ML20127J219
| ML20127J219 | |
| Person / Time | |
|---|---|
| Site: | Grand Gulf, Arkansas Nuclear, Waterford, 05000000 |
| Issue date: | 12/31/1984 |
| From: | Lewis F MIDDLE SOUTH UTILITIES, INC. |
| To: | |
| Shared Package | |
| ML20127J165 | List: |
| References | |
| NUDOCS 8505210411 | |
| Download: ML20127J219 (51) | |
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Abotit the Cover I Skillatpersonnelandsepbisticatedstrbnology
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i l Abbreviations: In this report, references to Middle South Utilities companies are as follows: MSU or Company . . . . . . . Middle South Utilities,Inc. System . . . . . . .. . . .The companies of the Middle South Utilities System (excludes Electec) AP&L. .. . .. . . . Arkansas Power & Light Company - Associated . . . . .. . . . Associated Natural Gas Company Electec. ..... . .... .. . . . Electec, Inc. l LP&L ,. .. . . . . . . louisiana Power & Light Company l MP&L .... .... . . . . . . . . Mississippi Power & Light Company ! MSE . . . . . ... . . . . Middle South Energy, Inc. MSS. . . Middle South Services,Inc. l . .... . .. . . . . .. l N OPSI . . . ..... . .... . . New Orleans Public Service Inc. SFl . . . ...... . ... . .. . . . . . . . . . . System Fuels, Inc. .
Performance Highig3ts 1984 1983 % Increase Total Operating Revenues (millions) .. . .. . $3,146 $2,910 8.1 Total Opemting Expenses (millions) . . . . . . . . $2,593 $2,439 6.3 Fuel, Purchased Power, & Purchased Gas Costs (millions) . . . . $1,446 $1,474 (l.9)
' Operating income (millions) . . . . .. .. . . .
$553 $470 17.7
' Allowance for Funds Used During Construction (millions) . . . .. $537 $426 25.9 Net income Before Cumulative Effect of Change in Accounting Method (millions). ... . . .
$491 $378 29.8 Net income (millions). ... ..... . . ... . .
$508 $378 34.5 Rate of Return on Average Common Equity . . .. ... .. 15.71 % 13.79% 13.9 t-Earnings Per Common Share on income Before Cumulative Effect of Change in Accounting Method. .. .... $2.76 $2.46 12.2
- Earnings Per Common Share . $2.86
. ... . . .. $2.46 16.3 Dividends Paid Per Common Share . .. . .. . .. . .. $1.74 $1.70 2.4 Retail Electric Customers at Year-end ... . . . . . 1,641,691 1,613,797. 1.7 Retail Electric Energy Sales (million kwh) .. . . . 51,138 48,350 5.8 Sptem Itak load (megawatts) . .. .. .. .. . 10,456 10,870 (3.8)
Net Utility Plant at Year-end (billions) . ..... . . . ... $11.4 $10.2 11.6 Construction Expenditures (millions) . . . .. . $1,299 $1,454 > (10.6) Average Number of Common Shares Outstanding (thousands) . . . 178,084 153,383 16.1 Tabe of Contents Chairman's i.etter to Stockholders . . ... . . . ... . 2 19M in Review . . .... . . . . .. . . . . . .. . . .4 Financialinformation Report of Management . . . . ... .. .. . .. . . .. . .17 Auditors' 0 pinion . . . . . . . . . . . . . . . . . ... .. . . ... . . ..... .. .17 Management's Financial Discussicn and Analpis . . . . . . .. .. . . . . . 18 Consolidated Balance Sheets . . . . . . .. . ...... . .. . .. . . .... . 22
. Statements of Consolidated Income . . . . . . . . . . ... . ...... . . .. .. . 24 Statements of Consolidated Retained Earnings and Paid-in Capital .... . .. .. ..... . 25 Statements of Changes in Consolidated Financial Position . .... .. .. .. . . . . . . . . . . 26 Notes to Consolidated Financial Statements . . . . ... .... . . . ... . .. . . . . 27 Corporate information . . . . . . .... . .... .. ... .. . ............ . . . . . 45 1974-1984 Financial Record . . . . . . . . . . . . . . . . . . . . .... . . . . . . . . . . . . . . . . . 46 Middle South Utilities Directors and officers. . . . . . . . . . .... . ...... .... . . . . . . . . . . . 48 Corporate ldentification . . . . . . . . .................... .. ... . ... . Inside Back Cover 1
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Clairmalfs Letter to Stocooers
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The significant accomplishments of sour O>mpany in 1984 and the chal-r.. i , t ,,s. # l' - j < {# _j lenges that it ercotilitered are chroiii- 9'.< jgy ~. , 4 '.t: ^ ;4 :4 7-e s cled in the Annual Report sections that s],f; j ycy.;. 2 C y .fi; . . ,, jj .y follow this letter. I encourage vou to %f ~ i .. . . * * '
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lhnt \l leuu Garrman l'rnadent "E Middle b.olith recorded ili e\Ces5 oI' b~ i bdhon in revenues dunng 1981 Total tem counted some 63.461 customers per household f.or the entire year 1949 nsenne for the year amounted to $ 41; in its thnetate semce ; uni The growth wa3136 kilowatt-houm and after an i bdhon. an amount that surely would of our Sunbeh service area h;b almost mcrea3e of more than nine-fold. the 1 ' have seennd mcredible to our counter- tripled the customer IKoe to more than aserage use per househohl in the Mid; 16 mdhon b the end of 1981 dk South mtem in % wa3 8 parts m 19a9 when th Compans s d hrst scar resenues were <96 a milhon hrhaps the nnt ese-opening growt(1 kdowatt hotirs Put aiiodler w3. the statistic of Middle South's E sears of electric energy that a typical famik
'? At the chise of 1919. wia n Middle i existence is the phenomenal uwreax used over an entire tear in 1919 would South had been in existence for about m average electnc energs use bs our run out after about m davs at our sesen months. the Middle South Svs i residential customers the aserage use - l r
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usage rate today. Meanwhile, the Company's for- the companies have been merged This usage rate, together with in- malized strategic planning process since 1981; however, regulatory creased use by the other three catego- prosides the framework for continued approval for full consolidation is ries of retail customers, tallied up to a progress. System operating companies pending before the louisiana Public n> cord lesel ofelectricity consumed across share a common goal of maximizing Senice Commission and the Securities
'the Middle South System in 1984.The System operating efficiency to provide and Exchange Commission.
total amount: 51.1 billion kilowatt-hows. . both reliable and reasonably priced
.. senice to customers and a fair retum NewBoardsem6er1/ected A DMN#l#I8 to Middle South Utilities stockholders. At the 1984 Annual Stockholders la the months ahead, the System's Managersthroughoutthe System know Meeting, Mr. Kaneaster llodges,Jr., was long-mnge program to gain a broader, that access to financial markets and elected a Director to fill the vacancy more balanced mix of generating fuels investment capital on reasonable created by the retirement of Mr.
will be more fully realized. Commer- terms depends on a consistently fair George E Bennett, who had sened on cial senice of the Grand Gulf I and rate of return to Middle South Utilities the MSU Board since establishment of Waterford 3 nuclear units will com- stockholders. the Company in 1949. Mr. Ilodges is mence this year, following only months To help meet this challenge, the an attorney and former United States after commercial operation of the coal- System operating companies, Middle Senator from Arkansas. fueled Independence 2 unit in Decem- South Senices, Inc., and Middle South On behalf of the Board of Directors ber 1984. Energy,Inc. have proposed a com- and my more than 13,000 fellow With these major construction promise plan to resohr two rate cases employees in the Middle South Utilities projects behind us, the Company will before the Federal Energy Regulatory System, I thank you for your continued have the opportunity to re-establish Commission regarding cost allocations support of our efforts. better quality earnings. As the invest- of the Grand Gulf I nuclear unit and - Sincerely, ment in new units is reflected in the contractual agreement under which customer rates when the units go the operating companies plan and - mto commercial operation, non-cash operate the System s power pool. Addt-earnings imputed on funds invested tionally, the System operating com. Floyd W. Isis in construction will be replaced with panies have proposed phased-in retail Chairman / President cash eamings. Additionally, energy rates to spread cost recovery for two sales increases, combined with the new nuclear units over a number of Company's continued emphasis on years, thus reducing the impact of reducing operating costs, should have increasing rates on customers. positive effects on the Company's The Company also faces the earnings. challenge of completing the consoli-For the more distant future, the dation of New Orleans Public Senice Company believes that its diversified Inc. and louisiana Power & subsidiary, Electec, Inc. offers interest- Light Company, to reduce costs and ing opportunities. Chartered in 1983, gain operating efficiencies at both Electec's early success in marketing companies. A number of activities of various aspects of S) stem expertise and resources indicats considerable potential ~ for attractive long-term earnings for Middle South Utilities. 3
1984 In Review gas and oil, since these fuels have not nuclear units will boost the System's Progress Nade Ton'ard been stable in supply or price since nuclear generating capacity to 23.4 A BroaderFuelMir percent of total generating capacity. the Mideast oil embargo of 1973 The year 1984 was a notable period I" '" " "" " for Middle South Utilities, Inc. for a oil se s be ter as esfo te. Waterford3 6e/s
"" # mediate and peaking generating low-Fon'erlicense e1 ic ene > ta stome c p city, the type of capacity that can A low-power operating license for efficient operation of a nuclear be started and stopped as customer the Waterford 3 nuclear unit, near Taft, generating unit at levels surpassing needs rise and fall during the day and Louisiana, was issued on ikcember national averages; and initial success on a seasonal basis. 18,1984, following several months of Electricity raration By fuel l>pe A significant milestone towr . greater intense scrutiny by the Nuclear @ # "N fuel diversification was reached on Regulatory Commission (NRC) staff.
August 31,1984, when the Nuclear Two independent consultants who lllkl3@ Regulatory Commission (NRC) issued a full-power operating license for participated in the review of Water-g Grand Gulf Unit 1 in Mississippi. ford 3's quality and construction m 4 historv concluded that the unit was y { f' Another milestone was achieved on one of the best built in the industry
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coal-fueled Eneratin5 S cAUacity was <gxration <{the kler)ord) uniffdlon ing receipt Nrbr oil C Gas expanded when Unit 2 at the Inde- ,fa inu -po,nr <y= rating tercuse en iAmna , C Gd wnm%w - ma % pendence Steam Electric Station in ,,'1QHg"Kg";,f' h' ""s """Ple'"' wra
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Arkansas began commercial operation on December 6,1984. in developing business for the diver- Coal now accounts for 11.5 percent nie naterAd3 nuclear ur,it usa co<airia uwier sified subsidiary, Electec, Inc. during of the System's total capacity. The A," d'e viaiuitvi ri,cr in its condensers. 'hus its first full year of existence. But . additional 2,229 megawatts of capacity ",'",'"llll"# "".,"llffy"/",%7""'lf,,#l"l.', f i none of these other achievements is from the Grano GulfI andWaterford 3 plana
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more important than the significant - , . strides taken to shift the System's
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customers and stockholders alike.
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the shift to coal and uranium for base 'N load capacity has been a comple-mentary reduction in the System's 3m historically heavy reliance on natural 4 i L
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power test program to a ; percent ; 42.yh - l9 ; o :.G 17 . M( -j . ; " ' power level. the NRC is expected to 14 y yl. dy M ;h.:;. ; '4 ./ . approve power axension testing and fufl power operations. bPNb expects to y t< w.y:yn.g.f [.[ y [ y. d4E$7~ p14 f g ' j ;;L,y place the unit in commercial operation - yvvy yr y . y y. y y y .( ay}ggg? 7 ' - l' Ly. ;1N 11 e %ac: ;qqq yy q during the first half of 1985' .
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personnel Middle South Entrgy is a generating subsidiary of Middle South L M,'J) ; - l l'tilities and 90 percent owner of Grand N. g / l k% % " ~ -- Gulf. I'nder an agency contract, _ rd"d 6'd/ / "a / "lara*>r' r""I'""e I" Ic't /^c i Mississippi Power & Light. also a sub- Itntt at mcreastngig higher jurutr Ier ris rnorIng ' sidiary of MSI.. supervised construction 3,y y,a pgf p,,y c, ,y,g,y,,y,, and will operate the Unit for the 1.125 megawatt 3 of the 1.250 nkyawatt
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Sntem. capacity The remaining 125 megawatt 3 following extensive testmg at are owned by another utihty. South Mississippi Electric Power Associatioil lhe co<s,ny son,v /or crans cul/ I na I t riyhi/ incTeabing power levels. the tinit is Allowallce for flillds l' sed During Con- d """ " "' l"d ' C""'/"'""" / C""'"'"" /" expected to he ill Commercial opef'ltioll manI nru lear ana foudluelgeneratsne plants Nonlellme during the second qtiarter of strtiction ( All.DC) accounts for more ,, ,, u ,,y ,o am ,p,a, 3co, f,n,,, ,3, ,,,,,,
< trrui. ding in the plant s rondemets u hn h < on l985 al a projeCled cost of approNI than one th ,d of the pro lCcted tota l matel) $3 3 billioll for Middle S<> tith cost of GrariL (iiilfl'lut 1. (See page li [7((,[,[j$,[y71 for an e\phthallotl of AfllIi /rar ine the by, of the r<wding tourr Energv's owflership 5 hare. WIlich is h
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Arkansas Nuclear OnJ budgeted cost of $3%8 million. This during the first half of 1985. Addition-8tation's Generatingzevel project was described by a national ally, work to improve the System's c nsulting firm as an example of transmission network will progress. ExceedsindustryAverage state-of-the-art power plant construc-Low-cost electricity generated from tion management"The 842 megawatt Cornpany Presents seed uranium has been providing sub- ' unit, which is 56.5 percent owned for Grand Gulf 2 cus ers of Ar Powe Light P" At the Grand Gulf Nuclear Station Company (AP&L) since 1974 when d pPw . , , in Mississippi, construction on a p" second generaung unk has been the first of two units at the Arkansas ompani t f rth oal- eled Nuclear One(ANO) Station began unit of similar design built by the .4ng rxenyde commercial operation. ANO Unit 2 Mississippi Public Service Comm,ss,on ii System sin 1980. which began commercial operation in conducted hearings during the fall 1980, achieved an 80 percent capacity lou'er Construction of 19M on the need for the capacity factor during 1984, which is its best and energy from Grand Gulf Unit 2 Fapenditures F2pected ever.This operating levelis well when it is scheduled for commercial above the industry lifetime average of hl1985 service during the early-1990's. In 63 percent for pressurized water S) stem construction expenditures for those hearings, System companies reactors. The ten-year-old ANO Unit 1 1985, excluding nuclear fuel costs, cited expert conclusions that even operated on a similarly high capxity are estimated to be $965 million, down under very conservative assumptions level before it was shut down for significantly from the $1.3 billion about demand growth in the System's refueling on October 18,1984. Because construction expenditures by S> stem service area, the unit will be needed of the plant's performance, AP&L companies during 1984.This reduction by the time it is scheduled for estimates that its customers saved reflects the System's recent completion commercial operation.
$190 million in fuel costs during of several major generating units. Construction on the unit is approxi-1984, compared to the average cost of Construction-type activities during mately 34 percent completed. Work fossil fuel used in other AP&L power 1985 will be directed primarily toward on the unit, however, has been slowed plants. completing the testing of Grand Gulf while Middle South Energy devotes Unit I and Waterford 3, so that these its resources towards getting Grand Coal-Fueled Generating units are put into commercial senice Gulf Unit 1 into commercial senice.
Cafxicity thpanded The second unit at the coal-fueled Indeper.dence Steam Electric Station, Construct /on Program nuncmemrnw near Newark, Arkmsas, was placed into commercial operation on December 6, Unit Company Fuel - 31egawatt Scheduled 1984, appmximately one month capacity commercial ahead of schedule and below its resised UPC'*ti"" Grand Gulf L' nit 1 MSE Nuclear 1,125* 1985 The ow/ pile, shren Aft. hcIng unrect!at the Water [Ord 3 LP&L Nuclear 1,lM 1985 tuncit liukyvm4.nce 3 team Hatric Atal/on " Grand Gulf Unit 2 MSE ' Nuclear i*125* omtains hne sulfur oudfmm mines in the nnahr Rinsliasin tfil_)vming the nud is delinvol umhr a 20) var tram (mvlatium cemtract u hkb belfS tUsurY aN skinfuate and n%hle kne auf
- Mpawnts llw \plem's antis punt ViL intnyst in livse 1,RU AlW umit fudsuslpy "w %te M too tow omsotkt. ant Iinamial \tatemenn. Tummaments anal omttngnu tet" 9
FinancialMarkets Show ($65 minion in Louisiana Power & Systern Companies Receive ' Light Company and approximatelY RateIncreases ConfidenceIn MSU $102 milhon m Middle South Energy), i Duringlpgf The financial condition of the J to repay certain short-term bank Actions +sa t helped clarify and Middle South Utilities Sptem is closely loans, and for other corporate stabilize the Sptem s financial future related to the adequacy of rates purposes. were factors m the Companys granted by the various regulatory continuing ability to obtain necessary bodies having jurisdiction over the Mith//e South Energ), outside financing during 1984. For openuing c mpanies. During 1984, example, licensmg milestones for the lncreaseS Borrou'//#S# and two System operating companies two nuclear units were especially 6e/s Cred// Er/ensionS Louisiana Power & Ught Company and New Orle4ns Public Senice Inc., important. During 1984, Middle South Energy were allowed to adjust retail elec-(MSE) achieved a milestone as a tricity mtes due to higher genemi NewShareS of rmancing subsidiary by securing more business costs. The Louisiana Public NSUStock /ssued than ss33 million of additional capital Senice commission, in sepamte actions During the year, approximately 23 to meet its cost requirements related to on February 20,1984, authorized Grand Gulf. These funds were provided miHion new shares of Middle South mte increases of approximately $69 through issuance of approximately $233 Utilities (MSU) common stock were million annually for LP&L and approxi-issued, netting the Company more million in two sepamte pollution control mately $24 million annually for
- than $278 million of additional capital revenue bonds sales and approximately NOPSL The continuous stock-offering pro- $300 million in first mortgage bonds.
