ML20052H156
| ML20052H156 | |
| Person / Time | |
|---|---|
| Site: | Crystal River  |
| Issue date: | 02/19/1982 |
| From: | FLORIDA POWER CORP. |
| To: | |
| Shared Package | |
| ML20052H151 | List: |
| References | |
| NUDOCS 8205200007 | |
| Download: ML20052H156 (36) | |
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Financial Highlights 1981 1980 Revenues increased 31.8% $1,278,297,000 S970,173,000 ( Fuel And Purchased Power Were Up 38.4% $710,147,000 S513,186,000 , Earnings Per Share-Up Sharply Due Primarily to a Change in an Accounting Principic $2.80 $1.66 Dividendo on Common Stock-Up 7.3% $1.68 S1.565 Construction Expenditures Were Up $379,752,000 S316,974,000 Sales of Energy-Up 3 5% 19.5 Billion KWH 18.8 Billion KWH Average Customers increased 4% 802,787 772,265 Average Residential Usage Was Up Slightly Due to Energy Conse.vation 10,758 KWH 10,643 KWH Peak Demand - Up 15.1% 5,088,000 KW 4,419,000 KW Contents I 1 President's Letter to Shareholders 3 Dividend Reinvestment Plan f 3 Use of Energy 3 System Operations 5 Fuel 7 System Development 7 Energy Conservation 10 Research and Development 10 Environmental Compliance 13 Employees COVER: With its large rotating parts 14 Financial Review-Management's r; moved, maintenance personnel enter the Discussion turbine generator for inspection. It is in 17 Financial Statements these coils that electricity is produced. 29 Selected Financial and Operating , Data 30 Quarterly Data 31 Business and System Map 33 Directors and Officers 33 Shareholder Information ( _ _ _ _ _ _ _ _ _ _ _ - - - . . . _ _ _ . - - _ _ _ _ - - . l__
President's Letter One of tne duties and pavileges Commission. The effects of the of a corporate chief executive offi- rate relief are being badly eroded cer is to communicate regularly to by inflation. It will require the best the owners of the business. This efforts of a:I of us to mair tain is usually done through quarterly satisfactory results in today's and annual reports and at the an- economic climate. nual meeting The discipline of this In keeping with its practice of 29 process requires me to review our years, your Company's total com-progress, problems and opportuni- mon stock dividends increased in ties. It affords you an update on 1981. The dividend rate was in-your Company's position in an creased from $1.64 to S1.80 per ever-changing socioeconomic sys- share effective with the December tem. Hopefully, we both benefit. 20 dividend payment. The process must truly be one of During 1981, we made a great communication rather than ntual! deal of progress in improving our Our annual report this year em- nuclear operations. In mid-Decem-phasizes the power production ber, the nuclear unit returned to
; side of our business and attempts service on schedule following an yl to illustrate and inform you of 11-week outage for refueling and j' some of the varied activities in extensive modifications. Its capac-g this important field. The year 1982 ity factor for the calendar year 7%
jg marks the 100th anniversary of the start up of Thomas Edison's Pearl was 59.7 o versus a national aver-age of about 60 o. Its perform-Street Station in lower Manhattan. ance over the past fuel cycle ex-y Electncity was then produced by ceeded the national average. Dur-steam. This is still largely so. ing the refueling, new elements
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- with greater enrichment were in-changed - and changed beyond stalled. This means that a refuel-
% the imagination of those who lived ing outage will not be required in in those pioneering days. Our re- 1982. The capability of the unit i port gives you a view of diversified was increased by 29,000 kilowatts.
practices in a modern electnc An intensive program of training utility system. was further expanded. The unit Our financial results for 1981 continues to produce our lowest represented a substantial cost kilowatt-hours, and its safe, improvement over those for 1980. legal and highly productive opera-Earnings per share reached $2.80 tion constitutes one of our highest ! versus $1.66 for the year earlier, a prionties. I gain of 69 'o. This improvement The importance of the nuclear stemmed from rate relief in both unit has led to considerable con-the retail and wholesale sectors of troversy with the Flonda Public our business, an accounting Service Commission. In two sepa-modification to recognize unbilled rate proceedings, they have at-revenue and from a more realistic tempted to force the Company to treatment of fuel expenses by the Flonda Public Service 1
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.7 9 ml Due to the worldwide economic
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situation, widespread energy con- We have not been able to protect s T L1 servation and fuel-switching, some our investors from erosion of [# }. E.y\ h[,_ J ,( reduction in oil prices occurred dur- their assets.
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. .' ing the past few months. This is a As a result, many utilities today i i', ~
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b^ ,. L . ments in 1979 and 1980. Florida Florida Power took its initial steps
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,n. . ;- g- push to coal as rapidly as possi-t tric Fuels Corporation was cre-
. ~. - . dp 4 . h.f ble. The goodwill of the OPEC na-tions is a very illusory quality. ated. At the annual meeting in 5th.&.__ _ _ x a March 1982, you will be asked to They can be expected to manipu- approve a corporate restructuring. I te the world oil prices upward if This will permit the development r ent Andre H Hines, r , ar Ily L crifin, senior Vice President, Engineering an opportunity presents itself. of non-regulated business oppor-and construction (center) and George c. On January 12,1982, our system tunities under a new parent Moore, Vice President, Power Production (lef t). Was subjected to a severe test company, Florida Progress Corpo-due to the extremely cool weather ration. The purpose of these pro-striking Florida, as well as most of posed changes is to position your refund a total of approximately Company for movement into more the United States. The system re-
$15 million in revenue to our cus- sponded properly to the new peak profitable areas of activity and to tomers, while alleging inadequate I ad of 5,347,000 kilowatts. The increase the rewards for your in-management. We have vigorously vestment. These changes will not generat,ng i units performed well denied these charges and are pur- have a material ,mpact for several and our transmission system and i suing the matter in the Florida years, but they do offer a promise interconnections answered the Supreme Court. of better days ahead. In this situa-challenge ,n i a very satisfactory During 1981, we were very heav- manner. tion, all will benefit - the share-ily engaged in a multi-faceted en- holder, the customer and During the past ten years, the ergy conservation program de- the employee.
electric utility industry has been signed to delay the need for future exposed to strains and pressures For the Board of Directors, generating plant additions. This of a massive nature. Record in-program is funded through the creases in money costs, the over-conservation cost recovery adjust-ment clause in retail billings. I am all effects of inflation, runaway fuel [ costs and changing patterns of encouraged with the initial results. , consumption of electricity have However, a long, hard effort will combined to cause dire financial J be necessary if the very worth- , distress. The increasing costs as-while goals are to be accom-sociated with regulation of more President plished. The stakes are worth the and more of our activities and the effort, however. If we are success-unwillingness of regulatory bodies ful, we can delay caoital expendi-to allow adequate prices have February 19,1982 tures of over $1.5 billion during the sapped the ,ndustry's i financial decade of the 1980's. strength. The industry as a whole and your Company in particular have fought very hard for the re-sources necessary to do our job. 2 1
Earnings and Dividends Per share average residential usage in-
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income for dividends paid and re- creased only 1.1% during 1981. invested in Company stock from This is attributed to an intensive January 1,1982, through Decem- conservation campaign and the; ber 31,1985. Individuals may elect effect of increased base rates - m to defer federal income taxes on during the' year. reinvested dividends of up to Our co'mmercial customers used
$1,500 each taxable year on joint 4.3% morel energy'in 1981'than in
,D no returns or $750 on single returns. ~
1980, compared to the 1.8% de-gg 9 p Shares acquired under this elec- crease in 1980. The 1981 increase qhh? - ko tion will have a zero tax basis. reflects relatively stable economic 1 Before selling any Company com- conditions in Florida during the ph Ii g gh mon stock, we advise our share-hpb ph% year, and a 4.2% increase in com-holders to consult with their tax mercial customers. g qp advisor on the effect under the new tax law. Energy sales to our industrial jfl} customers decreased 5.5% during n m o m e' USE OF ENERGY 1981. This decrease is a result of E ani,np h Dweinds Paid otal sales of electricity in- reduced production in two of our
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major industrial customer catego-creased 3.5% compared to 7% during 1980. Our average cus- ries-phosphate mining and DIVIDEND REINVESTMENT tomer growth rate during 1981 was chemicals. PLAN 4%, down from the 5% in 1980. The remainderof ourenergysLes Over 8,500 common sharehold- during 1981 primarily represents Energy sales to our residential ers, or 20%, now participate in the customers increased 5% during sales to other electn,c utilities and Company's Dividend Reinvestment to governmental authorities which 1981. This is well below the 6.5% Plan. During 1981, there were sev- growth rate in 1980, despite abnor- increased 7.2% over 1980. eral major improvements made to mally cold weather which caused the Plan. SYSTEM OPERATIONS a 49% increase in heating degree
- 1. Effective with the December days during the first quarter of Operating our base load and 20 dividend payment, participating 1981. In spite of the cold weather, peaking units on an efficient basis shareholders have the opportunity requires balancing the changing to reiri est all or a portion of their load requirements of our custom-dividends to purchase additional Kilowatt-Hour Sales ers with the cost of available fuel
- 22mo shares at a 5% discount from the and purchased power. The Com-market price. pany's Energy Control Center
- 2. Optional cash payments of . 2uxu coordinates our system reliability up to S2,000 can be invested on a by controlling the use of our re-l monthly basis.
g 20 , sources to optimize power produc-tion and operating expenses.
