunded over a 10-year period.
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5704.(KM)of emergency interim rate A total of 10.606,400 shares of
% /b relief in Algiers, but the Council common stock was sold during the had taken no action on this request year to LP&L's parent. Niiddle g y 3
as of February 23.19XI.
South Utilities. Inc., for an aggre-
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The Company has been granted gate price of 570 million.
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rate relief by tiie LPSC on only two For the first half of the year, t
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presious occasions-513.8 million LP&L was not able to sell either Jq'
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-a 6b"a increase-in 1978. and first mortgage bonds or preferred 4
E 559.6 million-a 17"., increase-in stock because it did not have the j ; \\g l'
1979. On both occasions, rate relief necessary earnmgs coverages.
granted the Company was far behnv LP&L was able to sell 530 million LP&L EngineeringTechnician uoid Brasell works on water treatment at Waterford I w hat it had requested. Pr.ior there-f aggregate par sa se) of preferred and 2.
to, over the course of its history, stock in November, consisting of LP&L had put into effect 29 rate 1,200.000, 525 par value shares.
reductions.9 of which were major bearing a dividend rate of 15.20%.
decreases in its retail elect ric rates.
The net cost to LP&L was 16.06%.
the highe.t cost of preferred stock f,,nanc,ng in the Company's history. This new i
i LP&l's financine and a sale and preferred stock is subject to a sink-leaseback of certain office proper.
ing fund providing for the redemp-ties in 1980.esulted in net proceeds tion annually,beginning in 1985,of to the C<,mpany of 5174.7 million.
a minimum of 60,(X)0 shares and a Early in 198I). LP& L undertook maximum of 120,000 shares, at 525 a cash ebnservation program w hich per share plus accrued dividends.
covered every facet of Company
.in December, the Company operations. Construction projects sold 550 million of 8-year, first were deferred or delayed, the hiring mortgage bonds, which carry an of new employees was tightened, interest rate of 15.75%. The cost of right-of-way maintenance bud this money was 16.01%, by far the were reduced. power plant n'getshighest ever experienced by LP&L ain.
tenance was delaved, and certain on first mortgage bonds.
7 of the Company's office 'ouildings and land were sold under a lease-back arrangement.
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N1oody's and Siandard & Poor's ratings of LPAL bonds and pre-
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ferred stock have been lowered and
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~ low coseraces.
reflect the vert g
which results in extremely costly financing.
u Waterford 3 Construction l
Waterford 3. LPAL's nuclear i}
generating unit under construction i
1 at Taft. La. 25 miles upriser from I
New Orleans on the west bank of
-- ~~ # - 3M the N1iwissippi River, was 82"..
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complete at the end of 1950.
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in Ntay. LPA L slowed construe-p tion on the 1.104 J H)O-k ilow a t t r)w -
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h facility due to anticipated delay s in
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obtainine an operatine license and ef-N F
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financin'g limitations. The con-e f'"g. - h id struction work force was reduced N
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J result, the unit is now scheduled from about 33WWI to 2AHW). As a
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'I for commercial operation in early
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spring 1983, and is expected to cost i
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t 51.~ illion. Fuel loading is sched-0 M.. t.y b.
e w uled ior October 19X2.
.s Futtire Fuels for Generation LP&L Engineers James ihmard. Barb ra Morrisor., and Bob Legere study start-up plans llecause natural gas c.ad fuel Sr waterford 3.
oil are continuing to soar in price.
are expected to become less avail-able in quantities sufficient for reliable power generation, and are subject to federal restrictions on their fut ure use as boiler fuel. LPA L is disersifying its fuel mix. In addi-tion toits nuclear plant under con-sti uction. t he Company is develop-ing plans for two coal-fired gen-erating units at its Wilton site on the east bank of the N1ississippi River at Central. La.. in St. James Parish.
Each unit will be rated at NX)JWM) kilowatts. The first is expected to be completed in 1988, and the second in 1991. Iloth are expected to use low-sulphur western coal.
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Research and Energy Conservation Development As it has done since it started business. LP&L continued in 1950 Since it began doine business in 1927 LP&L has ithested in to help its customers make t he best j
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i research to find ways to provide and wisest use of electric energy.
- 'T i electric power at lower cost and to N1ajor programs in this effort in-h h
4 improve the quality and continuity
lude LP&lls own Energy Efficient i
Electric flome and Energy Effi-
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of its service. In 1950. t F
>mpany spent 53,567,000 or aca rc h'.
cient Commercial Building pro-pV 52.666.(WX) of which went to the grams as well as the industry-
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i Electric Power Research Institute, sponsored National Energy Watch.
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i the principal research oreanization During 1980, LP&L provided
- 5f-3 of Ihe electric utility industry.
electric service to 7.S36 new single-I j,
family residences: 52.6"e of these
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[t Local research done by LP&L are total electric, with 338 of them and local researchers cost the meeting Energy Efficient Electric Company 5987.(XX). This was di-llome standards. A total of 3,650 rected to engineermg projects.
multi-family units took electrie consumer services, electric power service froni LP&L for the first time production, and miscellaneous re-in 1950, with Ml"e of these being search aetivities. In addition. LP& L total electric. Commercial cus-i contributed 5214.(XX) toward the tomers increased by 1,769 in 1980:
l development of a breeder reactor, 611 of them are total electrie. Of
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i a project be,mg con $ ucted by the the 611, enerev efficienev standards 1
Edison Electric Institute.
were met byN. Also in5portant in promoting energy efficiency and Econome; ries energy conservation are the Com-Because of Ihe great impor.
pany's Zip Up Your liome program tance of predicting LP&L's energy and energy-savmg heat pumps.
I sales and peak demands in future LP&L neared completion in
- EM. o years. the Company in conjunction 1950 ofits plans for the Residential Cathy Herren of LP&L Consurner Ser ices with the other N1iddle South Conservation Services Program,in in Luling conducts a group on a tour of waterford 3.
operating companies continued to which all major utilities must par.
develop in 1980 a new econometric ticipate. The Louisiana Depart-system. It involves a system of ment of Natural Resources will equations relating electricity use oversee this new program in to such economic variables as the Louisiana.
price of electricity, hourly earnings, the gross national product, rate of New and Renewed l
inflation. and consumer spending Franchises patterns.
One new franchise-to operate
.The C,ompany f.irst started de-the Jonesboro electric utility system yeloping the econometries system
-was granted the Company in m 1976. The forecast made by the 1950. Community franchises re-system in 1980 projects a 4.2"a newed include Clayton, Golden average annual increase in elec-N1eadow, llammond, N1arksville, tricity usage on the LP&L system and Waterproof,and the franchise during the Eighties.
in Concordia Parish also was renewed.
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Environmental Affairs Due to the rapidly increasing W
magnitude and coniplexity of
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LPAUs operations. the Cinnpany Y
formed in 19N) an Ensironmenta'l
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Affairs section in the Esecutive department.
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3 L P& L's employee political
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.. -..s' action committee LECOPA-LP&L h,y tLouisiana Employees Committee f ',
on Political Action of Louisiana j,
- g. ma p
, /A
- 8/h Power & Light Company). enjoyed
}Kj a successful year in 19N). LECOPA j' j was active in the fall Congressional u
elections, making contributions in Oliver Burke tiefn and L.J. Braquet, h>th of Risertake Consumer Senices assist customer seven of Ihe eight Congressional Linda Miller with plans for an Energy Efficient Electric Ilome.
races in the September primary.
,m-Six of the seven candidates sup-
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ported by LECOPA were elected.
LECOPA goes into 1981 as a solid
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organization. Of a total of 537
-4 eligible members. LECOPNs con-
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tributing membership stood at 26h N
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)
at the end of 19N), about 50"., of I
PS
'Mm M
those eligible.
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Tlie Company's Employees m-LPAL employees continue to be the Company's most valuable
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e
,s.
d2Mu k.
more than 12h years of service with asset. Our average employee has
- M%m,
LECOPA-LPAL tieuisiana Emphiyees Committee on Political Action of Louisiana i\\mer the Company. GI the 2.342 em-A Light Company) was actise in political campaigns last year. Around table from left, the Executise Committee are Alton Calhoun, Dolores LeBlane. E Jay Poche. Albert E.
Illoyees at the end of the year. 269 Henderson Jr., Chairman Al Young, and Walter E. Bond, Jr.
were promoted durm.g the year.
In November, the Company announced a 9.25"o earnings in-crease for its hourly employees.
Salary increases also were awarded to those employees in the new decentralized Salary Administra-tion Program.
LP&Us Blue Ribbon committee, made up of five employees repre-senting all major areas of the 10
l l
l Company. completed its second full the nation. it is designed to provide i
year at th c end of the summer.The helpful information on radiation committee was organized to con-exposure to these practitioners in sider suggestions, problems. and order that they may respond to their complaints of employees, and to patients' concerns. LP&L has spon-make recommendations to Com-sored seminars for local medical a
pany management. In 19h0, the organizations, furnished reading w
Company appointed 42 hourly material for waiting rooms, and l
employees representing every de-developed a series of communica-(
partment and major section of the lions on various radiation topics.
Company to serse as communi-A survey of these physicians and cators to express employee views dentists resulted in obtaining pos-to the Blue Ribbon committee.
itive responses from 140 w ho were V
LP&L's N1anpower Utilitation uiterested m gettmg more mforma-4 tion on radiation.
{
program, which was begun in 1977, has resulted in increased produe-tivity and greater flexibility in work Outlook for 1981 eroups. A reduction of 61 job With a new national admini-
' positions has been made since the stration more favorable to business kei,,
- h ** *CW E "C di n,
program began and additional than the previous administration, efficiencies are expected as a result there seems to be more reason for of cross-training and further study.
optimism about prospective im-t4,
' p@?
The activities of the N1anpower provement in general business con-e 4
x Utilization section now extend to ditions. Furthermore.in Louisiana.
q approximately 75"o of LP&l's two other major factors provide AM
~
hourly wployees.
additional reasons for optimism LP&L placed second in its i1) a more realistic attitude by the g
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i state Public Service Commission g
cateeory of personnel safetv in 1980 in the Southeastern Electric Ex.
in dealing with utility rate relief, g\\,
~
chance. LP&l's Southeastern di.
and (2) continued industrial growth g"
- ^
s vision achieved a highly enviable and the absence of any severe re-
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0-accomplishment by completing a cessionary effects on the economy pg second consecutive year without a m Louisiana.
/
disabline injury. This division, which hiid 441 ' employees at the end of 1980, has had a total of Meter $ke dNh Supervisor carl Toca. left.
!,931.849 work hours without a discusses a meter card with Meter Reader disabling inj ury.
George Vega. Both are of Riwrlake district.
Several training and develop-ment programs were continued through 1960, involving partici-pation by 371 LP&Lemployees. An orientation program for new super-visors was begun in July.
Radiation Information for Physicians and Dentists in 1950. LP&L implemented a new communications program aimed at physicians and dentists.
One of the first such programs in 11
Customers Operating Revenues (Thousands)
From Retai1 Customers (Millions otDollars) 525
$875 yD 420 5 9 700 E
- l' sq
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g*1 h,
h IN 315 mm
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210 4-
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350
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105 -
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175
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-=
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- 72 73 74 75 76 77 78 79 80 1971 72 73 74 75 76 77 78 79 80 1971 Energy Sales Average KWII Use To Retait Customers (Billions of Kilowatt Hours)
Per Residential Customer (Thousands of Kilowatt Hours!
25 15 0 -
r-20 m
12
=-
15 9
,, n a ggtl HpgyjggEgg nt 11:
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O 1971 72 73 74 75 76 77 78 79 80 1971 72 73 74 75 76 77 78 79 80 Construction Expenditures Utility Plant (Mdlions ofDollars)
(Millions of Dollars)
$300
$2500 U
M 240 2000
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180 1500 1--
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I 120 1000
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60 500 fd fl d
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1971 72 73 74 75 76 77 78 79 80 1971 72 73 74 75 76 77 78 79 80 12
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,WMEEMEV puhuJu Mas _
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+ 2
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jWy' '. gy.s -
"g g ".p
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Destrehan Manor Plantation on the Riser Road.
Coal in LP&L's Future... But History is Protected LP&L knows that coal and nu-The Wilton and llelvetia plan-facility and git shop at the Des-clear are needed to provide suffi-tations. containing about 3,000 trehan N1anor Plentation House, cient electric power in the decades acres on the east bank of the N1is-located a few miles downriver. Both ahead.
sissippi River, comprise the site of cabins are still structurally sound
'I he Company is nearing com-LP& L's two planned coal units. Both and have been refurbished.
pletion of..s first nuclear unit at plantations are steeped in 19th The two cabins were presented
'Ilift. La.. and is busy planning two century plantauon lore and were to the Society, which is host at the coal-fired generating units near important sugar cane produemg Destrehan N1anor for 35.000 to Central. La., in St. James Parish.
plantations long before the Civil 40,000 visitors annually. Built in One is seheduled for completion in War.
1787,the N1anoris the second oldest 1988. and the other in 1991.
Two old, but remarkably pre-plantation home on the lower N1is-l l
.but the Company is not too served plantt.on cabins-among sissippi River. It is open for tours busy to presene the priceless his-the only structures remaining on every day, except major holidays, tory involved in the land it will use.
the Wilton plantation-were do-from 10 a.m. to 4 p.m.
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nated to the River Road llistorical Society as a visitor registration
.., a 3
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One of two catiins donated 13 LP&L tc the Riser Road llistorical Society.
13 l
Louisiana Power & Light Company MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION FINANCIAL gg AND RESULTS OF OPERATIONS REPORT
- 1. Financial Condition Over the last three years, the Company has experienced problems in a number of areas. Two major pmblems involwd (1) the Company's cash requirements necessary to finance large annual construction programs primarily related to the construction of Waterford No. 3, a nuclear generating unit scheduled for operation in 1983, and (2) the inadequacy of and prolonged delays in obtaining rate increases. As a result of the need for capital to finance the annual construction programs, along with inadequate earnings, the Company's Bond and Preferred Stock earnings coverages were at de-pressed levels during this period.
As compared with the adverse economic conditions that existed over the last three years, the Company hopes shortly to obtain rate relief which should produce signifi-cant improvement in its financial condition. Some improve-ment actually began in 1980 as a res..'t of a rate increase granted to the Company by the leuisiana Public Service Commission in December 1979 which, along with the un-usually hot summer and the mterim emergency rate relief granted in October 1980, caused the Company's 1980 earn-ings to improve when compared with 1979 and 1978.
- 2. Liquidity and Capital Resources As mentioned above, meeting the Company's cash requirements has been one of the major problems over the last three years. Primarily as a result of inadequate earnings and increased costs in conjunction with continuing the construction programs, the Company's net financing trans-actions amounted to 5174,652,000, 5252,927,000 and
$240,984,000 for 1980,1979 and 1978, respectively, or 67%,
90% and 88%, respectively, of construction expenditures (including allowance for funds used during construction).
Such financing included primarily the sale of First Mortgage Bonds and Preferred Stock, when related earnings cov-erages, market conditions and nher factors permitted and sales of Common Stock to MUdle South Utilities,lne. Bank loans and commercial paper were used to finance con-struction on an interim basis pending permanent financing.
The Company estimates that its requirements for capital funds from external sources during the period 1981-1983 will be approximately $560.000.000, principally for con-struction programs totalling 5765,000,000 and for the fund-ing of $107,000.000 of maturing long-term debt. This
$560,0QO,000 estimate is premised upon the receipt by the Company of adequate rate relief so that the Company's earnings coverages will enable the Company to sell addi-14
tional First h1ortgage Bonds and Preferred Stock over the creased in 1978 due to increased scheduled maintenance on period to pmvide funds as needed to continue the con-generating units, which is required by continuous usage of struction programs. Additional sales of Common Stock to oil as boiler fuel, unscheduled maintenance and inflationary h1iddle South Utilities, Inc. and short-term borrowings are pressures.
estimated to provide a major portion of the balance of The amortization of property losses increased from funds fmm external sources. If the Company is unable to
$2,835,000 in 1977 to S4,101,000 in 1978 due to settlement of obtain the necessary rate relief, the Company may be re-cancellation charges with a contractor in excess of the quired to reduce, defer, or eliminate certain construction amount estimated. The abandonment loss had been com-expenditures, including those associated with Waterford pletely amortized by December 31,1979.
No.3.
The increase in taxes other than income taxes for the years 1979 and 1980 is due primarily to increased real and 3.Results of Operations personal property taxes and franchise taxes.
The fluctuations in total income tax expense included The following factors, which may not be indicative of in Perating expenses and in other income in 1980, 1979 future operations or earnings, have had a significant effect and 1978 are primarily attributable to changes in income upon the Company's results of operations during the years before income taxes, and to differences m timing between 1980,1979 and 1978.
deductions for tax and book purposes for which deferred Operating reven ues increased 52%,N7,000, $ 101.101.000 taxes were not provided. In addition, the 1979 change is and $77,424,000 for the years 1980,1979 and 1978, respec.
Partially attributable to a change in the Federal income tax tively. Increased fuel cost recovered through fuel adjustment rate.
clauses and increased fuel cost included in new levels of The increase in the allowance for equity and borrowed base rates accounted for 69%,103% and 44% of the respec.
funds used during construction is primarily attributable to tive increases. Rate increases received in this time period the mereased amounts of construction work in progress.
increased revenue by 27% in 1980 and by 15% in 1978.
Additional investments in System Fuels, Inc., an affili-Changes in sales of energy were relatively small except in ated company, and higher rates of interest on such m-1978 when increased energy sales to ultimate customers vestments are primarily respons,ble for the increases in i
and sales to other utilities as a result of a national coal misce!!aneous income and deductions in 1979 and 1980.
miners' strike and extremely cold weather accour'ed for Interest charges increased during each year primarily as 43% of the increase in operating revenues.
a result of issuances of additional debt in conjunction with increases in operation and maintenance expense were financing the construction programs and increased reliance primarily due to higher fuel and purchased power costs.
Fuel costs mse owr the 1978-1980 period, reflecting increases on short-term financing at high interest rates.
in the awrage unit prices for natural gas and oil. Increased
- 4. Effects of Inflation purchased power costs reflected not only higher average unit prices but also larger volumes of energy purchased to inflation has had a significant impact on the Company's displace even higher cost gas and/or oil-fired generation. A operations in recent years (see Note 12 to Financial State-portion of the increase in fuel and purchased power cost in ments,"Effect of Inflation on Operations (Unsudited)").
1978 also resulted fmm higher demand for electric service.
Other operation expense, exclusive of deferred fuel costs,
- 5. Summary increased as a result of the effects of inflation on wages, The Company believes that adequate and timely rate materials and supplies and services. Effective January 1979, increases are the major factors in determining its ability to t
the company commenced deferring fuel costs in excess of meet the energy demands of its customers. Such rate in-base levels ellowed in rate schedules until these costs are creases, along with the Company's conthuing efforts to reflected in billings to customers (generally two morahs contml costs in all areas of operation, should produce the later) pursuant to the fuel adjustment clause. The deferral earnings growth and the financing ability necessary to meet results m a better matchmg of energy costs witt. related such demands. As of December 31,1980 the Company had revenues. Thus, the deferred fuel cost amount represents a pending $216,544,000 in proposed annual rate increases net adjustment of energy costs. When there are wide fluc-(see Note 9 to Financial Statements," Rate Matters").
tuationsin the cost of energy between periods,the necessary adjustments can be quite large. Maintenance expense in-15
REPORT OF MANAGEMENT The management of louisiana Power & Light Company The board of directo:s pursues its responsibility for has prepared and is responsible for the financial statements reported financialinformation through its audit committee, and related financial information included in this annual composed of outside directors. The audit committee meets report. The financial statements are based on generally periodically with management, the internal auditors, and accepted accounting principles, consistently applied. Finan-the independent public accountants to discuss auditing, cial information included elsewhere in this report is consis-internal control, and financial reporting matters. The inde-tent with the financial statements.
pendent public accountants have free access to the audit To meet its responsibilities with respect to financial committee at any time.
information, management maintains and enforces a system The independent public accountants provide an objec-of internal accounting contmls which is designed to provide tise assessment of the degree to which management meets reasonable assurance, on a cost effective basis, as to the its responsibdity for fairness of financial reporting. They integrity, objectivity and reliability of the financial records regtdarly evaluate the system of internal accounting con t rol and as to the protection of assets. This system includes and perform such tests and other procedures as they deem communication through written policies and procedures.
necessary to reach and express an opinion on the fairness of and an organizational structure that provides for appropria:e the financial statements.
division of responsibility and the training of personnel. This We believe that these policies and procedures proside system is also tested by a comprehensive internal audit reasonable assurance that our operations are carried out
- program, with a high standard of business conduct.
AUDITORS' OPINION Ieuisiana Power & Light Company:
We have examined the balance Seets of Louisiana Power & Light Company as of December 31,1980 and 1979 and the related statements of income, retained earnings, and changes in financial position for each of the three years in the period ended December 31, 1980. Our exam: nations were made in accordance with genera:ly accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing prmedures as we considered necessary in the circumstances In our opinion, the above-mentioned financial statements present fai:ly the finaneir.1 position of the Company at December 31,1980 and 1979 and the results of its operations and the changes in its financial position for each of the three years in the period ended December 31,19K). in conformity with generally accepted accounting principles applied on a consistent basis.
1 k k b t-)P New Orleans, louisiana February 13,1981 16
STATEMENTS OF INCOME For the years ended December 31,1980,1979 and 1978 80 79 78 (in Thousands)
OPERATING REVENUES (Notes IB,8 and 9).
... 5853,523 5557,476 5456.375 OPERATING EXPENSES:
Operation:
Fuel (Note 81.
296,820 IM),226 168,177 Purchased power (Note 8).
. 242,279 140,111 69,730 Other.
59,830 38,318 43,430 Alaintenance.,
28,906 31,269 29,213 Depreciation.
42,513 40,863 38,389 Amortization of property losses.
4,101 4,101
' lines other than income taxes.
18,733 15,977 14,1%
Income taxes (Notes IE and 6).
48,141 22,750 19.919 Total..
2T7,222 483,615 387,065 OPER ATING INCON1E.
116,301 73.861 69,310 OTilER INCONIE:
Allowance for equity funds used during construction (Note IF).
31.693 30,722 20,823 N1iscellaneous income and deductions-net.
7,301 4.920 2,422 income taxes (Notes IE and 6)...
13,117 11,751 9.058 Total.
52.111 47.393 32.303 INTEREST CH ARGES:
Interest on iong-term debt...
..... 69.396 60,263 51,959 Other interest-net.
16,167 10,993 6,166 Alkweance for borrowed funds used during construction (Note IF)....
(17.827)
(15.131) (10,256) 67.736 56,125 47,869 Total.
. 5_I00.676 5 65,129 5 53.744 NET INCON1E.
STATEMENTS OF RETAINED EARNINGS For the Years Ended December 31,1980,1979 and 1978
.. 5 58.541 5 63.292 5 59,863 RETAINED EARNINGS, January 1.
ADD-Net income.
100,676 65,129 jT,7_44 Total.................
159,217 128,421 113,607 DEDUCT:
Dividends-cash:
Preferred stock at prescribed rates (Note 21.....
24,883 16,749 8,108 Common stock (per share: 1980,50.97t 1979,50.872 and 1978,50.86).... 69,110 52,673 42,194 Capital stock expenses, etc...
15 458 13 94,008 69.880 50.315 Total.......
RETAINED EARNINGS. December 31 (Note 3).
.. 5 65,209 5 58,541 5 63,292 See Notes to Financial Statements.
17
1 4
f BALANCE SHEETS Dece-iber 31,1980 and 1979 if ASSETS 80 79 (In Thousands)
UTILITY PLANT (Notes IC,4 and 7):
Electric...............
..... 51,288.901 51.237,269 Construction work in progress...
1,030,345 831,837 15.175 N uclea r fuel...................................
1 2,334,421 2,069,106 Tatal.............
Less accumulated depreciation.....
393.342 353J4j
................................... l 941.079 1,715.112 Utility plant-net..