At various times during 1984,Sprem gram,which allows the Company to The proceeds from one pollution control "Penuing companies filed ekctricity decide daily how many new shares revenue bonds sale of approximately . are merede requests with their
$200 million are being held by a trustee of common stock it should sell respective state regulatory agencies.
through this mechanism,was used and are expected to become available These rate cases reDect numerous periodically throughout the year and for use by MSE sometime during 1985. e N.nnal incess in the cost of pnv raised $33 million on the issuance of Additionally, Middle South Energy ' nding electnc senice as well as 2.9 million shares. In June, a negoe received extensions of repa) ment genemung umt additions effective in tiated sale of 9.2 million shares of schedules for portions of its existing late 1936 (Independence 2) or first MSU stock to underwriters pmduced debt, to allow time during 1985 for half 1985 (Grand Gulf I and Euer-some $112 miHion net pmceeds to the Grand Gulf Unit I to be put into ford 3). Ahhough the exact allocation Company, with the underwriters re- commercial operation. of Gand GulfI' nit I s capacity and offering the shares to the public. The Sprem's operating companies enwunongik opemtingcompanis An additional 10 million shares of raised capital during the year nmst k &tennined by the Federal MSU stock were purchased by stock- thmugh the issuance of one or more of the following: additional preferred Enggy hyukuory Cmunhion (FERC) hoklers participating in the Stockhokler dns subint a, preentalin delad Dividend Reinvestment and Stock stock ($65 million), first mortgage el3ewhere in this report), all of the Purchase Plan. Net pnxeeds to the bonds ($325 million), and pollution nue cae aHow for Haibility by stare Company fmm the sale of these shares contml revenue bonds ($220 million). nyulatory agencia so that thee niad was $119 million. At the end of The $220 million of poHution contml nue cm nent not k &laval hv revenue bonds pmceeds includes 1931,33 percent of MSU stockholders I kugMy E pnmunh ' were participating in the Plan. appmximately $105 million,being held At yeaand 1941, Sptem com-Proceeds fmm the Company's sale in a cash collateral account,the pro-pania had pending, or were appealing, of common stock were used to pur- ceeds of which are expected to become electricity rate increase totaling chase $167 million of the common available later in 1985. approdnutely $658 million. stock of the Company's subsidiaries 10
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- The pending rate requests of Regulatory Commission (FERC) research ana se,rl,y,meni ,f,ru are pnnaing Arkansas Power & l.ight Company, because the Unit's pcwer wiU he sold n"r t"W' 'VP<t**#inf" 4/iddle **'h "'-
f Slississippi Ibwer & l.ight Q)mpany, in several states. In accordance with $'3"#",,$""[$',*"3,7,"$,#^N,',,y,,y f and New Orleans Public Service Inc. applicable regulation, a Unit Ibwer rad o=dMatrenenainj untu rn +4 ansa, inChlde proposals to phase-in the Sales Agreement Was Suhmitted to the *"'###ff(",k#";"'#"j",##["#[""#"##[,,'^
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. . afw>lentialy ruluableacidneutrali:crfe Cial optration before depreClation tnmsactions between SISE and the 3,uthern arkans,ufannians has a significant impact. The phase-in operating companies for Grand Gulf I l plans are designed to allow the capacity and energy. In that same year, getting 1 i p rcent SIP &l,taking 33 per-l operating companies to increase a new System Agreement under which cent, and NOPSI having 17 percent.
revenues while significantly lessening the operating companies plan and On lanuary i,1985, the Sptem i the initial impact of new plant costs operate the Sptem s power pool also operating companies and SISE filed a on customer bilb. was filed with the FERC. compromise settlement plan with the in february 1984 the FERC l [f8C C(MS/dPTS ((pc jnyolVing a two-step pnress for
' H H en n alkrating the capacity and energy of 1
- Crd//d 61//[l///// / -
Power Sales Agreement pneuling Grand Gulf Unit 1. The first step would j A// Oral /0/1 reached an initial decision that SISE's include the period from the Unit's date 1 niike other generating units in 90 percent ownership of Grand Gulf of commercial operation through l i the Sptem, Grand Gulf Unit 1 b owned Unit I capacity and energy should he aHocated to the four operating companie i hv Sliddle South Energy (SISE), which I is regulated by the federal Energy with APKI. receiving 36 percent, l.P&l. Il
l I December 31,1990. During this period Administrative I.aw Judge hearing the The suit was originally filed in 1974. MSE's share of the l' nit woukt be alke System Agreement case rendered an United Gas has appealed the court's cated to the four operating companies initial opinion that would allocate decision. Meanwhile, Mississippi as fol'ows: AP&L 17.1 percent; 1.P&I., Grand Gulf Unit I capacity and energy Ibwer & Ught has a similar suit pend-14.0 percent: MP&l.,19.0 percent; and based on the ratio that each operating ing against United Gas. NOPSI,17.0 percent, for a total of company's annual demand bears to 67.1 percent. The remaining 32.9 percent the annual demand of the entire RetailElectricitySales wouki he " inventoried" by MSE and System. /hlihest hl could, under certain conditions, he sold The percentage alk) cations from Company's ///Slory to utilities outside the Middle South the three proposals are presented in The Sutem's total retail electric I tilities S) stem. 0therwise, energy fmm the chart below. Additional informa-
,, energy sales reached the record high the inventoned capacity would be sold tion on the settlement proposal is m-lael of 51.1 billion kilowatt-hours to System operating companies at the cluded in the Management's Financial b IM This eard uw was 5.8 per-cost of energy displaced which wouhl Discussion and Analysis section of this cent higher than 1983 usage of 48.4 he generally lower than total c dts for Report (page 18)'
billion kilowatt-hours and 1.8 percent power from Grand Gulf l' nit 1. On February 22,1985, the FER(, During the initial allocation directed all the parties to these diffi-Srstem Retailcustomer period, the Companys stockholders cult and complex cases to attend a umr/cny t/ sage (uounhun) would share in the cost of the settlement settlement conference beginning , through a lower rate of return on a March 12,1985. u - partofthecommonajuityinGmndGulf si l' nit I than they might otherwise have IP64 eindN0/5'I , __ 3: realized. The Company's consolidated /Inarded Damages for ,, EE- E net income on an annual basis could CasSup/dy Disruption . EEE E be reducal by appmximately $50 million, or about 25 cents per share, during the in August, Louisiana Ibwer & , M initial phase of the settlement plan. Ught and Neworleans Public Senice , E E E E E' In thesecondphase,beginningin Inc. were awarded damages totaling
$M million by a Civil District Court
" EEEEE
,mmmm 1991, all of Middle South Energy's capacity andenergy fmm Grand Gulf 1 in New Orleans in a suit concerning woukt be sohl to System operating failure of United Gas Pipeline Company higher than the predous record of companies. to deliver natural gas as stipulated in 50.2 billion kilowatt-hours set in on February 4,1985, the FERC long-term contracts with the companies. 1981. A kiknvatt hour, a standard measure of electric enemy use, is atual to the electricity used to light a 100-
.11ajor l'roposalsjbr Allociding ,11Slh Share ofGrand Gul f Unit I watt bulb for 10 hours. Residential Capac//y ar,dlinergy mmwn customers in the Middle South System AP&l. l.P&l. MP&l, NOPSI paid about 64 cents for each kilowatt-l' nit ibwer Sales Agreement Case-hour they usal in 19M.
Initial Ruling. . ... $00 14.00 33.00 17JM) An km in d@y uw mal System Agreement Case- in all four cim of atad cuMomas,
' Initial Ruling . . . 33J)0 41JM) 161H) 101)0 ,
prodding &ar Widence of economic Settlement Plan by S) stem Companies: Through 1990 (67.l",, total) . 17.10 14fM) 191H) 173X) After 1990 (100",, total) . 27.87 27.48 24.42 20 23 aa,p,,, p ,,.w e,e, s, mr,e w,,,mammm- m son *~ *t~n 12
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t recoven in the Setem service area mdication of the lhlrd of ihrectors percent ingher m los4 tiun the 1984 after the recession of the early 19Su s comnlitment to a colisistent dnidend operatnig expenses of 52 +i bdhon Industrial customers posted a b7 pa\ ment pohc\ \ liddle south l tiktas consohdatnl percent increase in electricits use o\er "'I " I'"' "' I" I "* ' " #"S " " U ' "" - Non-Cash Earnings Hoos/ 1984 Commercial customers usage . 41; percent lugher th.m the 14Si
%.; b llp , b })ercellt. Ne51delltlal salts I98i k.nancial Results '
The Compan\ s l9s total o!wr "*""'/*'"""*"""'a""'" were 4'9 >ercent I higher than lys; un tnes in the pnn eutng .tnd madtne of slon k ($o\erflinelllal lbagt' %;b sIni,ltl) NI N IN"D II# FICC"IbI '*dd47 </narterh dn eden / c /wv ks sinee /monnel n/ d yu/d/c south sen u e s ( mputer I enter
;lho\e the \ ear earher ! "" II'W $ I"Id! "Ppr;g[;;jg began /wrforming thn /une (ton thew synrattorn lncrea5ed t'lectrlcll\ Ibage. sllch ;ls IC\CIIIk5 f S19l hdh'II' ( }pCIAIIIlN uvre moto/in /wnne in /hv ember /%4; /nnn expene o h lon Were b 5 #v Com/nsni s trana/er acent tilb. polllis C\en Illore strollgh til ecollonlic reco\er\ since the \ liddle '
South area experiencnt a cooler than-a\crage summer; thlb. the Suteni s peak Inad durmg 19S-1 %;b 5 S percent , below the 14S4 peak Peak load n ' the one hour during the \ ear when the , 5ntem custoniers ein1ricit\ ns. ige ggg ; is the inghest }
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net income of $378 million. llowever, A//on'unce for Funds Eleclec Narkets carning per share of $1.86 reflected [Jsed1)nring Construction Systern Capabi/ities a more malest increase of 16.3 percent As a geneml mie, various ngulaton- ElectecistheCompany'sdisusified above the $2A6 level aclueved m ' agencies have not allowed Ssstem subsidiary chartered in December 1983. The earnings per share increase operating companies to increase rates 1983 to market the System's capabili-Operating #erenues and Evpenses to cover carrying costs of funds ties, expertise, and resources, and to
% raised to finance new generating and participate in cogeneration and small su transmission facilities which are not power production projects. During 33o m yet in senice. These costs include its first year of operation,it moved
,g g @ interest on horrowed funds, dividends aggressively to establish a foundation sa )
gI g g on preferred stock, and a reasonable for marketing a wide range of S) stem return to the common stockholder. senices and capabilities. The scope su E llowever, such costs are expected to be of such efforts included: prosiding tech-
,to J
EEEEEEEEE recovered through revenues once the nical support to the People's Republic
- IEE5 EEE facility is pl ced in service. Therefore, the estimated amount of these costs f Chin f r the 5 kV Xu hou-Shanghal Hansmission Une Project; s o I- is added to the value of the project successfully blarketing the S) stem's
" **** under construction, and an offset is training expertise to Arkansas iluman El it'l'bt' tat 8"*"' recognind in the income statement Development Corporation; completing M ***'t" of the current year. This accounting video production projects; and con-umnurw"* practice is widely used in the utility tinuing the sale ofindustrial grade water
! industry to remove the impact of from one of the System's generating was held down by the 16.1 percent construction financing costs from stations to an oil and gas drilling greater average number of shares current earning, and it has the effect company. outstanding in 19&l. ofincreasing net income without Three principal factors contributed producing current casli for the to the ilicreased financial perform. Company, ance. Vir3t, there was a $110 million, or li9 percent, incn'ase in the Comparhon of& stem Construction Etpendituresj>r utility Allowance for Yunds l' sed During Plant and Alknmncef>r hands UseiDuring Construction Constniction (AlFDC) which does not (A/vnc) pnnide cash to the Compally. Second, %, l a change in accounting method, '""' 8 "* relating to delivemi but as )tt unbilkd gg energy, was impkmented by Inuisiana Ibwer & l.ight in March 1931 and 8"a 8 "a' gggg made effective January 1,1931, and this change h id the effect of increasing i 8 aa aa gg the company 3 net earnings h> $17A 8a mMEEEEEEE million.or s.10 per share.1hird, a >= Qi BBBBEEEEE electrlC operating reVelllies Illcreased 8 8 E ilEEEEEIEEE g , g 9 percent, rel}ecting the lllgher customer use, as well as rate increases U"*'""*'""""' granted to Certain S))lem companles during the year. 19
)(( k[f ikO N NI b((((((f8 iS)$[f/// SC;illillllg l}l;ll ellahllS 11 to anllCipale Icels 50 Slfollgl\ alhHij the ikTCSSil\
future Changs m the huSiness and of pnsenmg the noClear opimn .unt l Is Dedicated 7h long-7erm econo n& n Us manner. Utl my n Mong W nh Coa l to di\erSlf\
<Yl1*(llfglC l'[tllill[Ilg general eConoml0 f}oreC;bts are it3 fuel sources The path Charted for the Compam valuable to the Compan\ s strategic plallllefS ht'C;ttlSe ClPCIflCll\ deill;llh! l b Sel loflh ill a CIe:lTh dCIlllei! niiSSloll 5talenlell! alld %el ol CofptH'lle objef illkl Colbllillpfloll ;lfe e\ptiled II)
Nd hl'*H#"I '3*"/"f" *""It" /'r"' *A' liVt3 The Chief e\eCllll\P o(([Cer al track CCononHC RfoWlh. Most UCononHC
< morihnatalJttrrisort for alllas ets of 'tukile t"lCh Col 11 pall \. Ill liifn. plalb hn lofef;bt> lihllC;lle eCollonlle grow 1h wuth I /ds/scs prats,irrs aridp4nerrir'x <!nm th;ll will llleall UICTc;bHig ilt'ed II)r mitter members trulude /41/torryht/
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Middle South Utilities, Inc, & Subsidiaries Report of Management The management of Middle South 1:tilities,Inc. has prepared and is responsible for the financial statements and related financial information included in this annual report. The financial statements are based on generally accepted accounting principles, consistently applied. Financial information included elsewhere in this report is consistent with the financial statements. To meet its responsibilities with respect to financial information, management maintains and enforces a system of internal accounting controls which is designed to provide reasonable assurance, on a cost-effective basis, as to the integrity, objectivity, and reliability of the financial records and as to the protection of assets. This system includes communication through wtitten policies and procedures, and an organizational structure that provides for appropriate division of responsibility and the training of personnel. This s> stem is also tested by a comprehensist internal audit program. The Board of Directors pursues its responsibility for reported financial information through its audit committee, composed of outside directors. The audit committee meets perodically with management, the internal auditors, and the independent public accountants to discuss auditing, intemal control, and financial reporting matters. The independent public accountants and the internal auditors have free access to the audit committee at any time. The independent public accountants preside an objective assessment of the degree to which management meets its responsibility for fairness of financial reporting. They regularly evaluate the system of internal accounting controls and perform such tests and other procedures as they deem necessary to reach and express an opinion on the faimess of the financial statements. Management believes that these policies and procedures provide reasonable assurance that its operations are carried out with a high standard of business conduct. Aucitors' Opinion Deloitte Haskins+ Sells 39th Floor One Shell Square New Orleans, t.ouisiana 70t39 The Ndhoklers and the ikxttd of Directors of Middle 9xith l'tditin,Inc.: We have examined the consolidatalbalance sheets of Middle siuth rtihtin, Inc. and its subsidiarin as ofIktemixt 31,1936 and 1983 and the relatal consolidatal statements oflocome, retained eaming, pan! in capital, and changn in financial p oinon for each of the thnt ) tars in ihe ptml entkd Iktem!xt 31,19si. Our cuminations were made in acairdance with generally acceptal auditing standards and, accordmgly, includal such Ints of the acconting nrords and such otint auditing pnxeduro as we considerni necosary in the circtmtstance. In our opinion, the abme mentioned om>lidated financial statements prnent fairly the fmancial psition of the Gimpany and its subsidiaries at ihrember 31,19&l and 1983 and the rnults of their ogrations and changes in their financial poltion for each of the ihnt 3rars in the Pfl<x! ended Ihremher 31,1936 in conformity with generally accepted acaxmting principin, comistently applin! during the stial, except for the change, with whkh we conmr,in 1946 in the methal of nrordmg rornun by one of the subsidiaries as dncntul in Note I to the cottvilidatal fmancial statements. f umn wss 17
Management's Financial Discussion and Analysis i Mmmcist Crmdstirm raised rates for sale of powrr and energy ruluirements associated with the commerdal anumg de S)*m paung compania in operation of Grand Gulfl' nit I and,in &&l's Rate increasa implemented in 1983 each of thee pmceedings, various parties, case, Waterf<rd i The AP&l., MP&l, and NOPSI and 1984 along with reord electric sales including state regulator authorities, hase rate applications inchxlaf rate moderation to retail customers and a 10.6 percent decrease advocatal psitions which would hase tir pnpsals by which die companies wwld dekt in comtruction expendiruns helped strengthen
& MsoldtanuaHyincmadngdmtsing collectim fmm custonuts (mer the first sental the Middle South Sntem's financial condition de pmble impact of Grand Gulf l' nit I and 3rars of ogration of Grand Gulfl' nit I) of a in 19&L liowever, by year +nd 1984 the W terford3upon thevariousSptenuprating portim of the related prcha>W parr expensu Sntem was rapidly appnuching a c-itical
