ML20071G799

Annual Financial Statements 1978 & 1979

ML20071G799
Person / Time
Site:	Vermont Yankee
Issue date:	02/15/1980
From:	AFFILIATION NOT ASSIGNED
To:
Shared Package
ML19309A504	List: ML20071G799
References
NUDOCS 8003310377
Download: ML20071G799 (15)

Text

l O

l l

l

~

O

~

L _ J l

1 i

O I

i i

Itat,Manvick,Mitchell&Ca i

ADU

I l

i i

I VERMONT YANKEE NUCLEAR POWER CORPORATION Financial Statements December 31, 1979 and 1978 O

(With Accountants' Report Thereon)

O

)

Cenified Public Accountants c . ,

.b

' One Boston Place Itat,Manvick,Mitchell&Co. Boston, Massachusetts 02108 Y.e y

1 4 .,

The Stockholders and Board of Directors'

vermont Yankee Nuclear Power Corporation: ,

p We have examined the balance sheets of Vermont Yank:e Nuclear Power Corporation-as of December 31,1979 and 1978 and the related- statements (of 'inconie and retained earnings and changes in financial posi, tion for the years then ended., Our examina-tions 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 aforementioned financia'l' statements present fairly the finan-cial position of Vermont Yankee Nuclear Power Corporation at December 31, 1979 and 1978, and the results of its operations and the changes in its financial, position for the years then ended, in conformity with generally accepted -accounting principles applied on a consistent basis. i s s 0 t. h ~ 4. *hs e 4 ,

February 15, 1980 'n -

O ,

.w l ,

' t s,

N

\

N.

g.

\

t

= _ - _ _ . . _ _ _ - . - _ _ _ - _ _ . _ - - _ - - . _ . _ _ _ . _ _ . . . . - - -

_ _ - - - g

-3 g

- -f*'

VERPONT 7ANKEE NUCLEAR POWER CORPORATIOst Balance Sheets December 31, 1979 and 1978 g,

Assets 1979 1978 Capitalisation and Liabilities 1979 1978 Capitalisation: \

Utility planta .

Electric plant, at cost $ 214,335,562 209,990,887 Common stoet equity inote 43:

Less accumulated depreciation 53,003,149 45,273,555 Common stock, $100 par values authorized 400,100 sharess pet electric plant 161,332,413 164,717.332 outstanding 400,014 shares S 40,001,408 40,001,400 Other paid-in capital 13,100,071 13,006,204 Retained earnings 5,578,481 5,774,009 Nuclear fuel, at cost (note 23 Assest>11es in reactor 48,955,319 35,734,000 16.011,781 14,026,990 Total cosanon stock equity _58,679,873 58,781,613 f, Fuel in process Spent nuclear fuel 51,294.372 44,223,367

• 116.261,472 93,985,165 Cumulative preferred stock, 7.489 '

Less accumulated amortisation 80,674,131 65.128,298 series: $100 par values authorized 300,000 sharess outstanding Net nucleas fuel 35,587,341 23,856,867 183.254 shares (194,254 shares in 1978) (note 43 18,325.400 19,425.400 196,919,754 193.574,199 Long-term debt, net (note 5) 81,278.573 85,799.697 Net utility plant Current assets: Total capitalization 15P,283,845 J64,006,710 Cash (note 3) 4.053,574 3,457,350 Temporary investments, at cost Current liabilities:

- which approximates market - 2,591,448 Notes payable 6,000,000 -

Accounts receivable, principally tong-term debt to be retired within from sponsors 9,482,524 6,659,793 ene year (note 5) 4.340,000 2,118,000 platerials and supplive, at cost 3,188.717 2,754,398 Accounts payable 4,065,958 4,144,681 Prepaid evpenses D0,14 3 290,848 Accrued interest 1.977,273 2,006.587 Accrued taxes 624,409 1.147,672 Total current assets 17,114,95g gg,7$3,g37 Total current liabilities 17.020,640 9,416,940 Deferred chargest Unamortized debt expense 410,944 432,861 Unamortised gain on reacquired debt, not 392,370 313.878 1,470,045 Accumulated deferred income taxes 41,967,584 37,493.414 Unamortised downtime costa 3.218,783 Tbtal deferred charges 3,629,727 1,902.906 Cosmitments and contingencies (note 8)