- 3. Employees can participate From its inception, the Energy through monthly payroll deductions. E' o'ooo Control Center automatically con-New Tax Benefit trolled the operations of our base 18 "
load generating units. During 1981, Our Dividend Reinvestment Plan our gas turbine peaking units were qualifies for the tax incentives pro- 17.000 placed under automatic control of vided under the Economic Recov- the Energy Control Center. This ery Tax Act of 1981. The act pro- W e automatic control of both peaking vides exclusion from taxable 80 at 82 83 e' W ESTVA'ED
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and base load units provides a more finely tuned management of Nuclear Energy our production capability and a At year-end 1981, our generating During 1981, prior to being taken more reliable, overall cost-effective capability was 5,255,000 kilowatts, out of service for a scheduled re-system operation. The Company's system capability fueling, our Crystal River nuclear represents 3,537,000 kilowatts of unit operated at a 75% capacity
, in early 1982, the Company increased its capability to base load generating units and factor. During August 1981, the purchase power at economical 1,718,000 kilowatts of gas turbine unit set a Company record by op-rates through new intercon- eaking units. With 280,000 erating at a one-month capacity nections with the cities of kilowatts of firm purchased power factor of 99%. The Nuclear Lakeland and Orlando. The available, our total capability at Regulatory Commission approved Lakeland interconnect,on w.ll year-end 1981 was 5,535,000 a 29,000 kilowatt increase in ca-i i provide the Company with the kilowatts. pacity which was implemented opportunity to purchase 200,000 during the refueling outage.
Anclote Cooling Towers kilowatts of capacity from that Completed During the refueling, which m.- city's new coal-fired generating cluded replacing over one-third of The Company's first saltwater unit. The Company also increased cooling towers, located at our
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- 8' its purchase of coal-fired power Anclote Plant, became operational from 200,000 kilowatts to 250,000 "' 9" in August 1981. They were kilowatts from The Southern * " ""*"
- installed as the result of an Company unn May 1982. performed. These included re-Environmental Protection Agency placement of the present com-Sy; tem Capability order to lower the temperature of puter with a more advanced sys-Our system was adequate to ty warm wata discharged from tem, a complete turbine generator meet the record 5,347,000 kilowatt this oil-fired plant during the sumer. e c st of mese two inspection and replacing seats on peak demand on January 12,1982. the reactor coolant pumps. The
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- U-However, in January 1981, as a unit will not require another refuel-result of record low temperatures, Coal-Oil Mixture Conversion ing outage until the spring of 1983.
a system peak of 5,088,000 This is a change in the interval To help reduce our dependence kilowatts was reached on imported oil, the Company is in between refuelings from 12 to 18 representing a 15.1% increase months, which will improve the the process of converting its P. L. above the 1980 winter peak. Bartow Plant, Unit No.1, from urit's availability. < During that peak period, about buming oil to buming a composite FUEL 250,000 kilowatts of demand by coat-oil mixture. This conversion , . . certain interruptible industrial includes modification of the boiler 4 customers was curtailed in order as well as the installation of an to meet overall customer demand. electrostatic precipitator. The j Due to the unavailability of some competitively priced supply of conversion is scheduled to be generating units at the time of e tricity to support Florida s eco-completed in April 1982, at a cost peak, the Company resorted to a n mic growth and development. of about $11 million. The coat oil program of planned residential mixture to be used is supplied by "9 # "" and commercial outages for short COMCO, a partnership of the "" periods of time on a rotating basis based primari./ on oil, to one subsidiaries of Dravo Corporation, throughout our service area. This A. T. Massey Coal Company and fj"e( reduced requirements by an our subsidiary, Electric Fuels [ase the e aity of - additional 150,000 kilowatts. Corporation- supply, the Company is achieving greater control over its fuel sup-5 j l, i
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Our long-range fuel objective is to obtain fue' at the lowest eco-yd' % ' g ' nomic cost and to diversify by
$ .,w t s type. source. timing and transpor-tation method Our major fuel. until
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mm fiuctuated throughout 1981. how-The nerve center of the generating plant is ever, as a result of a worldwide it'e control room Manned 24 hours a day, oversupply. oil Costs at year-end virtuaHy the entire piant is operated from 1981 were somewhnt lower than these controi panels. The responsibihty for gg7_ggg j gg ggg ,te the erratic safe, rehable operatior s a d avoidtng potential problems requires expertenced operators who have received many years of both formal and on the-job tra:ning e"Ced durf ng 1001 O
struction of Crystal River Unit Nos. In 1985, coal will be our primary 4 and 5 is completed. Annual Peak Demand Forecast fuel, with an annual consumption The Florida economy is pro-of over 5 million tons at our jected to expand during the 1980's. ! l ll Crystal River Plant site. Our sub. Florida will go from the seventh to [ p sidiary, Electric Fuels Corporation, the fourth most populous state by / mu will supply all of our coal require. 1990. Population is expected to in- j " ments by both water and rail crease at 2-3% on an annual 9 - transportation. We will continue to basis during the balance of the wm Energ/conservanon use natural gas in certain generat. 1980's. During the 1980's, we ex- ma ing units when it is available, but pect new customers to increase at its use is currently restricted by an average annual growth rate of pipeline capability in Florida, avail. 3% However, if car conservation ability of gas in the field and gov. efforts succeed, average annual ernment regulation. During 1981, increases in our winter peak de-our fuel mix was 48% oil,26% mand will be slightly over 1% and coal,20% nuclear and 6% gas. In energy sales growth will te 1985, our fuel mix is estimated to under 2% m m w s be 60% coal,25% nuclear,12% oil and 3% gas. ENERGY CONSERVATION 1981, the Company received ap-The Florida Public Service Com. proval from the Commission to im-SYSTEM DEVELOPMENT mission established strict energy plement its Energy Conservation The basic ooligation of the conservation guidelines for all and Load Management Plans. Company is to provide our cus- Florida utilities in an effort to re- Over the next ten years, the tomers with an adequate and reli- duce the growth of peak demand Company can postpone an invest-able source of electric energy at a and energy sales. During 1980 and ment of more than $1.5 billion in reasonable cost, while protecting and enhancing our shareholder's ,, , , . . investment. To meet this chal-lenge, the Company's strateg_c i
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. t A-events. During the 1980's, energy g,Q ' f.~.. *) C. A cy'. -Q/- . ,TE [j conservation will be a critical part
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During the early 1980's, we will also rely on power purchased from neighboring utilities until con- Many technical support personnel are required for powcr plant operations. As examples: laboratory technicians monitor the quality of the boiler water which is converted to steam. Control technicians maintain automatic and electronic control systems. Maintenance specialists ensure that all equipment is operating at its most efficient levels. 7 l
E generating plant construction costs through a successful energy conservation program. To accom-plish this goal, the Company has _ embarked on one of the most am- g-bitious energy conservation pro- - grams in the country. & .. . , Our success in meeting most of our initial energy conservation m.. goals can be attributed primanly to an aggressive and creative adver- . p
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- 'N ers in our 32-county service area by depicting expenences of Com '(j
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. ,. . : s .. . : ., v :v.s-Dunng 1981, the Company also emphasized several new and im- In fossil-fueled generating units, the boiler c nets the fuels to stearn and the proved energy conservation Energy Saver New Home turbine generators (above) convert the programs A ward Programs steam into electricity. Representing the Audit Programs These programs offer guidelines targest items of cost of piant construction.
to building contractors and home the boiler and the turbine generator are Supplementing the Company's carefuliy designed and engineered to buyers for selecting energy saving standard $15 Home Energy produce eiectricity sateiy and reiiabiy at options to meet individual needs. Checkup audit for residential cus- minimum cost. During 1981, these programs were tomers, our programs now include expanded to include commercial
" walk through" audits provided at nd industnal construction. vation standards, including high no cost to customers. Through To stimulate even greater sav_ efficiency heat pumps, wiring for these programs, our energy audi.
