ML20044A582

Forwards Annual Financial Rept & Certified Financial Statements for 1988 & 1989

ML20044A582
Person / Time
Site:	La Crosse File:Dairyland Power Cooperative icon.png
Issue date:	06/15/1990
From:	Mueller R DAIRYLAND POWER COOPERATIVE
To:	NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM)
References
LAC-12941, NUDOCS 9006290245
Download: ML20044A582 (15)

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-D DA/RYLAND-t COOfERADVE

• 3200 EAST AVE, sod.O., BOX _B17

• LA CROSSE, WISCONSIN 64602 0817 -

(608) 788 4000, FAX NO. (608) 7871420 r

June 15, 1990 RE:

LAC 12941 DOCKET No. 50 409 U.S. Nuclear Regulatory Commission Attn:

Document Control Desk-t Washington, D C. 20555 Centlemen:

DAIRYIAND POWER COOPERATIVE la CROSSE BOILING WATER REACTOR (LACBWR)

,y PROVISIONAL LICENSE NO. DPR 45 FINANCIAL STATEMENTS AND AUDITORS' REPORT i

Reference:

1) 10 CFR 50.71 (b)

In accordance with the requirements of Reference 1,twe are forwarding three (3) copies of the' annual financial report and certified financial statements for Dairyland Power Cooperative for the years 1989'and 1988.- We will' forward our 1988 Annual Report to you as soon as_it is completed.

n Sincerely, i

DAIRYLAND POWER-COOPERATIVE J

Robert C. Mueller Assistant Ceneral Manager and Controller f.q RCM:pls' i

e Enclosures cc:

C. Bert Davis, Regional Administrator, NRC-DRO III f

[f f Peter B. Erickson, NRC Project Manager

J. Parkyn, IACBWR

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ARTHUR q.

ANDERSEN Dairy anc Power Cooperative l

and Subsidiary j

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ConsolidatedFinancial Statements as ofDecember31,1989 and 1988

.Together with Report of.

Independent Public Accountants i

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ARTuun ANDERSEN & CO.

MINNU Arous, MINNESOTA q

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Members and the Board of Directors, Dairyland Power Cooperative:

We have audited the accompanying consolidated balance sheets of DAIRYLAND POW 2R COOPERATIVE (a Wisconsin cooperative).

AND SUBSIDIARY as of. December 31, 1989 and 1988, and the related i

consolidated statements of revenues, expenses-and patronage capital and cash flows for the years then ended, These financial

'C) statements are the responsibility of the Cooperative's management.

I Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.

An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the'overall financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to

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-position of Dairyland' Power Cooperative and subsidiary as of above present fairly, in all material respects, the financial December 31, 1989 and 1988, and the results of their operations

.and their cash flows for the years then ended in conformity with generally accepted accounting principles, i

ARTHUR ANDERSEN & CO.

March 2, 1990.

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DAIRYLAND POWER i

Ci-CONSOLIDh

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I ASSETS 1989 1988-ELECTRIC PLANT (Notes 1, 2, 6 and 9):

Plant and equipment, at original cost

$521,914

$497,3 5-Less-Accumulated depreciation (232,306)

(216,C 289,608 280,4 i

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t, Construction work in progress 14,431 19,2

_____q Total electric plant 304,039 300,4, L

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OTHER~ ASSETS:

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Investments (Note 1) 45,946 45,@

Investment in fiber optics venture (Note 8) 2,431

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Investments in capital term certificates

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of National Rural Utilities Cooperative Finance Corporation 9,856 9,8 Pollution Control Bond proceeds on j

deposit with trustee 1,945 2,0L Deferred charges-k LACBWR costs, net (Note'9) 13,412 15,2l

.Other 1,368

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E IM' Total other assets 74,958 76,8,

_ _ _ _ _ _s CURRENT ASSETS:

l Cash and cash equivalents 32,643 22,2 Short-term investments 13,302 29,4

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Accounts receivable-

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Energy sales 15,865 16,1 other 1,300.