OTHER PROPERTY A
.. VESTMENTS:
36,137 36,997 Imestraent in associates ompany-at equity (Note 4).....
Other.......
407 382 Total..........
36.544 37.379 CURRENT ASSETS:
Cash (Note 5)........
12,696 11,078 Special deposits.......................
10.636 10.289
'lemporary investments-at cost, which approximates market.
11,0u0 8,000 Notes receivable...........
812 938 Accounts receivable-(less allowance for doubtful customer accounts of 5135 thousand):
Customer.....
28,847 24,826 Other....
2,046 1,441 Associated companies....
115 100 Deferred fuel costs (Note lB)..
17,056 15,054 Materials and supplies-at average cost.
10.299 10,795 O t h e r...................
4.474 4.975 Total..
97.981 87.496 l
DEFERRED DEBITS-Unamortized debt expense..
2,841 2.378 i
total......
......................... 5 2.078.445 51.842,365 See Notes to Finanew1 Statements.
18
CAPITALIZATION AND LIABILITIES 80 19 (In Thousands)
CAPITALIZATION:
Common stock, no par value, authorized 150,000,000 shares; issued and outstanding 75,746,400 shares in 1980 anci 65,140,000 shares in 1979 (Note 2)... 5 498,900 5 428,900 Retained earnings (Note 3)........
65.209 58.541 Total common shareholder's equity..
564,109 487,441 Preferred stock, without sinking fund (Note 2).
145,882 145,882 Preferred stock, with sinking fund (Note 2)..
121,381 92,990 Long-term debt (Note 3)......
828.989 827.430 Total.......................
1.660.361 1.553.743 CURRENT LIABILITIES:
Notes payable--banks (Fote 5)........
44,293 32.375 Currently maturing lom term debt.....
52,162 11,871 Accounts payable:
Associated companies....
28,015 22,902 Other......
38,372 36,698 Customer deposits.
16,368 13,159 Taxes accrued........
12,099 3,459 Accumulated deferred income taxes (Notes IE and 6)...............
8,259 7,289 Interest accrued.
20,833 19,825 Dividends declared...
23,882 6,156 Other..
811 634 Total....
245.094 154.368
'l g
DEFERRED CREDITS:
Accumulated deferred income taxes (Notes IE and 6)..........
91,744 91,221 Accumulated deferred investment tax credits (Notes IE and 6)..
47,360 28,382 Other....
26.888 7.729 Total.....
165.992 127.332 RESERVES (Note IG):
' Property insurance...
5,905 5,792 Injuries and damages....
1.093 1.130 Total.
6.998 6.922 COMMITMENTS AND CONTINGENCIES (Notes 4,7 and 9)
TOTAL.......
52,078.445 51.842,365 See Notes to Financial Statements.
19
~
STATEMENTS OF CIIANGES IN FINANCIAL POSITION For the Years Ended December 31,1980,1979 and 1978 80 79 78 (In Thousands)
FUNDS PROVIDED BY:
Operations:
Net income......
.......... 5100,676 5 65,129 5 53.744 Depreciation..
42.513 40,863 38 389 Amortization of praperty losses..
4,101 4,101 Deferred income taxes and in estment tax credit adjustments-net.
20,471 10,896 4,915 Allowance for ft. ads used during construction (Note ti7....
(49.520)
(45.853)
(31,079)
Total funds provided from operations...
I14,140 T 136 70,070 Other:
Allowance for funds used during construction (Note IF)....
. 49.520 45,853 31.079 Decrease in working capital *........
30,063 3,187 Miscellaneous-net..
4.893 4,146 Total funds provided by operations and other...
198.616 120.989
!08.482 t
Financing t nsactions and other:
... 70,000 73.000 50,000 Common st wk..
28,391 128.063 Preferred stack..
First mortgage bonds.....
50,000 100.000 135.000 Other long-term debt.....
4,572 11,458 29,531 Short term securities..
8,918 23.923 24,771 13,044 Sale and leaseback transactions...
Total funds pmvided from financing and other..
186.652 314.521 251,498 Total funds provided.
. 5385,268 5435,510 5359.980 FUNDS APPLIED TO:
Utility plant additions Construction exper.Jitures for utility plant..
........ 5259.979 5280,346 5272,911 15,175 568 Fabrication costs of nuclear core..
4,121 1,796 25,685 Other-net...
Total gruss additiors (includes allowance for funds used during cons:cuction of $49,520 in 1980,545,853 in 1979 and 531,079 in 1976,.
279,275 282.142 299,1M Other:
Dividends declared on preferred stock.....
24.883 16,749 8 'J8 Dividends declared on common stock.
. 69.110 52,673 42,194 7.136 Increase in working capital
- Miscellaneous-net.........
15.216 Total funds applied to other.
93.993 91,774 50,302 Financing transactions:
9,900 10.000 Retirement of first mortgage bonds.
Retirement of other long term debt.
2,100 1,879 514 59,715 l
Repayment of short-term securities.
Total funds applied to financing.....
12.000 61.594 10.514
.... 5385,268 5435,510 $359,980 Total funds applied.
- Working capital excludes short-term securities, current maturities and deferred taxes included in current liabilities. The 1980 net decrease in working capital is primarily due to the increases in dividends declared, taxes accrued and accounts i
payable, w hile the 1979 net increase is primarily due to increases in accounts receivable and deferred fuel costs, reduced by an increase in accounts payable, and the 1978 net decrease is primarily due to an increase in accounts payable and interest accrued, reduced by increases in cash and special deposits.
See Notes to Financial Statements.
20 m
-e
m,______
Notes to Financial Statements For the Years ended December 31,1980,1979 and 1978
- l. Summary of Significant Accounting Policies A. System of Accounts E. Income Tames The accounts of the Company are maintained in ac-The Company joins its parent in filing a consolidated cordance with the system of accounts prescribed by the Federal income tax return and income taxes are allocated Louisiana Public Service Commission (LPSC) which sub-to the Company in proportion to its contribution to the stantially conforms to that of the Federal Energy Regulatory consolidated tax liability.
Commission.
Deferred income taxes are provided for differences be-tween book and taxable income to the extent permitted E N"' '"""
by the regulatory bodies for rate-making purposes. Invest-The Company records revenues as b~ed to its customers ment tax credits allocated to the Company are deferred on a cycle biiling basis. Revenue is n-accrued for energy and amortized based on the average useful life of the re-delivered but not billed at the end ut the fiscal period.
lated pmperty beginning with the year allowed in the The rate schedules of the Company include fuel adjustment consolidated tax return.
clauses under which fuel costs above the levels allowed in the various rate schedules are permitted to be billed or E Allowance for Funds Used During Construction required to be credited to customers.
To the extent that the Company is not permitted by its in January 1979 the Company received authorization regulatory bodies to recover in current rates the carrying from the LPSC allowing and requiring the Company to costs of funds used for construction,it capitalizes, as an credit or charge customers through the fuel adjustment appropriate cost of utility plant, AFDC which is calculated clause in future billings for net over or under-collections of and recorded as provided by the regulatory system of fuel costs in excess of those included in base rates. Con-accounts. Under this utility industry practice, construction currently with this change in billings for fuel costs, the work in progress (CWIP) on the balance sheet is charged Company commenced deferring on its books fuel costs in and the income statement is credited for the approximate excess of base rates until these costs are reflected in billings net composite interest cost of borrowed funds ad for a to customers p irsuant to the fuel adjustment clause. This reasonable retur;. on the equity funds used for const. -tion.
deferral amounted to 52.002,0(X) and $15.054,000 for the This procedure is intended to remow from the int me years 1980 and 1979, respectively, and is recoverable in statement the effect of the cost of financing the connction subsequent months through the fuel adjustment clause.
program and results in treating the AFDC charges in the The effect of this deferral, net of deferred income taxes, same manner as construction-labor and material costs, was to increase net income for the years 1980 and 1979 by As non-cash items, these credits to the income statement 51.033J)00 and 57,765.000, respectively.
have no effect on current cash earnings. After the property is placed in senice the AFDC charged to construction costs C. Utility Plant and Depreciation is recoverable from customers through depreciation pro-Utility plant is stated at original cost. The cost of visions included in rates charged for utility service. For additions to utility plant includes contracted work, direct the year 1980, the Company used an accrual rate of 5% on a labor and materials, allocable overheads, and an allowance portion of CWIP in the amount of $736,180,000 in accordance for the composite cost of funds used during construction with the December 18, 1979 LPSC order granting a rate
( AFDC).The costs of units of property retired are removed increase to the Company, and an accrual rate of 7.84% on from utility plant and such costs plus removal costs. less the balance of CWIP.The accrual rates were 6.94% for 1979 salvage, are charged to accumulated depreciation. Mainte-and 6.75% for 1978.
nance and repairs of property and the replacement of items The Company's poaicy is to continue to capitalize AFDC determined to be less than units of property are charged to on projects during periods of interrupted construction when operating expenses. Substantially all of the utility plant is such interruption is temporary and the continuation can be subject to the lien of the Company's Mortgage.
justified as being reasonable under the circumstances.
Depreciation is computed on the straight-line basis at G. Resenes rates based on the estimated service lives of the various classes of property. Depreciation pmvided on average de-The Company provides reserves for uninsured property preciable property amounted to appmximately 3.5% in 1980, risks and for claims for injuries and damages through charges 1979 and 1978.
to operating expense on an accrual basis. Accruals for these resenes have been allowed for rate-making purposes.
p The Company's pension plan is non-contributory and cowrs substantially all employees. The Company's policy is to fund pension cost accrued.
21
- 2. Preferred and Common Stock Preferred stock at December 31,1980 and 1979 consisted of the following:
Shares i
Authorized at Snares Outstanding Current December 31, at December 31, Call Price Cumulame. 5100 Par Value 1980 19N) 1979 Per Share Without sinking fund:
4.96*<. Series.,.
N)JM K)
N)JXW)
N)JXX)
Sl(M.25 4
4.16% Series...
70/XX) 70JXX) 70/X X) 1(M.21 4.44% Series.....
70JXX) 70/XM) 70/M X) 1043)6 5.16% Series.
75JXX) 75JXX) 75JXX) 104. lM 5.40% Series.
boJXX)
N)Jxh) 80JxW) 103JM) 6.44% Series.
80/XX)
N)JXX) h0JXX) 102.92 9.52% Series...
70fxx) 70JX10 70JXX) 106.58 7.84% Series..
1003MX) 1(x)fxX) 1(X)/xx) 107.70 7.36% Series...
Itx)JXx) 100fx10 100JXX) 107JM 8.56% Series.
100JXX) 1(x)JXK) 100fx)0 107.42 9.44*. Series.
300fXX) 300fxx) 3(X)JX x) 111.44 ll.48% Series.
3N)JW K) 350/xx) 3N)JM K) 113.98 Total..
I.455.0(X) 1.455JXX)
I,455JXX)
Unissued.
3/45JXXI Total.
4,500J M x)
I,455JWo I,455/xx)
Cumulatise,525 Par Value With sinking fund:
10.72% Series.
13.12% Series.
2.400/XX) 2.400fMx) 2.4(X)JXX) 27.68 1.600fXX) 1/dK)JXM) 1.NN)JNX) 28.28 15.20% Series..
1,200/XK) 1,200JX0 23.N)
Total.
5.2(x)JXX) 5.200fxW) 4/W o.txx)
Unissued.
6,Nx)Jxo Total.
12/100/xx) 5,200JXW) 4JWojxo 19N) 1979 qin Thousandu Without sinking fund:
Stated at 5100 a share.
5145.500 5145.500 Premium.
382 3x2 Total preferi.d stock and premium, without sinking fund.
5145.hM2 5145.hM2 With sinking fund:
Stated at 525 a share.
5130,(xx) 5100JMM)
Issuance expense.
q8.619)
(7.010:
Total preferred stock and issuance expense, with sinking fund.
$121,381 5 92,990 The 9.44%,11.48%,10.72%,13.12% and 15.20% preferred and 60JX)0 shares, respectively, at a price of $25 per share stock issues contain provisions restricting the redemption plus accumulated and unpaid dividends. This obligation is of any of the shares thereof prior to November 1,1982, cumulative but is subject to a credit for prior redemptions March 1,19M, July 1, ifM, October 1,19M and Nov mber I, not effected pursuant to and not previously credited against 1985, respectively, with funds effectively costing the Com-such obligation. In addition ;5e Company may at its option pany less than 9.4297%,11.456%, i1.2705%,14.6103% and redeem up to an additional 120,000 shares of the 10.72*3 16J)616% per annum, respectively. In addition, the 10.72%,
preferred stock,80.000 shares of the 13.12% preferred stock 13.12% and 15.20% preferred stock issues are each subject and 60,000 shares of the 15.20% preferred stock on the to a sinking fund pursuant to which the Company is obligated above applicable sinking fund redemption dates at the to redeem, out of funds legally available therefor, com-sinking fund redemption prices.
mencing on July 1,1984, October 1,1984 and November 1, The increases in the number of shares of Common and 1985, respectively,and ending in the year in which all of the Preferred Stock outstanding during the three years ended shares of said issues hase been redeemed, 120,000,80,000 December 31,1980 were as follows-22
~
Year Ended December 31 1980 1979 1978 Common Stock shares sold.
. 10,606,400 11,3M.000 7.576.000 5100 Preferred Stock shares sold.
350.000
$25 Preferred Stock shares sold.
1,200.000 4.000,000 The Company has made a filing with the Securities and tion to sell 6.060.700 shares of common stock, no par Exchange Commission for the purpose of obtaining authoriza-value, to its parent company for $40,000,000 during 1981.
- 3. long. Term Deht Long-term debt at December 31,1980 and 1979 consisted of the following:
1980 1979 (In Thousands)
First Mortgage Bonds:
9%*. Series due 1981.
5 50.000
. 5 50,000 50,000 9%% Series due 1983.
18.000 18,000 3%"'. Series due 1984.
75,000 75,000 9 *a Series due 1986...
20,000 20.000 4%% Series due 1987.
15%% Series due 1988.
........... 50,000 45,000 45.000 1073*6 Series due 1989.
20.000 20,000 5 % Series due 1990..
4%*. Series due 1994.
25.000 25,000 5%% Series due 1996.
35,000 35,000 5%% Series due 1997.
16.000 16,000 18,000 18,000 6%% Series due September 1,1997.
35,000 35.000 7%% Series due 1998.
9%*a Series due 1999.
25.000 25,000 20.000 20,000 9h% Series due 2000..
25,000 25,000 7%% Series due 2001..
25,000 25,000 7h% Series due 2002.
25,000 25.000 7%% Series due Nosember 1,2002.
45,000 45,000
? % Series due 2003.
45,000 45.000 8%% Series due 20m..
8%% Series due 2006.
40,000 40.000 60,000 60,000 10 % Series due 2008...
1 55.000 55.000 13%% Series due 2009.
. 772.000 772f)00 Total First Mortgage Bonds.
t Other:
P.incipal amount of municipal revenue bond obligations,1%%-8% due serially 1982-2004, and other future 41,421 39,473 obligations under operating agreements.
16,300 16,300 lbilution control and industrial deselopment revenue bond obligations.6.40%-8% due 1988-2009..
(1,000)
(1,333)
Less amounts held by trustees..
56.721 54.440
= Total Other.
268 990 Unamortized premium and discount on long-term debt-net....
Totai Long-Term Debt.
.. 5828.989 5827,430 23
Sinking fund requirements on First N1ortgage Bonds and maturities under long-term debt instruments,in effect at December 31,1980 and 1979, for the years 1980 through 1985 are as follows:
Sinkine Fund' Year 19N) 1979 Maturities **
lin Thousands) 1980.
. 56.720 $6.720 512.000 7,729 7,720 52.162 1981.
1982.
7,720 7.220 2,267 1983.
7.720 7.220 52.350 1984.
7,(MO 6.540 20.462 1985.
7.tMO 6.540 2.549
- Sinking fund requirements may be satnfied by certification of property additions at a rate of 167%, of 5.ch requirements.
- lt is anticipated that First Mortgage Bond maturities will be refinanced at maturity.
The hfortgage, which is presently more restrictive than At December 31,1980 and 1979, $51.087,000 and the Articles of Incorporation, contains pnwisions restricting 544,419,000, respectively, of the retained earnings was free the payment of dividends or other distributions to common under the hfortgage provisions uhich were then the most stockholders based generally on an initial restriction in the restrictive.
amount of retained earnings at various dates,less certain The Company has made a filing with the Securities and deductions as provided in the N1ortgage, and a restriction Exchange Commission for the purpose of obtaining appnwal based on a comparison of the Company's provisions for to sell up to S75.000.(XX) principal amount of First hlortgage depreciation and retirement of property with the related Bonds in April 1981.
replace nent fund requirements.
4, Commitments and Contingencies The Company's construction program contemplates ex-In connection with certain of SFI's Imrrowing arrange-penditures of approximately 5280,163,000 in 1981, 5294,-
ments, SFI's patent companies, including the Company, 000,000 in 1982 and $191,000,000 in 1983.
have covenamed and agreed, severally in accordance with The Company has a 33% interest in System Fuels, Inc.
their respectim shares of ownership of SFF. common 6-four principal stock, that they will take any and all action necessary to
( FI), a jointly owned subsidL ry of t operating subsidiaries of htiddle South Utilities, Inc. SFI keep SFI in a sound financial condition and to place SFl operates on a non-profit basis for purposes of planning and in a position to dischmge, and to cause SFI to discharge its implementing pmgrams for the pmeurement of fuel supplies obligations under these arrangements. At December 31, for all of the operating companies; its costs are primarily 1980, the totalloan commitment under these arrangements recovered through charges for fuel delivered, amounted to $221,196.(XX) of which $128.224,000 was out-The parent companies of SFI have made loans to SFl standing at that date. Also SFFs parent companies including to finance its fuel supply business under a loan agreement the Company, haw made similar cownants and agreements dated January 4,1978, as amended January 1,1981, which in connection with long-term leases by SFl of oil storage pmvides for SFl to borrow up to 5261,500,000 from its and handling facilities and coal hopper cars. At December parent companies through December 31,1981. As of 31, 1980, the aggregate discounted value of these lease December 31,1980 the Company had loaned 522,135,000 arrangements was $59,150,000.
to SFI pursuant to this loan agreement and the Company's in December 1976, SFl entered into a contract with a joint share of the unused loan commitment is 589,010,000. Notes venture for a supply of coal from a mine to be developed under this agreement mature December 31,2006. In ad-in %)uming. The contract is expected to provide an estimated dition the Company had loaned SFI 513,995,250 under 150 to 210 million tons of coal over a period of 26 to 42 previous loan agreements. Notes mature in 10 and 25 years years; the coal supplied is expected to be used at a future from date of borrowing under the provisions of the previous Arkansas Ibwer & l_ight power plant. SFI's parent companies, loan agreements.
including the Company, each acting in accordance with their 24
}
1 i
respective shares of ownership of SFI's common stock, allocations, all responsibilities and obligations related to j
joined in, ratified, confirmed and adopted the contract the Grand Gulf Plant, and Arkansas Pbwer & Light Company and the obligations of SFI thereunder.
and Arkansas-Niissouri Power Company, which did not The Company, together with the other N1iddle South receive allocations, will relinquish their rights in the pir.i.
System operating companies,is obligated under agreements The proposed reallocation is rubject to the receipt of the with Niiddle South Energy,Inc. t NISEl to make payments or appr wal of regulatory agencies and of all other necessary subordinated adumees adequate to coser all of the operating approvals.
ex penses and capital costs of N1SE and,in return,is entitled The Federal income tax returns for the years 1971 through to receive the power available to NISE from the Grand Gulf 1976 have been examined by the Internal Revenue Service Plant. Thmugh 1950 51.8 billion had been expended by N1SE and adjustments have been proposed. The principal issue on the Grand Gulf Plant's two units which are scheduled is whether customer deposits are includible in taxable for completion in 1952 and 1986. Under certain circum-income. A formal written protest has been filed and con-stances, payments may be required to be made commencing ferences are being held with an Appeals Officer of the December 31.1982 if the first unit of the Grand Gulf Plant Internal Revenue Service. Any final liability for taxes re-has not been completed by that date. During 1960 the sulting from settlement with the Internal Revenue Service operating companies agreed in principle to a permanent would not have a material effect on net income, income allocation of the Grand Gulf Plant's capability. Under this taxes on customer deposits would be normalized. Niost arrangement those companies receiving allocations, N1is-of the other issues haw been settled and adequate prosisions sissippi Power & Light Company, New Orleans Public Sersice have been recorded.
inc. and the Company, will assume,in proportion to such 1
l 1
- 5. Short. term florrowings At December 31.19h0.the Company had 528,585.000 in these lines subject only to its maximum authorized level 1
lines of credit with Louisiana banks. Accounts are main-of short-term bormwings. Compensating balances are re-tained with the Louisiana lending banks and, although quired by tertain of the lending banks (57,128f
. at l
immaterial balances in some of these accounts may be December 31,1980 and 511,862,500 at December 31,. 79).
j deemed to be compensating balances, most of these ac-The amount of unused short-term borrowings as of De-counts are working accounts and fluctuations in their cemher 31.1980 and December 31,1979 was $116,292,500 r
balances do not reflect or depend upon fluctuations in the and 5117.625,000, respectively.
[
amounts of bank loans outstanding Additionally, the Com-
' The Company has received authorization from the Secur-pany had joined with three other Ntiddle South System ities and Exchange CommissWn under which the Company operating companies in establishing 5253.(XX).(XX) in lines can effect short-term borrowing aggregating up to the lesser j
of credit with banks outside the N1iddle South System from time to time of 5190.000.000 (5150,000.000 in 1979) sersice area. The Company may borrow any portion of or 10% of total capitalization, outstanding at any one time.
The short-term borrowings and the applicable interest rates (determined by Jividing applicable interest expense by the aserage amount borrowedt for the Company were as follows:
Year Ended December 31.
1980 1979 1978 I
l Masimum aggregate amount outstanding.
. 5131,750.000 5114.627,500 5 84.090.000 A -rage borrowing:
.5 92.302.000 5 52,773,000 5 22.340,000 llanL loans.
I Commercial paper.
.5 9,604,000 5 29.503,000 5 28.476.000 i
Average interest rate during the period:
14.7%
12.1%
8.8%
l Ilank loans.
i Commercial paper.
13.7 %
11.5 %
8.8%
i Aserage interest rate at end of period:
20.8%
15.3 %
11.8 %
llank loans.
11.5 %
Commercial paper.
i 25 l
y..-,.-y.-
,,-w,_y.--,_
., _ _. -m,..
-._,m,--
,.,,. ~. _ +,-
,.u-me,.,m
..--,.---,y,-
m -
s
- 6. Income Tas I.'spense income tax expense is composed of the folhming:
19N) 1979 197h Iin T housands)
Current:
Federal.
. s 8.627 5 106 5 5.149 I
State.
5,926 436 797 Total.
14,553 103 5%
Deferred-net:
Liberalized depreciation.
7.269 7.674 8.494 Deferred fuel cost.
yno 7,739 Test energy.
170e (70i v70i Differences between book and tas gains and lowes on sales and abandonment of property.
t 4.949) a1.9X66 i1.9566 Unbilled revenue.
I1.689 a 1.074 13the Other.
137 82 Total.
1.493 11.915 6.120 Insestment tax credit adjustments-net.
I h.97X 11.019e
- 1,205 Tbtal income tases.
. $35.024 510,999 510.561 Charged to operations.
. $4%.141 522.750 519.919 Credited to other income.
113.117e (11.751 i9.058 i j
Tbtal income tases.
. 53; 024 510.999 S10.561 Total income taxes differ from the amounts computed by applying the statutory Federal income tax rate to income before tases. The reasons for the differences are as follow s:
1950 1979 1978 Pre-las
" Pre T.n
Pre-lin Amount income Amount Income Amount income Computed at statutory rate.
$62.422 46.0".
$35.019 46.0 >e 531,011 48.0",
increases treductionslin tas resulting from:
Alkmance for funds used during eonstruction.