ings in energy usage, the Super load management and heating wa-tors locate obvious areas of Energy Saver New Home Award ter with alternate forms of energy. energy waste in residences and recommend measures which will Program was initiated in the fall of Load Management Programs enable customers to use energy in 1981. This new program allows Restraining the growth of peak a more cost-effective manner. Dur. customers to receive a S350 demand assures adequate gener-ing 1981, the Company performed credit on their first electnc bill ating capability for the future and a total of 18,702 energy audits and when they buy or build homes helps maintain the Company s fi-expanded these programs to in. meeting very stnct energy conser-nan a in g ng inn aM clude commercial and industna load control equipment and rate customers. 8
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Q [l,-7.: -_ k many customers in connecting ; r ..g . design concepts, we hope to help these devices to our system, the .. .'. _ '. ~,. .- our customers manage energy de-mand during high cost peak peri-Company installed a 9 kilowatt wind generator at our General
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monthly electric bills. COMPLIANCE , , In all of our Company's facilities J, _ w 4 RESEARCH AND planning and daily operations, we a
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,y energy sources or refinements environmental regulations have W&*
which show potential for imple- eased, our Company continues - J mentation. We recently began op-erational testing of a waste-wood to feel the financial impact and business uncertainties associated W'P # D " M i;d gasifier which was designed and with the massive environmental j j~ ~ constructed at our Suwannee regulations at national, state River Plant. The gasifier will pro- and local levels. Several of the vide enough wood-derived gas to more significant regulations, fuel 2,000 kilowatts of our 33,000 such as the national Clean Air kilowatt Suwannee River Unit Act, are currently under review for No.2. The objective of this experi- possible amendment. mental project is to determine the New regulations dealing with the i feasibility of using wood-derived complex phenomenon of acid dep-gas in a combustion turbine. This safeguarding the impact on our osition, often called " acid rain,,, unique fuel is Ieasible ior our surr unding air and water is a vital part of are being proposed at the national the production of electricity. The design Company due to the availability of level which may have significant and operation of generating plants require large tracts of woodlands which operating and financial impact a broad spectrum of environmental could be managed for a continu- on our system if enacted into faciutin, such as the electrostatic ous supply of waste wood. law. The Company is actively par- precipitator under construction (top) which reducu the air p Hutants and the natural To determine the potential for draft coohng tower (bottom) which wind power and the interest of reduces the temperature of the water discharged from the plant. l i 10
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a" As a pubhc util:1, our business 3 ; -- ; .' f.1,^ j-f # .[l' ' , is essentia;ly peop:e serving peo- 4 c: .A l. , % '. -
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efficiently manage and operate the / Company. The number of employ-Ei
- ees required to staf' our Company has been charging over the years m .n iesponse to changing condi, Producuon efhciancy : nd rehabnity is the
- tic is. Much of our .ncrease in em-preventi.tive rnanntenance and periodic ployees G m the professional mainteriancy outages. A turbine generator y areas such as engineenng, aC- is s,cheduled for overhaul approximately s .m countnq and computer sciences. every five years. However oatages for c Many of our new posi
- ions re- bcd" maintenance occ'u annuany.
sullod frOfTi gledtly expanded Scheduhng for these mtages takes pace years in advance to assure that adequate h regi;latory requirernents. replacement energy is availabie during pri ds the unite are oN-Hne. l Employee Development Job productivity is essential to an operationally sound and finan. ,,, i cially healthy company. Most em-S . ployees already possess the skills rwuired te perform their jobs, t;ut V [ are encouraged to strengthen and expand their skills. To continually upgrade aur proouctivity and meet I highv pe-formance standarcs. ( skills training is orovided for unior, office and technical employees. The Company offers eriucation re. D imbursement 'o help ensure that I we will have er iploves with tiie "'D'"*9'"*"*'"'*"'""'"
~ 1 depicted on these pages, is an integrai rYCe,saiy educahon and trau ung part of production activities. speciai
[ lo fill out f uture requirertents. techniques such as ultrasonic and magnetic particle fault detection are used to ensure the reliability of ali the parts tha; make up the equipment. b T $ 13 I
The Company has a corrpre-hensive program to recognize and growing states in the nation. Therefore, we are not able to fund i develop fsture managers. This mf Directors promoted three assist. ant vice presidents to positions of our construction program with program identifies these employ-funds derived from operations. In ees and provides them vith a vice p'ee' dent. Those officers pro _ moted were Joseph F. Cronin, 1981 and 1980, funds derived from variety of job expenencee in order to help them grow are to Corporate Communications: John operations provided 52% and A. Har. cock, Nuclear Ooerations 41 e, respectively, of the funds
' allow top manac ement in evaluate
- their potential and Ph. lip C. Hnnry, Transmission used for construction. The balance and Substation Proiects. of the 1981 and 1980 construction Equal EmrJoyment programs were funded through Opportundy Employee Communications short-term borrowings and long-Dunng 1981, tia Company made Our Company continues its term financings.
significant progress in achieving its efforts to see that all employees et erall internal affirmative action are kept informed aoout events goais We continued to stress our and c:rcumstances affecting the The Company's 1981 construc-commitment of taking affirmative Company and themselves. We be. tion program totalled $380 million. sction in the emp!oyment of all lieve that every employee ;an To help finance this program, the individuals and ensunng equal em- speak for the Company. Thge. Company sold $10 million of 11% ploymere cpportunities for 2 l of i fore, they must be fully informed cumutative preferred stock in Feb-oui ;mp;oyees. Dunng 1982 this on a brnad area al subjects in ruary through a private placement. program will be forher enhanced order to resoond to questions in in May, $50 million of pollution by rduct'ng on-going 'ormal . ed add:t;on, we emphasize the recog_ control revenue bonds were sold a firmative action training for mln- nation of employee deeds and ac. at an interest rate of 9% o. Three agers throughout the Company. knowledge special accomplish. million shares of common stock ments by employecs throughout were soid at a price of s14.00 per Union Contract our system. Many of our employ. share, providing net proceeds of t About one-half of our employ ~ ees contnbute Ngnificantly to the $40.4 million. An additional $11.8 ees are represented by the Inter- communities we serve. Their lead _ rnillion was received from selling
- national Broinerhood of Electncal ership and service benefit many new common stock to the Divi-Workers. Negotiahons for the pur- volunteer organizations We are dend Reinvestment Plan and em-pose of establishing a new con- grateful to our employees f their pioyee berefit plans. In December, tract began in Octcbe: 1931. The service to the Company, its cus_ a $75 million variable rate term contract expireo December 13, tomers and the community. loan was placeJ with a 1981, but was extended until the commercial bank.
Company and the Union agree on FINANCIAL REVIEW- The Company can borrow up to contract changes. MANAGEMENT'S $100 million in short-term funds fr m banks or through the sale of
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Management Changes Liquidity and Cap.tal i commerdal paper. As the level of The Comoany has functiened Resources short-term debt outstanding in-well dunng difficult times as a r+ Electric utilities are in a highly creases. the Company issues sult of a tradition of leadership in long-term secunties. Sources of capital intensive industry and the our management team. la recogni- Company is in one of the fastest capital include bonds, preferred tion of the need to provide contin- stock, preference stock. unse-uou.s strong leadership, thc Board 14 e;
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4 Meeting customer demand for future energy requirements translates into more Construction Espenditures power production f acilities. Our Crystal River Unit Nos. 4 and 5 (above) will come program. However, the actual con-on-line in 1982 and 1984. respectively. They StruClion expenditures in Hrred will provide a total of 1.280.000 kilowatts of may Vary frOm the estimates for additional coal-fired production- many reasons. These include completing our generation construction program for the 1980 s. changing economic conditions, in-
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timehness of rate relief, regulatory cured debt and common stock. requirements and the Company's The proceeds from the sales of ability to attract capital at reason-long-term securities are used to able costs to finance the expendi-repay short-term debt-tures. The 1982-84 construction i Construction Program program will require additional onq-term financings. The nature The construction program is de-and amount will depend on. veloped from the Company's long-
- - - - - - ~
among other things, the resuits of ' range facihties plan. The Company operations and market conditions plans to spend approximately $400 mdhon, $330 mdhon and $300 mil- prevaihng each time the financings hon in 1982,1983 and 1984, re- are to be undertaken spectively for its construction 15
' II_
rate increases as more fully dis-While rate relief was granted in cussed in Note 7b in the Notes to Financial Statements. nuclear unit increasing as a result 1981, significant rate relief will be In July 1981, the Federal Energy of Nuclear Regulatory Commission necessary in .he future. Inade-Regulatory Commission approved requirements. quate rates could require the Company to curtail its construction a Settlement Agreement between Other Expenses program. the Company and its wholesale Intercst on long-term debt in-customers. The Agreement pro-Operating Results creased substantially in 1981 due vides for an annual rate increase to increased interest rates and ad-Revenues of $14.7 million in wholesale rates. ditional long-term financing. The trend of increasing reve- The Company had been collect-ing, subject to refund, an increase in 1980, construction work in nues is due primarily to three fac-of S19.6 million since April 29, progress more than doubled over tors. The major contributor is in- 1979 and in 1981, there was an creased fuel costs which are 1980. The difference between the wholesale revenues collected and increase of 82%. This resulted in passed on through the fuel adjust-the amount of the Settlement significant increases in the allow-ment clause. Revenues have also Agreement, plus interest, was ance for equity and borrowed increased due to higher base refunded in August 1981. funds used during construction. rates and continued customer naase n consMon growth. The impact of these Operating Expenses during 1981 resulted from con-factors is shown in the Fuel expenses have increased tinued activity at our Crystal River following table: . significantly during the 1979-81 Unit Nos. 4 and 5. This trend is 1981 1980 1979 period. Price increases amounted expected to continue until Unit No. (umions) to 92%,83% and 77% of the total 4 is completed. Increased fuel increase in fuel expenses for the costs . $191.4 5 63.0 $60.7 years 1981,1980 and 1979, respec-Accounting Changes inc watt- tively. The remaining increases in In December 1981, the Company hou s 3 58 4 m fuel expenses were essentially began accruing the non-fuel por-increased base tion of revenues related to service rates 47.4 25.9 - due to increased generation Other . 35.9 .9 requirements. rendered but unbilled as of the (12.2) Purchased power evpenses in- end of the period. This accrual,
$308.1 5134.7 584.3 along with the deferred fuel ac-creased during '.he 1979 and 1980 periods. These increases had pr- counting which began in 1980, pro-Other Revenues for 1980 de- vides a closer matching of reve-creased due to the Company de- marily been the result of the need to purchase replacement power nues ano expenses. For the year ferring approximately $13.6 million 1981, the change in the non-fuel in retail feal revances as a result due to the extended nuclear unit portion of unbilled revenues of the revised fuel aojastment outages. In 1981, purchased power again increased bat this was pri- amounted to $6.3 million and is clause. In 1981, other revenues in.