2, 4, 4

Inventories, at average cost-Fossil fuels 31,853 30,8

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Materials and supplies 10,120 8,4 s

Prepaid. expenses 763 6

i-I Total current assets 105,846 110,2

$484,843

$487,5 j

U The accompanying notes are an intei l

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?OOPERATIVE AND SUBSTDIARY Si jTED BALANCE SHEETS AplutTURE iECEMBER 31

. CARD i Thousands) go Available On Aperture Card CAPITALIZATION AND LIABILITIES 1989 1988 CAPITALIZATION:

98 Member and patron equities-59)

Membership fees 10 10 Patronage capital (Note 4) 78,360 73,494 29 i

Total member and patron equities 78,370-73,504 43 Long-term obligations-(Note 2) 346,018-355,253-12 Total capitalization 424,388 428,757 14 07 DEFERRED CREDITS (Notes 5 and 7) 19,724 20,097 36 14-24 5-COMMITMENTS AND CONTINGENCIES (Note 6) 30 36 CURRENT LIABILITIES:

_5; Current maturities of long-term obligations 9,348 8,944 Advances from member cooperatives (Note 3) 10,744 8,471

-1 Accounts payable 7,441 9,289 7-Accrued-liabilities-Payroll and vacation pay 3,233 2,579 5

Taxes 1,526 1,612

>9 Interest 5,463 5,614 4F Other 2,976 2,160

_- 1, Total current liabilities 40,731 38,669-73

$484,843

$487,523

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fral part of these consolidated balance sheets 70062902 V5-01

DAIRYLAND POWER COORERATIVE AND SUBSIDIARY

("y CONSOLIDATED STATEMENTS OF REVENUES, v

EXPENSES AND PATRONAGE CAPITAL FOR THE YEARS ENDED DECEMBER 31 (In Thousands) 1989 1988 OPERATING REVENUES:

Sales of electric energy

$155,855

$155,826 Other 947 676 Total operating revenues 156,802 156,502 v

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OPERATING EXPENSES:

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Fuel 59,129 62,727 Purchased and interchanged power 10,093 9,371-Other operations 25,603 22,579 Maintenance

-11,730 11,186 Depreciation and

. 18,456 17,865 amortization (Notes 1 and 9)

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Taxes 6,611 6,408 Total operating expenses-131,622 130,136 Operating margin before interest and other-deductions 25,180 26,366 INTEREST AND OTHER DEDUCTIONS:

Interest 25,545 25,374 Allowance for funds used during construction (Note 1)

(1,683)

(545).

/()w Other (Notes 7 and 8) 2,829 3,590 Total interest and other deductions 26,691 28,419 Operating deficit (1,511)

(2,053)

NONOPERATING MARGIN. principally investment income 9,292 8,035 Net margin 7,781 5,982 PATRONAGE CAPITAL, beginning of year 73,494 70,35 RETIREMENT OF CAPITAL CREDITS (Note 4)

(2,915)

(2,839) l PATRONAGE CAPITAL, end of year, including l

margins assignable of $7,781 in 1989 g

and $5,982 in 1988 S 78,360 5 73,494 t)-

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The accompanying notes are an integral part of these consolidated statements

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DAIRYLAND POWER C l

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CONSOLIDATED STA POR THE YEARS (In T CASH FLOW PROVIDED BY (USED FOR):

Operating activities-Net margin Depreciation and amortization Provision for diminution in value of investment Losses from fiber optics venture Writeoff of deferred charge (Note 7)

Other Change in current operating items:

Accounts receivable Inventories Prepaid expenses Accounts payable Accrued liabilities Cash provided by operating activities Financing activities-Proceeds from borrowings Change in Pollution Control Bond proceeds on deposi Repayment of long-term obligations Retirement of capital credits Cash used for financing activities Investing activities-Electric plant additions, net Changes due to termination of LACBWR operations-De Net change in other investments Investment in and advances to fiber optics venture Cash used for investing activities Cash flow during the year CASH AND CASH EQUIVALENTS:

Beginning of year End of year The accompanying notes are an integr

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?_ERATIVE AND SUBSIDIARY NI API'RIUlm EMENTS OF CASH FLOWS i

ENDED DECEMBER 31 Also Available (;)n Aperture Caro lousands) i 1989 1988

$ 7,781

$ 5,982 18,456 17,865 1,350 1,341 1,063 2,289 1,402 1,789 1,473 1,163 (2,709) 4,800 (95) 111 (1,848) 2,504 1,233 3,913 28,384 41,479 7,844 4,306 with trustee 59 37 (14,402)

(12,428)

(2,915)

(2,839)

(9,414)

(10,924)

(21,819)

(21,288) erred charges 103 13,891 (9,905)

(625)

(1,084)

(8,553)

(32,174) 10,417 (1,619) 22,226 23,845

$32,643

$22,226 m

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DAIRYLAND POWER COOPERATIVE AND SUBSID2ARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1). Summary of Significant Accounting Policies-Organization:

Dairyland Power Cooperative (the Cooperative) is an electric generation and transmission cooperative association organized under the laws of Wisconsin and Minnesota.

