ML20052E713

Annual Financial Rept 1981

ML20052E713
Person / Time
Site:	Farley
Issue date:	03/05/1982
From:	Farley J ALABAMA POWER CO.
To:
Shared Package
ML20052E711	List: ML20052E710 ML20052E713
References
NUDOCS 8205110376
Download: ML20052E713 (42)

Text

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1 AlabamaPower Company 4

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1 Comparative Highlights 1981 1980 (Douars Expressed in hisarvis)

Electne Energy Sales (trullions of kwh):

Residenbal.

9,229 9,511 All Other Retail.

20.369 20,141 Wholesale.

4.171 3,866 Total.

33,769 33,518 Average Annual Use Per Residenbal Customer (kwh).

10,621 11,041 Customers Served Directly at End of Year.

996,200 986,082 Operabng Revenues.

Residential Sales.

$ 518,730

$ 489,031 AllOther RetailSales 917,062 808.066 Wholesale Sales.

145,740 114,931 Total from Sales of Energy.

1,581,532 1,412,028 Other Revenues.

12.490 9,%9 Total.

$1,594.022

$1,421,997 Operating Expenses Fuel.

$ 504,930

$ 439,488 Purchased and Interchanged Power, Net.

144,916 124,163 Other.

655,461 569,347 Total.

$1,305.307

$1,132,998 Income BefomIntemst Charges.

$ 335,642

$ 331,714 Intemst Charges (Before credit of $46,849,000in 1981 and

$79,839,000 in 1980 for allowance for debt funds used dunng construebon and related income tax effect).

246,611 250,836 Dividends on Preferred Stock.

36,071 31,013 Net Income After Dividends on Pmfermd Stock.

99.809 129,704 Total Utility Plant at End of Year.

$5,609,959

$5,199,848

) Gross Add:nons to Unlity Plant Dunng Year.

437,587 411,813

! Construction Work in Pmgmss at End of Year.

583.036 1,147,650 l Ths annu,4 report ts sulceed for the infortration of stockhus and is rxat intended for use in tunnection with any sa'e or purchase of.

or any of ter or sohc:tation of offers to buy or se3. any secuntrs, except to the extent incorporated ty referance in a prospectus DISTRIBUTION OF REVENUE imERnsTcHARGEs DOLLAR * (PERCENT)1981 N$gsm o

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Management Changes g

The compmy's board of directors mado

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several management change in 1981.

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.t Kenneth L Allums and H Allen Frankhn were ekrted senior vice premdents and i

Robert R Todd was named vice president

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for construction

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human resources, matenals services, 1.

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Mr Frankhn. formerly assistant to

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support services and sccunty 1

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services and f uel departments. He oversees j-

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system planning, operations, interconnec-(-

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tion ocavities and the fuel procurement

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Mr Trxkl. formerly goneral manager-

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power plant construction, was assigned

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responsibihty for all generating plant s

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/c.unan rra nanener.t rmtorrun 19aI w"re

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prrer.t for mnstructon Net income 1or 1981, of ter preferred stock dividends, was $99 8 milhon a decrease of $29 9 milhon from 1980 T1.e Financing dechne is due in large part to the substantial additional investment in ekttnc f acihties, Dunng 1981, the company raised $315 milhon from the sale of hrst mortgage mcluding the second unit of the Farley bonds and preferred stock Proceeds from Nuclear Ekrtnc Generating Plant, in~

these sa!es were used to pay short-term creaml operating and capital costs, and debt and to meet new construction and continued inflation, which had not been r -

othercorporateneeds Salesof first i Ik cted in the company's rates at year-end mortgage boss were mada in January, The company's return on averaq common equity was 817 percent for th Apnl and October in pnnapu amounts of l

5100 milhon, $75 milhon and $100 milhon, year ended December 31.1981 compared with 1161 p;rcent for the year enckx!

respectively The sale of $40 milhon of December 31,1980 prefer;ed stock was completed in February-the first time the company was ab!c to sell additional preferred stock since December 1977 Unstable market cariditions and interest rates, among the highest in recent history, charactenzed the hnancial markets in 1981 As a result, the interest anc1 dividend rates for the secunties sold dunng the year are mgnihcantly higher than havel.xmnincurred in previous years

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4 Rates

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Dunng 1981, Alabama Power continued i

I to seek adequate rates for its product

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order, Alabama Power, the Alabama Pubhc n

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Service Commission ancia number of

.I' intervenors settled retail rate cases begun i

in 1978 and 1979, bringing about respective annualincreases of $208 milhon and $80 milhon On March 19,1981, the company filed a request for an additional

$324.9 milhon annually to provide a fair retum on its investment, including the investment in its second nuclear unit, and to

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which invariably affects a growing utthty company under current economic condi-ms ed a crmb3r were By year-end, the company's earnings tions Following extensive heanngs, the ItN;N$$bi ]f had dropped below the levels required by Commission refused to grant any increase the indenture and charter for sales of in rates, forcing the company to appeal to i

additional first mortgage bonds and the Supreme Court of Alabama in October.

l preferred stock. Adequate and timely rate On February 12,1982, the Court increases are necessary in order to main-granted Alabama Power the nght to collect i

tain a level of earnings sufficient to mcet the a portion of the requested increase, subject earnings coverage requirements of the to refund, pending a final ruhng on company's indenture and charter Other-the case Accordingly, the company filed wise, the company will have to depend on rates designed to produce $75 nulhon short-term debt or seek alternative means additional revenue for the six-month period of financing its construction and other commencing October 16,1981.

requirements With the granting of the full amount of The mapr source of short-term funds is requested increases, the company's rates through hnes of crecht with banks Tne would remain below the national average.

company has credit hnes of $292,065,000, In September 1981, the Federal Energy of which $200 milhon represents comntt-Regulatory Commission approved a c

ments obtainecl under a revolving crecht agreement With ten out-of-state banks that DISTRIBUTION OF REVENUE DOLLAR

• terminates September 30,1982 The com-

@ @ T) pany's borrowings dunng 1981 peaked at

$30 7 milhon in March and there was no

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outstanding short-term debt at year-end Totalinterest expense for the year was 4_

$246 6 milhon Dmdends on preferred

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stock tota!ed $361 milhon n

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m.cnie," s a company had 2.9 milhon tons on hand,

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a l 16-day supply based on anticipated cm dre v.tre umng the-

• pi htest b: ;. s eq1pawnt eW TeQu1Tements an'& << hen tha photo-Nuclear generation has become

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increasing 1y important to Aiabama Power he;raph m.rtne for With the adchtion of the second 8CO i

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dp despite an e!cctrical malf tinction in the main s 4, turbine generator which required Urut I of

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September for the remamder of the year.

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Plant Farley to be taken out of service in y

Due to extremely hght ramf all in 1981, l

3s the company's 13 hydroelectne facihties generated only 9 percent of the total electncity produced dunng the year,12 b;! hon kilowatt-hours less than expected and ef ficient, the company adapted its Alabama Power was developed iruttally forecasting methods to reflect the most as a hydroelectnc and then as a coal accurate data avai}able System, tdpping IWo of Alabama's abundant l Alabama Power uses several forecasting natural resources The Army Corps of methods incluchng an econometnc model Engineers installed a few locks and dams based on the relationslup between numer-alona the Coosa River in the late 1800s and ous national and regional economic f actors early 1900s, but it was Alabama Power

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and electncity usage Due to the impor-Company that began where the govern-tance of accurate load forecests. the ment lef t off Between 1912 and 1930, company places great emphasis on the the company built three major dams on techiuques used to project growth the Coosa River and two more on the Peak kilowatt demand for the next Tallapcxasa River. The company was well on decade is now projected to average alyaut the way to harnessing a major portion of 2 3 percent annually while energy usage is projected to grow at a shghtly higher rate.

RESIDENTIAL ELECTRIC BILLS FOR SELECTED U.S. CITIES FOR MONTHLY USE OF 1000 KILOWATT-HOURS, RATESIN EFFECT DECEMBER 1,1981 Alabama Power was developedmitially as a an n

hydroelectnc and then as a coalsystem, tapping two of Alabama's abundant naturalresources.

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Generating Resources d

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Dunng 1981. 73 percent of Alabama jn =d i5 Power's total eneray production was

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fossil-fueled electnc generatmg p! ants Alabama mines supphed 85 percent of the approximately 119 milhon tons of coal f b[. h>. $ht/$+#

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the state's nver system. In the late 1950s PERCENTOF'ICI'AL KWH GENERATION and early 1960s, the company completed the development of the Coosa River with I" l* I" I" l* l*

construction of four additional dams and

.' by built three hydroelectne fachties on the

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Black Warnor River.

~.k The installed generating capaaty of the company,includmg 50 percent of Southern

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Dectne Generating Company at Gaston 4

i Eectne Generating Plant and 60 percent of i

i the capacity of the Greene County Plant, totaled 8,485.675 kilowatts at the end of the year Southern Bectnc Generating Com-pany is owned equally by Alabama Power and Georgia Power comparues, and the Greene County Plant is owned jointly 1976 1977 1978 1979 1980 1981 by Alabama Power and Mississippi Power numetHYDRO GAS AND OIL companies Both the GreeneCounty and rarar4 NUCLEAR m COAL Gaston plants are operated by A!abama Power.

spend more than $ 1 billion on necessary t

Construction c nstruction i

l Urut 2 of Plant Farley began commeraal i

The problem of financing new plants is operation in July, completing the company's not unique to this decade Many of the current nuclear construction program.

i early years of Alabama Power were spent Construction of Harns Damis about in search of capital to finance the 68 percent complete with commeraal development of hydroelectnc power in operation scheduled for mid-1983. Planned Alabama The young company's efforts to commercial operation dates for Uruts 2,3 obtain adequate funds were in vain until and 4 of the Miller Eectnc Generatmg Plant one of its developers, James Mitchell, are 1985,1989 and 1991. respectively.

i persuaded a London banking house to Additional generating capaaty is being underwnte the ambitious early nver installed at Mitchell Dam. The completion development projects dateis scheduled for 1985.

For the company to fulfill its obhgation to provide adequate and rehable elertnc MONTHLY PEAK DEMAND service to its present and future customers, it must construct new generating plants and make additions and improvements to m

existing plants and other fachties Dunng

_m 1981, the company spent approximately

$438 million for construction of trans-

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For Alabama Power to fulhllits obligation.. it must construct new generating plants and make

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generating and other facihties Over the g g _,

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10 company with respect to entena estab-a 9,

11shed by the NRC.

The nuclear plant's second unit, which h

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Westinghouse plant in the world.

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These efforts have helped save k

customers millions of dollars in fuel costs.

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technologies to provide electricity in the most efficient and economical way. From centerut k>nhn to each other through an interconnected the invention of the backwater suppressor N StN U t7 electnc system in the most reliable and by the company's chief engineer in the early gnph+n 192a>Wi economical manner for their combined 1920s, which kept floodwaters from inter-load requirements and maintencnce fenng with power production at Mitchell program.