122.779) tih.Mi
- 21.092i
- 27.7i (14.918
- 23.1 :
Tases capitalized on books and deducted on tas returns.
t1.7951 t 1.3 e iI.7976 12.46 a 1.7'P4
- 2.8 #
Tas sasings due to filing a consolidated return.
t 4.50s b 13.3i
( I,00t h a1.66 Ot her - net.
1.676 1.2 (1,131) 41.5:
(2,4331 13.76 Recorded income taxes.
535.024 2 5.X"..
s lo.'N9 14.4_"
510.h61 16.h Unused insestment tax credits aggregated appnnimately the basis of such credit contributed. liffectise in 1979 the 563.632.(XX) at December 31,19h0 of which $10.(X)4.(XX) method of allocating investment tas credit was changed so may be carried forward through 1984. 524.269.(XX) through that the Company is allocated the credit on the basis of its 1955. 59.872.(Ol through 19X6 and 519,487.(XX) through 1987 portion of the consolidated tas liability. Any additional Prior to 1979 the investment tax credit utilized in the consolidated credit utilized is allocated on the basis of the consolidated ux return was at:ocated to the Company on remaining tax credits.
26
7.l. cases The Company accounts for leases on the same basis as 51.2N.000 and 5521,uX)in 19N),1979 and 1978, respectiwly.
that used by its regulatory authority in ihe rate-making On June 1,1978, the Company sold its interest in a supply process which determines the resenues utilized to recoser of nuclear fuel for $8,210,000. representing cost,and simul-the lease costs.
taneously entered into a $60,000,000 nuclear fuel lease.
(in October 30,19N), the Company entered into a sale Lease payments, based on nuclear fuel used, will be treated and leaseback of certain office buildings and related real as cost of fuel. The lease, unless sooner terminated by properties. A pain of 513.436.000 has been deferred and is one of the parties, will continue through June 1, 2028.
being amortized oser the life of the lease. The lease is for The unrecovered cost base of the lease at December 31, a primary term of 20 years and requires minimum annual 1960 was 559,400.000. The Company has filed with the rentals of approximately 52.996,000 through 1955 and Securities and Exchange Commission for authorization to 53.307.000 thereaf ter.
increase the aggregate amount of the lease to $105,000,000.
Rental expense amounted to approximately 51,519JXN),
Other lease commitments are not significant.
N. Transactions with Affiliates The Company buy s from and sells electricity to the other amounting to $46,778,000 in 1980,529,366,000 in 1979 and operating subsidiaries of Middle South Utilities. Inc., its 541,655,000 in 1978. Operating expenses include fuel cost parent, under rate schedules filed with the Federal Energy and purchased power charges from affiliates totalling Regulatory Commission. In addition, Ihe Company pur-5333,033,000 in 1960, $158,788,000 in 1979 and 5119,408,000 chases fuel from SFl.
in 1978.
Opewting trwnues include rewnues fmm sales to affiliates
- 9. Rate Matters As of December 31,1980, the Company had pending 1950 the LPSC permitted the Company to implement an 5216.544JXX)of proposed annual rate increases,includi ig a interim rate increase of approximately 532,400,000 under general rate increase application filed in May 1980 with protective bond, subject to refund. Included in operating respect to customers under the LPSC jurisdiction in the revenues for the year 1980 is approximately 58,037,000 of amount of 5203.NX),000. In connection therewith,in October such revenues subject to refund.
- 10. Pension Plan Total pension expense of the Company for 19b0,1979 cost over periods of up to 26 years A comparison of ac-and 1978 was 55,346.000, 54,654J)00 and 53,639,000, cumulated plan benefits and plan net assets for the defined respectively, which includes amortization of past service benefit plans is presented below:
January 1, 1980 1979 Actuarial present value of accumulated plan benefits:
Vested.
. 545,290.000 542,230MX)
Nonsested.
. _.2,786.000 2,337,000
~lbtal.
. 548,076.000 544,567,0f x)
Net awets asailable for plan benefits.
. 556,184fXY) 546,7M,000 The weighted average assumed rate of return used in determining the actuarial present values of acccmulated plan benefits was 6%% for the years 19M) and 1979.
27
i i
II. Quarterly Resuhs (Unaudited)
Unaudited operating results for the four quarters of 1980 and 1979 follow:
Quarter Operating Operating Ended Revenues Income Net Income
(!n Thousands) 1980:
March.............
SIM,921 525.478 521.697 June.
169.310 21.315 15.772 September....
273,717 40,050 36.363 December..
245.575 29,458 26.844 1979:
j March....
109.885 20,973 17.031 June'.
121.435 15.525 12.569 September..
169,192 22,668 20,966 December....
' 56.9M 14,695 14,563 3
' Operating rewnues in the quarter ended June 30,1979 include a reduction of $2,8NO,000 for rewnues refunded to industrial customers.
The business of the Company a subject to seasonal interim period should not be considered as a basis for fluctuations with the peak period occurring during the estimating the results of operations for a full year.
I summer months. Accordingly, earnings information for any
- 12. Effect of Inflation on Operations (Unaudited) i j
The following supplementary information about the the recovery of fuel costs through the operation of adjust-effects of changing prices on the Company is provided in ment clauses or adjustments in basic rate schedules to accordance with the requirements of Statement of Financial actual costs.
+
Accounting Standards No. 33, " Financial Reporting and As prescribed in Statement of Financial Accounting Changing Prices". It should be viewed as an estimate of the Standards No. 33. income taxes were not adjusted.
effects of changing prices, rather than as a precise measure.
The regulatory commissions to which the Company is Constant dollar amounts represent historical costs ad-subject allow only the historical cost of plant to be recowred i
jnsted for the effects of general inflation. The effects are in revenues as depreciation. Therefore the excess of plant i
determined by converting these costs into dollars of equal stated in terms of constant dollars or current cost over purchasing power using the Consumer Price Index for all the historical cost of platit is not presently recoverable in Urban Consumers (CPI U).
rates. This excess is reflected as a reduction to net recover-Current cost amounts reflect the changes in specific able cost. While the rate-making process giws no recognition prices of pmperty, plant and equipment from the year of to the current cost of replacing property, plant and equip-acquisition to the present. The current costs of property, ment, the Company believes, based on past experiences, I
plant and equipment, which represent the estimated costs that it will be allowed to earn on the increased cost of its of replacing existing plant assets, are determined by ap-net imestment when replacement of facilities actually occurs.
plying the Handy-Whitm.m Index of Public Utility Con-To properly ref;ect the economics of rate regulation in l
l struction Costs (HWI) to the cost of the surviving plant by the Statement of Income from Operations presented below, year of acquisition. Land and certain other plant assets the reduction of net property, plant and equipment to net which are not included in HWI were converted using the recourable cost is offset by the gain from the decline in CPIU.
purchasing power of net amounts owed. During a period The difference between current cost amounts and con-of inflation, holders of monetary assets suffer.a loss of
. stant dollar Amounts results from specific prices of property, general purchasing power while holders of monetary liabil-plant and equipment (as measured by the HWI) changing ities experience a gain. The gain from the decline in at a rate different from the rate of general inflation (as purchasing power of net amounts owed is primarily at-measured by the CPI-U).'
tributable to the substantial amount of debt which has been
- The current year's depreciation expense on the convant
. used to finance pruperty. plant and equipment. Since the
}-
dollar and current cost amounts of property, plant and depreciation on this plant is limited to the recowry of.
equipment were determined by applying the reported de-historical costs, the Company does not haw the opportunity preciation rate of the Company to the indexed amounts.
to realize a holding gain on debt.
i The cost of fuel used in generation has not been restated from historical cost in nominal dollars.- Regulation limits i
~6 2
4
Statement of income from Operations mod Other Financial Data Adjusted for Effects of Changing Prices for the Year ended December 31.1980 (in Thousands)
As Reported in Adjusted for Adjusted for the General Changes in Financial inflation Specific Prices Statements (Constant Dollars) (Current Costs) 5853,523 5853,523' 5853,523' Revenues.
Operating expenses (excluding depreciation)..
(694,709)
(694,709)*
(694,709)*
(42,513)
(87,356)
(%,977)
Depreciation.
J737,222)
(782,065)
(791,686)
Total operating expense.
I16,301 71,458 61,837 Operating income.
Other income.
52,111 52,111*
52,111' interest & other charges.
167,736)
(67,736)*
(67,736)*
Income from operations (excluding reduction to net recoserable costL 5100,676 5 55.833**
5 46,212 incre.ne in specific prices (current costs) of property, plant and equipment held during the year.
5402.322* "
5(164.873)
(189,201)
Reduction to net recoverable cost.
Effect of increase in general price level.
(368,373)
Excess of increase in gereral price lesel user increase in specific prices after reduction to net recoserable cost.
(155,252) 151,379 151.379 Gain from decline in purchasing pmer of net amounts med.
5 (13,494) 5 (3,873)
Net..
- Assumed to be " average for the year" dollars and thus are not restated.
" Including the reduction to net recoverable cost, the loss from operations on a constant dollar basis would have been $109.040,000 for 19N).
"*At Decembei 31,19N), current cost of utility plant, net of accumulated depreciation, was 53,461,100,000 while historical cost or net cost recowrable through depreciaO:n was 51.925,904.000.
Flie. Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices (In Thousands of Average 1980 Dollars) 1980 1979 1978 1977 1976
. 5853,523 5632.666 5576,424 5515,290 5479,525 OPERATING REVENUES.,
lilSTORICAL COST INFORNIATION ADJUSTED FOR GENER AL INFLATION Income from operations (excluding reduction to net recoverable cost).
. 5 55,833 5 24,803 Net assets at year-end at net recoserable cost.
.. 5538,785 5524,414 CURRENT COST INFORNIATION Inceme from operations (excluding reduction to net recowrable cost).
.5 46.212 5 23,723 Excess of increase in general price level over increase in sp t ific prices after
.. 5155.252 5171.331 reduction to net recoverable cost.
%538,785 5524,414 Net assets at year end at net recoverable cost.
GENERAL INFORNI ATION Gain irom decline in purchasing peer of net amounts owed.
. 5151,372 5158,752 246.8 217.4 195.4 181.5 170.5 Ascrage consumer price index.
29
RECORD OF PROGRESS 1970-1980 i
1980 1979 1978 Estimated population served..
1.553.(XX) 1.509,(XX) 1.455 (XX)
Electric customers-year end Residential........
457.191 443.527 427,938 Commercial.
48,617 46.848 44.884 Industrial..
6.846 7,162 7.518 Other........
3.250 3.173 3.N4 Total electric customers.............
515.9M 500.710 483 384 Electric operating revenues (5000)
Residential.............
. 5 265,080 5 180.3M S 146 326 Com mercial...........
123.656 85.983 68.328 Industrial.
358,177 212.853 141.803 Other...........
106,610 78,276 99.918 Total electric operating revenues.
.. 5 853.523 5 557,476 5 456375 KWil sales (millions)
Residential..
L.48 5,996 5.862 Commercial.
2.876 2,721 2,624 Industrial..
11.963 11388 9.685 Other.,
2.708 3,147 4.541 Total sales..........
23.945 23,252 22,712 Residential customer data Average annual use-KWH........
14,177 13.758 14.063 Average annual revenue per KWH...
4.14e 3.01c 2.50c Commercial customer data Average annual use-KWH........
60,129 59.363 60,498 Average annual revenue per KWH...
4.30c 3.16c 2.60c Peak System demand (N1W).
4,078 4.091 3.852 System input (KWH in millions)
Generation.......
16.440 18.429 21.251 8.670 5,860 2.799 Purchased power.
Total system input...
25,110 24.289 24.050 1
. 5 296.820
$ 190.226 5 168.117 Fuel cost for generation (5000)..
Generating capability (N1W' 4.625 4.612 4.603 Heat rate-BTU Per KV H,en rated...
10.753 10,625 10,185
.5 116 301 5 73.861 5 69.310 L
Operating inco.ie.
Net income..
.5 100.676 5 65.129 5 53.744
. 52319.246 52,069,106 51.792.952 Gross electric plant l5000)....
. 52.078.445 51.842,365 51.557.157 Total assets (5000)..
Capitalization ($000) i Long-term debt.........
. 5 828.989 5 827.430 5 728.748 Preferred stock, with sinking fund......
121,381 92.990 Preferred stock, without sinking fund.
145.882 145.882 110.809 5M.109 487,441 417.192 i
Common equity.
...... 51,660.361 51,553,743 51.256.749 Total capitalization.
Employees-year end.
2,342 2.329 2.216 30
1977 1976 1975 1974 1973 1972 1971 1970 1,345,000 13(M,000 1,250,00()
1,225,000 1,187,000 1,150,000 1,130,000 1,115,000 395.479 384.213 366.242 356,479 346,088 334,375 318,740 308.056 40,G96 38,632 36.166 35,014 33,839 32,608 31,254 30,735 7,651 6,586 5,824 5,424 5,733 6333 5,872 4,777 2,770 2,634 2,496 2.425 2313 2,247 2,167 2,099 445,996 432,065 410,728 399,342 387,973 375,563 358 033 345,667 5 124,500 5 93.712 5 87,819 5 85,791 5 78,809 5 71,622 5 61,292 5 56,093 55398 42,505 39,789 38,092 34,(M9 30,793 27,384 24,990 114,874 77.278 64,386 65,264 53,453 44,827 37,682 34,878 84,179 117,782 72,850 53,605 43,085 34.980 27,285 22,885 5 378,951 5 51,277 5 2M,844 5 242,752 5 209,396 5 182,222 5 153,643 5 138,846 5334 4.597 4346 3,956 3,951 3,664 3,105 2,814 2,268 1,965 1,852 1,671 1,596 1,468 1,298 1,168 9,028 8,068 6,600 6,133 5,823 5,215 4,462 4,292 4322 6,92I 6,359 6,788 6,627 5.576 4,565 4,793 20,952 21,551 19,157 18,548 17,997 15,923 13,450 13,067 13,6N) 12.328 12,028 11,249 11,594 11,220 9,941 9,239 2.33c 2.(Mc 2.02c 2.17c 1.99c 1,95c 1.47c 1.99c 57,502 53,115 51,940 48,447 47,986 45,865 42,286 38,241 2.44c 2,16c 2.15c 2.28c 2,13c 2,10c 2,11c 2,14c 3.515 3,160 2,883 2,692 2,563 2,389 2,096 1,872 20,204 21,541 18,931 17,9(M 17,832 15,768 12,807 9,669 1,tM)1 1,077 1,154 I,594 1,034 1,145 1,464 4,081 22,105 22,618 20,085 19,498 18,866 16,913 14,271 13,750 5
- 1.,,236 5 135.211 5 85,134 5 76,846 5 56,597 5 41,760 5 27,878 5 19,955 4,447 4.392 4346 3,569 3,481 2,580 2,654 1,887 10,202 10.036 10,198 10.345 10,198 10,105 10,199 10,160 5 62,;56 5 59,053 5 59,629 5 59,146 5 52,636 5 46,400 5 39,678 3 33,062 5 44,406 5 39,277 5 43,695 5 40,886 5 36,946 5 32,226 5 26,182 5 22.835 51,509,785 51 309,439 51,172,911 51,077,798 5 933,393 5 826,139 5 729,064 5 657,734 51,298,751 51,158,262 51.051.242 5 946,933 5 814,275 5 719,120 5 621,639 5 557,009 5 566,315 5 575.N)9 5 519.088 5 468,987 5 389,186 5 342,197 5 292,197 5 267,197 110,809 80,776 80.776 80,776 70.760 70,760 60,720 50,678 363,763 332,725 307,361 247,174 235,276 208,914 177,768 159,577 51,040.h?
$ 9X9310 5 907,225 5 796,937 5 695,222 5 621,871 5 530,685 5 477,452 2,129 2,118 2,104 2,089 2,090 2,003 1,962 1,963 31
DIRECTORS FPJ'l !{!jr""^T![A TIM ~1
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4 LP& L Directors, from lef t, are: Harry M. England *. New Orleans, Louisiana, President. Coetal Canning Enterprises. Inc.; E.A. Rodrigue, New Orleans, Louisiana, retired, former Chief Executive Officer and Chairman of the Board of the Company: Floyd W. Lewis. New Orleans, Louisiana, Chairman of the Board & Chief fixecutive Officer. Middle South t!rilities, Inc.: and James M. C.:n, New Orleans, L>uisiana. President. New Orleans Publie Senice Inc.
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First Bank and Trust Co.: J.M. Wyatt. New Orleans, Louisiana. President of the Company:
H. Duke Shackleford*, Bonita b)uisiana, Agricultural Interests; and les R. Kilpa: :ck*. West Monroe. Liuisiana P esident, Central American Life Insurance Co.
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J.Q. Cipriano C.li. Vaughan. Jr.
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I From left: Wif. Talbot. Secretary and Controller: J.M. matt.
President: 1.11. Erwin, Jr.. Vice President and Treasurer; and C.D.
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1 R.N. Garrett. Jr.. Awistant Treasurer: Jack Dasey. Vice President
- Memtvr of Audir committee and Chief Engineer: S.G. Cunningham. Jr.. Director of Rates and
,, Retired from Company March 1.1981 Research; and T.W Hoatright. Awistant Treasurer.
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>4 MIDDLE SOUTH UTILITIES, INC.
1980 ANNUAL REPORT t
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PERFORMANCE HIGHLIGHTS Percent Change IMO 1979 1978
'80
'79 Total Operating Revenues (millions) 52,342
$1.823
$1.622 28.5 12.4 Total Operating Expenses (millions) 52,044
$1.605
$1.394 27.4 15.1 Fuel. Purchased Power & Purchased Gas Costs (milhons) 51,317
$1.045
$ 826 26.0 26.5 Operating Income (millions)
$ 2M
$ 218
$ 228 36.7 (4.4)
Net Income (milhons)
S IN
$ 182
$ 185 7.7 (1.6)
Allowance for Funds Used During Construction (millions)
S 240
$ 213
$ 148 12.7 43.9 Rate of Return on /.verage Comtr.on Equity (percent) 10.N %
11.82 %
14.19 %
Earnings Per Share (dollarsi 5 2.01
$ 2.13
$ 2.46 (5.6) (13.4)
Dividends Paid per Share (dollars)
$ 1.58
$ 1.52
$ 1.44 3.9 5.6 Customers (Electric-Year.end) 1,546,733 1.520,142 1.489.188 1.7 2.1 Total Electric Energy Sales (billion kwh) 55 53 52 3.8
- 1. 9 System Peak Loa ' L~.
I1,769.000 10.687.000 10.648.000 10.1 0.4 Gross U.thty Mont at Year-end (bilhons)
$ 7.9
$ 7.0
$ 6.1 12.9 14.8
_ Construction Expenditures (milhons)
$ 910
$1.025
$ 901 312) 13.8 Common Stock (Number of shares in thousands) 97.469 85.445 75.522 14.1 13.1 Average At year-end 107,350 90.433 76.098 18.7 18.8 ABBREVIATIONS: In th:s report. references to compan:es in the M:ddle South Utat:es System are as follows:
MSU or the Company.
.. Mdd:e South Utut:es. Inc.
MSS...
. %ddle South Serv:ces. Inc.
MSE..
..... Mdd:e Scuth Energy. Inc AP&L..
. Arkansas Power & L:ght Company Ark.Mo
. Arkanns-M.ssou:1 Pown Company LP&L,.
. Lou:s:ana Power & Light Cernpany MPkL.
. Essiss:ppi Power & L:ght Company NOPSI.
. Now O-leans Pubhc Service Inc.
.... System Fue:s. Inc.
SFl.
Associated.
. Associated Natural Gas Ccmpany
My Fellow Stockholders:
f M,
Tf kg g ) g h-through underwritten In desenbing the 1980 public offerings on twc-Y occasions in 1980. The recults for our Middle
$",.. M: ?
South Utilities L atem, I higher average num-1 think it would be fair to ber of shares thus out-characterize the year as standing in 1980 caused hgj I
one of " turning the earnings per share to corner" toward greater decline from $2.13 per m
fmancial vitahty, more share in 1979 to $2.01. It
/
. J'p'*Q r Jg1f responsive regulatory is the considered judg-WEE
'reatment, and im-ment of your manage-proved acility to serve ment team and board
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the energy needs of the of directors that your j
System's 1.5 million customers.
long-run best interests, considering the tre-W.y'
- W We made substantial progress toward mendous changes which have occurred in world fuel mar ets in the last decade, de-(,4 J
out goal of diversifymg the System's fuel base k
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to lessen our dependence on fuel cil and mand that the System's coal and nuclear natural gas as fuels for electric generation.
program be carried through to successful s.,
This progress was marked by completion and completion.
d N.^ MDM commercial operation of our second During 1980, construction expenditures c
nuclear-fueled generatmg unit and our first totaled $910 million, compared to $1.025 bil-
%UW modern coal-fueled unit, both in Arkansas.
lion in 1979. We expect that capital expendi-WM tJg These two units added 1,673 megawatts to turer for construction for 1981 will be approx-h b
the System's generating capacity and, at imately $897 million.
gy1 normal operating load factors, can displace The System's retail customers required
%gg' sly gg-p 16 million barrels of very expensive fuel oil five percent more electric energy in 1980 than per year. As the System's remaining six in 19/9, again heavily influenced by the ex.
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trerte temperatures of the summer of 1980.
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three coal, three nuclear - are complud Our forecasts, based on normal weather, in- -%bM and go into commercial operation, the heavy di ate that customer requirements for elec-YM construction financing load which the Sys-tricity will grow at a slower rate in the 1980s tem has been carrying in recent years can be than was experienced in the 1970s, but we A
expected to bear fruit, with renewed fman-believe that in our : :iddle South service area
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cial vigor for the System, much-improved
- in the Sunbelt, with the nation's only 3
ability to serve our customers' electric energy deep-water oil port soon to open, and many g,
,I requirements at the lov. 3t practicable cost other inc;ustrial advantages - customer
'ayy.g through displacement ci aver-more-costly oil electric energy requirements will grow faster F
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f and gas, and adequate capacity for area than those of the nation as a whole. Thus, our
'4 growth.
construction of new generating facilities is u
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M. k,A Our consolidated net income, which not only for the purpose of fuel diversification dipped slightly from 1978 to 1979, increased but also to ensure that the System will have J
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almost eight percent in 1980. This improve-the ability to meet those future needs when ment was mainly attributable to three f actors:
they arise.
ra'e increases placed in effeet during the The business in which yc, have invested 4
year by several of the System operating is basically the serving of essential electric companies, heavy electric energy require-energy needs of the people and inst'tutions of 4-y ~%gY;fM' $ni ments by our customers during a wide-some 92,000 square miles. And to this we are spread, sustained record-s.*tting period of deeply dedicated, but with the clear qualifi-AhM69.h JE M W@!} M hot weathnt last summer, and continued cation that the System must be accorded the
$92M tight control of expenses.
realistic opportunity 10 earn a fair return for As a necessary part of financing the Sys-our stockholders, to compensate you ade-Ph[%
, A, M M M 054 tem's essential construction program, the quately for the use of your capital. To achieve gg jg Company sold additional common stock this needed level of earrungs, the Syste n
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operatmg companies have been dihgent in seekmg contmue to recognize the importance of nuclear needed rate increases while strivmg to minimize power and suppert its contmued use. tust as they did cperatmg expenses. As reported to you m last year's pner to the Three Mile Island acndent.
annua! report, we began to see progress m the rate We are encouraged by the nuclear positicns i
area m the second half of 1979, and this tiend cor-abich have been enunaated by the Reagan ad.
tmued in 1980. Unquestionably cne of the keys to mmistraticn. and will cocperate fully m efforts to as-sustomed finonaal health for the electnc utihty mdus-sure nuclear power's role m meetmg Amenca's try is the overcommg cf regulatcry agences' practice energy goals.
