ML20073M023
| ML20073M023 | |
| Person / Time | |
|---|---|
| Site: | River Bend  |
| Issue date: | 12/31/1990 |
| From: | Draper E GULF STATES UTILITIES CO. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| Shared Package | |
| ML20073M016 | List: |
| References | |
| NUDOCS 9105140226 | |
| Download: ML20073M023 (49) | |
Text
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- Audited I;inancial Statements Cajun Electric Power g
Cooperative, Inc.
[ oecember 31, 1990 I
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I Ernst & Young li r 182,it M 8 M ./2 c
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I AUDITED FINANCIAL STATEMENTS l CAJUN ELECTRIC POWER COOPERATIVE, INC.
DECEMBER 31, 1990 I
l REPORT OF INDEPENDENT AUDIT 0RS....................................................
BALANCE SHEETS .................................................................. 2 1
STATEM ENTS OF REVENUE AND EXPENS E S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 STATEMENTS OF CHANGES IN EQUITY AND MARGIN (DEFICIT).............................. 5 STATEMENTS OF CASH FL0WS.......................................................... 6 I NOTES TO FINANCIAL STATEMENTS:
NOTE A - SIGNIFICANT ACCOUNTING POLICIES .................................... 7 NOTE B - UTILITY PLANT . .................................................... 9 NOTE C - INVESTMENTS IN ASSOCIATED ORGANIZATIONS ........................... 11 NOTE D - LONG-TERM DEBT . .................................................. 11 NOTE E - S HORT - T Uol I NV E S TM E NT S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 NOTE F - INCOME TAXES ...... ............................................... 16 NOTE G - EMPLOYEE BENEFIT PLAN ............................................. 17 NOTE H - RELATED PARTY TRANSACTIONS ........................................ 17 NOTE I - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES................... 18 NOTE J - NUCLEAR INSURANCE ................................................. 19 l NOTE K - GULF STATES UTILITIES COMPANY..................................... 20 NOTE L - RATES AND REGULATION .............................................. 21 NOTE M - COMMITMENTS AND CONTINGENCIES ............................. ....... 22 NOTE N - SUBSEQUENT EVENTS.................. ...................... ....... 25 I
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50 ERNST A YOUNG ,n w , ~ . ~ ~ ~
vi. v . ~, -
ag REPORT OF iNi>EPENI)ENT ALLI)1 TORS I
Board of Directors l Cajun Electric Power Cooperative, Inc.
We have audited the accompanying balance sheets of Cajun Electric Power Cooperative, Inc.
l (the Cooperative) as of December 31,1990 and 1980, and the related statements of revenue and expenses, changes in equity and margin (deficit), and cash flows for the years then ended.
These financial statements are the responsibility of the Cooperative's management. Our I responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those g
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes l examining, on a test basis, evidence supporting t; amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement I presentation. We believe that our audits provide a reasonable basis for our opinion.
l In our opinion, the financial statements referred to above present fairly, in all material respects the financial position of Cajun Electric Power Cooperative,Inc. at December 31,1990 and 1989, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
I As discussed in Note M to the financial statements, the Cooperative expects to continue as a going concern under the Debt Restructure Agreement (DRA), finalized in December 1990, notwithstanding the expectation of continuing significant operating deficits. Although by l compliance with terms of the DRA the Cooperative will not be in default, the Cooperative's ability to fully recover the costs of its investment in its utility plant is uncertain as a result of lg those expected operating deficits, future rate regulation and the outcome oflitigation involving
'E Gulf States Utilities Company, described in Note K. Additionally, as discussed in Notes K and M, the ultimate resolution of proceedings with the Federal Energy Regulatory Commission I involving certain transmission charges asserted by GSU, and certain class action litigation invohing the Cooperative's members, cannot be presently determined.
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March 8,1991
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BALANCE SHEETS CAJUN ELECTRIC POWER COOPERATIVE, INC. g (IN THOUSANDS)
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December 31 l
ASSETS UTILITY PLANT Electric plant-in-service $2,635,081 52,624,925 Construction-in-progress 10,938 15,283 Nuclear fuel at amortized cost 602 31Q __fifujljL4 2,706,329 2,706,202 Less accumulated depreciation and amortization 481.511 410.647 2,224,806 2,295,555 Electric plant held for future use 10.182 10.18? g 2.234.988 2.305.737 3 OTHER PROPERTY AND INVESTMENTS Nonutility property 687 687 Restricted funds held by trustees 2,027 703 g Investments in associated organizations 50,847 46,979 m Decommissioning reserve funds 8,297 6,512 Other receivables 25.064 g 61.858 79.945 E CURRENT ASSETS Cash and short-term investments 31,997 69,360 Accounts receivable - electric customers: 3 Men.oers 31,309 34,170 E Nonmembers 9,b18 12,302 Accounts receivable - other 2,801 4,119 Fuel and supplies inventories 34,727 38,680 Prepayments 2.156 500 112.708 159.131 I
DEFERRED CHARGES 2,861 9,603
}2,412,415 $2 454,416 I
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I December 31 I 1990 1989 EQUITY AND LIABILITIES EQUITY AND MARGIN (DEFICIT)
Memberships $ 1 $ 1
, Patronage capital credits 36,533 36,533 Unallocated deficit (952,738) (709,210)
Donated capital 406 40f2 (915.715) (672.270)
LONG-TERM DEBT J Less current portion 3,241,261 124,185
- CURRENT LIABILITIES jg Debt classified as current prior to debt restructure 2,945,179 i
E Accounts payable 482 905
, Taxes other than income tax 240 242 I Accrued interest and other expenses Current portion of long-term debt 23,490 54.44J 78.655 89,486 59.426 3.095.?33 I DECOMMISSIONING RESERVES 8,297 6,512 l DEFERRED CREDITS 751
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$?,412,415 }J,554,416 I See notes to financial statements.
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I STATEMENTS OF REVENUE AND EXPENSES l CAJUN ELECTRIC POWER COOPERATIVE, (IN THOUSANDS)
INC.
Year [nded December 31 1990 1989 OPERATING REVENUE Sales of electric energ';:
Members $ 289,580 $ 278,299 I Nonmembers Other 129,646 1.142 420.373 161,519 L.QB 44qd3Z OPERATING EXPENSES Power production:
Fuel 156,177 151,549 l Operations and maintenance Purchased power Other power supply expenses 65,400 6,321 680 69,794 4,785 707 I Transmission Administrative and general Depreciation and amortization 45,125 23,298 74,774 32,720 21,410 74,357 Taxes, other than income 3.273 Ll01 I 375.048 45,325 358.425 82,406 OPERATING MARGIN OTHER INCOME AND EXPENSES Interest, rents and leases 7,838 11,164 963 I Other income Gains or losses on asset dispositions Litigation settlements 190 (7,425)
(10.378)
MARGIN BEFORE INTEREST AND OTHER DEBT EXPENSE 35,550 94,533 INTEREST AND OTHER DEBT EXPENSE 279,078 268,410 NET DEFICIT }]243,528) $(173.877) l See notes to financial statements.
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g I STATEMENTS OF CHANGES IN EQUITY AND MARGIN (DEFICIT) g CAJUN ELECTRIC POWER COOPERATIVE, INC.
(IN THOUSANDS)
I Years Ended December 31, 1990 and 1989 I
Patrona e Member- Capita Unallocated Donated
_Jhipl_ _Crldill_ __Dg_ficit (Jpital Total BALANCE JANUARY 1, 1989 $ 1 536,533 $(535,333) 5406 5(498,393)
Net deficit for the year _(173.877) _112L322)
I BALANCE DECEMBER 31, 1989 Net deficit for the year ___
1 36,533 (709,210)
_(243.528) 406 (672,270)
.(243.523)
BALANCE DECEMBER 31, 1990 $ 1 536,533 $(95?,738) $406 $(915.798)
See notes to financial statements.
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STATEMENTS OF CASH FLOWS g CAJUN ELECTRIC POWER COOPERATIVE, INC.
(Ita THOUSAl1DS)
I OPERATING ACTIVITIES Year Ended December 31 1990 1939 Not deficit $(243,528) $(173,877)
I Adjustments to reconcile not deficit to net cash used by operating activities:
Ocpreciation 73,099 72,619 I Amortization of nuclear fuel Amortization and write off of deferred charges and credits net 15,446 8,595 13,149 762 Interest expense accrued to I long term debt Interest income on long-term receivable 157,250 (1,395) 54,691 Patronage capital credits (3,858) (4,725)
Book value of asset dispositions 5,213 Decrease (increase) in accounts receivable 6,963 (11,684)
Decrease in fuel and supplies I inventories (Increase) decrease in prepayments 5,221 (1,856) 4,081 286 Decrease in ac' "a'* odyable (424) (115) l Decrease in ac.
other expens>
crest and
((LL95) (21.259)
NET CASH USED (4L110) (66.071)
INVESTING ACTIVITIES Increase in utility plant (24,358) (20,537)
I Proceeds from settlement of lawsuit (Increase) decrease in investments 21,914 and restricted funds held by trustee (1,334) 33,561 I increase in deferred charges Collection of other receivables (2,080)
__ ED.11 (4,811)
NET CASH (USED) PROVIDED (1.757) 10J21 FINANCING ACTIVITIES Proceeds from payments made by REA as i
i I guarantor Repayment of long term debt and debt 134,052 220,339 classified as current prior to i
l debt restructure NET CASH PROVIDED (124.388) 9.664
_12 & lEQ) 17.18_9 DECREASE IN CASH AND CASH EQUIVALENTS (37,363) (18,756)
Cash and cash equivalents at beginning of year 62JfD Mlls CASH AND CASH EQUIVALENTS AT END OF YEAR $ 31.991 L69 MO 1 See notes to financial statements.
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I FINANCIAL I NOTES TO STATEMENTS CAJUN ELECTRIC POWER COOPERATIVE, INC.
g DECEb1BER 31, 1990 NOTE A - SIGNIFICANT ACCOUNTING POLICIES General: Cajun Electric Power Cooperative, Inc., (the Cooperative) is a rural electric generation and transmission cooperative wholly-owned by 13 member I distribution cooperatives (the Members) which provide electricity to approximately 310,000 metered customers representing over 1,000,000 people residing throughout 80%
l of the land area of Louisiana. The Cooperative and its 13 Members have entered into wholesale all requirements power contracts which require the Members to purchase all of their electric energy requirements from the Cooperative generally through 2026.
The Cooperative is subject to certain rules and regulations promulgated for rural electric borrowers by the Rural Electrification Administration (REA) and is also subject to the jurisdiction of the Louisiana Public Service Commission (LPSC) (see Note L).
System of Accounts: The Cooperative maintains its accounting records in accordance with the federal Energy Regulatory Commission (FERC) chart of accounts as modified and adopted by the REA.
Electric Plant-in-Service: Electric plant-in-service is stated on the basis of cost. Depreciation is computed using the straight-line method over the expected useful lives of the related component assets. The net book value of units of property replaced or retired, including costs of removal net of any salvage value, I is charged to operations.
Nuclear fuel: The cost of nuclear fuel, including interest during construction, is amortized to fuel expense on the basis of the actual number of units of thermal
' energy produced, multiplied by a unit cost which reflects the total thermal units expected to be produced over the life of the fuel (see Note 1).
Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc.
Note A Continued Construction-in Progress: Construction-in-progress is stated on the basis of cost, which may be net of the amounts applicable to a joint owner, and includes interest during construction on major projects.
Investments: The Cooperative has investments in The National Rural Utilities Cooperative Finance Corporation (CFC) and the National Bank for Cooperatives (CoBank) which are in the form of capital term certificates and Class "C" and "E" stock, respectively, in the accompanying financial statements, these investments are carried at cost and include undistributed patronage capital credits from these organizations. The Cooperative allocates patronage capital credits received from associated organizations to assets and expenses in the same ratio as the interest paid to these organizations is capitalized and expensed.
I Fuel and Supplies Inventories: Fuel and supplies inventories are stated on the basis of cost utilizing the weighted average cost method of inventory valuation.
Decommissioning: Decommissioning reserves represent cumulative accruals for decommissioning expense. The annual charge for decommissioning expense is the required addition to the decommissioning trust funds such that the balance of the funds (contributions plus not earnings) will be sufficient to satisfy estimated decommissioning costs at the end of the expected useful lives of the Cooperative's I facilities (see Ncte 1).
Deferred Charges: Deferred charges at December 31, 1990 consisted primarily of capitalized software.
I Income Taxes: Certain revenue and expense items are recognized in different periods for financial reporting and income tax purposes thus creating timing differences.
Deferred income taxes are provided on these timing differences which are principally related to depreciation on electric plant-in-service and the sale of tax benefits.
I The Cooperative uses the flow-through method of recognizing investment tax credits.
Patronage Capital Credits: The Cooperatis u organized and operates on a not-for-profit basis, patronage capital credits represerit that portion of the Cooperative's net margins which have been allocated to Member cooperatives. As provided in the Cooperative's bylaws, all amounts received from the furnishing of electric energy in l l
Notes to Financial Sta:ements - Continued i Cajun Electric Power Cooperative, Inc.
I Note A - Continued excess of the sum of operating costs and expenses and amounts required to offset any current year losses are assigncd to Members' patronage capital credit accounts on a patronage basis or, at the discretion of the Board of Directors, may be offset I against losses of any prior fiscal year. All other amounts received from operations in excess of costs and expenses may be used to offset losses incurred during the current or any prior fiscal year and, to the extent not needed therefor, are allocated to Members on a patronage basis. The Cooperative may also retire previously allocated patronage capital credits out of its Retained Share (see Notes D and N). In accordance with the Cooperative's bylaws, the net deficits have not been allocated to the Member cooperatives.
Cash Equivalents: The Cooperative considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Reclassifications: Certain reclassifications have been made to the 1989 financial statements to conform to the 1990 presentation.
I NOTE B - UTILITY PLANT I Electric plant-in-service at December 31 consisted of the following (in thousands):
1990 1989 Production:
Nuclear $1,475,098 $1,471,0^8 I Coal Gas 1,015,450 31,708 1,016,170 32,348 Transmission 96,672 91,254 General 16.153 14,085
}2,635,081 12,6?4,925 I Net Megawatt Coopera_tjve Ownership I Generatina Unit Ratina Fuel Percentacq [iegawa t t s River Bend 936 Nuclear 30% 281 Big Cajun 2, Unit 1 540 Coal 100% 540
- Big Cajun 2, Unit 2 540 Coal 100% 540
! Big Cajun 2, Unit 3 540 Coal 58% 313
'l Big Cajun 1, Unit 1 105 Natural Gas 100% 105 m Big Cajun 1, Unit 2 105 Natural Gas 100% 105 l
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I Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc.
Note B - Continued River Bend and Big Cajun 2, Unit 3 are jointly owned by the Cooperative and Gulf States Utilities (GSV) (see Note K). Construction-in progress consisted of improvements and additions to existing plants. The estimated cost to complete these I projects at December 31, 1990 was approximately $9.8 million.
fluclear fuel represents the Cooperative's 307, share of River Bend fuel and as of December 31 consisted of the following (in thousands):
1990 1989 Nuclear fuel in process $ 14,243 $ 25,451 Nuclear fuel in stock 177 Nuclear fuel in reactor 78,978 76,698 Spent nuclear fuel 40.948 _2L4M 4 134,346 124,584 Less nuclear fuel amortization (74.0H) JL8J1Q)
Net nuclear fuel $ 60,310 $ 65,994 Nuclear fuel in process represents the accumulated cost, including interest during
, construction, of fuel required for the fourth reload and a portion of the fifth reload. The fuel is in various stages of conversion, enrichment or fabrication.
The third refueling of River Bend occurred in September 1990. Spent nuclear fuel consists of the original cost of nuclear fuel assemblies, in the process of cooling, removed from the reactor during each of the three previous reloads.
Land relating to an abandoned lignite project has been retained as a possible site for a future generating facility and its cost, $9.8 million, is included in electric plant held for future use (see Note Fi),
The net change in accumulated depreciation and amortization for the years ended December 31 was (in thousands):
1990 1989 Charged to operating expenses $73,099 $72,619 Charged to fuel inventories and other assets 1.268 1.332 74,367 73,951 I Less asset disposals J3.491)
$70,876 11,971)
$71,980 I Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc.
I NOTE C - INVESTMENTS IN ASSOCIATED ORGANIZATIONS g
Investments in associated organizations at December 31 consisted of the following (in thousands):
1990-- __1989 CfC $ 7,704 $ 8,016 CoBank 41,819 37,680 Other _LJ14 . 1,281
$50,847 $46,979 NOTE D - LONG-TERM DEBT On December 21, 1990, the Cooperative consummated a Debt Restructure Agreement (URA) effective May 31, 1990, with the United States of America acting through the REA.
As a result, the Cooperative is no longer in default on any of its debt. Since December 31, 1987, the Cooperative had been in default on its debt service obligations and, as a result of cross default provisions of various debt agreements.
I essentially all of the Cooperative's debt was deemed in default and subject to acceleration and was classified as a current liability. During the period in which it was in default, the Cooperative wcs operating under payment restrictions set forth in Section 3713 of Title 31 of the U.S. Code. As of December 21, 1990, the Cooperative was no longer operating under such payment restrictions.
Under the terms of the DRA, the Cooperative executed and delivered to REA two notes on December 21, 1990 which restructured all of the Cooperative's debt to and guaranteed by the REA: Note A, in the original face amount of $2,147,994,670 which maturas on December 31, 2026 and Note B, in the original face amount of
$1,037,007,550 which has a final maturity date of December 31, 2036. Both Notes A and B bear interest on the unpaid principal balance at a nominal rate of 8.64% with I an assumed effective annual rate of 8.99%. Any accrued but unpaid interest on Notes A or B is added to principal on a monthly basis. The DRA provides that Note A may not be prepaid without the express written consent of REA. Note B may be prepaid without premium or penalty.
l I The DRA requires that Note A be paid in stipulated annual installments contained in the Note A debt service schedule. Under the terms of the DRA, so long as the annual amount due under the Note A debt service schedule has not been paid in full, on the I . .- - - . - -- -- - .- . - --
E Notes to financial Statements - Continued R Cajun Electric Power CooperMive. Inc.
Note 0 - Continued I
fifteenth business day of each month (the cash sweep date) the Cooperative pays to REA all cash balances at the end of the preceding month in excess of $35,000,000 (the permitted general funds cap) and certain other allowable reserves. Upon the I date that advances are available to the Cooperative under a working capital line of credit, which is currently oeing negotiated, the general funds cap will be reduced to $25,000,000.
l Payments on Note 8 prior to 2026 are contingent upon several factors, including member and nonmember sales growth, extraordinary cash roccipts and the existence of cash in excess of the general funds cap at any month.end af ter all annual Note A I required payments have been made. The existence of such excess cash will also result in additions to the Cooperative's Retained Share, which represents tie amount I of cash which the Cooperative may utilize for any valid corporate purpose, including the payment of previously allocated capital credits. Note B payments required for 1990 were $2.4 million, of which $1.1 million was paid prior to December 31, 1990 after the annual Note A debt service requirement of $118 million was satisfied, and the remainder is to be paid by April 8, 1991, resulting in a reduction of the general funds cap equal to the amoun' of the payment. At December 31, 1990, the Cooperative's Retained Share was equal to $544,552 (see Note N).
The DRA provides that the unpaid principal amount of Note B as of December 31, 2026 will be restructured as follows: The Cooperative will have the fair market value of its assets appraised as of Deccmber 31, 2026. An amount equal to sixty percent of the appraised value shall be psid in equal annual installment s over the next ten years ending December 31, 2036 at the sama interest rate, accrued and compounded monthly in the same manner as the present Note A. The remaining forty percent balance of Note B as of December 31, 2026 will be repaid over the subsequent ten year period in a manner contistent with the terms and conditions associated with Note B of the DRA. Any amount unpaid at December 31, 2036 will be due and payable in full as of that date.
I Under the terms of the DRA, the Cooperative's debt which was in def ault prior to the DRA, and was guaranteed by the REA (the REA related debt: notes payable to the Federal financing Bank, the Cooperative Utility Trusts, and CoBank) which is included in the restructured Notes A and B, was not retired or defeased but remains outstanding. The obligation of the Cooperative to REA arising out of the Citibank
I Notes to Financial Statements Continued Cajun Electric Power Cooperative. Inc.
Hote 0 L v. inned Agreement is also part of Note B (see Note M). The DRA requires REA to make all of g
its guaranteed oayments on the REA related debt in a timely manner, and, so long as no event of def ault has occurred under the ORA, REA agrees not to exercise any
'I remedy it may have under the REA related debt loan documents. Additionally, the REA related debt will not be deemed fully satisfied until the Cooperative satisfies in full the requirements of Notes A and B. Under the terms of the DRA, in the event of def ault, REA may proceed under either the terms of the DRA or the REA related debt l loan documents.
A portion of the underlying restructured REA related debt, aggregating $533 million at December 31, 1990, bears interest at varying rates, for which the Cooperative has assumed the interest rate risk. If the actual interest cost of this debt in any I year is less than the benchmark amount set forth in the DRA, the difference will be added to the Cooperative's Retained Share, if the actual interest cost is greater.
the Cooperative must pay the difference to the REA.
Long term debt at December 31 consisted of the following (in thousands):
1990 1989 Note A to REA, due in varying annual installments through I 2026, interest at 8.64%
compounded monthly. $2,149,284 Note B to REA, varying annual I payments, based upon several contingent factors, final maturity December 31, 2036, I interest at 8.64% compounded monthly. 1,089,276 I Citibank agreement, due June 1991 (see Note M). 48,870 $101,610 Portion of the Citibank I agreement assigned or assignable to REA (see Note 70,248 M).
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1 Notes to financial Statements Continued I Cajun Electric Power Cooperative, Inc. l Note 0 Continued
_ _1141 _ 1989 l Industrial Development Revenue Bonds, series 1982, interest at two-thirds of prime rate I (6.7% at December 31, 1990),
due in 7 annual installments from 1991 through 1997. As <
a result of cross default I provisions of the bond indenture, the 1989 balance of $3,600,000 was classified l as a current liability.
River Bend construction and
$ 3,150 operations commitment, I interest at a variabic rate (7% at December 31, 1990).
due in monthly installments I of $600,000 (including interest). 5,124 $ 11,753
$5 Less current portion of long term debt (54.443) .fi9226) 53,241.261 }j,24.185 E
Scheduled maturities of long term debt including Note A principal and interest payments and excluding Note B payments are (in thousands):
I 1991 1992 1993 120,450 135,450 90,573 170,450 I 1994 1995 Thereafter 170,450
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$8.913.?73 Interest and other debt expense incurred on long term debt, and on debt classified as current prior to debt restructure for the years ended December 31 consisted of the following (in thousands):
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I Notes to Financial Statements Continued Cajun Electric Power Cooporative, Inc.
Note D Continued
.1910_ 1989 Interest charged to operating expense $270,768 $268,907 Other debt expense __.J J D (491)
Total interest and other debt expense _279.076 ._Z6B A 10 Capitalized interest on nuclear fuel 1.469 I 8 43
$ ? 79,9_2fi }?69,879 I for the years ended December 31, 1990 and 1989, the Cooperative, and the REA on behalf of the Cooperative, paid interest of approximately $189.3 and $236.4 million I respectively.
Substantially all of the Cooperative's assets are pledged to secure the Cooperative's debt by the Supplement to the Supplemental Mortgage and Security l Agreement (the REA mortgage) executed November 28, 1990 between the Cooperative, RLA and COBank in order to facilitate the DRA. Both the REA mortgage and the DRA contain certain restrictive covenants including limitations on indebtedness, capital I additions, distributions to members and an agreement not to lower the Cooperative's wholesale electric rate for the term of the DRA. At December 31, 1990, the Cooperative was in compliance with all such covenants. Certain office facilities in Baton Rouge are separately pledged to secure Industrial Development Revenue Bonds.
CoBank is also secured by the REA Mortgage for two letters of credit amounting to approximately $65.3 million supporting potential indemnity payments under sale.
leaseback transactions completed in 1983. During 1988, CoBank renewed the letters of credit for an additional five year period.
NOTE E - SHORT-TERM INVESTMENTS At December 31, 1990, the Cooperative's cash was invested in U.S. Treasury securities, U.S. government agencies securities, commercial paper and short-term obligations issued by financial institutions. All investments conform with the guidelines established by the REA. Maturities are selected to correspond with cash flow requirements and are generally for periods of less than three months.
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I Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc.
I NOTE F - INCOME TAXES g
During 1983, less than 85% of the income of the Cooperative was collected from I Members for the sole purpose of meeting losses and expenses. As a result, pursuant to Section 501(c)(12)(A) of the Internal Revenue Code of 1986 (the Code), as amended, the Cooperative became a taxable entity. The Cooperative has made an election under the Code to remain taxable through the year 2003 in order to participate in certain equipment leases. As a consequence of completing the DRA in 1990, the Cooperative reduced its net operating loss carryforwards by approximately
$1 billion. The Cooperative had no current or deferred income tax provisions for the years ended December 31, 1990 and 1989.
I At December 31, 1990, the Cooperative had general business credit carryforwards of approximately $166 million, of which approximately $9 million expire in 1999; $27 million in 2000; $128 million in 2001; and $2 million in 2002.
In addition, the Cooperative has loss carryforwards of approximately $1.4 billion which may be used to offset future taxable income. The expiration dates and amounts of the net operating loss portion of the total loss carryforwards are as follows (in thousands):
l 2004 2005
$ 15,837
_211 1 0.3
$247,646 The remaining losses of approximately $1.2 billion are attributable to Member activities ard may be carried forward indefinitely.
The Cooperative has available approximately $100 million in net operating loss carryforwards for alternative minimum tax purposes which expire in 2005.
I Also, the Cooperative has approximately $1.2 billion of losses attributable to Member activities for alternative minimum tax purposes which may be carried forward indefinitely, Additionally, approximately 5166 million of the general business credit carryforwards of the Cooperative may be used to offset future alternative minimum tax. These credits expire in the same years as the general business credit carryforwards for regular tax purposes.
I Notes to financial Sta%cments - Continued Cajun Electric power Cooperative, Inc.
Note F - Continued I
in December 1987, the financial Accounting Standards Beard (f ASB) issued Statement of financial Accounting Standards (SFA" No. 96, Accounting for income Taxes. SfAS No. 96 must be adopted before 1993 and the extent of its impact has not yet been I determined. The FASB has indicated that it intends to issue a new exposure draft on accounting for income taxes in 1991. The exts:nt of the impact of any final statement which may be forthcoming from the exposure draf t is uncertain at this time.
I NOTE G - EMPLOYEE BENEFIT PLAN I All of the Cooperative's enployees participate in the National Rural Electric Cooperative Associatinn (NRECA) Ret noment and Security program once they have met I mir , mum service requirements. The Cooperative makes annual contributions to the plan equal to the amounts accrued for pension expense. in this master multiple-l employer defined benefit plan, which is available to all member cooperatives of the NRECA, the accumulated benefits and plan assets are not determined or allocated separately by individual employer. As a result of a better then anticipated return from the plan's investments, the Cooperative was not required te make contributions to the plan in 1990 or 1989.
