ML20081H130
| ML20081H130 | |
| Person / Time | |
|---|---|
| Site: | Wolf Creek  |
| Issue date: | 03/21/1995 |
| From: | Carns N WOLF CREEK NUCLEAR OPERATING CORP. |
| To: | NRC OFFICE OF INFORMATION RESOURCES MANAGEMENT (IRM) |
| Shared Package | |
| ML20081H134 | List: |
| References | |
| WM-95-0055, WM-95-55, NUDOCS 9503240104 | |
| Download: ML20081H130 (19) | |
Text
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W$LF CREEK NUCLEAR OPERATING CORPORATION I
Neil S. "Burf Carns cnaiman. pn.*ni mad March 21, 1995 Chief Executive Officer WM 95-0055 g
i U.
S. Nuclear Regulatory ATTN: Document Control Desk Mail Station P1-137 Washington, D.
C.
20555
Subject:
Docket No. 50-482: Transmittal of 1994 Annual Financial Reports i
Gentlemen:
Wolf Creek Nuclear Operating Corpot.ttion is transmitting one copy of each of the Western Resources Inc. 1994 Annual Report, the Kansas City Power & Light Company 1994 Annual Report, and the Kansas Electric Power Cooperative, Inc.
1994 Audited Financial Statement.
This information is being submitted in accordance with 10 CFR 50.71 (b).
If you have any questions concerning this matter, please contact me at (.s 16 )
i 364-8831 extension 4000 or Mr. R. D. Flannigan at extension 4500.
Very truly yours, p-Neil S. Carns NSC/jad cc:
L. J. Callan (NRC), w/a D.
F. Kirsch (NRC), w/a J.
F. Ringwald (NRC), w/a J.
C. Stone (NRC), w/a l
240037 gflI i 9503240104 950321
~ B x du / Burlingt n. KS 66839 / Phone (316) 364-8831 I
PDR ADOCK 05000482 An Equal Opportunity Employer M T HC/ VET I
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KANSAS ELECTRIC POWER COOPERATIVE, INC.
Financial Statements for the Years Ended December 31,1994 and 1993, and Independent Auditors' Report i
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\\
Deloitte&
ToucheLLP Suite 400 Telephone:(816)474-6180 1010 Grand Avenue Kansas City, Missouri 64106-2232 Independent Auditors' Report Board of Trustees Kansas Electric Power Cooperative, Inc.
We have audited the accompanying balance sheets of Kansas Electric Power Cooperative, Inc. as of December 31,1994 and 1993, and the related statements of operations and changes in patronage capital (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Cooperative's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards and the standards for financia' audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As more fully described in Note I to the financial statements, cenain depreciation and amortization methods have been used in the preparation of the financial statements which do not,in our opinion, conform to generally accepted accounting principles.
In our opinion, except for the effects on the financial statements of the matters referred to in the preceding paragraph, such financial statements present fairly, in all material respects, the financial position of Kansas Electric Power Cooperative, Inc. as of December 31,1994 and 1993 and the results ofits operations and changes in its patronage capital (deficit) and its cash flows for the years then ended in.,nformity with generally accepted accounting principles.
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h January 20,1995 l
DelelttaTsucid Telunstsu 4
intomatiraal
KANHAS ELECTRIC POWER COOPERATIVE, INC.
EALANCE SHEETS DECEMBER 31,1994 AND 1993 ASSETS 1994 1993 CAPITAll2ATION AND LIABILITIES 1994 1993 UTILITY Pl. ANT:
CAPITALIZATION:
I'lectric plant in service
$ 202.715.378 5201.548.014 Patronage capital (deliciti:
I ess allowances for depreciation 27.346.781~
24.513.462 Memberships 5
2.900 2.900 Patamage capital Idelicial unallocated (I 433,125)
(5.947.207)
Net utshty plant 175.368.597 177.034,552 Total patronage capital (deficit)
(1.430.225)
(5,944.307)
Ctmstruction work in process 686.013 I,215.106 Long-term debt, less current portion:
l Nuclear fuel. less accumulated amortiration of 59.453.697 Federal Financing llank 124.130.436 126.003,966 and $10.541.087 at December 31.1994 and 1993.
Cooperative Finance Corporation 59.287.978 60.126.834 respectively 5.091.847 3.998.923 Pollution Control Revenue lionds 39.900.000 40.500.000 i'
Ietal utitity plant i8 f.146.457 I82.248.58I Total long-term detg 223.318.414 226.630.800 RLSTRICIED ASSETS.