marily due to the increased cost reflected as an increase in other creased significantly due to the revenues. The cumulative effect of recognition of the past deferral of per kilowatt-hour of interchange power received. this item, resulting from a change retail fuel revenue in conjunction n an ccounting principle, is re-with the recording of S6.3 million Other operation expenses in- flected in the income statement of unbilled revenue. creased at an annual compound ne ncoma rate of 22% during the past three y a a Rat This change represents an after years. These increases are due n se b net income During 1981, the Florida Public primarily to the effect of inflation in Service Commission granted retail all areas of our operation, com-bined with the expenses of the 16
FLORIDA POWER CORPORATION Statements of Income FOR THE YEARS ENDED DECEMBER 31,1981,1980 AND 1979 1981 1980 1979 (Thousands) OPERATING REVENUES (Notes 1b and 7b): Residential $ 549,946 $410,018 $356,597 Commercial 255,906 208,209 193.886 indud!"ial 174,994 145,470 121,336 _Other 297,451 206,476 163,674 1,278,297 970,173 835,493 OPERATING EXPENSES: Operation-Fuel (Note Ib) 607,872 420,552 359,579 Purchased power 102,275 92,634 52,168 Other 117,479 93,964 74,329 827,626 607,150 486,076 Maintenance (Note 1c) 66,914 62,484 44,885 Depreciation (Note Ic) 75,484 69,797 65,010 Taxes other than income taxes 64,924 53,374 48,665 income taxes (Notes 1g and 2) 73,580 51,473 63,517 1,108,528 844,278 708,153 OPERATING INCOME 169,769 125,895 1_27,340 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction (Note 1d) 8,144 2,687 769 Miscellaneous other income and (deductions) 4,435 (136) 4,300 12,579 2,551 5,069 INTEREST CHARGES: Interest on long-term debt 81,880 59,087 47,994 Other interest expense 9,609 7,096 11,398 91,489 66,183 59,392 Allowance for borrowed funds used during construction (Note 1d) (11,786) (5,816) (502) 79,703 60,367 58,890 INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN AN
; ACCOUNTING PRINCIPLE 102,645 68,079 73,519 Cumulative effect to January 1,1981, of accruing unbilled revenues-net of income taxes of $10,916.000 (Note Ib) 11,499 - -
NET INCOME 114,144 68,079 73,519 DIVIDENDS ON PREFERRED STOCK 19,074 18,197 13,649 NET INCOME AFTER DIVIDENDS ON PREFFRRED STOCK $ 95,070 $ 49,882 $ 59,870 AVERAGE SHARES OF COMMON STOCK OUTSTANDING (Note 3) 33,938,859 30,137,689 28,951,212 EARNINGS PER AVERAGE COMMON SHARE Before cumulative effect of change in an accounting principle $2.46 $1.66 $2.07 Cumulative effect to January 1,1981, of accruing unbilled revenues-net .34 - - EARNINGS PER AVERAGE COMMON SHARE (Notes 1b and 3) $2.80 $1.66 $2.07 The accompanying notes are an integral part of these financial statements. , 17
FLOR:DA POWER CORPORATION Balance Sheets DECEMBER 31,1981 AND 1980 Assets 1981 1980 (Thousands) ELECTRIC PLANT (Notes 1,7a and 8): In service $2,196,645 $2,080,326 Less-Accumulated depreciation 542,876 475,940 1,653,769 1,604,386 Construction work in progress 445,860 245,516 Nuclear fuel, at amortized cost 97,230 61,362 2,196,859 1,911,264 OTHER PROPERTY AND INVESTMENTS: Nonutility property and other investments 3,718 4,466 Investment in and advances to subsidiaries (Note 1e) 21,352 13,562 25,070 18,028 CURRENT ASSETS: Cash 2,965 2,888 Special deposits 9,227 22,716 Accounts receivable, less reserve of $1,424,000 in 1981 and
$1,186,000 in 1980 80,140 75,770 Accrued unt,illed revenues (Note 1b) 28,667 -
Income taxes receivable - 16,442 Materials and supplies at average cost-Fuel 120,048 99,169 Plant materials and operating supplies 34,905 32,283 3,3*2 4,003 l Prepayments 279,334 253,271 { DEFERRED CHARGES: Unamortized debt expense, being amortized over term of debt 7,139 6,730 g ' Deferred fuel expense (Notes 1b and 7b) 27,292 28,190 Other 27,499 26,108 61,930 61,028
$2,563,193 $2,243,591 /
The accompanying notes are an integral part of these financial statements. I 18
m Capitalization and Liabilities 1981 1980 (Thousands) CAPITALIZATION (see accompanying statements): Common stock equity S 681,169 $ 590,576 Cumulative preferred stock without sinking funds 133,500 133,500 Cumulative preferred stock with sinking funds 93,971 85,540 Long-term debt 1,024,715 912,895 1,933,355 1,722,511 CURRENT LIABILITIES: Accounts payable 59,441 34,145 Customers' deposits 30,864 27,767 l Accrued income taxes 8,466 - l Accrued other taxes 23,906 29,282 Accrued interest 17,929 16,356 Other 10,664 9,759 151,270 117,309 Long-term debt due within one year 8,071 7,745 Notes payable 30,000 20,755 189,341 145,809 DEFERRED CREDITS: l Accumulated deferred income taxes (Note 1g) 307,400 270,227 Accumulated deferred investment tax credits (Note 1g) 130,757 102,759 Other 2,340 2,285 440,497 375,271 l COMMITMENTS AND CONTINGENCIES (Note 7) l
$2,563,193 $2,243,591 19
s FLOfCDA POWER CORPORAllON Statements of Capitalization DECEMBER 31,1981 AND 1980 1931 1930 Common Stock Usted (Thousc.nds) COMMON STOCK EQUITY (Note 3): New York Common stock without par value, authorized 60,000,000 shares (941,024 shares reserved for Stock Exchange conversion of convertible debentures), outstandir. ? Transfer Agent for 36,493.269 shares in 1981 and 32,622,650 in 1980 $ 352,460 $ 298,339 Common Stock Retained earnings, including $63.241,000 not available for dividends on common stock 328,709 292.237 Manufacturers Hanover 681,169 35 % 590,576 34 % Trust company New York, N.Y. CUMULATIVE PREFERRED STOCK (Notes 4 and 5):
$100 par value, authorized 4,000,000 shares-Shares Outstanding Without Sinking Funds December 31,1981 4% to 4.75% 335,000 33,500 33,500 7.40 % 300,000 30,000 30,000 500,000 50,000 50,000 Transfer Agent for 7.76 %
200,000 20,000 20.000 Preferred Stock 8.80 % 133,500 133,500 chemical Bank New York, N.Y. With Sinking Funds 10 % 339,713 33,971 35,540 10.50 % 500,000 50,000 50,000 11 % 100,000 10,000 - 93,971 85,540 227,471 12 % 219.040 13 % LONG-TERM DEBT (Note 6): First mortgage bonds- Trustees for 8,005 First Mortgage Bonds 3%% due July 1,1981 - 3%% due November 1,1982 8,349 8,611 Morgan Guaranty Trust 3%% due Novemter 1,1983 5,486 5,661 Company of New York 3%% due July 1,1984 6,669 6,879 Florida National Bank 3%% due July 1,1986 11,037 11,387 Jacksonville, Florida Maturing 1987 through 1996-4%% to 13%% 286,130 288,405 Maturing 1997 through 2006-6%% to 9% 477,046 478,008 Premium, being amortized over term of bonds 5,169 5,693 Par value of bonds reacquired to meet cash sinking fund requirements (4,663) (4,809) F 795,223 807,840 Trustee for Convertible debentures,4%% due August 1,1986 Convertible Debentures (convertible into shares of common stock at the rate Irving Trust company I of one share for each $20.50 of principal amount) 19,291 19,428 New York, N.Y. 11 % electric consumer capital notes due October 1,1985 4,697 4,797 Variable rate term loan due December 15,1986 75,000 - Guarantee of pollution control revenue bonds-Maturing May 1, 1984-9 % % 50,000 - Maturing 2000 through 2010-6%% to 10%% 88,575 88.575 1,032,786 920,640 Long-term debt due within one year (8,071) (7,745) 1,024,715 53 % 912,895 53 % S1,933,355 $1.722,511 The accompanying notes are an integral part of these financial statements. ( 1 20
Statements of Source of Funds Used for Construction FOR THE YEARS ENDED DECEMBER 31,1981,1980 AND 1979 1981 1980 1979 SOURCE OF FUNDS: ""# Funds Derived from Operations-Net income $114,144 $ 68,079 $ 73,519 Less-Dividends on common and preferred stock 76,039 65,351 54,486 Earnings retained in the business 38,105 2,728 19,033 Items included in net income not requiring (providing) funds-Depreciation 75,484 69,797 65,010 Amortization of nuclear fuel 10,741 9,562 8,748 Deferred income taxes and investment tax credits 70,736 77,009 38,402 Deferred fuel expense 898 (28,190) - Allowance for all funds used during construction (19,930) (8,503) (1,271) 176,034 122,403 129,922 (Increase) Decrease in Net Current Assets (exclusive of tempo-rary cash investments and current debt)(a) 7,898 (102,615) (21,842) Funds from Financing and Other Sources (Uses)- Common stock 42,000 44,625 - Common stock-employee benefit and dividend reinvestment plans 11,828 6,600 4,541 Preferred stock 10,000 - 49,407 First mortgage bonds - 200,000 - Pollution control revenue bonds 50,000 38,000 40,000 Electric consumer capital notes - 4,797 - Electric consumer capital notes redeemed - (11,277) - Variable rate term loan 75,000 - - Retirement of pollution bond anticipation note - - (10,000) Long-term debt and preferred stock matured or reacquired for sinking funds (13,660) (5,962) (6,022) (Increase) decrease in temporary cash investments - 6,000 (2,000) Increase in short-term debt 9,245 11,146 9,609 (Increase) decrease in investment and advances to subsidiaries (7,790) (5,090) 3,853 Other sources-net (733) (156) (5,640) 175,890 288,683 83,748 359,822 308,471 191,828 Allowance for All Funds Used During Connruction 19,930 8,503 1,271 FUNDS USED FOR CONSTRUCTION $379,752 $316,974 $193,099 ' (a) Analysis of (Increase) Decrease in Net Current Assets-Special deposits $ 13,489 ($ 15,178) ($ 5,806) Accounts receivable (4,370) (26,541) (12,238) Accrued unbilled revenues (28,667) - - Income taxes receivable 16,442 (16,442) - Materials and supplies (23,501) (11,828) (35,515) Accounts payable 25,296 6,834 8,113 Accrued income taxes 8,466 (43,283) (3,779) Accrued other taxes (5,376) (4,545) 19,389 Accrued interest 1,573 (1,420) 6,822 Other-net 4,546 9,788 1,172