The Cooperative's principal offices are located in Wisconsin.

The Cooperative provides-wholesale electric service to Class A members engaged in the retail sale of electricity to member consumers located in Wisconsin, Minnesota, Iowa, Illinois and Michigan and provides electric and other services to Class C, D and E members.

The accounting records of the Cooperative are 9

maintained in accordance with the uniform system of accounts prescribed by the Federal Energy Regulatory _ Commission as adopted by the Rural Electrification Administration (REA), the Cooperative's principal regulatory agency.

'The consolidated financial statements include the accounts of the Cooperative and its wholly owned subsidiary, Curtis Telecommunications, Inc. (CTI).

All intercompany balances and transactions between the Cooperative and CTI have been eliminated.

Depreciation:

Depreciation is provided based on the straight-line method at rates which are designed to amortize the lER original cost of properties over their estimated useful lives and includes a provision-for the cost of removal and decommissioning of the_ properties.

The provision for depreciation averaged 3.8% of depreciable plant balances for 1989 and 1988.

Income Taxes:

The Cooperative is exempt from federal and state income taxes and, accordingly, no provision for such taxes is reflected in the consolidated financial statements.

Allowance for Funds Used During Construction:

Allowance for funds used during construction repre-sents the cost of external and internal funds used for construction purposes and is capitalized as a _ _ _ _ _........

-DAIRYLAND POWER COOPERATIVE _AND SUBSIDIARY-NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1)

Summary of Significant Accounting Policies (continued)-

Allowance for Funds Used During Construction (continued):

component of electric plant.

The amount of such allowance is determined by applying a rate to certain electric plant additions under construc-tion.

The rates used were 7.8% in 1989 and ranged from 7.1% to 8.5% in 1988, depending on the source of funds.

Property Additions:

The cost of renewals and betterments of units of n-property (as distinguished from minor items of v

property) is charged to electric plant accounts.

The cost of units of. property retired, sold or otherwise disposed of, plus removal costs, less salvage, is charged to accumulated depreciation.

No. profit or' loss'is recognized-in connection with ordinary retirements of property units.

Maintenance and repair costs and replacement and renewal of minor items of property are charged to operating expenses.

Investments:

Investments consist primarily of commercial paper and government obligations.

All investments are recorded at the lower of aggregate cost or quoted market value.

The carrying value of the invest-1BIl ments is adjusted for a'ortization of premiums and m

accretion of discounts.

During 1989, the Cooperative reduced the carrying value of one of its investments by $1,350,000 to recognize the estimated permanent decline in the value'of this investrant.

The provision for loss is included in other deductions in the accompanying consolidated statements of revenues, expenses and patronage capital.

Cash and Cash Equivalents:

Cash equivalents include all highly liquid invest-ments with an original maturity of three months or less.

Cash and cash equivalents primarily consist e

of commercial paper stated at cost, which approximates market.

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-DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1)

Summary of Significant Accounting Policies (continued)-

Supplemental Cash Flow Information:

During 1989 and~1988, the Cooperative paid interest, net of capitalized' interest, of $24,013,000 and $20,514,000, respectively.

Reclassifications:

Certain 1988 amounts in the accompanying consolidated financial statements have been reclassified to conform to the 1989 presentation.

These reclassifications have no effect on previously reported net margin or patronage capital.