Dam, to an expenmental solar-energy office Alabama Power's generating plants building in Montevallo, the company has include some that rank among the most spent millions of dollars and thousands efficient in the industry. Each plant has its of man-hours in research.

own performance team that continually Alabama Power and the nation's other monitors and tests entical equipment to energy-supplying companies are support-ing the work of the Electric Power Research Institute. Research projects Despite a reduction in.orojected growth in energy include ma;or cfforts in solar, geothermal usage dunng the 1980s, utilitics cannot stop building and nuclear fusion energy The instituto was altogether funded in 1981 by theindustryin the assure that each generating unit meets the GROSS PLANT ADDITIONS ef ficiency level it was designed to achieve eo Alabama Poweris a leader in the use of M "' wj computer applications and the most

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modern analytical techniques in the design

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1981 This is the most favorable rating used ~r w y' re s

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l 12 Alabarna Power ov ned a m :'

8erVice to Customers and Ikw Indic.tnes dwtaon Area Growth m 1921, uang exhalrt3 and t!ms to educe Z

nonhern bus;nensmen A decade ago, the simple solution to 2b ar electric growth was to accelerate and aer r

dehvery sy'. tem he h!m

'l expand the construction of electnc facilities j

adedraj m this dmplay.

Despite pubhc conservation offorts, the Vmg Cotton l" wm a Up Company's most recent long-range forecast u!ar attradion at Brton II and Ih!adelphn textde projects an increase in electne terntonal

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sales over the next decade of approximately N b> ' o 28 percent. 'R3 meet that growth, Alabama Power must combine conservation vath a responsible construction program.

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A%bama Power is the suppher of electncity A

for a major portion of Alabama and, as a public utihty, has an obligation to provide for both future and current needs of its amount of $218 milhon, including Alabam customers.

Power s share of $5.1 milhon-Alabama Power emphasized dunng 1981 the benehts of conservation to l

Environmental Regulation customers as well as to the company. The l

Alabama Power spent $8.8 milhon Residential Conservation Service program in capital expenditures dunng 1981 to was implemented as the centerpiece of a comply with environmental regulations customer participatory program It offers imposed on the company by vanous federal, customers the opportunity to learn specihc state and local agencies Such expenditures ways to conserve energy in their homes by Alabama Power since 1970 now exceed through a comprehensive, computenzed

$3667 milhon. An estimated adchttonal home energy audit.

$687 milhon vall be required dunng the The company continued to encourage next three years to meet regulations now in the construction of Good Cents Homes and effect or anticipated the remodehng of existing homes to include Alabama Power has been deeply energy-saving features and to promote concerned about environmental quahty highly energy-ef ficient air conditioners and for many years Long before pollution other apphances as a means of reducing abatement became a national issue, the energy waste.

company was equipping its generating plants vath pollution abatement devices AVERAGE RESIDENTIAL The company is committed to comphance USAGE P_ER CUS'IDMER

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14 Alabama Power, the Alabama Department The understanding of how a utihty of Energy and the Alabama Cooperative operates can only be achieved when Extension Service are sponsonng an employees and the public are fully informed energy-management pilot program with the on energy matters and the financial and city of Roanoke to promote and implement mgulatory situation facing the company.

energy-management concepts within an entire community.

The Employees Dunng the 1920s, the company was among the first utthties in the country t Dunng the early years of Alabama Power, the skill and dedication of its begin an aggressive industnal development effort. A NewIndustnes division was founders were key factorsin the started within the companyin 1921 t company's growth and development.

Today, the same skill and dedication are attract outside industries to the state-Dunng 1981,474 industrialfirms found in the company's 9,661 employees.

announced plans tolocate or expand They are part of a group of men and facilities in Alabama Power s service area, women who have provided reliable electric creating 14,000 new jobs and an estimatea, service to this state for 75 years.

annualpayrollof approximately The company's abihty to maintain and

$351 millien. When these additions and improve upon this past performance will expansions are in full operation, total invest-depend in large measure on the skdls and ment for new and expandedindustnes talents of the people who work for Alabama announcedin 1981 willbe $3.3 bilhon Power. Dunng the year, about 30 percent of our employees received additional Communication and Information training through company-sponsored Courses.

As electnc usage and rates have nsen Highly speciahzed training programs for dunng the past decade, the need for experienced workers have been developed communication with employees and the to assum that design, construction and pubhc has alsoincreased.

operating procedures meet or exceed all Alabama Power has expanded its public apphcable standards.

information activities to reach more The emphasis on both classroom and customers with energy-saving messages hands-on training resulted in improvement and facts about the company's operations of operating efficiency.

and activities.

Many employees carry a tradition of In Alabama, just as throughout the service into their pnvate lives. They serve as nation, pubhc utihties are recognizing that l

l customer and employee concerns must be identified and addressed in a factual and

'IUrALTERRnVRIAL ENERGY SALES timely manner.

xo Dunng 1981, Alabama Power continued with an aggressive media relations pro-

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l 17 Report of Management The management of Alabama Power Company has prepared and is responsible for the financial statements and related finan-cial information included in this report. The financial statements were prepared in accordance with generally accepted accounting principles appropriate in the circumstances, and necessanly include amounts that are based on best estimates and judgments with appropriate consideration to materiahty. Financial informa-tion included elsewhere in this annual report is consistent with the financial statements.

The company maintains a system of intemal accounting controls to provide reasonable assurance that assets are safeguarded and that the books and records reflect only authorized transactions of the company. Limitations exist in any system of internal control based upon the recognition that the cost of the system should not exceed the benefits derived The company believes its system of internal accounting controls, augmented by its internal auditing function, appropnately balances the cost / benefit relationship.

Independent public accountants provide an objective assess-ment of the degree to which management meets its responsibthty for fairness of financial reporting They regularly evaluate the system of internal accounting contmls and perform such tests and other procedures as they deem necessary to mach and express an opinion on the fairness of the financial statements.

The Board of Directors pursues its msponsibility for reported financialinformation through its Audit Corrmittee, composed of directors who are not employees. The Audit Committee meets periodically with management, internal auditors and independent public accountants to assure that they are carrying out their responsibthties and to discuss auditing, internal control and finan-cial reporting matters. Both internal auditors and independent pubhc accountants periodically meet alone with the Audit Committee and have free access to the Committee at any time.

We beheve that these policies and procedures provide reasonable assurance that our operations are conducted with a high standard of business conduct and that the financial state-ments reflect fairly the financial position, msults of operations and sources of funds for gross property additions of the company.

18 Selected Financial Data (Do!!ars In Thousands) 1981 1980 1979 1978 Condensed Statements of Income:

Operatng Revenues

$1,594,022

$ 1,42.1,997

$1.163.623

$ 1.014.443 Operating Expenn Operabon and mamtenance.

978.075 816.243 700,647 655,384 Depreaaton and amortzaton.

147.581 127,840 123,075 109,315 Taxes other than income taxes.

86.878 74,488 74.592 63,737 Rderal and state income taxes 92.773 114,427 58.759 25.080 Total operaung expenses.

1.305.307 1,132.998 957.073 853.516 OperaungIncome 288.715 288.999 206.550 160,927 Other Income, Net 46.927 42.715 40.775 44.892 Income BeforeIntenr.t Charges 335.612 331.714 247,325 205,819 Net Interest Charges.

199,762 170,997 158.666 131.697 Dmdends on Prefernd Stock.

^6.071 31.013 31.219 31.219 Net income /dter Dmdends on Preferred Stock.

$ 99,809

$ 129,704

$ 57,440

$ 42_,903 Cash Dividends on Common Stock.

$ 120.800

$ 115,300

$ 54,000

$ 108.800 Return on Average Common Equity (Percent) 8.17 11.61 5.82 446 Total Assets

$4.880,490

$4,617,943

$4.292,736

$3 %7,906 Gross Property Additions

$ 437,587

$ 411,813

$ 459.533

$ 483,430 Capitalization:

Common stock ecpty.

$ 1.231.061

$1.211,417

$1,022.533

$ 952.618 Preferred stock 374.400 334,400 334.400 334.400 Prefermd stock subject to mandatory nMemphon.

43,789 47,500 50.000 50,000 Long-term debt.

2.394.674 2.159.793 1.883.684 1.851.394 Totd.

$4.043.924

$3.753.110

$3.290.617

$3.188.442 Kilowatthour Sales (in Thousands).

Remdental 9.229,255 9.510,609 8.679,417 9.088,856 Conunercial 5,586,990 5,514.844 5.207,513 5,282.746 Industnal 14.651,012 14.499.375 14.629,581 13,799,043 Sa'es for resale 2.402.331 2.518.347 2.461.078 2.479,439 Other 131.117 127.582 126.729 125,177 Total terntonal sMes 32 000,705 32.170,757 31,104.318 30,775.261 Non-terntona! ses 1.768,650 1.346.912 6.286 342.302 Tota! Kdowatthour Sales 33.769.355 33 517,669 31.110fG1 31,117,563 Operating Revenues:

Residenha!

$ 518.730

$ 489.031 5 385.224

$ 351.644 Comnorcal 325.388 293.576 242,626 213.059 Industnal 584.030 507.784 442.221 357,691 Saks fu resale 89,727 77.627 76.056 67,539 Other.

7.644 6.706 6.335 6.004 Total terntonal revenues 1.525.519 1.374.724 1.152,462 995.937 Non-terntona! revenues 56,013 37.304 1.222 10.534 Total revenues from saks of chrtnaty 1,581.532 1.412.028 1,153.684 1.006.471 Other nevenues 12.490 9.969 9.939 7.972 Total Op:rahng Revenues

$ 1.594.022

$ 1.421,997

$1.163.623

$ 1.014,443 Customers tend of Year) 906.200 986,082.