2 of treatma investment capital as ef no mterest er ben-Dunno 1980. we mauaurated a new strategic efit to customers until a project goes mto commercial planning process to formahze, coordinate, and Enng service. As an mvestor you certamly put your capital into sharper focus the manner in 'vhich the System into the total Company and its programs f or service to considers its future environment, xeighs its alterna-customers now and in the f uture: and you are entitled tives, and plans appropriate actions in f u rtherance of to a fair return from the busmess without havmg to try its basic goals. We believe that this more structured to trace the f aahties 'vhere each dollar cf 'four in-strategic plannmg program will help us to cope well vestment is actuchy spent. We beheve that some with the mereasmgly difficult economic, energy, and pregress is bemg made m gettmg regulators to ree-regulatory chal!enges ;f the future. See page 38 of ognize that if customers' needs (whether for added this annual report for a hst of the ccrporate cblectives energy or to offset sky-rocketmg oil costs) are served which form the basis of this strategic plannmg pro-by construction cf facihties. the customers' mterest m cess.
the faalities does not ccme mto existence only at the The conschdation of cperations of Arkansas instant of imtial commercial operation of the f aality.
Power & Light Company and Arkansas-Missoun All dollars cf myectment to support needed ccnstruc-Power Company became effective January 1.1981.
tion should be mcluded m the base en vhich the Ark-Mo is now a division of AP&L. and Associated busmos is permitted to earn when the mvestment :s Natural Gas Company, formerly an Ark-Mo sub.
made: and extensive studies have shown that over sidiary is now a subsidiary of AP&L.
the hfe of the faahty. customers vould actually pay After almost 25 years with Middle South Utihties, less under such procedure. For a detailed discussion Donald J. Wmheld, seruar vice president..vho for of the System's current rate situation. see page 7 of many years was the chief fmanaal ofheer for the this annual report.
System. will reach normal retirement on March 31, Last year. I reported to you on the electnc utihty 1981. Followmg a successful career w:th a promment industry's efforts to respond appropnately to the mvestment counsehng hrm, he jomed Middle South March 1979 ccadent at the Three Mile Island nuclear m 1956. Mr. Winheid has served Middle South with plant in Pennsylvania. Further progress was made in unusual skill and professionalirm m its fmancial af-1980 in the industry's substantial effort to apply 'he fairs. Inasmuch as his successor. Edwin Lupberger.
lessons learned at Three Mile Island. One sigruhcant is located m our New Orleans headquarters, the New milestone was the establishment in September 1980 Ycrk office is being closed.
of Nuclear ElectncInsurance Limited (NEIL), a mutual As you were mformed by letter in January 1981. a insurance orgamzation funded by the mdustry.
large portion of your 1980 dividends represented, for Coverage by NEIL will greatly alleviate the fmanaal federalincome tax purposes a return cf capital and, burden placed upon an insured utihty experienang for that reason, were nontaxable as mecme. See an extended outage of a nuclear generating plant page 39 cf this report for more details concerning this due to an acadent by paying a portion of the re-determmation.
placement power costs incurred. Middle South has Your board of directors. m declaring the div.
secured this added insurance coverage for its nu-idend payable January 2.1981, raised the quarterly clear umts.
dividend rate to 40W per share. This is equal to an Prrbably one of the most important accomphsh-annual rate 01 c
- 2. Smce its format 2on, the Com-ments of 1980 was the mstitution of the Signihcant pany has been able to merouse the dividend every Event Evaluation and Information Network (SEE.IN).
year except one.1956.
By means cf this program every non-normal event at A new discount feature mitiated at mid-year any U.S. nuclear generating plant is carefully made the Company's Dividend Reinvestment and analyzed by the Nuclear Safety Analysis Center and Stock Purchase Plan an even more attractive option.
the Institute of Nuclear Power Operations for its Begmning with the July 1.1980, dividend payment, genene signihcance. Where the analysis mdicates reinvested dividends were applied toward the the need for corrective action, this is immediately purchase of Middle South common stock at a hve-communicated to every nuclear plant m a manner percent discount. Such purchases are made without calculated to secure such action. I do not beheve it is brokerage fees er commissions. If you are not domg overstatmg the case to say that if SEE-IN had been m so already, and you vould hke to avail yourself of the I
operation at the time cf a precursor event at another savings and converuence cf this plan, please wnte to nuclear plant similar to the happening at Three Mile Dan E. Stapp secretary of the Company.
Island, most of us and certainly the national public On behalf cf the board cf directors and my 12.000 would never have heard of TML fellow employees in the Middle South Utihties System.
The contmued work of the Nuclear Safety I thani you for your continued support of our efforts.
Analysis Center, the Institute cf Nuclear Power Op-Smcerely.
i erotions. the Committee for Energy Awarenes. md j
NEIL has been important m the effort to restore the American public's conhdence m nuclear power.
Floyd W. Lewis Opinion polls indicate that the majority cf Amencans o mrm a A Prn e
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XPFNSES. Total operatmg expenses l' '
rose $440 million. or 27 percent. to $2 billion. As has been the case m almost every
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ye.r smee the cil embargo, mereased costs l
for fue!. purchased poveer and purchased gas have been a major factor in the mereases 4
i m cperatmg expenses. The increase for 1980 j
veas $272 milhon to a level of $1.3 billion. Of i
FINANCIAL this increase m cost, approximately 90 per-cent is due to pnce increases, with the re-REVIEW mamder bema attnbutable to increased vol-umes purchased. Ccmbined, these expense categones made up 64 percent cf the Sys-tem's total 1980 cperatmg expenses.
Other operatmg expenses, including When umt coal taxes contmued to mcrease m response to trains from inflationary pressures md the placmg m ser-i Wyoming arrive at vice of tvto nev gent.atmg units.
i the White BlufTplant Costs of fmancmg - mterest charges site, special and preferred dividend requirements - in-equipment alcads creased $122 million er 36 percent over 1979.
cars individually by reflectmg the large amount cf external tuming them over fm ncing required m 1979 and 1980 and the and dumping the unprecedented high level of mterest on-1 du C "I vidend rates prevaihng throughout these i
penods. ihe increased costs are for the most part related to our fmancmg of construction to recovery of higher costs f or purchased gas.
pro;ects - new capacity not yet placed m NOPSrs transit revenues for the year service.
vere $44 rmlhon. an merease of 19.2 per cent.
Commenemg m 1977. NOPSI has annuall'f i
negotiated riith the Citf of Nov Orleans a ONSOLIDATED NET INFOME, EARN-subsidy and mdemmty agreement vhich as-INGS. Net mcome mereased from $182 sures that compan/ cf earnmg a specified milhon in 1979 to $'96 milhon in 1980. This rate cf return on the transit rate base. NOPSI 7.7-percent merease is pnmarily attribut-i is,vorking vith city and state authenties able to higher-than-normal summer energy I
toward the estabhchment of a regional transit sales m 1980 and new rates placed m effect
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authonty and uhimate dtvestiture of transit by System operctmg compames dunng the cperations. The New Orleans City Council m se and half cf the year.
l 1979 stated a policy cbjective of acquinng the Earmngs per share decreased from $2.13 transit s'fstem at some unspecified future m 1979 tc $2.01 m 1980. There was a IL date.
percent greater average number of shares cutstandmg m 1980 than m 1979.
EARNINGS AND DIVIDENDS PAID REVENUES AND EXPENSES m ons of Douars, I
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any cash to the busmess. The System has LLOWANCE FOR FUNDS USED DUR-censistently and vigorously been assertmg m ING CONSTRUCTION (AFDC). As a gen-regulato:y proceedmgs that hnancmg costs l
eral rule. the System's regulators have not shculd be re ove:ed m cunent revenue and al!cwed System operatmg companies to m-not deferred to future years.
4 crease rates to iecover cunent costs (mterest Until regulators allov recovery of sub-and dividends) of funds raised to fmance stantial amounts cf these costs of capital in i
construction of prc;ects not yet m service current revenue, mternal cash flow will be (construction work m progress). These costs of restncted and the System will continue to construction funds melude mterest en bar-have to depend en new external fmancmg for towed funds. dnndends on preferred stock, the construction program more heavily than and a reasonable return to the common it should, m the mierest of bcth mvesters and stockholder (which meludes commen divi-customers.
dend requuements). However, these costs are expected to be recovered through rev-100A enue collected in the future (once the con.
.L UUV FINANCING. The Sy.*m's con-struction is placed m service). Therefore. the struction program requued the aismg cf estimated amount cf these costs is added to substantial amounts of investment capital the value of the project under construction -
during the year 1980.
an merease m asset value is recogmzed. This MSU had two common stock offenngs 4
mcrease m value c! assets cf the corporation dunng 1980. A sale m Apnl of seven million j
is recogmzed m the income statement of the shares. sold to underwnters through com-j current year and has the effect of removmg petitive biddmg at $12.26 per share. for pub-j trom the mcome statement the e!!ect of the hc resale at $12.65 per share, netted the construction hnancmg costs. The amount is Company $86 milhon. A second sale in Oc-l reported as Allowance for Funds Used Dur-tober of eight milhon shares, again sold to l
ing Construction m two par ts: an amount rep-underwriters through competitive bidding, resentmg costs of funds mvested by common netted proceeds of $94 mi!! ion. The shares.
and preferred stockholders. and a seccnd sold for $11.75, were resold to the public at i
amount equivalent to the cher-tax cost of bor-
!!2.13 per share. Proceeds from thece two rowed funds. The total ammnts included it, sa.es were used to retue outstanding bank
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net income in 1980.1979. ana 1978 were: 5240 debt.
million. $213 milhon. and $148 millien, re-Among MSU subsidianes. AP&L raised spectively. While these credits to the mcome the most capital m 1980 through sales of pre-statement remove the effect of the costs of ferred stock and first mortgage bonds. The j
fmancmg construction, they do not provide January 1980 sale of two milhon shares of $25
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jf - SEI.ECTED FINANCIAL DATA 980 1979 1978 1977 1978 Net Operating Revenues *. $2.342.228 $ 1.823.059 $ 1.622.177 $ 1,443.057 $ 1.1. 4.411 Net incorne * $ 195.907 $ 182.058 $ 185.438 $ 144.969 $ 106.047 Earnings Per Shars $2 01 $2.13 $2.46 $2.18 $1.82 Dnndends Declared Per Share. $159 $1.535 $ 1.4t $1.395 $1.335 Total Assets. $7.334.879 $6.503.068 55.501.027 $4.736.707 $4.136.235 Long-Term Debt (excluding current rnatuntres) $3.392.309 $3.017.816 $2.629.711 $2.175.471 $1,965.985 Preferred Stock eth Sinking Fund * $ 283.165 $ 193.507 $ 6u.063 $ 60.063 $ 60.063 =(In Thousands)
i 1 money center and regional banks which vnll F cover the Company's short-term needs Vc through 1954. The hne v ill contract as pro- ) jected needs are reduced, dropping to 75 f j percent of the origmal amount m 1983 and 50 1 percent in 1984. The credit agreement be-came effective June 27, 1980. 7 l 1Q01 FINANCIAL AvUA FINANCING. System construction i., expenditures for 1981 are estimated to be REVIEW i $897 million, excludmg nuclear fuel costs. SFI expects to increase its investment in fuels-i related programs other than nuclear by $8 Construction million. Nuclear fuel costs in excess of those h engineers give i previously provided for in existing lease M, Arkansas Nuclear agreements are expected to be $107 milhon. One Unit 2, a Retirement of bonds approaching matunty thorough checkout and other capital requir " aents call for some Pnor to its initial $125 million, bringmg to $1.137 billion the c mmercial System's tuoi capital needs anticipated for 1981. peration in March The System expects to raise approxi-1980. mately $837 million of the required funds from external sources, including the sale of first mortgage bonds and preferred stock, long-ATE ACTIVITIES. The financial condition and short-ter m bank loans, sale and lease-of the Middle South System is closely back of properties, leasing of nuclear fuel, related to the adequacy of rate relief received pollution control bond fmancing, and sale of from the various regulatory bodies with MSU common stock. jurisdiction over its operations. During 1980 The ba!ance of projected capital re-all of the operating companies filed for rate quirements, an estimated $292 million, will increases. At year-end 1980, System com-be met by the System with internally gener-panies had pending or en appeal electne ated funds. and gas rate increase applications totaling 1 The Company expects to raise approxi-approximately $465 milhon on an annual mately $206 million in 1981 through the is-basis. suance and sale of additional shares of l common stock. A portion of these funds will AP&L. On May 29,1980, AP&L filed with the be raised through an underwritten public of-Arkansas Pubhc Service Commission ( APSC) fenng tentatively set for late April 1981. a request for a two-step retail rate increase Total investments by MSU in the com-totaling some $130 milhon, with $86.7 million mon stocks of System companies in 1981 are to be placed in effect immediately and the estimated at $123 milhon. Funds for these in-remainder to be placed in effect June 1,1981. vestments are expected to be raised through The first step, $86.7 milhon, was put in effect, bank borrowing - repaid through the sale of subject to possible refund, on October 28. On additional shares of MSU common stock. The No amber 26, AP&L and the APSC staff en-remainmg proceeds from the sale of MSU teied into a stipulation agreement whereby j common stock, approximately $83 million, the staff recommended an increase of ap-will be used to reduce bank loans outstand-proximately $90 million and, in return, AP&L ing. agreed not to contest certam staff adjust-ments which would have the effect of reduc-ing AP&L's request to approximately $117 Cat year-end were as follows: long-term APITALIZATION. Capitalization ratios milhon, as opposed to the $130 million engi-nally sought. Hearings have been con-debt, 57.5 perett; preferred stock,10.4 p 3r-cluded, and AP&L was awaiting a fmal order cent; and common equity, 32.1 percent. The as this report went to press. capital structure reflects the weakened fi-On August 28, 1980. AP&L asked the nancial position of the Company, 'vhich has Federal Energy Regulatory Commission j developed as our construction investment (FERC) for an meiease of almost $ 10 milhon in accelerated in recent years. Management its 'vholesale rates, pursuant to a pre-filing j recognizes the need to strenghten the ratios settlement agreement vnth AP&L's whole-and is developing plans to increase the sale customers. AP&L began collecting the common equity portion of the ratio. first phase of the increased rates, amountmg
LP&L also serves one ward of the City of New Orleans. where the New Orleans City Council holds regulatory authority. On July 3. 1980. LP&L asked the City Council for an m-crease of approximately $4.4 milhon per year in order to ahgn its New Orleans rates with i g those being sought for customers outside the city. On C ober 24. LP&L asked for some FINANCIAL $704.000 on an interim emergency basis. Heanngs on the original $4.4 milhon request REVIEW and the S704.000 intenm fihng had not been 1 - - ~ ' ~~ p held at year's end. p,? u D!spatchers nno [. I MP&L. A request for a $68.8-million annual specia!ize in increase in retail rates was filed by MP&L on t computerized power May 28,1980, with the Mississippi Pubhc Ser-I dispatch constantly / vice Commission (MPSC). MP&L placed the q monitor the rates in effect. under bond and subject to System s energy a possible refund. on July 1. On November 24. foad at the MSU f // the MPSC rendered a decision granting System Operations / [' O 6/, MP&L a rate increase of $48.3 milhon per 0 ye r. This decision has been appealed to the Center in Pine Bluff. state courts by MP&L and by two intervenors ,,".angay One d 'o some $7 milhon en an annual basis, on in the case. the state attorney general's office meir jobs,s t i November 2.1980, subject to possib:e refund. and the Mississippi Legal Services Cochtion. ensure that Ark-Mo. nov, a division of AP&L. h!ed MP&L, m appechng. is askmg for the full c!cctricity is vith the APSC on July 23. 1980. for a retad amount ongmally requested and is seekmg generated using the merease of some S7. 5 milhan. The full amount inclusion in the rate base of Construction mest economical 'vas placed in effect on December 21. 1980. Work in Progress. Pending a final decision. facdities avaitabie. subject to possible refund. Heanngs had not the full amount of the rate increase ongmally begun when the year ended and Ark-Ma be-sought cill continue to be collected. came a part of AP&L. NOPSI.On Apnl 14.1980. NOPSIfiled with the LP&L. On May 30. 1980. LP&L requested the City Tauncil of New Orleans a request for Louisiana Pubhc Service Commission (LPSC) mcreases in its electne and gas rates totchng to increase its retail rates by $203.6 milhon $32.5 milhon per year ($23.3 milhon for elec-annually. On October 8. LP&L was allowed tnc. 59.2 milhon for gas). At year's end hear-to place in effect on an intenm basis an in-ings in the case had been concluded, and crease of $32.4 milhon, while the LPSC con-NOPSI was awaitmg the Council's decision. siders the ongmal request. A decision of the ) LPSC is expected m May 1981. COMMON STOCK DATA PENDING RATE INCREASE APPLICATIONS (at December 31. 1980) I ,y Quarter } Date Annual 1980 First Second Third Fourth 1 Filed Type-Amount ' Where Pending High 13 % 14 %. 13 % ~ (In Mmions) Price Range 12 % j 'AP&L 5/29/80 Retail $130.10 APSC Low 10 % .11 11 % ' 10 % : 8/28 80 Wholesale $9.97 FERC 1 Dividsnd Declared $0.395 $0.395 $0.395 $0.405 i ARK MO 7/23.80 Retail $7.48 APSC l LP&L 7/29/77 Wholesale $8.54 FERC -1979 5/30/80 Retail $203.60 LPSC l Price Range High 16 % 15 % ~ 16 % 14 % j 7/ 3/80 Retail $4.44 City Council (NO) MP&L 12/23.80 Retail- $60.77~ (Hinds Co., Mississippi) Chancery Court low 14 % 13 % 13 % 12 % Appealed Dividsnd Declared $0.38 - $0.38 $0.38 $0.395 NOPSI 4/14/80 Retail $23.28 City Council (NO) 4/14/80 Retail (gas) $9.18 City Council (NO) Aes sw erwe se re e awo. sas c,r ces as repred em was st,egowwas come twsacr,m ~ TOTAL- $465.36 -~..
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NDUF'. F AL GROWTH. The System service ONSERVATION & EFFICIENT ENERGY 1 area w been the beneficiary of a portion USE. Energy conservation and in-of the industrial growth known as the " Sun-creased efficiency m the use of energy are belt shift " which desenbes the movement of important factors in America's energy pic-busmess and population from the North io the ture. Avoidance of energy waste has for an South. increasing segment of our population be-10 An important source of regional come a pragmatic as well as an ethical 4 economic growth is an merease m manufac-imperative. CUSTOMER turing in the region. This increase produces Too great a dependence on foreign INFORMATION increased employment and higher wages, sources of oil poses perhaps the greatest se-which attract workers who in turn mcrease cunty threat to the Uruted States. Studies, the demand for locally provided goods and both by the System and by objective outside services. sources, firrnly establish that greatly in-This employme nt growth leads not only creased use of coal and uranium as fuels for to higher incomes but more importantly to panerating electricity will be required in higher average income per person. The in-c,..er for America to move in the direction of creases in incomes and employment create energy self-sufficiency. Extensive efforts t, j economic opportunities wi hin the service improve the efficiency of the use of energy i area. This has reversed the outward migra-resources will also be vital to tha success of tion which was experienced in the 1950s and reahstic energy mdependence atforts. early 1960s as people sought employment in The Middle South Unlities System has other parts of the country. long been a leader in the field of innovative The System companies actively promote load management and practical customer r the economic and industrial development of conservation techr49es. Programs de-their service areas. Although the national signed for the construction of energy-efficient economy was characterized as being in re-homes and commercial buildings, com-cession dunng a substantial part of 1980, the puter-assisted home energy au+ts, other System service area's Sunbelt location ex-consumer-oriented conservation promo-perienced continued, if slower, develop-tions, solar water heaters. aria heat-recevery ment. water heaters are among the imaginative. Dunng 1980, new industrial facilities or progressive load management ideas that expansions numbered some 217 in the Mid-have been conceived and implemented by d!e South servic.a area, creatmg 8,876 new System companies. These techniques have jobs and boosting the area's annual payroll positive benefits for customers - reducing by approximately $107 million. Of pcrticular their energy costs by minimizing the System's importance to the System companies is the use of older "p?cking" units which generally fact that these new or expanded industrial have lower eff:ciencies and require higher-customers will require energy that should Ericed fuels. produce so w !38 million per yer.r in addi-One way for utihties to chieve this be-tional System revenues. For the three years nefit is by improving daily load factor - the prior to 1980, new or expanded industries degree to which facihues are used relative to averaged 237 per year, with an average of their capacit'/ - while minimizing peak load 7,681 new jobs and a $72.3 milhon average requirements. Customer ene.gy require-yearly addition to the area's payroll. ments come in " peaks" and " valleys." The customers are best served by utility pursuit of CUSTOMERS
- ENERGY REQUIREMENTS prcgrams that lime the daily peak demands On B3ons of Knowatt. Hows) and transfer thii energy requirement to O Total O Retail periods belnw the peak daily requirements, where incremental costs of power are nor-10m n=:=====
e maliz i w r. Jg y ; 7f. An innovative technique utihzed by Sys-tem companies is the radio-controlled switch .[.[ r e mnu m mmamamwam a..co.M mx ua U.. j j
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for air-conditioning compressors. With the incentive of special reduced rates, customers allow their electric utility to remotely turn off 1978s--.~m,.~_,_"'"'-"_'"_' '" >< "1r "d1'1 " >< ' ' '<> ' 1"' i 8" >- v. 9^%. E ing periods of high demand. This reduces _YM peak electrical load requirements without 1979,7 % % causing undue discomfort to the customer. m d e@u-R G a m_ e_ _i *. AP&L has introduced time-of-day rates m m m - m %,.x M md "EE q for residential customers aimed at causing a y ,ysmaae-e shift in some of their use of electricity to E-periods of lower demand. m
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.em s extenr:vo ecneructen proaram a:med vore 65 percent and 22 percent complete. ,t w ofy,;trsfun. tare iersen depen-respecuveli a: year-end 1980. These um:s. a;- fue f c e:ec-bemg but:t by MPsL as agent fc: MSE. c:e dence en cu and natural g
- :c
.,ev 2ncn. Dunn, 1950. one nur:ea: scheduled to: cc...merc:a1 cperanen m 1922 s;er.orann, um* and cne ccifue:ed,erm at-and 1956. They vil: have a capaca/ cf mg umt - me piacod m c;mmerco cper a-1.250.000 k:.csz,rs each. In Octcher 1980. an n:n en the Systern. Unde: cenenuenon ato careemera cas entered mt fc the acqu:s:- three mcv cc,1-fue' >d umts and th:ee nuc-t:cn cf a 10-percent univided evenership m-k.: una a:1 cf "ch:ch a:e na r scheduled to terest m ie Gr and Gu!! unas by South M:ss-Le m cmmeren :p mucn by the end at iss:pp: E:ecinc Pc ter Assoc:anen. Negena-1936. In mi-!. nan, the Sy;te:n r p'ar una the ucns are currency under vay " nth Mumc; pal m;ta:. von cf ax r* :ndcrd de.gn uruts n the Enorgy A,ency c f Muvs.pp: f cr the pessi'.e ,te 19EDs mi e,:.y 1990c Some . he acqu=n n by :he agency cf up to a 2.43-coa: tuc ed.md cther_.nnee-f ue:ei percen: uninded cycnership mterest m bcth System con =rucuan expenitures m umts at G:and Gu:f. The ecc to MSE cf its l 1980 tctaled scrne 3910 m:lhon. Expenitures 87.52-pe: cent share cf the unns is expected to f for nev bc:!:nes m 1981 a:e expected tc be re scme $2.85 bilhon. approximre:y $897 :m!! ten. Waterford 1 LP&L's nuclear urut. is i l remg bu:'t near Ta". Leu:stan,. 25 rmles up tue M:sms: ppt Fave: frem Ne r O: leans. The '"he System's socand un* nth a capacav cf 1.104 000 k :cvcans. nuclc 2: umt. AP&L's A:kanc as Nuclear vas 82 pe: cent camp;ete m yea:-end and is l One, umt t.ve, c,a placed in ecmmercia. expected to go mtc ccmmore:a! cperanen m ope:atun m March 1920. Tota. coct of th:a the hrst half cf 1933. The tctal ces* cf tha: \\ P58 000-kh.zat: una ' aa 5632 miluon. f ac::.t/ vill be apprc cmately 51.5 bt! ben. 4.. i. O struCnon CD t[. '$ bySte 1. I
nd the can a f ! ~.;e n. _ Ccx<<ay,and u, s.er.u.empb te 7 hp.. _. The p:anta cecun 1 uut. -: :de: t:cul do. hY @M e)4lOO_.m yn. n 64 p : cent c ' np!ete at th i end cf 4 C ~o A eca anj is expected to ente ecm ne:c:ai
- tz.,,. m A'j cer.;;ce de:n ; the summ.- cf 1931. T.2e Sfa 1_7 J. _!_it
- em s cv nersh:p cf tins un::: a:ca 57 p: cent.
kn ine c=: cf n, P&L',s pc:::cn of the tyco umte tz M,..m...-> ~ s NL'. " '. CONSTRUCTION, a s,.%' oxP"ckd to i n zane, nu lor-Tvco cthm coal-:ue:ed uma unde
- can FUEL AND
~^ j ;.Q i '.i ', I struct.cn at the Independonce Steam E!ectnc ?: Statien ute essentnHy dupbcates cf the OPERATIONS l .tg {"
- u. s..tute mu.. un:ts ocns*:u rt:cn c, the tyzo
~ n m, " 2-p, qy .f umts. vh:ch be- :n m late 1978. vas 29 per-J*, cent and e:gi t percent ccmp!ete, respec-At c h *dLM t:ve;y. at the che cf 1950. They a:e expomed nude u geneuig i to he ready !m ccmmere:a: creration m 1923 pl.pu rn Port and 935 O!!d tcgether
- $ Cccf app:Cx:-
Gn on. : %su mppi. mately 5509 rm ::cn im the Syttom a 56.5-Unit I tenhed B5 percent share cf the:: c vin":. :p. 'm.: a nt at f, S x aditicnal coa! ^r Lgrate-fue;ed urats p tiU U N i l :; In Auaust. a nev' fuel cf ctandrd des:an a:e planned f;r cperat:an mngetion y be y,ad1WO Un" for the !.hdd:e Scuth Uni:t;es Syctem m the ! ate 1950s and ear:y !990s. Tvea umtc zas uchered m "< hen AP&L phecJ m ccm- , ::1 Eurn Mrute. tvia " r orn !cv'cu!!ur I is v Ndoled t" merc:a! cperat:an the Syctem s fust coal-eca!. and the :ue! fc: the re: nmmg tyco :i! m nuu,ula! fueled generatmu umt m modern nmes. Tho Le determined at a later date. Each urut v H e.uinn in 142 hrst uret of AP&L's Whue E' r! ant has a have c nemma! capac:tf cf EDO.0001alavratts. capac:t/ cf 815.000 kdoveatt: . th:ch the Ti.e inst um* :s expected to he bu:lt h f LP&L m System has 57 percent evenersh:p. The re-ccmh Lcu:s:ana cn a Es:ca:pp: Rve: c;te. It mam:ng 43 percent cycnereh p :s he!d by the
- s p:emntly rated fe: comn orc:a! cperat:en A: kansas Electnc Cecperanve Cc:peranca n 19E8.