NOTE H - REl.ATED PARTY TRANSACTIONS In December !!86, the Cooperative purchased certain substation equipnent owned by eight Members in order to better define the operating responsibili'ies of the transmission system. The aggregate purchase price of 512.4 million war partially financed by the Cooperative assuming long-term notes payable to the RiA in the amount of $8.4 million. In addition, the Cooperative agreed to make payments to certain of its Members. During 1990, the Cooperative made payments of 52.2 'nilliori under the terms of this agreement. Final REA action on certain of these transactions is still pending as of December 31, 1990.
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I Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc.
I NOTE I - SPENT NUCLEAR FUEL AND DECOMMISSIONING RESERVES g
GSU has executed a contract with the Department of Energy (D0E) whereby the DOE will I furnish disposal service for the spent nuclear fuel from River Bend.
cost amounts to one tenth of one cent per kilowatt hour of net generation. The Currently, the Cooperative, as a joint owner of River Bend, shares this cost with GSU. The DOE spent nuclear fuel fee is subject to change in accordance with the provisions of the l Nuclear Waste Policy Act of 1982.
The Nuclear Regulatory cow.ssion in 1988 issued 'inal regulations setting forth the technical and financial criteria for decommissioning licensed nuclear facilities.
The regulations require electric utilities either 'o certify that a minimum dollar I amount will be available to decommission the facility or to submit a decommissioning funding plan. In addition, these regulations require that financial assurance be provided by either prepayment, an external sinkire fund, or by a surety, insurance, or other form of guarantee. In response to these regulations, on December 2, 1988, the Cooperative established an external grantor trust, the River Bend Decommissioning Trust fund, and intends to make annual contributions to accumulate an amount which will be sufficient to pay for its share of the cost of decommissioning at the end of the estimated useful life of River Bend. Annual contributions to the trust based on current estimates and assumptions are I approximately $1.4 million. As of December 31, 1990, the balance in the River Bend Decommissioning Trust fund was $7.1 million.
The Cooperative is required by the State of Louisiana Department of Environmental l Quality (DEQ) to provide assurance that it has the ability to fund the actions which will be necessary to rehabilitate its Big Cajun 2 ash and wastewater impoundment areas which, as disposal sites, are subject to DEQ review and supervision. The total liability for funding the solid waste disposal site rehabilitation is currently estimated t be ppr xim te y $4 milli n, f which GSU is responsible for lE
!u approximately $500,000. On July 1, 1984, the Cooperative created the Solid Waste Disposal Trust and deposited $1.06 million with the trustee in satisf action of its DEQ funding requirements. The annual contributions to the trust are approximately
$116,000. The actual payments for site rehabilitation are not scheduled to occur until the end of the estimated useful life of the Big Cajun 2 coal-fired facility.
,l The balance in the Solid Waste Disposal Trust at December 31, 1990 was $1.2 million.
I Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc.
NOTE J - NUCLEAR INSURANCE g
The ownership of an undivided interest in River Bend subjects the Cooperative to I certain risks. The Cooperative is insured, as described below, for public liability and property damage.
The Price Anderson Act (the Act) was renewed by Congress in 1988 and was extended through August 1, 2002. Public liability under the Act for any nuclear incident is currently limited to $7.8 billion. The Cooperative and GSU are insured for this exposure by private insurance as well as by a secondary financial program. Recent legislativc changes to the Act related to the secondary financial program may require the Cooperative to become subject to a possible retroactive assessment of I which the Cooperative's share would not exceed $19.8 million per incident with a maximum of $3 million per incident payable in any one year for losses at any licensed nuclear facility.
The Cooperative, together with G5U, maintains $500 million of property damage insurance and $700 million of excess insurance related to River Bend obtained from the private insurance market. ,Vditionally, the Cooperative is a member insured of the Nuclear Electric Insurance Limited (NEIL II) program which provides $1.1 billion of excess property insurance. As a member-insured of 14 Ell 11, the Cooperative is I subject to a maximum assessment of $2.1 million in any one policy year, Although the Cooperative and GSU continue to attempt to increase insurance coverage as it becomes available, the Cooperative can give no assurance as to the adequacy of its coverage in the event of a major accident. Total available property damage l insurance is substantially less than the potential insurable value of River Bend.
The Cooperative has joined G5V in establishing a Nuclear Workers' Liability policy which covers liability for the claims of workers employed at River Bend after January 1, 1988 for noncatastrophic nuclear related injury such as prolonged exposure to low-level radiation. Any claims by workers employed at River Bend prior to January 1, 1988 will continue to be covered under the Nuclear Workers' Liability policy if the claim is made by December 31, 1997. Under the Nuclear Workers' Liability policy, the Cooperative is subject to a maximum potential retrospective premium assessment of $1.2 million. It is possible that liabilities related to the I
Notes to Financial Statements - Continued Cajun Electric Poter Cooperative, Inc.
Note J - Continued release or escape of a hazardous substance from River Bend may be greater than the coverage on policies currently carried and, consequently, sting insurance may not be sufficient to meet all possible liabilities or losses. The Cooperative cannot provide assurance that it will be able to maintain coverage at present levels. Any liability or loss in excess of that covered under existing policies could have a material adverse effect upon the Cooperative, g NOTE K - GULF STATES UTILITIES COMPANY In August 1979, the Cooperative and GSU entered into a contractual agreement for the I joint ownership of River Bend (see Note B). The unit was declared to be in commercial operation as of June 16, 1986. The Cooperative has a 30% undivided interest in River Bend and is responsible for 30% of River Bend's costs of construction, capital additions and operations. GSU is the operator of the facility. GSU paid the Cooperative approximately $66 million in 1990 and $94 million in 1989, and is expected to pay $27 million in 1991 over the remaining one-half year term of a five-year capacity and energy sellback agreement related to River Bend (see Note M).
I in November 1980, the Cooperative and CSU entered into a contractual agreement for the joint ownership of Big Cajun 2, Unit 3, and certain common f acilities at Big Cajun 2 (see Note B). The Cooperative retained a 58% undivided ownership interest in Unit 3 and an 86% undivided ownership interest in the common f acilities. The Cooperative is the operator of the Big Cajun 2 facilities.
The Cooperative filed suit on June 20, 1989 against GSU in United States District Court in Baton Rouge alleging fraud in the inducement to enter into the River Bend Joint Ownership Participation and Operating Agreement (J0P0A) as well as misrepresentation, mismanagement, breach of fiduciary duty and breach of contract.
The Cooperative seeks the annulment of the River Bend J0P0A and the recovery of its I investment in River Bend (approximately $1.6 billion) as well as damages resulting from the Cooperative's participation in the River Bend project. The Cooperative is
- eeking further damages associated with excessive operating costs of the facility wLich arose due to GSU's alleged mismanagement. On November 7,1990, GSU filed an ameded ceunterclaim with the court requesting that the Big Cajun 2, Unit 3 J0P0A be rescinded and asked for an appropriate monetary judgment sufficient to place
I Notes to Financial Statements - Continued Cajun Electric Power Cooperative. Inc.
Note K - Continued the Cooperative 'nd GSU in the same position as if the Big Cajun 2, Unit 3 J0P0A were never consummated. Additionally, GSU's counterclaim asserts that its present transmission arrangements with the Cooperative should be terminated by the court, I further, GSU asserts that in any event it is entitled to monetary damages resulting from an alleged breach of rontract and fiduciary duty by the Cooperative. The timing or outcome of these matters is uncertain.
l NOTE L - RATES AND REGULATION in 1989, following two years of litigation, the Louisiana Supreme Court held that the LPSC has plenary authority over all rural electric cooperatives in the State.
In Octobe 389. the Cooperative's rate schedules were filed with and accepted by I the LPSC.
In May 1990, the LPSC ordered that the Cooperative reduce its base rates to its Members by 4 mills per KWh, and the Cooperative did so. This rate decrease l essentially replaced a special fuel-related credit that the Cooperative had been flowing through to its Members, which was to expire in that month.
In July 1990, the LPSC approved the DRA with certain conditions. One of these conditions was that the Cooperative's average annual rate to its Members in 1990 and 1991 be no higher than 54.5 mills per KWh. To meet this requirement the Cooperative reduced its fuel cost adjustment by approximately $900,000 in 1990.
The Cooperative has no formal rate change application on file with the LPSC, but the LPSC has initiated an examination of the Cooperative's rates, initial discovery in this matter took place in 1990. The timing of hearings before the LPSC on this matter is uncertain.
In addition to LPSC regulation of the Cooperative's rates, under the DRA, REA must I approve any rate change prior to its being implemented. Additionally, the DRA requires the Cooperative to obtain REA approval prior to filing with the LPSC for a i change in any rate or rate schedule.
l i
I Notes to Financial Statoments - Continued Cajun Electric Power Cooperative. Inc.
I l NOTE H - COMMITMENTS AND CONTINGENCIES Equity And Margin (Deficit): The Cooperative expects to incur continuing and substantial annual deficits for the foreseeable future and also expects that its Unallocated Deficit [a component of equity and margin (deficit)) will continue to increase because of interest expense that is accrued but not paid. The debt restructure completed in 1990 recognized that the Cooperative was unable and would continue to be unable to pay previously scheduled debt service (principal and interest) on all of its debt and therefore split substantially all of its future debt service obligations into Note A and B components in order to avoid forcing a restructure or reorganization under the bankruptcy code.
I Under Generally Accepted Accounting Principles, the Cooperative must continue to accrue the interest expense on Note A and Note B, however, payments on Note A are I based on a nontypical amortization schedule specifically set forth in the DRA while payments on Note B prior to 2027 are required only when certain contingent events occur (see Note D). The interest that is accrued but not paid is added to the balances of the notes each month thereby increasing the debt of the Cooperative even though a default has not occurred.
The intarest expense that is accrued but not paid will continue to cause annual deficits and a deteriorating net worth, but neither is an event of default.
Accordingly, the Cooperative expects to continue to operate as a going concern in I the normal course of business notwithstanding the continuing and substantial annual deficits.
Citibank On february 3, 1989, Citibank filed suit against the Cooperttive in the United States Did r;ct Court fnr the Southern District of New York alleging damages of approximately $209 million, including interest and other charges, as a result of drawings on its letters of credit whir.h occurred in 1988 when the Cooperative's pollution control revenue bonds were called and redeemed. On April 21, 1989, the court returned a judgment against the Cooperative of $209,487,183 plus accrued I interest at 9.51% from the date of the judgment. On June 19, 1989, the Cocperative, l
,I j . -. . _ - . -- -
I Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc.
Note H - Continued REA and Citibank entered into an agreement whereby the Cooperative agreed to make the following payments to Citibank in f ull satisfaction of Citibank's rights under the judgment (in thousands):
June 20, 1989 ,
000 June 1, 1990
- 740 I June 3, 1991 48.870
$146,610 As part of the agreement, Citibank agreed to forego its rights to enforce the judgment so long as the three payments are made when due. The agreement also provided that Citibank would transfer to REA a severed interest in the judgment of
$86.9 million with accrued interest at 9.51% which was included in Note B (see Note D). In 1991, REA's severed interests in the judgment will be converted to a note to REA and the judgment will be deemed satisfied. The note to REA will be treated as part of Note B in accordance with the DRA (see Note D).
Gulf States Utilities Company: On July 17, 1987, the Cooperative filed a complaint with the FERC against GSV alleging overbilling and improper cost allocations for certain transmission service charges. On May 11, 1989, a FERC administrative law judge issued an initial opinion which could require the Cooperative to pay GSU approximately $19.3 million for transmission charges for the period 1981 through 1990. The FERC will make a final determination on the initial opinion which may increase, reduce or eliminate the Cooperative's potential liability to GSV. After final FERC action, either party may pursue further appeals through the federal court I system. At December 31, 1990, GSV alleged that the Cooperative had underpaid these transmission charges in the amount of approximately $82.9 million. The final timing or outcome of this matter is uncertain.
Coal and Transportation Commitments: Purchases under the terms of contracts for the acquisition and related transportation of coal during 1990 and 1989 were approximately $121 million and $120 million, respectively. Certain purchases are subject to various price escalators and deflators, minimum quantity takes and periodic pricc reopeners at then current market prices. Management is of the I opinion that these contracts will properly meet anticipated coal supply needs. The transportation contracts begin to expire in 1999 while the coal contracts are for 1
I - -. - - --.
I Notes to Financial Statements - Continued Cajun Electric Power Cooperative, Inc.
Note M - Continued the useful life of the coal-fired generating facility provided the present supplier is willing to meet or better offers from other suppliers at scheduled periedic price reopeners, I As explained more fully in Note K, i
Litigation: the Cooperative filed suit on !
June 20, 1989 against GSU alleging fraud in the inducement to enter into the River Bend J0P0A as well as misrepresentation, mismanagement, breach of fiduciary duty and breach of contract. Also, on November 7, 1990, GSU filed an amended counterclaim against the Coooerative. The timing or outcome of these matters is uncertain.
I On March 7, 1990, the Cooperative executed a settlement and compromise agreement with a coal comoany concerning litigation related to abandoned lignite projects. On March 9,1990 the Cooperative paid a cash settlement of $9.2 million and agreed to transfer 120 acres of land in full settlement of all claims. The transfer of the land is expectea to take place in 1991 after approval by the REA.
On September 20, 1989, a class action petition was filed in the Tenth Judicial District State Court in Natchitoches Parish, Louisiana naming the Cooperative's Members as defendants. The plaintiffs in this action seek a refund of all rate increases enacted by the Cooperative's Members from 1978 Entil the respective Memt,er voted to ba subject to the jurisdiction of the LPSC or was placed under the jurisdiction of the LPSC by action of the State Supreme Court (see Note L). On June 23, 1990, a motion was filed by the Cooperative's Members to name the Cooperative as a third party defendant in the caso. The timing or outcome of this matter is uncertain.
I On December 13, 1990, Sam Rayburn G&T Cooperative, Inc. (SRG&T) filed suit against the Cooperative in a Texas state court seeking specific performance by the Cooperative of a contract to provide for the sale of a 7% undivided ownership interest in Big Cajun 2, Unit 1. The contract had expired, according to its terms, I on June 1, 1990. Further, SRG&T petitioned the court to rule, if specific performance is not granted, that a firm power sales contract between SRG&T and the Cooperative be declared null and void. Additionally, SRG&T filed a motion requesting that proceeds fron, the firm power sales contract be paid into I 1 - .- ._
Notes to Financial Statements - Continued I. Cajun Electric Power Cooperative, Inc.
Note H - Continued the registry of the court. The Cooperative successfully removed the suit to federal court and has filed a motion requesting transfer of the suit to Louisiana. The timing or ultimate outcome of this case is uncertain (see Note N).
NOTE N - SUBSEQUENT EVENTS Litigation: On February 19, 1991, The United States Districi Court for the Eastern District of Texas denied SRG&T's motion requesting that it be ai. owed to deposit the payments under its firm power sales contract with the Cooperative into the registry of the court.
Retained Share: On February 25, 1991, the Cooperative's Board of Directors approved I a distribution to the Members of the balance of the Cooperative's Retained Share in the amount of $544,552 to pay previously allocated capital credits. The distribution was made on March 5, 1991.
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MSCRIPTO Of BUSMESS GJ States UtSt-es Co generates, t*ansma and seus e-e:tncity to rnord than 570 0lX) custome s in a 26 thou-Sand squa'e rNe area tnat st?stches 350 moes west from Baton Rouge, La ,
to a cont about 50 rnaes east of Austm.
Texas The temtoy served ty GA States has a populaton of aw! 143 m.ihon and in:iudes the northern suburbs of Houstan and t*4 maior emes of Conta Hantsde, Beaurnont and Port A1hur in Tesas and Lake Chares and Baton Rouge in Lovs-ana At the end of 1990 the compaay was provdng whoiesa:e service to seven municcaitties and three rural electncai TAllLE OF CONTENTS cooperawes in botn states in action.
GSU sapphes steani and eiectnoty to a REPORT TO SHAREt10LDP.RS. 4 targe industnal customer through a 1990 Yf 8.R IN REVirW 6 cogereram tan in Bam RMe and is a paaer in a cogeneration praect.
f)NANCIAL INFORMATION 14 New industna! Swa n ca. mar Laa4 Cha"4s STATISTICAL
SUMMARY
. 48 GJ States owns and operates a nat-ural gas reta4 distnbuton system sere INFORMATION TO StiAREMOLDERS 49 mg more than 63 000 customers in f e Batan Rouge area OfflCERS 50 As a member of tre Southwest Power Pool. t** company tas the at4ty to in-DIRECTORS . 51 terchange electacity with 44 members l29 full raeq;ters and 15 associated members) m eight states m tre South and Southwest in 1990. Gutt States had a peak load of 5.388 megawatts instaaed capacitt and hrm purchased power agreements tota:ed 6.553 mega*ans at the t.me of the pean GSU reacsane's is located at 350 Pine St-, Deaamont, Texas
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About the Cover: 1 IBe giGba! nature cf environmental matters - prote;tc0 Of OVr V, land gge and w ater resources -4 has expanded tNnking beyond local f Gu!f States Utihties' Senace Area touncanes and concerns Gulf i l States Utmt es comm.tment to I preseMng our envtrcement is a iong-stand.ng one l
2
rinancial tilghlights 1990 1989 Changc Operating Revenue (000) $ 1.690.685 $1.607.406 5.2 Operating Expenses and Taxes (000) $1,357 452 $ 1.2 79,506 6.1 Net Loss (000). $ (44.282) $ (45.573) 2.8 Loss Applicable to Common Stock (000) $ (107.024) $ (108.412) 1.3 Loss per Average Share of Common Stock Outstanding $(0.99) $( 1.00) 1.0 Dividends per Share of Common Stock - - -
Average Common Shares Outstanding (000) 108.055 108.055 -
Number of Electric Customers (end of year) 570,738 563,277 1.3 ggg;p ggg gj gggg gg Total Kilowatt Mour Sales (000) 28,964.499 27.466.189 5.5 System Peak Load - Kilowatts 5.388,000 5.040.000 6.9 00EM 12 115 -
$1 -
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-10 5 41-815 " "
1986 1981 1968 1989 1990 inring 1990, the company recorded a 51,25 pu snare ct:arge for the settlement of e
O Peinted on Recyced Paper a long standrng purchase pcwer contract aispute mth the Southern CO j
I 3
//s s Report to Shareholders T'
.h
%T87MW {Q% $NQQj d , . i g] We hate reported a loss oI 99 cents per shaic of com-
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@yi mon sto(h for 1990. This (ompares with a $1 loss per
. %p- gy e
ff;a>; gja gc :q 1 share lot 1989.
f f
? [ N ;7.. t is important to note that the earnings per I th ' g ib" Q 9' I
/ -
f gM 1 shaic the past two ) cars have been t V gV h ' ~& j)
~ }s j significantly irnpacted by wtite-ofls and q -
accounting (harges. In the sec ond g ' quarter of 1990 the company booked a $135 million after tax charge for the settlement with the Southern Co. which is discussed elsewhere in this report. This g.
c g
- v ,,# e- t ?i amounted to 51.25 per share, whic h means that without p - [N (c this charge, we would hase shown carnings of 2G cents pmg 9 ' ; R dg per share. In 1989 accounting charges amounted to 85 cents of the $1 per share loss.
{qQ ]
%2 % hat is ticarly a positis e sign is the 5 pcrt ent inctcase in our hilcwatt-hour electric sales user the presious 3 car.
1his is the latqcst adsance since we started posting 3 higher sales in 1988 lollowing three years of declining g sales.
One of the biggest clouds hanging oser Gulf 5tates for scscral years is hopefully about to dissipate. GSU and the Souther n Co. announced in June 1990 that we had reached an agreement in principle to settle our lawsuits.
lhe two companics s6gned the documents in December and we are now worhing on redulatory approsals of the E. Linn Draper Jr.
Our board of directors realized that it would take sescral DEAR FELLOW St1ARLitOLDt'RST more years and millions of dollars in legal expenses to resolse the lawsuit GSU filed in 1986, with no I ~ thashas offeredbeen you scry much toohope many for the years since this letter assutances as to the outcome. With this behind us, we can now spend our time and our resources looking to the Imurc, Although I still cannot give you a precise cate as to when disidends can be future. We would not hase taken this step had we not resumed. I am more optimistic about what lies ahcad been cornlaced it was in the best interest of the compan),
than 1 have been in some time. Challenges certainly its shatcholders and its customers. Details about the remain, but progress has been made. The patience you agreement will be found ciscwhetc in this report.
have shown is deeply appreciated by the board of direc- Some of you may be aware that there base been tors. management and employees of the company. numerous rumors that Gulf States was merging with As you know. QSU~s weakened financial condition in another utihty company or was being acquired. These recent years has hept us from hasing access to traditional rumors have been floating about for several years. Intensi-sources of funding at reasonable terms Although lacking fying at times, diminishing at others, the cash to pay disidends, we hate been able to handle Our policy is not to comment on merget or acquisition our maturing debt as a result of modest rate increases- rumors, market actist!y, possibilities or negotiations continued cost control. Increased electric sales and unless legally required to do so. as occurred in late other self-help measures. November 1990. During a hearing in our just concluded it is our hope that, assuming there are no surprise rate case in Louisiana, both Joe Donnelly, our chief setbacks in the near future. we will be able to retinante financial officer, and I were asked, under oath, about some of our remaining debt. There are no guarantees. rumors regarding merger discussions. I said I had engaged but if those steps are tahen, we then may be in a posillon in informal consersations recently with the chief execu-to look at beginning to pay bach the accumulatcd disi- lises of two neighboring utilities. during which they dend arrearages that are owed our prefened and prefer. indicated some interest in possible mergers or acquisi-ence shareholders. As of Flarch 151 1%1. that obligation tiont I also told the commissioner who had asked the will be nearly v267 million 1
1 4
Gulf States Utilities Co.
question that similar conscisations had occurred cat- It is w'ith a great deal of trqtet that I tell you Ned liiam is lict with two other companies. stopping down liom our board of dite(tors at the annual mt eting in M3) t!e has helped gukje Gulf States foi N > cars longer than any other director in the history of
'E the (Ornpan), llis dedicated attention to the business of We company duough good dmes an(t bad. and the utf States has hired an imestment banker
~ G-- . and a law firm knowirdgeable about acquisi-tions and merqcts to
- stand r eady-a mun and mn enUous manner in whi< h he has ghen and aWan(c to me and paM CMunen mer the Wts wW be sorely missed. I wish we ( ould hase per-should anything des elop. In September 1990 a four person committee comprised of outside directors was appointed wded Mn to wmA to " study and repod to the board with respect to the long-tcrm bus'ncss plans of the company and alternathes and courses of action which would be in the ;ong term .
best Intetest of the company and all of its sharehold- ur employees tahe pilde in their company crs.' I will be working with the committee in its on going and, esen though they se been through tough process of considering out alternatives which will times too somehow thcy still find the time include follow-up on the indications of possible intercSt I to sene as a mentor to a Vietnamese (hild collect dis-recched. We espect to continue our ' no comment" carded c omputer paper t ning (otlec breaks solunteer to polic) and do not intend to update the testimony in I oul- help make a wetlands site a retuye for wintering slana or to comment further unless and until material migratory waterfowl and get imohed in many other wlun-desclopments occur which require us to do so. teer programs that help out communities and the nation M MHer plam m wWh to h The decade of the 1980s was a ditticult onc for our company, in many ways, the 90s are aheady looWig bet- Then there is the one major t'lece of unfinished business ter. We hate ampic generating capacity to help the area that is of prime concern to each of you. It is (onstantly in continue its economic rebound at a time when other in) thoughts, too. I assure you on(c again that the regions are worried about power shonages. We have a disidend question will be addressed the moment we feel diversified luel mix that will help insulate our customers we are financiasly able to do so - and not one second from the effects of fluctuations in the price of oil and latet, other energy sources. We have a fuel mit that is hind to the ensironment. which means that. unlike some utilitics. we Si- crely ,
will not have to spend hundreds of millions or esen Q bl!! ions of dollars to comply with the new Clan Air Act. We h, also sponsor many programs dealing with wildlife con-servation, land management and recycling.. E. Lilin DrapCI Jr.
Chauman of the hui This report, printed on tecycled paper, has an ensiron- nesident and thset mental theme. As you read it. I believe you will be thecutne Ottner impressed by the outstanding job our cmployees hate
- donc in protecting nature s resources despite a shortage March 1.1991 of financial resources.
e 1 90 Year in Review ,
Electric Gun states utniocs l he unnpany punides these rates for Sales in reported a 99 cent 90 Bright 'os5 Pc' sh ,o'o,com- '"9"hng cus F ' iarge
"""' customers
" """" "" on the Osu m,, ,1,
,p0tf0r 3 1990, compared with 5 > 5 ' C '"* ^ "" "'b" I th" '"'9C a $1 ioss per share '"""$"'"""""'""""*"'"">
Year yncrate dd own elecudy H for 1989. One bright ram do nm temMn auwtum to spot for 1990 was cicctric sales, which incicased for the third > car in a row.
The results for the year include a Texas At its March 7.
$135 million after tax charge. C0mmiSSi00 1991. mecung, the equivalent to $1.25 per sharc, % nc unuty booked during the second quarter to C0uld Rule Commission of reflect setticment with the Southet n March 20 Tcxas g o C11 said Co. In 1989, non cash accounting it could rule charges totaled $92 million, March 20 on a pro-which penalized earnings by 85 cents posed settlement of G50's rate per share. casc. The curtent rate case addresses Excluding the accounting charges River tiend investment already in for both years. carnings from oper- the rate base and toutinc operating b6CbC NES ations improsed slightly in 1990, and maintenance expenses.
compared with 1989. Increased The campany, which had ast,cd for NN hilowatt hour sales and reduced a $65 million base rate increase, put F~ --
interest charges, resulting from the that amount into effect under bond retirement of $219 million of debt on Dec.11.1990, subject to a icfund 25 ' during the year, contributed to the of any diffetence between that improved performance. amoutn and the rate increase N- . Sales for 1990 totaled 29 billion approved by the l'UC1.
hwh, 5 percent more than the 27.5 T his rate case is the latest develop-15 .
billion hwh sold during 1989. The ment in a regulatory saga that began increase in sales was primarily the in November 1986 with the Oling of
- jg 7 result of more industrial activity, a rate case to allow GSU to begin hotter than normal weather and a recovering costs associated with 5, 1.3 percent increase in the number building River tiend. That case of customers. cnded before the l'UCT in May 1988 It should be noted that about one- when the commission declared
}. quarter of the megawatt-hour sales about $1.6 billion of the systemwide 4m iw w e me to industrial customers during costs of the nuclear plant as The mcrease in resental 1990 were at rates that are current!v prudently incurred and recoscrabic.
Nes tN[5 [a cIaYeYy discounted from full recovery rates. ' granted a $60 million une time as a resuit of an entremety increase and set aside approximately In!e gS tNera$[eI $ 1 A billion of the company's sys-Industrat - sa es rema ned temwMc plant intestment with no
""" findings as to prudency. The l'UCT, in its Onal order, anticipated address-ing the prudency of this portion of the investment in a later proceeding.