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-(2)

Long-Term Obligations-Long-term obligations at December 31 consist of the following (in thousands):

1989 1988 REA obligations, 2%

.$ 62,963

$ 67,764 REA obligations, 5%

32,163 32,798 FFB obligations, 7.5% to 10.6%

221,791 223,938 NRUCFC obligations, 9.5%

5,728 6,116 City.of Alma, Wisconsin, Pollution Control Bonds:

Fixed rate (6.383%)

10,990 11,315 Adjustable rate (6.43%

at December 31, 1989) 13,900 13,900 City of La Crosse, Wisconsin, 1E%

Industrial Development Revenue Bonds, adjustable rate (6.43% at December 31, 1989) 4,160 4,160 Capitalized lease obligations, principally at implicit interest rates of 7.1%, due in varying amounts to 1995 3,671 4,206 355,366 364,197 Less-Current maturities (9,348)

(8,944)

Total long-term obligations

$346,018

$355,253

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Long-term obligations to the REA are payable in equal quarterly principal and interest installments through

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2016.

Principal repayments on the long-term obligation I.

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DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (2)

Long-Term Oblications (continued 1-to the Federal Financing Bank ('FB) extend through 2021.

Principal and interest payments on the National Rural Utilities Cooperative Finance Corporation (NRUCFC) obligations are payable quarterly through 1999.

The fixed rate Pollution Control Bonds are payable in increasing annual amounts through 2008.

The adjustable rate Pollution Control and Industrial Development Revenue Bonds mature in 2015 unless pre-vicusly called for redemption.

Bank letters cf credit aggregatino $19,900,000 which expire in February 1991 have been issued on behalf of the Cooperative to the trustee to provide funds for payment of principal of any such bonds to be redeemed or repurchased prior to that 0-date.

Accordingly, the entire principal amount of these bonds is classified as long-term obligations.

Substantially all of the Cooperative's assets are pledged as collateral for these obligations.

The Cooperative is required to and has maintained certain financial ratios related to earnings and liquidity in accordance with the covenants of its loan agreements.

Maturities of the Cooperative's long-term obligations are a

f as follows (in thousands):

Year Amount 1991 9,624 1992 10,011 (BO 1993 10,310 1994 11.490 Thereafter 304,583 Total

$346,018 (3)

Lines of Credit-To provide interim financing, the Cooperative has arranged lines of credit aggregating approximately $28.8 million, principally through NRUCFC.

Borrowings are at a rate no greater than prime plus 1% and were not significant in either 1989 or 1988.

Compensating balance requirements or f>9s relating to the lines of credit are not signifi-cant.

While the lines of credit expire in May 1990, the Cooperative believes such lines will be renewed.

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DAIRYLAND POWER COOPERATIVE AND SUBSIDIARj(

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (3)

Lines of Credit (continued)-

The Cooperative also allows menter cooperatives to prepay their power bills and pays interest on these prepayments based on current short-term borrowing rates.

Interest expence on member cooperative advances ($1,276,000 in 1989 and $1,098,000 in 1988) has been included in intere9t expense while interest income earned by the Cooperative on prepayments ($1,279,000 in 1989 and

$1,077,000 in 1988) is reflected as nonoperating margin.

(4)

Retirement of Capital Credits-The Cooperative's board of directors has adopted a policy of retiring capital credits allocated to members on a "first-in, first-out" basis so that at all times the O

Cooperative will not retain as patronage capital any capital contributed or deposited more than 20 years prior to the current year.

Accordingly, the 1969 and 1968 capital credits were retired in 1989 and 1988, respec-tively.

Implementation of this policy is subject to annual review and approval by the board of directors and the REA, and no cash retirements are to be made which would impair the financial condition of the Cooperative or violate any terms of its agreements.

(5)

Shared Transmission Agreements-The Cooperative has entered into shared transmission agreements with the Southern Minnesota Municipal Power Agency (SMMPA) and the Western Wisconsin Municipal Power Group (WWMPG) which provide SMMPA and WWMPG use of the (30 Cooperative-owned transmission system to deliver power and energy requirements to SMHPA and WWMPG members in the Cooperative's electric service area for a period of 50 years.

Payments received from SMMPA and WWMPG for use of the Cooperative's transmission system are reflected as deferred credits and are being amortized to operations over the terms of the related agreements.

The Cooperative may be entitled to further payments depending on the investment in, and joint use of, the system.

(6)

Commitments and Contingencies-The Cooperative's estimated 1990 construction psogram is

$21.8 million.