CONSTRUCTION PROGRAM: u,,,,,,, schedured MAJOR GENERATING UNITS cuin Commero.: Unit Company Fuel Capedty Operadon White Bluff #2. AP&L Coal 465-1981 Grand Gulf #1. MSE Nuclear 1.094 "
- 1982 Waterford #3.
LP&L Nuclear 1,104 1983 Independence #1
- &L Coal 461" 1963 Independence #2.
AP&L Coal 461 " 1085 Grand Gulf a2. MSE Nuclear 1.094* " 1986 newesents tr.e sysrem s siwme est en ins a os uw un " newesents t~e system s si s%me.est e rese wo uw ws "Remesems me system s se s wmwest m rese e rs vw ums GROSS PLANT t ou < o CONSTRUCTION EXPENDITURES E Tota! E Electnc " **l ' # 'k"' E Total L ' Elects.c [i 4432.4 l@dl V 584 6 2hJ h E l... _,. L 4539.9 l 5d7.4, f 5073 6 ![* 9 */ 689.1 4 .I i J ~
- 1 692.4i
[~'-~-, '.,...' 5183.3 t: 3 ;l 1. a a 3 hf) lf f& Idf u,) .. n 90t0: 5935 5 I di O E.. r J ; 6032.0, 893 6 'Il. ' fe*f$rh C 6879 9 1 4 1014 6 dL _.[E [ 7022.1, $ Q t tl, _1024.7j %[]f { {' j] Q { 905 6 7746 4 dh .l._ . [.7C .T ~7893.6 l J fd h h _ [P 909 8 m
l No 1 - 2f.e.,.. 4_,,. l %mM.gM .q Np 1 l . xt. 13 N ,fj CONSTRUCTION, 5 g FUEL AND ,y,y i + i - OPERATIONS 1 t 'y M - ' E "I h
- E=4 M Oy -
ggQ. y G... In an average week. Su,,,,,,,, A w. a-Ge= " ~ . i ten unit trains each ~ -;m-with 110 coal cars. s a deliver their coal DW %" a e. = M.p ^ fin.. to the White Blu!T l ,- g T .~u . e pw plant site. The w ..a
- a.,e m
'N' Jps g. plant keeps at least a a v3; 60-day coal supply .m storage. L ~ w S AA ,8 rM 1 UELS. The necussarf divers:hcotton creatma cpt: ens :: dependence en natural .* cf the Sycte:n. +ue: source.t away from gas as a ocde: :ue; the System " ras ab:e h:stenral deoendence cr natura ons and. -iu ma 1979 c nd 1950 to make eccncmic use as begun m the mid-19Ea cf tne gas 'uc. vh:ch necame avadable. bter fue ci vhen mannaement made the decunen to As ::um.ted m tte chart of gas unhza-uc-nen. the amcunt of a ns used m S/ stem gas-t udd a nuck e,ene: ann plan +, The dem of th: ctvermhcat:on vas unde-hned bur n.ng s ve: phnis m 1979 and 1950, as dunng the 1970s vhen the System t epn to measured m mdh,ns of cub:c feet. me: eased enmnt-ci thcu ':e-. nu only m obimang ruotantia!!'f ever the years :mmediately ne comm:tment ; f: IcnTie: m supphes of pncr to the h uh b!" n::tu:al q r 5r pc. ve: pl n.' ocde:c Lut Jsa m The a:oeth a cy:: and nuclear-fueled ioceivmg dehv< no ; under ex stm, cent: :cta e:ec:nc generanaa as a pe:centace cf the Samo mbu mng 'acihtte.' >:e ccnve:teci Syster., t:tal fue! m.x. resulted in a : elative to enal:le thern to burn fuel cd. Ec: the decime.n the peice: :aes attnbuted to gas fo ecee :He future. ali no - :.se-lead .md fue; cd. generotm1 triht:es on tho System 91 be Tho natu:ai ga: ured by System ccm-ccal, hamte. or nuch ar-f u >!ed. pames :n 1980 :epresen*ed the equivalent of some 52 mdbcn barrels of mer umgly ex-pens:. fuel od. The System used approxi-ATUPAL GAS AND FUEL OIL Dunng mato:y 315.000 m:lhen cub:c teet cf gas m .L M 1979 and ecsntmumg th:cuah 1980, the 1930, accountma for 62.9 percent of the fuel avaihb hty cf natu:al aus under chmt term -nix. as compa:ed vith 57 percent in 1979. mierruptib!e contract was much g: eater than The System used app cximately 14 mil-had been anticipate-i. Thu, "cas known as the han barrels el f uel cil m 1930. Th:s represent- "cac bubbie.' a recent phenomenon in the ed about IS percent of the System's fuel :or gas marketplace. the expected ciuratica of elecn.m aenerat:an. as compared tth 33 "ch:ch i a mutnect cf cubstantn! debate. Al-pe: cent m 1979 and 47 percent in 1978 though k nianao p:cections c! g u av u!.: hd1ty and rnema conhrn the u: gen. of
NATURAL GAS USAGE w maco -nm OAL C, o! r ecarna a part o, the 4.fSU fuel mix in 1980, accounung for tyco per-19.f j. ~;- : ' cent cf e,.ectnc gener man. 11 : The System trnports lo;'aulfur coal 9,I,I ;.~. from r.. mea near Gillette, Wyommg. *o the White Bluff plant site m Arkancas usmg its 14 t jj k# :J ovcn fleet of leared rail cara ye Sy:t m has a connact n gi En-CONSTRUCTION, "I e/ .2 ' -e ,icuee Corporation or the supply c coal to l N 1 - -- ' the tyco White Bluff umta vhich cal!s for 150 FUEL AND W, e. milhon tons over a pre;ected 30-year life of ~ OPERATIONS I g.W' n,- 2 the units. The tvio uruts at AP&L's IndeF3en-J y'., dence Station vzill also use lov -sulfur Wyom-g .gr e. 7.... mg coal under another long term contract 'g ' Nhh 5. J. mth North Ante!cpe Coal Ccmpany. vhich is a ;omt venture betvceen Poveder Puver Coal Company, a subsidiary cf Peabody Coal Company and Pan Eactern Coal Companf, The System expects to use about 3.3 mil-a subsidiary cf Panhandie Eastern Pipe Lme hon barrels cf fuel cui m 1981. It has centracts Ccmpany. fo more than this quannty and. ill market to The fust of the mandard-design coal etF.e ucers that vhich is ex es2 to System piants. nov p'anned ier construction in requirements. Additiona! natural oas as Louisiana, vill burn a lov -culfur Wycmmg available and vhen ecencrmcal. 111 Le coal similar to that used at the White Bluff ased to lessen the Sy; tem's use of fue! oil. and. later Independence ctanons. Ligmte, a lov -heat-content form cf coal avmlable m Arkansas. vill be uced cn.wel for Ntion of the Syctem's second nuclear UCLEAR FUEL With commer cial cpera-tyco future stand rd-design generatmg umts m Arkancas. umt, the nuclear portion of Sfstem electne generation chmbed frcm 10 percent m 1979 to 17 percent m 1980. h URCHASED PVNER. Through mter-The Sfatem has under contract cufficient A connectmg ties vcith other utthfies. the %d-uramum to meet all of its nuclear fuel needs die South Sfetem has accecs to e!ectric through the year 1935. energy other than thm generated on our sfs-Seeking supplementary supplies of tem. The System from time to time can pur-uramum for future needs, SPI has Eeen con-ductmg a uraruum exp!craticn program. FUELS FOR ELECTI JC GENERATION (Actual and Estimated Percent of Net Generation by Fuei Source) I] Oil & Ga4 O Nuclear O coa!
- [.
,1[. IIDE 5 w #g N @ w.-... w ~u = g w Ul g w. w 7 -Q: A { J_ f $D &' +--= -' ' ' e ): ' g' s, Y *' f 11f 2 _L; .. ;-x. x
- x;;>.3.w.
g c:). I B -.~. 21$31.81 ~ -- --m:-m - -~ 3 p w=-*cww: . w*m.. ~<* mot a,g n'- .asI 17. L. p. _. ;., 2,.
- n... g.,- ;g.a c u
...m. i 1 0 w,a; M #2 n. me y m - i.NE$ -C ' 41 l 29 l . g; m,,,,_,, % A.uw,,w we w v,.ess a es
r I' IS p f*. D 9 ' ! "3 o +- ^ ,1 CONSTRUCTION,
- *' (
FUEL AND i ~ o 4 3 . v. < 49 . 3 fM ~ .p h,. $ ~ 3 y-v 3.... ? i j, 'l ' T ((." g g+ ~ I'? LP&L's Waterford 3. 3 w.. c.- -~ which is scheduled q. c, for commercial ~ SY " ,1 g 'E_..
- 9. ( '.'s [, ]g.
operation in the first Means '~ half of 1983 will 104 000 ilo watts. chw hmited < r..mt cf such povcer mae overal decades. This extract.on expenment tecnarmea!!y thm. It can be aenerated. In sml ia in the ourly stages of plannmg. Its even-1930. 22 percent of the System's t-tal energy tual feasibthty is net yet proven. Becauce SFI .cas purchaced trom cth. t utthtiet Mddle c per ate: en an at-cast, not-for profit basis, Seuth centmues to utilize a!! its roscurces to any Lenefits r eahzed vcculd accrue to the cus ror ve ita custemen .th the most ocenamical tomer s if this exponmental pro:ect is success-energy av1 1:Mo ful. The mmer part cf the %ddle South Sys-tem's resemch and development effort cen-UEL EXPLORATION. RESET.RCH & DE-tmues to be through the mdustry funded VELOPMENT. SFI has the rmpenmbihty E:octne Povco: Rosemch Institute (EPRD. of fcr fmdma, purch ung and dehvonna tuel ,vhich MSU Chairman and Prerident Floyd for Syr. tem generatml plants W. Lems is ca n ently chau man. The S fstem's SFIis mvc!ved m ga; and eil explot atten. 1980 contntution. 26.8 milhen. vas used to Dunno 1990. SFI had vmymg degrees cf pm help fund EPRFs comprehensive research ticipation m the dnlhn7 cf 21 celh. Of these progr a n.. veilc. SFI held a maict vo.icng interect and acted as epo ater of eight vcells, fou of vehich in its recently pubhshed five-year Over-became ccmmercia producere. Of the re-viev and Strategy. EPRI stated that.oal. mamina 13 vcella dallod vcith other parties au coal-denved synthetic fuels, and uramum cperator hvo proved commer cially cpera muet supply the mapr portion cf electncity nanah Nme successful vcella out of 21 is a lugh generated for at least the next tyco to three porcentage by mdustry ctandards decades. Even vcith a rapid merease in coal-Work cent.nued m 19SD on SFFs effort to faed generation, accordmg to EPRI.10 to 25 acquire bisec c,f land m souther n Louiciana percent of America'c e'.ectncity needs could on vchich to implement i s exponmental proj. be unfilled in the year 2000 unless nuclear t ect to extract natural gas f rom hydro. povcer hlh the gap. making nuclear povcer presnured salt ' vater formations unde lymg "not a questicn cf preference, but a matter of the Loutmana-Texa., coaat. Estimates mdi. nececaty. cate that the gas dis elved m this vater may. It commeIcia!!y recover able, pr ovide a maior nev, source for dameste a, production for
i I i 4 1 REPORT OF MEAGEMENT 9 s. N W fag _ - l The management of Middle South Utihties. The board of directors pursues its re-L! * 'd b j Inc., has prepared and is responsible for the sponsibility for reported financial information jrk-u C W l! unancial statements and related financialin-through its audit committee, composed of NS"M.. formation included in this annual report. The outside directors. The audit committee meets UfUTQ$, financial statements are based on generally periodically with rr.ragement, the internal - e. e 4 - accepted accounting principles, consistently auditors, and the independent public ac-W Q. q j applied. Fmancial information included countants to discuss auditing, internal con-M j elsewhere in this report is cornistent with the uol, and financial reporting matters. The in-T4$$ dO! fi~zncial statements. d? pendent public accountants have free ac- ~" To meet its responsibilities with respect to cess to the audit committee at any time. j financial information, management ma:n-The independent public accountants j tains and enforces a systc.m of internal ac-provide an objective assessment of the de-counting controls which is designed to pro-gree to which management meets its respon-vide reasonable assurance, on a cost effec-sibility for fairness of financial reporting. l; tive basis, as to the integrity, objectivity and They regularly evaluate the system of inter-reliability of the financ'al records and as to ncl accounting control and perform such the protection of assets. This system includea tests and other procedures as they deem communication through written policies ano necessary to reach and express an opinion ..j procedures, and an organizational struc ure on the fairness of the financial statements. that provides for appropriate division of re. We believe that these policies and pro-i sponsibility and the training of personnel. cedures provide reasonable assurance that This system is also tested by a comprehensive our operations are carried out with a high -i internal audit program. standard of business conduct. i
- 1 1
y i 9 AUDITORS' OPINION 4 1 1 j The MhNn: uu! th+- P mrd r f D1: xt, 4 " Midi. 5:uth UtuS. Ine k ~,- hmxmm:n > um m ze. m asn.. cn. m u:d m s,uth Utt'ir c. Inc und.2 eute:W u t < ur ~f Dor" m b " 31,1980 and 1979 nnd 3i th-rs md eenen Dist-! r%toron9 'S m, reuiin-d earnings, j PRid-l'1 c?tp!'Jti. find Ph'U@_ J in f'rdtn: hi p "Pn fCr e9ch of the three i vuurs in the pt.Dd and s1 De mmt, 31 1980. 'Dur examinuurns wre j mnda in nee' dance 21'h Pn " ', r mped aud:d:g ctandarda and, j nee rdinC/, inmdod wh t zw f the m ^unung rmrds and such } cum" 9ding pr ';di' * 'W a c. S!" od neeN yuy in the i c:reu m a ire lag In cur C pini n, the ib, -np.11E' 'l e; nr W.tdi On'inc!?ti UJAt >rnenW '] pre 9 n' [S!r.y tha ' On m0M i pc U r, nf 9e C mpSny nnd 13 Subsliaries ut De mbe 31,1980 und 1979 : nd the resh cf thMr cporntions and j the Ohhn@ ln th"!r C:? " hl p? 'luOn f..r .nh < f the three ye9rs in the 't period ende Decerr1.- 31,19S3. in < atrinity with pnrally acetpied ] neccur.rr4 pr:na:p. ; spp!: ;d en u 1 .t Uts% e 2 l D1&l$ ?Uw
- Sdb -
) onns D wisnn ~! Mc nef 13, li81 i k j T41 1
For the Years Ended December 31,1980,1979 and 1978 1979 1978 l (In Thousands) s(/' Operating Revenues (Note 2): $ 1.669,451 $ 1.489,915 f , _ f o,._[d,.f_ Electric. I16.612 95,863 l ! '~ g Natural gas. 36,996 36.399 u. e_ a jg)gg Transit ise:S 1,823.059 1.622.177 Total ' '
- O * " 8 Eh
- p[g; g;~
Operating Expenses: i yQ .T,_' Operation: '? 697.606 623.402 v.ti.;;n s - Fuel for electric generation 258,377 133.929 L '
- T' "
Purchased power 6 88.801 68.657 Gas pt.rchased for resale. 200,264 199,406 Other ti il1.394 99.941 Maintenance i 119,304 112.805 L Depreciation. 77,849 69.771 t Taxes other than income taxes 51,266 86.004 ii + Income taxes (Note 3). 1.604.861 1,393.915 Total 2 8.198 228.262 i Operating Income l Other Income: [ Allowar.ce for equity funds used 124.086 93.573 ; during _enstruction (Note 1G) 7,940 6.239 Mscellaneous income and deductions - net. L 76,232 50,105 Income taxes - cr. (Note 3) Y J 208.258 149,917 Total i i Interest and Other Charges: 255.242 199,212 Interest on long-term debt 42,139 22.769 0 } Other interest - net. Allowance for borrowed funds used during construction - cr. (Note IG). (89,247) (54.717) t t Preferred dividend requirements of 36 264 25.477 ! subsidiaries (Note 6). Total . E 244.398 192.741 [ $ 182.058 $ 185.438 [ Net Income (Note 2)
- > ;i
$2.13 $2.46 Earnings Per Common Share. $1.535 $1.46 c Dividends Declared Per Common Shore. j { Average Number of Common Shares I 85.444.691 75,522,179 ',. Outstanding. i f i i s S* Notes to Conschda*ed F.nanac! Statements. ~
CONSOLIDATED MLANCE SHEETS /u. I' dco _ 1979 dn Thous..ds) 2"': Utility Plant (Notes 9 and 10): .,, _, a s j r. Electric $3.597.923 Natural gas 102.878 v1 Transit, n 19.049 Construction vork in pogress. 3,282.202 ' ^, " Total 7. 7.002.052 Less - Accumulated depreciation 1.139.164 Utility plant - not 5.862.888 Other Property and Investments 91.806 Current Assets: Cath (Note 4) ic Special deposits. ~ 52,038 13.341 Temporary investments - at cost, which approximates market 69.839 Notes reemvable. 17,706 Accounts receivable: Customer (less allowance for doubtful accounts of (in thousands) $2.253 in 1980 and $1,800 in 1979). 12i: 101,148 Other. '/ 22.197 . i Deferred fuel cost. 28,929 Fuel inventory - at average cost (Note 4) l' 137,058 Matenals and supplies - at average cost l Other. ~ 36,488 21,744 Total 500.488 Deferred Debits ^ 1. M - 47.886 TOTAL F'A $6.503.068 See N tes to Conso::dxed Tmancnl Seve.r.onts.
t t; l-I' 1t V [ i r .~ l
- Ut E _., 2C.
CAPITALIZATION AND LIABILITIES E ~%'IF)"TfR7K6 [ 1980 1979 dn Thomands) f.xb5 Capitalization: J S%g L g--" M w e Common stock, $5 par value, authorized 150,000.000 shares: issued and outstanding $ 452,165 } MS[MMf,h ^IU F;[4i, 107,349,943 shares in 1980 and 90.432,998 S 536,750 shares in 1979 (Note 5) 749,206 630,450 i72$)l3@@ Paid-in capital 1,664,060 [t ~ ' " ~ 581,445 619.572 Retained ea.dngs (Note 8) 1,905,528 Total common shareholders' equity. i Subsidiaries' preferred stock, withcut sinking {. 330,967 330,967 fund (Nota 6) Subsidiaries' preferred stock, with sinking r 283,165 193,507 [' fund (Note 6). Long-term debt ' Note 7) 3_,392.309 3.017.816 l ~ 5,911,969 5,206,350 L Total i r-Current Llobilities: N W Notes payable (Notes 4 and 9)- 187.494 264,275 . >Mi - Banks 16,750 20.630 Commercial paper 91,378 Other. 121.473 149,830 Currently maturing long-term debt 276,991 210.123 ,p Accounts payable 37,870 33,289 7 Customer deposits. 67,401 55,435 Taxes accrued 14,602 14,950 Accumulated deferred income taxes (Note 3) 81,984 75,737 Interest accrued 58,372 47,594 Dividends declared. 43,555 25.679 Other. '[ 997.270 897.542 Total Deferred Credits: 255.572 257.599 Accumulated deferred income taxes (Note 3) _.f4 j ~~ %V. Accumulated deferred investment tax credits (Note 3) 101,137 104.835 43,679 17.282 [ Other. 400.388 379.716 Total 19,460 {t 24.652 Reserves Commitments and Contingencies (Notes 2, 9 and 10) s_ S7.33' G79 $6.503.068 L TOTAL 8, k o ~ is-rp p m m
n ! STATEMENTS OF CONSOLIDATED RETAINED EARNINGS AND PAID-IN C APITAL for the Years Ended December 31,1980,1979 and 1978 i i t ,p' 1980 1979 1978 Es }pjf , PETAINED EARNINGS On Thousands) 7.K7TI" l Retained Earnings, January 1 5581.445 $534,893 $460,608 11-. 4;; 1 Add - Not income 195,907 182,058 185,438 ' "g 53 8 %i Total 777,352 716,951 646,046 f(( j[ j Deduct: 'q' u,1 ggd., 7 Dividends declared on common stock - $:,59,
- ~
e! $1.535 and $1.46 per share for 1980,1979 and j 1978, respectively 156,968 132,585 110,849 l Capital stock expenses, etc. 812 2,921 304 I Total 157,I80 135,506 111,153 1 Retained Earnings, December 31 (Note 8). $619,572 $581,445 $534,893 ii PAID-IN CAPITAL i { Paid-in Cepital, January 1 $630,450 $499,855 $401.156 i Add: i Excess of proceeds over par value: .,3 Public sales of common stock: 0 ^7 x 8,000,000 shares in October 1980 54.023 j 7,000,000 shares in May 1980. 50,819 j 5,000,000 shares in November 1979 38,099 i 8,500,000 shares in January 1979 84,490 j; ) 8 500,000 shares in January 1978 V i Common stock issued in connection with 94,460 dividend reinvestment and stock purchase plan I1,029 5,865 4,053 ] Common stock issued in connection with j employee stock ownership plan. 74 126 54 i Common stock issued in connection with a j employee savings plan. 2,202 2,021 132 Other ' Paid-in Capital, December 31 609 (6) 5749,206 $630,450 $499,855 .4 I s l j 9 i 4 I -t 1 j See Nates to Consahdated Fmanm! Sta*emente Ai I
i, m STATEMENTS OF CHANGES IN CONSOLIDATED FINANCI AL POSITION For the Years Ended December 31,1980,1979 and 1978 .s I 1980 1979 1978 l (In Thousands) Funds Provided By: j an Operations: i T Net income s 195.907 $ 182.058 $ 185,438 i rg;gy Depreciation. 141.937 119,304 112,805 L .? "@TT ofB Amornzation of property loss. 4,101 4,101 ! I "W@MM-*~O% Deferred income taxes and investment tax (148,290 ;3 36,427 credit adjustments - net. (6.050' (24,856) { g[$],f6] Allowance for funds used dunng construenon (Note 10). (239.940) (213,333) Totat hmds provided by operations. 91,934 67,274 190.481 emb Other: ^ ~~ Allowance for funds used dunng construction (Note 1G). 233.940 213,333 148,290 Advance for non utility property.. 14,737 - 1 Dectnase in working capital
- 70.830
- l Miscellaneous - net. 17.206 7,573 ) Total funds provided by operations and other 419,830 295.344 346.344 j Fmancing and other transactions: 4 Common stock. 202,732 202.269 143,147 F Preferred stock.. 93,444 183.699 - l_ First n.ertgce bends. 218.500 160,000 242.000 j Promisscry notes and other long-term debt.. 282.626 378,863 235.623 i Book va! e of utility plant sold.. 934 9,547 - (L Short-term securities - net. 10,733 135.575 Sale and leaseback transactions 45,484 24,652 - l t f l Total funds provided by financing and other I transactions.. 854,459 959.030 '/56.345 I Total funds provided. 51,274,339 $ 1.254,374 $1,102.689 [ I j Ftmds Applied To: Utility plant additions: [ l Construction expenditures for utility plant. s 903,844 $1.024,743 $ 900,907 L Expendituras for nuclear fuel. 26.238 (17,229) 701 F Other - not 4.219 (1.718) (18,10 3 [ Total gross additions (includes allowance for funds j' i-l used during construction of (in thousands) $239,940 in 1980 $213,333 in 1979 and $148.290 I in 1978). 940 3sl 1,005,796 863,505 1 [f ' d Dividends declared on common stock. 156,368 132,585 110,849 \\ Retirem at of promissory notes and other long-term debt. 12a.58G 3,313 2,177 Retirement of first mortgage bonds 24.081 19,802 27,954 [ Retirement of preferred stock. 3,787 - ( Repayment of short-term securities - net 43,849 - i 12,637 52,754 ! Increase in working capital
- Deferred costs on coal plant standardization study.