Therefore. In March 1989, G5U Hled another rate case, including evi-dence supporting the prudcr::y of the set-aside River 15cnd costs. Inter-tenors obtained an injunction from 6,
4 a
Gulf States Utilities Co.
a state district court batting the com- ,l_PSC inc touisuna runnc pany and the commission from proceed ,
inq on this portion of the rate case.
gg g. ,g Although the injunction was dissolved by the intermediate appellate court, the Favorable g;'l g',,y yo ",
Decision oui, staics a 330 a Tetas Supteme Court on, Sept.12, nWHon e inm 1990, upheld the lower court. saying the set aside costs could not be rellt,i-m o k o de of its consultants and special coun-gated in this rate proceeding. LPSC said this inacase would The state Supreme Court denied t>c the last in a series of four related motions for rchcaring on Nov. 28,1990, don of Dend ok os Ki and the company appealed to the U.S. .
Supreme Court in February 1991' had icquested a fo, th-step intrease The Tcxas Supreme Court ruling in of $29.9 dHon and Md indicated September, which does not constitute a the need for a fifth step increase of disallowance of the disputed River g g g; 9
Bend costs, was accompanied by a lhe company will esaluate the rate strong dissent saying, in essence. Gulf case decision before determining il States should not be punished for certain aspects will be appealed.
crroneous decisions made by the The tuing, made on Oct. 26,1990.
PUCT in its 1988 rate order. as in compliance with the court- N MI The majority opinion did state that all ordeted phase in plan for Riser Bend issues pertalning to the original order.
construction costs and included G-including the prudence of all River g g Bend related costs, remain to be infomadon ~
addressed in the appeal of the 1988 rate M Dmb98L W mhim
^
order. This appeal was assigned to a district court in December 1990. Gulf ermanently disallowed $1 A billion a of River Bend costs on a sys-States had asked the district judge temwide basis and ordered a $63 b0 - - - --
for an irnmediate remand to the com' million rate increase to enable GSU to mission, but in early February 1991 he recoser the $1.6 billion portion of N0 notilled patties that "this case should g g g g proceed to a final resolution on all -i 60 dim p
issues before the court,, '
flied suit in state district court.
ticarings in the late case began in g .
W - - ~
Septembe 1989 and were temporarily judq* c. acting on OSU s application for suspended in late 1989 while the '
. H -
parties wal d for the state Supreme l They resumed on Oct. 12,1990, after
- ' U * " ' " " " U""*C' ****"
" U" #" * " " " *
- emenowes the court had issued its ruling and con- Cons 9uct<nn cluded on Dec. 18,1990. The ccm-s s' Ce Ii -
pany told the PUCT on Feb. 20,1991 ing the com;ntion of Rwer in o , a sec nd district Bend m June 1986 Ston-that " serious, fruitful negotiationC gem cash savmg measves court judge aillrmed the LPSC's were continuing although no settle" llnding that the company was ment had been reached. imprudent to hate restarted con-struction of River Bend in 1979 instead of building a lignitedited
AA -
'E 1
1990 Year in Review plant, but did allow modified "inven- recovery. Between now and 1999, tory" or "dcregulated asset" treat- Gulf States' total cash payment ment for the disallowed portion. could be as littic as $167 million and This allowed GSU to sell power from 6 million sharcs of OSU's common the deregulated part of the plant stock. T he Southern Co. claimed to customers or, with Li'SC GSU owed about $1 billion.
permission, off system. In addition, Major cicments of the agreement thejudge made permanent the scrics are:
of rate increases in the phase in a Gulf States will provide the plan. Southern Co. with about $7 million in Gulf States is waiting for a decision cash, plus the $68 million that has from the Loulslana Supreme Court accumulated in an escrow account l in the consolidated appeal of the established by the federal court while the contract was in dispute.
~
phase-in and dert.3ulated asset plans l
ordered by the state distrmt court, a GSU willissuc 6 million shares of as ' well as the fin < l{ of common stoch to the Southern Co.
Imprudence by the 12S( r the which, under terms of the agrec-court. The Supreme Cours . card oral arguments in October anct Id mh is vo% @
as a stockholder only in scry limited December 1990. A decision could be issued at any time.
m On Jan.1.1993, GSU may be hii3;!f!Sd!832fC bt . Purchased mquimd t niahe a c sh payment to Guif States and the l Ma% Power Southern Co. In he Souumrn Co. based on the pM tmance oNunates' conunon C0nflict December 1990 stock, if GSU's common stoch N. Settled signed an agreement
! 16 trades at an average high of at least to settle a long-
$18.25 per share for five consecutive 14 standing dispute days between the time the settle-12 involving purchased power contracts. nient takes effect and Jan.1,1993, In June, the two companies N Gulf States would pay nothing. If announced they had reached an um wmmon st ch price d es not I ~
agreement in principle to terminate meet this cnterion during that period.
the contracts and end the litigation between the parties.
" " "" E0Y "* OU"#"
a n s 6 mMon shams, i The settlement and the tegulatory treatment ofit must be approved by the boards of directors of the com- and the (lighest average price the s oc anaum e mns&uk 0 -
panics and the settlement itscif by m w ma mw various regulatory agencies and "IS '
4 the court that has Jurisdiction over a Gulf States will provide the The mene m restcetai use the lawsuits. It is the intent of Gulf Southern Co. with a $160 million g$$e cuIto$er ea r States and the Southern Co. to promissory note which is non interest eiew.c:ty in t*e tem W wGe' obtain these approvals by April 30. bearing prior to Jan.1,1993.
nomes tmg buat m tne area and mcae electnc apaxes in 199L u l'ayments on the promissory use. The GSU board approved the settic- g ,7 ment on l'eb. <,199L any differential payments arc duc, Under the terms of the agreement, will be deferred and will accruc OSU's initial cash outlay will be lim- interest after Jan.1,1993, if GSU has ited to about $7 million while the n & b um em
! timing and, in part, the amount stock dividend payments by that of future cash payments will depend on the pace of GSU's financial a
8.
~
~ - . .
t . - , _ _ , , , - - . . . . _ - - - . - _ _ _ _ . _ _ _ _ _ _ _ _- _ _ _ _ _
Caulf1 States Utilities Co.
time and does not have cash availa- River u ng ,the h r Gsu people serve ble above an agreed minimum bal- Bend nucicar ocncr-ance. In any event, full payment Bend m, version ouir wer Continues "picted d "9 """' "' " '
would be duc Jan.1,1999. mst 69nt M stam its third refuel- employees were calied to sound ing ' and mainte-a The Lewis Creek power plant and actwe duty wrtn the the stock of OSO&T, a OSU subsidl- Operations nance outage in ?;'L*; o;a;,o'sgaa ary that owns the 520-megawatt record time, posted Hussein - marched into gas fired station near Willis. TcAas. a 68.2 peicem Kuwa;t nn Aug 2. Two of will be provided as collateral for capacity factor for the vcar and these employees were received a g'ood " rep' ort card" deployed to sav6a Araba.
QSU's future payments, are The settlement resulted in an after- from the Nuclear Regulatory , er ationa tax charge to net income of $135 Commission. Guard members employed million. Gulf States owns 70 percent of the by the company, a number of whorn say others in tnew 936 megawatt unit near St Francis.
Discovery in mid.1989. Cajun vinc. La~ and nic Cajun acauc ""ghad';*;"a!,ataa
, , s ,,,
P wer C peradic owns the or Nawal G'Ard CN Continues acaric Power Cooper- remaininq portion. Gutt states will make up the gg C gg ath.e, Inc. filed suit W M was taken OH line for ditterence between the:r Lawsuit sa'r"g$g"o?U$s*ren. "'" d "9 " Sept 2a m0, about g aly,33,m, ,a"o g g we an mWnaHy ary or wages for up to 12 resented the costs of s u ecause fe m s W,y moes building River Bend weauminuw e cc ama, nd he company also agreed in order to lure the cooperative to anow employees caned went bach into service on Dec. 4.
into becoming a partner in the * " #
- d"D ' ' "D""
1990. This 66-da}> outage represents tnew Gsu besith msurance project. No court date has been Den s W refucHng unW M covrage by paying them set and the parties are in the discov-a margin of 19 days, or 22 pen cnt usuai premiums.
ation. For customers, Gulf cry phase of filed the litig'uit, the federal faster than the previous best, Refuel.
After Cajun s inq is donc approdmately every 18 states is maung special bdi district court turned down GSU's pell- payment arrangements for months. During th.is outage. about any tamdy that requests it tion to have the Rural Dcctrifica- nc qu rter of the uranium fuel was and presents a copy of tne tion Administration included as a replaced and presenti e mainte. service man or woman s party. flowever, in October 1990 the roers Those helped so tar nana taAs and smelHance test U.5, Department of Agriculture, to procedures were performed to nave included famees with _
a member daectly mvolved which . the REA reports, sub- wndnu m operau n Desen ston ensum wha poenaed GSU to supply it with docu, as won as some with reia-performance of the plant,
.ments regarding River hend cost During its 4W Scars of commercial tives serving at other mm-estimates. The federal agency said tary posa peration, River Bend has demon- rew GSu employees it was investigating guarantics of strated a capacity factor of 66.3 nave not been touched by loans made by the REA to Cajun to percent and equivalent availability of tne situabon in the Persian enable the cooperathe to partici- 68.7 percent. The capacity factor Gutt. tt not a brother. son or pate in River Dend, d""9"'*#' "I* YD #Y o k past Unce ga did who works forGuit'' states A USDA olticial reviewed the n u o re chug ou ap, has das a tnend or neighbor records they requested on-site at been about 72 percent A capac- e e ano act River Bend and at GSU corporate .
- " ""*" try hatt way across- the headquarters pleting the review papa y, whi c equivalent availabil-The Loulslana Public Service Com- ity means the percentage of time
-mission applied to become a part) in the lawsuit, but the court denied
"" *"* ## C **
r um > car 0, um plant the motion to intervene in September recorded a 68.2 percent capacity lac-1990.
tor and a 69.5 percent equivalent n
1
g
? 31990 Year in Review availability, an improvement on the been by telephone which do not previous performance of the plant, always provide a complete picture of The NRC conducted a comprehen- what purchase on sales opportuni-sive review of GSU's performance in tics might be availabic.
managing River Bend for the The utilitics making up the pool period from Oct.1,1988, through span the western half of the United Dec. 31,1989, and issued its report in Stat ^s and the Canadian province Plarch 1990. The federal agency of British Columbla in the past, Gulf gave the plant the highest possible States primarily exchanged power performance ratin3s, Category 1, with neighboring utility systems, in three hey aren - plant opera-tions, radiological controls and emer- GSU Guif States uuHtics gcncy preparedness. The plant received Category 2 ratmgs in four Receives received the iccionai ad e C otticials who participated m this Systematic Assessment of Or {$$"[o"h$'*
Licensec Performance praised the V0lunteer ment of tluman Serv-ices. Otticials with plant, saying " strong management C i0n the 15-county region support for excellence. continued t praised GSU for offer-C" inq sescral programs aimed at During the year, the nuclear unit ; g
. generated 5.6 million megawatt-TM gahs om pop B R!M Gilh!'ait 0!;it3$1W 5'r Jcct CARE (Community Assis-ing 3 9 I n tance Relating to Energy) which Since River Bend went into com-nan aHy ass!sts those 60 and older mercial operation on June 16,1986.
enugy s. when they hase It has generated 24.7 million megawatt hours. * * "9C " C8' 10 Project CA'RE was created in'1983 with the company providing seed g GSU in mid.1990' Oulf money. The program is sustalacd Shops states joined an - by empioyce and customer experimental venture - contributions.
5
.For aimcd at imp,0ying ouring 1990, morc tnan 4,300
, 'P0wer etliciency and helping ciderly households in the service area 1 Bargains' c c *P "Y 9ct th' 'ccc'"cd "'SiSt "c" 'r * "' Jcct
'"est b price for CARE. The administering agencies
! power being bought - the Councils on Aging in Loul-or sold to and by utilitics in 22 states, slana and the American Red i The 40 electric utilitics that make up Cross in Texas '- authorized pay-on w wea *
- the Western Systems Power Pool ments . totaling more than $33LOOO have now asked the Federal Energy during the year. Contributions dur-tI[n nas c'e5fNS sYay( Regulatory Commission to make ing 1990 reached $395.000.
since 1987 due the pool permanent, r'ot- ' in 1987, Gulf States became the hoen: rate rebet _ to insuf. experimerital. first Texas utility to participate in the The arrangement enables the par- Gatchecpers Program where utility ticipating utility systems to tell cach employees help "open the gates" '
other through daily computer list- between isolated peopic and sources ings how much power they expect to of assistance. Employces who
.have available and for what price. normally come in contact with the While it has always been OSU's pol- public are trained to identify potential Icy to shop around for 'fpower bar- needs. The Texas Area Agency rconunued on page 12) g gains / communications hase 10
N Gulf States Utilitics Co.
GSU Weighs EnvironmsntalImpacts out" ponds in Southeast Tctas and One of the major pieces oflegis ' During 1990, a program termed yeep sr m e pmjm other lation coming out of Washington in ' the " investment Recovery than providing the tanks at the plant 1990 affecting the electric utility ~
Program" cither made or allowed # "" " " U"U C"'
industry was the Clean Air Act. GSU to avoid spending $3.5 million. " # "*" b"CC "I While Gulf States cannot put an Today's philosophy is to sell or rc-pair everything possibic, rather
" 9" actual price tag on what impic. e cc area could bring m addi-mentation of its provisions will cost than pay to haEc it hauled off. " ."*
the company. we do know that GSU for exampic, in 1990 the com- "" # "'9" " ""C will be impacted far less than pany made more than $400,000 by sa nown as muc those companics that burn oil selling fly ash from coal-fired plants, ". a rather than paying for and build- * # ##'il 1970s to build a and/or high sulfur coal as primary ' nuclear plant. 'I,he power plant fucts. ing more landfills to hold the waste The company does know ! will be product. The major use for fly ash is . "
n ng a , but a plan foi
" #" C"*"'
required to pay emission fees and as an additive to cement. mentally sound manner did, to install emission monitoring sys. Scrap wire, junk batteries, poles. nt tems on many power plants. New crossarms. used schicles and other "" pesclop the "bO'I"'
pollution control equipment may commoditics were turned into ciud.mg wood products and recrc-also be required at sescral plants. 51.3 million. By repairing trans- ation, came after a 1985 southern GSU burns virtually no oil, al. formers, polcline hardware and p ne beetic infestation that af-though several ofits power plants street lights, where abic, the com- fccted about 500 acres of mature are capable of using ollif a shortage pany atoided spending almost p ne timber. The company stopped of natural gas were to occur its $950.000. the spread of the msect and coal fired plant and one operated While not part of the imest- * # U *d '
by the Cajun f:lectric Power Ccioper. ram, employ ec ne g als f the land man-ative in which GSU has an interest ment volunteersRecoscry are coll Prog'ccting computer agement plan is to improve the site both use low sulfur Western coal. paper in some locations and scil- an enwurage Coal-fired electricity accounted for ing it for recycling. The funds that " ^" ## 5"" '"'
about 13 percent of the power are collected are donated to tarlous impr iing the site is."to decrease the 1990. worthy causes. rish of another pine bectic infesta-generated by GSU The backbone of Guduring'If States +The sale of scrap items, the reuse generating system is natural gas, of materials and the repair of others all help reduce the amount of ronmW WM which accounted for 71 percent of areas. along streams and wherc the hilowatt-hours generated by raw materials that must be taken rarc or endangered plants exist, the OSU in 1990. The power plant from the natural environment to serve as replacements. This also
" *#"# " "D" with the cleanest burning fuct is - "
significantly reduces the amount ". age the plants and wildlife the nuclear unit, Riser Bend, which while impactmg the surrounding cn-prosided 16 percent of the electric. of waste material returned to the \ir nment as littic as possible.
Ity generated by the company in carth. GSU cmpi yces are working with 1990. Gulf States is proud of these ef- thers in Southeast 'l exas to create Compliance with the Clean Air forts because they help protect the a waterfowl refuge in a wetlands Act is going to pinch not oniy utili. environment. proside jobs in the area near a p wer plant in Bridge ties but mimy of Gulf States' indus. senice area, hecp disposal costs , mmpany has trial customers that are in the down and benefit GSU shareholders na use of Hus pmperty to rcilning and petrochemical busi- and customers. Am n WadoM ness. They, too, must comply with While making and selling elettric- " " "**
'#"#S *C" the act. however, since GSU will be ity is GSU's main business, the com- ted to a course oIaction to presene cmitting less pollutants, it may pany has entered, in a small way, the waterfowl habitat arcas to en-mean that some industries might into the business of raising redfish
" """" 9" d'" " '
find it beneficial to have GSU supply at one of its larger power plants. #" d" *"*
all or some of their electrical load, Once the fish reach appropriate rather than cogenerate their own size they are transfened to " grow power.
11
s s' 3
- 1990-Year. in Review
~
o'n Aging actually mahe's the referrals nctessary to get invoked. Dis-to proper agencies. advantaged sixth grade students with
-Gulf States also has SenloiWisc. good test scores are chosen and formed in the spring of 1989 by com- assigned a "mentorJ When these
. .bining several existing and new sen- students complete high school cach lor citizen scnices into a singic is guaranteed a $2.000 scholarship free program. Some of the features to 1amar, Several GSU cmplo>ces available to those 60 and older are -are acting as mentors:
"Get Well First," which places the The "I 11 ave a Dream" concept participants' accounts in special began in 1981 when a New York phl-handling if they are hospitalized, a lanthropist promised 61 sixth newsletter and security light rebates. graders in East Harlem a free college education if he or she finished high GSU schwl. In a school where the dropout in some of the iaract 'dte ""5 Adopts wmmuniocs. OSu' 75 P"c"t "" . hhc S1 students who remained m New York ha e Schools .in c'",P'oLees , u, raduated from high school and Terri tory w,hc,c the voiuntects. half anmHed in vadous mHys,
"*" " I N '*
goal is .to help cn'a a pamanent endowment of M make the learning experience more million for additional scholarships.
Ecic Dyatd Mem pleasant. therefore encouraging the g gg, children to learn. About 200 GSU Gulf States employees are guided by hman employees voluntect their time t d W wmq 600 these schools.
tor M This may mean building play-ground equipment, conducting coat H ihi4 ho@ k Mhak g
drives or providing school supplies M s N k comm has been able to hire shilled person-and clothes. It could be spending an nel from all community sectors.
100 hour a week reading to a group of g second graders.
GSU in developing its human g in communitywide activities, sucli resources to sene the service arca as WalhAmerica or Earth Day fairs, some of the adopted school students D0 participate with their GSU "special friends." GSU, The cwnomy of Gun-
- g. GSU volunteers also get involved . Cl{l8S States' senice area with their school's field day activitics. " bestbe desc" bed making themselves available for Become '"ith two words:
w Partners
^
'L helping with the games, handing out gro wtn and d s crsin.
nu w me m m ribbons and just cheering on their cation, t'lectric sales students. were up 5 pctrent from 1989, due primanij to an
. 1990 tomersrrountee Gsu camed to a eqL unusually hot summer, and the num-g- ~
3 fn7q oEtfe$c .]"] L- h During 1990f G5U became a participant ber of customers was up 1.3 percent 1937- InV0lVed in oser last year. All the divisions Scholarship ' "Dream" "' c " ' " W a scholarship showed some level of customer growth during 1990.
program through 1.arna r University in Beaumont.
-Employees contributed the $2.000
, 12 e
A Gulf States Utilitics Co. %
All-time company terord levels were Gulf States is also teaming up with .
achieved in each of the years 1988 90 I istry to help them do their jobs bet-for both residential and commercial L By ficiding a team of process engl-sales, The 1990 sales level was nects who hate a clearly stated goal achieved due to both an increase in cus- - to help make industry more efhclent tomers in cach category as well as all- in its encigy usage and plant proc-time record average kilowatt hour esses - Gulf States has made a eom-usage per customer. mitment to the industrics in our region.
Economic dhersification, a primary Why? The more cilicient the industry.
goal of the region,is ongoing. In fact, the more likely it is to thrise, grow and substantial Industrial electric usage expand. That's good for the economy increases during 1990 came from of the service area - and good for Gulf smaller Industries, demonstrating diver- States.
slfication in progress. The refining and Another major des clopment during petrochemical Industries, economic 19'O was the companywide dedication mainstays of the region, also showed to marheting on the " grassroots" an increase in clectric usage, letel. GSU cmployees have made qual-The marketing team at Gulf States Ity senice and dhett sales an integral provides leadership to the communitics part of their work. gg g p g pg in the senice area - helping them Through dedicated senice to cus-continue the economic expansion of tomers and pride in the efficient, safe g Southeast TcAas and South Loulslana. and reliable nature of electricity. E _._ _ ___
The Team Cities program works with employees are helping the (ompany s communilles throughout the region to bottom line. In 1990,20 percent of them 14 - --
hcip them market themsehes - on became invoked in the direct sales local, national and international effort through Reddy Referrals. a pro- 13 levels - to business and Industry, gram that enables employees to help Sixty-five communities In Gulf States' the company by alerting the market- #
service area have qualified as Team ing team to sales opportunitics. g. __
Cities, preparing themselves for the included in this ettort was 3 A00 conver-competitive business of bringing Lusi- slons irom nateral gas to more etlicient g ness and Industrj to their communi- clectric water heating, ties. Oulf States' cconomic development During 1990. Gulf States corporate- 4- - - -
specialists work in concert with these wide marheting team, through innova-communitics to expand and retain tion 7 1 dedication, continued to M the business and industry vital to the play an important role in the cApan- ,
region. The diligence of this partnership sloa and diversification of Southeast , , , _ , .
means positive results for the econ- Texas and South Louisiana. Into the y * ;i
- omy. During 1990,57 companics 21st century, the partnerships Gulf announced new locations or expan- States has formed through its leader- Gsu s muente re slons in Gulf States'senice area, creat- ship will prove valuabic foi the *"". * *r' tun the ing 3,229 Jobs. Also during the year, an region. Its individual communitics and $$tOEeNmN m m Tom W estimated $3 billion was invested in the company. ~
major industrial projects in the region. . ". ". w The foregoing portion of this report is intended to p esent information une con pany t>elleve may be or interest to shareholders. For purposes or making Investment decisions. the more complete Information contained in the company's Annual Report on form 10 h and other turfent reports filed with the securttles and Exchanne Commiulon should be <nnsulted. l
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pdl{/ ed Financial Information FINANCIAL SECTION
, Contents Management Responsibility for Consolida:ed financial Statements . 15 Common Stock Prices and Cash Diddends Per Share 15 Selected Consolidated financial Data .. .
16 1 Management's Discussion and Analysis of financial Condition and Results of Operations , 17 Consolidated Statement of income . - 24 Consolidated Statement of Cash flows . 25 Consolidated Balance Sheet. _ . 26 Consolidated Statement of Changes in Capital Stock'and Retained Eaminas- 27 Consolidaten Statement of Capitalization 4 . 28 Notes to the Consolidated financial Statements. 30 Report of Independent Accountants . 47 Statistical Summary 48 14 Y
Gulf States Utilitics Co. _
Management Responsibility for- Coopers & Lybrand, independent (citifled pub-Consolidated Financial Statements lic accountants, is engaged to audit, in accord-ante with generally accepted auditing stand-Management is responsible for the preparation, ards, the consolidated financial Statements of the integrity, and objectivity of the consolidated Company and issue their report thereon, which financial statements of Gulf States Utilitics Com. appears on page 47. Coopers & L3htand con-pany. The statements have been prepared in ducts a review of Intemal accounting controls to conformity with generally accepted accounting the extent required by generally accepted audit-principles and, in some cases, reflect amour $ts ing standards and performs such tests and pro-based on estimates and judgement of manaq' c- cedures as they deem necessary to arrive at an ment, giving due corisideration to materiality.
opinion on the falmess of the consolidated financial statements presented herein.
The Company maintains an adequate system of The Board of Directors, through its Audit Com-intemal controls to provide reasonable assur- mittee, has general oversight of management's ante that transactions are executed in accord- preparation of the consolidated financial state-ance with management's authorizationi that the ments and is responsibic for engaging subject to consolidated financial statements are pre. sharcholder approval, the independent pared in accordance with generally accepted accountants. The Audit Committee, caprised accounting principles, and that the assets of the entitely of outside directors, reviews with the inde-Company are properly safeguarded. The system pendent accountants the scope of their audits o'intemal controls is documented, evaluated, and and the accounting principics applied n finan-t-sted by the Company's internal auditors on a cla rep rt ng. The Audit Committee meets regu-larly, both sepalately andjointly, w1th the 8nde-(ontinuing basis, No intemal control system pendent accountants, representatives of f.an provide absolute assurance that errors and management, and the internal auditors, to review Irregularities will not occur due to the inherent activitics in connection with financial reporting' .
limitations of the effectiveness ofintemal controls: The independent accountants hase full and however, management strites to maintain a bal- free access to meet with the Audit Committee, ance, recognizing that the cost of such a system without management representatives present.
should not exceed the benefits derived. to discuss the results of their audit.
Common Stock Prices and Cash Dividends Per Sharc for the years ended December 31 o,.'4.Ni dIEI. r$!d
?# 2t H~ "!2*!L #? "W h* '" %*?
first Quarter $12% $11 $- first Quarter $9 57% $-
Second Quarter . 12% 9% -
Second Quarter 12 8 --
Third Quarter . 12 % 9% -
Third Quarter 13 % 11 -
fourth Quarter 11 8% --
fourth Quarter . 14 % 10% -
The Common Stock of the Company is listed on the New York, Midwest and Pacific Stoch Cunanges. The numt er of common shareholders on Occcmber 31,1990 was 47.129.
15 l
1
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Financial Information
= _ , - - n ... -,,.- ~ . . - - - - _ _ _ _ . , . _ _ . -
Selected Consolidated Tinancial Data (in thousands cuept per share amounts and ratlos) for the Years Ended 1990 1989 1968 1987 1986 December 31 Opera (Ing Revenue . . . . . . . . .
$ 1.690.68 5 $ 1 h07.400 $ 1520 4 77 $ 1.432,586 $ 1.478.3km income (Less) Before Extraordinary item and the Cumulatige f.ffect of Statement of Financial Accounting
. Standards (STAS) No. 90 in 1988 (44.282) 13 251 117.512 241.101 271.872 Net inconte (Loss) . . . ,. (44.282) a5573) 103.143 241.101 244.981 income (Loss) Appilcable to Common Stock ....... .. (107.024) t 106.412 i 40 079 178 091 181,854 f.ornings (Loss) Per Agerage Share of Common Stock Outstanding Before Extraordinary item and the Cumulathe Effect of SFAS No. 90 in 1.97 1988........,, . . . . . . (.99) t .46 ) .50 1.65 Earnings (Loss) Per Average Share of Common Stock Outstanding . ( .99) 00) .37 1.65 1.71 Dividends Per Share of Common Stock - - - - .67 Return on Average Common Equity. ( 5.4 4 )% 15 2GN lh5% 9.29% 10,49%
As of December 31 Total Assets * . , , .. .. . $ 6.863.2 69 $6 807 894 d6.941.531 $6.907.453 $6,578.258 Long Term Debt and Preferred Stock Subject to Mandatory Redemption 2,512.743 2.801.660 2 M90,934 3.090.977 3.134 950 Capital Lease Obituations (Current and Non current) . .. . . . 161,065 180 552 98 H52 187.640 228.270 Book Value Pet Share (reduced for all Preferred and Freference Stock Dividend Arrearages) . 16.81 17.80 18 60 18.43 16.79 Capitalization Ratios:
Common Shareholders' Equity . 41.2% 39.8 % 39.3 % 37.8% 35 0%
Preferred and Preference Stock 14.4 12 S 11.7 11.1 10.8 Long Term Debt . . .. ,
44.4 47.3 49.0 51.1 _ _ 54_.2 100.0% 1000% 100 0 % _ _100.0 % 100.0 %
See Notes 1 and 3 to the Consolidated financial Statements regarding (ontingencies. current rate matters invoMnq possible disallowances and wTite ofis and accounting standards.