' c mpanies and their retail customers. depending upon each company's aHocation point that would determine whether de l'nder traditional unlity regulatory and reponsibility (as determined by the FERC) imprmement in financial condition that principles, whdeale rates appnned by the for buying Grand Gulf l' nit I smer. LP&lls ocairmlduring 1986 wadd condnue well into IT.RG for the sale of capacity and energy fmm rate application induded a rate mmkratim 1985 and beyond. The Sprem's future Grand GdfI'nh I by MSE to the Sptem pnpsal gitaining only to the deferred fmancial condition remains dependent (pmung mnpania wmkl be charged to retail rec nrry of a prtion of the cats associatal upon placing two nudear fadlines into o>mnxtdal operation, pnsently schedidal W4" M d O 44 *d ""N #MO'**'D Mdd hadlwn inkndal to be aHocatalm enain Finandal Statemens Rate and RegWatory for the second quarter of 1985,'and the om ddrSwan<pnungansmiotunnxteng ManenD current nreipt of a&tpate rate rdlef udiannxtdal ognuon d the unn. Uyu/dity G C<piledhsourres sufficient to reoner the Sntem's inmtment Houw,in c nnedlm widicontnnmin in thee facilities and to Earn a return on wine d* P"ind 1982 to I94h the surmurxling the cmt of powa from Grand t;ut im.erment gg MidueSmthSpran kdcnnstmcumnptWi-gg,g i g i , The Sprem,s inctnxtit in coidtrtrtion gg turn wtahng $ t1 biHlon, Indudng aRow-work in pmgnss (C41P) wm appnnimately ance for funa usalduring omstnrtion k6n'de Eimsing,amongode diing,
$66 bdlim at )cartral 19&L an incnme of W d$h3 biUion. AppmWnately66pt-
, the alkration of the ash of Sprem gnxfating 11.7 percent mer 1983 and 31.7 pfcent mrr cent of de alvnt total motmetim apsxhtuns 1982. When I nit I of Ihe Grand Gulf Nudcar M d@wWy@ wrn fun &d thnogh nternal finandnp. - M h dd@m lhe appmxhing commercial <ptarim ofloth Statim (GramlGulf t' nit 1) and tir Water 6td 3 up
- bdomdde Nuck'ar Station (Waterf rd 3) are placed in Grand Gdfl' nit I and Water 6td 3,nstted to comnardal ipntion Al1x:, a major com' hdMMkW ocar during tle swond quarter of 1985, will
,. w dd Mlaare a mid M 67J ptcent d de svent of carning in nrent irars (If4 pt- g g g.g g mkre theimy fmandaHonknopfexn! cent of net income in 1986 h wdl ctme 19 de M*m in rnent yean mdung from Grand Gulfl'nn I to the Sprem spuung acondng on tlase two uniu and earnInp will comtnrtion ofilw two units. TRd Sptem he aamdy affatalbylleme of opndm mm p e d e d a dd motmcuon opendturn(irrhding Arlo and the reardmg of aprwtation ns1tse f a um d h 4Gdu's Id Q 6e 1985,1986, and 1987 are numatal to he g tinse units unins aatpate rate rdief is $96t8 miHion, $'019 mdlim, and $6H3A MGmidGdil'na IwmMnpmmunwrid dilairkd. The nTelpt of rak relief linkd to , gpjjl ion, repntht'ly in ;hkhlk0, lNmtMt, adh-omunerdal aptatko is tinft 6te critical. Honalcapital mpdmnenb odmatal to k in omixtthm with the tutd 6e rare Sbd W M m M'ap .. appnnimatdy $9196 mdhm 6e the pfim! rdief, run imprtant pnatWmp are orrendy 19r,.pp7 wmW mdt if attain cma aws-
- Renb anMoungendo404 Nwn Sab t daldwhhGundGdf UnH I andWater6td3 pikhng Counioim heforeHild:), thetiroutome Inkfalo Dutgy whidi Rtfndahry are &famtin acoed.untwnhtle muoly-
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i ad nure,if the Sedenent Ofkt submmn! to the usdtmu,ayaruuiumampna 11r first, the Unit list Sale Agntnrnt pro. of appnninutdy $227 mdhm wmM he l cmbng, rdates dirntly to de allocathm of M W d dWE ad mpurn)in tir 19851987 stkd to Inane l gyay capuity arnl etutgy front MSE's dure of Gratal tir emb awdaint widi Graral Gulf l' nit i s l At hutdo3h P&uhddr$*m Gulf rmt i ankog de 4*m centir:g u p ap W W M.d me h e I""Und cavity (awming tir immhrkd companh lle snwd, tie New SpMn upxny b sul to de M*nupnung , l Agnrnumt pneulmg Inw6n,In getufal, mpots pinhng p gg p ng g a h,gn kitelidt rndwmr state cnmpmin at a a4 opal toitr Spkm in,.atm.pne4d 6r ine d nonue +cw d e-- 18 1
wmJ MSE and all of the Sptem operating has jurisdiction to appmve NOPSfs securities pnnide for pre-operating expuses and intenst compania haw pending or will shortly fde mte sales. ( See Note 2 to the Consolidated Financial chargts of StSE,(iv) to gimit the a)ntinuation m{ tests in connection with the anticipahd Statements " Rate and Regulatory 5 tatters") of commercial opfation after commence-commercial operation of Grand Gulf l' nit i The Sptem operating comptnies are ment thereof, and ( v) to pay in full all indebt-and/or Waterford 3. It is not possible to predict currently authorized by the Securities and edness f<r borrowed money of MSE when due. what decisions the FERC and the various state Exchange Commission to make short-term AISE contemplaks construction expenditures, public utility commissions will render in thee b rmwing in an aggregate amount outstand- including AFDC, of $737 million in the primi pmemlings. Ihmmt,if the recmtry of the ing at any one time of up to the ksser of $413 1985-1987 for construction ants associakd onts associated with titse plants is not per- million or 10 pttct11t of capitalization, subject with its 90 picent ownenhip in Grand Gulf. mitted on a timely basis by the applicable to the availability of funds thmugh bank These otimated expenditurn assume that regulatory agencie, the financial poition, lines and other credit sources. At Dttember 31, Grand Gulfl' nit I will be pixed in commercial carning, and liquidity of 'he companies will 19&i, the Sptem operating compania had no operation in the second quarter of 1985 and be adversely affected, depending on each of the existing short-term bornmings outstanding that only a limiksi amount of omstruction on Sptem operating company's plans and under bank lines of cmht, in comparison, Grand Gulf I' nit 2 will be ptfornxil during capabilities. This pniblem is more acute with at Decemht 31,1983, and 1982 outstanding the 19S5 1987 perial S!SE currently otimates nspect to LP&L and NOPSI, each of whose Nenming ammmksi to $78 mdlion and that it mil mjuire appmximatdy $158.1 millim aNhty to finance its requirements is currently $45 mdlion, respectistly. l'nused bank line of to meet its captal (includmg debt service) limind as docnksi below. credit amounkd to $322 million, $266 million, rapiirenrnts for the primi fmm Starch I, l The alortgage and Charter cmtrage and $193 million at Decemht 31,193i,1983 1985,untd the ot;makd comnvrciahytation l ratic of the Sptem operating companies and 1982, nspttistly. Akhtlonally, the four date of Grand Gulf l' nit 1. (See Note 8 to the l hmit the ammnts of atkhtional fint mortgage Spkm opfatmg companics, together with Omklatal financial Statenrnts "0:nmit- , knals and preferred stock that they may SISi t,11SS aml SFI, are auth rimi to participite menu and Gotingencio-Cipital Rapiire-l iwue to finance their omstructhm programs in the Sptem money not (Sw Note 4 to the ments and financing") l arxhxht capital mpiirenrnts. ILisal on tinse Onnolidakd Financial Statemenb "I.ino lit tir prialfolkmingcomnrixrnrnt i ratio at Iktemht 31,19&l, the Sptem of Crnht and Rdatallbrnminp") of commercialiptatha of Grand Gulf l' nit l l oprating compania, othf than I.P&L omld The Q)mputy must be able to sell its ihnogh the end of 1987, $1SE will mpiire i hae inual an aggnpre of appmsimately comnw o stock in irdtt to maintain an acalit- appmximatdy $2.314 million to rtfina:Ke l $79') millim of a(khtkmal first nurtgage hvxh ahte capitil stnxture and to pnwide the maturing hakhtednos, induding the Iktem-l (plus any knxis inun! for refunding par- Sptem opfating companks and StSE with kt 31,1986. maturity of its $1,711 million pecs), xib}cct to the avadaNhty of bantible a&hthmal furah to cotinue dielt cotistnKtion donxstic htnk Inari agrtemerit, to nxtt sinkirg pnpity, or appmximatdy $236 million of pmgrams. l>uring the par en&d IktemNt fund obkgations, and to finance continuanon preferm! stock, assuming an annual internt 31,19S6,the 0>mpany inuni an aggnpte of of costructum of Graml Gulfl' nit 2 on a rate or preferrni dnkkad rate of 15% Tirse 23,08Uno shans of common stock that limitnl buis (Sw Note H to tir Onnolklihd Splem <ptating dunpanks had sufficient pnnkkd de Oxupany with net cash pnnub financial Statements "Onnmitments and unfundn! hmdabkTpnetty av;'itable at of appnnimatdy $278 mdhon.The Gimpany coungencin-Capital Rnlutremenu and lintmht 31,1986.to twue an aggnpte of usnt tlase funth to purchase a(khtlonal financing") Prior ta lktcnht 31,1986, slSE appnnimatdy $572 mdlko in fint mortgage annnwo stock of certain of its sukkharks, nptts to retire a significant portion of tle
- hoik h year end 1986, IJ'ali carning to repay rnohing bank henming, and for in&hintnew undt ib donwstic hank loan omfage were sah that it wrold har hrn othf orprate pirpus in Iktrnht IWi tie agnement with fumb gnatatnl Imm tir
[mlialid fn mi twuirig akhtu mal fint nu rtpgt- Oimp.uiy enkful itito a irw revohing cmht coruttutdal opfation of GntxiculfI' tut I alal hunh (nart for rtfundmg pirpus) and agnrnrnt wnh varkos banks that pnnkks cmklhar tumd mly a minimal amount of for herowing of up to $71,5 millka thnogh I prefermiste Akhtimalirrreaxs hicartung iktenht 31,1985, all of whkh rtmatoni ihnogh timdy and adopnte rate rdicIwtil unuwd at Iktrnht 31,1986 le owntul to ptmit cmtinun! ules of th3e in conntion with Grand Gulf, tle senkt ko.nths in annonts suffKlent to Osmpany ha urukttaken to punide it cauw Im, uke nhtnally lle Splemi caplal ropare- to le prm kkt! to %lSE suffkicht capital (l} to nwnts. Furthinvec, NOI$li aNht) to sdl ib mamtain $15Ei oputy capital at an anuont MCintks will abile dp1xkot upo satisfac- at lest epul to 3% of total capitah/ation, tory rnolonon ofib dnpute wnh tir New (ii) to nostn(t and pixe in <ptahort tle Oricam Oty uorwil as to wlethf that bdy two unib of the Grand Gulf Statioti. (lii) to 19
l from additional external financing. In addi- which reflects the Sprem's increasing invest- from a colder than normal 1983-84 winter) tion, MSE expects to be able to apply the ment in GlP, omtinues to mnain a substantial and a NOPSI rate incmtse implemented in pmcteds (appmximately $206 million) nteived portion of net income. Once Grand Gulf l' nit 1 December 1983. As a result of lower gas onts, in Decemixt 1981 fmm a sale of pollution and Waterford 3 kgin commercial operation, gas purchased for nsale irread 15 gtcent in contml etnue txnh to a mhxtion in anwunts presently scheduln! to occur dunng the second 1986. In contrast, the 1983 gas rornue outstanding under its domestic bank loan quarter of 1985, the impact of AFDC on ntt increase was almost entirely the rtsult of a agreement within 90 dap after the commer- income will decrease substantially. 119 percer,t increase in the cost of gas cial opfation of Grand Gulf l' nit 1. MSE will Earning gt share on Middle South purchasal for nsale, directly billed to cus-be required to seek an extension past 1986 of Utilities, Inc. common stock increatl to tomers, while MCF sales decreasni by 2.0 per-the balance of the borrowing under its $2.86, up fmm $2.46 in 1983 and $2.33 in a nt, compam! to 1981 domestic bank loan agntment which are 1981 The substantial 1984 increase ocmrml Delermi fuct and other expenses then outstanding and not retimi through the despite a 16.1 gictut greater avtrage numler of mereased by $102 million, or 28.1 percent, foregoing measures. shares outstanding in 19&l ont 1981 during 1986 as compartd to an incmtw of $75 During the perkx! 19851987 the Middle Electric o faring rarnues increased tw million, or 26 gfcent, during 1981 The Smth System will require appmximately $243 mdlion.or 9.0 gfcent,in 1944 compaml variability in thne anmunts is primarily the
$1,328 million to meet &bt maturities anti to an increase of $43 million, or 1.6 ptcent, nsult of Auctuatims in defemd fuel onts cash sinking fund regulmnents, and to make in 1981 The large 19&t increase was due ont time, which renect Ductuations in the preferred stock sinking fund redempions. The primanly to an increue in retail energy sales not of energy and amounts bdkd to custonxts Ornpany contemplates that a substantial por- for all customer classifications. R6rnues in of proimsly defermi fuel cists. Sixh incn ases loth years benefital fmm nnkst rate incmtses also relktt the increased onts of labor, tion of tlee mluitenxnts will be fundn!
timogh external sources. Implemented during 1983 and the first materials and supplies, and senices. quanaof19s Totannau turtwinacasnM39 Results of0pemthms fnergy salo to rttail custonxts increavd milkm, or 118 pftent,in 19shux! $9 nullum. The Middle South Sptem's net income by 5.8 gtcent in 1946 to 51.1 billion nil, or 35 pmot. In 1983 hecause the incnase for 1986 was $508 million, an increase of reaching its higlet toel in Sptem hntory. In pre in look income were greater than the appnnimately $130 nullkm, or 36.5 pfcent, in contrast, retail ehrtric ulo in 1983 offwtting inemtws in nurtkd AR 4'. The 1936 mrr 1983 and an mcrease of appnnimately arread by 10 ptcent. Ret.ul saks nprially incmtv can alw be attnbutal to income
$198 mdlion, or 617 ptcent mtf 1981 to irx!ustrial arxl amirixtetal aistonxts ha tatn of $16.5 million rtsutting from the Thee significant incmtws were t!r roult of continuni to impnne since lamumnxt 1983 cumulative effat of a (hange in acconting a numlxt of factors. Fint, ArtC for 1986 as businns activity in the Sprem'nmice metlyd by IP&I.,
inacased approximattly $110 nullion, or area ntmrnd from the 19483 recosion. Intenst on lonplerm debt incmtvd 219 ptcent, mrr 1983 and appnnimately Fnergy salo to industrial aistonrrs inctntsal $107 mdino.<c 202 ptant,in 19si and
$186 nulhon, or 512 ptcent, mrt 1981 l#7 pmnt in 19si compand to a tktmtw $ 61 milhon.in 8 4 ptcent,in 1981 primanly Sounal, clatric operating rornun liKmtwd of 46 pfcent in 1981 Similarly, comnxtclal baauw of incmtud amounts oflong term mt loth 1983 and 198216 tis as a roult of energy ulo increan! 7.6 pfcont in 1981 debt out3tandmg Odat intenst1wt for 1986 incmtw I ret,ul entgy ufo, tellatmg the compam! to a I 6 pfcent &treu in 1981 increawd by 21.5 ptcent comparnt to a %3 cmtinuing upwing in comnic adnity of Saln to rnkkntial notomen intmtud 39 ptcent iktrew fic 1981 Tlr 1986 hwmoe the Mkk!!c South regim, and ntul rate ptcent in 1936 whde Arresing hss than nsidtni from inar,twd internt rain on stort-Incmtsn grantal and implementnl during i pfant in P181 The 1981 incmtsc can be term turnminp w!ule tir 19d Atrexc was the laner part of 1983 and the fint ipirter of attnbutnl to oAkt th.m normal wrather due to a rnhation in etternal $lort titm 1986 Finally, not inonne for 1986 inacanl etstk ncnlin early PEI whde fairly normal hornminp and a attine in intenst ratn on try $17.6 nuthon or 10 cents pt share a a wr.nlut omddiom prnadolin 1981 forneing nsult of the cumulatne effect of a thange in Ga opraung rninun Atreen! by cu onnng natlnl by it&l, offameluxur) 1, appnnimately $7 nulhon, or 14 pretnt, in 19s6, to nrognue nm futi relatal tornue p;86 compamt to an inarse of $21 nultim, Ingn urrgy allutnlbut not )tt bdtni AFIC or 11.9 ptamt,in 198311r 1986 drarer o a stattage of net income was In6 ptomI wa annbutable to an 18 6 pternt dan aw in in 1986,shglaly bmt than tir look in 19M t!c ont p r Mtf of ga ntmttnlihnogh t!r act 19x2 Iwpur this imprmtmtnt, Arl< futi a4ninrnt dauw, partially of fu t 19 a 4 I pftent trxtnty in Mtf ula (whkh nsidtal 20
1 Nudear Units Since late 1983 construction activitics at in construction expenditures in 19si kvened On August 31.1936. the Nuclear Grand Gulf l' nit 2 have been reducal by MSE the Sptem's nml for additional aternal in ordtt to further concentrate its fmancial financing. These factors are indicatise of the ikgulatory Gmmission (NRC) issutti a full pmit opfating license for Grarx! Gulf l' nit I resources on Grand Gulfl' nit 1. SISE pnsently Sprem's impnnni financial omdition. Ilow-intends to complete Grand Gulfl' nit 2 which 6er,lxwnning in 1985. the Sptem wutdd afat cunpk%m of kmf pmtt testingin wuuld pmvide the capacity nenled by the nen! a significint amount of addniotial capital Noumht 1983 and succtsful resolution of attain issues raisal by the NRC. The facility Sliddle South Sptem to meet projected Sptem if rate nn!cration pnemals were aapal loads in the early 19)tfs. MSE will continue with rectt to the reonery of act3 a+ociatal is noW mkktgoillg cttlain n' pairs of ING. nuclear empitx nts notkt! to be onuplekd with limited construction leading toward with the commercial optation of Grand Gulf nsumption of full omstruction unless variota l' nit I and wantfird i furtlutmore, rnolution by de end of Slarch 1985. l'pu ampletion (4 this work the unit will notinue with its subsapent factors cause nronsideration of the of s6eral difficult and aimplex iwun trfore omprelarsive pmtr ensism progam, pt Mtente toampkteGmWGulkmt 2. de E rebtmg to h docadon okapaaty expttnl to take sental months then afkt to (Sw Note 8 to the Consolidated Financial and enitp from Grand Gulf l'mt I. induding Statements "CommitmentsandContingen- the Settlement Offtf submittalby certain cunplete. O mnxtdal tpfation is now pn> jttkd to xtur by the axl of the strond quar. cies-Grand GulfI' nit 2.") MSE presently Sptem o>mpanies, will hase a significant kt of 1985 at a total cost of 53 2 billum Er accrun and capitalizes AFDC on its imistment impact on the Sptenn financial omdition. MSE's9n% shareof theus t(excitahng M M M N 2 at die mte of approxi- l'inkt the settlement pnpisal, die Company's mately $8 million gt mor,th. If progess stockholders would share in the ont of tle nuckar fue4 If mmnxtcial' atka is alayal tr>ux! the staxi q, kt f( 1985, towrd completion of Gand Gulfl' nit 2 is not settlement thn ogh a h m er rate of return on a fin.uring chann aka w di aikt an estimated Imding to a nspisite dtyte, mxkt applicable strt of tir comnuo opity in GnualGulll' nit I, 329 mdin o pt month to de ntimatul total regulatory principles, this accrual may be due to kmtr annual ro enon derisul fnim the cost il MSE's share in GrxMulf l'mt 1. ropirn! to ame. Tlw assatko of AfDC wmld unit, than they migin odwrwise realize. nsult in a like decreme in MSE's earning The knancialIralth of the Spkin adi 1.P&l. trilors that Waterfoid 3 is esen. and in a hke decreme in the Company's dep1x1 upe the ahhty ildr Sptan opfat tially completal and ready for opfation. On earning on a omsolidatal ban. ing a npanieni sn un aikyuate anil umely Decemht 18, IW, the NRC issual a 5 pfcent Egyts o[hilathmf rate nIrf rudd to oner the cot 3 associatn! pmtr license It* Waterford 3. and IJ'&l. he g, g w nh the in senice statuul crand Gulf I' int since completnl fuel loadmg at the unit. lj%I.s . I amt waterEed 3 Adquate and timely rate t9rp6d ElW,Nmpad on dr $tm s reltf s nsentialif the Mstan opfatirigom preent etimate of the slrdde for Wahtford 3 is that aimmitaal operatiin cold be "PT"U""' I" "*""I I"#5 W"'" M"#" panies are to le able to pn n kle the pintating attainnlity the end of the wond quarter of cant W Now h to de Omolklatal ca tity atal odat rtworen inttwiry to FmanciaNatnnene Ufedenhuonon IW at an otimatn! totd ost for tie unit sine the pnsent amt futun nutgy rnpun' UE """""' W"'"dd"b,,I (ndudmg nuclear fuel) of $2333 bdhorL nrntui ther msticats, and if dr umpany Iknmer, mmnxtciahetation of Waterfont 3 Summary is to ootar to pnnkle a remnake n turn b omungent, among otlar thinp, upon Tir SpkmbntnH Dn.mtd oiidano loitulotkh"kkfi satisfactory nsolution of varHn ISiio tlie hu emn knpnnenrnt our dr pt thnr nttipt from lle NRC of a full pmit (pfating W#t nptully in 19M4 Tlr whst.udul henne, and tir ampledon of tle pmtf j,tn.w,in Inst nd hmx nsuhn! fnm, axensko aml tnung windde witimt nnosial anmg odwr Odno the unreumg anumi of delan kordmgly, onnatclal opfau<o by MDC,utnkan' W dr spunnomnag t!rnxlof dr wrinhpuhtofIW cannot h" u ostna tu o progam, rate la re.en gantnl assural if comnwrcial aptatko k dela>nt M utt.un of da sph m opoung ompm. bc>ond the wond quukt, Imandng clurK" nord rttad chirr sab rnulung fnm de ahme wdi adi an nunutol $12 5 mdhon unpnwnrta in busurmhtany in dr sp pt month to !!e nunutal total ont of tir gn, e rsu uddr maanneiIht ""E ilan hooittingihangr by ll%l,in di nrtlu d il rn ogni/mg nwtur, hi adidu o, Or atn ec 21