5, n 9 6,776 1,781 i Deferred costs relating to SFl's fuel acquisition progran for: Oil and gas. 1,908 9,163 3,962 [: Uranium 8.051 8,487 2,232 Coal 3.858 4.085 2,838 Advance for non utility property. 14,737 Miscellaneous - net. 7.881 - l Total funds a; plied. s1,274.339 $ 1,254,374 $1,102.689 [ t V
- Worknq capital does not mclude short term secunties. current mctunties of long-term debt or deferred taxes mcluded m current !.
habihties, The 1980 net decrease m warbng ca rr lis pnman) - due to increases in accounts payable and other current habihties [ a reduced by an mcrease m customer accounts reuesvable. whar ths 1979 net increase is pnmanly due to mcreases in accounts yy recesvable and fuel od mventory reduced by an mcrease m accounts payable. and the 1978 net mcrease is pnmanly due to an p l mcrease m cash and special dercs ts and a decrease m taxes accrued. c r See Notes to Consohdated Fm~ncial Statements. Q t { l
l = l l NOTES TO CONSOLIDATED FINANCI AL STATEMENTS 5 s y + w I i NOTE 1.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES F Wo+ A. PRINCIPLES OF CONSOLIDATION 7 q ;p.. The accompanying conschdated fmancial statements include the accounts of Middle South Utihties, Inc. b _.._, (the Company) and its direct and indirect subsidiaries, Arkansas Power & Light Company (AP&L), 594 eaeeu j Arkansas-Missoun Power Company (Ark.Mo), Louisiana Power & Light Company (LP&L), Mississippi Power & Light Company (MP&L), New Orleans Pubhc Service Inc. (NOPSI), Middle South Services Inc. ) y 9 (MSS), Middle South Energy, Inc. (MSE) and System Fuels, Inc. (SFI) which are collectively referred to as oy,, the System Companies or the Middle South System. All significant intercompany transactions have been ehminated. E" B. SYSTEMS OF ACCOUNTS The accounts of the Company and its service subsidiary are maintained in accc dance with the Public ? Utihty Holding Company Act of 1935, as administered by the Securities & Exchange Commission, which has adopted the systems of accounts presenbed by the Federal Energy Regulatory Commission (FERC). The accounts of the operatmg subsidiaries and the generating subsidiary are maintained in accor-I ? dance with the systems of accounts presenbed by the applicable regulatory bodies, which systems of = accounts substantially conform to those prescribed by the FERC. NOPSI operates pursuant to ordinances and orders of the Council of the City of New Orleans relating to regulation, supervision and control. Under 4 these ordinances the City has on option to purchase that company's properties and operations. SFI capitalizes all costs related to its exploration activities. These costs are amortized by the unit-of-producticn method in the period in which nevenue is recognized on oil and gas reserves produced and
- i sold.
C. REVENUES AND FUEL COSTS The operating subsidiaries record electric and gas revenues as billed to their customers on a cycle billing basis. Revenue is not accrued for energy dehvered but not billed at the end of the fiscal period. Substan-l tially all of the rate schedules of theoperating 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 4 to be billed or required to be credited to customers. l Two operating subsidiaries have fuel adjustment clauses which allow current recovery of fuel costs. Prior to 1978 two others had adopted a deferral method of accounting for those fuel costs recoverable under i fuel adjustment clauses. Under this method s"ch costs are deferred until the related revenues are billed. Effective January 1,1979, pursuant to an order by its regulatory commission, the remaining operating subsidiary commenced deferring fuel costs recoverable under its fuel adjustment clauses, the effect of which was to increase net income (net of deferred income taxes) by $ 1,033,000 and $7,765,000 in 1980 and 4 1979, respectively. The fuel adjustment clause for AP&L contains a provision for a nuclear reserve fund to cover the 1 estimated costs of replacement energy when the nuclear na~ is down for scheduled maintenance and refueling. The fund bears interest and is credited to tne fuel and purchased power expenses during the W
- shutdown period.
~
- D. UTILITY PLANT AND DEPRECIATION
- Utihty plant is stated at original cost. The cost of additions to utihty 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 utihty plant and such costs, plus i removal costs, less salvage, are charged to accumulated depreciation. Maintenance and repairs of { property and replacement of items determined to be less than units of property are charged to operating j expenses. Depreciation is computed on the straight-line basis at rates based on the estimated service hves of the G l vanous classes of property. Depreciation rates for AP&L's nuclear plant include a provision for nuclear 1 plant decommitsioning costs. Depreciation provisions on average depreciable property approximated - l 3.4%, 3.5% and 3.4% in 1980,1979 and 1978, respectively. a j Substantially all of the utility plant of the Company's operating subsidiaries and generating subsidiary j is subject to the liens of their respective first mortgage bond indentures. jW b s ka __ j
E. PENSION PLANS The Company and its subsidianos have various pension plans covering substantially all of their employoes. The pohey el the Company and its subsidiaries is to fund pension costs accrued. j i g' F. INCOME TAXES !i The Campany and its subsidianes file a concohdated Federal income tax return. Income taxes are L __g@ aHocatod to c!! subsidianos based on their contributions to the conschdated tax liabihty. Deferred income taxes are provided for differences between book and taxable income to the extent permitted by the "gijg6l regulatory bodies for ratemakmg purposes. Investment tax credits utthzed are deferred and amortized erm based upen the average useful hfe of the related property. ggj G. ALLOWANCF FOR FUNDS USED DURING CONSTRUCTION DM,Uld To the extent that the Company's operatmg subsidiaries are not permitted by their regulatory bodies to 3bh-recover m cunent rates the carrying cost of funds used for construction, they capitchze, as an appropriate 3 cost of utthty plant, an allowance for funds used dunng construction (AFDC) which is calculated and [ ggyh O e-recorded as provided by the regulatory system of accounts. Under this utihty industry practice, construc-tion.verk m progress on the balance sheet is charged and the incomo statement is credited for the I approximate not composite interest cost of borrowed funds and for a reasonable return on the equity funds used fcr construction. This procedure is intended to remove from the incomo statement the effect of the coct t of fmancmg the construction program and results in treatmg the AFDC charges in the same manner as construction labor and matenal exts. As non-cash items, these credits to the income statement have no effect on current cash earnings. Atter the property is placed in service the AFDC charged to construction conts is recoverable from customers through depreciation provisions included in rates charged for utihty corvice. The effective composite AFDC rate for the Company's operating subMdiaries was 7.5% and 7.2% J for 1979 and 1978. Iespectively. Dunng 1980, one of the operating subsidiaries used an accrualrate of 5% on y $736.2 milhon of construction costs in accordance with a December 1979 rate order from its regulatory j commission. The effective composite rate of the operating subsidiaries for the balanee of AFDCwas 8.0% f for 1980. ?[ MSE has determmed its accrual rate for allowance for funds used during construction based on a M return on average common equity of 11.6% through October 1980 and 13.75% thereafter, plus actual e interest costs. net of related income taxes. The Company's subsidiaries continue to capitalize allowance for funds used during constuction on pro;ects during penods of interrupted construction when such interruption is temporary and the continua-
- ~,
tion can be justified as being reasonable under the circumstances.
- 11. ItESERVES c
v 4' It is t!.e pohey of the Company's operutmg subsidiaries to provide reserves for uninsured property risks and for clmma for mjunes and damages through charges to cperatmg expense on an accrual basis. Accruals a t for these rocerves have been allowed for ratemaking purposes. 4 i i w f) /D i b ge. In May 1980 AP&L filed with the Arkansas Public Service Commission' t ?SC) an appheation toincrease. [' through a two-stage process, its retail rates approximately $ 430 million on an annual basis. On October 28, 1980 AP&L placed into effect, subject to refund, approximately $86.7 million of the increase: operating revenues for 1990 include approximately $10.7 milhon from the increased rates. The balance of the i requested ine. vase, approximately $43.4 million is proposed to be implemented on June 1,1981. In a h 4, pre-heanng stipulation agreement between AP&L and the APSC staff, the APSC staff recommended an [ merease of approximately $90 milhon and, i mturn AP&L agreed not to contest certain staff adjustments L which would have the effect of reducmg AP&L's request from $130 million to approximately $117 million. t ( The matter is pendmg before the APSC. In May 1980 MP&L filed with the Mississippi Pubhc Service Commission (MPSC) a notice of intention to h change tates m order to produce additional annual revenues of approximately$68.8 milhon. The proposed I " rc 'es were put into offact, under bond, on July 1,1980. On November 24,1980, the MPSC issued its order [ M authori mg MP&L to file new rates that would produce additional annual revenues of approximately $48.3 p. milhon. This decision was appealed by several parties seeking modifications to the MPSC's order. In p MP&L's opinion. based on the epmion of legal counsel, these appeals will not be successful. MP&L is y requestmg that the full rate increase sought be allowed, appealing the MPSC's decision on rate of return, p i I t
the disallowance of CWIPin rate base, and the dica::owance of a portion of the worlang capital requested. MP&Lis contmumg to bill custcmers usmg the rates h!ed in May 1980 pendmg fmal determmation of these appea!s. In 1980 these rates produced an additional $33 milhon in revenue. The portion of thu amount that would have been billed under the rates approved by the MPSC. $23 milhen, was meluded.n operating revenues. The remamder. $10 million, was recorded as a habihty. As of December 31. 1980. LP&L had pendmg $216.5 nulhon of preposed annual rate increases, mcludmg a general rate merease appheation filed in May 1980 with respect to customers under the Louisiana Pubhc Service Commission (LPSC) junsdiction m the amount of $203.6 milhon. In connection therevnth. in October 1980 the LPSC permitted LP&L to aplement an interim rate increase of approxi-mately $32.4 milhen under protective bcnd, sub;ect to ref und. Included in operating revenues for the year i 1980 is approximately 38 milhon of such revenueo sub:ect to refund. l Inccme tax expense (credit) consists of the followirui 1950 1979 1978 Cn Thusandc] Ca r rent. Federa! - 5 (I A751 $(3 275: Et 2te. ! 4 793
- 1. M 5 2 747 Tct,1.
4 797 (1:01 (528' Deferred - net-IAerahzed depreenten 33 994 40 639 34 411 Deferred fuel ec.st. (592) 11.215 (543 Taxes capitahzod m the f.nancial statements. 6 985 6.153 4 022 Ddference Letween book and tax grns and lossea cr. mies and al<md:nment of prcperty. (5.753) (3 527) (1.794; Other. (15 99;0 9 483 10 981 Reducten due ta tax loss carrybrwards. (21.027)
- e9 253)
(6 497) Tota!. (2 375) (22 290) 40 593 Invectment tax credit ad,uctments - not f 3 685) _ 2 SC6) (4 160 (
- 'u: income taxes.
2 (1 261) !.24 968 $35 833 Ch1rged to creratons. 2105.023 3 51 266 !$6.004 Cred.ted to c.ther income. 0 06 284; (76 230 (50 105) Tota: income taxes. 3 (1.261) I'24 MO $35 839 Total incorm taxes differ from the amounts computed by applying the statutory Federalincome tax rate to income bcfore taxes. The reasons for the differences are as follows: 1950 1979 1978 Cn Thousands) % cf %.f % cf Pre-Tax Pre Tay Pre-Tax Amcunt Incemo Amcunt Income Am unt Income Ccmputed at statu ory rate. $114 e49 46 0 3 33 944 46 0 Ill8.471 48 0 Increases (redact.cns) m tax resu;t ng frcm Allawance for funds used darma constructon (110.372) (44 2) (98.133) (50 8) (71 160) (28 9) D.!!erence between Lock deprecanan and tax straight hne dopwnton 1.170
- 0. 5 (7. 5?I
( 3 91 0 207) ( 1. 31 C+her - net. (6 907)
- 2 e) d 194 (4 Z i8 185)
' 5 3; Recorded in=me tax-s. ! (126D ( 0. 5, $,24 9EC (12.9 t 3ie?3 14 5 The tax effects of the comohdated 1980.1979 and 1978 Federal tax losses of $259.674.000 have been recorded as reductions cf deferred income taxes. Unused investment tax credits at December 31. 1980, amounted to $291.276.000 of which $34.939.000 may be carried forward through 1984 $92.966.000through 1985. $100.502.000 through 1986. and $62.869.000 through 1987. r
7 NOTE 4. LINES OF CREDIT AND RELATED BORPOWINGS The Crmpan f and MSE have revolvmg credit agreements with various banks providing for theissuance of r uncecured premisscry notes tota!bng $230 milhon and $808 milhon. respectively. The Company's agree- ! ment vnll termmate December 31.1984, and the maximum prmeipal amount cf allowable bcirovnngs will be reduced to 75% and 50% of th" ongmal commitment on December 31. 1982, and December 31. 1983. respectively. MSE's agreement expices, and all notes thereunder mature. December 31.1985. Under both ' cf thece agreements commitment !ees are paid on the unused portion cf the credit lines. In addition. MSE's. The cperatmg subsidianes have arrangements, not requiring commitment fees, with various banks j -Ri@i E agreement requires compensatmg balances. 1 l y provJ.ng for short-term borrovnngs through bank loans and with commercial paper dealers for the sale of, ? '? F commercial paper. Of the total bank hnes of credit. $253 milhon is provided by banks located outside of the ,,,,, g Middle South System service area. Any of the four participatmg System cperating companies may borrow, ',' <u ( any portion of these hnes sub;ect only to each company's maximum authonzed level cf borrowmgs. ! J ip 2. Compensating balances.:re required by certam of the lending banks. The short-term loan agreements for MSS ($30 milhon) and MSE ($60 millicn) require commitment fees f #$$ @ds. on the unused portions of the hnes cf credit and compensatmg balances are required for MSE. SFI has a fuel cil fmancmg arrangement allovnng for borrowings up to $100 million subject to a limit equivalent to the lower of the cost or the fair market value of SFI's fuel oilinventory. In addition, SFI may bcrrow up to $60 milhon through the sale of commercial paper for use in fmancing its welear fuel i inventory. Borrowmgs under these arrangements are restricted as to use and ce secured respectively by [ SFTs fuel cil and nuclear fuel inventories and accounts receivable arising frvm the sale of these inven- [ tones. SFI also has a revolvmg bank credit agreement which allows for borrowings up to S60 milhon subject [. to a hmit equivalent to 85% of the net book value of certain assets. A commitment fee is paid on the unused t portion cf this hne of credit. I The lines o4 credit. borrowmgs and compensating balances of the System companies were as follows:, l' .;6 Decerrber 31. ; #0 December _31.1979 Corrpen. Compen-l. Une ci satmg bne of satmg e Cred.t Bor r owmgs Balance Cred;t Borrowmgs Balance { (In Thousands of Donars) { Ebor t ter m Comw. - 226.820 145.900 Ma CD000 39.151 1800 60.000 1.800 l EFI 160 000 108.128 !!0.000 17;500 M1 30.000 14E50 Operm.n y sul nd.ur.es 393.095 94 693 15 C69 332.000 121.5C5 20.718 ; / ( 1.c n J ter m
- ~
CE np u.y 230.000 1C8.150 -f ./ '~ MSE 808.000 671.000 33.550 565.000 547.000 27.350 g EFI. 60 000 IB 900 115.000 103.590 -t MS3 10.000 4 000 - I. -s l W y l I; { The short-term borrovnngs and the interest rates for :he Middle South System were as follows: [ t Year Ended December 31. i I 1980 1979 1978 [. (In Thousands) I Aveme Bctrawmg. $340 245 $316.061 $199.773 M ix; mum Borrewmg. $469.740 $3i43.015 $323.440 l~ Ye<n ensi Ber rowm i $295.622 3294 905 $323 440 Average m'erert rw t D!mng per:0d - r Bank b:ns. 14 9 % 13 6 % 10.0 % Ccmmered px;ser 14 4 % 11.7 % 8.6% } Other 12.7 % 4 At en i cf penal - Smkkvma. 21 4 % 16.4 % 12.1% C.2mmerca paper 20 6 % 15.4 % 10 8 % Pher 19 9 % 1 i
J,j a NOTE S. COMMON STOCK ]3 Changes in shares of the common stock of the Company for 1980,1979 and 1978 were: j Type cf Transacton Number cf Shres .l 1980 1979 ~978 ) Sa:es. 15.000.000 13.500 C00 8.500.000 '$~+-- a.ww l" Dmdend remvestment and stock purchase plan. 1.604.174 608.875 372.110 Emp:cyee stock owne sh;p plan. I1.487 12.452 4.825 j flfg ~ /g Emp!cyee sremgs plan.. (994 . '@3g-we, e 301.284 214.433 1L637 Fenrement of uncia;med shares. .p r+-w.a - h8.1.8J (J.' d 16 916 945 14 334.766 8,889122 a.:t~;.Arn;%J u n v ot n a .j g S =y xsfMl In January 1981 the Company issued 589.409 shares of its common stock under the Dividend Reinvest-M;((fyd_ti;4 1981 with the proceeds being u :d primarily to reduc n. JGW ment and Stock Purchase Plan. The Company is also seeking authorization from the Secunties and Q Exchange Commission to issue and sell up to 10.000,000 shares of its common stock in the second quarter of Sl#Ek d j NOTE 6. PRFEERRED STOCK i1 The number of shares cf preferred stock of the operatmg subsidiaries as of the er.d of thelast two fiscal years 1 were as follows: d Shares 1 Authonzed at Shares Outs.an ng Ca:1 Pnce ] December 31. 1980 at December 3L Fst Shre j 1980 1979 ~ 2 Cumulanve. 3100 Par Value ] W;thout smbng fund: i 4.16 - 5.56 % 1.070.774 1,070.106 1.070,106 3102.50 to S107.00 -i 6.08 - 8.56 % 1.180.000 1.180.000 1.180.000 $102.83 to $107.70 L .j 9.16 - 11.48% 795.000 795 000 795 000 $106.35 to S111.98 3.045.774 3.C45.106 3.045.106 'l W;th smbng fund !W, j 10.60 - 11.C4% 562.134 562.134 600 000 $ 109.39 to $109.78 .} 15.44 %. 150 000 150 000 $115.44 ~ 'l 712.134 712.134 600 000 la U:ussued. 5.756.500 J; h Total. 9.514.408 -Q l. .; 1 j Cumulatve. 325 Par Value 't W;thout smbng fund I= 8.84%. 400.000 400.000 400.000 5 28.21 k 10 40 %. 600.000 600.000 600.C00 $ 28 60 l 1.000.000 1.000.000 1.000.000 4 i j W;th smbng rund i ,w 9.92%. 1,600.000 1.600.000 1.600.000 5 26.18 {
- 'O
- ]
10.72 %. 2.400.000 2.400.000 2.400 000 $ 27.68 l 1 13.12 %. 1.600.000 1.600.000 1.600.000 $ 23.28 1 3 13.28 %. 2.000 000 1 000.000 $ 29.58 15.20 %. 1.200 000 1.200.000 5 28.80 } 8.800.000 8 800.000 5.600.000 A Urussued. 12.200.000
- f Tota!.
22.000 000 J \\ Jj { a I 9 -I kq a 1 ^] f, Y H-j ]
h +, r f-i d Changes in the-number of shares of preferred stock of the operatmg subsidiaries dunng the last two ( fiscal years (there were no changes in 1978) were as follows: [' [- [;U Number of Shares 1980 1979 T. h Sa:es: [ .g AP&L e-yg' 10.40% $25 par, w:th smbng fund. 600.000 -n- "x W~"hk 9 92% $25 par. w:th s:nbng fund. 1.600.000 ] _.4~. g,28% $25 par. w:th s:nbng fund. 13. 2.000.000 11.48% $100 par. without s:nbng fund. 350.000 [ 1 [ 10.72% $25 par. w:th s:nbng fund. 2.400.000 M:7
- L
)H88N'58h; 13.12% $25 par. with s:nbng fund. 1.600.000 'F**2h. 15.20% $25 par, with s;nbng fund. 1.200.000 15.44% $100 par. with s;nbng ft.nd. 150.000 fi [ %g f fi NOPSI 5[ Re,dempt: ens: nF&- i we,mm-4 1104% $100 par. w.th s:nhng fund. (20.000) 10.60% $100 par. w:th s:nbr.g fund. (17.866) 3 312.134 6.550 000 6 The amounts of preferred ctock of the operating subsidiaries as of the end of the last two fie:al years e y xere as follows: 6: t December 31. 1980 1979 p j 1;, *C Gn Thousands) ,f ".chout sinbng fund: M. Stmed at $100 a share. $304.511 $304.511 Stated at $25 a share. 25.000 25.000 Prernium. 1.456 1.456 .w. Tctal w:thout s.ncng fund $3?0.967 $330.967 V-D With smbng fund. l Stated at $100 a share. 3 71.213 $ 60.000 w' Sta:M ct $25 a share. 220.000 140.000 4i '# W'
- Prem:um.
852 517 Issuance expense. (8.900) (7.010) Tomi w:th s:nieng fund $283.165 $193.507 ' N
- 3.s
-.w Annual preferred stxk div;dend requ:rements. $ 59.809 $ 46.703 . yy Avera;;e annual preferred stock d:v:dend F5j rxe en par valu3 9.34'o
- 8. 8 2*.