$ 217,664,439 211,230,942 $ 217,664,439 - 211,230.942 See accompanying notes to firancial statements.

a 7

VERMONT YANKEE NUCLEAR POWER CORPORATION Statements of Income and Retained Earnings

Years ended December 31, 1979 and 1978 1979 1978 Operating revenues $ ;55,981,810 61,637,509 Operating expenses

Nuclear fuel expense (note 2) 15,326,978 13,151,317 Other operating expenses 11,245,967 10,260,905 Maintenance 5,363,759 3,120,981 Depreciation 8,299,930 8,085,918 Taxes on income-(note 6) 6,564,000 7,509,531 Other taxes, principally property taxes 4,006,552 3,812,365 Total operating expenses 50,807,186 45,941,017 Operating income 15,174,624 15,696,492 Other income and deductions, net 190,387 153,024 Income before interest expense 15,365,011 15,849,516 i Interest expense:

Interest on long-term debt 7,944,832 8,373,201 Other interest expense 162,557 71,949 Totsl interest expense 8,107,389 8,445,150 Net income 7,257,622 7,404,366

) Retained earnings at beginning of year 5,774,009 6,899,155 13,031,631 14,303,521 Dividends declared:

Preferred stock, 7.48% series 1,453,020 1,537,267-Common stock, $15.00 per share ($17.48 in 1978) 6,000,210 6,992,245 Retained earnings at end of year S 5,578,401 5,774,009 Net income per average share of common stock

) outstanding $ 14.53 14,68 See accompanying notes to financial statements.

I 1

I VERMONT YANKEE NUCLEAR POWER CORPORATION Statements of Changes in Financial Position

• 1 Years ended December 31, 1979 and 1978 '

1979 1978 Source of funds:

From operations:

Net income $ 7,257,622 7,404,366 Charges not requiring use of funds:

Depreciation 8,299,930 8,085,918 Amortization of nuclear fuel 15,326,978 13,151,317 Amortization of deferred downtime costs 2,350,554 2,567,388 Deferred income taxes 4,013,170 5,667,414 O Investment tax credit adjustments Amortization of debt and capitc1 stock expense Total from operations 461,000 37,727,965 18,711 204,000 23,018 37,103,421 Decrease in working capital 6,242,579 -

Other, net 499,609 384,267

$ 44,470,153 37,487,688 Use of funds:

Electric plant additionc 5,020,200 4,389,235 Nuclear fuel additions 22,276,307 16,472,622 Downtime costs deferred 4,099,292 2,140,169 Reduction of long-term debt 4,521,124 4,521,124 Retirement of preferred stock 1,100,000 1,126,300 Preferred stock dividends 1,453,020 1,537,267 Common stock dividends O Increase in working capital 6,000,210 6,992,245 308,726 j

$ 44,470,153 37,487.688 Changes in components of working capital:

Increase (decrease) in current assets:

Cash 596,224 2,771,088 Temporary investments (2,591,448) (1,098,295)

Accounts receivable 2,822,731 (443,884)

Materials and supplies 434,319 230,395 Prepaid expenses 99,295 (36,484) 1,361,121 1,422,820 l

Increase (decrease) in current liabilities:

Notes payable 6,000,000 -

Long-term debt to be retired within one year 2,230,000 (2,269,000)

Accounts payable (78,723) 2,971,668 Accrued interest (29,314) (155,354)

Accrued taxes (518,263) 566,780 7,603,700 1,114,094 Increase (decrease) in working capital $ (6,242,579) 308,726 See accompanying notes to financial statements. ,

j VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements December 31, 1979 and 1978 i (1) Sununary of Significant Accounting Policies 4

(a) Regulation and Operations i The Company is subject to the regulatory authority of the Federal Energy l Regulatory Commission (FERC) and the Public Service Board of the State of

' Vermont as to transactions with associated companies, accounting and security issues. The Company is also subject to regulation by Federal or j state agencies with respect to nuclear plant licensing and safety, air and l water quality, land use and other environmental matters.