Mider South I'tHities, Inc. & Suinkliaries Consolidated Balance Sheets I)kwnber31,1984 and 1983 ASSE75 1984 J2!.i (ln busands) l t Utility Plant (Notes 8,9, and 12): Electric . . .. . . .. .... .... .. .. ... ... . .... .. . .. .. $ 6,258,019 $ 5,688,426 Natural gas . . . . ... . . ... . . . . . . . . . . . . . . . . . . . . . . . . 120,292 117.&l8 . l Onstruction work in progress . . . . . ... ......... .... .. .. .. 6,615,424 5,923.619 Nuclear fuel . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... ... . .. .. 300.912 212.924 Tota!......... . ....... ...... .. . .. . ,, .... 13.291,647 11.962.417 i Ins-kcumulated depreciation .. . ...... .... . .... .. ... ... l.856.101 1496c475 Utility plant-net . . . . . .. .. ...,,..... .. ... . ..... I1.438.446 10.247.962 Other Property and imestments. . .......... .............. ... ... . , . 7ll742 75.979 ; Current Assets: Cash and special desmits (Exe 4) . . . . . . . . . . . . . . . . . ...,,.. .. ..... .. 29,8MO 21869 hmprary hm'siments-at cmt, which appmximates market. . . . .. ....... . .... 429,320 9,129 Nwes recchable . . . . . . . . ................. ..... ................ 2.H07 2,663 komnts receivaNe: , Customtf (less alkwmce for doubtful accounts of $5,753.000 ; in 19&l and $3,VB.000 in 1983) . . . . . . . . . . . . . . . . . .... ......... ..... 165,501 174.936 Otlmt . ........ ........... ..... ... .... ............... 40,662 43.025 Acnmi unbillo! mentas (Nwe 1) . . . . . . . ..... ........... ..... ...... 36,977 - ReceivaNe from gs contract settlement (Nue iI). . . . . ......... .. ......... 250.000 l Ik ferrni fiaI cmt . . . . . . . . . ....... . ... . ...... ... ... ........ - 3.698 fuel lmentory-at autage cmt @ote 4) . . . . . . . . . . . . . , ........ ........ . .. 152,7H0 110.076 . Materials and supplies-at average ant. . . . . ....... ....................... 72,3H2 61865 1%3nyments and ollut . .....,..... .......,........... .... ... .... 49.l76 26.177
%Aal . . . . . . . . . . . . . . . . . . . ............... ... ...,. 959,6H5 70U9x Ih frrred ih456ts . . . . . . . . . . . . . .... .... .. .......... ...... .. . H5.758 ?)SI l
l 1UTAl...... ....... , ...... .......... .., .. ... ..... IlM5M31 M)MI!/$ 1
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$_.md CAMTAU7MONAND UAMIB1ES 19M 19s.5 (in %wuls)
Capitalization Common stock, $5 par value, authorized 250.000.000 shares; issued and outstanding 189,167,328 shares in 1984 and 166,082.128 shares in 1983 . .. . .. . . $ 945,837 $ 830,411 1%i-in capital . . . . . . . . . . . . . . . .. .... ... . . .. .. . 1,435,570 1.271,152 Retained earnings (Note 7) . . . . . . . . . .. .. .. .... . ... . I.MO.839 899.979 Total common sharehokkrs' equity . . ... . .. .. . ... . ... 3,472,246 3.001.542 Sulmidiaries' prefermi stock (Note 5): Without sinking fund . . . ... .. . .. ..... .. ..... .. ... .. 330.967 330.% 7 With sinking fund . . . . . . .. ..... ... ...... .. .... 476,928 429,601 long-term debt (Notes 6 and 8) . ..... ,,.. . .. . .. . . .... .. . 5.M77.149 5.032.175 Total . . . . . . . . . . . . ..... . .... . . . . ... ... . . .10.157.290 H.79L285 other Nm Current I. labilities (Note 1) . . ...... . ...... .. 55.N3 37.052 Current IJabilities: NrAes payable (Notes 4 and 8): llanks . . . . . . . . . . . . . . . . . ... ... . ..... . ..... . . .. . 10.000 114.573 Commercial paper. . .. ..... ......... . .... ..... .. ... 135,1NN) 123.0no Other . . . . .. . .. . ......... ... .. . ... ............ ... .. 6H,625 50.i71 Currently maturing long term debt (Note 6) . . . . . .. .... ..,,........ 21H.662 228.w) kcounts payable . . . . . . . . . . . . . . . .. .......... .. .. ... ........ 262.592 271391 Gas contract settlement-liabthry to ontomers (Note 11) . . . . ... .. . . .. ... . 62,652 58.H86 Ikfermi fuel crat . . . . . . . . . . . . . ... . .. .. ... . . .... ..... ..... 43.3ll - Ostomer drposits . . . . . . .... ................. . . .... .. .., . $N,206 53.285 Taxes accrued . ... . ...... .......... .... . . ....... . No,lii 75.576 kcumulated deferm! income taxes (Note 3) . ... . ........ .... ...... .. (10.015) ( 5.322) Interet accrued . . . . . . . . . . . . . . . . . . . . . . . . ......... ........... 2tm.HW 161.% 5 l*ldends declared . . . . . . . . . . . . . . . . . . . . ... . .. ....... . IN,493 92.583 MKlear refuehng rtwnt (Note l) . . . . . . . . . ... . ............ .. 19,106 12,651 0tler... ............ ........ . .. .. . . . ............. 723.12 41#/> Total . . . . . . . . . . . . . . . . . . . . . . ... ... . ........... .. _ l.316.921 1.288.135 Ileirrred Credns: kommlated difermiinavne tasn (Note 3) . . . . ,,. ... .. .. ....... ....... 435,791 377,46M Acumulated defermi inminwnt tax cmhts (N de 3) . . . .... .. . ... 70,54M 73.Mi9 Gm contract wttlenwnt-Ilabikty to ontomers (Note 11) . .. .. . .... .. 651,216 475.ml 0tler....................................... . . .. ....... 70161 61377 T0t41................ . . . . ... .. .. . . . ........ ._J.0[N,212 'lN7Mi Ownm6tments and Omtinprncies (Notn 2. M, and 9)
'IUTAl................. .. . ...... ... ..... . ..... ,. l jl,2$5j glHZ U
Middle South Utilitks, Inc. & Subsidiarks Statements of Consolidatec Income lir the lines Endstiihremher31,1984,1983, and 1982 1M! M M (In ihnaands) Operating Revenues: Electric . . . . . . . . . ... .. . . . $2,959,570 $2,716329 $2.673.572 Natural gas . . . . ,.... .. . . ... . ...... I86.4 5 1 % 328 172.692 Total . .... . . .. .. .. . .. . .. 3.146.035 2,909.657 2,846.241 Operating Expenses Operation: Fuel for ekctric generation . . . . . . . . . . .. 1,020,280 H2.219 1,066,325 Purchased power ... .. . .. .. . . 291,129 373.712 345,076 Gas purchased for resale . . . .. . . .. . 134,420 158,186 138390 465,713 363,509 288,283 Deferm! fuel and other . . . .. ..... ... Maintenance . . . .... . .... .. .. .. ..... . 161,433 149,453 132.031 Depreciation . .. ... .. .. .. . . . .. . 192,452 183,171 167,725 Taxes other than inceme taxes . . . ... ... ... . .. .. I10,799 106,493 101.381 income taxes (Notes 3 and 12) . . . . 216395 161.570 157.514 T'>tal . . . . . . . . . . . ... 2.592,621 2.439313 2397.22i Operating income . . . . . . . .. ... ............ . . 553.414 470346 469.039 Other Income: Allowance for equity funds im! during construction (Note 1) . . 301,123 245,6i0 182,342 18,090 6.799 7,133 Miscellaneous income and dnfuctions-net (Note 12) . ... . income taxes-credit (Notes 3 and 12) . . ... .... , I6 M 12 141124 132.959 Total . . . . . . . . .... ... . . ..... ... ... . 479.655 485762 322.434 Interest and Otiwr Charges: Internt on long term debt . . .. ....... .. .............. .. 636,390 529.597 488,750 57,388 47.251 74,1y) Other Internt-net . . . .... ...... . . .. Allowance for lorrowed funds tml during construction ( Note !) ... ..... (235,873) (180.858) (170,438) Preferred dividend rajuirements of subsidiaries , , ,, ... . , . . .., 86353 _8n.0(4 (M% Total . . . . . . , .. ... ...... . . .... . 562.258 476.0 % 4(A878 income liefore Cumulathe Lifnt of a Change in Accimnting Metimd . . . . . . . . . . . . . . . . ... . . . . 490,H11 378,050 310,595 Cumulative Effect toJanuary 1,1986, of Accruing l'nhilled Itnenues (net of income tases of $16,5 68 timusand)( Note 1) . . .. . .. __IL626 Net income . . . . . . . ........................... .......... @g U78p! $ 310.595 Earnings ltr Average Ommum share: ikfore cumulathe t(fat of a th.inge in aconinting metin! . ... . $176 $2s,6 $233 Cumul.ithe effat toJ.inuary 1,1986. of accruing unbdin! menum-net . . ..... ........ . ... ..... .. . D IO u.d ...... ...... . ..... . ... ..... .. e
$1.75 gt
$1.71 g
$167 l*ldrmin Ihslared Per Gimmon Share . ..... . ..... .........,.
her.de Number of Commim shares outstaml6ng . . . , . . . . . . . . . . . . . . . . 178.ON3,867 113,383.1164 133 19),.%
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;i Statements of Consoicatec Retainec Earnings anc. Paic.-In Capita. "
fvr the Wars Endalikwnber 31,198L 1983, and 193.? 1984 1399,1 1282 (In Thrusands) RETNNED EARNINGS Retained Earnings, January I . $ 899,979 $ 790,487 $ 705,776 Add-Net income . , , 508A37 378,050 310,595 Total , 1,408A16 1,168,537 1,016,371 Deduct: Dividends declared on common stock-$1.75, $1.71, and $167 per share for 19&l,1983, and 1982, respectively. 315,811 266,762 224,825 Capital stock expens(s, etc. l.766 1,796 1.059 Total 317,577 2(6.558 225331 Retained Earning, December 31 (Note 7), $1JM0,839 $8!y)379 $ 790A87 PMD-IN CAPITAL Pald-in Capital, January I . $1,271,152 $ 994,760 $84),833 Ak!; Excess of net pmceeds arr par value: Public saks of common stak: 9,200,000 shares in 19&6 66,148 - - 15/0)f)00 shans in 1983 - 156,531 - 10Jn),000 shans in 1982. . . . - - 89,800 Common stock issued in connection with: Continuous offering pngam: 2,931,900 shans in 1934 . . 23,361 - - 4,8(a,100 shans in 1983 . . - 52,388 - Dividend reimrstment and stock purchase plan: 10,253,270 shares in 19M , , , , 67,751 - - 6A75,896 shans in 1983 - 62,577 - 5,126,1U) shares in 1982 , - - 39,871 Emphnte saving plan: 539,229 sh. Ins in 19&I , . . >l,1 lb - - 406.200 shans in 1983 - 4.308 - 420,124 shans in 1982 ,
- - 3,732 Empknre stock owumhlp pl.tn 14t801 shans in 194 . 1,216 - -
Otf rr . . , , , 1,766 588 526 Paid in Capital, lhember 31, gg jjgE g) M A+In Omn4/ahulnnamtalMohnentt P b
Middle Smith Utilities, Inc. & Subsidiaries Statements of Changes in Conso k atec Financia. Position Ror the lhors Endal Dxember 31,1984,1983, and 1982 1984 D8] M82 Funds Prmided By: (/n Thriusands) Operatici.s:
$ 508,437 $ 378,050 $ 310,595 Net income (1984 includts $17.6 million special item (Note 1)) .
192,452 183,171 167,725 Depreciation. . 50,867 24,787 14,720 Defermi income taxes and inwstment tax credit adnistments- net Mlowance for equity funds used during construction (Note 1). , (301,123) (245.640) (182342) 450,633 340,368 310,698 Total funds provided by operatims . otfer Mlowance for equity funds used during construction (Note 1). 301,123 215fA0 182312 (20,018) - 1,132,535 Gas contrxt settlement (Note 11) . . . Fun 6 receimi or due from gas supplier (Note 11) 247,526 - (782,197) 7,908 28,136 2350 Determi cats relating to SITS fuel acquisition programs. 25,581 120,915 - Decrease in working ca; ital' 7/44 - 5,232 Miscellaneous-net Total fun 6 provided excluding fmancing transactions. 1.020A37 735.089 850 960 Financing and other transactions: Common stock ... 278,079 409 565 211.135 65,000 85,000 60,000 Prefttred stock 625,000 320,000 185,000 First nxrtgage bona . 399,094 681,222 515,512 Promissory txxes and other long-term debt . Obligations under capitalleases 4,161 - - 628 5,151 25.111 Iku>k value of utility plant sold , Total fun 6 provided by financing and other transactions . 1371,965 1300918 906.758 Total funds prmided $2.392302 $2.2% 007 $1367.718 Funds ApplicilTo: l'tility plant additions:
$1,298,858 $1,453,662 $1393,399 Construction expenditures for utility plant 88,388 59316 51,30)
Nuclear fuel . , , , , . Capitalleaxs . , , . 5.000 - 1392.266 1313.0n8 1 446.703 Total gross additions (includes allowance for funs used during construction) Otixt: 315,811 2(4 762 226,825 Dividends declami on common stock . .
- - 31,628 Increase in working capital * , .
- 598,651 -
Cas contract settlement (Note 11) . . . Fune on hand or due imm gas settlement (Note 11)
- ($25,128) -
Refund to retail customers . . . 74.600 Miscellanents-net . ,
- 9996 -
315.81i 42 6.H81 256 353 Total other funa applied , Financing tramactkm Retirement of promisty notes and other long term dat . 95,169 127,400 68320 80,865 110.297 48,719 Retirement of first nvrtgage imls .. 16,195 7,175 2,9'9 Redemption of preIctmlstock , . . 492.136 53.266 26346 Slutt term aturitus-net . Total funds apphed in financtng tramactmns . 686365 2%I18 146362 Total funik applied . . . . . _$2392302 [21%f,$7 g 9mfraw (lbstraw16n Dotherg Capeld tah arul pod drPaits i a oil 8 (4 Ell f(10iitti lintivd4ct . 9.313 R658 l?31 Furl #menery . 41,*M i Wil4 (14 ef) ( 6*.fm) ( si t ;) 31 3 % Mt'ed 6al one it,4 m (4004 tilH nilif curmd marts 40,921 Ausets pavdile J M.'99 (ll.?fd)) Intreig mut issa sunal * (ll. mod (Rail) (7,4(2) Imbenk htsni (11.91o) Il W il (9 'Wi7) (uter n,rmit lid *htwo gj]4p 4!% (C 9) Edd - M) g) M
*DebIng eapitales tu,kt alwat Irrm e uritM t kverertir m<ttravent l'*tR tus"t nicht. II.e g.o ciattrth I settlenrent. ,\H'll's !Nt i refurhito ret.sti< ustunnen nouldepsent un rare taan on kkd on s urrr+rllushtistM sN .%1* eVoh'5 lel CLIHstdidellt%l llHtlHClel$ Ndl(ttlCHl3
k*t' , j .WJ."T1 I $ s 3 fiddle S<mth Clilities, Inc. & Subsidiaries ,
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Notes to Conso k atet Financia. Statements NOIE 1. SU313fARY OF SIGNIHCANT ACCOUNTING PollCIES A. Principles ofConsolidation The accompanying consolidated financial statements include the accounts of Middle South I'tilities,Inc. ( the Company or MSth and its direct and indirect subsidiaries, Arkansas Power & Light Company ( AP&L), louisiana Power & I.ight Company ( l.P&l.), Mississippi Ibwer & Light Company ( MP&L), New Orleans Public Service Inc. ( NOPSI), Middle South Sen-ices, Inc. ( MSS), Middle South Energy, Inc. ( MSE), System Fuels Inc. (SFI), and Electec, Inc. The alxne companies, excluding Electec, Inc., are collectively referred to as the S3 stem Companies or the Middle South System. All significant intercompany transactions have been eliminated, exctpt as allowed by statement of Financial Accounting Standards (SFAS) No. 71. B. Qstems ofAccounts The accounts of the Company and its service subsidiary, MSS, are maintained in accordance with the Public Utdity lloiding O)mpany Act of 1935 (lloidmg Company Act), as administemi by the Securities and Exchange Commission ( SEC), which has adopted a system of accounts consistent with the system of accounts prescribed by the Federal Energy Regulatory Commission (FERC). The accounts of the operating suloidiaries, AP&L, LP&L, MP&L, and NOPSI, are maintained in accordance with the systems of accounts pascribed by the applicable regulatory Nxhes, w hich systems of accounts substantially conform to those prescribed by the FERC. The accounts of the generating subsidiary, MSE, are maintained in accordance with the system of accounts pnscribed by the FERC. The accounts of the diversified non-utihty subsidiary, Electec, Inc., are maintained in accordance with the system of accounts prescnbed by the SEC. SFI capitalize all exploration and development c(sts related to its exploration activities. These clots are reduced by pmfits realized on sales to non-affdiated companies and are amortized by the units-of-pnduction method in the period in which roenue is recognized on oil and gas reserves produced and sold. C. Revenues and fuelCosts Fhree of the ograting subsidiaries record ekttric and gas revenues as billed to their cus'omers on a cycle billing basis. Revenues are not accrued f( r energy deliwml but not yet billed by the end of the fiscal griod. Substantially all of the rate sci edules of the ograting subsidiaries include adpotment clauses under which the ont of fuel used for generation and gas purchased f(r resale above or below specified kise larls is permitted to be billed or minimi to be crnlited to customers. Prior toJanuary 1,1984, LP&L recognized revenue when billed. To pmvide a better matching of LP&lls rornues and expenses, effective January 1,1936, LP&L adophst, in March 1981, a change in accounting methat to pnnide for accrual of the non fuel petion of estimated unbilled revenues. l'nbdled revenues result from energy delivemi since the period antml by the latest billing to customers. The cumulative effect of this acajunting change as ofJanuary 1,1931 was reconled in March 1984 and increasni 194 net income appmximately $ 174 million ( net of related income taxes of $16.5 million). Ilad this new acajunting meth<d been in effect during 1983 and 1982, consolidated net income bef(re the cumulative effect would not have been materially different fmm that shown in the accompanying financial statements. One opfating subsidiary has a fuel ad i ustment clause which allows current ntovery of fuel acts All the other operating subsidiaries utdize a defited methtd of accounting for those fuel aists nrmtrable und(t fuel adjustment clauses. I nder this meth<d, such ants are defermi until the relatal rarnues are bilk 1.