Total capitalization 221.888.189 220.686.493 -
Cash and cash equisalents 214.956 Investments in associated organiiations 2.763.977 2.678.468 LIAllli.IllLS:
llend fund teserse 3.928.086 3.925.832 Current liabilitics-Ikcommissioning fund assets 2.047.869 1.714.265 Accounts payable 3,931.834 4.242.567 Pay roll and payroll related liabilities 68.896 63.524 Total restricted assets 8.739.932 8.526.521 Accrued property taxes I.569.274 I.395.290 Accrued interest payable 3.084.302 3.212.821 CURRI NT AS%L~I5-Arbitrage rebate payable 631.161 Cash and cash equisalents 9.803.038 9,767.980 Current portion oflong-term debt 3.790.930 4.075.406
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Temporary insestments 1.018.451 Accounts receivable from membcrs 5.798.921 5.850.733 Total current liabilities 13.076.397 12.989.608 Materials and supplies imentory 2.178.960 2.155.719 i
l Other assets and prepaid expenses 589.621 475.042 Other liabilities:
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Decommissioning liability 2.047.869 1,714.265 Total current assets 19,388.991 18.249.474 Arbitrage rebate payable 446.238 Wolf Creek Nuclear Operating Corp liabilities 2,420.8 %
2,142.087 UTIIER I.ONG-TERM ASSETS:
Deferred charges, less accumulated amortiration Total other liabilities 4,468.675 4.302,590 of $5 475,545 and $4,765.714 at December 31.1994 and 1993. respectively 24.455.349 25.143.793 COMMITMENTS AND CUNTINGENCIES Deferred incremental outage costs 1.681.644 1,019.668 i
Unamortiicd debt issue cost 2.023.720 1.162.801 Wolf Creek Nuclear Operating Corp. investments, at cost 1.997.168 1.627.853 Total other long-term assets 30.157.881 28,954.1I5
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10 TAI. ASSETS
$ 239.433.26l
$ 237.978.691 TOTAL CAPITAL.lZAllON AND LIAlllLillES
$ 239.433.261
- $237.978.691 See notes to financial stctements.
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KANSAS ELECTRIC POWER COOPERATIVE,INC.
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STATEMENTS OF OPERATIONS AND CHANGES IN PATRONAGE CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31,1994 AND 1993 1994 1993 l
r OPERATING REVENUE:
Member
$ 71,519,705
$ 69,118,520
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Nonmember 565,938 794.611 f
Total operating revenue 72,085,643 69,913,131 OPERATING EXPENSES:
Power purchased 31,853,553 31,146,947 Nuclear fuel 2,019,375 2,0.i5,015 Nuclear plant operations 3,426,665 3,178,107 Nuclear plant maintenance 1,777,780 1,737,963 Nuclear plant administrative and general 5,450,718 5,032,174 Administrative and general 2,371,668 2,205,031 Amortization of deferred charges 709,831 685,857 Depreciation 3,878,270 3,762,844 j
Total operating expenses 51,487,860 49,803,938 Operating margin 20,597,783 20,109,193 INTEREST AND OTHER NONOPERATING INCOME 792,072 608,972 income before interest expense 21.389,855 20,718,165 INTEREST EXPENSE ON LONG-TERM DEBT 16.875,773 17,304,625 l
Net margin 4,514,082 3,413.540 PATRONAGE CAPITAL (DEFICIT) UNALLOCATED, BEGINNING OF YEAR (5,947,207)
(9,360,747) i PATRON AGE CAPITAL (DEFICIT) UN ALLOCATED, END OF YEAR
$ (1,433,125)
$ (5.947,207)
See notes to financial statements.
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KANSAS ELECTRIC POWER COOPERATIVE, INC.
I STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,1994 AND 1993 1994 1993 CASil FLOWS FROM OPERATIONS:
i Cash received from member sales
$ 71,824,160
$ 69,319,804 Cash received from nonmember sales 597,638 705,340 Cash paid for purchased power (32,110,186)
(31,341,538)
Cash paid for Wolf Creek operations (8,836,919)
(7,664,034) l Cash paid for KEPCo operations (2,318,719)
(2,130,643)
Interest paid (16,899,177)
(14,749,319) s Property taxes paid (2,991,557)
(2,724,225)
Interest received 962,008 716,194 Cash paid to decommissioning trust (266,336)
(266,336)
Miscellaneous cash received 214,956 2,364 Net cash from operations 10,175,868 11,867,607 l
CASil FLOWS FROM INVESTING ACTIVITIES:
Nuclear fuel purchases (2,545,968)
(672,514)
Plant additions (1,698,981)
(1,667,316)
Wolf Creek Nuclear Operating Corp. investments (222,005)
(181,750)
Cash paid for purchase of temporary investments (1,018,451) f increase (decrease) in investments in associated organizations (92,509) 1,751 Net cash from invest 5g activities (5,577,914)
(2,519,829)
CASil FLOWS FROM FINANCING ACTIVITIES:
I Repayment oflong-term debt (3,596,862)
(2,820,291)
Fees paid for repricing long-term debt (966,034) i Net cash from financing activities (4,562,896)
(2,820,291)
INCREASE IN CASil AND CASil EQUIVALENTS 35,058 6,527,487 j
I CASil AND CASil EQUIVALENTS, BEGINNING OF YEAR 9,767,980 3,240,493 CASil AND CASil EQUIVALENTS, END OF YEAR
$ 9,803,038
$ 9.767,980 (Continued) l i
KANSAS ELECTRIC POWER COOPERATIVE,INC.
STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,1994 AND 1993 1994 1993 RECONCILIATION OF NET INCOME TO NET CASH l
PROVIDED BY OPERATING ACTIVITIES:
Net margin 5 4,514.082
$ 3.413.540 Adjustments to reconcile net margin to net cash from operating activities:
Depreciation 3,878.269 3,762,844 Amortization of nuclear fuel 1,453,045 1,512,726 Amortization of deferred charges 709,831 685,857 Amortization of deferred incremental outage costs 1,383,604 1,657,783 Amortization of bond issue costs 105,114 61,514 Accretion of discount / amortization of premium (2,255)
(2,255)
Loss on sales of assets 15,760 3,645 (Increase) decrease in restricted cash and cash equivalents 214,956 (5,098)
(Increase) in Wolf Creek Nuclear Operating Corp. investinents (147,309)
(164,573) i (Increase) in decommissioning fund assets (333,604)
(330,039) t increase in decommissioning liability 333,604 330.039 (Increase)in deferred charges (21.387)
(919,407)
(Increase) in deferred incremental outage expense (2,045,580)
(2,294,252)
Increase in arbitrage payable 184,923 162,410 Increase in Wolf Creek Nuclear Operating Corp. liabilities 278,719 1,177,777 Other (30,297)
Net change in current assets and liabilities:
Accounts receivable 51,812 (43,210)
Materials and supplies inventory (23,241)
(126,920)
Other assets and prepaid expenses (114.579)
(17,858)
Accounts payable (310,733) 443,400 Payroll and payroll related liabilities 5,372 6,144 Accrued property taxes 173,984 90,048 Accrued mterest payable (128,519) 2,493,789 Total adjustments 5,661,786 8,454,067 Total cash from operations
$ 10,175,868
$ 11,867,607 See notes to financial statements.
(Concluded) 1
KANSAS ELECTRIC POWER COOPERATIVE, INC.
NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31,1994 AND 1993 1.
DEPARTURES FROM GENERALLY ACCEPTED ACCOUNTING PRINCIPLES Effective February 1,1987, the Kansas Corporation Commission (KCC) issued an order to Kansas Electric Power Cooperative, Inc. (KEPCo) requiring the use of present worth (sinking fund) depreciation and amortization. As more fully described in Notes 3 and 6, such depreciation and amonization practices constitute phase-in plans which do not r.ieet the requirements of Statement of Financial Accounting Standards (SFAS) No. 92, Accountingfor Phase-In Plans. The effect of these departures on the financial statements is as follows:
Overstated (Understated) 1994 1993 Net utility plant
$ 32,971,498
$ 29,477,355 Deferred charges 4,413,315 3,957,272 Patronage capital (deficit)
(37,384,813)
(33,434,627)
Net loss (3,950,186)
(4,261,782) 2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES System ofAccounts - KEPCo maintains its accounting records substantially in accordance with the Rural Utilities Services (RUS)(formerly Rural Electrification Administration (REA)) Uniform System of Accounts and in accordance with accountit i practices prescribed by the KCC.