$ 7,898 ($102,615) ($ 21,842)
The accompanying notes are an integral part of these financial statements. l 21
FLORIDA POWER CORPORATION Statements of Retained Earnings FOR THE YEARS ENDED DECEMBER 31,1981,1980 AND 1979 1981 1980 1979 (Thousands) Balance at Beginning of Year $292,237 $291,119 $272,695 Add-Net income after dividends on preferred stock 95,070 49,882 59,870 387,307 341,001 332,565 Deduct: Cash dividends on common stock; quarterly dividends equiva-lent to the following annual rates-
$1.38 - - 29,912
$1.50 - 10,947 10,925
$1.53 - 22,854 -
$1.64 40,599 13.353 -
$1.80 16,366 - -
Expense of issuing common and preferred stock 1,633 1,610 609 58,598 48,764 41,446 Balance at End of Year $328,709 $292,237 $291,119 The above amounts include undistributed earnings of subsidiaries as of December 31,1981,1980 and 1979 of
$2,653,000, $1,936,000 and $1,004,000, respectively.
Notes to Financial Statements (1)
SUMMARY
OF StGNIFICANT ACCOUNTING POLICIES (a) Electric Plant-Electric plant is stated at the original cost of construction which includes payroll and related costs such as taxes, pensions and other fringe benefits, general and administrative costs and an allowance for funds used during construction. Substantially all the Company's electric plant is pledged as collateral for the first mortgage bonds. (b) Operating Revenues and Fuel Expense-Previously, the Company recognized revenues concurrent with billings to customers on a cycle billing basis. To more closely match revenues and expenses, in 1981 the Company began accruing revenues for service rendered but unbilled. The pro forma effects of this change in accounting principle are as follows: 1980 1979 As Reported Pro forma As Reported Pro forma Net income (thousands) $68,079 $70,380 $73,519 $74,136 Earnings per share $1.66 $1.73 $2.07 $2.09 The cost of fossil fuel for electnc generation is charged to expense as burned. The cost of nuclear fuel is amortized to fuel expense based on the quantity of heat produced for generation of electric energy in relation to the cuantity of heat expected to be produced over the life of the nuclear fuel core. The Company is allowed to recover fuel and purchased power costs through fuel adjustment clauses. Revenues or fuel expenses are adjusted for differences between recoverable fuel costs and amounts included in current rates. The Company has been authcrized by the Florida Public Service Commission (FPSC), to provide for the recovery of estimated future permanent storage and disposal costs of spent nuclear fuel beginning Apnl 1,1982. The Company will petition the Federal Energy Regulatory Commission during 1982 to recover these costs from wholesale customers. 22
Notes to Financial Statements (c) Depreciation and Maintenance-The Company provides for the depreciation of the original cost of properties over their estimated useful hves on a straight-kne basis. The annual provision for depreciation, expressed as a percentage of the average balances of depreciable plant was 3.65% for 1981 and 3.62% for 1980 and 1979. The depreciation rLte apphed to nuclear facihties includes a factor for dismanthng or removal costs to the extent allowed by the FPSC. The Company's cost of decommissioning, based on decommissioning promptly after the unit is taken out of service, is presently estimated to be
$64,000,000.
The Company charges maintenance with the cost of repairs and minor renewals of property, the plant accounts with the cost of renewals and replacements of property units and accumulated depreciation with cost, less net salvage, of prcperty units retired. (d) Allowance for Funds Used During Construction (AFDC)-This item represents the estimated cost of funds applicable to utihty plant under construction. Recognition of this item as a cost of utihty plant is appropriate because it constitutes an actual cost of construction and, under estabhshed regulatory rate practices, the Company is permitted to earn a return on these costs and to recover them in the rates charged for utikty services Effective Apnl 1,1991, the rate used in computing AFDC was changed to 9.55%. Prior to Apol 1981, and fnr the years 1980 and 1979, the Company used a rate of 8.66%. The AFDC rate after having considered deferred income taxes on the debt component is 7.58% effective Apnl 1,1981 and 6.99% pnor to Apnl 1981, and for the years 1980 and 1979. (e) Investment in Subsidiaries-The Company has two wholly-owned subsidiaries, Electric Fuels Corporation, formed to secure long-term fuel supphes, and Talquin Corporation, formed to manage the Company's nonutihty properties and other diversified nonutthty activities. The equity method is used by the Company to account for its investments in subsidiaries. (f) Pension Costs-The Company has a retirement plan covering substantially all of its *roployees. The total pension costs for 1981,1980 and 1979 were $8.064,000, $8,483,000 and $7,423,000, respectiely, which includes amortization of prior service cost over 10 years. The Company makes annual contnbutions to the olan equal to the amounts accrued for pension expense. A companson of the actuarial present value of accumulated plan t;enefits based on an assumed rate of investmen' return of 8% a year and plan net assets is presented below: January 1, 1981 1980 (Thousands) Actuarial present value of accumulated plan benefits: Vested $ 47,385 $43,226 Nonvested 6,636 5,920 Total $ 54,021 $49,146 Net assets available for benefits $105,801 $84,541 The actuanal present value of accumulated plan benefits does not recognize any improvements in benefits and ignores the effects of future compensation increases on the benefits participsnts will receive for their past service. If this value is adjusted for projected compensation increases consistent with the assumed rate of investment return, the adjusted actuarial present value of accumulated plan benefits would be approximately $80,000,000 and $72,163,000 for 1981 and 1980, respectively. (g) Income taxes-Deferred income taxes result pnmanly from the use of hberalized depreciation, accelerated amortization, the deferral of taxes on the debt component of the allowance for funds used during construction and substantra!!y all other current book-tax timing differences as recognized in rates by the FPSC. The investment tax credits, including job development investment tax credits, have been deferred and are being amortized through credits to income over the lives of the related property. I 23
FLORIDA POWER CORPORATION Notes to Financial Statements (2) INCOME TAX EXPENSE 1981 1980 1979 (Thousands) Federal: Payable currently (refund) $10,974 ($25,995) $24,138 Deferred to subsequent years (a) 64,071 61,140 32,052 Deferred income taxes-credits (30,735) (21,302) (11,959) investment tax credits, net of amortization 32,945 32,178 15,661 Income tax expense 77,255 46,021 59,892 Taxes included in miscellaneous other income and (deductions) and the cumulative effect of change in an accounting pnnciple (12,001) (688) (3,522) Income tax expense in operating expenses 65,254 45,333 56,370 State: Payable currently 5,248 1,236 4,886 Deferred to subsequent years (a) 7,651 7,028 3,654 Deferred income taxes-credits (3,196) (2,035) (1,006) Income tax expense 9,703 6.229 7,534 Taxes included in miscellaneous other income and (deductions) and the cumulative eMect of change in an accounting principle (1,377) (89) (387) Income tax expense in operating expenses 8,326 6,140 7,147 income taxes $73,580 $51,473 $63,517 (a) The components of income tax deferred to subsequent years were as follows: Federal. Excess tax over book depreciation $24,665 $28,705 $20,308 Construction costs and other property related items deducted foi tax purposes 3,286 6,576 4,430 Repair allowance 766 765 3,138 Underrecovery of fuel expenses 14,323 18,267 - Other 21,031 C827 4.176