976 200

% 1,440 Employees tend of Year) 9.661 9,573 9.038 9.695 Average Revenues Per Kilowatthour TotalSales Cents) 4 68 4 21 3 71 3 23 Average Cost of Fuel Per Net Kilowatthour Generated (Centa) 1 84 161 1 56 1 20

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19 1977 1976 1975 1974 1973 1972 1971

$ 968.693

$ 699.667

$ 631.250

$ 489.455

$ 3%.841

$ 325.700

$ 278,325 594.880 461,504 362,041 300,7I8 185,372 167,471 139,422 69.938 57,692 51,394 45,523 40,605 37,253 32.216 47.887 45.584 38.147 34,370 30.241 24.950 19,146 89.I61 36.577 58.342 26.426 44.076 20,327 22.265 801.866 601.357 509.924 407,037 300.294 250.001 213.049 166,827 98,310 121,326 82.418

%,547 75,699 65,276 57.436 95.552 75,012 55,383 33,780 16.682 12.638 224.263 193,862 1%.338 137,801 130.327 92.381 77,914 83,101 115,053 101,609 72.843 55.472 42,709 33,157 23.886 22.385 16.947 1S,964 9.766 9.027 4.808

$ 117.276

$ 56.424

$ 77.782

$ 48,994 5 65.089

$ 40.645

$ 39,949

$ 94.900

$ 60.000

$ 60,000

$ 46.800

$ 45.800

$ 35.500

$ 31,300 12 82 7 18 11.60 8 61 13 89 10 12 11.37

$3,581,456

$3.081.349

$2.679,940

$2,271.061

$1.843,524

$1.490.754

$ 1,257,884 5 540.076

$ 443.951

$ 447,966

$ 428,874

$ 383,114

$ 257,338

$ 212.1S7

$ 971.626

$ 858,300

$ 713.197

$ 628.415

$ 511.109

$ 426,809

$ 376.978 334.400 235.400 235.400 235.400 200.400 150,400 92.400 50.000 50.000 1,652.013 1.294 731 1.200.277 1.01S.948 897.333 730,045 548.107

$3.008.039

$2.438.431

$2.148,874

$1.879.763

$1,608 842

$ 1.307,254

$ 1.017.485 8.804.755 8.I35.215 7,743.609 7,321,419 7.344.878 6.656.760 6,106.810 5.121,461 4.793.698 4.611,863 4.306.750 4.I94,288 3,797,751 3,394.637 12,845.489 11.872.717 10.742,325 10.992.118 10,867,180 10,278,181 9,725.873 2.346f03 2.134.011 2,020.406 1.954.52S 2,330.717 1,922,452 1,552,178 120.556 117.377 111.313 104.989 97,097 93.493 88.941 29.238.861 27.053.018 25.229.516 24.679.801 24.834,160 22,748,637 20.868.439 61S423 544.327 420.868 552.995 104.303 145.470 29.854.287 27,597.34S 25.650.384 25.232.7 %

24.834.160 22.852.940 21.013.909 5 339.393

$ 248.306

$ 230.161

$ 178.949

$ IS2.tM9

$ 126,355

$ 109,703 208.861 152.076 140.568 109.944 92,121 74,758 63,541 338.007 238.282 208.068 165.540 127,415 104.427 88.471 56.872 42.308 38229 21.362 17.434 11,784 9.351 5,663 4 310 4,051 3.814 3.503 3.269 3,094 948.799 685.282 621.077 479,609 393.162 320.593 274,160 12.496 7.817 S.253 S.031 1.981 1,255 961.295 693 099 626.330 484.640 393.162 322,574 275,415 7.398 6.568 4.920 4.815 3.679 3.I26 2.910

$ 968.693

$ 699.667

$ 631.250

$ 489.455

$ 396.841

$ 32.5.700

$ 278.325 938.576 921.208 898.658 882.706 863.272 835.017 807,862 8 813 8.161 7.870 7.948 7.693 6.947 6,394 3 22 2 51 2 44 19P.

1.58 1 41 1 31 1.21 1 OS 1 07 0 79 0 44 0 41 0 36

f I

20 Management's Discussion and Analysis of Results of Operations and Financial Conciition Results of Operations The company's hnancial performance detenorated in 1981 The allowance for funds used dunng construction repmsents compared to 1980, although 1981 was a signihcant improvement the cost of capital charged 'o utihty plant under constructon over 1979. Net income after dividends on preferred stock totaled which is not included in rate base The equity portion of this

$99,809,000 in 1981, $ 129,704,000 m 1980 and $57,440,000 credit mpresents non-cash income In addition, the normahza-in 1979. Return on average common equity for 1981 was 82 ton of the income tax effect of the debt porton msults in a non-percent compamd to 11.6 percent in 1980 and 58 percent in cash charge. A signihcant portion of current cash flow msults 1979.

from the allowance of a mturn on and recovery thmugh depre-Incmases in operating revenues in each period are attnbut-ciaton of previously capitahzed amounts. The allowance for able pnncipally to rate increases, recovery of increased fuel and funds used dunng construction, net of income taxes, as a per-purchased power costs thmugh fuel and energy adjustment cent of net income after dividends on prefered stock was 102.0 provisions contained in rate schedules and increased energy percent in 1979,57. I percent in 1980 and 64 2 percentin 1981.

sales in 1980 and 1981. Kdowatthour sales in 1979 were Inflaton has a signihcant effect on the company due to the virtually the same as in 1978, compared to a 7.7 percent increase regulatory environment in which the company operates and m 1980 over 1979 and an increase of 0.8 percent in 1981 over the large investment (appmximately 91 percent of total assets) 1980 The increase in kdowatthour sales in 1981 was due in utli:y plant See Note 14 to the hnancial statements for p unanly to the implementation of contracts hnalized in 1980 supplementary informaton concerning the appmximate effects for sales to neighbonng utihties. The company's portion of these of inflaton.

l bulk sales amounted to 18 bdlion kdowatthours and revenues The results of operations discussed above are not necessanly of $56 muhon in 1981, representing incmases over 1980 of indicative of futu eearnings Itisexpectedthathigheroperating 31.7 percent and 50 6 percent, respectvely Sales increased in costs and carrying charges on mcreased investment in plant, if 1980 due to sales to neighbonng utihbes and an extended heat not offset by proportionate increases in operating mvenues wave. The small decrease in 1979 and 1981 residental kdo-(either by penodic rate increases or increases in sales), wdl watthour sales msulted pnmanly from conservation efforts by adversely affect future eamings. Increases in sales in the future customers, and the 1981 decmase is also attnbutable to more will be affected by the extent of energy conservaton practiced moderate weather. Increased bdhngs msultmg from the by customers, the elasticity of demand, weather and the rate of recovery of increased fuel and purchased power costs and the economic growth in the company's service area In recent years, msults of rate increases have increased the average mvenue eamings have tended to dedtne dunng pericds following the per kilowatthour from 3.7 le in 1979 to 4 21C in 1980 and full 12 months' realization of general rate increases and pnor to 4.68C in 1981 receipt of further rateincreases.

Die nse in operation expenses occurnng each year smce 1978 resulted pnmanly from increased generation and escala-FinancialCondition bons in the cost of fud and other operaton expenses, partially offset by reductions in purchased power for the years 1979 The company's continuing construction program to budd and 1980 Fuel cost per kilowatthour generated was 1.56C in an energy supply network with a sufhaent margin of reserve 1979,161C m 1980 and 1847 in 1981. Purchased and inter-capaaty to ensure an adequate, economical power supply, changed power expenses dechned in both 1979 and 1980, required the expenditum of $1.3 bdhon dunng the three years reflecting increased availabihty of generatng capaaty and 1979 through 1981. As shown on the Statements of Sources of increased economy and emergency energy sa!es to neighbor-Funds for Gmss Property Additions, the primary sources of ing utdities Although Unit No 2 of the Farley Nuclear Plant funds for constructon expenditums are sales oflong-term debt, was placed in service in July,1981, pumhased and intemhanged capital contnbuhons fmm The Southern Company and internal power expenses increased 167 percent in 1981, compared to sources.

1980, due, in part, to a decrease in hydro power generabon of The company's capitalaation ratios have remained approxi-397 percent. as a result of abnormally low rainfall, and mately the same in mcent years, but the compos.te mtemst rate Unit No 1 of the Farley Nuclear Plant being out of service on long-term debt has incmased from 8 3 percent at December approximatdy seven months Increases in other operahon and 31,1978 to 10 0 percent at December 31,1981. As further mamtenance expenses are largely due to esca!abng costs of evidence of the increasing cost of capital, the company's annual labor, matenals and services.

interest requirement on long-term debt has increased 54 3 Incmases in deprecabon and amortization each year are due percent since 1978.

pnnapally to the contnued growth in depreaable plant in At December 31,1981, the company had $23,951,000 of service The composite straight-hne depreciation rate was 3.5 cash and temporary cashinvestments and $292,065.000 of percent in 1979,3 4 percent in 1980 and 3.5 percent in 1981.

unused cmdit arrangements with banks to meet its short-term Fluctuations in income taxes resulted from changes in mcome cash needs (See Note 4 to the hnanaal statements ) At the end before income taxes Federal and state mcome tax provisions of 1981, the company had no short-term bank loans outstandmg am detaded in Note 5 to the hnanaal statements as compamd to a balance of $96,501,000 at the end of 1980

21 The company's construccon expenditures are estimated to preferred stock, the company must comply with certam total $l.7 bdlion for the three years 1982 through 1984 These earnings coverage regturements contained in its mortgage constnacton programs are subject to revision because of indenture and corporate charter The abdity to mamtain these factom such as granung of tmely and adequate rate increases, coverages and to generate adequate amounts of internal funds new estmates of increased costs, revised load estmates and for constructon is dependent on receiving adequate and the avadabdity and cost of capital. These factors have fort ed tmely rate increases to offset the contintung effect of inflation substantal reductons in construction programs in recent yeam, Should the company be unable to obtain funds from external resultng in a combmaton of postponements and cancellations sources in amounts which, together with internally generated of generating urutsandotherfacdities SeeNote3tothefir.anaal funds, wdl be adequate to carry out the present construction statements for further detads In addition to the funds regtured program, further delays and possible cancellations wotdd be for the constructon program, approximately $49.228,000 wdl necessary.

be regtured through the end of 1984 in connecton vath On the basis of the requirements contained in the matuntes of first mortgage bonds, po!!ution control bonds and company's mortgage indenture and corporate charter, preferred stock subject to mandatory redempton the bond and preferred stock coverages of the company at it is antiapated that the funds required wdl be denved from December 31,1981 were 193 and 1.33, respectvely. See Note sources in form and quantity similar to those used in the past.

3 to the financial statements However, in order to issue additional long-term debt and Auditors' Report To the Board of Directors of Alabama Power Company.

We have examined the balance sheets and statements of capitalization of ALABAMA POWER COMPANY (an Alabama corporation and a wholly owned subsidiary of The Southern Company)as of December 31,1981 and 1980, and the related statements of income, earnings retained in the business, other paid-in capital and sources of funds for gross property additions for each of the three years in the penod ended December 31, 1981. Our examinations were nude in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in tha circumstances.

In our opinion, the finanaal statements referred to above present fairly the financial position of Alabama Power Company as of December 31,1981 and 1980, and the results of its operations and the sources of funds for gross property additions for the periods stated, in conformity with generally accepted accounting principles applied on a consistent basis.

Arthur Andersen & Co.

Birnungham, Alabama, February 12,1982.

22 Balance Sheets at December 31,1981 and 1980 1981 1980 Assets (In Thousands)

UTILITY PLAtR(Notes 1 and 3)

Plant in service and held for future use, at ongmal cost.

$4,771.723

$3.854.627 las - Accumulated pmvision for depmciation.

1.063.897 934,f06 3.707,826 2,920,021 Nuclear fucl.at amortized cost 143,541 131.442 Construction work m progress-Nuclear 18,927 684,945 Other 564.109 462.705 OTHER PROPERTY ANDINVESTMENTS Southern E2ectne Generatmg Company (Note 9).