Utility Plant and Depreciation - Utility plant is stated at cost. The costs of repairs and minor replacements are charged to operating expense as appropriate. Costs of renewals and betterments are capitalized. The original cost of utility plant retired and the cost of removal,less salvage, are charged to accumulated depreciation.
Through January 31,1987, the provision for depreciation for electric plant in service was computed on the straight-line method at a 3 A4% annual composite rate. Effective February 1,1987, in accordance with an order issued by u.e KCC, the provision for depreciation is computed on a present worth (sinking fund) method which provides for increasing annual provisions over 27.736 years. The composite rates for the years ended December 31,1994 and 1993 were 2.030% and 1.970%,
respectisely. Pursuant to a KCC rate order dated March 27,1992, beginning January 1,1992, all additions, betterments and improvements are depreciated os er the remaining life of the plant. The provision for depreciation, computed on a straight-line basis, of other components of utility plant are as j
follows:
i Transportation and equipment 25 to 33%
Office furniture and fixtures 10 to 20%
Leasehold improvements 20%
Transmission equipment 10 %
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Nuclear Fuci-The cost of nuclear fuel in process of refinement, conversion, enrichment and fabrication is recorded as an asset at original cost and is amortized to nuclear fuel expense based upon 1
the quantity of heat produced for the generation of electric power. The permanent disposal of spent fuel is the responsibility of the Department of Energy (DOE). KEPCo pays one mill per net kwh of r.uclear generation to the DOE for the future disposal service. These disposal costs are charged to nuclear fuel
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expense.
i Investments in Associated Organizations - Investments in associated organizations are carried at cost and consist principally of patronage capital certificates, capital term certificates and subordinated term
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certificates of the National Rural Utilities Cooperative Finance Corp. (CFC). CFC patronage capital
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certificates maturing within one year of the balance sheet date are reflected as a current asset.
Temporary Investments - During 1994, KEPCo purchased equity securities that are considered i
available-for-sale in accordance with the provisions of SFAS No.115. The investments are carried at j
cost which, based on published prices, approximates fair market value at December 31,1994, i
Cash Equivalents - All highly liquid investments purchased with maturities of three months or less are considered to be cash equivalents and are stated at cost which approximates market.
i Materials andSupplies Inventory - Materials and supplies inventory for the Wolf Creek Generating Station (Wolf Creek) is stated at cost determined by the average cost method.
Unamortized Debt Issue Costs - Unamortized debt issue costs related to the issuance of the floating / fixed rate pollution control revenue bonds, mortgage notes payable to the CFC and fees for repricing debt are being amortized using the interest method over the remaining life of the bonds.
Decommissioning Fund Assets / Decommissioning Liability - At December 31,1994 and 1993, l
$2.047,869 and $1,714.265, respectively, has been collected and is being retained in an interest-bearing i
I trust fund to be used for the physical decommissioning of Wolf Creek. The decommissioning funds have been invested by the trustee primarily in United States Treasury obligations and are carried at cost.
I During 1989, the KCC extended the estiraated useful life of the Wolf Creek Generating Station to 40 years from the original estimate of 30 years only for the determination of decommissioning costs.
Additionally, on October 14,1994, the KCC appros ed a 1993 Wolf Creek Decommissioning Cost Study which increased the estimate of total decommissioning costs to $370 million in 1993 dollars.
j KEPCo is responsible for a 6% share of the decommissioning costs for Wolf Creek. The increase had no impact on KEPCo's current provision for decommissioning which is being recovered and charged to operations over the life of the plant. Management expects such increases in cost to be recovered though the ratemaking process.
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KEPCo's provision for decommissioning totaled $226.336 in 1994 and 1993, respectively.
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Cash Surrender Value ofLsfe Insurance Contracts - The foilowing amounts related to Wolf Creek l
Nuclear Operating Corporation (WCNOC) corporate-owned life insurance contracts, primarily with one highly-rated major insurance company, are recorded on the balance sheets in WCNOC investmeats:
1994 1993 l
Cash surrender value of contracts 51,503,641 51,296,765 Borrowings against contracts 358,587 358.587 Net
$ 1,145,054
$ 938.178 i
i Income Tares - As a tax-exempt cooperative, KEPCo is exempt from income taxes under Section l
501(c)(12) of the Internal Revenue Code of 1986, as amended. It is management's opinion that KEPCo has met the requirements of this section and will continue to do so for the foreseeable future.