}

Pursuant to the terms of Power Contracts with sponsors, for a term of 30 years

g commencing on December 1,1972, each Sponsor is obligated to pay the Company i each month (regardless of the Plant's operating level or whether it is i operating or shutdown during the period), an amount equal to its entitlement percentage of the Company's total fuel costs and operating expenses . with respect to the Plant, and an allowed return on equity. Also, under terms of j the Capital Funds Agreements, the Sponsors are committed, subject to obtaining necessary regulatory authorizations, to make funds available in i amounts required to obtain or maintain licenses necessary to keep the Plant in operation.

l (b) Depreciation and Maintenance

! Electric plant is being depreciated on the . straight-line method at rates ,

designed to fully depreciate all depreciable properties through 1998.

! Renewals and betterments constituting retirement units are charged to electric l plant. Minor renewals and betterments are charged to maintenance expense.

} At the time depreciable properties are retired, the original cost, plus cost of removal, less salvage of such property is charged to the accumulated

! provision for depreciation.

(c) Amortization of Nuclear Fuel

, The cost of nuclear fuel is amortized to expense on the basis of the rate of 2

burn down of the individual assemblies comprising the total core. The 3

Company also accrues - the estimated future costs ' of disposing of spent nuclear fuel. See note 2 of notes to financial statements.

I

! (d) Deferred Charges Costs associated with scheduled plant downtime for replacement of nuclear fuel  !

I assemblies and major maintenance are amortized to expense over the I i estimated period until the succeeding downtime (normally between twelve and I

fourteen months) .

L (e) Taxes on Income

! The tax effects of timing differences are accounted for as prescribed by and in l accordance with the rate-making policies of FERC. Provisions for= deferred l income taxes reflect the tax effects of all timing differences.

l (Continued) I e

2

! VERMONT YANKEE NUCLEAR POWER CORPOPATION Notes to Financial Statements s

Investment tax credits are deferred and amortized to income over the life of the related assets.

(2) Nuclear Fuel Expense The Company accrues estimated costs of disposing of nuclear fuel as a component of nuclear fuel expense. Provisions for estimated costs of disposing of nuclear fuel in the reactor (at projected costs in 1987 when disposal

facilities may be available) are being accrued based on the rate of burn-i down of assemblies in the reactor. Provisions for. costs of disposing of

nuclear fuel used prior to October, 1977 (estimated to cost $36,400,000 in 1987) are being accrued over a 10 year period ending in 1987.

Accruals for estimated costs cf disposing of nuclear fuel increased 1979 and i 1978 nuclear fuel expense by approximately $5,800,000 and $4,900,000, 1 respectively, and are expected to increase annual nuclear fuel expense by approximately $9,000,000 ' including $4,700,000 for spent fuel) in 1980 and i - through the year 1987. Current estimates of disposal costs are subject to a j number of uncertainties including the cost, availability and timing of disposal facilities, the extent of future inflation, regulatory require-ments and the cost of future services, all of which may require periodic I revisions in estimated costs of disposal.

(3) Compensating Balances and Short-term Borrowings The Company had bank lines of credit aggregating $12,000,000 at December 31, j 1979 requiring average compensating balances equal to 7.5% of outstanding j loans (there were S6,000,000 of loans outstanding at December 31, 1979) and j 7.5% of the line. During 1979 the maximum amount of short-term borrowings outstanding at any month end was $6,000,000 and the daily average amount of short-term borrowings outstanding was $975,300 with a corresponding l weighted average interest rate of 15.35%. There were no significant amounts of short-term borrowings during 1978.