'llie fuel ad of ment factor for AP&L a>ntains an amount for a nuclear nsene estimated to anrr the ast of nplacement energy when the nuck ar plant is down f(* schedulul maintenance and refueling Tlie asent bears intenst and is usal to m!uce fuel expen.se for fuel adi ustment purpms during the shutdown prial.
- 11. Utilfly Plant andI)epnclation I tdity plant is statal at original act. The owt of adthtions to utihty plant includes contractal work, dintt lalor and materials, alkable mvrheads, and an allowance for the compnite o ot of funds used dunng construction The costs of units of propfty retimi are removed Imm utility plant and su(h awts, plus removal costs, kss salvage, are charged to accumulatal depreciation Maintenance and npairs of pmperty and nylacement of lleno deternunal to be kss than units of propfty are chargni to operating expenses.
Ikyntiatiui k aimputal on the straight-line basis r,t raks htsed on the ntimated sen ice hves of the various chwses of property. Depnriation rain for AP&lls nuclear station, the Sptem's only commercially operatmg nuclear station, include a provi:lon for nuclear plam decommissioning onts. Ikyntiation pnnisjons on aserage thyntiable pnperty approximatal 3A in 198L 1981 and 1981 . Sulstantially all of the Sptem's utihty plant h subj(tt to the hem of tlw subsidiarin' first mortgage bond indentures E lbsin'llrernent liene(Ils Tlw uimpany and its su!Ndiaries base varimn ik fmni potretirement benefit plans antring substannally all of their employns. The pokey of the Gimpany and its sulnidiarin is to fund pension onts accrunt and other pntrentement plan ant 3 as incurmt. 27
EIncome laxes The Company and its subsidiaries file a consolidated Federal income tax return. Income taxes are allocated to all subsidiaries b contnbutions to the consolidated taxable income. Defernd income taxes are prosided for differences between book and taxable income to the extent permitted by the regulatory bodies for ratemaking purposes. Inwstment tax credits utilized are deferral and amatized based life of the related pmperty. G. Mlottancefor Funds Used During Construction L To the extent that the Company's operating subsidiaries are not permitted by their regulatory bodies to recover in current rates the carrying costs of funds used for construction, they capitalize, as an appropriate cost of utility plant, an allowance for funds used dunng construction (AF1)C) that is calculated and recorded as prosided by the regulatory sptems of accounts. I'nder this utility industry practice, construction work in j progress on the balance sheet is charged and the income statement is credited for the appmximate net composite interest cost of bormwe
- for a reasonable return on the niuity funds used for construction. This pmcedure is intended to remove from the income statement the effect of the cost of financing the construction program and results in treating the AFDC charges in the same manner as construction labor and material costs.
As non-cash items, these credits to 'he income statement have no effect on current cash earning. After the pmperty is placed in service, the AFDC . charged to construction costs is recoverable from customers thmugh depreciation prosisions included in rates for utPity service. I During the period of 1982 thmugh March 1,1984, one of the operating subsidiaries used an accrual rate of 3% on $ 1 4 billion of constructio costs in accordance with a May 1981 rate order from its regulatory commission. Effective March 2.1984, this accrual rate was changed by that commission to 3.5% on the subsidiary's inwstment in a specific pmject, up to an investment of $ 1.7 billion. The effective compnite rates of the operating subsidiaries for the balance of AFDC were 9.5%,9.2%, and 9.1% for 19% 1983, and 1982. respectively MSE used an accrual rate based on a retum on average common equity of 14%, plus actual interest costs net of related income taxes. y The Company's subsidiaries continue to capitalize AFDC on pmjects during perials of interrupted construction when such interruption is temporary and the continuation can be justified as being reasonable under the circumstances. [
; ll. Other Non-Current Liabilities it is the policy of the Company's operating subsidiaries to pnnide pnnisions for uninsured pmperty risks and for claims for injuries and damag + through charges to operating expenses on an accrual basis. Accruals for these pnnisions, classified as other non-current liabilities. have be i for ratemaking purposes.
- 1. Reclassifications In 1983, the results of the discontinuni transit operations, including the gain on sale. were aconmtal for as miscellaneous income. Accordingly, t
the 1982 MSU Consolidated Income Statement was rechtssified to report the results of discontinued transit operations in miscellaneous income. Net income for 1982 was not affected by this reclassification. (See Note 12.) h[ In addition, certain other reclassifications of pro tously rep rted amounts have been made to conform with currtnt classifications. . These rechtssifications had no effect on net income. NOTE 2 RATE AND REGULATORY JIA1TERS e Decisions Rendered
) in appeals btfore the Circuit Cairt of Ptdaski County, AP&l. asked for a review of the difference between the $101.4 mdlion increase in rates sought in a May 1981 filing and the $29 million grantal by the Arkansas Public Senice Commission ( APSC) in Septembtf 1982. AP&
also appe:dal the APSC's order to refund apprmimately $19.3 million of revenues collected associated with tax normahzation. In Octo the Court ruled that AP&l. had the right to colktt an additional ammmt through a temporary surcharge to retad customers. The G)urt abo
;- confirmed the APSC's psition on tax normalization in some respects and, as a result. AP&l. wdl be reluiral to refund to retail customers apprmimately $is million. In January 19% the APSC appmved a surcharge, as directed by the Court, of appnnimately $32.4 million, inchiding interest, over a thirty-one month niial. This surcharge. Implemental in February 1985, excluded a $17.9 million unrecoverni fuel c
, issue which remains unrtwival.
In February 194 the Inuisiana Pubhc Senice Commission (1.15C) granted a $9)million retail rate increase to I.P&l. in ndingon a j January 1983 Iding. The 1.15C aho appnnat a $2 i nulhon annual increa3e to NOPSI in nding on its January 1983 fding. The 1.15C reinte
=
any allowance in rates at that time to reflect an in-senice status for either l' nit 1 of MSE's Grand Gulf Steam Ehttric Generating Station (Gr Gulf) or l' nit 3 at I.P&l.'s Waterford Steam Llntnc Generating Station (Waterford). A major portion of 1.P&lls proposed rates was designed to oner the rnenue requirtments associatal with the commercial opfation of both units, and a major portion of N015Fs rates would base 5 E
g.=.- n. S covered its requirements in connection with the MSE unit In April 19&4, LP&L filed with the LPSC a general rate increase application requesting authorization to put into effect, upon commencement of commercial operation of Waterford 3, new retail rate schedules designed to pro ide additional annual net rewnues of $234 5 million. This application included a rate moderation proposal that would defer the collection from customers of an aggregate of $270 million during the first three years of commercial operation. In addition, this application requested rate relief of $81 million or $261.1 million based upon nvo different allocations of responsibility for buying power from Grand Gulf l' nit 1. In April 1984, NOPSI filed with the LPSC a general rate increase application in connection with Grand Gulf l' nit 1. The application requested rate relief of $26 million or $58.4 million and included a rate moderation pmposal that would defer the collection from customers of an aggregate of $136.6 million or $239.5 million during the first three years of commercial operation. The rate relief amounts and the deferrals are based upon two different allocations of responsibility for buying power from Grand Gulf l' nit 1. In March 1985, the USC denied the abwe rate requests ofI P&L and N0 PSI primarily on the basis that the two units are not yet in commercial operation. LP&L and NOPSI plan to refile their rate cases and to take all necessary legal and other actions in order to obtain the rate relief necessary to enable them to meet their respective obligations resulting from the anticipated second quarter 1985 in-senice status of Waterford 3 and Grand Gulfl' nit 1. GmndGtdfDecisions Pending In Nmember 19&l, AP&L filed an application with the APSC nyuesting an annual increase in Arkansas retail rates of approximately
$139.7 million above the level of rates currently approved. This application also includes a proposed rate rider, to be effective in the event AP&L is required to make payments to MSE for costs associated with Grand Gulfl' nit 1. This rate rider contains a phase-in plan under which portions of any payments AP&L is required to make associated with Grand Gulf l' nit I could be deferred. The deferred amount was estimated, based on the FERC administrative law judge's initial decision, to aggregate approximately $470 million during the first three years of commercial operatim The APSC has scheduled hearings to commence on May 7,1985, regarding this matter.
In November 1984, MP&L fded a Notice of Intent with the Mississippi Public Senice Commission (MPSC) to increase its retail rates in connection with Grand Gulf L' nit I and Independence l' nit 2. The Notice of intent nyuests additional rate relief of $82.1 million or $126.8 million and includes a rate moderation proposal that would defer the collection from customers of an aggregate of $355 million or $615 million during the first fiw years of commercial operation. The rate relief amounts and the deferrals are based upon two different allocations of responsibility for buying power from Grand Gulf l' nit 1. The matter is pending. On January 15,1985, the MPSC held a hearing to consider the request of MP&L that it should be allowed to implement interim rates in connection with Independence l' nit 2 until a final decision in the above case was made by the MPSC. On January 17,1985, the MPSC issued an Interim Order allowing MP&L $416 million of the $56.9 million interim retail rate increase requested for Independence l' nit 2. The interim s rates were effective January 17,1985, and will be in effect pending a final determination in the above case. Reference is made to Note 8 for information with respect to wholesale rate proceedings pending before the FERC affecting MSE and each of the sprem opeating companies. Regulatory Jiatlers Because of recent controversies over the cost of power from Grand Gulf l' nit I and the allocation of such power among the Sprem operating companies, the Gwernor of the State of Arkansas has initiated an investigation into the possibility of a takeover of AP&L by the State of Arkansas or an agency thereof. Similarly, theCouncil of the City of New Orleans (Councd) has undertaken studies to consider the possibility of a takeover of NOPSI by the City of New Orleans (City), and on January 24,1985, the Council adopted a resolution proposing to establish a public power authority for the purpose, among other things, of acquiring and operating electric power utilities within the City. Public hearings on this matter were held on February 28,1985. On January 28,1985, the City fikd a petition in the Civd Di3trict Court for the Parish of Orleans seeking to enjoin the proposed i suance by NOPSI of certain securities and a dedaration that the issuance of securities by N0151 without prior approval of the Council is unlawful. NOPSI believes, and has asserted before the courts, that provisions of City ordinances which had prniously confernd jurisdiction upon the - Council to approve the issuance by NOPSI of securities were effectively annulk>d by the transfer of regulatory jurisdiction over the ekttric and gas operations of NOPSI from the Q)uncil to the LPSC, effective January 1,1982, and by the disposition by NOPSI of its entire interest in die transit business, effective June 30,1983 (sw Note 12). On January 29,1985, the Council adopted an ordmance directing the submission to the voters of the City of the question of whether nydatory jurisdiction should be retransferred to the Otucit The referendum on this issue is schedukd to be held on May 4,1985. 29
NOTE 3. INCOME TAKE income tax expense (credit) consists of the follo' wing-1984 13 8 ] 1982 (In Thousimds} Current:
$ 21.634 $ 8A60 $ 9.835
-State.. . . . .. .. . . .
Deferred-net: 733% 41,766 47,652 Liberalimidepreciation . . . .. .. . 18,985 (2347) M8 Unbilled revenue . . . .. . . (22,775) (10,053). 15,652 Deferred fuel cost .. . . . . . .. . 12,924 8,530 11,783 Taxes capitalized in the financial statements ' . . .
- 17,729 (6,074)
Nuclear fuel disposal costs . . . . (1,711) 26,347 (9,%7) Rewnues subject to refund . . .. . . .. (11,167) (11,934) (5,023) Other . . .. . . .. .. . . .. . Restoration (reduction) due to tax loss carryforwards . . . (15.277) (41.514) (n902) 54,373 28,524 18,16) Total . . . .. . ... Inwstment tax credit adjustments-net . . (3.506) 6757) (3.449) Recorded income tax expense . ... . . $ 72.501 $ 33.247 $ 24.555
.. .. . $216395 $164.570 $157,514 Charged to operations. . ... ..
(160,442) (131323) (132,959) Credited to other income . . . .. . . .. . . . . . Charged to cumulative effect of change in accounting method . . . . .. 16568 72,501 33,247 24,555 Recorded income tax expense . . . .. .. . . 202.626 157.520 145.514
. Income taxes applied against the debt component of AFDC . . ..
5275.127' $190.767 $170,0f6 Total income taxes . .. . .. . . Total income taxes differ from the amounts computed by applying the statutory Federal income tax rate to income before taxes. The reasons for the differences are as follows (dollars in thousands): 19M 1983 1982
% of %of % of
- Pre-Tax Pre-Tax Pre-Tax Amount income Amount income Amount _ income Computed at statutory rate . ... ..... . . $ 306,034 46.0 $ 226,027 40 $ 185,650 46.0 Ir. creases (reductions) in tax resulting from:
Allowance for funds used during construction . .. .. (245,742) (36.9) (196,242) (39.9) (159,912) (39.6) 11,659 1.8 9,94 2.0 8,605 2.1 State income taxes net of Federal income tax effect . . . . 550 - (6.502) _(1.3) (9.788) (24) Other - net . . . . . . . . . . . . ... . . .. 72,501 10.9 33,247 6.8 24,555 6.1 Recorded income tax expense ... .... .. 202.626 20 8 157.920 22 6, _ 145.514 24 9 Income taxes applied against the debt component of AFIC .
$ 190.767 g $ 170,069 0
,,,31,0,,,
Total income taxes . . . . . ... .... . $ 275.127 JI.7 30
~ _ -- ... - .-.
u mu.u
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1 m m J i The tax effects of the consolidated 1982,1983, and 1984 Federal tax losses have been recorded as reductions of deferred income taxes. The remaining Federal tax loss carryforwards at December 31,1984, amounted to $391.8 million and are available to offset taxable income in future years. If not used, they will expire in 1991 through 1999. L'nused imestment tax credits at December 31,1984,amotmted to $650.5 million. These credits may be applied against Federal income tax liabilities in future > rats. If not used, they will expire in 1991 through 1999 Cumulative income tax timing differences for which deferred income tax expenses have not been provided are $352.6 million, $337.5 million, and $252.5 million,ia 19M,1983, and 1982, respettively. NOTE 4.11NES OF CREDIT AND RElATED BORROGYGS 1he Company has a revohing credit agreement with various banks providing for the issuance of unsecum! pmmissory notes totaling
$71.5 million. This agreement will terminate December 31,1985. The Company pays a commitment fee on the unused portion of the credit line.
SISE has two revolving credit agreements with various banks providing for borrowings totaling $2,089 million. One agreement, for
$1.711 million, is with a group of domestic banks; the other agreement, with a group of foreign banks, is for $378 million. l'nder both agreements, SISE pays a fee on the unused commitment. All borrowings under these agreements are scheduled, subject to SISE's fulfilling or obtaining waivers ofcertain conditions, to com ert to term loans on the earlier of commercial operation ofGrand Gulf l' nit 1 orJune 30,1985. The term loans with domestic banks haw a maturity date of December 31,1986, subject to a mandatory prepayment requirement of $ 100 million at the end of 1985. The maturity date for the term loans with foreign banks is February 5,1989, subject to mandatory semiannual prepayments commencing August 5,1985, equal to one-ninth of the amount outstanding on the date these borrowings comert to a term loan.
MSE has entered into an " interest rate swap" agreement with a bank through February 1989 for 5189 milhon of the 5378 million outstanding under its rem!ving cmlit agreement with foreign banks. SISE has agmt! to make semiannu.d intertst payments baxtl upon an 11.5% fixed rate in exchanp> for semiannual interest payments by the bank baati upon the London Interbank offered Rate (IEOR). This agreunent serves to offset fluctuations in variable rates to be paid under MSE's remiving credit agreement with fon ign banks. It does not chang MSE's obligations to the foreigi banks for intertst payments of LIBOR plus 1%. MSE also has agreements for short-term borrowings of $14.7 million that require campensating balances, totaling approximately 2% of the commitment, which are not restricted as to withdrawal. These agreements will terminateJune 30,1985. At December 31,1984, MSE had no short-term borrowings outstanding under these agreements, but had other unsecumi short-term borrowings totaling $10 million with additional banks. The operating subsidiaries have lines of credit, not mjuiring commitment fees, providing for short-term bormwings thmugh bank loans. 0f the total bank lines ofcredit at December 31,1984, $180 million was prosided by banks located outside of the Middle South System sersice area. In February 1985, these non-territorial bank lines of credit were reduced to $140 million. Any of the four System operating companies may bormw any portion of these lines subject only to each company's maximum authorized level of borrowings. Compensating balances (approximately 5% of the commitment amount) or equivalent fees are required by certain of these non-service area lending banks. These compensating balances are not rcstricted as to withdrawal. Additionally, the four System operating companies, together with MSU, MSS, and SFI, are authorized to participate in a S33 tem money pml, whereby those companies in the System with available funds can invest in the pool while other companies in the System (except MSU) having short-term needs can bormw fmm tne pool, thereby reducing the System's dependence on extemal short-term bormwings. The maximum borrowing and average borrowing fmm the System money pool during 1984 were $ 124 million and $74 million, respective 4 At December 31,19M, System money pool bormwings were $51 million. SFl has a fuel oil financing arrangement allowing for bormwing of up to $75 million subject to a limit equivalent to the lower of the cost or the fair market value of SFl s fuel oil inventory. In addition, SFI may bormw up to $135 million through the sale of commercial paper for use in financing its nuclear fuel inventory Borrowing under these short-term arrangements are restricted as to use and are secumi by SFfs fuel oil inventory and a portion ofits nuclear fuel inventory, respectively, and certain accounts receivable arising from the sale of these inventories. SFI also has a revohing bank credit agreement which allows for bormwings of up to $15 million through December 31,1987. A commitment fee is paid on the unused portion of this commitment. 31 - 4 m .. - _ - - _ _ . _ . . __ _ _ _ . _ _ . _ - - - - - - - - - - - - - - --
1 The credit facilities at December 31,19M,1983, and 1982 and the borrowings thereunder of the System companies were as follows: December 31,1984 December 31,1983 December 31,1982 Credit Credit Credit Borrowings Facilities Borrowings Facilities Borrowings Facilities Short-term: (In &usamis) Company $ 71,500 - - - - - MSE $ 24,680 $ 10,000 $ 102,265 $ 36,673 $ 134,150 $ 114315
$ 210,000 $ 203,625 $ 235,000 $ 173,471 $ 235,000 $ 180,610 SR
$ 343,460 $ 77,900 $ 237,535 $ 44,750
$ 322360 Operating subsidiaries long-term:
- - $ 115,000 $ 32,000 $ 172,500 $ 71,000 Company
$2,089,000 $2,074.000 $2,089,000 $1,831,000 $1,626,000 $1379,000 MSE .
$ 15,000 - $ 60,000 $ 3,000 $ 60,000 $ 17,600 SFI MSS
$ 75,000 $ 56,200 $ 75,000 $ 9,000 The short-term borrowings and the interest rates (determined by dividing applicable interest expense by the average amount borrowed) for the Middle South System were as follows:
Year Ended December 31 1984 ,1383 1982 Average Borrowing: (IMlanin husamts)
$131,275 $178,172 $182,358 Bank loans
$116,558 $102,960 $102,850 Commercial paper .