Accordingly, provisions for income taxes have not been reflected in the accompanying financial l
statements.
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Rates - The KCC has authority to establish KEPCo's electric rates subject to the times interest earned t
ratio and debt service coverage set forth by the RUS.
KEPCo believes it is probable that future rates, as established by the KCC, will allow the recovery of i
deferred charges (see Note 6). If subsequent recovery is not permitted, the unrecovered deferred balances would be charged to expense at that time.
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Revenues - Revenues from the sale of electricity are recorded based on billings to customers and on contracts and schedulej power usages, as appropriate.
Reclasssylcations - KEPCo has reclassific d the presentation of certain prior year information to conform l
with the current presentation.
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3.
WOLF CREEK GENERATING STATION I
KEPCo owns 6% of the Wolf Creek Generating Station (Woh' Crc ek) near Burlington, Kansas. The remainder is owned by 'he Kansas City Power & Light Company (KCPL - 47%) and Kansas Gas &
l' Electric Company (KGE - 47%). KGE is a w holly owned subsidiev of Western Resources, Inc.
Substantially all of KEPCo's utility plant represents its share of W ' Creek. KEPCo is entitled to a proportionate share of the capacity and energy from Wolf Creek wi..ch is used to supply a portion of KEPCo's members' requirements. KEPCo is billed for 6% of the operations, maintenance,
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administrative and general costs and cost of plant additions related to Wolf Creek. All operations are accounted for in the same manner as would be a wholly owned facility.
The KCC declared Wolf Creek commercially operable on September 3,1985. KEPCo's total investment includes interest and administrative costs during construction.
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i Effective February 1,1987, the KCC issued an order to KEPCo to utilize a present worth (sinking fund) depreciation method which does not conform with generally accepted accounting principles and which constitutes a phase-in plan which does not meet the requirements of SFAS No. 92. If depreciation on electric plant in service was calculated using a method in accordance with generally accepted accounting principles, depreciation expense would be increased and KEPCo's operating margin would be decreased by $3,494,143 and $3,796,503 for the years ended December 31,1994 and 1993, respectively. In addition, net utility plant would be decreased and the de6 cit in patronage capital (dencit) unallocated would be increased by $32,971,498 and $29,477,355 at December 31,1994 and 1993, respectively.
4.
INVESTMENTS KEPCo's portfolio, which is included in the balance sheet at cost as cash and cash equivalents (including restricted assets), is invested in Oxed-income securities and is composed of the following securities at December 31:
i 1994 1993 Deposits at federally insured banks 3,038 65,486 Collateralized repurchase agreements 6,417.450 CFC - Commercial paper 9,800,000 3,500,000 KEPCo has entered into a bond covenant whereby the Cooperative is required to maintain, with a trustee, a Bond Fund Reserve of a stipulated amount of approximately $3.9 million, suf6cient to satisfy certain future interest and principal obligations. The amount held in the Bond Fund Reserve is invested by the trustee in various municipal securities, pursuant to the restrictions of the indenture agreement, which are carried at cost.
5.
INVESTMENTS IN ASSOCIATED ORGANIZATIONS At December 31,1994 and 1993. investments in associated organizations consisted ofihe following:
1994 1993 CFC:
Membership 1,000 1,000 Capital term certi6 cates 395,970 395,970 Subordinated term certi6 cates 2,205,000 2,205,000 Patronage capital certi6 cates 47,746 56,807 Other 114.261 12.691
$ 2,763.977
$ 2.671,468
' 6.
DEFERRED CHARGES Disallowed Costs - Effective October 1,1985, the KCC issued a rate order relating to KEPCo's investment in Wolf Creek which disallowed approximately $22.9 million of KEPCo's investment in Wolf Creek. A subsequent rate order, effective February 1,1987, allows KEPCo to recover these disallowed costs and other costs related to the disallowed portion for the period from September 3,1985 through January 31,1987, over a 27.736 year period starting February 1,1987. KEPCo is using present worth (sinking fund) amortization to recover the disallowed costs which enables it to meet the times interest earned ratio and debt service requirements in the KCC rate order dated January 30,1987. The method used by KEPCo constitutes a phase-in plan which does not meet the requirements of SFAS No.