I6.400 16.400 Nonutibty property, net 2.564 2,372 Miscellanmus.

1.104 993 CURRENT ASSETS Cash (Note 4).

4.400 13.429 Temporary cash investments, at cost -

19,551 9,017 Receivables-Customer accounts receivable...

94.515 90.745 Other accounts and notes receivable,

10.632 7.132 Intercompanyaccounts.

10.605 9.871 Accumulated provision for uncolkctible accounts (572)

(542)

Pefundable federal income tax (Note 5).

25.000 20,000

. oscil fuel stock, at average cost 166.857 161,593 Matenals and supphes. at average cost.

24.087 21.734 Prepayments.

28.952 24,871 DEFERRED CHARGES.

Cost of cancelled plant, being amortized (Note 1) 5.473 12.402 Debt expense, lung amort 2 zed 7,343 6.878 Macellaneous.

29.176 21.935 41.992 41.215 Capitalization and Liabilities

$4880.490

$4.617,943 CAPITALIZABON (See accompanying statements)

Common stock equ2ty

$ 1.231,061

$1.211.417 Prefermd stock.

374.400 334,400 Preferred stock subgtt to mandatory redemption (Note 8) 43.789 47.500 Long-term debt 2.394.674 2.159,793 CURRENT LIABILIIES Notes payable tolunks (Note 4) 96.501 Long term debt due withm one year (Note 7).

52.687 47.424 Accounts payable-Intercompany accounts 33.367 38.922 Other 90.520 108.294 Revenues to be refunded 11.978 Customer doposits 22,362 9.89?

Toxes accrued-Federal and state mcome 25.268 22.645 Other 10.236 10.462 Interest accrued 65.382 54.M1 Macellanmus 12.974 11.707 DEFERRED CREDIE ETC Accumulated deferred income taxes 436.594 370.439 Accumulated deferred investment tax credts 67.407 53.030 Mmm!!anmus 19.769 19.479 523.770 442.948 COMMrITAFlTIS AND CONTINGENT MATIERS(Notes 3. 4 9 and 11)

$4.880.490

$4.617.943

'The accompany:ng notes are an integral part of these statements

23 Statements of Capitalization at December 31,1981 and 1980 Percent of Amount Total 1981 1980 1981 1980 (InThousands)

COMMON STOCK EQUIT(.

Common stock, par value $40 per share, authonzed 6.000.000 shares, outstanding 5.608,955 shares.

$ 224.358 $ 224.358 Other paid in capital 908.145 866,145 Premium on preferred stock (Note 8).

1,535 941 Earnings retamed in the busmess (Note 10).

97.023 119.973 Total.

1.231.061 1.211.417 30 4 %

32.3%

CUMULATIVE PREFERRED STOCK (Note 3).

$1 par value, authorced 27.500,000 shares-

$25 stated value-1.600.000 shares outstandmg-15 68%

40.000

$ 100 par va!ue, authonzed 3.850.000 shares-Senes 4 20% to 4 52%

41.400 41.400 4 60% to 4.92%

29.000 29.000 5 %% to 8041 32.000 32.000 816% to 944L 232.000 232.000 Total (annual dmdend requirement - $31.991.000).

374.400 334,400 93 8.9 Subject to mandatory rvxlempt20n (Note 8) 1 1 001 (annual dmdend regwrement - $4.817.000) 43.789 47.500 1I 1.3 LONG-TERM DEBT (Note 3)

First mortgage bonds-Matunty Interest Rates September 1,1981 3%%

15.000 Apnl 1,1982 3%%

12.000 12.000 May1,1983 4%%

11.939 11,939 Mamh 1.1984 3%%

17.000 17,000 June 1,1985 3%E 15.000 15.000 March 1,1986 3%1 13.725 13.725 1987 through 1991 3%% to 18%%

352.457 152,457 1992 through 1996 4%% to 6%S 114,941 114.941 1997 through 2001 6%% to91 217.924 217.924 2002 through 2006 7%% to 10%E 648.500 648.500 2007 through 2011 8%% to 17%1 750.000 675,000 Total hrst mortgage bonds.

2.153.486 1.893.486 Other long-term debt (Note 6).

311.060 329.066 Unamortced debt premium (discount), net (17.I85)

(l5.335)

Total long-term debt (annual interest requ2rement -$249.132.000) 2.447.361 2.207.217 Less amount due within one year (Note 7).

52,687 47.424 long-term debt. excludmg amount due withm one year 2.394,674 2.159.793 59 2 57.5 TGAL CAPITALIZATION

$4.043.924 $3.753.110 100 0%

100 0%

The accompanymg notes are an integral part of these statements

24 Statements of Income for the Years Ended December 31,1981,1980 and 1979 1981 1980 1979 (InThousands)

OPERATING REVENUES

$1,594,022

$1,421,997

$1,163,623 OPERATING EXPENSES.

Operation-Fuel.

504.930 439,488 365,628 Purchased and interchanged power, net.

144,916 124.163 124,929 Other.

192,502 153,552 129.430 Maintenance.

135,727 99,040 80.660 Depreciation and amortization.

147,581 127,840 123,075 Taxes other than income taxes.

86,878 74.488 74.592 Federa' and state income taxes (Note 5).

92.773 114.427 58.759 Total operatmg expenses.

1,305.307 1,132,998 957.073 OPERATINGINCOME.

288.715 288.999 206,550 OTHERINCOME:

Allowance ior equity funds used dunng construction (Note 1).

39,471 32,189 28,554 Income ficm subsidiary (Note 9).

2,531 2,466 2.425 Other, net 4.925 8,060 9.796 Income beforeintemst charges.

335,642 331.714 247.325 INTERESTCHARGES-Interest onlong-term debt.

239,858 184.557 163,343 Amortization of debt discount, pmmium and expense, net.

871 593 610 Otherinterest charges 5.882 65,686 51,909 Allowance for debt funds used dunng construction (Note 1).

(46,849)

(79.839)

(57,1%)

Net intemst charges 199.762 170.997 158.666 NETINCOME 135,880 160,717 88,659 DIVIDENDS ON PRE,t ratRED STOCK 36.071 31.013 31.219 NET INCOME AFTER DMDENDS ON PREFERRED STOCK.

$ 99.809

$ 129.704

$ 57,440 Statements of Earnings Retained in the Business for the Years Ended December 31,1981,1980 and 1979 1981 1980 1979 l

(In'Ihousands)

Balance,beginningof penod

$ 119,973

$ 105,569

$ 102,129 Add (deduct):

Net income af ter dwidends on preferred stock 99.809 129,704 57,440 Cash dnndends paid on comr., stock.

(120,800)

(l15.300)

(54,000)

Prefermd stock issuance expense.

(1,959)

Balanee, end of pened(Note 10).

S 97,023

$ 119.973

$ 105.569 Statements of Other Paid-In Capital for the Years Ended December 31,1981,1980 and 1979 1981 1980 1979 (In Thousands)

Balance, begmnmg of penod 5 866.145

$ 692.145

$ 625,700 Cash contnbution to cap.tal by parent company.

42.000 174.000 66.445 Balance, end of penod

$ 908,145

$ 866,145 5 692,145 The accompanying notes are an integral part of these statements.

25 Statements of Sources of Funds for Gross Property Additions for the %rs Emdul Decenh r 31,1981,1980 and 1979 1981 1980 1979_

(In 7hourands)

Net income

$ 135.880

$160,717

$ 88.659 Ac kl (deduct) pnncipal noncash itenn -

Deprmation and amortization 198,106 1ft),C69 137,275 Defernxhncome taxes, net.

82,723 105.299 61,970 Dehern11inve<,tment tax cruhts.

29.400 10,700 ADowance for eq1uty funds uned dunna constniction (39,47l)

(32.I89)

(28.SS4) 406.638 405,196 259,360 Less -

Diwlends on common stock.

120200 l1S 300 S4,000 Dividends on preferred r,tock 36.071 31.013 31.219 249.767 258.883 174,131 Decrease (increase)In net current osmts, excluding long term debt due willun one yetir and notes payable to banks-Ca.h and temporary cash inve<,tments (1,505)

(13.398) 8,742.

Receivables (7,974)

(3,944)

(14,915)

Refundable federal uicome taxes (5,(XX))

(16.846)

(3,154)

Fossil fuct stock (5.291)

(37,84l) 3,932 Matenals and supphes (2,353)

(821)

(498)

Accounts payable (23.329)

(l1,662) 48,910 Revenues to be refunded (l1,978) 11,978 (2.547)

Intenst acen vel 11,321 4.968 4,734 Taxes accruni 2.397 19,fA6 (442)

Other, net (343)

(14.010) 2.(XD (44.028)

(61,930) 46,831 Other. net nicludes allowance for eqtuty funds to11 dunng construction 8.066 (3.242) 25,811 Total internal rources 213,80S 193.711 2.46,773 External Source -

I irst mortgage bonds 275,000 250,000 ik>nds retirol (lS 000)

(18,433)

Preferrol stock 40.000 Preferral stock n acq'un<l(Note 8)

(3.711)

(2,500)

Capital contnbution by pu ent company 42,000 174.00()

66,445 Pollution control obhgations, net 1,713 8203 8,688 Obhgations under capitahr.ed leases (19.719) 43,776 22,835

_ 96,601)

(255.977) 133,22S

(

Increme (decrease) in notm payab!e to hinks.

Total externahmurm 223.782 2I8,102 212.700 Gross Proprty Add:tions hncluchs net o!Iowance for funds umd dunna cototruction in the amount of $G1070.00Chn 198l, $74,110fXXhn 1980 and $5fiS86.(XXhn 1979)

$437.S87

$411.813

$459.533 The acxnmpanymg notes are an inta;ral put of these statements

(

I 26 Notes to Financial Statements

1.

SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES:

General-Allowance for Funds Used Durmg Construction-Re company is a whdly owned subsidiary of The Southem The a!!owance for funds used dunng constniction repmsents Company (SOUTHERN) which is the parent company of four the estimated debt and equity costs of capital funds which are operating comparues and a system service company Re app'icable to utihty plant whde under construction. Le operatmg companies are engaged in the business of providing composite rate used to determme the amount of the allowance, electnc utdity service in four southeastern states. Operating net of the income tax effect of capitahzed debt cost, was 8.1%

contracts among the companies, covenng interconnecton in 1981,8.3%in 1980 and 8.1%in 1979.Thecompanyaccounts arrangements, interchange of electnc power and joint owner-for the income tax effect of capitahzed debt cost as a charge ship of generatmg fachtes, am subject to regulation by the to income tax expense assoaated with operations with a Federal Energy Regulatory Commission (FERC) or the cormsponding credit to allowance for debt funds used dunng Secunties and Exchange Commtssion (SEC) The system constructon.

service company provides, at cost, technical and other special-Depreciation and Amortization-ized services, upon request, to the pamnt company and to each Depreciation of the onginal cost of depreaable utihty plant of theoperatmgcompanies in service is provided using composite straight-hne rates which The pamnt company is mgistered as a hddmg company approximated 3.5% in 1981, 34% in 1980 and 3.5% in 1979, under the Public Utihty Hddmg Company Act of 193S(Hddmg and indudes a factor to provide for the expected cost of Company Act), and it and its subsidianes am subject to the decommissioning nudear facuities The cost of decommission-regulatoryprovisionsof theHddingCompany Act The ing, based on decommissioning promptly after the urut is taken company is also subject to regulation by the FERC and the out of service, is estmated at approximately $37,000,000 per Alabama Pubhc Sennce Commission (APSC) and fdlows gen-unit at Plant Farley his estimate wdl be adjusted penodically erally accepted accounting pnnaples and the accounting poh-considenng changmg price leveh, and techndogy. When cies and practices presenbed by the respective commimons.

property subjwt to depmciaton is reumd or otherwise dis-Revenues-posed of in the normal course of business, its cost, together Revenues, indudmg those subject to refund, are induded in with its cost of removal, less salvage, is charged to the accumt.-

income as bdled monthly to customem on a cycle bdhng basis-lated provision for deprecaton.