' Reclassified - See Note 2 to the Consolidatcd financial Statements.
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16
Gatif States Utilitics Co.
Mana_qement's Discussion and Analysis of that certain litigation contingencies exist. w hlch I'Inaricial Condiffon arid Hesults of management does not presently beliese will be Operations finally resched in 1991. See Note I to the Consoll-dated financial Statements for the consequences Although the Company's financial position has d sud conhngencies wm ulumately resched been strained by the inabilliy to obtain permanent adversely to the Company.
rate relief on the Company's entire investment in Rher Bend Unit 1 (River Bendh the rate relief This report was based upon infor mation available grantedt together with improving sales, reductions at the time it was telcased for printing. Litigation in capital requirements, strict cost controls, some and actall rate proceedings continued in an estctnal financing arrangements, and the omis. active status at such time. Signllicant develop-slon of dividends on tt c Company's common, pref. ments ma) occur during the printing and distribu-crence and preferred stoch, has been sutilclent to tion per'od as well as thereafter. Readers are permit the Company to meet its ongoing cash urged to imestigate and consider such subsc-requirements since 1986. quent desclopments.
During 1990, the Company's cash flow provided Results of Operations by operations continued to improve. The Com- The 1990 net loss and loss per average share of a pany's plans to meet its cash requirements in 1991 common stoch outstanding resulted primarily and 1992 include a combination of ellorts. To bom a $135,310.000 net of tas charge recorded increase revenues and cash flow, management during the second quarter of 1990, for the settic-plans to pursue the increase of rate levels and ment with the Southem Company regarding a long-sales, and pursue appeals of rate orders. To seduce standing purchase power contract dispute, cash requirements, management intends to con- fxcluding the cost of the Southern Company set-tinue cost controls and undertake the refinancing tiement. results of operations improsed during of a part of the tong 4?rm debt maturing in 1991, 1090. Increased hilowatt hour sales and reduced Management also intends to extend or replace let- interest charges contributed to the improsed ters of credit which expire in 1991 and 1992, that performance.
secure cer:aln pollution control bonds, or As noted abose, the Company's financial position remarket such bonds, as was done with other pol- has been strained by the inability to obtain lution control bonds in 1990. If the Company is permanent rate relief on its enthe imestment in ,
unsuccessfulin these efforts to refinance matur- River Bend. As of December 31,1990, the Com-Ing debt and to cause the pollution control bonds pany has not recovered a significant amount of the to remain outstanding, the Company believes that imestment or icceived any return associated with it has other means available to access external the portion of River Bend disallowed in the Loul-funds which may be needed. Management believes siana rate order of December IS,1987 and that these plans, combined with cash on hand, included in the deregulated asset plan which is ~
funds provided from operations, and funds avall- turrently under appeal, and the portion of River able under its short-term bank credit arrangements Bend placed in abeyance as part of the Texas rate will be adequate to meet its cash requirements order which went into cilect July 23,1988.
through 1992. While the Company believes it future results of operations could be adversely can access external funds to the extent necessary allected by substantial additional write offs or to accomplish its plan, economic, financial mar' write downs of the Company's imestment in River het, or banhing conditions or adverse develop- Bend and defer cd costs related to such unit, which ments with respect to contingencies to which the may result from regulatory actions, judicial Company is subject could adycrsely affect such actions, or from pricinq of energy below the full access. Should conditions prevent the Company's cost of service to mect' competition and the assocl-access to extemal funds, management believes it ated application of accounting principles. See has intemal resources to meet its cash needs in Note 3 to the Consolidated financial Statements 1991, and the ability, by controlling certain opera- for potential exposures. Substantial write-otts or
. tions and construction expenditures. to prevent write downs would adversely affect the Company's short term cash deficiencies which mIght other' ability to reinstate dividends and obtain financ-wisc occur in 1992- ing. which could in turn affect the Company's While litigation with the Southern Company 3 Nidity. See VLiquidity, financings, and Capital settled during 1990, subject to the conditions e sources" below, cussed in Note 1 to the Consolidated finant The Company's results in 1988,1989, and to a Statements, significant litigation and regulator) s!gnificantly lesser extent in 1990, have been contingencies continue to exist. In reviewing this affected by amounts recorded in accoidance with Management's Discussion and Analysis of finan- phase in plans and amounts recorded in accord-clai Condition and Results of Operations and the ante with account!ng orders issued in 1986 by Consolidated financial Statements of the Com- regulators allowit.g the Company to defer, for pany, attention should be given to the disclosure financial reporting purposes, those expenses 17 l
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ppw fhf yg,
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Financial Information Incurred in connection with the operations of Rher amortization of those costs. These items (nct of the bend, the cost of buying bath power from Cajun related tax cliccts) have reduced the 1990 and 1:lectric Power Cooperatis c. inc. (Cf.I'CO). and to 1989 net losses and related losses per share and record a non-cash carrying charge on the Com- have increased the Company s 1988 net pany's investment in River Dend not already income and catnings per shaic as follows:
reflected in rate base and the subsequent 1990 1989' 1988' I fic(t on itiett t f!ctt on t(fect iflect on t_ ff e<.t het toss on t f*S Net Lost on t.PS Met intome on ILPS (in thoutandt estept pra share amounts)
Deferred River Bend expenses $ -
$- $ (11.048) $ t.10) $ 31.503 $ ,29 Defened revenue requirement 27.400 .25 75.7)i .40 130.516 1.21 Amortliation of accumulated defened Rhet Bend costs . (12.242) t .1 1 ) (20.991) L20) (25.012) (.24)
River Bend carrying charges - - -
(519) -
24,723 .23 Reduction of deferred Rhcr Bend cost: - - - -
(30.576) (.28)
$ 15158 $ .14 $ 43.159 $ .40 $ 130,554 $1.21
' Reclassified - Sec Note 2 to the Consolidated financial Statements.
Without the inclusion of the abose items in the Company S Consolidated Statement of Income, the Company would hase reported net losses before estraordinary item and the cumulathe c!!cct of Statement of financial Accounting blandards (5fAS) No. 90 in 1988, of $59.440.000,
$29.908.000, ;nd $13.042,000 for 1990.1989, and 1988. respecthcly. Th' deferred items described aDose and in Note 3 to tne Consolidated finan-cial Statements include substantial cash expendi-tures which hase been only partially recotered, and there ccn be no assurance that all of such expenditures will ultimately be recovered.
Mate Matters As of December 31, 1990, the Comoany's rate situation remained uncertair. See Note 3 3 and 15 to the Consolidated fi..ancial Statements for a more detailed desttiption of rate matters.
TcMs Hetall Jurisdiction (Regulator - Public Util-ity Commission of Texas (PUCT))
In October 1990, hearince on a $65,000,000 base rate request filed in March 1989 were restarted before the l'UCT. On December 11,1990, the Com-pany iraplemented an approslmate $65,089,000 base rate increase subject to refund Scttlement negotiations began on Icbruary 13,1991 and have continued with sarious intersening parties, l'resious rate orders have been appealed, and pending resolution of various appellate proceed-ings, the Company has made no write ott's for the presiously abeyed $1.4 billion of Kb er Bend investment (approximately $420,000.000, net of accumulated depreciation and related tax benellt.s.
on a Texas retail .lurisdiction basis. as of December 31,1990) or the $63.468,000 of Rher Bend Investment disallowed as imprudent (appro Al-mately $20,000.000. net of accumulated depreci-ation and related tax benefits. On a Texas retall jurisdiction basis. as of December 31.1990). Addi-tionally. no write off has been made for the 18
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Gtilf States Utilitics Co. . _ , -.
approsimate $187;000,000 of defened River Bend previously disallowed $1.4 billion of the Com-costs not included in rate base at December 31. pany's total Riser Bend plant imestment (approxi-1990. mately $480,000,000, net of accumulated depreci-
"U"" ""!1 related tag benclits on a Loulslana Adverse decisions of the various outstanding appeals pending before the courts in Texas could retaNunsduon basis. as of December 31,1990).
have a material adverse effect on the Company. If the deregulated asset plan is not continued in effect and the disallowance is upheld, a wTite ofl Loulslana Retall JurisdictionlRegulator - of the entlic jurisdictional amount could bc Loulslana Public Service Commission (LP5C)) required.
On February 22,1990. the LPSC granted the As discussed in Note 3 to the Consolidated finan-Company a $28,000,000 rate increase as the third cial Statements, cutient analysis of the deregu-step in the february 18,1988 court ordered lated asset plan, which was subsequently ordered phase in plan. The LPSC order includes, among by the LPSC with respect to the previously disal-other things, the deregulated asset plan, which was lowed $1.4 billion of River Bend and which is cur-previously proposed by the LPSC in Nosember rently under appeal indicates no permanent 1988 and ordered by the district court on October impAment of the Loulslana retall deregulated 11,1989. portP.a of River Bcnd exists under such plan, if the On October 26 1990 the Company filed for the E.1 is upheld upon appeal. Accordingly, the fourth step rate Nicreas'e of the court-ordered t mpany has made no write-down to the deregu-phase in plan. lated esset lovestment. Ilowever, future analysis will be required to determine if permanent On February 26,1991, the LPSC oranted the impairrt en'. v bts. Permanent impairment would y Company a $16,800,000 base rate increase. effec- result in a net of tax write down which could range tive March '1,1991, as the fourth and final step of hom zera to iG30.000,000.
the february 18,1988 court-ordered phase-in Adverse decisions of the various outstanding plan. Preliminary analysis of the LPSC rate order before the courts in Louisiana indicates that approximately $26,000,000 of appeals could pending' have a material adverse eticct on the-deferred River Bend costs, that the Company had Company.
previously been allowed to recover, were excluded from rate base. This may result in a net of tas Liquidity, rinancings, and Capital write off of approximately $19.300.000. The Com- Resources ny is the process of evaluating all aspects of Cash provided by operations continues to be the Company's primary source of funds, while the Previous rate orders have been appealed, and retirement of long-term debt has been, and will pending resolution of various appellate proceed- continue as, a primary cash use. The following -
ings, the Company has made no write-off for the table shows selected cash flow items; 1990 1989 1988 Funds Provided fly on thousands)
Net operating activities $363.788 $220.071 $203.314 Sale of nuclear fuel - Rher Bend fuel lease. - 114,931 -
f,xisting cash and cash equivalents 930 -
65.672
. Other 2,513 6.642 15.263 Total . 5367,231 $341644 $284 249
_4 Funds Used for Capital expenditures S 73,020 $ 74.888 $114,184 Retirement of long term debt and deferred River Send construction and continulng services commitments 219.454 143,170 115,720 Payment of lease obligations. 44,110 27,552 38,18e investment !n cash and cash equivalents . -
95,125 -
Other 30.647 909 _ 16.157 Total . 5367.231 $341.644 $284,249 1
1;w pu, MTRima _
Financial Infonnation __m._ -
As of Decembci 31, 1990, the Company had management belicscs to be the most significant available $100,000,000 under a bank cred:t are discussed below.
. agreement as described in Note 12 to the Consoll- Cf7CO LItigaUon. As discussed in Note 1 to the dated financial Statements. Such agreement was Consolidated financial Statements. CEPCO has due to expire on March 1,1991, however, eff.ec- nicd suit seching recovery of its alleqcd $1.6 billion tive March 1,1991 the bank credit agreement was investment in Klier Bend as damages, plus extended to february 28,1992. The agreement attorneys' fees, interest, and cost. The Company contains restrictions upon additional borrowings, believes the suit is without merit and intends to payment I dividends in excess of $75,000.000, he and other actions of the Company, with certain contest as to theit outcome sigotously.
of No thisassurance litigation, ifcan thebeC g'om n exceptions. pany were ultimatcly unsuccessful in this litigation As discussed in Note 11 to the Consolidated and were required to make substantial pay-financial Statements, the Company has ments, the Company would probably be unable to
$313,082,000 of debt maturing during 1991, make such payments and would probably have to including a $204,167,000 final payment of the scch relief from its creditors under the Bankruptcv revolving credit agreement on September 12, Code.
1991. The Company also has $94,000,000 of pol' Southern Compam/. In 1990 the Company and lution control bonds which are backed by letters Southern Company' settled, subject to the condi-of credit that cxpire in 1991, if the letters of tions discussed in Note 1 to the Consolidated credit are not renewed or replaced, the bonds must financial Statements, disputes regarding purchase be redeemed unless remarketed. As discussed ation risks would previously, the Company believes existing funds, power revhc ifcontracts. Significant the settlement is notlitig'onsummated, c see funds available from the bank credit agreement Note 1 to the Consolidated financial Statements discussed above, and funds to be provided from for those consequences. When the settlement is operations will be sufficient to satisfy its cash consummated, the issuance of 6,000.000 shares requirements during 1991, of common stock by the Company, provided for The Company's ability to arrange external financ- in the settlement, will have a dilutive clicct upon ing has been and continues to be materially carnings per share and book value per sharc of affected by its weak financial position. The credit common stoch, ratings assigned by credit rating agencies to the NucIcar Risks. Ownership and operation of a l Company's long term debt and preferred and pref' nuclear generating unit subjects the Company to '
crence stoch were reduced to " speculative" significant speciai risks. No assurance can be grade in 1986. The failure to pay dividends on given that the amount of insurance carried as to preferred and preference stock since 1986, and the various rishs will be sutticient to meet potential omission of a common stock dividend since the liabilitics and losses, second quarter of 1986, make it highly unilhely En* nmentaI lssue3. .rhe Company has been that additional equity securities could currently bc notified by thc U. S. Emironmental Protection marketed. The Company's Mortgage Indenture contains an interest coverage covenant which lim. Agency (EPA) that it has been designated as a
. Its the amount of first mortgage bonds which the potentially responsible party for the cicanup of sites on which the Company and others have or Company may issue. Based upon the results of have been alleged to have disposed of material operations for the year ended December 31,
, 1990, and existing circumstances, the Company is currentlyasnegotiating designated hazardous waste. The Company with the El'A and state believes it does not have sufficient coverag: to issue additional first mongage bonds. The Com, uthoritics regarding the cleanup of some of these sites.
pany believes it could issue approximately
$33,000,000 of first mortgage bonds, as of Several class action and other suits hase been December 31,1990, to replace first mongage filed in state and federal courts seeking relief from bonds previously retired. External intermediate or the Company and others for damages allegedly long term financing may only be available through caused by the disposal of hazardous waste and for the issuance of unsecured or subordinated tien asbestos-related disease which allegedly occurred debt securities if, and to the extent, .they can be from exposure on Company premiscs. One haz-marketed. ardous waste related suit claims approximately
$15 billion of damage from the defendants. While Significant Litigation, Risks, and the amounts at issuc in these cleanup cilorts Environmental issues and suits may be very substantial sums, the Com-As discussed below and more fully in Note 1 to pany presently believes that its financial condition the Consolidated financial Statements significant will not be materially adversely affected by the litigation and other risks exist. The risks which outcome.
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i' Gulf States Utilities Co.
In 1990, amendments to the Clean Air Act in hilowatt hour sales and related rc\cnue within became law The immediate effects on the Com. the industrial class are detailed below:
pany will be minor due to the Company's clean '" """'.. 8" fuel mit The long term effects may ha\e a ~"' ""*"'""*"
- M'u r7
_. more significant impact on the Company's oper- run cost or seni<e ations, and such effects are cuncotiy being ana- bd e'srates 10 26s.mo 10.2 0 280 lo ano 7is lyred by the Company. non r'un cost or senke g based rates 3 065 774 2.111 625 1 191.363 Operating Revenue '
w<,u- w .nu s Operating revenue increased by 5 percent during "a= rda "a 1990 when compared to 1989, by 6 percent during Changes in Kilossatt hout Salet 1989 when compared to 1988 and by 6 percent run mt of senu e based rates is 16 % %
during 1988 whcn compared to 1987. The com. Nn4un et d eke based rates 45 77 263 1 T otal industrial u 2 2 l ponents of the changes in operating resenue arc _ _, _
Octailed below trurnu <neceuw) Resenue "a ""* *d ad u E '."" P"? ' " " _ FuH (ost of senire
_ _ .HM*" 8" IW..,.
tased rates $480.280 $470.401 s473 Ni?
C' **"' ado Non full cos; of senke Changt in base rates $12,894 $38 209 $ B7,150 based lates 97.156 69 M3 36.767 fuel cost recovery 19 824 29.281 (25.710) T otal Industiial $577 436 $53Q944 $510.3M sales volune and other _50J6,1 _J9J59 _26 Asl
$q279 $q(92p
--6,87 8_91 in 1991 the Compan) anticipates a 9 percent Rales. The changes in base rates shown above sales, and a reduction of less than one percent in reflect rate orders, settlement agreements, and full cost of senice industrial Mies; however. the rate changes implemented during the period from potential crists for loss of adoltional load in the 1987 through 1990. The Company implemented Inture to other competitive sources of power, and interim, emergency, or permanent rate funhcr pricing below the full cost of service may increases jn 1987,19ea 1989, and 1990. be necessary to meet competition in order to present such loss.
/tllowattflow Sales. Total hilowatt hour sales hho!csale Sales. Competi ion for wholesale increased 5 percent during 1990, when compared sales resulted in the Company and a majoilty of to 1989. This increase follows a 1 percent its wholesale customers reaching agreements increase in sales during 1989 when compared to during 1989 for rates that were lower than the 1988.- and a 2 percent increase in sales for 1988 then existing approsco rates for the Company's when compared with 1987. Changes in the three wholesale electric service and, in some cases, _
major kilowatt hour sales categories are showT1 in lowered the energy and power requirements from the following table: those previously contracted for. The rates agreed
, Jay,'Ja," y, to in contracts running until 1996 2000 do not iho' p m - im recover the full cost of service. The city of College Residentiat 6% 2% 2% Station. Texas intends to cease purchasing its commercial 4 3 2 energy requirenient from the Company when its industrial a 2 2 contract expires at the end of December 1991. Non-S.ec the Statistical Summary on Page 48 for addi' fuel related revenues were approximatel'v tional information on hilowatt-hour sales and $9,200,000, $8,900,000, and $7.600,000 during related revenues by customer class.
1990,1989, and 1988. respecthcly, from sales to College Station, A Steam Department 1:lectric Sales. The Company Industrial Sales. Cogeneration projects devel.
oped or considered by certain industrial cus, has for a number of years produced steam at its usi n n 1 in Ba n up and W tomers over the last several years have resulted in such steam, along w;ith the cogenerated c!cctric-the Company developing rates lower than the rates ity, to industrial' customers located adjacent to approved by the PUCT and LPSC for such industrial Louisiana Station. Electric power requirements customers. Such rates are designed to retain such of these customers in excess of the byproduct customers, and to compete for and develop new electricity have been met by the Company with -
loads, and do not presently recover the Com- power from the Company's system power grid, pany's full cost of service. Sales to those customers in June 1990, the remaining steam custome' l qualifying for such rates have mcreased over the replaced a substantial portion of power previously last several years. Kilowatt hour sales, changes provided from the Company's grid with power 21
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&q i m& Financi_al_ Inform _at_ ion _
--._m . .__ . __ _ _ _ _ . - - ~
from additional cogenerated facilitics. Non luct g geng, "L j"[g,j" -
revenues from sales of electric power off the Com- mduding steam pany's system power grid to the steam depart-ment amounted to approximately $19A00.000' gry ciettn' y g funhased power 4 230 143 S.373 912 3 511 321 1 *?2.800,000, and $23,200.000 during 1990,1989. % gg and 14 re*; .G ay, requirements 29 012 691 28.133 444 27.471.122 i
I Operating hpenses and Taxes " " '* 1 net generation <euiuding steam Tuct and l'urchased l'ower. Fuel cwpense depanment electik generatinro Nudou 13 % 12% in increased 11 percent during 1990. when com. "
pared to 1989, due to increased use of Company- y g;i II II 3
owned generating units. This increase was offset Natural gas 01 Sa 57 in g3 in part due to a decrease in the Company's aser- 33 age fuel cost. Furthased power 15 w 13 T otal cicct"c c"e'm requiicments locrw toos 100 %
ft.cl expense decreased 1 percent during 1989.
when compared to 1988. because of decreased Other Opciations and NaIntenance Opense.
generation from Company owned generating Other operations and maintenance expenses hdy during 1990, as expenses asso-units, Bend during due primaril) tne first part toofthe 1989- refueling outage ciated at River withdecreased th slig'c Riser Bend refueling outage were fuct expense increased 3 percent during 1988, less in 1990 than in 1989. That decrease was when compared with 1987. The increase in fuel somewhat offset due to sese'ance pay and early resulted from the increased utilization of Com- retirement t enefits associated with the workforce pany-owned generating urdts, primarily River Bend. restructuting in January 1990.
to meet its energy requirements. A slight decrease Other operations and maintenance expenses in the Company's ascrage fuel cost, due to increased during 1989, when compared to 1988, increased utilization of low cost nuclear fuel, due primarily to increased payroll and benefit heiped otTset in part the increase described charges, expense of $2,738,000 associated with abos e- the cleanup of two hazardous waste disposal sites, Purchased power expense decreased 12 percent and increased costs associated with the refueling during 1990, when compared to 1989. due to outage fer River Bend. In addition, operations reduced capacity payments to CEPCO under the expense also increased due to a tentatisc settic-buybath agreement. as discussed in hote 13 to the ment reached with CEPCO regarding the overhead Consolidated financial Statements, and decicased related to administratise and general expenses for Riser Bend, which resulted in the Company purchases resulting from the availability of Com-pany-owned generating units.
increasing operations expense by $8.310,000, as discussed in hote I to the Consolidated finan-Purchased power expense decreased 1 percent ,a ammenE during 1980 when compared to 1988, due to Other operations and maintenance expenses, reduced ty payments to CEPCO under the including those associated with River Bend, buybac! 1cnt. and adjustments reflecting decreased 4 percent during 1988. as a result of the sett , a with CEPCO. as discussed in Note 1 the Company S continued ettoit to reduce such to the Coi.solidated financial Statements. This decrease was offset in part by increased purchases expenses. During 1988 in accordance with the PUCT and LPSC rate orders, the Company required due to the River Bend refueling outage recorded a deferred charge and reduction to oper-during the first part of 1989.
' ations and maintenance expenses associated with g Purchased power expense decreased 29 percent the retail portion of the carty retirement plan.
during 1988, when compared to 1987, due prir:ar' Depicciation and Amortizatfor . Amortization ily to reduced capacity payments to CEPCO wider , incrcased $5,544.000 in 989,when ,
the buyback agreement, as well as increased W W 1988 Cgw by ah utilization of Company owned generating units' ing the Louisiana retail and s; cam ju'risdiction's The cost per kilowatt hour of fuel consumed and amounts cf the previomly cancelled Riter Bend purchased power and the breakdown of electric Unit 2 oic 10 scars as required by the February energy requirements are detailed below: 28,1989 r itc ci a ft.
" " " The tintion in depreciation and amortization Cost of fuel consumed <per nwm hatural gas t ole 1% 1.875 cxpenst Jrw 19' to 1988, of $ 10.034,000 was yj attributi De a a icduction in the depreciation ei oil rates in the Louis:ana and lexas retail jurisdic-nudear i 2ae 1.33 < L 14 e comtAned l a3r itne 176< tions in accordal.t e with the L.PSC and PUCT rate cost of purchasco power tper tw.m 4 Jnt 4 24( ti S i e orders and an adjustment to decommissioning 22
9.
9-o.
Gulf States Utilitics ._ _ . _ .-
Co.
expense which resulted from icvised assumptions No. 90 to the Company's presiously cancelled and a 38 year nuclear decommissioning funding River Bend Unit 2.
period approsed by the PUCT and LPSC.
Interest Charges. Interest charges on long term Tates. _ Deferred income taxes increased during debt decreased during 1990, due to the retirement 1990 when compared to 1989, due primarily to of $219 454.000 of debt that matured during 1990.
the utilization of tax nct operating loss carryfor- Interest charges on short tetm debt and other wards, offset in part by a reduction in the Rher increased during 1990, due to interest expenses
] Bend costs deferred for financial reporting associated with the Southern Company settle-purposes, ment estimate recorded in the second quarter of Deferred income taxes decreased during 1989 1990. The Company will record interest cspense
- when compared to 1988, due to a teduction in the on the present value of the estimated liability until River Bend costs deferred for financial reponing January 1,1993, purposes. See Notes 3 and 4 to the Consolidated Interest harges on long term dcht decreased
- financial Statements for the deferred Rher Bend sHghtly during 1989, due to the retirement of costs and the components of federal income maturing debt, oilset in part by increased interest ta xes. charges on the Company's variable rate debt Deferred income taxes increased almost 150 caused by higher interest rates. Interest charges
- percent during 1988, despite a decrease in the on short term debt and other interest c> pense statutory rate from 40 percent to 34 percent. The decreased during 1989, due to the climination of increase resulted primarily from lower tax losses the required payment by the Company of interest and permanent differences related to River Bend. on intentoried nuclear fuel. Interest on the inventoried nuclear fuel is currently being capital-Non OIieratinD ltems ized as part of a nuclear fuel lease which was
. Southern Company Settlement and Related entered into in february 1989.
Income Tages. See Note 1 to the Consolidated Financial Statements for a description of the dis- interest charges decreased slightly during 1988.
pute and setticment *cgarding purchased power due primarily to the retirement of maturing' debt.
contracts with the Southern Compan). lhtraordinary item - DiscontinuaHon Uf Regu-gg g f, Allowance for funds Used During Construction (ATUDC). ATUDC decreased during 1989, due to Sec N' ote 3 to tric Consolidated flnancial State-the sale of Company-owned nucIcar fuel in ments for a description of the write-offs in 1989 February 1989. resulting from the applicat!on of SFAS No.101 to the Company's wholcsale jurisdiction during the AfUDC increased slightly during 1988, due to the third quarter of 1989 and to the steam depart-Company's increased ownership of nuclear fuel. ment in the fourth quaner of 1989.
Reduction of Deferred River 15cnd Costs. As a result of the interim rate relief granted in the New Accounting Standards Texas retalljurisdiction in 1988, the Company The financlal Accounting Standards Board reduced the amount of deferred Rher Bend costs (fASB) has issued SFAS No. 96 which may affect bcIng recorded in accordance with accounting the Company s results of operations and finan-ordcrs issued in 1986 by the regulatory commis, clat poshion when adopted. See Note 4 to the sions. This amount reflects a reduction of $1.50 Consolidated financial Statements for information for each $1.00 of revenue receised as a result of the regarding SFAS No. 96.