$ 50,592 $ 57,718 $ 77,689 Other Maximum Borrowing:
$219362 $275,022 $236,189 Bankloans
$135,000 $123,000 $142,265 Commercial paper ,
$ 68,625 $ 76360 $ 99,950 other Year-end Borrowing:
$ 10,000 $114,573 $159,565 Bank loans
$135,000 $123,000 $107,725 Commercial paper .
s 68.625 $ 50,471 $72385 Other Average Interest Rate: During period-11.9% 10.2% 143't, Bankloans 11.8% 10.3% 14.2% Commercial paper I1.6't, 10.2% 13.5% Other. At end of period-9.6% 10.9% 10.9% Bank loans 9.6% 10.9% 9.9V, Commercial paper 9.0% 10.6% 9.6% other. 32
TR7 r hl N p$ I $ n$d { . NOTE 5. PREFERRED S10CK . The number of shares of prefermi stock of the operating solsidiaries as of the end of the last two fiscal years ns as follows: Shares Shares Outstanding Authorized at at December 31 Call Price December 31,1984 1984 1983 Per Share Cumulative, $100 Par Value Without sinking fund-4.16 % 5.56 % . .. . . 1,070,774 1,070,106 1,070,106 $102.50 to $107.00
- 6.08% 8.56% . . . .. . 1,180,000 1,180,000 1,180,000 $102.83 to $105.74 9.16 % 11.48%'. . . 795,000 795,000 795,000 $106.35 to $111.11 3,465,774 3,Gl5,106 3,465,106 With sinking fund:-
10.60 % 12.00% . ,. 522,814 522,814 554 s29 $10939 to $112.00 14.75 % 17.00% 585,095 585,095 450,000 $111.47 to $117.00 1,107,909 1,107,909 1,004,829 Unissued . .. . 6,506,500 Total . 10,660,183 Cumulative, $25 Par Value Without sinking fund: 831% . . . 400,000 400,000 400,000 $27f6 10.40% . 600,000 600.000 600,000 $27.95 _l,000.000 1,000,000 1,000,000 With sinking limd: 9.92%12f>t% . 6,713,621 6,713,621 6,913.299 $27.01 to $28.16 13.12%-15.2(M. . . 6,531,626 6,531,626 6,792,060 $27.46 to $2933 19.20 % . . 2,000,000 2,000,000 -
$29.80 15,245,247 15,245,247 13,705,359 Unissued. . , . 15,200,000
' Total . 31,445,247 33
t Changes in the number of shares of preferred stock of the operating subsidiaries during the I last three fisc:d vars urre as follows: Number of Shares 1984 1983 1982 Sales: LP&L
- 3,000,000 -
12fA%, $25 par,with sinking fund 2,000,000 14.72%, $25 par, with sinking fund 2,000,000 - - 19.20%, $25 par, with sinking fund MP&L
- 100,000 -
12.00%, $100 par, with sinking fund
- - 100,000 14.75%, $100 par, with sinking fund 150,000 - -
16.16%, $100 par, with sinking fund Redemptions: AP&L (79,678) (86,341) (360) 9.92%, $25 par, with sinking fund . (13,970) (15,445) (9,550) 10f# ,, $100 par, with sinking fund (18,045) (32.735) (20,150) 11.04%, $100 par, with sinking fund (180,434) (7,940) - 13.28%, $25 par, with sinking fund . I.P&L 10.72%, $25 par, with sinking fund (120,000) - - 13.12%, $25 par, with sinking fund (80,000) - - NOPSI 15.44%, $100 par, with sinking fund (14,905) - - 1,fvil.968 2.957.539 2.069.% 0 Total The amounts of preferred stock of the operating subsidiaries as of the end of the 3last two fiscal rars were as fellows: December 31 1984 1983 (In Thrmsands) Without sinking fund:
$301,511 $301,511 Stated at $100 a share.
25,000 25,000 Stated at $25 a share . 1,456 1,456 Premium .
$330,967 $430,967 Total without sinking fund With sinking fund:
$110.790 $100,483 Stated at $100 a share.
381,131 342,6M Stated at $25 a share 758 533 Premium (15.751) (14,n49) issuance expense .
$476,928 $429,601 Total with sinking fund Cash sinking fund requirements for the ensuing five years for preferred stock outstanding at December 31,19M, are as follows (in thousan 1985, $14,000; 1986, $15,010; 1987, $18,250,1988, $22,500; and 1989, $23,250.
.M
r-l : i !
! I
.o NOTE 6. LONG-TER11 DEBT The long-term debt of the Company and its subsidiaries as of the end of the last two fiscal years was as follows:
December 31 1984 1381 (in Tlxmmth) First Mortgage ihnds , $3,560,888 $3,016,753 Promissory Notes: Due: 1984, at various rates - 91,200 1986, at i10% of the sum of prime and 1.3% 1,696.000 1,453,000 1989, at Iondon Interbank Offertd Rate plus 1% 189,000 189,000 1989, at i1.5% plus 1% ( Note 4) 189,000 189.000 Total Promissory Notes . 2,074,000 1,922.200 Other: 1.ong-Term Obligation-Department of Energy (Note 8) 57,908 49,400 Capitalimi lease-due serially through 1993. 8% 5.154 5,536 Municipal Revenue Ibnds-due serially through 2004,1%%-8% . 34,342 36,804 lbilution Control Revenue Ibnds and Installment Purchase Contracts: Due serially through 2014,6.4%-livet, 63,795 63,900 Due 1985-2014,6%%-11W% . (42,225 190,125 less-Funds on deposit with trustees * (315,092) (14.131) Total Other. 488 332 331,634 l'namortized Premium and Discount-Net . (27,409) (10,403) Total long-Term Debt 6,095,811 5,260,1&l less-Amount due within one year 218,662 228.009 long-Term Debt Excluding Amount Due Within one Year $5,877,149 $5,032,175
- Includes $201 million for MSE and $105 million for I.P&I. of proceeds from the sale of Pollution Contml Revenue Ibnds which can be drawn down upon each of MSE and 1.P&I. satisfying certain conditions relating to, among other things, the commercial operation of Grand Gulf I' nit I and Waterford 3, respectively.
Maturities and sinking fund requirements for the ensuing five years on long-term debt outstanding at December 31,1931 are as follous: Sinking Fund Maturities Requirements Cash other" (In Thousamh) 1985 $ 163,062 $55,600 $22.421 1986 $1,828,916 $55,600 $24,401 1987 $ I14.166 $63,600 $23.901 1988 $ 273.650 $63,555 $24,025 1989 $ 201.728 $52,555 $23.700
" Sinking fimd requirements may be met by certitication of pmperty additions at the rate of 167% of the required amount.
i. i The outstanding first mortgage bonds of the Company's subsidiaries as of December 31,1984 and 1983 were- l TOTAL Maturity 3%53% 6%83% 9 % 113 % 12 % 143 % 15 % 17 % % (In Tivusands) 1984
$ 18,000 - - - - $ 18,000 1985.
- - $ 75,000 - S 70,000 145,000 1986.
$ 26,000 - - - -
26,000 1987.
$ 15,418 - $ 45,000 - $125,000 185,418 1988.
$325,000 - -
325,000 1989
$307,250 $ 88,960 $ 75,60 $100,000 $385,000 956,670 1990-1999
$460,000 $$16,300 $153,500 $300,000 1,429,800 2000-2009
- - - $440,000 $ 35,000 475 000 2010-2014
$3,%0,888 Total First Mortgage Ik>nds .
1981 - - $ 31,500
$ 31,500 - -
1984.
$ 18,000 - - - -
18,000 1985.
$ 75,000 -
$ 70,000 145,000 1986.
$ 26,000 - - - - 26,000 1987.
$ 15,463 - $ 45,000 -
$125,000 185,463 1988.
$307,350 $ 89,560 $378,880 $100,000 $285,000 1,160,790 1989-1998
- $460,000 $526,500 $ 98,500 - 1,085,000 1999-2008
- - $ 60,000 $305,000 - 365,000 2009-2013 Total First Mortgage Ik>nds .
fj,016,753 NOTE 7. RETAINED EARNINGS The Public l'tility llolding Company Act of 1935 prohibits the Company's subsidiaries fmm making loans or advances to MSU. The indenture prosisions relating to the operating subsidiaries' long-term debt, transfers by such subsidiaries fmm retained earnings to the stated value of common stock, and the provisions of MSE's credit agreements and indenture restrict the amamt of consolidated retained earning available for cash dividends on common stock of the subsidiaries. As of December 31,19M, $151.1 million of consolidated retained earning were free fmm such restrictions, including $121.9 million of unrestricted, undistributed retained earning of the Company's subsidiaries. The unrestricted, undistnbuted retained eaming of any subsidiary of MS11 are not available for distribution to the common stockholders of MSU until such earning are made available to the Company through the declaration of dividends by such subsidiary. N01E 3. CO.1LIIITAILN15 AND CONTINGEVCll3 CapitalRequirements and Financing The Middle South Sptem's construction program contemplates the following estimated expenditures (including AFDC):
.lf 12 5 128Z (In Millions)
Construction expendituns $966.8 $709.9 $683.4
$338.1 $128.9 $151.4 AF1)C (included above)
In addition to the capital requinments necessary to fund the construction pmgam, the Middle South Sptem estimates that additional capital of appmximately $H9.6 million would be required in the perial 1985-1987 if certain cats associated with Grand GulfI' nit I and Waterford 3 are deferred in accordance with rate moderation proposals contained in retail rate applications filed or assumed to be filed by the Sptem operating companies and in FT.RC rate applications filed by the Sptem operating companies, MSS and MSE. (See Note 2). 36
i j u c _.; The following table shows those expenditures (including AfDC) applicable to MSE's 90% ownership interest in the Grand Gulf Station: M 12 5 M (ln .11illions} Construction expenditures $337.9 $191.9 $207.1 AR)C (included abme) $231.4 $111.2 $126.1 MSE currently estimates, and the abmr construction expenditures and AFDC estimates assume, that the commercial operation date of Grand Gulf I' nit I will be in the second quarter of 1985 at a total cost (excluding nuclear fuel) of appmximately $3.2 billion for its 903, ownership interest, and that only limited amounts will be expended on Grand Gulfl' nit 2 thmugh 1987, A limited amount of construction on Grand Gulfl' nit 2 was performed during iLai. Through December 31,1981, MSE had invested $3,890 million (excluding nuclear fuel) in the Grand Gulf Station. MSE estimates, pending a final res iew of the cost allocation between the two units upon the completion of Grand Gulfl' nit 1, that of this total, $1061 million was imested in Grand Gulf!! nit I and $829 million in Grand Gulfl' nit 2. In connection with the Grand Gulf Station, MSil has undertaken, to the extent not obtained by MSE from other sources, to furnish or cause to be furnished to MSE sufficient capital for construction and operation of the station and related purpoxs. Through December 31,1984, MSI' invested $789.4 million in the common stock of MSE. MSE has cmrnanted with its first mortgage bondhoklers that it will complete Grand Gulfl' nit I no later than December 31,1985, and that Grand Gulfl' nit 2 will be completed no later than December 31,1988. Either unit would be considered complete under the covenant if, among other thing,it were licensed and ready for commercial ogration. In the event either of these covenants is not fulfilled or MSE defaults in respect of either its bonds or bank borrowing, the bonds and the bank borrowing will become due and payable unkss extensions of time can be arranged. In this event, MSl! would be required Io prmide MSE with sufficient funds, to the extent not obtained by MSE from other sources, to met the payment obligations of MSE with respect to any of its bonds and bank borrowings then outstanding. (See Note 4). MSE estimates that it will require approximately $1M1 million to meet its capital requirements (including debt senice)for the griod from March 1,1985,until commercial operation of Grand Gulfl' nit 1, assuming that Grand Gulfl' nit I achieves commercial operation in the second quarter of 19S5. MSE plans to nxet these requirements through the sale of additional first mortgage bonds, payments t' rom the Sptem optating companies with aspect to power purchase advance payments and net test energy charges and from borrowing under its bank loan agreements. Funds not obtained from these sources will be raised through sale of common smck to MSil. MSE currently anticipates convertingintmwings under its foreign and domestic bank loan agreements to term loans on the earlier of commercial operation of Grand GulfI' nit I or June 30,1985. The conversions will be subject to MSE's fulfilling certain conditions and (htaining waivers of certain other conditions. There can be no assurance that such waivers can be obtained. If waivers cannot be obtained and the remaining conditions cannot be fulfilled, the bank loans will then be due and parable. Following commencement of commercial ogration of Grand Gulf l' nit 1, presently scheduled for the second quarter of 1985, MSE will require substantial funds to refmance or retire current indebtedness, to meet sinking fund (bligations, and to finance continuation of construction of Grand GulfI' nit 1 MSE expects to obtain a significant portion of such funds through its receipt of payments from the sale of power to the Sprem operating companies under a l' nit Ibwer Sales Agreement, approval of the terms of which is currently pending in a proceeding before the FERC. The balmce of amounts required by MSE will be obtained from external sources. MSE will be required to seek extensions of the maturity of borrowings not refinanced or retired. MSE's ability, generally, to obtain new funds externally will depend on a number of factors, including the results of retail rate proceedinp filed by the Sptem operating co npanies for recovery of Grand Gulf l' nit I costs, contractual retrictions contained in MSE's first mortgage bond indenture and credit agreements, market conditions, and the credit ratings of MSE's securities. Availability, Pouer Purchase AdvancePqment, and Reallocalicm Agreements The Splem operating companies are obligated under an Avaihtbility Agreement to make payments or subordinated advances, in accor lance with stated percentages, adequate to cover all of the operating expenses and certain of the capital costs of MSE. In addition, under a Ibwer Ibrchase Advance Ibvment Agreement the Sptem operating companies, excluding AP&l. as contemplated by the Realkication Agreement discussed bdow, began making advance payments to MSE in January 19si for power purchases which in the aggregate total $115 million per month. The Sptem operating companies in November 1931 entered into a Realkration Agreement allocating the capacity and energy available to MSE from the Grand Gulf Station to I.P&l., MP&L and NOPSI. These companies thus a3sumed all of the responsibilities and ibligations of AP&l. with respect to the Grand Gulf Station under the Availability Agreement and Ibwer Purchase Advance ib> ment Agreement with AP&l. relinquishing its rights to the Grmd Gulf Station Each of the Sptem operating companies including AP&l. individually remains primarily liable to MSE and its assignees for payments or advances under thee agraments. AP&l. wou!d be obhgated to make its share of the payments or advance only if the other Sptem ogr.uing companies were unable to meet their contractual chligations. 37 l l i
i Unit Ibtwr Sales Agreement and Nete System Agreement The Sptem operatingcompanies have requested from their respective state public utility commissions rate adjustments adequate to permit them to meet their obligations to MSE to purchase power under a Unit Power Sales Agreement ( See Note 2). L'nder the l' nit ibwer Sales Agntment, as filed with the FIRC, the capacity and energy available to MSE from the Grand Gulf Station would be sold to 1.P&l, MP&L and NOPSL An Administra:ise 1.awJudge ( Ay) of the FERC rendered his initial decision reg;trding such Agreement. The Ay deferred any decision on Grand Gulf Unit 2 and recommended that capacity and energy from Grand Gulf L' nit I be allocated to AP&l as well as the other Sptem operating companies. The Alfs deusion alk) cates MSE's share of the capacity and energy fmm Grand Gulfl' nit 1, as follows: 363, to AP&L 1M, to 1.P&L 33% to MP&L and 17% to NOPSI, compared to MSE's request that such costs be allocated 38.6i, to LP&L 31.6% to MP&L and 29.8% to NOPSL This decision is subject to review of the FERC. On April 30,1982. MSS, on behalf of the Middle South Sprem operating companies, fded for appmval with the FERC a New Sptem Agreement pmviding for the coordinated planning, construction, and operation of generation and 'ransmission facilities. Rates under the new agreement became effect;ve on January 1,1983, subject to refund. Various parties have intenened in these pmceeding. Some parties are contesting the method by which the agreement equzlizes capacity and energy among the Sptem operating companies and certain pmposals, if adopted, could cause material changes in the alkcation of costs among the companies. llearing concluded in December 1983. On February 4,1985, the A!J hearing the New Sptem Agreement pn(eeding issued his initial decision recommending that the New Sptem Agreement be adopted, as filed with the FERC, with certain modifications. Principally, the decision recommended that a 15.753, return on common equity be granted; that no periodic review conditions be attached to approval of the New Sptem Agreement; that pmduction aist equalization of all Sptem
' generating units, as proposed by various intervening parties, not be granted; and that the resene equalization provisions in the New Sptem Agreement, as fded, he adopted. Ilowever, the Ay went on to recommend that the Grand Gulf Station be integrated into the New Sptem Agntment by having each of the Sptem operating companies pay for the capacity and energy acts of Grand Gulf basal on the ratio that each Sprem operating company's annual demand bears to the annual demand of the entire Sptem and that each Sptem operating company's share of Grand Gulf be included in calculating such Company's capabihty and, consequently, its reserve equalization payments. This decision is subject to review of the FERC.
In an e ffort to resolve the difficult and complex issues involved in the Unit Power Sa!es Agnement and the New Sptem Agreement pmceeding. the Sptem operating companies, MSE, and MSS, as agent for the Sptem operating companies, submitted an Offer of Settlement to the FERC on January 4,1985. Under the terms of the Settlement offer, the New Sptem Agreement, as currently in effect would remain in effect unchangut The l nit Power Sales Agreement, as prcpoed to be amended, alhicates MSE's share of the capacity and energy from Grand Gulfl' nit 1, from the date of commercial opfation thmugh December 31,1990, as follows: 17.1",, to AP&L 14" to LP&L 191, to MP&L 17" to NOPSI and 32.9",, as imentonal capacity. EffectiveJanuary 1,1991, the allocation changes as follows: 27.87"i, to AP&L 27A8", to I.P&L 2142"o to MP&L and 20 23"o to NOPSL Accordingly, beginningJanuary 1,199i,;he Sptem opfating companies would commence paving their repective share of the full cost of sen ice of Unit 1, including amortization of the deferred carrying charges on inventoried capacity mer the remaming hfe of I nit 1, plus a return on the deferred carrving charges. This propon! 0ffer of Seulement is subject to review of the FERC. The effect of inventor)ing a portion of Grand Gulf fnit I thmugh 1990 could be to reduce the total payments by the Sprem opfating companies to MSE by approximately $200 million gf annum and. consequently, ovuld reduce MSPs net income by approximately $;0 million per annum. On February 22,1985, the FERC issued an ordtr convening a settlement conference for the purpose of addressing the pnpoed Settlement offer and of resolving the issues m the I nit Puwer Sales Agnement and New Sptem Agreement pmcadino. The init al settlement conftfence is schulu!ed to convene on March 12,1985. It is not possible to pudict u hat decision or decisions the FERC wdl ultimately render in the New Sprem Agnimmt and I nit Power Sales l Agreement procetding or with respect to the offer of Settlement. If timely ncmery of any not allxated to the Spam opfating companiis as a result of any FERC decision in these cases is not permitted by their respective state regtdatory agencies, the Middle Smth Sptem's financial condition odd be adversely impactett ) Gmnd GulfUnit 2 MSE presently intends to complete Grai d Gulf f;nt 2 which wotdd pnnide the capacity nudul by the Middle South Sprem to meet l pmjected Middle South Sptem brads in the <arly 1990's To conserve fmancial resource. only a limited amotmt of construction is currently being performed on Grand Gulf Unit 2. MSE will continue wah limited construction leading toward nsumption of full construction untos various subsequent factors cause reconsideration of the pnsent intentan to complete Grand Gulfl nit 2 At the preent time these factors include the outcome of a hearing or&rul by the MPSC on the Certificate of Public Comenience and Necesity for Grand Gulfl' nit 2 in which MSE and MP&l. were ordered to show cause as to the need for continued construction of Grand Gulf Unit 2. the outcome of pending FERC pnretding and the Setdement offer therein with repect to rates for Grand Gulf I nit 1,the atadability of necessarv financing on reamnah!e tenns and any whstantial change, from prior assosments. in the pmicctu! onts of power fmm Grand culf I nit 2 relante to oth f power sontces. If the Settlement offer under which MSE does not recortt currently the fidl ont of Grand Gulfl'mt 1 is adophilit wotdd require the continued delay in roumption of full construction of Grand Gulf Umt 2. 38 l
c_.______._.__.m__.----------.------------ F 7 [ t
' *j '
$~ 22 MSE has covenanted with certain of its first mortgage bondholders that it will complete Grand Gulf Unit 2 no later than December 31, 1988. MSE will seek from its bondholders whatever waivers or amendments are necessary to change the stipulated completion date of Grand Gulf
? I' nit 2, but no assurance can be given that such waivers or amendments can be obtained.