Fuel Costs-The construction of Plant Barton was cancelled in 1977 Fud costs am expensed as the fuel is consumed. The Obhgations related to equipment design and engmeenng and company's rates include fuel and net purchased energy termmation of contracts appbcable to this plant amounted to ad@tment clauses under which fuel and net purchased energy approximately $34,000,000 The company has received regu-costs above or below certain base levels are bdled, or credited latory approval to amortize and recover these costs as an to customers on a curmnt basis he cost of nuclear fuel,includ-operating expense, ratably over a five-year penod. Such amor-ing the esumated cost of hnal dispositon of spent fuel, is tzaton is included in "Deprecaton and amortzation" and amortized to fuel expense based on the quantity of heat amounted to $6,958,000in 1981, $7,071,000 in 1980 and produced for generanon of electnc energy Such amortzaton

$7,14S,000in 1979.

was $42,369,000 in 1981, $27,505,000 in 1980 and $8,500,000 Pension Costs-in 1979.

He company has a trusteed and non-contnbutory pension Final dispositon of spent fuel may mquire future adjustments plan which covers substantally all regular employees The to fuel expense. Pendmg hnal dispositon, the company has pohey of the company is to fund each year's accrued pension suf haent installed storage capaaty at Plant Farley for storage cost for the plan which amounted to $25,592,000 in 1981, of spent fuelinto 1993 and 1994 for Plant Farley Umt Nos.1

$14,849,000in 1980and $13,111,000in 1979.Of these and 2, respectively He company plans to install higher capaaty amounts, $ 16,829.000 in 1981, $9,466,000 in 1980 and storage racks in Units No 1 and No 2 which wdl provide

$8,712,000 in 1979 were charged to operatmg expenses, and sufhaent storage of spent fuel into 2007 and 2009, respectively the balance was charged to construccon and other accounts.

Le company has apphed to the Nuclear Regulatory Accumulated pension beneht informaton as of the valuation Commission (NRC) for a heense for the Unit No. 2 moddcanon dates (January 1 of each year) follows.

and plans a simdar apphcanon for Urut No 1-Utility Plant-Utdity plant is stated at ongmal cost. Such cost indudes apphcable admirustratve and general costs, payrdl-mlated costs such as pensions, taxes and other fnnge benehts, and allowance for funds used dunng construccon.

The cost of mamtenance, mpaim and mplacements of minor items of property is charged to mamtenance expenseaccounts Ee cost of mplacements of property (exdusive of mmer items of property)is charged to the unhty plant accounts.

i

27 1981 1980 sale revenues by $9,400,000 annually based on the test (InThousands) year ended December 31,1982. As requimd by the settle-

Actuarialpresent value of ment agmement between the company and its whdesale accumulated plan customers in the most mcent whdesale case, the company benehts-has requested that the FERC suspend the operation of the new Vested.

$152,780

$130,322 rates unbl May 1,1982.

Nonvested.

3.220 6,946 The outcome of these pendmg rate proceedings cannot now be determined.

Total actuanal present value of accumulated plan

3. CONSTRUCTIONPLAN, FINANCING AND benehts.

$156,000

$137,268 FUEL COMMITMENTS:

ConstructionPlan-Weighted average rates The company's estimated gmss property additions, as of returnassumedin of October,1981, amount to $545,321,000 in 1982, determining actuanal

$5S6,842,000in 1983 and $588,281,000 in 1984 pmsent value of The construction pmgram is subject to penodic myiew and accumulated plan revisior., and actual constmchon costs incurred and commercial benehts.

8%

S%

operation dates may vary from estimates because of factors Net assets available such as granting of timely and adequate rate increases, new forbenehts

$191,055

$154,373 estimates of increased costs, revised load estimates and the availabihty and cost of capital. Lese f actors fomed substantial mductions in the company's construction program in recent The actuarial present value of accumu!ated plan benehts was yeam, msultmg in a combinabon of postponements and cancel-determined on the basis of accrued benehts as of January 1, of lat ns of generating units and other facilities.

the mspecove years, whereas the plan is funded based on the On February 10,1975, a break occurred at the company's premise that the plan will contnue in existence, which requires Bouldm Dam causing extensive damage and resulung in the that futum events be considemd. Amendments to the plan removal Imm service of the hydmelectnc generating facihties in 1981 bberahzed mtimment benehts, indudmg incmased (225,000 kilowatts) at the dant The facihties at the dam wem termmal pay formulas, and expanded benehts to employees.

returned to service in late 1980. Litganon against one of the A net incmase of $78,865,000 in the accrued liabthty with contractom msponsible for construcuon is still pendmg-respect to past service under the plan resulted from the amend.

U"*"C*9 -

ments The 1981 contnbubons to the pension plan increased The abihty of the company to carry out its construcbon plan

$10,743,000 of which $7,285,000 was attnbutable to past depends on the amount of funds generated internally and the service and $3,458,000 was attnbutable to cunent service funds it can raise by external hnancing. The company's pnmary ne unfunded pnor service cost under the plan and supple-sources of external hnancing are sales of fist mortgage bonds t

mental contracts amounted to appmximately $90.752,000 at and preferred stock to the public, receipt of addibonal paid-in December 31,1981 and is being amordzed over a penod of capital from SOUTHERN, sale of pdluton-control revenue approximately 15 years.

bonds by pubhc authonbes and leasmg of nuclear material Income Taxes-Paid-in capital is planned to be pmvided, to the extent l

Le company pmvides deferred income taxes for substan-mible, by SOUTHERN from the sale of additional common bally allincome tax bming differences as permitted by the stock in amounts and at times not yet determined; however,

. appropnate regulatory agencies. The company is incfuded in there is no assurance that SOUTHERN can conunue to sell l the consohdated federalincome tax return of SOUTHERN additional shares of its common stock in the amounts and with

1. gg the frequency that would be required to provide funds for the company's construction pmgram.

2. RATEMATTERS:

In order to issue addinonal first mortgage bonds and pre-On March 19,1981, the company hled a mtail rate r*

ferred stock, the company must comply with certain earrungs quest w.th the APSC to increase revenues by approximately coverage requirements contained in its mortgage indenture

$324,900,000 annually based on the twelve months ended and corporate charter The most restrictve of these provisions November 30,1980. On October 16,1981, the APSC issued require for the issuance of addibonal hrst mortgage bonds an order denytng any part of the rate request-that before-income-tax earnings, as dehned, cover pro forma On February 12,1982, the Supreme Court of Alabama annual interest charges on outstandmg hrst mortgage bonds granted the company the nght to collect a porton of the m-at least twice, and for issuance of additional preferred stock, quested increase, s'iblect to mfund, penchng hnal deternunation that gmss income available for interest cover pro forma annual of the company's appeal to such court Pumuant to such order, interest charges and prefermd stock dividends at least one and the company has hled rates designed to pmduce $75-milhon one-half bmes Rese coverages, for hrst mortgage bonds and additional revenues for the six-month penod commencmg for prefened stock for the year ended December 31,1%1, October 16,1981 were 1.93 and 1.33, respecovely On January 18,1982, the company hled a wholesale rate The company's abihty to obtam funds from external sources increase request with the FERC estimated to increase whole-

28 and generate adequate amounts of internal funds which wdl S. INCOMETAXES:

enable it to finance its constructon prnJram is dependent on A detail of the total federal and state income tax provisions mceiving adequate and timely rate incmases (see Note 2).

is set fonh below:

Should the company be unable to obtam funds from external 1981 1980 1979 sources m amounts which, together with internely generated funds, would be adequate to carry out the present construction (In Thousands) program, further de!ays and possible cancellatons would Feoeral-ha necessa7 Cunently(refundable). $(21,257) $ (4,678) $ (3,154)

Fuel Commitments-Deferred 86,637 110,871 68,540 To supply a portion of the fuel mquimments of its generatng Deferred in pnor plants, tha company has entemd into vanous long-term commit-years (credit).

(9,093)

(10,091)

(10,178) ments for the procumment of fossil and nuclear fuels. In some Deferred investment cases, such contracts contam provisions for pnce escalatons tax cmdits.

29,400 10.700 and mmimum production levels. In addtion, contracts with certam coal contractors require reimbursement or pumhase, at 85,687 106.802 55,208 net book value, of the investments in mines or equipment upon State-termmatonof thecontract. Additonalcommitments forcoal Currently payable.

1,946 3,151 and for nuclear fuel will be required ia the future to supply the Defened 5,814 5,205 4,259 company's fuel needs Defenuiin pnor years (credt).

(674)

(731)

(708)

4. NOTES PAYABLE'IO BANKS:

7,086 7.625 3.551 Total apphcable to The size of the company's constructen program necessitates operations.

92,773 114,427 58,759 from time to time substantal amounts of short-term unsecumd Income taxes apphcable borrowings Under the provisions of its charter, the company's to other income.

3,518 (1,273)

(1,864) pmferred stockholders have approved an increase m the Totalincome taxes.

$ 96.29t

$113,154

$ 56.895 amount of secuntes representmg short-termunsecumdindebt.

edness, which it may have outstandmg until January 1,1987, from 10% of secured mdebtedness and other capital to 20%

The company received a federal income tax refund of thereof At December 31,1981, such 20% hmitaton amounted

$ 10,750,000 for the year ended December 31,1980, and has to approximately $827,419,000 Pursuant t the provisions of accrued a refund of federalincome taxes of $25,000,000 at the Holdng Company Act and based on year-end capitahzation.

December 31,1981, attnbutable to the company's utihzation the company may have approximately $141,426,000 of short.

of investment tax credts in SOUTHERN's consohdated income term debt outstandmg at any one eme without approval of the tax return for 1981.