{

(4) Capital Stock

So long as any shares of the Cumulative Preferred Stock are outstanding, the

! payment of cash dividends and distributions on Common Stock (other than i redemptions, which requires 30% common equity af ter redemption) is limited

, when Common Stock Equity (as defined) is less than 25% of Total Capitaliza-tion (as defined) . At December 31, 1979, Common Stock Equity was 35.91% of Total Capitalization, i

The 7.484 series Preferred Stock is redeemable (1) at par through a mandatory sinking fund in the amount of $1,100,000 per annum, (2) at the option of the 1 Company, at par, an additional $1,100,000 per annum and (3) in whole or in part from time to time, at redemption prices per share ranging from $106.97 in 1980 to $100 in 1998, together in each case with accrued and unpaid I dividends to the redemption date.

(Continued)

3 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements '

(5) Long-Term Debt

A summary of long-term debt follows

1979 1978 First mortgage bonds:

Series A 5/8% due 1998 S 59,503,000 61,110,000 Series B 1/2% due 1998 11,150,000 11,394,000 Series C - 7.70% due 1998 14,840,000 15,273,000

, Total first mortgage bonds 85*,493,000 87,777,000 1

Unamortized premium on debt 133,573 140,697 O Total long-term debt 85,626,573 87,917,697 Less long-term debt to be retired 3 within one year 4,348,000 2,118,000 Long-term debt, net S 81,278,573 85,799,697 The Mortgage constitutes a first lien on utility plant, excluding nuclear fuel.

Bonds issued under the Mortgage are further secured by the terms of the Power Contracts (except for related fuel payments) and the Capital Funds Agreements with the sponsors. Sinking fund recairements with respect to First Mortgage Bonds amount to $4,514,000, annually.

(6) Income Taxes The components of income tax expense are:

1979 1978, i Current:

Federal income taxes:

Included in operating income S 1,419,479 826,912' Included in non-operating income 173,000 158,000

Vermont income taxes

9 Included in operating income 670,351 811,235 2,262,830 1,796,117 Deferred:

Federal income taxes:

Included in operating income 3,695,521 -5,412,088 Vermont income taxes:

Included in operating income 317,649 255.326 Total deferred income taxes 4,013,170 5,667,414 Investment credit adjustments 461,000 204,000

Total income taxes S 6,737,000 7,667,531 (Continued)

9 i

VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements A reconciliation of the Company's effective income tax rates with the Federal statutory rate is as follows:

1979 1978 Federal statutory rate 46.0% 48.0%

State income taxes, net of Federal income tax benefit 3.8 3.7 Investment credit (3.1) (2.4)

Other 1.4 1.6 48.1% 50.9%

The principal items compcising deferred income tax expense are:

(

1979 1978 Excess of tax depreciation over financial l

statement depreciation $ 3,196,427 3,995,000 '

Excess of fuel amortization for financial statement purposes over (under) tax amortization (1,750,704) (1,614,000)

Maintenance expenses deferred for financial statement purposes 735,875 (220,000)

Other 51,572 60,000 Investment tax credits utilized 1,780,000 3,446,414

$ 4,013,170 5,667,414 (7) Retirement Plans The Company has retirement plans covering all regular employees. The Company's policy is to provide for and fund the normal cost including provisions to amortize the unfunded liability by 1998. Pension expense for 1979 and 1978 was $230,217 and $215,962, respectively.

(8) Commitments and Contingencies ,

Certain intervenors, challenging the sufficiency of the Nuclear Regulatory Commission's (NRC) environmental review of portions of the fuel cycle, appealed the NRC decision authorizing the Company's permanent, full power, forty-year operating license, to the Court of Appeals for the District of Columbia Circuit, where their appeal was consolidated with another appeal from the NRC's generic rulemaking proceeding on the same subject. In July, 1976, that Court decided the appeals by setting aside and remanding to the NRC for further proceedings certain aspects of the rulemaking which dealt with fuel reprocessing and waste disposal and by remanding the Vermont Yankee decision to await the outcome of the rulemaking. On April 3, 1978 the United States Supreme Court ruled favorably on the Company's Appeal from that decision and remanded the consolidated cases to the District of Columbia Circuit where the matter is still pending.