$64,071 $61.140 $32,052 State:
Excess tax over book depreciation $ 2,817 $ 3,317 $ 2,318 Construction costs and other property related items deducted for tax purposes 376 7., i 505 Repair allowance 413 100 358 Underrecovery of fuel expenses 1,638 2,091 - Other 2,407 779 473
$ 7,651 $ 7,028 $ 3,654 The provision for federal income tax as a percent of income before taxes, including amounts allocated to miscellaneous other income and deductions, and cumulative effect of change in an accounting principle, was less than the statutory federal income tax rate. The primary differences between the statutory rates and the effective income tax rates are detailed below:
1981 1980 1979 Federal income tax statutory rate 46.0 % 46.0 % 46.0 % Amortization of investment tax credits (2.6) (2.8) (3.7) Allowance for equity funds used during construction (2.7) (2.2) (.3) Other (.3) (1.4) 2.9 Effective federal income tax rate 40.4 % 39 6 % 44.9 % 24
Notes to Financial Statements (3) EQUITY SECURITIES c nifd p,,f r Nek The changes in equity secunties for 1981, Common i ng Si ing 1980 and 1979 are as follows: Stock Funds Funds (Thousands) Balance December 31,1978 $242,505 $133.500 $33,700 307,508 common shares sold 4,557 - - 10% series,15,750 shares reacquired - - (1,575) 10.50% series, 500,000 shares sold - - 50,000 Balance December 31,1979 247,062 133,500 87,125 3,462,898 common shares sold 51,277 - - 10% series,15,855 shares reacquired - - (1,585) Balance December 31,1980 298,339 133,500 85,540 3,870,619 common shares sold 54,121 - - 11% series, 100,000 shares sold - - 10,000 10% series,15,682 shares reacquired - - (1,569) Balance December 31,1981 $352,460 $133,500 $93,971 The Company has 1,000,000 shares of authorized but unissued preference stock, $100 par value, and 5,000,000 shares of authonzed but unissued cumulative preferred stock, without par value. Financial data for 1979 has been restated to reflect a two-for-one common stock split effective April 2,1980. (4) CUMULATIVE PREFERRED STOCK WITHOUT SINKING FUNDS This preferred stock may be redeemed at the following prices: December 31, Scheduled Decreases in Series 1981 Redemption Price 4% $104.25 - 4.40 % 102.00 4 58 % 101.00 4 60 % 103.25 4.75 % 102.00 7.40 % 106.92 $105.07 after August 15,1982, $103.22 after August 15,1987, and $102.48 after August 15, 1992. 7.76 % 106.80 $104.92 after February 15,1984, $102.98 after February 15,1989, and $102.21 after February 15,1994. 8.80 % 104.00 $101.00 after November 15,1985. (5) CUMULATIVE PREFERRED STOCK WITH SINKING FUNDS The Company is requ3cd to retire 15,750 shares of the cumulative preferred 5,tock,10% series, before August 15 of each year. The Company, starting Ncvember 15, 1984, is required to retire 15.000 shares of the cumulative preferred stock,10.50% series, with the option to retire a maximum of 30,000 shares before November 15 of each year. The Company, startinpebruary 15, 1987, is required to retire 20,000 shares of the cumulative preferred stock,11% series, before February 15 of each year. The combined aggregate amount of minimum redemption requirements for these series amounts to $1,575,000 per year through 1983 and $3,075,000 per year through 1986. This preferred stock may be redeemed at the following prices: December 31, Scheduled Decreases in Series 1981 Redemption Price 10 % $107.50 $105.00 after August 15,1984, $102.50 after August 15,1969, and $101.00 after August 15,1994. 10.50 % 110.50 $108.00 after November 15,1984, $105.00 after November 15,1989, $102.00 after November 15,1994, and $101.00 after November 15,1999. 11 % 100 00 (6) FIRST MORTGAGE BOND SINKING FLdD REQUIREMENTS The annual sinking fund requirement relating to the first mortgage bonds at December 31,1981 is $12.050,000 of which
$4.937,500 must be satisfied in cash or an equal principal amount of bonds and the balance may be satisfied wi!M bondable additions. At December 31,1981, the Company had available $10,419,500 principal amount of bonds. This amount will be used to satisfy the 1982 cash sinking fund requirement and the remainder will be used for future cash sinking fund requirements. The I
balance of the 1982 sinking fund requirement will be met with bondable additions. l 25
FLORIDA POWER CORPORATION Notes to Financial Statements (7) COMMITMENTS AND CONTINGENCIES (a) Construction Program-Substantial commitments have been made in connection with the Company's 1982 construction program which is presently estimated to be $399,600,000. (b) Legal Proceedings-The 1978 forced shutdown of the Crystal River nuclear unit and ensuing Florida Public Service Commission (FPSC) investigation resulted in an order that the Company refund approximately $14,700,000 in increased fuel costs paid by customers. On April 8,1981, the FPSC reduced the required refund by $1,800,000 plus interest but denied other points raised by the Company. The Company appealed this decision to the Flonda Supreme Court on April 24,1981. Provision has been made in the 1980 financial statements for the Company's best estimate of the amount of revenues which will ultimately be refunded to customers. In the opinion of Company management and legal counsel, the resolution of this rate matter will not result in any matenal adjustment to the estimated refund. The FPSC, in revising the retail fuel adjustment clause, effective Apnl 1,1980, authorized the Company a one time transition adjustment of approximately $23,000,000. This adjustment was allowed to permit recovery of fuel costs which would otherwise be lost in changing to the new clause. However, on April 2,1980, the Florida Public Counsel appealed the FPSC's order to the Florida Supreme Court. As a result, on April 4,1980, the FPSC ordered that billings of the transition fuel adjustment revenues be suspended pending the Court's decision. On September 10,1991, the Flonda Public Counsel's appeal of the Commission's order was denied and the Company anticipates collecting these revenues over a twelve-month renod beginning in April 1982. As a result of the new retail fuel adjustment clause, the Company had recorded deferred fuel expenses for the period Apnl 1 through September 30,1980, of $46,300,000. On November 26,1980, the FPSC issued an order authorizing the Company to collect $22,800,000 of the deferred fuel expenses. On Apnl 15,1981, $19,900,000 of the remaining $23,500,000 was authorized for collection. The Company has appealed to the Florida Supreme Court to recover the remaining deferred fuel costs. As a result of the rctail rate petition filed in Apnl 1980, the Florida Public Service Commission issued ca Order on March 11, 1981, granting a permanent rate increase of $58,400,000. This increase included the intenm rate increase of $40,400,000 which went into effect on August 6,1980. The additional retail rate increase went into effect on March 22,1981. On June 30,1981, supp!cmental hearings were held by the Commission which resulted in a revised permanent rate increase of $57,100,000, a reduction of $1,300,000. On August 26,1981, the Florida Public Counsel filed a Notice of Apoeal to the Florida Supreme Court, appealing the $57,100,000 increase. The amount of rate increase collections for the twelve months ended December 31,1981 and 1980, were $54.500,000 and $16,300,000, respectively. The Company will continue to collect the new rates, subject to refund, while the appeal is pending. In the opinion of Company management and legal counsel, the resoiution of this rate matter will not material!y affect the results of operations. (c) Nuclear Insurance-The Price-Anderson Act currently limits the liability of an owner of a nuclear power plant to
$560,000,000 for a single nuclear incident. The Company has purchased the maximum available private insurance of
$160,000,000 and the balance is provided by indemnity agreements with the Nucl ear Regulatory Commission. In the event of a nuclear incident, the Company could be assessed up to $5,000,000 for the licensed reactor it owns with a maximum assessment of $10,000,000 in a year. The Company carries additional insurance with Nuclear Electr3 Insurance, Ltd. (NEIL) to cover the cost of replacement power canng prolonged outages of the nuclear unit. The Company is subject to a retrospective premium liability of up to $7,800,000 in any year in which losses exceed accumulated funds available to NEIL.