L {-1s-QS _ Cash smlang fund requirements for the ensuing five years for the preferred stock outstanding at 4 - ~
- December 31.1980, are as follows(in thousands): 1981,53,000: 1982, $3,000: 1983, $3,000: 1984, $10,000; and i
1985, $14,750. [- s i .s i y~ f, l 4:
- j V
, 1 p 3 =.
a i NOTF 7. LONGTERM DEBT J The long-term debt of the Company and its subsidiaries as of the end of the last two fiscal years was as >. IOllO" Outstandmg I at December 31 1980 1979 .o M (In Thousands) V,y First Mortgage Bonds. $2.421.451 32.321.632 Jj[ j Debentures - due 1993 -1993. S'~e - 7% 3.840 3 3Q t Promissory Notes: ~ Due. r 8??!$V?8 N.; 1982. at pnme plus % ef 1%. 1.023 1.527 .a. W 1982, at pnme .d.900 . I Ijp ' R - M; 1984. at 105% of pnme plus % of 1%....... 108.150 1 1 1985. at 110% cf the sum of pn :e and % of 1%. 671.000 547.000 e% c. f% TyNj Total Prom 2ssory Notes 799 073 548.527 Other: Capitalized Lease - due seria:!y tb > ugh 1993. 8*a 7.292 7.648 Munic: pal Revenue Bonds - due senajy th ough 2004. Ib - 8%. 41.421 39.473 Polluncn Control Revenue Bonds and Installment P".rchase Contracts: l .)ue senal;y through 2009. 6 - S%. 17.350 17.451 Due 1995 - 2008. 6te - 10%. Ii1.425 94.625 Less - Funds en deposit with trustee. (8.580) (19.580) Total Other 168.908 139.617 - ] Unamortzed Prer :ium and Discount - Net. 2.877 4.200 Total Long-Term Debt $3.392.309 $3.01716 t Annual interes: requirements on Long-Term Debt.... $ 429.903 $ 298.277 g. ( Average annui nterest rate on total Long-Term Debt (exclud:ng unamcrtzed premium and d:scount - net) 12.68 % 9.90 % Mc ties Sinkmg Fund Requirements a' December 31. 1980 December 31. 1979 I I Cash Other* Cash Other* 3 (In Thousands of Do!!ars) 1980 861 16,992 - [- 1981 121.473 681 17.912 861 17.912 I 1982 38.137 ^.573 17.162 32.807 16.32 1 1983 72.007 40.683 16.946 40 d33 16.446 v 1984 142.660 48.753 16.071 48.903 15.571 '.j 19 5 692.133 R 988 15.831 $(
- Smkmg fund requirements m=y be met by certi!nonon of ricperty addmcns ct the rate of 167%
4 ci the reqwred amount.
- The outstanding First Mortgage Bonds of the Company's subsidiaries as of December 31.1980 and 1979 i-w cre
Matuny I?s% to 5'e*' 6*6 to 8'e% 9% to 11? % 12% to 16% TOTAL ~ J e (In Thousands rf Dollars) ) j 1%0 1981. 8.000 110.000 118.000 1982. 15.464 15.464 i 1983. 19.172 50.000 69.172 ] 1984. 31.500 31 500 198 5.... 18.000 18,000 1986 - 1995. 182.955 526.44) 120.000 829.395 1996 - 2005. 166.250 511.14 302.0% 98.500 1.077.920 ,g 2006 - 2010. 40.000 285.000 55.000 380.000 Total First Mortgage Bonds. 2.539.451 s i 197. ~580. 23.400 23.400 1981. 8.000 110.000 118.000 i 1982. 15.572 15.572 'd 1983. 19,202 50.000 09.202 1%4. 31.500 31.500 j j 1985 - 1994. 154.598 528.050 682.648 4 -i 1995 2004. 211.250 511.360 e.37.100 959.710 } 2005 - 2009. 40.000 350.000 55.000 445.000 Total First Mertgage Bonds. 2 3C.032 m [ )
_ =-. -= c x t. p NOH B IGTAINED EARNINGS [ E The indenture provisions relating to the operating subsidiaries' long-term deot and transfers by such 7 subsidiaries from retained earnings to the stated value of common stock and the provisions of the MSE bank t loan agreement and indenture restrict the amount of consolidated retained earnings availoEe for cash L - dividends on common stock. As of December 31,1980,3214,348,000 of consolidated retained earnings were k 2 free from such restrictions. [ 4 M. ak ,. ~.~ i 'MIWW pydn kUMb NOTE R COMITMENTS AND FINANCING $33[ The Middle South Sytem's construction program contemplates construction expenditures (including bh AFDC) of $897 million in 1981, $836 million h 1982 and $704 million in 1983, of which expenditures in the QF%$ estimated amounts of $207 million, $234 m6cn and $228 million ore applicable to the Grand Gulf Plant, a two-unit nuclear generating station. MSE currently projects dates of 1982 and 1986 for the first and see nd units of this plant, respectively. In connection with this plant, p the Company has undertaken to furnish or cause to be furnished to MSE, to the extent not obtained by MSE from ether source, sufficient capital for construction and operation of the plant and related purpose ~' i December 31, 1980, MSE had outstanding intermediate-term revolvmg credit borrowings and first Q a 1 mortgage bonds in the amount of $1.17 billion and the Company had invested $443.6 million in the common E ~ y~ stock of MSE. In the event that Unit No. I of +he Grand Gulf Plant p. i6 December 31,1982, or Unit No. 2 in commeretal operation by December 31,1986, the outstanding bonds and bank borrowings would become due and payable unless extens 1 the Company would be required to provide MSE with sufficient funds, to the extent net obtained by MSE e - w; from other souices, to meet these obligations M sJf4 4 The Middle South System Operating Con.panies are obligated under agreements with MSE to 4' payments or subordinated advances adequate to cover all of the operating expenses and capital costs of b QE j MSE and, in return, are entitled to receive the power avaluble to MSE from the Grand Gulf Plant. During k - Amp 19F 'he operating companies agreed in principle to a permanent allocation of the Grand Gulf Plant's f ^ fM capability. Under this arrangement, those companies receivmg allocations, LP&L M d assume, in proportion to such allocations, all responsibilities and obligations related to the Grand Gulf 's Plant and AP&L and Ark-Mo, which aid not receive allocations, will relinquish their rights in the plant. p
- f wg These new agreements are subject h receipt of the apprcval of regulatory agencies and of all other {
" 7 Z necessary approvals. y ~" The Federal income tax returns for the years 1971 through 1976 hav - oeen examined by the Internal [ Revenue Service ORS) and adjuc nents have been proposel The principal issue is whether customer j% l* deposits are includible.n taxable income. A formC. written protest has been filed and conferences are F - 9" 1 being held with an Appeals Officer of the IRS. Any finalliability for taxes resulting from settlement with the b , a" "j D IRS would not have a matenal effect on net income. Income taxes on customer deposits wou normalized. Most of the other issues have been settled and adequate provisions have been recorded. W M SFI has a long-term oil supply agreement with a major oil company providing for the purchase by M ' SFI of 50.000 barrels of oil per day for a twenty year period ending in 1996 with the option, upon two b years written notice, to reduce the contract quantity to no less than 35,000 barrels. SFI also has an agree-y % &' t ment with another major oil company providing for the purchase by SFI of up to 200,000 barre's of oil 4 per month through 1984. h di SFI has contracted with a joint venture for a supply of coal from a mine to be develo 4 which is expected to provide 150 to 210 million tons over a period of twenty-six to forty-two years. AP&L is p % ~ f+ currently purchasing coal under an apement that will provide approximately 100 million tons of coal p, ' ' over a twenty year period. p'" W Under the terms of their nuclear fuelleases, three subsidiaries are responsible for the disposal of spent N m s@ nuclear fuel. These companies consider all costs incurred or to be incuned in the use and disposal of %;h, _.,.C % nuclear fuel to be proper components of nuclear fuel expense and provisions to recover such costs have 0 4'Wi been or will be made in applications to regulatory couimissior e. AP&L, the caly System company with an 5 J 4 operating nuclear station, collected approximately $7,382,000 in 1980 for the storace or dispeal of spent b . ~ fuel. AP&L is also recovering approximately $61 million for decommissioning costs for its two nuclear units 3 ? through increased depreciation charges over the life of the station. Based on an AP&L study, decommis-C ' sioningcosteareprojectedtobeinexcessof theamountscunentlybeingcollected. AP&Lisrequestingand [$ e, u - 4 will request recovery of thwe estimated increased coets in applications to its regulatory commissions. [ t 8 w- [ O s, g_ p{ - ' j [W ]- .t ut . ~ ~ - - -.
a 2 l NOTE 10. LEASES j l The Company's subsidiaries account for leases on the same basis as that used by their respective j regulatory authorities in the ratemakmg process which determines the revenues utilized to recover the k. ' lease costs. U. -1 Application of criteria used to define a capitallease would permit recordmg the following assets and -jpy -j liabilities on the balance sheet: wg a
- a. _... ~ t 1
1993 ig79 1973 (In Thousands)
- a. !
Assets: wou.- -kg]9:i t Ut2h y plant, S 63.304 3 61.319 3 5L722 M 5%G;1 Accumulated an. ort.zat:en. (16.892) (16 493) (12 904: [ EN Net. $ 46.412 3 44 826 $ 42 819 g" jg:'&,t 1 Othe property and mvestments - net. _3 47 BS5 $ 50.318 3 52.751 ~ j *??k l OSTE.ht(Pl 88- ' wromwese.e Non. current obhgatons .-ym-~ under cap:tal leases. $104.136 $104 357 $ 102.293 '} Current >hgat:ons under ' J, cap:tal leases. $ 4.583 $ 4.565 $ 3 632 ,i l The recording of such leases would not materially affect the amounts reported as either expense or net 1 A ~ income. At December 31,1980, the companies had noncancellable leases with m...:muu rental commitments j as follows: 'I (In Thousand=) "Bl. $ 36.515 l 32. 34 163 683. 32.548 1984. 29 742 4 28.366 i 1985. 379 787 For years thereWr 3541.121 h j Rental exrense amounted to approximately $34,441,000. 329,453,000 and $26,977,000 in 1980,1979 and i 1978, respectively. j Three subsidiaries have entered into nuclear fuel leases aggregating $270,000,000. The leases, unless terminated sooner by one of the parties, will continue through 2018, 2028 and 2029. Lease paymenta, which t i are not included in the tabulations above, are based on nuclear fuel use. Nuclear fuel lease expense of i $37,300,000, $14,998,000 and $13.279,000 was charged to operations in 1980,1979 and 1978, respectively, a; The unrecovered cost base of +he leases was $238,351,000, $170,989,000 and $103,018,000 at December 31, 1980,1979 and 1978, respectively. l: 4 ['d h NOTE 11. PtNSION PLANS 4.ij Total pension expense of the Company and its subsidiaries for 1980,1979 and 1978 was $21,253,000, j $18,605,000 and $16,843,000, respectively, which includes amortization of past service cost over periods of j ten to thirty years. A comparison of accumulated plan benefits and plan net assets for the defmed benef t plans is presented below: u - ,aj lanuary 1. l 1983 1979 [ ] Actuanal present value of accumulated cf plan benetts: Vested.. 3217.839 $ 187.230 15.!89 Nonvested. 14.370 _ I Total. $237 869 $202 419 O usets available for plan benef:ts. 325' '4 1221.752 4 f .] i The weighted overage assumed rate of retum used in determmmg the actuarial present values cf M l accumulated plan benef'ts ranged from 6% to 7% for 1980 and 1979. a; y -i 4 ,4 ,i
L 4 NOTE 12. QUARTERLY RESULTS (UNAUDITED) .1 Consolidated operating results for the four quarters of 1980 and 1979 were as follows- ,j s Ouarter Operatmg Operatmg Net Earnmgs f 3 Ended Revenues Income Income Per Share ?W D."$ _ [. W, I - 4""** (In Thousands of Dellars) 1980: ~ 9 78 March 502.020 61.392 48.144 $0.53 {%dtf_ June 486.177 51.427 20.838 $0.22 I' ' : September 761.874 111.968 83.816 $0.85 sO Il; "#. December. 592.157 73.035 43.109 $3.41 1979: ik March 401.579 58.899 50.247 $0.60 [, 4 June 407.257 43.556 34.131 $0.40 Ms
- g September 538.121 70.764 61.777
$0.73 ~ 4ki((fy T] December. 476.102 44.979 35.903 $0.40 -~ mrv ~ m g The business of the Middle South System is subje s to seasonal fluctuations with the peak period E,_ occurring during the summer months. Accordingly, ea.nings information for any three month period should not be considered as a basis for estimating results of operations for a full year. e
- 0 w
NOTE 13. OIL AND GAS RESERVES (UNAUDITED) Fmancial Accm.nting Standards Board (FASB) Statement No.19 as amended by Statement No. 25. i. 1 requires disclosure of certain information pertaining to oil and gas reserves. SFI serves the Middle South 4 System on a non-profit basis and is limited in its recovery to the cost of such reserves. Billin ie companies are based upon a uw-of-production cost, determined on the basis of proved developed i reserves, as defmed by FASB Statement No. 25. The following table sets forth information as to the t estimated net quantities of reserves, all of which are located within the United States, as of the dates ; W indicated: 1980 ,'s Na+ ural Oil and Gas Ccndensate g, tMCF) (Barrels) >N' Proved deveL, ped reserves: As of January 1.1980 73.167.069 1.858.523 [L. Revisions of previous estimates. (13.702.714) (362.763) Extensions, discovenes. and other addmons. 3.862.680 472.798 b Production. (J 506.657) (228.672) D. As of December 31. 1980. Proved undeveloped reserves as of Decembe... 57.820.378 1.739.886
- 31. 1980.
800.722 359.628 Proved developed and '- 2 developed reserves as of ( d. December 31. 1980. 58.621.1n. o 2.099. 14 f; W I 3:, 1979 - 1" ? Natural Oil and f
- 4-Gas Condensate r
(MCF) (Barrels) d' Proved developed reserves: As of lar'uary 1.1979 94.887.410 1.224.629 M-U + Bevisions of previous estimates. (18.023J (2E i., + Extensons. discovenes and ether addmons 3.244,252 1.060.453 ~ N Production. (5.069.375) (107,912) f ', ' / 1' Sole of nunerals in place. (l.871.661) (20.478) F-- 'Q J As of December 31. 1979. 73.167.069 1.858.523 j^.Wghy a 4f:9 9 .E Y, Ql Information with respect to proved undeveloped reserves is only available as of December 31.1980. 'a' r.- I
l . NOTE 14. EFFECT OF INFLATION ON OPERATIONS (UNAUDITED) j The following supplementary information about the effects of changing prices on the Companyis provided ' in accordance with the requirements of Statement of Financial Accounting Standards No. 33. Tinancial Reportmg and Changing Prices". It should be viewed as an estimate of the effect of changing prices, rather j ' than as a precise measure. M Statement of Income f cm Operations and Other Fmancial Data q@)1: Adjusted for Effects of Changir.g Pnces for the Year ended December 31. 1980 (In Thousands) ei - ~, Adjusted for Adjusted for $N ' Mi' _. As Reported in General Changes in the Fmancial Inflation Specific Prices m.m.s.m.> e 5 !U ! 9 T "~i Statements (Constant Dollars) (Current Costs) .C4 m Revenues' $2.342.228 $2.342.228 $2.342.228 Opero:mg expenses (excludmq depreciatien)' l.902.409 1.902.409 1.902.409 Q, @ ';g .Jeprec:ation. 141.997 285.262 322 ")5 a5 Total operatmg expenses 2.044.406 2.187.671 2.222.514 i Operatmg mcome. 297.822 154.557 119.714 a Other mcome' 235.580 235.580 235.580 l Interest & cther charges' 337.495 337.495 337.495 . Income from operations (excludmg reduction to net recoverable ust): $ 195.907 3 52.642 $ 17.799 Increase m specif:c pnces (current costs) of property. } Reduction to net recoverable cost. plant and equtpment held dunne the year' $1.660.089 $ (571.075) (905.432) Effect of merease m general pnce level. (1.222.213) Excess of merease in general pnce level over increase in specific pnces after reducticn to net recoverable cost. (467.556) 5 Gam frem decime in purchasmg power of net amounts owed 225.345 225.345 + Net. $ (345.730) $ (242.211) 4 ' Assumed to be m " average for the year" dollars mid thus are not restated. 'lncludmq the reduction to net recoverable cost. the loss from operations on a constant dollar bas:s would have been $518,433 for i980. i 'At December 31. 1980 current cost of picperty. plant and equ:pment, net of accumulated deprec2ation, was $11.654.904. while L. histancal cost or net coct recoverable through deprec:at:on was $6.629.1Il. Five-Year Companson of Selected Supplementmy Fmancial Data 1 Adjusted for Effects of Changmg Pnm In Thousands of Average 1980 Do!!ars 1980 1979 1978 1977 1976 OPER ATING RE"ENUES.......................... $2.342.228 $2.069.600 $2.048 891 $1,%2 239 $ 1.656.543
- HISTORICAL COST INFORMATION ADIUSTED FOR GENERAL INFLATION 4
Income from cperat: ens (excludmg reduction to net recoverable ccst). $ 52.642 $ 74.049 i Income per commen share (after dividend j requirements on preferred s.ock and exclud:ng reduction to net recoverable cost) $0.54 $0.86 Net assts at year end at net recoverable cost. $ 1.819.986 $ 1.790.279 , CURREtn COST INFORMATION 1 Income from operat: ens (excludmg reduction to net recoverable cost)... $ 17.799 $ 41.503 q Income per common share (af*er dmdend requirements on preferred stock and i [ excludmg reduction to net recoverable cost) $0.18 $0.49 Excess of iacrease m general pnce level 'i over increase in specific pnces after .J reduction to r'et recoverable cost. $ 467.556 $ 590 976 q Net assets at year-end at net recoverable cost $1.819.986 $1,790.279 GENERAL INFORMATION Gam frcm decime.n purchasmg power of net amounts owed.. $ 225 345 $ 309.324
- ?
Y Cash dmuands declared per common share 9.59 $1.74 $2 05 $2.27 $2 46 Market pnce per common share at year-end. I1% 13 % 18 % 22 23?h .m Average consumer pnce mdex 246.8 217.4 195.4 181.5 170.5 q l NCTE. The Statement requires that bzstancal cost miarma*.. n adjusted for generalmflatwn and current cost miormarion be provuded for 1979 and subsequent years. Comparable mformation as not readily available for the years praar to 1979 and thus is uct provsded. H _.
Constant dollar amounts represent historical costs adjusted for the effects of general inflation. The 1 effects are determined by converting these costs into dollars of equal purchasing power using the Consumer Price Index for all Urban Consumers (CPI-U). Current cost amounts reflect the changes in specific prices of property, plc.-t and equipment from the 4 i ysar of acquisi' ion to the present. The current costs of property, plant and equiptr.ent, which represent the f estimated costs of replacing existing plant assets, are determined by cr,1ying the Handy-Whitman Index of Public Utility Construction Costs (HWD to the cost of the surviving plant by year of acquisition. Land and i 4Kt certain ot%r plant assets which are not indaded in the HWI were converted using the CPI-U. The f difference between current cost amounts and constant dollar amounts results from specific prices of i, ?IIME property, plant and equipment (as measured by the Handy-Whitman Index) changing at a rate different ; - WWOik The current year's depreciation expense on the constant dollar and current cost balances of property, than the rate of general inflation (as measured by the Constmer Price Index). plant and equipment were determined by applying the Company's depreciation rates to the indexed ! g ;7ggg$ mg$(y 4 /:t;.* amounts. restated from their historical cost in nominal dollars. Regulation limits the recovery of fuel and Fuel inventories, the cost of fuel used in generation, and gas purchased for resale have not been b _. gas costs through the operation of adjustment clauses or adjustments in basic rate schedules to actual q '~' costs. For this reason fuelinventories are effectively monetary assets As prescribed in Statement of Financial Accounting Standards No. 33, income taxes were not ad- [ ~ justed. 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 L of constant dollars or current cost over the historical cost of plant is not presently recoverable in rates. This [ 4 excess is reflected as a reduction to net recoverable cost. While the rate-making process gives no E 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 of its net investment when, replacement of facilities actually occurs. To properly reflect the economics of rate regulation in the Statement of Income from Operations 3 presented above, the reducticn of net property, plant and equipment to net recoverable cost is offset by the L gain from the decline in purchasing power of net amounts owed. During a period of inflation, holders of 1 monetary assets suffer a loss of general purchasing power while holders of monetary liabilities experience i a gain. The gain from the dechne 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 L depreciation on this plant is limited to the recovery of historical costs, the Company does not have the l-opportunity to realize a holding gain on debt and is limited to recovery only of the embedded enst of debt, capital. I I t I 1 E a p J e i i 4 W.* [s-t k 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- 1. FINANCIAL CONDITION fl w will nly be alleviated when the utihty plant involved is placed in service or the regulatory In recent years the Middle South W.em has ex-bodies allow a cash return on CWIP.
34 perienced financial problems res-2no primarily % m the System's massive construction program II. LIQUIDITY AND CAPITAL RESOURCES MIDDI.E made necessary by customer requirements and S,2UTH the need to diversify the System's fuel base. The During the period 1978 to 1980 the Middle South increasing cost of construction and the ever-System had construction expenditures of $2.8 bil-UTILITIES, lengthening construction periods have further ag-lion, including AFDC, of which over 80 percent gravated this situation. At the end of 1980, the was funded by external financing. Projected con-INC. and amount invested in construction work-in-progress struction expenditures for 1981 through 1983 are CWIP) was $3.2 billion, an increase of $2.0 bi!- $2.4 billion which is estimated to be funded in Subsidiaries (lion over the amount invested at the end of 1976. large part through external sources but to a lesser Financing this investment has been a significant exte n than in recent years. task in itself, but the reluctance of regulatory Due to the earnings coverage ratio constraints bodies to provide adequate rate relief and to allow on the System operating companies during the last the System operating companies current recovery three years, conventional sources of financing for of the carrying cost of CWIP has made the task construction had to be supplemented with non-even more difficult, conventional sources, primarily sale and Reported earnings rose approximately $10 leaseback arrangements. Although $80.6 million million from 1978 to 1980, while earnings exclusive was raised from these sources during that period, of the effect of capitalizing the carning cost of they are expected to contribute a lesser amount in CWIP, Allowance for Funds Used During Con-the future. During 1980 one operating cceinany struction (AFDC), declined $81 million. This de-cxercised its option and temporarily ceased sup-cline resulted primarily from the increase in the plying its portion of funds for the construction of amount and cost of debt and preferred stock that three jointly-owned coal units. Construction was the System has outstanding, the major portion of not interrupted, however, as one of the co-owners which was issued to finance CWIP, and the effect agreed, as provided in the related ownership of inflation on the System's operating expenses. agreement, to advance the operating company's Generally, fuel cost increases are recovered cur-share of construction funds. This advance, rently through fuel adjustment clauses. Increases amounting to approximately $69 million through in other operating expenses, however, can only be 1980, is scheduled for repayment in 1981. recovered through the regul xtory process during Given improved earnings levels in late 1980 which costs continue to rise and earnings decline and assuming the receipt of timely and adequate further. rate relief in response to perdng rate increase The delay in recovering these costs reduced applications, the System operating companies' internally generated funds available for construc-mortgage bond and preferred stock earnings tion and at the same time reduced the System coverage ratios should permit greater use of con-operating companies' mortgage bond and pre-ventional financing methods for their construction ferred stock earnings coverage ratios to the point requirements. In addition AP&L, LP&L, MP&L where conventional sources of uternal financing, and NOPSI are currently authorized to make mortgage bonds and preferred stock, were se-short-term borrowings in an aggregate amount verely limited. To keep the System financially via-outstanding at any one time of up to the lesser of ble, a program was instituted to conserve cash $427 million or 10 percent of capitalization. At De-flow. This program was implemented through de-cember 31,1980, only $81 million cf short-term lays in ec.nstruction programs and the initiation of bcrrowings were outstanding compared to $113 an austerity policy throughout the System. In addi-million at December 31, 1979. These companies tion, in order to continue construction, the System had available unused lines of ciedit of $296 mil-continued to use non-conventional financings lion. such as sale and leaseback arrangements and Middle Souti Energy (MSE), the only non-sales of plant under construction to third parties. In operating compar y with a significant construction one case, as discussed further below, an operat-program, contemt lates construction expenditures ing comr any temporarily ceased supplying funds for 1981 througl-1983 of $669 million, including for the construction of certain generating units. AFDC, for its porm c' the costs of building the At the end of 1980, however, based on in Grand Gulf Plant, a tw< -unit nuclear generatirig creased rates approved in 1979, pending rate m-station. The first unit is t heduled for commercid crease applications and rates implemented in 1980 operation in 1982 and the second in 1986. In con-but subject to refuna, the Compc.ny hopes that nection with this Plant, the Company has under-increased funds will be available for the System's taken to provide or cause to be provided to MSE scheduled construction program. The detrimental sufficient capital to complete the Plant. To this end, effect that the large CWIP balance has on cash through 1980 the Company had invested $443.6
I million in MSE's common stock. In addition, MSE appeared as offsetting increases to operating ex-had sold on ag<;regate of $498.5 million of its first penses, resulting in no contribution to net income.