(Continued)

5 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements The Company has commitments for nuclear fuel purchases through 1992 approxi-mating S139,850,000. Expenditures for such commitments will be approxi-mately $19,800,000 in 1980 and approximately S17,000,000; $18,400,000;

$19,200,000 and $19,100,000 in the years 1981 through 1984, respectively.

The Company has contracted for uranium concentrate to meet substantially all power production requirements through 1983. The Company has an enrichment

. contract with the United States Energy Research and Development Administra-tion through 2001 and has contracted for fuel fabrication requirements through 1984 and conversion services through 1983.

The Company does not have contracts for disposal of spent fuel. Pursuant to an

"'g effective amendment to the plant's operating license, work is underway to g i expand temporary storage capacity so that spent fuel removed from the reactor through 1987 can be safely stored while maintaining the ability to discharge a full core should that be necessary for operntional reasons. By decision dated January 27, 1978 the NRC Atomic Safety and Licensing Appeal i

Board affirmed an earlier Licensing Board decision authorizing the license amendment to permit expansion of the fuel rack capacity for storage of spent fuel at the Vermont Yankee plant. An appeal by one intervenor from that decision is currently pending before the Court of Appeals for the District of Columbia Circuit.

The Company is responsible for costs which will be incurred to decommission its nuclear generating plant at the end of its useful life. While studies indicate that such costs could anount to $21,000,000 (in 1975 dollars), the

, eventual costs of decommissioning will be largely dependent upon technology and regulatory commission requirements at or near the time of decommis-sioning (the plant's current operating license expires in 2007) and such

/~'}

\s/

requirements could materially affect estimates based upon current tech-

, nology. The Company is not presently providing for decommissioning costs.

The 1975 amendments to the Price-Anderson Act provide that each owner of an operating power reactor may be assessed a retrospective premium of up to

$5,000,000 per reactor in the event of any one nuclear incident occurring in any reactor in the United States (with a maximum assessment of $10,000,000 per year per reactor) should any nuclear incident result in liability losses which exceed the maximum available private insurance protection (presently

$160,000,000). That Act further provides for federal indemnity for liability losses in excess of the above two layers of insurance up to the statutory limit of liability of $560,000,000.

(Continued) a

6 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (9) Unaudited Quarterly Financial Information The following quarterly financial information is unaudited and in the opinion of management includes all adjustments (consisting only of normal recurring accruals) necessary to a fair st'tement a of results of operations for such periods.

Quarter ended 1979 December September June March Operating revenues $ 19,318,085 15,762,525 15,788,644 15,112,556 Operating income 4,089,777 3,516,110 3,804,876 3,763,861 Net income 1,999,078 1,611,900 1,826,582 1,820,062 O Net income per share of common stock 4.11 3.12 3.66 3.64 1978 Operating revenues S 15,245,831 13,490,261 16,477,351 16,424,066 Operating income 3,904,369 3,874,709 3,937,949 3,979,465 Net income 1,839,998 1,835,956 1,860,268 1,867,544 Net income per share of common stock 3.65 3.63 3.69 3.71 (Continued) l l

7 VERMOF YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements (10) Unaudited Information on the Effects of Changing Prices The following information is supplied in accordance with the requirements of the Statement of Financial Accounting Standards No. 33 for the purpose of providing certain information about the effects of changing prices. It {

should be viewed as an estimate of the approximate effect of changing I prices, rather than as a precise measure. A statement of income adjusted for changing prices follows (dollars in thousands):

Year ended December 31, 1979 Conventional Adjusted for Adjusted historical general for changes in l cost inflation specific prices i Operating revenues $ 65,982 $ 65,982 $ 65,982 Operating expenses:

O Nuclear fuel expense Other operating expenses 15,327 11,246 17,190 11,246 18,312 11,246 Maintenance 5,364 5,364 5,364 Depreciation 8,300 14,365 16,523 Taxes on income 6,564 6,564 6,564 Other taxes, principally property taxes 4,006 4,006 4,006 Total operating expenses 50,807 58,735 62,015 Operating income 15,175 7,247 3,967 Other income and deductions, net 190 190 190 Interest expense (8,107) (8,107) (8,107)