Interim rate increases in Texas. The reduction of The FASB has issued SfAS No.106. fmplo) cts deferred River Bend costs was terminated upon Accounting for Postrctirement Benefits Other receipt of the permanent rate order. Than Pensions. that will significantly change the Other - lYet. Other - act increased during accounting for such benefits. The Company esti-1990, when compared to 1989, due to decreased mates the annual expense for such benefits could income taxes on other income. ta7ge from $20.000.000 to $40,000,000.
g During 1989, other - net increased due to Am unts ultimatcly recorded in accordance with increased interest income. SfAS No.106 will be influenced by the actuarial Other - nu increased during 1988, due to assumptions used and the regulatory treatment increased interest income and tax benefits related provided the Compan) See Note 2 to the Con-to the sale of Nelson Units 1 and 2 to a joint solidated financial Statements for the postrctire-venture ment benefit costs recorded during 1990,1989.
an KThe Company will be required to apply Appl! cation of STAS lYo, 90 - Accounting for ,
Abandonments and Disallowances ofI'lant Costs ~"O #
Sec Note 3 to the Consolidated financial State-ments fer the effect of the appl. cation of SFAS 23
haa YT Lm Financial Information _ ._ . _ _ _ _ _ _
Consolidated Statement of Income FOr the years ended Deceinber 31 (in thousands except per share alnounts) 1990 1989_ 1988 Operating Revenue Electric. $ 1.596,635 51,501,874 $1 A 15.713 Steam 61,052 69.200 70,728 Gas 32,998 36.332 ,
34 036 1,690.685 1,607A06 1,520 A77 Operating Expenses and Tases ,
fuel, 457,503 412.591 417.030 Purchased power 197,764 225.781 228.330 Other operations . 256,951 274,150 234,320 Maintenance .
131,775 120.570 100.270 Depreclation and amortization , 186,451 187.985 179.567 Deferred Rher Bend expenses . -
16.739 (57,670)
Deferred resenue requirement - Rher Bend phase in plans (41,515) (114,722) (197.752)
Amortl2ation of accumulated deferred River Bend costs 2.1,631 31.086 36,433 income Taxes federai 46,640 24.987 59,517 State . 11,323 8.778 272 Other taxes . _88_.929 _ 91.641 87,3_04 1,357_,452 1.279.586 _1,087.621 Operating income 333,233 327.820 432.856 Other income and Deductions Allowance for equity funds used during construction . 640 875 3.115 Southern Company settienent. (205,015) - -
Southern Company settlemet.t related locome taxes 80,834 - -
River Bend carr) lng charpes. -
($19) 24.723 Reduction of deferred River Bend costs - -
(46.266)
Abandonment of subsidiary lignite ! cases -
(19.183) -
16;345 8,355 Other - net _ 21.513 Income Before Interest Charges and the Application of SFAS No. 90 231,205 _ 325,338 _ 4_22,783 Application of SFAS No. 90 - Accounting for Abandonments
, and Disallowances of Plant Costs (Note 3) -
(23 853) (21.771)
Related income taes . -
, 8.965 _ 7 A02
__~~ ._ ,J 14,888) _ t 14,369)
Interest '".arges 1 n,';, term debt . 259,186 289,058 298.009 Mort terin debt and other 16,811 10A03 14,302 Allowance for borrowed ftmds used during construction __ 510)( __ (2.262) _ f ,040) 275,487 297,199 305.271 Income (Loss) Before Extraordinary item (44,282) 13.251 103.143 Extraordinary item - Discontinuation of Regulatory Accounting Principles (net of income taxes) (Note 3) . _ _ _( 58 824) _ _-- g Net income (Loss) .
(44,282) (45,573) 103,143 Diddends on Preferred and Preference Stock (unpaid since 1986) _ (i2,742 _ 62.839 _ 63_,064 income (Loss) Applicable to Common Stock $ (107,024) $ ( 108 A 12) $ 40 079 ,
Average Shares of Common Stoch Outstanding 108,055 108.055 108.035 Earnings (loss) per average share of common stock outstanding before extraordinary item and the cumulative effect of SFAS No. 90 in 1988 $ (.99) $ ( A6) S .50 Earnings (loss) per average share of common stock outstanding $ (.99) S ( 1.00) $ .37 DMdends Per Share of Common Stock $ - S -
The accompanying notes are an integral part of the consolidated financial statements. ,
)
24
l Gulf States Utilities Co.
Consolidated Statement of Cash Flows for the years ended December 31 (in thousands) 1990 1989 1988~
Operating Acthities
' ' ' ' ~ ~ ~
Net income (loss) $ (44,282) $ (45,573) $ 103,143 Items not requiring cash:
Defened fuel and purchased power expense - net 1,899 (18.103) (5,084)
Amortization of nuclear fuel 35,454 30.102 44,393 Depreciation and amortization. 188,885 191.2M 182.089 Deferred River Bend expenses, revenue requirement. and carrying charges (41,515) (97,464) (280.145)
Amortization of accumulated deferred River Bend costs 21.631 31,086 36,433 Reduction of deferred River Bend costs - - 46,266 Deferred income taxes - net . (16,169) 49.993 71,594 investment tax credits - net (4,286) (4,424) (4.118 Allowance for funds used during construction (1,150) (3.137) (10.155)
Southern Company sett!cment 213,885 - -
Abandonment of subsidiary lignite leases. -
19.183 -
Application of 5fAS No. 90 - accounting for abandonments and disallowances of plant costs (net of income taxes) -
14 888 14.369 Extraordinar) item - discontinuation of regulatory accounting principles (net of income taxes) . -
58.824 -
Disputed amount - ( /,795) 3.62^
Other . 16,439 26.995 (9,257)
Changes in:
Receivables . (1,897) (16.990) (756) fuel Inventories (3,156) 3.113 1,920 Materials and supplies . (919) (1.027) 237 Prepayments and other current assets 2,173 2,072 (7,496)
Accounts payable - trade 9,959 (7,828) 4,10 '
Customer deposits . 1,031 1,221 1,053 Taxes accrued (1.601) (12.419) 14,704 Interest accrued (10,927) (1.322) (7.353)
Other current (labilitics _
_ (1,667) . 7A2_2 _ 3;636 Net cash flow provided by operating acthitics . _ 365,7_88 220.071 _ 203,314 Financing Activities increase in deferred River Bend construction and continuing services commitments . . . 1,363 2A26 4A28 Increase in other long-term debt -
679 680 Payment of deferTed Rher Bend construction and continuino ser\ ices commitments , (16,800) (31,517) 18A00)
Payments of lease obligations (44,110) (27.552) 438.188)
Retirement of long-term debt (202 654) (111 653) (107,32_0)
Net cash flow used by financing activitics (262,201) (167.217) (148.800)
Investing Activitics Construction expenditures (73.020) (54.679) (38.654)
Nuclear fuel expenditures . - (20,209) (75,530)
Sale of nuclear fuel - Rher Bend fuel lease -
114.931 -
Allowance for funds used during construction 1,150 3.137 10,155 Deposit to escrow account . (11,463) - (12,0005 other property and in\estments. (19,184) (909) (4,157)
Net cash flow provided by (used by) investing activities (102,517) 42.27'1 (120,186)
Net change in ca h and cash equivalents (930) 95.125 (65,672)
Cash and cash equivalents at January 1 197.518 102.393 168.065 Cash and cash equivalents at December 31 $ 196,588 $ 197,518
$ 102.393 Supplemental Cash Flow Disclosure cash paid during the period fort interest , $ 267,529 $ 286,211 $ 299.665 income Taxes . . 6,359 812 2A06 increase in nuclear fuel lease obligations 24.623 3.521 -
The accompanying notes are an integral part of the consolidated finam.ial statemerits.
25
)
, g_ , . ~. _ . . . . _ . . _ . .. - . .
. - y z;. . . ,e ,- -
_ , x- ~ 2,
- ,,- r, c . .
Fi ancial Infortnation"
+ . -
~
Colis611 dated Balance Sheet ~
. Dec6mber 31 -
.(In thousands) ,
1990 .
1989 Assets -
Utility and Other Plant, at original cost Plant in scivice , . , , . . . . . .. ... .....
$ 6,741,601 $ 6,683,858 Less Accumulated provision for depreciation . ' 1,847 88_2 3 1,679,122 -
4,893,719 5,004,736 #
x (Construction work in progress . . ..... . . , . 24,576 15.600 Nuclear fuel net of accumulated amortization _ .135,285- 146.116
.-.5,053,580 5.166.452 -
- Other Property and investments - . . , . . _61,301: 31.678 Current Assets
, Cash and cash equivalents . .
196,588 197,518 Receivables , , ~
Customers . , . .s 115,7*/ 5 -116,709 ' +
~
Other , , . . , 18,764 .15,883 f'uel inventories . . , < , ,.
~
27,423- 24,274
- , ' Materials and supphes 7,951 7.032
' Prepayments and other. , _
35,458 37,631' --
401,915 399,04_7
, Deferred Charges and Other Assets.
' Unamortized debt expense . . . . .
19,442 20,571
. Unamortized project cancellation costs... , ., , 49,231 - 57,578
' Accumulated deferred income taxes ,
169,355 ' 56,462
~~
, Deferred River Bend costs . ,
.1 954,163 957,502.
' Long-term receivables . . . 128.568 L 106,311 Other , _ 25,714 12.493
' 1,210,717 3 346,473
- $ 6,863.269 $ 6,807,894 Capitalization and Liabilities . _
- r- - ~=
. . Capitalization (See Statement cf Capitalization)
Common shareholders' equl;y '$ 1,928.022 $ 2,007,350 ~
Preference stock 100,000 100,000 v Preferred stock ,
136,444 136,444 Not subject to mandatory redemption.
Subject to mandatory redemption , . . 438,631 414.651 Long term debt .
2,074.112 2,387,209 4.677,209' 5,045,654 .
, Current Liabilities .. .
Long term debt due within onc year , . . . . . . . . . . , ,
252,083 ,135,333 Preferred stock and long term debt sinking fund requirements- ~ 76,963 ~84,647 12.429 15,241 Defened River Bend construction commitments . 109,596 99,637 Accounts payable - trade . ,
Customer deposits .
18,898- 17,867 >
, _ Taxes accrued , , . .
20,973 22,574 74,078 85,005
. Interest accrued. .. , ,
.- Capital leases - current , 38,952 45.003 JOther .
. , 4 48,454 48,609 553,916
~~6525 5 J Deferred Credits and Other Liabilities _ _.
101,197- 105.483 investment tax credits. . .. . ,
667,518 570,794--
, Accumulated deferred income taxes
"~ -
' Capitri leases - non current . , , 122.113- 135,549
- Deferred River Bend. financing costs. 179,841 202,864 Southem Company settlement . 235,283 .--~ s '
Over recovery of fuel costs . ,
,,15,948 15.561.
Disputed amounts . ......... ..
82,884 .81,211 s
. Deferred income from sale of utility plant -
~ 44,964 45M63 - 2 Other - ,
83,886 51.199
__1,533,634 1,208,324 Commitments and Contingencies (Note 1) . -
$ 6,863,269 $ 6,807,894 -
===m ==; __m._
The accompanying notes are an integral part of the consolidated financial statements. !
,:,26? -
)' %
-,-s s , .,
. _ _ _ ._ _ _ . - . _ _ _ _ _ .- __G_ _u l f_S_t a t e s t_J t.i.l i.t i c. s _C o .
Consolidated Statement of Changes in Capitai Stock and Retained Earn!ngs for the years ended Di s etAser 31 (in thousatids)
"1"l'
[35k$. ' t=" I[b!I, b5 lll2*!
Dalances January 1,1988 $356.522 51,195.140 $ (3 9001 $ 26.161 $602 905 Net income -- 1968 . 103 143 Meacquired capital stoth 2 Prefeacd stoth sinh ng fund tequif ements (4,701)
Dhidends la arrears on prefened stock *,ubject to mandatory redemption 35.368 (35,300)
Capl91 stoch expense (30)
Balante: December 31,1988 307.109 1.195 148 (3 9%) 26.163 070 000 het loss - 1909 (45 573)
I'refened stoth sinking fund requitetnents (7,660)
Diddet.ds h artcars on prefened stoch subject to mandatory redemotion 35142 (35.142)
Capital stock espense 10 nalante Detember 31,1989 414.651 1 195,148 (3 9%) 26.173 789 M 5 Net 'ecss - 1990 (44.2821 heferred stoth Sinhing fund requirements (11 M G)
Diddends in ancars on preferred stoch subjeu to mandatory it demrtion 35 046 . _ _ _ _ _ . _ _ ._
l31046)
Halances Deternber 31,1990 $438 631 $ 1.195.140 $ (3.930) $26.173 $710 637 The accompanying notch are an Integral part of the consolidated financial statements 27
M.*N41,
-i@an.Financial _Information_ _
Consolidated Statement of Capitalization Decernher 31 (in thousands) 1990 19n9
, Common Shareholders' rquity Common stoth A uthort.'ed 200.000 000 shares without par salue
$1,195,141t i1.195,140 Outstanding 108,055 065 shares hemium and e Apense on capital stock (3,936) (3.9Ma Other paid-in capital 26,173 26 173 Retained carnings 710,637 7Ki%5 1,9 2 tl.02 2 2 007.350 l'teferente Stock Authorised 20 000 000 shares without par salue. cumulathe Outstanding 4,000.000 shares Cumulathe Hedemption l'er Share f*tice as of Dhidends Shares December S t.
_Dhidend $ctles in Arteate Outstanding _ 1990
$ 4.40 S17.78 2,000,000 $ 30 45 50,000 50 000 3 fi5 1556 2 000.000 30 15 50.000 Ni000 100.000 100.000 l'acierred Stoc k
. Authorized 6,000.000 sharcs $100 par salue, curr,ulathe Outstanding 4.617.568 shares Cumulathe Redemption Per Share l'alce at of Dh'ide nd s 5 hatch Dec emlict 31,
_In Artears Outstar_iding 1990
. . . . .Dhidend 5n!cs _
Not subject to mandatory redemption 5 4.40 $ 17.78 51.173 5108 00 5.117 5.117 4.50 18 19 5 630 105.00 5113 NO 4.40-1949 17.78 1.655 1(3 00 160 166 4.20 16.98 9.745 10.1616 975 975 17.95 14 B04 103 75 1,4110 1.400 4 44 5.00 20.21 10.993 104.25 1.099 1,099 5.08. 20.53 26045 104.63 2,685 2.665 4.52. 18.27 10 % 4 103 57 1,056 1.056 24.57 32 ft?9 103 34 3,2113 3 2tt3 0 08 7.56 30.56 350.000 101 80 35,000 35 000 8 52 34.44 500.000 104.43 50,000 50 000 9.96 40.26 350 000 104.04 35,000 35 000 136,444 136 444 Subject to mandator) redemption ft 80 35.57 301.029 103.00 30,103 30.103 39.41 29.636 103 00 2,963 2,963 9.75 8.64- 34.92 302 465 103 00 30,247 30.247 11,48 46.40 480.000 103 00 4 U.000 48 000 13f>4 55 13 40.000 103 00 4,000 4.000 12.92 52.22 600 000 '105 00 60,000 601)OO 31.50 .. . 46 40 750,000 111.50 75,000 75.000 Adjustable Rate 38 02 300,000 103 00 30,000 30.000 ustable Kate .. 38 23 4504)O0 103.00 45,000 45.000 Ad]ferred l're dhidends in arrears - 141,711 106 665 467,024 431.97tl Preferred stoch sinking fund requirements (211.393) (17.327) 438.631 414.651 auanw unwn.nt on raoma pay )
28
^ ' ~ ' ^ - ' ' ' ' ' ^ ^ . . . . . __ __ _ _ _ _ _
Ottif States UtlMtics Co.
_1990 1989
- teng Term Debt f~lrSt mortgage bonds Maturing 1991 through 1995 -
14%% duc May 28,1991 $ ~ $ 37,$00 174% duc January 13,1992 60,000 100.000 4%% due May 1,1992 17,000 17 000 16.8% due September 23,1993 25,720 34.290 13%% due Marth 1,1994 100,000 100 000 Maturing 1990 through 2000 - $% through 8'W 230,000 230.000 Maturing 2001 through 2005 - 7W% through 10.15% 185,000 185.000 Maturing 2000 through 2610 - 8%% through 12.3% 345,000 345.000 Maturing 2011 through 2015 - 12%% through 15% . 400,000 400,000 Maturing 2016 - 11%% and 12W% - 200,000 200.000 first mortgage bond sinking land requirements , (48,570) (07.320) 1,514,150 1,$81,470 Pollution control and industrial development bonds 7% duc 2006 2 5,000 ~ 25.000 S.9% duc 2007. 23,000 23,000 10%% duc 2012. 48,285 48,285 9W% duc 2013. 17,450 17.450 10%% duc 2014. 50,000 50.000 12% duc 2014 , 52,000 $2,000 Variabic rate duc 2014 94.000 94.000 Variable rate duc 201S 109,000 154,000 9% duc 2015 45,000 -
Variable rate duc 2016 , 20,000 20.000 Debentures Euro debentures - 13% duc March 4.1992 75,000 75,000 Convertible <cbentures - 7%% duc September 1,1992. 2,003 2,003 Revolving credit agreement - .233.334
+
Dcierted River Bend construction and continuing services commitments bariable rate) -
12.025 Other long tcrin debt __
2.038 _ 2.038 2,076,926 2,390.205 Unamorttred premlurr, mm iscount on debt - net _ 2,814)
( _ 2,996)
(
2,0,74,112 2,387.209
$ 4,67 7,209
< 1 .$5.04= 5.654 The accompanying notes are an integral part of the consolidated financial statemenN '
s .
4 L
t 9
. 29 nii ii
ellf F
__ b_! - .. - . . - - . . .----
P"""' the ComPa"> s d'"$$ m cue'"a' '""ds.
Gulf States Utilities ComISanb' managunent belleses it has in'cinal resources Notes to the Consolidated to meet hs <asn needs in 199i. and inc anihty, by w"uotuneenain ope"" tons and wnstrucuan FinanClal Statements espenditures. to pres ent shod term cash
- 1. Cottimittrients and deh(lencies whkh might othenvise occur in 1992.
_Contitigencies Fhile .itigation with the Southein Company was setded during 1990, suhjet t to the conditions dis-
/1nancial Condiflon. Although the Company has cuned below. Manifkant htination and regu-received partial rate tellef relating to its Kh er Bond latmy (onungendes condnue to esist. Attention Unit 1 (Rher tiend) nuticar unit. the Company's shouM be ghen to the disclosurc that (crtain litiga-financial position continues to be strained by its tion (ontingendes esist, whith management does Inability to carn a fetuin on and fully recosci its not presently bellese will be finally resolved in investment and other costs associated with Rher 1991. See below for the (onsequences ll such Bend. The Company is still experienting strong contingentics were ultimately resobed adversely to regulatory, political, and consumer resistante to *C l, *"Pd"I' rate increases which may aficct its ultimate retos cr-ability of River Bend and related costs issues to lhe Nuclear Regulatory Commission (NRC),
be finally resolved in the Loulslana Public SenItc whkh regulates ;he operation of River Bend.
Commission (L.PSC) and the Public Utility Com- cxpressed its concern in 1986 that the Company's mission of Texas (PUCT) rate proceedings and financial condition could negathcly knpact attivi-appeals thereof, tambined with the application of ties associated with Rher Hend. The Company accounting standards, may result in substantial continues to hecp the NRC informed of its financial write otts and charges that could result in substan- condition. If the Company's financial condition llal net losses being reported in 1991 and subsc- deteriorates, what action the NRC may take and its quent periods with resulting substantial adverse financial impact upe the Company cannot be adjustments to common shareholders' equity, predicted, t>ut such action could include suspen-Substantial write otts could adscisely affect the slon of operation of Rher Bend, whkh could have Company's ability to purchase its stoch in order to a substantial adscrse effect on the finantial con-satisfy sinking fund requirements, reinstate divi- dition of the Company, dends, and obtain flnancing la the future. Southern Comp.my (Southem). Since 1986, the The Company's plans to meet its cash require- Company and Southern hase been litlnating dis-ments in 1991 and 1992 include a combination putes relating to (citain purchase power con-of efforts. To increase levenues and cash flow, tracts providing for purchases by the Company of management plans to pursue the increase of rate capacity and energy from Southern.
IcVels and sales, and pursue appeals of rate As of June 2L 1990, the Company had not orders. To reduce cash requirements, manage- recorded as a liability and had not paid an esti-ment Intends to continue cost controls and under- ed 5677'000.000 of charges related to the take the refinancing of a part of the long term debt Southern (ontracts. The Compan)' estimated that, maturing in 1991. Management also intends to U owed, minimum payments for capacity whkh cxtend or replace letters of credit which esplic in would be due under such contracts from June 25, 1991 and 1992, that secure certain pollution con- 1990 through their termination in 1992, would
' trol bonds, or remarket such bonds, as was aggregate approximately $357,000,000 and that done with other pollution control bonds in 1990. If payments im enogy wouW be appmdtnately the Company is unsuccessful in these eflotts to ,000,000, refinance maturing debt and to cause the pollution control bonds to remain outstanding. the Com- Srint MtN r. As of Dec ember 21,1990, the Com-pany believes that it has other neans availabic to pany and Southern executed a deflnithe settle-access external funds which may be needed. Man- ment agreement ($cttlement Agreement) setting ,
agement believes that these plans, combined forth the specific terms and principles of settle-with cash on hand, funds provided from opera- ment of the Ildgation and dalms between the com-tions, and funds availabic under its shon term bank panics. The Settlement Agicement contains the credit arrangements will be adequate to meet its general terms and prosisions previously outlined cash requirements through 1992. While the in the Memorandum of Understanding dated Company belletes it can access esternal funds to June 25,1990. In 1990, the Company recorded a the extent nctessary to accomplish its plan. eco- charge to carnings of $205.015,000 before the I nomic, financial market, or banking conditions related income tax benefits of $80,8M,000 (which or adverse developments with respect to contingen- includes $11,129.000 of state tax benefits) repic-cles to which the Company is subject could senting management's estimate of the settle-adscrsely affect such access. Should conditions ment costs. Due to the state net operating loss 30
Gulf State.s (Jtilitiers Co.
position the Company is in, an offsetting state tas Compan). On februaty 7.1991, the Cotopany s expense of $11,129.000 is Induded in " income tioard of Direttots apptosed the settlement. The Tases - StatcJ The Company will te(ord interest pait'es resened ccitain rights to withdraw from the on the picsent value of the c5timated liability settlement under stated < onditions and the Set-until January 1, IbD3. tiement Agrectncnt prosides that if the settlement The $cttlement Ag! cement prosidet that, subjett is not elledhe by Aptil 30.1991, the pattles to the condillons teletted to below. Sovthern would hase no futther obligation undet the $cttic-would reccirc: ment Antecment.
(a) approsimately $75,000.000 in tash, indur'ng if the settlement is not consummated and if the all funds pictiously deposited by the Com- Compan) welc ultimatcl) unsunessful in the pany in a court-controlled escrow account in pending litigation and were required to mahe sub-Ilcu of c rtain payments under the purchase stantial payments to the Southern Company and power contracts (the Company will pay not permitted to pass those costs through to (up approsimately $6A04,000 in addition to the tomets in its rates, the Company would probably estrow funds); be unable to make such payments and would (b) a $100.000.000 non interest beating promis. probably hase to sceh f ellel Itom its creditors sory note due on January 1,1993, subject to under the llanhtuptcy Code.
the Company having " adequate cash" at Calms f Ic(f ric Power Coopetalitt Inc. (ClJ' COL January 1,1993, as desulbed below; and %e Company has signihtant business relation-(c) 6,000,000 shares of the Company's common ships with CLPCO, including co ownctship of Rher stock, which Southern would have the right to bend and 1519 Cajun 2 Unit 3.1hc Company and vote only in the event of bankruptcy of or CLITO own 70 pctcent and 30 percent of Rher default by the Company. !)end, tespecthel), while Dig Cajun 2 Unit 3 is in addition. the $cttlement Agreement provides owned 42 pctcent and 58 pet (ent by the Com-that on January 1.1993, the Company would pay pan) and CCPCO. respecthet).
Southern for each of the 0,000.000 shares of On June 26,1989, CLPCO filed a (hil action common stock, the amount by which (if any) against the Company in the U. $. Distrkt Court for
$18.25 esteeds the highest average of the highest the Middle Distrkt of Louisiana. CLPCO stated in prices at which the Company's common stoch its complaint that the ob)c(t of the suit is to trades for the consecuthe days during the period annui, icstind, terminate, and/or dissohe the between the date the shares are delivered to Joint Ownctship l'articipation and Opciating Agree-Southern and January 1,1993, dowever, if the ment enteted into on August 20.1979 (Operating Company does not have " adequate cash" on Agreement) related to Hher liend because of January 1,1993, all unpaid amounts pursuant to fraud and error by the Company, bicach of its fidu-the preceding sentence and under the promis' clary dutics owed to CLl'CO, and/or the Com-sory note would begin to accrue interest at the pany's repudiation, tenunciation. abandonment, prime rate plus 1 percent and would be payable on or dissolution of its cote obilg' ations under the the earlict of the January 1st as of which the Operating Agreement, as well as the lach of fall-Company has " adequate cash" or January 1, ure of cause and/or consideration for CLPCO s -
( 1999. Pursuant to the Scttlement Agreement, the pedormance under the Operating Agicement.1hc Company would be deemed to hate " adequate sult sechs to recover at least CEPCO s alleged cash" at the time it begins to pay cash dividends $14 bHHon investment in the unit as damages.
on its outstanding common stoch or to tlc cAtent plus attornevs* fees, Interest, and cost.
Its projected availabic cash balance cach year '
exceeds $35,000,000. The Company believes the sult is without merit
- The Company's obilgations under the settlement and is contesting it vigorously. No assurance can would be secured by a first mortgage lien on the be ghen as to the outcome of this litigation. If
, Lewis Crech generating station. a 520 mcqawatt the Company were ultimately unsuccessfulin this gas fired fatllity owned by OSONT. Inc. (OSONT), a litigation and were required to make substantial wholly owned subsidiary of the Company, and a payments, the Company would probably be unable pledge of the common stock of OSONT, to make such pa)ments and would probably have to sech relici hom its aeditors under the Danh-
. The settlement is subject to and will become ruptcy Code.
cffective upon the satisfaction of several conditions.