- 92. If amortization to recover the disallowed costs was calculated using a method in accordance wit'.i generally accepted accounting principles, amortization of deferred charges would be increased and KEPCo's operating margin would be decreased by $456.043 and $465,279 for the years ended December 31,1994 and 1993, respectively. In addition, deferred charges would be decreased an6 the de6 cit in patronage capital (deficit) unallocated would be increased by $4,413,315 and $3,957,272 at December 31,1994 and 1993, respectively.
Revenue and Expensesfor the Periodfrom September 3,1985 through September 30,1985 -
Although the Wolf Creek Generating Station began commercial operations on September 3,1985, the KCC ordered KEPCo to accumulate all revenues and expenses related to the operation of Wolf Creek for the period from September 3,1985 through September 30,1985 in deferred charges. The KCC issued an order on February 1,1987 which allowed KEPCo to recover these costs over a ten year period. Annual amonization of such costs increases over the recovery period.
Decommissioning and Decontamination Assessments - The Energy Policy Act af 1992 established a fund to pay for the decontamination and decommissioning of nuclear enrichment facilities operated by the DOE. A portion of this fund not to exceed $2.25 billion is to be collected from utilities that have purchased enrichment services from the DOE. This ponion is limited to no more than $150 million each year and will be in the form of annual assessments that will not be imposed for more than 15 years. KEPCo has recorded its portion of this liability which is being paid over 15 years. KEPCo has recorded a related deferred asset which is being amortized to nuclear fuel expense over the 15 year assessment period. Management expects to include these assessments in its next rate case to be Oled with the KCC and believes it is reasonable to expect approval for recovery of these assessments.
DeferredIncremental Outage Costs - On April 9.1991, the KCC issued an order that allowed KEPCo to defer its 6% share of the incremental maintenance and replacement power costs associated with refueling of the Wolf Creek Generating Station. Such costs are deferred during each outage and are being amortized over the operating cycle coincident with the recognition of the related revenues.
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- 7. - LONG-TERM DEBT Long-term debt consists of mortgage notes payable to the United States of America acting through the Federal Financing Bank (FFB), the CFC and others. Substantially all of KEPCo's assets are pledged as collateral. The terms of the notes as of December 31 are as follows-f 1994 1993 i
I Mortgage notes payable to the FFB at rates varymg from 5.261% to 7.206%, yable in quarter y installments through 20
$ 126,482,510
$ 128,747,364 Mortgage notes payable to the CFC at a rate of 10.028%
through December 1997 and 9.83% thereafter, payable semi-annually, principal payments commencing m 2003 and continuing annually through 2017.
51,340,000
.51,340,000 j
Mortgage notes payable to the CFC at a rate of 9.5274%
t through December 1997 and 9.33% thereafter, payable semi-annually, principal payments commencing m 1989 and continuing annually through 2002.
8,786,834 9,518,842-Floating / fixed rate pollution control revenue bonds, City of Burlington, Kansas, Pooled Series 1985C, variable interest rate (3.96% at December 31,1994) payable annually through 2015.
40,500,000 41,100,000
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227,109,344 230,706,206 Less current portion 3,790,930 4,075,406 l
$223,318,414
$ 226.630,800 On January 12,1994, KEPCo repriced $10.3 million of mortgage notes payable to the Federal Financing Bank. The new interest rate is 6.107% compared to the old rate of 9.366% and is projected to save KEPCo $4.7 million over the life of the notes.
Aggregate maturities of mortgage notes payable to the Federal Financing Bank and National Rural Utilities Cooperative Finance Corporation and floating / fixed rate pollution control revenue bonds as of December 31,1994 are as follows:
Year Amount 1995
$ 3,790,930 l
1996 4,949,004 l997 4,625,74I l
1998 4,823,402 1999 5.338,128 i
Thereafter to 2018 203,582,139
$ 227.109,344 l
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l At December 31,1993, KEPCo has FFB approved loans guarante% RUS with balances of
$126,482,510. Of this amount, $4,780.366 currently has a matury a e f March 31,1996. Upon maturity of each shon-term advance, KEPCo may renew the advance se /.iother two year period or elect to extend the maturity date on a long-term basis. The above sclaedule oflong-term debt maturities i
assumes that the $4,780,366, which matures on March 31,1996, will be extended based on the above l
options.
In addition, restrictive covenants require KEPCo to design rates that would enable it to maintain a times interest earned ratio and debt service coverage of at least one-to-one in at least two out of every three
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years.