Net income (loss) excluding reduction to net recoverable cost $ 7,258 (670) (A) (3,950) (A)

Gair. from decline in purchasing power of net amounts owed 16,830 16,830 Reduction to net recoverable cost (17,548) (14,268)

$ (718) (2,562)

Increase in specific prices (current cost) of property, plant and equipment held during the year (B) 38,085 Effect of increase in general price level 49,586 Excess of increase in general price level over increase in specific prices $ 11,501 (A) Including the reduction to net recoverable cost, the net loss would have been $18,218.

(B) At December 31, 1979, the current cost of utility plant net of accumulated depreciation and amortization were estimated to be approximately

$402,346,000 as compared with net utility plant recoverable through depreciation and amortization of $196,920,000.

t- (Continued) _

8 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements A five year comparison of selected supplementary financial data adjusted for the affects of charging prices follows (in thousands of average 1979 dollars except per share amounts):

Year ended December 31 1979 1978 1977 1976 1975 Operating revenues S 65,982 68,578 73,203 67,602 76,194 Historical cost information adjusted for general inflation:

Net loss (excluding reduction to net recoverable cost) 670 O

t Net loss per share of common stock (excluding reduction to net recoverable cost) 5.29 Net assets at year-end at net recoverable cost 66,869 Current cost information:

Net loss (excluding reduction to net recoverable cost) $ 3,950 Net loss per share of common stock (excluding reduction to net recoverable cost) 13.49 Excess of increase in general price ,

level over increase in specific prices 11,501 Net assets at year-end at net reciverable cost 66,869 General information:

Gain from decline in purchasing power of net amounts owed $ 16,830 Cash dividends declared per common share 15.00 19.45 20.94 22.29 17.86 Average consumer price index 217.4 195.4 181.5 170.5 161.2 Dollar amounts adjusted for general inflation (constant dollar amounts) represent historical costs stated in terms of dollars of equal purchasing power, as measured by the Consumers Price Index for all Urban Consumers (CPI-U). Dollar amounts adjusted for changes in specific prices (current cost amounts) reflect ' the changes in specific prices of net utility plant from the date the plant was acquired to the present, and differ from constant dollar amounts to the extent that specific prices have increased more or less rapidly than prices in general.

(Continued)

9 VERMONT YANKEE NUCLEAR POWER CORPORATION Notes to Financial Statements The current cost of propertf, plant, and equipment, which includes land, land rights, intangible plant, property held for future use, nuclear fuel and construction work in progress, represents the estimated cost of replacing existing plant assets and was determined by indexing surviving plant by the Handy-Whitman Index of Public Utility Construction Costs. The current year's provisions for nuclear fuel expense and depreciation on the constant dollar and current coct amounts of utility plant were determined by applying the Company 's depreciation and amortization rates to the indexed plant amounts.

As prescribed in Financial Accounting Standard No. 33, income taxes were not adjusted.

N Under terms of the Power Contracts, which specify costs billable to the Company 's sponsors, only the historical cost of utility plant is recover-able in revenues as 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 deprecia-tion, and is reflected as a reduction to net recoverable cost. While the Power Contracts give no recognition to the current cost of replacing propertf, plant, and equipment, based on past practices the Company believes it will be allowed to earn on the increased cost of its net investment when replacement of facilities actually occurs.

To properly reflect the economics of rate regulation in the statement of income adjusted for changing pricos, the reduction of net property, plant, and equipment should be offset by the gain from the decline in purchasing power of net amounts owed. During a period of inflation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary O liabilities experience a gain. The gain from the decline in purchasing U power of net amounts owed is primarily attributable to the substantial amount of debt which has been used to finance property, plant, and equip-ment. Since the depreciation on this plant is limited to the recoveqr of historical costs, the Company 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.

.