Including necessary approsals by the Boards of The Company has been Informed that CEPCO Directors of the companics, the federal Energ) has had serious financial probicms but that the Regulatory Commission (FERC), the $ccuritics and Rural Electrification Administration (KEA) has Exchange Commission, the court controlling the refinanced CEPCO s outstanding debt. Addition-escrow deposit, and certain creditors of the ally, one of CLPCO's member cooperathc5 has 31 l
r MffELs__ Financial Information
. _ _ _ _ _ _ _ _ _ - .. _ _.. ~ . _ _ _ .
fded t anhtuptt). CLPCO s weak finant i.il ( ondl- Company may la subin t. nu ludmq t ut not limi tion or its banhiupt() Could base signilu ant ted to llatulnics telating to the telease or es(ape of adsetse tilects on the Compan), including but not hatardous substantes into the t ruimoment may lhnited to, possible NHC action as described not be insutalde. arut the amount of insurante atsose and a need to bear additional costs asso( I (atried as to the satious tishs may not be sutikient aled with the (0 owned facilities. During 1991. atul to intet potentlal liabilitics and lowes lhele is foi the nest segetal ) cats. It is espected that also no assutaru e llhu the Comp my will l>e able to maintain m*.utanc e cos erancs at thch ptes' :
Ct.PCO s share of Rher Bend related costs will tie in the range of $60,000 000 to $70 000 000 per ent lesels. L'ndet those t itt umstantes. suc h
> car. If the Company were tequhed to fund lowes et liabihtles would h.n e a s cry substantial CI:l'CO s share of (osts and to continue to meet its adset se ellec t on the hnancial ( ondition of the current obligations to Ct.I'CO there tan be no C ornpa n);
assurante that the Company s tesources would be Pubht habihts in me of a nm irat mtident at am "
adequate- lu ensed no(Ic[u f.n ilit) in the t'nited States is The Compan) and Cl.l'CO are parties to !! HC turrently knuted to $7 H billion undet plosisjons of proceedings regarding tertain iong standlng dw the Price' Anderson Att i Att) whh h was tenewed putes telating to transmission setTite c harges. and resised in 1Nm and estonds through August 1.
llearings before the ITBC were completed in 200L the Company in* anes Rhrt hend lot this De(ember 198tL On May 11,1989 an adtninistra- c4)osure through a < ornf onation of pthate insur-the law judqe issued an initial (letiston. which is ante and the industt) wide setondary financial subject to a final F LKC oldt t. The Compatn DtD4tain 1he ( heumes to the At t neu ssitated claims CLPCO has underpaid u ansmission "lodilitations l0 0"' 'C("*LH) finam ial inote( tkut charges. which as of December 31.1990, an ount wh that the Omnpany wih be suhic< ted to a to $8LB&4 000. Such amount was reco!ded on Initential rettospn the awcument of apptott-the balance sheet as a long term attount re(cip inately vt A 150 000 per incid(nt with a masimum able and an offsetting amount ht dispute. with amount of $ 10.000 000 per in(ident payable in no effect on net income No awutante can be ghen any onc Sc.u for lowes in the esent of a nu(leaf intident at its facility of any other Ikensed as to the timing or outc ome of the final !! RC nuclear teactor f acility in the t'nited States. Any order. rettospe(the aucuments pertaining to this llobil-T he Company and CLl'CO were in dispute oser t).uc sub certain billings related to the jointlyowned facili' intetest in'Kncr ject to the between Bend 70 30 pctctheent ownctship
( ompan) and ties. Rher Bend and Big Cajun 2 Unit 3 Durin4 Ct PCO.
the first quarter of 1989. the Compam and Cll'CO
.I N (."'"P d ") '"'""Id i"
- UUU NU NU I"""d '}
reached a tentathe settlement tegatding the inopen) Annge inunant e and MW WO OW of amount of oserhead telated to adminisuathe and euxw inuninu e im her knd from the pihate gencial espenses to be paid b) CLi'CO for Rher innuante inin t. A htionally the Company hend and the amount the Compam will pay to ha atqukd $1. m W@W of cu ew [nopert)
CLPCO for Dig Cajun 2 Unit 3, retroatthe to insuuna metage on Rhet Dend through par-June 1980. During the first quarter of 1981 the Mpadon in Uu: Nuckar N W Inunana Wuhed Company made adjustments to refictt the tenta. (Nt.llJ il prontam Unde: Ni~.ll. Il thc Company ls the settlement related to Rher bend, whkh increased the not low for 1989 by $4.346 000. sut jett to a mnimum assewment of appiost-matcl) 10 860 000 in any one poht) ) cat. Although The Company and CLPCO hase also reached a the Company has c ontinued to inttease the limits settlement tegarding disputes under the Riser of suc h insurante as c apait) becoines malla-Bend buybach arrangement which was tatified b) ble. no assurant e (an be ghen about the adequac y the RCA on March G.1989. During the hist quarter of such insurante limits in the esent of a major of 1989, the Company made adjustments to ac cident. The propert) damage insutanc e polk) reflect the settlement of the Rher bend bu) bach limits are substantially lew than the tepime-arrar"3ement with no material effect on the net ment c ost of the Kher Dend laihtics.
The Company maintains a Nucleat Wothers t.la-Buclein EJs. Ownership and operation of a bility pohcy whic h cos ets liability for tott c laims by nuticar generating unit subjects the Company to on-site worhets brst employed at a mKlear facil-sigidtttaid speclal risks. The Company is it) aftet January 1.19HR for non-(atastrophic hLurci to au estent as to its interest in Rher Bend nucleat telated injut) suth as the esposute to for propeny damage and detontamination, liabib long term. Iow les el radiation Nuclear related Ity to employces and third parties. and incte- claims by wothets employed in a nuclear facility ineht31 tcplacement power costs. as destlibed prior to Januar3 1.19WL will c ontinue to be below1 Itaweser, potential liabilities to which the cos eted under the Nu(Irat t.neno I.labihty policy 32
1 Gulf States Utilities Co.
prosided the claim is made b) December 31. to elect two directo's and hase done so s!n(c the 1997. Under the Nudcat Wothers' Liability pollt). annual meeting on May 4,1981 The Company the Company is subject to a masimum tettospet- ina) not pas an) dhidend ut disttitmtion on any of the ptemium assessment of approsituately its common stoth, or putthase or otherwise
$2.700,000, acquite common sloth, unless all turnulathe dhi-Some estra esoense for Rher l'end repletement dends and sinhing fund obHgadons hate been power is insated' through the NLil I program. paid on prefetted and prefeietite stoch. Under its
' ram the Company is subject Restated Attitics of incorporation ( Atticlesi, as Under the NLil to a maximutu annu i prog'ai retrosputhe assessment aniended the Cornpany ina) not pay any dhldend of apptosimately $1.310,000. of distribution on any of its pielerenc e stoth or
" ' '"'"*"'U' "b'" U" '"
Dh/>osal of 5I>cnt hutlear Iuct and Nulear sinking fund obligations base been paid on pte-Dec ornmissioning As provided in the Nuticat fetted stoch, As of Detettiber 31.1990 the Com-Waste Pollt) Act of 1982, the Company has entered pm ha not met sidim fund obHydom toulig into contracts with the United States Department 3 37;3R000. Under the terms of a bank tiedit of L,ncigy (DOL) for disposal cf spent nuticar agreement Cistussed in Note 12. the Comparn is fuel from Rher Bend. The Company pays a quar- also restikted from paying dhidends in eucsi terl) fee to the DOL equal to one mill per net with (ettain cucptions. of $75 000,000 on any of hilowatt hout generated by Rher Beni lhe Com- its classes of stoth while such ucdit agtcoment pany is currently recovering such costs In all remains outstanding. T he Company s abilit) to pa)
Jurisdictions. dhidends and redeem and purchase outstanding The Compan) has recched approval from the stoch (as is necessaty to meet its picierted stoch I'UCT. Li'5C. and IT.RC to collect in rates arnounts sinking fund obilgations) will be adversely necessar) to detonunission Rher Bend when it affected, and possihl) foteclosed for an teaches the end of its setTite life. Decomm!s- indeterminate period of time il significant write offs sioning costs are subject to the 70/50 pctcent own- result from regulator) actions,judkial actions. of crship interest in Rher Bend between the Com* toqulrements of accounting standatds.
pany and CCI'CO in 1990 dollars the Company s share of decommissioning costs is estimated to be Alternathe financial anangements to address
$ 188.000.000, which at the end of the life of the part or all of the ptcierred and piefetence stoth unit may be oser $1 billion. To provide for future attearancs base been periodically teslewed by the detonunissioning costs. the amounts (ollected Board of Directors, but the feasibility and timing of any through rates ftom (ustomers are placed in a mas- ,,a) ment of current dividends such arrangements as >ct remain uncertain.
ter trust fund, where the contributions plus inter- on all sto(h is at est will provide amounts needed in the future, the distiction of the Board of Directors and depends upon its continuing esaluation of the lhe Company has elected the provisions of set-tion 408A of the Internal Res enue Code to qualify financial condition of the Company.
for an annual tas deduction for payments made lhe Company has accrued dividends on and to the nuclear decommissioning fund. At inc reased the balante of mandator) ledeemable December 31,1990, the balante in the decommis- picfened sloth with an offsetting deucase to sioning trust fund was $4,505.000. There can be tetained earnings. Howeser. since dhidends on all no assurance that the amount being prosided for series of the Compan) 3 preferred and pielerente will be adequate. stoch ate cumulathe tthe agqtegate amount of Dleidend Suspension. The board of Directors accumulated and unpaid prefened and preference did not declarc any dividends on the Company s stoch dhidends as of December 15.1990 is common stoch for the third quarter of 1986, and no $251M000h inunne doss) applicable to com-dividend on common stoch has been declared inon stoth and earnings (loss) per ascrage (om-through December 31,1990. The Board of Diret- mon shate outstandmg hase been computed tors did not declare the dhidends on the pre- assunting that all such dividends through ferred and preference stoch of the Company paya. Decernber 31.1990 wetc accrued.
ble on March 15.1987. and has continued not to Other Confingencies. The Company has been declare them through December 31,1990. Divi- notilled by the U. 5. Enstronmental l'totection dends on all series of the Company's prefened and Agency (LPA) that it has been designated as a preference stoch are cumulathe. Since the potentially responsible party for the ticanup of sites Company has failed to pay such dhidends, the on which the Company and others hate or base holders of preferred stoch became eligible, as of been alleged to have disposed of material March 15.1988. to elect a majority of the Board of designated as hatardous waste.1 hc Company is Directors and hase donc so since the annual currently negotiating with the LPA and state authot-meeting on May 5.1988. The holders of ptcIerente itics regarding the cleanup of mme of these sites.
stoch became eligible, as of September 15 1988, Sescial class action and other suits base been 33 l l
ma LV Y. Financial Information illed in state and federal courts seeking relief from portions of Al UDC are nonnish items whkh hate the Company and others for damages caused by the effect of incicasing the Company s repotted the disposal of hazaldous waste and for net income. When the related utility plant is placed asbestosqcla;cd disease which allegedl) occurred in senice, a return on and retosely of prudently from esposure on Company premises. While the loc urted costs hase been pr imitted b) regu-amounts at issve in the cicanup ellotts and suits lators in determining the iates chatacd fot utility may be stry substantial sums. management senit e (see Notes 3 and 15 f ar information togard-believes that its f!nancial condition will not be mate- Ing recent f ate actionA I flally affected by the outcorne of the suits. in 1987, due to the construction interest capitall-The Company is also invoh ed in litigation arision lation prosisions of the 'Ias Reform Act of 1900, in the riormal course of business. While the results the Company began accruing Al UDC at pte tas of such litigation cannot be predicted with cer- rates. t hese rates were as follows:
talnty. management belleses that the hnal out- wun3 poi _ m un33 i39, ij %
come will not hasc a material adscrse clic(t on its spm i 19% ,.- Mao 31 Iw9 12 25 financial condition. %m1 1m - Mm h 31 M' O 11 75
- 2. Stittil11ary Of SigtilflCatit ACCOttt1tilig PollCICS Hevenue. fuel and l'archased rumet. The Com-( Ed") * * 'C'C""# # b" '" "" "
System of AccountA The accounting records of a t)(le billing basis. Resenue is not recorded for the Company are maintained in actordance with energy delivered and unbilled at the end of each the Uniform System of Accounts as picscribed listal period. 't he Company's wholesale and Loul-by the f ERC and adopted by the Li'5C and the slana retail rate schedules proside for adjust-l'UCT' ments to substantially all rates for increases or
~
liillity Plant and Depicciallon. Utility and other decicases in the costs of fuel for nencration, plant is stated at original cost when first dedi- purchased power, and gae distributed. T he Corn-cated to public sentcc. Costs of repairs and minor pany's Tesas retall rate schedules include a icplacements are charged to expense as incurred- fised fuel factot approscil by the l'UCT. Such fac-The original r.ost of depreciabic utillt) plant tor remains the same ur il the Company flies for a tellred and cost of removal, less salvage, are acneral rate increase or futt reconcillation or until charged te accumulated prosislon for depreciation. the l'UCT orders a reconcillation for any over or lhe prosisbn for depreciation is computed using under collections of fuel cost. I ucl and the straight line method at rates, approved by purchased power (osts in escess of those included the regulatory commissions, which will amortlic in base rates or iccoscred through fuel adjust-the umecovered cost of depreciable plant oser tr.cnt clauses are deferred (or accrued) until such the estimated remaining service life. costs are billed (or credited) to customers.
- Composite depicciation rates weic as follows: /nventories. The Company s fuct inventotics are 1990 1989 1988 comprised of fuel oil. Valued at weighted astrage ucctric 2.70 % 2 (n 2 72 % cost, and coal, valued at last in, first out (Lif0) 4 4 cost. Materials and supplies are valued at weighted
{(am 0#N Totat compan) 2.72 2.70 2.74 locome 7ates. The Company and its sub-Decommissioning. The Company is accruing sidiaries file a consolidated federal locome tas the decommissioning costs of River Bend in accord' return. Income lases are allocated to the individual ance with the regulatory commissions' orders companics based on their respective tasable '
over a 38 to 40 > car period. Income or loss and investment tas credits, subject Allouunce for runds Used DurIng Construcllon to the limitations for recognition of net operating (AfUDCJ and Capitafflaflon of fnterest. The accrual loss carryforwards and investment tas credits. 1 of ArUDC is a utility accounting practice calcu- The Company follows a policy of comprehensive lated under guidelines prescribed by the TERC and interperiod lucome tax allocation where such capitalized as part of the cost of utility plant rep' treatment is per mitted for ratemahing purposes by resenting the cost of servicing the capital invested datory bodies. Defened income tases result in construction work in progress (C%If ). Such from timing differences in the recoqnition of rese-AFUDC has been segregated into two component nuc and espenses for las and accounting parts - borrowed and equity funds. That portion purposes.
allocated to borrowed funds is icilected as an .
adjustment to interest charges, while that portion Investment tax credits have been defened and applicable to equity funds is shown as a source of are being amortized ratably over the useful lives of other income. Both the equity and the borrowed the related property.
34
Gialf States Utilitics Co.
Subsidiary Companies. The Company accounts to "Deletred Credits and Other liabihties ---
.for the operations and financial position of its Deferred Rher Hend finantlna(ostsJ ihls reclas-wholly owned subsidiary companles. Varibus Cor- sHlcation was in accordante with the Compan) s potation (Varlbus). l'rudential Oil and Gas Inc. Interpretation of the inC rate order effetthe (Prudentiall. OSONT, and Gulf States Overseas March 1,1990, regarding i oulslana retail jurisdit-finance N.V. on a consolidated basis. tional amounts of carrying (harges related to por-Heffrement l'lan and Other l'ost Emplo,rpnent dons of Rher Dend prestously included in rate lienefits. The Company has a noncontributon base fudog thc wnstruulon period of the unit.
pension plan which cmers all emplo)ces mecting The (mnpany (hanged the amortitation period for certain age and service requirements benehts are such anmunts liom 40 ) cars to an eightqcar babed on ) cars of service and the highest fhe pedod the ternalning term of the Rher bend consecuthe ) cars of emplo)ces conipensation phaseln plan, in au mdance whh We (noWons of during the last 10 years of senice. All of the Com. the rate order. Attordingly. amounts depreciated pany s eligible employees are entitled to retire, in 1988 and 1989 were reclassified itom Depre-ment benefits upon completion of 10 Scars of serv cladon and arnmtitation' to Amortitation of accumulated defened Khcr Bend costs., These Ice and after reathing age 50. The Company's policy is to fund the actuarially computed pension reclassifications had no ellett on net income (loss) contribution annually. Past and prior sentte costs. m cmnnmn shatWol&ti equ4 which are due primarily to retirement plan Prior year financial statements hase been reclas-amendments, are bcIng funded by the Compan) sihed in order to be consistent with tunent ) car oser periods of up to 40 ) cars. presentation with no effect on net income doss) in addition to the pension plan, the Compan) m tanmon shareholders equit).
provides retired emplo)ces with life and health care Insurance bencilts. All of the Company s 3. Hales arid ACCOLI111111O lble for benefits upon employees ma) Company retirement. The become ellq'ecords t the cost of Hate Matters such benefits as cialms are attually paid. The cost imas. On May 16,1968. the PUC'l granted the of such benefits was $4.722,000 $4,051000 and Company a one time permanent rate increase of
$3,736.000 for the years 1990,1989, and 1988. $ 59.900.000. The inctcase is based on including respectively, in rate base approximately $1.0 billion of the Com-Statement of Financial Accounting Standards panf s system wide Rh er Bend plant imestment (5fAS) No.106, Employers' Accounting for Post, and approstmately $182.000.000 of related Texas retirement Benefits Other Than Pensions, requires retalljurisdiction delened Rher Bend costs ruled the Company, beginning in 1993, to change the prudent. Additionall), the PUCl affirmed its prellml-method of accounting for such benefits to the "dO' mungs inade in februan 19NI to disallow as accrual method. The Company estimates the imprudent $63.468.000 of the Company 's annual expcnse for such benellts could range from system wide Rher Bend plant costs (approsimately
$20,000.000 to $40.000.000. Amounts ultimately $20h00D00, net of accumulated depreciation recorded in accordance with SPAS No.100 will be and related tak benefits. on a Texas retailjurisdit-Influenced by the actuarial assumptions used tion basis. as of December 31,1990) and placed and the regulatory treatment provided the in abeyance approsimately $1.4 billion of the Com-Company, pany's system wide Rher Bend plant imestment (approximately $420.000.000. net of attumulated Consoffdated Statement of Cash flows. for the depreciation and related tas benellts, on a Texas purposes of the Statement of Cash flows, the retallJurlsdittlon basis, as of December 31, 1990)
Company considers all highly liquid investments and approximately $157.000.000 of Texas retail with original maturitics of three months or less jurisdiction deferred Rher Bend costs with no to be cash equivalents. finding as to prudency. The PUCT aHirmed that the Unamortized I'ro/cci Cancellation Costs. Duriag ultimate rate trcatment of such amounts would bc 1984, the Company began amortiring the cost of subject to future demonstration by the Company the River Bend Unit 2 cancellation applicable to of the prudency of such costs.
Its Texas retall operations oser 15 years. In 1989, On July 29.1988. the Company flied an appeal of the Company began amortlzing the cost of the the May 16,1988 rate order in a state district River Bend Unit 2 cancellation app lcable to the court. Other partir ; have also appealed the order, Loulslana retall jurisdiction oser 10 > cars. The Company's appeal in(luded. among other Rec!assi/lcatlon of financlaf Statements. In things, a request that the $1.4 billion of Rher Send s March 1990, the Company reclassified plant investment whkh was set aside wiih no find-
$81,303.000, which had been recorded as a reduc- ing as to prudency be included in rate base, as tion to " Utility and Other Plant. at original cost.' well as a request that approsimately $27.000.000 i
35
w>
g 6'
3 Financial Informatiott in additional rate tellel be grantcd t he Com- On October 12, 1990 heannys on the rate pany s appeal also cosets the imprudent) disal- request filed on Manh 21 INM were tes'arted lowance related to River Bend. Pending resolution belote the ITCI'. Portions of the late request that of this c.ase, the Company has not recognized deal with the Rher Bend items piesiously pimed the alleged imp adency disallowance, ho assut- in abeyance were culuded from these heatings.
ante can be ghen as to the timing or outcome of On December 11.19u0. the Compan) impie<
the court appeals. mented an approximate $b5.009 000 base late ,
On March 21.1989, the Company filed with the inctease subject to refund. During Dn emt cr 1990, PUCT and lesas municipalities a request (Dochet the Company tollected $152.000 of resenue net No. 8702) for a first ) car rate increase of of refonti rescrses, sublect to refund. $cttlement
$67,500.000, net of fuel icfunds. The request also negotiations beqan on l'ebruar) 13.19?! and base ptovides for the Tesas ictall share of the SI A continued with satious interseninq parties.
billloa of Rher Bend linestment preslously plac ed Pending resolution of various appellate prorced-in abeyance to be placed in imentory rathet than s rate base, or alternath cly in rate base through a ing'es.
p, tously thedisallowed Colnpanyportion has madeof River no write Bend off for the plant phaseda plan- costs or the picsiously abe)ed Rher Berni plant Various parties opposing the Company's rate costs and delened Rher Bend (osts dist.ussed increase request filed motions seching to heep the at ose.
PUCT from hearing the prudency issue of the pre- On f ebruar) 5.1991, the state distritt t ourt hear-vlously abc)cd Rher Bend construction costs. ing the appeal of the i UC1 s May Itt 198d rate On September 5,1989, the PUCT began hearings oroer denied the Company s request for an imme-on certain issues of the March 21,1689 rate diate remand and stated that the appealed tequest. l'UCT order was a flnal determination on the issue of prudency of the $1 A billion of Rher i end that it On September 20,1989, the Court of Chil did not allow in rate base.1he coutt also stated Appeals of the Third Supreme Judicial District of that the appeal will proceed to a final tesolution on the State of Texas rescrsed a decision of the 250th all issues before the (outt.
District Court of Travis County, Tesas and dis-solved a permanent injunction issued July 10. f oulsl.ma Appeal of Der ember 15 1987IUte On/ci. On October 11, 1989, the state district 1989, by that district court which would hase court ruling on the Compan) s appeal of the Li'5C s presented the PUCT from holding hearings on the December 15.1987 rate order upheld the LPSC prudency of the $1 A billion of Riser tiend imest.
ment presiously placed in abeyance.
finding that the Company was imprudent to hate restarted construction of Rher Bend and allirtued Certain parties requested emergency rellef from the Li'SC disallowance from rate base of $1 A bil-the Supreme Court of the State of Tesas with lion of Rher Bend plant imestment (approsi-respect to the consideration by the PUCT of the mately $460.000.000, net ol au umulated depreci-prudency of River Bend costs. On September 12, ation and related tas benefits on a Loulslana 1990, the Texas Supreme Court upheld the dis- retailjurisdittlon basis, as of December 31.1990).
tdct court decision holding that the prudence of the The state district court ordered the L l'5C to itnple-costs purported to be held in abeyance by the ment a deregulated asset plan preslously pro-PUCT in its May 16,1988 order could not be rellti- posed by the LPSC for the 51 A billion of Rhet gated in the Company's current rate case, Bend plant imestment. The plan would allow the Docket No. 8702. Company to sell power from the deregulated por-tion of Rhcr tiend to customers or, wIth LISC -
The Texas Supreme Court's decision stated that approval. off system. One element of the plan as all issues relating to the merits of the original proposed by the Il'$C was a prosision that sel-order of the PUCT, including the prudence of all Rher Bend related costs, remain to be addressed tiernents by the Company w,th i other regulators ,
inore las table to ratepaycis with respect to Rher in a pending district court appeal filed by the Bend costs would entitic the Li $C to revisc the Company on July 29,1988, and that the Com. plan to obtain the incrcinental benefits. The state pany s burden in such appeal is to show that the district court also attirmed the LP5C finding that PUCT's order was not supported by substantial the $1.6 billion of Riser Bend costs was prudent.
Oevidence. The Texas Supreme Court s decision does not in and of itself constitute a disallowance Bad gn wh Li'SC floding. the state distritt court conbrmed the phase in plan awarded the of the costs in question. That issue remains before the distdct court. The Company flied a Company on f'chruary la.1988. by another c ourt.
motion for rehearing with the Texas Supreme in December 1989. an appeal of the October 11.
Court, which was rejected, and is pursuing an 1989 state district court order was filed by the 3ppeal to 'he U.S. Supreme Court. Louisiana Attorney General with the louisiana 36
Gulf States Utilities Co.
Supreme Coutt. In January 1990. both the Com- On April 27 1989 the ( ompany hh d an appeal of pany and the ll'5C appealed sarious pottions the 11'50 s i ctitual) 2H 1989 rate order whic h of the state distikt court order to the 1 ouisiana ( ontained a disallowanc e of $30M3 000 from rate
$upreme Court, lhe Company has not sc(orded tuse of defcord reu out requhement Out the an) cflect of the Octot,cr 11. MMO state distt i (t C ot tipa n) tu oidt d for the period Det ember Ib court order pct 1 ding resolution of the appeals. T he 1987 thtough i ebtuary 1H 19Ne Sut h appeal did t.ouisiana Sup. cme Cotnt hein heartnas on the act addlew m ether aspects of the Mtc ordet.
- Incrits of the appeals of the s arto!.s parties on h uding resolution of thN (ase the ( ompan, inns Oc tober 23.1990 and Deumber 4.1990 not tc< 03nbed 'hc disaHonant e of Oie defened resenue requirement t hetc (an be ne assulara c No assurance can be ghen as to the timinq of as to the tindig m outt orne of this appeal, actions of the Loulslana Supreme Court. Il the dis-allowance is upheld and the dercquiated asset hmMui.f Mn M M.m N Qm W nt W) O.n the ( otnpany filed for the third plan is not afttrmed, a w11te-of! of the disallowed insestment allocable to the Loulslana retail juris- *E i" #'" W "##U" * ".* W D "
diction could be requited Cunent analysis trul! 0" ' "'u ) 1I mankd Ow (ates that lf the deregulated asset plan het omes
- h* } d *'" #
final as issued, the Company would be required to "" I' ' # "#
- discontinue application of St AS No. 71 to the C M ** "#" U " b "WIh '
Loulslana retail deregulated portion of the Rher l.I.SL onici imludes. among other things the Bend Insestment. A write down of the 1 oulslana dueWMed md $m whk h m ptedo@ pro- '
deregulated portion of Rher Bend would be posed by the I l'5C in Nmember 19HH . and requhed if the deregulated asset plan becomes ordned ta a state distik t t ourt on O(tober 11.
19811W Company and othet parties base also final as issued and if the deregulated portion of appealed unous aspec ts of Ods orda to the i oul-Rher Bend is detcrinined to be permanenti) siana Supreme Court impalted. Management belleses that any impairment currently esisting in the duegulated I"H hl' Wd l'hd'C IN I1M I"WIh AfCP Oh asset plan In its cunent form is temporat). A(coni. October 2E 1990, the Company hird for a fourth Ingly. the Company has made no write-down to step rate increase of $29 988 000 with the I.lM ulated asset imestment.110weser, f uture pc founh Wp im re.N tequest is part of the the dereg'will be required to determine if any f ebruary 1H 1988 (ourt ordered phase m plan. f ot analysis impairment esists and " such impahment is imrp dnclopments in the I ouisiana rate pro-permanent and requhos a write-down to the deren- <C '"9 $" D"E I N ulated asset imcstment in the esent the Bho!csde .hulsdh flon. Dulinn .hme through deregulated asset plan is issued in its cuttent August 19H9. the Cornpan) and a majorits of its form. l'ermanent impalement would result in a net wholesale customers leat hed agirements whk h of tax write-down. for financial icporting put. became cfin the at utious times through Apdl poses, which could range from iclo to 1990, that prosided tot rates that were lower
$250.000.000. Howeser, no assurante can be qh en than the then esisting approsed rates for the Com that a larger wTite off could not be requhed. lhe pany's wholesale cln ttit sen k e and. in some factors allecting the possible write down include ( ases,10hered the enciq) and power requucments projections of Khcr Bend's future operating costs. from those preuously (ontracted for.
the unit s ethciency and availability, and the Accountin[1 Den elopments future mathet for encig) over the remaining life of the unit. SI A5 Ao 90 in Decembet 19Hh the f inam ial Act ounting StandaIds Board d A$blissuul St As loulslana. l'hase in I'lan Sc(ond 5fcp On No. 90 Regulated ! nterprises - A(< ounting for l'ebruary 28. 1989, the Li'5C authoitted a Abandonments and Disallowam es of I'lant Costs.