Restricted cash and cash equivalents consisted of unexpended loan proceeds remaining in the l
Construction Fund. These funds were utilized for scheduled principal reduction of the originating debt.
i 8.
SHORT-TERM BORROWINGS I
KEPCo has available a $12 million line of credit with the CFC which remained unused at December 31, i
1994.
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9.
OPERATING LEASE l
KEPCo leases office space and equipment under noncancellable operating lease.c through 1998. The office space minimum lease payments can be increased to the extent that taxes and insurance paid by the lessor exceed 1987 levels.
Future minimum lease payments at December 31,1994 are as follows:
1 f
Year Amount 1995
$ 84,453 l
1996 78,799 1997 4,867 1998 4.867
$ 172.986 i
The related rental expense for 1994 and 1993 was $83,895 and $81,489, respectively.
- 10. HENEFIT PLANS National Rural Electric Cooperative Association (NRECA) Retirement andSecurity Program -
KEPCo participates in the NRECA retirement and security program for its employees. All employees of members of NRECA are eligible to participate in the program. A moratorium on contributions was in effect for the period July 1,1987 through December 31,1993 due to reaching the full funding limitation. Ilowever, during 1994, the moratorium ended and KEPCo resumed its contributions. In the master multiemployer plan which is available to all members of NRECA, the accumu;ated benefits and plan assets are not determined or allocated by individual employee. KEPCo's pension expense was l
$23,319 for the year ended December 31,1994. KEPCo had no pension expense in 1993.
i r l m-y r.
-,r
Substantially all employees of KEPCo also panicipate in the NRECA Savings Plan 401(k) option.
i Under the plan, KEPCo contributes amounts not to exceed 3%, dependent on the employee's level of participation, of the respective employee's base pay to provide additional retirement bene 6ts. KEPCo contributed approximately $31,497 and $30,595 to the plan in 1994 and 1993, respectively.
Wolf Creek Nuclear Operating Corporation Retirement Plan - KEPCo has an obligation to the WCNOC Retirement Plan for its 6% ownership interest in the Wolf Creek Generating Station. This plan provides for benefits upon retirement, normally at age 65. In accordance with the Employee Retirement income Security Act of 1974 (ERISA), KEPCo has satisfied at least its minimum funding requirements. Benefits under this plan reDect the employee's compensation, years of service and age at retirement.
Provisions for pensions are determined under the rules prescribed by SFAS No. 87. The following sets l
fonh KEPCo's share of the plan's actuarial present value and funded status at November 30,1994 and l
1993 (the plan years) and a reconciliation of such status to the financial statements as of December 31:
1994 1993 Accumulated benefit obligation:
Vested
$ 419,936
$ 423,782 Nencested 152,783 178,577 Total 5 572,719
$ 602,359 i
Fair value of plan assets S 778,781
$ 739,335 j
Projected benefit obligation 1,230,407 1,492.578 1
Projected benefit obligation in excess of plan assets (451,626)
(753,243)
Unamortized transition amount 123,379 130,636 I
Unrecognized net (gain) loss (432,848) 3.745 l
Unrecognized prior service cost 51,392 58.688 Accrued pension liability 5 709.703
$ 560,174 1
Plan assets are invested in insurance contracts, corporate bonds, equity securities, U.S. Government i
securities and short-term investments.
l Actuarial assumptions.
1994 1993 Discount rate 8.5%
7.0%
Annual salary increase rate 5.0%
5.0%
Long-term rate of return 8.5%
8.0%
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e 4
i KEPCo's share of the net periodic pension costs were as follows for the years ended December 31:
f i
1994 1993
}
Service cost
$ 188,080
$ 162,180 Interest cost on projected benent obligation 115,402 103,453 i
Actual return on plan assets 56,637 (48,439)
Other (107,636) 8,972 l
l Total pension expense
$ 252,483
$ 226,166 l
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- 11. CONTINGENCIES l
l Litigation - There is a provision in the Wolf Creek operating agreement whereby the owners treat i
certain claims and losses arising out of the operation of the Wolf Creek Generating Station as a cost to j
be born by the owners separately (but notjointly) in proportion to their ownership shares. Each of the owners has agreed to indemnify the others in such cases.