SEC At December 31,1981, the company had hnes of credt The provision for deferred income taxes msults from the with banks totalmg approximately $292.065,000 of which company's tax deduccon of accelerated depreciation and other

$200,003,000 mpresents commitments obtained under a wnte-offs of property costs, as pmvided for by the income tax revolvmg credit agreement with a group of ten banks outside laws, bemg significantly greater than the straight-Ime depre-its service area, termmatmg September 30,1982 The agw.

ciaton of such costs. Income taxes deferred in pnor years are ment contams (1) restnctons which among other thmgs.

credited to income when straight-hne depreciation of those (a) hmit the amount of &rtam types of additonalindebtedness property costs exceeds the related tar deduchons.

which the company may incur, and (b) require that a substantal portion of the proceeds from sdes of propertes or secunties, with certam exceptons, be apphed to repayment of the notes, and (2) requirements for the payment of a commitment fee This and other fees amounted to 21,539,000 in 1981,

$6.356,000 in 1980 and $6,693.000 m 1979 A:Tangements with respect to the $92,065,000 remammg hnes of credit expire at vanous times dunng 1982 and provide for average annual compensaung biances Because the arrangements are based on an average balance. the company does not consider any of its cash balances to be restncted as of any specihc date Includmg compensatmg biances, the company has mamtamed operatmg account Idances in these banks averagmg approximately $6,441 COO m 1981 and

$9.858 030in 1980

29 The total provision for federal income tax as a percent of

6. OTHER LONG-TERM DEBT:

income before income tax was less than the statutory federal income tax rate for the following reasons.

Details of otherlong-term debt are as fdlows.

1981 1980 1979 December 31, Effectve federalincome tax 1981 1980 rate as reported.

39 6%

39.6%

37.7 %

(In Thousands)

Reduchonsin tax expense Obhgatons incurred in connection reculting from statutory with the sale of tax exempt exdusions fmm taxable pdluton-contrd revenue bonds income-by pubhc authonbes-Equitycomponentof the December 1,1981,7.551 500 allowance for ftmds used December 1,1982,7.701 500 500 dunng construchon.

81 56 92 December 1,1983. 7.851 500 500 Other 1.3 23 1.9 December 1,1984,8%

3,500 3,500 Effectve federalincome tax December 1,1995 and 2004 ratebeforeeffectof tim:ng (due senally) 9% to 9%%.

18,700 18,700 differences.

490 47.5 48 8 2003-2010. 6% to 9%E 175,950 175,950 Timing differences not 12ss funds on deposit with normahzed for accounting trustee.

23,301 23,514 and rate-makmg purposes-175 849 174,136 Using afferent depre-Capitahzed lease obhgations-aation bases and rates Nuclear fuel 108.519 130,340 than are used for book Vehicles.

15.028 12,913 purposes. net (3 0)

(1.8)

(3 0)

Ofhce buildings.

10,440 10,556 Other 03 02 Other 1,224 1,121 Federalincome tax statutory 135.211 IS4,930 rate.

460%

46 0%

46 0%

$311,060

$329,066 Investment tax credits uthzed m the consohdated tax return are allocated to the members of the SOUTHERN system gen-Paluton-contrd obbgations represent installment purchases eratmg such cmdits. Deferred investment tax credts are amor-of pdlution-contrd facihties hnanced by funds denved from bzed over the hfe of the property which gave nse to the credits sales by pubhc authonties of revenue bonds. The company is Such amortzation is apphed as a cred2t to reduce deprecation required to make annual payments sufhaent for the authonties in the Statements of income and amounted to $ 1,699,000 in to meet pnnapal and interest requirements of such bonds With 1981, $1,687,000in 1980 and $1,713,000in 1979 At Decem-respect to $32,500,000 of such pd!uton-contrd obbgations, ber 31,1981, investment tax credts totalmg approximately the company has authenticated and dehvered to the trustees a

$265,000,000, expinng at vanous tmes from 1994 to 1996, hke pnnapal amount of hrst mortgage bonds as secunty for have not been uthzed and am available to reduce federal its obhgation under the installment purchase agreements No income taxes payable in future years.

pnnapal or interest on these hrst mortgage bonds is payable unless and until a default occurs on the installment purchase agreements.

The company has capitahzed leased nuclear matenal and mcorded the related lease obhgations One arrangement pro-vides for the payment of interest monthly, in advance, based on the commeraal paper rate, as dehned, plus 15% ( l 3.75% at December 31,1981) 'Ihe other arrangement provides for the payment of interest at the time of each extension of credit at an l

intemst rate based on the secondary market bid discount rate for time certhcates of deposit, plus certam additional charges (approximately 14 07% at December 31,1981) Pnnapal payments are required under both arrangements based on the cost of fuel burned The company has also capitahzed certam vehicle, ofhce btulding, equ2pment and other leases Monthly pnnapal pay-ments plus mterest are required, and at December 31,1981, the mterest rate was 14 25% for vehides,9 5% for ofhce btnldings and the composite interest rate for other leases was 1814%

g h net book value of capitahzed leases mduded in transmission fachtes The capaaty of these units is sdd equally uthty plant in service was $ 134.208,000 and $ 1 S4.238,000 at to the company and GEORGIA under a contract expinng in December 31,1981 and 1980, respectvely W estmated 1994 which, in substance, requires payments sufhcient to aggmgate annual matunty of the company's capitahzed lease provide for the operatmg expenses, taxes and debt service, obhgatons through 1986 is as fdlows: $40,187,000 in 1982, includmg a retum on investment, whether or not SEGCO has

$38,716,000 in 1983, $28,611,000 in 1984, $ 13,561,000 m 1985 any capaaty and energy ava lable h company's share of such and $2,805,000 in 1986.

amounts tota!ed $76,576,000 in 1981, $68,882,000 m 1980 and l

$64,849,000 tn 1979, and is induded in "Pumhased and inter-

7. LONG-TERM DEBT DUE WITHIN changed power, net" in the Statements of Income.

ONE YEAR:

In additon, the company has guaranteed unconditonally the obliganon of SEGCO under an installment sale agmement for A summary of the smking fund requirement and scheduled the purchase of certam pollution-control facihtes at SEGOO's matunties of long-term debt withn one year are as fdlows:

generating uruts, pursuant to which $ 17,400,000 pnnapal 1981 1980 amount of pdluton-contml revenue bonds have been issued.

GEORGIA has agreed to mimburse the company for the pro-rata porton of such oNigaton conespondmg to as um Bond sinking fund reqturement

$23, 2

14 proportonateownershipof stockof SEGCOif thecompanyis called upon to make such payment under its guaranty.

Porton to be satshed by bondmg At December 31,1981, the capitahzation of SEGCO con-property additions.

23,824 21,014 sisted of $32,800,000 of eqtuty and $45,715,000 of long-term First mortgage bond matuntes.

12,000 15,000 debt on which the annualintemst mqturement is $2,957,000

, 2,424 Otherlong term debt.

40.687 a

Through December 31,1981. SEGCO has paid dividends

$52.687

$47,424 equal to its ni t income.

The company and one of its afhhates Mississippi Power h annual hrst mortgage bond smbng fund requirement Company, own as tenants in common in the proportions of due on June 1 is one percent of the aggregate amount of bonds.

60% and 40%, respectvely, a 500,000 kilowatt steamelectne other than refundmg bonds, authentcated pnor to January 1 of generatmg plant in Greene County, Alabama h plant was each year This requirement may be satished by the deposit of placed in service m 1%5 and the company's investment at cash or reacquimd bonds or by the dehvery of bonds December 31,1981 amounted to $54,752,000 h company's specihcally authentcated for such purposes agatnst unfunded shara of expenses is induded m the correspondng operaung property addtions The 1982 sinking fund reqtumment was expense accounts in the Staten uts of Income.

satsfied by dehvery of bonds against unhmded property additions

10. DIVIDEND RESTRICTIONS:

The company's charter contams provisions which pmhibit

8. PREFERRED S'IOCK SUBJECT'ID the payment of cash common dividends (except those paid MANDA'IORY REDEMPTION:

concurrently with the receipt of a cash capital contnbuton in The 11% preferred stock is subject to a cumulanve smbng hke amount) in cases where retamed earnmgs are not at least fund requinng the company to redeem annually or purchase equal to two tmes annual dmdends on the outstandmg 25,000 shares ($2,500,000) of the stock ommenang January 1 Pmferred Stock and Class A Prefenui Stock. At December 1981 h company has the option to double the number of 31,1981, this restnction amounted to $73,616,000. In addition, shares redeemed in any one year begmr. ng January 1,1986 vanous senes of the company's outstanding first mortgage The stock is redeemable for smbng fund purposes at $ 100 per bonds am enttled to the benehts of covenants restncting the share, plus accrued dmdends to the date of redemp:.on. Dunng payment of cash dividends on common stock. However, under 1981, the company reacquired 37,110 shams of which 25,000 the terms of such covenants, the entire amount of eamings shares were used to satsfy the 1982 sinbng fund requirement retained in the business at December 31,1981 is avadable for and the mmatrang shares will be used to satisfy futum years' the payment of cash common dmdends.

requirements 'The gains on macquisiten of $594.000 in 1981 and $480.000 in 1980 am induded with pmmium on pre!ermd

11. NUCLEARINSURANCE:

stock as shown in the Statements of Capitahzaton Under the Pnce-Anderson Act, the company mamtains

9. INVESTMENTIN JOINTLY OWNED agmements of indemnity with the NRC which, together with FACILITIES:

pnvate insurance, cover third-party habihty ansing from an nudear inadent occunng at the company's nuclear power h company and one of its afhhates G,eorgia Power plant h Act hrruts pubhc habihty daims that cou!d anse from Company (GEORGIA), own equally all of the outstandmg a smg!e nuclear inadent to $560.000,000 Each reactor at the capital stock of Southem Bectnc Generating Company company's nuclear plant is insured against this habihty to a (SEGCO), which owns electne generaung units with a total maximum of $ 160.000,000 by pnvate insurance (the maximum rated capaaty of 1.019,680 kilowatts, together with assoaated amount presently avadable) and the remainder is provided by mdemruty agreements with the NRC. In the event of a nudear

)

31 l

inadent inv 4vmg any commeraal nuclear facthty m the country.