- If it is ultimately decided that Grand Gulf l' nit 2 should be cancelled, MSE belie es that its imestment in the unit will be determined to have been prudent and MSE will take all. actions necessary before the FERC and the courts to recover its imistment through rate relief. Such actions wuuld likely imulve a filing with the FERC requesting recovery of its full investment, over a period of years, through charges to the System operating companies. As in the case of rate relief necessary to recover Gr nd Gulf l' nit I costs such proceedings could be protracted and strongly contested.
L If adequate and timely rate relief is not obtained to recover the imestment in Grand Gulf Unit 2, the financial condition of the Middle South System could be adversely affected. SFIand MSS z SH has a number of contracts for the purchase of fuels for use at various generating stations within the Middle South System. Among the contracts L} is one for 100 million tons of coal, with an option to purchase an additional 50 million tons, for LP&Cs proposed Wilton Station (discussed below), another for up to 185 million tons of coal for use at the Independence Station in Arkansas, and another for 33 million tons of lignite for AP&Cs L share of a future powrr station in Arkansas. In addition, SFI has a long-term oil supply agreement with a major oil company pmviding for the n purchase of 25,000 barrels of oil per day thmugh 1996 with an option to reduce, within certain limits, the contract quantity either temporarily or S prmanently. AP&L is currently purchasing coal for the %hite Bluff Station under an agreement that will proside approximately 100 million tons of L coal over a twenty-gar period. By separate agreement, LP&L guaranteed SR's performance under the coal contract for LP&Cs pmposed Wilton Station and agreed to
, purchase the coal from SFl. SR has advised the coal supplier that because of forces beyond its control, including in particular the regulatory i situation, the earliest possible dates that the two units of the station could be put into operation are 1993 and 1995, respectively, and further b
that the station may be delayed to a time that would make the existing contract non-viable. The supplier has refused to agree that regulatory constraints or any other difficulties constitute events of force majeure under the Coal Supply Agreement, but has indicated a willingness to continue an exchange of views with the hope that they will lead to a mutually satisfactory resolution of the matter Resolution of this matter could adversely impact the cost of fuel for the Wilton Station, or could possibly expose either SH or LP&L to claims for significant damages in the event SFI does 7 not ultimately prevail in asserting that events of force majeure have excused performance or in the estnt efforts to mitigate any possible damages are unsuccessful. SFI has a long-term pmgram for the acquisition, conversion, and enrichment of nuclear materials required for the fabrication of nuclear fuel that may be utilized in any of the present or pmposed Middle South System nuclear generating stations. j' MSS has equipment commitments totaling appmximately $2M million relating to the development of a standard design for the construction of coal-fueled or lignite-fueled electric generating stations for the Middle Smth System. Thee commitments will be billed to the appmpriate operating companies as incurred. Nuclear LiabilityInsurance [ As of December 31,19M. the Price-Anderson Act limited the public liability of a licensee of a nuclear power plant to $620 million for a single p nuclear incident. This limit will increase by $5 million for each additional operating license issued by the Nuclear Regulatory Commission ( NRC).
- Insurance for this exposure is pmvided by private insurance and an indemnity agreement with the NRC. Every licensee of a nuclear power plant is obligated, in the eent of a nuclear incident invohing any commercial nuclear facility in the i nited States that results in damages in excess of the f private insurance, to pay retmspective assessments of up to $5 million per incident for each licensed reactor it operates or up to a maximum per reactor owned of $10 million in any calendar year. At December 31,19M, the Middle South System had four licensed reactors.
AP&L is a member-insured of Nuclear Electric Insurance Limited ( NEIL), a mutual insurer that provides its members with insurance cmtrage for certain costs of replacement power incurred due to catain pmlonged outages of nuclear units ( NEll l) and for $500 million of coverage for pmperty i damage sustainal by the insured in excess of $500 milhon caused by radioactiw contamination or other specified damage ( NEIL ll). MSE is a member-J insured under the NEll 11 excess property insurance pmgram and MSE and LP&L are member-insureds under a primary pmperty damage insurance
. pmgram pmvided by Nuclear Mutual Limited. another mutual insurer. As member-insureds with these mutuals, AP&L LP&L and MSE are sub l ect to assessments iflosses exceal the accumulated funds available to the insurer. The present maximum assessment for incidents occurring during a policy
,; year is appmximately $22 million, $21 million, and $40 million for AP&L LP&L and MSE, respectively.
! Qent Nuclear fuel and Decorninissioning Costs l'nder the tsms of their nuclear fuel leases, AINL LP&L and MSE are responsible for the disposal of spent nuclear fuel These compani6 consider i a!I costs incurred or to be incu red in the use and disposal of nuclear fuel to be proper components of nuclear fuel expense and pmvisions to recmtr 39
such costs have been or will be m ide in applications to regulatory commissions. The affected Middle South Sptem companies have execu with the Department of Energy ( DOE) whereby the DOEwill furnish disposal service for the companics' spent nuclear fuel at a kilowatt-hour of gross generation on or after April 7,1983 plus one-time fees for previously discharged fuel and in-core burned fu AP&l, thmugh rates and a settlement of a past disposal contract, has recorded the approximately $57.9 million (includes inter necessary for pavment to the DOE for the disposal of all spent nuclear fuel on hand at April 6,1983. In addition to the rec the disposal of spent nuclear fuel, AP&L is recovering a total of approximately $160 millien for decommissioning c sts for its IhieralIncome TaxIssues-IRS The Federal income tax returns for the years 197 I thmugh 1978 have been examined by the Internal Revenue Service ( IRS). For th through 1976. all issues, other than an issue involving the taxability of customer desdits, have been settled and a tax ass interest of $5.5 million,has been paid. Payment of the tax assessment and interest did not have a material effect on net income. For and 1978. the IRS has proposed certain adjustments that, except for the customer depwits issue, are not material. Awritte tkr 1RS. Any additional tax liability that may result from resolution of the customer deposits issue wotdd not have a material eff LP&L andNOPSIConsolidation In the interest of increased economic efficiencv,l.P&L and NOPSI have devehpl a plan to consolidate the two companies and their o l'nder the proposed arrangement, subject to the receipt of necessarv regulatory and other appmvals, the two companies a new company to be called louisiana Power & Light Company. M6L', which currently owns all the outstanding common wotdd own all the common stock of the new company. < NOTE 9. LEASES The Companis operatingsubsidiaries account for leases entered into prior to 1983 on the same basis as that used by t authorities in the ratemaking process that determines the revenues utilized to recover the lease costs. The Company's operating account for capital leases entered into subsequent to 1982 in accordance with SFAS No.13 and SFAS No. 7L Application of criteria used to define a capital lease entered into prior to 1983 (excluding nuclear fuel leases), absent the operatinglease in the rate-makmg process, would require recording the following assets and liabilities on the balance sheet: 1984 3 83 1982 (In 11xmamh) y,
$136,245 $139,2M $135,676 l'tility plant .
(29 188) (26367) (22,225) Accumulated amortization
$107,057 $112,837 $113,451 Net
$ 38,151 $ 40,585 $ 47,406 Other property and investments-net .
Liabilities:
$l49,060 $155.869 $162388 Non-current obligations under capital leases .
$ 13,279 $ 13,420 $ 13919 Current obligations under capital leases The recording of such leases would not materially affect the amounts reported as either expenses or net income.
At I ecember 31.19Si, the Spiem companies had noncancellable leases (excluding nuclear fuel leases), presently accounted for as oper:uing ledes. with minimum rental commitments as follow 3: Hn 11xwamh)
$ SSMi 19S5 56,743 1986 4S 215 1987 44.938 19SS 43,;07 19S9 3 % 015 For years thereafter g>i6,422 Total .
40 1
E I s t Rental expense for capital and operating leases (excluding nuclear fuel leases) amounted to approximately $68.2 million, $58.3 million, and $53.8 million in 1984,1983, and 1982, respectively.
- urte subsidiaries haw entered into nuclear fuel leases aggregating $455 million. The leases, unless terminated sooner by one of the parties,
- will continue through 2018,2028, and 2029. Irase payments, which are not included in the tabulations abow, are based on nuclear fuel use. Nuclear l fuel lease expense of $72.7 million, $49.7 million, and $40.1 million was charged to operations in 19&l,1983, and 1982, resyctively. The unreantred ast base of the leases was $433.1 million, $431.4 million, and $361.4 million at December 31,1984,1983, and 1982, respectively.
NOTE 10.1%TRETIREffEVTBEYEF11S ! The companies of the Middle South Sptem have urious postretirement benefit plans covering substantially all of their emploires.
- Pension plans are administered by a trustee who is rtsponsible for pension payments to retirees. Various imutment managers haw reponsibility for management of the plans assets. In addition, an independent actuary pttforms the necesary actuarial valuation f(r the individual empany plans.
i EffectiveJanuary 1,1982, the companies modified the method of amortizing prior sen ice ants by changing from fixed amortization periods of fmm ten to thirty >rars to varying amortization periods not to exceed thirty 3rars. The effect of this change on 1982 pension expense was not signincant. Total pension expense of the Company and its subsidiaries for 19&i,1983, and 1982 was $ 28.4 million, $24.9 million, and $23.9 million, respectively. Of the total pension expense, NOPSfs transit-related pension expense f(r 1983 and 1982 was $ 1.2 million and $2.1 million, respective 4 There was no transit-related pension expense f(r 19&4 due to the removal of transit employees from NOPSI's actuarial valuation. The comparison of the actuarial present values of accumulated pension plan benefits and plan net assets for the denned benefit plans is presented below. This comparison was determined in accordance with the provisions of Statement of Financial Accounting Standards No. 36 which 7 requir s the use of certain assumptions that are different from those used by the Company's actuary in determining an appropriate level of fuading i for the Company January 1 19&4 L983 Actuarial present value of accumulated g,, 79m,,4 pension plan benefits: Vested . $229.800 $232,339 Nonvested 13,316 13539 Total. $243.116 $245,878 Net assets avadable f<r pension benefits $430,316 $3%41J The assumed rate of return used in determining the actuarial preent value of accumulated pension plan benefits was 93,. The 19&i preent value of accumulated benefits and the value of assets do not include amounts attnbutable to former transit related panicipants. As part of the sale of the transit optration on June 30.1983 (See Note 12) NOPSI agreed to transf(f the assets and liabilities of the transit related participants to a separate plan (to be maintained by the sucensor employer). The pmcedure for determining the amounts to be transferred is indicated in detail in the Sale Agreement, and the amounts have been determined by NOPSI. While such trar3fer is effective as of the date of the sale, the assets and liabihties base not yet been phpically transferred to a successer plan pending agreement by the successor emplo:er. The Sptem companies also pmvide certain health care and life insurance bene 6ts for retired employees. Substantially all employees may become eligible for these benefits if they reach retirement age while still warking for the Sptem companies. These benefits and similar benefits for actise empk)yees are pnnided thmugh various means including payments of premiums to insurance companies and/or accruals for selI insurance policies managed by insurance companies. The Sptem companies recognize the cost of pmviding thee benents by expensing the payments made to the insurance companies or accruing the cost as recommended by the managing insurance company. The ont of pnn iding thee benents for retirees is not separable fmm the cost of providingbenefits for actiw employees. The total ost of pnn iding thee benefits and the numbot of actim employns and retirees f(r the last three fiscal years were as follon 19&& 1283* 1982* Total cost of health care and life insurance (in thousands) . $20,874 $19,277 $18,298 Number of active employees 12,961 13,012 13,343 q Number of retirees . 2.245 2,417 2,475
- hn haies Inmal qmten IM n m s41 eptnjune JO,19M '
41
s NOTE I1. SElllDIENT AGREE 31EVT WITil G1S SUPPLIER A dispute between a gas supplier and if&L arising from the gas supplier's claimed inability to deliver full quantities of fuel gas due if&L under several natural gas contracts was settled by the execution of a settlement agreement on June 4,1982. The settlement agreement pmvides for the payment of $ 1.087 billion in cash (of which $587 million, $250 million, and $250 million were receised by if&L inJune 1982, January 1983, a January 19M, respectively) plus a guaranty of savings of at least $585 million in certain gas acquisition cmts between 1982 and 1996. In Ma the IfSC ordered in general that the refunds be made as follows: the $587 million receimi by if&L onJane 4,1982, plus interest, or a total of
$637 million, shall be refunded in 1983, the $250 million received inJanuary 1983 shall be refunded in ten equal annual installments beginning in 19M, and the $250 million recei rd inJanuary 19M shall be refunded in nine equal annual installments beginning in 1985. In addition, in February 19M the ITSC ordemi If&L to reft nd $32.6 million, representing interest not already covered in its March 1983 refund order, to customers in equal annual installments ner a nint year period beginning with the 1985 rcfund. As a result of the ifSC orders. LP&l. accrued in 19M,1983 and 1982 net interest expense in the amounts of $9.2 million, $11.1 million, and $19.2 million, respectively.
NOTE I2. TRANSIT DIVESTITURE onJune 30,1983, NOPSI sold and transferred to the Regional Transit Authority (RTA), a political subdivision of the State of Inuisiana, various pmperties and assets related to NOPSI's operation of the transit sptem in the City of New Orleans for a purchase price of $21.0 million agreement, NOPSl agreed to pay $7.3 million in cash to RTA and to reimburse m or Transit Management of Southeast louisiana, Inc. $ 13.0 m plus a 9% upward adjustment factor per annum, for future disability insurance premiums or welfare benefit payments f<r all retired and transit and transit-related employees of NOPSI and their respective dependents and survivors. The balance for these benefit payments was $10.8 million as of Decemba 31,1984. As a consequence of this transaction, NOPSI disposed ofits entire interest in the transit business. The resuhs of the discontinued transit opnations in the 1983 consolidated income statement have been accounted f(r as miscellaneous income. This amount inclu revenues imm transit operations for the six months endedJune 30,1983 of $30.5 million , and a gain fmm the sale of transit operations, before inc taxes, of $2.2 million. Accordingly, the 1982 results of transit operations hase been reclassified similarly Restnues from tnmsit operations far 1982 amounted to $55.5 million. Income taxes related to transit operations for both years and income taxes related to the gain on the sale of transit operations have been accounted f<r, on a consohdated basis, as income taxes on other income. NOTE 13. QUARTERLYRESULIS (UNAUDITED) Consolidated opnating results for the four quarters of 1984 and 1983 were as follows: Operating Operating Net Earnings Quarter Ended Revenues Income income Per Share Un huwd. Empt nrSbare Amounk)
;9g
$740,419 $124,502 $134,168* $0.80*
March
$729,231 $129,602 $105,598 $0.61 June
$953,491 $193,656 $175,725 $0.96 September .
$723,266 $105.654 $ 92916 $0.49 December 1983:
$651,166 $ 90,738 $ 62,407 $0.43 March
$636,791 $106.139 $ M,0i9 $0.55 June
$918,40+ $171,193 $150,656 $0.97 September .
$703,296 $102,274 $ 80,938 $0.51 December
*Inclu&s the net cumulative effect of a change in accounting method, effective January 1,1984, of approximately
$17.6 million and $0.11 per share for the quarter ending March 31,1984 (See Note 1).
Operating revenues and operating income for 1983 have been restated to exclude results of discontinued transit operations. The business of the Midd'e South Sptem is subject to seasonal fluctuations with the peak period occurring during the summer
- months. Accordingly, earnings information for any three-month period should not be considered as a basis f<r estimating results of operations foi a full year.