138.000.000 rate increase as the second step in the whic h amends catain ac counting standards for Company s court ordered 10-) car phase in plan. rate regulated enterprises. Sf'A5 No. 90 speciNes The court ordered phase-in plan provides for a the anounting for the effn t of disallowanc es of total of four annual increases, sub]cct to Li'$C (osts of newl3 completed plants and plant review, and level rates for sls ) cats thereaftet. The abandonments Additionally. it requires the Corm LP5C order, among other things. modified certain pan) to reduce its imestinent in the abandoned aspects of earlier decisions by resersing the prior River Bend Unit 2 to an amount equal to the denial of recoscry of thc Company s imestment present ulue of the probable future retenues in the cancelled Rher Dend Unit 2, reduced the espected ta be provided user the amortitation appropriate level of return on common equit) penod authori/cd by regulators. In subsequent from the 14 percent ordered by the court to 13 petiods the Company is ret ognl/ing intotest percent. and made other adjustments. income to the estent of the ddictent e between 37
__ E
Financial Information atuottiration allowed for regulator) purposes and Pending resolution of the appeals of the the reduced amortization tetorded for finatulal Det etnbet 15.1987 l l'5C tale order arW the s esolu-reporth13 purposes.
tion of the appeals of the October 11.1989 I oul-siana state distik t tourt ordet the Comisiny has 1989 Duting 1989. the Compan) toduc ed its MMH dMud p imestment in Rite) Bern! Unit . by $23 853.000 tion of Rher Bend. whk h at Det ember 31.1990.
before teleted income tax benefits of 58 965.000 W N- mM WOWO N nd of for the Louislanji tetall junsdiction atut steam idated intome taxes assumitut the appHcation of .
departnient, This write <10wn tesuheji f tom the ,
STAS No. 71 is not discontinued. fendmq tesolu+
february 28.1989 Il'$C tate ordet wnKh allowed Hon of me appeals of the Me Ib 1988 PUCT rate the Company to recoset its imestment in Rher oh (W Cogam has mde no wdk OH tor Betul Unit 2 but dkl not allow J tetutn on the the disallowed pottion of Rhet Betul whkh at imestmerit. Accordingly. this write-down was tone Det ember 31. IMHL would be apprositnately '
puted in actotdance with $f A5 No. 90 ar 1 was WO 000 000 nd of rdMed in(otne taxes See not letorded as a tumulathe ettett of an at(ount lesas - ICite Mattets for additiorhil possible write-ing change. offs of Rher Bend plant imestment which wete 1986. 1he following table illustrates 5fA5 No. presiously placed in abeyante.
90 s tumulathe ettett of the Rhet Bend l' nit 2 6N DH. In December 1983 Oie F ASB plant writetlown for the T exas retail amt wholesale issued N AS M 101, Regulated t;ntetplises -
Jutisdictions recorded in 198th Ac(ounting for the Discontinuation of Application of o,.m d $ .u.s ! A5B Statement No. 71.
St A5 ho 101 spetifies how an enterprise that noprth Abanaonn ont - Khn bend (cases to incet the (titena for appHcation of St AS pmt 2 Trus teuiijansacunn No 71, Attounting for the 1:lfects of Certain Return disanoont e - du ouna d va a 77 1 vpes of Requiation to au or part of its operations sciated inc ome taus ^% should tcpod that esent in its nencial purpose tut d .
- dN ouNCd / e b4 ma -em aus An ente,phses operanons tan cease to meet i fict t of Rher fu nd t ntt 2 punt wri!r those (titella for ValiouN Icasons, includlMQ deregu-down Undet st As No 9U 614 3'J' latbn a (Mnge it) the inethod of regulatiori of a f.arnings per ocraac short of (nrmT1on ( harige it) the (onipetithe enthonttient for the st(wh outstanding tirrort tbc et'rus of ggggp,g,s toqulated sch N es of pr odul t s.
st' As No 90 t i >
qan s IN IcaWo. an entMph MW opd*
l ou por moraae shate of c ommon (toih ttin t of 5t' AS ho 90 4 136 allons cease to nicCl those ( titella should dIslotP t arnina pn enNr shme of inmmnn tinue appikation of $R$ No. 71 and icport that stw k outstandw; 5 37 dis ( onlinuation in climinating fiom its balante shcot the elloc ts of any actions of regulators that 51 A5 No. 90 l'io im ma IJn Is Ihe followinl had been retognized as assets and liabilities put-table details the pro lot ma effec ts had the C om' suant to Sf A5 No 71 but whit h would not hate pany rettoat tively testated the St A% ho. 90 ( tietts been act ognited as assets and liabilities by entet-for the Tesas tetaH and wholesale juti .dic tion pnses in gencial, bach to 19M. the yeat Rh et Bend l' nit 2 was , g g, abandoned, as opposed to tet otding the CHetts g g j g tumulatacly as detailed abose: hN1 M h %m % W k W" toqenerated ele (t:kity, to industrial tustomers SS"U7Jj;,g b(atM ulWent to t ouistath) $tation t;lectric ,
powel tequhemcw of these c ustomers m eu ess inc ome apphtaNe to (nmmon MW L ..
CtfludinQ thC (DO19 si!!)C f rta l% Of sI ks 1
I O ' !(
~o 90 tu un the Compan) with power from the Compan) s s)s-Into t st inc ome inct of E t emt imCs-teln powet gibt, in the past. ( ontractual attaitqc-ments with the steam (ustomers (aHed for that not na, im ome oppb oNe tu ( one i i Md hum k pd to k NHed at Ides set in tate pior cedings by the If5C. As a result no imma carnms pcr metre shav of of this atrangement the Cotopany has previously
( nmnno sim k oumantna t""' ,
ar ounted for the steam department in actor-en tracedmary item i q no toma uminas per new shrt of The temaininq stcain tostomer repla(cd a sub-(ommon hh ad!5MnD i % "'
MM Md d W iW% PMded 38
Gulf Staates Utilitics Co.
-. _ ~._ _.
from the Company's stid with power from an addi- recording a deferted resenue icquirement repir-tional cogenerated facility which was completed senting those Rher Ucod to$.ts whic h hase been and became operational in June 1990.
delcued for future recoser).
Durmg the fourth quarter of 1989, thc Company discontinued regulatory accounting principles for ih'r Dend Cost Dc/ctralt l'utsuant to accounb .
the steam department and wrote-otl the defcned ing orders recched In 1986 from the ifSC md the revenue requirenient and account ng order deler. l'UCT, the Compan) deferted te(ognition, for .'
rals and made other adjustmentt. The .vrite-off floantialicporting purposes, of the retal. pottlon of l
was recorded as mi estraordinary item and the operatinh costs associated with Rher Hend amounted 20 $34A31.000 before the IclJted and (O;.tS of pulchasing capacit) hom CITCO's income tan benefits of $12.527,000.
portion of the unit incuned subsequent to the unit's Wnottsste JerusDicuom. As discussed preslously commercial in4ervice date and accrued carrying in Wholcsale Jurisdiction - Kate Matters, the charges upon the retail portion of both the cash Company reached agreements whh a majority of portion of the deferrals and the imestment in the its wholesale customers khich, among other things- unit not induded in the Company s f ate base, lowered the contracted amount of power and thc The defeital of costs and actrual of canying rates for such power. Upon approval by thc TLRC. *, mo@cd Wh River Bend e WMakd of these agreements in the third quarter of 1989, chat y'he the Company discontinued regulator) accounting in t 1.oulslana ictall Jun.s diction on principles for the wholesalc jurisdiction, wrote oft December 15, 1987. upon receipt of the the deferred revenue requirement previously permanent rate decision and terminated in the recorded by the Company with respect to the Texas retailjurisdiction on July 23,1988. the eticc-phase In plan for its wholesale customers. and the date of rates authorized by the PUC1 rate n.ade other adjustments. The kTite-off wJs older of May 16,1988.
recorded as an estraordinary item and amounted to $65,502,000 before the related income tas Balances of arnounts delened and at trued under benefits of $28,502,000, accounting orders issued by regulators, net of ,
Dc/cned Neocnue Hcquirements - Hlver Send amonization of such amounts and deferred leve
/hase-in 1%:n, in accordance with the terms of the nue requirements related to o "hase in plan phase in plan authorlied by the court in Loul- recorded for finantial icporting ,mtposes net of slana, and adopted by the Ll'5C. the Company is deferred Rher Bend financing costs ate as follows changet for the
)eatInded Dec canbet 31,1990 llalante at Defrered A rno t + lialance at Det etnt.et 31, hesenue (1- Deternbet 31.
1989 Hequirement s ation 1990 Dr M MMr D Kr\ r N1, r Rf QUlktMt N1% -
t'it A%r 19 f*l 49
- 1. outstand tetail jurNhi tion -
$17 7 440 $41.51 % v- $ 314 4 M Al( oDN11NG oRDt R Dr f! RR Al $
Tc tan retdal jurNht unn Defetred Rnt f I)cnd capsmm and tef ying t ha'uf t h 9M - -
,Wi 4M AmortildtIDO Di d t umuldif fi (1PfrDUI Rattf Ut"fM1 ((Mth if $N' -
s 4 %f ,t i ()l ]$0i LOpl%4dMd ff tdil jutN1Kluth i ;
Deltf rro Ract herA eteensr= dmt tart):m Owges M lO 3 7 *, - --
4aWs Amofiitation of d(( umbl.attd rig ,terd Rbtf firHd tobt% 41% V ar,i 440 034; ijj 3 44),
(f79 V.j --
i4% LMn f34 7(IM A
DMLKRt D Ru rR Df ND coMS 9%7 %t 4131% 144 h54) 4%4 l(o Dr f f'RRr0 RNt R Bf SD LS ASCISO (051%
Nri of A*10Niil4TacN .0/tm4- - - - -
ai n/ h 179 M I 57M4% $41 $ 15 Stil M1) 5714 Sit 1he defetted income ta(es telated to the amounts detailed above at December 31,1990 and 1989 of $247.565,000 and $242.839,000i respec-tively, are included in ' Deferred Credits and Other Liabilities - Accumulated defened income tases" on the Consolidated Balance Sheet.
39
.,.______..________..__.r___--_-...-.a_-.__.___.
y ?- , y gr 0 0 c ~ - .
h54nancial In. formation Recotant/ of Costs - Amorfinition of Ac < mnu lhe (ompon(nts of federal inc ome taus are as.
lated Dc/ cried Mhc Send Costs lhe Company follow s; i< m itm9 imm was ordeted b) the LP5C. as nmt of the Decembo 15,1987 tale ordet, to amortite the dn umuuncto deletted costs atul accrued cat t)inr1 charges *"'*'.'."m'*,it,,,
- t. t enmn ei , m , i telated to the accounting older oset a 10 > car no , h ' a u 3 ev$ $
period in July 19th the Company began amottit- wo u n w ,, , , -m, %,
o 3 ' '>
ing user a 4 h ear pedod approximately in<
'o >
5182,000 000 of defeited costs atul auued carry- vo ou t .m on . s s ..
$k'5%i k d id' l l e d I 8 h\' /k$k' l k. l i b bbok 6
'm a M won i m '
- Bend ruled prudent tw the PUCT In act of dance with
- m n oia aom e n- i a 4 m e g q- ygg g jg gp g 7g j l ,e 9 4 ,_ ,y y g g) Jjg. 7 g (g jg ,
6 s .
judscliction deferred River Bend costs which are w no o; ,x .i % on . ,%m - m s.. -
o w NM onte
- not being amottlied pending resolution of the " o,o
+ ci o",mr ,.m % ,, n,
.- - ,i m a@ cal of the May 10.1988 rate order is apptoxF m,, ,m a i u u.;m,~~ - iri
- ' c" WS t'm i a m"' '
match 5187 000.000.
- m u. u m , i m o ,,, a i .
- 4. Fedetal Income Taxes 1", '" " " ' ,
17 , %,
w~~u< '
The bnosisions lot lederal income taxes (benchts) um ,4it ,a Ms mi s* i i ,_
were different from the amounts computed b) rm.o. mom. . 5 4 i. i aim 4 iin appi)ing the statutory federal income tat tale to net income tloss) before federal income lases $.7j, p ,""! " " ' * "" '" y ,w a4 , .,m lhe reasons for these differences arc as follows mo n u . w. enw - e. -
- #*""""""" '"' " I "#
1990 1989 1988 Siinii Jfi 'M IM k f kb b t ! 'O' (In thoutelldt 0 i oi ot o ,fo abant e i m t?'; ?AN>
e t(t pt pf t(f fit %) aM hwh n m < $ o' t W i < M s
.%' i
<t t W omt . m !g'or t (1,vy,:tto sst.c. ! inyun ICt H. fill W 04'tf 13 4 f s k .ti_J Idll %+"lI44i IIf4 IN /
'h ,M P y u t Idt( D\ MA Si ~S
, , gq m nonem u.n a,o,nm at Camtm) tag rate ?fut 17 k > *s r Ol hth th4 t Odw iM4Ki M !ItllkIIf{ lid ciclN k% e %Isk oI wIlif. It defcIIed (<i\cs
- e. weuin<cwnm, he not been pimided M dicMote, hase not t wen s no rew been teto\ cted through lates T he (umulatise
!Ct,3$f " '
en, res .s4 amount of timing ditteten(es fot whh h no deferred nons ocun va tu e e taxes h.nc been punided was apptosimately i ss t s;icru d fm
. - $86 DOM 00 4 Im adwr 31, 19M 1 M u s
%o omn ed oco.n , anon effec ts of the Compan) s lederal la A low (att)fot-I I A4 i pop. n eu s nun am en rwam dcferred taxes. tncestment ta A (redit cainforwalds ha\c not been Ic(OHjed foi booh pufposes. At i e Morm d of Dec e mber 31.1990. for tax purposes, the Com-nu%non sons,.uam an w "
t of v a a' Nr' ,, N hmt federal tas low (art) forum A of geosF k n4 m .w of % nw., m mately v970.000 000 and itnestment tas (redit
< ieto + M. A 444 4 IW imi (atQ f om'MM d apokMt@ $ 1M OOO OOO.
ma now lin rio.
.Ibese will IJe used to teduCe Itle(nne ta A paylncllts
%c te to,a ,m ome win
- bmem s . 4aat4 $ '"?), b ' ais .Ill futuf e )cdis dnd, I! tiot used. w.li l e \pire thlough ten m n M w m ome u.
the yrat 2004.
U'M '"
tMr ?*It in De(ember 19H7. the ! ASB iwued M A5 No. 96, Accounting for income laxes which signihtanti) c hanges acc ounting for in(ome lases and super-sedes almost all eslsting authoritathe ac counting literatut e on act ounting f or income tau s. While the statement retains the c Aisting requhement to retold delerted taxes for transm tions that are tcpotted in dilletent ) eats for hnancial repotting and tax purposes it teuses the c omputation of deferred income takes so that the amount of deferred income taxes on the balante sheet is arijust(d whencier tas rates os other protisions of 40
4.
_ __ Gallf States Utilities Co.
the locome tas law are c hanged.- Required adop- T he au umulated bencht obilgation is the present tion of $ RAS No. 90 has been repeatedly delayed utlue of future pension tienefit payments mal is by the l'ASit as possible revisions to STA$ No. 96 based on the plan's benefit fonnulas without (on-are being considered. Adoption of $ RAS No. 96 sidering espected futm e s.tta r) in( t easet is currently tequired in 1992, and when adopted it A%umptions used to deterinine act pen <, ion < ost is expected to hase a signincant impact on the are as follows:
Company's balance of defetted intome tases IMO N I"88
, through reclanification3. Pending final modihca- (HW'unt we 7m m nm
} tion of STA5 No,96. the impact on the Company s Tc7 IN "" * "' "" "" 7m ; so ;w Consolldated Statement of locome for future wrage futwo beim kid W itw o 10 r, t o o to scars cannot be deletmined at this time.
At December 31,1990. M.1 perc ent of plan
- 5. Hetircinent Plan assets were imested in equit) setunties. 29 0 percent in bonds, and b.3 peu ent in cash of cash The Company s pension provision lot the ) cars equisalents.
ended December 31,1990. 4989. and 1988 was
$1025.000, $2,357,000, and $091.000, respec. In addition to the net pension c ost detailed thcly. Of such amounts, $2.691000, 52.107.000, abme, the unnpany teunded 50M.000 0f espense and 5600.000, respecth cly, were charged to oiated to the 1980 cally tethement plan for the income with the bal6nce of such costs for each ) car ended December 31 1990, in auordante period charged to construttlon and other with tegulatory treatment of this expense.
accounts.
- 6. Abandonntent of Subsidlary The components of the pension provision for =- t.lgnite Leases 1990,1989, and 1938, are summariicd as follows.
1990 1909 19an Wulbus acquhed the rights to lignite resents in
'dre thounands) the snid 1970 s as fuel reserves for the Company s scryke tost 5 9 %O $ 7 835 li 6 742 ptopo$ed ligflitt <}cnCtaling units. Upon dcIcital intercit tom on pro,}ctted of construction of the p!oposed lignite unIlh.
t>rnefit ot,ligadon 14.224 12 676 11 0 %
Ac al srturn on plan Varlbus retained Its Investmerit in thC llgflite g 373 p,,,3 g lesetscs in otder to marhet them In October 1989.
Unrecogntied net ualo Yd'II'us deter mined all ellotts to mat het the lignite 00%) (2s $20) 21u31 11tn2 teNerses had failed and therciore, abandoned ArnortlJation or net {}ain (1.2121 (74N (1.2701 the leases and wtote off its 519.183 000 im est-Amorttiahon or ptiot terrWe togt 1,385 lin5 730 gpng lg gj gpg y
-- Amottliadon of net transluon a%Ct (2.3071 Q A87) {2.387i net pension (ou - $ 3 cas 5 23s? 5 wi The obligallons for plan benefits and the amount recognized in the Company's Consolidated lial-ante Sheet at December 31,1990,1989,and 1988, are seconciled as follows:
1990 wn9 s ema Attuartal hrsent Velut el On thousandt) twrwth otihaationn Act umuhHed lichtti OtthG ell'On IN h4ng Weltd ITHtllt% Of $I70 ll1 S tB tW.1, and $ 1 D !?S . $ 174 m $1%OD $1%179 t'rojected lenef4 Ol,lqKiOq 0220h2N $ 1% 77N 1. l t 7 S* n -
Plan autta at fait ma4et s040 JM C t N 810 .t?*%
~ flan putta in turn of A
= pf 0jftttd (40ffit OlshgdHO4 D43 (3 D4D NW8 0 3 UntTrogniMd fwl pin fI\417t 60 j V./ s . gh /Mi
- Umrcognized twt autts, being -
amonilN1 OtrF 1*t ) t'8 '1 (D 074) 12 f: hJ l 4 2 et Mel Ut1rft OgnitCd priOf $tfib t (O%t _ }" 717 25 378 j 's ( di1L Etaidme of Arrucct penWn awt Watehtyi 9 14 U l , $ :1 M! v 1 ist i
/} }
.__--_--------------------------------------------l----------------------------
mJ
$1 L u ___ _ Fitiaticial
_ _ _ Infortitatiott
- 7. Jointly Owncti l'acilities As of Decembei bl,1990. the Company owned undhided interests in thice jointly owned elet trk generating latilitics as detailed below idollats in Hiousandu Higer Hend Ito) S. Nelson tilat Cajun 2 L' ult I l' nit 6 l' nit 3 Compan) Shaic of lmestments- ,
I'lant in v:tytc e 13 07I < W t '60$ 4h 1 1219 150 A(cumulated depreciation 345 307 10b 636 42.332 lotal plant tapability 930 Mn %0 MW 540 MW Puel soun c Nm leaf ( Udl 0 0dl Ownership shaic 7tn 70 % 42%
1he (Ompany $ shaic of operations ana mamtenam e ripenw m i me t.iwetn the (onwo) aol the b"tu Won to %rf n.lM(d (O thf j0lfitI)'PWhCd UDlt4 h hf jud0d in Optf atlhg th O 1 d'd NNU1 UHil b f tpCfh0% stC NO!C }) IDI IMIOf fhalNill if!dtlHQ (O bu)td b (1 Leases parthinate in benefit plans whk h pioude an oppor-tunity to obtain tomoton shcies of the Compan).
1hc Company has esisting agreements lot the At De(ember 31. 1990. the Coinpany had leasing of cottain vehkles. Loal ignl tais and other resen ed 5,562 503 shares of (onunon sto(h to equipment, buildingt and nuclear fuel. lcase be issued in (unut etion with its DKil' and employee charges werc $65.984.000 560 619.000, and benefit plans lieginning in June 1987, the Com-
$75,390.000 for the hears ended ()cccmber 31, pany has acquited the 1) KIP aad emplo)ce bene-1990.1989, and 1988. tespec th cly. Of such lit plan shares of common sto(him the open marhet amounts, 565.114.000, 560.256 000, and rathet than oficting unissued shates. whkh 574,431 000, respetth cl), were thatgcd to inc ome- would base a diluthe cite (t on catnico pet share f uture minirnum lease payments under non. and booh value.
(ancellable capital and operating leases for cath of At the Company s option. the Attitles ploside the nest the ) cars and in the agqregate at Out aH or part of its preferred and preference stoch December 31, 1990, are estimated to be (in may be redectned at stated prices Certain issues thousands): are subject to restik tions in the Attkles whic h 1991 4 64.009 prohibit iedemption foi a petiod of time, dhetti) or
~gg ggg indirettly out of the proteeds of or in anticipation 3 g7' of bottowings or issuante of additional stot h of 1993 62,020 equal or prior rank hasing a lowet interest (ost or 1994 52.158 dhidend late. See athlitional testric hons undet 1995 17 h36 the bank (tedit agreement in Note 12, Remaining > cats 155.242 At December 31. 1990, the Compan) had
$409,360 authorized 10.000.000 shares of pteferred stoch without par salue (none issued) and authorized Tbc Company is leasing the Lewis Ctech generat- 6.000.000 shines of prefened sloth $100 par Ing station from its wholly owned tonsolidated value (4 617,568 issued). l_ imitations based on the subsidiar), GSONl. tatio of aftet tas carnings to llsed (harges and i preferred dicidends are linposed by the Attirles
- 9. Capital Stock anti Itetaincti upon the issuance of additional pretened stoth.
L'.a rillnSS Ilased upon the results of opeiations for the .
Scar ended Det ember 31,1990. and existing tir-
't he C.ompany otters its common, preference, and tumstantes the Compans is unable to issue any prefened shareholders the oppottunity to reinvest additional pr(ferted stocli.
their dividends and to make additional cash pa)-
ments to acquhe shares of the Compan7s com- Certain limitations on the payment of cash dhi-mon stoch through its Dividend Reimestment and dends on common stoth arc (ontained in the Stoch Purchase I'lan (LRIP). (See Note 1 for Artkles. Indentures, loan agreements, and appil.
information on the omission of common. pre- (able state and federal law. Undet esisting feit ed. and prefer ence stoch dhidends since 1986.) limitations. as discussed in holes 1 and 12. the The Company also ot!crs all emplo)ces meeting Compau) may not pay diddends on stu b stoch. If designated service requirements the option to suc h restrictions did not exist, the most testricthe 42
t Gull States Utilities Co.
Smitation at December 31, 1930, as to the pros ule lot the annual rcdemption of shates amcunt of su(*) dividends which rnight be cald. naryinq in amount hum 3 percent to 5 percent of was contoined l'1 the Trust indenture related to the the number of shatcs oliqically issued) at $100 7%% Comertible Debentures duc 5eptember 1 pel share plus JM) di idetMit i'l artcals on such 1992. Based on such limitation, the totamcJ stot h (see Note 1) carnings available for payment of dhidends as of December 31 PW). amounted to $524.000.000. As of Dec embet 31,1990 the Company has The applicable limitation and the Company s failed te satisfy > 17.327,000 of pit fened stoch sinic ability to pay dhidends would be adversely inq fund requhements (see Note I lot the conse af!ccted, and possibl) foreclosed for an quentes of stn h fallute).
Indelet minate pctiod, by wtite-offs and wTite downs relating to Rher Bend which may be required as Dunnq 10% the Company purr hased in the described in hotes 1 and 3. I'refetted and prefen open in.uhet. shates of the applic able series of ence dividend requirements. as w ell as preIct red prefetted stoch in cuess of the arnount needed to stoch sinhing fund scquitements. hase pilotity oser NatlNI) the 1986 sinhing fund requhement. At the pa>tnent of cash dividends on common stock. Deccinber 31.1%0. assuming that the additional l'a) ment of dhidends on prelctence stoch is sub- "" U*' haw dudng M .uc ud to saWy ordinate to payment of dividends on picletted futwe MnM.nq fund n'quknwnh ininhuum stock and pteletted stoc k sinhing fund obligations tWmption requhernents amount to $11.066.700 lherc are no limitations in the Atticles on the lot Mt. and V M Um 20 im cam of On yean issuance of preference stock. hmn M2 Onough M tapecthely, cuiushe of the 517.32 7.000 unsatisfied provision dis-
- 10. I' referred Stock Subject to cussed ahose, see Notes I and 12 for ilmitations
- _ M. a tid a_t o ry_R. e d e mptio n on paynwnt of disidends on and purchases of prefened stoch. l'ayment of dhidends tuay also The setics of ptcierred stoch subject to manda- be litnited by possible write olts relating to River tory f edemption is entitled to sinhing funds whkh Bend and applic able law. ,
l't._ LOlig Term Debt mortgage reguliements in past yests and plans to meet (utrent and future requiremcnts by The Company's Mortgage Indenture contains c e rtih inq' 'asailable net additions to the trustee.
sinking fund prosisjons which requite, generally, that the Company make annual cash deposits Cet1ain series of the Compan) s first mortgage equal to 1.2 percent of the gtcatcst aggtegate bonds and pollution control and industilal principal amount of first mortgage bonds development bonds require cash sinking funds.