14. SUPPLEMENTARYINFORMATION a company could in assem] up to $5.000.09 per incident CONCERNING THE EFFECTS OF for each heensed reactor operated by it, but r.at more than CHANGING PRICES (UNAUDITED):

$ 10.000.000 to be pud in a ca'endar year On the basis of its ownership of two reactors in service the compmy could be The fdowing supplementary information concerning the asn<md a maximum of $10.000.000 for any such inadent, but effects ! changing pno;s is presented in accordance with the not more than $20,000.000 to be pmd in any one year q neral concepts set forth in Fmancial Accountmg Standanja The company is a member of Nudear Mutual Limited, a Board Statement No 33, as modihed to reflect the economic mutual imurer estabhshed to provide insurance coverage acts impmal on the company by regulatory authonhos It agamst property damage to members' nudear generabng should be viewed as an estimate of the approx 2 mate ef fects of facihtes The company is subyrt to a retrospctve prerruum inflah n, rather than a precine transure.

adpastment in the event that kmn exceed accumulated funds Cetant dollar amounts repmnent histoncal cost stated in The present naximum enesstranit for the comparty is limital M e d M e d g 4 mm M m g w,e m m M W h to $46000'000 Consumer Pnce Index for all Urban comumers Current cost Ahd the oumpany is a menJmc of Nudear El<ctncInsurance am unts m&ct dang roperty damage to nudear generabng cuent cmt of plant was determmed by indexing each major fachtieninexoasof $500.000.000 The company is insumd cles of pbnt unmg de Handy-Whitman Index of Pubhc Utility agmmt menmxi costa of replacement p;wer in the amount of Cetruction Costs Current cost daes not necessanly rep-up to $2.300.000 per week (starnng 26 weeks after the outage) mnent the replacerrent cost of existmg productive capaaty for one year and up to $ 1.150.000 p:r week for the second b;cause h unlity plant is not exp Mo Ie mpbcM pMy in kmd year Under each pohey, the company ta subytt to retroactive assessments if kms exceal the accumulated funds avahb!c Em accumulatal provtsion for depreciation for current cmt to the insurer under that pohcy The precent maxtmum amens-we develope d by applying, for each maior dass of p: ant, the ments for the compmy are hrruted toapproximately $ 1E000.000 sanc pscentage relationship that existed between grons plant under the replacement power pohey and $9.000.000 under the and accumulatvJ precion for depnnahan on a lustoncal be property damage p> hey to the adjusted plant data Depreaation exp;nne for both trv thods was deterrrurnl by applying the current deprecaton

12. ASSETS SUBJECT TO LIEN:

rates to the respecuve indexed plant amounts reduced by the amortizauon of investment tax cruhts which were hrst adneted The company's mortgage. as arrended and supplerrented, to average 1981 dollar amounts by year of addition strunng the hrst mortgage bonds issued by the company.

Increases in the cmt c,f ekctnc generatng fuel are recov-constitutes a threct hrst hen on substanhally c!! of the erable in revenues through operanon of fud cost recovery compmy's hxed property and francluses mecharusms Such increanes elfectively are receivables from customers Therefore. such incremn are not induded m

13. QUARTERLY FINANCIAL DATA income but imtead am trmted as monetary usam; Income tax (UNAUDITED):

exp:me was not adneted because only histoncal costs are nnunzod marterly hnancial data for 1981 and 1980 are

"[ff (7{,'[]"c rbYvIt s pmpaymentsand inventory, results in a loss of purcheing power dunng penods Net Income of inflaton becaune the amount of cch received in the future Af ter Dividends for thme items will purchme kcs Conversely, holding monetary Opsatmq Operanng on Pmferred liabihtica, pnmanly long term debt, results in a gmn because Revenues incorre Stock the piyment in the future vall be made with norninal do!!ars In Thousands) having lens purchasing power The company has a net gmn due 1981 to the sigruhcant amounts of long term debt outstanchng Under the ratemakmq presenbed by the rc<fhtory com-Fimt

$395.I28

$73.108

$33.686 nusmons to which the cornpany is suby:ct. only the histoncal Second 365.949 56.783 14.671 M of l ant is nxoverable in revenues and depreaabon and Durd 457.93P.

96.713 46.084 plant in rate ben is hrratal to onrynal cost Therefore, the cost I ourth 37S 013 63,!11 S,368 of plant statalin tenns of constant dollars or current cost that vanes from the lustoncal cost of plant is not prrrently mcover-1980 able in rates an depmciahon Die amount of tiiis vanance that First

$297.639

$62129

$22.043 accrued as a rmult of inflaton in the current year is reflected Second 302.226 56.391 12.982 as an adjustment to net recoverable cost While the use of debt Thrd 457.313 94.374 S7.526 hnancing reduced the efkct of this losa on the common stock-Foui1h 364.819 7E106 37,I53 holder, mrnings were not adequate to offnet the eromon in the

~~

purchasing p>wer of 'ts investment

32 Statement of Income Adjusted for Changing Prices for the Year Ended December 31,1981 Constant Current Dollar Cost (InThousands of Average 1981 Dollars)

Income applicable to common stockhdder, as reported.

$ 99,809

$ 99,809 Enasion of common stockholder's equity because of changing prices:

Cost in excess of the origmal cost of productive facihties not recoverable in rates as depmciation-Reportable as an additional provision for depreciation.

131,242 171,513 Reportable as a reduction to net mcoverable cost.

196,193 117,499 327,435 289,012 Excess of the general level of prices ($686.879)in the curmnt year over increase in specihc price changes ($648,456)*

38,423 Offsetting effect of debt hnanang.

(229,933)

(229.933)

Net erosion of common stockholder's equity.

97.502 97,502 Income applicable to common stockholder, as adjusted ** (includmg the effect of debt hnancing).

5 2,307

$ 2,307

• At December 31,1981, current cost of property, plant and equ2pment, net of accumulated depreciation, was $9. I bilhon, and histoncal cost or net cost recoverable through depreciation was $4.3 bilhon.

" Adjusted income applicable to the common stockholder would be a loss of $31.4 million on a constant dollar basis and a loss of

$717 milhon on a current cost basis if only the amount mportable as an additional provision for depmciation were deducted from the reported amount of such income Five-Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices 1981 1980 1979 1978 1977 Operating Revenues.

(In Thousands)

Rstoncal cost.

$1,594,022

$1,421,997

$1,163,623

$1,014.443

$ 968,693 As adjusted

• 1,594 022 1,564,197 1,454,529 1,410,076 1,453,(M0 Income (loss)apphcable to common stockholder:

Rstoncal cost.

5 99,809

$ 129,704

$ 57,440 As adjusted for the net erosion of common stockholder's equity

• 2,307 10,637 (75,465)

Common stockholder'sinvestment (net assets), at yeannd.

Rstoncal cost.

$1.231,061

$1.211,417

$1,022,533

$ 952,648

$ 971,626 As aJjusted*

1,194,129 1.271,988 1,206,589 1,276,548 1,418,574 Excessof thegenerallevelof pnces over increase in speche pnce changes *

$ 38.423

$ 120,210

$ 323,614 Effect of debt hnancing*

$ 229,933

$ 335,947

$ 398,195 Retum on average common equity.

Hstorical 8 17 %

11 61%

5 82 %

As adjusted for the net erosion of commen stockholder's equity

• O 19 %

095%

(7 64)%

Cash dividends declared Rstoncal cost.

$ 120,800

$ 115,300

$ 54,000

$ 108,800

$ 94,900 As adjusted

• 120,800 126,830 67,500 151.232 142,350 Average consumer pnceindex.

272.4 246.8 217.4 195 4 1815

• Adjusted amounts represent average 1981 ddlars t

~

i 33 GeneralOfficers Division Officers Joseph M. Farley, President W.D. Bolton, Vice President, Anmston Elmer B. Harris, Executive Vice Nsident John B. Byars, Jn, Vice Nsident, Eufaula Jesse S. Vogtle, Executive Vice President Hugh P. Fomman, Vice Nsident, Montgomery William O. Whitt, Executive Vice Nsident William L McDonough, Vice Nsident, Mobile Kenneth L Allums, Senior Vice Nsident A C. Rogers, Jr., Vice Nsident. Tuscaloosa Fred L Cayton, Jn, Senior Vice President H H Turner, Jn, Viw President, Birmingham -

R Allen Franklin, Senior Vice Nsident -

John D. Jones, Senior Vice President Transfer Agents Bob Andmws, Vice President, Human Resources Alabama Power Company-S. H Booker, Vice President, Energy Services 600 North 18th Stmet.

Birmingham, Alabama 35291 Travis J. Bowden, Vice Pmsident, Finance and Treasumr ChemicalBank SS Water Street Stephen E Bradley,Vice President, New York, New York 10041 PublicInformation (For the 8.72% Nfermd Stock and the 16.68%

Rayford F. Davis, Vice President, Power Delivery Cass A Nferred Stock)

R E Huffman, Vice President Operations Services Continental Stock Transfer & Trust Company R P. Mcdonald, Vice Nsident, Nuclear 19 Rector Street Generation New York, New York 10006 (All series except 8.72% Prefermd Stock and the 15.68%

Jackson W. Minor, Vice Nsident and Comptroller Qass A Preferred Stock)

G Rornton Nelson, Vice Nsident, Industrial Development Ollie D. Smith, Vice Nsident, Corporate Real Registrars Estate Robert R Todd, Vice Nsident, Construction

'Ihe First National Bank of Birmingham

• ^

Alvm W Vogtle, Jr., Vice President Otibank, N.A J.T Young, Vice Pmsident, Fossil / Hydro Generation New York, New York 10015

. Richard A. Bowron, Secretary ChemicalBank Charles M. Deason, Assistant Comptroller New York, New York 10041 Ernest E Glass, Jr., Assistant Comptroller (For the 8.72% Prefermd Stock and the 15.68%

Qass A Pmfermd Stock)

Dale W. Oliver, Assistant Comptroller Robert C. Ford, Assistant Secretary and Assistant Tmasurer E Ray Perry, Assistant Secmtary and Assistant Treasurer Dorothy L Essig, Assistant Secmtary John H. Snyder, Assistant Secmtary William B. Hutchins, III, Assistant Tmasurer W.L Sanders, In, Assistant Treasumr William L Smith, Assistant Tmasumr All executive officers am full-time employees of the company with the exception of Mr. Alvin W. Vogtle, Jr, The Southern Company, and Mr. Robert C. Ford and Mr. E Ray Perry, Southern Company Services. Inc.