The Company also insures with NEll for excess nuclear property insurance. Currently the Company carries $247,000,000 of excess property coverage. The Company is contingently liable under this policy for a retrospective premium assessment of up to $6,400,000 in the event NEIL's excess property losses exceed available funds. (d) Gu,i,rantee of Indebtedness-The Company's subsidiary, Electnc Fue!s Corporation (EFC), is involved in a variety of activities in connection with the procurement and sale of fuel. Most of these activities are carried on in the form of joint ventures by EFC or one of its subsidiaries. The Company may under certain circumstances be required to advance amounts to its rubsiciary in order for it to meet its obligations. Such advances, if required, would not materially a'fect the Company. (8) SUPPLEMENTARY INFORMATION TO DISCLOSE THE EFFECTS OF CHANGING PRICES (Unaudited) The following supplementary presentation is made consistent with Statement No. 33 of the Financial Accounti ".andards Boarc and is intended to set forth the effect of both general inflation and changes in specific prices on the Company. It should be viewed as an estimate of the approximate effect of inflation, rather than as [ precise measure. Constant dollar amoune represent historical cost stated in terms of dollars of equal purchasing power, as measured by the Consumers Price Inde x for cil Urban Consumers. Current cost amounts reflect the changes in specific prices of plant from the 26
Notes to Financial Statements date the plant was acquired to the present, and d1fier from constant dollar amounts to the extent that specific prices have increased more or less rapidly than the general rate of inflation. The current cost of plant is determined by indexing surviving plant by the Handy-Whitman Index of Public Utility Construction Costs Since the utility plant is not expected to be replaced precisely in kind, current cos! does not necessarily represent the replacement cost of the Company's productive capacity. Amortization of nuclear fuel, an item included in operating and maintenance expense, and depreciation are determined by applying the Company's amortization and depreciation rates to the average indexed plant amounts. Since only histoncal costs are deductible for income tax purposes, the income tax expense in the historical cost financial statements is not adjusted. Under the rate making prescnbed by the regulatory commissions to which the Company is subject, only the historical cost of plant is recoverable in revenues as amortization and depreciation. Therefore, the excess of the cost of plant stated in terms of constant dollars or current cost that exceeds the historical cost of plant is not presently recoverable in rates as amortization or depreciation, and is reflected as a reduction to net recoverable cost. To properly reflect the economics of rate regulation in the Statement of income from Continuing Ooerations, the reduction of net plant should be ofiset by the gain from the decline in purchasing power of net amounts owed. Dunng a period of inflation, holders of monetary assets suf'er a loss of general purchasing power while holders of moneta f iabilities l experience a gain. The gain from the decline in purchasing power of net amounts owed is primarily attnbutable to the substantial amount of debt which has been used to finance plant. S;nce the amortization and depreciation on this plant is 1.mited to the recovery of histoncal costs. the Corapany does not have the opportunity to realize a holding gain on debt and is limited to recovery only of the embedded cost of debt capital. FIVE YEAR COMPARISON OF SELECTED SUPPLEMENTARY FINANCIAL DATA ADJUSTED FOR EFFECTS OF CHANGING PRICES (Thousands, Except Per Share Amounts, of Average 1981 Dollars) Years Ended December 31, 1981 1980 1979 1978 1977 Operating revenues: Historical $1,278,29; $970,173 $835,493 $751,220 $656,138 Adjusted $1.278.297 $1,070,807 $1,046,864 $1,047,248 $984,749 Historical Cost 'nformation Adjusted for General inflation locome from continuing operations (excluding reductic-to net recoverable cost)* 22.068 972 26,367 income (loss) per common share (after dividerd requirements on preferred stock)* .09 (.57) .44 Net assets at year-end at net recoverable cost 646,872 623,055 640,176 Current Cost information - Income (loss) from continuing operations (excluding reduction to net recoverable cost)* 21,711 (7,846) 12,627 Income (loss) per common share (after dividend requirements on preferred stock)* .08 (.66) (.04) Excess of increase in general pnce level over increase in specific pnces after reduction to net recoverable cost 95.661 143,747 164,117 Net assets at year-end at net recoverable cost 646,872 623,055 640,176 General Information Gain from decline in purchasing power of net amounts owed 116.597 150,557 161,601 Cash dividends declared per common share: Historical $1.68 $1.565 $1.41 $1.275 $1.165 Adjusted $1.68 $1.73 $1.77 $1.78 $1.75 Market price per common share at year-end: Histancal $15.625 $13.625 $14.125 $15.375 $16.50 Adjusted $15.625 $15.04 $17.70 $21.43 $24.76 Average consumer price index 272.4 246.8 217.4 195.4 181.5
- The year 1981 excludes the cumulative effect of change in an accounting principle for unbil led revenues.
27
FLORIDA POWER CORPORATION Notes to Financial Statements STATEMENT OF INCOME FROM CONTINUING OPERATIONS ADJUSTED FOR CHANGING PRICES For the Year Ended December 31,1M1 (Thousands) Current Conventional Constant Dollar. Cost-Historical Average Average Cost 1M1 Dollars 1M1 Dollars Operating revenues $1,278,297 $1,278.297 $1.278,297 Operating and maintenance expense 959,464 964,769 964,769 Depreciation expense 75,484 150,756 151,113 Income tax expense 73,580 73,580 73,6d0 Interest expense-net 79,703 79,703 79,703 Other income and deductions-net (12,579) (12.579) (12.579) 1,175,652 1,256,229 1,256,586 Income from continuing operations (excluding reduction to net recoverable cost) $ 102,645 5 22.068 $ 21,711 Increase in specific pnces (current cost) of utility plant held dunng the year $ 298,411 Less increase in cost of utility plant adjusted for changes in general pnce level 267,616 Excess of increase in specific pnces over general p ice level 30,795 Reduction to riet recoverable cost ($ 96.018) (126,456) (96,018) (95,661) Gain from decline in purchasing power of net amounts owed 116.597 116,597 Net once level adlustment $ 20,579 $ 20,936 Report of Independent Certified Public Accountants To the Shareholders of Florida Power Corporation: We have examined the balance sheets and statements of capitalization of Florida Power Corporation (a Florida corporation) as of December 31,1981 and 1980, and the related statements of income, retained earnings and source of funds used for construction for each of the three years in the period ended December 31,1981. Our examinations were made in accordance with generally accepted auditing standards and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the financial statements referred to above present fairly the financial position of Florida Power Corporation as of December 31,1981 and 1980, and the results of its operations and the source of funds used for construction for each of tha three years in the period ended December 31,1981, in conformity with generally accepted accounting principles, which, except for the change, with which we concur, in the method of recording revenues described in Note 1, were applied on a consistent basis. ARTHUR ANDERSEN & CO. Tampa, Florida, January 29,1982. 28
Ssiscted Financial Data 1977-1981 1981 1980 1979 1978 1977 (Thousands, Except Per Share Amounts) Operating Revenues $1,278,297 $970,173 $835,493 $751,220 $656,138 Net income after Dividends on Preferred Stock-As Reported $95,070 $49,882 $59,870 $68,151 $68,854 Pro forma * - $52,183 $60,487 $66,057 $71,914 Earnings per Average Comrron Share-As Reported $2.80 $1.66 $2.07 $2.37 $2.41 Pro forma * -
$1.73 $2.09 $2.30 $2.52 Dividends per Common Share $1,68 $1.565 $1.41 $1.275 51,165 Total Assets $2,563,193 $2,243,591 $1,914,225 $1,739,081 $1,665,159 Capitalization Long. Term Debt $1,024,715 $912,895 $682,605 $658,676 $673,867 Preferred Stock with Sinking Funds 93,971 85,540 87,125 38,700 40,275 1,118,686 998,435 769,720 697,376 714,142 Preferred Stock without Sinking Funds 133,500 133,500 133,500 133,500 133,500 Common Stock Equity 681,169 590,576 538,181 515.200 481,412 Total $1,933,355 $1,722,511 $1,441,411 $1,346,076 $1,329,354 *To give effect of change in an accounting principle for unbilled revenues Note It>-Notes to Financial Statements.