Financing of construction is expected to be provided by borrowings from the FFB and funds generated internally.

(1 DAIRYLAND POWER COOPERATIVE AND SUBS 7 DIARY I

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Y },

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Commitments and Contingencies (continued)-

i The Cooperative has been named a defendant in several lawsuits and claims, primarily related to construction and operation of its electric plant.

Although the outcome of these matters cannot be determined at the present t4me, management and legal counsel believe these actions <,n be successfully defended or resolved without a material effect on the financial position of the Cooperative.

In January 1990, the Cooperative reached an agreement with Cooperative Power regarding the cost sharing agreement for a jointly operated power plant.

The settlement which resulted in the Cooperative receiving a cash payment of ra approximately $1.1 million will be recognized in income

's in 1990 since the board of directors has required the Cooperative to reduce service rates in 1990 by the amount of the settlement.

(7)

Pension Plan-Pension benefits for substantially all employees are provided through participation in the National Rural Electric Cooperative Association (NRECA) Retirement and Security Program, Contributions are determined in accordance with the provisions of the program and are based on salaries, as defined, of each participant.

NRECA declared a moratorium on plan contributions effective July 1, 1987 through December 31, 1990, and, accordingly, pension expense was substantially eliminated in 1988 and 1989.

As of December 31, 1985, the date of es, (J '

the last available actuarial valuation, net assets of the plan exceeded the actuarial present value of accumulated plan benefits.

Effective January 1, 1986, the Cooperative a pted an amendment to the pension plan which reduct the normal retirement age from 65 to 62.

This amendn :n.t resulted in the creation of a liability for unfunded ptior service cost of $2,407,000, tne unpaid portior of which is included in deferred credits.

A deferred charge of the same amount was recorded to reflect the expected recovery of this amount from future customers.

During 1988, the Cooperative's board of directors passed a resolution preventing the Cooperative from affecting service rates charged to members to recover the unfunded prior service cost.

Accordingly, $2,289,000 was charged to expense and is included in other deductions in 1988 to reflect the elimination of this deferred charge.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS q)

(8)

Fiber Optics Venture-The Cooperative's wholly owned subsidiary, CTI, owns a-31.9% partnership interest in NorLight, a venture with three other partners to own and operate a fiber optics network in the Upper Midwest.

This investment is accounted for under the equity method and, in addition, the Cooperative periodically reviews the carrying value of this investment in relation to its estimated fair market value.

CTI made advances in the form of subordinated notes to NorLight of $625,000 in 1989 and capital contributions of

$1,000,000 in 1988.

CTI's share of NorLight losses was approximately $1,341,000 in 1989 and $1,063,000 in 1988 and is included in other deductions.

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CTI has assigned its interest in NorLight to a bank as collateral securing NorLight's financing.

Based upon information currently available, the Cooperative expects to continue its involvement in the NorLight venture and to be able to recover the carrying value of its investment either through operations of NorLight or divestiture of its ownership interest.

(9)

Nuclear,_ Reactor-The La Crosse Boiling Water Nuclear Reactor (LACBWR) was voluntarily removed from service by the Cooperative effective April 30, 1987.

The intent was to terminate operation of the reactor and a " possession only" license NUI was obtained from the Nuclear Regulatory Commission in August 1987.

The facility is being placed in a " safe storage" status and will remain so until at least the year 2010 to 2014 at which time decommissioning will be completed.

All LACBWR-related property, construction work in progress, inventories and nuclear fuel totaling

$18.4 million was transferred to a deferred charge in 1987 and is being amortized to operating expense over a ten-year period ending in 1997 with appropriate recognition in rates charged to members for electric service.

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DAIRYLAND POWER COOPERATIVE AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS s

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(9)

Nuclear Reactor (continued)-

The provision for depreciation includes $2.4 million in 1989 and $2.1 million in 1988 to provide for the estimated costs of decommissioning the nuclear generating facility; however, the manner of decommissioning the facility has not been determined.

The Cooperative continues to review its decommissioning cost estimates and expects that any increases in such costs will be recovered through future rates.

The Cooperative has adopted a policy of funding decommissioning costs currently and the related invest-ments of $13.9 million are included in investments in the consolidated balance sheets, while the decommissioning reserve of $13.9 million is included in accumulated depreciation.

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