Outstanding or, in lieu thereof, to apply propert) Sinhing fund tequiremcnts along with long-term additions or reacquited first mortgage bonds foi debt matutities. for each of tbc nest fhe years that purpose. The Company has satisfied the are detailed below tin thousandsh sinidnn f und long lerin Debt Matuettles Requirement
- I tr at Delested sdtt%0rd It) goggggqg gpgghggg ghpg gjend l'r ope rty tionds and credit construc tion cash 4dditions De be nt ur es Aq ectnent Comnutane nt s 1991 148 570 517,724 $ 1H.750 523 1 333 $ 12.429 1992 8.995 17.520 114,003 - -
1993 425 17,520 8,5H0 - -
1994 425 16,320 100.000 - -
1995 425 16.320 - - -
The Company's Mortgage Indenture contalas an of first mortgage bonds as of December 31.1990, interest coscrage cosenant which limits the to replace first mortgage bonds previously retired.
amount of first mortgage bonds which the Com' Hevotelnq ( redit Acreement. At December 31, pany may issue. Based upon the results of opera- W90. the amount oOtstandinq under the Corn-tions for the 3 car ended Dec ember 31,1990, arid csisting circumstances, the Compan) belicscs it pant s tes olvinq ( t edit agt cement consisted of does not have sufficient coserage to issue addi'
$13i3HOOO hearing an interest rate of 8%
tional first monqage bonds. The Company penent and $100.000,000 at 8% percent.
believes it couki issue approximately $33.000 000 M"Cd 6"" &"d G"$U"C UO" (,""""IDHCHh Certain post-completion rosts relating to the con-struction of Rhet Bend remain unpaid to the 43 1
g -
1 it _ _ _ _ _
Financial Information generaicontractoi. As of Decembei 31,1990, the Compan; does not ici,cw or repnce the esphing Company's shaic of such costs atnounted to letters of (tedit, the bonds must bt iedeemed
$12 A29,000. T he Company and Ct l'CO began unless rematheted No nsutante can be gisen that making monthly installments of $2.000 000 on the Cotupany c ould sut tesshdh t egodate an July 1,1988. and will continue until the principal estension to of the tepla(c'm nt of the mistinq amount due and tehtted accrued Interest is paid. letters of t ndit or retnamet suc h bonds.
American Hwikipal tsond A%urance Corpntathn 12. Shortd.ortti Lilies of Credit (ANUAct 1he Company has agtcennnts with AMDAC whkh guarantee the pgyment of principal As of Dec embei 31.1990. the Company had and Interest on stb,731000 of pollution control icements with banks and t anking institutions revenue bonds. aq'hlth w pimided for short-tetin lines of credit total-In accordance with suth ajreements, at ing $110 400 000 of wh'ch $100 000.000 is col-December 31,1909, the Company had 1%ued notes lateralized as described below. There can be no assutance that the temaining uncollaterallied payabic to AMBAC, whkh weic due in Apill 19?o. sounts f sh neun funds ni y be auessed at On June 20,1990. the Company and AMBAC this time, ed will remain asaltable, of that new finallred an amendment to the esisting agreements munn (an be arranged. Interest rates awo$ ated l which estend the maturity dates of the notes to with these lines are based on the prime rate. Lom-Ap-il 30.1993. The amcAdment also required the nuunent fees n the conatcrallied line of credit Company to plate $12.000,000 picslously c M of 1 penent of Um mnonut of asallable depositco into esctow, plus accrued interest and an tredit. In lieu of commitment fees on the encol-additional $8,000.000, into a l'er manent indem, tallied lines, ccitain banks requhe a nity Rcscr c which will be relcased to the Com, nontestrkted (ash balante be maintained equal to pany when the pollution control revenue bonds 10 penent of the munlunent are fully retired. Additionally, the amendment requires that unless certain financial tests are met. Included in the totai $hort tetin lines of (tedit is a the Company will deposit an additional 5100 000.000 banh credit agreement whkh was
$ 1,500,000 a year in an indemnity Resene to be dne to esplic on Man h 1,1991, howeser. effecthe released to the Company alter such financial Manh 1,1991 the bank credit agtcement was tests are met or when the pollution controlicsenue estended to Ichruary 28.1992, lhe shoit term bonds are retired. banh credit agreement (ontains negathe cos enants wWh, arnong ouwt restrictions, with (crtain As of December 31,1990, the Company had cxcepti ns, testrict the intutten(c of additional issued $82.027,000 of notes hepresentlnq 200 debt, creation of liens. prepayment of debt, pay-percent of the otherwise tequired cash payment) ment of dividends in cuess of $75.000.000 pur-payabic to AMBAC. thase of stoch other than to satisfy mandator) lcf ters of Credif. The Company has vallous out' sinking fund requirements, sale of assets, and standing series of polludon control resenue bonds acquisition of assets and requite satisfaction of a (bonds) which are collateralized by inevocable minimum net worth test. The bank credit agice-letters of credit. The letters of credit are scheduled ment is collaterallied b) the pledge of to espire before the scheduled maturity of the $100 000,000 principal amount of the Company's bonds. Detailed below is a matutity schedule of thst monqage bonds.
the bonds and ited letters of credit. lhe Company had no short tet m debt outstand-me,o on,a
. wm onm ne,n.' ing during the three> car period ended Vartable rate duc M4(no December 28 1991 December L 2014 Yartable rate due May 1,
- 13. PttrCha50 power AgrCCIllCI1tS 201s 41 600 % 2R 17n
~
As of Decembet 31,1990. the Company has a variabic rate doe november L 201s s noo Ncnemt.cr 2L Iw2 agreements with Sam Rayburn Munkipal l'ower vartable rate ove Agencs and CITCO to buy bach declining amounts December L 201s 28 wo December 2a im2 of their share of the capacity of Nelson Unit 6 and variable rate due April 1. Kh er Bend. tespectively, through the end of May 2016 20hoo Apri! 2 7.19A low due May 1 2014 so 000 May 15. Im 1996 in the case of Nelson Unit 6 and through mid June 1991 in the case of Rh er Bend. T he variable Upon the espiration of the original letters of costs associated with such bu)bachs are com-credit, the Company may, at its election, proside for posed of fuel costs and operations and mainte-an estension of the letters of credit or alternate nance expenses. while the fixed costs are based letters of credit to collateralite the bonds. If the upon gross plant imestment and other fattors.
44
Gialf S tat e a, titilities Co.
. . - - - - _ ~ - - - -- ~ ~ -- -
Actson i nit tt f or the seats etuted clcituc ky prom rd ity the ends. lhe Lompany December 31.1990,1909. and 19M s ariahic ( o =ts k s ontinuin.1 to se!! etc< ith h3 to the o utic ipants.
applkab!c to the Nelson Unit 6 buybaths were i h- ed e noa 31 WO 8 09 57A61000 $10M4 000 and 113305 000 and mm the pm ucs W cln uh it) from the respet thch while the ibed (osts assotiated with sm h buybac ks were $9 563.000 $13 h92 000. Mrd me towd tw 028 0M v'inu3 001 g g 3 3 q 3 ygg ,c gc and $16 542.000, (specth cly. hased upon ( ut-tent information, the Company estimates Hyat the 1 I MD@ N'$
annual fised (osts iru utted in tonnettion wid.
the helson (1hlt 6 bu)bachs will range in dec hninh lemporary Cash /noestments At Dec ember 31.
amounts from 57,524,000 in 1991 to $3.367 000 1990, the Compen ha<t 5195MS U00 of tempo-hi 1995. l~lsed Cost payments for 19% the final tan cash irncstments insested in tepulc hase Scar of the buyba(.h of power of sut h unit are aqiccments of high (pade short-ter m (orpotate estimated to tm apptosimately $1.391000. hnestments oth nine banhs and huestment Rh'er bend. The Compans and Cl;l'CO hase a banh% The nanuchase anteements ate (ollateral-Ihe ) cat agreement whk h bdgan on June 16.1986. lied by U3. 00 set nment se(utitles or high grade whereby lbe Compain will buy bath declining short ter m c orporate irnestments. T he Com-amounts of power fro'm Cl.FCO 5 share of Rher Dd") h2 f10t esperiem ed an) losses on its tempo-Dend The flsed costs incurred in connection with '*") wh ,un estnu nts the buybac hs were $50,312.000, 555 H30,000 w o g,Is A n tinat>!c. 1hc Cornpany's senke and $ 100,688,000 for the ) cars ended soca of Southeast Tetas and Southwest t.ouisiana December 31,1990,1989, and 198& tespe( th cly , is heavil) dependent on the petrochemical and and are estimated to be appro simatcl) telated industries The t ompany maintains
$20.757.000 in 1991. Ior the scars ended resenes for doubtful au cunts. based on past December 31,1990,1989, and 1988, sariable costs e sper ient e, applicable to the Kher Bend bu)back were
$ 14.94 0,000, $ 17.341.000, and $34.233 000
- 15. Stabsequent Events r especth cly.
helson Industrial Stc.un Campsny mlhCor in I g ctl, {', '
. ,', c , ,\ g lt, , ,'c;f,{ cf, gn 1988, the Company entet0d into a joynt scoture a $ 10,800 000 base rate mttrase as the fourth ~
w'ith a primary term of 20 ) cars w-ith C onoco.
Inc . C,itgo Petroleum (,orporation. and Vista bW of k hum m NHH we Chemical C,ompany (the partkipants) wtierchy the ordered phase in plan ettecth e Matt.h 1.1991. I'te-Compan) s Nelson Units 1 and 2 (100 M\\ cath) liminan anaksis of the !I'5C tate ordet indicates were scid to a partnership tN15CO) consisting of Om MoS W6 000.000 of deletted -
the pankipants and the C,ompan). Rhet Bend costs, (nal the Company had previously been allowed to recoset, were escluded from tate lhe participants are supplying the fuel for the base lhis ma) result in a net of bis write-oll of 1 units. while the Company operates the units at the approximately $19 300,000.1he Company is in discrellon of the participants and purchases the the process of esaluating all aspects of the order.
((] _ Financialjnfornjat!on_. _ , _ _ _
- 16. Quarterly financial Infornwilon (Unaudited)
(in titousands ext.ept per sliate antounts) _
t ar n'nus (tonc) Per Anetage
% ate t.f cominon l' a r tiln g s int otue Stock (tott) tions) outstanding Per Attrage .
fiefore Net Deluse Shane of operating operatinD t straoedinae) Income l'.straoedinet) cornmon Stock 1990 Retenue int orne ltr ni (toss) lle nt outstandtrig first Quarter . . . . . .,. $380.012 $ 68.207 $ 2.455 $ 2,455 $ (.12) ) (.12)
$ccond Quarter . . . ... 416,212 80,320 (I11,039) (111.039) (1.17) (l.17) 488,186 124,911 60.490 60.490 .41 .41 l lhttd Quarter . . .... .
rourth Quartet . . . . . . . . 406,275 59.795 3,812 3.812 (.11) (.11) 1989 first Quarter $365.688 5 77.066 $ (10.075) 5 (10,675) $ (.24) 5 ( .24 )
Second Quarter 392.525 75 663 3.137 3.137 L12) ( .12 )
1hhd Quarter 466.816 107.768 20,416 (16.625 .04 ( .30 )
rourth Quarter 382.377 6's.323 373 (21.410) (.14) ( .34 )
$ce Note 1 for information regarding the Southern Company settlement recarded in the setand quarter of 1990.
See Note 3 for information regarding the extracidinary item tecorded in the tnird and fourth quarters of 1989, due to the write ott for the discontinuation of tegulatory accounting principles to the Company's wholesaic jurisdiction and steam department respetthcly. $ce Note 6 for information regarding the abandonment of lignite leases in the third quatter of 1989 t>y Varit>us.
a K
s i"-
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Gtdf' Stata Utililles Co. #
Report of Independesit Accountnits
'to the Shatcholdeve of Gulf Staten l'tthtles Corrtpany:
We base audited the accoinpanying (onsolidated balafKe sheets and stalCinchis Of (apitalitation of Gulf States Utilitics Compan) and subsidialics as of De(ember 31 1990 and IWht amt the telated corsolidated statements of income, cash flows, and changes in capital stoch and retained cainings for each of the three > cars in the period ended December 31.199n.1hese consolidated imam ial statements are the responsibility of the Compan) s inanagement. Our responsibility is to espress an opinion on these consolidated financial statements based on out audits.
We conducted our audits in accoldJnce with generall) aMepted auditing s'andards. lhose standaMis requite that we plan and perform the audit to obtain reasonable assurance about whether the flnancial statements are hec of material misstatement. An audit includes esamining. on a test basis esidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management. as well as evaluating the oserall financial statement presentation. We believe that our audits proside a reasonable basis for out opinion.
In our opinion, the consolidated financial statements referred to abo 6e present fairly, in all material tespects. the consolidated financial position of Gulf States Utilities Company and subsidiaries as of December 31,1990 and 1989, and the consolidated results of their operations and their cash flows lot cach of the thtec ) cars in the period ended December 31,1990. in conformit) with generally aucpted accounting principles.
As of December 31.1990 and 1989 the consolidated balance sheets include capitalized (osts (consttuc-tion costs and deferred charges) related to the Companys Kiser Bend Unit ! Nuclear Generating I'lant (Khcr Bend) of apptosimately $3.8 billion (net of depreciation. amottliation and witte-oilst As dis-cussed in Note 3 to the consolidated financial statements. the net amount of capitalized (osts are substantially in escess of Khcr Dend costs cuuently in rates. If current regulatory atdets are not modified.
a significant write off of such costs may be required, howeser, the extent of such write ott. If any, will not be determinable until appropriate rate proceedings and court appeals hate been concluded. Manage-ment can protide no assurance that the Company will ultimately earn a return on or fully recoser all capitallied costs associated with Kher Bend. Additionally, without regulatory orders prescritnng the capitalliation and amortization of the deferred charges, the net loss for 1990 and 1989 wonld base been increased by $15 million ($ 14 per share) and $43 million (5.40 per shatch respettisely, and net income for 1988 would have been reduced by $131 million (51.21 per shatch As discussed in NW 1 to the consolidated financial statements, the co ownct of Kh er Bend has inillated legal proceedings against the Company seching, among other things, to reuner its intestinent in River Bend and to annul the Khcr Bend Joint Ownctship l'articipation and Operating Agicement. The ultimate outcome of these proceedings cannot presently be determined. Accordingly no protision for any liability that may result from their ultiinate resolution has been made in the auompanying conscli-dated financial statements.
As discusacd in Note 1 to the consolidated financial statements, during 1990, the Company entcied into y a settlement agtecment relating to certain purcSase power contracts. In conncttion with the agreement, the Company recorded a $135 million 'nct of lases) charge to eatnings representing inanagement S estimated cost of the settlement.
As discussed in Note 3 to the consolidated financial statements, the Company adopted the provisions of Statement of financial Accounting Standards tSFAS) No. 90 in 1988 and the provisions of St A5 No.101 for its wholesaic jurisdiction and steam department in 1989, h
flouston, Texas Tcbruary 28.1991 47
W ew l hm l
j WQ ma_ _ ___._.__=
Financial Information -. . _ _ _ -._ _ _ ._...-....~._ .
Statistkai Summary for the yeals ended Deccinber 31 1940 1989 1908 1987 19116 tt *( 1RiC Of FAKTMtAT Numbct of cutionicts at > car cod.
Roskicntial 448.672 4!C 054 406 993 48 U6H 4th 600 C ommcit ial 63.044 624U8 b l S5H 61 861 62 059 Int;usttial 4.581 4 511 4.%3 4 319 4322 T emporary (onstruction 1.005 1 633 1 477 IM2 16%6 Other 2.636 .' 6D 5 2 5H5 2 Ae 2 430 T otal lustomer s 570,73H 563 277 557,576 5M 905 555 075 Sales - Kilowatt hours (thousands)'
Residential 6.833,920 6 473 011 0.326 OH1 6 200S61 6.174.567 Commcttial 5,380.449 5 107,356 5 V23 755 4311370 4320 882 industrial '3.331,772 12321.405 12.07LO70 11 811.676 12.15R 762
- Temporar) construction 15,399 10,759 13135 16,241 42 498 Other 1,464,586 1.191 720 1 482 f,52 1 AH5.242 1.503 245 N tal Salc5 2 7.03 4,12 b 25 194.76) 24 917.707 24 A33 A98 24 004354 Rcschuc - (thousands).
Mcsidential $ 523,911 5 487,912 5 45L 53H $ 43G 3!>2 5 425.206 Commercial 578,253 357 500 331.170 312 M4 309440 Industrial . 577,436 539 S44 5103 M 476 H71 500.026' Temporary construction 1,492 1 075 1,130 1364 3 066 Other 115,543 115315 120.513 108335 120.690 Total hesenue $ 1,596.63 5 $ 1 501.tl74 $ 1 415,713 el 330.100 $1358428 Astra:lc Annual h%ll Use Per Customt r; Residential 13,795 13 228 13 029 12 HlH 12 731 Commercial 85,761 Hi 513 61.339 79,1&) 79 A 16 Industrial 2 944,946 2.703 951 2 717,101 2 744SH6 2.781.053 Resenue Per hull - (cents)-
Residential 7.67 7M 7.15 6 43 6 89 Commettlal 7,02 0 HH b 59 636 6.29 Industrial 4.33 438 4 23 4 04 4,11 Licctric t:ncryy Output - Thousands of Kull:
Net Ocncrated 26.102.741 23 955 b60 25,146 700 23 421.700 23 009,283 Net l'urchased and interchangcd 4,'277.621 5352 Ahi 3.570 012 4 593.232 5 2HI A04 30,380,362 29 308 145 20 717 592 20 014.932 28 290 bH7 Sptom l'eah load - Including Interruptible ioad - Megawatts 5,388 5.040 4 910 4391 5 089 lotal Capability, including Contract l'urchases at Time of system Peah 1. cad (MW) 6,553 6,609 6.tM 6 92G 7,MH Load ratter 64 4 % 66 4 % 66.b% 64.1 % 63 5%
STLAM l'MODUCTS del'ARTMENT 5tearn Resenue (thousands) $ 01,052 5 69.200 $ 70.728 5 690%6 $ 77,783 13cctrl; Sales - rs% 11 (thousands) 1.930,373 2.2 71 42 H L27H884 2.186.7H9 2.144.058 Steam Sales - millions of pounds 13,204 11.39H 10 A94 0 593 7,516 GAS DEPARTMENT 045 Revenue (thousands) $ 32,998 $ 36 332 1 34 036 5 33 424 5 33.125 Nutr.bLt of Customers at ) car end 83,164 HLbH 1 82.510 H3.003 H3,99)
Output -- MM tu. ft. of natural gas purchased . 6.215 7.026 7.320 7.305 7,036 Sales - MM cu. ft. 6,652 7,072 7.134 7.409 7 005 WEATMcK DATA Coolinq deipec dap (Normal 2.703) 3,034" 2 H16 2,742 2 060 2335 l'citaatage change from normal 12.2 42 14 ( l .6, H6 fluting d(grec days (Notmal 1 H4ll 1,649" 1,681 1 812 1.092 1.b30 i cicentage thange from normal ( i O.4 ) (H Si ( l .6 ) 2H ( 11.1 )
- Euludes 182 580 MW11 and $9,052 applicable to priot pellods irlated to (apitallied Rhet Hend constnation e ncigy.
" Estimated.
l
l f/5E
! $ {: information to Shareholders _ _ _
Stockholdet infortnation _
Stoc h listinn
""" M"t" " d" '"
- Sharcholder Questions t ommon stot h is traded utn1rr the
$hartholdets having questions about thMr 'ompany or about thch 9 mhol G$U on the New 104
_(
~
holdings ma) (entact %areholder Sen k es pt tsonnti at the corpola!" %hrst and ra(dh Stoi h of!) cts in Deautnont dudnq nonnal budorss hours. $hatchulders talls fuhanges rnade within Texas art tell-free at If 800),M013L while calls hom shatcholdets outMdc Tesa are toll free at 1t6004319E0 SI Dt h I '""*IC ' UC "l*
l'totpetth e sharehokicis imiy also use those numb ( ts to tequest UuH m (Wties to
" d' Unancial and other Informatlun 1ransfer of Stock t hst thu aao liust ( o of % 3 mh New i mh. N Y.
Wheneger 11 becom(s nettuary to (hange the reg stratioa on a OSU stoth (citlficate. a transfer of the sloth is lequited. Changes in He{tistrars tenistration are necessary. for esample, unen a gift of stock is made I hst ( ity losas braumont N A the stoch is to be to togistertd with another person a name r hange is beaumont. letas inade or for a nuinbcr of other trason%. .
f hst ChKago Itust to of New York lhete is no single stoch transfer pro (c' dure whk h wul (os ?! all g g pon;ble (Ircumstancos Some transfet situations tcquire suppotHnq documents be transferted, while others might requhe On!) the signa. Dhidend Reltnestment flan Agent tute of the shatcholder authorizinit the transfer to be guarantred b) Gulf States Utlhtirs Co eithcr an oftcci of a commercial bank of a stockbtoher Po.hoA1671 1he compan)*h Shatcholder Servl(es Department may be (on. heautnout 'ic u s tatted to dctctmlne the conett procedure for each type of transfer 77704 Lost Certificates rorm 10 h lf a OSU sto(h certifkate !s lost or stolen writte n nottfkation shou!I I e un K Annual HepNt to be Sent iminedlately to the (ompany s $hatcholder $rnite Depatttnent c u es and Mange so that a "stop" can be plac ed ayalnst the mining (crtificate. Your nun n and W > MO notification should contain as much information as powible desuibing
"#" "" # "E" "
the certificate, including exact reg!stration. tcrtincate number and date be obtained without charge fiom l.cslie D. Cobb. Vice l'rcsident &
After a "stop" he been plined. whk h picsents the stoch < crti! hate g from being traded, an afiklasit ina) be toquested from the transfer pg ggg 793 y, agent in order to obtain a toplacement (crtincate, The affidasit must be buumont, h M7%
completed, signed, notarized and toturned before replacement will be rnade. An irrevocable indemnity bond is required in most cases T he hotke of Annual Meeting cost is 3 percent of the market salue of the missing shares.
The transfer agent should be notified promptly if a missina u rtth. 1he IW1 Annum Meeth;g of tale is located. Anchohiers will be hohl at 2 p.in 1hursda). Ma) 2.1991. In the rompan) s headquaners. 350 noe
$tteet beaumont 'Icsas. I o tral noth es of the mortlnct prot.)
staten ents and plotics wdl be m.illed to all shairholders on or about Manh 15.1991 Shareholders are United to attend but il the) ( annot= *bry at e ur';cd to fill out and tr-tutti theit proxies {
l w
o
- B O mcers Chairittatt l' resident & CEO ~
- t. L inn Draper Jr. (11) 48 t luirm.m of the too. nr Vtrsident A Chief larr uth e ('I'u ct Senior raecuthe Vice l'tesidents Joseph L Donnelly (11) 61 Edward M. Longins (32) 60 henior fact uth s t h e l'ttsident henfor lan oth< \ k c l'restderal h i nicfItruntial O!ricci operations Senior Vice Presidents James C. ()cddens (7) 62 Cabin J. liebert (28) 56 benior th e l'teshknt hentor \ke 14crnlent IAternal IUver 11rnd Nulc.n Group Affair s Vice I'vesidents william t, narksdair (33) 59 Cec il I.. Johnson (14) All th e l'ics!dcnt Inqtncerinq th e l'tesident icrpt herth es
.vn17t('nkal $ct4
- cs Amer) J. Champagne (17) 47 J. Ice Miller (D) 50
\Re l'reshrent Lnconti Hrsontr es \h e l'rcstdent flurture ficsourtes Icstle D. Cobb (30) 55 James ti. Mou (32) 54 t he 11csident h bre retaril th e l'tesident Marketinn Anthony T. Gabilclic (10) 63 Jm k L Schenth (9) 52
\ ke l'rcs.ldent Computer Appth atforis th e l'ursident h' f rcasuret Chatics D. Gian (41) 62 liobby J. Willis (216) 54
\k e l'tcstdent Operations th e l'rcstdent h' Controllet William J. Jet!cthon (10) 61 Jasper r. Worthy (34) 62
\h c l'teshJent listes N \ h c l'rcshicnt Gericial benckes Henulatory A!!alts Dhision Vice Presidents John W. Contcy (32) 59 Konald M. M(Xenile (24) 50 Hestern Dielslon Ibit Arthia Dielslott Arden D, l.oughtnitter (29) 52 J. Ted Mrins(her (40) 58 13caurnant Dielslon IAc ( harles Division James D. Watkins (32) 59 liaton fiuune Ulvision Other Officers Clyde W. M(liride (13) 5fl limothy L Morris (11) 39 Autstant itcasurer Aufstant bet tetary .
( ) Ifdrs o[6,g[{il{p Aqcs and years of senke as of Dec. 31 1%n 5
50
l y s
T Directors
' Robert it, liarrow 'I'aul M. Murtill Ocncial. Nctired Cornrnand.vtl hctlanl C!ultanan of the Ikurd United Statc% Marine Corps N Chh I isn uth c ( >tt,c cr 5t. f rancisville. la (198 U I;eaunnoctt IcAn iluid:
6 " John W. tiarton rugene 11. Owen L haltinan of ttle llantd x FV Vic e l'rchident Ioulslana Alttraft Inc. N Uwner- Ch!rf Isrcuthe O!!n cr (Lettort Iatms (' urn N H hite Inc .
15atort 80ucle. la (1970* 11aton liotale l<e !JU W Joseph L. Donnelly isookman l's ters benlut t.ut utive Vice ncstdent tTA and fuuncial z onruttant W Chief financial Offher and fortner Chairrnan of the Ibard (1caumont ichts (lUtiG) N Cl O 1 fr %t Clly f rAa%
lir van IcAn (1U'M
- t. Linn Draper Jr.
Chafrtnart of the lioard Monroc J. Rathhone Jr.
I' resident N Chici succuthe Officer Mcdkal doc tor and putncs-Deaurnont 7eads (1985' The Suryb a! Citruc ILaun fiouge. l.c t IUTS*
Martin Goland hesident Southurst Sam ti Segnar Research Instlitdc Chalorn vt of (nr Iku'd ban Aatonlo TcLa il983) Collet tinq li.enk. h A floustors 1 cats tIw;in Frank W tiarrison Jr.
Consulting Ocologist 'titsmmk A, Steinhaarn lafayette, la t1990) Chairman of the thud
$lcinhagen (Hl Co. Inc (1)Edwin W.111am ficaurnant. Traas i1970 l'rintipal Otlk es Inorstinent Consultant gg ,, gg gg,gcg fioston. Mass. (1959) James E. Taussin ll jg ggg p.
hesident 7aussig ( or/> 777g) 140 Ch ults, la (19 TS)
Williatr) 11. letilant Jr.
Challrnan of the I;oard DhisloH4 __
Ikifon Nouge Supply Co. Inc, 'Etetuthe Committee luton Nouge la (1974; 28's Liberty Asenue
" Chairman Exet othe Committer licaumont, l esas (1; Alli not s!< nd for te rict tion Ma) 2.1991 IMO Ninth Asenue l' ort Arthur Texas
??640 liighway 7'> North Conroe Tetas 77301
- 446 North lioulesaf d 11aton Rouge, l.ouisi na 70802 314 thoad $tteet i.ahe Charles.
1 oulslana 70f >01 -
i 51
Gulf States Utilitics Co. nu!k nati. ~
l'. O. Dos 2951 U S POSTAGE Beautnant. lesas 77704 :
PAID Hout. ton, Texas l Pettnit Numtier 427 l 6 J e
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