Other Financial and Operating Data 1977-1981 1981 1980 1979 1978 1977 Electnc Sales (Thousands of KWH) Residential 7,752,265 7,379,740 6,927,339 6,838,906 6,373,899 Commercial 3,735,191 3,581,112 3,646,279 3,766,194 3,526,562 Industrial 3,288,325 3,480,993 3,215,932 2,942,065 2,813,000 Other 4,680,974 4,365,810 3,779,639 3,499,576 3,221,536 Total 19,456,755 18,807,655 17,569,189 17.046,741 15,934,997 Residential Service (Average Annual) KWH Sales per Customer 10,758 10,643 10,496 10,895 10,604 Revenue per Customer $763.19 $591.32 $540.29 $521.19 $478.12 Revenue per KWH 7.09C 5.56c 5.15e 4.78c 4.51c Operating Data investment in Electnc Plant (000) $2,782,689 $2.419,416 $2,113,614 $1,940,917 $1,831,680 Net Generating Capability (KW) 5,255,000 5,117,000 4,884,000 4,929,000 4,452,000 Net System Peak load (KW) 5,088,000 4,419,000 4,224,000 4,135,000 3,899,000 BTU per KWH of Net Output 10,357 10,443 10,503 10,481 10,423 Fuel Cost per Million BTU $3.12 $2.52 $2.01 $1.68 $1.51 Average Number of Customers 802,787 772,265 735,633 699,677 669,615 Number of Employees 4,533 4,195 3,891 3,738 3.546 29
FLOR:DA POWER CORPORATION Quarterly Financial Data (Unaudited) Three Months Ended March 31 June 30 September 30 December 31 (Thousands, Except Per Share Amounts) As Stated Restated As Stated Restated As Stated Restated As Stated Restated 1981 Operating revenues $323.046 $319.200 $299,066 $308,746 $351,928 $351,793 $298,558 - Net income 25.029 34,555 23,964 28,930 34,072 34,003 16,656 - Earnings on common stock 20,317 29,843 19,162 24,128 29.292 29,223 11,876 - Earnings per average common share $ 62 S.91 $.58 $.73 $.87 $.87 $.33 - Pro forma Pro forma Pro forma Pro forma 1980 Operating revenues $203,448 $203,448 $222,787 $222,787 $306,934 $306,934 $237,004 $237,004 Net income 6,397 6,072 11,428 14,075 27,991 28,704 22.263 21,529 1,508 6,884 9,531 23,447 24,160 17,718 16,984 Earnings on common stock 1,833 Earnings per average common share $.06 $.05 $.24 S.33 $.79 S.82 $.54 $.52 Quarterly earnings for the first three quarters of 1981 have been restated and the pro forma effects on 1980 are shown to give effect to a change in an accounting principle for unbilled revenues, Note 1b-Notes to Financial Statements. Earnings per average common share as presented above do not equal amounts reperted in the Statements of Income as a result of issuing additional sharce of common stock during the penods. The business of te Comnany is seasonal in nature and it is management's opinion that comparisons of earnings for the quarters do not give a true indication of overall trends and changes in the Company's operations. Common Stock Data Price of Common Stock Dividends Paid on New York Stock Exchange Per Share 1981 1980 1981 1980 High Low High Low First Quarte, $14% $12% $15 $10 ?'s $.41 S.375 Second Quar 1er 16 12 % 15 % 12 % .41 .39 Third Quarter 16 13 15 % 13 % .41 .39 Fourth Quarter 16 % 13Fs 15 % 12 .45 .41 Common stock prices and dividends per share have been restated to reflect the two-for-one stock split effective April 2,1980. At December 31,1981, the rmmber of common shareholders of record was 41,724. 30
.-B The Company serves over 800,000 customers in more than 375 cities, towns and rural communities. The terntory compnses approximately 20,600 square miles with a population of over 3,330,000 located in 32 of 67 Flonda counties. In addition to the generating plants indicated on the map, electnc power can be supplied _
by interconnected electnc utility systems throughout Florida and the southeast.
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Gansrating Plants Q. and Capability N1 1, in . g o N Kilowatts of Net Winter INTER f# I' '\* 2 Capability 1 Crystal River Coal . 842.000 10 WAL . DISNEY WoRLD * -[ J Crystal River Nuclear . . . . . ,A '- 752.000 , 2 Port St. Joe Peaking Unit . 17,000 2 3 Suwannee River . . . . . . . . . . . . 147,000 CLEARWATER QTAuP g A-Suwannee River Peaking Units . 204.000 ST. FETERSBuRG 7x , :% ; 4 George E. Turner . . . . . . . . . . . . . 168.000 / , I -~* 6 George E. Turner Peaking Units . 186,000 (f l "\k .g 5 Rio Pinar Peaking Unit . 6 Avon Park . . . . . . . . . . . . 17.000 38.000 if
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Avon Park Peaking Units. 66.000 ' - 7 \ f* -b 7 Bayboro Peaking Units 216.000 i / 4 b 8 Paul L. Bartow . . . . . . . . . . . . 441.000 L .. ' T Paul L Bartow Peaking Units . 212.000 (1. *
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9 A. W. Higgins . . . . . . . . . . . . 124.000 Si~ !j A. W. Higgins Peaking Units . 140.000 'y J 5 10 Ancloto ................... 1,025.000 t 'h; 11 Intercession City Peaking Units . 12 DeBary Peaking Units 342,000 318.000 ( i Total at December 31,1981 5g / U ) Under Construction Expected VN s. . mAus ol 5 , Capability ( } . 1 Crystal River Coal. Fired Unit in 1982 640.000 (2-- i Crystal River Coal. Fired Unit in 1984 640.000 %gM e Division Offices E Generating Plant Sites F Transmission System
+ interconnections BUSINESS AND SYSTEM MAP E
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I Florida Power Corporation Ger+ral Offo. 3201 asth Street South; P O. Box 1M32. St. Petersburg. Flonda 33733 + Telephone 8134/Er5151 DIRECTORS OFFICERS OTHER THAN DIRECTORS Robert C. Allen S. A. Brandimore T. F. Thompson Vice Prr+sedent. Wat Disney World Senior Vice President Vice Premdent and Chi 1rman. Disney World Corporate Serv < es and Administrative Serwces Oper:ihng Comm.ttee Gercral Cour. set Lake Buena Vista, f ionda J.H. Joyce B. L Griffin Assistant Secretary and Wilmer W. Bassett, Jr. U""' r Vice I remdent Assistant Treasurer Pres &nt. Rusett Brotters. Inc lngineenng and nMmctcn (D+ry Busine ss) Betty M. Clayton Monta effo, i lond i Lee H. Scott Assistv.t Secretary aernor Vice Presrdent Operattons Sam T. Dell Partner. De!i, Grah Im. Wdlcox. Barber. J. H. B!arschard Hend-rson; Monaco & Cates. P.A - Vice President sttorneys at Lam system opcobnns SHAREHOLDER INFORMATION G+nesvme. Honda C. R. Collins, Jr. Shareholder Services Department Vice President
,9mrd 0"[{ ",','f0"g Suncoast Division All dtvidend checks. shareholder reports, proxy matenai and tax forms are hand:ed from our A S' Her St Petersburg General 0".ce All correspondence jCdru'susiness)
B. tong & Co" inc J.F.Cron.in concerning address changes. d:vidend checks teesburg. f Inr ria Vice President ~ Corporate Communications and related matters should be dtrected to. Andrew H. Hines, Jr. F!onda Power Corporation J. E. Gleason Sharetio/ der Services Department President Vice President. Easter" and Hudge Dvssons P O.Sm E St Peterstwrg flonda 33733 Frank M. Hubbard Chairman of the E wcuhve Commntee J.A.Hancock inquines concerning the transfer of stock Hubbard Construct:on Company "' r r ons certif cates shoutd be directed to our New York (Highway Construchon) transfer agents.
- 3"d* UU"dd R.R. Hayes Vice President and Dividend Reinvestment Plan Richard C. Jchnson Controller Sene vn On adent The Company of'ers a Dividend Reinvestment Southeaat If ank. N A M.F.Hebb Plan for shareholders of record Plan enrollments Seminole. F h;nda Vice President. Staff withdrawals and other correspondence should be directed to the Shareholder Services Department at the address shown Clarence W. McKee, Jr.
henior Vice Pressdent Vc fe nt f enanaat Services Transmission and Transfer Agents and Registrars Substabon Projects Common SDc4 Corneal B. Myers J. G. Loader Manufacturers Hanover Trust Company Partner. Peterson. Myers. Cra.g. Vice President. Secretary 4 New York Maza Crews Hrandon & Mann. P A and Treasurer New York. New York 10015 (Attorneys at Law) Preferred Stock iake Wales flonda G. C. Moore Chemical Bank Les President 55 Water Street George Ruopel m'r Pr docton New York. New York 10041 Vice i n font and Secretvy Modern : 4 & Die Company R. W. Neiser d flondt Vice President and Annual Report Form 10-K and the (Manufactn rt. N Auto f, arts) Assistant General Counsel Statistical Supplement hnellas Park. I h >nda Upon request. the Company will furnish its A. J. Ormston Vice President shareholders without charge a copy of its 1981 Jean Giles Wittner Form 10-K. without exhibits, as filed W.th the Eng:neenng and Construction Secunties and Exchange Commission. A detailed President. St. Petersbur9 Ten-Year Statistical Report on the Company's Federal havings & Loan M. H. Phillips Assoaation buuness is a!so available. Requests should be Vice President. Central St Petersburg f tenda and Northern Divisions addressed to J. G Loader. Secretary. N.B. Spake Auditors n n & Co v ro m nd New f( p Technology
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