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I 35 Directors William L Rushton, III, Birminghem (1970)t President Joseph M. Farley, Birrrungham (1%S)t Protective Corporation President Sales and Service of Life and Health Insurance Frank M. Moody, Tuscaloosa(1956) John W Woods, Birmingham (1973)t Chairman of the Board Chairman of the Board The First National Bank of Tuskaloosa AmSouth Bancorporation Commercial Banking Multibank Holding Company D.H. Morns, III, Enterpnse (1956) Emest E Ladd, Jr., Mobile (1974) President Chairman Ementus FabncsAmerica Division Merchants National Bank of Mobile Bama Mill Commercial Banking Allied Products Corporation Manufacturer and Firusher of Textile Products Emil Hess, Birmingham (1975)t Chairman of the Board T Massey Bedsole, Mobile (1%3)* Pansian, Inc. Partner Apparel Hand, Arendall, Bedsole, Greaves & Johnston Attorneys Fred Morgan Clark, Eufaula(1977)* Senior Vice President and Director Howard Murfee, Prattville(1%3) United Federal Savmgs and Loan Association Chairman of the Board Financial Service of Savings and loan Association McQueen Snuth Farms, Inc. Diversified Farmers and Ginners John C Webb, IV, Demopohs (1977)* President James C. Inzer, Jr., Gadsden (1%S)** Webo Lumber Company, Inc. Partner Wholesale Lumber Inzer, Suttle, Swann & Stivender, P A. Attorneys Jesse S Vogtle, Birmingham (1979) Executive Vice President Alvm W Vogtle, Jr, Atlanta (1968) President Wilham O. Whitt, Birmingham (1979)t The Southern Company Executive Vice President Bectnc Utihty Holding Company Elmer B. Harris, Birmingham (1980) Crawford T Johnson, lli, Birmingham (1969)t Executive Vice President Pmsident Coca-Cola Bottling Company Uruted inc. Bottlersof Soft Dnnks G 'Ihornton Nelson, Birmingham (1%9)t Vice President Frank A. Rummer, Montgomery (1%9) Chairman of the Board First Alabama Bancshares,Inc. Multibank Holding Company

• Audit Comnuttee member S Eason Balch, Birmingham (1970)
  • Audit Committee alternate member Partner t Executive Comnuttee member

, Balch, Bingham, Baker, Hawthorne, Wilhams & Ward Attorneys Years in parentheses indicate date of election l

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SIRMINhkAM ANNISTON' ~, , " FLaf0f A. ,y astun. 2 3; ~ ( ~ tupoosA - ~ t' 4 Le near Y (. ~f w a m 4 G s. M CeWerTV partssam / .? naar - =; N.)%# MONTGOMERY 4 EUFAUL4 4 DOTHAN stant taassy e l -) 4 l A SUBSTATION (115.000 volts or above) TRANSMISSION LINE 3:3 INTERCONNECTION MOBILE S HYDROELECTRIC B COAL 9 NUCLEAR A OIL OR GAS Alabama Power d the Southern el0ClHC SYSlem

4 T i ALABAMA POWER COMPANY e I...9. _ g.E_._ ,B21&nce Shssts .~ a ~.....4m .a m o,,,,, a % r..,, w.w.x q va a March 31 ~~~ v C 1982 1981 Assets and Other Debits (Thousands of dollars) 5 Utility 11 ant $5,429,746 $5,089,730; Acciquiated frovision for depreciation (1,106,375) (967,406) Nuclear fuel 288,953 225,385 Accumulated provision for amortization (120,616) (66,129) tiet utility! plant 4,491,708 4,281,580 I m Nonutility property (net) 2,564 2,392 Invpstinent 'in -subsidiary companies 17,495 17,403 Other investments ;and-special funds 13 12 ' Total other propArty and inves'tments 20,072 19,807 Cash and marketable securities 12,225 20,898 funds and special deposits 681 666 Working,ics less provision for uncollectibles Receivab 174,625 120,831 205,470 167,542 Fuel 4tock g Other. mat,erials andEcupplies 25,457 22,110 Prepayments 68,178 58,683 Total'eurrent assets 486,636 390,730 Deferred debits 86,279 81,219 Total assets and other debits $5.084.695 $4.773.336 i Liabilities and Oredits'" t Common capital stock $ 224,358 $ 224,358 Preferred capital' stock 416,825 421,900 Premium on preferred capital stock 461 461 Gain on cancellation of reacquired preferred n capital stock s 1,333 479 Miscellaneous paid-in capital 918,145 881,145 s j Earnings retpined in the business - 109 658 117,098 l, "- Total proprietary capital 1,667,790 1,645,441 Long-term d4bt-Bonds ! 2,153,486 1,993,486 l ~ 7 Other Long-term debt " 329,925 323,176 Unamortized premium and discount (net) (16,974) (15,838) Total, capitalization 4,134,227 3,946,265 30,700 Jotes payable, 42,840 _163,796 Acccunts payable 120,775 Customer deposits 22,568 20,231 Taxes accrued 52,409 39,386 ,m Interest accrued 73,22E 57,269 , 0ther current liabilities 29,619 22,517 l Total current liabilities 341,439 333,899 j Accumulated deferred income taxes 488,440 413,501 l Accumulated deferred investment tax credits 83,699 56,236 ( -Other deferredJcredits 33,136 21,642 Total deferred-credits 605,275 491,379 s Injuries and damage reserve 3,754 1,793 1 , -Total liabilities and other credits $5.084.695 $4.773.336 g I ' The accompanying notes are an integral part of these financial statements. l., ( m i - ~..... m.

ALABAMA POWER COMPANY . ~ - - - - Stateminto of Incoma b -- ~ i c., .4 ..a , l .s a....e Twelve Months Ended March 31 1982 1981 (Thousands of Dollars) Operating revenues - Sales of electricity $1,620,548 $1,508,950 Other operating revenues-12,923 10,537 Total operating revenues 1,633,471 1,519,487 Operating expenses - Operation 811,008 792,702 Maintenance ~146,983 105,065 Total operation and maintenance expenses '957,991 897,767 Depreciation and amortization 157,655 129,074 Taxes other than income taxes 94,114 73,760 Income taxes 111,109 118,908 Total operating expenses 1,320,869 1,219,509 Total electric, operating income 312,602 299,978 Steam heat operat,ing income 483 272 Total operat,ing income 313,085 300,250 Other income,and deductions - Allowance for funds used during construction-Other 31,888 38,000 Other income 12,641 8,823 Other income deductions 1,017 607' Taxes 3,514 (149) Totc1 other income and deductions 39,998 46,365 Income before interest charges 353,083 346,615 Interest charges - Interest on long-term debt 246,232 199,419 Amortization of debt discount, expense and premium (net) 920 658 Other interest expense 6,326, 46,788 Total interest charges 253,478 246,865

• Allowance for funds used during construction -

Borrowed - Credit (23,131) (38,410) Income tax effect - AFUDC . Borrowed - Credit (20,921) (34,741) Net interest charges - 209,426 173,714 Net income 143,657 172,901 Dividends on preferred stock 36,890 31,554 Net income after dividends on preferred stock S 106.767 $ 141.347 The accompanying notes are an integral part of these financial statements.

ALABAMA POWER COMPANY n :, s.. -a,,%,, c.~ u .in:, Statements of' Retained Earnings - ~

e s,,

,e i._ _._.__-..~._.____,____s Twelve Months Ended March 31 1982 1981 (Thousands of Dollars) Balance at.first of period $117,098 $ 99,613 Add (deduct): Det income after dividends on preferred stock 106,767 141,347 Cash dividends on common stock (117,100) (122,000) Preferred capital stock expense (97) (1,862) Balance at end of period $106.668_ $117.098 The accompanying notes are an integral part of these financial statements. i b r.--. y wy,--ywir,-, ,--%m-- rv-- ,7---.v- + ~ -g w,vv-,--, 4 y- -,r w

ALABAM POWER COMPANY Sectement of Source, of Funda for Grass Prep:rty Additien7 f, Twelve Months Ended >w s o a March 31 .>.m i.. 1 1982 1981 "e-SOURCES Net income $143,657 $172,901 Less - Dividends on common stock 117,100 122,000. Dividends on preferred stock 36,890 31,554 (10,333) 19,347 Add (deduct) principal noncash items - Depreciation and amortization 214,604 154,439 Deferred income taxes, net 84,400 102,507 Deferred investment tax credits 42,627 14,384 Allowance for equity funds used during construction (31,888) (38,000) _299,410 252,677 Decrease (increa'se) in net current assets, other than long-term debt due within one year and notes payable to banks - Cash and temporary cash investments 8,673 (7,171) Receivables (53,808) (27,134) Materials and supplies (41,275) (20,657) Accounts payable (45,300) 15,705 Taxes accrued 13,023 17,545 Interest accrued 15,959 1,775 Other, net 2,223 (27,433) (100,505) (47,370) Other, net

• Total funds from internal sources 21,540 (1,962)

S220,445 S203,345 Sales of securities - First mortgage bonds $175,000 $350,000 Less - bonds retired 15,000 Preferred stock 40,000 Less - preferred stock redeemed 5,075 154,925 390,000 Capital contributions by The Southern Company 37,000 156,000 Pollution control obligations, net 2,014 6,107 Sales of property, net book value 49 73 Obligations under capitalized leases 4,735 36,536 Increase (decrease) in interim obligations __12,140 (363,296) Total funds from external sources 210,863 225,420 GROSS PROPERTY ADDITIONS j43jjjylB '$428,765

• Includes allowance for equity funds used during construction.

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

mfgs~~ ~ _ _ o ma w-b!"' " " "i Alabama Power Company _j Notes to Financial Statements March 31, 1982 Alabama Power Company's (ALABAMA) charter contains provisions which prohibit the payment of cash common dividends (except those paid concurrently with the receipt of a cash capital contribution in like amount) in cases where retained earnings are not at least equal to two times the annual preferred stock dividends which currently amount to $73,315,900.00. The financial statements for the twelve months ended March 31, 1982 include increased revenues, subject to refund, in the amount of $71,976,000 which after deducting applicable taxes result in a net income effect of $37,793,000. On March 19, 1981, ALABAMA filed a retail rate request with the Alabama Public Service Commission (APSC) to increase revenues by approximately $324,900,000 annually based on the twelve months ended November 30, 1980. On October 16, 1981, the APSC issued an order denying any part of the rate request. On February 12, 1982, the Supreme Court of Alabama granted ALABAMA the right to collect a portion of the requested increase, subject to refund pending final determination of ALABAMA's appeal to such court. Pursuant to s*.:h order, ALABAMA filed rates which'have been estimated to produce approximately $176 million additional revenues for the twelve-month period commencing October 16, 1981. ALABAMA then filed, on March 9, 1982, a retail rate request with the APSC seeking a $129 million annual increasa in addition to the $324.9 million increase requested in March, 1981. On January 18, 1982, ALABAMA filed a wholesale rate increase request with the Federal Energy Regulatory Commission (FERC) estimated to increase wholesale revenues by $9.4 million annually based on the test year ending December 31, 1982. In accordance with ALABAMA's request, which was required by the settlement agreement between ALABAMA and its wholesale customers in the most recently completed wholesale case,the FERC suspended the effective date of the new rates until Fby 1, 1982, subject to refund pending final determination of such case, i 1 un. a r

?~ I ALABAMA r0WER COMPAhT Internal Cash Flow for Joseph M. Farley Nuclear Power Station (Dollars in Thousands) 1981 1982 Actual Projections Net Income After Taxes $135,880 $ 31,838 Less Dividends Paid (156,871) (57,660) Retained Earnings (20,991) (25,822) Adjustments: Depreciation and Amortization 198,106 262,913 Deferred Income Taxes and Investment, Tax Credits 112,123 67,277 Allowance for Funds Used During Construction (Gross) (86,320) (69,628) Total Adjustments 223,909 260,562 Internal Cash Flow $202.918 S234.740 Average Quarterly Cash Flow $ 50.730 $ 58.685 Percentage Ownership in all Operating Nuclear Units: Joseph M. Farley Units 1 and 2 100% Maximum Total Contingent Liability $20,000 l' I i l l l l l r I l _ - _}}