- mortgage bonds and had arrange. 'ents with a Although approximately $200 million of rate in-group of banks under an intermodiate term re-creases were granted to the System operating 35 volvmg credit agreement to borrow up tc $808 mil-companies by their regulatory bodies over the last -
4 lion. At year-end 1980, $137 million of MSE's re-three years, this relief was neither timely nor suffi. MIDDLE volving credit line remained unused, in order to cient to cover the rising costs of operations as-SOUTH obtain additional funds required to complete Unit sociated with the double-digit inflation that our No.1, MSE is negotiating for an increase in its nation has experienced. At year-end 1980, the Sys-UTILITIES, revolving credit line up to $1.3 billion. MSE has tem had outstanding rate increase applications covenanted to complete Unit No. I by the end of totalling approximately $465 million, of which $19 INC. and 1982 and to complete Unit No. 2 by the end of 1986. million was collected subject to refund during the Subsidiaries If either of these covenants were not fulfilled, the year. Increases in encrgy sales contributed less to outstanding bonds and bank borrowings would net income than in earlier years, averaging less then become due and payable 'mless extensions than 6 percent per year during these three years. could be arranged, and the C mpany would be The small increase in gas operating revenues required to provide MSE with sufficient funds to resu.:ed from a lower volume of sales, a trend ~ meet these obligations to the extent not provided caused by conservation efforts of gas customers, from other sources. MSE is also negotiating for offset by increased gas cost recoveries. changes in these covenants to extend the dates by Carrying charges associated with construc-which Unit Nos. I and 2 must be completed to not tion, AFDC, were capitalized. Since these charges later than December 31,1984, and December 31, were not expensed during the current period, net 1988, respectively. incona during this period was substantially in-In order to maintain an acceptable capital creased. The amount reported as AFDC repre-structure and to provide the System operating sents the costs of funds invested by common and companies and MSE with additional funds to ec,.. preferred stockholders plus the after-tax cost of tinue their construction programs, the Company borrowed funds that were used to finance the con-must maintain its ability to market Ms common struction program. These credits to the income stock. During the period 1978 to 1980, the Company statement are intended to remove the effect of the issued an aggregate of 40,141,333 shares of com-costs of financing the construction of new facilities mon stock, providing the Company with net cash from net income: they do not provido any current proceeds of approximately $548 million. These 1sh to the System. AFDC was 80 percent,117 funds were utilized to repay revolving credit bor-percent and 122 percent of net income for 1978, rov,ngs incurred to purchase addmonal common 1979 and 1980, respectively. stocrs of the Company's subsidiaries. The Com-The substantial increases in interest and pre-pany's existing revolving credit agreement pro-ferred dividend requirements during the last three vides for borrowings of up to S230 million, of which years reflected additional issuances of debt and approximately $121 million remained unused at preferred stock, the proceeds of which were year-end 1980. applied to finance construction, and the very sig-In addition to obtaining funds for its construc-nificant increases in prevailing interes* and pre-tion program, the Middle South System will need ferred dividend rates. to raise during the period of 1981 through 1983 $315 million to meet debt maturities and cash sinking IV. EFFECT OF INFLATION funds and to make preferred stock sinkmg fund redemptions. It is anticipated that a substantial Inflation has had a significant impact on the Com-portion of these requirements will be funded pany's operations in recent years. (See Note 14 to through external sources, including the sales of the Consolidated Financial Statements "Effect cf similar securities, and that the balance will be Inflation on Operations.") provided by internally generated funds. V.
SUMMARY
III. RESULTS OF OPERATIONS The ability of the Middle South System to reach After a decline in 1979, net income increased and maintain a sound.'inancial position while 4 slightly in 19P0. While net income is the result of providing the generating capacity necessary to many factors, there are several that had a signifi-serve the present and future energy demands of its cant effect on the System's results of operations for customers at reasonable costs depends primarily these years. on timely, fair and sufficient rate relief from the increasm electric ope.ating revenues each System's regulatory bodies. year were largely due to increased fuel-related costs which were billed to customers, as allowed by the fuel adjustment clauses, but which also
1970-1980 FINANCIAL RECORD CCNSOLIDATED
SUMMARY
OF OPERATIONS 1930 1979 1978 Operating Revenues: Electric. s 2.181.320 $1,669,451 $1,489,919 36 Natural gas......... 116,796 116,612 95,860 Transit MIDDLE 44,112 36,996 36,399 Total..... 2.342,228 1,823,059 1,622,175 S5TH Operating Expenses: Operation: UTILITIES, Fuel for electric generation 24 E,145 697,606 623,401 I C. cnd Purchased power. 281,951 258,377 133,929 Gas purchased for resale... 28,864 88.801 68,657 Subsidiaries Other.. Maintenance 283.905 200,264 199.406 111.831 111.394 99.941 Depreciation. 141,997 119,304 112.805 Taxes other than income taxes.. s.690 77,849 69,771 Income teues 100.023 51,266 86,004 Total. 2.014AOS 1,604,861 1,393,915 Operating Income. 297.822 218,198 _ 228,262 Other Income: Allowance for equity funds used during construction 122.277 124,086 93.573 Miscellaneous income and deductions - net 7.019 7,940 6,239 Income taxes - cr. 106.284 76,232 50,105 Total.. 235.580 208.258 149,917 Interest and Other Charges: Interest on long-tr n debt 327A GS 255,242 199,212 Other interest-nu 1053 42,139 22,769 Allowance for borrowed funds used during construction -(cr.)... (117.663) (89,247) (54,717) Preferred dividend requirements of subsidiaries.. 55024 36,264 25,477 Minority interest in subsidiary's net incorra Total.... 337.495 244,398 192,741 Not Income. 5 195.907 $ 182,058 $ 185,438 Earnings Per Share (based on average number of sharea outstanding). s2.01 $2.13 $2.46 Dividends Declared Per Share..... 51.59 $1.!,J5 $1.46 Average Number of Common Shares Outstanding ($5 Par Value). 97AG9,169 85,444,691 ib,522,179 UTILITY PLANT AND CAPITALIZATIOIl DATA (at Decemoer 31) Fixed Assets: Utility Plant. 5 7,893.038 $7,002,052 $6,052,023 Less accumulated depreciation and amortization..... 1.261.525 1,139,164 1,038,256 Utility plant-net. S 6,629.111 $5,862,888 $5,013,767 Capitalisation: Long-term debt.. 3 1 392,309 $3,017,816 $2,629,711 Preferred stock (including premium and issuance expense): Without sinking fund. 330,967 330,966 280,712 With sinking fund. 293.165 193,508 60,063 Common equity.... 1.005.52? 1,664,060 1,415,239 Minority interest in the common equity of Arkansas-Missouri Power Company.. Total... s 5.011,969 $5,206,350 $4,385,725 Capitalisation Ratios: Long-term debt. 57.4 % 58.0 % 60.0% Preferred stock (including premium and issuance expense). 10.; 10.1 7.8 Common equity 32 ^ 31.9 32.2 Ca. win amounts have been restated for comparative purposes and to ref ect ratem=hng aec stons affecting p:for years.
1977 1976 1975 1974 1973 1972 1971 1970 1,327,319 $ 1,063,036 $ 868,100 $ 768,297 $ 609,082 $ 550,089 $ 473,352 $ 420.937 83.910 62,502 49,513 38,409 38,362 31,884 21,267 17,885 37 31,828 18,673 13,176 11,091 10,933 11,408 11,646 11,668 1,443,057 1, W 411 930,789 817,797 658,377 593.381 506.265 450,490 568,990 422,204 294,482 259,435 149,882 120,940 92,409 76,672 86,087 61,439 35,075 43,880 22,458 18,705 12.351 5,315 58,577 37,852 30,994 21,807 19,936 18,774 11,747 7,995 180,887 145,489 139,708 116,486 107,776 102,968 92,192 84.232 72,708 58,694 50,729 46.662 40,776 36,893 31,540 29,391 106,748 101,045 92,770 74,635 68,781 64,439 58,132 52,926 67,306 61,561 56,481 49,127 49,224 46,068 42,363 39,211 98,091 68,795 55,560 31,632 52,957 52,801 53,582 54,504 1,239,394 957,079 755,799 643,664 511,790 461,588 394,316 350,246 203,663 187,332 174,990 174,133 146,587 131,793 111,949 100,244 65,346 62,169 46,064 49,509 31,948 22,188 14,628 10,080 6.910 8,329 4,397 2,885 2,421 913 590 1,485 l 29,393 18,287 14,175 (1,788) (1,069) (455) (304) (801) l 101,649 88,785 E i,636 50,606 33,300 22,646 _ 14,914 10,764 153,005 132,719 113,486 105,532 72,464 61,110 50,662 40,209 18,260 15,571 19,17-8,094 3,723 2,870 1,553 2,726 (34,031) 23,109 21,780 16,660 15,040 13,181 10,642 8,833 7.287 46 18 160,343 170,070 149,323 128,666 89,368 74,668 61,066 50,222 $ 144,969 $ 106.047 $ 90,303 $ 96,073 $ 90,519 $ 79,771 $ 65,797 60,786 $2.18 $1.82 $1.78 $2.17 $2.09 $1.98 $1.68 $1.61 $1.395 $1.335 $1.275 $1.23 $1.15 $1.07 $1.03 $0.975 66,598,876 58,395,628 50,733,782 44,279,481 43,376,255 40,257,053 39,213,614 37,687,885 $5,183,284 $4.539,891 $3,953,814 $3,470.598 $3,054,867 $2,672,464 $2,386,07 7 $2,059,387 935,702 831,930 747,612 668,148 _ 608,613 546,378 502.740 436,579 $4,247,582 $3,707,961 $3,206,202 $2,802,450 $2,446,254 $2.126.086 $1.883,337 $1,622.808 $2,175,471 $1.965,985 $1,751,328 $1,529,958 $1,341,637 $ 1,147,127 $ 983,941 $ 829,053 280,712 250,679 240,627 240,627 230,611 205,558 160,431 150,389 60,063 60,063 60,063 1,197,807 1,010,278 864,035 746,628 705,212 576,262 538,935 494,504 637 $3,714,053 $3,287,005 $2,916,053 $2,517,213 $2,277,460 $1,928,947 $1,683,944 $ 1,473,946 58.6 % 59.8 % 60.1 % 60.8 % 58.9 % 59.5% 58.5 % 56.3 % 9.2 9.5 10.3 9.5 10.I 10.6
- 9. 5 10.2 32.2 30.7 29.6 29.7 31.0 29.9 32.0 33.5
S TOCKHOLDER GROWTH. At the This nontaxable portion of divi-close of 1980 MSU had 175.326 dendc is treated, for income tax pur-stockholders, or 31,258 ntore than a poses, as a return of the stockholder's year earlier. The number of shares of capital. When the stockholder ulti-common stock outstanding increased mately sells or otherwise disposes of from 90.432.998 at the end of 1979 to shares, this return of capital should 38 107.349,943 as of December 31,1980. be deducted from the tax cost of the shares in computing gain or loss for l l CORPORATE income tax purposes. IVIDEND REINVESTMENT AND The five-percent discount INFORMATION STOCK PURCHASE PLAN. The applicable to the purchase of shares Company's Dividend Reinvestment through the Dividend Reinvestment and Stock Purchase Plan became a and Stock Purchase Plan is consi-CORPORATE OBJECTIVES. In ful-more attractive option when, effec-dered, for federal income tax pur-filling our public trust as a corpo-tive with the July 1.1980 dividend, a poses, to be an additional distribu-rate citizen. Middle South Utilities is five-percent discount feature was tion and is treat'd the same as div-firmly committed to these primary ob-added. Under the plan, dividend idends paid. jectives: payments are used to buy additional l'he quarterly dividend paid on shares of MSU common stock. Cash January 2,1981, reflected a one-cent
- 1. To f u rmdi rehable utility services to purchc2ses of additional shares may increase to 402 ke per share. This is customers at the lowest reasonable also be made by plan participants.
equivalent to an annual rate of $1.62 cost consistent vith sound business No ec:nmission or service charge is per share. With the single exception practices, while continuing to re-paid by participating stockholders in of 1956 the Company has been able spend to their needs in a courteous connection with purchases under the to increace the dividend every year ] and efficient manner. plan. Information about participation since its organization.
- 2. To attain the fmancial integrity in the plan can be secured by writing j
necessary for System companies to Dan E. Stapp, secretary of the Com-RGANIZATIONAL AND MAN-provide a fair return to stockholders pany. AGEMENT CHANGES. The and to contmue servmg their cus. tomers effectively. Emphasis will be previously announced plan to con-en optimizmg capitalization ratios IVIDENDS. Dividends of $1.58 sohdate Ark-Mo and AP&L became j and earning a fair return on capital, per share were paid on Mid-effective January 1,1981. In this c - including that invested m construc-die South common stock in 1980. This solidation of operat t ns. Ark.Mo be-tion, with resultant improved cover-was up from the 1979 rate of $ 1.52 per came a division of AP&L. Associated ages, mternal cash generation. and share. Natural Gas Company, formerly an quahty of earnmgs. An estimated 98.24 percent of the Ark-Mo subsidiary, became a suo-dividends paic in 1980 are nontaxa-sidiaiy of AP&L. i
- 3. To see,ic contmual improvement of ble as dividend meome to the stock-Donc!d J. Winfield, senior vice the work environment within the Sys-hcdder. This is mainly due to the fact president of MSU. will retire on tem to increase productivity, promote thm a large nortion of reported net March 31.1981, after almost 25 years safe and efficient operations, on-income whid resulted from capi-with the Company.
courage employee growth and de-tahzing the costs of the capital in-On May 16,1980 Frai G. velopment, and minimize employee vested in projects still under construc-Smith, Jr. president of Ark-Mo. be-turnover. tion does not constitute taxable in-came presider cad chief executive officer of MSS, succeedina F. E. Au-
- 4. To be a socially responsible corpo-come.
rate citizen by emphasizmg such ac- ' rey, who resigned as president of tivities as the social and economic MSS anc; MSU. Floyd W. Lewis, then development af our sorvu 2rea and chairman and chief executive officer i of MSU and MSS, assumed the MSU j the contmuing pract ce of sound en-k presidency vacated by Autrey. vironmental policies consistent with sour.d busmess practices. . -s
- 5. To encourage the efficient use of
.] energy through such practices as conservation and load manage-ment, and to promt,te the develop-ment and application of innovative energy technology and renewable Dona:d j winfield. resources vhen it is economic to the senior vice president. customer and provides a fair return on investment. i
h 'IDDLE SOUTH UTILITIES. INC.. owns the major portion of Giand Gulf The common stock of Middle J.L. an investor-owned public util-Nuclear Station, a 2.5-million-kilo-South Utilities, Inc., is listed on the ity holding company, owns 100 per-watt generating facility now under New York, Midwest, and Pacific
- cent of the common stock of four construction in Mississippi.
Stock Exchange. The stock ex- , operatirig companies - Arkansas System Fuels, Inc., is a fuels pro-cHnge symbol is MSU. The com- ' Power & Light Company, Louisiana curement subsidiary of the four munly used abbreviation in stock list-Power & Light Company, Mississippi operating companies. Associated ings is MidSUt. Power & Light Company, and New Natural Gas Company is a gas dis-Orleans Public Service Inc. The two tribution subsidiary of Arkainsas ANNUAL MEETING: The Annual other principal subsidiaries of the Power & Light Company. Meeting of Stockholders is scheduled to be h Company are Middle F:. th Ser. With Middle South Utilities, Inc., l0:00 A ( T). 19 ih vices, Inc., a service comimny, and these companies constitute the Mid-Middle South Energy, Inc., which die South Utilities System. 1980 Annual meeting was held in New Orleans, Louisiana, on May 16, 1980, and 80.3 percent of the shares SALES IN KILO'VATT-HOURS Phousands) then outstanding were represented in person or by proxy. Total Residenual Commercial Industrial Other TRANSFER AGENTS: Morgan Guar-1980. 55,154,237 16.065,362 9,276,714 22,876,339 6,935,822 nty Trust Company of New York, 1979. 52,946,799 14,606,178 8,754,087 22,329,201 7,257,333 New York 10015: The First National 1978. 51,973,705 14,781,680 8,635.615 19,714,164 8.842.246 Bank of Boston, Boston 02102: Conti-1977. 48,477,281 13.852,810 7.972,364 18,712.127 7,939,980 nentf. Illinois National Bank and 1976.. 42,957,761 12,232.611 7,240,843 16,831,622 6,652.685 Trust Company of Chicago, Chicago 1975. 38,742,993 11,942,436 6.906,944 13.619,710 6,273,903 60690: Hibernia National Bank in 1974. 37,779,407 11.012.164 6,370,308 14,965,405 5,431,530 New Orleans, New Orleans 70161: 1973. 37,062,524 11.261,040 6,364,193 14,553,792 5,706,499 Bank of America National Trust and 1972. 37,808,576 10,281,403 5,834.029 13,519,543 8,173,601 Savings Association San Francisco 1971. 35,136,681 8,808,078 5,214.614 12.029.426 9.084.563 94120' 1970. 32,531,614 8,005,340 4,761,833 11,267.636 8.4 %,805 REGISTRARS: Morgan Guaranty riust Company of New York, New REVENUE FROM ELECTRIC ENERGY SALES (thousands) York 10015: State Street Bank and Trust Company, Boston 02102: The Total Residential Commercial Industrial Other First National Bank of Chicago, Chicago 60670: Whitney National 1980... $2,169,327 $738,073 $447,688 $721,378 $262,188 Bank of New Orleans, Ne v Orleans 1979. 1,659 192 553,746 357,064 529,008 219,374 70160; Wells Fargo Bank )LA., San 1978... 1,479 759 505,790 317,412 408,319 248,238 Francisco 94120' 1977. 1,328,983 466,299 291,807 369,405 201,472 1976. 1,051,270 373.631 243,480 299.558 143,601 ADDITIONAL INFORMATICN: For i 1975. 856,009 325,944 199,050 209,506 121,509 persons who desire additional statis-1974. 766,541 289.776 174,553 214.327 ',885 tical information, a 1980 Financial A 1973.. 602,842 237,990 141,969 157,173 65,710 and Statistical Report is available on 1972. 543,221 206,086 120,853 131,318 84,964 1971.. 467,548 174,859 105,795 110,172 76,722 request. 1970. 415,543 158,579 96 169 98,476 62,319 THE 1980 ANNUAL REPORT is pre-pared for the informa+ ion of stock-RESIDENTIAL CUSTOMERS AND USE fefe3ted p rsons '[h P onpan 1980 Annual Report to the Securities Average Kilowatt-Revenue Reywue per and Exchange Commission on Form number of hours per per kilowatt. 10-K (including financial statements customers customer customer hour an d finan cial statem en t sch edules) is v t ny s e er up n 1980.. 1,34i,297 11,969 $549.87 4.59< 1979. 1,314.028 11,116 421.41 3.79 request without charge. P?rsons in-1978. 1,280,694 11,542 394.93 3.42 terested m obtaining a copy si >uld 1977.. i .38,597 11,184 376.47 3.37 write to Dan E. Stapp, Secreta.., at 1976.. 1,208,140 10,125 309.26 3.05 the address below: 1975. 1,182,925 10,096 275.54 2.73 1974.. 1,159.536 9.497 249.91 2.63 MIDDLE SOUTH UTILITIES, INC. 1973. 1,124,746-10,012 211.59 2.11 Box 61005 1972. 1,077,509 9,542 191.26 2.00 New Orleans, m, uisiana 70161 197:. 1,014,735 8,680 172.30 1.09 (504) 529-5262 ,1,970.. 973,621 8,222 162.88 1.98
OFFICERS DIRECTORS FLOYD W. LEWIS GEORGE F. BENNETT Chairman and President President t State Street lovestment Age SS. Joined MSU System in 1949. Corporation and Federal Street Fund. Inc. B st n. M ss chusetts EDWIN A. LUPBERGER Cornpensan n an Nominanng Commntees j Scrior Vsce President. Chief Financial Othcer Age to. lcin=^ MEU System in 1979. JAMES M. CAIN 40 Ssxteen years prior utility industry service. President and Chi i Execuiive Othcer of New Orleans Public Service Inc. CLEFOFATE ?,*n"o? vie { P$d$?inancial Consultant RICHARD W. FREE!.!AN INFORMATION DAN E. STAPP Cha!rman of the Louisiana Coca. Cola Secretary Botthng Company. Ltd.; Chairrran Age 46. Joined MSU System an 1958. of the Finance Committee of D@c Air Lines. Inc. RODNEY J. ESTRADA New Orleans. Louisiana Treasurer Executive. Audst (Chasiman), and Age 43. Joined MSU System in 1965. Nominating Committees E. EUGENE BROWN FLOYD W. LEWIS Assistant Treasurer Chairman and President of the Company Age 47. Joined MSU System in 1956. New Orleans. Louisiana DOROTHY M. ANTOINE Executive (Chairman) and Nominating Assistant Secretary Committees Age 48. Joined MSU System in 1952. DONALD C. LUTKEN President and Chief Executive Othcar of -Rentement March 31. 1981 Mississippi Power & Light Company lackson. Mississippi JERRY L MAULDEN President and Chief Executive Othcer of Arkansas Power & Light Company Little Rock. Arkansas LeROY P. PERCY Cotton farmer; Chairman of the Boards of Mississippi Chemscal Company and First Massissippi Corporation Greenville. Mississippi Executsve. Audit. and Nominating (Chairman) Committees ROBERT D. PUGH President of Portland Gin Company (Agricultural and Agri-Business) and Chairman of the Board of Directors of Portland Bank Portland. Arkansas Executive, Audit, and Nominating Committees GEORGE K. REEVES Parts w of Ward and Reeves, attorneys Caruthetsville. Missouri Compensation and Nominating Coemittees FRANK G. SMITH. JR. President and Cnief Executive Olbset of Msddle Sou% Services. Inc. New Orleans. Louisiana DR. WALTER WASHINGTON President of Alcorn State Univers.ty Lorman. Mississippi Audit and Nominating Committee? R. E. L WILSON Chairman of the Boards of Lee Wilson & Co. (Agricultural and Agri. Business) and The Bank of Wilsor: President of Delta Products Company (Cottonseed Oil Mill) Wilson. Arkansas Compensation (Chairman' and Nominating Committees JACK M. WYATT President and Chief Executive Officer of Louisiana Power & Light Company New Orleans. Louisiana Executive Committee
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MIDDLE SOUTH UTILITIES, INC. Post Office Box 61005 New Orleans, Louisiana 70161 _. _ _. _ _ _ _. _. _ _ - _ _ _ _ _}}