3 As is the case with other electric utilities, KEPCo, from time to time, is subject to various actions which l
occasionally include punitive damage claims. KEPCo maintains insurance providing liability coverage; j
however, the insurance companies generally reserve the right to challenge insurance coverage for punitive damage recoveries. In the opinion of the general counsel of KEPCo, there is not a significant J
probability that, as a result of pending or threatened personal injury actions, KEPCo will be liable for l
payment of actual or punitive damages in an amount material to the financial position of KEPCo.
i Nuclear Liability andInsurance - The Price-Anderson Act and its amendments currently limit the l
public liability, including attorney costs, of nuclear reactor owners for claims that could arise from a j
nuclear incident to $9.0 billion. The Wolf Creek owners (Owners) have liability insurance coverage of this amount which consists of the maximum available private insurance of $200 million and the balance is provided by an assessment plan mandated by the Nuclear Regulatory Commission. Under this plan, t
the Owners arejointly and severally subject to a retrospective assessment of up to $79.28 million
($4,76 million - KEPCo's share), in the event there is a nuclear incident involving any of the nation's I
licensed reactors. This assessment is subject to an inflation adjustment based on the Consumer Price j
index. There is a limitation of $10 million ($600,000 - KEPCo's share) in retrospective assessments per incident per year.
l The owners of Wolf Creek also have decontamination and decommissioning insurance for loss resulting l
from damage to the Wolf Creek facilities in the amount of $2.75 billion ($165 million - KEPCo's share). Nuclear insurance pools provide $.5 billion of coverage. Nuclear Electric Insurance Limited l
(NEIL) provides $2.25 billion. In the event of an accident, insurance proceeds must first be used for reactor stabilization and site decontamination. The remaining proceeds from the $2.75 billion insurance coverage ($165 million - KEPCo's share), if any, can be used for premature decommissioning costs up i
to $250 million ($15 million - KEPCo's share) in excess of funds previously collected for l
decommissioning.
)
i The owners of Wolf Creek have also procured extra expense insurance from NEIL. Under both the
[
NEIL property and extra expense policies, the Company is subject to retroactive assessment if NEIL j
losses, with respect to each policy year, exceed the accumulated funds available to the insurer under
)
that policy. The estimated maximum retroactive assessments for KEPCo's share under the policies f
total approximately $1,620,000 per year.
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f h
l :
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In the event of a catastrophic loss at Wolf Creek, the amount ofinsurance available may not be adequate for property damages and extra expenses incurred. Uninsured losses, to the extent not recovered through rates, would be assumed by KEPCo and could have a material adverse effect on KEPCo's financial condition.
Nuclear Fuel Commitments - At December 31,1993, Wolf Creek's nuclear fuel commitments (KEPCo's share) were approximately $1.6 million for uranium concentrates through 1997, $15.7 million for enrichment through 2014 and $7.2 million for fabrication through 2012.
RUSDevelopment-KEPCo has received notification from the RUS that, because KEPCo's financial statements are not in conformance with generally accepted accounting principles, as discussed in Note 1, the RUS will evaluate all requests for action on the basis of financial information prepared as if the straight-line method of depreciation and amortization had been used.
12, FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value as set forth in SFAS No.107:
Cash and Cash Equivalents - The carrying amount approximates the fair value because of the short-term maturity of those investments.
Temporary Investments, Decommissioning Trust, investments in Associated Organi:ations and Bond Fund Rescere - The fair value of these assets is based on quoted market prices at December 31,1994.
Variable-rate Debt - The carrying amount approximates the fair value because of the short-term variable rates of those debt instruments.
Fived-Rate Debt - The fair value of the 6xed-rate debt is based on the sum of the estimated value of each issue, taking into consideration the current rates offered to KEPCo for debt of the same remaining maturities.
The estimated fair values of the Company's Onancial instruments are as follows:
December 31,1994 Carrying Value Fair Value Cash and cash equivalents (including restricted assets)
$ 9,803,038
$ 9,803,038 Temporary investments 1,018,451 981,267 investments in associated organizations (including restricted assets) 2,763,977 2,923,551 Ilond fund reserve 3,928,086 4,092,167 Decommisisioning trust 2.047,869 2,024,724 Variable-rate debt 40,500,000 40,500,000 Fixed-rate debt 186,609,344 185,419,505
- 13. OTIIER MATTERS On December 31,1992, the KCC issued a rate order allowing KEPCo to collect $859,000 per year through an increase of.66 mills per kwh in KEPCo's energy rates effective January 1,1993. The increase allows KEPCo to recover additional property taxes resulting from legislation passed during the 1992 Kansas legislative session.
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