NOTE 14. EFFECT OFINFlitTION ON OPERATIONS (UNAUDITED) The following supplementary information about the effect of changing prices on the rempany is provided in accordance with requirements of Statement of Financial Accounting Standards No. 33," Financial Reporting and Changing Prics as amen &d by the Statement of Financial A counting Standards No. 82. It should be viewed as an estimate of the effect of changing prices rather than as a precise measure. d
i L. F"Jj?j i. L.c.EtJ Statemen: of Income from Operations and Other Financial Data Adjusted for Effuts of Changing Prices for the Year Ended December 31,1984
- (/n husam/s) Adjusted for
, As Reportedin Changes in the Financial Specific Prices Statements (Current Costs) l
[ Operating revenues * .. $3.I46,635 $3,146.03; l Operating expnses (excluding depreciation)* 2,400,169 2,400,169 f Depreciation . . . . . . 192.452 439.057 Total operating expenses . . 2.592,621 2,839.226 Operatingincome , . . . . . 553,414 306,809 other income * . . . 479,655 479.655 Interest and other charges * . . . . . 542.258 542.258 income from operations (excluding adjustment to net recoverable cost) , , $ 490,811 $ 244,206 increase in specinc prices (current cats) of property, plant, and equipment held during the irar** . $ 402,695 Mjustment to net recoverable cost . . . 110,262 ' EITect of increase in general price level . . ( _ 675.482) Excess (deficiency) of increase in specinc prias, after adjustment to net recmtrable cost, mer increase in general price level . . (162,525) Gain from decline in purchasing power of net amounts owed 292,557 Net . , . .. . . $ 130.032
*Asmual n in en "atm4:efr dxyan' 4diars and ha are nnt mtatal
**AtiManherj!, !9% cwrrretamtt(prrgetr. plant amiequqwrent net t{ammrulatalJqmtatum. eva $IH50.501.um), a brie ktwalonter ndout mmrable hragb spmtatnn sua $11.4}'t,546,an Fh'e-Year Comparison of Selected Supplementary Financial Data Adjusted for Effects of Changing Prices (In basamis ofAtmye 1%i Dollars) 1984 1981 1982 1981 ,l_9, 80, OPERATING REVENUES . . . . $3,146,035 $3,033,493 3,062,860 $3,108,739 $2,893,306 CURRENT COST INFORMATION:
Income from operations (excluding adjustment to net recmtrahle cost) . . . . . $ 244,206 $ 137,110 $ 86,185 $ 87,528 $ 22,436 Income per common share (after dividend requirements on prefermi stock and excluding adjustment to net recmrrahle cust) . ... . ,
$ 1.37 $ 0.90 $ 0.65 $ 0.77 $ 0.23 Excess (denciency) of increase in speaGc prices, after adjustment to net recowrable cost, over increase in general price level . , . . . .. $(162.525) $ (44,696) $ (46,748) $ (434,966) $ (589,371)
Net assets at irar-end at net recoverable cost . . $3,423,822 $3.076.701 $2460413 $2,415,358 $2.288,950 GENERAL. INFORMATION: Gain from decline in purchasing power of \ net annats owN . . .. . . $ 292,557 $ 261,520 $ 237,520 $ 495,137 $ 657,015 Cash dividends declared per common share . . $ 1.75 $ 1.78 $ 1.80 $ 1.86 $ 2.00 Market price per common share at year-end . $ 13% $ 13 % $ 15) $ 14 $ 13 1 Average consumer price index . . . . . 311.1 298.4 289.1 272.4 246.8 43 m.
r f Current cost amounts reDect the changes in specific prices of property, plant, and equipment from the year of acquisition to the prtwnt. The current cats of property, plant, and equipment, which represent the estimated costs of replacing existing plant assets, were determined the llandy4hitman Index of public l'tility Construction Costs (IN1) to the cost of the sun iving plant by 3rar of acquisition. I.andy and certain plant assets that are not included in the IN1 were converted using the Consumer Price Index for all l'rban Consumers. The current year's depreciation expense on the current cost amounts of pmperty, plant, and equipment was determined by applying the Company's depreciation rates to the indexed amounts. Fuel inventories, oil ar.d gas resenes, the cost of fuel used in generation, and gas purchased for resale were not restated from their historical cost in nominal dollars. Regulation hmits the recovery of fuel and purchased gas costs to actual costs incurred thmugh the operation of adjustment clauses or adjustments in basic rate schedules. For this reason, fuel inventories and oil and gas resenes are effectively monetary a3 se As presenbed in Statement of Financial Accotating Standards No. 33, income taxes were not adjusted. The regulatory commissions to w hich the Company's subsidiaries are subject allow only the historical cost of plant to be recmeral in rewnu as depreciation. Therefore, the excess cost of plant stated in terms of current cost over the historical cost of plant is not presently recov rates. This excess (deficiency) is reRected as an adjustment to net reemerable cmtXhile the ratemaking pnxess gives no recognit;on to the current cost of replacing property, phtnt, and equipment, the Company believes, baxd on past exptfiences, that it will be allowed to earn on the of its net investment when replacement of facilities actually occurs. To redect properly the economics of rate regulation in the Statement of Income from Ontations presented alue, the adjustment of net property, plant, and equipment to net recoverable cost was adjusted by the gain from the decline in purchasing power of net amounts a ptTiod of in0ation, holders of monetary assets suffer a loss of general purchasing power while holders of monetary liabilities exprienc gain from the decline in purchasing power of net amounts owed is primarily attnbutable to the substantial amount of debt which has b to finance propertv, pbnt, and equipment. Since the deprttiation on this plant is limited to the recon ry of historical costs, the Company d the opportunity to realize a holding gain on debt and is limited to recmtry only of the embedded cost of debt capital. Common Stock Data by Quarter First Second Third Fourth 198i Price Range
$13%-9% $121-10% $14%-11%
liigh-law $14%-121
$.43W $.43% $.43W $.44h Dividend Declared 1983 Price Range
$16kl4% $16%-14% $16b14% $16%-13 liigh-Low
$.42% $.42h $.43%
Dividend Declared $.42b Selecteil Financial Iktta -Fire li'ar Comparison (hi ihmsands. EmM nr Shire Amounts 1 198i 1983 1982 1981 1980
$ 3,146,035 $ 2,909,657 $ 2.846,26i $2,722,020 $2,295.299 Net Operating Revenues .
508,437 $ 378,059 $ 310,595 $ 281eiS3 $ 195,907 Set income $ 2.86 $ 2.46 $ 2.33 $ 2.41 $ 2.01 litrnings Per Share $
$ 1.75 $ 1.71 $ 1.67 $ 1.63 $ 1.59 Disidends Declared Per Share
$12,555,531 $11,107,166 $10,36i,653 $8,318,556 $7,33i,030 Total Assets inng-Term Debt (exciuding
$ 5,877,119 $ 5,032,175 $ 4,429,447 $3,896,370 $3,392,309 current maturities)
$ 429,601 $ 354,957 $ 300,219 $ 283,165 Preferred Stock With Sinking Fund .$ 476,928 44
.t CorporateIn'ormation InvestorInformation 1)ividend Reinvestment and Form 10-Kilvailable At the close of 1934, there were Stoch Purchase Plan The Middle South l'tilities Sntem 216.116 shareholders of record of The Company's Dividend Reinvest. 19&i Annual Report to the Securities 1 l
Middle South t:tilities. Inc., an increase ment and Stockhirchase Plan is open and Exchange Commission on Form i of apprmimately 9 percent fmm the to holders of MSU common stock and 10-K (including financial statement same time a year earlier. The number preferred stock issued by the Sntem schedules) is available to any stock- ! of shares of common stock outstanding operating companies. The Phm provides holder upon request. To receile a copy mereased from 166.082.128 to for stockholders to purchase additional without charge, write to Dan E. Stapp, 189,167,328 during 1934. shares of MSU common stock with Secretary, at the address below. Addi-tional statis,ical infonnation is available lliridendSI)eC/ared reinvested dividends at a 5 percent discount without payment of any in the 1984 Financial and Statistical , The Board of Directors authorized L: hmkerage commission or senice charge. Res iew by writing to Edwin I.upberger, the increasing of the common stock For Federalincome tax purposes,the Senior Vice President-Chief Financial quarterly dividend payment by one officer, at the address below. cent per share, effectik'e with the difference between the price paid and , Jaimary 2,1985 dividend. The new the fair market value on the investment M ddle South l'tilities, Inc. quarterly rate,44% cents per sham, is date is considered as an additional imx 61005 equivalent to an annual rate of $1.78. distribution and is treated the same as New Orleans, Inuisiana 70161 . 1 This was the 28th consecutive year dividends paid. Most MSU individual mi) 529-5262 that the Company increased its dividend common stockholders may elect to exclude from taxable income up to $750 7hrms[er/lgent and Regis/rar rate. ($1,500 on a joint return) of the tax. Morgan Guaranty Trust Company Ofdividendspaidin 19% 72 percent New York, New York 10015 is estimated to be a return of capital able portion of 19&i MSU dividends to the stockholders for Federal income reinvested thmugh the MSU Dividend gafice of,InnualNeeling tax purposes and is not taxable as Remvestment and Stock Purchase Plan. The' Annual Meeting of Stock-dividend income. This occurs primarily 'Iaxes on such remvested dividends in a holders will be held in Jackson' because a large portion of net income qualified pmgram are deferred until Mississippi, at 10:00 a.m. (CDT), on resulting from capitalizing costs of the stock is sold or othenvise disposed of. May 17,1985. Pmxy material will be .. . capital invested in projects still under Stock Erchange listings mailed on or about April 12,1985 to construction does not constitute Thecommon stock of MiddleSouth stockholders of record April 8. Stock-taxable income. t:tilities, Inc. is listed and traded on the holders of record may obtain a badge for New York, Midwest, and Pacific stock admission to the meeting at the registration desk. Stockholders whose exchanges. The ticker symbol for shares are held in stn'et name, i.e., in the Company is MSU. the name of their bmker,must present a letter fmm their broker indicating ownership of MSU common stock asof April 8,1985. iluditors Deloitte liaskins & Sells New Orleans, louisiana 70139
Midrite South Utilities, Inc. & Subsidiaries 1974-1984 Financial Record ya_um,~,,_ , CONS 0LilMTED SLMMARY OF OPERATIONS 19tli ]381 1982 Operstag Revemses Electric. . . 5 2,959,570 $ 2,716329 $ 2,673,572 Natural gas , , , , , . 186.465 193328 172.692 3,146,035 2,90),657 2366,2M Tbtal. . . Operating Expenses Operatim: Fuel for electric generation , 1,020,280 H2,219 1,0(4,325 Purchased power . . 2)l,129 373,712 345,076 134,420 158,186 138,890 Gas purchased fcr naale . 465,713 363,509 288,283 Ikfermt fuel and other 161,433 149,453 132,031 Maintenance . 192,452 183,171 167,725 Depreciatim , , Taxes other than income taxes , 110,799 104,493 101,381 Income taxa , 216395 1M570 157514 Total. 2592,621 2A39313 2397.225 553.414 470344 449.039 Operating income . other income: 301,123 245,M0 182,342
#10wance for equity funds used during construction .
18.090 6,799 7,133 Miscellaneous income and deductions-net . 1(A442 131323 1329;9 Income taxes-cmbt . Total. . 479.655 V3.762 322.444 Interest and Other Charges: 636,390 529,597 488,750 Intenst on long-term debt 57,388 47,251 74,130 other interest-net
#10wance for borrowed funds used during construction . (235,873) (180,858) (170,438) g Prefermi dividend requirements of subsidiaries R4353 80.0M 68A46 Total. 542,258 4'6.0;6 460 8'8 Income Before Cumulative Elint of a Change in Accounting Method 490,811 378,050 310595 Cumulative Elint to ** a ary 1,1984, of Accruing l'nbilled Revenue- t of income taxes of $16.548 thousand) 17.626 Net Income $ 508.437 $ 3'8.0;0 $ 310595 Earnings Itr Average Gimmon Share:
Ikfore cumularise effect of a change in accounting nxtlxxi. $ 2.76 $ 24 $ 2.33 Cumulatne effect to January 1,194,of accruing unbilled rtwnues-net. 0 10 - Total. . 5 2 86 $ 24 $ 2 33
$ 1.75 $ l.71 $ 1.67 Dividends Dalared ltr Common Share. .
Average Number of Common Shares outstanding . 178,083,867 153383,4H 133,193.2 % LTilJIY PIANT AND CAPITAllZATION (at December 31) fixed Assets:
$13,294,M7 $11H2Al7 $ 10AM,188 liihty plant .
Irss- Accumulated Jgreciation and amortization , 1.856.101 1.6HA75 1551.700
$11.438566 $10,247962 $ 8912A88 tiility plant-net Capitalizatiim:
$ 3,472,246 $ 3,001,542 $ 2,481316 Common equity . .
Prefermi stock (:ncluding pmnium and issuance expense): Dithout sinking fund , 330,% 7 330 367 330 367 476928 429,601 354357 Dith sinking fund , , tong term debt . . . 5.877.149 5.032.171 4A29A47 Total. . $10.157.290 $ 8.7H.285 $ 7597.287 Capitalkation Ratios: Common eipsity . . 34.2% 34.1% 32.7% Preferred stock (including premium and issuance expense) 7.9 R7 90 tong-term debt . . .. , . . 57,9 57.2 5&3 M
,c- 1 . .,
b FW } I N L . KN 19,81 1980 1979 1978 1977 1976 1975 1974
$ 2,582,778 $ 2,179,232 $ 1,671,491 $ 1,485.901 $ 1,325,266 $I,0M.ll6 $ 867,M1 $ 768,433 139.242 116.067 117.2;6 99.2sj Ring) 61892 48,928 48373 2.722,020 2.295,299 1,788,747 1381,185 1,408.304 1,127,968 916Mo N6816 i
! 1,0810M 946,145 697,606 621402 568,990 422,246 2H,482 259,435 281,951 258,377 131929 86,087 61,439 35,075 43,880 I 261559 ! 107,768 88,866 88201 68,657 58,577 37,852 30394 21F07 307,218 248.601 176,181 171318 157,791 126,362 121328 y).116 127,067 104333 106,310 93,260 67.150 51863 46,815 42,311 158,2M 141,229 118,192 112,108 106,031 100,175 91,761 71427 91058 823M 75,837 68,025 65,388 59,(/>l 54.888 47,433 161.0;3 87,7 4 37.189 72.HI 89.946 68309 %1K9 MW) 2301.051 1.981.4;3 13 % ;23 13R240 1.199918 929E68 731331 626 9's 4209(6 3:33 4 231224 2%%i 20x386 198.100 1R;03M
. 180.728 143369 122.277 124,086 91573 65346 62,169 46,0 4 49309 j 24,249 8,272 7,206 7,8;0 7,719 (1,953) (6.279) (10,747) l 112377 89917 63.4;2 R;tN 21946 17#11 14 3 )3 ; 2i9 279.995 2193% 1 % ,744 140.02] 9;(49 78,017 ;43R9 44,011 441Mi 327,468 255,242 199.212 151005 132,719 111486 105332 1 72,(/4 41990 21161 18323 15,571 19,177 MMt I 74307 (157,511) (117.6631 (89.247) (54,717) (34.031) - - -
60391 ;; 024 %2M 2; 477 24 104 21.7*) 16f(d) 1998) 419.481 347,494 246 269 194133 I(t)#6 170J)'O 149 424 128f/4 281,483 195,907 180,719 181833 14199 106.067 90303 96,0'3
$ 281.483 $ 19;!x)? $ 1x0,719 $ 181833 $ 1433x9 $ in6Ai1 $ 9n303 $ 96 073 $ 2.+6 $ 101 $ 112 5 2.43 $ 2.16 $ l.82 $ 1,78 $ 2.17 $ 2 44 $ 2 01 $ 2 12 $ 2 43 $ 2.16 $ 1 82 $ 17x $ 2 17 $ 1.63 $ 139 $ 1535 $ l.46 $ 1395 $ 1335 $ 1.275 $ 1.23 115,175,550 97,469,169 85,464h91 75322,179 (4 398,876 58395.628 50,714,782 h23),481 $9fm0A% $7,891636 $7,001052 $6,052,023 $5,181284 $4,539,891 $1951814 $1470,598 1.407384 1.2M325 1.139.lM 1.04x 2% 9n702 831.930 747.612 (M.I +M $ 7h72);2 $6,629,1y $ 5s62Kss $5!)l1767 $4 2673H2 $ 1707,961 $ 4,206 202 $23114;0 $ 2.185.5 66 $1,901,206 $ 1459,736 $ 1,411254 $ 1,196,427 $ 1,010,278 $ 8M 0% $ 7t6h28 3R967 150,967 140,967 280,712 280,712 250h79 210.627 210.627 300,219 283.165 191507 60j%3 60J163 60J63 60J63 -
374470 339L409 3 017.816 2 429.711 1174.471 1.96; 985 1.75132M 1329.9;M
$ 12M7!v); $ 6,711102 Mi $ 53)2,026 $ 4332,740 $ 3.712473 $2316,0;3 $ 2317.2_13 32 6's 32 ?t 31 9 % 31?t 32 ?t 30.7% 29ut 29 7 %
9.4 10.4 10.1 7.8 9.2 93 10 3 9.5 58 0 57.4 58 0 G)0 58 6 59 8 (al (n8 47
Directors anc O!3cers i AISUDirec/ ors ROBERT D. Pl'Gli JISU 0]Jlcers Chairman of theBoardofIbrtlandGin FIDYD W. LEWIS JAMES M. CM Company (Agricultural and Agn- Chairman and Preident. Age 59. Joined President and Chief Executive Officer of New Orleans Public Service Inc., Busmess) and Chairman of Portland MSU Sptem in ltyi9 llank,Ibrtland, Arkansas, President and Chief Executive 0fficer of Executive, Audit (Chairman) and EDWIN A. LITBERGER louisiana Ibwer & Light Company, Senior Vice President and Chief Nommating Comnuttees. New Orle:ms,Inuisiana. , Fmancial Officer. Age 48. Joined MSl] GEORGE K. REEVES BROOKE II. DUNCAN Sptem in 1979. Sixteen years prior ihrtner of Ward and Reers, Attornep, President of Foster Company,Inc., utility industry service. Caruthersvdle, Missouri. New Orleans, louisiana. DAN E. STAPP Compensation (Chairman) and Audit and Nominating Committees. Secretary. Age 50. Joined MSl] Sptem Nommating Committees. KANEASTER ll0DGES,JR. I" I9 *
- 11. Dl'KE SilACKELFORD President of Shackelford Co.,Inc.; R. DRAKE KEITil
', Arkansas Treasurer. Age 49. Joined MSU Sptem Shackelford Gin, Inc., and louisiana Audit and Nominating Committees. m 1981 Fifteen years prior utility Cotton Marehouse Company,Inc.;
Chairman of Union Oil Mill,Inc. industry experience. FIDYD W.1.lMTS Chairman and President of the (Agricultural and Agri-Businesses); E. EUGENE BROWN Company, New Orleans, Lotnstana. Bonita, toutstana. Assistant 1Yeasurer. Age 51. Joined MSU Executise (Chairman) Committee. Audit and Nommating Committees. Sptem in 1956. DONAl.D C. LilTKEN FRANK G. SMITil DOROTHY ME'I'0lNE Chairman of the ikurd of Directors and President and Chief Executive Officer Assistant Secretary. Age 52. Joined MSU Chief Executive Officer of Mississippi of Middle South Senices,Inc., Sptem in 1952. Ibwer & Light Company, Jackson, New Orleans, Inuisiana. Mississippi. Executive Committee. Direc/or #v// red Ullring 198/ Executive Committee. We wish to acknowledge the effective WM. ClJFFORD SMITil senice of Mr. 6eorge E Bennett, who President of T. Baker Smith & Son, Inc.,
.. wasa memberof theBoardof Directors JERRY L MAULDEN 11 uma, toutstana.
President and Chief Executive Officer b i k Gmpv ws ' Compensation and Nominating of Arkansas Ibwer & Light Company, dW d hm Comman the Board in May 19m. Mr. Bennett is IJttle Rock, Arkansas. DR. WALTER WASillNGTON Chairman and Chief Ewcutive Officer of ItROY P. PERCY President of Alcorn State University, State Street Research and Management Cotton Farmer; Chairman of the Boards Intman, Mississippi. Company, Ikoton, Massachusetts. of Mississippi Chemical Company and Compensation and Nominating First Mississippi Corporation; President Committees. of Greenville Con press Company, Greenville, Mississippi. Executive, Audit and Nominating (Chairman) Committees. 48
Corporate k.entilcation Middle South L'tilities, Inc. is an investor-owned public utility holding company that owns all the outstanding a common stock of four operating f companies. Those companies are ,, Arkansas Power & Light Company, Louisiana Power & Light Company,
- m Mississippi Power & Light Company, and New Orleans Public Service Inc.
Other principal subsidiaries of Middle South l tilities, Inc. are Middle South l Services, Inc., a service company, Middle South Energy, lac., a generating j subsidiary which owns 90 percent of __ the 2.5 million kilowatt capacity Grand . Gulf Nuclear Station, and Electec, Inc.,
), a dimsified subsidiary which markets es~ the capabilities, expertise, and resourccs
/
]fg g of the System companies. !
as-- System Fuels, Inc. is a fuels pro- A
*/ curement subsidiary of the four operating 9
, companies. Associated Natural Gas _=
mm Company is a gas distnbution sub- __ sidiary of Arkansas Power & Light 9 es Company. 7
~
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